DGAP-News: Linde AG / Key word(s): 9-month figures
Linde AG: January to September 2014: Linde generates a slight increase
in revenue despite unfavourable exchange rate effects - Growth targets
adjusted to reflect the weakening in the economic outlook
30.10.2014 / 07:03
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Press Release
January to September 2014: Linde generates a slight increase in revenue
despite unfavourable exchange rate effects - Growth targets adjusted to
reflect the weakening in the economic outlook
- Group revenue up 0.9 percent to EUR 12.584 bn (2013: EUR 12.468 bn);
up 4.8 percent after adjusting for exchange rate effects.
- Group operating profit : EUR 2.898 bn (2013: EUR 2.996 bn);
up 0.4 percent after adjusting for exchange rate effects.
- 2014 Group outlook:
- Revenue: Solid growth after adjusting for exchange rate effects.
- Operating profit: Similar level to 2013 after adjusting for
exchange rate effects and non-recurring items.
- Group medium-term targets for 2017:
- Operating profit: EUR 4.5 bn to EUR 4.7 bn.
- ROCE : 11 percent to 12 percent.
Munich, 30 October 2014 - In the nine months to 30 September 2014, the
technology company Linde achieved a slight increase in Group revenue
despite unfavourable exchange rate effects. Group operating profit, on the
other hand, was not as high as the figure achieved in the first nine months
of 2013. "Although global economic growth slowed down in the course of the
year, we held our own pretty well," said Dr Wolfgang Büchele, Chief
Executive Officer of Linde AG. "At the same time, we have recognised some
impairment losses, which were required due to changed conditions in some
regions in the Gases Division."
Given these impairment losses, Linde will no longer be able to achieve the
target it had set itself for the 2014 financial year of around 10 percent
for return on capital employed (reported ROCE). The Group now expects to
achieve a similar level of Group operating profit (EBIT before
non-recurring items adjusted for the amortisation of intangible assets and
the depreciation of tangible assets) in the 2014 financial year as in 2013,
after adjusting for exchange rate effects. Until now, Linde had anticipated
that it would achieve a moderate improvement in Group operating profit. The
Group continues to expect to achieve solid growth in revenue in 2014 after
adjusting for exchange rate effects.
As regards the Group's medium-term targets, CEO Büchele explained: "We will
continue to implement our strategy which is geared towards profitability
and sustainability. However, we have to take account of the fact that
economic growth has been much weaker than we all expected. In addition,
future prospects for global economic trends have recently dulled." Seen
from today's standpoint, Linde therefore assumes that it will not be able
to achieve the earnings target it originally set itself for 2016 until
2017. Depending on economic trends, Linde expects to achieve Group
operating profit of EUR 4.5 bn to EUR 4.7 bn and a reported ROCE of 11
percent to 12 percent in 2017, based on current exchange rates.
January to September 2014 - Group
In the first nine months of 2014, Linde achieved a slight increase of 0.9
percent in Group revenue to EUR 12.584 bn (2013: EUR 12.468 bn). Exchange
rate effects had a significant adverse impact on revenue, especially in the
first half of 2014. In the third quarter, the exchange rate effects became
less unfavourable to Linde. After adjusting for exchange rate effects
(which equated to revenue of EUR 462 m during the reporting period), the
increase in revenue for the Group in the first nine months of 2014 was 4.8
percent.
Group operating profit of EUR 2.898 bn was not as high as the figure
achieved by Linde in the first nine months of 2013 of EUR 2.996 bn. Adverse
exchange rate effects also need to be considered here. The effect of these
distortions was to reduce earnings by EUR 109 m. Without these distortions,
the Group would have achieved a 0.4 percent increase in Group operating
profit. The Group operating margin for the first nine months of 2014 was
23.0 percent (2013: 24.0 percent). When considering the fall in the margin,
it should be noted that the Engineering Division (as expected) contributed
more to Group revenue in the reporting period than was the case in the
first nine months of 2013. Linde's engineering business has a lower margin
than its gases operations.
The Group generated earnings before interest and taxes (EBIT) in the nine
months to 30 September 2014 of EUR 1.400 bn, which was below the figure for
the prior-year period of EUR 1.644 bn. This significant fall was the result
of non-recurring items. Non-recurring items comprised impairment losses of
EUR 229 m recognised in the Gases Division. After adjusting for
non-recurring items, EBIT in the reporting period was EUR 1.629 bn.
Earnings before tax (EBT) in the first nine months of 2014 amounted to EUR
1.138 bn (2013: EUR 1.356 bn). Profit for the period was EUR 863 m (2013:
EUR 1.078 bn). Profit for the period attributable to Linde AG shareholders
was EUR 818 m (2013: EUR 997 m). This gives earnings per share of EUR 4.41
(2013: EUR 5.38). Earnings per share before non-recurring items stood at
EUR 5.31 (2013: EUR 5.38).
January to September - Gases Division
As a result of unfavourable exchange rate fluctuations, Linde's revenue in
the Gases Division in the first nine months of 2014 of EUR 10.398 bn was
somewhat lower than the figure of EUR 10.510 bn achieved in the prior-year
period. If an adjustment were to be made for these exchange rate effects,
Linde would have achieved a 3.3 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 3.1 percent increase in
revenue in its gases business.
In the first nine months of 2014, operating profit in the Gases Division
fell by 2.6 percent to EUR 2.837 bn (2013: EUR 2.913 bn). Exchange rate
fluctuations also had a significant influence here. If these exchange rate
movements had not occurred, Linde would have achieved a 1.1 percent
increase in operating profit. The operating margin in the gases business in
the nine months to 30 September 2014 was 27.3 percent (2013: 27.7 percent).
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
nine months of 2014 was EUR 4.497 bn, just below the figure for the
prior-year period of EUR 4.569 bn. On a comparable basis, revenue rose
slightly, by 0.8 percent. Operating profit increased by 2.3 percent to EUR
1.344 bn (2013: EUR 1.314 bn). 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.
Within the EMEA region, Linde achieved double-digit growth rates in its
on-site business in the UK and in the Middle East. In Continental Europe,
on the other hand, business performance in this product area in the first
nine months 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 the EMEA region was only slightly above the figure
achieved in the first nine months 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 nine months 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 was entitled to appropriate compensation which it duly
received 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.
In the third quarter of 2014, Linde had to recognise an impairment loss of
EUR 100 m in China relating to parts of a plant complex in the Chongqing
Chemical Park. It was necessary to recognise this impairment loss due to a
change in the structural organisation at this site, which had an impact on
both the raw gas available as feedstock and the purchase volumes of the
plant complex. As a result of changed conditions in a sub-region of the
South & East Asia region and in Australia, Linde also recognised an
impairment loss during the reporting period of EUR 29 m.
The Group generated revenue in the nine months to 30 September 2014 in the
Asia/Pacific segment of EUR 2.822 bn, almost the same as the figure for the
prior-year period of EUR 2.843 bn. On a comparable basis, Linde achieved an
increase in revenue here of 5.4 percent. Operating profit fell slightly by
1.3 percent to EUR 737 m (2013: EUR 747 m). The operating margin remained
virtually static at 26.1 percent (2013: 26.3 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 was able to achieve double-digit revenue growth here.
In the Americas segment, Linde generated revenue of EUR 3.172 bn in the
first nine months of 2014, around the same level as that achieved in the
first nine months of 2013 (EUR 3.190 bn). On a comparable basis, revenue
increased by 4.3 percent. Whereas growth in North America was stable, the
economic climate in some countries in South America, especially Brazil,
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