Linde continues good business performance and confirms outlook

In the nine months to 30 September 2011, Group sales rose by 8.5 percent to EUR 10.209 bn, compared with the figure for the first nine months of 2010 of EUR 9.405 bn. After adjusting for exchange rate effects, the increase in sales was 9.0 percent. Linde increased Group operating profit* at a faster rate than sales, by 10.2 percent to EUR 2.363 bn (2010: EUR 2.145 bn), mainly as a result of the rigorous implementation of its HPO (High Performance Organisation) programme, a holistic concept for sustainable process optimisation and productivity gains. The Group operating margin rose to 23.1 percent (2010: 22.8 percent).

Earnings before tax (EBT) were EUR 1.184 bn, 18.0 percent higher than the figure for the prior-year period of EUR 1.003 bn. Earnings after tax rose by 20.7 percent to EUR 903 m (2010: EUR 748 m). After adjusting for non-controlling interests, earnings attributable to Linde AG shareholders were EUR 856 m (2010: EUR 698 m). Earnings per share increased as a result by 21.5 percent to EUR 5.02 (2010: EUR 4.13). On an adjusted basis, i.e. after adjusting for the effects of the purchase price allocation in the course of the BOC acquisition, earnings per share stood at EUR 5.68 (2010: EUR 4.88).

Gases Division

Given the improvement in the general economic environment in the first nine months of 2011 compared with the prior-year period, demand in the global gases business rose. Due to the Group’s global footprint and its strong market position, especially in the emerging economies, Linde was able to benefit from this trend in all its product areas.

Sales in the Gases Division in the first nine months of 2011 grew 9.0 percent to EUR 8.270 bn, compared with sales of EUR 7.590 bn in the prior-year period. On a comparable basis, i.e. after adjusting for exchange rate effects, changes in the price of natural gas and changes to Group structure, the increase in sales was 8.1 percent.

The Gases Division achieved a 9.7 percent increase in operating profit to EUR 2.254 bn (2010: EUR 2.055 bn). One of the factors contributing to the increase, which once again was at a faster rate than the increase in sales, was the continuing implementation of Linde’s HPO measures. The operating margin rose to 27.3 percent, exceeding the high figure achieved in the first nine months of 2010 of 27.1 percent.

Business trends in the individual operating segments of the Gases Division make it clear that the pace of economic recovery still varies from region to region. In the first nine months of 2011, the highest growth rates were once again to be seen in the emerging economies of Asia, especially in China and India, and in South America. Demand also increased in the more mature markets such as the US and Western Europe, compared with that in the first nine months of 2011.

In the EMEA operating segment (Europe, Middle East, Africa), Linde achieved sales growth of 7.0 percent in the first nine months of 2011 to EUR 4.258 bn (2010: EUR 3.978 bn). On a comparable basis, the growth in sales was 5.6 percent. Operating profit increased by 7.9 percent to EUR 1.215 bn (2010: EUR 1.126 bn). This resulted in an operating margin of 28.5 percent (2010: 28.3 percent). Here too, as well as higher volumes, the continuous implementation of the various productivity improvement and process standardisation initiatives under the HPO programme made a positive contribution.

Economic dynamism in Asia continues unabated. Against this background and based on its leading position in these markets, Linde again achieved double-digit growth rates in the Asia/Pacific operating segment. In the nine months ended 30 September 2011, sales in this region rose by 16.2 percent to EUR 2.283 bn (2010: EUR 1.965 bn). On a comparable basis, the increase in sales was 10.8 percent. Operating profit rose by 14.9 percent to EUR 634 m (2010: EUR 552 m). The operating margin in this segment for the nine months ended 30 September 2011 was 27.8 percent (2010: 28.1 percent). When comparing the operating margin for the first nine months of 2011 with that for the first nine months of 2010, factors to be taken into account are the pass-through of increases in the price of natural gas and the preliminary investment required to establish infrastructure and employ new staff in the rapidly expanding Chinese market. To sustain steady profitability, Linde is also continuing with the rigorous implementation of its HPO concept in the Asia/Pacific segment.

In the Americas operating segment, sales in the first nine months of 2011 rose by 4.6 percent to EUR 1.778 bn (2010: EUR 1.700 bn). On a comparable basis, the increase in sales here was 10.5 percent. Operating profit improved by 7.4 percent in the nine months to 30 September 2011 to EUR 405 m (2010: EUR 377 m). Factors contributing to this increase in earnings, apart from higher volumes, were the progress made by Linde in the implementation of HPO and positive one-off effects from the first quarter of 2011. At 22.8 percent, the operating margin exceeded the figure for the prior-year period of 22.2 percent by 60 basis points.

