A great variety of solutions and · Our activities*and our markets A great variety of solutions and...

Our activities* and our markets

A great variety of solutions and

Electronics Healthcare

Large Industries

CHEMICALS

Basic and fine chemicals, petrochemicals

> Enhancing the performance of petrochemical processes (oxygen)

> Product quality and plant safety, inerting (nitrogen)

> Production of acetic acid, poly-urethanes and polycarbonates (carbon monoxide)

> Production of plastics, polyesters and nylons (hydrogen)

> Steam, power, compressed air, etc.

METALS

Iron and steel industry

> Decarburization of iron and enrichment of blast-furnace air (oxygen)

> Conveying pulverized coal, inert atmos-pheres and heat treatment (nitrogen)

> Protection of continuously cast steelfrom oxidization (argon)

> Heat treatment (hydrogen)

> Smoke reduction (carbon dioxide)

> Steam, power, compressed air, etc.

OIL AND NATURAL GAS

Refining industry

> Desulfurization of gasoline and otherfuels and “cracking” of heavy crudes(hydrogen)

> Boosting the production of certain facilities, recycling of residues and production of “clean” GTL* diesel fuel(oxygen)

> Increasing product quality and protection of facilities (nitrogen)

> Steam, power

HOSPITAL

> Treatment of respiratory insufficiency, resuscitation, emer-gency care (medical oxygen)

> Enhancement for general anesthesia, additive for analgesics(medical nitrous oxide)

> Pain management following minoroperations: Kalinox (50/50 mixture ofoxygen and nitrous oxide)

> Respiratory distress, pulmonaryarterial hypertension: Kinox (nitricoxide)

> Cryoconservation (liquid nitrogen)

> Anesthesia, resuscitation andaerosoltherapy* equipment

> Hospital hygiene products

> Medical air, special gas mixtures, etc.

HOMECARE

> Treatment of respiratory insufficiency (medical oxygen)

> Sleep apnea syndrome: ventilation and treatment equipment

> Equipment for assisting patients at home

> Nutrition and infusion related services

> Hygiene products

SEMICONDUCTOR FABRICATION

Packaging and assembly

> Deposition on silicon wafers: specialty gases(silane, arsine, etc.)

> Conveying specialty gases, protecting chips:carrier gases (nitrogen, oxygen, hydrogen)

> Cleaning semiconductors: the on-site* generation and purification of liquid chemicals(hydrogen peroxide and ammonia)

> Equipment and installations for distributingultra-pure fluids

> Assembly and packaging (nitrogen, hydrogen and helium)

* “Gas and Services” account for 87% of total Group sales

of Gas and Servicessales28%

of Gas and Servicessales12% of Gas and Services

sales16%

Air Liquide Annual Report 2001 28/29

OUR ACTIVITIES AND OUR MARKETS

products for every customer

Industrial Customers

WELDING AND CUTTING

> Heating, cutting andbrazing of metals(oxygen and acetylene)

> Protection and quality of welds (argon, carbon dioxideand argon mixtures)

> Increasing productiv-ity and reducing emis-sions during weldingoperations (premiumfuels and gas mixtures)

> Laser cutting andwelding (specific mixtures and services)

> A variety of pack-aging solutions (largeand small cylinders,innovative valves of theAltop or Minitop type,liquefied gases, etc.)

FOOD INDUSTRY

> Preserving packaged foods andprotecting beverages(wine) from oxidation(nitrogen)

> Optimizing the pre-servation of packagedfresh food, salads for example (specialtygas mixtures, Aligal)

> Deep freezing (liquidnitrogen)

> Deep freezing and chilling of food and carbonated beverages (carbondioxide)

> Oxygenation of fish-farm water

> Compressed air,hygiene products, traceability solutions

CHEMICALS ANDPHARMACEUTICALS

> Making active prod-ucts inert, preventingoxidation, limiting therisks of combustion orexplosion (nitrogen)

> Injection molding of plastic componentsand preparation of plastic films for printing (nitrogen)

> Low temperaturereactions in the phar-maceutical and finechemistry industries(cryogenic technologies)

> Desulfurization or oxidation of certaincompounds (oxygen)

LABORATORIESAND ANALYSIS

> Calibration andmonitoring of meteringand testing devices, forexample for monitoringatmospheric pollution(ultra-pure gases and special mixtures)

> Specific require-ments: thousands of products available,many of which aretailor-made

> Numerous types oflaboratory equipmentand complementaryservices

> Online Internet services

METAL FABRICATION

> Production of ironand conventional and stainless steels(oxygen and argon)

> Smoke reduction(carbon dioxide)

> Reheating productsbefore shaping, Alrollprocess (oxygen)

> Recycling ferrousand nonferrous metals(oxygen)

> Galvanizing highquality and secondarysheet metals, extrusionof profiles (nitrogen)

HEAT TREATMENT OF METALS

> Production ofcontrolled atmospheresused in furnaces(nitrogen and hydrogen)

> Significant opportunities for on-site* units

SECONDARY ELECTRONICS

> Wave or reflow processing of printedcircuits (nitrogen)

> Assembly and packaging of compo-nents (atmospheresbased on nitrogen,hydrogen or helium)

> Molding and drawingof optical fibers(helium, hydrogen and nitrogen)

GLASS AND ENAMELS

> Doping of furnaceburners (oxygen)

> Development of all-oxygen furnaces to enhance quality and protect the envi-ronment (limitation of nitrous oxides)

> Protection of tinbaths during the manu-facturing of flat glass(nitrogen and hydrogen)

PULP AND PAPER

> Bleaching pulp(oxygen)

> Manufacturing pulp without chlorine(ozone)

> Inerting and transferring chemicalproducts (nitrogen)

SPECIALTIES

> Monitoring the pH ofwater in the chemical,textile and papermak-ing industries (carbondioxide)

> Treatment of water(oxygen)

of Gas and Servicessales44%

Breathe betterWe walk, run and play—often without considering the quality of airwe breathe. In partnership with the largest industrial companies in the world,Air Liquide offers gas solutions and services protecting the environment, while also improving process efficiency. Refining,chemicals, steel: these industries are essential parts of the globaleconomy, and Air Liquide plays an important role in all three.


