Group sales up 13.1 percent to EUR 9.405 bn
23.2 percent growth in Group operating profit* to EUR 2.145 bn outpaces increase in sales
Significant improvement in Group operating margin of 190 basis points to 22.8 percent
Increase in earnings per share to EUR 4.13 (2009: EUR 2.47)
Group outlook for 2010 firms up:
Growth in sales expected, with operating profit increasing at a faster rate than sales
Group operating profit expected to exceed record year 2008
Munich, 2 November 2010 - In the third quarter of 2010, the technology group The Linde Group saw a continuation of its positive business performance in the first six months of the year, achieving significant growth in Group sales and Group operating profit by 30 September 2010. "We have taken advantage of the economic recovery and our profitability has continued to increase," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "The measures we have adopted to achieve sustainable improvements in efficiency are having an ever greater effect. This is another reason why we are confident for the remainder of the year. We reaffirm our objective, which is to reach a higher level of Group sales and Group operating profit in the 2010 financial year than in 2009. We are convinced that Group operating profit will increase at a faster rate than sales and even exceed the record profit achieved in 2008."
In the first nine months of 2010, Group sales rose by 13.1 percent to EUR 9.405 bn (2009: EUR 8.313 bn). After adjusting for exchange rate effects, the increase in sales was 6.5 percent. Linde achieved a 23.2 percent improvement in Group operating profit* to EUR 2.145 bn (2009: EUR 1.741 bn). Once more operating profit rose at a faster rate than sales. The Group operating margin was 22.8 percent, 190 basis points above the figure for the prior-year period of 20.9 percent. If an adjustment is made for the one-off restructuring costs of EUR 80 m recognised in the first nine months of 2009, the increase in the Group operating margin is 90 basis points. The significant improvement in profitability is evidence that Linde is continuing to make good progress with the rigorous implementation of HPO (High Performance Organisation), its integrated concept for sustainable process optimisation and increased productivity.
Earnings before taxes on income (EBT) reached EUR 1.003 bn, significantly exceeding the figure for the prior-year period of EUR 611 m by 64.2 percent. Earnings after tax rose by 64.0 percent to EUR 748 m (2009: EUR 456 m). After adjusting for minority interests, earnings attributable to Linde AG shareholders were EUR 698 m (2009: EUR 417 m). Earnings per share increased as a result by 67.2 percent to EUR 4.13 (2009: EUR 2.47). On an adjusted basis, i.e. after adjusting for the effects of the purchase price allocation in the course of the BOC acquisition, earnings per share stood at EUR 4.88 (2009: EUR 3.38).
In the wake of the general economic recovery, the increase in demand in the international gases business continued to stabilise in the course of 2010. Linde benefited from the improvement in the economic climate, given the Group's global footprint and its strong position in emerging economies in particular.
Sales in the Gases Division in the nine months to 30 September 2010 grew 14.5 percent to EUR 7.590 bn, compared with a figure for the first nine months of 2009 of EUR 6.629 bn. On a comparable basis, i.e. after adjusting for exchange rate effects, changes in the price of natural gas and changes to Group structure, the increase in sales was 5.7 percent.
The Gases Division achieved a 16.6 percent increase in operating profit to EUR 2.055 bn (2009: EUR 1.763 bn). The growth in operating profit again outpaced the increase in sales. The operating margin improved by 50 basis points to 27.1 percent (2009: 26.6 percent). This further increase in profitability is mainly due to the positive impact of the efficiency improvement and process optimisation measures which form part of HPO.
The business performance of the various operating segments in the Gases Division demonstrates the extent to which the pace of economic recovery continues to vary from region to region. The highest growth rates during the first nine months of 2010 were once again to be seen in the emerging economies of Asia, especially Greater China, and in South America. At the same time, the economic recovery continued in the more mature markets, such as the United States and Western Europe. As expected, growth rates in these economies failed to reach the same levels as those being achieved in the emerging nations, but even here significant demand momentum was being seen once more, especially in the energy and environmental sectors.
In the Western Europe operating segment, Linde achieved sales growth in the nine months to 30 September 2010 of 7.2 percent to EUR 3.002 bn (2009: EUR 2.801 bn). On a comparable basis, the growth in sales was 3.6 percent. Operating profit again increased at a faster rate than sales, rising by 12.1 percent to EUR 877 m (2009: EUR 782 m). This resulted in an operating margin of 29.2 percent, 130 basis points above the figure for the prior-year period of 27.9 percent. Here too, the rigorous implementation of the various initiatives which form part of HPO had a positive impact.
In the Americas operating segment, sales increased in the first nine months of 2010 by 14.5 percent to EUR 1.700 bn (2009: EUR 1.485 bn). On a comparable basis, sales rose 8.5 percent. Operating profit increased in the nine months to 30 September 2010 by 19.3 percent to EUR 377 m (2009: EUR 316 m). This resulted in an operating margin of 22.2 percent, 90 basis points above the figure for the prior-year period of 21.3 percent. Linde was able to more than offset the dilution of the operating margin as a result of the contractual obligation to pass through higher natural gas prices to its customers, boosted by the successful implementation of the HPO measures designed to optimise costs and increase efficiency.
