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.
.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.
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 nine months to 30 September 2014 on a comparable basis by 5.4 percent to EUR 2.765 bn (2013: EUR 2.623 bn). In the liquefied gases product area, revenue increased on a comparable basis by 3.8 percent to EUR 2.476 bn (2013: EUR 2.385 bn). On a comparable basis, revenue in the cylinder gas business of EUR 2.917 bn increased slightly to 0.3 percent above the figure for the first nine months of 2013 of EUR 2.907 bn.
January to September 2014 - Engineering Division
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 nine months of 2014 increased by 7.6 percent to EUR 2.226 bn (2013: EUR 2.068 bn), while operating profit of EUR 216 m was not as high as the figure for the first nine months of 2013 of EUR 225 m. This gives an operating margin of 9.7 percent (2013: 10.9 percent), which is well above the industry average and equal to the target of around 10 percent Linde had set itself for the current financial year.
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.
.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.
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 nine months to 30 September 2014 on a comparable basis by 5.4 percent to EUR 2.765 bn (2013: EUR 2.623 bn). In the liquefied gases product area, revenue increased on a comparable basis by 3.8 percent to EUR 2.476 bn (2013: EUR 2.385 bn). On a comparable basis, revenue in the cylinder gas business of EUR 2.917 bn increased slightly to 0.3 percent above the figure for the first nine months of 2013 of EUR 2.907 bn.
January to September 2014 - Engineering Division
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 nine months of 2014 increased by 7.6 percent to EUR 2.226 bn (2013: EUR 2.068 bn), while operating profit of EUR 216 m was not as high as the figure for the first nine months of 2013 of EUR 225 m. This gives an operating margin of 9.7 percent (2013: 10.9 percent), which is well above the industry average and equal to the target of around 10 percent Linde had set itself for the current financial year.
