2026.10.09 | GP | Chemicals | Air Liquide BEYOND & Linde Gap

Primary:

AI:FP

Associated:

APD

LIN

Viewpoint:

Former Executive

Moderator: Gaurav Arora (GA)

Richard Boocock (RB), Former Senior Vice President and Special Advisor to the Chairman - Air Products

SUMMARY

Overview

The discussion assessed Air Liquide’s BEYOND plan, which aims to narrow its profitability gap with Linde and Air Products. The expert considered the margin objective credible but execution-intensive, with cost reductions and productivity improvements offering greater near-term certainty than acquisitions or new capital projects.

Industrial gases remain supported by electronics, healthcare and selected regional growth. However, weak manufacturing, high energy costs, geopolitical uncertainty and delayed customer investment decisions create substantial downside risk.

Key Insights

Air Liquide must act quickly and aggressively because major industrial-gas projects typically require several years before contributing to earnings. Cost reductions, organizational simplification, asset optimization and disciplined pricing are the most dependable margin levers. The sales-growth target appears challenging because traditional manufacturing demand is generally subdued. Semiconductor demand can support growth, particularly where projects are already contracted. A cyclical correction could materially reduce planned investment. Healthcare offers durable demand, but its ability to generate targeted margins is less certain. Energy-transition projects face delays and cancellations as policy support weakens and customers postpone final investment decisions. Air Liquide’s central disadvantage is considered cultural and operational rather than geographic. It lacks the pricing discipline, accountability and asset-density focus associated with Linde’s legacy Praxair model. Activist pressure is expected to remain intense and could eventually affect leadership if measurable progress is insufficient.

Competitive Landscape

10/11/2026 at 11:38 AM UTC

Company

Positioning

Advantages

Challenges

Air Liquide

Global industrial-gas leader pursuing margin catch-up

Broad geographic footprint, electronics pipeline and Airgas platform

Complex structure, weaker pricing discipline, aging European assets and slower productivity adoption

Linde

Profitability benchmark

Strong operating discipline, selective contracting, pricing rigor and dense distribution networks

Exposed to normal industrial and semiconductor cycles

Air Products

Historically strong- margin competitor

Cost focus and renewed emphasis on core operations

Managing difficulties linked to energy-transition projects

Smaller regional suppliers

Quantitative Insights

Metric

Local competitors

Strong positions in selected markets

Limited scale, but capable of intensifying pricing pressure

Management target or industry reference

Expert assessment

Margin expansion by 2030

400–600 basis points

Credible, but requires faster and deeper action

Sales growth

5% CAGR

Challenging under current market conditions

Planned investment

Approximately $24–25 billion

Plausible, though execution and demand risks are material

Return on capital

Workforce reduction

Above 11%

Dependent on contract pricing, budgets and schedules

6%

May be insufficient; roughly 10% could be defensible

Asia growth

8%–9%

Achievable only with strong electronics execution

Americas growth

EMEA growth

5%–6%

Supported by lower energy costs but exposed to political uncertainty

2%–3%

Credible, though high energy costs remain a major obstacle

Major semiconductor project

Around $1 billion of gas investment

Attractive but typically requires 24–36 months

Semiconductor downturn scenario

About 20% capital-plan reduction

Considered plausible in a correction

10/11/2026 at 11:38 AM UTC

GA: Hello everyone. My name is Gaurav Arora and I am a senior analyst for the EMEA Industrial Research Team at Guidepoint Insights. I want to welcome everyone to our call today where we are discussing about Air Liquide. What we will try to do in today's call is to try and understand the observations from the CMD which they had with respect to their revised targets for 2030, what the overall CMD for the BEYOND plan means and what it could do to limit some of the gap which it has with margins with respect to Linde and Air Products. To get these expert insights, we have Richard Boocock with us on this call today. Richard, first, if you could give us a short background about yourself and then we shall go from there.

RB: Sure, Gaurav, and good morning, good afternoon, good evening to everyone that's listening. My name is Richard Boocock. I have 40 years plus experience in the industrial gases space, predominantly accumulated at Air Products where I progressed to being senior vice president, head of various business units, chief information officer, fulfilled many roles in the industrial gases space over my career and looking forward to having a great discussion with Gaurav as always.

GA: Okay, great. Thank you for sharing that, Richard. Let's dive right into our discussion today. So, Richard, I guess, you know, this has been long coming. Air Liquide has been lagging behind a bit on the margins front and there's been building pressure from some of the investors as well. How do you overall see, you know, some of these observations and the targets which are coming out from this? Maybe your first reads on it and I guess then we can build on it.

