Group revenue up 10.3 percent to EUR 3.985 bn
Group operating profit1 increases by 12.6 percent to EUR 953 m
Group operating margin rises to 23.9 percent (2012: 23.4 percent)
Short-term and medium-term outlook confirmed:
2013: Increase in revenue; operating profit of at least EUR 4 bn
2016: Operating profit of at least EUR 5 bn; ROCE2 of around 14 percent
Munich, 6 May 2013 – In the first quarter of 2013, the technology company The Linde Group again achieved increases in Group revenue and Group operating profit. "We have made a good solid start to the new financial year," commented Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG, on the interim report. "Despite less than favourable conditions especially in the mature markets, we have continued to achieve profitable growth. Our newly-acquired operations in the Healthcare product area made the most significant contribution here."
As far as the rest of the year is concerned, Reitzle said, "We expect to achieve further increases over the coming months and we confirm our outlook. We want to generate higher Group revenue in 2013 than in 2012 and to achieve our target for Group operating profit for the current year of EUR 4 bn." Linde also believes that it remains on track to achieve its medium-term targets. The Group is still seeking to generate Group operating profit of at least EUR 5 bn in the 2016 financial year. Return on capital employed (ROCE) should be around 14 percent in the same year.
In the first quarter of 2013, Group revenue rose by 10.3 percent to EUR 3.985 bn, compared with EUR 3.614 bn in the first three months of 2012. After adjusting for exchange rate effects, the increase in revenue was 11.8 percent. Contributing to this positive trend was US homecare company Lincare, acquired by Linde in August 2012. Revenue generated by Lincare in the reporting period was EUR 397 m.
Linde was able to continue to reinforce its profitability at a high level and to increase Group operating profit by 12.6 percent to EUR 953 m (2012: EUR 846 m). As a result, the Group operating margin rose to 23.9 percent (2012: 23.4 percent).
Profit for the period rose in the first quarter of 2013 by 10.0 percent to EUR 340 m (2012: EUR 309 m). After adjusting for non-controlling interests, profit for the period attributable to Linde AG shareholders was EUR 318 m (2012: EUR 282 m). This gives earnings per share of EUR 1.72 (2012: EUR 1.65). On an adjusted basis, i.e. after adjusting for the effects of the purchase price allocation from the BOC acquisition, earnings per share stood at EUR 1.94 (2012: EUR 1.88).
Linde achieved 14.8 percent revenue growth in the Gases Division in the three months to 31 March 2013 to EUR 3.448 bn, when compared with revenue of EUR 3.004 bn in the first quarter of 2012. When considering this substantial increase, the newly-acquired Lincare business should be taken into account. During the reporting period, Lincare contributed revenue of EUR 397 m to the total revenue of the Gases Division. On a comparable basis (i.e. excluding exchange rate and natural gas price effects and the consolidation effect of Lincare), the increase in revenue was 3.7 percent. Within the Gases Division, Lincare is included in the Americas reportable segment and the Healthcare product area.
Linde's Gases Division saw a 14.5 percent increase in operating profit to EUR 942 m (2012: EUR 823 m). This gives an operating margin of 27.3 percent (2012: 27.4 percent).
Business trends in the individual segments in the Gases Division varied in each case, depending on prevailing economic conditions.
In the EMEAsegment (Europe, Middle East, Africa), revenue rose by 2.5 percent in the first quarter of 2013 to EUR 1.497 bn (2012: EUR 1.460 bn). On a comparable basis, the increase in revenue was 4.0 percent. In line with the revenue trend, operating profit improved by 2.6 percent, rising to EUR 430 m (2012: EUR 419 m). The operating margin achieved in the first three months of 2013 of 28.7 percent was exactly the same as the high figure achieved in the prior-year period. Business in the EMEA region was strengthened in particular 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, while the on-site business remained relatively stable.
The market environment in Eastern Europe was characterised by a slowdown in economic activity. The economy in the Middle East on the other hand remained robust.
In the Asia/Pacific segment, revenue rose by 3.3 percent in the three months to 31 March 2013 to EUR 926 m (2012: EUR 896 m). On a comparable basis, the increase in revenue was 5.4 percent. In particular, growth in the first quarter was adversely affected by the weaker economic environment in the South Pacific region. Operating profit was up 2.6 percent to EUR 240 m (2012: EUR 234 m). This resulted in an operating margin of 25.9 percent (2012: 26.1 percent).
Within the Asia/Pacific segment, Linde achieved its greatest business expansion in South & East Asia. In the cylinder gas and liquefied gases product areas, the Group saw volume increases in most of the countries in the region. Linde also generated significant revenue growth in the Greater China region. In the South Pacific region on the other hand the market was characterised by declining volumes, especially in the technical accessories and equipment business.
