Slide 1: Staying on Track. Analysts' Conference 2009
Staying on Track. Analysts‘ Conference 2009 Munich, 16 March 2009
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 Part 1 Prof. Dr Wolfgang Reitzle 1. 2008 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2009 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Financial KPIs 3. Financial position and Financing Appendi
Slide 4: Highlights 2008
Highlights 2008 Gases & Engineering model delivers a strong operational performance Group sales increased by 8.4% excluding currency effects to €12.663 bn 10.3% currency-adjusted growth in group operating profit to €2.555 bn Group margin up by 50 bps to 20.2%, driven by synergies and cost efficienci
Slide 5: Group: Sales by Divisions
Group: Sales by Divisions 8.4% increase in sales excl. currency effects in € million 2007 2008 +2.9% 12,663 12,306 Gases Division +3.3% 9,515 9,209 — 9.3% growth excluding currency effects — Comparable* growth of 6.8%, increase of 9.5% incl. bolt-on acquisitions — Positive price and volume trends —
Slide 6: Group: Operating profit by Divisions
Group: Operating profit by Divisions 10.3% increase in operating profit excl. currency effects in € million 2007 2008 +5.4% 2,555 2,424 Gases Division +4.5% 2,417 2,314 — 9.6% growth excluding currency effects — Full year margin up by 30 bps to 25.4% despite gas price dilution Engineering Division G
Slide 7: Engineering Division: Strong order backlog allows for 2-year visibility
Engineering Division Strong order backlog allows for 2-year visibility Strong order intake of €762 m in Q4 drives full-year order intake again above €3 bn Order backlog of €4.4 bn gives visibility for relatively stable development over the next two years Order intake Order backlog € 3,057 million €
Slide 8: Engineering Division: Order backlog diversified and of high quality
Engineering Division Order backlog diversified and of high quality Order backlog by plant type, 31/12/2008 Others: 4.2% (2007: 4.9%) Olefin Plants: 23.9% Synthesis Gas Plants: 14.5% (2007: 28.2%) (2007: 14.9%) Natural Gas Plants: 10.6% (2007: 12.3%) Air Separation Plants: 46.9% (2007: 39.6%) ▸ Highl
Slide 9: Business Synergies of Gases & Engineering Divisions
Business Synergies of Gases & Engineering Divisions Leveraging a global set-up and common customer focus Global set-up of Gases Division Plant Sales of Engineering Division Greater China Recent tonnage contracts with long-term Engineering customers: ADNOC 2 tonnage contracts signed in 2007/2008 SAIL
Slide 10: Gases Division: Project pipeline remains strong, despite some delays
Gases Division Project pipeline remains strong, despite some delays — 64 start-ups will deliver new revenue streams by 2011 (incl. JVs) — Project list remains strong, supported by Emerging Markets and energy applications 12 13 33 22 Americas Western Eastern Europe / ME 18 Europe China / South and Ea
Slide 11: Gases Division: Sales by products areas
Gases Division: Sales by products areas Stable growth across all four segments in € million, comparable*, consolidated +6.8% 9,515 8,911* 995 Healthcare 906 +9.8% 2,375 Tonnage 2,265 +4.9% Bulk 2,325 2,241 +3.7% Cylinder 3,499 +9.2% 3,820 *excluding currency, natural gas price and consolidation effe
Slide 12: Gases Division: Stability driven by a broad customer base
Gases Division Stability driven by a broad customer base 2008: Split by end-customer groups Others 7% Chemistry & Retail Energy 11% 22% Electronics 5% Metallurgy & Manufacturing Glass 21% 16% Healthcare Food & 11% Beverages 8% ▸ Highlights & Operational Performance | ▸ Resilience | ▸ Outlook 12
Slide 13: Gases Division: Stability driven by a broad customer base
Gases Division Stability driven by a broad customer base 2008: Split of product areas by major end-customer groups Retail Other Electronics Chemistry & Energy Manufacturing Bulk Metallurgy & Glass Tonnage Chemistry & Energy Metallurgy & Glass Food & Beverages Electronics Other Food & Beverages Homec
