The Linde Group has achieved increases in both group revenue and group operating profit in the period from January to June 2017.
Professor Dr. Aldo Belloni, CEO of Linde AG, said, “We are pleased with our performance and will meet our forecast for the full year.”
Group revenue from continuing operations rose in Q1 of 2017 by 4.7% to €8.653bn ($10.128bn), compared with the figure for the first half of 2016 of €8.264bn ($9.672bn). The main factors contributing to this increase were ongoing stable trends in the EMEA and Asia/Pacific segments and higher revenue in the Engineering Division.
Group operating profit from continuing operations rose from €2.036bn ($2.383bn) to €2.123bn ($2.484bn), a 4.3% increase. After adjusting for exchange rate effects, group revenue was 2.8% higher than in the prior-year period. Group operating profit after adjusting for exchange rate effects rose by 2.4%. At 24.5%, the group operating margin was similar to the figure in the first half of 2016 of 24.6%.
During the financial year, Linde is continuing to implement long-term efficiency improvement measures across the group through its Focus and LIFT programmes. By the end of 2017, the LIFT programme is expected to have incurred total costs of around €400m ($468m) which will be classified as special items. Of this total, €116m ($135m) was recognised for the whole of the 2016 financial year and a further amount €134m ($156m) has been recognised in the first half of 2017. Also disclosed as special items are costs of around €27m ($32m) which related to the planned merger with Praxair. The total figure for special items in the first half of 2017 was therefore €161m ($188m) compared to €39m ($46m) in 2016.
Gases division: Revenue continues to increase on a comparable basis
In the Gases Division, Linde generated revenue in the first half of 2017 of €7.572bn ($8.862bn), an increase of 3.3% when compared with figure for the prior year period of €7.327bn ($8.575bn). After adjusting for exchange rate effects and changes in the natural gas price, the growth in revenue was 0.3%. Operating profit was €2.166bn ($2.535bn), which was 3.5% higher than the figure for the first half of 2016 of €2.093bn ($2.449bn). After adjusting for exchange rate effects, operating profit increased by 1.8%. At 28.6%, the operating margin was the same as in the prior-year period.
The company generated revenue of €2.947bn ($3.449bn) in the first six months of 2017, which was 3.0% higher than the figure achieved in the first half of 2016 of €2.861bn (3.348bn). On a comparable basis, revenue rose by 2.9%.
Operating profit was €924m, which was similar to the figure for the first half of 2016 of €928m ($1.086m). The operating margin fell from 32.4% in 2016 to 31.4%. However, the 2016 figures included income from changes to pension plans and profits on disposal of non-current assets totalling €39m ($46m).
Positive trends were to be seen in the EMEA segment in almost all product areas. In the on-site business, where the company supplies gases on-site to major customers, Linde was able to achieve revenue growth in Northern Europe and Middle East and Eastern Europe as a result of plant start-ups. In the liquefied gases and cylinder gas product areas, revenue increased in virtually all regions.
Linde generated revenue in the Asia/ pacific segment in the six months to 30th June 2017 of €2.172bn ($2.542bn), which was 9.9% above the figure for the first six months of 2016 of €1.976bn ($2.412bn). On a comparable basis, revenue increased by 5.3%. At €615m ($720m), operating profit was 19.9% above the figure for the prior year period of €513m ($600m), giving an operating margin of 28.3% compared to 26.0% in 2016. It should be noted that there was a one-off effect from the sale of assets of €70m ($82m), which had a positive impact on the operating margin.
In the Asia/Pacific segment, positive trends were to be seen in all product areas. Solid volume and revenue increases were achieved in particular in the liquefied gases and on-site product areas.
In the Americas segment, revenue decreased by 1.3% in the half of 2017 from €2.578bn ($3.017bn) to €2.545bn ($2.978bn). When compared to the prior-year period, operating profit dropped 3.8% from €625m ($732m) to €627m ($734m). The operating margin was 24.6%. The lower margin in 2017 was also due to higher natural gas prices.
Conditions in the individual countries in South America, especially in Brazil and Venezuela, did not improve in the first half of 2017. The economic situation in the region is characterised by high inflation and low growth rates. Trends in the product areas in South America were positive. However, the growth achieved is from a relatively low base in the prior-year period.
Engineering Division: Margin in-line with expectations
Revenue in the Engineering Division rose in the first half of 2017 by 11.7%, from €1.085bn ($1.270bn) to €1.212bn ($1.420bn). Operating profit also increased from €89m ($104m) in the six months of 2016 to €97m ($114m). The operating margin was 8.0%, this matched the target Linde has set itself for the current financial year.
Despite continuing high levels of competition and the persistently low price of oil and the resulting slack demand in plant construction, there was an increase in order intake in the six months to 30th June 2017 from €718m ($840m) to €1.170bn (1.370bn). The order backlog in the Engineering Division at 30th June 2017 remained solid at €4.223bn ($4.942bn).
“We are pleased with our performance and will meet our forecast for the full year.”
Professor Dr. Aldo Belloni, CEO of Linde AG
The company is expecting to achieve an increase in revenue after adjusting for exchange rate effects in the 2017 financial year of 3%, although the challenging market environment could result in a decrease of up to 3%. After adjusting for exchange rate effects, operating profit in 2017 should be on a par with, or up to 7% higher than the figure achieved in 2016.
In the Gases Division, Linde is aiming to generate currency-adjusted revenue in the 2017 financial year which is up to 3% higher than in 2016. In the Engineering Division, Linde expects to generate revenue in the 2017 financial year of between €2.0bn ($2.3bn) and €2.4bn ($2.8bn) and an operating margin of around 8%.