Linde Plc · NASDAQ:LIN
Linde — Non-Deal Roadshow (May 2010)
56 slides from Linde's roadshow presentation, May 19, 2010
Slide 1: Frankfurt Roadshow
Frankfurt Roadshow. 19 May 2010 Georg Denoke Member of the Executive Board and CFO
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements about Linde AG (“Linde”) and their respective subsidiaries and businesses. These include, without limitation, those concerning the strategy of an integrated group, future growth potential of markets and products, profitability in speci
Slide 3: Agenda
Agenda Operational performance — Back to growth in Q1 2010 — HPO (High Performance Organisation) — 2010 outlook Set-up for sustainable profitable growth — Emerging market footprint — Business synergies Gases and Engineering — Energy and Environmental mega-trend — Healthcare mega-trend Appendix 3
Slide 4: Highlights
Highlights Resilient performance in the crisis Limited operating profit decline in 2009: Group -6.7% and Gases -1.6% Credit rating upgrades confirm operational and financial stability through the recession Back to growth in Q1 2010, driven by HPO and the economic recovery Group sales increase of 7.4
Slide 5: Group, sales by Divisions
Group, sales by Divisions Gases recovery drives group sales up 7.4% in € million, Q1 2009 Q1 2010 as reported 2,894 2,695 +7.4% Gases Division — Comparable* sales increase of 3.9% — Global economic recovery drives improving volumes, strongest growth in tonnage and bulk product areas +8.5% 2,340 — Po
Slide 6: Group, operating profit by Divisions
Group, operating profit by Divisions 210 bp group margin improvement supported by HPO savings in € million, Q1 2009 Q1 2010 as reported 641 Gases Division +19.1% 538 — Double-digit operating profit growth — Overproportionate growth compared to sales: operating margin increase of 140 bp to 26.7% (Q1
Slide 7: Gases Division, operating profit by operating segment
Gases Division, operating profit by operating segment HPO continues to drive margin improvements in € million Western Europe Asia & Eastern Europe — YoY margin increase in the Gases Division +11.3% 20.2% supported by efficiency 247 275 155 129 improvements in all +200 bp +80 bp 28.4% 30.9% operating
Slide 8: Gases Division, product areas
Gases Division, product areas Economic recovery visible in comparable yoy change Bulk Tonnage 6.2% 11.1% 10.3% 5.2% 6.9% 0.5% -3.3% -1.4% -1.7% -6.9% -7.9% -4.4% -11.1% -6.5% 9M 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 9M 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Cylinder Healthcare 11.6% 14.5% 2.7% 0.0%
Slide 9: Engineering Division
Engineering Division Strong order backlog supported by a recovery in new orders — Order intake of € 502 m up 76% from last year´s low level — Order backlog of € 4.281 bn (year-end 2009: €4.215 bn) Order intake Order backlog € 502 million € 4,281 million 4,215 +1.6% 4,281 502 +76.1% 285 Q1 09 Q1 10 Y
Slide 10: Group, solid financial position
Group, solid financial position Successful deleveraging rewarded with rating upgrade 2009 Net debt/EBITDA ratio of 2.6x, well within our target range of 2-3x Net debt in € bn Net debt/EBITDA 3,5 12.815 4.8 9.933 3.03 Target 6.427 6.423 2.7 6.119 6.054 range: 2.6 2.5 2.0–3.0x 2.5 2,5 2.02 30/9/06 200
Slide 11: HPO (High Performance Organisation)
HPO (High Performance Organisation) A holistic approach covering the full value chain in all regions Gross cost savings > € 300 m € 650-800 m ~30% ~35% Bulk Supply Chain ~20% Cylinder Supply Chain ~25% ~25% ~25% Procurement/Others ~25% ~15% SG&A 2009 2009-12 … SG&A Procurement Cylinder Supply Chain
Slide 12: 2010 outlook
