You separate those primary components to where they can be stored and then shipped and delivered to the customers. Those primary components are oxygen, nitrogen, and argon. Basically cryogenic air separation is when you chill down, you freeze these atmospheric gases down to a point where you can separate the primary components of that atmospheric gas. Cryogenic air separation is the way that they produce their atmospheric gases. It's a highly capital intensive business. This is complicated chemistry going on here. What's the process of making these gases? You've mentioned cryogenics. Sciple: These things are difficult to do. Like I said, these gases are sold into everything from steel mills to hospitals, to semiconductor fabrication facilities. Usually, only 1-3% of their customers' total budget. They are an essential product, but they only account for a very small percentage of their customers' total expenses or their customers' total budget. I just went through some of the industries they sell into, including electronics and semiconductors. The last thing I'll say about the industry is that industrial gases, and one of the things that attracts me to the industry, Nick, is that they are an essential product for global growth and industrial production. Then, CO2 used in beverages for the bubbles in the beverage and in food freezing. Argon is a big industrial gas used in welding. Nitrogen is used to make semiconductors, it's used for food freezing. It's used to make electronics, it's used for jet fuel, for rockets. Hydrogen that is used for ultra low sulfur diesel. Steel mills also use oxygen to heat the blast furnaces. I'll say the primary gases sold are oxygen, which is used in healthcare facilities, both hospital and home care. The three largest players have 80% global market share, and Linde is the largest. But there you have it, it is a global oligopoly. Over time, Nick, that could provide a slight growth opportunity, because Linde does occasionally acquire some of these plants that its customers are decommissioning or deconsolidating. There is another market outside of the big three because some customers have their own industrial gas plants. Combined, those three players have roughly 80% global market share, and Linde has roughly a third of that. It does operate in a global oligopoly, with the three largest players being Linde, Air Liquide and Air Products and Chemicals. Then it sells these gases or these molecules to clients in different industries around the world. Basically at a high level, these industrial gas companies produce a variety of industrial gases using cryogenic air separation and other technologies. But its balance sheet is very strong, which we can get into. It does have net debt of $11.6 billion, so its enterprise value is about $160 billion. It generates about $28 billion in sales, has a market cap of $148 billion. Rotonti: Linde is the largest industrial gas company in the world. For folks who may not be familiar with this, what is it? What do they do? Why does this matter? Why is it important in the world? I mentioned we are going to talk about Linde later, but first off I just want to give an introduction into the industrial gas market. In the past, we talked about water heaters, so we talked about water, now let's talk about gas. We've got another exciting sector to talk about.
Sciple: Well, I'm excited to have you back on. It's one of my favorite things I do at The Motley Fool.
I was just thinking back before I came on, I think this is the fourth episode we've done on your Industrial podcast and I've loved it all. This week, Motley Fool Senior Analyst John Rotonti returns to the show to take a look at the industrial gas industry, focusing on one of its most dominant players. Welcome to Industry Focus, I'm Nick Sciple. Some things may have changed between then and when you're hearing this episode. Nick Sciple: This episode of Industry Focus was recorded on June 28th, 2021. This video was recorded on June 28, 2021.
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