Linde plc · NASDAQ:LIN
Linde — FY2010 Earnings Presentation
53 slides from Linde's earnings presentation, Mar 10, 2011
Slide 1: Analysts' Conference Call Full year results 2010
Analysts‘ Conference Call Full year results 2010. Continuously Improving 10 March 2011
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. 2010 Highlights and Divisional Performance 2. Strategic Focus: — High Performance Organisation — Growth Potential Mega-trends 3. 2011 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Project Pipeline and Capex 3. Financial Performance Appendix 3
Slide 4: Highlights 2010
Highlights 2010 Continuously Improving Group sales and profit on record level Group sales up 14.8% to € 12.868 bn Group operating profit increased by 22.6% to € 2.925 bn Operating margin up by 140 bp to 22.7%, Gases operating margin further improved to 27% Adjusted EPS increased by 50.4% to € 6.89 A
Slide 5: Group, sales by Divisions
Group, sales by Divisions Recovery above pre-crisis level proves potential of our set-up in € million 2009 2010 12,868 Gases Division +14.8% — Comparable* sales increase of 5.7% 11,211 10,228 +14.5% — Demand recovery visible in all product areas 8,932 — Ongoing currency support from weaker Euro: 8,9
Slide 6: Group, operating profit by Divisions
Group, operating profit by Divisions Continuous strong margin performance in all Divisions in € million 2009 2010 2,925 + 22.6% Gases Division 2,385 — Operating profit 16.3% above 2009 2,378 +16.3% 2,766 (14.4% above record year 2008) — Further profitability improvement with full year margins up by
Slide 7: Gases Division, sales by product areas
Gases Division, sales by product areas Balanced mix as basis for growth in € million, comparable* (consolidated) +5.7% 10,228 9,677 * Healthcare continuous growth 1,130 +4.2% Healthcare 1,084 — The Mega-trend continues with clear growth opportunities 2,451 Tonnage 2,237 +9.6% Tonnage sales above yea
Slide 8: Engineering Division order backlog remains high at € 4 bn
Engineering Division Order backlog remains high at € 4 bn — Q4 order intake of € 621 m shows the engineering business further recovers — Order backlog remains high with almost € 4 bn and an increased number of midsize and also smaller projects Order intake Order backlog € 2,159 million Successful pr
Slide 9: HPO (High Performance Organisation)
HPO (High Performance Organisation) Covering the full value chain in all regions — Successful start and continuation with savings of ~ € 460 m — Increase of efficiency by sharing best Accumulated gross cost savings practices and standardising € 650-800 m processes throughout the group € 150-200 m Bu
Slide 10: Mega-trends
Mega-trends Leveraging growth with our Gas & Engineering set-up Growth Markets Energy/Environment Healthcare Leveraging Gases & Engineering business synergies 10
Slide 11: Mega-trend Growth Markets: Differentiation
Mega-trend Growth Markets Business approach in Growth Markets Price Solutions selling selling Differentiation Application Technology Geographical infrastructure capability Engineering & Gases synergy Strong customer portfolio Early mover in growth markets Current position t 11
Slide 12: Growth trend leveraged by strong investment decisions
Mega-trend Growth Markets Growth trend leveraged by strong investment decisions Growth market sales, excl. JVs Gases Capex 2007 – 2010 in € bn (% of total Gases sales) 2.0 48% 46% 33% 35 46% 1.5 1.5 44% 1.3 1.1 30 1 1.0 26% 0.7 25 0.6 0.5 0.5 0.4 20 0 2006 2007 2008 2009 2010 2007 2008 2009 2010 Gro
Slide 13: Additional industrial gases market 2010 vs. 2020
Mega-trend Growth Markets Additional industrial gases market 2010 vs. 2020 in € bn ~3 ~3 ~12 ~6 2.2 ~6 ~3 ~0.5 ~1 Mature markets Growth markets Source: Linde database, figures excl. Equipment, healthcare and major impact out of future growth markets of the energy/environment sector 13
Slide 14: Leading Gases set-up in local growth markets
Mega-trend Growth Markets LeadIng Gases set-up in local growth markets Market leader in 4 out of 5 Growth Markets Eastern Europe & Middle East #1 Greater #1 China South and #1 East Asia South America #2 #1 South Africa 14
