First six months of 2009: The Linde Group strengthens operating
margin in difficult market environme
(Thomson Reuters ONE) - Corporate news announcement processed and transmitted by Hugin AS.The issuer is solely responsible for the content of this announcement. ------------------------------------------------------------------------------------ * Programme for sustainable improvements in productivity takes effect * Operating margin increases to 20.2 percent despite restructuring costs * Improved operating cash flow: 841 million euro (2008: 816 million euro) * Group sales down 12.5 percent to 5.476 billion euro * Group operating profit* down 12.2 percent to 1.104 billion euro (down 6.9 percent after adjusting for restructuring costs) * Outlook for 2009: Further recovery in business trends expected compared with the first half of the year; however, 2008 record level no longer attainableMunich, 3 August 2009 - The technology group The Linde Group has inthe first six months of the 2009 financial year in an ongoingdifficult market environment and despite volume reductions caused byglobal economic conditions stabilised its profitability. At Grouplevel, the operating margin was 20.2 percent in the first six monthsof the year, compared with 20.1 percent in the comparable prior-yearperiod. Adjusted for one-off restructuring costs of 67 million euro,the operating margin was 21.4 percent. "The measures we have taken toachieve sustainable improvements in productivity are having aneffect," said Professor Dr Wolfgang Reitzle, Chief Executive Officerof Linde AG. "At the same time, in our gases business we arebeginning to see occasional signs of a slight recovery in demand.However, future global economic developments are beset withuncertainty and the crisis is not yet over. Against this background,we will be unable to achieve in the 2009 financial year the samelevel of sales and earnings achieved in 2008, a record year. However,provided that the economic recovery stabilises, we expect a betterbusiness development in the second half year of 2009 than in thefirst six month."In the course of the global economic crisis, Group sales fell by 12.5percent in the first half of 2009 to 5.476 billion euro, comparedwith the record figure achieved in the first half of 2008 of 6.256billion euro. Group operating profit* for the six months to 30 June2009 was 1.104 billion euro, 12.2 percent below the prior year figureof 1.258 billion euro. Taking into account restructuring costsarising from the accelerated implementation of the High PerformanceOrganisation (HPO) programme, the fall in Group operating profit forLinde was only 6.9 percent. With HPO, the integrated programme forprocess optimisation and increased productivity, the Group is seekingto achieve cost savings of between 650 million euro and 800 millioneuro in the financial years from 2009 to 2012 and to continue toimprove its competitiveness irrespective of the economic situation.Earnings before taxes on income (EBT) were 365 million euro, adecline of 179 million euro (-32.9 percent) compared to the firsthalf of 2008 (544 million euro). After deducting restructuring costsof 67 million euro and the gains on disposal of businesses of 59million euro achieved in the first half of 2008 this decline was only53 million euro (-10.9 percent).Earnings after tax at 30 June 2009 were 274 million euro (2008: 402million euro). After taking minority interests into account, earningsattributable to Linde AG shareholders were 248 million euro (2008:375 million euro), giving earnings per share (EPS) of 1.47 euro(2008: 2.24 euro). Account should be taken here too, when comparingthe figures for the first six months of 2009 and 2008, of the one-offrestructuring costs charged in 2009 and the gains on the disposal ofbusinesses recognised in 2008. On an adjusted basis, i.e. afteradjusting for the effect of the purchase price allocation in thecourse of the BOC acquisition and the profits on disposal achieved inthe prior year, earnings per share in the first half of 2009 stood at2.06 euro (2008: 2.72 euro). The restructuring costs recognised inthe first half of 2009 have not been adjusted for in thiscalculation. Cash flow from operating activities in the first sixmonths of the year was 841 million euro, a figure which was higherthan that for the first six months of 2008 of 816 million euro,despite the fall in earnings. This increase was mainly due toimprovements in working capital management.Gases DivisionIn the Gases Division, Linde was able to achieve slight increases insales and earnings in the second quarter compared to the firstquarter of 2009. However, if the figures for the first six months of2009 are compared with those for the first six months of 2008, therewas an overall decline. Sales in the Gases Division for the sixmonths to 30 June 2009 were 4.350 billion euro, which was 7.6 percentlower than the figure for the comparable prior-year period of 4.709billion euro, despite an increase of 1.7 percent over the firstquarter of 2009. On a comparable