How do you value an industrial gas company?

Part by part. Contracted on-site cash flow is discounted year by year over the contract at a rate close to investment-grade borrowing cost, with a value for likely renewal added at expiry. Merchant and packaged EBITDA, which has no contract floor, goes on a market EV/EBITDA multiple. Signed projects not yet running are added as one number, then net debt and minority claims come off to reach equity. A flat multiple on total EBITDA is only the first screen.

What EV/EBITDA multiple do industrial gas companies trade on?

Global leaders sit in a 12-16x through-cycle band on normalised EBITDA, with 14.0x as the anchor. The band describes leaders only: a regional player with thinner scale and route density sits below it. Commodity chemical producers sit at 6-9x on a different cash-flow duration, so their multiples should never be borrowed for a gases company.

What discount rate is used for take-or-pay gas contracts?

The primer discounts on-site contract cash flow at 7.5%, close to what an investment-grade borrower pays. The minimum purchase makes that stream behave more like a bond than an equity. A group WACC of about 9% is used separately, as the bar that return on capital has to clear.

What is a take-or-pay contract in industrial gases?

An on-site supply contract, usually 10-20 years, under which the customer pays for a minimum volume, or a fixed monthly fee, whether or not it takes the gas. No company files the share of on-site revenue under take-or-pay, so the primer sets the minimum at 85% of plant capacity until contract terms are known. Only the 15% above it can fall in a downturn.

Why do industrial gas companies trade at a premium to chemical companies?

Duration. A gas plant cannot move and sits on the customer's site under a long contract, so each site works like a local monopoly with a contracted floor. At the anchors, 14.0x against 7.5x, the gases band sits about 87% above commodity chemicals. A higher on-site share does not by itself earn a higher multiple, though: return on capital and project execution matter as much.

Chemicals · Industrial Gases

Industrial Gases Sector Primer

A 43-page primer plus Excel valuation model on industrial gas companies: supply modes, take-or-pay contracts, ROCE and a sum-of-the-parts valuation.

2026 Edition · data as of June 2026

pages: 43
sections: 15
model sheets: 11

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Worked examples and applied cases
2026 Edition, data as of June 2026

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All three Chemicals industries: three primers, three Excel models (Commodity Chemicals, Specialty Chemicals, and Industrial Gases).

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Inside the primer

The 15-section contents, a worked valuation page, and the Excel dashboard.

Sample page from the Industrial Gases Sector Primer — The sum-of-the-parts worked example, steps 4 and 5: $28.4B of on-site value, the cyclical slice at 13.0x and a $3B backlog value sum to a $104.2B enterprise value; less $16.0B of net debt, that is $220.52 a share, against $240 from a flat 14.0x screen on total EBITDA.

01 How Industrial Gases Make Money
02 Listed Company Types
03 The Supply-Mode Spectrum
04 Segments and Sub-Markets
05 Revenue Drivers: Hypothetical Portfolio Walkthrough
06 Cost Structure: Density and Pass-Through
07 Valuation Frameworks
08 Worked Example: Sum-of-the-Parts Valuation Engine
09 Applied Cases: On-Site and Take-or-Pay
10 Applied Cases: The Four Majors
11 Applied Cases: ROCE, Multiples and Capex
12 Key Metrics and Screening
13 Risks and Red Flags
14 Benchmarks, Case Study and Commodity Chemicals
15 Glossary and Quick Reference Cheat Sheet

Worked examples and applied cases · 43 pages · 15 sections · 2 worked archetypes

The Excel model

Sample view from the Industrial Gases Sector Primer Excel model — The model's sensitivity view: the Leader archetype's value per share across the on-site share of EBITDA and the cyclical multiple, each cell re-running the engine, with the centre cell reproducing the $220.52 headline.

Educational material for professional use. This primer and its model are not investment advice or a recommendation to buy or sell any security, and they are not personalised. Worked valuations use illustrative calibrations, not fair-value estimates for any company.

An industrial gas plant cannot move once it is built, and a customer cannot switch supplier without building new capacity, so each site works like a local monopoly. Revenue comes through three supply modes with very different contracts: on-site plants under 10-20 year minimum-purchase agreements, merchant bulk deliveries on 3-7 year contracts with no minimum, and packaged cylinders on 1-3 year contracts or purchase orders. Value therefore rests on how much of the earnings sit under a contracted floor, and a single multiple on total EBITDA hides that.

Industrial gas valuation benchmarks by company type

Return on capital and the share of earnings under contract decide where a gases company sits. The return bands come from the four filed majors; the valuation read beside each is the primer's own, built part by part.

Company type	Return on capital	Valuation read	What sets the position
Global packaged-plus-merchant leader	20-26%; screen above 20%	12-16x EV/EBITDA through the cycle, 14.0x anchor	Route density and contracted mix
On-site and clean-energy major	10-12%	Sum-of-the-parts; net debt of 2.0-3.5x EBITDA is normal	Whether projects reach contracted off-take before the debt bites
European segment-labelled major	10-12% recurring ROCE	Sum-of-the-parts plus recurring ROCE, restated from euros	Segment labels mapped to supply modes first
Regional diversifier	7-10% ROCE	At a discount to the leader band	Thinner scale and route density
Commodity chemicals (contrast)	Not comparable	6-9x EV/EBITDA through the cycle	Spread cyclicality with no contract floor

Two rates sit under these bands. On-site contract cash flow is discounted at 7.5%, close to what an investment-grade borrower pays, while return on capital is tested against a group WACC of about 9%. At those inputs a dollar of on-site EBITDA is worth about 11.8x, below the 13.0x the worked example puts on merchant and packaged earnings: the defensive stream need not carry the higher multiple. Returns above 20% and dense routes hold a leader in the band; thinner scale and density are why regional names trade lower. At the anchors the gases band sits about 87% above commodity chemicals, a gap in cash-flow duration rather than growth.

