01—Abstract
Summary
Summary of the 10-Q filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Linde plc's first quarter 2024 results show top-line softness but solid profit growth.
Reported sales fell 1% to $8,100 milliona, as 2% price gains were offset by a 1% volume decline and a 2% drag from cost pass-through. Reported operating profit rose 8% to $2,095 million, with the operating margin expanding to 25.9% from 23.6%. Adjusted operating profit (excluding Linde AG purchase accounting and other charges) grew 6% to $2,341 million, a 28.9% margin.
Reported diluted EPS rose 9% to $3.35b, and adjusted diluted EPS rose 10% to $3.75, helped by lower diluted share count from buybacks. Cash generation and capital allocation were the main themes. Operating cash flow was $1,954 million, up 2%, while capital expenditures increased to $1,048 million to support backlog growth.
Linde returned capital through $669 millionc in dividends (quarterly dividend raised 9% to $1.39 per share) and $1,041 million in share repurchases. Total debt rose to $20.3 billion as the company issued about €2.25 billion of new notes in February, and net debt increased to $15.5 billion. Cash stood at $4.8 billion, and the company had undrawn revolvers totaling $6.5 billion.
Key watch items include the Russia-related litigation, where a St. Petersburg court ruled in favor of RusChemAlliance in February 2024, though Linde has recorded a $1.2 billiond contingent liability and expects no material earnings impact. Engineering segment operating profit fell 33% due to the prior year's benefit from wind-down of Russian projects. Currency translation was a significant drag on equity, with other comprehensive loss of $738 million, mainly from a $744 million translation adjustment as the U.S. dollar strengthened against major currencies.
02—Key points
Key Highlights
- Reported sales declined 1% to $8,100M; pricing (+2%) was offset by volume (-1%) and cost pass-through (-2%)
- Reported operating profit up 8% to $2,095M; operating margin expanded to 25.9% from 23.6%, driven by pricing and productivity
- Adjusted diluted EPS rose 10% to $3.75 (reported $3.35, +9%), aided by lower diluted shares outstanding (485.6M vs. 495.7M)
- Operating cash flow of $1,954M (+2%); capex rose 26% to $1,048M, supporting backlog growth
- Shareholder returns of $1.7B in the quarter: $669M dividends (quarterly rate up 9% to $1.39/share) and $1,041M buybacks, with $15.3B of total authorization remaining
- Total debt rose to $20.3B after February issuance of €2.25B in notes; net debt $15.5B with $4.8B cash and $6.5B undrawn revolvers
- Russia exposure: St. Petersburg court ruled for RusChemAlliance; Linde carries a $1.2B contingent liability and expects no material earnings impact; Other comprehensive loss of $738M mainly from currency translation
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $8.10B$8.19B | −1.1% |
| R&D Expenses | $38.00M$36.00M | +5.6% |
| SG&A Expenses | $860.00M$822.00M | +4.6% |
| Operating Income | $2.10B$1.93B | +8.4% |
| Net Income | $1.63B$1.52B | +7.3% |
| EPS (Basic) | $3.38$3.08 | +9.7% |
| EPS (Diluted) | $3.35$3.06 | +9.5% |
| Shares Outstanding (Basic) | 481.95M491.82M | −2.0% |
| Shares Outstanding (Diluted) | 485.59M495.68M | −2.0% |
05—Questions
Frequently Asked Questions
Did Linde's revenue grow in Q1 2024?
No. Reported sales fell 1% to $8,100 million from $8,193 million. Pricing added 2%, but lower volumes (-1%) and cost pass-through to customers (-2%) more than offset that gain. Currency was flat for the company overall, though APAC sales were reduced by 4% from currency movements.
Why did operating profit increase despite lower sales?
Margin expansion. Reported operating profit rose $162 million (8%) to $2,095 million, and margin improved to 25.9% from 23.6%. Higher pricing, productivity savings, lower other charges, and a $43 million insurance recovery in other income outweighed cost inflation and volume declines. Adjusted operating profit rose 6%, so the reported figure benefited from items that do not recur as a permanent trend.
How is Linde funding its capital spending and shareholder returns?
Primarily through operating cash flow and debt. Operating cash flow of $1,954 million covered most of the $1,048 million in capex, but the company also spent $669 million on dividends and $1,041 million on buybacks. Linde issued €2.25 billion in new notes and drew on commercial paper, with net debt rising to $15.5 billion from $14.7 billion at year-end 2023. The company said it has no financial maintenance covenants and sufficient liquidity.
What is the main legal risk investors should monitor?
The Russia dispute with RusChemAlliance. A St. Petersburg court ruled in RCA's favor on the gas processing plant claim in February 2024, and Linde has appealed. Linde has recorded a $1.2 billion contingent liability in other long-term liabilities, and management says it does not expect a material earnings impact. Timing of resolution is uncertain. Separately, Linde has a German appraisal case and Brazilian tax matters, which management also considers not material to the consolidated position.
Is the share buyback program still active, and how much capacity remains?
Yes. Linde repurchased 2.4 million shares for about $1.0 billion in Q1 2024 at an average price of $430.33. Of the $10.0 billion 2022 program, $9.7 billion has been used, leaving $0.3 billion authorized and expiring July 31, 2024. The $15.0 billion 2023 program has $15.0 billion remaining, so total authorization is $15.3 billion.
06—Continue