L'Air Liquide Societe Anonyme pour l'Etude et l'Exploitation des Procedes Georges Claude SA
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L'Air Liquide Societe Anonyme pour l'Etude et l'Exploitation des Procedes Georges Claude SA
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Good morning, ladies and gentlemen, and welcome to the Air Liquide Q1 2021 Revenue Conference Call. [Operator Instructions] I'll now hand over to Aude Rodriguez, Air Liquide S.A. Investor Relations. Please begin your meeting, and I will be standing by.
Good morning, everyone. Thank you very much for joining our conference call today. Fabienne Lecorvaisier will present the first quarter revenue. He is joined by François Jackow, Executive VP supervising Healthcare, Africa, Middle East & European Hubs; and, on the phone from Houston, Mike Graff, Executive VP supervising Americas and Asian Hubs and the Electronics business line. They will both participate in the Q&A session. In the agenda, our next announcement is on July 29 for our half year 2021 results. Please let me now hand you over to Fabienne.
Thank you, Aude. Good morning, everyone. Thank you very much for joining the call. I will start by sharing with you the highlights of the Q1 activities, then I will spend a few minutes on a reminder of the ESG commitments that we disclosed on March 23 and conclude with the confirmed guidance before opening our Q&A session. Let's begin with the activity. Starting from a contrasted comparison basis, Q1 sales for the group are up nearly 4% compared with Q1 2020 and are also above the Q1 2019 level, overcoming a still pretty challenging environment. In fact, Q1 is well aligned with our expectations with the additional medical gas sales, compensating for the impact on the U.S. freeze.All our business lines are back to growth, Industrial Merchant included, which was the most impacted, with a strong month of March. The focus on performance is, of course, maintained, and it showed in our cash flow level. And in terms of investments, the number of projects under review is huge driven by energy transition and Electronics. I believe we should first come back to the comparison basis. In fact, the effects of the pandemic on the Q1 2020 sales per region were very contrasted. In Asia, the impact was very strong in China and Singapore, especially for merchant, but more modest in the other countries. In Europe, sales were hampered by more than 15 days of strict lockdown in the Southwest and by very low steel and metal fabrication in Germany, but the other countries remain positive. In medical gases, sales started to rise throughout the zone. Conversely North America was only touched by the crisis at the very end of March. This shows very clearly on Slide 5. Q1 2020 was only slightly affected globally, and this reinforces our feeling that Q1 2021 is not only recovering but clearly back to growth, at least in Europe, Asia and the Middle East. Let's look at the key figures now. Gas & Services sales are up 2.8%, supported by the recovery in Large Industries and in merchant, notably in Asia and Europe, as well as by pursued high Healthcare sales. Engineering & Construction third-party sales are up nearly 50%, with an order intake close to EUR 300 million, significantly above last year's level. Global Market & Technologies are booming, thanks to advanced technologies and continued Biogas development. Here again, the order intake is solid at EUR 160 million. As a result, group sales comparable growth is 3.8%. Published sales are penalized by a strong ForEx effect at minus 5.1% and by the effect of significant scope at minus 2.7% linked to the Schülke divestiture and the Japanese distributor deconsolidation, which are not fully compensated by the positive impact of the rise of the energy pricing at plus 3.3%. Coming to the geographies. Europe, Asia and Africa/Middle East are putting nice growth, and we'll review the details in a minute. You see that only Americas were slightly under last year in terms of sales, and there are 2 main reasons for that. Q1 last year was mostly unaffected by the COVID in this zone. And second, our activities on the U.S. Gulf Coast and in the South of the U.S. more globally, was strongly were strongly impacted by the freeze in February. In fact, in Americas, apart from this very specific event, sales are around last year's level, also showing a solid recovery driven by air gases demand in Large Industries, start-up in Argentina as well as [ radian ] markets and Metal Fabrication in merchant. Healthcare sales and medical gases also remained very strong both in North and South America. Europe is clearly back to growth, up 4.5%. We see a significant pickup for steel driven by the automotive sector and better Chemicals, while refining remains weak. In merchant, volumes are now above 2019 volumes, and the pricing remains solid. Activity is particularly high in Eastern countries. Healthcare at plus 9% benefits from pursued high demand for medical oxygen and equipment and from regained Home Healthcare momentum linked to out-of-hospital patients and diabetes. Asia is also back to growth. Large Industries are strong in China, Korea and Singapore driven by a pickup in Chemicals and refining. Merchant is above 2019 levels, thanks to China, up more than 30% and to sequential improvement in most of the other countries. In Electronics, Carrier Gases still post strong growth, but pricing for Advanced Materials are affected by contract renegotiation in anticipation of higher volumes. Equipment & Installations are also low compared to last year notably in Japan. Africa/Middle East at plus 18% is suffering on a low comparison basis, while the maintenance stoppage of the Yanbu unit was effective in Saudi last year but also benefits from very high sales through our pipeline in Saudi and from a solid improvement of merchant in Egypt and India and strong Healthcare sales throughout