Following the announcement from The Linde Group on business performance, below is a breakdown
of how the various segments of the business performed.
In the EMEA segment (Europe, Middle East, Africa), Linde saw slight revenue growth of 1.1% in the first nine months of 2013 to €4.569bn (2012: €4.518bn). On a comparable basis, the increase in revenue was 4.1%. Operating profit improved by 2.7% to €1.314bn (2012: €1.280bn). The operating margin therefore rose to 28.8% (2012: 28.3%).
Business in the EMEA region was strengthened partly as a result of the contribution made by the Continental European homecare operations acquired by Linde from Air Products in April 2012.
Business trends in the EMEA segment were adversely affected by the prevailing unfavourable economic conditions in the eurozone. Demand in the liquefied gases and cylinder gas product areas was accordingly modest. However, positive trends were to be seen in the on-site business in virtually all parts of the EMEA region.
The market environment in Eastern Europe (with the exception of Russia) was characterised by a downturn in economic activity. The economy in the Middle East on the other hand remained relatively robust.
In the Asia/Pacific segment, Linde generated revenue in the nine months to 30 September 2013 of €2.843bn, a figure which was not quite as high as the figure of €2.884bn achieved in the first nine months of 2012. This was due to unfavourable exchange rate effects. On a comparable basis, revenue rose by 3.8%. Growth in the reporting period was adversely affected in particular by the weaker economic environment in manufacturing industry and in the mining industry in the South Pacific region. Operating profit in the reporting period remained virtually unchanged at €747m (2012: €743m). The operating margin therefore rose to 26.3% (2012: 25.8%).
Within the Asia/Pacific segment, the most positive trends were to be seen in the business in the South & East Asia region, where the rate of growth was into double digits. Linde achieved volume increases here in virtually all product areas, especially in the on-site business. The group also generated revenue growth in the Greater China region, whereas the market in the South Pacific region was characterised by declining volumes.
In the Americas segment, revenue grew by 38.8% in the first nine months of 2013 to €3.190bn (2012: €2.299bn). This considerable increase was due above all to the positive contribution made by US homecare company Lincare. Lincare operates solely in North America and contributed revenue of €1.176bn in the reporting period to the total revenue of the Americas segment. On a comparable basis (i.e. after adjusting for exchange rate effects and changes in the price of natural gas and the effect of the Lincare acquisition on the consolidation), the increase in revenue in the Americas segment was 2.1%. Operating profit rose by 45.9% to €852m (2012: €584m), mainly as a result of the Lincare business. The operating margin was 26.7% (2012: 25.4%). One item contributing to the earnings trend in the Americas segment was income of €57m which Linde received during the reporting period in the form of a dividend payment from a company in which it holds an investment.
In North America, there were positive trends in the electronic gases business, particularly in relation to technical material and equipment. Linde also achieved growth in the liquefied gases and cylinder gas market, while the on-site business was characterised by declining volumes. The group was able to continue to strengthen its business in South America, generating increased revenue in Venezuela and Argentina in particular. Linde’s business performance in Brazil, South America’s largest market, was much more modest than that seen in Venezuela and Argentina.
A comparison of the various product areas in the Gases Division reveals that, as expected, the fastest rate of growth was in the Healthcare business, following the acquisitions made by the group in the course of 2012. Here, Linde generated revenue in the first nine months of 2013 of €2.263bn, almost double the figure achieved in the first nine months of 2012 of €1.265bn. After adjusting for exchange rate effects and the effect of the Lincare acquisition on the consolidation, revenue growth in the Healthcare product area was 5.5%.
In the cylinder gas product area, Linde saw an increase in revenue on a comparable basis in the nine months to 30 September 2013 of 1.3% to €3.076bn (2012: €3.037bn). In the liquefied gases product area, revenue generated was €2.503bn. On a comparable basis, this was 2% above the figure for the first nine months of 2012 of €2.453bn. In the on-site business (where Linde supplies gases on site to major customers), revenue rose on a comparable basis by 5.1% to €2.668bn (2012: €2.539bn).
Gases Division - Outlook
Recent economic forecasts indicate that the rate of growth in the global gases market in 2013 will be similar to the rate seen in 2012. Linde remains committed to its original target in the gases business of outperforming the market and continuing to increase productivity.
In its on-site business, Linde has a healthy project pipeline, which will contribute to increases in revenue and earnings over the remaining part of the 2013 financial year. The group expects its liquefied gases and cylinder gas product areas to perform in line with macroeconomic trends. In the Healthcare product area, Linde is expecting to achieve significant increases in revenue and earnings as a result of the acquisitions it has concluded, especially that of Lincare.
Against this background, Linde continues to expect that revenue generated by the Gases Division in the 2013 financial year will be higher than that achieved in 2012 and that operating profit will increase in the current year.
In the Engineering Division, July to September 2013 saw the continuation of a dynamic trend in orders already apparent in the first half of 2013. In the third quarter, Linde was also awarded new projects. As a result, there was a significant increase in order intake in the nine months to 30 September 2013 of 74.7% to €3.661bn (2012: €2.095bn). Revenue and earnings reflected the progress made on individual plant construction projects. There was a rise in revenue in the first nine months of 2013 of 18.9 percent to €2.068bn (2012: €1.740bn), while operating profit increased by 5.1% to €225m (2012: €214m). At 10.9%, the operating margin did not reach the exceptionally high figure achieved in the prior-year period of 12.3%, but did again reach a level well above the industry average.
As a result of projects won during the reporting period, Linde was able to continue to strengthen its position as a leading gases and engineering company in the growth markets of Russia and Asia. In a joint venture with chemical company JSC KuibyshevAzot, Linde will build and operate a large ammonia plant on the Togliatti site in Russia. Investment in this project will total around €275m.
Back in the first quarter of 2013, Linde was awarded a major contract by Reliance Industries Ltd. (RIL) to build six air separation plants for the production of oxygen at the Jamnagar refinery and petrochemical site in India. Under the terms of the contract, which is worth around €450m, Linde will also supply two synthesis gas purification units. In the course of 2013, the scope of this project was further expanded to include, for example, Linde providing RIL with plants on the Jamnagar site for the recovery of sulphur and for the production of pure hydrogen. As a result, the total value of the order to Linde is now €700m.
The order backlog in the Engineering Division has remained at a very high level. At 30 September 2013, it stood at €5.135bn (31 December 2012: €3.700bn).
Engineering Division – Outlook
A relatively stable market environment is expected in the international large-scale plant construction business for the rest of the 2013 financial year. The order backlog remains at a very high level, creating a good basis for a solid business performance in the Engineering Division over the next two years. Linde continues to expect to generate the same level of revenue in its plant construction business in the 2013 financial year as in 2012. The Group anticipates that it will achieve an operating margin in the 2013 financial year of at least 10%.
Linde is well-positioned in the international market for olefin plants, natural gas plants, air separation plants and hydrogen and synthesis gas plants and will derive lasting benefit in particular from investment in two structural growth areas: energy and the environment.