2010 outlook Based on current consensus expectations for a moderate economic recovery Group: Growth in sales and operating profit vs 2009 — Capital expenditure above 2009 level — Confirmation of HPO programme: € 650-800 m of gross cost savings in 2009-2012 Gases: Increase in sales and operating prof
Slide 13: Agenda
Agenda Operational performance — Back to growth in Q1 2010 — HPO (High Performance Organisation) — 2010 outlook Set-up for sustainable profitable growth — Emerging market footprint — Business synergies Gases and Engineering — Energy and Environmental mega-trend — Healthcare mega-trend Appendix 13
Slide 14: Growth opportunities
Growth opportunities Product portfolio serving mega-trends Emerging Markets Energy/Environment Healthcare Leveraging Gases & Engineering business synergies 14
Slide 15: Mega-trend Emerging Markets
Mega-trend Emerging Markets Lower gases consumption implies structural growth potential USA: $52 Western Europe: $43 Eastern Europe: $16 China: $2 South and East Asia: $3 South America: $13 South Africa: $14 Gases market per capita Australia: $42 Source: Spiritus Consulting market data 2007/Ifo Emer
Slide 16: Mega-trend Emerging Markets: Leading Gases set-up
Mega-trend Emerging Markets Leading Gases set-up in local growth markets Market leader in 4 out of 5 emerging market regions Eastern Europe & Middle East #1 Greater #1 China South and #1 East Asia South America #2 #1 South Africa 16
Slide 17: Mega-trend Emerging Markets: strong investment decisions
Mega-trend Emerging Markets Growth trend leveraged by strong investment decisions Emerging market sales, excl. JVs (% of total Gases sales) Gases Capex (2007-09): € 3.5 bn 35 32% 30 26% Advanced Emerging 25 Economies Markets 20 2006 2007 2008 2009 Strong emerging market exposure based on: — Perfect
Slide 18: Gases Division, project pipeline
Gases Division, project pipeline € 2.85 bn of investment, majority in emerging markets — 2012 pipeline of 10 projects with a combined project amount of ~ € 400 m, several new signings in the first quarter — € 2.85 bn investments between 2008-2012 (thereof € 0.5 bn in JVs @ share) — Most significant
Slide 19: Engineering Division
Engineering Division Global set-up with leading market position in all segments Air Separation Plants Hydrogen/ Olefin Plants Natural Gas Plants Synthesis Gas Plants Top1 Top2 Top2 Top3 Providing plants for the gases business Providing chemistry and energy related solutions and 3rd party customers t
Slide 20: Strong customer relationships in Engineering
Mega-trend Emerging Markets Strong customer relationships in Engineering Plant sales of the Engineering Division Air separation units Hydrogen and synthesis gas plants Gas processing plants Natural gas plants Eastern Petrochemical plants Europe & Middle East Suez Greater China South and East Asia Af
Slide 21: Mega-trend Energy/Environment
Mega-trend Energy/Environment Current and future growth markets for Gases & Engineering Better use of fossil resources: Renewable energy: Clean energy: Existing growth markets Developing growth markets Future growth markets Liquified Natural Statoil plant, Photo- Signed Gases contracts for Vattenfal
Slide 22: Mega-trend Healthcare
Mega-trend Healthcare Long-term potential for medical gases & related services Global healthcare systems face interrelated & structural trends Market environment Healthcare challenges Linde‘s product offer Increasing & ageing Increased use of medical Hospital Care population gases & related devices,
Slide 23: Summary