LARGE INDUSTRIES

Fuel desulfurization requireshydrogen.

North America and Europe are now subjectto increasingly severe regulations for the sul-fur content of fuels. In the US, for instance, themaximum sulfur level in gasoline will be cut bya factor of 11 by 2005, and in the case of dieselthe reduction factor is greater than 30! Refin-eries need hydrogen to desulfurize petroleumproducts, and hydrogen is also needed to re-duce diesel emissions, which are damaging tohealth and harmful to the environment. At theend of 2001, 94% of this hydrogen was still pro-duced by the refineries themselves: the annualgrowth rate for this market is around 10%. AirLiquide is developing a new range of services in

Petroleum and natural gas

Hydrogen and oxygen:a winning combination

Respect forenvironmentalconstraints andimprovedproductivity: thesetwo requirementshave resulted inprofound changes in the oil and gasmarket, boostingconsumption of hydrogen andoxygen.

In August 2001, theSpanish petrochemicalgroup Repsol YPF chose Air Liquide toprovide all the hydro-gen needed for itsPuertollano refinery(200 km from Madrid),

one of the largest inSpain. The new hydrogen plant, whichwill be built and run by Air Liquide, will produce 48,000 m3/h of hydrogen and 45 t/hof steam.

Hydrogen for Repsol

partnership with AspenTech, in order to assistrefineries in optimizing their hydrogen use.This service, known as Pro-En, is in its initialdeployment phase with six major customers.

Another significant event in this sector hasbeen the progress made in GTL* (gas to liquid)technology, a process that consumes a majoramount of oxygen. This development enablesnatural gas to be converted into sulfur-free liquid petroleum products. Air Liquide has already built a very large air separation unit forthe GTL* process. Additional projects are under development.

Oxygen is also used in the gasification of petroleum residues to create electricity or hydrogen, and in coal gasification processes to produce fuels. Over the last 5 years, Air Liquide has recorded average annual salesgrowth of 20% in this market.

Markets

≥ Automobile pollution ≥ Pro-En advertisement

Markets

Chemicals

Continued outsourcing of gas suppliesPolycarbonates, polyurethanes, oxoalcohols - all of these chemical industryproducts are present in an astounding number of everyday products. Thismarket is showing sustained long-term growth, despite cyclical slowdowns.

2001: a difficult year for chemicalsAfter a few years of significant investment

and high levels of growth, the world chemicalsmarket recorded a marked slowdown in 2001.Cyclical periods of subdued growth are to beexpected in this market. The trend remainslong-term growth, on average 3 to 5% a year,and reaching 10% in the case of certain prod-uct lines. Chemical and petrochemical plantsproduce a number of intermediate organiccompounds, later used in the manufacturingof consumer goods such as CDs, computer casings, automobile seats, detergents, nylons,and others. Chemical customers increasinglydepend on industrial gas specialists to meettheir needs, which include air gases, hydrogen,carbon monoxide and synthetic gases (hydro-gen/carbon monoxide mixture).

SCADA (Supervisory Control And DataAcquisition), optimization at Air LiquideThe Scada program, launched in 2001 within Air Liquide’s NorthernEuropean network, seeks to optimize variable costs, particularlyenergy. It also improves the charge rate of the pipeline network andprovides customers with an extensive amount of valuable informationregarding their consumption and production indicators. As a result, Air Liquide is able to optimize its own production levelsand, on request, provide customers with additional volumes of gas.

≥ Control center in Houston

New sulfur content regulations (ppm)

(refer to page 31)


LARGE INDUSTRIES

Services are another area of significant development. Through combining a thoroughunderstanding of customers' processes andinformation technologies, Air Liquide is able toprovide services enabling manufacturers toimprove their productivity. Grouped within theALESIS range, these services target reductionin energy consumption, production manage-ment, and the automation of certain processes.Solutions are developed in collaboration withKeops Technologies, an Air Liquide subsidiary.

Metals

Air Liquide sales outperformmarket growth

Oxygen for cleaner, more efficientcombustionFor a number of years Air Liquide has been developing combustionprocesses using either a combination of oxygen and air, or only pure oxygen. This method, known as oxy-combustion, offers numerousadvantages: • prevents nitrogen (naturally present in air) from needlessly taking

up space in the furnace and, through more efficient combustion,reduces fume emissions;

• burns residual gases resulting from customers’ processes, limiting natural-gas consumption;

• facilitates carbon-dioxide recovery, combating greenhouse-gasemissions.

The use of oxygen makes it possible to improve both the energyefficiency and productivity of furnaces, while reducing pollutingemissions and emissions of greenhouse gases.

From casting to coilThe metal rolling solutiondesigned by KeopsTechnologies providesautomatic real-timemonitoring of productionparameters for steel and aluminum coils, fromstart of finish. This systemimproves quality andreduces waste by imme-diately reacting to anydefect. General monitoringexpenses are also reduced.This solution has already been adopted by a number of customers,including the Corus Group(aluminum) at its Cap de la Madeleine site in Canada.

Thanks to innovative applications, particularly those based onoxygen, Air Liquide is helping its steel and metallurgical customersimprove their productivity while reducing polluting emissions.

>

Oxygen improves blast-furnaceproductivity.

Global steel consumption continues to increase: light steel for automobiles, highly resistant steel for construction. 2001 was a difficult year for steel manufacturers, but thefuture looks promising, particularly in light ofthe recent trend toward consolidation. Mer-gers have been completed in Europe, are inprogress in Japan, and are on the horizon inthe US. Air Liquide sales are outperformingmarket growth: in 6 years, oxygen sales haveincreased 50%. This growth is the result of newoxygen solutions that increase blast-furnaceperformance levels and reduce polluting emis-sions. Hydrogen consumption is also rising,driven by steel-treatment processes.

