Forbes  Apr 28  Comment 
Gamers are hard at work cracking the latest ARG, this time for 'Call of Duty: World War 2.'
Yahoo  Dec 22  Comment 
Reddi-wip, the top-selling U.S. ready-made whipped cream, is going into hiding for the holidays. ConAgra Brands (CAG.N), maker of Reddi-wip, is scaling back on promotions and merchandising as the nation faces a shortage of ready-made whipped...
Forbes  Nov 4  Comment 
Blizzard just unveiled Sombra at BlizzCon, rendering the last few months of an ARG to find the character largely pointless. But the animated short she debuts in is definitely worth a watch all the same.
newratings.com  Oct 25  Comment 
PARIS (dpa-AFX) - Air Liquide SA (AIQUY.PK) reported Tuesday that its third-quarter revenues totaled 5.08 billion euros, a growth of 23.9 percent from last year, benefited by the inclusion of sales from recently acquired Airgas for the full...
Forbes  Oct 8  Comment 
Overwatch's new hero Sombra may have just been revealed by a Russian group, ending a long-running ARG early ahead of the game's Halloween event.
Forbes  Sep 27  Comment 
Destiny has debuted a new ARG in the wake of Rise of Iron, one that feels like what the Sleeper Simulant mystery was supposed to be last year. Fans are working hard to crack it, and you can help.
Reuters  Sep 23  Comment 
* Announces successful placement of five USD-denominated senior bonds for an aggregate amount of $4.5 billion ($4.50 billion) Source text for Eikon: Further company coverage: ($1 = $1.0000) ...
Forbes  Sep 19  Comment 
Destiny's Owl Sector Alternate Reality Game is almost complete, and all the various electronic diseases Guardians have contracted over the weekend are probably going to be cured by the time Rise of Iron launches.
Forbes  Sep 16  Comment 
Destiny has kicked off a new ARG called "Owl Sector" that is infecting players with viruses in the game, and unlocking lore outside of it.


Airgas (NYSE:ARG) sells gas, welding equipment, and safety supplies to manufacturers and end-users of industrial gases, which include chemical processors, the healthcare industry, and other smaller-scale industries requiring gases as raw materials. The company earned $3.86 billion in revenue and $196 million in net income in 2010.[1]

Airgas and its competitors buy gas from gas producers such as Air Products and Chemicals (APD), L'aire Liquide or Linde in bulk, and then repackages these industrial gases into high-pressure cylinders as required by end-customer specifications. About 90% of the company's revenues come from the gas delivery business.[2]

Airgas is the only national company in an industry dominated by regional players, largely because it is expensive to package and transport gas over long distances. Airgas has aggressively consolidated regional players throughout its history, acquiring 350 companies since its inception in 1986.

Company Overview

The company reports under two main business units:[2]

  • Distribution (90% of revenue) - This unit earns most of Airgas' revenue. Airgas has over 1 million clients ranging from metal fabricators to packagers of carbonated soda. Airgas' national scale, in contrast with its regional competitors, gives it an advantage in negotiating better contracts than competitors.
  • All Other Operations (10% of revenue) - All other operations primarily consist of gas producing operations within the company. The Gas Operations Division produces and distributes carbon dioxide, dry ice, nitrous oxide, anhydrous ammonia, and specialty gases. Airgas Merchant Gases produces oxygen, nitrogen, and argon, most of which is sold internally within the company to the Distribution business unit. National Welders is a producer and distributor of industrial, medical and specialty gases, as well as the related packaging and safety products.

Geographic Analysis

Airgas operates in specific geographic regions in the US. It is limited by the expense of transporting gas in new regions, as well as the limitations of its existing infrastructure. Airgas does not have immediate plans for international acquisitions, but the CEO has indiated that, "we are open to the possibility of extending our business beyond North America and are currently evaluating opportunities on a case-by-case basis.

Business Growth

FY 2010 (ended March 31, 2010)[1]

  • Net sales fell 11% to $3.86 billion. Gas and rent same-store sales declined 3% and hardgoods declined 2%. Gas volumes for the current quarter were 2% lower than the prior year quarter while pricing was down 1%. Hardgoods volumes were 1% lower than the prior year quarter while pricing was down 1%, as declines in costs and prices for filler metals had the most significant impact on hardgoods pricing, with most other product lines stable to slightly down.
  • Net income fell 25% to $196 million.


Scale lends power to ARG's procurement and distribution networks

ARG margins are better than its competitors' because it can negotiate better deals when leasing trucks for transportation, produce gas canisters more cheaply at scale, and can negotiate larger distribution deals with clients. The effects are seen in both gross profit as well as operating profit, and ARG can win share by converting customers through lower prices, and buying-out opponents when the opportunity presents itself. This is the advantage of being the only national player in a highly fragmented industry.

The success of integration and the associated management challenges are hurdles to Airgas' success

Airgas' primary revenue growth comes from acquisitions of existing smaller distributor networks, with operating income efficiencies coming from leveraging Airgas' national structure. Although the company has historically been successful at meeting targets for acquisitions and not overpaying, integration risk exists for any one of Airgas' acquisitions.

The acquisition of Linde's bulk gas production group is a larger integration challenge than most, since it is in a business line different from the distribution side. While its products can be sold internally to ARG's distribution segment, the business will have to earn share from ARG's competitor-suppliers, such as Praxair (PX) and Air Products and Chemicals (APD).

Rising costs for industrial gases threaten ARG's growth and margins

Industrial gases are the main input to ARG's operations, and are typically purchased from a distributor such as Air Products and Chemicals (APD), L'aire Liquide or Praxair (PX). Energy price increases have been passed on to Industrial gas prices, as electricty costs are the main component of industrial gas cost of goods sold. High oil prices are creating the opposite effect - higher input costs - and competitive pricing pressure in this fractured market means ARG might not be able to pass-through cost increases. The dynamic between energy cost and industrial gas pricing will determine Airgas' revenue growth as well as margin expansion.

Domestic market cyclicality and the potential of recession are challenges for Airgas' growth

In light of the recessionary fears caused by the U.S. Housing Market, consumption of manufactured goods may drop, feeding into the economy at large. While slack demand for manufacturing will damage Airgas, as its gas sales come from manufacturer demand, there are alternative customer segments that Airgas participates in which shielded from some of the recessionary woes. For example, with rising energy inflation, alternative renewable energy becomes more attractive, which also demands gases as inputs. Healthcare, food, life sciences have also been identified as shielded from some of these cyclicality concerns.

Concerns over soft demand due to manufacturing are also partially offset by the weakening dollar. Though Airgas is a domestic-only player, many of its customers are international players in their respective markets, leading them to see more demand internationally as the dollar weakens.


International Gas Producers

These major international producers and distributors also happen to be ARG's chief suppliers, with long-term take-or-pay (either take the gas at our rates or pay us a small fee instead) agreements in place to guarantee their own revenues as well as ARG's supply.

These suppliers don't typically elect to compete in Airgas' "last-leg" business, delivering gases in non-bulk quantities to individual customers at a time. They instead prefer a business without the distribution challenges that ARG has embraced. However, they occasionally do choose to compete for select clients and markets.

Regional Gas Distributors

The challenges of distributing packaged gas over more than 50-100 miles are significant and costly - meaning the regional market is highly fragmented in this industry. This has created an opportunity for the acquisition strategy that has propelled Airgas to significant ownership of the market. However, even it does not have majority share in the national market.


  1. 1.0 1.1 ARG 2010 10-K "Selected Financial Data" pg. 20
  2. 2.0 2.1 ARG 2010 10-K pg. 5-7
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki