Linde plc - Performance vs combined Linde + Praxair

%change YoY
  • Corporate Sales
  • Corporate operating income
  • Proforma Sales
  • Proforma Operating Income
,Corporate Sales,Corporate operating income,Proforma Sales,Proforma Operating Income 2014 Q1,-0.7%,2.3%,null,null 2014 Q2,-1.7%,-1.0%,null,null 2014 Q3,3.5%,3.2%,null,null 2014 Q4,-1.7%,-10.3%,null,null 2015 Q1,-9.8%,-10.7%,null,null 2015 Q2,-9.3%,-19.2%,null,null 2015 Q3,-14.1%,-15.7%,null,null 2015 Q4,-13.2%,-11.5%,null,null 2016 Q1,-6.6%,-7.9%,null,null 2016 Q2,-5.8%,7.3%,null,null 2016 Q3,-0.6%,-9.7%,null,null 2016 Q4,2.1%,0.9%,null,null 2017 Q1,4.6%,1.9%,null,null 2017 Q2,1.9%,0.8%,null,null 2017 Q3,4.6%,20.7%,null,null 2017 Q4,5.1%,10.5%,null,null 2018 Q1,7.8%,23.0%,null,null 2018 Q2,8.9%,15.6%,null,null 2018 Q3,1.7%,2.8%,null,null 2018 Q4,0.0%,3.6%,null,null 2019 Q1,-15.0%,-14.4%,-0.4%,1.3% 2019 Q2,-14.0%,-10.9%,0.4%,5.9% 2019 Q3,-14.1%,1.5%,0.7%,16.5%
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New Linde plc published its first three quarterly results as combined group – for purposes of the following analysis comparisons are made with the combined results of the ‘old’ Linde and Praxair and also with the pro forma results for 2018 quarters for the new Linde plc. Difference between pro-forma results for Linde plc and combined results for the previous businesses reflects businesses which have either been divested or are required to be divested by regulatory authorities.

Q3 group sales at $6.99Bn, down -3% sequentially – down -14% YoY vs combined Linde and Praxair pre-merger - but up +1% on a pro forma basis.

Group Operating Income at $1.38n was up +1½% vs combined result pre-merger and up +16% on a pro forma basis due to solid operating leverage.



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Linde plc - Margin vs combined Linde + Praxair

%change YoY
  • Old Linde + Praxair margin
  • New Linde plc margin
,Old Linde + Praxair margin,New Linde plc margin 2014 Q1,16.2%,null 2014 Q2,16.6%,null 2014 Q3,16.1%,null 2014 Q4,15.6%,null 2015 Q1,16.0%,null 2015 Q2,14.8%,null 2015 Q3,15.8%,null 2015 Q4,15.9%,null 2016 Q1,15.8%,null 2016 Q2,16.8%,null 2016 Q3,14.4%,null 2016 Q4,15.8%,null 2017 Q1,15.4%,null 2017 Q2,16.7%,null 2017 Q3,16.6%,null 2017 Q4,16.6%,null 2018 Q1,17.5%,17.4% 2018 Q2,17.7%,17.4% 2018 Q3,16.8%,17.1% 2018 Q4,17.2%,null 2019 Q1,17.7%,17.7% 2019 Q2,18.3%,18.3% 2019 Q3,19.8%,19.8%
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Group Operating Margin at nearly 20% in Q3 compares with an average of around 16% for combined Linde and Praxair over the previous 5 years – it is also continues the recent upward trend and is up 60bp sequentially and 270bp YoY on a proforma basis.

Margin improvement helped by improved Engineering profitability.

Cost reduction and transaction charges $141m in Q2 vs $89m in Q1. Target cost synergies of $300m expected to be reached in Q3 2019. Cost reduction charges YTD include elimination of 1300 positions (out of 83,000 employees) mainly in Americas and APAC.

Reported After tax ROCE up sequentially to over 11%.



