This French gases giant is more resilient than it seems
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest.
At a time when global markets are reeling from tariff twists and turns, there's something to be said for seeking out companies with share prices that display relative calm. Air Liquide may seem an unlikely company to fit this billing.
France's industrial gases giant derives two-fifths of its sales from the Americas and many of its customers are sensitive to global economic conditions.
However, scratch beneath the surface and Air Liquide is more resilient than it first seems, which is reflected in its shares being up 7pc in 2025 and only off 3pc since the market-wide sell-off began in late February.
The work it undertakes is generally underpinned by large, long-term contracts tied to specific customer projects, such as recent US wins to supply gases for Micron's chip manufacturing and LG Chem's battery operations.
The gas plants Air Liquide builds adjoin the projects they serve and are operated by local subsidiaries. As such, while Air Liquide is an international company, it avoids tariffs by operating as a collection of local businesses.
There is also comfort to be taken from the fact Air Liquide enters this testy moment for the global economy in rude health. It is well underway with a transformation plan to invest more in growth while raising margins with the help of efficiency savings – nearly €500m (£434.2m) so far since 2022.
The strategy has been paying off handsomely, which is something that's underlined by the popularity of Air Liquide's shares with the world's best fund managers. Twelve of these individuals, all identified by financial publisher Citywire as among the top 3pc of over 10,000 globally, back the company. Not only does this give Air Liquide Citywire's top AAA company rating, it also earns it a place as one of just 79 stocks in Citywire's Global Elite Companies index, which tracks the very best ideas of the world's best managers.
In a sign of the ongoing progress at the company, management has recently decided to extend its margin improvement target for 2022 to 2026 to 4.6 percentage points. The group, which reported a 19.9pc operating margin in 2024, originally had a target for a 1.6 percentage point improvement, which was doubled to 3.2 a year ago.
Air Liquide is also ahead of plan with its investment objectives. Commitments from the start of 2022 to end 2024 add up to €12.7bn, which means it is likely to surpass a €15bn cumulative target by the end of this year.
The high level of investment has helped the group's capital-hungry operations exceed another target for annualised sales growth between 5pc and 6pc between 2021 and 2024. It actually managed 6.5pc.
Margin gains amplify the benefit of sales growth on profits. Annualised earnings per share (EPS) growth was 8.4pc over the last three years and is forecast to ratchet up to 12.1pc in the coming two.
While the potential for tariffs to cause a global economic downturn is a danger because of the large number industrial customers Air Liquide has, the business is also riding some strong long-term growth trends.
The company has forged a strong position in the market for green hydrogen. While the pendulum of sentiment has swung to an 'anti-woke' position, the energy transition continues to have strong support in Europe where Air Liquide does a lot of business. In fact, the company has welcomed the current environment as providing more realism about hydrogen's potential.
Air Liquide is also benefiting from the boom in AI and attempts by countries from across globe to forge semiconductor self-sufficiency because of the vital role gasses play in chip making. And the healthcare industry, which accounts for 16pc of sales from the dominant gas and services division, provides Air Liquide with a defensive end market.
The business also has defensive characteristics thanks to the length of its contracts which are linked to the lives of the assets they serve. The big investment commitments it has made over recent years, which are only announced when the company is sure everything will go ahead, also give visibility on future revenues.
The concentrated nature of the industrial gases sector helps underpin pricing, which is especially helpful given costs are sensitive to the oil price. Recent oil price falls are a plus.
Encouragingly, while investment has been increasing at Air Liquide, debt has also been falling. The company has also continued to grow its dividend, which has risen at an annualised rate of almost 7.8pc over the last 20 years. British buyers of the shares, which are available through the main UK broking platforms, need to fill out the right paperwork to minimise withholding tax on those dividends.
Priced at 24 forecast earnings, the valuation reflects some of the recent improvements, but given ongoing progress, it is a price that many of the world's best investors are happy to pay.
Questor says: buy
Ticker: EPA:AI
Share price: €168.34
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