Uninterrupted economic growth in Asia and the beginning recovery in Eastern Europe enabled Linde once again to achieve a high rate of growth in the Asia & Eastern Europe operating segment. In the nine months to 30 September 2010, there was a significant 21.8 percent rise in sales to EUR 1.636 bn (2009: EUR 1.343 bn). On a comparable basis, the increase in sales was 11.7 percent. Operating profit improved by 18.3 percent to EUR 491 m (2009: EUR 415 m). The operating margin was once again very high at 30.0 percent (2009: 30.9 percent). To ensure that this profitability is maintained, Linde is continuing the stringent application of its HPO concept here as well.
In the South Pacific & Africa operating segment, Linde achieved sales growth in the first nine months of 2010 of 25.7 percent to EUR 1.322 bn (2009: EUR 1.052 bn). This substantial increase was almost entirely due to the positive impact of the exchange rates for the Australian dollar and the South African rand. On a comparable basis, there was a slight increase of 1.4 percent in sales compared with the prior-year period. Operating profit, which was also boosted by exchange rate effects, rose 24.0 percent to EUR 310 m (2009: EUR 250 m). The operating margin achieved was 23.4 percent (2009: 23.8 percent).
Business performance in the individual product areas reflects the positive trends overall in the Gases Division. In the on-site business, where gases are supplied on site to major customers, Linde achieved the highest rate of sales growth. On a comparable basis, i.e. after adjusting for exchange rate effects, changes in the price of natural gas and changes to Group structure, sales in this segment increased in the nine months to 30 September 2010 by 11.2 percent to EUR 1.818 bn (2009: EUR 1.635 bn). Linde benefited from the continuing revival in the utilisation of existing plant capacity, as well as from start-ups of new plants. In the liquefied gases business, sales were EUR 1.847 bn. On a comparable basis, this was a 6.7 percent increase over the figure for the prior-year period of EUR 1.731 bn. The cylinder gas product area continued to recover in the course of the year. In the nine months to 30 September 2010, Linde achieved sales growth in this business on a comparable basis of 2.8 percent to EUR 3.091 bn (2009: EUR 3.008 bn). The Healthcare segment continued to grow steadily in the first nine months of the year. On a comparable basis, sales here increased by 3.5 percent to EUR 834 m (2009: EUR 806 m).
Gases Division - outlook
Linde's original target for the gases business still applies. The Group wants the Gases Division to outperform the market and continue to increase productivity. In the on-site business, Linde has a well-filled project pipeline, which will continue to make a significant contribution to sales and earnings growth targets in the final quarter of 2010. The liquefied and cylinder gases business should benefit from the sustained general economic recovery which is being forecast. In the Healthcare segment, Linde expects to continue to deliver steady growth.
Given its business performance in the first nine months of the year, Linde specifies its forecast for the Gases Division for the full year 2010. The Group now assumes that its Gases Division will exceed the record levels achieved in 2008 not only for operating profit but also for sales.
In international plant construction, a late-cycle sector, demand has increasingly stabilised in the course of 2010. As the economy picked up, Linde's Engineering Division noted a revival in investment activity in the four major product segments (olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants). Small and medium-sized projects in particular were increasingly being commissioned.
Sales in the Engineering Division in the nine months to 30 September 2010 were EUR 1.674 bn, almost the same as the figure for the prior-year period of EUR 1.677 bn. Operating profit rose 26.9 percent to EUR 184 m (2009: EUR 145 m). Due to the successful execution of a number of individual projects, the operating margin improved from 8.6 percent in the first nine months of 2009 to 11.0 percent in the first nine months of 2010. This is an exceptionally high figure for an engineering business. Once again, Linde significantly exceeded its own target of 8 percent, which is above the industry average.
The overall improvement in the economic climate is reflected in order intake. New orders in the Engineering Division in the nine months to 30 September 2010 were EUR 1.538 bn, a 1.6 percent improvement on the prior-year figure of EUR 1.514 bn. When making this comparison, it should be noted that order intake in 2009 was significantly affected by a single major project in Abu Dhabi worth USD 1.075 bn. In contrast, order intake in 2010 has consisted to date of a number of small and medium-sized projects. New orders were received from third-party customers as well as from the Group's Gases Division. The order backlog remains at a very high level. At 30 September 2010, it stood at EUR 4.141 bn (31 December 2009: EUR 4.215 bn).
Engineering Division - outlook
In international plant construction, it is expected that the revival in investment activity which was evident in the course of 2010 will continue to stabilise.
At EUR 4.141 bn, the order backlog in the Engineering Division remains stable at a very high level. This will provide a solid foundation for a relatively robust performance over the next two years. Linde continues to project that sales in the Engineering Division for the full 2010 financial year will be at least as high as the level achieved in 2009. Based on the development in the nine months until 30 September 2010, Linde expects to achieve an operating margin for the full financial year of at least 10 percent, which will significantly exceed its 8 percent target. Linde is well-placed in the global plant construction business and will benefit in the long term in particular from investment in the structural growth areas energy and the environment.
To coincide with the publication of the quarterly financial statements, a teleconference 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 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 +49.0800 101 2111. Please give the following reference number: 877434.
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