Group Outlook for 2010: Increase in sales and operating profit expected
Gases Division: Goal is to exceed record operating profit of 2008
Engineering Division: High order backlog provides basis for stable development
2009 financial year: Decline in sales and operating profit limited
Productivity significantly increased
Proposed dividend of EUR 1.80 per share unchanged from prior year
Munich, 17 March 2010 - The technology group The Linde Group has demonstrated in the 2009 financial year that it is stormproof. 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. "We therefore have every reason to look to the future with confidence," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG, at the presentation of the annual results. "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."
In the 2009 financial year, Group sales were EUR 11.211 bn, 11.5 percent down on the prior-year figure of EUR 12.663 bn. Group operating profit*, however, declined at a slower rate. Linde achieved Group operating profit of EUR 2.385 bn, only 6.7 percent below the prior-year figure. Group operating margin rose as a result to 21.3 percent (2008: 20.2 percent). 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.
Linde achieved earnings before taxes on income (EBT) of EUR 838 m, EUR 168 m below the prior-year figure of EUR 1.006 bn. After adjusting for restructuring costs of EUR 83 m and the profit on disposal of businesses of EUR 59 m achieved in 2008, the decline was only EUR 26 m or 2.7 percent.
Earnings after tax were EUR 653 m (2008: EUR 776 m). The amount attributable to Linde AG shareholders was EUR 591 m (2008: EUR 717 m), giving earnings per share of EUR 3.51 (2008: EUR 4.27). After adjusting for the effects of the purchase price allocation identified in the course of the BOC acquisition and the profits on disposal achieved in 2008, earnings per share stood at EUR 4.58 (2008: EUR 5.46). The restructuring costs recognised in 2009 were not adjusted for here.
Operating cash flow continued the positive trends seen in the previous quarters. It increased significantly by 14.2 percent to EUR 2.142 bn (2008: EUR 1.876 bn). ROCE (return on capital employed) was 10.4 percent (2008: 12.4 percent). Linde reduced its net financial debt by over EUR 300 m to EUR 6.119 bn (2008: EUR 6.423 bn).
The Executive Board and Supervisory Board of Linde AG will propose a resolution at the Annual General Meeting to be held on 4 May 2010 that a dividend of EUR 1.80 per share be paid, the same as in the prior year.
Sales in the Gases Division in the 2009 financial year fell by 6.1 percent to EUR 8.932 bn (2008: EUR 9.515 bn). On a comparable basis, i.e. after taking into account exchange rate effects, changes in the price of natural gas and changes to Group structure, the decline in sales was 5.1 percent. The division achieved an operating profit of EUR 2.378 bn, only 1.6 percent below the prior-year figure of EUR 2.417 bn. The operating margin in the Gases Division improved significantly, rising by 120 basis points to 26.6 percent (2008: 25.4 percent).
Business performance in the various regions in which the Gases 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 this region fell by 8.9 percent to EUR 3.765 bn (2008: EUR 4.133 bn). On a comparable basis, the decline in sales was only 4.6 percent. Operating profit was EUR 1.051 bn, 6.1 percent below the prior-year figure of EUR 1.119 bn, also as a result of unfavourable exchange rate effects. Despite the difficult economic conditions, the operating margin increased from 27.1 percent to 27.9 percent. The productivity improvement measures adopted were a contributory factor here.
Faced with the weak economic situation in the Americas operating segment, Linde saw a decline in sales of 10.2 percent to EUR 1.981 bn (2008: EUR 2.207 bn). On a comparable basis, sales were 6.8 percent below the prior-year figure. Operating profit, on the other hand, at EUR 429 m was in the same range as the result for 2008 of EUR 432 m, while the operating margin improved significantly to 21.7 percent (2008: 19.6 percent). This was due to the positive impact of cost optimisation measures and movements in natural gas prices.
