Behind the engineering giant driving the hydrogen revolution

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Linde, which is a big position in the trust, is a global leader in industrial gas production. It was established in 2018 from the merger of Germany's Linde AG with the US's Praxair. A resilient and geographically diverse business, it has high exposure to fast-growing emerging markets, largely inherited from the German entity, combined with a solid base in the Americas.

Linde exerts strong pricing power from its leading position in the regions in which it operates, in what is a highly consolidated industry. A major player across the entire hydrogen value chain, Linde looks ideally positioned as its customers seek low carbon energy sources.

This is a long-term opportunity likely to meaningfully impact Linde’s business in the late 2020s. As the opportunities will be capital intensive, forming partnerships will be the key to success. Industrial gases are essential across many sectors in which diversity of end markets can provide stability in volatile economic cycles, which we like.

Gases constitute a tiny percentage of the customer's cost of goods sold, making demand for them price inelastic. This is a key to Linde’s pricing power. The recent establishment of a sustainability committee to provide oversight on environmental matters is welcome, and at the ‘22 AGM sustainability targets were embedded into financial incentives for management.

Linde is exposed to the climate change sub-theme as it is ideally positioned across different parts of the hydrogen value chain. This could represent a major opportunity as economies decarbonise. Further exposure to this theme is through reduction of customer's carbon footprints through energy efficient operations.

Physical infrastructure is the beneficiary of a number of global government spending programs and industrial gases have wide applications in this area, with healthy exposure to both Asian and South American markets and industrial production generally, Linde can harness the sub-themes of growth in emerging market middle class.

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