Summary Resilience in the crisis – back to growth in Q1 2010 Limited operating profit decline in 2009 as HPO savings drive significant operating margin increases Double-digit increase leads operating cash flow above € 2 bn for FY 2009 19% growth in group operating profit in Q1 2010, driven by Gases
Slide 24: Agenda
Agenda Operational performance — Back to growth in Q1 2010 — HPO (High Performance Organisation) — 2010 outlook Set-up for sustainable profitable growth — Emerging market footprint — Business synergies Gases and Engineering — Energy and Environmental mega-trend — Healthcare mega-trend Appendix 24
Slide 25: Group, Q1 2010 Key P&L items
Group, Q1 2010 Key P&L items in € million Q1 09 Q1 10 in % Sales 2,695 2,894 +7.4 Operating profit 538 641 +19.1 Margin 20.0 22.1 +210 bp EBIT before special items and PPA depreciation 323 410 +26.9 PPA depreciation 74 59 - EBIT 249 351 +41.0 Financial Result -79 -68 - Taxes 42 70 - Net income 128 2
Slide 26: Group, FY 2009 Key P&L items
Group, FY 2009 Key P&L items in € million 2008 2009 ∆ in % Sales 12,663 11,211 -11.5 Operating profit 2,555 2,385 -6.7 Margin 20.2% 21.3% +110bps EBIT before special items and PPA depreciation 1,703 1,460 -14.3 Special items 59 0 - PPA depreciation -371 -293 - EBIT 1,391 1,167 - Financial Result -38
Slide 27: Gases Division, product areas
Gases Division, product areas Various distribution mix served from one product source Tonnage Healthcare Global #2 Global #2 — 15-year take-or-pay contracts — Hospital care & Homecare (incl. base facility fees) — Bulk & cylinder gases — Add. growth in JVs & Embedded — Structural growth Finance Lease
Slide 28: Gases Division, local business model
Gases Division, local business model 70% of revenues come from a leading market position In bulk & cylinder: >70% of revenues from >30% market share positions Sales split by market shares Market leader in 46 of the 70 major countries, #2 Player in another 10 € 8.9 bn* <30% ≥ 30% ≥ 40% 70% ≥ 60% Mark
Slide 29: Gases Division: broad customer base
Gases Division Stability driven by a broad customer base 2009: Split of product areas by major end-customer groups Other Electronics Food & Beverages Chemistry & Energy Metallurgy & Glass Metallurgy & Glass Tonnage Manufacturing Bulk Chemistry & Energy Electronics Retail Other Homecare Food & Bevera
Slide 30: Gases Division, Q1 2010 sales bridge
Gases Division, Q1 2010 sales bridge Sales increase of 3.9% on comparable basis in € million +3.9% 2,340 +0.9% +4.3% -0.6% 2,157 Q1 2009 Consolidation Currency Natural Gas Price/Volume Q1 2010 30
Slide 31: Gases Division, Q1 2010 sales by operating segment
Gases Division, Q1 2010 sales by operating segment Emerging markets still show the strongest momentum in € million Western Europe Asia & Eastern Europe — Volume recovery visible in our industrial end markets 935 +3.7% 970 17.3% 502 — Strongest momentum in 428 Emerging Markets, with double-digit grow
Slide 32: Gases Division, Q1 2010 sales by product areas
Gases Division, Q1 2010 sales by product areas Business environment improving in all product areas in € million, comparable*, 2,340 2,252* +3.9% consolidated +2.7% 265 258 Healthcare +10.3% 569 516 Tonnage 541 +5.2% 569 Bulk Cylinder 937 - 937 *excluding currency, natural gas price and consolidation
Slide 33: Gases Division, Joint Ventures
Gases Division, Joint Ventures Asian projects drive growth of our JV sales in € million Proportionate Sales Share of Net Income (not incl. in the Group top-line) (contribution to operating profit) 10 18 16 +12.3% -11.1% 82 73 Q1 2009 Q1 2010 Q1 2009 Q1 2010 33
Slide 34: Gases Division, 2009 sales bridge