the zone. Starting on Slide 10, the business line analysis confirm the pursued improvement. In merchant, 3 regions out of 4 are back to growth, with bulk sales up more than 5% and packaged gases back to last year's level globally. In terms of markets, foods, pharma and technos are solid. Automotive and Metal Fabrication are improving, in particular at the end of the period, while constructions remains weak. Pricing is resisting well at 1.6% in the absence now of any helium effect, and new pricing campaigns have been launched in Europe over Q1 and in the U.S. in March. Large Industries benefit from solid contribution of start-up and ramp-ups as well as from the recovery in Chemicals and the pickup in steel and post a decent progression at plus 3% despite the impact of the U.S. freeze, which is costing Large Industries 2% of growth. The U.S. freeze is also hampering oxygen volumes, which remain under last year when hydrogen volume are slightly up, thanks to a lower comparison basis. Our Healthcare teams continued to fight to deliver huge quantities of medical oxygen and medical equipment whenever and wherever it's needed. As a consequence, our Healthcare sales remained strong throughout the world at plus 10%. Home Healthcare is also improving driven by sleep apnea and diabetes. To be noted, in Q2, the 2020 comparison basis is going to be much higher for Healthcare, and this will show in the growth rates. Compared to high 2020 basis supported by some stockpiling, Electronics' progression is showing a slowdown due to Equipment & Installation and contract renegotiation for Advanced Materials, while Carrier Gases continued to post strong growth. Performance continues to benefit from our efforts in terms of mix and pricing, efficiencies and portfolio management. New efficiency stands at EUR 95 million, nearly 5% above last year. We have closed 3 additional small divestitures, our subsidiary in Greece, compressed air business in France and propane bulk business in the U.S. And more are ongoing while we pursue our bolt-on acquisition program. On top, we have partly maintained our cost containment actions, and we will do so until we are completely out of the crisis. These performance efforts show in the cash flow level, above 23% of sales, 100 basis points higher than last year. As a result, the net debt is slightly under at the end of December 2020 level despite a significant negative ForEx effect and strong CapEx, which is a very good performance given the usual Air Liquide seasonality. In terms of development, the number of investment opportunities continued to expand, and our teams are working on numerous projects. We've been submitting several of them in the energy transition field to the European Commission for subsidy preselection with a good rate of success. We also see a relocation trend in Electronics with new projects outside of Asia. After a very high Q4, investment decisions are more or less back to normal at EUR 600 million with a strong efficiency component. And to finish with, the backlog is stable, around EUR 3 billion, despite 4 start-ups in Q1. In fact, the contribution of start-up and ramp-ups to sales for the quarter at EUR 65 million has doubled compared to last year and allows us to confirm our estimate for the year, around EUR 250 million, excluding the Sasol takeover. Regarding the Sasol project, we are still well engaged with the South African competition authorities, and we still hope to be able to close by the end of H1. Before the conclusion, I would like to quickly remind you about the sustainability objectives that we announced on March 23 structured around our commitment to ACT: A like abatement of CO2 towards carbon neutrality in 2050, C as care for our patients and T like trust to engage with our employees and stakeholders and for a best-in-class governance. Our commitments are detailed on our website, but I would like to come back on the CO2 emissions reduction milestones as they will drive our strategy and our project development choices but also support our growth. While still targeting a reduction of our carbon intensity of 30% by 2025, our first step will be to start decreasing emissions in absolute value around 2025 as well. The second step will be to reduce them by 1/3 by 2035. This will require high selectivity in project development as well as more renewable energy sourcing, low-carbon production capacities and carbon capture. This will also rely on the rapid development of our hydrogen investments and sales to be multiplied by 3 before 2035. As you've seen, our portfolio of opportunities is well aligned with these sustainable growth objectives that we will continue to couple with improved profitability, and our teams are fully mobilized around these commitments. Capitalizing on the Q1 performance, which is strong despite the uneven environment and the U.S. freeze, I will conclude by confirming our guidance, which is in a context of limited lockdowns in H1 and recovery in H2 to further increase operating profit margin and to deliver recurring net profit growth at constant ForEx. So thank you very much for your attention. We are now going to open the Q&A session with Mike and François.
[Operator Instructions] And the first question comes from the line of Gunther Zechmann from Bernstein.
A couple of questions to kick off, please. Firstly, on the strong growth in Healthcare, can you comment on the sustainability of that growth rate, please? Maybe if we'll use your group guidance of limited local lockdowns in the first half and recovery in the second half, how you see that pan out. And then secondly, on the chips shortage in the semi space, can you quantify what impact you might have seen already and guide what is included in your group guidance for the rest of the year, please?
Okay. Thank you very much for the questions. I think François will answer for Healthcare and maybe Mike for the semiconductor shortage.