Slide 14: Gases Division: 70% of revenues come from a leading market position
Gases Division 70% of revenues come from a leading market position Sales split by market shares Market leader in 46 of the 70 major countries, #2 Player in another 10 €9.5 bn <30% ≥ 30% ≥ 40% 70% >70% of our merchant ≥ 60% business sales come Market Leader from a leading market #2 Player position Ot
Slide 15: High Performance Organisation (HPO)
High Performance Organisation (HPO) Implementing the next step of our continuous optimisation Continuous transformation towards our vision to be the leading global gases and engineering group BOC Acquisition Integration Synergies HPO Transformation The Linde Group Synergies on track Continuous impro
Slide 16: Gases Division: Our global expansion
Gases Division Our global expansion … ▸ Highlights & Operational Performance | ▸ Resilience | ▸ Outlook 16
Slide 17: Gases Division: global process standardisation
Gases Division … offers large scope for global process standardisation ▸ Highlights & Operational Performance | ▸ Resilience | ▸ Outlook 17
Slide 18: Long term growth drivers remain intact: Energy/Environmental mega-trend
Long term growth drivers remain intact Energy/Environmental mega-trend Industrial gases solutions address structural challenges: Higher returns on existing fields Enhanced Oil & Gas recovery Nitrogen/CO2 Limited resources / environmental protection Sourer crude / lower emissions Refinery fuel upgrad
Slide 19: Long term growth drivers remain intact: Healthcare mega-trend
Long term growth drivers remain intact Healthcare mega-trend Global healthcare systems face structural trends: — MORE patients Increasing consumption of Hospital Care (ageing population) traditional healthcare gases — HIGHER expectations New diagnostics f.ex. COPD*, (quality of life) & therapies Sle
Slide 20: Current situation: The most uncertain demand environment in decades
Current situation The most uncertain demand environment in decades Q4 performance of Gases Division impacted by a significant demand slowdown in Nov/Dec Visibility on customer behaviour still low Customers still running at depressed capacity levels in January and February Slowdown in new project sig
Slide 21: Outlook: Market environment requires a scenario-based approach
Outlook Market environment requires a scenario-based approach In an environment of severe industrial slowdown and still limited visibility, we are incorporating a number of scenarios into our business planning for 2009: Group Forecasts for sales and earnings range from slightly above or the same as
Slide 22: Stable strategic set-up with strong management action
Stable strategic set-up with strong management action Strong operational performance in 2008 Sales growth despite currency effects and year-end slowdown Improved profitability and capital returns Ongoing strong cash flow generation Stable set-up in an uncertain market environment in 2009 Defensive s
Slide 23: Agenda
Agenda Part 1 Prof. Dr Wolfgang Reitzle 1. 2008 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2009 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Financial KPIs 3. Financial position and Financing Appendi
Slide 24: Gases Division Operating Segment Western Europe
Gases Division Operating Segment Western Europe in € million, as reported Sales Operating Profit Operating Margin 4,026 +2.7% 4,133 +2.0% 1,119 1,097 27.2% -10 bps 27.1% 2007 2008 2007 2008 2007 2008 Highlights — Comparable sales growth of 4.9% — Underlying sales momentum in cylinder gases driven by
Slide 25: Gases Division Operating Segment Americas
Gases Division Operating Segment Americas in € million, as reported Sales Operating Profit Operating Margin 2,348 -6.0% 2,207 447 -3.4% 432 19.0% +60 bps 19.6% 2007 2008 2007 2008 2007 2008 Highlights — Comparable sales growth of 6.4% — Reported figures reflect H1 2007 disposals and USD translation
Slide 26: Gases Division Operating Segment Asia & Eastern Europe
