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Investing.com -- Air Liquide shares fell more than 2% on Tuesday as a sharp decline in first-half free cash flow and a cautious second-half outlook overshadowed stronger-than-expected second-quarter comparable sales growth.
Group revenue rose 5.2% to €7.04 billion in the second quarter, below the consensus estimate of €7.09 billion and Jefferies’ €7.06 billion forecast.
Gas and Services revenue of €6.81 billion was broadly in line with both estimates. By business line, Electronics led second-quarter comparable growth with a 9.5% increase, well above Morgan Stanley’s consensus estimate of 4.6%, driven by strong demand for carrier gases and materials.
Healthcare grew 4.4%, while Industrial Merchant rose 3.8%, including five percentage points from pricing. Large Industries declined 0.3%.
Regionally, the Americas posted comparable growth of 5.2% and Asia-Pacific grew 4.7%, including 13% growth in Asia-Pacific Electronics, according to Jefferies, while Europe lagged with growth of 0.7%.
The top-line performance was overshadowed by cash flow. First-half free cash flow after net interest fell to €0 million from €989 million a year earlier, reflecting a €1.4 billion working capital outflow.
Net debt rose to €13.9 billion at the end of June from €8.4 billion at the end of 2025, equivalent to 2.4 times net debt to EBIT before scope items.
First-half adjusted EBIT rose 5.7% year-on-year to €2,893 million but missed the consensus estimate of €2,911 million and Jefferies’ €2.95 billion forecast.
The adjusted EBIT margin improved 110 basis points to 20.9%, 10 basis points above consensus. Gas and Services adjusted EBIT of €3,051 million was 3% below Jefferies’ forecast, although the division’s margin improved by 80 basis points.
Engineering and Construction second-quarter revenue of €230 million exceeded Jefferies’ €225 million estimate but fell short of a consensus figure that Jefferies said implied €292 million.
Morgan Stanley said the working capital outflow should prove temporary but acknowledged it weighed on sentiment. "1H FCF was weak on a large NWC outflow, albeit we consider this temporary," the broker said, adding that they expected full-year 2026 adjusted EBIT consensus estimates to "remain largely unchanged."
Guidance also disappointed. Air Liquide said second-half comparable growth would be "similar or slightly higher" than the 2.6% recorded in the first half, falling short of market expectations for growth of about 4.2%, according to Morgan Stanley.
"This may slightly disappoint the market," the broker said, although she added the guidance "may be baking in some conservatism," noting second-quarter Gas and Services comparable growth had already accelerated to 3.3%.
On the positive side, Air Liquide’s investment backlog reached a record €6 billion at the end of the first half, up from €5.5 billion at the end of the first quarter.
Investment decisions totalled €2.8 billion in the first half, while operating cash flow before working capital changes rose to €3.37 billion from €3.25 billion a year earlier. First-half EPS was €3.02, broadly in line with the €3.04 consensus estimate.
Air Liquide reiterated its target of improving its operating margin by 100 basis points in both 2026 and 2027.
