Praxair has released ‘high-quality’ results for the first quarter of 2017, thanks to the successful execution of its core strategy and higher organic volumes across all end-markets
The company has reported Q1 net income and diluted earnings per share of $389m and $1.35, respectively. These results include transaction costs of $6m after-tax, or 2 cents of diluted earnings per share, related to the potential Linde AG merger. Excluding this charge, adjusted net income and diluted earnings per share were $395m and $1.37, respectively.
Praxair’s sales in Q1 were $2,72bn, 9% above the prior-year quarter, up 6% excluding higher cost pass-through and positive currency translation effect. Sales growth was primarily driven by higher volumes in North America, Europe and Asia and included new project start-ups. By end-market, sales growth was led by the metals, downstream energy, chemicals and electronics sectors.
Reported operating profit in Q1 was $582m, 5% above the prior-year quarter. Excluding the current quarter impact of transaction costs, adjusted operating profit was $588m, 6% above the prior-year quarter. Reported operating profit as a percentage of sales was 21.3%. Adjusted operating profit as a percentage of sales was 21.6%, and the adjusted EBITDA margin was 32.5%.
Q1 cash flow from operations was $710m, 28% above the prior-year quarter. Capital expenditures were $327m and the company paid $225m of dividends.
”We have made significant progress on the potential merger with Linde AG”
Steve Angel, Chairman and CEO
Commenting on the financial results and business outlook, Chairman and CEO Steve Angel said, “Praxair employees once again delivered high-quality results through the execution of our core strategy. Q1 sales grew 9% versus prior year, primarily driven by higher organic volumes across all end-markets. By geographic segment, volume growth was attained in North America, Europe and Asia, partially offset by South America due to the challenging economic environment in Brazil. Furthermore, we maintained strong margins and increased our operating cash flow 28% year-over-year (YoY).”
“While our employees maintain their relentless focus on executing our strategy, we have made significant progress on the potential merger with Linde AG and are working toward reaching a definitive agreement as soon as practicable.”
He continued, “As we look to the remainder of the year, we anticipate improved base volume growth in-line with the current macro-economic environment. New project opportunities, specifically in the US Gulf Coast, continue to be a bright spot as bidding activity remains robust. Based on our competitive advantage in the region, we remain confident in our ability to win additional projects.”
“The combination of our execution culture and highly talented employees will enable Praxair to continually deliver high-quality.”
For Q2 of 2017, Praxair expects diluted earnings per share in the range of $1.38 to $1.43, excluding transaction costs related to the potential merger with Linde.
For full-year 2017, Praxair expects adjusted diluted earnings per share to be in the range of $5.55 to $5.80. This full-year guidance excludes transaction costs related to the potential merger. GAAP diluted earnings per share are expected to be in the range of $5.53 to $5.78 and exclude transaction costs incurred after Q1. Full-year capital expenditures are expected to be approximately $1.4bn.
A deeper look by segment
In North America, Q1 sales were $1,45bn, 5% above the prior-year quarter excluding higher cost-pass through. Sales growth was driven primarily by stronger volumes to downstream energy, metals, chemicals, food and beverage and healthcare end-markets and higher pricing. Acquisitions contributed 1% growth, primarily packaged gas distributors. Operating profit was $3£57m.
In Europe, Q1 sales were $356m, 11% above the prior-year quarter. Excluding negative currency and positive cost pass-through, sales grew 13% from the prior year due to higher volumes including project start-ups, and acquisitions primarily related to the carbon dioxide (CO2) business largely service the food and beverage end-market. Operating profit of $66m grew 10% from the prior-year, excluding negative currency translation impact
In South America, Q1 sales were $369m, 19% above the prior-year quarter. Excluding positive currency translation, sales grew 1% due to higher price. Volume growth from project start-up’s was offset by continued negative underlying base volumes in Brazil, primarily the manufacturing end-market. Operating profit was $64m.
Sales in Asia were $395m in the quarter, up 5% from the prior-year. Excluding currency, cost pass-through and a prior-year net divestiture, sales grew 8%, driven by higher volumes in China, India and Korea, primarily to the electronics, metals and chemicals end-markets. Operating profit was $75m.