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Linde plc - New business profile

Legend:
  • Americas gases
  • EMEA gases
  • APAC gases
  • Engineering
  • Other
Americas gases,39 EMEA gases,24 APAC gases,21 Engineering,10 Other,7
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New Linde plc business split geographically with Americas Gases the largest followed by Europe/M.East/Africa and Asia/Pacific.

This reflects the substantial divestments including most of the former Praxair Europe business, major part of Linde Americas business and most of Linde Korea and also other businesses which have yet to be divested (parts of Indian and Chinese businesses).

‘Other’ business includes small global gas related businesses in Global Helium and Electronic Materials as well as non-gas businesses such as Technologies and GIST Distribution.

Reported Q3 sales in Americas up +5% with negative impacts of energy pass-through and currency offset by positive acquisitions. APAC was -5% lower driven by currency (-3%) and energy pass-through (-2%). Europe reported sales were down -4% with currency  -5% and energy cost -1% impact.



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Linde plc - Business Profile by Region

  • Total
  • Americas
  • APAC
  • EMEA
,Total,Americas,APAC,EMEA Onsites,22.3%,25.2%,35.2%,21.6% Liquid Bulk,25.0%,26.6%,35.4%,27.6% Packaged,36.1%,47.3%,26.6%,50.7% Other,17.1%,0.9%,2.8%,0.1%
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New Linde plc business split YTD indicates around 36% of group sales are represented by packaged gases, around 25% in each of liquid bulk and onsites with over 15% of sales in other businesses, primarily engineering.

The Americas and EMEA geographic gases businesses have broadly similar business mixes with packaged gases substantially the largest business in both regions, while the APAC region shows highest share (37% ) in onsites.



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Linde + Praxair Gases Underlying Growth Drivers

%change YoY
  • Total underling Growth
  • Volume
  • Price
,Total underling Growth,Volume,Price 2014 Q1,2.9%,2.0%,0.9% 2014 Q2,2.2%,1.7%,0.5% 2014 Q3,4.0%,2.8%,1.2% 2014 Q4,1.3%,0.8%,0.5% 2015 Q1,1.0%,1.5%,-0.5% 2015 Q2,2.3%,2.3%,0.0% 2015 Q3,1.8%,1.7%,0.1% 2015 Q4,1.7%,1.5%,0.2% 2016 Q1,1.7%,1.9%,-0.2% 2016 Q2,-0.5%,0.1%,-0.5% 2016 Q3,-2.2%,-1.9%,-0.3% 2016 Q4,2.4%,2.5%,-0.1% 2017 Q1,1.7%,3.0%,-1.3% 2017 Q2,0.7%,2.6%,-2.0% 2017 Q3,1.6%,3.0%,-1.4% 2017 Q4,1.6%,3.1%,-1.5% 2018 Q1,2.5%,2.5%,0.0% 2018 Q2,4.5%,3.5%,1.0% 2018 Q3,5.4%,4.2%,1.2% 2018 Q4,4.7%,3.2%,1.5% 2019 Q1,4.3%,2.6%,1.7% 2019 Q2,3.4%,0.9%,2.5% 2019 Q3,2.9%,0.7%,2.2%
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Reported gas sales on a pro forma basis have again remained broadly flat YoY on a pro forma basis in Q3 despite a significant negative impact (-2½%) from currency and energy pass-through   (-1%) only partly offset be a small positive net impact from  acquisitions (+1%), primarily in N.America.

Underlying growth in gases sales slowed to nearly +3% YoY in Q3 – above the average of the last 5 years for the combined performance of old Linde plus old Praxair although below performance through 2018.

Contribution from pricing as again over +2% YoY while the volume impact slowed further towards +½%, its lowest contribution since mid-2016.

Helium pricing contributed a quarter of the overall pricing impact.



