Good morning, ladies and gentlemen, and welcome to the Air Liquide's Q3 2019 Revenue Conference participants are currently in a listen only mode until we conduct a question and answer session, and instructions will be given at that time. I'll now hand over to the Air Liquide.
Good morning, everyone. This is Claude Rodriguez, Head of Investor Relations. Thank you for joining our conference call today. Fabienne Nattarindier will present the 3rd quarter revenue She's joined by Mike Graff, Executive VP, supervising America's hub, the electronics business line, and more recently, Asian hub, and by Francois Jacob, Executive VP, supervising Africa, Middle East, Healthcare, and more recently European hub. He will both participate in the Q And A session.
In the agenda, our next announcement is on several events next year for our full year 2019 results. Let me now hand you over to Fabienne.
Thank you. Good morning, everyone. Thank you very much for being with us this morning. Our Q3 activity has been mined by robust sales growth at +3.5 percent, both for the group and for Jasmine services in a mobile language became quite interested. We saw in particular clear softening of some of our markets in September, and we'll come back to that in a moment.
We also pursued the deployment of performance improvement plans, capitalizing on price and mix management, enhanced efficiencies as well as for your active management and it showed in the level of the cash flow. At the same time, we continue to see numerous requests for proposal for customer new projects as shown by our very high investment portfolio and investment decision level. 13 by our volumes market. We clearly saw contract accent treating at the end of Q3, and we expect the trend to remain the same in Q4. Chemical Market is now softer while oil and gas and in particular refining in Northern Europe remains strong.
Key markets after several quarters of slowdowns in order to stabilize assets in Europe. In terms of merchant markets, consumption is decreasing while nickel fabrication remains quite low. In Argentinian chemicals, food and pharma as well as techno and research continue to grow, at a slightly slower pace than in Q2. Electronics, the demand for integrated circuit is still robust, why the equipment market is progressively coming back to a circle level after the last 12 months bubble. Then health care markets need to be mentioned as the volume growth remains fundamentally strong, notably in Omens Care.
Let's now look at our figures. I'm on page 4. In this context, our stated growth remains robust. At 3.5% for gas and services in Q3. In engineering construction, as for Q2, we have a higher percentage of group projects and therefore, consolidated sales, which are 3rd party sales only are down 25% when total sales are close to plus 20%.
Global Marketing Technology sales growth is very high, close to 60%, supported by BioGlobe's expansion, techno series for LNG maritime transportation and sales in the supply chain industry. And so total group sales are up 3.5% on the comparable as well as for commission numbers. So positive ForEx at plus 2.1% and 8 ks cooking price at plus 2.6%. Being compensated by negative energy pricing. Looking a little deeper in the value of activities, how do you 3 at 3% is offered by a number of turnarounds.
We continue to grow times throughout Indonesia and, you know, lesser extent in Europe. Industrial merchants is up a little bit more than 2%. Supported in particular by a solid trend in all Europe, volume growth in Southeast Asia Emirates, India and South America. Healthcare in Europe and Americas continues also to be above average. Electronics in Asia remains strong, even if the expected equipment and installation sales show a significant decrease compared to extremely high levels in Q3 2018.
As in services, this business has been resilient with 2% growth in Q3, while the contribution of startups and ramp up from small M and A was 1.5%. We're striking above expectations, thanks to a faster ramp up of our monitoring projects. And despite small divestitures, accounting for minus 0.4% in the quarter. The acquisition of Take care in the U. S.
At the beginning of Q2, treated as a large perimeter effect, is also contributing 0.7 percent to global gas and services growth for the quarter. Let's now review the value. Geography, talking on page 7. Growth in Large Industries in Americas has been penalized several turnarounds in the Gulf Coast. Merchant Freeman, even if construction and bits of fabrication continues softening, weighted on the Airgas volumes and in particular on the hard goods states.
Volumes were, however, more robust in consumption markets, food and beverage in particular, as well as in Canada, Latin America. Med gas sales were solid in the U. S. And home health care delivered strong growth in South America. Europe was 3% benefited again from a high demand for hydrogen for refining in the benelux while the demand from our chemical customers slowed in South Europe and Germany.
