Linde Plc · NASDAQ:LIN
Linde — Non-Deal Roadshow (July 2008)
45 slides from Linde's roadshow presentation, Jul 2, 2008
Slide 1: Ambition counts. Roadshow Hamburg
Ambition counts. Roadshow Hamburg 2 July 2008 Thomas Eisenlohr, Head of Investor Relations
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 Solid start into the year 2008 After successful deleveraging, very strong balance sheet ▸ Financial metrics and targets Outlook confirmed, well on track towards our 2010 financial targets Continued readiness to invest in growth ▸ Defensive growth - superior growth pr
Slide 4: Solid start into the year 2008
Solid start into the year 2008 Highlights Group — Sales growth excl. FX of 7.5% to € 2.917 bn, operating profit up 11.1% excl. FX to € 602 mn — Synergy ramp-up on plan, operating margin improved by 70 bp on Q1 2007 — Adjusted EPS rises 20.6% to € 1.29 (07: € 1.07) — Significant contract wins Gases —
Slide 5: Gases Division, financial track record
Gases Division, financial track record Overview of 2007 operating performance by operating segment Sales Operating profit Operating Margin 2 ,3 14 in € 9,209 + 1 3 .7% 25.1% m illion + 9.4% 2 ,0 35 303 2 4.2% 8 ,4 21 +9 0 bps 1,284 + 7 .4% + 9.8% 282 23.6% S. P acific & Africa 1,169 -50 bps 467 24.1
Slide 6: Engineering Division, financial track record
Engineering Division, financial track record Leading market position in all segments Air Separation Plants Hydrogen and Synthesis Gas Plants Sales and EBITDA margin 3000 10% Top 1 Top 2 2,750 Products: Products: 9% — Oxygen — H2/CO/Syngas 2500 — Nitrogen — Ammonia 8% — Rare gases — Gas removal — Gas
Slide 7: 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 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 6,251 Target 2.7 range: 2.0-3.0 € mn 30/09/2006 31/12/2006 31/12/2007 31/03/2008 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% 377 776 808 808 387 +10.4% 213 W. Europe Acquisitions Acquisitions 537 525 Gases +112.7% 334 193 + Americas + 157 Asia & Eastern Europe
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 mn cost savings (fully effective in 2009) — Tax rate of around 30% in
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: 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 13: 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 14: 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 15: 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 16: Gases Division: Busy pipeline of plant start-ups
Gases Division Busy pipeline of plant start-ups More than half of the new projects located in emerging markets 8 9 26 Americas Western Eastern Europe / ME Europe China / South and East Asia 22 16 7 12 Africa / South Pacific 2008 2009 2010 ▸ Operational performance | ▸ Financial metrics and targets |
Slide 17: Energy mega-trends, a sustainable long-term growth driver
Energy mega-trends, 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 g
Slide 18: Energy mega-trends as long-term growth driver
Energy mega-trends as long-term growth driver 2008 signings show our extensive technology expertise Enhanced Oil & Gas Recovery (N2) Tonnage contract with ADNOC Liquid Biogas JV plant with Waste Management 3rd generation Bio-Ethanol Detailed slide see appendix Exclusive cooperation with Süd-Ch
Slide 19: 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 20: Appendix
Appendix a THE LINDE GROUP
Slide 21: Q1 results review
Q1 results review Group financial highlights (in € million) Q1 2007 Q1 2008 Δ in % Sales 2,860 2,917 2.0 Operating profit 569 602 5.8 Margin 19.9 20.6 +70bp EBIT before special items and PPA depreciation 358 397 10.9 Special items 510 15 - PPA depreciation -107 -94 - EBIT 761 318 - Financial Result
Slide 22: Group, sales by Divisions
Group, sales by Divisions 7.5% growth in group sales excluding currency effects in € million, as reported +2.0% 2,917 Gases Division 2,860 9,209 — Comparable* growth of +7.5% 2,249 2,301 — 13.6% comparable growth incl. bolt-on acquisitions — 13.0% comparable growth in JVs, not incl. in top-line +2.3
Slide 23: Group, operating profit by Divisions
Group, operating profit by Divisions Margin up by 70 bps in € million, Q1 2007 Q1 2008 as reported +5.8% 602 Gases Division 569 586 — 10.7% operating profit growth excl. currency 556 — Operating margin up by 80 bps to 25.5% Engineering Division +5.4% — Operating profit growth reflects strong project
Slide 24: Gases Division, sales bridge
Gases Division, sales bridge 7.5% comparable growth 13.6% growth including acquisitions In € million 2,301 2,249 +1.6% -5.7% +7.5% -1.1% Q1 2007 Natural Gas Currency Consolidation Price/Volume Q1 2008 ▸ Appendix 24
Slide 25: Gases Division, sales by operating segment
Gases Division, sales by operating segment Underlying growth momentum across all geographies +2.3% As reported Gases Division +7.5% Comparable: excluding currency, natural gas price and consolidation effect 2,249 2,301 +2.8% S. Pacific & Africa 289 297 +10.3% Asia & Eastern Europe 313 +48.2% 464 +9.
