Group sales up 11.5 percent to EUR 6.104 bn
26.4 percent growth in Group operating profit* to EUR 1.396 bn outpaces increase in sales
Significant improvement in Group operating margin of 270 basis points to 22.9 percent
Increase in earnings per share to EUR 2.63 (2009: EUR 1.47)
Group outlook for 2010 reaffirmed:
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 August 2010 - Capitalising on the general economic upturn, the technology group The Linde Group has continued the positive trend seen in the first quarter into Q2. In the first half of 2010, the Group achieved significant growth in sales and operating profit. "The upward trend is continuing. In the course of the second quarter, we have increasingly seen a rise in demand worldwide," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "Once again we have improved our profitability and we look with confidence to the months ahead. 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 well on the way to achieving a faster rate of growth in Group operating profit than in Group sales and exceeding the Group operating profit of record year 2008."
In the six months to 30 June 2010, Group sales rose 11.5 percent to EUR 6.104 bn (2009: EUR 5.476 bn). After adjusting for exchange rate effects, the increase in sales was 5.8 percent. Linde achieved a 26.4 percent improvement in Group operating profit* to EUR 1.396 bn (2009: EUR 1.104 bn). The growth in operating profit again outpaced the increase in sales. The Group operating margin was 22.9 percent, 270 basis points above the figure for the prior-year period of 20.2 percent. If an adjustment is made for the one-off restructuring costs of EUR 67 m recognised in 2009, the rise in the operating margin is 150 basis points. This positive performance is also evidence of the successful and rigorous implementation of HPO (High Performance Organisation), Linde's integrated concept for sustainable process optimisation and increased productivity.
Earnings before taxes on income (EBT) reached EUR 646 m, a significant 77.0 percent improvement on the figure for the six months to 30 June 2009 of EUR 365 m. Earnings after tax rose in the first half of the year by 76.3 percent to EUR 483 m (2009: EUR 274 m). Earnings attributable to Linde AG shareholders were EUR 445 m (2009: EUR 248 m). Earnings per share improved as a result by 78.9 percent to EUR 2.63 (2009: EUR 1.47). On an adjusted basis, i.e. after adjusting for the effect of the purchase price allocation in the course of the BOC acquisition, earnings per share stood at EUR 3.15 (2009: EUR 2.06).
The market recovery in the international gases industry gathered pace in the second quarter of 2010 as a result of the improvement in the general economic situation. Linde benefited from this positive trend, given the Group's global footprint and strong position in emerging markets in particular.
Linde achieved a 13.4 percent increase in sales in the Gases Division in the first half of 2010 to EUR 4.931 bn (2009: EUR 4.350 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, sales rose by 5.6 percent. Business trends from quarter to quarter confirm that the recovery in the general economy is stabilising. After achieving growth of 3.9 percent on a comparable basis in the first quarter of 2010, Linde's gases business saw a 7.1 percent increase in sales in the second quarter of 2010.
Operating profit rose by 17.5 percent in the six months to 30 June 2010 to EUR 1.337 bn (2009: EUR 1.138 bn). The operating margin in the Gases Division improved as a result by 90 basis points to 27.1 percent (2009: 26.2 percent). This increase in profitability is mainly due to the positive impact of HPO.
The business trends in the operating segments of the Gases Division reflect regional variations in the pace of economic recovery. In the second quarter of 2010, the highest growth rates were to be seen in Asia, especially in the Greater China region. In the more mature markets, such as the United States and Western Europe, demand also continued to rise. However, the upturn here is proceeding still at a relatively modest pace.
In the Western Europe operating segment, Linde achieved sales growth of 7.0 percent in the first half of 2010 to EUR 1.979 bn (2009: EUR 1.849 bn). On a comparable basis, the increase in sales was 4.0 percent. Operating profit rose significantly as a result of process and cost optimisation measures by 13.0 percent to EUR 572 m (2009: EUR 506 m). This had the effect of improving the operating margin in this region by 150 basis points to 28.9 percent (2009: 27.4 percent).
In the Americas operating segment, Linde achieved sales in the first six months of 2010 of EUR 1.095 bn, an increase of 10.3 percent when compared with the figure for the prior-year period of EUR 993 m. On a comparable basis, sales rose 7.2 percent. Operating profit was up 18.1 percent, from EUR 210 m in the first half of 2009 to EUR 248 m in the first half of 2010. The operating margin was 22.6 percent, significantly higher than the figure for the prior-year period of 21.1 percent. Here, the positive impact of numerous cost reduction and productivity improvement measures more than offset the adverse pass-through effect of higher natural gas prices.
