begun to gradually recover since the beginning of May. Large Industries
sales were down by -3.5%. Industrial Merchant, which was down -8.2%, was
the most impacted by the public health crisis. Healthcare activities,
which account for more than 40% of Gas & Services sales in Europe, remain
fully mobilized to fight against COVID-19 and saw revenue growth of
+10.8% in the 1st half.
-- Revenue in Asia-Pacific reached 2,236 million euros in the 1st half, down
-2.1% on a comparable basis. China was the first country to suffer the
effects of the COVID-19 pandemic, with a -2.5% decline in sales in the
1st quarter. The recovery in this country was also very fast, with
revenue in China posting growth of +2.1% in the 2nd quarter, with
positive growth in all industrial activities. Part of the region remains
affected by the pandemic and lockdown measures. In the 1st half 2020,
Large Industries (-2.0%) was supported by the resilience of its business
model. Industrial Merchant (-5.8%) was the most impacted. Electronics
(+1.5%) represents a third of the region's sales and posted a very
dynamic growth of +12% excluding Equipment & Installation sales.
-- Revenue in the Middle East and Africa amounted to 269 million euros, down
-7.3% over the 1st half of the year on a comparable basis. Industrial
Merchant sales were very weak during the 2nd quarter following the
introduction of lockdown measures across the region. Large Industries
demonstrated its strong resilience despite a major customer maintenance
turnaround during the 1st quarter, with the region's two major units --
in Saudi Arabia and South Africa -- continuing to operate at a good level
during the 2nd quarter. Healthcare, posted strong growth, notably in
Healthcare is highly mobilized in the fight against COVID-19 and posted significant growth of +8.7%. Electronics also enjoyed very solid growth of +2.0% (+8.9% excluding Equipment & Installations sales), driven by very dynamic sales in Carrier Gases and Advanced Materials. Industrial Merchant (-8.1%) was the hardest hit by the public health crisis, but price impacts remained strong at +2.9%. Sales in Large Industries were down slightly, by -2.5% over the half year, due to a weaker demand in the 2(nd) quarter in particular in Europe and the United States -- two regions which were strongly affected by the pandemic.
Contribution to consolidated revenues from Engineering & Construction stood at 104 million euros in the 1(st) half, and reflected the priority allocation of resources to internal projects as well as the impact of the pandemic which led to closure of the workshop in China for four weeks and to several projects being postponed by a few months.
Global Markets & Technologies revenue reached 249 million euros, up +3.2%. The biogas activity remained very dynamic in the United States and Europe. Order intake for Group projects and third-party customers enjoyed a strong increase and included helium cryogenic refrigerators, Turbo-Brayton LNG reliquefaction units and hydrogen stations.
Efficiencies amounted to 200 million euros over the first six months of the year, in line with the annual objective now fixed at more than 400 million euros. Moreover, exceptional cost reductions under the public health crisis response plan were to offset the low activity level and are not, due to their nature, sustainable over the long term.
Group operating income recurring (OIR) amounted to 1,813 million euros in the 1(st) half of 2020, stable as published and up slightly +0.2% on a comparable basis versus 2019. The operating margin (OIR to revenue) stood at 17.6%, an improvement of +100 basis points compared with the 1(st) half of 2019, and of +50 basis points excluding the energy impact. Gas & Services operating margin as published stood at 19.6%, an improvement of +120 basis points compared with the 1(st) half of 2019, and of +60 basis points excluding the energy impact.
Net profit -- Group share amounted to 1,078 million euros in the 1(st) half of 2020, an increase of +1.8% as published. Despite the pandemic and the resulting significant decline in activity, net earnings per share were up +1.8% compared with the 1(st) half of 2019 and reached 2.29 euros per share.
Cash flow from operating activities before changes in working capital amounted to 2,371 million euros in the 1(st) half of 2020, which corresponds to a high level of 23.1% of sales, a marked improvement of +170 basis points compared with the 1(st) half of 2019(1) . Net cash flow from operating activities after changes in working capital requirement amounted to 2,153 million euros, up markedly by +9.9%. The net debt-to-equity ratio, adjusted for the seasonal effect of the dividend payment, stood at 64.5%, down sharply compared with end-June 2019 (70.7%).
