Despite first quarter earnings showing a decline in sales and profit, The Linde Group claims it is relatively stable and will continue with its prudent approach.
The technology group saw relatively steady trends in the first quarter of the 2009 financial year against the background of a significant weakening in the global economy.
After adjusting for exchange rates in every case, group sales were down by 5.3% to €2.695bn, compared to the previous year Q1 period.
In the Gases Division, sales in the first quarter fell by 3.5% to €2.157bn; on a comparable basis, i.e. if changes in the price of natural gas and changes in group structure are also taken into account, the fall in sales was 4.4%.
Group operating profit declined by 7.3% compared to the previous year’s Q1 period, although it has been noted that if the cost of capacity adjustments had not been charged to income, group profit would be a mere 3.8% lower than 2008.
The operating profit of the Gases Division for the three months ended 31 March 2009 was €546m, 3.2% below the previous year figure.
Earnings before taxes on income (EBT) of €170m were lower than the figure for the comparable previous year period of €239m; the reasons for the decrease include the restructuring costs of €20m incurred in 2009 and the gains on disposal of businesses of €15m achieved in the first quarter of 2008.
Earnings after tax were €128m, in 2008 they were €172m; earnings attributable to Linde AG shareholders were €115m, €45m lower than in the previous year, giving earnings per share of €0.68 compared to €0.96 in 2008.
It was noted account should be taken here too, when comparing the figures for the first quarters of 2009 and 2008, of the restructuring costs charged in 2009 and the gains on disposal of businesses recognised in 2008.
On an adjusted basis (after adjusting for the impacts of the purchase price allocation on the acquisition of BOC as well as profits on disposal), earnings per share in the first quarter of 2009 stood at €0.99, this figure in 2008 was €1.29.
In this figure, the restructuring costs booked in the first quarter are still included, cash flow from operating activities rose by 22.3 percent from €337m in the first quarter of 2008 to €412m in the first quarter of 2009; this was mainly due to improvements in working capital management.
“We are still comparatively stable, despite the fact that also we are being affected by substantial falls in demand,$quot; said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG.
$quot;There is currently no evidence to suggest a swift recovery. It is therefore our responsibility as entrepreneurs to do everything we can to survive this difficult economic phase relatively unscathed.”
Linde's overall aim is to achieve cost reductions of between €650m and €800m over the next four years as a result of its optimisation programme.
“We will accelerate the implementation of our integrated programme for sustainable process optimisation and increased productivity. In certain areas and regions this is combined with capacity adjustments, for example through process and organisational improvements such as an overall consolidation of functions,” Reitzle added.
“The cost of these measures in the first quarter was €20m. We will continue to adopt a prudent approach and will apply an additional amount of around €50m to sustainable efficiency improvements in the coming months.$quot;
Linde is continuing to examine various scenarios in its corporate planning for the rest of the 2009 financial year against the background of the uncertainty attached to future global economic development.
$quot;Sales and earnings trends cannot be determined before the second half of the year,$quot; explained Reitzle.
$quot;Seen from today's standpoint, we need to anticipate a decline. Our positive scenario, Group sales and earnings on the same level as in 2008 has become less likely in the light of the further deterioration of the economic outlook.$quot;
In terms of the group’s Gases Division, it claims the current weakness in demand has not caused it to change its original target in any way, and it will endeavour to grow at a more rapid pace than the market, continuing to improve its productivity.