Linde plc reported in its preliminary financial information for the fiscal year that ended 31st December 2018 that it had sales of just over $28.1bn, which increased 5% from 2017 (figures are subject to adjustment and may be different from the actual results that will be reflected in Linde plc’s soon to be published Annual Report).
Of the $28.1bn, $24bn was attributable to gases, mostly (31%) in the manufacturing segment.
Linde also said in its presentation that 2018 adjusted pro-forma income from continued operations rose to $3.44bn, a rise of 8.3% from $3.17bn in 2017.
Matthew White, Linde plc Chief Financial Officer, said on an investor and media conference call, “At this point, we anticipate 2019 sales growth to be lower than the 5% we experienced in 2018. The primary driver is from a 2% foreign currency headwind in 2019 versus a slight tailwind in 2018. In addition, global industrial production is projected to be lower in 2019. That view has been supported by first quarter indications of softer conditions in parts of Europe, Americas and specific markets like automotive and metals.”
“However, we fully expect positive contribution from the project backlog as well as pricing. All in, these assumptions would imply a low single-digit sales growth rate. Despite the top line outlook, we are expecting strong leverage down the income statement with adjusted pro forma EPS (earnings per share) growth rates in the range of 8% to 12% or 10% to 14% excluding FX translation. Cost and capital structure synergies combined with a lower share count will all contribute to the improvement and profit margins should steadily increase through the year as we execute synergies.”
White reported that gross profit was up 6%, with operating profit of $4.8bn up 7%.
“Diluted earnings per share rose up to $6.19 which is 8% higher than 2017,” White said. “EPS and net income are growing faster than operating profits due primarily to lower net interest expense from the combination of lower debt and higher yielding cash balances.”
The Americas maintained its position as Linde plc’s largest region for sales (30%). Steve Angel, Linde plc CEO, said, “Americas continues to be the largest region and that’s because the US is still a significant percent of our overall sales with a solid 30%.”
Going forward, together
Angel also offered some explanation on Linde plc’s vision statement of being “the best performing global industrial gases and engineering company.”
“When we think of best performing, we do think of financial performance,” Angel said. “It means to have the best operating margins. It means to have the strongest cash flow. It means to have the best return on capital. It means to have the best top-line growth.”
“Those are the objectives, but it also includes being the best-in-class with respect to safety, compliance, diversity, sustainability, productivity, working capital management, price management, project execution. It really pertains to being the best performing in every aspect of being an industrial gas and engineering company.”
Linde’s future sales will also be helped by Linde Engineering’s $5.5bn of orders for third-parties in its backlog, while it expects the synergies with Praxair to increase the operating margins.
“We’ve identified $1.1bn of synergies that we expect to capture over the next three years,” Angel said. “$900m of that is cost synergies and we arrived at this number as we concluded 2018. We saw where each organisation was and as a team, we determined that we believe we had $900m of cost opportunity going forward as it pertains to the merger.”