Air Liquide America to improve profitability in the United States
Houston (October 18, 2000) - Air Liquide America announced today a plan to improve profitability in the United States, including in particular the streamlining of the small and medium size industries (merchant) business.
Pierre Dufour, President and CEO, Air Liquide America said: " In a changing environment in the United States we have looked at our different segments and business lines and we have concluded that we are well positioned to deliver growth and profitability thanks to our past investments and strategy to bring high value added services to our customers.
However the profitability of our small and medium size industries (merchant) business segment, which represented 43% of our total US sales of 1.4 billion USD in 1999, is at an unacceptable level. We are addressing this situation through a series of actions in this segment mainly through restructuring distribution channels for the cylinder and hardgoods business and the development of cost efficiency initiatives for the bulk business. The plan being implemented today is expected to improve operating margins by 5 points while reducing capital employed by about 100 million USD within two years. This in turn will restore the profitability of our merchant activity to an acceptable level consistent with our past investments."
Air Liquide America’s US business covers three major market segments, each with unique characteristics:
In the Large Industries (tonnage) segment, Air Liquide delivers large quantities of gases to chemicals, refining or steelmaking clients, usually via pipeline. Growth and profitability for that segment is in line with the company’s goals, as long term contracts signed the previous years are gathering steam. Growth is focused in markets and industrial basins where Air Liquide has a strong presence. Sales to the Semiconductor market are growing in line with market trends and profitability is improving, supported by a strong focus on services. Small & Medium size Industries (merchant) sales, covering gases delivered in liquid (bulk) or compressed form (cylinders), welding hardgoods, and gases produced at the client’s premises with small onsite plants, present an uneven performance. A combination of structural and unusual circumstances have affected their profitability which needs to be addressed.
Restructuring the cylinder gases and welding hardgoods business
Cylinder gases and welding hardgoods are distributed through a variety of channels, typically including direct stores, direct shipping, distributors and, recently, e-business. In the United States, half of this market is served by an extensive network of independent gas and hardgoods distributors -- a situation unique to the rest of the world.
Air Liquide America will restructure its distribution channels in the US in the following manner:
It will cease the resale of welding hardgoods, making them available to clients only through distributors or direct shipments from suppliers. Air Liquide was only a reseller in the US, contrary to Canada and Europe where Air Liquide is a manufacturer. It will serve small and retail cylinder gases customers exclusively through a distributor network; not through its own stores, as previously done. These changes will allow Air Liquide America to serve those customers that require proximity more effectively, while reducing working capital. The divested businesses will be primarily sold to distributors that already are, or will become, its partners. This will result in a reduction of approximately 800 people for Air Liquide America, most of whom should become employees of the pu
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