annual report 2005 - part 1 - technische gase von air liquide in … · air liquide rapport annuel...

Annual

2005

Report

and Report on sustainabledevelopment

www.airliquide.com

AIR LIQUIDE Rapport Annuel 2005

The Group’s profile

Present in over 70 countries, Air Liquide is the world leaderin industrial and medical gases and related services. The Group offers innovative solutions based on constantlyenhanced technologies. These solutions, which are consistentwith Air Liquide’s commitment to sustainable development,contribute to the manufacture of many everyday productsand help to preserve life.Founded in 1902, Air Liquide has developed a relationship oftrust and transparency with its shareholders, guided by theprinciples of corporate governance.

The world leader in industrial and medical gasesTotal sales: 10,435 million euros■ Gas and Services 88% ■ Related activities 12%

SalesGas and Services € 9,148 million● Industrial Customers 45%● Large Industries 30% ● Electronics 9% ● Healthcare 16%

Salesby geographic zone● Europe 56%● Americas 25% ● Asia-Pacific 17%● Africa and

Middle East 2%

Operating income recurring(1)

by geographic zone● Europe 61%● Americas 22%● Asia-Pacific 15%● Africa and

Middle East 2%

SalesRelated activities € 1,287 million● Welding materials 40%● Engineering

and Construction 33% ● Chemicals 16% ● Diving 11%

Men and womenby geographic zone● Europe 61%● Americas 21% ● Asia-Pacific 15% ● Africa and

Middle East 3%

10.4 billion euros insales almost

80% outside France

1 million customers

2,680 patentedinventions

Nearly 36,000employees

360,000 shareholders

(1) Excluding research centers and corporate.

I to XII

2

3

10

12

14

16

18

28

36

Creating value for shareholders

Message from the Chairman of theSupervisory Board

Interview with theChairman of theManagement Board

6Corporategovernance

SupervisoryBoard

SupervisoryBoard Report

Managementstructures

Key figures

IndustrialCustomers

The Air Liquidedynamic

LargeIndustries

RelatedActivities

44

52

60

Electronics

Healthcare

Annual Report and Report on sustainable development

67

91

165

191

203

231

247

269

273

279 All about Air Liquide

Highlights

The Group’s history

Air Liquidearoundthe world

The Group’s offer

ManagementReport

Consolidatedfinancial statements

Statutory accounts of theparent company

Report from the Chairman of theSupervisory Board

Resolutions to be put tothe Combined AnnualGeneral Shareholders’Meeting of May 10, 2006

Sustainabledevelopment: indicatorsand objectives

Ten year consolidated financialsummary

Glossaries(for words followed by an *)

Supplementary information for theReference Document

valu

e fo

r sh

areh

olde

rs

Cre

atin

g

Con

sid

erat

ion

and

res

pec

tfo

r al

l sha

reho

lder

s–

equa

lity

of a

ll sh

areh

olde

rs:

1 sh

are

= 1

vot

e (n

o do

uble

-vot

ing

right

s)

– re

spec

t of p

refe

rent

ial s

ubsc

riptio

n rig

hts

– ab

senc

e of

ant

i-tak

eove

r bi

d m

easu

res

– re

stric

tion

of re

solu

tions

pro

pose

d at

Sha

reho

lder

s’ M

eetin

gs to

gen

uine

corp

orat

e re

quire

men

ts

– cl

ear

and

effe

ctiv

e co

mm

unic

atio

nbe

twee

n th

e S

uper

viso

ry B

oard

and

the

Man

agem

ent B

oard

Sha

reho

lder

rem

uner

atio

nan

d in

crea

sed

inve

stm

ent

valu

e ov

er t

he lo

ng-t

erm

– st

eady

long

-ter

m g

row

th in

ear

ning

s

– st

rong

div

iden

d-pa

yout

pol

icy:

di

vide

nd a

nd b

onus

sha

res

– hi

gher

div

iden

d pa

yout

s fo

r loy

al re

gist

ered

shar

ehol

ders

List

enin

g to

and

info

rmin

g sh

areh

olde

rs–

Sha

reho

lder

s’ C

omm

unic

atio

n C

omm

ittee

,fre

quen

t mee

tings

with

sha

reho

lder

s

– re

gula

r pu

blic

atio

n of

info

rmat

ion

abou

tth

e C

ompa

ny

– tr

ansp

aren

cy a

nd c

larit

y of

fina

ncia

l in

form

atio

n pu

blis

hed

– co

nsis

tent

and

uni

form

acc

ount

ing

met

hods

– in

form

atio

n se

nt to

all

shar

ehol

ders

befo

re m

eetin

gs

Sha

reho

lder

Ser

vice

s–

twen

ty-m

embe

r S

hare

hold

er S

ervi

ces

team

ded

icat

ed to

indi

vidu

al s

hare

hold

erre

latio

ns

– pe

rson

aliz

ed a

nd lo

w-c

ost m

anag

emen

tof

dire

ctly

regi

ster

ed s

hare

acc

ount

s

Sha

reho

lder

s’ C

hart

erS

hare

hold

ers

are

the

focu

s of

Air

Liqu

ide’

s st

rate

gy. O

ur o

bjec

tive

is t

o in

crea

se t

he v

alue

of s

hare

hold

er in

vest

men

t thr

ough

stro

ng, s

tead

y gr

owth

in e

arni

ngs

and

divi

dend

s ov

er th

elo

ng te

rm. A

ir Li

quid

e’s

resp

onsi

bilit

y to

war

ds it

s sh

areh

olde

rs, f

orm

aliz

ed in

the

Sha

reho

lder

s’C

hart

er, i

s ba

sed

on t

he fo

llow

ing

four

com

mitm

ents

:

III

Sha

reho

lder

s ar

e ce

ntra

l to

the

conc

erns

of A

ir Li

quid

e an

d its

man

ager

s.E

very

dec

isio

n is

mad

e in

con

side

ratio

n of

the

med

ium

and

long

-ter

min

tere

sts

of s

hare

hold

ers.

Air

Liqu

ide

cons

ider

s th

eir

loya

lty o

ver

the

long

-te

rm to

be

a so

urce

of c

ontin

uity

in te

rms

of it

s st

rate

gy fo

r ac

hiev

ing

stro

ng e

arni

ngs

grow

th.

Sal

esin

milli

ons

of e

uros

Con

solid

ated

200

5 sa

les

amou

nted

to 1

0,43

5 m

illion

euro

s, a

n in

crea

se o

n 20

04 o

f+1

0.7%

.

On

a co

mpa

rabl

e ba

sis

(exc

ludi

ng c

urre

ncy,

nat

ural

gas

and

perim

eter

effe

cts)

,th

e in

crea

se w

as +

6.2%

,w

ith, i

n ad

ditio

n, a

per

imet

eref

fect

of +

1.8%

, inc

ludi

ngno

tabl

y th

e fu

ll ye

ar c

onso

li-da

tion

of th

e ac

tiviti

esac

quire

d fro

m M

esse

r.

Ste

ady,

sus

tain

ed g

row

th in

net e

arni

ngs

per

shar

e(3

)

In 2

005

+19

.8%

Ove

r 5

year

s +

8.3%

Ove

r 10

yea

rs

+9.

1%O

ver

20 y

ears

+

7.9%

Ove

r 30

yea

rs

+10

.3%

Net

ear

ning

s pe

r sh

are

adju

sted

(1)

in e

uros

(1) A

djus

ted

to a

ccou

nt fo

r bo

nus

shar

e is

sues

.(2

) Dat

a ca

lcul

ated

ove

r 30

yea

rs u

sing

acc

ount

ing

stan

dard

s in

forc

e at

the

time.

As

of J

anua

ry 1

, 200

5,st

anda

rds

have

cha

nged

. The

se n

ew s

tand

ards

wer

e us

ed fo

r fin

anci

al y

ears

200

4 an

d 20

05.

(3) W

eigh

ted

aver

age

annu

al g

row

th in

net

ear

ning

s pe

r sh

are

(adj

uste

d).

IV

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

20032

004200

5

8,40

0

6,30

0

4,20

0

2,10

0 0

+9.2

% a

vera

ge a

nnua

l gro

wth

(2)

+10.

3% a

vera

ge a

nnua

l gro

wth

(2)

10,5

00

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

6 4 2 08

2003

} IFRS

20042

005 } IFRS

Cre

atin

g va

lue

Per

form

ance

over

30

year

s

Cas

h flo

win

milli

ons

of e

uros

Div

iden

d pe

r sh

are

adju

sted

(1)

in e

uros

Div

iden

d* p

ropo

sed

for f

isca

l yea

r20

05•

3.85

eur

os p

er s

hare

, an

incr

ease

of +

10%

ove

r 200

4.•

Dis

trib

utio

n ra

te o

f 46.

3% o

fne

t ear

ning

s*.

•In

com

plia

nce

with

the

Art

icle

sof

Ass

ocia

tion,

regi

ster

ed

shar

ehol

ders

who

hav

e he

ld th

eir

shar

es c

ontin

uous

ly s

ince

Dec

embe

r 31

, 200

3, w

ill re

ceiv

ea

bonu

s eq

ual t

o 10

% o

f the

divi

dend

pai

d.

Ove

r a

ten-

year

per

iod

• D

ivid

end

dist

ribut

ion

regu

larly

incr

ease

d, o

n av

erag

e +

11.9

%a

year

,•

Ave

rage

dis

trib

utio

n ra

te o

f43

% o

f net

ear

ning

s.(1

) Adj

uste

d to

acc

ount

for

bonu

s sh

are

issu

es.

(2) D

ata

calc

ulat

ed o

ver

30 y

ears

usi

ng a

ccou

ntin

g st

anda

rds

in fo

rce

at th

e tim

e. A

s of

Jan

uary

1, 2

005,

st

anda

rds

have

cha

nged

. The

se n

ew s

tand

ards

wer

e us

ed fo

r fin

anci

al y

ears

200

4 an

d 20

05.

V

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

3 2 1 04

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

+10.

6% a

vera

ge a

nnua

l gro

wth

(2)

+9.8

% a

vera

ge a

nnua

l gro

wth

(2)

1,50

0

1,00

0

500 0

2,00

0

2003

2003200

42005 } IFR

S

20042

005 } IFRS

Sha

reho

lder

rem

uner

atio

n an

d in

crea

sed

inve

stm

ent v

alue

ove

r th

e lo

ng-t

erm

• Th

e di

vide

nd*

(net

div

iden

d in

clud

ing

tax

cred

it) is

rein

vest

ed in

sha

res

on th

e fir

st o

peni

ng d

ay o

f the

Sto

ck E

xcha

nge

afte

r di

strib

utio

n.

• Fr

actio

ns*

stem

min

g fro

m b

onus

sha

re a

lloca

tions

are

conv

erte

d in

to fr

actio

nal s

hare

s.

Cha

nges

in s

hare

cap

ital

Cal

cula

tion

met

hod

Num

ber

of s

hare

s as

of

12.3

1.20

0410

9,18

0,82

3

Em

ploy

ee s

hare

su

bscr

iptio

n43

5,92

7

Exe

rcis

e of

opt

ions

271,

725

Can

cella

tion

of

trea

sury

sto

ck-3

50,0

00

Num

ber

of

shar

es a

s at

12

.31.

2005

109,

538,

475

360,

000

indi

vidu

al s

hare

hold

ers

31%

of s

hare

s re

gist

ered

1.2%

of c

apita

l hel

d by

Gro

up e

mpl

oyee

s

To th

e C

ompa

ny’s

kno

wle

dge,

no

sha

reho

lder

hol

ds m

ore

than

5%of

the

capi

tal

Cre

atin

g va

lue

Por

tfol

io g

row

thVa

lue,

bef

ore

tax,

as

at D

ecem

ber

31, 2

005,

of a

por

tfolio

of A

ir Li

quid

esh

ares

incl

udin

g re

inve

sted

gro

ss d

ivid

ends

*, b

onus

sha

res

and

loya

ltybo

nuse

s:

Dur

atio

nM

ultip

licat

ion

of

the

A

nnua

l in

itial

inve

stm

ent

by

aver

age

gro

wth

5 ye

ars

1.5

8.8%

10 y

ears

3.1

12.0

%20

yea

rs8.