Gases Division, 2009 sales bridge Limited sales decline of 5.1% on comparable basis in € million +2.9% -1.4% -2.5% 9,515 -5.1% 8,932 Sequentially: Q1 Q2 Q3 Q4 -1.2% -4.4% -5.8% -8.8% FY 2008 Consolidation Currency Natural Gas Price/Volume FY 2009 34
Slide 35: Engineering Division, financial track record
Engineering Division, financial track record Leading market position in all segments Air Separation Plants Hydrogen and Synthesis Gas Plants Order intake, € bn 2009 order intake by segment Top 1 Top 2 Products: Products: — Oxygen — H2/CO/Syngas 502 Others — Nitrogen — Ammonia — Rare gases — Gas remo
Slide 36: Engineering Division: order backlog
Engineering Division Order backlog diversified and of high quality Order backlog by plant type (31/12/2009) Others: 4.6% (2008: 4.2%) Synthesis Gas Plants: 9.5% (2008: 14.5%) Olefin Plants: 46.3% (2008: 23.9%) Air Separation Plants: 31.9% (2008: 46.8%) Natural Gas Plants: 7.7% (2008: 10.6%) 36
Slide 37: Technology synergies from Gases & Engineering portfolio
Mega-trend Energy/Environment Technology synergies from our Gases & Engineering portfolio Energy Transport/ Efficiency in Energy value chain Upstream conversion Storage/Climate energy use Fossil Floating Natural Gas LNG ship LNG GTL LPG Numerous (gaseous) LNG processing systems industrial gas applic
Slide 38: HPO: productivity improving initiatives
HPO A wide spectrum of productivity improving initiatives From 2009 Quick-start initiatives (Examples) … … to LeadIng processes by 2012 (Examples) Additional plants rolled into existing Remote All plants controlled via Regional and Global ROCs Operating Centres (ROCs) using advanced control systems
Slide 39: HPO: More than pure cost cutting
HPO More than pure cost cutting Better leverage synergies between our Gases and Engineering Divisions — Higher standardisation of ASUs: focus on a limited number of plant types — Lower lead times: reduced delivery times to less than 24 months — Lower costs: cut of total installed costs by more than
Slide 40: Group, Q1 2010 Cash Flow Statement
Group, Q1 2010 Cash Flow Statement in € million Q1 09 Q1 10 Operating Profit 538 641 Change in Working Capital -37 -98 Other changes -89 -146 Operating Cash Flow 412 397 Investments in tangibles / intangibles -267 -223 Acquisitions / Financial investments -60 -6 Other 45 38 Investment Cash Flow -282
Slide 41: Group, FY 2009 Cash flow statement
Group, FY 2009 Cash flow statement in € million Q1/09 Q2/09 Q3/09 Q4/09 2009 2008 Operating Profit 538 566 637 644 2,385 2,555 Change in Working Capital -37 47 15 135 160 -197 Other changes -89 -184 -69 -61 -97 -253 Operating Cash flow 412 429 583 718 2,142 1,876 Investments in tangibles / intangibl
Slide 42: Group, 2009 Cash Flow
Group, 2009 Cash Flow Strong free cash flow generation in the crisis Tight discretionary capex management leaves more than € 1 bn free cash flow before financing Operating Cash flow -282 412 in € million Q1 Free Cash flow before financing 130 Cash Flow from investing activities -254 Q2 429 175 -179
Slide 43: Group, 2009 Cash Flow: use of free cash flow
Group, 2009 Cash Flow Balanced use between growth, deleveraging and dividends Invest for sustainable profitable growth Investing Cash Flow: € 990 m — Strong capex discipline on Merchant investments € 1,190 m Capex/Acquisitions — Committment to contracted tonnage projects — Bolt-on acquisitions in at
Slide 44: Gases Division, 2009 Capex
Gases Division, 2009 Capex Capex split by operating segments (excl. financial assets) 2009: € 1.029 bn 2007-09: € 3.542 bn 10.8% 11.1% 33.7% 34.7% 31.8% 33.0% 23.7% 21.2% Western Europe Americas Asia & Eastern Europe South Pacific & Africa 44
