Group sales grow 14.9 percent to EUR 3.325 bn
Group operating profit* increases at a faster rate than sales, by 18.7 percent to EUR 761 m
Group operating margin up 80 basis points to 22.9 percent
Increase in earnings per share from EUR 1.17 to EUR 1.67
Holistic concept for sustainable process optimisation and efficiency gains (HPO) is proving effective
Group outlook for 2011 confirmed: growth in sales and earnings expected
Munich, 4 May 2011 – The technology company The Linde Group has made a good start to the new financial year, achieving significant increases in Group sales and Group operating profit in the first three months of 2011. "We have again seen profitable growth and are well on the way to achieving our targets," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "We confirm our Group outlook and expect to achieve higher levels of Group sales and Group operating profit in the 2011 financial year than in 2010." CEO Reitzle is also confident about the medium-term future of the Group: "We are well-positioned and will take full advantage of the opportunities available, especially in the environmental and energy sectors, the growth markets of Asia and the medical gases business."
In the first quarter of 2011, Group sales rose by 14.9 percent to EUR 3.325 bn, compared with sales for the first quarter of 2010 of EUR 2.894 bn. After adjusting for exchange rate effects, the increase in sales was 10.6 percent. Linde has continued to improve its profitability, achieving an 18.7 percent increase in Group operating profit* to EUR 761 m (2010: EUR 641 m). Operating profit has increased at a faster rate than sales. The Group operating margin was 22.9 percent, 80 basis points above the figure for the comparable prior-year period of 22.1 percent. The ongoing improvement in Linde's profitability demonstrates that the Group is continuing to make progress with the determined implementation of HPO (High Performance Organisation), its holistic concept for sustainable process optimisation and efficiency gains.
Earnings before taxes on income (EBT) rose significantly, by 40.3 percent to EUR 397 m (2010: EUR 283 m). Earnings after tax increased by 42.3 percent to EUR 303 m (2010: EUR 213 m). After adjusting for minority interests, earnings attributable to Linde AG shareholders were EUR 284 m (2010: EUR 198 m), giving earnings per share of EUR 1.67 (2010: EUR 1.17). 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 1.88 (2010: EUR 1.41).
The improvement in the economic situation in the first quarter of 2011 also resulted in ever-rising demand in the worldwide gases business. Linde was able to benefit from this positive trend in all product areas, due to the Group's global footprint and its strong position especially in the emerging economies.
Sales in the Gases Division in the first three months of 2011 grew 13.8 percent to EUR 2.662 bn, compared with the figure of EUR 2.340 bn for the first quarter of 2010. 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 were up 8.3 percent.
The growth in operating profit of the Gases Division of 16.3 percent to EUR 727 m (2010: EUR 625 m) once again outpaced the increase in sales. The operating margin improved by 60 basis points to 27.3 percent (2010: 26.7 percent). This latest increase in profitability was also due to the positive impact of HPO’s efficiency improvement and process optimisation measures. Also in evidence here was a higher level of capacity utilisation in production plants in the first quarter of 2011 than in the first quarter of 2010.
Business trends in the various operating segments of the Gases Division reveal that the dynamics of economic activities still varies from region to region. In the first three months of 2011, the highest growth rates were once again to be seen in Asia (especially in China and India) and in South America. At the same time, the economic recovery also continued in the mature markets, such as the US and Western Europe.
In the EMEA operating segment (Europe, Middle East, Africa), Linde achieved sales growth of 10.2 percent in the first quarter of 2011 to EUR 1.393 bn (2010: EUR 1.264 bn). On a comparable basis, the growth in sales was 6.0 percent. Operating profit again increased at a faster rate than sales, rising 12.5 percent to EUR 395 m (2010: EUR 351 m). This resulted in an operating margin of 28.4 percent, 60 basis points above the figure for the prior-year period of 27.8 percent. Here too, the determined implementation of the various productivity improvement and process standardisation initiatives which form part of the HPO programme made a positive contribution.