Notehips remained well oriented at just 4.6 percent, supported by pursued robust pricing effect and once again, the consumption market. Organic growth remains high net care and in Pakistan, home health care, in Germany, Northern and Eastern Europe, thanks to the increase in the number of patients treated. Asia at +7 percent benefits from ramp up effect in Large Industries in China as well as from startups and ramp up in electronics throughout the world. To be noted, Fujian in China contributed for 2 months in Q3 as the divestiture was finalized number. In auction, in China, we saw a significant decrease in product pricing, while cylinder volume growth remained high and pricing positive.
Conversely, both and on-site were strong in Southeast Asia. Demand on pricing for helium also remained very high. For electronics, sales growth remains double digits, excluding equipment and installation, well aligned with what we saw in each one. Driven by Cairo Gases And Advanced Materials. If we can't be the least in India to finish with benefits from steady, large industry volumes, and from growth in merchants in the Middle East, Egypt and India.
A few words now about the business lines, confirm on the review. I'm on page 9. Large Industries growth has been supported by Refining In Tenex. In Hydro again, and I worked at Apex in oxygen, in Asia, Europe, and Latin America, we're considering for the slight softening of the chemical market. To be not in the turnaround in the U.
S. As penalized Eli Growth in Americas by 2%. In auction, despite the softening of some end markets, pricing management remains successful after 3.8% or 2.5% excluding Allian. Decrease in our good cities in the U. S.
In connection notably with the slowdown in the construction market is significantly ampereng global sales. It's in each one. Healthcare is pretty high despite a very modest contribution of bolt on acquisitions. Home Health Care is up 7.5 percent supported by the development of hip, APMEA in Latin America, and the advances in Europe. Net gas is up 6.5% with the strongest growth in Germany, Benelux, USA, and South America.
In electronics, Skyogui continued to progress double digit helped by start up and ramp ups and advanced materials continue to grow strong in China, Korea and the US. Compared to very high 2018 basis, it depends on installation decreased 9% worldwide and 16% in Asia. And this decrease will amplify significantly in Q4. Well, you know, we continue to grow in all of our geographies and businesses, but at a more modest pace than in Q2. In an environment, which is now striking off of Jai.
Nevertheless, we pursued our performance improvement plans to make sure that a slower growth in top line would not joke for the other situations. As you've seen, the pricing management continues to be successful in Merchant, And the public mix also continued to be relative with less equipment installation and are good. Actually, gas and services sales growth excluding equipment and insulation and language is above 4%. Thanks to the refocus of our sales force and strategy. We also have a stronger progression of packaged gas versus bulk in a number of countries.
The customer portfolio in industrial merchants is also under review. Deficiencies are thank you both the expected trajectory for our objective of more than 1,000,000 for the full year. Actually, we are at €310,000,000 year to date, thanks to excellent progress at our Jazz and to more transformation project in the alikinnet work not having Europe. The savings links to digitization projects are increasing, and we have started our European Business Report Center in Lisbon. The deployment of the supply chain asset from you, Indonesia, and the materialization of the oxygen sourcing and supply in home health care in Europe are also well advanced.
Since the beginning of our new plan, we have now delivered close to 1,000,000,000 of cumulative efficiency. In terms of portfolio management, we are finalizing the value chain asset to the customer as well as a set of 2 small non strategic businesses. We have also closed 21 acquisition project since the beginning of 2019. In order to reinforce our local identity in key areas and we have 20 more under negotiation. Performance improvement shows also in the cash flow provision, which is above sales growth at 1,000,000,000 year to date.
Cash flow, which is 21.1 percent of net sales, it has enabled us to finance 1,600,000,000 of new industrial and financial CapEx, representing 11% of sales, To continue to reduce our gearing, we are now at 67% after adjustment for dividends is 90 versus 78% in September 2018 and 69% at the end of last year. As mentioned at the beginning, the confidence of our customers remains intact in terms of business development, our 12 months portfolio of opportunities at with the game compared to the end of each one and stands at €2,800,000,000, trying to diversify and well balanced between the geographies. Most of the opportunities are in chemical, oil and gas, as well as electronics. In Q3, we decided and 1,000,000 of new investments with major signings with key customers in Large Industries And Electronics. Investment decision reached €2,700,000,000 since the beginning of the year, including the acquisition of Take care in the U.
