January to September 2012: Linde's business performance remains steady and its outlook is confirmed

Mon Oct 29, 2012 2:33am EDT

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Linde AG / January to September 2012: Linde's business performance remains steady and its outlook is confirmed . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

  • Group revenue up 8.4 percent to EUR 11.063 bn
  • Group operating profit[1] increases by 8.5 percent to EUR 2.563 bn
  • Group operating margin rises slightly to 23.2 percent (2011: 23.1 percent)
  • Lincare transaction successfully concluded
  • Short-term outlook and medium-term outlook confirmed:
    • 2012: Increase in Group revenue and Group operating profit
    • 2013: Group operating profit of at least EUR 4 bn
    • 2015: ROCE[2] of at least 14 percent
  • Concept designed to achieve sustainable efficiency gains (HPO) to be extended:
    • 2013-2016: Additional reductions in gross costs totalling EUR 750 m to EUR 900 m

Munich, 29 October 2012 - The performance of the technology company The Linde Group has remained steady in the nine months ended 30 September 2012, with Group revenue and Group operating profit both increasing once again. "We are still on track, even though the economic situation has worsened in the past few months," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "Lincare has already had a positive impact. The acquisition of this business has made our position even more robust."

Against this background, CEO Reitzle confirmed the short-term outlook and medium-term outlook for the Group: "We continue to expect that we will achieve increases in Group revenue and Group operating profit in the full year 2012 when compared with the previous year. We want to achieve Group operating profit in the 2013 financial year of at least EUR 4 bn." The Group is seeking to achieve return on capital employed (ROCE) of at least 14 percent in the 2015 financial year.

Linde will continue to apply its holistic concept for sustainable efficiency gains (HPO) after 2012 and is planning to achieve further reductions in gross costs totalling EUR 750 m to EUR 900 m in the years 2013 to 2016. "This will help to reinforce our high level of profitability even in a challenging environment," explained Reitzle.

In the first nine months of 2012, Group revenue rose by 8.4 percent to EUR 11.063 bn, compared with EUR 10.209 bn for the first nine months of 2011. After adjusting for exchange rate effects, the increase in revenue was 3.8 percent. US homecare company, Lincare, contributed to this positive trend for the first time in the third quarter of 2012, generating post-acquisition revenue of EUR 231 m. Linde concluded its acquisition of Lincare in August 2012.

Linde continued with the rigorous implementation of its HPO (High Performance Organisation) programme, a holistic concept for sustainable process optimisation and productivity gains, increasing Group operating profit by 8.5 percent to EUR 2.563 bn (2011: EUR 2.363 bn). The Group was able to continue to reinforce its high level of profitability and to increase the Group operating margin slightly to 23.2 percent (2011: 23.1 percent).

Profit for the period rose in the first nine months of 2012 by 6.1 percent to EUR 958 m (2011: EUR 903 m). Profit attributable to Linde AG shareholders was EUR 904 m (2011: EUR 856 m). This gives earnings per share of EUR 5.15 (2011: EUR 5.02). When comparing with the figure for the prior-year period, it is important to consider the EUR 1.4 bn capital increase undertaken in July 2012 to refinance the Lincare acquisition. The number of Linde shares rose as a result of the capital increase.

On an adjusted basis, i.e. after adjusting for the effects of the purchase price allocation from the BOC acquisition, earnings per share stood at EUR 5.80 (2011: EUR 5.68).

Gases Division
Revenue in the Gases Division in the first nine months of 2012 grew 10.7 percent to EUR 9.153 bn, compared with a figure of EUR 8.270 bn for the prior-year period. When considering this increase, the acquisition of Lincare should be taken into account. In the third quarter, Lincare contributed revenue of EUR 231 m to the total revenue of the Gases Division. On a comparable basis, i.e. after adjusting for exchange rate effects, changes in the price of natural gas and Lincare's post-acquisition revenue, the increase in revenue was 3.3 percent. Linde's Gases Division achieved a 10.2 percent increase in operating profit to EUR 2.484 bn (2011: EUR 2.254 bn). The division's operating margin was 27.1 percent, almost as high as the figure of 27.3 percent achieved in the prior-year period.

