As Linde AG’s CEO, Professor Dr Wolfgang Reitzle delivered the group’s 2008 results here in Munich today, but all ears were trained on his views of what will happen in 2009 and beyond - during the global economic crises.

“This has been the most successful year in Linde’s history,” were Reitzle’s opening remarks.

“Group revenues were up 8.4% to €12.7bn and operating revenues rose 10.3% to €2.6bn, and so we have continued to grow and increased our profits above that of revenues in 2008. More importantly, ROCE rose 12.4%, 2.1 percentage points above 2007.”

Reitzle went on to say that the BOC integration has been completed and that the gases business produced very good results for 2008, despite the downturn towards the end of the year. Under questioning from the press, Reitzle revealed that Linde’s results were at an all time high in October 2008 and November was no less impressive.

Clearly that came to a halt in December and January and February 2009 has shown a significant drop-off from the October high, but encouragingly still remains above that seen over the same period as last year.

Gas sales reached €9.5bn in 2008, up 6.8% on a comparable basis, with Asia/Africa and Eastern Europe showing the highest growth performance of the regions with medium but robust growth in North America and Europe.

However, all eyes were on comments and views regarding 2009 and Reitzle didn’t fail to deliver a robust view that growth will be impacted and that it is extremely difficult in this first quarter to predict what 2009 as a whole will deliver.

A look ahead…
Linde’s own growth scenario ranges from a slight decline overall, to a small gain in 2008. New tonnage contracts will be offset by lower volumes on existing business and with Linde being the largest cylinder-based company, the group remains bullish in this sector.

Reitzle reveals that the group has over 30 million cylinders in circulation, with customers ranging from the very small to the large user of cylinders. This therefore ensures some protection from the economic woes that are currently being experienced in the tonnage business.

Healthcare is also expected to remain robust, due to the general improvement in healthcare services and requirements across the globe.

Reitzle went on to say that he expected China to show the global economy a way forward and forecasted growth in that sector to remain strong, even though it will be as a result of recent years. Therefore the ROCE target for Linde of 13% will not be met, as this was based on a CAGR of 7% and clearly this will not be the case during 2009/10.

Linde is already focusing on cost reduction and its High Performance Organisation aims to deliver €650-800m savings over the next four years. Planning was undertaken in 2008 and now the implementation stage is underway.

Perhaps unsurprisingly given his background in the car industry, the general press in Germany were interested to gauge Reitzle’s views on the impact the car industry has on Linde and the gases business. He responded by revealing some interesting figures – including the fact that the automotive industry consumes on average €10 per car (in the form of welding gases).

However, more gases are consumed in the supply chain for car production – including steel. Overall, around €44 of gases are consumed per car. As approx. 30% of steel output goes into car manufacturing, so the downturn in production does have significant effect on other industries such as steel and even leather.

However, working out the numbers – a 20% reduction in car output has a 1% impact on Linde’s revenues.

Still robust
Dr Aldo Belloni joined in the Q&A and stated that the on-sites business is important to Linde, but there has been some postponement in projects and even cancellations – impacting both on Linde’s on-site’s business and also its Engineering division.

Belloni reiterated that Capex was still robust and while Linde will be reviewing Capex going forward, he stated that Linde was the most successful of gas companies in on-site contracts in 2008, which will lead to increased Capex over the next 2-2.5 years.

Summarising Linde’s position, Reitzle states that there is a degree of the unknown this year unlike previous years, but that Linde has programmes in place and has strong business sectors that will see it through the difficult times.