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A continuous wave of on-off tariffs that abuse stock portfolios has led investors around the world to search for shelter. Industrial gas used in construction, manufacturing and hospitals will conform to the bill. Companies in this sector already live in a degloblased world with annual revenue of 87 billion euros.
Shunting oxygen, nitrogen, argon, carbon dioxide and more is expensive, so customers are offered on-site or nearby. More than four-fifths of sales of Ireland-based Linde, French aviation liquids and US aviation products each are local, Bernstein analysts calculate. International sales are minimal.
There is a lot of visibility in what is called an “invisible industry.” Buyers and suppliers enter into 15-20-year contracts that are protected from political whims. These generate recurring income through long-term rental kits on customer sites. The thick backlog offers ballasts with songs that cost over $1 billion at Linde and 4.5 billion euros at Airlikid.
The slower economy is also passing the sector. Since most gas is used immediately after it is produced, there is little inventory accumulation. Our customer base is diverse. Special gas cocktails for carbon dioxide canisters to pubs, oxygen tanks to hospitals, and etching tips.
Naturally, the sector doesn’t have technology or defense pizza. Both are, by chance, gas users. However, the sector’s stocks hold their own holdings through tariff-induced volatility. And the ratings are drifting higher. Even the lowest rated aviation products will be traded 21 times next year.
Growth accumulates. Ebitda is projected to grow at 3-6%, then 6-7% in the Big 3 this year. However, the numbers may still bubble up. Linde beat 25 quarter expectations with Trot.
Gas is not completely immune to political changes. This sector is an early link in the chain to renewable energy, for example producing hydrogen, a staple food for clean technologies such as hydrogen fuel cells. Some of the gusts of the project, unfolding in the more benign age, have already not stagnated. Aviation products in February withdrawal from the trio’s projects, including a project in New York that ended up producing green liquid hydrogen following the removal of the tax credit. Linde is behind in Canada’s $2 billion clean hydrogen plant.
But it’s just a wrinkle. The industrial gas company’s main business offers a welcome respite from the political heat.
louise.lucas@ft.com