As in prior quarters, business trends in the individual segments in the Gases Division varied in each case, depending on prevailing economic conditions.

In the EMEA segment (Europe, Middle East and Africa), Linde achieved revenue growth of 5.0 percent in the first nine months of 2012 to EUR 4.472 bn (2011: EUR 4.258 bn). On a comparable basis, the growth in revenue was 3.6 percent. Operating profit increased by 4.1 percent to EUR 1.265 bn (2011: EUR 1.215 bn). This resulted in an operating margin of 28.3 percent (2011: 28.5 percent). The Continental European homecare operations acquired by Linde from Air Products at the end of April 2012 were one of the factors in the expansion of business in the EMEA region.

Business performance was adversely affected by unfavourable economic conditions in the eurozone. A planned stoppage for plant maintenance in southern Europe also acted as a brake on revenue trends. In Eastern Europe and the Middle East, on the other hand, Linde was able to benefit from a good economic environment.

In the Asia/Pacific segment, Linde achieved revenue growth of 14.4 percent in the first nine months of 2012 to EUR 2.611 bn (2011: EUR 2.283 bn). On a comparable basis, the increase in revenue was 4.5 percent. Growth in this region was adversely affected by plant stoppages. In the third quarter, there was a slight weakening in demand in all product areas.

Operating profit was up 9.9 percent to EUR 697 m (2011: EUR 634 m). This resulted in an operating margin of 26.7 percent (2011: 27.8 percent). When comparing the operating margin for the first nine months of 2012 with that for the prior-year period, factors to be taken into account are the pass-through of increases in the price of natural gas and the up-front investment required to grow the business and employ new staff in the rapidly expanding Asian market, especially in China.

In the Americas segment, Linde achieved revenue growth of 20.9 percent in the first nine months of 2012 to EUR 2.150 bn (2011: EUR 1.778 bn). This dynamic growth was mainly due to the positive contribution made by Lincare. Lincare operates solely in North America and contributed revenue of EUR 231 m in the third quarter of 2012 to the total revenue of the Americas segment. On a comparable basis, Linde would have achieved a 2.4 percent increase in revenue in this segment.

Operating profit rose at a faster rate than revenue, by 28.9 percent to EUR 522 m (2011: EUR 405 m). At 24.3 percent, the operating margin significantly exceeded the figure for the prior-year period of 22.8 percent. The main reason for the increase was the Lincare acquisition. When comparing the operating margins, another factor to consider is the pass-through of reductions in the price of natural gas.

Within the various product areas in the Gases Division, Linde achieved the highest rate of growth in its Healthcare business, as expected. After adjusting for exchange rate effects, revenue here rose by 38.6 percent to EUR 1.265 bn (2011: EUR 913 m). The main reason for this dynamic trend is the Group's acquisition of Lincare. The newly-acquired business contributed EUR 231 m to the revenue of the Healthcare product area in the third quarter of 2012. Without this contribution, Linde would have achieved revenue growth in the Healthcare business of 13.3 percent.

In the cylinder gas product area, revenue rose on a comparable basis by 1.6 percent to EUR 3.190 bn (2011: EUR 3.140 bn). In the liquefied gases product area, revenue increased on a comparable basis in the nine months to 30 September 2012 by 2.6 percent to EUR 2.540 bn (2011: EUR 2.476 bn). In the on-site business (where Linde supplies gases on site to major customers), revenue rose on a comparable basis by 2.3 percent to EUR 2.158 bn (2011: EUR 2.109 bn). Plant stoppages acted as a brake on trends in this product area. It is also worth noting that most of the growth in the on-site product area was achieved through joint ventures and that the Group's share of revenue from these joint ventures is not disclosed in the revenue of the Gases Division.