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Americas Underlying Growth % growth vs Previous year

%change YoY
  • New Linde plc Volume
  • New Linde plc Total
  • Praxair Volume
  • Praxair Total
  • Linde Total
,New Linde plc Volume,New Linde plc Total,Praxair Volume,Praxair Total,Linde Total 2014 Q1,null,null,3.6%,5.1%,5.1% 2014 Q2,null,null,3.0%,5.0%,5.0% 2014 Q3,null,null,1.4%,2.0%,2.0% 2014 Q4,null,null,1.6%,2.0%,2.0% 2015 Q1,null,null,-0.2%,1.0%,1.0% 2015 Q2,null,null,-2.4%,-1.0%,-1.0% 2015 Q3,null,null,-4.0%,-3.0%,-3.0% 2015 Q4,null,null,-4.4%,-3.0%,-3.0% 2016 Q1,null,null,-4.4%,-4.0%,-4.0% 2016 Q2,null,null,-1.4%,-1.0%,-1.0% 2016 Q3,null,null,-0.4%,0.0%,0.0% 2016 Q4,null,null,-1.2%,-2.0%,-2.0% 2017 Q1,null,null,2.4%,4.0%,4.0% 2017 Q2,null,null,0.8%,4.0%,4.0% 2017 Q3,null,null,2.8%,4.0%,4.0% 2017 Q4,null,null,7.0%,9.0%,9.0% 2018 Q1,null,null,3.4%,6.0%,6.0% 2018 Q2,null,null,4.0%,6.0%,6.0% 2018 Q3,null,null,3.8%,7.0%,7.0% 2018 Q4,null,null,1.8%,2.6%,2.6% 2019 Q1,3.0%,5.0%,null,null,null 2019 Q2,1.0%,4.0%,null,null,null 2019 Q3,2.0%,5.0%,null,null,null
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Americas underlying growth in 2019 for Linde plc on a pro forma basis remains similar to that of old Praxair through 2017/8 – Q3 saw a modest acceleration in volume growth combined with continued price impact of +2½%.

Volume weakness due to continued softness in manufacturing and metals while healthcare and food & drink was stronger.

Lower US packaged gases volumes (both gases and hardgoods).



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EMEA Underlying Growth % growth vs Previous year

%change YoY
  • New Linde plc Volume
  • New Linde plc Total
  • Praxair Volume
  • Praxair Total
  • Linde Total
,New Linde plc Volume,New Linde plc Total,Praxair Volume,Praxair Total,Linde Total 2014 Q1,null,null,1.0%,2.0%,1.2% 2014 Q2,null,null,0.0%,1.0%,-0.2% 2014 Q3,null,null,1.0%,2.0%,1.4% 2014 Q4,null,null,-1.0%,-1.0%,-2.0% 2015 Q1,null,null,0.0%,1.0%,-1.6% 2015 Q2,null,null,-1.0%,-1.0%,-1.4% 2015 Q3,null,null,3.0%,3.0%,-1.8% 2015 Q4,null,null,3.0%,4.0%,0.0% 2016 Q1,null,null,2.0%,2.0%,-0.2% 2016 Q2,null,null,3.0%,4.0%,-0.2% 2016 Q3,null,null,0.0%,0.0%,-2.0% 2016 Q4,null,null,1.0%,1.0%,2.0% 2017 Q1,null,null,6.0%,6.0%,4.4% 2017 Q2,null,null,4.0%,5.0%,1.4% 2017 Q3,null,null,4.0%,5.0%,2.9% 2017 Q4,null,null,5.0%,5.0%,2.9% 2018 Q1,null,null,2.0%,3.0%,3.0% 2018 Q2,null,null,2.0%,5.0%,5.4% 2018 Q3,null,null,1.0%,4.0%,3.3% 2018 Q4,null,null,-1.0%,0.0%,null 2019 Q1,0.0%,1.0%,null,null,null 2019 Q2,-1.0%,1.0%,null,null,null 2019 Q3,0.0%,2.0%,null,null,null
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Europe/M.East/Africa underlying growth in 2019 for Linde plc on a pro forma basis has been modest and below the performance of both Linde and Praxair prior to the merger.

