First Half Results 2008: A strong performance in the first half ALMA gaining momentum August 4 th, 2008
First half results 2008 Agenda A strong performance in the first half ALMA gaining momentum John Glen Benoît Potier 2
H1 2008: a strong performance
Accelerated growth in Q2 10% +9.1% +9.1% +9.9% 8% 6% +5.3% +6.3% +7.9% 4% 2% 0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Gas and Services revenue comparable growth* *excluding impact of currency and natural gas 4
All business lines performed well 10% 5% Industrial Merchant: 42% of revenue 6.5% 6.5% 4.3% 5.1% 5.4% 4.3% 20% 15% 10% 5% Large Industries: 33% of revenue 17.2% 10.6% 10.6% 5.5% 5.9% 6.4% 0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 mid-term revenue objectives Healthcare: 16% of revenue Electronics: 9% of revenue 15% 10% 5% 5.9% 7.2% 11.1% 10.4% 8.2% 30% 25% 9.3% 20.1% 18.7% 20% 15% 10% 5% 8.8% 11.4% 26.2% 4.9% 0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 0% Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 All figures represent Gas & Services comparable growth: excluding impact of currency and natural gas 5
1 st half 2008: strong performance In m Group H1 2008 H1 08/07 as published H1 08/07 excl. currency H1 08/07 comparable* Revenue 6 370 +13.2% +16.7% +8.3% OIR 950 +11.0% +14.1% G&S Revenue 5 343 +8.8% +12.6% +9.5% OIR margin excl. nat. gas 18.0% +40 bps Net profit 601 +8.1% Diluted EPS (in ) 2.30 +10.6% +11.3% +13.9% G&S margin excluding natural gas is up Double digit OIR, Net Profit and EPS growth, excluding currencies *excluding impact of currency, natural gas and the Lurgi acquisition 6
Europe: double digit growth Industrial Merchant North and Eastern Europe: good volume and pricing South Europe: stable activity Large Industries Q2 Europe revenue: 1 491m +10.6% Industrial Merchant +2.1% +26.1% Large Industries Major ramp-ups in hydrogen and air gases Healthcare Electronics +9.6% +1.1% 0% 10% 20% 30% Q2 08/07 growth* Healthcare Hygiene back to double digit growth In m H1 08 Revenue OIR Margin** 2 972 541 18.5% Published growth +11.2% +7.6% -30 bps Comparable growth +9.4% * comparable basis ** excluding natural gas impact 7
Americas: demand remains strong Industrial Merchant Strong volumes and pricing in the US Sustained double digit growth in South America Large Industries Strong hydrogen demand in the US Industrial Merchant +10.7% Large Industries Healthcare Electronics Q2 Americas revenue: 675m +8.5% +5.6% +7.7% +12.4% 0% 4% 8% 12% 16% Q2 08/07 growth* O 2 volumes impacted by customer turnarounds In m H1 08 Published growth Comparable growth US growth +8.1% Revenue OIR Margin** 1 310 212 17.1% +3.2% +5.8% +130 bps +7.5% * comparable basis ** excluding natural gas impact 8
Asia: buoyant demand Industrial Merchant +19% growth in emerging Asia Stable activity in Japan Q2 Asia-Pacific revenue: 482m +9.7% Industrial Merchant +9.3% Electronics Electronics +5.4% ESG and carrier gases recurring business performed well: +10.7% E&I sales down principally in Japan Large Industries 2 start-ups in China in steel industry Large Industries In m H1 08 Revenue OIR Margin** 0% 6% 12% 18% Q2 08/07 growth* 973 161 16.8% Published growth +10.4% +14.6% +90 bps +20.6% Comparable growth +12.4% * comparable basis ** excluding natural gas impact 9
Engineering & Construction: remains fully loaded Lurgi fully integrated: 1st hydrogen project with Lurgi technology In m H1 08 Q1 08 Q2 08 Third party revenue 504 189 315 Total order-intake* Total orders in hand* 800 5 500 Total orders in hand breakdown* ASU HyCO Traditional Energy Alternative Energy Renewable Energy 12% 16% 14% 15% 43% * Refer to glossary on slide 35 10
Further margin progress, in core business +40 bps +30 bps -70 bps 15.2% 15.2% Natural gas impact 14.9% as published 13% 0% H1 2007 OIR margin Gas & Services Others E&C mix H1 2008 OIR margin 11
Double digit EPS growth In m H1 07 H1 08 H1 08/07 Operating Income Recurring 856 950 +11.0% H1 08/07 excl. currency +14.1% Other non-recurring operating expenses 25 (7) Net finance costs and other net financial expenses (105) (114) Income taxes (211) (220) Share of profit of associates 16 14 Profit attributable to minority interests (25) (22) Net profit (Group share) 556 601 +8.1% +11.3% Diluted EPS (in ) 2.08 2.30 +10.6% +13.9% 12
