In the nine months to 30 September 2014, Linde achieved a slight increase in Group revenue despite unfavourable exchange rate effects. Group operating profit, on the other hand, was not as high as the figure achieved in the first nine months of 2013. “Although global economic growth slowed down in the course of the year, we held our own pretty well,” said Dr Wolfgang Buchele, Chief Executive Officer of Linde AG. “At the same time, we have recognised some impairment losses, which were required due to changed conditions in some regions in the Gases Division.”

Given these impairment losses, Linde will no longer be able to achieve the target it had set itself for the 2014 financial year of around 10 % for return on capital employed (reported ROCE). The Group now expects to achieve a similar level of Group operating profit (EBIT before non-recurring items adjusted for the amortisation of intangible assets and the depreciation of tangible assets) in the 2014 financial year as in 2013, after adjusting for exchange rate effects. Until now, Linde had anticipated that it would achieve a moderate improvement in Group operating profit. The Group continues to expect to achieve solid growth in revenue in 2014 after adjusting for exchange rate effects.

As regards the Group’s medium-term targets, CEO Buchele explained: “We will continue to implement our strategy which is geared towards profitability and sustainability. However, we have to take account of the fact that economic growth has been much weaker than we all expected. In addition, future prospects for global economic trends have recently dulled.” Seen from today’s standpoint, Linde therefore assumes that it will not be able to achieve the earnings target it originally set itself for 2016 until 2017. Depending on economic trends, Linde expects to achieve Group operating profit of EUR 4.5 billion to EUR 4.7 billion and a reported ROCE of 11 percent to 12 % in 2017, based on current exchange rates.



January to September 2014 – Group

In the first nine months of 2014, Linde achieved a slight increase of 0.9 % in Group revenue to EUR 12.584 billion (2013: EUR 12.468 billion). Exchange rate effects had a significant adverse impact on revenue, especially in the first half of 2014. In the third quarter, the exchange rate effects became less unfavourable to Linde. After adjusting for exchange rate effects (which equated to revenue of EUR 462 million during the reporting period), the increase in revenue for the Group in the first nine months of 2014 was 4.8%.

Group operating profit of EUR 2.898 billion was not as high as the figure achieved by Linde in the first nine months of 2013 of EUR 2.996 billion. Adverse exchange rate effects also need to be considered here. The effect of these distortions was to reduce earnings by EUR 109 million. Without these distortions, the Group would have achieved a 0.4 % increase in Group operating profit. The Group operating margin for the first nine months of 2014 was 23.0 % (2013: 24.0 %). When considering the fall in the margin, it should be noted that the Engineering Division (as expected) contributed more to Group revenue in the reporting period than was the case in the first nine months of 2013. Linde’s engineering business has a lower margin than its gases operations.

The Group generated earnings before interest and taxes (EBIT) in the nine months to 30 September 2014 of EUR 1.400 billion, which was below the figure for the prior-year period of EUR 1.644 billion. This significant fall was the result of non-recurring items. Non-recurring items comprised impairment losses of EUR 229 million recognised in the Gases Division. After adjusting for non-recurring items, EBIT in the reporting period was EUR 1.629 billion.

Earnings before tax (EBT) in the first nine months of 2014 amounted to EUR 1.138 billion (2013: EUR 1.356 billion). Profit for the period was EUR 863 million (2013: EUR 1.078 billion). Profit for the period attributable to Linde AG shareholders was EUR 818 million (2013: EUR 997 million). This gives earnings per share of EUR 4.41 (2013: EUR 5.38). Earnings per share before non-recurring items stood at EUR 5.31 (2013: EUR 5.38).


January to September – Gases Division

As a result of unfavourable exchange rate fluctuations, Linde’s revenue in the Gases Division in the first nine months of 2014 of EUR 10.398 billion was somewhat lower than the figure of EUR 10.510 billion achieved in the prior-year period. If an adjustment were to be made for these exchange rate effects, Linde would have achieved a 3.3 % increase in revenue. On a comparable basis (after adjusting in addition for fluctuations in the price of natural gas), Linde would have achieved a 3.1 % increase in revenue in its gases business.


Gases Division – Outlook

Recent economic forecasts indicate that the global gases market will grow at a slightly faster pace in 2014 than was the case in 2013, although the rate of growth will not be as dynamic as was expected at the beginning of the year. Linde remains committed to its original target in the gases business of outperforming the market and continuing to increase productivity.

Linde is still expecting a moderate improvement in revenue in the Gases Division in the 2014 financial year when compared with 2013 after adjusting for exchange rate effects. It is now anticipating that it will achieve a slight improvement in operating profit after adjusting for exchange rate effects and non-recurring items.


January to September 2014 – Engineering Division

Revenue and earnings trends in Linde’s international plant construction project business reflected the progress made on individual projects. The revenue of the Engineering Division in the first nine months of 2014 increased by 7.6% to EUR 2.226 billion (2013: EUR 2.068 billion), while operating profit of EUR 216 million was not as high as the figure for the first nine months of 2013 of EUR 225 million. This gives an operating margin of 9.7 % (2013: 10.9 %), which is well above the industry average and equal to the target of around 10 % Linde had set itself for the current financial year.

Order intake in the first nine months of 2014 was EUR 2.665 billion (2013: EUR 3.661 billion). It was characterised by a major contract awarded to Linde in the third quarter of 2014 by SIBUR LLC, one of the leading petrochemical companies in Russia. Linde will be responsible for the engineering and for the procurement of components for one of the largest ethylene plants in the world which is to be built in Tobolsk in western Siberia. The exceptionally high figure for order intake in the first nine months of 2013 included a major contract to build a large ethylene plant for ExxonMobil in Houston, Texas, USA. Linde’s partner in this significant project is engineering company Bechtel.

More than 60 % of the order intake in the first nine months of 2014 came from Europe. This is mainly due to the major contract awarded to Linde by SIBUR. Just under a quarter of new business came from North America, where the market continued to be characterised by projects relating to the exploitation and processing of shale gas reserves. In the nine months to 30 September 2014, Linde was able to win new orders in this segment worth around USD 474 million. Approximately 10 % of new orders came from the Asia/Pacific segment. The order backlog in the Engineering Division at 30 September 2014 was EUR 5.021 billion. This exceeded the very high figure for the order backlog at 31 December 2013 of EUR 4.504 billion.


Engineering Division – Outlook

Linde continues to expect to achieve solid revenue growth in the Engineering Division in 2014 compared with 2013. The Group anticipates that it will achieve an operating margin in this division of around 10 %.


For more information, see The Linde Group online at www.linde.com