311

.2%

30 y

ears

66.0

15.0

%

Sha

re o

wne

rshi

p a

s at

D

ecem

ber

31,

200

5

Con

sid

erat

ion

and

res

pec

t fo

r al

l sha

reho

lder

s

●In

divi

dual

sha

reho

lder

s 3

8.1%

●Fo

reig

n in

stitu

tiona

l inv

esto

rs 3

6.5%

●Fr

ench

inst

itutio

nal i

nves

tors

24.

9%●

Trea

sury

sha

res

0.5%

VI

2003

2004

20

05A

djus

ted

shar

e pr

ice

(eur

os)(1

)hi

gh12

8.09

138.

5016

6.80

low

95.4

611

9.09

129.

60as

at 1

2.31

127.

2713

6.00

162.

50N

umbe

r of

sha

res

as a

t 12.

31 (t

hous

ands

)99

,913

109,

181

109,

538

Mar

ket c

apita

lizat

ion

as a

t 12.

31

(milli

ons

of e

uros

)13

,988

14

,849

17,8

00

Air

Liq

uid

e an

d t

he S

tock

Exc

hang

e

260

240

200

220

180

160

140

120

100 80 60

1996

19

9719

9819

9920

0020

0120

0220

0320

0420

05

Ove

r 10

yea

rs,

the

shar

e pr

ice

has

risen

ste

adily

.

VII

(1) A

djus

ted

to a

ccou

nt fo

r bon

us s

hare

issu

es.

Air

Liqu

ide

CA

C 4

0

List

enin

g to

and

info

rmin

g sh

areh

olde

rs

Mee

ting

shar

ehol

der

sA

ir Li

quid

e is

com

mitt

ed to

exc

hang

ing

info

rmat

ion

dire

ctly

with

its

shar

ehol

ders

thro

ugh:

• th

e G

ener

al S

hare

hold

ers’

Mee

ting:

ov

er 4

,200

sha

reho

lder

s w

ere

pres

ent,

• m

any

Info

rmat

ion

Mee

tings

out

side

of

Par

is: o

ver

2,00

0 at

tend

ed th

ese

even

ts,

• th

e S

alon

Act

iona

ria:

over

35,

000

peop

le v

isite

d th

e bo

oths

of

the

com

pani

es p

rese

nt.

VIII

Str

engt

heni

ngth

e di

alog

ue

Mee

ting

in T

oulo

use

Mee

ting

in L

ille

Sal

on A

ctio

naria

(a s

hare

hold

ers’

tra

de

fair)

In a

dditi

on to

the

Com

mitt

ee’s

thre

epl

enar

y se

ssio

ns, s

ub-c

omm

ittee

s al

som

eet t

o ad

dres

s sp

ecifi

c m

atte

rs s

uch

asth

e co

mm

unic

atio

n to

ols,

the

vide

o pr

esen

tatio

n of

the

Gen

eral

Sha

reho

lder

s’M

eetin

g, th

e In

tern

et s

ite, s

hare

hold

erdo

cum

enta

tion,

the

info

rmat

ion

mee

tings

outs

ide

Par

is a

nd e

nlar

ging

the

indi

vidu

alsh

areh

olde

r ba

se.

This

Com

mitt

ee, c

reat

ed in

198

7, e

mbo

dies

Air

Liqu

ide’

s co

mm

itmen

t to

liste

n to

its

shar

ehol

ders

and

to tr

eat t

hem

with

resp

ect.

Sev

eral

tim

es a

yea

r, its

12

volu

ntee

rm

embe

rs m

eet w

ith B

enoî

t Pot

ier,

Cha

irman

of th

e M

anag

emen

t Boa

rd, t

o im

prov

e th

e qu

ality

of t

he re

latio

nshi

p be

twee

n A

ir Li

quid

e an

d its

indi

vidu

al s

hare

hold

ers,

in a

reas

rela

ting

to c

omm

unic

atio

n an

dsh

areh

olde

r in

form

atio

n. T

he C

omm

ittee

, a

thin

k ta

nk a

nd a

sou

rce

of in

spira

tion,

is a

repr

esen

tativ

e sa

mpl

e of

indi

vidu

al s

hare

-ho

lder

s an

d ac

ts a

s a

chan

nel b

etw

een

Air

Liqu

ide

and

its in

divi

dual

sha

reho

lder

sby

giv

ing

a vo

ice

to th

eir

ques

tions

and

expe

ctat

ions

.

The

Sha

reho

lder

s’ C

omm

unic

atio

n C

omm

ittee

Mem

ber

s of

the

S

hare

hold

ers’

Com

mun

icat

ion

Com

mitt

ee

Sab

ine

Ben

oit

(Bas

suss

ary

- 64

)

Laur

ent

Cou

pie

r (A

ix-e

n-P

rove

nce

- 13

)

Ber

nard

Dic

k (S

aint

-And

ré-le

s-Ve

rger

s -

10)

Vin

cent

Gaf

fiot

(Aux

erre

- 8

9)

Jean

-Mar

ie L

afol

lie-H

orat

(Bra

ndon

- 7

1)

Chr

isto

phe

Nev

es (P

aris

- 7

5)

Cla

ude

Neg

rott

o (M

arcq

-en-

Bar

œul

- 5

9)

Dom

iniq

ue R

eute

r(D

omaz

an -

30)

Pat

rick

Ste

idle

(S

aint

Bric

e C

ourc

elle

s -

51)

Guy

Tes

sere

au (M

eyla

n -

38)

Pie

rre

Trou

ssel

(Vél

izy

- 78

)

Dom

iniq

ue V

igne

ron

(Sai

nte-

Adr

esse

- 7

6)

IX

Pro

vidi

ng in

form

atio

n re

gula

rly, c

lear

ly a

nd w

ithtr

ansp

aren

cy

Air

Liqu

ide

com

mun

icat

es re

gula

rly o

n its

activ

ities

, dev

elop

men

t and

stra

tegy

.

■In

tern

et•

A s

ectio

n d

edic

ated

to s

hare

hold

ers

onth

e In

tern

et s

ite. D

irect

regi

ster

ed s

hare

-ho

lder

s ca

n ch

eck

thei

r acc

ount

s an

d m

ake

on-li

ne s

tock

ord

er e

ntrie

s.•

An

e-m

ail a

lert

sys

tem

,ava

ilabl

e to

ever

yone

free

of c

harg

e, to

sta

y in

form

ed in

real

tim

e.•

An

e-m

ail a

ddre

ss s

o th

at y

ou c

an a

skqu

estio

ns d

irect

ly:

shar

ehol

der

s@ai

rliq

uid

e.co

m.

X

Com

mun

icat

ing

bett

er

■P

ublic

atio

ns•

The

Ann

ual R

epor

tpr

esen

ts a

ll th

e la

test

info

rmat

ion

on th

e G

roup

and

its

stra

tegy

.•

The

Sha

reho

lder

’s G

uid

e/S

umm

ariz

edA

nnua

l Rep

ort

high

light

s th

e pa

st y

ear’s

key

even

ts a

nd p

rovi

des

prac

tical

info

rma-

tion

for

ever

y sh

areh

olde

r.•

Fina

ncia

l inf

orm

atio

n:pr

ess

rele

ases

,pr

esen

tatio

ns, r

ecor

ding

s of

fina

ncia

lan

alys

ts’ m

eetin

gs a

re a

vaila

ble

on th

eIn

tern

et s

ite.

•Fi

nanc

ial n

otic

esar

e pu

blis

hed

quar

terly

in th

e pr

ess.

• Fo

r th

e G

ener

al S

hare

hold

ers’

Mee

ting,

ano

tice

is s

ent t

o ev

ery

shar

ehol

der

as w

ell

as c

ompr

ehen

sive

min

utes

of th

e m

eetin

gin

clud

ing

the

deba

tes

and

vote

s.•

Four

Let

ters

to S

hare

hold

ers

are

sent

eac

hye

ar to

regi

ster

ed s

hare

hold

ers,

hol

ders

of

bear

er s

hare

s w

ho v

oted

at t

he G

ener

alS

hare

hold

ers’

Mee

ting

and

anyo

ne e

lse

who

requ

ests

them

. In

2005

, tw

o sp

ecia

l issu

esfo

cuse

d on

oen

olog

y an

d ca

rbon

dio

xide

.

All

this

mat

eria

l can

be

dow

nloa

ded

inFr

ench

and

Eng

lish

from

our

Inte

rnet

site

.

Hol

ding

sha

res

in re

gist

ered

form

allo

ws

Air

Liqu

ide

to k

now

its

shar

ehol

ders

and

ther

efor

e to

:•

esta

blis

h di

rect

and

per

sona

lized

com

mu-

nica

tion:

all

corr

espo

nden

ce a

nd d

ocum

ents

rela

ting

to th

e G

ener

al S

hare

hold

ers’

Mee

ting

are

sent

dire

ctly

to th

ese

shar

ehol

ders

,•

rew

ard

loya

lty th

roug

h a

bonu

s pr

ogra

m:

addi

tiona

l 10%

on

the

divi

dend

pay

men

tan

d on

sha

res

allo

cate

d w

hen

bonu

ssh

ares

are

issu

ed (f

or a

ll sh

ares

regi

ster

edby

Dec

embe

r 31

, and

hel

d co

ntin

uous

ly

in re

gist

ered

form

for

mor

e th

an tw

o ca

lend

ar y

ears

).

Air

Liqu

ide

plan

s to

exp

and

its s

ervi

ces

for

the

bene

fit o

f reg

iste

red

shar

ehol

ders

,es

peci

ally

on

the

Inte

rnet

.

Info

rmat

ion

serv

ices

and

acco

unt m

anag

emen

t too

lsfo

r sh

areh

olde

rs

Air

Liqu

ide

plac

es a

pre

miu

m o

n th

e qu

ality

of it

s re

latio

nshi

p w

ith in

divi

dual

sha

reho

lder

s,w

hich

is c

entr

al to

the

prom

otio

n of

sha

re-

hold

er lo

yalty

.

Sha

reho

lder

Ser

vice

s •

The

20 m

embe

rs o

f Sha

reho

lder

Ser

vice

sar

e de

dica

ted

to s

ervi

ng 3

60,0

00 in

divi

dual

shar

ehol

ders

.•

It m

anag

es th

e ac

coun

ts o

f dire

ct re

gist

ered

shar

ehol

ders

free

of c

harg

e an

d al

so p

lace

sth

eir

buy

and

sell

orde

rs.

Reg

iste

red

sha

res

For o

ver t

en y

ears

, Air

Liqu

ide

has

prom

oted

regi

ster

ing

shar

es a

mon

g its

sha

reho

lder

s,es

peci

ally

via

its

loya

lty b

onus

pro

gram

.In

tota

l, as

at D

ecem

ber

31, 2

005:

• 13

8,00

0 re

gist

ered

sha

reho

lder

s, 5

2,00

0of

who

m w

ere

dire

ct re

gist

ered

sha

reho

lder

s,•

31%

of a

ll sh

ares

wer

e re

gist

ered

,•

60%

of r

egis

tere

d sh

ares

wer

e he

ld b

yin

divi

dual

sha

reho

lder

s,•

50%

of i

ndiv

idua

l sha

reho

lder

s’ s

hare

sw

ere

held

dire

ctly,

• 27

.3 m

illion

sha

res,

that

is 2

4.9%

of s

hare

capi

tal,

wer

e el

igib

le fo

r th

e bo

nus

divi

dend

paid

out

in 2

006.

• An

Inte

rnet

site

ded

icat

ed to

prov

idin

g sh

areh

olde

rs w

ith a

llth

e in

form

atio

n th

ey n

eed:

ww

w.a

irliq

uide

.com

• An

e-m

ail a

ddre

ss s

o yo

u ca

nse

nd y

our

ques

tions

to th

e Sh

are-

hold

er S

ervi

ces

team

mem

bers

:sh

areh

olde

rs@

airl

iqui

de.c

om

•

(tol

l-fr

ee n

umbe

r) to

che

ck c

urre

ntsh

are

pric

e, li

sten

to th

e G

roup

’sw

eekl

y ne

ws

and

finan

cial

info

r-m

atio

n, fi

nd o

ut a

bout

the

agen

da.

