10-QPeriod: Q2 FY2019

LINDE PLC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 9, 2019For Securities:LIN

Summary

Linde plc's second quarter 2019 filing reflects the significant impact of its merger with Praxair, completed in late 2018. Reported sales surged by 137% year-over-year to $7.2 billion due to the consolidation of Linde AG's operations. However, reported operating profit declined 3% to $669 million, primarily due to purchase accounting impacts and merger-related charges. On a pro forma basis, which aims to provide a more comparable view by assuming the merger occurred at the beginning of 2017, sales were flat at $7.18 billion, while pro forma operating profit saw a modest 1% increase to $728 million. Adjusted pro forma figures, which exclude certain non-recurring items, offer a clearer picture of underlying operational performance. Adjusted pro forma operating profit increased 6% to $1.32 billion, and adjusted pro forma diluted EPS rose 12% to $1.83, indicating positive operational momentum despite the complexities of integration and divestitures. The company is actively managing merger-related divestitures, with a substantial backlog of large projects under construction totaling $4.7 billion, signaling potential future growth, particularly in the APAC and Americas segments.

Financial Highlights

52 data points
Beta

Revenue

$7.20B

Net Income

$522.00M

7.2% Net Margin

EPS (Diluted)

$0.96

Total Assets

$87.19B

Cash & Equivalents

$2.69B

Free Cash Flow

$140.00M

Financial Statements
Beta
Revenue$7.20B
R&D Expenses$45.00M
SG&A Expenses$884.00M
Operating Income$669.00M
Net Income$522.00M
EPS (Basic)$0.97
EPS (Diluted)$0.96
Shares Outstanding (Basic)542.56M
Shares Outstanding (Diluted)546.49M

Key Highlights

  • 1Reported sales for Q2 2019 were $7.204 billion, a 137% increase year-over-year, primarily driven by the merger with Praxair.
  • 2Reported operating profit for Q2 2019 was $669 million, a 3% decrease year-over-year, impacted by merger-related purchase accounting and charges.
  • 3Pro forma sales remained flat year-over-year at $7.179 billion, indicating stable underlying business performance when adjusted for the merger's timing.
  • 4Adjusted pro forma operating profit increased by 6% to $1.319 billion, showcasing improved operational efficiency and profitability.
  • 5Adjusted pro forma diluted EPS grew by 12% to $1.83, demonstrating strong earnings growth on a comparable basis.
  • 6The company had a significant project backlog of $4.7 billion at June 30, 2019, primarily in the APAC and Americas regions.
  • 7Employee count significantly increased to 80,254 from 26,658 due to the merger.

Frequently Asked Questions

The substantial increase in reported sales is primarily due to the completion of the merger between Linde plc and Praxair, Inc. on October 31, 2018. The Q2 2019 results include the full consolidated financial performance of the combined entity (Linde AG and Praxair), whereas Q2 2018 only reflected Praxair's standalone results.

The pro forma information is presented to give investors a more comparable view of the company's performance by assuming the merger and related divestitures occurred at the beginning of the reporting period (January 1, 2017). 'Adjusted pro forma' further refines this by excluding certain non-recurring items like merger-related charges and purchase accounting impacts, providing a clearer picture of the underlying operational performance and trends.

In connection with securing regulatory approval for the merger, Linde has been required to divest certain businesses. These 'merger-related divestitures' have been completed in various regions (Europe, Americas, Asia) and were ongoing as of the filing date. The company's backlog of large projects under construction, totaling $4.7 billion, is a key indicator of future sales growth.

The number of employees increased significantly from 26,658 in the prior year to 80,254 as of June 30, 2019. This increase is predominantly due to the merger with Praxair, which brought in approximately 56,000 employees, partially offset by a decrease from divestitures.