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Linde Reports Second-Quarter 2020 Results

By August 2, 2020 9   min read  (1213 words)

August 2, 2020 |

Guildford – Linde plc (NYSE: LIN; FWB: LIN) reported its second-quarter 2020 financial results.

Financial Highlights

  • Strong operating cash flow of $1.8 billion, up 76 versus prior year
  • Operating profit margin flat versus prior year; adjusted operating profit margin up 230 basis points
  • EPS of $0.87, down 7 versus prior year; adjusted EPS of $1.90, up 4
  • Full-year 2020 adjusted EPS guidance of $7.60 – $7.80, up 7 to 9 year-over-year, ex-FX*

Linde plc (NYSE: LIN; FWB: LIN) today reported second-quarter 2020 income from continuing operations of $458 million and diluted earnings per share of $0.87. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,005 million, up 1 versus prior year and flat sequentially.
Adjusted earnings per share were $1.90, 4 above prior year, or 8 higher when excluding negative currency translation effects. Sequentially, adjusted earnings per share increased 1, or 3 when excluding negative currency translation effects.

Linde’s sales for the second quarter were $6,377 million, 5 below prior year excluding negative currency translation, cost pass-through and divestitures. Price improved 2 and was attained across all geographic segments. Volume decreased 7 as growth from project start-ups and engineering was more than offset by the global macroeconomic slowdown as a result of the COVID-19 pandemic.

The second-quarter operating profit was $591 million. Adjusted operating profit of $1,317 million was flat versus prior year, or 4 higher, when excluding unfavorable currency translation effects. Adjusted operating margin of 20.7 expanded 230 basis points versus prior year primarily due to price and cost actions underpinned by stable fixed payment revenues.

The second-quarter operating cash flow of $1,764 million increased $759 million or 76 over prior year primarily driven by higher cash earnings, lower merger-related cost and improved working capital. During the quarter, the company invested $783 million in capital expenditures and returned $506 million to shareholders through dividends.

Commenting on the financial results, Chief Executive Officer Steve Angel said, “I’m proud of how the Linde team came together to safely and reliably serve our customers and deliver high-quality financial results. Despite volume reductions from the pandemic, EPS excluding currency increased 8 , operating margin expanded 230 basis points and operating cash flow grew
76 from prior-year levels. These results demonstrate the resiliency of our integrated industrial gas supply model.”

Angel continued, “Looking ahead, the full effects of COVID-19 and the rate of recovery are uncertain. However, the growth opportunities for Linde remain strong from our high-quality project backlog, defensive end markets and leading infrastructure and technology in support of the secular trend in clean energy. Our resilient business model combined with our ability to continuously optimize business performance, while capitalizing on short and long-term growth opportunities, gives me the confidence that Linde can grow earnings in any environment.”

For the third quarter of 2020, Linde expects adjusted diluted earnings per share in the range of $1.90 to $1.95. This guidance assumes a negative currency impact of approximately 3 versus the prior-year quarter based on projected exchange rates.

For the full year, the company expects adjusted diluted earnings per share to be in the range of $7.60 to $7.80, up 4 to 6 versus prior year, or 7 to 9 excluding currency headwinds. Full-year capital expenditures are expected to between $3.0 billion to $3.4 billion to support maintenance and growth requirements including the $3.6 billion contractual sale of gas project backlog.

Second-Quarter 2020 Results by Segment

Americas sales of $2,417 million were 13 below prior-year quarter as 2 higher pricing was more than offset by 9 volume decline led mainly by manufacturing and metals end markets. Furthermore, currency was unfavorable by 4 and cost pass- through was down 1 . Operating profit of $622 million was 25.7 of sales, up 250 basis points versus prior year.

APAC (Asia Pacific) sales of $1,295 million were 13 below prior year. Price increased 1 versus prior year but was more than offset by negative 9 volumes driven by lower demand in the manufacturing end market and a prior-year sale of equipment. Additionally, currency was unfavorable by 4 and cost pass-through was down 1 . Operating profit of $294 million was 22.7 of sales, up 230 basis points versus prior year.

EMEA (Europe, Middle East & Africa) sales of $1,448 million were down 13 versus prior year as 1 higher pricing was more than offset by negative 7 volumes primarily due to lower demand in the manufacturing and metals end market. Currency was unfavorable by 5 and cost pass through was down 1 . Operating profit of $303 million was 20.9 of sales, up 110 basis points versus prior year.

Linde Engineering sales were $810 million and operating profit was $138 million or 17 of sales. Operating profit grew 39 versus prior year due primarily to strong project execution and productivity initiatives.

LINDE PLC AND SUBSIDIARIES SUMMARY NON-GAAP RECONCILIATIONS (UNAUDITED)

The following adjusted amounts are Non-GAAP measures and are intended to supplement investors’ understanding of the company’s financial statements by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance. Items which the company does not believe to be indicative of ongoing business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. See the “NON-GAAP MEASURES AND RECONCILIATIONS” starting on page 10 for additional details relating to the adjustments.

