Arnaud Langlois Short Air Products & Chemicals: Sohn London Conference ~ market folly

Monday, December 9, 2019

Arnaud Langlois Short Air Products & Chemicals: Sohn London Conference

We're posting up notes from the Sohn London investment conference.  Next up is Arnaud Langlois of 1798 TerreNeuve Fund, Lombard Odier who presented a short of Air Products and Chemicals (NAS:APD).

Arnaud Langlois's Sohn London Conference Presentation

Short: Air Products and Chemicals (NAS: APD)

The stock is up 59% this year. APD is trying to grow at 10% per annum. To achieve this, in 2018 the company set out a plan to invest $17bn between 2018-2022 mostly into coal gasification – making gas from coal. There are risks with this process:

- Country risk, projects take place in countries that are trying to exploit coal assets like China, Indonesian and Indian

- Concentration risk, APD is investing too much into coal gasification

- Joint venture risks, their partners are in the mining industry which can be unstable

- Environmental risks. Coal gasification is a water intensive process. Plants have been stopped in China due to water shortages. It is also CO2 intensive emitting x2 coal fired power stations

Langlois’s research suggests that APD’s CO2 footprint could be 100m tons by 2025. That would give it one of the largest footprints in the S&P 500. Any new legislation that limits or taxes greenhouse gas emissions would hurt the company. Carbon pricing is established in Europe and seems likely to spread. No investor with a long-time horizon should support the APD’s business model.

Be sure to check out the rest of the presentations from Sohn London conference 2019.

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