Volume impact was flat in Q3, appearing to continue the weakness seen since early 2018 reflecting the sluggish economic environment - while pricing impact continues at around +2%.

Weakness in Germany and UK, particularly in metals and manufacturing.



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Asia Pacific Underlying Growth % growth vs Previous year

%change YoY
  • New Linde plc Volume
  • New Linde plc Total
  • Praxair Volume
  • Praxair Total
  • Linde Total
,New Linde plc Volume,New Linde plc Total,Praxair Volume,Praxair Total,Linde Total 2014 Q1,null,null,9.0%,11.0%,4.6% 2014 Q2,null,null,5.0%,6.0%,6.2% 2014 Q3,null,null,10.0%,11.0%,5.4% 2014 Q4,null,null,5.0%,6.0%,2.6% 2015 Q1,null,null,1.0%,1.0%,0.0% 2015 Q2,null,null,1.0%,1.0%,-0.8% 2015 Q3,null,null,5.0%,6.0%,-2.5% 2015 Q4,null,null,4.0%,4.0%,-1.1% 2016 Q1,null,null,6.0%,5.0%,3.5% 2016 Q2,null,null,6.0%,5.0%,-0.5% 2016 Q3,null,null,2.0%,1.0%,0.3% 2016 Q4,null,null,6.0%,5.0%,3.9% 2017 Q1,null,null,9.0%,8.0%,4.9% 2017 Q2,null,null,10.0%,11.0%,5.7% 2017 Q3,null,null,13.0%,15.0%,8.3% 2017 Q4,null,null,11.0%,14.0%,7.9% 2018 Q1,null,null,11.0%,14.0%,4.6% 2018 Q2,null,null,11.0%,14.0%,4.0% 2018 Q3,null,null,7.0%,9.0%,6.7% 2018 Q4,null,null,7.0%,7.0%,null 2019 Q1,5.0%,7.0%,null,null,null 2019 Q2,3.0%,5.0%,null,null,null 2019 Q3,-1.0%,0.0%,null,null,null
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Asia Pacific underlying growth of Linde plc has slowed significantly through 2019 on a pro forma basis and was flat YoY in Q3.

Volume impact turned negative YoY in Q3, probably the weakest performance of the Linde/Praxair businesses since mid-2016 while pricing impact slowed to around +1%.

Weaker volumes despite positive project contribution – indicates base business volumes lower. Weakness in China and Australia.

Divestment of part of former Praxair’s assets in India was completed during Q3 following the sale of much of the Linde gases business in S.Korea in the previous quarter. These businesses were not included in the proforma results of Linde plc.



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Linde plc - New profit profile

$m Operating Income YTD 2019
  • Americas gases
  • EMEA gases
  • APAC gases
  • Engineering
  • Other
,Americas gases,EMEA gases,APAC gases,Engineering,Other ,1901,884,1014,297,-172
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Americas gases is the major source of profits for Linde plc accounting for nearly half of group operating income with APAC and EMEA each around a quarter.

Gases operating income at $1.31Bn in Q3 was up by over +10% YoY on a pro forma basis. Operating Income growth in the Americas was up +8% while APAC was up by +20% but Europe matched overall growth.

Group operating income and margin boosted by continued margin improvement in Engineering (+780bp YoY).



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Linde plc - New operating margin profile

% OROS YTD
  • Americas gases
  • EMEA gases
  • APAC gases
  • Engineering
,Americas gases,EMEA gases,APAC gases,Engineering ,23.0%,20.2%,20.3%,14.6%
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Highest margin regionally in Americas at around 22½%  while Europe and Asia Pacific are both around 20%.

Profitability of the Engineering business has significantly improved since the previous year.



