The Linde Group’s 2016 Q1 earnings unveiled today are “stable” according to the industrial gas company, with revenue generally remaining flat across the board, although a slight downward trend rings true throughout.
Dr Wolfgang Büchele, CEO of the German business, delivered a simple message which attempts to smooth over the rough results, saying, “We are able to report a stable start to the year, in line with our forecasts.”
The first quarter results show that overall, group revenue fell by 3.1% to €4.3bn ($4.9bn), compared to the same period last in 2015 when total revenue for the quarter was €4.4bn ($5bn). The corporation attributed this slump to adverse exchange rate effects.
Operating profit also dropped by 1.9% to €991m ($1.1bn), with the main factors for the decline being attributed to adverse exchange rate effects and the under par performance from its Engineering Division. As a result, after adjusting for exchange rate effects, which arose solely on translation, group revenue was just slightly below the figure for the prior-year period, sitting at a 0.3% loss.
“We are able to report a stable start to the year, in line with our forecasts…”
On the other hand, thanks to the corporation’s acquisition of healthcare business American HomePatient in February, the initial impact of price reductions on revenue throughout the sector in North America was offset. As a result of this combined with the changes in price of natural gas, Linde achieved a revenue growth of 5.6%. The acquisition was consolidated in the results as of 1st February 2016.
The company intends for American HomePatient to counter the negative impact of price reductions in the US in the coming fiscal year.
However, in its Asia Pacific segment, the slump continued with revenue falling by 2.5% to €969m ($1bn), but on a comparable basis it actually rose by 3.5%. Generally, the group saw positive revenue growth in Asia, but in the South Pacific, the prevailing weak economic environment in manufacturing and the declining investment in the mining industry have had an adverse effect on Linde’s growth. Stemming from this, the company started to implement appropriate structural and organisational cost-cutting measures during the previous financial year.
Revenue in the Europe, Middle East and Asia (EMEA) segment also continued the downward trend, generating €1.4bn ($1.6bn) at a loss of 4.2%. Growth, or lack of, in this unit, was affected by the previously disclosed insolvency of a customer in the UK, which gasworld understands to have been Sahaviriya Steel Industries (SSI), which suspended its operations in September 2015.
Despite this, Linde’s operating profit rose by 0.6% - a small increase on the figure for the first quarter of 2015 – whilst its operating margin for this quarter also showed a slight increase of 0.03%.
Cash flow also remained strong for the industrial gas corporation, increasing by 19.3% to €883m ($1bn), due to a higher figure for advanced payments received from plant construction customers.
In its gases division, Linde generated revenue of €3.6bn ($4.1bn) – a decrease of 1.4% when compared with the figure for the prior-year period of €3.7bn ($4.2bn)– but its operating profit largely remained stable at just over €1bn ($1.1bn).
Amongst its results, Linde revealed that the order backlog in its engineering division remained solid at €4.2bn ($4.8bn), but due to the persistently low oil price and the resultant faltering demand in plant construction, order intake in the three months up until 31st March 2016 stood at €310m ($351m). Revenue fell by 15% to €568m ($644m) in this division as a result, and as expected.
Looking forward, Linde is seeking to generate revenue in the 2016 financial year after adjusting for exchange rate effects of either equal or 5% higher than the revenue generated in the 2015 financial year.
With regards to its engineering division, the industrial gas establishment is aiming to achieve between €2bn ($2.3bn) and €2.4bn ($2.7bn), therefore achieving an operating margin of around 8%.