basis, i.e. after adjusting forexchange rate effects and also taking into account changes in theprice of natural gas and changes in Group structure, the fall insales was 6.7 percent.The operating profit of the Gases Division increased by over 8percent in the second quarter compared to the first three months ofthe year. However, when the figures are compared for the first sixmonths of 2009 and 2008, operating profit for 2009 at 1.138 billioneuro was 4.7 percent below the prior-year figure of 1.194 billioneuro. The Gases Division succeeded in limiting the reduction inearnings in a difficult market environment, improving its operatingmargin from 25.4 percent in 2008 to 26.2 percent in 2009.The trends in the individual regions and product areas of the GasesDivision were as follows:In the Western Europe operating segment, business continued to beadversely affected by the substantial loss in value of the Britishpound, as in the first quarter. Against this background, sales in thefirst half of 2009 were 1.849 billion euro, 11.2 percent below thefigure for the prior-year period of 2.083 billion euro. On acomparable basis, the decline in sales would have been a mere 6.0percent. Operating profit was also adversely affected by exchangerate movements, falling 12.0 percent from 575 million euro in thefirst half of 2008 to 506 million euro in the first half of 2009. Theoperating margin in Western Europe remained high and virtually stablein the first six months of the year at 27.4 percent (2008: 27.6percent). This relative stability was partly due to the positiveimpact of the cost optimisation measures under the HPO programme.In Western Europe as a whole, there was no real market recovery inthe second quarter. In most regions, including our three major salesmarkets, the UK, Germany and Scandinavia, volumes in the tonnage(on-site), liquefied gases and cylinder gas product areas declinedsignificantly in comparison with the prior-year period.In the Americas operating segment, we achieved sales in the first sixmonths of 2009 of 993 million euro, 8.2 percent below the figure forthe first six months of 2008 of 1.082 billion euro. On a comparablebasis, the decline in sales was 8.4 percent. Linde was, however, ableto achieve a slight increase in operating profit of 1.9 percent to210 million euro, compared to the figure for the first half of 2008of 206 million euro. The operating margin rose as a result from 19.0percent to 21.1 percent. This increase was partly as a result ofmovements in natural gas prices, but was mainly due to the variety ofmeasures we have taken to improve our efficiency.In the Asia & Eastern Europe operating segment, sales in the firstsix months of 2009 were 877 million euro, 7.2 percent below thefigure for the prior-year period of 945 million euro. On a comparablebasis, the fall in sales was 7.4 percent. Operating profit of 266million euro was almost as high as the figure for the first half of2008 of 269 million euro. There was a significant increase in theoperating margin as a result, from 28.5 percent to 30.3 percent. Theaccelerated implementation of our HPO programme again contributed tothis positive trend. Additional contributions to earnings also arosefrom our joint venture activities in China. In comparison with thefirst quarter of 2009, we saw the clearest signs of an economicrecovery in the Asia & Eastern Europe operating segment. This trendwas demonstrated, for example, by higher capacity utilisation of ourtonnage plants and by the awarding of new projects. We also continuedto reinforce our leading market position in this region as a resultof the start-up of new plants.In the South Pacific & Africa operating segment, we were able tocontinue to increase sales in the first six months of the currentyear - by 5.4 percent to 666 million euro (2008: 632 million euro).We were able to more than offset adverse movements in the exchangerates of the Australian dollar and South African rand as a result ofthe consolidation for the first time of the Australian LPG business,Elgas. On a comparable basis, sales in the first half of 2009 fell by4.6 percent. Operating profit rose by 8.3 percent to 156 million euro(2008: 144 million euro). This is equivalent to an improvement in theoperating margin from 22.8 percent to 23.4 percent.Business trends in the individual product areas of the Gases Divisionwere affected by the continuing challenging global economicenvironment. On a comparable basis, sales in the first six months ofthe year in the bulk business fell by 9.1 percent to 1.074 billioneuro (2008: 1.181 billion euro). Sales in the on-site (tonnage)business, where we supply industrial gases from plants situated onthe user's site, sales in the first half of 2009 of 989 million eurowere 5.4 percent below the figure for the prior-year period of 1.046billion euro. In the cylinder gas business, sales fell by 9.0 percentto 1.779 billion (2008: 1.956 billion euro). The Healthcare productarea once again proved immune to the economic crisis. Here sales rose5.6 percent