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Linde posts earnings gain on strong pricing, cost savings

May 7, 2020
Energy & Chemical Value Chain

Industrial gases maker Linde plc reported first-quarter 2020 income from continuing operations of $573 million, up 11% year-on-year (YOY) on operating leverage from broad-based price increases and cost savings.

Net sales were $6.7 billion, down 3% YOY on negative currency impacts and energy cost pass through. Reported adjusted earnings were $1.89/share, up 12% YOY and 6 cts ahead of consensus analyst estimates. Volume was down 1% YOY and 4% sequentially, led by timing of engineering projects and COVID-19 impacts.

Americas sales of $2.7 billion were down 1% YOY. Americas operating profit was $661 million, up 13% YOY. Americas segment volumes were up 2% YOY led by healthcare and food and beverage markets. Segment operating profit was higher on price increases and cost savings.

Europe, Middle East & Africa (EMEA) sales of $1.6 billion were down 3% YOY. Operating profit of $355 million was up 2%. Volumes were down 1% YOY on weaker EMEA industrial production. Profit was higher on price gains and cost savings.

Asia Pacific segment sales of $1.3 billion were 6% lower YOY. Operating profit of $281 million was up 3% YOY. Volumes were down 5% YOY due to COVID-19 impacts and an equipment sale included in prior-year results. Margins were higher on price and cost savings.

Engineering segment sales were $608 million down, 4% YOY. Operating profit was $91 million, up 17% YOY. Sales were lower on project timing but margins were high on strong project execution and productivity, Linde said.

Outlook scenarios

Linde cut its 2020 outlook due to COVID-19 impacts, updating its forecast with two different scenarios. Assuming early-third-quarter recovery, the company expects a mid-to-high single-digit earnings per share (EPS) gain. In a more bearish mid-fourth-quarter recovery scenario, the company expects flat EPS to a low-single-digit decline. The company previously forecast 2020 EPS growth of 10-13%.

Linde will cut planned 2020 base capital expenditures by $400 million, to $3 billion-$3.4 billion. “While it is very difficult to predict the future impact, I have full confidence in our ability to continue to create shareholder value given our resilient business model and inherent opportunities to mitigate macroeconomic headwinds,” said Linde president and CEO Steve Angel.

By: Robert Westervelt

Source: Chemical Week

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