2013 financial year:
- Group revenue up 5.2 percent to EUR 16.655 bn
- Group operating profit1 up 7.6 percent to EUR 3.966 bn
- Operating cash flow increases by 18.0 percent to EUR 3.144 bn
- 11.1 percent rise in proposed dividend to EUR 3.00 per share
Group outlook for 2014 after adjusting for exchange rate effects:
Solid revenue growth and a moderate improvement in operating profit
Munich, 17 March 2014 – The technology company The Linde Group continued to give a steady business performance in the 2013 financial year, again achieving increases in Group revenue and Group operating profit. The operations in the Healthcare product area acquired in the course of 2012 and positive trends in the engineering business made a particular contribution here.
"We have been able to hold our own pretty well, although conditions have been unfavourable and exchange rate effects have had an adverse impact on our growth especially in the second half of the year," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "Even in this environment, we have succeeded in preserving the high profitability of the Group. This has allowed us to maintain our dividend policy which is geared towards continuity," explained Reitzle. "The Executive Board and Supervisory Board will propose a resolution at the Annual General Meeting that a dividend of EUR 3.00 per share be paid." This is an increase of 11.1 percent compared with the prior-year dividend of EUR 2.70.
With its robust business model based on sustainability and its well-balanced global position, Linde believes that it is properly equipped for the future. "After adjusting for exchange rate effects, we are expecting solid growth in Group revenue in the 2014 financial year. We anticipate that we will achieve a moderate improvement in Group operating profit," declared CEO Reitzle.
In the 2016 financial year, Linde is still seeking to achieve Group operating profit of at least EUR 5 bn and a return on capital employed (reported ROCE) of around 13 percent (or adjusted ROCE of around 14 percent). These medium-term targets were set at the end of 2012 based on the assumption that there would not be any significant shifts in exchange rates compared with the rates prevailing at that time. However, if the unfavourable exchange rates which applied at the end of 2013 were to continue to apply over the coming years, this would reduce Group operating profit in 2016 by around EUR 400 m and might also have an adverse impact on return on capital employed.
In the 2013 financial year, Group revenue grew by 5.2 percent to EUR 16.655 bn (2012: EUR 15.833 bn). Exchange rate effects increasingly acted as a brake on revenue trends during the reporting period. After adjusting for these effects (which equate to revenue of EUR 656 m), the increase in revenue was 9.7 percent. US homecare company Lincare, acquired by Linde in August 2012, contributed EUR 1.563 bn to Group revenue.
Linde was able to reinforce its profitability at a high level and increased its Group operating profit in the 2013 financial year by 7.6 percent to EUR 3.966 bn (2012: EUR 3.686 bn). The Group operating margin rose to 23.8 percent, higher than the prior-year figure of 23.3 percent. Adverse currency fluctuations also had an impact on Group operating profit in 2013. The effect of these distortions was to reduce earnings by EUR 148 m. Without the distortions, Linde would have achieved a 12.1 percent increase in Group operating profit.
Earnings before taxes on income (EBT) rose by 3.5 percent to EUR 1.794 bn (2012: EUR 1.734 bn). Earnings after tax were EUR 1.430 bn (2012: EUR 1.341 bn). The amount attributable to Linde AG shareholders was EUR 1.317 bn (2012: EUR 1.232 bn), giving earnings per share of EUR 7.10 (2012: EUR 6.93).
Return on capital employed in the 2013 financial year was 9.7 percent (2012: 10.2 percent). When comparing the figures for 2013 and 2012, it is important to note that many large-scale projects in the on-site business are still in the construction phase and were therefore not yet able to contribute to earnings.
Operating cash flow increased by 18.0 percent to EUR 3.144 bn (2012: EUR 2.664 bn). This significant rise was due mainly to the improvement in working capital.
Linde achieved revenue growth in the Gases Division in the 2013 financial year of 5.7 percent to EUR 13.971 bn (2012: EUR 13.214 bn). The Lincare business contributed revenue of EUR 1.563 bn 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 the impact on the consolidation of the Lincare acquisition), the increase in revenue in the Gases Division was 3.3 percent. Within the Gases Division, Lincare is included in the Americas segment and the Healthcare product area. Linde’s Gases Division achieved a 7.9 percent increase in operating profit to EUR 3.846 bn (2012: EUR 3.566 bn). This gives an operating margin of 27.5 percent (2012: 27.0 percent).
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, Africa), revenue in the 2013 financial year of EUR 6.090 bn was a little higher than the figure for the 2012 financial year of EUR 6.061 bn. On a comparable basis, the growth in revenue was 3.6 percent. Operating profit in the EMEA region improved slightly by 2.1 percent to EUR 1.759 bn (2012: EUR 1.722 bn). The operating margin rose to 28.9 percent (2012: 28.4 percent). The Continental European homecare operations acquired by Linde at the end of April 2012 from Air Products were a contributory factor in the strengthening of the business in the EMEA region.