Thank you very much, Fabienne. Good morning, everybody. Indeed, the growth of Healthcare was quite strong in Q1, close to 10%, and we see that basically in all the geographies. Europe was close to 9%. What is changing, if I may say so, compared to what we have seen is that we were expecting med gas basically to slow down, which has not been the case. Med gas growth in Europe was close to 15%, mostly in the southern part of Europe. But at the same time, we have seen that the Healthcare homecare activity in Europe has been maintained. And we have seen a level of new patients which is quite normal. You keep -- you have in mind that last year, we have seen a decrease in the new patients. Most people were not getting to the hospital or to the doctor to see a prescription. So clearly, we are back to a more organic growth in the homecare activity, which, as you know, is well sustained. At the same time, especially in Europe, we have seen still a high level of equipment sale. We do expect this to slow down. But for the time being, it's still quite high. For the Americas, the growth was above 10%, close to 13%, with also a very strong dynamic in med gas at more than 15%, with some countries like Latin America, unfortunately, very, very high growth. Brazil, for example, close to 80%. Airgas, where we are #1 in med gas for the hospital, we have seen also an increased activity almost to 10%. And this is due to, of course, some of the COVID demand but also the fact that the proximity care and the elective surgeries are happening again. They mostly stopped last year. The homecare activity, especially in Latin America, is also very strong. Finally, Asia, we have seen moderate growth but above 5% in most of the countries, with a strong growth actually in med gas in China, where we have a small position overall, but the growth was quite significant. Finally, in Africa, Middle East and India, the growth was very strong to meet the demand for medical oxygen, and this is true especially in South Africa, in Tunisia, in Egypt and in -- more recently, very strong in India. So you see that all in all, there is still a quite strong COVID impact. We do expect this to normalize, and we hope so that it will in many countries, even if we are not at the peak in some countries, especially in developing areas Latin America and Africa and India. But we see, at the same time, that the organic rate -- or the organic growth is picking up. So we do expect, I mean, Healthcare towards the end of the year to come back to the growth level that we have seen before in the range of 5% across the different geographies and business mix.
Thank you, François. Mike for the chip shortage in Electronics, please?
Sure. Thanks, Fabienne. Good morning, everyone. Gunther, I think that everybody has read a lot about the chip shortage in automotive. We saw the sharp decline in automotive production in the first half of last year. And what happened, obviously, was that those fabs that produced the chips, the semiconductors that went into automotive that had fabs that they could convert to produce other chips which were in dire need, we saw the rapid growth in many aspects of electronics last year, actually ended up with a utilization rate fully utilizing those fabs for those other chips. And then with the earlier and fast rebound in automotive, suddenly there was a much more increased demand not just for chips that go into automotive, but you continued to some very strong growth in demand for other semiconductors. And then this freeze that occurred on the Gulf Coast only exacerbated that for some of the fabs that are located on the Gulf Coast. So I think what we're going to see is, first of all, continuing growth in demand for all the reasons we've talked about prior to the shortage for automotive. PCs, smartphones and servers are all forecast to continue to grow at 6% or 7%. Cloud demand is going to be up 25% probably for the year, which is up 44% last year. And for automotive, we see an increase in chips of almost 24%. Recognizing the automotive space, these are primarily analog devices. So you're looking at microcontrollers, analog devices, power semiconductors. And all of this is going to drive new investment and new demand. The forecast for the industry overall, looking at both the digital space and the analog space, has been revised for 2021, thinking about production rates more aligned with 11% to 12% growth rather than the original forecast of 7%. And I think much of that we're going to see in the second half of the year. So you've got the effect of COVID, where new fabs that were being constructed or delayed for the construction and the initial start-up, you've got additional significant investment now being announced in semiconductors across the globe. You see a lot of that in the U.S. You see a lot of that in Asia. And I think you will be -- see a very, very strong increase in investment for analog devices as well. So I think the combination of all these things bode well and only create an ever-growing dynamic for growth in the industry. But again, these are more the analog devices. They don't use as much of the advanced materials. They use certainly carrier gases. And I think we'll see the continued use of specialty material there as well.
The next question comes from the line of Martin Roediger from Kepler Cheuvreux.
Following up on Electronics. You mentioned lower sales in Advanced Materials and in E&I. Are there specific countries affected most, i.e., China or Japan? Or is that related to the U.S.? And secondly, can you elucidate again about the contract negotiations in Advanced Materials, please? Because you highlight that in your speech.
Okay. Thank you. I will hand over to Mike again. In terms of Equipment & Installation, it's clearly Japan that we had very high sale last year. So as a comparison, we -- under -- globally for the world, we are at minus 10% in terms of Equipment & Installation. The Advanced Materials sales are not decreasing. I want to insist on that. The growth is just slowing down compared to LatAm. But maybe, Mike, you can detail again.
