01—Abstract
Summary
Summary of the 10-Q filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Linde plc's Q2 2024 10-Q shows steady, pricing-driven performance.
Quarterly sales rose 1% to $8,267 milliona, with price/mix up 3% offsetting a 2% currency headwind, flat volumes, and a 1% cost pass-through drag. Reported operating profit grew 9% to $2,184 million (26.4% margin), and adjusted operating profit (excluding Linde AG merger purchase accounting and other charges) rose 6% to $2,422 million (29.3% margin). Reported diluted EPS was $3.44, up 8%, and adjusted diluted EPS was $3.85, up 8%.
Six-month results were similar, with reported diluted EPS of $6.79b (up 9%) and sales flat at $16,367 million. Cash generation softened while investment accelerated. Operating cash flow fell 4% to $3,883 million for the first half, driven by working capital needs and lower engineering advance payments.
Capital expenditures rose to $2,181 millionc (up $493 million) for backlog-driven plant builds, pushing free cash flow lower. Shareholder returns remained substantial, with $2,481 million in gross share buybacks and $1,334 million in dividends in the half. Funding came largely from new debt: total debt rose to $21.5 billion from $19.4 billion, including a February and June issuance of several euro-denominated notes.
Cash stood at $4.6 billiond, and $6.5 billion of undrawn revolving credit facilities remained with no financial maintenance covenants. Risk items warrant attention. Linde disclosed a $1.2 billion contingent liability tied to terminated Russian engineering projects, along with a St. Petersburg court judgment against its Russian assets, which management says is not expected to have a material earnings impact.
Brazilian tax disputes and a German appraisal proceeding also remain open. Interest expense rose 35% to $70 million in the quarter as borrowing costs increased, and the effective tax rate rose to 23.5%. Management reiterated that the company retains access to capital markets and that the Moody's and S&P ratings remain strong.
02—Key points
Key Highlights
- Q2 2024 reported sales of $8,267M (+1% YoY): price/mix +3% offset by currency -2% and cost pass-through -1%; volumes flat.
- Reported operating profit rose 9% to $2,184M (26.4% margin); adjusted operating profit rose 6% to $2,422M (29.3% margin), driven by pricing and productivity.
- Q2 diluted EPS of $3.44 (+8%); adjusted diluted EPS of $3.85 (+8%). H1 reported diluted EPS of $6.79 (+9%).
- H1 operating cash flow declined 4% to $3,883M, while capex increased 29% to $2,181M for backlog-driven plant investment.
- Total debt increased to $21.5B from $19.4B after multiple euro-denominated bond issuances; cash of $4.6B and $6.5B of undrawn revolvers provide liquidity.
- Shareholder returns were significant: $2.48B in H1 share repurchases and $1.33B in dividends; $13.9B remains authorized under the 2023 buyback program.
- Russian engineering contract exposure includes a $1.2B contingent liability and an adverse St. Petersburg judgment, which management believes will not materially affect earnings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 2, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $8.27B$8.20B | +0.8% |
| R&D Expenses | $36.00M$35.00M | +2.9% |
| SG&A Expenses | $840.00M$833.00M | +0.8% |
| Operating Income | $2.18B$2.01B | +8.6% |
| Net Income | $1.66B$1.57B | +5.6% |
| EPS (Basic) | $3.46$3.22 | +7.5% |
| EPS (Diluted) | $3.44$3.19 | +7.8% |
| Shares Outstanding (Basic) | 479.97M489.62M | −2.0% |
| Shares Outstanding (Diluted) | 483.18M493.55M | −2.1% |
05—Questions
Frequently Asked Questions
How did Linde perform in Q2 2024 compared with the prior year?
Linde's sales were roughly flat to slightly up, rising 1% to $8.27 billion. Pricing added 3%, while currency subtracted 2% and cost pass-through subtracted 1%. Reported operating profit increased 9% to $2.18 billion, and reported diluted EPS rose 8% to $3.44. Adjusted operating profit, which excludes merger-related purchase accounting and other charges, increased 6% to $2.42 billion.
Why did operating cash flow decline even though profits grew?
Operating cash flow fell 4% to $3.88 billion in the first half of 2024 because of higher working capital needs, lower inflows from engineering customer advance payments, and higher cash taxes and interest. These offset growth in net income adjusted for non-cash items.
What is the Russia-related risk and how large is it?
Linde faces claims from RusChemAlliance tied to terminated engineering projects in Russia. A St. Petersburg court ruled in RCA's favor on one claim, and the Russian injunction on Linde's assets has not been lifted despite a Hong Kong judgment in Linde's favor. Linde has recorded a $1.2 billion contingent liability in other long-term liabilities. Management says it does not expect a material adverse impact on earnings, given this liability and the minimal remaining value of its deconsolidated Russian subsidiaries.
How is Linde funding its capital spending and shareholder returns?
Linde issued several euro-denominated notes in February and June 2024, bringing total long-term debt to $16.9 billion. Total debt rose to $21.5 billion from $19.4 billion. Management says it retains access to debt markets and maintains strong Moody's and S&P ratings. The company holds $4.6 billion in cash and $6.5 billion in undrawn revolving credit facilities with no financial maintenance covenants.
What drove the increase in capital expenditures and what is the outlook?
Capex rose to $2.18 billion in the first half, $493 million higher than the prior year. The increase reflects investment in new plant and production equipment to meet backlog growth. Linde reported large projects under construction representing about $4.7 billion of total estimated capital cost. The filing gives no formal full-year guidance, pointing investors to earnings releases for updates.
06—Continue