Praxair, Inc. reported first-quarter net income and diluted earnings per share of $391m and $1.30, respectively.
These results include the impact of a $23m pre-tax charge, or 8 cents of diluted earnings per share, related to currency devaluation in Venezuela. Excluding this charge, adjusted net income and earnings per share were $414m and $1.38, respectively.
Sales in the first quarter were $2,888m, an increase of 2% compared to the prior-year quarter. On a comparable basis, sales grew 4%, excluding foreign currency, cost pass-through and fewer working days. Sales growth was driven by Asia and South America. Growth moderated in North America and weakened further in Europe.
Reported operating profit in the first quarter was $600m. Adjusted operating profit was $623m, 1% below the prior-year quarter. Excluding currency and day count effects, adjusted operating profit rose modestly driven by price, productivity gains and acquisitions. Adjusted operating profit as a percentage of sales was 21.6%.
First-quarter cash flow from operations was $472m and capital spending was $466m, primarily for new production plants under long-term contracts with customers. Acquisition expenditures were $1,098m, related primarily to the acquisition of NuCO2. The company paid dividends of $178m and repurchased $117m of stock, net of issuances. During the quarter, the company issued $400m of 3-year notes at 0.75%, $500m of 5-year notes at 1.2% and $500m of 10-year notes at 2.7%. The after-tax return-on-capital and return on equity for the quarter were 13.3% and 28.1%, respectively.
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “During the first quarter, Praxair saw varied growth rates across our geographic segments. Our Asia business grew sales at double-digit rates in China and Korea, due primarily to project start-ups. Sales in Brazil improved in March driven by manufacturing and construction. North American sales reflect solid underlying fundamentals with some deceleration of the growth rate.”
“For the balance of the year, we expect base volumes to grow modestly given the current uncertainty in the macro-economic environment. Additionally, we will be starting up several large hydrogen projects as well as a number of air separation plants that will contribute to earnings growth.”
For the second quarter of 2013, Praxair expects diluted earnings per share in the range of $1.45 to $1.50.
For the full year of 2013, Praxair expects sales in the area of $12bn. The company expects adjusted diluted earnings per share to be in the range of $5.90 to $6.05. Full-year capital expenditures are expected to be in the range of $1.8 to $2.0bn, and the adjusted effective tax rate is forecasted to remain at about 28%.
Following is additional detail on first-quarter 2013 results by segment.
In North America, first-quarter sales were $1,457m, 4% above the prior-year quarter. Acquisitions of packaged gas distributors and NuCO2, a United States micro-bulk carbon dioxide provider, contributed 3% growth. Base business sales were steady as higher pricing was offset by lower volumes, primarily due to fewer selling days in the quarter. Total sales growth was strongest to energy, manufacturing and food & beverage customers. Operating profit was $358m.
In Europe, first-quarter sales were $370m, down 2% versus the respective 2012 period. Sales were negatively impacted by lower industrial economic activity resulting in lower packaged gases volumes in Spain and Italy. Operating profit was $62m in the quarter, as compared to $68m in the prior-year quarter, primarily due to lower volumes.
In South America, first-quarter sales were $531m. Sales grew 3% from the prior-year quarter, excluding a 10% negative currency impact, primarily due to higher volumes and price. Operating profit was $114m as compared to $115m in the prior-year period due to higher volumes and pricing offset by negative currency translation.
Sales in Asia were $367m in the quarter, up 10% from the prior year driven by volume growth in India, China, Korea and Thailand. Sales growth came primarily from metals and chemicals customers. Operating profit was $63m, as compared to $57m in the prior year, due primarily to higher volumes.
Praxair Surface Technologies had first-quarter sales of $163m as compared to $169m in the prior-year quarter. Sales decreased 4%, primarily from lower sales of industrial and military aviation coatings. Operating profit was $26m as higher price and productivity benefits offset the impact of weaker volumes.