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
Read the most up to date Fuel Cell and Hydrogen Industry news at FuelCellsWorks