The Linde Group is today enjoying an ebullient start to the day, as the company demonstrates its robust business performance at its Annual Results press conference in Munich, Germany.
As the press conference unfolds, Linde is exuding its confidence in the market during 2010. This is on the back of an impressive 2009 performance, when the company demonstrated that it is ‘stormproof’ despite the tough economic climate.
The company was able to limit the decline in its sales and earnings and make a significant improvement in its productivity despite the global economic crisis.
With 2009 financial year group sales of €11.211bn (down 11.5% on the prior-year figure) and group operating profit having declined at a slower rate than expected, Linde is confident in its future outlook.
Linde achieved group operating profit of €2.385bn, only 6.7% below the prior-year figure. Linde was able to benefit significantly from the positive impact of its High Performance Organisation (HPO) programme, which is designed to achieve sustainable process optimisation and efficiency improvements.
Sales in the group’s Gases Division in the 2009 financial year fell by just 6.1% to €8.932bn, while on a comparable basis and after taking into account exchange rate effects, changes in the price of natural gas and changes to group structure, the decline in sales was only 5.1%.
The division achieved an operating profit of €2.378bn, only 1.6% below the prior-year figure of €2.417bn. Operating margin in the Gases Division improved significantly, rising by 120 basis points to 26.6% (2008: 25.4%).
Professor Dr Wolfgang Reitzle, CEO of Linde AG, is clearly confident. At the presentation of the annual results, he said, “We therefore have every reason to look to the future with confidence.”
$quot;Given current economic forecasts and seen from today's viewpoint, we expect group sales and operating profit in the 2010 financial year to exceed the 2009 figures. The measures we have adopted to achieve sustainable efficiency improvements will continue to have an effect, while at the same time we will benefit increasingly from our leading positions in the emerging markets. In our gases business we have a full project pipeline and in our plant construction business the order backlog remains at a high level.$quot;
Overall, Linde achieved earnings before taxes on income (EBT) of €838m, €168m below the prior-year figure of €1.006bn. After adjusting for restructuring costs of €83 m and the profit on disposal of businesses of €59m achieved in 2008, the decline was only €26 m or 2.7%.
Operating cash flow continued the positive trends seen in the previous quarters, increasing significantly by 14.2% to €2.142bn. ROCE (return on capital employed) was 10.4% compared to 2008 ROCE 12.4% and Linde reduced its net financial debt by over €300m to €6.119bn.
With that in mind, The Linde Group is positive to say the least. Productivity has significantly increased and group outlook for 2010 targets an increase in sales and operating profit, while the gases division aims to exceed the record operating profit of 2008.
For the group’s Gases Division, 2009 was a diverse year from a regional perspective; business performance in the various regions in which the division operates reflects the economic conditions in each region.
In the Western Europe operating segment, sales trends were adversely affected not only by the decline in demand caused by the economic situation, but also by the substantial weakening of the British pound. As a result of these factors, sales in the region fell by 8.9% to €3.765bn. On a comparable basis, the decline in sales was only 4.6%. Despite the difficult economic conditions, the operating margin increased from 27.1% to 27.9%.
Faced with the weak economic situation in the Americas operating segment, Linde saw a decline in sales of 10.2% to €1.981bn. Operating profit, on the other hand, at €429m was in the same range as the result for 2008, of €432m.
In the Asia & Eastern Europe operating segment, Linde was able to keep sales relatively stable, with sales of €1.836bn showing only a moderate decline of 5.2%. On a comparable basis, sales fell by only 3%. In the South Pacific & Africa operating segment, Linde achieved an increase in sales of 8.2% to record €1.418bn – one of the main reasons for the rise in sales was the full consolidation for the first time of the Australian LPG company Elgas.
In the various product segments, the Gases Division was increasingly able to stabilise its business performance in the course of 2009.
On a comparable basis, sales in the on-site business, where Linde supplies industrial gases from plants situated directly on the customer's site, were €2.075bn, almost the same as the prior-year figure of €2.085bn. On a comparable basis, sales of cylinder gases fell by 9.1% to €3.635bn, while sales in the liquefied gases product segment fell by 6.5% to €2.192bn.
On the back of such positive results, the original target for the gases business has not changed: Linde wants to outperform the market and continue to increase its productivity.
In the on-site business in particular, Linde can fall back on a full project pipeline, which will make a greater contribution to sales and earnings this year due to the start-up of numerous plants. On the basis of current economic forecasts, Linde expects to achieve an increase in sales and earnings in the Gases Division in 2010 and expects to be able to exceed the record level of operating profit achieved in its gases business in 2008.
Meanwhile in the Engineering Division, which endured a sales slump of 23.4% in financial year 2009, the continuing high level of the order backlog forms a good basis for a relatively stable business performance in the next two years. However, given the continuing economic uncertainty, it is still likely that the award of some new projects may be postponed.