Slide 15: Long-term Engineering footprint in Asia enables growth
Mega-trend Growth Markets Long-term Engineering footprint in Asia enables growth Number of ASU and hydrogen/synthesis gas plants sold by Engineering in Middle East and Asia to external customers since the year 2000* 46 52 Greater China 18 11 — Long-standing customer relations — Two Engineering hubs
Slide 16: Leading player in Greater China
Mega-trend Growth Markets LeadIng player in Greater China Sales in Greater China in € m 2010 576 198 774 2009 421 163 584 2008 420 132 552 Key locations of Linde Gases: Supply Schemes Industrial Parks 2007 328 109 437 Offices Application Center Consolidated Joint ventures (@ share) — First internati
Slide 17: Leading player in Greater China: industries served
Mega-trend Growth Markets LeadIng player in Greater China Oil/Petrochemicals Chemicals Metallurgy Electronics Others 17
Slide 18: Potential Energy/Environment market is huge
Mega-trend Energy/Environment Potential Energy/Environment market is huge Energy/Environment annual market revenue estimates in € bn* — Competitive advantage due to LeadIng Existing growth markets Future growth markets Engineering know-how € 80 -140 bn and in particular also development of equipment
Slide 19: Clean Energy development trends
Mega-trend Energy/Environment Clean Energy development trends Example: LNG-terminal Sweden Example: Example: CO2-Handling, NL Bio-to-Liquids, US High market potential for merchant World´s largest biofuel plant producing Reduction of CO2 Emission by 170k LNG: LNG from landfill gas: tons per annum: —
Slide 20: High potential for medical gases and related services
Mega-trend Healthcare High potential for medical gases and related services Linde Global Business Unit Healthcare : — Second largest global medical gas business — Active in more than 50 countries with approx 3,000 employees Linde‘s product offer Market Environment - Increasing & ageing population -
Slide 21: Growth through innovation and regional expansion
Mega-trend Healthcare Growth through innovation and regional expansion ~1.8 Additional medical gases market 2010 vs. 2020 in € bn ~2.4 2.2 ~1.2 Linde Healthcare development approach Mature markets Mature Markets Other geographies Growth markets Source: Linde database, figures incl. gas Core: Hospita
Slide 22: Outlook
Outlook 2011 Group — Growth in sales and operating profit vs. 2010 — Confirmation of HPO-programme: € 650-800 m of gross cost savings in 2009-2012 Gases — Sales increase vs. 2010 — Operating profit to grow at a faster pace than sales Engineering — Sales at the same level as in 2010 — Operating margi
Slide 23: Agenda
Agenda Part 1 Prof. Dr. Wolfgang Reitzle 1. 2010 Highlights and Divisional Performance 2. Strategic focus: — High Performance Organisation — Growth Potential Mega-trends 3. 2010 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Project Pipeline and Capex 3. Financial Performance Appendix 23
Slide 24: Financial key indicators at record levels
Group Financial key indicators at record levels Further improvement in all our three key financial indicators — Profitable growth for our shareholders: adjusted EPS and adjusted ROCE — Strong cash flow generation further improved: OCF up by 13.1% Adjusted EPS Adjusted ROCE Operating Cash Flow € m, a
Slide 25: Free Cash Flow before Financing (2010 vs. 2009)
Group Free Cash Flow before Financing (2010 vs. 2009) in € million Investing CF Operating CF Free CF 2010 vs. 2009 2010 -191 397 206 Q1 +58.5% 2009 -282 412 130 2010 -245 505 260 Q2 +48.6% 2009 -254 429 175 2010 -227 631 404 Q3 +0.0% 2009 -179 583 404 2010 -402 889 487 Q4 +9.9% 2009 -275 718 443 Tot
Slide 26: Gases Division, sales by operating segment
Gases Division, sales by operating segment Growth markets show strongest momentum in € million (comparable*) +6.8% +15.0% +21.9% +25.8% (+3.3%) (+8.6%) (+11.3%) (+2.5%) 4,021 3,765 2,279 2,239 1,981 1,836 1,784 1,418 2009 2010 2009 2010 2009 2010 2009 2010 Western Europe Americas Asia/Eastern Europe
Slide 27: Gases Division, operating profit by operating segment