S. In fact, your today's industrial decisions are approximately 20% higher than last year. We had 5 more startups in Q3 3 in Large Industry And Electronics, and contribution of startup and ramp ups reached 1,000,000 year to date. The contribution will be lower in Q4, following the divestiture of the Fujian assets. However, thanks to a faster ramp up than expected for some restructuring projects, we are now confident that the full year contribution will be the 1,000,000 range above our initial expectations.
Conversely, as mentioned 4, this will result in a smaller contribution in 2020, around 1,000,000, which will tick up again in 2021. But cloud is also higher than at the end of H1 at 2,500,000,000. So This is why what I wanted to share with you this morning about our Q3. Of course, the question you all have now is what's next? And in fact, if you look at our performance, it's the result of 4 main components.
1st, the end market orientation and there, We have diverse situation as explained before, and we are constantly adapting and targeting the growing segments. 2nd, our resilience supported by our business model and the diversity of our geographies, activities, and end market, which is proven. 3rd, our performance improvement plans based on price and mix management, efficiency and portfolio optimization, which, as you know, have significantly been reinforced. And to finish with our strong investment backlog, which is a key to future growth. So looking at these 4 elements, We are very confident that even in a softening environment, we can continue to deliver very solid performance and therefore, we of course confirm our outlook.
So this is the end of our presentation and I'm happy now to open the Q And A session. Thank
We'll now take our first question from Martin Roediger from Kepler Cheuvreux.
Yes. Good morning, Fabienne, Mike. I would like to ask 3 questions. Now the one is on industrial merchant in America. We see, that prices are up by 4.7 percent, but volumes down by 3.6%.
You mentioned the reasons for the weakness in construction, medical application, hardwares, My question is, if demand being rather poor in America, especially in the US, how is it possible that prices are up so strongly? Is it because of the more disciplined approach by all the suppliers that I guess you guess in that region? The second question is still also an industrial measurement. Here, I switched to Asia. It seems to me that the pricing power in Asia is fading in those dimensions, while I compare the 0.4% price effect in Q3 with the much stronger pricing into 182 of 1.4, 1.5%.
If the price is sitting among the players vanishing, or is it just due to the high parison base as pricing has been strong in China quickly 1 year ago. And the final question is on engineering and construction. I expect I understand that the sales of two parties decreased, but the actual sales increased. I would like to know how much is already internal business in engineering business? So keep, let's say, the the contribution of that, and here are certainly more saturated because early graded because sales is Anyway, eliminating the consolidation and, b, if the shift towards more internal business continues, should we assume that you get, quickly to your historic coverage margins in your business?
Thank you.
Thank you Martin. Maybe I will answer over to Mike for the question about Americas and when I will digits to others, Asian, D And T.
Okay. Thanks, Vivienne, and good morning, everyone. In the Americas, if you focus on the U. S. And Airgas.
I think first of all, a couple of points of clarification. The, the numbers actually from a gross standpoint, in terms of AmeriGas are closer to 3.2% from a pricing standpoint. And so that gives you a sense The other point that I would make, we see the growth of 1.1% recognize that We also sold the Airgas Safety Services business and as a result, it is not in the quarter numbers. So that 1.1% actually would be 1 point 7% if that were included. So that gives you a sense of the basic offset.
As Fabienne mentioned, I think that certainly in metal fab, and in construction, we see some softening. And I think the majority of that's in hard goods, light softening in airgas volumes and certain markets At the same time, whether it's in research, or more of the consumer related businesses, whether that's food and pharma, We continue to see growth in terms of the actual volumes and the related businesses. In terms of pricing, I think we continue to see strong pricing. Recognizing, yes, there's discipline in our approach. I think Fabienne had addressed that on the last call.
It can also, we haven't seen a catastrophic reduction in any volumes. Things continue to remain strong. They're just not quite at the same level they were. And pricing is comprised of a number of different areas, which includes utilization rates. The utilization rates continue to be high in this current market.
And a lot of these comparators against a very strong Q3 of last year. So I think overall, the pricing continue to be strong for a number of reasons, whether that's the approach, whether that's the fundamentals in the marketplace. And I think in general, the markets continue to be solid.
