Good morning, ladies and gentlemen. Welcome to the Air Liquide Q3 2019 Revenue Conference Call. All participants are currently in listen-only mode until we conduct the question and answer session, and instructions will be given at that time. I'll now hand over to the Air Liquide team. Please begin your meeting, and I'll restart.
Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations. Thank you for joining our conference call today. Fabienne Lecorvaisier will present the third quarter revenue. She's joined by Mike Graff, Executive Vice President, supervising Americas Hub, the electronics business line, and more recently, Asian Hub, and by François Jackow, Executive Vice President, supervising Africa, Middle East, healthcare, and more recently, European Hub. They will both participate in the Q&A session. In the agenda, our next announcement is on February 11th next year for our full year 2019 results. Let me now hand you over to Fabienne.
Thank you, Aude. Good morning, everyone, and thank you very much for being with us this morning. Our Q3 activity has been marked by robust sales growth at plus 3.5%, both for the group and for Gas & Services, in an environment which became quite contrasted. We saw, in particular, a clear softening of some of our markets in September, and I will come back to that in a moment. We also pursued the deployment of our performance improvement plans, capitalizing on price and mix management and enhanced efficiencies, as well as portfolio active management, and it showed in the level of the cash flow. At the same time, we continue to see numerous requests for proposals for customer new projects, as shown by our very high investment portfolio and investment decision level.
As seen by our various markets, we clearly saw contrast accentuating 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. Steel markets, after several quarters of slowdown, seem now to stabilize, at least in Europe. In terms of merchant markets, construction is decreasing, while metal fabrication remains quite low. Energy and chemicals, food and pharma, as well as techno and research continue to grow at a slightly slower pace than in Q2. In electronics, the demand for integrated circuits is still robust, while the equipment market is progressively coming back to historical level after the last 12 months bubble. Healthcare markets need to be mentioned as the volume growth remains fundamentally strong, notably in home healthcare.
Let's now look at our figures, and on page four. In this context, our sales growth remains robust at 3.5% for Gas & Services in Q3. In engineering construction, as for Q2, we have a higher percentage of group projects, and therefore, consolidated sales, which are third-party sales only, are down 25%, when total sales are close to +20%. Global market and technology sales growth is very high, close to 30%, supported by biogas expansion, techno sales for LNG maritime transportation, and sales to the space and industry. Total group sales are up 3.5% on a comparable basis, as well as for published numbers, the positive ForEx at +2.1% and Tech Air scope impact at +0.6%, being compensated by negative energy pricing.
Looking a little deeper in the various activities, large industries at 3% is helped by a number of turnarounds that continue to grow thanks to ramp in Asia and in a 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, Egypt, India, and South America. Healthcare in Europe and America has continued also to be above average. Electronics in Asia remains strong, even if, as expected, equipment and installation sales show a significant decrease compared to extremely high levels in Q3 2018.
For Gas & Services, base business remains resilient with 2% growth in Q3, while the contribution of startup and ramp-ups and small M&A at +1.5% was slightly above expectations, thanks to a faster ramp-up of some electronic projects and despite small divestitures accounting for -0.4% in the quarter. The acquisition of Tech Air in the U.S. at the beginning of Q2 treated as a large perimeter effect, is also contributing 0.7% to global Gas & Services growth for the quarter. Let's now review the various geographies, starting on page seven. Growth in large industries in America has been penalized by several turnarounds on the Gulf Coast. Merchants remain resilient, even if construction and metal fabrication continues softening, weighted on the Airgas volumes and in particular on the hard goods sales.
Volumes were, however, more robust in consumption markets, food and beverage in particular, as well as in Canada and Latin America. Med gas sales were solid in the U.S., and home healthcare delivered strong growth in South America. Europe at +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. Merchant remained well-oriented at +4.6%, supported by pursued robust pricing effect, and once again, the consumption markets. Organic growth remains high in healthcare, and in particular in home healthcare in Germany, Northern and Eastern Europe, thanks to the increase in the number of patients treated. Asia, at +7%, benefits from ramp-up effect in large industries in China, as well as from startups and ramp-ups in electronics throughout the zone.