Gases Division, operating profit by operating segment Growth in all regions supported by HPO in € million Operating margin +12.7% +16.3% +19.7% +22.0% 1,184 1,051 29.4 % 27.9 % 667 499 557 29.8 % 429 30.3% 416 21.9 % 341 21.7 % 24.0% 23.3% 2009 2010 2009 2010 2009 2010 2009 2010 Western Europe Ameri
Slide 28: Gases Division: Split of Capex by operating segment
Gases Division Split of Capex by operating segment in € million 1,326 Split Capex by markets 2010 (2009) +28.9% 439 Western Europe 1,029 +26.5% 347 Americas 218 Growth Mature 46% (44%) 54% (56%) Markets Markets -10.7% 244 504 Asia & Eastern Europe 327 +54.1% 111 +48.6% 165 South Pacific & Africa 12/
Slide 29: Gases Division, project pipeline
Gases Division, project pipeline Good basis for sustainable growth — € 3 bn investments between 2008-2012 (thereof € 0.6 bn in JVs @ share) — Project amount 2012 further increased to € 550 m — Close to 70% of total project-Capex allocated to Growth Markets — Increasing number of project opportunitie
Slide 30: Gases, Capex Development Capex Sales Ratio 2007-2010
Gases, Capex Development Capex Sales Ratio 2007 - 2010 15% 13% average 2011-2014 12% 11% 13% plus* ~1,500 Capex/Sales Ratio 1,451 1,326 1,062 1,029 Capex in € million 2007 2008 2009 2010 2011E Data 2007-2010 @ actual average fx rates at the end of the respective year; * plus: additional potential fo
Slide 31: Net debt reduction of € 622 million
Group, solid financial position Net debt reduction of € 622 million in € million 6,119 5,497 88 349 2,422 298 1,065 Net debt Operating Cash Flow from Net interest Dividends FX/Others Net debt 31/12/2009 Cash Flow investment 31/12/2010 activities 31
Slide 32: Successful execution of our de-leveraging schedule
Group, solid financial position Successful execution of our de-leveraging schedule — 2010 Net debt/EBITDA ratio of 1.9x — Rating upgrade by S&P and Moody´s towards A- and A3 respectively, both with stable outlook Net debt in € bn Net debt/EBITDA 12,815 5.0 4.8 9,933 6,427 6,423 3.0 2.7 6,119 2.5 2.6
Slide 33: Stable long-term financing
Group, solid financial position Stable long-term financing Well-spread and long-dated maturity profile Financial debt, — Regular issues have continuously lengthened our refinancing schedule by instrument — More than 90% of total financial debt is due beyond 2011 10% — Approx. 50% of total financial
Slide 34: Financial Result and Tax Rate
Group Financial Result and Tax Rate Financial Result (in € million) Tax Rate 385 27.6% 377 329 23.9% 280 22.9% 22.1% 2007 2008 2009 2010 2007 2008 2009 2010 34
Slide 35: Proposed dividend increased by 22.2% to € 2.20
Group, dividends Proposed dividend increased by 22.2% to € 2.20 Consistent dividend policy € 2.20 +22.2% € 1.80 stable € 1.80 +5.9% € 1.70 +13.3% € 1.50 Change in Operating Profit +18.1%* +5.4% -6.7% +22.6% 2006 2007 2008 2009 2010 * Comparable change: prior year figures including twelve months of B
Slide 36: Summary: Continuously Improving
Summary Continuously Improving. New record levels achieved in 2010 Group sales and profit on record levels Group operating margin and Gases operating margin further improved Strong operating cash flow further improved Net debt reduced to € 5.5 bn (Net debt/EBITDA ratio of 1.9x) Competitive set-up fo
Slide 37: Agenda
Agenda Part 1 Prof. Dr. Wolfgang Reitzle 1. 2009 Highlights and Divisional Performance 2. Strategic focus: — High Performance Organisation — Growth Potential Mega-trends 3. 2010 Outlook Part 2 Georg Denoke 1. Operational Performance 2. Project Pipeline and Capex 3. Financial Performance Appendix 37
Slide 38: Group, FY 2010 Key P&L items
Group, FY 2010 Key P&L items in € million 2009 2010 ∆ in % Sales 11,211 12,868 14.8 Operating Profit 2,385 2,925 22.6 Margin 21.3% 22.7% +140bps EBIT before PPA depreciation 1,460 1,933 PPA depreciation -293 -254 EBIT 1,167 1,679 Financial Results -329 -280 Taxes -185 -335 Net income – Part of share
Slide 39: Group, Q4 2010 Key P&L items
Group, Q4 2010 Key P&L items in € million Q4/2009 Q4/2010 ∆ in % Sales 2,898 3,463 19.5 Operating Profit 644 780 21.1 Margin 22.2% 22.5% +30bps EBIT before PPA depreciation 381 509 PPA depreciation -72 -63 EBIT 309 446 Financial Results -82 -50 Taxes -30 -80 Net income – Part of shareholders Linde A
Slide 40: Group, FY 2010 Cash flow statement