Thank you, Michael, regarding the price, the price in Indonesia. What we've seen in Q3 is a a really quite a change in your situation in China. So in China, we continue to see volume growth, but the bulk pricing is more or less returning to normal. We had very high, pricing effect in both in China, all along last year. We mentioned that several times, this is now feeding.
We had a decrease of 4% in the bulk pricing in China. However, our growth in finances have continued to be, more than double digits with a, growth volume and price. So it's true that in China, we had more large industry projects, starting up on bumping up. So there are more liquid volumes available and therefore the bulk pricing is going down. We also were affected in September, I think, by the 70 year anniversary, young golden week, you know, that during this period, because the industry is dramatically side, it's throwing down in China.
So, we still have a positive pricing, globally. This, this should continue in Q4, but we have a very high comparison with the bulk price last year. In terms of engineering, the sales to 3rd party, stake is decreasing to the internal sales. We have a lot of, process signing right now. So we are using a lot of our own engineering capacities for the group projects, which is kind of good news That's why we have a discrepancy between the policies, the contribution to the consolidation, which is only sales to 3rd party, and the total sales which include the sales for a group project with the group subsidiaries.
In terms of margins, you know that, we had the turbo 18 E and C in 2016, 2017 with the dramatic reduction of the number of projects. At that time, we were experiencing losses. We were back to breakeven last year. We will be positive this year. But it will probably take, 1 or 2 more years for us to come back to our regular margin, which is a little bit less than than 2%.
In terms of proportion, historically, we had 50% group project, 50%. Third party projects. It's here right now that we have more group projects. This remain like that in 2020. As we continue to sign a lot in particular in Large Industries.
We'll now take my next question from Andrew Stokes from UBS.
Good morning. Thanks for taking the question. It was just coming back to pricing. We're looking at the global number on just the US. Given the comps were somewhat tougher, 3.8% looks pretty strong.
I'm just wondering how much of that is helium. I think you said that was 25 percent of the Q2 number, Fabienne. So I just want to check-in on that. Also a broader question on the second half. When you look all the moving parts that you can see so far for the 4 months of the 6, how are you thinking about the operating margin.
So for the the global pricing in English, your merchants are merchants only. We are 3.8%. There is a strong impact of helium, and this is going to continue into 2020. There are no questions. There are no new sources coming on stream next year for Allium, and the the Allium components is 1.3%.
So excluding that, the merchant pricing effect is around 2.5 percent to be very clear. What I said in my presentation regarding the margin is that we have accelerated our improvement plan for the performance so that even if the top line slows down, we still deliver the level of performance we expect and you expect. So, we are very confident in our margin level. Efficiency level, margin level, for the 2nd part of the year. We have shown a a change in each one, and we have no intention to go back.
However, you know that I'm not going to give you any more precise number than that.
That's absolutely useful. Thank you very much.
We'll now take our next question from Tom Wrigglesworth from Citi.
Yeah. Thanks, everybody. For your presentation, just a couple of follow ups from me. Firstly, on US Large Industries, you talked about customer maintenance turnarounds, Could you, I can try, kind of, what impact that had on the growth rate? Secondly, on US merchant following up from from Mike's comments, obviously, the volume decline there, in fact, it could could be the fact that hard seats is more than the volume decline and that there's growth in other areas.
And I guess, obviously, we're seeing the macro data continue to deteriorate in the US. Should we read that as a further headwind for the fourth quarter as well from the merchant volume perspective? And then lastly, in Europe, I guess you've noted in large industries that activity was weaker in steel and chemicals, but we're still seeing actually relatively good merchant performance, I guess, on on a volume perspective, again, going forward in large industries, through the end of the year, you know, you expecting, will that continue to that slowdown in steel and chemicals continue to weigh on the 4th quarter.
Thank you.
Well, hi, Camofundi. We'll have to do most of the jobs on the first one. We'll answer for Europe.
Sure. Good morning, Pam. I think first of all, from a large standpoint in the U. S. We just seen a lot of turnarounds on the Gulf Coast.
We saw another turnarounds both from a refining standpoint in terms of hydrogen demand and also on the chemical side. And I think some of that will continue as we go into the end of the fourth quarter as well. So I think that's a clear driver of the numbers and the softening that we see. There is a bit of weakness in in some of the oxygen volumes in in metals, from a steel standpoint, as well as in certain chemical areas, but nothing overly pronounced. So it does certainly has an impact.