You

can

also

talk

to a

Sha

reho

lder

Serv

ices

team

mem

ber f

rom

8:3

0am

to 5

pm

or l

eave

a m

essa

ge.

XI

A 24

/7 s

ervi

ce

Cal

enda

r20

0616 17 23 6 1926 4 2623 7 17 18 18

May

Air

Liqu

ide

Villa

ge

Info

rmat

ion

mee

ting

Gre

nobl

e

Nan

tes

Nan

cy

26A

pri

lFi

rst

qua

rter

sal

es

Ju

ne

Ang

ers

Info

rmat

ion

mee

ting

orga

nize

d by

the

FFC

I

Se

pte

mb

er

Hal

f yea

r ea

rnin

gs

Octo

be

rB

esan

çon

Info

rmat

ion

mee

ting

orga

nize

d by

the

FFC

I

No

vem

be

rLa

Roc

helle

Info

rmat

ion

mee

ting

orga

nize

d by

the

FFC

I

De

ce

mb

er

Per

pign

anIn

form

atio

n m

eetin

g or

gani

zed

by t

he F

FCI

Ju

lyH

alf y

ear

sale

s

Se

pte

mb

er

Le H

avre

In

form

atio

n m

eetin

g or

gani

zed

by th

e FF

CI

Octo

be

rTh

ird q

uart

er s

ales

No

vem

be

rS

alon

Act

iona

ria (a

sha

reho

lder

s’ t

rade

fair)

at

the

Pal

ais

des

Con

grès

– P

aris

May

Gen

eral

Sha

reho

lder

s’ M

eetin

gat

the

Pal

ais

des

Con

grès

– P

aris

10

XII

FFC

I: Fr

ench

Fed

erat

ion

of In

vest

men

t Clu

bs

67

91

165

191

203

231

247

269

273

279 All about Air Liquide

Highlights

The Group’s history

Air Liquidearoundthe world

The Group’s offer

ManagementReport

Consolidatedfinancial statements

Statutory accounts of theparent compagny

Report from the Chairman of theSupervisory Board

Resolutions to be put tothe Combined AnnualGeneral Shareholders’Meeting of May 10, 2006

Sustainabledevelopment: indicatorsand objectives

Ten year consolidated financialsummary

Glossaries(for words followed by an *)

Supplementary information for theReference Document

Ladies and Gentlemen, Dear Shareholders,

In 2005, your Groupsuccessfully integrated theMesser activities acquiredin 2004 while continuing itsgrowth in new regions ofthe world including China,Eastern Europe andRussia, and in promisingmarkets such as hydrogen.The results speak forthemselves: 2005 was agood year for Air Liquide.

In December, 2005, the Supervisory Boardproposed to its shareholdersto return to the Group’soriginal managementstructure with a Board ofDirectors and placing theCEO’s functions under the

charge of Benoît Potier. The futureBoard of Directors would comprisethe current members of the Super-visory Board for their remainingtenure, a new member and thecurrent chairman of the ManagementBoard. The existing managementstructure – a Management Board anda Supervisory Board – approved by

the shareholders in 2001, had beenset up to ensure both the transition toa renewed management team andthe continuity of strategies and objec-tives. This was successfullyaccomplished, as the Group’s earn-ings demonstrate.

The proposal to return to a Board ofDirectors is in keeping with Air Liquidetradition and promotes a close relationship between its managersand the shareholders. This formulahas made a real contribution to theGroup’s performance in the longterm. If this change is approved, it will be carried out in compliancewith the corporate governance rulesthat Air Liquide has always supported.The principles of respect for share-holders’ rights, the Board’scompetence and independence andthe clear delegation of power in effectin the current structure will naturally betransferred to the new organization.

I am convinced that this organization isthe best formula for ensuring the Group’sfuture and serving the interests of itsshareholders.

Alain JolyChairman of the Supervisory Board

A successful transition

AIR LIQUIDE Annual Report 20052

How would you evaluate thispast year?Year 2005 was the first full year inwhich all of Messer’s activities wereintegrated after their acquisition in2004. For this reason, it was animportant step for Air Liquide. Year2005 was also one of solid growth.The Group took advantage of power-ful economic drivers – Asia and NorthAmerica – while demonstrating itscapacity to pursue growth in Europethrough innovation, hydrogen andservices in Healthcare. Air Liquidegrew in all sectors: apart from thechange and variation effect in thecost of energy, sales increased by+10.7%, net earnings by +19.7% and+10.9% on a comparable basis(1) andnet earnings per share by +19.8%.Major cost increases were offset byimproved productivity and commercialaction as well as by price indexationin sales contracts. The Air Liquideshare rose +19.49% over the year, oran evolution comparable to that of theCAC 40 (+23.39%). I am very pleasedwith this performance, and our objectiveis to continue to increase the value ofthe Air Liquide share over the longterm through our growth dynamic.

How did the integration of Messer’s activities go? It was a real success for the Group.The teams carried out this integrationquickly and efficiently, which acceleratedthe realization of synergies beyondexpectations. This success isexpressed in the figures, but also inthe support of Messer’s men andwomen for the Air Liquide employeeshare offer: the high participation rateby staff in Germany in this project isan excellent demonstration of theircommitment to the Group. The next stage, which has just started, is enrichment on the basis of

a broadened customer portfolio andincreased know-how. It involves adual approach: the rollout of the Air Liquide offer to former Messercustomers and the inclusion ofMesser’s valuable know-how in thesolutions the Group proposes.

Engineering also seems to havehad good performances in 2005…Engineering, which designs andinstalls gas production units for theGroup and third-party customers,recorded a record growth rate in2005 (+27.1%). This is good newsbecause it means that the industrialworld is investing heavily, especially in certain zones with emergingeconomies that are real marketopportunities for Air Liquide. In countries with more developedeconomies, this growth comes fromnew needs in health, food, and theenvironment, which, despite extreme-ly competitive conditions, enables Air Liquide, thanks to innovation, totake advantage of this transformation.

Benoît PotierChairman of the Management Board


(1) Excluding exceptional and significant items linked withthe realization of disposal gains and restructuring provisions.

Presence, conquest, innovation: our growth dynamic

What about the Group’s three-part strategy: presence,conquest, innovation?These three main strategies comprisethe Group’s growth model. Presencein fully developed economies, meansstrengthening relations with customerswith whom we are heavily involvedand that make up a broad, solidbase. Conquest is breaking into newterritories. It can mean market sharesto be won in new geographies: oursuccesses in 2005 in China, EasternEurope, Russia, India and the MiddleEast are cases in point. But conquestis also the development of a newactivity in a country where the Groupis already present, for example,homecare in Germany or gasificationof oil products with oxygen in Italy. Asfor innovation, it is indispensable tothe growth of Group activities, inparticular in developed countries.

The success of hydrogen in Europeand North America is an example ofthis approach.Out of the 9.3 points of growth in ourGas and Services sales, 2.6 pointscome from the acquired Messeractivities, 1.8 from new territories,essentially emerging countries, 2.0are connected to the innovation partof our offers, and 2.9 are generatedby our core businesses in countrieswith advanced economies. Investments,which remain strong, are similarlydivided. Two thirds of the 1.2 billioneuros in investments approved in2005 focus on new geographies oractivities based on innovation.


Are these three main strategiesconnected?Naturally! Each subsidiary, eachmarket creates its own combinationbased on these three main strategiesby asking the following questions:How can the performance of the existing business be improved? How can new territories be developed?What innovations should be favoredto obtain maximum growth? Let’s usethe example of the development ofthe health market in Germany: for us,the recent entry into the homecare aswell as hospital care markets are newterritories. We embark on a conquestby relying on our local organizationand know-how and on innovation. By combining all these factors, theGroup is in the process of building avery promising health model inGermany!

How do you maintain themomentum in innovation? Innovation has always been Air Liquide’sspearhead and for the secondstraight year, the Group has sizablyincreased its research budgets,which rose about +15%. The research Air Liquide carries outis focused on health, sustainabledevelopment and advanced tech-nologies. Air Liquide has developedexpertise in hydrogen at every stageof the chain: production, storage,distribution, fuel cells, etc. Thisexpertise grows stronger every yearthrough new experimentation, espe-cially in the framework of internationalprograms in which Air Liquide plays aleadership role. Clearly, our verystrong research focused on hydrogenas an energy carrier brings us intothe world of the next fifty years.

Furthermore, the advanced technol-ogy teams are studying newapplications in the aerospace sectorand exploring very low temperatures.In 2005, to support our growth inhealthcare, we launched a newresearch focus specific to healthcare.This covered respiratory assistancein the broad sense – the Group’score Healthcare business – but alsothe administration of medications ingaseous form.

What do you think about thechanges in Air Liquide’s invest-ment portfolio in 2005? In the framework of our deploymentstrategy for our core business, we have disposed of our 39.5%stake in Séchilienne-Sidec, acompany specializing in steam andelectricity production in nichemarkets. We also bought out thebalance of shares in SOAEO, our original subsidiary in South-EastAsia, to simplify the Group’s structures in this region of the worldwhose growth requires us to use allthe means at our disposal.

In 2005, Air Liquide organizedan increase in capital reservedfor employees…Air Liquide’s performances are aboveall the result of teamwork. Tostrengthen the long-term involvementand interest of the employees in AirLiquide’s growth, the Group regularlyreserves an increase in capital forthem at a preferential price. The oper-ation carried out in 2005 was veryfavorably received: nearly 45% of thepersonnel subscribed to shares.I welcome this commitment which I consider a sign of their trust in theGroup’s future. I would also like todedicate to all employees the Chal-lenges 2005 prize awarded to AirLiquide for top financial performanceover the last three years.

What is the outlook for 2006?With the integration of Messer’s activ-ities and the formalization of ourpresence, conquest and innovationstrategy, we have redrawn theGroup’s contours: geographic expan-sion, enrichment of our offer andbroadening of our customer portfolio.We have laid the foundations for anew Air Liquide growth cycle. TheGroup’s fine performance in 2005 isthe first concrete sign of this dynamic,which will be pursued in 2006 and the years to follow. Today, the Grouphas all the key elements to meet thechallenges of the modern world,tackle international competition andseize growth opportunities whereverthey are.


Supervisory Board

The Supervisory Board met six times in2005. The member attendance rate was98%.

The Supervisory Board’s activities centeredon the following points:

Regular supervision of the management of the GroupThe Supervisory Board examined theManagement Board’s quarterly reports,reviewed reports of Committee meet-ings, and exercised its authority for priorapproval, particularly for major invest-ments, the stock options program andthe employees share purchase programperformed in 2005.

Monitoring of significant issues– the strategic goals of the Group: theManagement Board and several opera-tional managers made presentations tothe Supervisory Board on developmentdrivers and strategic goals identified indeveloped countries and in emergingcountries with high economic potentialand through the development of innova-tive solutions.A special meeting to address the Group’sstrategic goals was held in June,– monitoring the development of AirLiquide’s shareholder base and of thedistribution policy to shareholders, – monitoring the application by AirLiquide of the the corporate gover-nance rules recommended by theAFEP/MEDEF report of October, 2003,– on-site visits to industrial locations ofthe Group and to certain major customersites and meetings with Group operationalmanagers.

Operations of the corporatestructureThe Supervisory Board met, without themembers of the Management Board, toconsider:– Management Board operations: the Supervisory Board evaluated theperformance of the members of theManagement Board for the 2004 finan-cial year and set the variable portion ofthe Management Board members’remuneration for such financial year aswell as the fixed portion and the princi-ples applicable to the variable portion for2005,– Supervisory Board operations: theSupervisory Board approved the proposedappointment to the Supervisory Board or renewal of the terms of office ofSupervisory Board members and decidedto renew the term of office of its Chairman. It appointed new Committeemembers and renewed the terms ofoffice of certain existing Committeemembers.

