“Linde employees delivered strong financial results” said CEO Steve Angel as the Irish-domiciled company today released its second quarter 2019 results.

Linde plc reported second-quarter income from continuing operations of $513m.

Excluding Linde AG purchase accounting impacts and other changes, adjusted pro forma income from continuing operations was $1bn, up 11% versus prior year adjusted pro forma and 8% sequentially.

Linde’s sales for the second quarter were $7.2bn. Pro forma sales were $7.18bn, in line with the prior year.

Excluding unfavourable currency translation effects, sales increased 4% driven by volume and price each growing 2%.

Volume growth was evenly split between base business and project startups while price improved across all geographic segments.

Sales sequentially increased 4% driven by 4% higher volumes and 1% price, partially offset by 1% currency headwind.

Second quarter reported operating profit of $669m was 3% below the prior-year quarter, primarily due to the impact of purchase accounting.

On an adjusted pro forma basis, operating profit of $1.32bn was 6% above prior year or 10% when excluding unfavourable currency.

During the second quarter, the company paid $474m of dividends and repurchased $498m of stock, net of issuance.

Commenting on the financial results, CEO Steve Angel said, “Linde employees delivered strong financial results by improving operating profit margins to drive 12% EPS growth and securing a record project backlog of $4.7bn.”

“As we look towards the remainder of the year, I’m confident we will deliver on our commitments to create shareholder value irrespective of the economic environment.”

Segments

Americas sales of $2.78bn were 4% higher versus prior-year quarter and 3% higher sequentially.

Compared with the first quarter of 2019, volume and price increased 3% and 1% respectively, while currency was unfavourable by 1%. Operating profit of $646m was 23.2% of sales.

APAC (Asia Pacific) sales of $1.49bn decreased 2% from prior year but increased 4% sequentially.

Excluding negative currency, sales grew 4% versus the prior year and 5% sequentially.

Sequentially, price improved 1% and volumes increased 4% primarily driven by seasonal effects in Australia and China.

Operating profit of $304m was 20.4% of sales.

EMEA (Europe, Middle East & Africa) sales of $1.67bn were up 1% versus both the prior year and sequentially excluding unfavourable currency.

Compared with the first quarter of 2019, volume increased 1% and price was flat. Operating profit of $332m was 19.8% of sales.

Linde Engineering sales were $752m and operating profit was $99m or 13.2% of sales. Operating profit grew 27% versus prior year and sequentially due to strong project execution and cost management.

Rob Cockerill - BW v1

Promising indicators

Analysis by Rob Cockerill, Global Managing Editor

On the face of it, and by my admittedly humble financial analysis, this looks to be a good set of results for the still-new Linde plc as we continue to follow its post-merger performance.

These first quarters of the merged Praxair-Linde operations are naturally going to be filled with various admin and accounting impacts, while a relatively uncertain economic environment globally is undoubtedly a factor across the industry.

Currency headwinds or ‘unfavourable currency impacts’ is terminology often found throughout the Tier One financial releases and this is no different. We can perhaps expect more of this towards the back of 2019 and into 2020 as a result of the ripples of Brexit and trade tariffs on the global economy.

What we can see here in these results from Linde plc are some very promising indicators. Adjusted pro forma net income from continuing operations was up 11% versus the prior year, and 8% sequentially. Sales rose 2% on volume and 2% on pricing over the prior year, excluding those unfavourable currency effects. And the company describes securing ‘a record project backlog of $4.7bn’ which affirms its future business. All of these are solid if not strong fundamentals.

We can also see strong performances in the operating profit of each of the group’s three key regions. An operating profit margin of at least 20% is considered desirable, and we can see that Linde’s operating profit of 23.2% of sales in the Americas and 20.4% of sales in the Asia-Pacific regions comfortably exceed that. In the EMEA (Europe, Middle East and Africa) region, operating margin stood at 19.8% of sales, which was down both year-on-year and sequentially but still solid. So despite economic headwinds, performance is strong for the group.