In the Americas segment, Linde saw 56.8 percent revenue growth in the first three months of 2013 to EUR 1.054 bn (2012: EUR 672 m). This significant 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 EUR 397 m to the total revenue of the Americas segment in the first quarter of 2013. On a comparable basis (i.e. excluding exchange rate and natural gas price effects and the consolidation effect of Lincare), the increase in revenue in this segment was 2.2 percent.
Operating profit rose at a faster rate than revenue, by 60.0 percent to EUR 272 m (2012: EUR 170 m), mainly as a result of the newly-acquired Lincare business. The operating margin increased accordingly to 25.8 percent (2012: 25.3 percent).
In North America, there were positive trends in the liquefied gases product area, while growth in South America was boosted in particular by increases in revenue 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 quarter of 2013 of EUR 764 m, more than double the figure achieved in the first quarter of 2012 of EUR 310 m. Excluding exchange rate effects and the consolidation effect of Lincare, revenue growth in the Healthcare product area was 10.7 percent.
In the cylinder gas product area, revenue generated was EUR 997 m. On a comparable basis, this was exactly the same as the figure for the prior-year period of EUR 997 m. In the liquefied gases product area, Linde achieved a slight increase in revenue in the first quarter of 2013 on a comparable basis of 0.7 percent to EUR 812 m (2012: EUR 806 m). In the on-site business, where Linde supplies gases on site to major customers, revenue rose on a comparable basis by 5.0 percent to EUR 875 m (2012: EUR 833 m).
Gases Division – Outlook
Recent economic forecasts continue to indicate that the global gases market will grow at a somewhat faster rate in 2013 than in 2012. Linde remains committed to its original target in the gases business of outperforming the market and continuing to increase productivity.
In the on-site business, Linde has a healthy project pipeline, which will continue to make a substantial contribution to revenue and earnings for 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 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 Linde's Engineering Division, the first quarter of 2013 was characterised by a number of significant new orders. There was a dynamic increase in order intake to EUR 1.379 bn in the first three months of 2013, 81.7 percent higher than the figure for the first three months of 2012 of EUR 759 m. Revenue and earnings trends reflected the expected progress on individual plant construction projects. Revenue in the first quarter of 2013 was EUR 552 m (2012: EUR 601 m), while in the same period Linde achieved an operating profit of EUR 66 m (2012: EUR 73 m). The operating margin once again reached a very high level (12.0 percent in the first quarter of 2013, 12.1 percent in the first quarter of 2012).
More than half of the newly-acquired projects related to the air separation plant product area. Linde was, for example, awarded a major contract by Reliance Industries Ltd. (RIL) to build six air separation plants for the production of gaseous oxygen at the Jamnagar refinery and petrochemical site in India. Under the terms of this contract, which is worth around EUR 450 m, Linde will also supply two synthesis gas purification units. Linde has also scored further successes in the first quarter of 2013 in the growing market for natural gas plants. The Norwegian company Gassco AS gas commissioned Linde to build a natural gas terminal in Emden in northern Germany. The contract is worth around EUR 260 m.
Given the very positive trend in orders, the order backlog in the Engineering Division increased significantly in the first quarter of 2013 to EUR 4.578 bn (31 December 2012: EUR 3.700 bn).
Engineering Division – Outlook
A relatively stable market environment is expected in the international large-scale plant construction business in the remaining part of 2013. The high order backlog creates 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. Linde is still anticipating that it will achieve an operating margin in the current financial year of at least 10 percent.
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.
To coincide with the publication of the quarterly financial statements, a webcast for analysts will take place today at 2pm German time in English with Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to watch the webcast by following this link:
About The Linde Group
The Linde Group is a world-leading gases and engineering company with around 62,000 employees in more than 100 countries worldwide. In the 2012 financial year, Linde generated revenue of EUR 15.280 bn. The strategy of the Group is geared towards long-term profitable 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 www.linde.com
N.B.: Linde has applied the new accounting standards IFRS 10 and IFRS 11 from 1 January 2013. The consolidation method applied to joint ventures has changed as a result. Some joint ventures are now fully consolidated in the Group financial statements and some are included on the basis of the share of equity held by The Linde Group. As these standards have been applied with retrospective effect from the date of acquisition or formation of the joint ventures and this has an impact on virtually all the items in the statement of financial position and statement of profit or loss, the prior-year figures have been adjusted accordingly in the Group interim report. For more detail about the impact of the first-time adoption of IFRS 10 and IFRS 11, please see Note 1 "General accounting policies" in the Notes to the Group interim financial statements on pages 18 to 24 of the Group interim report.
1 Operating profit: EBITDA including share of profit or loss from associates and joint ventures.
2 Return on capital employed adjusted for the amortisation of fair value adjustments identified in the course of the BOC purchase price allocation.