to 508 million euro (2008: 481 million euro).Gases Division - OutlookThe continuing uncertainty in the market environment for the gasesbusiness has not caused us to change in any way our original targetfor the gases business. We want to grow at a more rapid pace than themarket and to continue to increase our productivity. Given thecurrent trends towards economic recovery, we are expecting a betterbusiness performance in the Gases Division in the second half of 2009than in the first six months of the year. This positive developmentwill, however, not be sufficient to ensure that sales and earningsfor the full year 2009 will reach the levels achieved in 2008.Engineering DivisionIn the Engineering business, which is characterised by majorinternational projects, The Linde Group achieved sales of 1.113billion euro in the first half of 2009, although it was unable toachieve the very high level of sales achieved in the first six monthsof 2008 of 1.411 billion euro. This decline is mainly due to thedifferent project structure and physical completion compared to theprevious year. Operating profit of 90 million euro was also below thefigure for the first half of 2008 of 126 million euro. The operatingmargin was 8.1 percent. This means that we slightly exceeded ourtarget margin of 8 percent, which is significantly higher than theindustry average. Due to a marked reluctance by customers to awardnew projects, order intake in the first half of 2009 of 1.299 billioneuro was, as expected, lower than the figure for the prior-yearperiod of 1.557 billion euro. However, the major contract received atthe end of June from Abu Dhabi for the construction of an olefinplant on the Ruwais site worth 1.075 billion US dollars demonstratesthat we have a strong competitive position in the internationalengineering business.This order also had a marked positive impact on our order backlog.Our order book at the end of June stood at 4.381 billion euro (31December 2008: 4.436 billion euro). Most of the current order backlogrelates to air separation plants (45 percent) and olefin plants (34percent). The geographical focus remains the Middle East. Examples ofmajor projects in this region are the new ethylene plant in Ruwais,the Enhanced Gas Recovery plant which we will operate jointly withour joint venture partner ADNOC and the Gas-to-Liquid (GTL) plant weare supplying for Shell in Qatar.Engineering Division - OutlookThe continuing high level of our order backlog is a good basis for arelatively stable business performance in our Engineering Division inthe coming 18 to 24 months. However, the effects of the economiccrisis are being felt even in global large-scale plant construction.This may result, for example, in the award of new projects beingpostponed. We therefore assume that new orders in our EngineeringDivision will not be sufficient to achieve the same level of salesrevenue in the 2009 financial year as in 2008. On the other hand, thetarget for our operating margin remains at 8 percent.N.B.: To coincide with the publication of our quarterly report, ateleconference for analysts will take place today at 2pm (Germantime) in English with Georg Denoke, CFO of Linde AG. Journalists willhave the opportunity to listen to the conference live by dialling+49.69.589.99-0509. Please tell the operator your name and the nameof your company.Following the teleconference, you will be able to hear a recording ofthe event by calling +49.30.726.167-224. Please give the followingreference number: 841346.The Linde Group is a world leading gases and engineering company withalmost 50,000 employees working in around 100 countries worldwide. Inthe 2008 financial year it achieved sales of 12.7 billion euro. Thestrategy of The Linde Group is geared towards sustainableearnings-based growth and focuses on the expansion of itsinternational 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 businessareas, regions and locations across the globe. Linde is committed totechnologies and products that unite the goals of customer value andsustainable development.For more information, please see The Linde Group online athttp://www.linde.comFor additional information:Press Investor RelationsUwe Wolfinger Thomas EisenlohrTelephone: +49.89.35757-1320 Telephone: +49.89.35757-1330* Operating profit: EBITDA before non-recurring items, includingshare of net income from associates and joint ventures.http://hugin.info/125064/R/1332211/315470.pdf --- End of Message ---Linde AGKlosterhofstrasse 1 Munich GermanyWKN: 648300; ISIN: DE0006483001; Index: CDAX, DAX, HDAX, Prime All Share;Listed: Prime Standard in Frankfurter Wertpapierbörse, Freiverkehr in Niedersächsische Börse zu Hannover, Regulierter Markt in Bayerische Börse München, Regulierter Markt in Börse Berlin, Regulierter Markt in Börse Düsseldorf, Regulierter Markt in Börse Stuttgart, Regulierter Markt in Frankfurter Wertpapierbörse, Regulierter Markt in Hanseatische Wertpapierbörse zu Hamburg;
Datum: 03.08.2009 - 07:30 Uhr
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