Industrial investment decisions totaled 1.3 billion euros, stable compared with the 1(st) half of 2019, despite the challenging global health situation. Electronics reached a record level of investment during the 1(st) half, notably thanks to the signing of several new units in Asia. The 12-month portfolio of investment opportunities stood at 2.9 billion euros, stable compared to the end of 2019 and up compared to the 1(st) quarter of 2020.
The Group confirmed the start-up dates of the main projects for 2020 and maintained its forecast for the additional contribution to 2020 sales of unit start-ups and ramp-ups of between 150 million and 180 million euros. Based on the health situation as of the beginning of the 3(rd) quarter, the Group's best estimate regarding the additional contribution to sales for 2021 is in the range of 300 million euros, reflecting notably the postponement of certain start-ups and ramp-ups to 2021 due to the COVID-19 crisis.
Recurring return on capital employed after tax (Recurring ROCE)(2) stood at 8.4%, an increase of +10 basis points compared with the 1(st) half of 2019.
In the 1(st) half of 2020, the Group maintained its dividend payment and increased industrial capital expenditure while refinancing in advance the debt maturing in 2020. These initiatives underline the robustness of the balance sheet and net cash flow from the Group's operating activities in a crisis context and its ability to ensure its future growth.
(1) Compared with restated 1(st) half 2019 following changes in 2019 annual financial statements: financial costs before taxes linked to IFRS 16 are reclassified in other financial expenses whereas they were included in net finance costs on 30 june 2019. A distinction is now made between other non-cash items under which the adjustment of this cost is recognized as well as income and expenses under IAS 19 and IFRS 2 and other cash items.
(2) Based on the recurring net profit, see reconciliation in appendix.
Table of Contents of the activity report
H1 2020 PERFORMANCE 6
Key Figures 6
Income Statement 7
Change in Net debt 16
INVESTMENT CYCLE 17
RISK FACTORS 19
2020 OUTLOOK 21
Performance indicators 22
Calculation of performance indicators (Semester) 23
Calculation of performance indicators (Quarter) 26
2(nd) quarter 2020 revenue 26
Geographic and segment information 27
Consolidated income statement 27
Consolidated balance sheet 28
Consolidated cash flow statement 29
H1 2020 PERFORMANCE
Unless otherwise stated, all variations in revenue outlined below are on a comparable basis, excluding currency, energy (natural gas and electricity) and significant scope impacts.
(in millions of euros) H1 2019 H1 2020 change change (a)
Total Revenue 10,952 10,273 -6.2% -3.2%
Of which Gas & Services 10,536 9,920 -5.8% -2.7%
Operating Income Recurring 1,814 1,813 0.0% +0.2%
Operating Income Recurring
(as % of Revenue) 16.6% 17.6% +100 bps
Variation excluding energy +50 bps
Operating Income and
Expenses (86) (92)
Net Profit (Group Share) 1,059 1,078 +1.8%
Net Profit Recurring (Group
Share) (b) 1,126 1,113 -1.1%
Earnings per Share (in
euros) 2.25 2.29 +1.8%
Cash Flow before changes in
requirements 2,348(c) 2,371 +1.0%(c)
Net Capital Expenditure (d) 1,537 1,309
Net Debt EUR13.7 bn EUR13.2 bn
Net Debt to Equity ratio
(e) 70.7% 64.5%
Return on Capital Employed
after tax - ROCE 8.1% 8.3% +20 bps
Recurring ROCE (f) 8.3% 8.4% +10 bps
(a) Change excluding the currency, energy (natural gas and electricity) and significant scope impacts, see reconciliation in appendix.
(b) Excluding exceptional and significant transactions that have no impact on the operating income recurring, see reconciliation in appendix.
(c) Compared with restated 1(st) half 2019 following changes in 2019 annual financial statements: financial costs before taxes linked to IFRS 16 are reclassified in other financial expenses whereas they were included in net finance costs on 30 june 2019. A distinction is now made between other non-cash items under which the adjustment of this cost is recognized as well as income and expenses under IAS 19 and IFRS 2 and other cash items.
(d) Including transactions with minority shareholders.
(e) Adjusted to spread the dividend payment in 1(st) half out over the full year.
(f) Based on the recurring net profit, see reconciliation in appendix.
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