Group, FY 2010 Cash flow statement in € million Q1/10 Q2/10 Q3/10 Q4/10 2010 2009 Operating Profit 641 755 749 780 2,925 2,385 Change in Working Capital -98 -3 -25 210 84 160 Other changes -146 -247 -93 -101 -587 -403 Operating Cash flow 397 505 631 889 2,422 2,142 Investments in tangibles / intangi
Slide 41: Group, Pensions Key figures
Group, Pensions Key figures Net obligation Pension plan assets portfolio structure DBO Plan Net in € million asset obligation 27% 25% Equities 01.01.2010 4,744 3,896 848 Service costs 93 93 Net financing 265 246 19 Actuarial gains/losses -92 141 -233 Contributions/payments –217 –9 –208 FX 209 200 9
Slide 42: Liquidity reserve further strengthened
Group, solid financial position Liquidity reserve further strengthened € 2.5 bn committed revolving credit facility maturing in 2015 — Arranged in May 2010 with 25 national and international banks — Replaced € 2 bn syn loan maturing in 2011 and € 1.6 bn forward start facility 2011/2013 — No financia
Slide 43: Gases Division, 2010 sales bridge
Gases Division, 2010 sales bridge Comparable growth of 5.7% in € million +5.7% 10,228 +7.6% +1.3% 8,932 -0.1% FY 2009 Consolidation Currency Natural Gas Price/Volume FY 2010 43
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) 348 85 298 68 +16.8% +25.0% 2009 2010 2009 2010 44
Slide 45: Order backlog diversified and of high quality
Engineering Division Order backlog diversified and of high quality Order backlog by plant type (31/12/2010) Others: 4.6% (2009: 4.6%) Synthesis Gas Plants: 14.7% (2009: 9.5%) Olefin Plants: 43.5% (2009: 46.3%) Air Separation Plants: 24.7% (2009: 31.9%) Natural Gas Plants: 12.5% (2009: 7.7%) 45
Slide 46: FY 2010 order intake by plant type and region
Engineering Division FY 2010 order intake by plant type and region Others: 10.3% Africa: 9.3% (2009: 8.9%) (2009: 6.8%) Synthesis Europe: 27.3% Asia/ Gas Plants: 16.2% (2009: 31.9%) (2009: 10.6%) Pacific: 27.2% (2009: 14.7%) Air Separation by plant type by region Plants: 28.3% (2009: 14.6%) Americas
Slide 47: Current and future growth markets for Gases & Engineering
Mega-trend Energy/Environment Current and future growth markets for Gases & Engineering Better use of fossil resources: Renewable energy: Clean energy: Existing growth markets Developing growth markets Future growth markets Liquified Natural Statoil plant, Photo- Signed Gases contracts for Vattenfal
Slide 48: Clean Energy market estimation 2020 & 2030 top down
Clean Energy market estimation 2020 & 2030 top down General assumptions: - Market numbers are directional only and w/o inflation or fx - Oil price development at 80-100 USD/bll - Outsourced gases market only (excl. captive market or equipment sales), Market size in € bn Assumptions for 2030 2015 202
Slide 49: Reconciliation of Capital Employed
Group Reconciliation of Capital Employed 31.12.2009 31.12.2010 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures Equity incl. minority 8,235 11,362 -790 10,572 PPA and disposal effects interest Plus: net debt 6,119 5,497 5,497 Plus: liabilities from 28
Slide 50: Reconciliation of EPS
Group Reconciliation of EPS 31.12.2009 31.12.2010 Key Financial As reported Non-GAAP Key Financial Effects in € million Figures adjustment Figures EBIT before special items 1,460 1,679 254 1,933 PPA Taxes on income -297 -335 -92 -427 deferred taxes on PPA Earnings after taxes 772 1,005 162 1,167 and
Slide 51: Purchase Price Allocation: expected Depreciation & Amortisation
Group, Purchase Price Allocation Confirmation of expected Depreciation & Amortisation Development of depreciation and amortisation (in € million) Impact in 2010: € 254 million Expected range 500 2011 > 200 – 250 2012 > 175 – 225 400 … 300 2022 < 100 200 100 0 0 07 0 09 0 11 0 15 0 21 2 2 2 2 2 51
Slide 52: 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 53: Investor Relations
Investor Relations Contact Phone: +49 89 357 57 1321 eMail: investorrelations@linde.com Internet: http://www.the-linde-group.com/en/investor_relations Financial Calendar — Interim Report January to March: 4 May 2011 — Annual General Meeting: 12 May 2011 — Interim Report January to June: 29 July 2011