Linde Plc · NASDAQ:LIN
Linde — The Linde Group — FY2006 Earnings Presentation
32 slides from Linde's earnings presentation, Mar 12, 2007
Slide 1: The Linde Group. Growing Together.
The Linde Group. Growing Together. Analysts’ Conference, FY 2006 Results Munich, 12 March 2007
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements about Linde AG (“Linde”), The BOC Group plc (“BOC”) and their respective subsidiaries and businesses. These include, without limitation, those concerning the strategy of an integrated group, future growth potential of markets and produ
Slide 3: Agenda
Agenda Part 1 Prof Dr Wolfgang Reitzle 1. Highlights 2006 2. Update on Integration Process 3. Outlook Part 2 Georg Denoke 1. Major Accounting & Reporting Implications 2. New Reporting of Key Financial Figures 3. Purchase Price Allocation & IFRIC 4 4. Development of Cash flow, Net debt, Equity
Slide 4: Highlights 2006
Highlights 2006 A year of important strategic transformation Good progression on deleveraging and integration schedules Net debt down to € 9,933 million from € 12,815 at end of Q3/ 2006 New operating model, effective since Jan 1st, will allow to take full advantage of growth opportunities Strong ope
Slide 5: Key Financials 2006 Revenues
Key Financials 2006 Revenues € million 2005 2006 ∆% Gas 4,448 6,195 39.3 Linde 4,448 4,814 8.2 BOC 1,381 Engineering 1,623 1,863 14.8 Linde 1,623 1,822 12.3 BOC 41 Others – 187 55 – ∑ 5,884 8,113 37.9 Discontinued KION 3,627 4,020 10.8 Others – 306 – ∑ 3,627 4,326 19.3 Total Group 9,511 12,439 30.8
Slide 6: Key Financials 2006 EBITDA (pre-exceptionals)
Key Financials 2006 EBITDA (pre-exceptionals) € million 2005 2006 ∆% Gas 1,104 1,540 39.5 Linde 1,104 1,225 11.0 BOC 315 Engineering 117 153 30.8* Others – 89 – 107 – ∑ 1,132 1,586 40.1 Discontinued KION 573 611 6.6 Others 19 ∑ 573 630 9.9 Total Group 1,705 2,216 30.0 * Positive impact from Cryostar
Slide 7: Key Financials 2006
Key Financials 2006 € million 2005 2006 ∆% EBT 808 2,527 – Net income (excl. minorities) 514 1,838 – adjusted 644 25.3 EPS (in €) 4.30 13.30 – adjusted 4.30 4.66 8.4 Dividend (in €) 1.40 1.50 7.1 Capex (excl. financial assets) 864 971 12.4 Cash flow from operating activities 1,501 1,227 – 18.3 Net d
Slide 8: Division Gases: Good revenue growth in all regions
Division Gases Good revenue growth in all regions € million +21.1% +53.3% +21.4% +29.8% 3,667 359 3,308 3,028 1,372 450 573 420 922 163 895 31 381 160 345 389 178 192 2 3 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 Europe North America South America Asia/Pacific Africa Linde BOC 8
Slide 9: Division Gases: All product segments with strong revenue increase
Division Gases All product segments with strong revenue increase € million (consolidated) +46.1% +47.2% +36.7% +19.3% 2,247 503 1,788 1,490 460 1,744 1,644 329 1,328 848 1,161 1,215 88 1,020 711 760 +13.8% +9.3% +6.1% +6.9% 2005 2006 2005 2006 2005 2006 2005 2006 On Site Bulk Cylinders Healthcare Li
Slide 10: Division Engineering
Division Engineering — Ongoing strong environment in all four end markets drives order backlog to record levels — Linde Engineering on profitable growth track, EBITDA-margin up from 7.2 to 8.2% Order income +2.7% Order backlog +36.7% € million € million 4,518 3,305 2,913 2,992 2005 2006 2005 2006 10
Slide 11: Division Engineering: Order income by business segments
Division Engineering Order income by business segments Qatar GTL as biggest single order drives high ASU weighting in 2006 order intake Others 7.6% Olefin 16.4% 2005: 8.0% 2005: 43.6% HYCO 14.7% Natural Gas 12.4% 2005: 8.2% 2005: 7.9% ASU 48.9% 2005: 32.3% 11
Slide 12: A successful transformation into a pure play
A successful transformation into a pure play Dec 20 Dec 28 Jan 31 Jan 24 May 3 July 11 July 18 Nov 5 Sale of Closing of Sale of March 7 Announce- Syndicated Rights FTC- Sale of Linde KION Group participation Sale of ment loan Issue Approval KION Group Australia disposal in Indura Linde UK March 6 Ju
Slide 13: Successful completion of disposal process
Successful completion of disposal process € million Proceeds (EV) Signing Closing KION Group 4,000 05/11/06 9 28/12/06 9 8 Linde US ASUs 386 22/11/06 9 09/03/07 9 Linde Australia 300 20/12/06 9 01/02/07 9 Stake in JAG 695 21/12/06 9 01/03/07 9 BOC Poland 370 08/01/07 9 Q1/07 Stake in Indura 150 31/0
Slide 14: Further portfolio optimisation
Further portfolio optimisation Mexico — Sale of former Linde industrial & medical gas business to Praxair — The transaction is part of mutual agreement with Praxair under which Linde acquired the Turkish market leader Karbogaz in 2006 INO Therapeutics — Transfer into strategic partnership with US bi
Slide 15: Quick implementation of the new operational model with clear responsibilities
Quick implementation of the new operational model with clear responsibilities Prof Dr Georg Denoke Dr Aldo Belloni Kent Masters Trevor Burt Wolfgang Reitzle CFO CEO Regional — Europe — America — Asia/Pacific Responsibility — Middle East — Africa Global — Global Functions — Global — Engineering — Ton
Slide 16: Operating model: Regional Business Units
Operating model Regional Business Units – regional responsibility Continental & Northern Europe Eastern Europe & Middle East UK & 8,8% Ireland North America 7,8% Greater China South & East Asia South Africa America South Pacific 16