To be noted, Fujian in China contributed for two months in Q3, as the divestiture was finalized beginning of September. In merchants in China, we saw a significant decrease in bulk pricing, while cylinder volume growth remained high and pricing positive. Conversely, bulk and onsite were strong in Southeast Asia. Demand and pricing for helium also remained very high. For electronics, sales growth remained double digits, excluding equipment and installations, well aligned with what we saw in H1, driven by carrier gases and advanced materials. Africa, Middle East, and 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 to complement the review. I'm on page nine.
Large industries growth has been supported by refining in Benelux, in nitrogen, and by ramp-up effects in oxygen in Asia, Europe, and Latin America, compensating for the slight softening of the chemical market. To be noted, the turnaround in the U.S. has penalized LI growth in Americas by 2%. In merchant, despite the softening of some end markets, pricing management remained successful at plus 3.8%, or 2.5% excluding helium. The decrease in our good sales in the U.S., in connection notably with the slowdown in the construction market, is significantly hampering global sales. As in H1, healthcare is pretty high despite the very modest contribution of bolt-on acquisition. Home healthcare is up 7.5%, supported by the development of sleep apnea in Latin America and diabetes in Europe. Medgas is up 6.5%, with the strongest growth in Germany, Benelux, USA, and South America.
In electronics, carrier gases continue to progress double digits, helped by startups and ramp-ups, and advanced materials continue to grow strong in China, Korea, and the U.S. Compared to very high 2018 business, equipment and installations decreased 9% worldwide and 16% in Asia, and this decrease will amplify significantly in Q4. All in all, 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 slightly more fragile. Nevertheless, we pursued our performance improvement plans to make sure that a slower growth in top line would not jeopardize our vertical ratios. As you've seen, the pricing management continues to be successful in merchant, and the product mix also continues to be relative, with less equipment and installation and hard goods.
Gas & Services sales growth, excluding equipment and installation and hard goods, 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. Efficiencies are slightly above the expected trajectory for our objective of more than EUR 400 million for the full year. We are at EUR 310 million year to date, thanks to excellent progress at Airgas and to more transformation projects in the Air Liquide network, notably in Europe. The savings linked to digitalization projects are increasing, and we have started our European business support center in Lisboa. The deployment of the supply chain asset renewal in Asia and the mutualization of the oxygen sourcing and supply in home healthcare in Europe are also well advanced.
Since the beginning of our NEOS plan, we have now delivered close to one billion EUR of cumulative efficiencies. In terms of portfolio management, we are finalizing divestiture of the Fujian asset to the customer, as well as the sale of two small non-strategic businesses. We have also closed 21 acquisition projects since the beginning of 2019 in order to reinforce our local density in key areas, and we have 20 more under negotiation. Performance improvement shows also in the cash flow progression, which is above sales growth at EUR 3.5 billion year to date. Cash flow, which is 21.1% of net sales. This has enabled us to finance EUR 1.8 billion of new industrial and financial CapEx, representing 11% of sales, and to continue to reduce our gearing. We are now at 67% after adjustment for dividend seasonality, 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-month portfolio of opportunities has increased again compared to the end of H1 and stands at EUR 2.8 billion, quite diversified and well-balanced between the geographies. Most of the opportunities are linked to chemical, oil and gas, as well as electronics. In Q3, we decided EUR 183 million of new investments, with major signings with key customers in large industries and electronics. Investment decisions reached EUR 2.7 billion since the beginning of the year, including the acquisition of Tech Air in the U.S. In fact, year-to-date industrial decisions are approximately 20% higher than last year. We had five more startups in Q3 in large industry and electronics, and contribution of startup and ramp-ups, which is EUR 283 million year-to-date. The contribution will be lower in Q4 following the divestiture of the Fujian assets.
