Linde Plc · NASDAQ:LIN
Linde — Non-Deal Roadshow (October 2008)
43 slides from Linde's roadshow presentation, Oct 15, 2008
Slide 1: Ambition counts. Edinburgh Roadshow.
Ambition counts. Edinburgh Roadshow. October 15, 2008 Georg Denoke, 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 Strong underlying growth in sales and operating profit in H1 2008 After successful deleveraging, very strong balance sheet ▸ Financial metrics and targets Outlook confirmed, strong confidence in our 2010 financial targets Continued readiness to invest in growth ▸ Def
Slide 4: H1 2008 results Highlights
H1 2008 results Highlights Growth acceleration despite economic challenges — H1 Group sales increase 12.9% excl. FX to €6.256 bn (Q2: +18% excl. FX to €3.339 bn) — H1 Group operating profit* up 15.4 % excl. FX to €1.258 bn (Q2: +20% excl. FX to €656 m) — H1 Adjusted EPS grows 24.8% to €2.72 (2007: €
Slide 5: Gases Division, financial track record
Gases Division, financial track record H1 operating performance by operating segment Western Europe in € m, as reported Americas in € m, as reported Sales Operating Operating Sales Operating Operating Profit Margin Profit Margin +5.5% 2,083 1,275 -15.1% 240 -14.2% 1,975 +6.3% 575 541 27.4% +20 bps 2
Slide 6: Gases Division, sales by product areas
Gases Division, sales by product areas (consolidated) Comparable Gases growth of 8.5% in H1 2008 in € m, comparable*, 4,709 4,342* +8.5% consolidated 487 450 +8.2% Healthcare 1,183 1,111 +6.5% Tonnage 1,149 1,080 +6.4% Bulk 1,701 1,890 Cylinder +11.1% *excluding currency, natural gas price and conso
Slide 7: 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 H1 order intake by segment Top 1 Top 2 Products: Products: — Oxygen — Nitrogen — H2/CO/Syngas — Ammonia 1,499 1,557 — Rare gases — Gas remov
Slide 8: Solid financial position
Solid financial position Deleveraging executed ahead of plan and expectations Significant reduction of net debt driven by disposal proceeds and strong cash generation 12,815 Net debt/EBITDA ratio 9,933 4.8 6,427 6,364 Target 2.7 range: 2.0-3.0 € mn 30/09/2006 31/12/2006 31/12/2007 30/06/2008 2006 20
Slide 9: Investments (capex + acquisitions)
Investments (capex + acquisitions) Investing in our growth path Group (∑ = € 1,572 mn) Gases Division (∑ = € 1,587 mn) +33.4% 1,035 +31.4% 1,062 +31.4% 1,062 -2.6% 377 776 808 808 Acquisitions 387 Acquisitions +10.4% W. Europe 213 Gases 537 525 + +112.7% 334 Americas 193 + Asia & Eastern Europe 157
Slide 10: Outlook
Outlook Strong confidence in our mid-term financial targets Group — Increase in sales and overproportionate growth of operating profit in 2008 — Operating profit above €3 bn in 2010 — Adjusted ROCE of at least 13% in 2010 — €250 m cost savings (fully effective in 2009) — Tax rate of around 30% in 20
Slide 11: Focus on Industrial Gases
Focus on Industrial Gases Stable growth – attractive opportunities Strong and stable growth Global Industrial Gases — Expected market growth of ~7% p.a. Market Growth 1999-2011e — Based on historic performance New applications across all end markets ≥ €60 bn CAGR +~7 % — For high innovation (solar,
Slide 12: Industrial gas consumption, USD per capita, by region
Industrial gas consumption, USD per capita, by region Still very low intensity in the emerging markets Western USA Europe Eastern $ 49 $ 38 Europe: $ 16 China: $ 2 South and East Asia: $ 3 South America: Australia Gases market $ 13 $ 42 per capita South Africa: $ 13 Overproportionate growth in emerg
Slide 13: Broad spectrum of end user applications
Broad spectrum of end user applications Selection of key end customer industries Healthcare Food & Environmental Metal Metallurgy Pulp & Beverage Fabrication Paper Oil & Gas Refining Electronics / PV Specialty Gases Chemicals Glass Recovery High diversity and innovation drive stable long-term growth
Slide 14: Gases Division – Global balance with strong market shares
Gases Division – Global balance with strong market shares Solid basis for a stable business development Present in around 100 countries, representing >90% of global GDP Market leader in 46 of the 70 major countries, #2 Player in another 10 Market Leader #2 Player Others ▸ Operational performance | ▸
Slide 15: Gases Division – Strong set-up in emerging markets
Gases Division – Strong set-up in emerging markets Market leading positions across all important regions Perfect fit between BOC (esp. Asia/Africa) and Linde (esp. Eastern Europe/South America) Eastern Europe & Middle East #1 Greater #1 China South and #1 East Asia South America #2 #1 South Africa ▸
