Linde Earnings to Grow Faster than Sales


Linde, the world's largest industrial gases producer, forecast 2008 earnings growth would outpace an expected increase in sales in its second full year after buying larger UK rival BOC in a leveraged takeover.

"We have made better progress than expected. The new Linde Group is a fast-growing global company which is highly profitable and very robust," Chief Executive Wolfgang Reitzle said in a statement on Monday.

Defined as pre-exceptional earnings before interest, taxes, depreciation and amortisation (EBITDA) but including the share of profit from associates and joint ventures, Linde's operating profit rose 18 percent last year to 2.42 billion thanks in particular to extraordinary growth in Asia and Eastern Europe.

Sales there rose nearly 35 percent mainly due to acquisition-related growth while operating profit jumped by almost half to 467 million euros, overtaking Western Europe to become Linde's most profitable region by margin.

Helped by a 42 percent increase in operating cash flow, net debt shrank to 6.43 billion euros at the end of last year, sharply lower than Linde's initial expectation of 7.2-7.5 billion and compared to nearly 10 billion at the end of 2006.

The company said pre-exceptional EBITDA would exceed 3 billion euros in 2010 regardless of the economic situation.

"This forecast will also apply even if the global figure for gross domestic product is lower than that which is currently expected," Reitzle said.

Although never a topic among investors due to the local nature of the gases business, the Linde CEO pointed out that Linde's currency risks were "very limited" on a day in which the dollar plunged across the board, hitting a fresh record low to the euro at $1.5905.

Engineering Hedged

"In those regions and countries in which we supply gases to our customers, we also produce gases," he said. "Export risks, such as those borne by the automobile industry, do not exist for us. Any adverse exchange rate effects arise only in the financial statements, when foreign currencies are translated into euros," the former BMW and Ford Motor executive said.

Reitzle added that all major plant construction projects in its far smaller Engineering division were fully hedged.

Linde aims to achieve a return on capital employed (ROCE) of at least 13 percent in 2010.

Last year its key performance measure amounted to 10.3 percent, meeting its double-digit ROCE target for 2008 one year earlier than it anticipated.

A specialist in air separation using a cryogenic method invented by Carl von Linde over 100 years ago, Linde supplies industrial gases such as oxygen, nitrogen and argon for use in producing steel and other metals, among other products.

It overtook rival Air Liquide to become industry leader after paying roughly 12.4 billion euros to purchase BOC.

Shares in Linde were 1.2 percent lower at 85.60 euros by 9:16 a.m. London time, compared with a 4 percent drop on the German blue-chip DAX index.