RB: Yes, so it's a very interesting development that we're seeing in the industry here. I mean, over the decades, one of the things that the industry was kind of used to was that the old Linde, so Linde that was centered in Germany and Air Liquide centered in France, they always trailed in the margins race compared to Air Products and Praxair. There were all sorts of reasons put forward for that in terms of the European market is more competitive or there's complexity in dealing in certain markets and so on and so forth. And what we've seen in the last couple of years, of course, is that with the Linde merger, Linde have now, as the new Linde, demonstrated that, no, actually, if you apply yourself, you can get the type of margin performance that Air Products and Praxair in particular historically delivered. And so, in regards, you know, this is the spotlight now turning to Air Liquide saying, "Okay, so what are you guys going to do? If the other people can do it, they have a similar kind of landscape and footprint to their business, you should be able to do it. So, please show us how you're going to do it." And that's what we're now seeing with the recent Capital Markets Day with Air Liquide and their presentation in terms of their action plans to expand their margin by 2030. They now have the opportunity to show us what they can do.

GA: Right. And then with BEYOND marking out some 400 to 600 bps of margin expansion by 2030, how credible do you see this? And maybe if you could take us to some of the underlying areas where you see this is being driven by. I know they called out some of them, but maybe then we can dig a bit into each one of them and try and understand your views on acceptability and sustainability on those.

RB: Sure. So in terms of the credibility, it's certainly a credible goal in terms of the 400 to 600 basis point margin expansion. By 2030, that means they're going to have to start moving quickly because we are towards the latter end of 2026. And so if you're going to deliver this by 2030, you've basically got about 3 years. Now, the 3-year timeline is significant because when you start to decompose some of the objectives that they're pushing in there, when you look at the, let's pick the capital target, to invest capital in assets that are going to deliver these margins. Well, most of that capital in today's industrial gases world will take 24 to 30 months to actually come to market. Right? So if I start a project today, a major project for a semiconductor customer, for example, well, that capital that I'm deploying over the next 24 to 30 months, that's actually not going to impact my P&L until well into 2028. And hopefully, when it comes into the P&L, it's going to deliver the type of margins that I'm committing to. So the thing I would highlight in terms of the plan over the next 3 years is I would be much more confident about the contribution to this goal from cost reduction actions and short-term productivity actions than I would be to, shall we say, considerations around

10/11/2026 at 11:38 AM UTC

growing the top line through organic growth and in particular growing the top line through this type of capital deployment because they are very short of time in terms of those top line capital contributions.

GA: Sure. And they've obviously outlined a lot of factors which would lead to some of these numbers. When you kind of look at these assumptions, where do you see which are the most exacting ones and where could market conditions make it the most harder to achieve and probably reach some of these targets?

RB: I think one of the ones that stands out to me is the 5% sales CAGR target that's put in there. That's, depending on how you define that, a pretty challenging objective in today's market. We've seen consistently from the industrial gases companies that, yes, there are 1 or 2 sectors like semiconductor, like space that have slightly higher volume growth numbers. But when we look at the manufacturing base, the traditional drivers of industrial gases, we're looking at something like 1% to 2%. Most manufacturing economies, while there are some bright spots, are struggling. China has been struggling for many years. Europe continues to struggle. Given the things that are going on in the world, we have a high energy cost environment, a very high energy cost environment. Traditionally, that's not good for manufacturing. Good for oil companies, and we're seeing that in the oil company results. But when you look at the midstream, downstream activities in oil and chemicals, and then those large energy consuming industries like iron and steel manufacturing, metals processing, glass manufacturing and so on, this high energy cost environment is not the sort of thing that causes them to grow, expand and to increase their industrial gases consumption.

GA: I was going through the deck and in terms of a star mark, they also say that this includes the scope of effect of acquisitions as well. Do you see some of the key acquisitions they've done previously on DIG, I guess, and some of the... there might be a few others which are on target and if so, are there any specific areas you see they might be looking at to grow and get into the high growth market areas?

RB: So, again, that one attracted my attention because as we've discussed before, one of the things that we've seen around industrial gases is the competition authorities have been very interested in, you know, consolidation steps and concentration steps. Now, admittedly, in the last couple of years, the US competition authorities have kind of backed down a little bit in terms of, under the current US administration, they've backed down in terms of their emphasis on anti-competitive behavior. But I think the competition authorities in other parts of the world, whether it's India, whether it's Europe, whether it's other countries in Asia, are alive and well and still doing their job. And, I would say, okay, acquisitions, yep, that's an opportunity.

GA: Thank you very much.

RB: The first thing I would say is, I'm not sure how many significant acquisitions there are out there that the competition authorities would allow the, you know, the second biggest industrial gases company in an industry that's already defined as an oligopoly to actually move forward with. The other thing I would say, quite, you know, perhaps unkindly, is that when it comes around to margin improvement and performance improvement, generally going off and doing M&A is not the sort of thing that will be one of your primary drivers of improving your margin. Again, if we look at the timeline between now and 2030, if there is a sizable property out there that's going to move the pointer for a company like Air Liquide, if you start looking at it now, you might be in a situation where perhaps in late 2027, you're getting close to doing a deal. You may have a protracted competition authority investigation. You know, Air Liquide's UK home healthcare business that they're looking to sell is currently going through a UK competition authority process. So, you know, even with everything working in your favor, you're not going to be closing on that acquisition until sometime in '28. And then the way that you would deliver your margin improvement is through your integration strategy, you know, your synergies, your benefits, and so on and so forth. And so, again, it strikes me as just being, you know, having some question marks in terms of the viability of that M&A strategy, but it's also very back- end loaded in terms of the targets that they've set.

