Praxair reported Q4 net income and diluted earnings per share of $406m and $1.41, respectively.
Sales in Q4 were $2,644bn, 2% above the previous year. Exclusive 1% headwind from foreign currency translation and a gain on asset sale in the previous year, operating profit was comparable with previous quarter.
Operating profit as a percentage of sales was 22.7% and EBITDA margin was 33.8%.
Q4 cash flow from operations was $726m, 27% of sales. Capital expenditures were $409m and the company paid $214m of dividends.
Full-year sales were $10,534bn, 2% below 2015 due to the impacts of negative currency translation and lower cost pass-through, primarily natural gas.
The company highlighted that underlying sales were 2% above the previous year as growth from positive price, new project start-ups globally and acquisitions were partially offset by lower bases volumes primarily in North America due to weaker upstream energy and manufacturing end-makers. Reported operating profit was $2,238bn, 4% below the previous year. Adjusted operating profit of $2,338bn was 3% below 2015, excluding negative currency translation.
For full-year 2016, Praxair generated strong operating cash flow of $2,773bn, 26% of sales, and free cash flow of $1,308bn. The company invested $363m in acquisitions, primarily a carbon dioxide (CO2) business in Europe, paid dividends of $856m, repurchased $89m of stock, net of issuances and reduced net debt.
”We have announced an increase in our dividend for the 24th consecutive year”
Chairman and CEO, Steve Angel
Chairman and CEO Steve Angel, commented, “During 2016, Praxair employees demonstrated operational excellence by again delivering high-quality results despite facing another challenging global economic year. We gained traction on our core strategy and generated record operating cash flow of 26% of sales and free cash flow of $1.3bn. As a result, we have announced an increase in our dividend for the 24th consecutive year.”
Angel continued, “Expanding our presence in more resilient end-markets including food, beverage, healthcare and aerospace is a key component of our strategy. We completed our CO2 acquisition in Europe which will strengthen our food and beverage growth platform and began the PST joint venture with GE on aircraft coatings which we expect will triple the size of that business in a few years. Another important element of our strategy is to execute our backlog and capitalise on the additional project opportunities driven by the low-cost feedstock advantage in the US Gulf Coast. We won seven new large on-site projects during the year that brought our backlog to just over $1.5bn, with 70% of that value supporting our extensive network in the US Gulf Coast.”
“The year culminated in a non-binding agreement in principal to merge with Linde. We view this as a compelling opportunity to create substantial value for stakeholders. This announcement is the first step in a process that will take some time to complete. While we pursue this opportunity, rest assured our employees will remain laser focused on operational excellence and executing our core strategy,” Angel concluded.
For full-year 2017, Praxair expects diluted earnings per share to be in the range of $5.45 to $5.80, 2% to 9% growth excluding currency versus 2016. This guidance assumes a negative currency impact of approximately 3%. Full-year capital expenditures are expected to be approximately $1.4bn and the effective tax rate is forecast to remain at approximately 28%.
For the first quarter of 2017, Praxair expects diluted earnings per share in the range of $1.28 to $1.35. This EPS guidance assumes a negative currency impact of approximately 1%.
Results by region
North America, Q4 sales were $1,397bn, down 2% from the previous quarter. Sales growth from higher pricing and stronger volumes to metals, food and beverage and healthcare customers were more than offset by weaker volumes in energy and manufacturing end-markets. Operating profit was $359m.
In Europe, Q4 sales were $351m, 9% above the previous quarter excluding negative currency translation. Acquisitions contributed 8% growth, primarily related to a CO2 business largely serving the food and beverage end-market. Volume was up 1% primarily due to new project start-ups. Operating profit of $71M grew 15% from the previous year, primarily due to lower cost, higher volumes and acquisitions.
In South America, Q4 sales were $352m, 18% above the previous quarter. Sales, excluding positive currency translation, grew 9% as a result of higher price, new on-site project volumes and higher sales to healthcare and food and beverage end-markets. Operating profit was $64m.
Finally, Sales in Asia were $395m in the quarter, 1% below the previous quarter. Excluding negative currency translation and a prior quarter divestiture, sales grew 5%. Operating profit of $78m grew 8%, excluding currency translation.
Praxair Surface Technologies had Q4 sales of $149m as compared to $152m in the previous quarter. Excluding negative currency translation and cost pass-through, sales were comparable to the prior-year period. Favorable price and higher aerospace volumes were offset by weaker sales primarily to the energy end-markets. Operating profit was $27m.