Thanks to a faster ramp-up than expected for some electronic projects, we are now confident that the full-year contribution will be in the EUR 320 million range above our initial expectations. Conversely, as mentioned before, this will result in a smaller contribution in 2020, around EUR 250 million, which will pick up again in 2021. Backlog is also higher than at the end of H1 at EUR 2.5 billion. This is what I wanted to share with you this morning about our Q3. Of course, the question you all have now is what's next? In fact, if you look at our performance, it's the result of four main components. First, the end markets orientation. There we have diverse situation as explained before, and we are constantly adapting and targeting the growing segments.
Second, our resilience supported by our business models and the diversity of our geographies, activities and end markets, which is proven. Third, our performance improvement plans based on price and mix management, efficiencies, and portfolio optimization, which as you know, have significantly been reinforced. To finish with our strong investment backlog, which is a key to future growth. Looking at these four 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. This is the end of our presentation, and I'm happy now to open the Q&A session.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to ask a question. I'll now take our first question from Martin Roediger at Kepler Cheuvreux.
Yes. Good morning, Fabienne, Mike, François, Aude. I would like to ask three questions. Number one is on industrial merchant in Americas, where we see that prices are up by 4.7%, but volumes down by 3.6%. You mentioned the reasons for the weakness in construction, metal fabrication, hard goods. My question is, with demand being rather poor in Americas, especially in the U.S., how is it possible that prices are up so strongly? Is it because of the more disciplined approach by all the suppliers of industrial gases in that region? The second question is still also on industrial merchant, but here I switch to Asia. It seems to me that the pricing power in Asia is fading in industrial merchant when I compare the 0.4% price effect in Q3 with the much stronger pricing in Q1 and Q2 of 1.4%, 1.5%.
Is the price discipline among the players vanishing, or is it just due to the high comparison base as pricing has been strong in China already one year ago? The final question is on engineering and construction. I understand that the sales with big parties decreased, but the internal sales increased. I would like to know how much is already internal business in engineering business. Let's say the contribution of that, and here certainly more sales related, because internal sales is anyway eliminated in the consolidation. If the shift towards more internal business continues, should we assume that you get rather quickly back to your historic average margins in that business? Thank you.
Thank you, Martin. Maybe I will hand over to Mike for the question about Americas, and when I will take the two others, Asia and E&C.
Okay. Thanks, Fabienne. Good morning, everyone. In the Americas, if you focus on the U.S. and Airgas, I think first of all, a couple points of clarification. The numbers actually from a growth standpoint, in terms of Airgas, are closer to 3.2% from a pricing standpoint. 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, as a result, that is not in the quarter numbers. That 1.1% actually would be 1.7% if that were included. That gives you a sense of the basic offset. As Fabienne mentioned, I think that certainly in metal fab, in construction, we see some softening. I think the majority of that's in hard goods, slight softening in Airgas volumes in certain markets.
At the same time, whether it's in research, or more 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. 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. Pricing is comprised of a number of different areas, which includes utilization rates. Utilization rates continue to be high in this current market, and a lot of these comparators against a very strong Q3 of last year.
I think overall, the pricing continues to be strong for a number of reasons, whether that's the approach, whether that's the fundamentals of the marketplace. I think in general, the markets continue to be solid.
Thank you, Mike. Regarding the price in Asia, what we've seen in Q3 is really quite a changing situation in China. 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 bulk in China all along last year. We mentioned that several times. This is now fading. We had a decrease of 4% in the bulk pricing in China. However, our growth in cylinders continues to be more than double digits, with both volume and price. It's true that in China, we had more large industry projects starting up and ramping up. 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 and Golden Week.