Governanceprinciples

Supervisory BoardThe Supervisory Board controls the Management Board's man-agement of the Company. It currently comprises nine membersappointed for four-year terms who are selected on the basis oftheir ability, integrity and dedication to the interests of all share-holders. The Company’s Articles of Association require that eachmember of the Supervisory Board hold at least 500 Air Liquideregistered shares. On the basis of the four independence criteriaestablished by the Supervisory Board (as mentioned in theReport of the Chairman of the Supervisory Board on page 191),seven of the nine current members are independent.

The principles guiding relations between the ManagementBoard and the Supervisory Board are clearly defined inan internal document. Moreover, the Supervisory Board issubject to internal rules governing its composition andfunctioning. An internal code of conduct on the preventionof insider trading details the legal and regulatory obligationsapplying to members of the Supervisory Board.

The Supervisory Board includes an Audit and AccountsCommittee and a Selection and Remuneration Committee.

Corporategovernance


The Supervisory Board conducted areview of its operations through individualassessment questionnaires completedby Supervisory Board members. On thebasis of the responses obtained, theSupervisory Board decided that, besidesthe regular report on the Group financialpolicies which is made to the Audit andAccounts Committee, a summary reportwould be made to the SupervisoryBoard on this topic once a year and thatreporting on risk management would befurther developed.

The Supervisory Board set the rules fordetermining its members’ attendancefees for the year.

Taking due note of the age limit applicable to the Chairman of the Supervisory Board set by the Articles ofAssociation, the Supervisory Boarddecided during a specific meeting entirely dedicated to this topic, torecommend to the Combined AnnualGeneral Shareholders’ Meeting of May10, 2006, a return to the historical structure of the Company comprising aBoard of Directors. This matter is set outin depth in the Supervisory Board’sreport.

In 2005, emphasis was placed on broadening Supervisory Boardmembers’ understanding of the Group’sbusinesses. To this end, a number ofon-site visits to Group locations andcertain major customer sites as well asmeetings with Group operational managers were organized following theSupervisory Board’s meeting held inSyracuse.

Management BoardThe Management Board met eighteentimes in 2005 in order to formulate theGroup’s strategy and monitor businessprogress.

It approved the proposed change in theCompany’s Articles of Association to besubmitted to the Combined AnnualGeneral Shareholders’ Meeting of May10, 2006.

The Board deliberated on the disposalof the investment in Séchilienne-Sidecand the acquisition, through a publicoffering, of the shares held by SOAEOminority interests.

Within the framework of authorizationsprovided in the Articles of Association,the Management Board performed ashare capital increase reserved foremployees, allocated stock options* tomanagers and employees of the Companyand its subsidiaries and determined theCompany’s share buyback policy.

As in previous years, the ManagementBoard remained especially vigilant inrelation to issues of employee safety.

The Management Board reviewed theGroup’s estimates, annual budgets andtargets, financial statements, investmentsand major industrial projects undernegotiation, and gave all necessaryapprovals.

Delegations of authority within theCompany were renewed as appropriate.

Management BoardThe Management Board, a collegial body, has been composed of threemembers since May, 2004: Benoît Potier, Chairman of the ManagementBoard, and Jean-Claude Buono and Klaus Schmieder, ManagementBoard members. They are assisted by the Management Board secretary.

The Management Board is responsible for managing the Company incompliance with the law and the Articles of Association. It formulates theGroup's strategy and, for overall coordination and implementation, relieson the Executive Committee currently composed of eleven members,including the members of the Management Board.

Each time the Management Board meets, a written report is submitted to the Chairman of the Supervisory Board. A quarterly report is submittedto the Supervisory Board.

Note: Please turn to page 191 for the full Report from the Chairman of the Supervisory Board


Audit and AccountsCommitteeThe Audit and Accounts Committee metfive times in 2005. The member attendancerate was 95%.

Review of annual and half-yearlyfinancial statementsParticular attention was paid to off-balancesheet items, taxation, non-recurringitems, provisions, and the managementof risk related to customers, countriesand foreign exchange.

In addition, the Committee closelyconsidered the impact of IFRS on thefinancial statements, in particular duringits review of the financial statements forthe first half of 2005.The statutory auditors presented theirreports to the Committee. The Committeewas duly informed on the measures takenby the Finance and AdministrationDepartment in order to carry out its activities with increased resources.

Monitoring the work of theInternal Audit DepartmentThe Committee heard the conclusions of the Internal Audit Department on the assignments performed by it. TheCommittee was duly informed on theorganizational structure of the InternalAudit Department and on the measurestaken by this Department in order tocarry out its assignments.

Specific presentationsPresentations were made to theCommittee concerning, in particular, the implementation of a single informationsystem common to several Group entitiesin Europe, the crisis management process,procedures applicable to medium-sizedacquisitions and the organization of theexternal audit of the Group.

Selection and RemunerationCommittee

The Selection and RemunerationCommittee met twice in 2005. The memberattendance rate was 100%.

New candidates for theSupervisory BoardFollowing approval by the SupervisoryBoard of the Committee’s proposals,Alain Joly, Thierry Desmarest and Sir Lindsay Owen-Jones, together withThierry Peugeot, were elected or reelectedto the Supervisory Board at the GeneralShareholders’ Meeting in May, 2005. At the end of 2005, the Committee madenew recommendations for presentationto the 2006 General Shareholders’Meeting concerning the renewal of theterm of office of Béatrice Majnoni

Gérard de La Martinière (Chairman), Edouard de Royere,Béatrice Majnoni d’Intignano, Professor Rolf Krebs (three of the four committee members are independent,including the Chairman).

Pursuant to internal regulations, the Audit and AccountsCommittee must be comprised of four or five members ofthe Supervisory Board, of whom at least two-thirds areindependent.

The Committee reviews the financial statements approvedby the Management Board, the accounting practices, the existence and implementation of internal audit methodsand organization, and the selection and reappointment ofthe statutory auditors. In its assessments, the Committeedraws on the professional experience of its members andrelies on reports submitted by the Management Board, by the Finance and Administration, Legal, and Internal AuditDepartments, and by the statutory auditors.

The Committee meets at least three times a year andalways before any meeting of the Supervisory Board thatreviews annual and half-yearly financial statements. The Committee reports on its work to the SupervisoryBoard orally and in writing. It can also draw on the expertiseof external advisers.

Audit and Accounts Committee

Corporategovernance


Selection and Remuneration Committee

This Committee examines the composition of theSupervisory Board and assesses the needs for futuredevelopment. It directs the search for new members andproposes candidates to the Supervisory Board. It reviewsthe appointment, remuneration and employment conditionsof Management Board members. It assesses their performance and reports to the Supervisory Board. The Committee can draw on the expertise of externaladvisers.

The remuneration policy for the Management Board, as approved by the Supervisory Board, includes:

– a short-term portion, consisting of a fixed portion tiedto the level of responsibility and experience in the function,and a variable portion, currently evaluated against threeelements of performance: two financial items which rep-resent the majority portion of the variable remunerationwhich are based on (i) growth in net earnings per shareand (ii) return on capital employed after tax, and a thirdelement based on individual qualitative objectives thatnotably took into account in 2005 the preparation of theCompany's future development, the acceleration of theproductivity program and the continued integration ofMesser with the development of synergies. Formulas areestablished at the beginning of the year and the actualamounts are determined at the end of the period, basedon results,

– stock option plans complete the short-term remunerationplan, with an incentive consistent with shareholders’ mid-terminterests.

These various elements aim to be competitive, withoutbeing excessive, in light of several external market studies and with serious consideration given to shareholderinterests. In response to shareholder expectations, it was decided to opt for annual plans, awarded duringpredetermined periods, so as to avoid exposure to criticism should stock market prices fluctuate widely.

The Committee also examines stock option plans proposed by the Management Board for other groupmanagers. It recommends their allocation by theSupervisory Board, following the same guidelines, withthe objective of motivating a significant number of managersover the mid-term while maintaining the total number ofoptions at a reasonable level.

The Management Board’s policy is to buy shares on themarket in order to neutralize any dilution that could resultfrom issuing shares upon the exercise of the stock options.

Data on remuneration and options can be found in theManagement Report. The Committee is also kept informedof the performance and remuneration of the ExecutiveCommittee. Periodically, it also considers the developmentpotential of the Management team.

Alain Joly (Chairman), Thierry Desmarest, Sir Lindsay Owen-Jones (two of the three committee members areindependent).

Note: Please turn to page 191 for the full Report from the Chairman of the Supervisory Board


Change to the Company’s management structureTaking due note of the age limit applica-ble to the Chairman of the SupervisoryBoard set by the Articles of Association,the Committee recommended to theSupervisory Board a return to theCompany’s historical structure compris-ing a Board of Directors. This matter isset out in depth in the SupervisoryBoard’s report.

d’Intignano and the appointment ofPaul Skinner, to the Air Liquide Supervi-sory Board. In addition, the Committeeproposed to the Supervisory Board theappointment of Béatrice Majnoni d’Intig-nano and Professor Rolf Krebs to theAudit and Accounts Committee and theappointment of Gérard de La Martinière,an independent member, as Chairmanof this Committee.

Attendance fees for SupervisoryBoard membersAt the recommendation of the Commit-tee, the Supervisory Board set theallocation principles and amounts appli-cable for 2005.

Remuneration of ManagementBoard membersThis Committee made recommendationsto the Supervisory Board on the fixedportion and the formulas for calculatingthe variable portion of ManagementBoard members’ remuneration for 2005.

Alain Joly■ Chairman of the Supervisory

Board■ Chairman of the Selection

and Remuneration Committee■ Director, Société d’Oxygène et

d’Acétylène d’Extrême-Orient (SOAEO)(until January, 2006)

■ Director, Lafarge■ Director, BNP-Paribas

Born in 1938 (51,547 shares)

Édouard de Royere ■ Honorary Chairman

Member of the Audit and Accounts Committee

■ Director, Sodexho Alliance (until February, 2005), SiparexAssociés (until December, 2005)

■ Member, Supervisory Board, Michelin■ Auditor, Fimalac■ Honorary Chairman, Association

Nationale des Sociétés par Actions(ANSA)


Sir Lindsay Owen-Jones ■ Vice-Chairman of the Supervisory

Board■ Member of the Selection

and Remuneration Committee■ Chairman of the Board of directors

and Chief Executive Officer, L’Oréal■ Chairman of the Board of directors

and director, L’Oréal USA Inc. andL’Oréal UK Ltd.

■ Director, Galderma Pharma,Switzerland

■ Director, BNP-Paribas (until December 14, 2005), Sanofi-Aventisand Ferrari SpA (since April 22, 2005)


3

2

1

Thierry Desmarest ■ Member of the Selection

and Remuneration Committee■ Chairman and Chief Executive Officer,

Total S.A. and Elf-Aquitaine■ Chairman, Total Foundation■ Director, Sanofi-Aventis■ Member, Supervisory Board, Areva

Born in 1945 (970 shares)

Professeur Rolf Krebs■ Member of the Audit

and Accounts Committee■ Chairman, Supervisory Board,

Epigenomics AG■ Member, Supervisory Board, Ganymed

Pharmaceuticals AG, GEA Group AG(until January, 2006) and Vita 34 AG(until March, 2006)

■ Member, Advisory Board, Apax Partners,Deutsche Venture Capital andWeissheimer Malz GmbH, LehmanBrothers Limited, E. Merck OHG andAlmirall Podesfarma S.A.


Gérard de La Martinière■ Chairman of the Audit

and Accounts Committee■ Director, Schneider Electric S.A.■ Chairman of the Board of directors,

LCH. Clearnet Group Limited UK■ Chairman, French Federation

of Insurance Companies■ Chairman, European Federation of

National Insurance Associations


6

5

4

Cornelis van Lede■ Member, Supervisory Board, Akzo

Nobel N.V., Royal Philips ElectronicsN.V., Heineken N.V.