Slide 17: Integration synergies: Well on track towards our set target
Integration synergies Well on track towards our set target Synergy ramp-up scheme Synergy Split (yearly run-rate, pre one-time cost) Procurement + R&D 25% Supply 250M 30% (Operations) 100M 45% G&A 2006 2007 2008 — Rapid implementation of new organisational structure by 1st January 2007 — Significant
Slide 18: Rapid identification, generation of, and commitment to all synergy categories
The Linde Group is pursuing a rapid identification, generation of, and commitment to all synergy categories — Identification of best practices in production and distribution for all regions by global joint Linde/BOC expert teams — Initiation of pilot implementations, e.g., Supply — Plant maintenance
Slide 19: Priorities and further outlook
Priorities and further outlook Group — Adjusted ROCE above 10% in 2008 — EBITDA will be above € 3 billion in 2010 — Dividend policy will adequately reflect profit growth — Further deleveraging — Pre-tax cost of debt 5.6-5.8% — Tax rate 30-32% — € 250 m cost savings (fully effective in 2009) — Cost s
Slide 20: Agenda
Agenda Part 1 Prof Dr Wolfgang Reitzle 1. Highlights 2006 2. Update on Integration Process 3. Outlook Part 2 Georg Denoke 1. Major Accounting & Reporting Implications 2. New Reporting of Key Financial Figures 3. Purchase Price Allocation & IFRIC 4 4. Development of Cash flow, Net debt, Equity
Slide 21: Starting point beginning 2007 as pure play Gas & Engineering
Starting point* beginning 2007 as pure play Gas & Engineering € million Revenues EBITDA Margin Pro forma 2006 9,178 - Cryostar -138 9,040 2,329 25.8% - IFRIC 4 -129 -129 -1.1% 8,911 2,200 24.7% - Disposals/acquisitions -477 -165 -0.6% 8,434 2,035 24.1% + Share of net income of JVs +37 Gases Starting
Slide 22: Major accounting implications & reporting changes in 2006
Major accounting implications & reporting changes in 2006 Purchase Price Allocation for the BOC Group Significant increase in depreciation without cash impact IFRIC 4 Embedded finance Lease for On-Site-Plants Reclassification of operating profit because of financial lease into interest result and am
Slide 23: New financial key figures
New financial key figures New Previous definition definition Operating Return EBITDA (incl. IFRIC 4 adjustment) adjusted not adjusted excl. finance costs for pensions Profit excl. special items incl. net income from associates and joint ventures 2,216 2,162 adjusted Return Operating profit - depreci
Slide 24: Linde Group Reconciliation of EPS
Linde Group Reconciliation of EPS 31.12.2005 31.12.2006 € million Key Financial As reported Non-GAAP Key Financial Effects Figures adjustment Figures Revenues 9,511 12,439 12,439 Gross profit on sales 3,039 3,892 124 4,016 PPA Other income/expense –2,292 – 2,968 62 – 2,906 PPA Special items – 1,614
Slide 25: Major accounting implications: Purchase Price Allocation
Major accounting implications Purchase Price Allocation € million 12,400 3,000 200 9,600 Purchase Price Equity Pre-Existing Goodwill for BOC Goodwill of BOC 25
Slide 26: Major accounting implications: Purchase Price Allocation
Major accounting implications Purchase Price Allocation Results of Purchase Price Allocation meet our expectation Comparable to fair value adjustments (FVA) of other transactions € million 9,600 3,500 6,600 eg: 1,300 —Customer relations —Trade marks eg: 1,800 1,800 4,800 —Plants —Distribution equipm
Slide 27: Purchase Price Allocation: Development of depreciation
Major accounting implications Purchase Price Allocation Development of depreciation (€ million) Expected range 500 2007 > 400 – 450 400 2008 > 350 – 400 300 2009 > 250 – 300 200 2010 > 200 – 250 100 2011 < 200 … 0 07 09 11 15 21 2021 < 100 20 20 20 20 20 27
Slide 28: Impact of mandatory adoption of IFRIC 4
Impact of mandatory adoption of IFRIC 4 Financial Statements as of 31 December 2006 The Linde Group shows a significant amount of plants as embedded finance leases due to the adoption of IFRIC 4 Receivables from Financial Services: 31/12/2006 € 1,001 million Important considerations: 31/12/2006 — No
Slide 29: Development of operating cash flow
Development of operating cash flow (incl. minority interests) € million KION capital gain tax Pension funding UK impact (-€ 260 m in (-€ 220 m) 2006, +€ 260 m in 2007) 251 751 Transaction costs 117 1,501 109 1,227 31.12.2005 Division Division Corp./cons. Discontinued 31.12.2006 Gases Engineering Ope
Slide 30: Net debt
Net debt (Financial debt ./. cash ./. securities) First major step with KION disposal, closing of other disposals to follow in 2007 € million 13,677 3,275 1,816 939 1,227 130 9,933 1,505 2005 Acquisition Sale of Net Equity Net Operating Others 2006 of BOC KION Increase invest. Cash flow 30
Slide 31: Development of group equity
Development of group equity Strong increase due to capital increase and FY06 net income € million 55 1,858 8,225 171 1,836 168 4,473 01.01.2006 Gross Capital Net Exercise of Dividend Net Income Others 31.12.2006 adjusted Increase Convert. Bond Payment 31
Slide 32: Thank you for your attention.
Thank you for your attention.