Sure. So as Fabienne said on E&I, we had a very strong comparator, especially with growth in Japan a year ago. I think that E&I is actually at a normal level if you look at the typical cycles for E&I investment. So it's not low, it's not high. It's probably somewhere in the middle of where it normally is. And with those new investments that I just mentioned, a very significant uptick in the announcements for new fabs and for construction activities, likely that will continue to grow further as we see things evolve later this year but, more importantly, in the out years. On Advanced Materials, there's multiple factors here. I think on a volume standpoint, late in 2019 or early 2020, we clearly saw the ramp in new offers for advanced nodes. We talked about a lot of the market drivers and a lot of the need that was already planned for the industry. And I think as customers started to go ahead and look forward to the introduction of a lot of new technologies, thinking about AI, thinking about 5G, thinking about the Internet of Things and a variety of other aspects that were driving growth in the digital space, they started to build some inventory because they wanted to make sure they had a very smooth ramp-up of their facilities. And then supply chain concerns, some of that initially driven by trade issues but then exacerbated by COVID, drove some further stocking of inventory. And I say that because if semiconductor volumes grew 7% last year, we saw more than twice that in the growth for the advanced nodes, which is where a lot of our advanced materials are used. And yet in retrospect and looking at the level of sales of advanced materials last year, it was far more than 3x what the growth factor was in semiconductors overall. So clearly, there was an inventory build there. At same time, you see that with COVID, you've got delayed construction and start-up of new fabs for our customers as well as for the introduction of some of our new advanced materials to support those fabs as well. So you've got this combination of inventory build and the lag of facility startups that affected volumes. And then typically, with our advanced materials, we have an entire portfolio of products. You've got those that are just being introduced, those that begin to evolve in acceptance. Some end up as niche products that are highly valued by the customers. Some find multiple uses and broader use in the industry and ramped to be very high-volume products. And eventually, you reach a point on the maturity curve where you want to go ahead and sustain the level of sales at very high volumes for those molecules that have matured. And so we have entered into some long-term agreements to ensure high volumes of those advanced materials at the right price point that makes sense for value creation for the customer and it makes sense for Air Liquide. So these are being produced by facilities that are already existing. They've already been in use for a while, and it's a natural evolution of what we see in our typical portfolio. The issue here is that we don't see the offset of the start-up of some of the other new advanced materials that go with it. So to Fabienne's point, we continue to see growth, and we will continue to see substantial growth in Advanced Materials. And I think as a lot of these new facilities, both our customers' fabs and our facilities that were delayed by COVID, come on stream later in the second half and into 2022, we will continue to see the kind of growth rates we're use to.
The next question comes from the line of Andrew Stott from UBS.
I had 3, sorry. One is a very small one. Let me start with the 2 bigger ones. So on pricing, you talk about launch of several price campaigns in the slide deck. Just wondering if you could give us a broad picture for 2021. Because obviously, helium has got -- now got negative. So when we take the 1.6% you did in Q1, how do we think that travels through the year? Can you hold on to that? Or can you even improve on that? First question. Second question is on margins. I'm not going to ask you the question about the full year margin because I get the point that there are so many moving parts. But just thinking about the first half versus the second half balance, so here's my thinking. And I just was interested in your own response. First half, you're going to have ongoing COVID savings, you're going to have a very good Healthcare performance, obviously, and Industrial Merchant still a bit soft. So if nothing changes dramatically, then I was assuming you'll have a lot better margin in the first half than the second. So I just wonder what your thoughts were on that comment. And the final one is very easy. Kazakhstan, the takeover you commented on. It's been included in organics, and I just wondered what the impact of that was.
Well, thank you, Andrew. I think the 2 firsts are for me. In terms of pricing, it's true that last year, we had a stronger component of the helium pricing in our global pricing. It's coming back to neutral for this Q1. We are also starting to compare to periods where the price of helium was already very high. So we anticipate more the neutral or maybe slightly negative impact of helium pricing but should not weight much on our global pricing. For the rest, as mentioned, we have launched new pricing campaigns, in particular a significant pricing campaign at Airgas in the U.S. at the end of March. So we don't see the effects yet of this pricing campaign. I think they will be helped by the fact that inflation in the mature countries is picking up a little bit. So we are pretty confident on pricing for the full year to be relatively solid. Quite difficult to estimate yet but at least between 1% and 2%, I would say, for the full year. In terms of margin, my favorite one, I need to recognize that it's a very good question to wonder about the balance between H1 and H2. In H1, we are comparing to a period last year where our cost containment plan was not fully deployed, and we are maintaining partly this cost containment plan while continuing to develop our performance improvement actions. So it's true that the improvement of margin is very likely to be stronger in H1, knowing that in H2 we anticipate that the activities should normalize that we should progressively close our cost containment plan and that we will compare to a period last year where the cost containment was at its maximum. However, the margins will continue to improve, both in H1 and in H2, but it's very true to anticipate a stronger improvement in H1 than in H2. The last one is about our takeover in Kazakhstan. So this one, I will hand over to François.
The takeover that we have made in Kazakhstan for KMG is, in fact, included in the comparable and in the organic, yes? So that's part of the growth that you see.
Oh, yes. And it will be a part, of course, of the start-up and ramp-up contribution for the full year. It accounts for less than 10% of the total for the full year according to our anticipations.
The next question comes from the line of Tom Wrigglesworth from Citi.
So I'd like to focus on Americas growth. Can you help quantify the impact of the cold weather in the first quarter in Large Industries and merchant? What do you think the growth would have been without that? And I think we're seeing in a number of end markets in the U.S. quite a substantial catch-up in March looking into. 2Q is that something that you're feeling from specifically, I guess, the construction-focused end markets? I guess the Biden policy is as well helping to stimulate that. So any comments on that with be exit rates in 1Q? And my second question is slightly longer dated on Electronics. Obviously, so we've seen some big announcements about onshoring of semiconductor manufacturing back to the U.S. and Europe. Is that something that's -- is that potential new business for Air Liquide? When might you be able to -- when would we expect to see those kind of enter the order book if you were to be able to win with contracts associated with those projects?