You know that during this period, the industry is dramatically slowing down in China. We still have a positive pricing globally. 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 third-party stake is decreasing to the internal sales. We have a lot of projects 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 published sales, the contribution to the consolidation, which is only sales to third-party, and the total sales, which includes the sales for group project to the group subsidiaries. In terms of margins, you know that we had a terrible hit in E&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. It will probably take one or two more years for us to come back to a regular margin, which is a little bit less than 10%. In terms of proportion, historically, we had 50% group project, 50% third-party project. It's clear right now that we have more group project. This remain like that in 2020 as we continue to sign a lot, in particular in large industries.
Thank you very much.
We'll now take our next question from Andrew Stokes from UBS.
Good morning. Thanks for taking the question. It was just coming back to pricing, looking at the global number rather than just the U.S. 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% of the Q2 number at the end. I just want to check in on that. A broader question on the second half. When you look at all the moving parts that you can see so far for the four months of the six, how are you thinking about the operating margin?
For the global pricing in industrial merchants, our merchants only, we are 3.8%. There is a strong impact of helium, and this is going to continue into 2020. No question, there are no new sources coming on stream next year for helium. The helium component is 1.3%. Excluding that, the merchant pricing effect is around 2.5%, to be very clear.
Right.
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. We are very confident in our efficiency level, margin level for the second part of the year. We have shown a step change in H1, and we have no intention to go back. You know that I'm not going to give you any more precise number than that.
No, that's still useful. Thank you very much.
Next question from Tom Wrigglesworth from Citi.
Yeah. Thanks, everybody. Your presentation, just a couple of follow-ups from me. Firstly, on U.S. large industries, you talked about customer maintenance turnarounds. Could you identify what impact that had on the growth rate? Secondly, on U.S. merchant, following up from Mike's comments. Obviously, the volume decline there, could it be the fact that hard goods is more than the typical volume decline and that there's growth in other areas? I guess, obviously, we're seeing the macro data continue to deteriorate in the U.S. Should we read that as a further headwind for the fourth quarter as well from the merchant volume perspective? 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 a volumes perspective.
Going forward in large industries, through the end of the year, are you expecting will that slow down in steel and chemicals continue to weigh on the fourth quarter? Thank you.
Well, Mike, I must tell you will have to do most of the job, and then François will answer for Europe.
Sure. Good morning, Tom. I think first of all, from a large industry standpoint, in the U.S., we've just seen a lot of turnarounds on the Gulf Coast. We saw a number of turnarounds, both from a refining standpoint in terms of hydrogen demand and also on the chemical side. I think some of that will continue as we go into the end of the fourth quarter as well. I think that's a clear driver of the numbers and the softening that we see. There is a bit of weakness in some of the oxygen volumes in metals, from a steel standpoint, as well as in certain chemical areas, but nothing overly pronounced. It certainly has an impact. I think that we've also got the underlying piece that the crude slate has lightened in the U.S. I think Benoît articulated that on our last call.
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. I think in general, that's where we are on the Gulf Coast. The continuation, to Fabienne's point, of very strong business development continues. We signed two major contracts again in the quarter. I think we've signed nine new pieces of business on the Gulf Coast over the course of the last several years. We continue to see good strength overall. In terms of the merchant markets themselves and some of the things 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 tiered 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, so think about construction, oil and gas, and agriculture. Underlying all that, general manufacturing and fabrication continues to be strong. As mentioned in the construction piece, we've got a combination of things in the midstream. The pipeline and the storage projects have not fully materialized as expected. They're sanctioned, they're just waiting for permitting in parts of the countries. 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.
I think in looking at all that, we seriously see from a hard goods standpoint, kind of a single-digit decline in the numbers, somewhat more pronounced in a couple of the markets. That's the bigger driver. The gas volumes in these areas are flat to slightly soft, nowhere near the declines that we see in the hard goods piece. 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 continue to see growth in those volumes. That's kind of how we compare as we think about where we are today and likely how that will evolve as we go through the fourth quarter.