Slide 45: Group, net debt reduction
Group, solid financial position Net debt reduction of € 304 million in FY 2009 in € million 6,423 2,142 204 6,119 343 301 990 Net debt Operating Cash Flow Net Dividends FX/Others Net debt 31/12/2008 Cash Flow from interest 31/12/2009 investment activities 45
Slide 46: Group, stable long-term financing
Group, solid financial position Stable long-term financing Well-spread maturity profile Financial debt, Regular issues have continuously lengthened our refinancing schedule by instrument 95% of total financial debt is due beyond 2010 55% of total financial debt has a longer maturity than 5 years 14%
Slide 47: Group, Dividends
Group, Dividends Dividend unchanged of € 1.80 Consistent dividend policy +5.9% € 1.80 stable € 1.80 +13.3% € 1.70 € 1.50 Change in Operating Profit +18.1%* +5.4% -6.7% 2006 2007 2008 2009 * Comparable change: prior year figures including twelve months of BOC 47
Slide 48: Group, Pensions
Group, Pensions Key figures Net obligation Pension plan assets portfolio structure DBO Plan Net asset obligation 28% 27% Equities in € million 01.01.2009 4,097 3,453 644 Service costs 77 77 Net financing 238 195 43 59% 60% Fixed-interest securities Actuarial gains/losses 514 253 261 Contributions/pa
Slide 49: Group, Tax
Group, Tax Development of tax rate 39.7% 27.6% 22.9% 22.1% 2006 2007 2008 2009 Target range for 2010: 24-26% 49
Slide 50: Reconciliation of Capital Employed
Group Reconciliation of Capital Employed 31.12.2008 31.12.2009 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures Equity incl. minority 7,116 9,187 -952 8,235 PPA and disposal effects interest Plus: net debt 6,423 6,119 6,119 Plus: liabilities from 34 28
Slide 51: Reconciliation of EPS
Group Reconciliation of EPS 31.12.2008 31.12.2009 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures EBIT before special items 1,703 1,167 293 1,460 PPA Taxes on income -342 -185 -112 -297 deferred taxes on PPA Earnings after taxes 917 591 181 772 and mi
Slide 52: Group, Purchase Price Allocation
Group, Purchase Price Allocation Confirmation of expected Depreciation & Amortisation Development of depreciation and amortisation (in € million) Impact in 2009: € 293 million Expected range 500 2010 > 200 – 250 2011 > 175 – 225 400 … 300 2022 < 100 200 100 0 11 15 21 07 09 20 20 20 20 20 52
Slide 53: Group, Mandatory adoption of IFRIC 4
Group, Mandatory adoption of IFRIC 4 Expected impact on sales and EBITDA The Linde Group shows a significant amount of plants as embedded finance leases due to the adoption of IFRIC 4 Sales and EBITDA from IFRIC 4 plants not recognized through reported sales and EBITDA in 2009: € -120 million Receiv
Slide 54: Group, Accounting considerations
Group, Accounting considerations Impact of PPA and EFL Purchase Price Allocation (PPA) IFRIC 4: Embedded Finance Lease (EFL) Impact in FY 2009: € 293 m (FY 2008: € 371 m) Impact* in FY 2009: € -120 m (FY 2008: € -127 m) Expected impact FY 2010: €200-250 m Expected impact* FY 2010: €-112 m *(on Sales
Slide 55: Definition of financial key figures
Definition of financial key figures Operating Return EBITDA (incl. IFRIC 4 adjustment) excl. finance costs for pensions Profit excl. non-recurring items incl. share of net income from associates and joint ventures adjusted Return Operating profit - depreciation / amortisation ROCE excl. depreciation
Slide 56: Investor Relations Contacts
Investor Relations Contacts Thomas Eisenlohr, Head of Investor Relations Phone +49 89 357 57 1330 thomas.eisenlohr@linde.com Robert Schneider Phone +49 89 357 57 1332 robert.schneider@linde.com 56