I think that we've also got the underlying piece that the crude slate has lightened in, in the U. S. I think Benoit articulated that, on our last call. And so the actual requirements or the hydrogen intensity to manage the upgrade of a different level of crude slate also has an impact as we look at that. So I think in general, that's where we are in the Gulf Coast.
The continuation to Fabienne's point of very strong business development continue. We signed 2 major contracts again in the quarter. I think we've signed 9 new pieces of business on the Gulf Coast over the course of the last several years. So we continue to see good strength overall. In terms of the merchant markets themselves and some of the things that that have evolved from that standpoint.
I think it's a multifold situation. Specifically, if we look at manufacturing, You've got a situation where the automotive and the cured supplier production volumes into automotive have really stabilized. In the U. S. We still see the decline on Class A trucks and also in terms of heavy equipment think about construction, oil and gas and agriculture.
Underlying all that general manufacturing and fabrication continues to be strong. Is mentioned in the construction piece. We've got, a combination of things into the midstream. The pipeline and the storage projects, have not fully materialized as as expected. They're sanctioned.
They're just waiting for permitting in parts of the country. So they're coming. The question is, how soon will they get their permit? The new petrochemical projects are in sanction and permitting process as well. Some of those haven't gotten to the field yet.
In terms of LNG terminal construction that continues. New gas power plants to replace coal fired power plants continues. So I think in looking at all that, we've certainly see from a hardgood standpoint, kind of a single digit decline in the numbers somewhat more pronounced than a couple of the markets. So that's the bigger driver. The gas volumes in these areas are, are flat to slightly soft, nowhere near the declines that we see in the hard goods piece.
Yet at the same time, if we look at food, if we look at beverage, if we look at retail, we look at life sciences, we continues to grow from those volumes. So that's kind of how it we compare as we think about where we are today and likely how that will evolve as we go through the 4th quarter.
Okay. And then in Europe, in Europe, should we is this a a sustained low level of activity? I guess I I kind of think is large industries being relatively utilization rates immune from a steel and chemical perspective, so I'm perhaps a little bit surprised to see that being pulled out in large industries.
Good morning. So checking that, Europe, this is true that the, large industry is lower. It's quarter than the industrial merchant. Industrial merchant is close to 5% at 4.6%. Which is basically a combination of pricing and stable volumes.
For large industry, we have seen overall growth of little less than 1%. And this is quite specific and driven by, indeed, a slower demand on the steel industry. And this is true in some countries, mostly Germany and to some extent also Spain and Italy. But the main, actually, part of this softness is coming from Germany, where the skin industry is mostly driven by the automotive industry. And, as a whole of the European players, are actually announced adjustment of capacity in different sites.
I should say that, unfortunately, we are well positioned on many of those site tech will remain and keep the production. So that should be, that should be fine. But to your question about what do we see for Q4? Probably, this slow demand or slower demand for steel industry will remain in Q4. The good news is that midterm, we see some very nice, perspective in the steel industry in Europe.
You remember that we have signed, contact with the Thyssenkrupp for a hydrogen supply in Germany and we have just announced, 2 weeks ago another agreement to reduce CO2 emission with the accelerometer in one of the site in advancing the region. Regarding chemicals, also, we have seen some softness in the demand side in, in Europe in Q3. But probably, also, will remain for Q4. The most positive trend that we see in Europe is definitely in refining and for hydrogen. Where we leverage our presence with many of the leading refineries which are well positioned to capture opportunities in the change in the fuel demand and especially with the IMO and the, change of So we see a very good demand and an increasing demand.
We are actually at a historical high level in hydrogen sales on the northern part of our network in Europe and that should continue overall for Q4. Okay.
Thank you
very much.
Thank you very much.
We will now take our next question from Charlie Webb from Morgan Stanley. Hi,
all. Thank you for taking my questions. Actually just kind of coming back to the margins, clearly, there are a lot of measures in place this year that kind of continued momentum from the first half with the efficiencies conferior shaping and then, obviously, we couldn't pay positive pricing.
