July 6, 2016 / 6:34 AM / in 4 years

Air Liquide sees slower growth after U.S. Airgas deal

PARIS (Reuters) - France’s Air Liquide warned of slower growth in sales and profitability on Wednesday despite a recent U.S. acquisition designed to offset poor economic prospects in Europe, pushing its shares more than 3 percent lower.

Air Liquide and Airgas logos are seen during a news conference in Paris, France November 18, 2015. REUTERS/Charles Platiau

The industrial gases company, which presented a new strategic plan to investors and analysts in London, said it was seeking revenue growth of 6-8 percent annually between now and 2020. It pledged to deliver a return on capital employed (ROCE) in excess of 10 percent “after five to six years”.

Air Liquide’s ROCE, a measure of profitability, stood at 10.3 percent in 2015, short of a target of a 12-13 percent return under its previous multi-year scheme.

Shares in Air Liquide, buoyed in the past by steady growth in net profit and dividends, were down 3.6 percent at 90.14 euros at 1050 GMT.

Air Liquide bought Airgas, the leader in U.S. packaged gases, in a $13.4 billion transaction finalised in May.

When the deal was announced last November, analysts said it would help Air Liquide to overtake rivals Linde AG, Air Products and Praxair to top spot in North America and speed diversification away from slow-growth Europe. However, they questioned the hefty premium the company was paying..

“The purpose of this event (in London) is to attract investors not only to buy Air Liquide shares but also to participate in the upcoming capital increase in the magnitude of 3-3.5 billion euros (...) part of the financing of the Airgas acquisition,” Kepler Cheuvreux said in a note to clients.

“We maintain our ‘Buy’ rating on the stock, although we admit that upside from here is moderate,” the broker added.

The group said on Wednesday the acquisition would allow savings of over $300 million while Air Liquide would also achieve other cost cuts of more than 300 million euros ($332 million) on average every year.

“The group has acquired a new dimension following the acquisition of Airgas and thus enters a new phase,” Chairman and Chief Executive Benoit Potier said, adding that he expected “moderate global growth” over the coming years as well as “major changes related to scientific and technological advances”.

Potier also said Britain’s vote to leave the European Union on June 23 would have a limited effect as group’s revenue there only account for 1.5 percent of total sales.

Under a previous plan set out for 2011-2015, Air Liquide had sought annual revenue growth of 8-10 percent.

Air Liquide said it would strive to maintain a Standard & Poor’s “A” range credit rating. Following the announcement of the Airgas acquisition, the rating agency downgraded the group’s rating by two notches to “A-“ with a “stable” outlook.

Additional reporting by Noelle Mennella; Editing by Brian Love and Keith Weir

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