Well, thank you, Thomas. I think, Mike, it's all yours about the impact of the freeze, the end market picking up in the U.S. and the trend of relocation of some electronic investments on the other side of the Atlantic.
Sure. Thanks, Fabienne. First of all, with the winter storm. Clearly, this was an unexpected winter storm, a hard freeze. And this really affected the entirety of the Texas Gulf Coast, the entire industrial ecosystem as well as individuals who were severely affected by this particular storm and decrease. In the U.S., we saw many impacts for our own facilities, as did many of our customers where third-party power was curtailed, natural gas supply was curtailed. In some areas, people didn't even have access to water. And so we saw a direct impact on our own facilities that lasted for 2 to 3 weeks depending on the site and some of the things that we had to deal with. More importantly, I think our customers took at least 5 to 6 weeks, in some cases, to recover. And I think that the impacts of the freeze on their facilities had a lingering impact for them. Recognize that this was much worse than a hurricane because there was no time to prepare, especially for our customers with these very large industrial facilities. Under normal circumstances, they recognize that a hurricane may be on its way. They are able to go ahead and prepare in advance. If they need to, they can go through an orderly shutdown. In this case, at most they had 2 hours' notice. And so you had very, very large facilities that were basically just shutting down. And in that uncontrolled or, let's say, unplanned environment, it created a lot more problems for their own facilities and their own equipment than they might normally see. For us for the week, the most severe week of the storm, our volumes on average were down roughly 75% during that week, during the peak of the storm. And I think that the overall impact on the Q1 numbers for Large Industries alone was probably on the order of about 11% and probably roughly about 1% on the merchant activity. So I think from a market standpoint, what we saw in January, actually, before the storm, we started to see in Large Industries a very strong uplift in volumes. We started to see oxygen demand on the pipeline systems basically back to normal, except for a few customers that had a turnaround or some other event. As a matter of fact, if you looked at the volumes for LI, they were almost double digit, certainly 9% above 2020 and certainly well above 2019 as well, double digit above 2019. So we were seeing good growth. And I think what we see is the impact of the storm on our customers not only with the outage and all the impacts there, but they ended up depleting all of their inventories. And so we see through March and now into April with the impact and the aftermath of the storm, the customers, once they gradually restarted their operations, the April numbers are showing similar strength to what we saw in the January time frame. So for Large Industries, I think the chemicals market continues to strengthen. I think this impact of the winter storm with the depleted inventories and the multi-week outages have resulted in strong activity levels as things returned to normal. Even steel fundamentals continue to be strong. In refining, while still soft, I think that there are clear signs of improvement that we saw in January. And refining suffered the same effect of this winter storm. The majority of the refineries on the Gulf Coast and Texas were shut down as a result of the storm. And so as a result, they have those same inventory effects. So I think that the combination of recovering from the store, rebuilding inventories and a recognition that transportation fuel demand continues to improve with diesel back to normal, gasoline continuing to improve and probably jet fuel still lagging a bit bodes well in terms of Large Industries. I think on the merchant side, as I mentioned, I think Airgas, besides the winter storm, they also saw 1 working day impact on their numbers. But I think from a packaged gas standpoint, we continue to see good recovery as we look at where things are evolving. And in bulk, we're already back to growth from a bulk standpoint, and I think it's hardgoods that are still somewhat impacted. The markets in IM as we look out, we see very positive momentum in those markets. Food, pharma, life sciences, all elements of manufacturing and metal fabrication have been sequentially strengthening throughout. And some were strong throughout COVID, but they continue to show that strength. What's weaker? I mean nonresidential construction is yet to recover. Certainly, elements supporting the oil and gas industry, which is showing modest signs of recovery, are still weaker. And I think the heavy machinery aspects, the heavy equipment for mining, for oil and gas, for earthmoving, for construction are still weak. And I think that those particular markets, that weaker performance in those markets, are also hardgoods intensive, and I think that continues to hinder the recovery in the hardgoods market. So I think overall, things are positive as we end the -- move into the second quarter. Both kind of the natural evolution of recovery, what we see, growth in the markets. And I think in addition to that, the recovery from the winter storm is also very positive. So I think that, that covers the key elements of what we see for the winter storm. And looking at the trends for investment in semiconductors, there's a multitude of things that have evolved here. We talked about trade tensions before. I think supply chains have been under stress both with trade tensions and COVID. And I think what's happened is the advanced economies are clearly concerned about security of supply for semiconductors, recognizing the long-term critical needs for digital in every aspect. And so you've got geographical drivers. You've got the continued focus on the Chinese ecosystem for semiconductor growth. You clearly see the U.S. attracting a major wave of new investment, and that's been a driver now for the last couple of years. And I think even in the President's announcement yesterday, that again was a core component. And you see the European ambition to produce 20% of global demand by value of semiconductors in 2030. So I think all of these things are going to drive significant investment. Some of those investments have been announced. It'll certainly take a period of time for those investments to come to fruition. For the typical mega fab these days, once it's announced, it's going to take somewhere between 18 to 24 months or more to go ahead and build. And then you've got to go through start-up and a variety of other things. But you see that -- on a global basis, you see a very substantial focus with many of the key players in semiconductors looking at the U.S. for investment. And I think that, that will bode very well for all aspects of our business in the out years.
