Linde CEO Steve Angel has a confident business outlook despite an uncertain environment as the industrial gas giant publishes its third quarter (Q3) results today (5th Nov).
“Linde employees once again delivered a strong quarter with operating profit margins expanding 230 basis points and EPS growing 11%, reaching a record of $2.15,” Angel said.
“This high level of profitability combined with disciplined capital management resulted in further expansion of our ROC to approximately 13%.”
Angel added, “Looking ahead, there is significant uncertainty in the environment, but regardless of the underlying economy, I have confidence in our business model and high-performance culture to continue growing earnings and cash flow for years to come.”
Linde reported Q3 2020 income from continuing operations of $699m and diluted earnings per share of $1.32. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1.14bn, up 8% versus prior year and 13% sequentially.
Linde’s sales for the third quarter were $6.85bn, 2% below prior year and up 7% sequentially. Compared to prior year, excluding the impacts of foreign currency, cost pass-through and divestitures, underlying sales decreased 1%, as 2% price attainment was more than offset by 3% lower volumes, Linde said.
Sequentially, industrial gas volumes increased 6% but were partially offset by a 3% decrease in Engineering sales. Higher pricing of 1% was driven by increases across all geographic segments.
Q3 operating profit was $969m. Adjusted operating profit of $1.51bn was up 9% versus prior year led by prudent price and cost management underpinned by the stable fixed payment revenue structure, Linde said.
Adjusted operating margin of 22.1%, expanded 230 basis points versus prior year and 140 basis points sequentially.
Q3 operating cash flow of $1.88bn increased 1% versus prior year and 7% sequentially. After capital expenditures of $787m, free cash flow was $1.1bn, up 20% versus prior year.
Americas sales of $2,64bn were 5% below prior-year quarter, but increased 9% sequentially. Compared with Q3 2019, Linde said underlying sales were flat as 2% higher pricing was offset by a 2% volume decline.
Sequentially, pricing increased 1% and volumes grew 8%, led by higher demand across all end markets.
Operating profit of $742m was 28.1% of sales, up 390 basis points versus prior year and 240 basis points sequentially.
APAC (Asia Pacific) sales of $1.48bn were 2% above prior year and up 15% sequentially. Compared to the prior year, Linde said underlying sales were flat as 1% price attainment was offset by 1% volume decline.
Sequentially, price increased 1% and volumes grew 10% led by higher demand, primarily in China and India.
Operating profit of $337m was 22.7% of sales, up 160 basis points versus prior year and steady sequentially.
EMEA (Europe, Middle East & Africa) sales of $1.62bn were down 1% versus prior year, but grew 12% sequentially. Compared with Q3 2019, underlying sales were down 1% as 3% higher pricing was more than offset by a 4% decline in volume, Linde said.
Sequentially, underlying sales grew 7% due to 2% higher pricing and 5% volume growth primarily in the manufacturing, food and beverage end markets.
Operating profit of $370m was 22.8% of sales, up 230 basis points versus prior year and 190 basis points sequentially.
Linde Engineering sales were $678m, 6% higher than prior year, and operating profit was $106m or 15.6% of sales. Order intake for the quarter was $484m and third-party sale of equipment backlog remained steady at $4.9bn.