Financial Dashboard Q3’20 - Linde
Dashboards
- Performance vs combined Linde + Praxair
- Margin vs combined Linde + Praxair
- Gases Revenue Growth Drivers
- Gases Underlying Growth Drivers
- Americas Underlying Growth
- EMEA Underlying Growth
- Asia Pacific Underlying Growth
- Total Sales by Business
- Americas Sales by Business
- Europe Sales by Business
- Asia Pacific Sales by Business
- Profit Profile
- Americas Operating Margin
- EMEA Operating Margin
- Asia Pacific Operating Margin
- Capital Expenditure
- Capex/Sales ratio
Performance vs combined Linde + Praxair
- Corporate Sales
- Corporate Operating Income
- Pro forma Sales
- Pro forma Operating Income
• Q3 group sales at $6.85Bn were up +7½% sequentially to be down -2% lower YoY (on a reported basis)
• Group Operating Income at $1.52Bn was up strongly sequentially and was up +9½% YoY – driven by broad based price improvement and continued progress on productivity
• Operating Cash Flow again increased sequentially by +1% and +9% YoY
• Gases regions represent 84% of global sales while Engineering accounts for 10%. ‘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
Margin vs combined Linde + Praxair
- Old Linde + Praxair margin
- New Linde plc margin
• Group Operating Margin rose to over 22% in Q3 and continued its upward trend to a new peak and compares with an average of around 16% for the combined Linde and Praxair over the pre-merger years
• Cost reduction and other charges were nearly $50m in Q3, over half of which in EMEA. Group SG&A costs were again down significantly at -10% YoY
• R&D costs remained at around 0.5% of sales
• Reported After tax ROC up sequentially to nearly 13% up 160bp YoY
Gases Revenue Growth Drivers
- Reported Growth
- Natural Gas
- Currency
- Acquisition/Divest
- Underlying Growth
• Reported gas sales were deteriorated again to be down nearly -2% YoY in Q2
• Negative impacts of nearly -1% from currency (with a negative impact in Americas almost offset by positive contributions in Asia Pacific and Europe) was matched by a similar negative impact from net acquisitions/divestments (in Europe and Americas)
• Energy cost pass-through impact was flat in all three geographies
Gases Underlying Growth Drivers
- Total Underlying Growth
- Volume
- Price
• The YoY decline in underlying growth in gases sales slowed sharply in Q3 to be down less than –½% – reflecting reduced global economic impacts of Covid
• Volume impact remained significantly negative YoY at -2½% while pricing was again over +2% YoY, close to its highest rate in recent years
• ‘Other business’ including some global gases businesses down -12% in Q3
• Americas accounts for nearly half of global gas sales with around a quarter each from EMEA and Asia Pacific
Americas Underlying Growth
- Linde Total
- Praxair Total
- Praxair volume
- New Linde plc Total
- New Linde plc volume
• USA accounts for over 70% ($6.8Bn) of Americas sales with Brazil, Mexico and Canada each around 7-10% (over $700m)
• Q3 saw a recovery in Americas underlying growth to be marginally positive at +½% driven by a volume fall of -2% (despite +8% sequentially) offset by a positive price/mix impact again at +2%
• Metals and manufacturing (15% and 11% of region sales respectively versus 33% in Healthcare and 20% in Chemicals & Refining) were again the most significant markets in terms of volume declines YoY
EMEA Underlying Growth
- Linde Total
- Praxair Total
- Praxair volume
- New Linde plc Total
- New Linde plc volume
• Within Europe/M.East/Africa, Germany accounts for over 20% ($1.2Bn) of region sales with UK and Eastern Europe each around 12-16% (over $700m) with Rest of Europe sales of $2.4Bn and M.East/Africa nearly $500m
• EMEA underlying growth remained negative YoY but narrowed to -1% although up +5% sequentially
• Volume contribution was again negative at -4% in Q3 - while positive pricing impact rose again to +3%
• Lower volumes across all markets except healthcare and electronics (17% and 2% of region sales respectively)
Asia Pacific Underlying Growth
- Linde Total
- Praxair Total
- Praxair volume
- New Linde plc Total
- New Linde plc volume
• China & Taiwan sales (combined $1.9Bn) account for 40% of Asia Pacific sales followed by Australia (over $900m), S.Korea and India (each nearly $500m). Electronics market accounts for 25% of sales in this region – higher than other regions
• Asia Pacific underlying growth flat YoY in Q3 but up +10% sequentially
• Negative volume impact reduced to -1% YoY and offset by pricing/mix impact again at +1% in Q3
• Volume growth seen in two largest markets in Electronics (25% of region sales) and Chemicals & Refining (21%) offset by Manufacturing market (17%)
Total Sales by Business
- Total
- Onsites
- All Merchant
- Liquid Bulk
- Packaged
• Over 40% of Linde plc global gas sales are in packaged gases with nearly 30% in liquid bulk (giving total combined merchant sales of over 70%) and over a quarter in onsites
• Fall in reported global onsite sales YoY reduced to -2% YoY in Q3 – driven by volumes with cost pass-through impact appearing to be relatively flat
• Merchant (Spiritus definition) saw reduced downturn in Q3 at just over -2% YoY with both liquid bulk and packaged gases showing similar falls
Americas Sales by Business
- Americas
- Onsites
- All Merchant
- Liquid Bulk
- Packaged
• Nearly half of Linde plc Americas gas sales are in packaged gases with nearly 30% in liquid bulk (giving total combined merchant sales of nearly 75%) and a quarter in onsites