■ Director, Air France-KLM, ReedElsevier and Sara Lee Corporation

■ Chairman of the Board of directors,INSEAD


Béatrice Majnoni d’Intignano■ Member of the Audit

and Accounts Committee■ Director, AGF■ Professor of Economics, Université

de Paris XII - Créteil■ Member, Economic Analysis Council


Thierry Peugeot■ Chairman, Supervisory Board,

Peugeot S.A.■ Vice-Chairman, Etablissements

Peugeot Frères■ Director, Société Foncière, Financière

et de Participations, Française deParticipations Financières, SociétéAnonyme de Participations,Immeubles et Participations de l’Est,and Faurecia

■ Director, Compagnie Industrielle deDelle

■ Permanent Representative ofCompagnie Industrielle de Delle on the Board of Directors of LISI


9

8

7

SupervisoryBoard

Corporategovernance


2

3

4

7

8

9

5

6

1

The Works Council delegates, for fiscal year2005, were as follows:Marie-Annick Masfrand, Guy Cours, Gilles Boudinand Philippe Bastien.

Note: Please turn to page 256for the full account of Supervisory Board members’mandates.

Mandate in the Air LiquidegroupMandate in another groupOther mandatesOther responsibilities


The Supervisory Board reviewed theCompany’s performance and results ona regular basis throughout 2005.

Strong growth in consolidated sales(+10.7%), net earnings (+19.7%) andnet earnings excluding non-recurringitems (+10.9%) is a measure of theGroup’s capacity to successfully inte-grate Messer activities while ensuringsubstantial organic growth of its activitiesin buoyant sectors and in rapidly developing geographical areas.

Net indebtedness, following the acquisi-tion of Messer and related divestments,which amounted to 4,012 million eurosat the end of 2004, was reduced to3,740 million euros at the end of 2005,in accordance with the objectivesannounced. The debt to equity ratio of60.2%, in addition to substantial cashfrom operating activities, enables yourCompany to benefit from a very strongfinancial base.

The Supervisory Board has, as in previousyears, evaluated the performance of themembers and Chairman of the Manage-ment Board.

The Supervisory Board has been dulyinformed of its Chairman’s report preparedin accordance with the law, describingthe conditions for the preparation andorganization of the Supervisory Board’swork, as well as internal control procedures implemented by theCompany. The Supervisory Boardwishes to emphasize that, as in the past,it considers shareholders’ interests andthe Company’s transparent approach tobe of the utmost importance.

The Supervisory Board has, in accordancewith the law, reviewed the financialstatements for 2005 prepared by theManagement Board, as well as the

management report relating to thisperiod. It also reviewed the consolidatedfinancial statements. The SupervisoryBoard has no comment to make withrespect to these documents.

The Management Board proposes to setthe dividend per share at 3.85 euros.This amount is increased by 10% forshareholders who, as of December 31,2005, have held registered shares fortwo years or more. Furthermore, subjectto the approval of the financial statementsat the Shareholders’ Meeting, as well asthe resolution authorizing the Companyto perform capital increases by capitaliz-ing reserves, the Management Board,with the approval of the SupervisoryBoard, decided to distribute, on June12, 2006, 1 bonus share for every 10existing shares, carrying dividend rightsas of January 1, 2006.

As in previous years, it is proposed thatthe authorization to purchase shares ofthe Company on the stock market, andto cancel such shares up to a maximumof 10% of the share capital, be renewedfor the period provided for by law. TheSupervisory Board has no comment tomake with respect to these proposals.

Furthermore, it is also proposed, followingthe modification of the marketable securities regime, to delegate to theManagement Board or Board of Directors as the case may be, for theperiod provided for by law, the authorityto perform capital increases via theissuance of ordinary shares with retention of preferential subscriptionrights for a maximum par value amountof 250 million euros corresponding tothe issuance of a number of new shares,with a par value of 11 euros, of less than22.8 million. As indicated previously,

shareholders will also be asked to dele-gate to the Management Board orBoard of Directors as the case may be,the authority to perform capitalincreases by capitalizing premiums,reserves or earnings, for a maximumamount of 250 million euros. In addition,shareholders will also be requested toauthorize the Company to perform capitalincreases reserved for members of agroup/company savings plan. TheSupervisory Board has no comment tomake with respect to these proposals.

In order to simplify share managementby some of our shareholders, it is proposedto increase from 1% to 2% (or any multi-ple of 2%) of the share capital or thevoting rights, the threshold, higher orlower, beyond which the notificationobligation applies. The SupervisoryBoard has no comment to make withrespect to this amendment to the Arti-cles of Association.

The Supervisory Board proposes torenew, for four years, the appointment of Béatrice Majnoni d’Intignano, whocontributes her experience as an economist with respect to issues dealingwith the economy and healthcare sectors.

The Supervisory Board also proposesthe appointment of Paul Skinner as anew member of the Board. Born in 1944,a British national, Paul Skinner has spent37 years with the Royal Dutch/Shellgroup. After having been responsible formanaging several subsidiaries in Greece,Nigeria, New Zealand and Norway, Paul Skinner was President of the ShellInternational Trading and ShippingCompany from 1991 to 1995. He wasresponsible for strategy and internationalmarketing for Shell International PetroleumCo Ltd from 1996 to 1998. In 1998,

SupervisoryBoard Report

Corporategovernance


he was appointed President of ShellEurope Oil Products. In 1999, he wasappointed Chief Executive Officer of RoyalDutch/Shell’s global Oil Products business,and appointed a Group Managing Director of the Royal Dutch/Shell groupfrom 2000 to 2003.

After his retirement from Shell, he wasappointed as Chairman of Rio Tinto plc,the global mining company, in Novem-ber, 2003. Paul Skinner will bring to theGroup his management experience inlarge multinational industrial groups andhis understanding of key markets for ourbusiness activities.

The Supervisory Board has reviewed theorganization of the Company and,considering the age limit set forth in theArticles of Association for the Chairmanof the Supervisory Board, has decidedto propose to shareholders, during theAnnual General Shareholders’ Meetingof May 10, 2006, to return to theGroup’s historical management structurewith a Board of Directors. It will then beproposed that the Board of Directorsappoint Benoît Potier as Chairman-ChiefExecutive Officer.

The Supervisory Board and ManagementBoard structure, approved by the shareholders in 2001, had been imple-mented to ensure both the successfultransition to a renewed managementteam and the continuity of strategy andobjectives. This was successfully achieved, as the results obtained by theGroup demonstrate.

The proposal to return to the Board ofDirectors structure is part of Air Liquide’stradition and favors a close relationshipbetween its managers and shareholders.This organization widely contributed toGroup performance in the long-term. If

this change is approved, it will take placein full compliance with the corporategovernance principles to which Air Liquidehas always been committed.

The principles of respecting shareholders’rights, the competence and independenceof the Board and clarity with respect to delegation of powers applied withinthe current structure will be naturallytransposed to the new managementstructure.

All of the provisions of the Articles ofAssociation which are submitted to youcompleted by the rules set forth in theinternal regulations aim to give the Boardof Directors the powers to review anddecide on essential issues relating to theCompany and notably the selection ofcorporate officers, their employmentconditions, strategic choices as well asinvestment and divestment decisions inexcess of certain amounts.

It is envisaged that in its internal regulations, the Board of Directorswould continue to apply the currentinternal regulations, notably with respectto the limitations on the powers of theGeneral Management, by adapting themto the new organization. It is envisagedthat the current Audit and AccountsCommittee would continue in its presentform, but the Selection and RemunerationCommittee would be split into two separate committees: the SelectionCommittee and the RemunerationCommittee.

The corporate governance rules andpractices adopted by this set of ruleswould be similar to those currentlyapplied and explained in the Report ofthe Chairman of the Supervisory Board(see page 191 of this Annual Report).

Shareholders will be asked to approvethe amendments to the Articles of Association corresponding to this structureand appoint as directors the currentmembers of the Supervisory Board forthe term remaining on their mandate aswell as Benoît Potier.

Shareholders will be asked to set direc-tors’ fees at a maximum amount of€550,000 per fiscal year which is equalto the amount previously set for themembers of the Supervisory Board.

Based on the criteria adopted by theSupervisory Board, regarding theassessment of the independence of itsmembers, as explained in the Report ofthe Chairman of the Supervsiory Board,the following members are independent:Béatrice Majnoni d’Intignano ThierryDesmarest, Professor Rolf Krebs,Gérard de La Martinière, Cornelis vanLede, Sir Lindsay Owen-Jones, ThierryPeugeot and Paul Skinner who areproposed as directors of the Company.Edouard de Royere and Alain Joly,former executive officers and Benoît Potier, a currently active executiveofficer, are not considered to be independent. The Board of Directorswould accordingly be comprised of eightindependent members out of a total of 11.

The Supervisory Board is convinced thatthis structure is the best solution to ensurethe Company’s future and to betterserve the interests of its shareholders.


ManagementBoardMembers of theManagement Board

Benoît PotierChairman of the ManagementBoardWith the Group for 25 years,Benoît Potier has been Chairmanof the Management Board sinceNovember, 2001. He is also:■ Chairman and Chief

Executive Officer, Air LiquideInternational, American Air Liquide Inc. and Air LiquideInternational Corporation

■ Chairman, American Air Liquide Holdings Inc.

■ Director, Société d’Oxygèneet d’Acétylène d’Extrême-Orient (SOAEO) (until March, 2006)

■ Director, Air Liquide Italia Srl.,AL Air Liquide España, Air Liquide Asia Pte. Ltd., Air Liquide Canada Inc.

1

■ Director, Danone Group, and Chairman of the AuditCommittee,

■ Member, Supervisory Board,Michelin

■ Director, École Centrale des Arts & Manufactures

■ Member, Council (France),INSEAD

Born in 1957 – French nationality (5,622 shares)

Jean-Claude BuonoExecutive Vice-PresidentJean-Claude Buono joined Air Liquide in 1989. He bringsto the Management Board hisstrong experience in financialand legal areas. In addition, he has major operational responsibilities in Europe andAsia. He has been a memberof the Management Boardsince November, 2001.

2

12

3

4

Klaus Schmieder Executive Vice-PresidentKlaus Schmieder has been amember of the ManagementBoard since May 12, 2004.Former Chairman of theManagement Board of Messer,he is the Chairman of theEuropean ManagementCommittee, and is responsiblefor overseeing and coordinatingGas and Services operations inEurope, excluding Large Industriesand Healthcare.■ Director, Air Liquide Deutschland

GmbH, Air Liquide Italia Srl.and AL Air Liquide España

■ Member, Supervisory Board,Altana AG

■ Director, MNS Nippon Sanso(until January 5, 2005)

Born in 1948 – German nationality(770 shares)

3■ Chairman and Chief ExecutiveOfficer, Air Liquide Weldingand Air Liquide Asia Pte. Ltd.

■ Chairman, Board of directors,Société d’Oxygène etd’Acétylène d’Extrême-Orient(SOAEO) (until March, 2006)

■ Vice-Chairman, Carba Holding■ Director and Deputy Chief

Executive Officer, Air LiquideInternational

■ Director, Air Liquide SantéInternational, AqualungInternational, American Air Liquide Inc., Air LiquideInternational Corporation, Air Liquide Far Eastern Ltd.,Air Liquide Tunisie, Air Liquide Italia Srl. (untilMarch 22, 2005), AL Air LiquideEspaña (until June 22, 2005)

■ Director, Velecta Paramount■ Director, SNPE

Born in 1943 – French nationality(8,144 shares)

Corporategovernance

Managementstructures


ExecutiveCommitteeMembers of theManagement Board

Benoît PotierChairman of the Management Board

Jean-Claude BuonoExecutive Vice-President

Klaus SchmiederExecutive Vice-President

Members of theExecutive Committee

Pierre DufourExecutive Vice-PresidentNorth and South America,and Middle East, IndustrialActivities, Safety, IndustrialRisks, Electronics

Born in 1955 - Canadian nationality

Jean-Marcde RoyereSenior Vice-President Health,Specialty Chemicals

Born in 1965 - French nationality

5

4

Jean-Pierre DuprieuSenior Vice-President Asia-Pacific


John GlenVice-President Finance and Administration

Born in 1959 - Scottish nationality

François DarchisVice-President Large Industries Europe, Marketingand R&D, Engineering andTechnologies


8

7

6 Ron LaBarreVice-President LargeIndustries Markets, International Customers

Born in 1950 - U.S. nationality

Larry AltobellVice-President HumanResources

Born in 1945 - U.S. nationality

Dominique MaireVice-President Communications


11

10

9

5

6

7

8

9

10

11


Keyfigures

The year 2005

■Salesin millions of euros

■Net earningsper share adjusted(1)

in euros

■Net dividendper share adjusted (1)

in euros

■Return on capitalemployed after tax(ROCE*)in %

■Return on equity(ROE*)in %

■Net indebtedness/shareholders’ equity in %


(1) Adjusted to take into account bonus share issues*.IFRS: new international accounting standards in effect since January 1, 2005.

