Slide 1: Analysts' Conference Call Full year results 2009
Analysts‘ Conference Call Full year results 2009. 17 March 2010
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. 2009 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2010 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Cash Flow and Capex 3. Financial position and Financing App
Slide 4: Highlights 2009
Highlights 2009 Economic crisis proves resilience of our business model Group sales down 11.5% to € 11.211 bn, Gases sales decreased 5.1% on comparable basis Group operating profit declined 6.7% to € 2.385 bn, Gases operating profit down only 1.6% Operating margin improved by 110 bp to 21.3%, before
Slide 5: Group, sales by Divisions
Group, sales by Divisions Economic crisis proves relative stability of our set-up in € million 2008 2009 Gases Division 12,663 -11.5% 11,211 — Comparable* sales decrease of -5.1%, -2.3% incl. bolt-on acquisitions 9,515 -6.1% — Most resilient sales development -5.1%* 8,932 — Volumes impacted by broad
Slide 6: Group, operating profit by Divisions
Group, operating profit by Divisions Strong margin performance in all Divisions, supported by HPO in € million 2008 2009 Gases Division 2,555 -6.7% 2,385 — Operating profit only 1.6% below 2008 — Strong profitability improvement with 2,417 -1.6% 2,378 full year margins up by 120 bp to 26.6% — Succes
Slide 7: Gases Division, sales by product areas
Gases Division, sales by product areas Balanced mix as basis for a resilient performance in the crisis in € million, comparable* (consolidated) 9,412* -5.1% 8,932 Healthcare 985 +4.6% Healthcare growth of 5% 1,030 Shows that the mega-trend is intact Tonnage 2,085 -0.5% 2,075 Tonnage sales on 2008 le
Slide 8: Engineering Division
Engineering Division Order backlog of € 4.2 bn close to the high level of 2008 Q4 order intake of € 944 m incl. three new contracts in Russia Strong order activity despite the economic environment: full-year order intake close to € 2.5 bn Order backlog remains high with € 4.2 bn Order intake Order b
Slide 9: HPO (High Performance Organisation)
HPO (High Performance Organisation) A holistic program 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 Bulk Supply Chain Cylin
Slide 10: HPO
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 11: HPO
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 12: Growth opportunities
Growth opportunities Product portfolio serving mega-trends Emerging Markets Energy/Environment Healthcare Leveraging Gases & Engineering business synergies 12
Slide 13: 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 14: Mega-trend Emerging Markets
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% Emerging Advanced 25 Markets Economies 20 2006 2007 2008 2009 Strong emerging market exposure based on: — Perfect
Slide 15: Mega-trend Emerging Markets
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 15
Slide 16: 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 17: Mega-trend Emerging Markets
Mega-trend Emerging Markets Strong customer relationships in Engineering Plant sales of the Engineering Division (for legend see p. 18) Eastern Europe & Middle East Suez Greater China South and East Asia South America South Africa 17
Slide 18: Mega-trend Emerging Markets
Mega-trend Emerging Markets Strengthening of footprint in Russia (new contracts in Q4/09) Strong long-term potential in Russia Gases and Engineering footprint in Russia Serving the industrial expansion with our combined Gases and Engineering offering St. Petersburg Engineering Division — Long-standi
Slide 19: Mega-trend Energy/Environment
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 20: Mega-trend Energy/Environment
Mega-trend Energy/Environment Linde run mega projects in Enhanced Oil & Gas Recovery JV (Linde/Pemex), Cantarell Elixier JV (Linde/ADNOC), Abu Dhabi Linde solution Linde solution 5 ASUs, largest nitrogen injection project globally 2 ASUs (based on Cantarell experience) Total Capex: $ 1 bn, 1,750K Nm
Slide 21: Mega-trend Energy/Environment
Mega-trend Energy/Environment All Carbon Capture technologies in the Linde portfolio Linde Portfolio Technology Process CO2 Gas Gas cleaning Pre-Combustion ASU Gasifier conversion (Rectisol) liquefaction & compression (IGCC) Feedstock CO2 Feedstock Fluegas Fluegas CO2 Oxyfuel ASU Boiler purification
Slide 22: Mega-trend Energy/Environment
Mega-trend Energy/Environment Well positioned as Carbon Capture projects and Storage projects gain strength 1 Building on our strong references European map of CCS projects — Established partnerships with German Operational projects Potential projects utilities like Vattenfall and RWE (planned or an
Slide 23: Mega-trend Energy/Environment
Mega-trend Energy/Environment Support customer efficiency in energy use: example REBOX Eco-friendly applications: Oxygen increases combustion efficiency and reduces emissions The application: Linde’s REBOX® solutions are today employed in 120 reheat and annealing furnaces, using oxygen instead of ai
Slide 24: 2010 outlook
2010 outlook Based on current consensus expectations for a moderate economic recovery Group: Growth in sales and operating profit versus 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