Gases Division - Outlook
Linde remains committed to its original target for the gases business of growing at a faster pace than the market and continuing to increase productivity. In the on-site business, Linde has a healthy project pipeline, which will continue to make a substantial contribution to revenue and earnings trends over the coming years. The Group expects its liquefied gases and cylinder gas business to perform in line with macroeconomic trends. In the Healthcare product area, Linde is expecting to achieve significant increases in revenue and earnings as a result of the acquisitions it has concluded, especially Lincare.

Linde continues to expect that revenue generated by the Gases Division in the 2012 financial year will exceed revenue generated in 2011 and that operating profit will improve.

Engineering Division
Linde continued to see relatively stable trends in the first nine months of 2012 in its international engineering project business. During that period, the Group's Engineering Division generated revenue of EUR 1.740 bn, almost as high as the figure achieved in the prior-year period of EUR 1.776 bn. At EUR 214 m, operating profit was the same in the first nine months of 2012 as in the first nine months of 2011. The operating margin of 12.3 percent exceeded the high figure achieved in the prior-year period of 12.0 percent.

The trends for order intake were very positive. Order intake in the nine months to 30 September 2012 was EUR 2.095 bn, 25.0 percent above the figure for the prior-year period of EUR 1.676 bn. This dynamic performance was due in particular to a major contract in Saudi Arabia acquired by Linde's Engineering Division in the first quarter from the Group's Gases Division. The total investment in this project is USD 380 m. That part of the order which relates to Linde's Engineering Division is for the turnkey construction of a HyCo plant and an ammonia plant. The new plants will enable Linde to provide long-term supplies of industrial gases to Sadara Petrochemical Company (Sadara) in Jubail.

The Engineering Division has also been contracted by the Gases Division to build the largest air separation plant in Vietnam to provide long-term supplies of industrial gases to the Vietnamese steel company POSCO SS-Vina (PSSV). The new plant will also supply products for the regional market in southern Vietnam. This project, awarded in August 2012, involves investment of around EUR 40 m.

Given the positive trend in orders, the order backlog in the Engineering Division grew in the first nine months of 2012 to EUR 3.897 bn (31 December 2011: EUR 3.600 bn).

Engineering Division - Outlook
The high order backlog creates a good basis for a solid business performance in the Engineering Division over the next two years. Linde expects to generate the same level of revenue in its plant construction business in the 2012 financial year as in 2011. Linde is still anticipating that it will achieve an operating margin in the current financial year 2012 of at least 10 percent.

Linde is well-positioned in the international market for olefin plants, natural gas plants, air separation plants and hydrogen and synthesis gas plants, and will derive lasting benefit in particular from two structural growth areas: energy and the environment.

To coincide with the publication of the quarterly financial statements, a webcast for analysts will take place today at 2pm German time in English with Georg Denoke, member of the Executive Board and CFO of Linde AG. Journalists will have the opportunity to watch the webcast by following this link:

http://event.onlineseminarsolutions.com/r.htm?e=527497&s=1&k=E25BC9981C42DAFDE92A4C1477CAC682

The Linde Group is a world-leading gases and engineering company with around 62,000 employees in more than 100 countries worldwide. In the 2011 financial year, Linde generated revenue of EUR 13.787 bn. The strategy of the 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 Group is committed to technologies and products that unite the goals of customer value and sustainable development.

[1] Operating profit: EBITDA including share of profit or loss from associates and joint ventures.
[2] ROCE (return on capital employed) based on the definition given on page 046 of the 2011 Financial Report.

For more information, see The Linde Group online at http://www.linde.com.

Further information:

Media
Uwe Wolfinger
Telephone: +49.89.35757-1320

Matthias Dachwald
Telephone: +49.89.35757-1333
Investor Relations
Dr Dominik Heger
Telephone: +49.89.35757-1334

Lisa Tilmann
Telephone: +49.89.35757-1328




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