Air Liquide reaffirms margin targets as investors await backlog payoff

By Olivier Cherfan and Margaux Perrin

July 28 (Reuters) - French industrial gases group Air Liquide reaffirmed its margin targets on Tuesday after reporting first-half operating earnings broadly in line with expectations, as investors looked for signs that a record project backlog can translate into stronger growth.

The company has become a closely watched test of whether industrial groups can continue expanding margins despite weak demand in parts of Europe, while converting investments in semiconductors, healthcare and energy-transition projects into future earnings growth.

First-half recurring operating profit rose to 2.89 billion euros from 2.74 billion euros a year earlier, compared with analysts' expectations of 2.91 billion euros.

Analysts at J.P. Morgan said the in-line results could spur profit-taking after the shares' 19% rise in 2026, as a record 6 billion-euro backlog has yet to drive meaningful like-for-like sales or earnings upgrades.

Chief Executive Francois Jackow said AI-driven semiconductor investment would remain an important growth driver for demand for ultra-high-purity gases and advanced materials used in chip manufacturing.

"The investment wave will last a few years," Jackow said in a press call, adding that technological changes could affect demand but that the company sees significant growth potential over the coming years. High-purity gas projects are beginning to contribute to growth. "We're only just at the beginning of this story," Jackow added.

Air Liquide reaffirmed its targets for a 100-basis-point operating-margin gain in both 2026 and 2027, taking the cumulative improvement since 2022 to 560 basis points. It expects recurring net profit to rise at constant exchange rates in 2026 and second-half growth to match or slightly exceed the first half.

Shares in Air Liquide fell 2.5% by 1057 GMT.

China's industrial-gases market improved in the second quarter, supporting merchant-gases growth as volumes increased and pricing returned to positive territory. Jackow cautioned during the press call that the broader economic backdrop remained uncertain. Separately, on the analyst call, he said China's semiconductor market was "very, very dynamic."

Sales in Air Liquide's gas and services business, which accounts for 97% of the group total, reached 13.41 billion euros in the first half of 2026, up 2.6% on a comparable basis.

($1 = 0.8795 euros)

(Reporting by Olivier Cherfan and Margaux Perrin, editing by Bartosz Dabrowski)