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Americas Operating Margin

%change YoY
  • New Linde plc pro forma
  • Old Praxair
  • Old Linde
,New Linde plc pro forma,Old Praxair,Old Linde 2014 Q1,null,23.7%,12.5% 2014 Q2,null,23.9%,11.0% 2014 Q3,null,24.7%,11.6% 2014 Q4,null,23.9%,12.9% 2015 Q1,null,24.4%,13.9% 2015 Q2,null,25.1%,13.5% 2015 Q3,null,25.2%,14.3% 2015 Q4,null,26.8%,12.9% 2016 Q1,null,24.3%,13.4% 2016 Q2,null,24.3%,13.8% 2016 Q3,null,23.8%,11.1% 2016 Q4,null,24.2%,15.9% 2017 Q1,null,22.2%,12.4% 2017 Q2,null,23.5%,11.8% 2017 Q3,null,23.7%,11.6% 2017 Q4,null,23.9%,11.8% 2018 Q1,22.3%,23.9%,12.8% 2018 Q2,23.7%,25.1%,16.9% 2018 Q3,23.7%,24.6%,14.4% 2018 Q4,null,24.0%,null 2019 Q1,21.6%,null,null 2019 Q2,23.2%,null,null 2019 Q3,24.2%,null,null
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Operating Margin in the Americas rose to over 24% in Q3, similar to the historic performance of Praxair in this region – much of the former Linde business in the region has been divested, dampening the impact on the new regions performance.

On a pro forma basis margin in Americas has been improving sequentially and was marginally up YoY in Q3.



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EMEA Operating Margin

%change YoY
  • New Linde plc pro forma
  • Old Praxair
  • Old Linde
,New Linde plc pro forma,Old Praxair,Old Linde 2014 Q1,null,19.9%,18.3% 2014 Q2,null,19.1%,19.5% 2014 Q3,null,18.4%,18.9% 2014 Q4,null,17.7%,17.2% 2015 Q1,null,19.0%,18.5% 2015 Q2,null,19.0%,19.6% 2015 Q3,null,18.6%,17.5% 2015 Q4,null,19.1%,17.7% 2016 Q1,null,19.4%,18.6% 2016 Q2,null,19.2%,19.8% 2016 Q3,null,19.7%,18.2% 2016 Q4,null,20.2%,17.3% 2017 Q1,null,18.8%,19.1% 2017 Q2,null,19.3%,19.3% 2017 Q3,null,19.4%,20.1% 2017 Q4,null,19.7%,20.5% 2018 Q1,21.3%,18.7%,23.1% 2018 Q2,19.9%,19.6%,18.3% 2018 Q3,18.2%,19.1%,16.8% 2018 Q4,null,23.1%,null 2019 Q1,20.6%,null,null 2019 Q2,19.8%,null,null 2019 Q3,20.5%,null,null
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Operating Margin in the EMEA region at over 20% in Q3 of 2019 is marginally above the historic performance of the old Linde and Praxair businesses in this geography.

Margin recovered sequentially and was significantly above the prior year on a pro forma basis when returns were on a declining trend.

Much of the former Praxair business in the region had to be divested although there has been little difference in the overall profit performance between the two businesses in recent years until late-2018.



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Asia Pacific Operating Margin

%change YoY
  • New Linde plc pro forma
  • Old Praxair
  • Old Linde
,New Linde plc pro forma,Old Praxair,Old Linde 2014 Q1,null,19.1%,12.0% 2014 Q2,null,19.3%,13.4% 2014 Q3,null,17.6%,12.1% 2014 Q4,null,18.9%,13.1% 2015 Q1,null,18.6%,10.4% 2015 Q2,null,17.8%,12.8% 2015 Q3,null,19.5%,11.7% 2015 Q4,null,18.6%,11.0% 2016 Q1,null,16.8%,12.2% 2016 Q2,null,17.0%,12.2% 2016 Q3,null,17.4%,13.3% 2016 Q4,null,19.7%,13.1% 2017 Q1,null,19.0%,11.5% 2017 Q2,null,19.0%,12.8% 2017 Q3,null,19.5%,14.4% 2017 Q4,null,19.1%,11.9% 2018 Q1,17.7%,21.8%,15.0% 2018 Q2,17.9%,21.3%,16.7% 2018 Q3,16.6%,22.6%,17.3% 2018 Q4,null,23.2%,null 2019 Q1,19.1%,null,null 2019 Q2,20.4%,null,null 2019 Q3,21.1%,null,null
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Operating Margin in Asia Pacific rose sequentially to over 21% in Q3.

