gasworld Business Intelligence provides you with the latest analysis of Linde’s Q1 2017 earnings report.
Total corporate sales in Q1 were reported at €4.39bn. This was an increase of over 6% YoY, or 4% growth when adjusted for currency. This was a further improvement over the previous 3 quarters, which had shown the weakest reported performance since late 2013.
Gases account for over 80% of Linde corporate sales, with Engineering under 20%. Other businesses (mainly Gist distribution) have been moved into discontinued business, as Linde seeks to divest this business.
Reported Gases growth also accelerated to nearly 5% YoY in Q1, which was significantly better than the previous year. This again shows growth of around 2% on a comparable basis.
Engineering sales increased over 14% YoY in Q1 but, at $648m, remained below the average of recent years. Order intake was up, but backlog was again down YoY.
Reported corporate operating income showed slower growth at 2% YoY to be €540m, with reported gases operating income slightly down YoY.
The previously announced discussion with Praxair over a potential merger/acquisition is proceeding with completion by mid-2017 targeted.
Special charge of €22m in Q1 related to restructuring and pre-merger costs. Restructuring continuing across all units under the ‘LIFT’ programme, with a total charge of €400m expected in 2017 (vs €116m in 2016).
Reported gases growth accelerated again in Q1, with an increase of nearly 5% YoY. Drivers for this growth were equally split between underlying growth and other factors. Energy pass-through made a small positive contribution to top line growth (1%) for the first time in over 2 years, whilst currency had a larger positive contribution of nearly 3% (driven most significantly by impact of US and Australian Dollars partly offset by Sterling impact). Small negative impact from acquisitions, albeit less than 1%, reflected the balance of bolt-on healthcare acquisitions in North America being partly offset by the divestment of the small specialty pharma business.
Underlying growth remained in positive territory, although this slipped back slightly. It appears that the driver of this underlying growth is volume, boosted by project start-ups in both the onsites and merchant businesses. Pricing contribution remains under pressure, substantially driven by healthcare pricing and neon.
Merchant gases represented over half of Linde’s gas business, with Cylinders 28% and Bulk 24%. Onsites accounted for 26% and Healthcare 22%.
Onsites and Liquid Merchant accelerated solid growth YoY at around 6-7% in Q1, while Merchant Cylinders improved to be flat YoY. Bulk positive in all regions, particularly within Asia. Small improvement in industrial cylinders offset by a weakness in specialty gases.
Underlying Onsites growth was again assisted by new project start-ups and ramp-ups.
Healthcare growth remained significantly negative YoY in Q1, even after removing the negative impact of Pharma divestment. Positive underlying volumes were offset by deepening negative price impact of competitive bidding, which will continue through 2017. Underlying growth declined by 7.5%.
On a comparable basis, the relative performance between regions widened significantly, largely due to the Americas underperforming the other two regions in Q1.
Americas declined by 2%, significantly driven by the disposal of SpecialtyPharma. Bulk and onsites were both stronger, but spec gas weaker. Furthermore, competitive bidding pressure in healthcare continues.
EMEA accelerated significantly to over 4%, its best performance since 2011. The highest growth contributions came within Northern Europe, Eastern Europe and the Middle East, as well as strong onsites growth.
Asia Pacific growth improved further towards 5%, returning it to the 2011-14 average. Asia growth stood a 6.6%, however, the Pacific was modest/down with the South Pacific stabilising. Positive bulk growth in all parts of region.
Regionally, Europe, the Middle East & Africa remained the largest profit source for Linde and accounted for around half of gases operating income, with Americas and Asia/Pacific both accounting for around a quarter.
Europe operating margin remained highest in Group and bounced back to over 18% in Q1, after slipping significantly in Q4. This growth was aided by a number restructuring actions.
Americas margin slipped back again to 12%, after reaching its highest level of recent years in the previous quarter. The margin was assisted by strong onsite developments but adversely impacted by healthcare pricing.
Asia Pacific margins slipped below 12% and below the trend of recent years. YoY comparison impacted by asset sale in 2016..
The Linde Group is expanding its commitment to China and the Asia Pacific region through a multi-million-euro investment in new onsite gas production facilities.
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