Group revenue: EUR 8.212 bn (2013: EUR 8.207 bn); up 5.6 percent after adjusting for exchange rate effects.
Group operating profit: EUR 1.896 bn (2013: EUR 1.966 bn); up 1.7 percent after adjusting for exchange rate effects.
2014 Group outlook confirmed: After adjusting for exchange rate effects: solid revenue growth, moderate improvement in operating profit.
Munich, 29 July 2014 – In the first half of 2014, the technology company The Linde Group generated virtually the same amount of revenue as in the first half of 2013. Group operating profit was not quite as high as in the prior-year period. "We have proved our stability, although reported growth was again hampered by unfavourable exchange rate effects," said Dr Wolfgang Büchele, Chief Executive Officer of Linde AG.
Linde believes that it is still on track for the full year 2014 and confirms its previous outlook: "In the current financial year, we expect to achieve solid growth in revenue and a moderate improvement in Group operating profit - after adjusting for exchange rate effects," continued CEO Büchele.
In the first half of 2014, Linde generated Group revenue of EUR 8.212 bn (2013: EUR 8.207 bn). As in previous quarters, fluctuations in exchange rates had a significant adverse impact on growth trends. After adjusting for exchange rate effects (which equate to revenue of EUR 428 m), the increase in revenue in the first half of 2014 was 5.6 percent.
Group operating profit in Linde for the six months to 30 June 2014 was EUR 1.896 bn, not quite as high as the figure for the first six months of 2013 of EUR 1.966 bn. Adverse currency fluctuations also need to be considered here. The effect of these distortions was to reduce earnings by EUR 101 m. Without the distortions, the Group would have achieved a 1.7 percent increase in Group operating profit. The Group operating margin for the first half of 2014 was 23.1 percent (2013: 24.0 percent). It should be noted here that, as expected, the Engineering Division contributed significantly more to Group revenue in the reporting period than was the case in the first half of 2013. Linde’s engineering business has a lower margin than its gases operations.
The Group generated earnings before tax (EBT) in the first half of 2014 of EUR 894 m (2013: EUR 911 m). Profit for the period was EUR 680 m (2013: EUR 715 m). Profit for the period attributable to Linde AG shareholders was EUR 624 m (2013: EUR 660 m). This gives earnings per share of EUR 3.36 (2013: EUR 3.56).
As a result of unfavourable exchange rate fluctuations, Linde achieved revenue in the Gases Division in the first half of 2014 of EUR 6.825 bn, which was below the figure of EUR 7.021 bn achieved in the first half of 2013. If an adjustment were to be made for these exchange rate effects, Linde would have achieved a 3.2 percent increase in revenue. On a comparable basis (after adjusting in addition for fluctuations in the price of natural gas), Linde would have achieved a 2.7 percent increase in revenue in its gases business. Revenue trends have also, as expected, been adversely affected by price adjustments and by supply contracts in the Healthcare product area being put out again to tender. Revenue in the Gases Division would have increased by 3.7 percent if an adjustment were also made for these factors.
In the first half of 2014, operating profit in Linde’s Gases Division fell by 2.7 percent to EUR 1.863 bn (2013: EUR 1.915 bn). Exchange rate fluctuations also had a significant influence here. If these exchange rate movements had not occurred, Linde would have achieved a 2.5 percent increase in operating profit. The operating margin in the gases business remained stable during the reporting period at a high level of 27.3 percent, the same figure as in the first half of 2013.
Business trends in the individual segments of the Gases Division varied in each case, depending on prevailing economic conditions.
In the EMEA segment (Europe, Middle East, Africa), revenue in the first six months of 2014 of EUR 2.978 bn was slightly below the figure for the prior-year period of EUR 3.046 bn. On a comparable basis, revenue rose slightly, by 0.5 percent. Operating profit increased to EUR 889 m (2013: EUR 876 m). The operating margin in the EMEA segment rose to 29.9 percent (2013: 28.8 percent). Proceeds on the sale of non-current assets also contributed to this increase.
There were positive trends in the on-site business in almost all areas of the EMEA region. Linde achieved above-average growth rates in this business, especially in the UK and in the Middle East. In Continental Europe, on the other hand, business performance in the first half of 2014 was temporarily affected by the stoppage for repairs of a hydrogen plant in Italy. Against the prevailing background of modest economic growth in the eurozone, revenue in the liquefied gases and cylinder gas business in this region was slightly above the figure achieved in the first half of 2013. In the Healthcare product area, a number of supply contracts relating to homecare operations acquired by Linde from Air Products in April 2012 were put out again to tender. As expected, due to the reorganisation of supply areas associated with this process, revenue in the Healthcare business in the EMEA segment in the first half of 2014 was slightly below the figure for the prior-year period. In accordance with the terms of its purchase agreement with Air Products, Linde is therefore entitled to compensation which will be paid in the third quarter of 2014.
Business trends in the Asia/Pacific segment were hampered mainly by unfavourable exchange rate effects. In the South Pacific region, the economic environment in manufacturing industry remained weak and investment in the mining industry declined. Both these factors had an adverse impact on growth. Given these conditions, Linde generated revenue of EUR 1.816 bn in the Asia/Pacific segment in the six months to 30 June 2014, which was 4.3 percent below the figure for the prior-year period of EUR 1.897 bn. In contrast, on a comparable basis revenue increased by 5.4 percent. Operating profit fell by 4.2 percent to EUR 476 m (2013: EUR 497 m). The operating margin remained the same in the first half of 2014 as in the first half of 2013, at 26.2 percent.