Okay. In Europe, is this a sustained low level of activity? I guess I would think of large industries being relatively utilization rate immune from a steel and chemical perspective. So I'm perhaps a little bit surprised to see that being called out in large industries.
Good morning.
Hi, François.
Talking about Europe, it is true that the large industry is lower this 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%. This is quite specific and driven by indeed a slower demand on the steel industry. This is true in some countries, mostly Germany, and to some extent also Spain and Italy. The main actually part of this softness is coming from Germany, where the steel industry, of course, is mostly driven by the automotive industry. Overall of the European steel players have actually announced adjustment of capacity in different sites. I should say that fortunately, we are well-positioned on many of those sites that will remain and fit the condition. That should be fine.
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 a contract with ThyssenKrupp for hydrogen supply in Germany, and we have just announced two weeks ago, another agreement to reduce CO2 emission with ArcelorMittal in one of their sites in Ghent, in Belgium. Regarding chemicals, also we have seen some softness in the demand side in Europe in Q3, that probably also will remain for Q4.
The more 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 maritime change of regulation. We see a very good demand and an increasing demand. We are actually at 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.
We will now take our next question from Charlie Webb from Morgan Stanley.
Hi, all. Thank you for taking my questions. Mostly just coming back to the margins. Clearly, there are a lot of measures in place for this year that continue the momentum from the first half, whether it be the efficiencies, the portfolio shaping and obviously this positive pricing. As we think about the sustainability of that momentum into next year, should we start thinking it returns to a more normalized margin improvement like you've shown historically, or do you think that some of these measures you're taking continue and are sustainable into next year? That's the first one. Just secondly, around some of the longer-term opportunities and what you're seeing in the CapEx cycles. Clearly the backlog, investment decisions, all trending higher.
Are you seeing any new kind of larger projects that are of interest planning to come onto the radar? Where is that activity and where is that investment coming from? That'd be helpful.
Okay, back to margins. Well, all the plans we are deploying right now are sustainable. We have various short transformation, which are ongoing now in various region of the group and we are absolutely committed to continue in this direction. We have committed to a return capital employed at 10% in 2021, 2022. It's obvious 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 portfolio, on our capital employed, and we will do both. We'll try to give you a little bit more color on 2020 when we publish our 2019 full year at the beginning of February. In terms of long-term opportunities, you've seen that the portfolio of opportunities at €2.8 billion is very high. It's increasing. What do we have in there?
We have a number of significant projects in our main industrial basins, not very huge ones. It's a portfolio which is pretty well balanced. What needs to be mentioned as well is that we continue to see a lot of opportunities in electronics. The electronic projects are smaller projects, but it's also projects which are delivering quicker with a slower construction period than the large industry projects. I would say that the portfolio is well-balanced. The largest projects are probably some takeover projects, but you know that it takes time to conclude those projects. We don't have a EUR 1 billion project in the portfolio, certainly not.
I guess just kind of thinking back, and I understand more color on the margins as we get the full year results, but clearly you've got another EUR 400 million of efficiencies, that kind of EUR 1.5 you're targeting accumulated by 2020. Are there lots of other kind of portfolio trimming opportunities that you still see there in the business? 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 to what we've seen this year? Is that just driven by consolidation, or is there any risk that some of this volume weakness or softening markets leads to also kind of, I guess, a softer price environment than what we've seen this year?
Regarding the portfolio, as I mentioned during the presentation, we have a number of divestitures ongoing. We also give more details on that at the end of each one. We continue our bottom-up acquisition program, which is also contributing to the margin because of the synergies we can extract. The acquisition of Tech Air, for example, is very contributive to the margin with a very high level of synergy. The programs are ongoing. Same thing for the efficiencies. We committed for more than EUR 400 million this year, and that would be the case again next year. I think all the projects and plans 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.
As we explained many times, 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. We have a lot of good fundamentals to be able to continue to manage our pricing. In terms of markets and volumes, I would really prefer to re-discuss that at the beginning of 2020.