The next question comes from the line of Jean-Luc Romain, the -- CIC Market Solutions.
My question relates to the strong growth in GM&T, plus 25%. I was wondering what drove the growth most. Was it biogas or hydrogen related or equipments or a mix of 3? What was the strongest contributions?
Well, the first driver of the growth in GM&T is clearly the pursued development of biogas activities. The Biogas segment is up more than 50% compared to last year. On top of that, we have strong sales in terms of advanced technologies and cryogenic technologies. Of course, our H2 mobility sales are also growing. But at this stage, it remains a relatively modest component compared to Biogas, for example.
The next question comes from the line of Tony Jones from Redburn.
I've got 3, if that's okay. I saw an article from a consultant this morning pointing out how desperate India is for healthcare gases given what's going on at the moment. Is that geographically a new potential opportunity for Air Liquide? Or do you not have the infrastructure and perhaps also in other developing regions? Then my second question, circling back to the price campaigns. You, Fabienne, talked about the sort of mature macro-inflation pressure creeping through. But are you starting to see it now in the business at a raw material and sort of logistics cost level? And could that get worse? Or do you think that what you've announced will be -- make sure margins remain robust? And then lastly, we've got oil and chemical prices back at high levels and margins are quite strong. Are you seeing any improvement to investment trends from those end markets, perhaps also refining as well?
Well, thank you for your question about India. I will hand over to François as India is part of his perimeter.
Thank you very much, Fabienne. Yes, indeed, the situation in India is becoming more and more dramatic. Today, we see that really the crisis is picking up with more than 300,000 daily cases. And we see that the health care system overall is overwhelmed in many region of the country, especially in the west and around New Delhi. We see clearly that there is a huge demand in the medical oxygen. Typically, just to give you order of magnitude, there is, for the whole country, probably close to 800 tonnes per day of medical oxygen demand. What we see today and for the past few weeks is an increase by tenfold, which also, to put things in perspective, represent now probably 50% -- more than 50% of the capacity of the LOX production for the whole country, which is mostly industrial LOX production. So for us, we have overall a small presence in India, where we have 4 air separation units which are supplying large industry and merchant customers. And all our teams, of course, are fully mobilized to meet the demand of the country. So we have switched basically 100% of our liquid oxygen production to medical oxygen, except for the priority industrial customer, which mean that we have increased by 4 already the amount of medical oxygen that we are supplying either directly to hospital or to distributors. We have also increased, I mean ,the number of trailers and made them available for the government because there is transport being organized throughout the countries. We are also looking at imports from outside of the country, especially idle containers from the Middle East. So all in all, we are daily contact to try to manage the crisis or to contribute as much as we can at our scale to the crisis. Does that mean that this could be a long-term opportunity? We hope that the crisis is going to be reaching a peak and then decreasing sooner, of course. We are committed to India. We have a long-term strategy to India, which is today mostly focused on the industrial footprint both for Large Industries and Industrial Merchant. We are benefiting from a nice growth, I would say. And we remain committed to India. The medical part supply still remains a small part for us. We'll probably reflect post the crisis on the opportunities. But overall, what we see today in India and in other emerging countries is the need to meet the emergency supply, which is what we are doing.
Well, thank you, François. On the question about the impact of inflation on our cost, I think we've not seen any significant impact yet. The tension we have are more linked to the very quick pickup of the Chinese exports with difficulties in the supply chain in terms of availability of ships and containers, but this is not new. That was already the case in Q4. And therefore, it's clearly embedded in our forecast. So we don't think that the regained inflation could jeopardize in any way our plans in terms of margin improvement. In terms of oil and gas investment, yes, we have a strong investment trend. No question, it is, in a large part, driven by energy transition. Now you've seen that 46% of the projects in our 12 months' portfolio are energy transition related. So the need of our customers to decarbonize the production for the new capacity they need in term of oil and gas. Now we see also some of our customers working on a biorefinery project. So yes, there is a strong investment discussion with the customers and, once again, largely driven by energy transition.
The next question comes from the line of Laurent Favre from Exane BNP Paribas.
I just have 1 question left. But before I ask it, Fabienne, if I'm not mistaken, it's your last call with us analysts, and so I just wanted to say thank you for all the discussions over the last, I don't know, 12 or 13 years. And good luck in the new role. And now on the question. It's a question on refining. And I was wondering if we could have a bit of color on how you're thinking about demand levels in Q2 compared to normal levels by region. Are you seeing with the reopening basically a strong improvement in demand back to pre-COVID levels, if not above, for instance, in the U.S.?