≥ Aljet rotary furnace, improving the quality

of cast iron thanks to the injection of pure oxygen

Broadening horizons

Car computers, cell phones, bank cards, and semiconductors are everywhere, giving us a "smarter" world advancing at an increasingly rapid pace.These products are manufactured and assembled using ultra-pure,hi-tech gases and wet chemicals, which Air Liquide supplies toelectronics customers worldwide.


ELECTRONICS

Markets

Semiconductors

A forward-looking sectorAir Liquide’s enlarged offer is focused on three strategic areas: (1) provide an increasing range of services, supported by ongoing technological innovationand continuously enhanced know-how, (2) ensure on-site expertise atcustomers’ plants, (3) accompany key partners worldwide. The successfulimplementation of this strategy has enabled the Group to maintain an averageof double-digit growth in Electronics.

Yesterday computers and cell phones,today the Internet and DVDs, tomor-row cars and micromachines

Although the electronics market is prone toperiodic adjustments, it is constantly movingforward through new applications. Brief cyclicaldownturns in the market (2001, for example)are generally due to the combination of pro-duction overcapacity and decrease in demand.Despite temporary setbacks, this sector hasquadrupled in the last 10 years.

Air Liquide has increased the purity of its ultrapure chemical liquids and gases 10,000-fold during the last 10 years. Additionally, theGroup designs, installs and maintains fluid-distribution equipment, while providing ser-vices that include total fluid management at customers’ sites. Approximately 50 teams work on-site* at customers’ plants, around 600 people in a dozen countries.

To support its customers in the technologicalrace for increased miniaturization, Air Liquidedeveloped its new-molecule business, basedon "advanced precursors". Always highly sen-sitive to environmental issues, the Group alsocontinues to develop solutions for retreatinggases (particularly PFC gases, which contributeto global warming) using technologies alreadysuccessfully tested at a number of customer sites.

Over the last 5 years alone, Air Liquide hasachieved an average annual growth rate of 15 to20% in this market.

Toward a “green Fab*”A “green Fab*” is anenvironmentally-friendlysemiconductor fabricationplant. Such plants provide,among other things, the treatment of gaseouswaste resulting frommanufacturing processes,particularly noxious gases(including PFC gases,which contribute to thegreenhouse effect), acidsand solvents. In late 2001,Air Liquide supplied such a solution for a majorEuropean customer.Solutions proposed by theGroup are based both on technologies developedin-house and throughpartnerships.

>

In 2001, the Groupinstalled a pilot fluo-rine-generation unit at the Tokyo Electron site.This Japanese company,which constructs semiconductor-manu-facturing equipmentand sells it to AirLiquide customers, will act in a consulting role for this type ofgenerator. The fluorine

“On-site*” fluorineis produced on-site*,reducing the need to transport nitrogentrifluoride (NF3, theusual source of fluo-rine) and decreasing the customer's costs.This arrangement also generates fewerbyproducts than NF3,thus limiting the environmental impact.

≥ Micro-analysis of silicon wafersin a clean-room

≥ Specialty gas cabinet

Healthy eating

Enjoy food! Eating is an essential and pleasurable part of life, andit is important that the food you eat is safe. Air Liquide’s contribu-tion to food preservation and traceability covers the entire manu-facturing process. In addition to food, the Group provides its manyand diverse Industrial Customers with a wide range of gas applica-tions and services, including: quality and reliability of welds in theautomobile and aviation industry, fabrication of optical fibers, airanalyses, waste incineration… The applications are countless, withmore added everyday.


INDUSTRIAL CUSTOMERS

Markets

Remarkably diversified

One million industrial customers in over 65 countries

The Industrial Customers markets are rich and diverse. Air Liquide’s one millioncustomers are in more than 65 countries and cover a wide range of activities.From small-scale businesses to research institutes, from maintenancedepartments in large companies to food processing plants, Air Liquide can be found providing solutions for our Industrial Customers.

Quality and traceability As a result of increasingly stringent food-

safety requirements, quality and traceabilityare now key in this industry. Another charac-teristic of this market is the accelerated deve-lopment of new products, forcing manufac-turers to constantly adapt their processes. For Air Liquide, these new demands have in-creased sales by 7 to 8% per year. The Group offers gas-based solutions for preserving freshfoods (Aligal mixtures), and state-of-the-artfreezing technology: liquid nitrogen, equip-ment, services (cold-chain monitoring).

As for traceability, Air Liquide is developingsystems that monitor air and gas quality through-out the entire manufacturing process. One ofthe Group’s most recent innovations involvestracking food products “from the farm to theplate”, a traceability solution using electronicchips (see below).

IndustrialCustomers in figures• over 40% of the Group’sturnover;• 3 to 5% long-termannual growth rate;• 1 million customers;• 7,000 distributors;• 14,000 collaborators;• 11 million cylinders,350,000 equipped with theAltop device; • 3,000 on-site*production units,accounting for 7% of theturnover achieved withIndustrial Customers; • 120 local customersupport teams;• 13,000 Teleflo* devices(remote-managementmonitors) installed atcustomers’ sites.

>

Today, Air Liquide canoffer the food industryinnovative and tailor-made traceability solu-tions, often provided byits subsidiary AtheliaSolutions. By using anelectronic tag, productscan be tracked through-out the production process. Campofrio,Spain’s number one meat-packaging

Where does this ham come from?

producer, decided to use just such a solution. Consumersof Campofrio ham cannow rest assured thatthis product, its origin,and processing have all been fully “tracked”using state of the art technology—a top quality product is guaranteed.≥ Food

traceability

≥ Deep freezing tunnel

Markets

The world of metals

A wide range of customers and applications

Welding and cutting accounts for approxi-mately one-third of Air Liquide’s total IndustrialCustomers sales. A wide range of customersin the automobile, ship building, and aeronau-tics industries, as well as maintenance com-panies and craftsmen depend on welding andcutting applications. These applications involveflame, electric arc, laser and plasma*. The gasmarket for this sector is growing moderately(around 2% per year), but there are fast-growing niches, such as new applications forstainless steel and aluminum used in high-technology processes.