10,4359,4289,376

8,394

2003 2004 2004 IFRS

2005IFRS

8.66

7.237.206.68

2003 2004 2004 IFRS

2005IFRS

3.853.503.50

2.90

2003 2004 2004 IFRS

2005IFRS

11.711.911.311.6

2003 2004 2004 IFRS

2005IFRS

17.216.3

14.914.1

2003 2004 2004 IFRS

2005IFRS

60.2

76.7

66.3

31.2

2003 2004 2004 IFRS

2005IFRS


Evolution over three years In millions of euros 2003 2004 2004 2005 2004/2005 2004/2005 2004/2005

excluding on a comparable foreign exchange basis

Total sales 8,394 9,376 9,428 10,435 +10.7% +10.2% +6.2% (1)

of which Gas and Services 7,389 8,275 8,275 9,148 +10.5% +10.0% +5.5% (1)

Operating income recurring* 1,196 1,277 1,375 1,518 +10.4% +9.9%(Operating income in 2003 and 2004

Net earnings* (Group share) 726 778 780 933 +19.7% +18.8% +10.9% (2)

Net earnings on a comparable basis +10.9% (2)

Net earnings per share (3)*

(in euros) 6.68 7.20 7.23 8.66 +19.8%

Cash-flow* from operating activities before changes in working capital 1,542 1,695 1,692 1,805 +6.7% +6.1%(Funds from operations in 2003 and 2004)

Capital expenditures 822 998 1,024 1,051(excluding (excluding

Messer) Messer)

Dividend* distribution (for the year) 327 391 391 432 (4)

Net dividend per share (3)

(in euros) 2.90 3.50 3.50 3.85

Shareholders’ equity* 5,079 5,374 5,232 6,209

Net indebtedness (1.730) (3,790) (4,012) (3,740)

Other ratiosIn % 2003 2004 2004 2005

Operating income recurring/sales 14.2 14.1 14.6 14.8 (5)

Net earnings/sales 8.6 8.3 8.2 8.9

Cash-flow from operating activities before changes in working capital/sales 18.4 18.0 17.9 17.3

(1) Excluding currency, natural gas, acquired Messer activities, deconsolidation of US liquid chemicals.(2) In order to compare 2004 results with those of 2005, items that we consider to be exceptional and significant relating to the realization of disposal gains and restructuring

provisions are deducted.(3) Adjusted to take into account the bonus share* issue of June, 2004.(4) Subject to the approval of shareholders at the General Shareholders’ Meeting.(5) Excluding variation of natural gas prices.

IFRS: new international accounting standards applied since January 1, 2005.

IFRS

IFRS

Presence on a broad and solid base

Our gases are everywhereand are indispensable forimproving industrialprocesses. They go hand in hand with growth andprogress in advancedeconomies where Air Liquidehas a strong presence.

Innovation, technology and services

New products like hydrogenand therapeutic gases,advances in electronics,innovative environment-relatedapplications and high value-added services are growthdrivers that meet ourcustomers’ new needs.

The Air Liquidedynamic


Conquest of new territories

Air Liquide seizes developmentopportunities in new marketsand emerging economies thatshow high growth rates: Eastern Europe, Russia, theMiddle East, India, China, etc.

Dynamic: a word that clearly expresses the way the Air Liquide group develops its growthstrategy. To strengthen its position as worldleader in industrial and medical gases, the Groupmoves forward constantly: it uncovers new markets, implements cutting-edge technologicalsolutions and develops innovative products andservices. Air Liquide is now now present inover 70 countries. Armed with the know-howand reactivity of its teams, its close relationswith its customers and the loyal support of itsshareholders, the Air Liquide group plans toaccelerate its growth backed by a commitmentto sustainable development.


The Air Liquide dynamic: 36,000 employees in over 70 countries

Christiane Muller,metal manufacturingmanager, IndustrialCustomers, Canada“I like diversity, new things andteamwork and that’s what hasguided my career at Air Liquide.I started in research in France,then China, where I took part inthe start-up of engineering inHangzhou. Back in France, I wasresponsible for on-site* interna-tional engineering, then the indus-trial management of IndustrialCustomers. In 2003, I wanted toget closer to my customers. I wasoffered a position in which I wouldbe monitoring the cylinder gasand welding business in Canada.It was a new sector for me andthat’s exactly what attractedme, just like the prospect of dis-covering another country and adifferent culture. My greatestsatisfaction has always been todevelop and share my passionwith my teams.

“When Air Liquide offeredme a research position inhydrogen as an energycarrier for clean trans-portation, I accepted right away.It’s an exciting sector because itconcerns all of us. Moreover, it’san area with a lot of challengesand where everything remainsto be done. You really feel likeyou’re taking part in an adventure.I work more specifically onquestions about the storage ofpressurized hydrogen and itstransfer to a vehicle’s tank. Theobjective is to develop a fast,efficient and reliable system forfilling tanks. My colleagues andI have a lot of freedom to explore,we’re in a real position to makeproposals. It’s very motivating.”

Sitra Pregassame,hydrogen energyresearch engineer,research center, Paris

Roy Hu, sales manager, Air Liquide, Qingdao,China“I’m one of 300 people who joinedAir Liquide in China in 2005.I entered the new subsidiary inQingdao, in Shandong province.In just a few months, I had takenpart in two training sessions thatfamiliarized me with the Group,its products, services and culture…and its ambitious developmentplan in China. During a teamtraining session, I visited severalsites and got to know my col-leagues at the different units.But where I learned the mostwas in the field, working for afew weeks with the Air LiquideTianjin team, then with a seniorsales manager on a short-termassignment in Qingdao. I now haveall the know-how I need to meetthe challenges of my job andmove ahead with Air Liquide.”


Alberto Luraschi, industrial management,Electronics,Singapore/ParisMy task is to serve my 800 col-leagues who work on our cus-tomers’ sites and monitor thedistribution of gases and liquidchemicals inside the fabs. Ourobjective is maximum safetyand reliability. What I find excitingin this business is first of all thehuman dimension: I’m in contact

with teams around the world, alldifferent, and I often meet themin the field. The continuous techno-logical evolution in this sector isvery stimulating and you neverget bored. In addition, the inter-national dimension of the Elec-tronics business offers real oppor-tunities. The three years I havejust spent in Singapore were awonderful experience for me atevery level.”



Keith Blappart,operations technician,United States“In just a few hours, hurricaneKatrina devastated my life, carry-ing away my house and every-thing I owned. My colleaguescame to my aid immediatelyand thanks to the ALAHO aidfund, I was able to quickly movemy family into a fully equippedmobile home. Then a few weekslater we received another dona-tion in cash.In total, 76 employees benefitedfrom our colleagues’ support,notably thanks to the $160,000contributed to the ALAHO aidfund, over a third of which camefrom the employees. This fundis set up for Air Liquide employeesin the United States who needtemporary financial assistancefollowing natural disasters.

I would like to express my heart-felt thanks to Air Liquide and mycolleagues whose support madeit possible for me to get throughan extremely difficult situationand to rebuild my life.”

Martin Tils, laboratories and analyses manager,Krefeld-Gellep,Germany“After having spent 18 years atMesser, Air Liquide’s acquisi-tion of our business was a veryinteresting experience that open-ed us up even further to interna-tional opportunities. It also gotus to rethink our way of workingso we could integrate the differ-ent cultures of the two groups,from both the human and theprofessional viewpoint. The newteam that came out of theacquisition chose the bestexisting practices to create a newEuropean and very internationalculture. This integration is suc-cessful today because of theefforts of the working groups,who examined this integrationfrom every angle. The head officeis now in Krefeld, in Germany,near the largest specialty gases*unit in the world. Moreover,working together will make itpossible to roll out a developmentplan for this business in ourEuropean subsidiaries.”

I wanted. Anyone who wants tomove shouldn’t have any hesi-tation in talking about it to thepeople around him or her. Thereare real possibilities for profes-sional mobility at Air Liquideand you’re very well supportedduring the transition period.Today, I’m really happy in termsof family – my wife was trans-ferred to the region – as well ason the professional level.”

Thierry Durand,electricity and instrumentationmanager in Port-Jérôme,France“In 2001, I was working in engi-neering in Champigny, near Paris.I wanted to change sectors, todiscover something else. I wasoffered a position as electricityand instrumentation managerfor the Large Industries site inPort-Jérôme in Normandy. Thisjob is very different from the onebefore. I needed time to adapt,but it really corresponds to what



Gabriela Apiou,medical gases researchgroup manager“The medical gases sector isvery promising and exciting:there are so many areas toexplore! That’s why the Groupput me in charge of forming adedicated, multidisciplinary andinternational team to work onnew therapeutic methods. Ourobjective is to combine gas andadministration systems for treat-ing respiratory illnesses but alsofor anesthetic use, pain man-agement and many other areas.My team will also study the useof gases as carriers for other

medications: the lung is anexcellent natural access pathto the body that is still barelyexplored. In this area, medicineworks with gas biodynamicsand biophysics. It’s all the moremotivating as our ultimate goal isto improve service to patients!”

For over a century, Air Liquide has been pursuing a growth

strategy that fits in perfectly with the sustainable develop-

ment* approach, combining long-term wealth creation and

respect for people and the environment.

The Group’s approach to sustainable development focuses

on four dimensions:

Developing the potential of men and women of

the Company in their commitment to common objectives

Creating value for shareholders by developing the

Company’s business performance over the long-term and

with transparency

Preserving life and the environment in Group opera-

tions and at customer sites

Innovating for tomorrow to guarantee the growth of

the Company and its customers

Sustainable development


Developingthe potential of men and women

Facilitating and accelerating skillstransferThe importance for Air Liquide of develop-ments in new geographic zones meansmobilizing on-site teams that can carryout these new projects. The result isstepped-up recruitment in these areas.In China, for example, 300 more peoplewere hired in 2005 for a total of 1,500.To support the ramping up of new teams,to back them up in a given sector thathas major needs at a particular period,in other words, to guarantee an efficientskills transfer, Air Liquide decided tomobilize its international experts network.In late 2005, about a hundred expertswere identified. All of them are ready toleave for a short-term assignment in aregion and on a project to which theycan contribute support while sharingtheir expertise with their local colleagues.This initiative is part of the Group’s technical expertise recognition program.

Compensation that rewards performanceRecognizing an employee’s contributionincludes a compensation system thatrewards performance: 41% of employeeshave a varying portion of their salary(excluding profit-sharing) tied to theirindividual and team performance andGroup or unit results. Moreover, in 2005,Air Liquide reserved an increase in capitalstock for its employees: nearly 45% ofthem bought shares and employeesnow hold 1.2% of Air Liquide’s capital.

Note: details and comments

on human resources indicators are on

pages 242 to 244.



Evolution of Group workforce over four years

40,000

30,000

20,000

10,000

0

2002 2003 2004 2005

30,800 31,900

35,900 35,900

Nearly 36,000 men and women makeup Air Liquide’s multicultural andmultidisciplinary teams: throughoutthe world, these teams are motivatedto innovate day after day to satisfytheir customers and improve Groupperformance.