Slide 16: Gases Division – Focus on Middle East
Gases Division – Focus on Middle East Leveraging our long standing Engineering market presence JV with ADNOC (founded in December 2007) Linde Engineering on the Arabian Peninsula: First contract: ASU in the Ruwais cluster More than 50 plants built Serving ADNOC JV Borouge with nitrogen over the last
Slide 17: Gases Division - Well balanced business mix
Gases Division - Well balanced business mix Growth opportunities and cash generation Merchant Market Tonnage — Global #1 in bulk and cylinder — Global #2 — Dominant market position in core markets — Significant share of tonnage business — Broad and diversified customer base, increasing exposure to (
Slide 18: Gases Division Project pipeline further increased
Gases Division Project pipeline further increased — Main market drivers for Tonnage are new applications in the energy sector and Emerging Markets — Strong market position due to business synergies between Engineering and Gases and market leadership in Emerging Markets — 7 major signings since March
Slide 19: Energy mega-trend, a sustainable long-term growth driver
Energy mega-trend, a sustainable long-term growth driver Linde has extensive technology expertise 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 ga
Slide 20: 2nd mega trend: Healthcare
2nd mega trend: Healthcare Strong positioning in a structural growth market Structural growth drivers in place: — Aging population, improved diagnostics & treatment (e.g. COPD*, Sleep Therapy) — Growth opportunities driven by benefits for patients, hospitals & health systems *Chronic Obstructive Pul
Slide 21: The Linde Group expands on a strong and stable platform
The Linde Group expands on a strong and stable platform Good set-up for future growth Business on a solid growth track — Underlying growth carried by all regions and product segments — Balanced profitability profile, synergy program reaching the bottom line — Attractive project pipeline supported by
Slide 22: Appendix
Appendix a THE LINDE GROUP
Slide 23: Group Financial Highlights
Group Financial Highlights in € m H1 2007 H1 2008 Δ in % Sales 5,888 6,256 6.3 Operating profit 1,158 1,258 8.6 Margin 19.7 20.1 +40bps EBIT before special items and PPA depreciation 727 842 15.8 Special items 574 59 - PPA depreciation -201 -185 - EBIT 1,100 716 - Financial Result -204 -172 15.7 Tax
Slide 24: Group, sales by Divisions
Group, sales by Divisions 12.9% growth in group sales excluding currency effects in € m, as reported 5,888 +6.3% 6,256 Gases 4,553 +3.4% 4,709 Gases Division — Comparable* growth of +8.5% — 12.8% comparable growth incl. bolt-on acquisitions — Driven by positive price and volume effects in all operat
Slide 25: Group, operating profit by Divisions
Group, operating profit by Divisions 15.4% increase in operating profit excluding currency effects in € m, H1 2007 H1 2008 as reported 1,158 +8.6% 1,258 Gases 1,125 1,194 Gases Division — 12.7% operating profit growth excl. currency — Operating margin up by 70 bps to 25.4% — Margin dilution from nat
Slide 26: Gases Division, sales bridge
Gases Division, sales bridge 8.5% comparable growth 12.8% growth including acquisitions In € m +2.2% -6.7% +8.5% 4,709 4,553 -0.6% H1 2007 Natural Gas Currency Consolidation Price/Volume H1 2008 ▸ Appendix 26
Slide 27: Gases Division Joint ventures
Gases Division Joint ventures in € m, comparable Proportionate Sales Share of Net Income (not incl. in the Group top-line) (contribution to operating profit) 10 288 +4.9% 302 19 (+32.5% excl. STL*) 25 -- 25 H1 2007 H1 2008 H1 2007 H1 2008 *Sales-type-lease for new projects treated as EFL (IFRIC*) ▸
Slide 28: Engineering Division Market environment remains supportive
Engineering Division Market environment remains supportive — Further growth at strong margin Others Olefin 8% 14% — USD 800 m order for the “Enhanced Gas Recovery” project HyCo 12% with ADNOC Order Nat. Gas — Order backlog of €4,347 bn (year-end 2007: €4,391 bn) 6% intake H1 08 — Unchanged outlook:
Slide 29: Group – Cash Flow Statement
Group – Cash Flow Statement Key elements in € m Q1/2008 Q2/2008 H1/2008 H1/2007 Operating profit before unusual items 602 656 1.258 1.158 Change in Working Capital -199 17 -182 -4 Other changes -66 -194 -260 -409 Cashflow from operating activities 337 479 816 745 EFL amortisation 18 20 38 42 Disposa
Slide 30: Engineering Division - Leveraging customer relationships