Air Liquide also offers numerous solutionsfor the metallurgy sector. The secondary aluminum industry (manufacturing of alumi-num profiled sections) is a market the Groupis developing, providing specialized solutionsfor extrusion processes.

Still within the world of metals, Air Liquide isinvolved in the thermal treatment of metalthrough its development of controlled gaseousatmospheres, guaranteeing the strength andhardness of certain products.

Metrology: the art of precisionSnecma Services specializes in aircraft jet engine maintenance.For many years now Air Liquide has been supplying gas to its twoprincipal French sites, primarily for thermal treatment. In 2001,Air Liquide extended its service offer through its Métrotechsubsidiary. When Snecma Services decided to outsource itsmetrology activity, they selected Métrotech to manage and verifyseveral thousand instruments used to measure a broad range ofprocess parameters: temperature, pressure, hygrometry,electricity, vacuum, weight, length, etc. Métrotech’s servicesinclude management, calibration, maintenance, replacement of measuring instruments, consultancy services, and a three-person team at one of the sites.

WhenhydrogenreplacesammoniaThe Ugine industrial sitein Burgundy useshydrogen for the thermaltreatment of stainlesssteel. In 2001, Air Liquidecommissioned a hydrogengenerator used to reformnatural gas, replacing the ammonia-crackinginstallations usedpreviously. The operationoffers dual advantages: it enhances customerprocess productivity, andeliminates the need tostore 90 tons of ammonia,thereby improving safetyfor the neighboring town.

≥ Calibration of electricalmeasuring instruments

≥ Calibration of temperaturemeasurements

≥ In the search for maximum productivity customerswant total solutions, which include powerful automatic equipment and consulting services


INDUSTRIAL CUSTOMERS

Other sectors serviced by Air Liquide includesecondary electronics (component assembly forcomputer manufacturing, cell phones, etc.), andthe glass industry. Glass furnaces require ever-increasing supplies of oxygen, to enhance pro-ductivity and to reduce nitric-oxide emissions.

The Group is also active in the pulp and papermarket, where it is developing applications toreplace chlorine for bleaching (oxygen, ozone),and for effluent treatment (oxygen).

Fine chemicals and pharmaceutical cus-tomers represent 9% of Industrial Customerssales. In pharmaceuticals, traceability and quality requirements are particularly important.To address these needs Air Liquide launched a new offer in 2001: Phargalis. This service guarantees a quality standard, priority deliveryand telemetry monitoring.

Gas and services sales to analytical and research laboratories are growing at a steadypace (approximately 10% per year). Gases, inpure and mixed form, are used for research andquality inspections: Air analyses, detection oftoxic or polluting substances, process control,etc. Since 2000, Air Liquide has extended its product distribution by selling products online(US, Europe), speeding up transactions and pro-viding help with selection. Each customer candefine the specific mixtures it requires fromthousands of available references.

From fine chemicals to paper pulp

Custom-made solutions

Since the early 1990s, Air Liquide has beenmonitoring Alcatel’s devel-opment of fiber optics.The Group initially suppliedAlcatel’s northern Francesite with oxygen andhydrogen via pipeline, aswell as nitrogen, and laterwith gas purification andutilization equipment. AnAir Liquide team nowmanages all fluids on-site*. In 2001, theGroup signed a contract to supply all the gas neededfor Alcatel’s German site. Turboxal technology,

developed by AirLiquide, involves inject-ing oxygen into shallow wastewatertreatment basins usinga device that floats onthe surface of thewater. Torras Papel,

Turboxal cleans upwastewater basins

one of the biggest pulp and paper manu-facturers in Spain, has installed threeTurboxal units inbasins at its Zaragozaplant, and others will soon be added.

≥ The pharmaceutical industry requires traceability and quality

A freer lifestyleIncreasing life expectancy, rising demand for homecare services by both patients and healthcare organizations and an upsurge inrespiratory disorders… these are some of the growing needs met by Air Liquide’s Healthcare activities. With over 5,000 healthcareprofessionals, the Group offers an ever-widening range of productsand services. Now more than ever, Air Liquide is the specialist inmedical gases and respiratory care, both in hospitals and at home.


HEALTHCARE

Respiratory disordersOften linked to smoking addiction or pollu-

tion, chronic respiratory disorders affect morethan 5% of the population in the developedworld. The majority of Air Liquide’s homecarebusiness involves assisted respiratory ser-vices: oxygen therapy*, treatment of sleep apnea,assisted ventilation and aerosoltherapy*.Through VitalAire and Orkyn’, the Group’s offercovers not only the supply of oxygen and special equipment, but also a number of otherservices: flexible and rapid emergency serviceavailable 24-hours a day, administration management, patient and family training, direct collaboration with medical teams andreimbursement institutions.

In 2001, homecare product innovation led tothe introduction of Bora, a new product line fortreating sleep apnea.

Homecare

Air Liquide treats over 250,000 patients

in their own homeHomecare servicesare in increasingdemand worldwide.Pressure to reducehealthcare costs,increasing lifeexpectancy andcontinuous medicaladvances are someof the majorreasons for thegrowth in home-care. Air Liquideassists over250,000 patients in approximatelytwenty countries.

In Italy, Markos-Mefar Spa, the company resulting from the merger of two specialtycompanies in 2000, serves the medical equip-ment market in the field of respiratory andbronchial disorders.

New servicesThe range of services the Group offers is

expanding steadily as healthcare providersemploy a variety of new therapies. These ser-vices range from perfusion treatments, enteral(via the esophagus or abdominal wall) orparenteral (intravenous) nutrition, to supplyingequipment used to treat diabetic patients (insulin pumps).

Air Liquide launches its new “telemedicine services”Important medical exams like electrocardiography (used to detect anddiagnose heart abnormalities) and spirometry (the measurement of respiratorycapacity) can now be conducted remotely, thanks to a new service developed in Italy by Medicasa, a 100% Air Liquide Santé subsidiary. In the patient’s home,the family practitioner places the electrocardiograph over the patient’s heartfor a few minutes before connecting to the Medicasa telephone-monitoringcenter. A cardiologist is then able to view and examine the electrocardiogramtrace on a computer monitor, and is thus capable of making the necessaryobservations. If the family practitioner wishes, results are also available by faxor mail. This same service enables Medicasa to provide remote cardiologicalmonitoring of Eni’s oil-platform employees worldwide (Eni is an integratedenergy company with extensive international operations).