Diversity: an asset for the Group For Air Liquide – an international groupinvolved in very different lines of business– diversity in every area is a source ofdynamism that the company constantlyfosters. Diversity exists in nationalities,cultures, skills, profiles, experience, the men/women ratio as well as in thepossibility of having very different jobsduring a career. The opportunities forgeographic and professional mobility arereal. There are many bridges betweenbusiness sectors and units and anemployee can go from a technical sector to management or sales posi-tions. Diversity also means integratingmore women: in 2005, worldwide, 17%of engineers and managers were womenand they make up 28% of all hires inthese categories. Women constitute24% of employees considered as having“high potential” in the Group comparedto 20% in 2003. Diversity is also reflectedin country of origin: there are 36 differentnationalities among the company’sexpatriates and 20 among executivemanagers.

Air Liquide and its shareholders havehad a relationship of trust for over acentury. The Group puts its share-holders at the heart of its strategy withone objective: enhancing the value oftheir equity through sustained, steadygrowth in earnings and dividends*over the long term. Each decision ismade with the medium and long-terminterest of its shareholders in mind.The Group’s long-term performancesand its shareholders’ loyalty are itstwo greatest assets.

The Group’s commitment to itsshareholders: the Shareholders’CharterAir Liquide has formalized its commitmentand responsibility to its shareholdersthrough the Shareholders’ Charter. Each shareholder has the same rights:one share* equals one vote.Air Liquide listens attentively to its share-holders. For example, the Shareholders’Committee, a group for reflection andproposal, is a concrete link between theGroup’s management and its individualshareholders. The Committee alsoensures that its financial information isclear and transparent. The Group placesa great deal of stock in communicationand sends a notice of the GeneralShareholders’ Meeting and the Shareholder’s Guide to each shareholder.The ongoing objective of steady, sustained growth in earnings over thelong term has made possible a policy ofcompensation and enhancement of theshareholders’ equity over time.Lastly, the members of ShareholderServices are totally available to share-holders: they manage their direct registered shares and transmit buy/sellorders to the stock market free of charge.

Strong share ownership with ahigh level of registered sharesOne of Air Liquide’s distinctions is that40% of its capital is held by 360,000individual shareholders. This link betweenAir Liquide and its shareholders isexpressed by a high number of share-holders with registered shares (138,000shareholders, of whom 52,000 are directlyregistered). Their loyalty is rewarded bythe allocation of a 10% bonus on anypayment (dividend* or bonus share allocation*) on registered shares heldcontinuously for at least two years.

The high proportion of registered sharesgives Air Liquide the opportunity to getto know its shareholders and to commu-nicate directly with them in a personalizedway. Furthermore, Air Liquide managesdirect registered shareholders’ accountsfree of charge.As of 2005, these shareholders canmanage their accounts directly via theAir Liquide site, have access to variousforms and can place their buy/sell orderson the stock market.

Creating value for shareholders

Note: the Shareholders’ Charter is on page III.

Details and comments on shareholder indicators

are on page 235.



Safety is Air Liquide’s number onepriority. The Group pursues a proactivepolicy to strengthen its safety culturein its teams, subcontractors and customers.Air Liquide has a dual approach tothe environment that focuses on itsown businesses and those of its customers, offering them solutionsfor cleaner production.Safety and the environment are at theheart of the Group’s industrial policy.

Preserving life and the environmentTraining and awarenessA large number of training and aware-ness programs on safety are run for theGroup and its subsidiaries. Operationscontinued or launched in 2005 focusedparticularly on road safety and the risksinherent in confined spaces and handlingheavy objects. They helped to bring aboutreal improvement in safety results. In 2005,the lost-time accident rate was 2.1.

IMS: an approach that integrates safety, the environmentand reliability An Integrated Management System(IMS) was rolled out worldwide in 2005.Focusing on installation design, operationand maintenance, its objective is to provide a higher level of safety, respectfor the environment and even greaterreliability. This reference system for procedures and technical standardswas finalized in 2004 and incorporatesthe Group’s best practices. In late 2005, it already covered over96% of Air Liquide’s activity. Its rolloutwill be completed in 2006 and it willbecome the company’s basic industrial

Note: details and comments on safety and environmental indicators are on page 236 to 241.

management culture.IMS forms a unique framework thatincorporates both the specific rulesconcerning the Group’s businesses andmost of the requirements of internationalstandards such as OHSAS 18000 (health,safety), ISO 9000 (quality) and ISO 14000(environment). At the end of 2005, internalaudits began at several subsidiaries toverify IMS application conditions.

A new reporting tool for environ-mental and safety dataAir Liquide is reducing energy consump-tion per cubic meter of gas produced inits air separation units. It is alsodecreasing its use of coolant gases that deplete the ozone layer and isconsiderably diminishing nitrous oxideemissions from its cogeneration* unitsthrough the development of innovativeburners.In the framework of its sustainabledevelopment approach and the formalization of environmental datacollection systems, in 2004, Air Liquidedecided to implement an adaptedreporting tool for in-depth analysis of itsperformance. A system was chosen in2005 and setting its parameters isunderway. It will be totally operational inmid-2006. This new reporting tool fordata outside the financial arena fulfillsthe recommendations made by thesustainable development departmentsof the statutory auditors concerningdata collection procedures for the 2004financial year. In 2005, these auditorsverified this data collection in the field.



1991

400359

234

179192

214188

207

164135 134

167194

136 135

6.4

4.3

3.83.4

4.2

3.4 3.72.9

2.4 2.32.8

3.2

2.3 2.3

135

300

200

100

0

8

6

4

2

0

7

5

3

1

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Number and frequency rate of lost-time accidents for the Group

Number of accidentsAccident frequency rate (number of accidents per million hours worked)

131

2.1

Innovation is one of Air Liquide’sgreat strengths: throughout theworld, over 2,000 people work inresearch, technology and engineeringcenters. These teams contribute tothe Group’s progress in three mainareas: sustainable development andthe environment, health and hygieneand advanced technologies. Theydevelop innovative and competitivegas production technologies, newapplications and service offerings,disseminate the Group’s technicalexpertise and keep an active watchon scientific developments.

Innovatingfor tomorrowInnovation in 2005

Budget:Nearly € 165 million

550 researchers representingover 25 nationalities

8 research centers (France,Germany, United States,Japan)

2,680 patented inventions

Over 100 industrialpartnerships

Over 100 internationalrelationships with universitiesand research institutes


New therapeutic applications for gasesIn 2005, the Group launched a specificresearch program on medical gases andtheir therapeutic applications.Thirty specialists in respiratory illnesses,anesthesiology, pharmaceutics, chemistry,biology and statistics will shortly bebrought together to explore new waysto develop therapeutic gases with realpatient benefit. Their work concernsfour main areas. The first is aerosol therapy*, i.e. administering medicationsvia the respiratory tract, which has theadvantage of being easy, very low riskand efficient. The second focus is anes-thesia. The authorization to marketxenon as an anesthetic in 2005 inGermany has opened the way to newdevelopments. The third research area ispain management and neuroprotection,for example, the prevention of strokes.Lastly, more fundamental research isbeing carried out on new gases andgaseous blends.

First steps toward hydrogen as an energy carrierHydrogen is an excellent clean energycarrier: its combustion produces onlywater. It is an important aspect of thecurrent debate on alternative energies.Air Liquide has been conducting researchon hydrogen for energy for many years.The Group has state-of-the-art expertisein all the links in the fuel cell* chain fromproduction to use including storage anddistribution.In 2005, Air Liquide was chosen ascoordinator of a European project calledHychain-Minitrans. The project will testdifferent types of light vehicles that runon fuel cells in four countries in Europe(Germany, France, Spain and Italy) under

actual conditions. This large-scale proj-ect will take place from 2006 to 2010and involve more than 150 vehicles inthe participating cities. Apart from its steering role, Air Liquide is involved inthe development of hydrogen cylinders,the gas distribution infrastructure andthe supply of fuel cells through its subsidiary Axane.In total, the Group is taking part in over15 projects on hydrogen as an energycarrier, on a French, European andinternational scale.


Note: details and comments on innovation indicators are on page 245.

Food industry - Pharmaceuticals 14% Materials - Energy 28%Motor vehicles - Construction 25% Technology - Research 8%

Craftsmen - Distributors 14% Other 11%

IndustrialCustoAir Liquide’s Industrial Customers

constitute an extremely rich and diversified sector. The Group proposes

a dedicated and tailored offer to meet the needs of each market.


4,154millioneurosin sales

1,825patentedinventions

1 millioncustomersin over70 countries


mers

■Getting the most out ofthe dynamism of emergingeconomies

In emerging countries with strong potential, Air Liquide’s strategy is to growrapidly by taking advantage of theirdynamism and supporting the local projects of its international customers.In 2005, the Group strengthened itspresence in China, invested in newproduction capacities and boosted itssales teams.Growth is especially strong in basicmarkets such as automobiles, construc-tion, equipment and energy. Air Liquideis also ramping up business in EasternEurope: Poland, Romania, Bulgaria. Just as in China, it focuses primarily ontraditional markets. In Russia, the recentsuccesses of Large Industries haveopened the way for the IndustrialCustomers business. South America isalso making a major contribution to thegrowth of these businesses. The Grouphas a very good foothold in Brazil andArgentina whose economies were particularly vibrant in 2005. Air Liquidehas signed a large number of contractsin this region, primarily in the automobile,glass, paper pulp and food industries.

■Solutions that providestrong added value

In its traditional markets mostly concen-trated in Europe, North America andJapan, Air Liquide is building real prox-imity with its customers by turning tolocal structures throughout each region.In this way it can better define itscustomers’ needs and create custom-made solutions. The integration of theactivities acquired from Messer inGermany, the United States and theUnited Kingdom have strengthened theGroup’s local presence in these largemarkets. Customers’ challenges havemobilized the teams, especially in environmental protection, product quality and process and production costoptimization.

■Innovation working for the environment

Innovation is one of the primary growthdrivers of Industrial Customers. It providesa competitive edge: lighter and easier-to-handle cylinders for craftsmen,improved energy in the glass and paperpulp industries, new waste treatmentprocesses and more. R&D, marketingand industrial teams work closelytogether on innovative projects. Thesubsidiaries develop solutions for theircustomers’ specific requirements, whichmay then be adapted in other countries.Some examples in 2005 are Aligal Florain Italy, a new deep-freezing process in Australia and an original biosolid treatment system in Germany. Many ofthe research programs are focused onhydrogen, which offer extremely promisingprospects. Among recent solutionsdeveloped for specific customer needsand providing high added value are: theAligal range for the food industry,“green” solutions for car manufacturersto help them limit vehicle emissions anda “lead-free” method for electroniccomponent assembly.

IndustrialCustomers


Growthdynamic

A “Sun Valley” in GermanyThe MicroTechpark in Thalheim, north ofLeipzig in Germany, is in the process ofbecoming another “Sun Valley”. Q.Cells,one of the largest solar cell manufacturersin the world today, was already at theThalheim site in 2001. This industrialpark was launched near the Q.Cells sitewith the arrival of CSG Solar, a newGerman solar cell manufacturer, andEverQ, a joint venture between theAmerican Evergreen Solar, the GermanQ.Cells and the Norwegian RenewableEnergy Corporation.

Solar energy is one of the alternativesources to fossil fuel energy and hascreated growing interest in Europe,especially in Germany. This country hasdecided to go beyond the target set bythe European Union: 20% of all energy is to come from renewable sources by2020. The production of wafers* andsolar cells, which convert sunlight intoelectricity, requires the use of specialtygases*, nitrogen and argon.

Air Liquide has just signed a contract tosupply all the gases and related servicesfor the entire Thalheim site. An on-sitelocal customer support team guaranteesthe total supply quality, meeting the specific requirements of this industry.