Well, thank you very much, Laurent. Thank you for your kind words. It's true it's my last one, but I will talk about that at the end of the conference call. In terms of refining, if we start from the situation. Now we have quite contrasted situation. As mentioned by Mike, refining remains quite low in the U.S. It's also true in a large part in Europe. However, we saw a relatively strong pickup in Singapore with a strong demand for hydrogen volumes for refining. Globally, we don't believe that we will come back to our 2019 level before the very end of 2021 or the beginning of 2022. So it would be most probably a very, very progressive recovery.
And in the U.S. with the reopening, you're not seeing, I guess, a willingness from the refiners to pick up activity into the driving season? I find it's a bit surprising.
Mike, do you want to respond to the U.S.?
Sure. Glad to. So as I said before, I think that refining was impacted, like everyone else was, with the freeze. And the fundamentals in refining continue to gradually improve. The fundamentals for transportation fuels are such, whether it's the U.S. or even globally, that diesel is back to the levels of use and demand that we saw pre COVID. And I think that gasoline demand continues to recover. And certainly, you're going to go into a driving season and that sort of thing with the summer months, and it's normal to see a pickup in that regard. But to see full recovery to pre-COVID levels, we're still a bit away from that. But it's -- it continues to improve. And then the real laggard is -- continues to be jet fuel with the rebound of air travel, especially global air travel, but in general air travel. And that is slowly recovering, but you can see that the situation with COVID in geographies around the world and certainly in the U.S. is a slow opening with the introduction of vaccines and a variety of other things. So to Fabienne's point, we likely don't see full recovery and full utilization rates in refining until the end of the year. We see an acceleration probably higher than what we would have expected in the second quarter because of the freeze impact. And recognize some of the most major -- large refineries in the world were down for 2 weeks, 3 weeks, 4 weeks. So you can imagine the amount of inventory draw that occurred, and they've got to make up for that. And so I think that the combination of the freeze maybe going into the driving season will give us a stronger second quarter than originally forecast, but I still think the fundamentals of full improvement are aligned with what Fabienne said. Thank you, Mike. Thank you.
The next question comes from the line of Peter Clark from Societe Generale.
Well done, Fabienne. And as it's nearing the end of your role as CFO, can I ask -- I'm going to try and push a bit on the margin. I mean all the commentary around the efficiencies, the temporary savings, the price indicates, and you're now 40% into the year, that things are looking probably a little healthier than when you did the Q4 comment about we start with the 50 basis points and take off the temporary savings. And you're even going to get a little flattery from, I guess, the Gulf storm effects on Large Industries. So I'm just wondering if you're more confident or not about the margin against what you said with Q4. I'll have a stab anyway. And then the second question for Mike on the U.S. I mean I'm still a bit surprised the storm only knocked off 1% on IM, I think that's what you said, because that would still mean IM in the U.S. was down, on volume terms, a high single-digit number on 2019 in Q1. And I'm just looking at the momentum into Q2 and what you're saying, hopefully, with construction starting to get better, et cetera, how you feel that comp will look against Q2 2019 for the second quarter. I hope a lot better than Q1, but let's see.
Well, thank you, Peter. You can still push on margin, but I'm still as resilient than before. So the only thing I will say, except from the fact that it will be stronger in terms of improvement in H1 than in H2, is that we are extremely confident in our margin improvement in 2021. On the U.S. question, before I hand over to Mike, just remember that merchant is all over the territory. And the U.S. freeze was mostly in the South, conversely to our Large Industries activities, which are very much concentrated on the South. It's why the impact on merchant is lower than in Large Industries. On top, I want to mention that for Q1, the hardgoods were still strongly down because of weak construction but that the gases volumes are clearly picking up and coming back to last year level. So of course, in Q2, we were so desperate with the merchant activity in the U.S. that the growth is going to be stronger. I don't know, Mike, if you want to add something.
I think you said it well, Fabienne. And I think, as I mentioned before, I think overall, we had about a 1% impact overall for the winter storm. And it's to the point Fabienne mentioned, I mean, for Airgas, I mean, they operate in all 50 states. And clearly, the Gulf Coast, specifically Texas, is a very important part of that, but it really was focused on the state of Texas primarily. And so if you look at things, we continue to see good, progressive improvement. If you look at the fourth quarter of last year from an Airgas standpoint, we were still probably 6%, on average, below where we would have been pre COVID. As we sit today, if you take in account for the winter storm, maybe we're 3% to 4% below where we were before COVID. And that's a mix of things. So I think that from a packaged gas standpoint, we're still -- from a volume standpoint, just pure volume, pure activity, we're probably still off about 8%. And maybe with the storm, you could say that's 7%. But it's somewhere in that range, and it continues to improve, progressively improve 3%, 4% every quarter. And I think by the time we get to the second half, we should be in a pretty good place. On the bulk side, like I said before, we're already back to growth. Volumes are already well above where we were in 2019, where we were pre COVID. So that's clearly come back to growth. And the reality, like I mentioned, I mean, construction is still significantly down, nonresidential construction. And we hope to see that begin to return later this year. But right now, it's still off. And there's a few other segments like oil and gas and heavy machinery yet to evolve. And so you've still got a situation where hardgoods, from a volume standpoint, are still probably off about 12%. So you've got all of those factors that are there. The rest of the markets are in very, very good shape. They're all showing significant growth. And I think overall, the balance is such that we are clearly on the right trend. But those markets are still impacted.
