10-QPeriod: Q1 FY2020

LINDE PLC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:LIN

Summary

Linde PLC's first quarter 2020 results indicate resilience despite a 3% year-over-year sales decline to $6.739 billion, primarily driven by unfavorable currency translation and lower volumes, partially offset by price increases. The company demonstrated strong operational efficiency and cost management, leading to a significant increase in reported operating profit (up 20% to $733 million) and adjusted operating profit (up 11% to $1,352 million). This performance was supported by cost reduction initiatives and higher pricing across segments. Diluted EPS from continuing operations saw a substantial increase of 35% on a reported basis ($1.07) and 12% on an adjusted basis ($1.89), partly due to share repurchases reducing outstanding shares. While the company faces uncertainties due to the COVID-19 pandemic, which has impacted volumes, particularly in APAC, its diverse geographic and end-market exposure, coupled with a substantial project backlog of approximately $9.4 billion, provides a foundation for future growth. The company also executed significant share repurchases during the quarter, reflecting a commitment to returning capital to shareholders. Linde's strong cash flow from operations ($1.347 billion) and ample liquidity position it to navigate current challenges.

Financial Statements
Beta

Key Highlights

  • 1Total sales for Q1 2020 were $6.739 billion, a 3% decrease year-over-year, primarily attributed to unfavorable currency translation and lower volumes, though offset by higher pricing.
  • 2Reported operating profit increased by 20% to $733 million, while adjusted operating profit rose by 11% to $1,352 million, driven by cost reduction initiatives and pricing power.
  • 3Diluted EPS from continuing operations grew significantly, up 35% to $1.07 on a reported basis and 12% to $1.89 on an adjusted basis.
  • 4The company's project backlog stands at approximately $9.4 billion, indicating a strong foundation for future sales and earnings growth, particularly in electronics, chemicals, and energy end-markets.
  • 5Cash flow from operating activities significantly increased by 26% to $1.347 billion, demonstrating strong operational cash generation.
  • 6Linde actively repurchased shares, with $1.815 billion in net purchases during the quarter, contributing to a reduction in diluted shares outstanding.
  • 7The company acknowledged the potential material adverse impact of the COVID-19 pandemic on its operations and financial results, citing risks related to supply chains, demand, and broader economic conditions.

Frequently Asked Questions

Linde reported total sales of $6.739 billion for the first quarter of 2020, a decrease of 3% compared to the prior year. The primary drivers for this decline were unfavorable currency translation effects and lower sales volumes, particularly in the APAC region due to COVID-19. However, this was partially offset by higher pricing across all geographic segments.

Despite the sales decline, Linde demonstrated strong profitability. Reported operating profit increased by 20% to $733 million, and adjusted operating profit, which excludes certain items like merger-related costs, increased by 11% to $1,352 million. This improvement was driven by effective cost reduction programs, productivity initiatives, and favorable pricing.

Linde's outlook is supported by a significant project backlog of approximately $9.4 billion, which is expected to drive future sales and earnings growth. The company's primary risk identified is the potential material adverse impact of the COVID-19 pandemic on its operations, supply chains, customer demand, and broader economic conditions. The company is actively monitoring the situation and has implemented measures to protect its employees and customers.

Linde generated strong operating cash flow of $1.347 billion, a 26% increase year-over-year. The company also actively engaged in share repurchases, buying back $1.815 billion worth of its ordinary shares in the first quarter, which contributed to a reduction in outstanding shares and supported its diluted EPS. Cash dividends paid to shareholders increased by $34 million compared to the prior year.