10/11/2026 at 11:38 AM UTC

GA: Thank you very much. Makes sense. And do you see if not, on the similar grounds, there might be some kind of vertical integration coming through in terms of trying to ramp up areas where they could cut on costs or maybe get raw materials at a cheaper price. Is that a possibility you've seen with other 2 peers, which in case they have done any work on that?

RB: So, again, those are possible contributors. For a company the size of Air Liquide that you would hope has already been doing a good job in terms of procurement leverage, volume leverage and so on and so forth. I would just say, well, how much more is there to get in that area? So, yes, it can make a contribution, but I'm just not sure how significant it is in the context of the target that has been set and in the time frame that's been set.

GA: Makes sense. All right. And since the CAGR target looks a bit difficult with the 2030 timeline, like you mentioned, would you want to explore a bit on the growth markets they've spoken about and help us understand your views in terms of achievability of some of those targets?

RB: Yeah, so I think in terms of the growth markets that they're identifying, if we take semiconductor as an example, semiconductor is just going crazy at the moment, isn't it? Let's just say how it is. The semiconductor market has historically had a sawtooth characteristic from the 1990s when I was first involved in semiconductor. One of the things that we saw, if you plot out the characteristic, you have a period of very intense activity followed by a period of correction and consolidation and so on and so forth. Now, there will always be people who will say, yeah, but this time it's different. This time it's going to go on and on and on. If it does, semiconductor is definitely a growth area. But I would say, again, in the next 3 to 3.5 years between now and 2030, there's every possibility of one of those corrections coming along and so it is a growth segment, but you can never take it for granted that it's going to continue forever. In terms of home healthcare, we all know we're all getting older. The world is getting older. Countries are short of money in terms of healthcare. They're looking at home healthcare as opportunities to improve their nation's efficiency in terms of delivering healthcare. Certainly a growth area. I think I would be asking questions around, can that growth in the healthcare sector actually deliver the type of margins that Air Liquide is projecting? So while there is growth there, I would have a question on margin in healthcare. In energy transition, I think we're entering a phase where for many of the projects that have been announced in the energy transition space, there's always a number of projects every day that are being cancelled or deferred. We're in a situation where the European Union continuing to be one of the world's major drivers of the net zero, the drive to net zero journey, they're starting to soften on some of their timelines on some of their regulations. This is not about me questioning the logic of pursuing net zero. What it is, is me questioning, okay, when I start to see uncertainty in policy frameworks and the policy environment in this type of space, then I start to think about project cancellations, project delays, and my customers taking more time to consider their FID decisions before they make a commitment. And so again, I would say that's an area that would have a question mark on it in terms of the certainty of that growth. The other category that Air Liquide has listed relating to space, space is very exciting. It's lovely to have those photographs of rockets on our websites that have industrial gases in them and so on. But I do think there's a question mark out there for some of the major space players in terms of, to what extent are they going to be buying industrial gases from the industrial gases companies or to what extent are they actually going to be making their own industrial gases? And there's a particularly large player in the segment that has been very public about them building, they've been developing plans to build natural gas liquefaction systems at their space terminals as well as air separation units and oxygen liquefaction systems at their space terminals. So again, it's a growth segment, but it has a number of questions that come with it.

GA: Fair enough. And with respect to electronics in terms of, you know, the 10% or double digit growth, they're talking about sustainable. Is that a sustainable rate right now? I know you mentioned some of the challenges or the cycle turning around. How do you see currently the rate of securing what they have? Is that a sustainable rate?

RB: I think it's a sustainable rate. The industry has seen that type of rate in the past. As I mentioned in my last answer,

10/11/2026 at 11:38 AM UTC

there's always that question as to when is the next correction going to come along. Again, I would say in terms of electronics and pushing that out there, you know, as a growth segment. Most of what is going to impact their performance by 2030 should already be in their project stack. As we see through the public domain information that the industrial gases companies share for a world scale semiconductor facility, the industrial gases investment associated with that is $1 billion. It's in that order of magnitude in today's world and that's a good amount of capital in the capital deployment objective but really as I mentioned earlier these projects take 24 to 36 months to execute. I would typically be expecting something in the 30 month range for these, so again, they should already have that business on the docket. So in some regards, their commitment for growth in the semiconductor area, they may be putting that forward because they know that they're already going to deliver that as long as they can execute their projects on time, on budget, and their customers are ready to pay those invoices. So that could be a secure component to their future growth if they already have those projects in their works. If they don't have that growth in their works, then I think it's going to be very back-end loaded in terms of anything coming in to contribute to this margin target by 2030.