Business trends in the EMEA segment were adversely affected by the continuation of unfavourable economic conditions in the eurozone. Demand here in the liquefied gases and cylinder gas product areas was correspondingly modest. The on-site business, on the other hand, saw positive trends, boosted by the start-up of new plants. The market environment in Eastern Europe was characterised by a downturn in economic activity in 2013, whereas the economy in the Middle East remained relatively robust.
In the Asia/Pacific segment, Linde generated revenue in the 2013 financial year of EUR 3.767 bn, a figure which was not quite as high as the figure of EUR 3.860 bn achieved in 2012. This was mainly as a result of unfavourable exchange rate effects. On a comparable basis, the Group achieved an increase in revenue in this segment of 4.1 percent. Business performance was adversely affected in particular by the weaker economic environment in manufacturing and in the mining industry in the South Pacific region.
Operating profit in the Asia/Pacific segment in 2013 of EUR 1.005 bn was slightly higher than the figure for 2012 of EUR 996 m. The operating margin therefore increased to 26.7 percent (2012: 25.8 percent).
Within the Asia/Pacific segment, the most positive trends were to be seen in the business in South & East Asia, where Linde achieved volume increases in all product areas. The Group also generated revenue growth in the Greater China region, whereas the market in the South Pacific region was characterised by declining volumes.
In the Americas segment, revenue in the 2013 financial year grew by 24.7 percent to EUR 4.231 bn (2012: EUR 3.394 bn). This significant increase was due above all to the contribution made by US homecare company Lincare. Lincare operates solely in North America and in the 2013 financial year contributed EUR 1.563 bn to the total revenue of the Americas segment. On a comparable basis, the increase in revenue was 2.4 percent. This is in line with economic trends in the region. Operating profit rose by 27.6 percent to EUR 1.082 bn (2012: EUR 848 m), mainly as a result of the Lincare business. The operating margin was 25.6 percent, which was higher than the figure for 2012 of 25.0 percent.
Within the Gases Division, revenue in the Healthcare product area grew 48.2 percent in the 2013 financial year to EUR 3.015 bn (2012: EUR 2.035 bn) following the acquisitions made by the Group in the course of 2012. After adjusting for the effect of the Lincare acquisition on the consolidation and for exchange rate effects, the increase in revenue in the Healthcare business was 4.8 percent.
In the cylinder gas product area, revenue was EUR 4.050 bn. On a comparable basis, this was 1.0 percent above the prior-year figure of EUR 4.009 bn. In the liquefied gases business, revenue increased on a comparable basis by 2.4 percent to EUR 3.328 bn (2012: EUR 3.249 bn). In the on-site business (where Linde supplies gases on site to major customers), revenue rose on a comparable basis by 5.6 percent to EUR 3.578 bn (2012: EUR 3.389 bn). Growth in this product area was adversely affected by the reversal of a contract to purchase air separation plants which had been transferred to Linde in 2012 by a steel company in the Greater China region. If an adjustment is made for this, the increase in revenue in the on-site business would have been 6.2 percent.
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, a steady business performance 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.
2013 was a successful year for Linde’s international engineering project business. Revenue in the Engineering Division increased by 12.4 percent to EUR 2.879 bn (2012: EUR 2.561 bn). Operating profit improved by 2.2 percent to EUR 319 m (2012: EUR 312 m). At 11.1 percent, the operating margin again reached a level well above the industry average (2012: 12.2 percent).
There was a strong upward trend in order intake. This rose to EUR 3.911 bn in the 2013 financial year, 38.9 percent above the figure for 2012 of EUR 2.815 bn. Orders from the Group’s Gases Division made a substantial contribution to this significant increase.
Order intake was characterised not only by major projects in the four key product lines (olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants), but also by a number of small and medium-sized new orders. More than a third of new orders came from the Asia/Pacific region, while around 30 percent came from North America. Around a quarter of new orders were from Europe. In North America, projects for the efficient exploitation of shale gas reserves again had an impact on Linde’s business.
As a result of good order trends, the order backlog in the Engineering Division continued to grow. At 31 December 2013, it stood at EUR 4.504 bn (2012: EUR 3.700 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. It anticipates an operating margin of around 10 percent.
Note: The 2013 Annual Report of The Linde Group is available on the Internet at:
To coincide with the publication of the financial statements, a webcast for analysts will take place today at 2pm German time in English with Professor Dr Wolfgang Reitzle, CEO of Linde AG, and Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to watch the webcast by following this link:
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.