Gases Division Operating Segment Asia & Eastern Europe in € million, as reported Sales Operating Profit Operating Margin +19.7% 1,936 +20.6% 563 28.9% +20 bps 29.1% 1,618 467 2007 2008 2007 2008 2007 2008 Highlights — Comparable sales growth of 9.5% — Overall strong development in Greater China, Sou
Slide 27: Gases Division Operating Segment South Pacific & Africa
Gases Division Operating Segment South Pacific & Africa in € million, as reported Sales Operating Profit Operating Margin 1,284 +2.0% 1,310 303 – 303 23.6% -50 bps 23.1% 2007 2008 2007 2008 2007 2008 Highlights — Comparable sales growth of 9.4% — Reported growth impacted by weakness of the South Afr
Slide 28: Performance Q4 2007 vs. Q4 2008
Performance Q4 2007 vs. Q4 2008 (in € million) Gases Engineering 1.3* - -1.5% 4.2% 5.0% 2,359 2,358 607 598 915 953 80 84 Q4/07 Q4/08 Q4/07 Q4/08 Q4/07 Q4/08 Q4/07 Q4/08 *comparable Sales Operating profit Sales Operating profit Other 1.4* Group -12.1% -1.4% 74 -2.3% 3,348 3,271 654 645 -33 -40 -37 Q
Slide 29: Group Financial key indicators
Group Financial key indicators Further improvement in all our three key financial indicators Profitable growth for our shareholders: adjusted EPS increase of 8.8% Further improvement in capital returns: ROCE improvement of 210 bps Strong cash flow generation maintained in weakening environment: OCF
Slide 30: Group Cash Flow
Group Cash Flow Strong cash flow finances long-term investments Operating Cash flow in € million -225 337 Free Cash flow Q1 112 Cash Flow from investing activities -199 Q2 479 280 -292 Q3 485 193 -556 Q4 575 19 -1,272 1,876 Total 604 — Strong development of operating CF in Q4 — High investment activ
Slide 31: Cash Flow from investing activities
Cash Flow from investing activities Capital expenditure and Acquisitions Cash Flow from investing activities CAPEX Acquisitions 42.0% in € million -1,272 2,086 -1,683 -1,611 1,470 1,451 1,035 CAPEX/ 576 Acquisitions 1,062 +36.6% Gases 213 Other* -21 -31 Engineering 46 +15.2% 53 -73 -34 Other Proceed
Slide 32: Capital expenditure Gases Division
Capital expenditure Gases Division in € million +36.6% 1,451 506 1,062 +34.2% Western Europe 377 295 +38.5% Americas 213 505 Asia & Eastern Europe 334 +51.2% 145 213 South Pacific & Africa 138 +5.1% 2007 2008 ▸ Operational Performance | ▸ Financial KPIs | ▸ Financial positioning & Financing 32
Slide 33: Adjusted ROCE Further improved to 12.4%
Adjusted ROCE Further improved to 12.4% in € million Capital Employed Adj. ROCE Adj. ROCE (B/S date) 10.3% 12.4% 15,490 13,884 13,508 7,878 13,696 7,116 Adj. Equity 7,445 7,330 1,703 + Financial debt 1,591 Adj. EBIT + Net pension obligation 403 681 Avg. CE - Net financial services -824 -712 - Cash -
Slide 34: Solid financial position
Solid financial position Successful & quick execution of our deleveraging schedule Net debt/EBITDA ratio of 2.5x well within our target range of 2-3x Net debt in € bn Net debt/EBITDA ratio further improved to 2.5x 3,5 12.815 4.8 9.933 3.03 Target range: 6.427 6.423 2.7 2.0–3.0x 2.5 2.5 2,5 2.02 30/9
Slide 35: Financial debt structure: Stable long-term financing
Financial debt structure Stable long-term financing Well-spread maturity profile Financial debt, Recent issues have lengthened our refinancing schedule further by instrument Appx. 80% of total financial debt is due beyond 2010 19% 19% Balanced mix of various financing instruments Long-term capital m
Slide 36: Financial debt structure
Financial debt structure Cash position & credit facility cover all financial maturities until end of 2010 €2 bn credit facility: 2,000 1,732 — Committed with more than 50 banks — No financial covenants in € million –1,290 1,022 Short-term Cash Credit Facility Liquidity reserve Financial debt 31/12/0
Slide 37: Pensions Key figures
Pensions Key figures Net obligation increases due to Further actuarial losses of approx. € 400 m actuarial gains/losses avoided due to early optimization of the plan assets portfolio structure DBO Plan Net in € million 45% 28% Shares asset obligation 01.01.2008 5,152 4,813 339 Service costs 106 106