Within the segment, the most positive trends were to be seen in business operations in the Greater China region. Boosted by volume increases in all product areas, Linde achieved double-digit revenue growth here.
In the Americas segment, Linde generated revenue of EUR 2.095 bn in the first half of 2014. This was not quite as high as the figure for the first half of 2013 of EUR 2.137 bn as a result of unfavourable exchange rates. On a comparable basis, revenue increased by 3.8 percent. Operating profit dropped by 8.1 percent to EUR 498 m, compared with a figure of EUR 542 m for the first half of 2013. The operating margin fell as a result to 23.8 percent (2013: 25.4 percent).
These figures were influenced by a number of different factors. Government tenders introduced in the healthcare business in North America in the second half of 2013, for example, resulted in reductions in prices, which as expected had an adverse impact on revenue and earnings in this segment. In the run-up to these changes, Linde had already begun to adapt its cost structures. In the course of the first half of 2014, it was increasingly seeing the benefits of this approach. Higher natural gas prices and inflation in some of the countries of South America also had a negative impact on the operating margin in the Americas segment. In addition, it should be noted that during the reporting period the Venezuelan government introduced a new exchange rate system with significant changes in exchange rates. Exchange rate effects have arisen for Linde as a result of its application of the new system from 1 April 2014. This is another factor which had an impact on revenue and operating profit in the Americas segment.
Gases Division – Product areas
Within the Gases Division, revenue in the on-site product area (where Linde supplies gases on site to major customers) rose in the first half of 2014 on a comparable basis by 4.5 percent to EUR 1.823 bn (2013: EUR 1.744 bn). In the liquefied gases product area, revenue increased on a comparable basis by 4.3 percent to EUR 1.609 bn (2013: EUR 1.542 bn). On a comparable basis, revenue in the cylinder gas business of EUR 1.913 bn was 0.6 percent higher than the figure for the first half of 2013 of EUR 1.901 bn. Towards the end of the reporting period in particular, positive trends were to be seen for Linde in its liquefied gases and cylinder gas business.
In the Healthcare product area, Linde generated revenue in the first six months of 2014 of EUR 1.480 bn. This was an increase of 1.5 percent when compared with the figure for the first six months of 2013 of EUR 1.458 bn. Here, supply contracts being put out again to tender hampered business performance. In Europe, the reorganisation of supply areas associated with this process affected the homecare operations acquired by Linde from Air Products in April 2012. In North America, government tenders introduced in the second half of 2013 led to price reductions in the healthcare market. The growth in Linde’s healthcare business in the first half of 2014 would have been 6.0 percent if the events described had not occurred.
Gases Division – Outlook
Recent economic forecasts indicate that the global gases market will grow at a slightly faster pace in 2014 than was the case in 2013. Linde remains committed to its original target in the gases business of outperforming the market and continuing to increase productivity.
In its on-site business, Linde has a healthy project pipeline which will make a contribution to revenue and earnings in the 2014 financial year and an even more significant contribution to revenue and earnings in subsequent years. The Group is forecasting that its liquefied gases and cylinder gas product areas will perform in line with macroeconomic trends. In the Healthcare product area, stable growth is expected.
Against this background, Linde expects to achieve (after adjusting for exchange rate effects) a moderate increase in revenue and operating profit in the Gases Division in 2014 when compared with the 2013 financial year.
Revenue and earnings trends in Linde’s international plant construction project business reflected the progress made on individual projects. The revenue of the Engineering Division in the first half of 2014 increased by 13.6 percent to EUR 1.418 bn (2013: EUR 1.248 bn), while operating profit of EUR 141 m was not quite as high as the figure for the first half of 2013 of EUR 148 m. This gives an operating margin of 9.9 percent (2013: 11.9 percent), which is well above the industry average and equal to the target of around 10 percent Linde set itself for the current financial year.
The Group was awarded a number of relatively small contracts during the reporting period, especially in the energy and chemical sectors. Order intake in the first half of 2014 was EUR 1.058 bn (2013: EUR 2.808 bn). It should be noted that the exceptionally high figure in the prior-year period included a major contract to build a large ethylene plant for ExxonMobil in Houston, Texas, USA, and a EUR 450 m contract to build six air separation plants on behalf of Reliance Industries Ltd. (RIL) in India.
Just under 40 percent of the total order intake in the first half of 2014 came from the North America region. Here, new business again included projects for the efficient exploitation of shale gas reserves. In the six months to 30 June 2014, Linde was able to win new orders of around USD 260 m in this market segment. Just over a third of order intake came from Europe and around 19 percent from the Asia/Pacific region.
The order backlog in the Engineering Division has remained at a very high level. At 30 June 2014, it stood at EUR 4.110 bn (31 December 2013: EUR 4.504 bn).
Engineering Division – Outlook
A relatively stable market environment is expected in the international large-scale plant construction business in 2014. Linde is well positioned in the olefin plant, natural gas plant, air separation plant and hydrogen and synthesis gas plant product areas and also has a high order backlog.
Linde expects to achieve solid revenue growth in the Engineering Division in 2014 compared with 2013. The Group anticipates that it will achieve an operating margin in this division of around 10 percent.
To coincide with the publication of the half-year financial report, a webcast 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 watch the webcast by following this link: http://event.mescdn.com/linde/webcast-20140729
In the 2013 financial year, The Linde Group generated revenue of EUR 16.655 bn, making it the largest gases and engineering company in the world with approximately 63,500 employees working in more than 100 countries worldwide. The strategy of The Linde Group is geared towards long-term profitable 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. The company 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 www.linde.com
1 EBITDA including share of profit or loss from associates and joint ventures.