Linde achieved a high rate of growth in the Asia/Pacific operating segment, boosted by continuing economic dynamism in Asia and based on its leading position in these markets. In the first quarter of 2011, sales in this region grew 22.5 percent to EUR 707 m (2010: EUR 577 m). On a comparable basis, the increase in sales was 11.0 percent. Operating profit rose by 21.0 percent to EUR 196 m (2010: EUR 162 m). At 27.7 percent (2010: 28.1 percent), the operating margin again reached a very high level. To sustain this level of profitability, Linde is continuing here too with the implementation of its HPO concept.
In the Americas operating segment, sales in the first three months of 2011 grew 12.8 percent to EUR 580 m (2010: EUR 514 m). On a comparable basis, the increase in sales was 11.1 percent. In this region too, operating profit rose at a faster rate than sales, by 21.4 percent to EUR 136 m (2010: EUR 112 m). The operating margin was 23.4 percent, an increase of 160 basis points over the figure for the first quarter of 2010 of 21.8 percent. Beside positive one-off effects, it has been the progress achieved by Linde in the implementation of HPO, which contributed to this substantial increase in the margin.
The performance in the individual product areas reflects the overall positive trend in the Gases Division in the first quarter of 2011. Linde achieved its highest rate of growth in the on-site business, where it supplies gases on site to major customers. Sales in this product area rose on a comparable basis by 12.1 percent to EUR 659 m (2010: EUR 588 m). The cylinder gas business continued its steady upward trend, achieving growth of 7.5 percent to EUR 1.075 bn (2010: EUR 1.000 bn). Sales in the liquefied gases business in the first quarter increased by 7.3 percent to EUR 636 m (2010: EUR 593 m). The Healthcare product area, the medical gases business and related maintenance and advisory services, again saw steady growth, achieving sales of EUR 292 m, 5.8 percent above the sales figure for the prior-year quarter of EUR 276 m.
Gases Division – Outlook
Linde remains committed to its original target in the gases business of growing at a faster pace than the market and continuing to improve productivity. In the on-site business, Linde has a full project pipeline, which will make a significant contribution to sales and earnings in the 2011 financial year. The liquefied gases and cylinder gas business is set to benefit from the continuing general economic recovery. Linde expects the positive business trend in the Healthcare product segment to continue, and expects a higher rate of sales growth than in 2010. Against this background, Linde anticipates that sales generated by the Gases Division in the 2011 financial year will exceed sales achieved in 2010 and that operating profit will grow at a faster pace than sales.
The market environment in the international large-scale engineering business continued to stabilise in the first quarter of 2011. In the four main product segments (olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants), Linde saw a revival in investment activity.
Sales in the Engineering Division in the first quarter of 2011 increased by 14.3 percent to EUR 591 m (2010: EUR 517 m). The successful execution of a number of individual projects meant that operating profit grew at a faster rate than sales, rising 21.6 percent to EUR 62 m (2010: EUR 51 m). The operating margin was 10.5 percent (2010: EUR 9.9 percent), again significantly exceeding the target figure of 8 percent.
Order intake in the three months ended 31 March 2011 was EUR 444 m (2010: EUR 502 m). In the engineering project business, a comparison between the situation at the end of the current quarter and the prior-year quarter is only of limited use. Projects do not arise at regular intervals and individual major projects can have a significant impact on this key figure in a particular quarter. As in previous quarters, order intake in the first quarter of 2011 was characterised by a number of small and medium-sized new orders.
Linde's order backlog remains high. At 31 March 2011, it stood at EUR 3.714 bn (31 December 2010: EUR 3.965 bn).
Engineering Division – Outlook
The high order backlog provides a good basis for a solid business performance in the Engineering Division over the next two years. Linde expects to achieve the same level of sales in its engineering business in the 2011 financial year as in 2010. The target figure for the operating margin in the current financial year is at least 8 percent.
Linde continues to be well-positioned in the international market for olefin plants, natural gas plants, air separation plants as well as hydrogen and synthesis gas plants and will derive sustainable 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 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 +49.800.101.2111. Please give the following reference number: 890118.
The Linde Group is a world-leading gases and engineering company with around 48,700 employees in more than 100 countries worldwide. In the 2010 financial year, it achieved sales of EUR 12.868 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 including share of net income from associates and joint ventures.