GA: And then when you look at their backlog or let's say the areas they're working with, specifically on the regional front, do you see they have the right exposure in terms of gaining within the regions which are seeing this exponential growth? I mean, obviously, Europe is not as growing as big as it should on the data center front versus US, but Semicon side and the manufacturing footprint side, how do you see their capacities and the availability or proximity to the market?

RB: So I think Air Liquide's geographical position is good. They've always been a very global and multinational company. I mean, this was before my... well before my time in the industry, but they were known to be one of the first companies to have that more international outlook, international perspective. In recent years, they have adjusted and modified their exposure to certain regions. So they took some steps in the Middle East, for example. A few years ago, they've expanded their position in South Korea with the Airgas acquisition. So I think their geographical positioning is generally pretty good. You could arguably say that they're perhaps a little light in terms of their positioning in India, which is a beneficiary of much of the move out of China for some manufacturing activities. And of course, the India economy is generally going well. But in general terms, I think they've got an appropriate geographic footprint.

GA: And beyond electronics and healthcare, since we discussed a bit on basic commodities, manufacturing, on the industrial side of things, how do you see, with some of the challenges in the market, what kind of if they're forecasting a low single digit or a mid single digit rate, RB: Yeah GA: Is that an achievable rate in your view with the current factors in mind?

RB: I think if you've got the right focus on those segments, then you'll be able to get that 1% to 2% to 3% organic volume growth. If you're out in the marketplace, signing business in the right locations at the right price, then that should be achievable. But it is a competitive environment out there and all of the major industrial gases companies, and even some of the not-so-major ones in some parts of the world, they're fighting for that business. And so again, always the question mark around the top line contribution to a margin goal is okay. If you're going to go out there and start chasing business, what are you going to do to make sure that you're signing the quality of business that's actually going to improve your margin as opposed to just signing business to grow the top line and actually finding that it's actually diluting your margin? And that would be a risk. It will be important for any company to recognize that the success of Praxair, Linde, the new Linde, is very much around process discipline of where to pursue business, what business to not pursue and making sure that when you sign that business you're signing it at the best possible price to continue to drive your margin.

GA: Within the basic commodities and manufacturing or industrial side of these things, which are some of the growth areas you see can still kind of scale through and where do you see the maximum drag is right now in the market?

10/11/2026 at 11:38 AM UTC

RB: Yeah, so I think if you look at it by sector, you know, general manufacturing is very sluggish worldwide. There are some elements in, you know, if you look at the parts of the world that are going through a significant data center build out, and there's quite a lot of parts of the world that are doing that, then you have a lot of steel that's required for those data centers. So iron and steel production is generally OK. It's not dramatic, but it's OK. Metal fabrication, glass manufacturing, and so on and so forth. I would say it's steady. But I don't think there's anything in those various segments that are really standing out. Perhaps if you and I had this conversation a couple of years ago, prior to the current oil situation, we might have said, well, actually, food processing is a great sector. But even the food processing sector is struggling because of high oil prices, because high energy prices translates into high fertilizer prices, translates into high feedstock prices for livestock and so on and so forth. So I don't want to sound too gloomy, but we're in a world where there's probably more things pushing risk on the downside rather than the upside at the moment.

GA: Got it. And maybe a bit on, you know, when we talked about the electronics market, in terms of the capex spend, like we spoke about, there are obviously changes in the cycle, but I'm just trying to get the best case scenario and the mid case and worst case in terms of the capex cycle slowing down, how much of a growth do you see might recede from their current targets and what impact do you anticipate? I know it's probably a lot of speculative question, but yeah, just your views in terms of how this market might respond to a change in capex.

RB: Mm-hmm.

GA: Yeah.

RB: Yeah. So one of the things that we've historically seen in semiconductor, and this isn't about going back 30 years, you could just go back 5 to 10 years and see these characteristics, is that when that capacity is going into manufactured semiconductors, then when the fab is built, you have a significant industrial gases investment, as I've mentioned, of about $1 billion. And that investment is for the bulk gases, for what in the Air Liquide presentation I referred to as the carrier gases: nitrogen, oxygen, argon, helium, hydrogen. And once that starts up and you're being paid, hopefully on a take or pay basis, although it could be a volume related contract, then your revenue is coming in and hopefully you're making a margin. If we go into a period where there is a downturn, let's say there's a correction in the AI market and all of a sudden this hundreds of billions and going into the trillions of dollars that's going into AI basically just pauses for breath. I'm not saying it's going to stop completely, but let's say it just goes through a little moment, then you could see $1 billion to $2 billion per year drop out of the capital deployment that Air Liquide are talking about. They've talked about having, if I remember rightly, $25 billion between now and 2030, and so you could have, out of that $25 billion, you could easily have $5 billion, maybe heading towards $10 billion, drop out of that. I should just think about it. $10 billion is probably too much, but certainly you could have a 20% cutback in terms of that capital deployment.

GA: Okay.

RB: Just to give you an indication of what could happen.