Slide 25: Agenda
Agenda Part 1 Prof Dr Wolfgang Reitzle 1. 2009 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2010 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Cash Flow and Capex 3. Financial position and Financing App
Slide 26: 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 26
Slide 27: Gases Division, sales by operating segment
Gases Division, sales by operating segment Emerging markets show strongest momentum in € million Western Europe Asia & Eastern Europe — Volumes remain well below previous year 4,133 -8.9% 1,936 -5.2% levels in Western Europe 3,765 1,836 but pricing remains supportive -4.6%* -3.0%* — Major currency e
Slide 28: Gases Division, project pipeline
Gases Division, project pipeline € 2.4 bn of investment, majority in emerging markets — € 2.4 bn investments between 2008-2011 (thereof € 0.5 bn in JVs @ share) — 65% of investments allocated to emerging markets — Most significant sales recognition in 2010; sales contribution in 2011 close to 2010 g
Slide 29: Gases Division, operating profit by operating segment
Gases Division, operating profit by operating segment Profitability improved despite lower volumes in € million Western Europe Asia & Eastern Europe — Early implementation of HPO measures and 1,119 -6.1% 563 -1.1% 557 positive pricing partly 1,051 compensates the +80 bp +120 bp 27.9% 30.3% volume re
Slide 30: Group EBT, recurring
Group EBT, recurring (in € million) 2008 2009 1.006 59 49 970 22 969 83 838 EBT as non- impairment EBT EBT as restructuring impairment EBT reported recurring recurring reported recurring 2008 item 2008 2009 2009 30
Slide 31: Group, Cash flow
Group, Cash flow Sustainable cash flow generation in new set-up Strong working capital control drives operating cash flow for the first time above € 2 bn 2,142 +14.2% in € million 1,876 +7.7% 1,742 2007 2008 2009 31
Slide 32: Group, Cash Flow
Group, 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 Q3 58
Slide 33: Group, Cash Flow
Group, 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 attract
Slide 34: Group, solid financial position
Group, solid financial position Net debt reduction of € 304 million 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 34
Slide 35: Group, solid financial position
Group, solid financial position Successful and quick execution of our deleveraging schedule 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 range: 6.427 6.423 2.7 2.0–3.0x 6.119 2.6 2.5 2.5 2,5 2.02 30/9/06 20
Slide 36: Group, solid financial position
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 37: Group, dividends
Group, dividends Proposed 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 37
Slide 38: 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 39: 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% 39
Slide 40: Agenda
Agenda Part 1 Prof Dr Wolfgang Reitzle 1. 2009 Highlights and Divisional Performance 2. Strategic focus: — Defensive set-up and HPO — Long-term industry growth drivers intact 3. 2010 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Cash Flow and Capex 3. Financial position and Financing App
Slide 41: Group, FY 2009
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 42: Group, Q4 2009
Group, Q4 2009 Key P&L items in € million Q4/2008 Q4/2009 ∆ in % Sales 3,271 2,898 -11.4 Operating profit 645 644 -0.2 Margin 19.7% 22.2% +250bps EBIT before special items and PPA depreciation 415 381 -8.2 Special items - - - PPA depreciation -94 -72 - EBIT 321 309 - Financial Result -111 -82 - Taxe
Slide 43: Group, FY 2009
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 44: Gases Division
Gases Division 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, solid financial position
Group, solid financial position Strong liquidity reserve € 2 bn credit facility available until March 2011 — Committed with more than 50 banks — No financial covenants — Fully undrawn € 1.6 bn forward start revolving credit facility — Signed June 2009, available March 2011 - March 2013 2,000 2,467 —
Slide 46: Gases Division
Gases Division Joint ventures in € million Proportionate Sales Share of Net Income (not incl. in the Group top-line) (contribution to operating profit) +6.3% -51.7%* 617 64 68 298 2008 2009 2008 2009 * Including consolidation change on Elgas 46
Slide 47: Engineering Division
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%) 47
Slide 48: Engineering Division
Engineering Division FY 2009 order intake by plant type and region Others: 8.9% Africa: 6.8% (2008: 7.6%) (2008: 3.0%) Synthesis Europe: 31.9% Asia/ Gas Plants: 10.6% (2008: 29.6%) (2008: 11.6%) Pacific: 14.7% (2008: 33.2%) Air Separation by plant type by region Plants: 14.6% (2008: 44.0%) Natural G
Slide 49: Group
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 50: Group
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 51: 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 51
Slide 52: 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 53: 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 54: Group, Definition of financial key figures
Group, 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. depreciatio
Slide 55: 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 55