The performance of the individual product areas confirms the overall positive trends in the Gases Division. The highest rate of growth was again achieved in the on-site business, where Linde supplies gases on site to major customers. On a comparable basis, i.e. after adjusting for exchange rate effects, changes in the price of natural gas and changes to Group structure, sales here in the nine months to 30 September 2011 rose by 9.7 percent to EUR 2.015 bn (2010: EUR 1.837 bn). Linde benefited not only from increased utilisation of existing plant capacity but also from the start-up of new plants. In the product area of liquefied gases, sales rose to EUR 1.993 bn. On a comparable basis, this figure was 9.0 percent above the figure for the prior-year period of EUR 1.828 bn. Cylinder gas sales increased to EUR 3.382 bn. On a comparable basis, this figure was 7.4 percent higher than the figure for the first nine months of 2010 of EUR 3.148 bn. The Healthcare product area (the medical gases business and related maintenance and advisory services) again saw steady growth, achieving sales of EUR 880 m. On a comparable basis, this figure was 5.0 percent higher than the figure for the prior-year period of EUR 838 m.

Gases Division – Outlook

Linde remains committed to its original target in the gases business of growing at a faster pace than the market and continuing to increase productivity. In the on-site business, Linde has a full project pipeline which will make a significant contribution to sales and earnings in the 2011 financial year. In the liquefied gases and cylinder gas business, steady growth rates are expected to continue for the rest of the year, despite the forecast slowdown in economic activity. Linde anticipates that the positive business trends in the Healthcare product area will continue, with a higher rate of sales growth than in 2010. Against this background, Linde continues to expect that sales generated by the Gases Division in the 2011 financial year will exceed sales achieved in 2010 and that operating profit will grow at a faster pace than sales.

Engineering Division

In the first nine months of the 2011 financial year, the market environment for international large-scale plant construction proved largely stable.

Sales in the Engineering Division in the nine months to 30 September 2011 increased by 6.1 percent to EUR 1.776 bn (2010: EUR 1.674 bn). The continuing successful execution of a number of individual projects meant that operating profit grew at a faster rate than sales, rising 16.3 percent to EUR 214 m (2010: EUR 184 m). The operating margin rose to 12.0 percent (2010: 11.0 percent).

Order intake in the first nine months of 2011 was EUR 1.676 bn, 9.0 percent above the figure for the first nine months of 2010 of EUR 1.538 bn. In the third quarter of 2011, order intake was influenced primarily by two major orders from China and Thailand. In Thailand, Linde’s Engineering Division was awarded a contract by the Group’s own Gases Division to supply an air separation plant with a capacity of 800 tonnes per day. Linde will also supply two air separation plants to the Chinese Yantai Wanhua Group with a capacity of 110.000 normal cubic metres per hour.

In addition to these major orders, order intake was characterised by a number of small and medium-sized new orders, as in previous quarters. The order backlog in Linde’s Engineering Division remains high. At 30 September 2011, it stood at EUR 3.761 bn (31 December 2010: EUR 3.965 bn).

Together with its project partner SBM Offshore, Netherlands, Linde’s Engineering Division signed a cooperation agreement during the reporting period with the Thai oil group PTT (Petroleum Authority of Thailand) to develop a floating natural gas liquefaction plant in the Timor Sea off the northern coast of Australia. The project will involve the conversion of natural gas from three gas fields into LNG (Liquefied Natural Gas). If the gas reserves meet expectations, the project will move into the front-end engineering and design phases by the end of 2011. The final investment decision would be made at the end of 2012. Commercial production would be expected to commence at the end of 2016.

Engineering Division – Outlook

The high order backlog creates a good basis for a solid business performance in the Engineering Division over the next two years. Linde still expects to achieve the same level of sales in its engineering business in the 2011 financial year as in 2010. The Group continues to assume that it will achieve an operating margin in the current financial year of at least 10 percent. In the medium term, the target for the operating margin remains at 8 percent.

Linde is well-positioned in the international market for olefin plants, natural gas plants, air separation plants and hydrogen and synthesis gas plants and will derive lasting benefit in particular from investment in the two structural growth areas, energy and the environment.

To coincide with the publication of the quarterly financial statements, a teleconference for analysts will take place today at 2pm (German time) in English with Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to listen to the conference live by dialling +49.69.589.99-0509. Please give the reference number 894635 and tell the operator your name and the name of your company. Following the teleconference, you will be able to hear a recording of the event by calling +49.30.726.16-7224. Please give the reference number 894635.

The Linde Group is a world-leading gases and engineering company with around 50,000 employees working in more than 100 countries worldwide. In the 2010 financial year, it achieved sales of EUR 12.868 bn. The strategy of The Linde Group is geared towards sustainable earnings-based growth and focuses on the expansion of its international business with forward-looking products and services. Linde acts responsibly towards its shareholders, business partners, employees, society and the environment – in every one of its business areas, regions and locations across the globe. Linde is committed to technologies and products that unite the goals of customer value and sustainable development.