GA: Very helpful. Okay. And on the margins front, the targets that are looking at the midpoint of around 500 basis points. So when you look at 4 years of ADVANCE strategy where they achieved around 350 or 360 basis points, I guess. How do you see this target now? Is it better or achievable versus what they did in ADVANCE and where do you see the stark differentiation is on the strategy overall?

RB: So I think in terms of what they put forward, it is a credible target. But as I mentioned at the beginning, they will have to move quickly and they will have to move assertively. And I think they, you know, in terms of the levers that they're putting forward, I would say they really need to move assertively on the cost side. And if you ask me, they've

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delivered 350-ish through their other programs. So what are they going to have to do differently to deliver 500? They're going to have to go further and they're going to have to go harder. And so, you know, some of the questions that come up from the information that they presented is, you know, when you're looking at growing your margin, is a 6% headcount reduction, is that enough? You know, should it be 10, for example? And some people may say, well, that's a big number. But if you look at what companies like Air Products have had to do and you look at what Praxair / Linde, the new Linde have done, then a 10 headcount reduction is quite credible. So again, on the cost side of things, I would ask the question of, are they going to go hard enough and fast enough to make sure that they secure those cost savings as quickly as possible to make that contribution to their margin growth, as they highlight in terms of their presentation, in terms of getting more from the base, in terms of things like assets loading, densification, pricing, gas applications. I would say gas applications is a bit of a long shot because if they're starting to think about new gas applications then that won't be commercialized or will barely be commercialized by 2030. Pricing is a very near-term opportunity, but that requires them to have the right processes and the right discipline in place that Linde have had for many years because they brought that in from Praxair. Air Liquide haven't got that type of discipline and that culture in their organization. So there's a lot of change that needs to be brought through to deliver on that 5% plus or minus 1%.

GA: Makes sense. And just before we target more on, you know, just comparing them with Linde and their products, I just wanted to dig a bit on the geographical kind of targets they gave out. And when you look at the larger of their growth targets resting on Americas and Asia, and they have their respective challenges, specifically when you look at Asia. EMEA is pegged at a low 2% to 3%. Maybe some RB: Yeah.

GA: thoughts there, you know, how it's being baked in and in terms of the current challenges we see on Asia, China side, and do you see there are more that meets the eye in terms of what they can really achieve?

RB: In terms of those geographical targets that you very nicely summarized there, if we start with Asia, it's 8% to 9% growth. They're talking about leveraging the electronics momentum and capturing manufacturing growth there. We've already touched on the fact that manufacturing in Asia is not growing at 8% to 9%. It's growing more than Americas and EMEA, but it's not growing at 8% to 9%. So I would see that as being a credible target, but they're going to have to make sure that they secure everything that they're entitled to. Their DIG acquisition in South Korea... South Korea continues to be a good market... but also making sure that, as we've already touched on, as manufacturing activity continues to move away from China and to move to places like India and Vietnam and so on and so forth, they have to make sure that they're in a position to secure that. In terms of EMEA, 2% to 3% I think is a credible target, but they're going to have to work hard and they're going to have to have a better energy situation in Europe. I could see quite easily a situation... Between now and 2030, which is the period we're talking about, I could see continued consolidation and disinvestment in Western Europe in energy intensive industries because the industries are finding it very difficult to compete at this type of energy pricing. And I think that will put pressure on the energy transition objectives that governments are putting forward because their industrial base is finding it very difficult to cope with both high energy prices and the cost and complexity of moving towards net zero. I do think the optimisation of the asset base that they highlight is a significant opportunity for them. But again, they'll need to be aggressive in terms of getting those costs out between now and 2030. And finally, for the Americas, the Americas is kind of a good news story. In terms of growth, the Americas continues to benefit from low energy pricing relative to other parts of the world. I was looking at my morning newsletter just before our call and natural gas in the United States is still Henry Hub natural gas is just over $3 a million BTUs. And that compares with Western Europe, which is probably, if I do the quick math, is probably around $15 a million BTUs or even higher at the moment. So America has some structural advantages, but then we are going to go into the midterms in about 3 weeks' time and then we're going to have another presidential election coming up in 2028 which is right, it's halfway through the target period that Air Liquide are looking at. There should be question marks over whether that 5% to 6% growth that they're

10/11/2026 at 11:38 AM UTC

targeting is actually going to continue in today's world is probably credible, but in next year's world or the 2028 world it may be a different situation.

GA: Okay. And then how would you see? Rate the ambiguity of the geopolitical and wars around in terms of the raw material supply chain? Do you see there is an increasing risk or largely industrial gases wouldn't be that much impacted?

RB: So I think the key issue around the impact of industrial gases, I would see as twofold. First of all, this type of uncertainty means that customers delay their decisions. So, when customers are looking at approaching FID on a project on new capacity, they will wait longer before they make a decision. And so what you may find is, especially with the industrial gases companies being very focused on deploying their capital, basically their capital projections get pushed out by a number of years. So that will be one of the key impacts. The second one, as I've touched on a number of times already, is this geopolitical situation. If the geopolitical uncertainty essentially continues to manifest itself in terms of high energy prices, then that's a bad news story for industrial gases because it just suppresses and depresses manufacturing activity and the growth that they're looking for probably won't be there and it increases the risk of some of your customers actually going out of business. And, of course, with the uncertainty that we have in the Gulf region, in the Middle East, that's been an area that has been quite an engine for some of the industrial gases companies, not so much Air Liquide in recent years, but it's difficult to see a significant amount of investment activity in that part of the world and just to go back to the geopolitical uncertainty and the energy prices and so on and so forth.