Slide 38: Tax: Successful development of the Group tax rate
Tax Successful development of the Group tax rate 39.7% 27.6% 2009 target Range: 25–27% 22.9% 2006 2007 2008 — Post-acquisition restructuring fully effective in 2008 — Positive impact of tax rate changes — Strong performance of the Group in countries with lower tax rates ▸ Operational Performance | ▸
Slide 39: Dividends
Dividends Proposed Dividend in line with growth of operating profit Consistent dividend policy +5.9% €1.80 +13.3% €1.70 €1.50 2006 2007 2008 ▸ Operational Performance | ▸ Financial KPIs | ▸ Financial positioning & Financing 39
Slide 40: Management focus on cash flow and returns
Management focus on cash flow and returns Long-term oriented financial set-up in place Solid operating performance in 2008 — Underlying growth in all operating segments — Relative stability in the fourth quarter Strong focus on cash flow generation — Operating cash flow finances long-term investment
Slide 41: Agenda
Agenda Part 1 Prof. Dr Wolfgang Reitzle 1. 2008 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2009 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Financial KPIs 3. Financial position and Financing Appendi
Slide 42: Group Key P&L items, 2008
Group Key P&L items, 2008 in € million 2007 2008 Δ in % Sales 12,306 12,663 +2.9 Operating profit 2,424 2,555 +5.4 Margin 19.7% 20.2% +50bps EBIT before special items and PPA depreciation 1,591 1,703 +7.0 Special items 607 59 - PPA depreciation -446 -371 - EBIT 1,752 1,391 - Financial Result -377 -3
Slide 43: Group Key P&L items, Q4 2008
Group Key P&L items, Q4 2008 in € million Q4/2007 Q4/2008 Δ in % Sales 3,348 3,271 -2.3 Operating profit 654 645 -1.4 Margin 19.5% 19.7% +20bps EBIT before special items and PPA depreciation 444 415 -6.5 Special items 33 - - PPA depreciation -111 -94 - EBIT 366 321 - Financial Result -100 -111 - Tax
Slide 44: Gases Division Joint ventures
Gases Division Joint ventures in € million Proportionate Sales Share of Net Income (not incl. in the Group top-line) (contribution to operating profit) +3.2% +11.0% 617 62* 64 556* 2007 2008 2007 2008 * comparable (excluding currency, natural gas price and consolidation effect), consolidated ▸ Appen
Slide 45: Gases Division: Sales bridge
Gases Division: Sales bridge 6.8% comparable growth in 2008 in € million 9,515 +6.8% +0.4% -5.8% 9,209 +1.9% 2007 Consolidation Currency Natural Gas Price/Volume 2008 ▸ Appendix 45
Slide 46: Net debt: Change from year-end 2007
Net debt Change from year-end 2007 Net debt/EBITDA in € million 4.8 2.7 2.5 2006 2007 2008 108 1,876 329 190 6,427 6,423 353 1,272 Net debt Consolidation Operating Cash Flow Net Dividends Others Net debt 31/12/2007 Cash Flow from interest 31/12/2008 investment ▸ Appendix activities 46
Slide 47: Linde Group Reconciliation of Capital Employed
Linde Group Reconciliation of Capital Employed 31.12.2007 31.12.2008 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures Equity incl. minority 7,878 8,249 -1,133 7,116 PPA and disposal effects interest Plus: net debt 6,427 6,423 6,423 Plus: liabilities fr
Slide 48: Linde Group Reconciliation of EPS
Linde Group Reconciliation of EPS 31.12.2007 31.12.2008 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures EBIT before special items 1,591 1,391 312 1,703 PPA Special items - 59 -59 - Disposal of businesses Taxes on income -356 -230 -112 -342 deferred ta
Slide 49: Purchase Price Allocation
Purchase Price Allocation Confirmation of expected Depreciation & Amortisation Development of depreciation and amortisation (in € million) Impact in 2008: € 371 million Expected range 500 2009 > 275 – 325 2010 > 200 – 250 400 2011 > 175 – 225 300 … 200 2022 < 100 100 0 15 21 07 09 11 20 20 20 20 20
Slide 50: Mandatory adoption of IFRIC 4
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 2008: € 127 million Receivables fr
Slide 51: 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 52: 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 52