Okay. Thank you very much.
We will now take our next question from Theodora Joseph from Goldman Sachs.
Hi. Good morning. Thanks for taking my questions. I'm kind of just coming back to pricing again, sorry about it. I was just wondering, with the pricing actions that you've taken so far, if you have actually recouped some of the cost inflation that you have seen in the merchant business? Also for me, as I'm thinking about 2020 and 2021 onwards, what's kind of a good approach to think about the long-term sustainable pricing target that you have internally? Also with the kind of pricing that you've put through in the business, have you started to see customers push back any volumes losses? If you actually start to see customer pushing back on this, are volumes losses something that you are able to accommodate?
One last question, just on the EUR 230 million in terms of startup contributions for the next year. Can you give an idea of actually how much of that is going to be from large industries versus electronics? Thank you.
Pricing again. Do we have a long-term sustainable target? Of course, our target is to be above inflation. It's also sustained by our efforts in terms of mix. I think as long as we see transportation costs increasing, and for the time being, they are increasing quicker than inflation in many countries, it will be easier to pass a price increase. Our long-term target is clearly to be above inflation through more innovation, more service, and a better mix. We've not seen customer push back for the moment. The elasticity of the market in terms of pricing is remaining quite good. We are not worried in the short term. In terms of next year contribution of start-up and ramp-ups, the split is around 70% large industry and 30% electronics. We have also a few merchant projects, the bulk of it will be between LI and electronics.
Okay. Thank you.
We will now take our next question from Laurence Alexander from Jefferies.
Good morning. Two questions. The review that you call out for some of the industrial merchant assets, is there any change in the scale of the review, or are you becoming more aggressive on your criteria in that front? Then on cylinders, are you seeing any improvement in cylinder rental prices, or is the price increases that you're reporting mostly tied just to the sale of gas?
In terms of portfolio management, there's no change in scale. I think we have our 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 five years, and where we don't see any potential in the next five years. It's pretty simple said like that, but it means that the small divestiture program is going to last more than in 2019, two or three years. In terms of pricing, it's of course both rentals and product pricing. It's a global effort.
Can you just parse in China the comment around cylinder volumes being positive? Is it because your mix is less tied to industrial, or is there something property going on there?
I think in China, in terms of packaged gas, we have developed a full network. You know that we continue also to develop a kind of Airgas style business model where the acquisition of small local distributors and the acquisition of those distributors. I think we are also pretty well positioned in some of the markets, like food and pharma, technology and research, and that does help. I confirm that we still have a double-digit growth for the cylinders in China, and we expect that to continue. Maybe, François, you wanted to add something on the cylinder pricing in Europe?
Yes. Thank you, Fabienne. Just a comment for Europe regarding the RTU rental, which is holding very well. 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 higher rentals, RTUs, through innovation and services to the customer. We have just launched in U.K. our new type of cylinder, which is called Qlixbi, which is really a breakthrough for welders. With this kind of offer, you can definitely get a premium on the rentals. That's the long-term or mid-term strategy to make sure that we bring value to the customer, and we are able to reflect that in the RTUs.
Thank you.
Next question comes from Peter Clark from Societe Generale.
Mike, well done. You were right on the volumes in Airgas. They didn't seem to get worse. I've just got a question that's going to follow up on Charlie's about the portfolio, I think. In terms of specifically the negotiations on the Gulf Coast, I'm just wondering whether they have slowed. I'm just wondering as well, I keep looking on the chart, the new projects coming on and the methanol project with Yuhuang, which obviously was a very slow start. I just wondering what's happened with that one on the Gulf Coast as well. Thank you.
Mike, do you want to answer this one?