Markets

≥ Homecare treatment

≥ Insulintherapy at home

Markets

Hospitals

New therapeutic applications for gases Oxygen and nitrous oxide are widely used in hospitals. Common examplesinclude treatment for respiratory insufficiency, pain management,resuscitation, anesthesia services and intensive care. Air Liquide places a greatdeal of emphasis on developing medical gases and related services.

Medical gases are medicine.Gases are considered medicine in a growing

number of countries. Air Liquide’s strategy isto secure pharmaceutical approval for newtherapeutic applications, particularly thoseproviding pain relief. In 2001, the Group ob-tained a number of marketing authorizationsin France from the AFFSaPS (French HealthSafety Agency) covering an oxygen and nitrousoxide-based gas mixture (an adjuvant for gen-eral anesthesia), Kalinox (see below), and Kinox,a mixture of medical nitric oxide and nitrogen(for breathing), which is used to treat pulmo-nary arterial hypertension.

Air Liquide is also developing new servicesto make gases available to medical personnelin the most convenient form and under improvedsafety and quality conditions. Air Liquide staff

located at the hospital can manage gas availa-bility for all services (remote tank-monitoringsystems and back-up systems in critical areassuch as operating theaters), manage cylinderstocks, maintain installations, and even trainhospital staff. Services also include on-site*“clean medical air” and vacuum productionunits at hospitals.

Kalinox relieves pain Brief medical procedures like lumbar punctures, sutures anddental care can be painful. Kalinox, a new Air Liquide product, canboth relieve and prevent this pain. The Group obtained marketingauthorization for Kalinox in France in late 2001. Kalinox is ananalgesic gas (50% medical oxygen, 50% medicinal nitrous oxide)that induces a conscious, sedated state—leaving the patientcompletely relaxed and calm. Kalinox has no undesirable sideeffects and can be used by all healthcare professionals in both a hospital environment and for emergency medical assistance of all patients, including very young children.

≥ In emergency situations, Air Liquide ensuresdelivery of medical gases


HEALTHCARE

In addition to medical gases, Air Liquide’s offer to hospitals covers two othercritical areas: hospital hygiene—a significant growth market—and the supply of anesthesia and resuscitation equipment.

Hospital hygiene To combat nosocomial infections (contracted

during a stay in the hospital), hospital hygienehas become a public health priority: air, hand,surface and instrument hygiene are essential.Air Liquide is the European leader in hospitaldisinfection, offering a wide range of productsand services covering every need (instrumentsterilization, auditing, cleaning of air networks,etc.). The Group is expanding its services in thisfield through its speciality subsidiaries (Anios,Schülke & Mayr, Seppic, and Omasa).

Hospitals

Combating nosocomial infections

Omasa: a complete sterilizationserviceIn early 2001, Air Liquide Santé acquired 50% of the stock of Omasa; an Italian companyspecialized in hospital sterilization. The steri-lization of surgical instruments is a delicateoperation, and one that is essential to thehealth and safety of both patients and health-care professionals. Hospitals and clinics havebegun to outsource this service, resulting in a new and emerging market in Europe. Air Liquide’s holding in Omasa enables it tostrengthen and supplement its range of hospitalhygiene solutions.

To supplement the services it offers interms of medical gases,Air Liquide, through itsTaema subsidiary, alsoprovides hospitals with gas-distributionsystems and anesthesia

Anesthesia/resuscitation equipment

and resuscitationequipment. This equip-ment is used in operat-ing suites, recoveryrooms, emergency services, and intensivecare units.

≥ Hospital hygiene

≥ Hospital anesthesia and resuscitation equipment

Expanding frontiers

The Ariane rocket fuel tank, the hull for a high-speed ship, divingequipment, and an oxygen generator for fighter aircraft… these arejust a few examples of Air Liquide’s range of expertise. Whethercryogenics, gas-separation or welding technology, the driving forcebehind the Group’s continued expansion remains: innovation, innovation, innovation.


OTHER ACTIVITIES

Other activities

Gases

From welding unitsto Ariane tanks Building on its core expertise in the field of gases, Air Liquide has developed its competence in a number of complementary areas. These include, welding and cutting, engineering, very low temperatures (cryogenics, space),specialty products (chemicals), and diving.

Welding/cutting technologies Air Liquide produces and markets a com-

plete range of welding equipment (weldingunits, metal-cutting machines, etc.) and ma-terials (electrodes, wires, and flux). This activ-ity is primarily concentrated in Europe at AirLiquide Welding. In addition to product innova-tion, Air Liquide Welding is service-oriented,providing advice, preventive and correctivemaintenance, training, and logistics. It is alsodeveloping automation and robotization solutions, enabling customers to improve the productivity levels of their manufacturing lines.

Engineering and construction Through its network of 1,400 employees

working at 6 different platforms worldwide(France, North America, Japan, China, Singapore,and India), Air Liquide Engineering designs andconstructs gas-production plants for both theGroup and external customers. This activity isdeveloping around new technologies, particu-larly in the fields of hydrogen and synthesis gases. Air Liquide’s Advanced Technology Division is demonstrating its expertise in thefield of very low temperatures by developinghigh-tech cryogenic equipment for researchinstitutes and the aeronautics industry.

SpaceA partner in the European Space adventure

from the start, the Group is the principal sup-plier of gases and related services for theAriane program, and has a dedicated sub-sidiary that provides services at the Kourou(French Guiana) launch site. The Group alsomanufactures the cryogenic tanks for theAriane 4 and Ariane 5 rockets through itsCryospace subsidiary (55% Air Liquide, 45%EADS) and its Advanced Technology Division.

Chemicals Air Liquide’s chemicals business is covered

by Seppic, and is focused on specialty chemi-cals (surface-active agents, etc.). These prod-ucts are used primarily in pharmaceuticals,cosmetics, and for special industrial purposes.

