10-QPeriod: Q2 FY2020

LINDE PLC Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 31, 2020For Securities:LIN

Summary

Linde plc's second quarter 2020 results reflect the impact of the global macroeconomic slowdown driven by the COVID-19 pandemic, with reported sales declining 11% year-over-year. Despite the revenue dip, the company demonstrated resilience, particularly in its adjusted operating profit, which remained flat for the quarter. This stability was achieved through effective cost management, including productivity initiatives and cost reduction programs, which helped offset lower volumes and unfavorable currency movements. Adjusted diluted earnings per share (EPS) saw a modest increase of 4%, highlighting operational efficiency and share repurchases. Looking ahead, Linde's substantial project backlog of approximately $8.6 billion provides a foundation for future growth, particularly in the electronics, chemicals, and energy sectors. The company maintains a strong liquidity position with $4.9 billion in cash and an undrawn $5 billion revolving credit facility, underscoring its ability to navigate current economic uncertainties and fund ongoing operations and strategic initiatives.

Financial Highlights

53 data points
Beta

Revenue

$6.38B

Net Income

$458.00M

7.2% Net Margin

EPS (Diluted)

$0.87

Total Assets

$85.86B

Cash & Equivalents

$4.94B

Free Cash Flow

$981.00M

Financial Statements
Beta
Revenue$6.38B
R&D Expenses$34.00M
SG&A Expenses$760.00M
Operating Income$591.00M
Net Income$458.00M
EPS (Basic)$0.87
EPS (Diluted)$0.87
Shares Outstanding (Basic)525.51M
Shares Outstanding (Diluted)529.05M

Key Highlights

  • 1Reported sales decreased by 11% to $6,377 million in Q2 2020, primarily due to lower volumes linked to the COVID-19 pandemic, partially offset by higher pricing.
  • 2Adjusted operating profit remained flat year-over-year at $1,317 million, with an improved operating margin of 20.7% driven by pricing and cost efficiencies.
  • 3Adjusted diluted EPS from continuing operations increased by 4% to $1.90, benefiting from higher income and a reduction in outstanding shares.
  • 4Cost reduction programs and other charges increased significantly by 77% to $249 million, impacting reported profitability.
  • 5The Engineering segment showed strong performance with an 8% increase in sales and a 39% increase in operating profit, driven by project execution and productivity.
  • 6The company's backlog for sale of gas and equipment projects stands at approximately $8.6 billion, indicating future revenue potential.
  • 7Linde maintained a robust liquidity position with $4.9 billion in cash and cash equivalents and an undrawn $5 billion credit facility.

Frequently Asked Questions

The COVID-19 pandemic led to a global macroeconomic slowdown, which significantly impacted Linde's Q2 2020 results. This was primarily reflected in an 11% year-over-year decrease in reported sales, driven by lower volumes across most geographic segments, particularly in the manufacturing and metals end markets. Currency translation effects also negatively impacted sales.

Linde utilizes non-GAAP 'adjusted' metrics to provide investors with a clearer view of the company's ongoing operational performance, excluding items like cost reduction programs, merger-related charges, and purchase accounting impacts. While reported income from continuing operations decreased, adjusted income from continuing operations saw a 1% increase, and adjusted diluted EPS rose by 4%, demonstrating the underlying operational strength.

Linde's sale of gas and sale of equipment backlog is approximately $8.6 billion. This backlog is a key indicator of future growth, with a significant portion allocated to projects supplying customers in the electronics, chemicals, and energy end-markets. This provides a strong foundation for growth over the next several years, especially with APAC and Americas representing the largest shares of this backlog.

Linde maintains a strong liquidity position, ending the quarter with $4.9 billion in cash and cash equivalents. The company also has access to a $5 billion unsecured and undrawn revolving credit agreement. This robust financial footing, combined with a commitment to maintaining strong credit ratings, allows Linde to navigate the current economic environment and meet its business needs.