As we think about kind
of the sustainability of that momentum into next year, should we start things in return to a more normalized margin improvement that you've shown historically, or do you think that some of these measures you're thinking kind of continue on sustainable into next year? That's kind of the first one. And then just secondly, around, I guess, some of the kind of longer term opportunities and what you're seeing in the first 6 cycles, clearly backlog, business decisions, all kind of trending higher. Are you seeing any new kind of larger projects that are of interest planning to come onto a radar? And where is that activity and where is that investment coming from?
That would be pretty helpful.
Okay. So back to margins. We are all the all the plans. We are deploying 1 right now are sustainable. I mean, we have, various short transformation, which are ongoing now in various region of the group, and, we are absolutely committed to, to continue, in this direction.
We have committed to a return to a return capital employed at 10% in 2021, 2022. It's abused. Then if we want to reach this objective, we have on one side to continue, to improve our margin at an accelerated pace and to work more on our top portfolio on our platform. And we will do both. Now we'll try to give you a little bit more color on 2020 when we publish, 20 nineteen full year at the beginning of February.
In terms of long term opportunities, you've seen that the port for you of opportunities at €2,800,000,000 is very high. So it's just increasing. What do we have in there? We have a number of significant projects in our main, industrial basings, but not very huge one. It's a portfolio, which is pretty well balanced.
And what needs to be mentioned as well is that we continue to see a lot of opportunities in electronics. So the electronic projects are smaller projects, but it's also projects which are delivering quicker with a slower concession period than the large industry project. So I would say that the the portfolio is well balanced. The largest project is probably some took over projects, but you know that it takes time to, to conclude those projects. But we don't have a 1,000,000,000 project in the portfolio, it's up.
I guess, I guess, just
kind of expecting, and I understand more color on the margins as we get the full year results. But clearly, you've got another 1,000,000 of efficiencies, that kind of 1,000,000 you're targeting stimulated by 2020, you've got obviously ongoing portfolio. I mean, are there lots of other portfolio trimming opportunities that to see their own business? And then perhaps you're thinking about how pricing clearly at very good levels today, do you still see a kind of continued positive effect on that, into next year, in a similar way with what we've seen in here? And is that just thinking about consolidation, or is there any risk that some of those volume weakness or softening markets?
Please do also kind of, I guess, a a off the price environment and what we've seen this year?
Regarding the portfolio. So as I mentioned during the presentation, we have a number of divestitures ongoing. We also give more on that at the end of each one. And we continue, our bolt on acquisition program, which is also contributed to the margin because of the synergies, which can extract the condition of ClickShare, for example, it's very contributed to the margin with a very high level of synergy. So the programs are ongoing.
Same thing for the efficiencies. We've committed for more than 400,000,000 this year, and that would be the case. Again, Nektar. I think, all the, the projects and plans are are aligned are aligned with that. In terms of pricing and volumes, once again, it's a little bit early to talk about 2020.
I think that pricing is, of course, driven by inflation, but as we've spent many time, we have also done a lot of effort to reorganize and retrain our sales force to make sure that we better manage our pricing The helium impact is going to remain there for at least the full year, 2020. So we have a lot of good fundamentals to be able to continue to manage our prices. In terms of markets and volumes, I would really prefer to rediscuss that at the beginning of 2020.
Okay. Thank you very much.
We will now take our next question from Theodore Joseph from Goldman Sachs.
Hi. Good morning. Thanks for taking my questions. I'm kind of just coming back to pricing again. I'm sorry about it.
But I was just wondering if with the pricing actions that you've taken so far, have you have actually recouped some of the cost inflation that you've seen in the merchant business? And also for me, if I'm thinking about 2020 2021 onwards, what's kind of a good approach to think about the long term sustainable pricing target that you have internally. And also with with the kind of pricing that you put through in a business, can we start to see customers push back and the volume losses? And if you actually start to see kind of customer pushing back on this, Is this a volume loss or something that you are able to to accommodate? And then one last question, Jess, on the 230,000,000 in terms of contribution, static contributions for next for the next year.
Can you give an idea of actually how much of that is is going to be from Large Industries versus electronics? Thank you.
So pricing again, do we have a long term sustainable target? Of course, our target is to be above inflation. It's also, sustained, but our efforts in terms of mix. I think as long as we see transportation costs increasing and the timing, there are increasing quicker than inflation in many countries. It will be easier, to pass a price increase.
