The slog through the current economic slump continues as US corporation, Praxair Inc., releases its first quarter 2016 results, in which the Tier One industrial gas player also generally records losses across the board.
Overall, sales were down 9% compared to the prior-year quarter, totalling $2.5bn. The company attributes this to negative currency translation and lower cost pass-through, which reduced sales by 7% and 1%, respectively.
Additionally, any growth from higher pricing, new project start-ups, and healthcare and food and beverage end-markets was “more than offset” by lower volumes to energy, metals and manufacturing end-markets, primarily throughout North America.
While North America continues to face year-over-year volume headwinds primarily in the energy, metals and manufacturing end-markets, we grew sales to the healthcare, food and beverage end-markets globally
Operating profit in this first quarter stood at $554m – 11% below the prior-year quarter. Excluding currency effects, operating profit continued the downward trend, falling by 4%. Despite this, Praxair recorded an increased cash flow from operations of $547m – 8% above the comparable 2015 quarter.
Broken down by region, both first quarter sales and operating profit across the US dropped by 4%, totalling $1.35bn and $349m, respectively, excluding negative currency translation and net divestitures.
Sales in Europe also dipped, sitting at $320m – 2% below the prior-year quarter. However, the geographical segment demonstrated an operating profit growth of 3% from operating leverage on volume growth, growing to $62m.
South American sales saw the biggest fall this fiscal quarter – down 22% to £311m – compared to the same quarter in 2015. Despite this, sales have actually grown since the fourth quarter by 2%, thanks to the acquisition of Geneva Industrial Gases in Panama, which was announced on 21st April. Higher prices and growth to the food and beverage and healthcare end-markets was also partially offset by lower volumes to the manufacturing end-market.
As demonstrated across the entire industrial gases sector in recent months, Asia continued to be the strongest region for sales. Praxair’s sales were up by 6% in this sector this quarter, totalling $376m. New plant start-ups in China and India, of which gasworld believes to be for the Yankuang Guohong Chemical Co. Ltd, and JSW Steel amongst others, contributed to this volume growth.
Regarding its Surface Technologies business unit, Praxair recorded a dip of 4% in sales for this segment in this fiscal quarter, totalling $149m compared to $160m. Operating profit stood at $25m.
After recently announcing its international acquisition spree in which Praxair attained no less than five industrial gas businesses across the US, Panama and Italy, Steve Angel, Chairman and CEO of the US corporation, underlined how this $63m investment will help to propel the organisation back into profits, “Praxair’s strategy of optimising the base business, growing resilient end-markets, executing the project backlog and capitalising on acquisition and project opportunities reflected positively in our first-quarter results and continues to drive long-term value creation.”
The boss also explained why he is optimistic for Praxair’s financial year ahead despite this rocky start to the financial year, “While North America continues to face year-over-year volume headwinds primarily in the energy, metals and manufacturing end-markets, we grew sales to the healthcare, food and beverage end-markets globally, achieved higher pricing in many businesses, and grew volumes in Europe and Asia supplemented by project start-ups. In addition, we closed six packaged gas acquisitions located in North America and Europe.”
“Praxair employees again delivered high-quality results with an operating margin of 22% and growth in operating cash flow of 8%, against a difficult macro-economic environment. Consistent high-quality results and strong cash flow affords us the long-term ability to invest in high-quality projects and acquisitions that align with our strategic objectives and meet our investment criteria as well as return value to our shareholders in the form of higher dividends and share repurchases.”