Narrow-moat industrial gas supplier Air Liquide AI briefed investors on Wednesday with its first-quarter revenue performance, which implied annual growth below our estimates. We will update our 2013 projections to reflect the weaker revenue but don’t expect to make a drastic reduction in our fair value estimate.
Reported revenue declined 2.1% compared with the same period last year. But excluding the impacts of negative foreign currency movements and lower natural gas passthroughs, revenue inched higher by 0.2%. Further, management noted its gas and services segment (91% of quarterly sales) delivered 4.9% growth excluding two large customer settlements in the year-ago period and the negative impact of two fewer workdays in the quarter.
Air Liquide provided a small blurb about operating performance. The company noted efficiency gains reached EUR 59 million (about 1.6% of sales) in the quarter, consistent with its new objective of EUR 250 million (approximately 1.7% of sales). Assuming no sales growth, the gains would bolster operating margins to 18.4% for 2013, suggesting that our long-term operating margin of 17.6% appears realistic.
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