On a pro forma basis operating margin is up by 450 bp YoY – strong operating leverage due to pricing and synergies.

This performance sits between that of Praxair and Linde historically.

This region’s performance has been impacted by the required divestment of several businesses, particularly significant parts of Linde S.Korea and Praxair in India.



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Linde plc - Capital Expenditure

$M
  • Old Praxair
  • Old Linde
  • New Linde
,Old Praxair,Old Linde,New Linde 2013 Q1,447,640,null 2013 Q2,501,687,null 2013 Q3,495,799,null 2013 Q4,495,907,null 2014 Q1,377,542,null 2014 Q2,369,564,null 2014 Q3,413,564,null 2014 Q4,463,821,null 2015 Q1,381,320,null 2015 Q2,338,494,null 2015 Q3,389,526,null 2015 Q4,372,758,null 2016 Q1,310,330,null 2016 Q2,343,444,null 2016 Q3,361,457,null 2016 Q4,393,607,null 2017 Q1,314,386,null 2017 Q2,312,399,null 2017 Q3,307,470,null 2017 Q4,325,736,null 2018 Q1,312,425,null 2018 Q2,337,535,null 2018 Q3,365,470,null 2018 Q4,437,696,null 2019 Q1,null,null,843 2019 Q2,null,null,865 2019 Q3,null,null,959
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Linde capital expenditure is running at nearly $960m in Q3 of 2019 – up +11% sequentially and higher than the combined spend of the former Praxair and Linde businesses in the prior year.

Base capex continues to run at around $450m p.a. – the increase in capex is driven by higher project spend.

Sale of gas backlog increased further to $4.8Bn – over 60% in APAC and 30% in Americas.

Continue to expect capex synergies of $200m pa out of the merger.

Acquisition spending was minimal in Q3 but significant funds flowed in from divestments (around $270m) including completion of the sale of certain Indian assets in Q3.



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Linde plc - Capex-Sales ratio

%change YoY
  • Old Praxair
  • Old Linde
  • New Linde
,Old Praxair,Old Linde,New Linde 2013 Q1,16.4%,12.9%,null 2013 Q2,17.6%,13.6%,null 2013 Q3,17.4%,17.3%,null 2013 Q4,17.4%,19.3%,null 2014 Q1,13.2%,11.8%,null 2014 Q2,12.5%,11.9%,null 2014 Q3,13.9%,11.9%,null 2014 Q4,16.4%,18.4%,null 2015 Q1,14.7%,7.7%,null 2015 Q2,13.1%,11.2%,null 2015 Q3,15.3%,12.4%,null 2015 Q4,15.2%,18.2%,null 2016 Q1,13.1%,8.3%,null 2016 Q2,13.6%,10.6%,null 2016 Q3,14.1%,11.1%,null 2016 Q4,15.7%,14.5%,null 2017 Q1,12.2%,9.5%,null 2017 Q2,11.6%,9.6%,null 2017 Q3,11.1%,10.9%,null 2017 Q4,11.6%,16.7%,null 2018 Q1,11.0%,9.9%,null 2018 Q2,11.7%,12.2%,null 2018 Q3,12.8%,10.9%,null 2018 Q4,15.8%,15.4%,null 2019 Q1,null,null,14.5% 2019 Q2,null,null,14.6% 2019 Q3,null,null,16.3%
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Capex to sales ratio moved back above 16% - higher than the trend for the combined businesses over the previous three years.

This ratio is above that of the average of Tier 1 companies.



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