Powered by the structural growth dynamic of the emerging markets, Linde achieved a significant increase in sales in the Asia & Eastern Europe operating segment in the six months to 30 June 2010 of 21.6 percent to EUR 1.066 bn (2009: EUR 877 m). On a comparable basis, sales rose 12.7 percent. Operating profit also improved considerably, by 21.4 percent to EUR 323 m (2009: EUR 266 m). The operating margin remained steady, reaching the same high level as in the first half of 2009 of 30.3 percent. To ensure that this strong profitability is maintained, Linde is continuing the rigorous implementation of its ongoing process and cost optimisation measures.
In the South Pacific & Africa operating segment, Linde achieved sales in the first six months of 2010 of EUR 833 m. This is an increase of 25.1 percent compared with the figure for the first half of 2009 of EUR 666 m. The positive impact of the exchange rates for the Australian dollar and the South African rand should be taken into account here. On a comparable basis, sales were at the same level as for the prior-year period. Operating profit, which was also boosted by exchange rate effects, rose 24.4 percent to EUR 194 m (2009: EUR 156 m). The operating margin achieved was 23.3 percent (2009: 23.4 percent).
Business performance in the individual product areas confirms the upward trend in the Gases Division. In the first half of 2010, sales in the on-site business, where Linde supplies industrial gases from plants situated directly on the customer's site, increased on a comparable basis by 11.8 percent to EUR 1.182 bn (2009: EUR 1.057 bn). In its bulk business, Linde achieved a 7.6 percent rise in sales on a comparable basis to EUR 1.203 bn (2009: EUR 1.118 bn). The cylinder gases business recovered during the second quarter. Linde was able to increase sales in this product area in the six months to 30 June 2010 on a comparable basis by 1.7 percent to EUR 1.999 bn (2009: EUR 1.966 bn). The Healthcare or medical gases product area continued its steady progress in the first six months of 2010, achieving 3.2 percent growth in sales on a comparable basis to EUR 547 m (2009: EUR 530 m).
Gases Division - Outlook
Linde's original target for the gases business still applies. The Group wants to outperform the market and continue to increase productivity. In its on-site business, Linde has a well-filled project pipeline, which will make a particularly significant contribution in the 2010 financial year to sales and earnings growth targets. The liquefied and cylinder gases business should benefit from the forecast general economic recovery. In the Healthcare product area, Linde expects to continue to deliver steady growth.
Against this background and given its good business performance in the first six months of the year, Linde continues to assume that it will achieve an increase in sales and earnings in the Gases Division in the full year 2010. The Group still expects to exceed the record operating profit of EUR 2.417 bn achieved in 2008.
The market environment in the international plant construction business was characterised in the first six months of 2010 by a slight increase in demand. In the four major product segments (olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants), there are growing signs of a revival in capital spending. Against this background, the Engineering Division achieved an order intake of EUR 962 m in the first half of 2010 (2009: EUR 1.299 bn), winning a number of small and medium-sized projects. In contrast, the high figure for the prior-year period was mainly the result of one major contract in Abu Dhabi worth USD 1.075 bn.
Sales in the Engineering Division in the six months to 30 June 2010 were EUR 1.095 bn, almost the same as the figure for the prior-year period of EUR 1.113 bn. Operating profit improved by 36.7 percent to EUR 123 m (2009: EUR 90 m). The operating margin rose as a result to 11.2 percent (2009: 8.1 percent). This means that Linde again exceeded its target margin of 8 percent, which is well above the industry average. The significant increase in the margin was due primarily to the successful execution of a number of individual projects.
The order backlog at 30 June 2010 was EUR 4.315 bn, remaining at a very high level (31 December 2009: EUR 4.215 bn).
Engineering Division - Outlook
The improved investment climate evident in international plant construction in the first half of 2010 should continue for the rest of the year.
The order backlog for the Engineering Division remains at a very high level of over EUR 4.3 bn, providing the basis for relatively stable business performance over the next two years. Linde continues to project that sales in the Engineering Division in the 2010 financial year will be at least as high as the level achieved in 2009 of EUR 2.311 bn. In the 2010 financial year, the Group expects to exceed the target it has set for its operating margin of 8 percent. Linde is well-placed internationally in the plant construction business and will continue to benefit in the long term from the structural growth drivers 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 +49.30.726.167-224. Please give the following reference number: 869708.
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 share of net income from associates and joint ventures.