⚡ Gas giants of the future: who will lead the energy race? 🏁

Company presentation

The four leading players in the global industrial gases market are Linde, Air Liquide, Air Products and Chemicals and Nippon Sanso Holding. Each of these companies has a long history and has developed into a major player over time:

- Linde was founded in Germany in 1879 and is today an undisputed market leader.

- Air Liquide was founded in France in 1902 and ranks second on the world market.

- Air Products and Chemicals was founded in the USA in 1940 and is number three in the market.

- Nippon Sanso Holding has its origins in a company founded in Japan in 1910 and is currently number four in the industry.

Historical development

The industrial gases sector is characterized by remarkable stability. The same companies have dominated the market for over a century, indicating high barriers to market entry and a particularly robust business model. In recent decades, there has been increasing consolidation:

- 2018 saw the merger of $LIN (+0,07 %) and Praxair, creating the new industry leader.

- 2016 $AI (+1,56 %) Liquide acquired its US competitor Airgas to strengthen its market position

$4091 (+3,8 %) Sanso benefited from the mergers of its competitors and was able to expand through strategic acquisitions in Europe and the US.

Business model

The four companies produce and distribute industrial gases such as oxygen, nitrogen and hydrogen, which are indispensable in numerous sectors, from the steel industry to medical technology. The business model is based on long-term customer relationships, technological expertise and highly efficient logistics that enable the gases to be transported and delivered safely and economically.

Core competencies and future prospects

The companies' core competencies lie in the efficient production and distribution of industrial gases and in their in-depth technical expertise. All four companies are increasingly focusing on growth markets such as hydrogen technology and electronic gases, which are seen as key areas for the future. In particular, the growing demand for clean energy sources and the development of new technologies create potential for further growth.

Market position and competition

The global market for industrial gases is dominated by these four companies:

- Linde is the clear market leader.

- Air Liquide follows in second place.

-$APD (-0,23 %) ranks third.

- Nippon Sanso is number four on the market.

Together, Linde and Air Liquide control around 63% of the global market share, underlining their supremacy in the industry.

Total Addressable Market (TAM)

The global market for industrial gases is growing continuously and is expected to continue to expand in the coming years. Although exact figures on the "Total Addressable Market" (TAM) are not publicly available, it is estimated that the global market for industrial gases will reach a value of USD 173.43 billion by 2030.

Share performance

The valuation and performance of the shares of these companies show considerable differences:

With a market capitalization of $221.43B, Linde is currently the most valuable of the 4 companies. Since the IPO on June 17, 1992, Linde has returned 10,041% and on a 3-year basis is at 55.72%. Air Liquide is at 44.28% on a three-year basis and at 3,248.2% since the IPO on January 2, 1992, clearly behind Linde. APC is at 5,183.8% since the IPO on January 2, 1990, ahead of Air Liquide but behind Linde. On a 3-year basis it is at 11.07%. Nippon Sanso is at 71% and has only reached 1,311.56% since the IPO on January 6, 1992, making it the worst of the four stocks.

Performance

A look at the turnover of the last few years shows stagnation, and Sanso has recorded significant negative growth in some cases. This development is mainly due to the conversion into US dollars. Calculated in yen, sales have actually increased, but the dilution caused by the alignment with standard currencies such as the US dollar or the euro should not be underestimated.

Growth at Sanso is currently the strongest and has increased significantly in recent years. This is mainly due to the weak yen, which makes it possible to make offers more favorable. This is followed by Air Liquide and APC with slightly lower growth rates, while Linde has experienced a real slump in growth figures.

The gross margin is highest at Air Liquide, which is quite surprising. This indicates a solid core business, as Air Liquide is not diluting shareholders to improve its gross margin. This is the case to some extent at Linde, although the company is still significantly better off than APC. Sanso is also doing well with a gross margin of 40% and could probably improve further in the future.

The net profit margin paints a very different picture: APC performs best here, closely followed by Linde. Air Liquide and Sanso are well behind, each with a net profit margin more than 10 percentage points lower. As is so often the case, the American companies perform significantly better than the others.

In terms of earnings per share (EPS), the picture is similar to that of the net margin, albeit in reverse for APC and Linde. Nippon Sanso is also disappointing in this respect, achieving only modest dollar values.

In terms of free cash flow (FCF), all companies have been in positive territory for years, with the exception of APC, which has posted negative figures for the last two years.

As suspected, stock-based compensation is higher at Linde and APC than at the other companies, which makes the weak gross margin all the more surprising. Apart from this, the free cash flow figures of the other two companies appear all the better as they operate positively without the large costs for employee compensation.

Linde buys back significant amounts of its own shares and is therefore net negative, while Air Liquide only buys back smaller amounts.

Linde tops the list in terms of net debt. APC has increased its debt considerably in recent years, while Air Liquide is actively reducing its liabilities. Sanso Basis, on the other hand, shows a declining trend as the company has both reduced debt and has an advantage in the US dollar values reported as the debt is actually denominated in yen. Expressed in USD, these liabilities therefore appear less high.

The ratio of net debt to EBITDA is most favorable for Air Liquide and Linde, with all companies achieving a value of less than 3.

Part 2: https://getqu.in/uQP2uJ/