The next question comes from the line of Chetan Udeshi from JPMorgan.
Just 2 questions from my side. Number one, can you talk about how is Air Liquide positioning in the electronics market in general, say, in terms of market share or customer relationships in Asia versus the western part of the world, especially in the U.S. and Europe? That would be useful. And a similar question. Is there a difference in terms of Air Liquide's offering in electronics market versus your gases peers'? Because I don't know if everybody has the same sort of advanced materials product portfolio that you guys have in general.And the second question. I saw a mention in the report that the industrial decision is -- about 17, 1-7, percent of the industrial decisions are now dedicated to efficiency improvements in the system. How should we see the benefit of that in the future? I mean, one way would be to say you need to spend more CapEx to achieve the margin improvement. Or the other way would be spending more CapEx to achieve higher margin improvement. So which one is the right way to think about it?
So maybe I will answer on the CapEx and on the peers' offering. And Mike, I will hand over to you for the market positioning, market share. If I start by the CapEx. It's true that we've not decided any major Large Industries projects in Q1. And therefore, our investment decision are a little bit lower and the percentage of efficiency CapEx is a little bit higher. That's -- clearly, this spending in efficiency CapEx clearly show on the level of the new efficiencies we deliver. For the moment, we are still committed to above EUR 400 million a year, and we will update you if we change this objective in the CMD next year. So how is it going to evolve in terms of percentage of CapEx? The evolution now will be modest, would be around 15%, I think, of our industrial decision. If per quarter, we have more large projects, it will be less. If we have less large projects, it could be slightly higher. But I think it will be around the 15% of the CapEx as long as we maintain this EUR 400 million per year objective for new efficiencies. In terms of offering, I think we are quite different from the peers in the way that we have a full offering from the Carrier Gases to the specialty gases, the Advanced Materials and the Equipment & Installation. When you know that Air Products has directed its advanced materials to [ RESOL ], now acquired by Merck, and they is relatively not present on this segment of Advanced Materials. Mike, do you want to complement?
Sure. Thanks. Thanks, Fabienne. So in terms of our offer, it's multifaceted and a bit differentiated maybe from some of our other peers in the industry. Clearly, our carrier gas offer is very, very strong. We continue to go ahead and design and build the most efficient large facilities to meet our customers' carrier gas needs, and we've been very successful in carrier gases across the entirety of the world. And certainly, that focus continues to drive growth. In Asia, it drives growth and in the U.S. And I think we'll see that further rejuvenated in Europe as well. We have a very, very strong Advanced Materials business. Our traditional competitors in the industrials gas space do not have that kind of offering. That is a key differentiator for us. The advanced molecules that we provide are core components for our customers, for the major producers of semiconductors to reach the next technology node. So we're part of their technology road map for them to achieve what they want to achieve. We work in conjunction with them to deliver on that. We have a specialty materials business that complements both the Carrier Gases and the Advanced Materials business, and this is a combination of materials and gases that are critical to producing all the full range of semiconductors. In addition, our offers, especially the latest offers, that we provide not only the exacting needs from a technology standpoint to get to these ever smaller nodes that are bound to the nano scale, but also they have a very strong element of sustainability associated with them. So their carbon footprint in their use ends up being a clearly important differentiator as we move forward as well. So there's different competitors in each of these spaces. The other part of our business is a services business which kind of supports our customers as we meet their needs. Overall, from the traditional capacity standpoint, we've got the largest market share in those areas that we focus in. And so we continue to maintain that given the breadth of our carrier gases offer, especially combined with the advanced materials offer. Our Carrier Gases business, more than 40% of our portfolio from a revenue standpoint, and Advanced Materials has grown from next to nothing 10 years ago to over 20% today. And then you've got the attributions of the other businesses. So I think we differentiate ourselves in multiple respects. But in each of these areas, we see a different set of competitors. And I think it's our technologies and our innovation that keep us at the forefront in all of these different sectors.
Well, thank you, Mike. Just to remind you that Electronics is a strongly growing business, and we are very proud of our position in Electronics. However, if we look at Q1, for example, it's only 10% of our total sales, just to remind you the proportion. So I think this was the last question, yes? Okay. So we've taken all of your questions. So we'll now conclude. As mentioned by some of you, it is my last quarterly call as the CFO of Air Liquide, so I also, on my side, would like to thank you all for your support and questions all along the last 13 years. Over this period, Air Liquide went through 2 major worldwide crises and several others, during which we demonstrated the resilience of the group and its ability to rebound, and I'm very confident that it will continue. And I also take this opportunity to wish all the best to my successor, Jerome Pelletan, who is, of course, connected with us to this call. So thank you again. Have a good day, and we'll talk again soon. Goodbye.
Thanks, everybody.
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