Solid cash flow & balance sheet In m H1 2007 H1 2008 08/07 Funds provided by operations 1 012 1 090 +7.7% WCR (195) (180) Others (28) (19) Net cash from operating activities 789 891 +12.9% Cash invested into business: (industrial capex) (575) (791) +37.4% Cash back to shareholders: (distributions & share buy-backs) (703) (682) 31/12/07 30/06/08 Net indebtedness Debt to Equity ratio (4 660) 72.0% (5 221) 82.5% 13
ALMA gaining momentum
ALMA delivering in H1 Standardization and design to cost 7 ASUsin construction, cost -20% SMR approved for Rotterdam, cost -15% Low-cost filling stations installed in Africa and Poland ROCE: 11-12% 102m efficiencies delivered, in line with objective 600m over 3 years Gas & Services comparable growth: +9.5% Capex increased: 791m, 12.4% of revenue Growth +8 to 10% Transformation projects launched 15
Continued improvement of OIR margin 20% 19% 19% 18% 17,8% 17,9% 18,0% 18,3% 18% 17,2% 17% 17% 16% 2004 2005 2006 2007 2008 H1 H2 Gas & Services OIR margin at constant 2004 natural gas price 16
Capex to fuel future growth 800 In m 600 400 200 0 2004 2005 2006 2007 2008 9.3% 9.3% 10.3% 11.5% 12.4% H1 Annual capex to sales Industrial capex H1 H2 17
Transforming opportunities into growth In H1 Portfolio of opportunities Decisions Capex Start-ups & ramp-ups High level Above 4bn of investment opportunities at 30/06/08 Increasing 1.3bn +18% yoy In line with ALMA 791m +37% yoy Delivering growth 7 major start-ups in H1 and 15 expected in H2 22 23 16 2008 2009 2010 to date 18
Leading gas supplier in the Middle East >$300m investment in last 5 years 5 start-ups and Pure Helium acquisition in 2008 $1bn investment in next 5 years Lebanon since 1926 Egypt since 2002 Syria Iraq Kuwait since 2006 Saudi Arabia since 2008 Iran Qatar since 2004 UAE since 2008 AL presence Start-ups HQ in Dubai in 2008 Oman since 2005 Basin -pipeline networks Yemen Pure Helium acquisition in 2008 19
Solid trends in end-user markets H1 2008 H2 2008 Steel Chemicals Oil and gas Continued strong demand High capacity utilization but uncertainty Sustained demand with record oil prices Electronics Strong IC volume growth; strong TFT-LCD demand, DRAM inventory adjustments Industrial Merchant Americas Japan Emerging Asia Europe Demand remains steady Modest growth Continued buoyant demand Northern Europe sustained growth Southern Europe soft demand Healthcare Good trends continue 20
2008 outlook We remain confident in our ability to achieve double digit growth in 2008 net profit at constant exchange rates. 21
Appendices
Confirmation of 5 long term growth drivers Energy Hydrogen for refining Alternative energy: Gasification Oxycombustion Energy efficiency Health Ageing population Homecare development Innovation in therapeutic gases High Tech Environment CO 2 emission reduction Carbon Capture & Storage Concentration of leading players in Asia-Pacific Consumer products driving high tech High Tech development requires more industrial gases Emerging economies Taking leadership positions in new markets 23
ALMA: growth projects delivering in Q2 Energy & Environment Emerging economies Hydrogen: major European long term contract with Lurgi technology Eastern Europe: long term contract in Poland Middle East: 4 start-ups in Egypt, Kuwait, Qatar, Oman Mid-term objectives Emerging economies & Energy +2 to 3% High Tech Healthcare Base Electronics: Acquisition of Edwards Chemical Management Division New contracts in South Korea, China and Taiwan Medical gases: 100 operations using LENOXe since the beginning of the year in France Liquid capacities in Germany and Portugal Capacity investments on German and Italian pipeline networks for major steel customers Electronics & Healthcare +1% Base current growth +5 to 6% 24
Geographical breakdown of sales H1 2008 Gas & Services revenue: 5 343m 2% Europe Americas Asia-Pacific Middle East & Africa 18% 25% 55% 25
Business mix by region H1 2008 Gas & Services revenue: 5.3bn Europe*: 3.0bn Americas: 1.3bn Asia-Pacific: 1.0bn 22% 3% 42% 8% 6% 44% 32% 42% 42% 5% 33% 21% Industrial Merchant Large Industries Healthcare Electronics * Including Middle-East & Africa 26
Revenue breakdown In m Q1 08 Q2 08 H1 08 Gas & Services 2 649 2 694 5 343 Engineering & Construction 189 315 504 Others activities 253 270 523 Total Group 3 091 3 279 6 370 27
