Praxair, Inc. has reported fourth-quarter net income of $33m and diluted earnings per share of $0.11. These results include transaction costs of $14m after-tax related to the proposed merger with Linde AG and a net income tax charge of $394m related to the US.
The net tax charge was $1.41 of diluted earnings per share. Excluding these two items, adjusted net income was $441m and diluted earnings per share was $1.52, up 9% and 8%, respectively versus prior year.
Praxair’s sales in Q4 were $2,953m, 12% above the prior-year quarter. After adjusting for positive currency translation and cost pass-through, sales grew 8%, driven by price attainment and higher volumes across all geographic segments and end-markets.
Reported operating profit in the fourth quarter was $636m, 6% above the prior-year quarter. Excluding transaction costs, adjusted operating profit was $653m, 9% above prior-year quarter. Reported and adjusted operating profit margins were 21.5% and 22.1%, respectively. EBITDA margin was 32.3% and adjusted EBITDA margin was 32.9%.
The company generated strong Q4 operating cash flow of $836M, 28% of sales. After capital expenditures of $339m, free cash flow was $497m, up 57% over the prior-year quarter. The company paid $226m in dividends and decreased net debt by $247m, sequentially.
For full-year 2017, sales of $11,437m were up 9% above prior year. Diluted earnings per share were $4.32 and on an adjusted basis, diluted earnings per share were $5.85, up 7% versus prior year.
Full-year operating cash flow was $3,041m, or 27% of sales. Free cash flow, defined as operating cash flow less capital expenditures, was $1,730m. The company paid dividends of $901m and reduced net debt by $608m.
Commenting on the financial results, Chairman and CEO Steve Angel said, “We had a strong finish to 2017 with 8% EPS growth and record free cash flow in the fourth quarter. The Praxair team delivered on our strategy by successfully executing the project backlog, winning several new onsite projects, and operating safely and efficiently. We have enhanced our business portfolio by increasing exposure to more resilient end-markets while remaining well positioned for the industrial recovery. All of this was accomplished while making significant progress toward our merger with Linde.”
“Looking ahead to 2018, we will maintain our focus and leverage the cyclical recovery occurring across several core geographies and end-markets,” continued Angel. “I remain confident in our ability to grow our project backlog with new contract wins, especially in Asia and the US Gulf Coast. And recent tax reform should help stimulate new capital investment in the US and thus provide additional growth opportunities in our largest market.”
“In the second half of 2018, I look forward to the completion of the merger between Praxair and Linde, which will bring together our complementary strengths and highly talented people,” Angel concluded.
For first-quarter 2018, Praxair expects diluted earnings per share in the range of $1.53 to $1.58, excluding transaction costs related to the proposed merger. The company’s effective tax rate is estimated to be in the range of 23% to 25%.
Results by segment
In North America, Q4 sales were $1,542m, 9% above the prior-year quarter, excluding currency translation. Sales growth was driven primarily by stronger volumes to the downstream energy, manufacturing and electronics end-markets and higher price. Operating profit was $396m, 10% above the prior-year quarter.
In Europe, Q4 sales were $412m, 17% above the prior-year quarter. Excluding currency and cost pass-through, sales grew 5% from the prior year due to higher volumes, mainly led by the metals, manufacturing and chemicals end-markets. Operating profit was $80m, 13% above the prior-year quarter.
In South America, Q4 sales were $370m, 4% above the prior-year quarter, excluding currency translation. Sales growth was driven mainly by higher volumes to metals and chemicals end-markets and price attainment. Operating profit was $60m.
Sales in Asia were $470m in the quarter, up 19% from the prior year. Excluding currency and cost pass-through, sales grew 14% from the prior year, driven by higher volumes in China, Korea and India, project start-ups and 3% price attainment. Operating profit was $90m, 15% above prior-year quarter.
Praxair Surface Technologies had Q4 sales of $159m, up 7% above prior-year quarter. Sales growth was driven primarily by aerospace coatings. Operating profit was $27m.
Adjusted amounts, EBITDA, free cash flow and after-tax return on capital are non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations of non-GAAP measures.