In the Asia & Eastern Europe operating segment, Linde was able to keep sales relatively stable. Sales here were EUR 1.836 bn, a moderate decline of 5.2 percent from EUR 1.936 bn in 2008. On a comparable basis, sales fell by only 3.0 percent. Linde succeeded in achieving a segment profit of EUR 557 m, almost the same level as the profit of EUR 563 m achieved in 2008. The operating margin therefore rose to 30.3 percent (2008: 29.1 percent). In addition to the cost savings generated by the accelerated implementation of the HPO programme, Linde's joint venture activities in China also contributed here.
In the South Pacific & Africa operating segment, Linde achieved an increase in sales of 8.2 percent to EUR 1.418 bn (2008: EUR 1.310 bn). One of the main reasons for the rise in sales was the full consolidation for the first time of the Australian LPG company Elgas. On a comparable basis, sales in the reporting period fell by 6.7 percent. Operating profit increased by 12.5 percent to EUR 341 m (2008: EUR 303 m). The operating margin rose from 23.1 percent to 24 percent, partly as a result of cost structure improvements.
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 EUR 2.075 bn, almost the same as the prior-year figure of EUR 2.085 bn. On a comparable basis, sales of cylinder gases fell by 9.1 percent to EUR 3.635 bn (2008: EUR 3.998 bn), while sales in the liquefied gases product segment fell by 6.5 percent to EUR 2.192 bn (2008: EUR 2.344 bn). The Healthcare or medical gases business continued to grow in 2009 despite the global economic crisis. Sales increased on a comparable basis by 4.6 percent to EUR 1.030 bn (2008: EUR 985 m), exceeding the billion euro mark for the first time.
Gases Division - Outlook
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 the current year 2010. This year, the Group expects to be able to exceed the record level of operating profit achieved in its gases business in 2008.
In 2009, Linde was unable to reach the record levels attained in its Engineering business in the 2008 financial year. Sales were EUR 2.311 bn, 23.4 percent below the prior-year figure of EUR 3.016 bn. This decrease was mainly due to the different structure of the projects in the two different years. Against this background, operating profit of EUR 210 m was 21.3 percent lower than the prior-year figure of EUR 267 m. The operating margin, on the other hand, was 9.1 percent (2008: 8.9 percent), significantly exceeding the target margin of 8 percent.
The market environment for the global construction of large-scale plants was characterised in 2009 by customers' marked reluctance to award new projects. This also had an impact on Linde's order intake, which at EUR 2.458 bn remained below the very high level achieved in 2008 of EUR 3.057 bn. Nevertheless, even in difficult market conditions, Linde was able to win important new contracts and to maintain its order backlog at the year-end at a very high level (2009: EUR 4.215 bn; 2008: EUR 4.436 bn).
Engineering Division - Outlook
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. At the same time, there are signs of a revival in demand in our four main operating segments: olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants. Against this background, Linde is expecting sales in the Engineering Division in the 2010 financial year to be at least at the same level as in 2009. The target for the operating margin remains at 8 percent.
Note: The 2009 annual report of The Linde Group is available on the Internet at www.linde.com.
To coincide with the publication of the annual financial statements, a teleconference for analysts will take place today at 2pm (German time) in English with Professor Dr Wolfgang Reitzle, CEO of Linde AG, and Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to listen to the conference live by dialling +49.69.589.99-0509. Please tell the operator your name and the name of your company. Following the teleconference, you will be able to hear a recording of the event by calling +49.30.726.167-224. Please give the following reference number: 858623.
The Linde Group is a world leading gases and engineering company with almost 48,000 employees working in more than 100 countries worldwide. In the 2009 financial year it achieved sales of EUR 11.2 bn. The strategy of The Linde Group is geared towards sustainable earnings-based growth and focuses on the expansion of its international business with forward-looking products and services. Linde acts responsibly towards its shareholders, business partners, employees, society and the environment - in every one of its business areas, regions and locations across the globe. Linde is committed to technologies and products that unite the goals of customer value and sustainable development.
For more information, see The Linde Group online at http://www.linde.com
* Operating profit: EBITDA before non-recurring items, including the share of profit from associates and joint ventures.