Slide 26: Gases Division, joint ventures
Gases Division, joint ventures 13% underlying sales growth in € million, comparable Proportionate Sales Share of Net Income (not incl. in the Group top-line) (contribution to operating profit) 10 139 +13% 123 19 67 9 5 +80% Q1 2007 Q1 2008 Q1 2007 Q1 2008 ▸ Appendix 26
Slide 27: Gases Division, operating profit by operating segment
Gases Division, operating profit by operating segment 10.7% increase excl. currency effects in € million, as reported +5.4% 586 556 +3.0% 68 S. Pacific & Africa 66 Asia & Eastern Europe 89 +47.2% 131 +19.3%* Americas 128 -18.8% 104 +9.8%* Western Europe +3.7% 273 283 *excluding consolidation effect
Slide 28: Gases Division, operating margin by operating segment
Gases Division, operating margin by operating segment Solid profitability in all geographies 24.7% 25.5% +80 bps 22.8% +10 bps 22.9% S. Pacific & Africa 28.4% -20 bps 28.2% +210 bps* Asia & Eastern Europe Americas 18.8% +90 bps 19.7% +220 bps* Western Europe 27.7% -20 bp 27.5% * excluding consolidat
Slide 29: Gases Division, sales by products areas
Gases Division, sales by products areas (consolidated) Ongoing growth momentum across our business mix in € million, comparable*, 2,301 consolidated +7.5% 2,141* 244 Healthcare 222 +9.9% 578 Tonnage 540 +7.0% 569 Bulk 536 +6.2% Cylinder 843 +8.0% 910 *excluding currency, natural gas price and consol
Slide 30: Engineering Division
Engineering Division Strong margin performance — Keeping very strong 8.7% margin Others Olefin 12% 11% — Mid-term sales growth range of 8-10% — Order backlog of € 4,152 bn (year-end 2007: € 4,391 bn) HyCo Order 17% intake — Order intake in Q1 2007 included Ethylene plant for Borouge ASU Q1 08 40% —
Slide 31: Group – Cash flow Statement
Group – Cash flow Statement Key elements in million € Q1 2007 Q1 2008 Operating profit 569 602 Change in working capital -85 -199 Funds from operations 484 403 Paid taxes -201 -38 Other changes 135 -28 Cash flow from operating activities 418 337 Disposal proceeds 1,810 38 Acquisitions -67 -11 Net in
Slide 32: 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 33: Integration Process
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 34: 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 35: 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 36: Capital market debt
Capital market debt Solid maturity profile No major maturities until April 2012 after issuance of senior benchmark bonds in April at attractive rates: € 1 bn, 5 years with fixed coupon of 4,375% (at midswap + 24bp) € 1 bn, 10 years with fixed coupon of 4,750% (at midswap + 45 bp) GBP 300 mn, 16 year
Slide 37: 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 38: 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 39: 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 40: 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 41: 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 42: Accounting considerations
Accounting considerations Impact of PPA and EFL Purchase Price Allocation (PPA) IFRIC 4: Embedded Finance Lease (EFL) Impact in Q1 2008: € 94 million Impact* in Q1 2008: € -32 million (Q1 07: € -35 mn) Expected impact 2008: € 375-425 million Expected impact* 2008: € -137 million *(on Sales and EBITD
Slide 43: 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 44: 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 2007: € -134 million Receivables f
Slide 45: 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 45