GA: Thank you for joining us.

RB: There was a piece in the business media just in the last couple of days where the CEO of Saudi Aramco was speaking at a conference and said, apparently it was his first public presentation since the conflict in the Middle East started. But he expects uncertainty in the energy markets to continue for at least the next 2 years, even if a peace deal or the conflict comes to an end very soon. It's going to take a couple of years for energy markets to stabilize and recover. And again, that's not a good news story for the industry.

GA: Got it. Okay. Let's then switch gears a bit and I wanted to discuss in terms of the margin differential that we see for Air Liquide versus Linde and Air Products. And if you could take us through your thoughts in terms of why does that exist right now? And, you RB: Yeah GA: know, what are your thoughts around the overall differential and which areas are the most impacting for this company?

RB: Yeah, so as we touched on at the very beginning of our call, the margin differential between the European companies and the American companies has been around for a long time. And as we touched on with the Linde- Praxair merger, the new Linde has demonstrated that it doesn't have to be that way, right? That you can deliver the type of margin performance that we're seeing from Linde. Air Products is dealing with some different issues at the moment with the unwinding of some of their energy transition projects, but nevertheless, they're still on a very encouraging margin track, getting their costs in the right position, focusing on the core. For Air Liquide, basically there's a whole bunch of areas that contribute to this type of margin performance, in my opinion. One of them is the culture that they have within the company is not at the level of performance excellence that Praxair had, and Praxair took to Linde and is now in place in Linde with the Praxair playbook, as I call it, being deployed on a regular basis. And the reason I start with culture is because some of the things that are going to have to be done to get the margin to where they wanted to be and where Air Liquide investors wanted to be very much relate to culture in terms of accountability, decision making, selling to customers that are in the right location. So one of the things that Air Liquide, including their presentation in terms of getting more from the base, is this so-called densification word, if that

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is a word. But it's a different way of saying what Praxair and Linde and Air Products have practiced, which is you actually sell to customers that are in a good location relative to your assets. You create density around your assets, not going off to sell to a customer that's perhaps 300 kilometers from your facility just because they're an interesting customer and maybe I can go and sign a deal there. Because signing that business is business, but it's not going to deliver the contribution to the margins that Air Liquide are looking for. And so, I just use that as a very simple example. That salesperson that's traveling off to see that customer needs to basically follow the rules that say, "No, here are the customers that you're going to go and talk to. This is the area that we're going to target, and this is the price that you have to secure." And again, contribution to the margin. They highlight pricing, taking an approach where you're much more assertively pricing and confidently pricing to a customer on the basis of the next best alternative... not giving them a price which is a reasonable addition to your costs and it is a comfortable price that the customer will sign quickly and you can move on to your next appointment. But actually using machine learning, artificial intelligence, mathematical modeling to say, "For this customer, I know that the best price my competition can offer because of the location of their facilities and the characteristics of their network, I know that the best price they can offer is X, and so I'm going to price at X minus 2%." Even though I could accept to price it at X minus 10%, I'm actually going to push that customer harder and get a better price, and that will roll down into my margin. So that's culture. This is about business process, but it's also about culture. It's about leadership accountability. It's about having clarity of accountability, which brings me on to the next thing I would say with Air Liquide is they've always had a relatively complex organization structure. And complex organization structures give you a number of challenges. They diffuse the accountability of decision-making because it's like, well, whose decision is this to make? Or I'm going to interfere in a decision because I don't like that. I have a regional focus. I have a geographical focus. Someone else has an end-use market focus or a major account focus. Who's making the decision? If you clarify the accountability, you can simplify the organization and you take a lot of costs out. That's why I asked the question about the headcount reduction. Is 6% really enough? It is throughout the organization. And as the Formula One, a gentleman I met who worked for a Formula One team many years ago was highlighting is, if you want to reduce your lap time in Formula One racing by a second, you don't go looking for something that's going to give you a second. You go looking for 10 things that will give you 0.1 of a second or you go looking for 20 things that will give you 0.05 of a second. And I think that's a very fitting analogy for this type of transformation, this type of change. There's a lot of things that Air Liquide need to do across the organization that will come together to deliver the target that they've set out there.

GA: Fair enough. And when you look at Linde, you know, the kind of transformative improvement they've seen since 2020 in their margin, is there a playbook that Air Liquide can look at and try to replicate? And which would be your biggest call-outs in terms of what could be followed at Air Liquide to do the same, probably?