(Millions of dollars, except per share amounts)

Income from Continuing                           Diluted EPS from Continuing

                            Sales                                               Operating Profit                                              Operations                                        

2020 2019 2020 2019 2020 2019 2020 2019
Quarter Ended June 30
Reported GAAP Amounts $ 6,377 $ 7,204 $ 591 $ 669 $ 458 $ 513 $ 0.87 $ 0.94
Cost reduction program and other charges (a) 249 141 187 115 0.35 0.22
Pension settlement charges (b) 8 0.01
Merger-related divestitures (c) (25) (6) (4) (0.01)
Purchase accounting impacts – Linde AG (d) 477 515 360 368 0.68 0.67
Total adjustments (25) 726 650 547 487 1.03 0.89
Adjusted amounts $ 6,377 $ 7,179 $ 1,317 $ 1,319 $ 1,005 $ 1,000 $ 1.90 $ 1.83

 

Income from Continuing                           Diluted EPS from Continuing

                            Sales                                               Operating Profit                                              Operations                    

2020 2019 2020 2019 2020 2019 2020 2019
Year to Date June 30
Reported GAAP Amounts $               13,116 $               14,148 $                 1,324 $                 1,278 $                 1,029 $                    948 $ 1.93 $                   1.73
Cost reduction program and other charges (a) 380 230 282 198 0.53 0.37
Pension settlement charges (b) 46 0.08
Merger-related divestitures (c) (55) (13) (9) (0.02)
Purchase accounting impacts – Linde AG (d) 965 1,046 703 744 1.32 1.36
Total adjustments (55) 1,345 1,263 985 979 1.85 1.79
Adjusted amounts $               13,116 $               14,093 $                 2,669 $                 2,541 $                 2,014 $                 1,927 $ 3.78 $                   3.52

To adjust for cost reduction program and other charges; 2020 includes severance of $192 million and $250 million for the quarter and year-to-date periods, other cost reduction charges of $21 million and $41 million for the quarter and year-to-date periods, and other charges of $36 million and $89 million for the quarter and year-to-date

  • To adjust for pension settlement charges relates to the
  • To adjust for the results of Praxair’s merger-related
  • To adjust for purchase accounting impacts related to the

LINDE PLC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME

(Millions of dollars, except per share data) (UNAUDITED)

Quarter Ended

                                      June 30,                                       

Year To Date

                                      June 30,                                       

 

                  2020                                    2019                                    2020                                     2019                 
 

SALES

 

$

 

6,377

 

$

 

7,204

 

$

 

13,116

 

$

 

14,148

Cost of sales 3,619 4,280 7,462 8,396
Selling, general and administrative 760 884 1,621 1,763
Depreciation and amortization 1,124 1,195 2,266 2,418
Research and development 34 45 78 91
Cost reduction programs and other charges 249 141 380 230
Other income (expense) – net                                                                              10                                      15                                      28
OPERATING PROFIT 591 669 1,324 1,278
Interest expense – net 18 10 42 33
Net pension and OPEB cost (benefit), excluding service cost                                    (45)                                    (24)                                    (90)                                      (9)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY INVESTMENTS 618 683 1,372 1,254
Income taxes                                    164                                    169                                    329                                    309
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY INVESTMENTS 454 514 1,043 945
Income from equity investments                                      29                                      28                                      46                                      62
INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING INTERESTS) 483 542 1,089 1,007
Add: income from discontinued operations, net of tax                                                                                9                                        2                                      98
INCOME (INCLUDING NONCONTROLLING INTERESTS) 483 551 1,091 1,105
Less: noncontrolling interests from continuing operations (25) (29) (60) (59)
Less: noncontrolling interests from discontinued operations                                                                                                                                                              (7)
NET INCOME – LINDE PLC $ 458 $ 522 $ 1,031 $ 1,039
 

NET INCOME – LINDE PLC

Income from continuing operations

 

 

 

$

 

 

 

458

 

 

 

$

 

 

 

513

 

 

 

$

 

 

 

1,029

 

 

 

$

 

 

 

948

Income from discontinued operations $ $ 9 $ 2 $ 91
PER SHARE DATA – LINDE PLC SHAREHOLDERS
Basic earnings per share from continuing operations $ 0.87 $ 0.95 $ 1.95 $ 1.74
Basic earnings per share from discontinued operations                                                                           0.02                                                                            0.17
Basic earnings per share $                              0.87 $                              0.97 $                              1.95 $                              1.91
 

Diluted earnings per share from continuing operations

 

0.87

 

0.94

 

1.93

 

1.73

Diluted earnings per share from discontinued operations                                                                           0.02                                                                           0.17
Diluted earnings per share $ 0.87 $ 0.96 $ 1.93 $ 1.90
 

Cash dividends

 

$

 

0.963

 

$

 

0.875

 

$

 

1.926

 

$

 

1.75

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic shares outstanding (000’s)

 

 

525,510

 

 

542,561

 

 

528,385

 

 

544,033

Diluted shares outstanding (000’s) 529,054 546,488 532,112 547,771
Note: See page 10 for a reconciliation to adjusted amounts which are Non-GAAP.

For more information about the company and its products and services, please visit www.linde.com

 

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