Diving Through its Aqualung subsidiary, Air Liquide

offers a wide range of products and equipmentfor professional and recreational diving.

Ariane 5 "Plus"In December 2001,Cryospace (an AirLiquide and EADS jointsubsidiary) and the Air Liquide AdvancedTechnology Divisiondelivered the tanks forthe future EuropeanAriane 5 “Plus” launchvehicle. Included was anenhanced version of theoxygen/hydrogen tankfor the main cryotech-nical stage of the rocket,and two new liquidhydrogen and oxygentanks, which will be fittedto the upper stage of therocket. The first flight of Ariane 5 “Plus” isscheduled for mid-2002.

>

≥ Modelization of a production unit

Growing togetherAir Liquide is committed to providing the Group’s more than 30,000 employees challenging and motivating professional develop-ment opportunities. This is essential for business success. When people are engaged in the work they do, inspired to succeed, and recognized for their accomplishments, business results are better.Air Liquide’s teams are multicultural and multi-skilled, enabling themto excel in a Group that actively promotes autonomy and initiative.


HUMAN RESOURCES

Men and Women

International

Multicultural teams reflecting the diversity of the

Group’s customers80 % of top management has

international experience. Air Liquide’s top 150 managers come from

20 different countries, and close to 80% of themhave professional experience in another coun-try. This experience is often gained through assignments abroad or by managing interna-tional projects or activities. It is common formanagers of our different national subsidiariesto spend a few years abroad before returning totheir home country. The same is true for mem-bers of our international marketing teams,whose expertise is strengthened by understand-ing the differing requirements of customers based all over the world. International assign-ments also facilitate the transfer of know-howand technology within the Group.

In support of the Group’s multicultural ap-proach and dedication to career development,Air Liquide recently launched the “Start” pro-gram. This international development programis open to recent graduates from top univer-sities throughout the world. Selected candi-dates begin their Air Liquide careers on assign-

ment in a foreign country, thus gaining valuable international experience and insight into theGroup’s activities. In 2001, 10 new employeesparticipated in this program—representing 9 different countries, they each speak at leastthree languages.

The Group is also committed to increasingthe number of women in managerial positions.In France, for example, recruitment efforts areproving effective. While women currently represent 24% of all engineers and managers,40% of new recruits in this category are women.

As a global leader,Air Liquide musthave a multiculturalmanagement teamwith internationalexperience. This isessential to ensurebetter partnershipwith our worldwidecustomers andmanagement with aglobal vision of theGroup’s activities.Mobility and inter-national experienceare central aspectsof Human Resourcesmanagement at Air Liquide.

The company Intranet: a global informationnetwork (25,000 employees connected) The Intranet provides employees a wealth of information on the Group (its organization, products, human resources, press releases, etc.). It alsoprovides many useful tools and applications, and facilitates globalnetworking. Employees can now personalize their home pages, enablingthem to utilize this tool as efficiently as possible. The Intranet portalappears automatically allowing easy access to the information most relevant to each person’s day-to-day work. It is now much easier and quicker for people to get the information they need when they need it.

≥ 80% of top management has international experience

≥

≥ Advertisement:“When I grow up, I want to be an Air Liquideconsultant.”

Men and Women

Competency

A key Air Liquide valueCompetency is one of Air Liquide’s most important corporate values.Employees’ know-how is strengthened through experience, training,and the acquisition of new skills.

A decentralized training system The Group’s competency relies on internal

expertise gained through experience and thecontinuous acquisition of new knowledge. Thisis particularly true in the areas of healthcare,electronics, and new information technologies.The Group’s competency base is constantly enhanced through internal exchanges, focusedrecruitment efforts, and training. Training isorganized in a highly decentralized manner toensure it meets the precise requirements ofthe Group’s many different subsidiaries andbusiness lines. In 2001, the training budgetwas approximately 3% of total wages. Recruit-ment is an excellent way to reinforce existingexpertise and welcome new talent to the Group.In 2001, Air Liquide hired more than 200 newuniversity graduates.

Identifying and developing potential

Career development is a priority at Air Liquide.The Group strives to help employees achievetheir highest level of potential. A good exampleof these efforts is the International Develop-ment Program designed and conducted inpartnership with Insead (one of the world’s leading business schools). In 2001, 28 youngmanagers from 13 different countries attendedthis high-level international management pro-gram, which was held at Insead’s campus inFontainebleau, France.

Proud to workfor Air LiquideAn internal motivationsurvey was conductedamong the Group’semployees in France inthe fall of 2001. In termsof employee satisfaction,the results were quitepositive: 86% are proudto work for Air Liquide,90% appreciate thedegree of autonomy theyhave, and 76% feelencouraged to takeinitiative. In terms ofemployee expectations,a key finding was: mostpeople would like moreinformation aboutdevelopment opportu-nities in the Group.

>

Air Liquide’s Fellowshipprogram was createdto promote the continu-ous development ofexpertise in core areasof the Group’s businessand recognize top tech-nical specialists. This program is oneway in which the Groupis striving to extend itstechnological leader-ship and offer excitingopportunities to people

6 new “Fellows”interested in building a technical careerwithout necessarilypursuing a managerialposition. In early 2002,the Group selected 6new “Fellows”. Withthis promotion, theyreach a new height intheir technical careers and join the sixteen“Fellows” appointed in years past. ≥ Benoît Potier (Chairman of the Management Board) and Paul du Saillant (Member

of the Executive Committee) with the six new “Fellows”: P. Gauthier, H. Barthélémy, M. Devaux, O.M. Ekiner, M. Till, H.C. Wang

≥ Training in a welding workshop ≥ Training in a hospital


HUMAN RESOURCES

Professional development For those more “technically” than “commer-

cially” oriented, Air Liquide is creating a careerdevelopment system based on specific compe-tencies. A “technical career ladder” will be inplace in 2002.