RB: So there is a playbook. You can't buy it, to my knowledge. Maybe I should write it. Maybe I should write it and then sell it to people. There's an opportunity. There is a playbook. And as I've mentioned a couple of times, it's the Praxair playbook. And Praxair were, they didn't go out of their way to make presentations at conferences about their playbook. But there's enough information that they've revealed in some presentations, in particular investor presentations, that are their kind of fundamental principles of they have a very well integrated strategy that starts with these are the geographies that we're going to focus on, not because they're nice geographies, but because we can see opportunities to deploy the integrated gases model. We have an on-site customer, we have a merchant market around it, we can get density which gives us improved customer satisfaction. It has a significant impact on distribution costs. When I have density and I'm the player in town, I can be influencing price in the way that I want, etc., etc. That playbook is out there in old Praxair investor presentations and some of the more recent Air Products presentations. But they have to have the discipline to enforce it. And for many people around the industry, one of the things that we've seen with the Praxair-Linde merger is there's a lot of people that used to work at Linde and to some extent Praxair that aren't there anymore because one, there were too many people there and two, there were some people that were uncomfortable with the implementation of that playbook and the discipline and accountability that goes with it. You know, having come across as sounding very negative, one of the things we can also look at, though, is Air

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Liquide did a pretty good job of managing their way through the Airgas acquisition. Now, they took on a very large acquisition. They put a lot of stress on their balance sheet, but they managed financially an organization to work through that. I think there are still opportunities, though, from a margin standpoint, for them to do more with the Airgas organization in the United States, which again will be about densification of our pricing and applying that Praxair playbook that I've referred to you on so many occasions already.

GA: Thank you very much. And in terms of coming out with this BEYOND plan now, there's been some rising activist pressure in terms of what they're trying to achieve versus the peers. Do you see that puts an additional pressure and try to go from A to B time frame which they are targeting? Does that lead to further mistakes or do you see this looks like a good foolproof plan?

RB: So I think certainly with the arrival of an activist investor, I'm hopeful that the Air Liquide leadership have taken notice of what's happened in other parts of the industry, in particular, Air Products. Air Products went through 2 phases of activist investor, 1 around 2010, 2011, another one much more recently, just in the last couple of years. And so activist investors can create some challenges. I'm hoping that Air Liquide are taking this seriously. It would appear that their leadership is in terms of coming out with this, it shouldn't... I don't think that pressure should drive them to make mistakes, but I do think the pressure will be unrelenting.

GA: Thank you very much.

RB: I think the pressure will be there, and I know Air Liquide usually report on a half-yearly basis, but that pressure will be there to say, OK, this is the plan that you've set down. Next time we talk to you, we want to hear how you're progressing. You know, what's your scorecard? How far along that curve are you? And so the pressure will be unrelenting, and if progress towards the target isn't being shown, then more pressure will be applied. If I remember rightly, one of the public statements from Elliott following the capital markets day was that it was a promising start or something like that to that effect. And, you know, OK, yeah, and I think that's a very good way of putting it. But as we've seen with Air Products, you know, ultimately, if activist investors start to gather momentum, and they have, you know, shall we say, like-minded investors that gather around them, then the pressure can become significant and, you know, leadership changes could result.

GA: Sure. And probably a factor we haven't gone a bit in detail in terms of pricing, which they want to achieve. You know, you've already spoken a bit about asset loading structure. How much of, you know, is pricing power available in the market right now, especially when you look at Air Liquide's portfolio? Does that provide a good ground to cover some of the areas or some of the margin improvement that they're looking at?

RB: Yes, I think it does. And I think pricing isn't going to solve all of their problems. But, you know, there's always an opportunity in pricing. You know, it was Air Liquide themselves many years ago that described the industrial gases industry as being a global industry that was locally executed. And so one of the things, and again, it goes back to that culture and that's accountability. They've got a pricing environment where from a pricing standpoint, they're getting the best possible price in every opportunity in every part of the world. And, you know, every salesperson that's in front of a customer needs to be basically pushing prices as far as they can in the context of their local competitive situation. So the opportunities are definitely there. You know, it is, as we touched on earlier in the call around volume and growth, you do need to be prepared to lose some customers when you're going after price. And so people will need very clear guidance in terms of what's more important, price or volume. Because if I go out and offer really soft pricing in the marketplace, I can pick up lots of business and grow my top line. But is it coming in at the margin that I've set out to my investors? So yeah, it's a balancing act that they have to apply. But I don't see anything different about the Air Liquide portfolio that would suggest that they don't have that opportunity if they can create the right culture, the right accountability, and have the right processes and enforcement and implementation around it.

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GA: Fair enough. And moving a bit on the 24 billion investment program they just spoke about, does it sufficiently create sufficient growth and operating leverage when they're looking at greater than 11% ROCE? Europe is restructuring and the challenges continue. They've given out how they kind of invest out these plans, but how do you overall view this in terms of their scheme of things?