But our our long term target is clearly to be above inflation, through, more innovation, more surveys on the on the better mix. We've seen customer pushback for the moment. The elasticity of the market, in terms of pricing is remaining quite good. So we are not we are not worried in the short term. In terms of next year, contribution of startup and ramp ups, the, the, speed is around 70% large industry and 30% difference.
We have also a few merchant projects that is the the bulk of it will be between Ally and the Equinix.
Okay. Thank you.
We will now take our next question from Laurence Alexander from Jefferies.
Good morning. 2 questions. The review that you call out of some of the industrial merchant assets Is there any change in the scale of the review or are you, are you becoming more aggressive on your criteria in that front? And then on cylinders, are you seeing any improvement in cylinder rental prices or is the price increases that you're reporting, mostly digest of the sale of, to the sale of gas?
Alright. So in terms of, portfolio management, there's no change in scale. I think we have, however, tougher criteria than in the past, and we are reviewing it more proactively. And, we will be considering selling the activities where we have a small market share, where we saw very little improvement over the last 5 years on where we don't see any potential in the next 5 years. So it's pretty simple.
It said that but it means that the small divestiture program is going to last, more more than in 2019, 2 or 3 years. In terms of pricing, it's, of course, both rentals and product pricing. It's a it's a, it's a global effort.
And then can you just parse in China that it comes around cylinder volumes being positive? Is it because your mix is is less tied to industrial or is there something quirky going on there?
I think in, in China, in terms of, package guys, we have developed a full network. You know that we continue also to develop a kind of a Airgaside business model with the acquisition of smaller on the aggregation of those distributors. I think we are also, also pretty well positioned some of the markets, like food and pharma, technology and research, and that does help. But I confirmed that we still have a double digit growth for the cylinders in China, and we expect that, to continue. Maybe if Francois wanted to add something on the cylinder pricing in Europe?
Yes, thank you again. Just a comment for Europe regarding the RTU, the rental, which is holding very well. And this is true that short term, we try to pass some of the price increase through the rentals, but our strategy really is long term to get the higher rentals RTUs innovation and services to the customer. And we have just launched in UK, our new type of cylinder, which is called 50. Which is really a breakthrough for our welders, and with this kind of offer, you can definitely get a premium on the rentals.
So that's the long term or midpoint strategy to make sure that we bring value to the customer and we are able to reflect that in the in the off to use.
Thank you.
Next question comes from Peter Clark from Societe Generale.
Yes. Good morning, everyone. And, Mike, well, done you, right, on the volumes in Airgas. They didn't seem
to get worse, but I just
got a question that's gonna follow-up on Charlie's about the portfolio, I think, in terms of specifically the negotiations on the Gulf Coast. Just wondering whether they have slowed. So I'm just wondering as well, I keep looking on the chart, new projects coming on and the the the methanol project with you hang which obviously was very slow starter. Just wondering what's happened with that one on the Gulf Coast as well. Thank you.
Mike, do you want to answer your question?
Sure. So I think Peter, good morning. The the business development activity on the Gulf Coast continues. And I mentioned earlier, we've signed just in the quarter several additional projects So I think the momentum continues. I think that, and it's across the board.
You see the developments in petrochemicals, whether that's olefins, polyolefins, whether that's an oxygen derivatives or anything else. I also think that in general, we've we'll see the continuation on some projects. There's always a few, that will float out there for a while. And some of those may be delayed or may not be delayed. But we have not seen anything significantly pushed out in into a much later timeframe for any of, I would say, our major customers who are contemplating new build.
For those projects that are under a different level of development. Sometimes you'll see those evolve in a slower pay depending on what's happening in markets and where they get their funding and those types of things. In general, we continue to see good growth. I think you see that in the timeline we show for major startups in 2019 2020. And with all the new signings we already have that will continue on through 2023 easily.
Well, thank you, Mike. I just had that the portfolio is is well balanced in terms of geographies. Now we are approximately right now, one third, America, 1 third, Asia Pacific and 1 third Europe, Europe. So it's not It's not. Obviously, not on Middle East Coast.
Okay. In terms of Johan, in terms of the project, the methanol project?
