10-QPeriod: Q3 FY2023

LINDE PLC Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 26, 2023For Securities:LIN

Summary

Linde plc reported solid financial results for the third quarter and the first nine months of 2023, demonstrating resilience and operational strength. While reported sales saw a year-over-year decrease of 7% for the quarter and 4% for the nine-month period, this was largely driven by factors like cost pass-through and a planned divestiture of the GIST business, which are not indicative of core operational performance. Crucially, adjusted operating profit increased by 15% for both the quarter and the nine-month period, showcasing the company's ability to drive profitability through pricing initiatives and productivity gains, which more than offset cost inflation and lower volumes. Key metrics like adjusted diluted earnings per share (EPS) also showed significant year-over-year growth, up 17% for the quarter and 16% for the nine months. The company's financial health remains robust, supported by strong operating cash flow generation and a significant share repurchase program. Linde's strategic focus on pricing and efficiency continues to yield positive results, positioning the company favorably despite a fluctuating global economic landscape.

Financial Highlights

52 data points
Beta

Revenue

$8.15B

Net Income

$1.56B

19.2% Net Margin

EPS (Diluted)

$3.19

Total Assets

$77.83B

Cash & Equivalents

$3.89B

Free Cash Flow

$1.57B

Financial Statements
Beta
Revenue$8.15B
R&D Expenses$36.00M
SG&A Expenses$808.00M
Operating Income$2.05B
Net Income$1.56B
EPS (Basic)$3.21
EPS (Diluted)$3.19
Shares Outstanding (Basic)487.12M
Shares Outstanding (Diluted)491.08M

Key Highlights

  • 1Adjusted operating profit grew 15% year-over-year for both the third quarter and the first nine months of 2023, highlighting strong operational performance and pricing power.
  • 2Reported sales decreased by 7% in Q3 and 4% year-to-date, primarily due to cost pass-through mechanisms and divestitures (GIST business), with minimal impact on operating profit.
  • 3Adjusted diluted EPS increased by 17% for the third quarter and 16% for the nine months, reflecting enhanced profitability and effective capital management.
  • 4The Americas segment showed a 3% sales increase year-to-date and a 10% operating profit increase for the quarter, bolstered by the nexAir acquisition and higher pricing.
  • 5EMEA segment operating profit saw substantial growth, up 36% in the quarter and 24% year-to-date, driven by strong pricing and productivity initiatives.
  • 6Linde generated substantial cash flow from operations, with $6.58 billion for the first nine months of 2023.
  • 7The company announced a new $15.0 billion share repurchase program in October 2023, underscoring a commitment to returning capital to shareholders.

Frequently Asked Questions

The decrease in reported sales was primarily influenced by external factors like cost pass-through mechanisms (which pass energy cost variances to customers and reduce reported sales without significantly impacting profit) and the divestiture of the GIST business. These factors do not reflect underlying operational performance. Conversely, the increase in adjusted operating profit and EPS demonstrates Linde's success in implementing higher pricing strategies and achieving productivity gains, which effectively managed cost inflation and volume changes, leading to improved profitability.

Non-GAAP measures like adjusted operating profit and adjusted EPS are provided by Linde to offer investors a clearer view of the company's ongoing operational performance by excluding items such as purchase accounting impacts from the Linde AG merger and other one-time charges. These adjustments allow for a more consistent comparison of financial results across periods and with other companies, highlighting the underlying business trends and management's effectiveness in driving core operations.

Linde is actively managing its capital through significant share repurchase programs. The company repurchased approximately $3.17 billion of its shares in the third quarter of 2023 and recently approved a new $15.0 billion share repurchase program. Additionally, Linde has been increasing its cash dividends to shareholders, demonstrating a strong commitment to returning capital and enhancing shareholder value.

Profitability across segments is driven by a combination of factors. In the Americas, higher pricing and the acquisition of nexAir contributed to strong operating profit growth. The EMEA region saw significant profit increases due to strong pricing and productivity initiatives, despite lower volumes in certain end markets. The APAC region also benefited from higher pricing and productivity, which offset currency headwinds and cost inflation. The Engineering segment's operating profit declined due to project timing, partly impacted by the wind-down of Russian projects.