Sure. I think, Peter, good morning. The business development activity on the Gulf Coast continues. I mentioned earlier we've signed just in the quarter several additional projects. I think the momentum continues. I think that, it's across the board. You see the developments in petrochemicals, whether that's olefins, polyolefins, whether that's in oxygen derivatives or anything else. I also think that in general, we'll see the continuation on some projects. There's always a few that will float out there for a while, some of those may be delayed or may not be delayed. We have not seen anything significantly pushed out 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 pace, 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 and 2020. With all the new signings we already have, that'll continue on through 2023 easily.
Well, thank you, Mike. Maybe I can add that the portfolio is well-balanced in terms of geographies. Now we are approximately, right now, one-third Americas, one-third Asia Pacific, and one-third Europe. It's obviously not only the Gulf Coast.
Okay. In terms of Yuhuang, in terms of the project, the methanol project?
I think that project continues. I think that we expect to see that start up sometime into next year. I don't think we have any other change on that at this point.
Okay. Thank you.
Next question comes from Chetan Udeshi from J.P. Morgan.
Hi, Adue. My questions are not on pricing or margin. 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.? I think from memory, I remember that, in 2015, 2016, where we saw sort of a big slowdown, and I think Airgas did see some sizable headwind from that. Just to remind ourselves, what is the upstream exposure to U.S. oil and gas? The second question was, you mentioned in the slide something around that there were 21 acquisitions. Just wanted to check how are those sort of reflected in the growth between like-for-like and scope? What will be the accounting methodology for the revenue that you might lose from Fujian going away from Q4? Thank you.
Mike, maybe you talk about oil and gas in the U.S., and I will answer for the acquisitions.
Well, in terms of oil and gas 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 frack. On the mechanical components, we certainly saw with the rise in hydraulic fracturing, a significant uptick in manufacturing sectors in the U.S. Think about not just piping, but think about valves, pumps, compressors, rail cars. I think that has kind of stabilized. 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 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 multitudes 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 is no change this year at all. It is just slower than it was previously on the energized frack. I think we continue to see some level of oil well services, but no real change there dramatically.
Thank you, Mike. In terms of acquisition, the Bolton acquisition are included in the comparable growth. It's a lot of very small projects. All in all, it was contributing to the growth of the quarter, no more than 0.2%. On another end, we are our divestitures, not including Fujian. The small divestitures accounting for -0.6% on the quarter. We have a balance of -0.4%, which is in fact hampering growth and not contributing to growth. It's mostly small distributors in industrial merchant, small actors in home healthcare. It's more contributing in terms of synergies and in terms of margin improvement than in terms of top line most of the time. Fujian will be treated starting next year in 2020 in the large perimeter. The divestiture of Fujian will be excluded from comparable growth.
Thank you.
As a reminder, press star one if you wish to ask a question over the phone. Our next question comes from Jean-Baptiste Roland from Bank of America.
Good morning, and thanks for taking my question. I have only one in relation to startups. This year, you're going to achieve EUR 320 million, next year, EUR 330 million. You mentioned that the startups will pick up again in 2021. At the same time, I just note that your backlog is at a pretty high level. Presumably there could be some further accumulation in the backlog, even more so that your startups are going to decline next year. What sort of magnitude can we expect in 2021? Would you expect some record levels, or would you expect just some numbers at the level of maybe around what you're going to achieve this year, i.e., around EUR 320 million? Appreciate any color you can give. Thank you.
It's not yet in 2021 that we see the peak. It will be more in 2022, 2023, because it's really in the last six to 12 months that the number of signing has really increased. In 2021, we should be more back to, I would say, normal level around 300 or something like that. It's a little bit early to say because we have, of course, estimates in terms of startup dates, but it's still evolving, as you can imagine, for a project that will start in two years.
Okay. Thanks very much.
There are no further questions over the phone.
I think we'll be able to conclude just in time to let you join the BASF call. 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. That's why we more than confirm our outlook. We'll be happy to talk to you again at the beginning of 2020. Thank you very much. Have a good day.
Thank you. That's the end of the call. Thank you for your participation. You may now disconnect.