So I think that that project continues. I think that, we expect to see that start up some time into into next year. And I don't think we have any other change on that at this point.
Next question comes from Chetan Udeshi from JP Morgan.
Hi, Adolf. My questions are not on pricing or margin. So, the first question I have is just can you remind us what is your exposure to the oil and gas, the upstream part in the U. S, because I think from memory, I remember that in 20 in 2016 where we saw a sort of a big slowdown. And I think Airgas did see some sizable headwind from that.
So just to remind ourselves what is the extreme exposure to U. S. Oil And Gas? The second question was, you mentioned in the slide, something around the 2021 acquisitions. Just wanted to check how are those sort of reflected in the in the growth between like for like and scope.
And what will be the accounting methodology for the revenue that you might lose from from Fujian going away from Q4.
So, Mike, can you, you talked about Toyota in the US and that we answered for the, for the acquisitions?
Well, in terms of oil and gas in, in the U S, I think that, a lot of this has to do with some of the equipment that goes into hydraulic fracturing. As well as any utilization of nitrogen in that space for an energized frac on the mechanical components we certainly saw with the rise in hydraulic fracturing, a significant uptick in manufacturing sectors in the U. S. I mean, think about not just piping, but think about valves, pumps, compressors, rail cars. And I think that that has kind of stabilized.
And as you look at pricing of $55 to $65 a barrel. We continue to see that as solid. We've also seen some consolidation, and so I think the spend there is is fairly steady. In terms of a percentage, I'm not going to go ahead and try and project exactly what a percentage is. I would say that that was one of the drivers of what we have seen over time.
And it continues to be a component of the multitude of what we have in terms of metal fabrication and manufacturing. Recognizing that that covers a broad spectrum of industries and evolution of what could be. On the oil well services piece, That clearly had slowed, up in Canada, where that had been fairly dominant several years ago. There's no change this year at all. It's just slower than it, than it was previously on the Energized frac.
And I think we continue to see some level of oil well services, but no real change there dramatically.
Thank you, Mike. So in terms of acquisition, the bolt on acquisition, you know, included in the the comparable growth. It's a lot of very small projects. So, all in all, it was, contributing you the growth of the quarter, no more than hoping to present. But on another end, we are our divestitures.
Not including Fujian, I mean, the small divestitures accounting for minus 0.4%. So on the quarter, we have a balance of minus 0.4%. Which is in fact encouraging growth are not contributing to growth. It's mostly, small distributors in industrial merchant, a small accident in home health care. So it's more contributing in terms of synergies.
In terms of margin improvement that in terms of top line and multiple times. Fujian will be treated starting next year in 2020 in the large perimeter. So it the divestiture of Fusion will be excluded from a compatible growth.
Our next question comes from Jean Baptiste Rolland from of America.
Good morning, and thanks for taking my question. I have only one in relation to startups. So this year, you're going to achieve SEK 320,000,000 next year SEK 130,000,000. And you mentioned that the stoppage will pick up again in 2021. What sort of, at the same time, I just note that your backlog is at a pretty high level.
So presumably, this is going to, there could be some further relation, the backlog, even more so that your road startups are beginning to decline next year. What sort of magnitude can we expect in 2020, in 2021? Would you expect some record levels or would you expect just some numbers at the level of maybe around what you, what you're encouraged. You achieved this year, SEK 3 100 and 20. Appreciate it.
Any color you can give? Thank you.
It's it's not yet in in 2020, one that we see the peak. It will be more in 2020 to 2023. Because it's it's really, in the last 12, 6 to 12 months that the number of signing has really increased. So in 2021, we should be more back to, yeah, within normal level around 300 or something like that. But it's a little bit early to say.
Because we have, of course, estimates in terms of start date, but it's still evolving as you can imagine for projects that will start in 2 years.
Thanks very much.
There are no further questions over the phone.
So I think we'll be able to conclude just in time to, let you, join the, BASF call. So thank you very much, everyone, for your questions. Just as a conclusion, you've seen that we continue to grow in all our geographies, that says our robust even if the environment is a little bit more difficult. We have pursued our performance improvement plans. And we are very confident that they will continue to deliver, and that's why we are we're more than concerned So we'd be happy to talk to you again at the beginning of 2020.
Thank you very much. Have a good day.
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