Worked example: an industrial gas sum-of-the-parts valuation

Take a hypothetical global leader with $8.0 billion of EBITDA, 30% of it from on-site plants, 400 million shares and net debt at 2.0x EBITDA. The primer values each slice on its own terms. On-site EBITDA converts 70% to cash, escalates 2% a year and is discounted at 7.5% over a 20-year contract, with an 80% chance of renewal at the end. The merchant and packaged slice goes on 13.0x.

Step	Amount
On-site EBITDA (30% of $8.0B)	$2.4B
On-site value: 20 years of contract cash flow ($19.9B) plus renewal ($8.5B)	$28.4B
Merchant and packaged value ($5.6B EBITDA at 13.0x)	$72.8B
Plus signed projects not yet running	+$3.0B
Enterprise value	$104.2B
Less net debt (2.0x EBITDA)	-$16.0B
Equity value	$88.2B
Value per share (400M shares)	$220.52

The parts add up to 13.0x EBITDA. A flat 14.0x on the same $8.0 billion, the anchor of the leader band, gives $240 per share, about $19 more, because both parts here are worth less than 14.0x. The split earns its keep in a downturn. A 20% volume shock cuts merchant and packaged EBITDA by 36.7%, since the margin lost on each lost tonne is 55%, and value per share falls 31.2%. A hypothetical major with 60% of EBITDA on-site loses 18.9% on the same shock, despite carrying more debt.

The primer shows sample years from the 20-year contract schedule behind the $28.4 billion, runs the downturn slice by slice and re-runs the whole valuation across the multiple and the on-site share. The Excel model does the same with your own inputs.

Which industrial gas valuation method fits which company

Company type	Primary method	Check with	Why
Global leader	Sum-of-the-parts	Return on capital above 20%; the 12-16x band	Route density plus contracted mix
On-site-heavy major	Sum-of-the-parts	Net debt to EBITDA; project backlog	Contracted cash flow, with execution risk while capex runs ahead of off-take
European major	Sum-of-the-parts plus recurring ROCE	Segment mix in euros	Return definitions differ by filer, and currency needs restating first
Regional diversifier	Sum-of-the-parts at a discount	ROCE in the 7-10% band	Scale and route density are thinner

What the full primer adds

The primer builds the tools in order: how industrial gases make money, the listed company types, the supply-mode spectrum, then revenue drivers and the cost side of route density and energy pass-through. A worked chapter values two hypothetical majors part by part: contracted on-site cash flow over the contract plus a renewal value, the merchant and packaged slice on a market multiple, signed projects not yet running and net debt, followed by a demand downturn and a sensitivity grid. Applied cases on take-or-pay contracts, the four listed majors, returns on capital and project capex follow, and screening closes with the red flags.

Free guides on the site cover the individual pieces: industrial gas business models, take-or-pay contracts, ROCE and the gases oligopoly, how gases are valued, hydrogen and the clean-energy backlog, project backlog against RPO and margins by company. Research profiles for Linde, Air Liquide, Air Products and Nippon Sanso apply the same method to filed results. The companion Excel model spans eleven sheets: two worked company engines, a valuation summary, an on-site contract schedule, a supply-mode downturn test, ROCE against WACC and a live sensitivity grid.

Sheets: Quick Start, Instructions, Assumptions, Leader, On-Site Major, Valuation Summary, Take-or-Pay On-Site, Mode Mix & Downturn, ROCE vs WACC, Sensitivity, Dashboard.

Industrial gas valuation: free guides

Industrial gas valuation FAQ

How do you value an industrial gas company?: Part by part. Contracted on-site cash flow is discounted year by year over the contract at a rate close to investment-grade borrowing cost, with a value for likely renewal added at expiry. Merchant and packaged EBITDA, which has no contract floor, goes on a market EV/EBITDA multiple. Signed projects not yet running are added as one number, then net debt and minority claims come off to reach equity. A flat multiple on total EBITDA is only the first screen.
What EV/EBITDA multiple do industrial gas companies trade on?: Global leaders sit in a 12-16x through-cycle band on normalised EBITDA, with 14.0x as the anchor. The band describes leaders only: a regional player with thinner scale and route density sits below it. Commodity chemical producers sit at 6-9x on a different cash-flow duration, so their multiples should never be borrowed for a gases company.
What discount rate is used for take-or-pay gas contracts?: The primer discounts on-site contract cash flow at 7.5%, close to what an investment-grade borrower pays. The minimum purchase makes that stream behave more like a bond than an equity. A group WACC of about 9% is used separately, as the bar that return on capital has to clear.
What is a take-or-pay contract in industrial gases?: An on-site supply contract, usually 10-20 years, under which the customer pays for a minimum volume, or a fixed monthly fee, whether or not it takes the gas. No company files the share of on-site revenue under take-or-pay, so the primer sets the minimum at 85% of plant capacity until contract terms are known. Only the 15% above it can fall in a downturn.
Why do industrial gas companies trade at a premium to chemical companies?: Duration. A gas plant cannot move and sits on the customer's site under a long contract, so each site works like a local monopoly with a contracted floor. At the anchors, 14.0x against 7.5x, the gases band sits about 87% above commodity chemicals. A higher on-site share does not by itself earn a higher multiple, though: return on capital and project execution matter as much.