Remuneration Remuneration at Air Liquide increasingly

includes a variable part based on individualperformance, team performance and theGroup’s results. Twenty-five percent of the remuneration of the top 150 managers is directly linked to the Group’s earnings, and anadditional percentage depends on the resultsproduced by their individual entities. The percentage of variable pay is higher as responsibility increases. Thirty-six percent ofall Air Liquide employees currently have a variable part in their salary (not including profit-sharing).

Recognition

Offering everyone a rewardingprofessional life

Share ownershipIt is important to strike a balance between

rewards to employees and the interests of share-holders. In 2001 the Group offered a specialshare issue for employees: 13,173 employees,around 41% of all employees, took advantage ofthis opportunity. Stock options are another wayAir Liquide rewards those who have made par-ticularly significant contributions to the Group’sdevelopment. Since 1991, 386 employees havereceived stock options.

Air Liquide honors its inventorsAir Liquide believes in honoring its inventors whose patented innovations have contributed to the Group’s development. Of the 78 inventors recognizedthroughout the year, 21 were honored in a special ceremony in October 2001.Present at this ceremony was Professor Carlo Rubia, Nobel Laureate in Physics. Inventors received rewards from the Group’s management. First prize was awarded to Joan Marles Franco for “Aljet”, a process injectingpure oxygen into rotary furnaces. Other prizes were given for the “Présence”cylinder (highly acclaimed by healthcare professionals), “Carbofresh”(preservation of fresh food products), and “Alglass” (glass furnace oxycombustion).

Air Liquideemployees arerecognized on thebasis of theirpersonal skill leveland individualcontribution to theGroup’s results.This is reflected inthe career develop-ment process,remuneration policyand use of perfor-mance incentives,such as stockoptions.

≥ Inventors’ Awards Ceremony

Share issue for employees

≥

Produce cleaner and safer

Air Liquide has a long-standing commitment to respect the environment. This is clearly evident through the Group’s safety andrisk-management policy, constant efforts to reduce energy con-sumption and environmentally friendly solutions. Sustainablegrowth depends on development that respects and protects theworld around us.


SAFETY AND ENVIRONMENT

Safety

Risk management

Guaranteeing safety for people and facilities

Safety of people Air Liquide’s safety performance levels are

measured by a lost-time accident rate. In 2001,this rate was 2.1 (at constant perimeter). Thisrepresents three times fewer accidents thanjust 10 years ago, and places Air Liquide amongthe leaders in the chemicals industry in termsof safety. Some new, recently integrated activi-ties have not yet achieved this same level ofperformance, resulting in a higher lost-timeaccident rate of 2.8.

The Group has a very active safety policy. Thisis particularly evident in its training programsfocused on anoxia, oxygen use, operational safety, and defensive driving. Air Liquide truckscover around 260 million kilometers (162 mil-

lion miles) a year, and defensive driving trainingis required not just for truck drivers, but foranyone whose position requires a significantamount of driving.

Security and safety of facilitiesAir Liquide has always implemented acci-

dent-prevention procedures at its facilities. After the events of September 11 and a seriousaccident at a chemicals plant in Toulouse(France), Air Liquide responded by conductingnew audits and re-examining its inspection andrisk-control system worldwide, including: hazard and vulnerability studies, emergencyprocedures, safety-management systems, andincreased site surveillance. As a result, someexisting procedures were strengthened or updated. Each air separation plant worldwide isregularly inspected to ensure the highest possi-ble level of industrial safety. Moreover, Air Liquide is committed to informing the author-ities and local communities of the nature of its activities and the preventive measures put in place.

“Safety is, and will continue to be, our number one priority”: this was one of the first messages delivered by Benoît Potier to all personnel after he was appointedChairman of the Management Board. This statement is a clear indication of the Group’s ongoing commitment to safety and transparency in this area, and calls upon all employees to intensify their efforts.

≥ Industrial risk management system

Lost-time accident rate(by millions of hours worked)

Environment

At Air Liquide premises

Saving energy Air Liquide’s activities pollute little, by their very nature, but theGroup does consume significant amounts of energy. Air Liquideis focused on improving energy efficiency at its plants, and in 2001 initiated a program to monitor carbon dioxide (CO2) emissions.

The less energy used, the less CO2emitted

Separating air into gases (oxygen, nitrogen,argon, rare gases) consumes approximately1,800 megawatts, or the equivalent of around 2 nuclear power plants. For several years now,the Group has been implementing a variety ofinitiatives to increase its plants’ energy effi-ciency: improving processes, developing moreeconomical production technologies, optimiz-ing plant operation, installing production unitsat customers’ sites (reducing transport), useof cogeneration*, etc. As a result, from 1997-2001 energy consumption at air separationplants decreased by around 10%. At a constant production rate, this represents reduced consumption of 180 megawatts, anda corresponding decline in carbon dioxideemissions, a gas which contributes to thegreenhouse effect and global warming.

Waste treatment and ISO 14001certification

All Group sites are committed to a “zerowaste” approach, with selective sorting ofwaste materials, full recycling of byproductsfrom the manufacture of acetylene, recoveryand treatment of cylinder gas waste, etc. An increasing number of the Group’s plants arepreparing for ISO 14001 certification, the globalbenchmark for environmental management.

Evolution of energy consumption at Air Liquide airseparation plants (base of 100 in 1997)

≥ Oxygen combustion reduces emissions

≥ Ozone replaces chlorine in the bleachingof paper pulp


SAFETY AND ENVIRONMENT

On theoffensiveagainst VOCs!In April 2001, Air Liquidesigned a technicalpartnership agreementwith DEC Impianti, aspecialist in recyclingvolatile organiccompounds (VOCs). VOCs(solvents, for example)are undesirable in theatmosphere.Air Liquide is focused on developing completeenvironmental solutionsfor reprocessing thesecompounds, particularlyfor the flexible-packaging industry.

Air Liquide promotes sustainable growth by offering customersenvironmentally-friendly solutions: reduced emissions of noxious and greenhouse gases, decreased energy consumption, andimproved effluent treatment.