RB: So, again, I think it's credible for a company like Air Liquide and the type of opportunities that they're in play for, as you use that example a few minutes ago, a semiconductor facility. That's $1 billion of industrial gases investment just for one facility. You look at one of these large scale blue hydrogen facilities. You know, there's some question marks on some of them in terms of whether they're proceeding, but a large scale blue hydrogen facility, that's a $5 billion project. So, the $24 billion is a very credible capital deployment target. In terms of the ROCE, it will come down to if they're executing those projects today, then do they have the pricing structures in the contract that's... that's actually going to give them that return. And most importantly on these large scale projects is, do they have the execution capability to deliver those projects to plan, to budget? Because that is one of the key ways, especially if you're executing those projects in a hot construction market. Right. So, if you look at some of the capital deployments into the United States, there's a lot of challenges in the United States in terms of getting construction labor for a number of reasons. A lot of demand for construction labor, lots of challenges in terms of bringing in immigrant construction labor into the United States. These are all the types of things that actually end up giving you cost overruns and schedule delays. And for those types of large capital projects, that's one of the key ways that you will miss your ROCE target. And that's something that I'm confident Air Liquide will be laser focused on, but it is a risk.

GA: Okay, got it. And in that pie of industrial investment decisions, they speak about asset-based resilience, which is looking at around 40% on the chart. What do you make of it? I mean, you know, investment in asset renewals, efficiency, maintenance, safety, and how do you see the value creation coming out of it?

RB: So it is. It's something that, you know, without being too unkind to Air Liquide, some of the things that they're talking about in terms of doing around their asset base are things that they're perhaps 10 years behind companies like Air Products and Linde. Things that they're talking about in terms of loading their assets, deploying AI, automating their assets so that they can reduce staffing levels and so on and so forth. This is something that the other players in the industry have been kind of laser focused on for the last 15 to 20 years. And so I think they are, face value, kind of playing a little bit of catch up here. Again, it comes down to that kind of culture and that assertiveness in terms of driving this through. There's opportunities in terms of improving their asset base, making tough decisions about perhaps closing a facility, shedding customers because you've got a facility that is not in the right place. It's not supporting a higher margin environment. So maybe you should just shut the facility and let the competition pick up some of those lower margin customers and so on and so forth. These aren't easy decisions if you have a culture which has been more of a steady as she goes type of environment. And so, yeah, I would expect some tough discussions to be taking place in Air Liquide around some of these things. It is doable, but they have to have the right culture. They've got to have the right accountability and the right attitude if they're going to get them over the line.

GA: In your view, Richard, are there any specific areas which fit the bill of this description we just spoke about in terms of getting rid of specific customers, areas, regions, or let's say assets? Just trying to pick your brain in terms of...

RB: Yeah.

GA: If you have any views on it already.

RB: So I think, you know, Europe is an area that requires a lot of asset re-optimization and restructuring simply because so much industry has left Europe to go to other locations that all of the industrial gases companies have had to deal with customers going away, so on-site customers going away, with manufacturing activity going away. So to put it into perspective, if you have an on-site customer that goes away, then you lose your base load demand on your

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plant, but you may still be supplying liquid into that geographical market, so you have to reconfigure that asset to figure out how do you supply those liquid customers without having that base load demand from the on-site customer. But in Europe, you have areas of Europe where industrial gas companies had liquid plants to supply local manufacturing industry and that local manufacturing industry is gone as well. And so, I would say, particularly in Europe, particularly in a very high energy cost environment, there's a lot of opportunity and particularly for an older company, a longer established company like Air Liquide that will have quite a lot of aging assets that are in positions that were driven by how the market was perhaps 40 or 50 years ago rather than how the market is today, then there's quite a lot of decisions that would need to be made around that. Right, man.

GA: And then in your view, what's the right balance when you look at this $24 billion of industrial investment? How do you see the bolt-ons, M&As, buybacks? How does it all kind of figure in, in your view, obviously?

RB: Yeah, in my view, you know, I think the continued investments in capital growth is important, but in terms of what they're setting out there. You know, one of the things I always remember discussing with a CFO that I worked very closely with is when you're in this type of situation, the thing that you have to remember is that the profit that you're getting from your investments has a high degree of uncertainty around it. But the cost that you're taking out of your P&L today by improving your efficiency and restructuring your organization, you have a high level of certainty that if you unfortunately reduce your headcount by 100 people then when those people have left that cost will come out of your P&L. And so that's what I will be looking at here, and watching Air Liquide as they go forward is moving aggressively on the cost side will build momentum and perhaps make up for some of the uncertainty that is undoubtedly going to come in on the top line side because there's a lot of stars that need to align over the next 4 years if they're going to deliver the top line objectives. Whereas on the cost side, they can get that done. That's all within their control. They can do that. They can start that now.

GA: All right. Great. I think on that note, Richard, we've reached the end of our time slot for the call. I appreciate your comments and insights like always. And thank you so much for joining us on the call today.

RB: Thank you, Gaurav. It's been a pleasure, as always. You stay well, and thank you to all our listeners as well. Thanks very much. Bye.

GA: Likewise. Cheers. Take care. Bye-bye.

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