Environment


Sustainabledevelopment

From the food industry to pharmaceuticals: quality andsafety firstGases are used in many food productionprocesses: control of the cold chainduring manufacture, storage and trans-portation, conservation of fresh anddried products, carbonation of sparklingbeverages, etc. This is an expandingmarket for Air Liquide and althoughalmost unaffected by economic fluctua-tions, it is constantly changing because

IndustrialCustomers

Air Liquide in AustraliaAnother step forward in deep-freezing foodsDeep-freezing small slices of ham individually without them sticking together is part of Air Liquide’s know-how throughits IQF (Individual Quick Freezing) solutions. But the Group never had to process two tonnes/hour. Not until Don Small-

goods asked it to do just that for the expansion of its pizza toppings factoryin Melbourne. Don Smallgoods, a division of George Weston Foods, is oneof the largest producers of precooked dishes in Australia and has been an AirLiquide customer for over 15 years. The Australian team immediately thoughtof the Zip Roll deep-freezing tunnel, but to increase production, carbondioxide, which it uses for chilling, had to be replaced by nitrogen. To make thechangeover in record time, an international Group project was launched,bringing together food cryogenics experts, European technical platforms andmembers of the Group’s marketing division. The solution was designed, testedand implemented at the customer site in early 2005. Thanks to the mobiliza-tion of the Group’s international expertise, this solution put Air Liquide a stepahead of the competition.

takes charge of managing its stock. The same high level of quality and traceability is found in the Phargalis offer that Air Liquide developed for itspharmaceutical customers. This solutioncombines the supply of pharmaceutical-quality gas and a specific service offering.

of quality requirements. Consumers areincreasingly demanding fresh, tasty and ready-to-eat products. At the sametime, food safety requirements arebecoming stricter. In Europe, sinceJanuary 1, 2005, traceability is manda-tory for the entire chain, from the farmerto the end consumer. Risk preventionprocedures based on the internationalstandard HACCP must now be appliedby every participant in the food chain asof January 1, 2006. To meet this dual requirement for product quality and safety, Air Liquideoffers a set of solutions found in theAligal range that guarantees an optimallevel of hygiene and traceability. The Group is constantly innovating withelectronic labels and bar codes, gasmeasurement instruments of micro-biological quality, “smart” equipmentbuilt into production facilities, increasinglyefficient gaseous mixtures and more.In 2005, for example, Air Liquidelaunched an international offering for fastfood chains: a delivery service of high-quality carbon dioxide for foods, in liquidform, to make soft drinks. A truck suppliescarbon dioxide from a remotely moni-tored container: the customer no longerhas to handle cylinders and Air Liquide


Phargalis, a dedicated offer to the pharmaceutical industry.

Technologies and research: high-growth markets Solar cells, fiber optics, LEDs… all theseproducts have one thing in common:they are linked to light. The first convertit into energy, the second transport itand the third produce it from an electricalcurrent. In each case, manufacturingthese products requires industrial gases.The contract signed with three solar cellmanufacturers in Thalheim, Germany in2005 was a great success in this growingsector.Electronic component assembly isanother highly technological marketsegment. It must take into account theinternational prohibition on the use oflead, a toxic element, in welding opera-tions. Substitute alloys, however, requirehigher temperatures and the risks ofoxidizing are therefore greater. To solvethis problem, Air Liquide proposes aninerting solution using nitrogen: ALIX.While being environmentally friendly, this solution offers substantial savingsover traditional techniques: it limits thequantity of the chemical product used,decreases residues and reduces thenumber of defects. Several hundredALIX applications are currently in use,mainly in Europe and the United States.A first success was even scored inChina in 2005 in the Shanghai area: a joint operation by local teams andGroup experts carried off this skillstransfer.

Hydrogen: experimental projectsin several countries The worldwide network of IndustrialCustomers units enables the Group todisseminate applications based onhydrogen as an energy carrier forstationary generators in various countries.In 2005, Air Liquide won new contractsfor the fuel cell*, designed and manufac-tured by its subsidiary Axane, especiallyto provide energy for telecommunicationrelay stations, for example in Greeceand France. The experiment carried outin 2005 on this application with BouygesTelecom in France validated this solution.Other cells will be installed on several ofthis customer’s sites in 2006 to extendthis experiment.Another example is in Japan, where thesubsidiary Japan Air Gases took part inthe Rallye Bibendum organized byMichelin in Kyoto in June, 2005, supplyingeight cars with hydrogen. The purpose

The fuel cell: a new reference in mobiletelecommunicationAfter the first successful experiment with Bouyges Telecom in France, Air Liquide’sfuel cell was used in Greece in 2005 in a commercial project for Vodafone, theworld’s largest mobile phone company.

A 2.5 kW cell, designed, developed and manufactured by Axane, a Group subsidiary, was installed at the end of the year to supply a telephone relay stationin a mountainous area in Attica. This cell is part of a nonpolluting, energy supplypilot project that also includes a photovoltaic system.

The findings from this experiment, which will last several months, will enable thishydrogen solution to be adapted to supplying energy at other relay station sites.

Air Liquide Italy has developed acarbon dioxide-based system thatimproves productivity of flower,fruit and vegetable cultivation ingreenhouses. A carefully controlledamount of this gas yields verypositive results: tests on tomatoesshowed an increase in productionranging from 10% to 40% over acultivation period shortened byone to three weeks. This solutionwas a great success in Italy in 2005.

of this operation was to promotesustainable mobility technologies.In Singapore, Air Liquide and itssubsidiary Soxal set up a hydrogenservice station for the BP group as partof a government program to developalternative energies. This station willsupply gaseous hydrogen to a fleet ofcars equipped with fuel cells. Hydrogenis produced by an electrolyzer and nocarbon dioxide is emitted into theatmosphere. These hydrogen stationsare now in six countries.

Environment


Sustainabledevelopment

Automobiles: reducing pollutingemissions and improving safetyAir Liquide is involved in every aspect ofthe automotive industry and innovates to support this sector’s evolution, especially on environmental and safetyquestions. The Group has developednew and more ecological manufacturing

processes, for example, gas quenching*using the Alnat HP solution that is superiorto traditional oil and salt quenching. Thissolution was chosen in 2005 by motorvehicle equipment manufacturers inEurope, and also in China and Brazil.Protecting the environment also meansexhaust systems that emit fewer particles.To meet new regulations, car manufac-turers are developing particle filters, inparticular, using silicon carbide, whoseproduction requires large quantities ofargon. In 2005, Air Liquide signed amajor contract in Poland for this applica-tion. The Group has also developed anew gas offering for calibrating vehicleair pollution monitors – Alphagaz Auto 4,which meets the new European environ-mental standard Euro 4*. As for passengersafety, Air Liquide supplies the argonand helium that fill many airbags,sophisticated devices that inflate in justa fraction of a second. The Group has

IndustrialCustomers

Interview with

Nathalie ChramostaGroup expert, Water and environmental marketsFrance

What does your work consist of?

Most of my work entails helpingwastewater treatment plant operatorsimprove their systems. Wastewater fromfactories or local communities is collectedin biological basins where millions ofbacteria break down pollutants by usingoxygen from the air. Adding pure oxygenis an excellent method of improving theirefficiency, increasing it fivefold. But eachcase is different and requires a preliminarystudy to choose the most appropriate

solution and its implementation conditions.We’re often called on an emergencybasis for problems concerning odors,scum formation or accidental pollution. I usually make an initial diagnosis byphone then, if necessary, I do furtheranalyses on samples.

Sometimes you also work in thenatural environment…

Yes, for example, in the case of theSeine in the Paris region. During astorm, rainwater, by washing the roads,picks up hydrocarbons. This water, someof which partially ends up in the Seine,forms an oily film that prevents oxygenfrom penetrating the river, causing a lotof fish to die. Air Liquide is involved onbehalf of the local communities, in anoxygenation system for the Seine set upon six different islands. It is activatedduring heavy rainfall and saves the fish.

What does being an environmen-tal expert for the Group mean?

It means that I put my experience inthe environmental sector, specifically inwater, at the service of Air Liquide’ssubsidiaries in Europe but around theworld as well. When they receive acustomer request that requires aspecific approach, I provide technicalsupport and consulting services to helpthem find an appropriate response. I’mpart of the ALTEC Europe network,which has about a dozen environmentalspecialists including four Group experts,notably Joerg Schwerdt, our leader,based in Germany. Regardless of ourspecialty, we all have one point incommon: a passion for the environment.

recently strengthened its partnershipwith Autoliv, the world leader in thissector.

Metal manufacturing: new momentum in welding andcuttingWelding and cutting are an integral partof a host of industries: automobiles, shipbuilding, aeronautics and more generallyall metal assembly and processing operations. These industries areconstantly modernizing and need moresophisticated materials, thinner sheetmetal and new specifications. Air Liquide is at the head of these evolutions by developing increasinglycomplex and specialized welding andcutting technologies focused onautomation, speed and welding quality.The use of lasers, for example, is on theincrease.The Group also develops original serviceoffers such as Cap, which improveswelding workshop performance. This offer is based on support from anAir Liquide specialist combined with theinstallation of an innovative productivityindicator management system.


emitted into the atmosphere. Themanufacturer saves energy and theoperator of the site derives incomefrom it. Everyone benefits.

A whole range of services The technological solutions Air Liquideoffers its customers are usually supportedby a service offering: cylinder management,traceability, equipment maintenance,training, on-site production, remote

which was launched in 2005 in several countries, in particular France,Germany and Italy. In the UnitedStates, Medal, an Air Liquidesubsidiary, has developed an originalmembrane-based* solution. It enablesgases produced at a waste disposalsite to be recovered and methaneextracted from them. The methane isthen used by a factory nearby. Theenvironment is preserved because thefermentation gases (which produce agreenhouse effect*) are no longer

Canada: safety has its mascotFor a safety message to be effective over the long term, it has to convey a positive and likable image. With this in mind, the Canadian safety team createdZero, the mascot who militates for “zero accidents”. Zero, which is protected bytrademark rights and copyrights, has been part of safety campaigns in Canadafor the last five years. So that it is a constant reminder to the teams, it appearson all sorts of everyday objects: posters, key rings, T-shirts, bags, soft toys, etc.And it works! In 2005, there were only three lost-time accidents in Canadaamong the 1,500 employees in the Industrial Customers operations. That is thebest safety record in seven years. The idea is being expanded to other AirLiquide units throughout the world and France, Australia, the Philippines, Japanand Brazil have already adopted it.

The PanoraMagique balloon at the Disneyland Resort® Paris,inaugurated on April 9, 2005, wasinflated with 6,000 m3 of heliumsupplied by Air Liquide.

Efficient solutions for wastetreatmentOxygen is also an important aid inwaste management. It is used, forexample, to burn household waste athigh temperatures to produce energyand can reduce the volume of incinera-tion fumes by as much as sevenfold. It is also extremely useful in cleaningrivers polluted by industrial waste andin improving the operation of waste-water treatment plants. Ozone, whichis produced from oxygen right insidethese plants, decreases the quantity ofsludge produced by as much as 80%.This is the Aspal Sludge process,

installation monitoring via Teleflo*, etc.The Group is also involved in metrology– monitoring and calibrating all themeasurement instruments indispensableto industrial site operations.

Safety


Materials and energy: the advantages of oxygen From the oil industry to glassmaking, and also in metal processing, a largenumber of industrial processes use aircombustion (oxygen + nitrogen). Overthe last few years, Air Liquide has beenworking on pure oxygen and oxygen-enriched combustion. The principle ofoxycombustion has many advantages.Energy efficiency is improved, whichreduces the quantity of fuel used andtherefore helps decrease carbon dioxideemissions into the atmosphere. In addition, when air combustion isdone at very high temperatures, as inthe glass industry, it generates nitrousoxides* (NOx), which are responsible foracid rain and respiratory problems. The combustion of pure oxygen almosttotally eliminates NOx formation.Another advantage is that it producesfumes with a high concentration of carbon dioxide, enabling this gas to betrapped and therefore not emitted intothe atmosphere. The new Alglass Sunburners, developed by Air Liquide forglass kilns, make use of oxycombustion.They are being gradually rolled out atglassmaker customers worldwide.Another example of oxygen use is thepaper pulp industry. In Karlsruhe,Germany, Air Liquide’s oxygen solutionhas enabled the Finnish-Swedish groupStora Enso to improve the efficiency ofits electricity and steam power plant,which is fired by manufacturing waste(bark and sawdust).


annual report 2005 - part 1 - technische gase von air liquide in … · air liquide rapport annuel...

Documents