Cleaner production Here are some recent examples of how “gas”

solutions contribute to a healthier environ-ment:

• oxygen helps reduce NOx emissions (toxic)in glass and blast furnaces by partially re-placing air. It also improves waste treatment, decreasing the amount of incineration emis-sions by a factor of up to 7! Oxygen is also usedto recycle petroleum residues in order to produceenergy, and is involved in the manufacturing ofnew fuels (GTL* process, see p. 31);

• hydrogen is used to desulfurize petroleum-based fuels (see p.31);

• ozone replaces chlorine in the bleaching ofpaper pulp, water purification and the washingof fresh fruit and vegetables;

• volatile organic compounds are removedfrom the air by cryocondensation with liquid nitrogen or by using membrane separationtechniques.

Limiting greenhouse gas emissions

Greenhouse gases have a major impact onsustainable growth and an increasing numberof industrial companies are committed to reducing their emissions. This is particularlytrue for those who use combustion processesthat generate carbon dioxide. Air Liquide offerscustomers energy optimization solutions,

At customers’ premises

Solutions that respect the environment

often based on information technologies (Optimal service, for chemicals customers), or the use of oxygen to improve combustion(see p. 33).

PFC (perfluorocompound) gases, byproductsof the electronics industry, have a much great-er greenhouse-effect than carbon dioxide. Air Liquide has developed technology for destroying PFCs, and it is currently being installed for a European customer (see p. 35).

Air Liquide is also focused on more long-term advancements and is working to developa carbon-free energy source (producing nocarbon dioxide when consumed): Hydrogen.

The Illinois State Officeof Coal Developmentand Marketing (US) hasentrusted Air Liquide’sChicago ResearchCenter with a study onoxy-combustion incoal-fired boilers.Through an experimentconducted at a pilotsite in Ohio, this studyintends to demonstratethat replacing air withpure oxygen

An ecological coal-fired boiler

significantly reducesthe cost of treatinggases released duringcombustion: nitric and sulfur oxides, and carbon dioxide.This experimentshould also illustratethat carbon dioxide(involved in thegreenhouse effect) can be recovered at the boiler’s vent.

Preparing tomorrow

Meeting today’s needs and anticipating tomorrow. For one hundredyears, Air Liquide’s research and engineering teams have met thischallenge, continuously imagining and inventing new solutions:gas-production technologies, new applications, and high value-added services based on information technologies. The objectiveis always the same: fulfilling customers’ needs while enhancingthe Group’s expertise and competitiveness. Today is no differentfrom 1902: Air Liquide’s commitment to innovation continues tomake the difference.


RESEARCH AND DEVELOPMENT

Research and Development

Technological innovation

Gas production, applications, services

Air Liquide’s research and development teams prioritize their efforts in a numberof critical areas: environmental protection, productivity enhancement, food safety,healthcare and hygiene. These teams are based at research centers, engineeringplatforms and within the Advanced Technology and Services Divisions.

Innovative and competitive gas production technologies

In the field of gas production, the Group hascontinued to improve its cryogenic distillationtechnologies for the air separation process.The progress achieved significantly enhancesproductivity at production plants of all sizes.

The Group has also developed innovativehydrogen-production technologies, particu-larly in the area of purification and recyclingsystems. Other advancements include en-hanced expertise at large production plantsand a new range of on-site* units dedicated to thermal metal treatment.

Air Liquide is also pursuing research in theuse of ceramic membranes for producing oxygen or synthesis gas, a more long-term endeavor.

Innovation: key figures for Air Liquide• budget: approximately 150 million euros; • over 500 researchers;• 8 research centers (located in France, Germany, the US,

and Japan);• 218 patented inventions in 2001;• over 100 industrial partnerships;• over 100 international collaborations with universities

and research institutes.

≥ Liquid helium tank (DTA)≥ Researcher at one

of the 8 R&D centers

≥ Atmosphere analysisof packaged food

Research and Development

Technological innovation

New applications Oxygen has been the subject of a great deal

of research focused on combustion. These studies have two key objectives: to improveprocess efficiency and reduce polluting emis-sions (see p. 33). Thus far, Air Liquide has developed oxycombustion technology that reduces NOx emissions by 30 to 40%, particu-larly in glass furnaces.

Another major research area is applicationsinvolving hydrogen, especially development ofthe fuel cell.

Air Liquide is also intensifying its researchin healthcare, hygiene, and food safety, increas-ing its focus on life sciences.

In electronics, the Group has developedproducts based on new chemical molecules, keeping pace with the ongoing revolution inchip manufacturing processes.

An upsurge in information technologies

Information technologies are another criticalpart of Air Liquide’s innovation efforts. TheGroup’s internal expertise is enhanced by external partnerships and through the Group’sacquisitions or holdings in targeted compa-nies. In 2001, new industrial data processingsolutions improved efficiency for both Air Liquide and its customers, particularly in refining, chemicals, and metallurgy.

In 2001, Air Liquidewas granted 580 patents,protecting 218 innova-tions. The Group filesmore patents than anyother company in theindustrial gases indus-try. Innovations leadingto commercial applica-tions in 2001, as wellas those ready forlaunch in 2002, can befound in many differentsectors, including food

218 patented inventions safety, healthcare, andthe environment. Someexamples are: a gastraceability process fora food manufacturingline; a helium/oxygenmixture used to treatasthma, allowingmedicinal products to be administered in aerosol form. AirLiquide currently has a portfolio of over 2000patented inventions.

Furtherprogresstoward the fuel cellThe fuel cell is a majoraspect of research intoclean energy solutions.The basic principle ofthe fuel cell is asfollows: inside the cell,oxygen and hydrogenreact, forming water andgenerating electricity.Air Liquide has beeninvolved in this researchsince the early 1990sand, in 2001, achievedtwo breakthroughs.First, the Group createdAxane, a joint venturewith Nuvera, anotherspecialist in fuel-celltechnologies. Axanetargets specific fuel-cellapplications, particularlyportable electricity-generators, stationarygenerators for industry,and systems for urbantransport. Second, inlate 2001 Air Liquidesigned a major researchcontract with the CEA(the French AtomicEnergy Commission).

≥ Modelization of pollutants dispersed into the atmosphere

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