Engineering Division - Leveraging customer relationships 147 Linde-built plants in China Heilongjiang Jilin Liaoning Xinjiang Beijing Dalian Ningxia Tianjin Shandong Shanxi Jiangsu Gansu Shaanxi Henan Anhui Shanghai Taipei Hubei Taichung Sichuan Zhejiang Jiangxi Hunan Fujian Mai Liao Taiwan Air sepa
Slide 31: Integration process progressing on plan
Integration process progressing on plan Synergy program on track towards our bottom-line target Bottom-line effect of € 75 mn in 2007 Phasing ahead of time, strong confidence in our target of € 250 mn in 2009 in € million € 250 mn 30% Supply 25% Procurement 125 100 45% G&A 0 End 2006 End 2007 End 20
Slide 32: Integration Process Synergy program
Integration Process Synergy program 2007 Synergy Achievements (Examples) 2008 Planned Activities (Examples) Consolidation of Corporate Headquarters Continued reduction on selective regional (BOC and Linde) overheads Restructuring of central functions Selected consolidation of operational sites Restr
Slide 33: Operating profit margin improvement
Operating profit margin improvement Synergy impact visible in the bottom-line 2006 2007 Δ Group 19.0% 19.7% +70bps Gases 24.2% 25.1% + 90bps Gases & Corporate Revenue Gases 8,421 9,209 OP Gases 2,035 2,314 OP Corporate -173 -151 Operating Profit 1,862 2,163 OP Margin 22.1% 23.5% +140bps JV impact 49
Slide 34: Solid financial position
Solid financial position Deleveraging executed ahead of plan and expectations Significant reduction of net debt driven by disposal proceeds and strong cash generation [in € mn] 9,933 3,557 1,471 1,742 404 281 363 6,427 31/12/2006 Disposals Net investments Operating Net Dividends Others 31/12/2007 (i
Slide 35: Capital market debt
Capital market debt Solid maturity profile No major maturities until April 2012 after issuance of senior benchmark bonds in April 2007 at attractive rates: EUR 1 bn, 5 years with fixed coupon of 4.375% (at midswap + 24 bp) EUR 1 bn, 10 years with fixed coupon of 4.750% (at midswap + 45 bp) GBP 300 m
Slide 36: Pension financing, key elements
Pension financing, key elements Net pension obligation down to € 403 mn in € million Defined Plan- Net- Net- benefit assets obligation obligation obligations 2007 2006 UK 2,860 2,900 -40 416 Germany 803 283 520 610 US+Canada 395 581 -186 -166 Other activities 1,094 1,049 45 91 Net obligation 5,152 4
Slide 37: Definition of financial key figures
Definition of financial key figures Operating Return EBITDA (incl. IFRIC 4 adjustment) excl. finance costs for pensions Profit excl. special items incl. share of net income from associates and joint ventures adjusted Return Operating profit - depreciation / amortisation ROCE excl. depreciation/amort
Slide 38: Linde Group Reconciliation of EPS
Linde Group Reconciliation of EPS 31.12.2006 31.12.2007 Key Financial As reported Non-GAAP Key Financial Effects € million Figures adjustment Figures EBIT before special item 989 1,145 446 1,591 PPA Special items - 607 -607 - Disposal of businesses Taxes on income -294 -379 23 -356 deferred taxes on
Slide 39: Linde Group Reconciliation of Capital Employed
Linde Group Reconciliation of Capital Employed 31.12.2006 31.12.2007 Key Financial As reported Non-GAAP Key Financial Effects € million Figures adjustment Figures Equity incl. minority 7,031 9,210 -1,332 7,878 PPA and disposal effects interest from 2006 and 2007 Plus: net debt 9,933 6,427 6,427 Plus
Slide 40: Group Financial key indicators
Group Financial key indicators Ahead of targets: Adjusted EPS already accretive in 2007 Double-digit ROCE achieved one year ahead of plan Improved cash generation in the new set-up Adjusted EPS Adjusted ROCE Operating Cash Flow € mn, as reported 1,742 11.4% € 5.02 10.3% 1,227 € 4.66 2006 2007 2006 2
Slide 41: Accounting considerations Impact of PPA and EFL
Accounting considerations Impact of PPA and EFL Purchase Price Allocation (PPA) IFRIC 4: Embedded Finance Lease (EFL) Impact in H1 2008: €185 m (H1 07: €201 m) Impact* in H1 2008: € -64 million (H1 07: €-72 m) Expected impact FY 2008: €375-425 m Expected impact* FY 2008: €-128 m *(on Sales and EBITD
Slide 42: Purchase Price Allocation
Purchase Price Allocation Confirmation of expected Depreciation & Amortisation Development of depreciation and amortisation (in € million) Impact in 2007: € 446 million Expected range 500 2008 > 375 – 425 2009 > 300 – 350 400 2010 > 200 – 250 300 2011 > 200 … 200 2022 < 100 100 0 15 21 07 09 11 20 2
Slide 43: 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 +44 20 7647 9614 robert.schneider@linde.com 43