• Within merchant (Spiritus definition) both liquid bulk and packaged gases showed similar sales declines of nearly -3% in Q3
• With pricing up by +2-3% this implies merchant volume declines down -5-6% in this region
• Sharp fall in reported onsite sales (-8% YoY) in Q3 driven by negative volumes
Europe Sales by Business
- Europe
- Onsites
- All Merchant
- Liquid Bulk
- Packaged
• Around half of Linde plc European gas sales are in packaged gases with nearly 30% in liquid bulk (giving total combined merchant sales of nearly 80%) compared with only marginally over 20% in onsites
• Within merchant (Spiritus definition) bulk sales down by –½% and packaged gases by -2% in Q3
• With merchant pricing up +3-4% higher YoY in Q3 this implies continued significant weakness in merchant volumes
• Fall in reported onsite sales reduced to over -3% YoY in Q3 – primarily driven by lower volumes
Asia Pacific Sales by Business
- AsiaPacific
- Onsites
- All Merchant
- Liquid Bulk
- Packaged
• Around 35% of Linde plc Asia Pacific gas sales are in onsites with a similar proportion in liquid bulk and close to a quarter in packaged gases (giving total combined merchant sales of slightly over 60%)
• Significant return to growth seen in Q3 in reported sales in all major businesses for this region
• Driven by return to solid growth in onsites at +6% YoY indicating continued higher volumes
• Within merchant (Spiritus definition) significant recovery seen in packaged gases at over +3% combined with marginal turnaround in liquid bulk at +½%. With merchant pricing up more than +3% it appears that volumes were flat or lower YoY in Q3
• Total sales growth for the region is lower than combined onsites and merchant due to a sharp decline in the small business in ‘other’ gases
Profit Profile
- Americas gases
- EMEA gases
- APAC gases
- Engineering
- Other
• 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 $1.45Bn in Q3 was up +10% YoY - all three geographic regions in gases showed YoY growth in operating Income around this overall global rate. Engineering showed an underling decline of -10% driven by project and productivity performance
• Group operating margin in Q3 rose to over 22% with regional Gases businesses reporting a combined margin over 25% – both of these are up by over 200bp YoY. Engineering margin slipped back sequentially and YoY towards 15% in Q3
Americas Operating Margin
- Old Praxair
- Old Linde
- New Linde plc pro forma
• Operating Margin in the Americas rose again to over 28% in Q3, exceeding the historic peak performance of Praxair in this region in 2015 – an increase of around 400bp YoY
• Highest performing regional gas business for Linde plc
• Margin expansion again led by pricing and productivity initiatives
• Much of the former Linde business in the region has been divested, dampening its adverse impact on the combined region’s performance
EMEA Operating Margin
- Old Praxair
- Old Linde
- New Linde plc pro forma
• Operating Margin in the EMEA region returned to its rising trend in Q3 approaching 23%, similar to Linde AG’s previous peak
• Much of the former Praxair business in the region has been divested although there had been little difference in the overall profit performance between the two businesses historically until late-2018
Asia Pacific Operating Margin
- Old Praxair
- Old Linde
- New Linde plc pro forma
• Operating Margin in Asia Pacific continued its trend sequentially at over 22½% in Q3 and was up over 150bp YoY
• This performance is similar to the peak of Praxair historically in this region and above that of Linde AG
• Region performance includes the impact of required divestments of several businesses, particularly significant parts of Linde S.Korea and Praxair in India
Capital Expenditure
- Old Praxair
- Old Linde
• Linde capital expenditure remains at around $800m, its lowest level since the merger – however this broadly reflects project timing profiles
• Project capex was flat sequentially at over $330m in Q3 and was down by a third YoY – in contrast base capex (mainly support equipment and smaller projects) was marginally up YoY at over $450m
• Sale of gas (Onsites) backlog rose slightly to $3.7Bn – over 70% in APAC and over 20% in Americas while nearly 60% is for refining, 20% for electronics and 10% for chemicals. Sale of Equipment backlog also fell again marginally to $4.9Bn maintaining a total backlog of around $9.5Bn. SOE order intake also rose sequentially towards $500m but was substantially down YoY due to project timing and mix
• Capex forecast range for CY2020 lowered/narrowed at $3.0-3.2Bn
• Started up 5 new plants in Q3 and also signed 4 new projects
• Signed long term agreement for UHP gas supply for Samsung’s new semiconductor facilities in Pyeongtaek, S.Korea
Capex/Sales ratio
- Old Praxair
- Old Linde
• Capex to sales ratio moved back below 15% - above the trend for the combined businesses over the previous five years
• This ratio appears close to the underlying average of Tier 1 companies
• Healthy pipeline of potential opportunities for decaps (acquisition of customer owned tonnage plants) as competitors also indicate. Continuing to look at further packaged gases and healthcare acquisitions – larger acquisitions delayed by Covid
• Continues to look at JVs and divesting some smaller country positions as part of portfolio management
• Significant interest in long term H2/energy opportunities but indicates economics need to change significantly before opportunity fully impacts – H2 for mobility most realistic near term opportunity
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