Income statement In m H1 07 H1 08 08/07 Revenue 5 629 6 370 +13.2% Operating Income Recurring before depreciation 1 320 1 435 +8.7% Depreciation & amortization (464) (485) Operating Income Recurring 856 950 +11,0% Other non-recurring operating expenses 25 (7) Operating Income 881 943 +7.1% Net finance costs (82) (93) Other net financial expenses (23) (21) Income taxes (211) (220) Share of profit of associates 16 14 Profit before minority interests 581 623 +7.3% Profit attributable to minority interests (25) (22) Net Profit (Group share) 556 601 +8.1% 28
Source and use of funds In m H1 07 H1 08 Funds provided by operations 1 012 1 090 Changes in working capital Other items (195) (28) (180) (19) Net cash from operating activities 789 891 Purchase of PPE* and intangible assets Purchase of financial assets Proceeds from sale of PPE*, intangible and financial assets (575) (1 103) 142 (791) (114) 27 Net cash in investing activities (1 536) (878) Distributions (516) (569) Net cash before financing (1 263) (556) Increase in capital stock Purchase of treasury shares Exchange rate and consolidation scope effect 46 (187) 44 22 (112) 85 Change in net indebtedness (1 360) (561) * PPE = Property, Plant and Equipment 29
Consolidated balance sheet In m ASSETS 31/12/07 30/06/08 EQUITY & LIABILITIES 31/12/07 30/06/08 Goodwill 3 643 3 681 Shareholders' equity 6 328 6 179 PPE and intangible assets 9 098 9 225 Minority interests 148 154 Other non current assets 719 646 Total equity 6 476 6 333 Total non-current assets 13 460 13 552 Provisions & deferred tax liabilities 2 756 2 530 Inventories Receivables & other assets 796 3 240 809 3 568 Non-current borrowings Other non-current liabilities 4 993 163 5 323 161 Cash and cash equivalents* 796 744 Provisions 169 331 Total current assets 4 832 5 121 Trade & other payables Current borrowings* 3 305 430 3 416 579 Total assets 18 292 18 673 Total equity & liabilities 18 292 18 673 31/12/07 30/06/08 Net indebtedness 4 660 5 221 Debt to Equity ratio 72.0% 82.5% *including fair value of derivatives 30
Operating income recurring margin H1 06 H2 06 Full year 2006 Group Gas & Services 14.7% 17.3% 15.6% 17.9% 15.2% 17.6% H1 07 H2 07 Full year 2007 Group Gas & Services 15.2% 17.6% 15.2% 18.8% 15.2% 18.1% H1 2008 Published excl. nat. gas 2008 Group Gas & Services 14.9% 17.5% 15.2% 18.0% 31
Industrial capex by geography 2006 investments*/ total revenue 2007 investments* / total revenue H1 2008 investments* / total revenue Europe 9.8% 9.5% 10.2% Americas 9.4% 11.3% 9.4% Asia-Pacific 13.0% 17.5% 23.7% Middle East & Africa 11.9% 28.1% 29.6% Total 10.3% 11.5% 12.4% * Excluding financial investments 32
Currency natural gas and Lurgi impact In m Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 H1 08 /USD /CAD /JP Others (41) (14) (27) (19) (35) (6) (30) (10) (34) (1) (23) (6) (53) +4 (20) (17) (64) +3 (2) (21) (73) (9) (1) (32) (137) (6) (3) (53) Total (101) (81) (64) (86) (84) (115) (199) Natural gas impact (25) +10 (9) +18 +51 +100 +151 Lurgi scope impact 0 0 +151 +210 +95 +229 +324 Average exchange rates for the period Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 /USD 1.31 1.35 1.37 1.45 1.50 /CAD 1.54 1.48 1.44 1.42 1.50 /JP 156.5 162.8 161.8 163.8 157.7 Q2 08 1.56 1.58 163.4 33
Share capital evolution Share buyback Number m Average price in H1 2008 1 289 483 112.3 87.09 Average number of shares outstanding 259 710 436 Total number of shares outstanding at 30/06/08 260 504 389 34
Engineering Glossary Orders in Hand represent the sum of the initial contracts value of all Group and Third Party contracts managed by the Engineering & Construction entities, excluding contracts under warranty The Order Intake represents the sum of the initial contracts value of all Group and Third Party contracts which entered into force during the period ASU: Air Separation Unit HyCO: SMR units, CO Cold Boxes, Hydrogen PSA for purification Alternative Energy: plants based on Natural Gas or Coal (such as Methanol and Methanol To Propylene plants, gasification projects) as well as gas cleaning units (Rectisol) Renewable Energy: biodiesel, bioethanol plants as well as oleochemical units Traditional Energy: plants built in the Refining and Basic Petrochemical area 35
First Half Results 2008: A strong performance in the first half ALMA gaining momentum August 4 th, 2008