10-KPeriod: FY2019

LINDE PLC Annual Report, Year Ended Dec 31, 2019

Filed March 2, 2020For Securities:LIN

Summary

Linde plc's 2019 10-K filing reveals a significant transformation following the business combination of Praxair and Linde AG, which officially closed on October 31, 2018. The company is now the largest industrial gas company globally, with substantial operations across the Americas, EMEA, and APAC regions, alongside its Engineering segment. For the year ended December 31, 2019, reported sales reached $28.2 billion, a 90% increase compared to 2018, largely driven by the merger's consolidation of both entities for the full year. Despite the significant reported sales growth, a substantial portion of the year's financial performance was impacted by merger-related costs, purchase accounting adjustments, and divestitures. Pro forma analysis, which aims to present a more comparable view, indicates underlying sales growth and improved operating profit, suggesting positive operational momentum post-merger. The company remains focused on integrating its operations, realizing synergies, and investing in growth projects, with a backlog of $4.4 billion in sale-of-gas projects at year-end 2019. Key investor considerations include the successful integration of the combined businesses, the realization of anticipated synergies, and the management of operational and financial risks associated with a larger, more complex global enterprise. Linde's extensive operations, long-term customer contracts, and diversified end-market exposure provide a stable foundation. However, investors should monitor the company's ability to navigate economic downturns, manage energy and raw material costs, and adapt to evolving regulatory landscapes, particularly concerning environmental matters. The company also demonstrated a commitment to returning value to shareholders through share repurchases and dividends, with $3.7 billion remaining under its authorized repurchase program at the end of 2019.

Financial Highlights

56 data points
Beta

Revenue

$28.23B

Net Income

$2.29B

8.1% Net Margin

EPS (Diluted)

$4.19

Total Assets

$86.61B

Cash & Equivalents

$2.70B

Free Cash Flow

$2.44B

Financial Statements
Beta
Revenue$28.23B
R&D Expenses$184.00M
SG&A Expenses$3.46B
Operating Income$2.93B
Interest Expense$284.00M
Net Income$2.29B
EPS (Basic)$4.22
EPS (Diluted)$4.19
Shares Outstanding (Basic)541.09M
Shares Outstanding (Diluted)545.17M

Key Highlights

  • 1The merger of Praxair and Linde AG was completed on October 31, 2018, creating the world's largest industrial gas company, with reported sales of $28.2 billion in 2019, a 90% increase over 2018.
  • 2Pro forma analysis indicates underlying sales growth of 1% and a 10% increase in operating profit for 2019 compared to 2018, demonstrating underlying business strength despite reported figures being impacted by merger-related activities.
  • 3The company generated strong cash flow from operations of $6.1 billion in 2019.
  • 4Linde returned $4.5 billion to shareholders in 2019 through dividends ($1.9 billion) and share repurchases ($2.6 billion).
  • 5Significant merger-related costs, purchase accounting impacts, and divestitures impacted reported financial results, necessitating the use of pro forma and adjusted pro forma measures for a clearer understanding of operational performance.
  • 6The company maintained a strong balance sheet with total assets of $86.6 billion and net debt of $11.3 billion at year-end 2019.
  • 7Linde's business is geographically diversified, with approximately 70% of its 2019 sales generated outside the United States.

Frequently Asked Questions

The merger, completed on October 31, 2018, significantly impacted reported financials for 2019. Reported sales increased by 90% to $28.2 billion due to the consolidation of both entities. However, the company incurred substantial merger-related costs and purchase accounting adjustments, which, along with divestitures, made direct year-over-year reported comparisons challenging. Pro forma analysis, which adjusts for these merger-related items, indicated a more modest sales increase and a significant improvement in operating profit, suggesting positive underlying business performance.

In 2019, Linde plc generated $6.1 billion in cash flow from operations. The company invested $3.7 billion in capital expenditures for growth projects. To return value to shareholders, Linde paid $1.9 billion in dividends and repurchased $2.6 billion of its ordinary shares. As of December 31, 2019, there was $3.7 billion remaining under its authorized share repurchase program.

Key risks highlighted in the filing include the potential failure to realize anticipated benefits from the business combination, adverse impacts from weakening economic conditions in its markets, increases in energy and raw material costs, risks associated with international operations (including currency fluctuations), potential impairment of goodwill and intangible assets, and the inability to attract and retain qualified personnel. The company also cited risks related to operational failures, IT system disruptions, and compliance with international laws and regulations.

Linde plc's operations are managed across four reportable segments: Americas, EMEA (Europe, Middle East, and Africa), APAC (Asia and South Pacific), and Engineering. The majority of Linde's business is in industrial gases, distributed through on-site, merchant, and packaged gas channels. Geographically, approximately 70% of Linde's 2019 sales were generated outside the United States, indicating a strong global presence.