Chairman's Letter cont'd

Our business in Asia generated double-digit sales and operating profit growth, led by South Korea and Thailand. We continued to expand our position in India, while restructuring certain packaged gases operations in order to generate higher returns. Praxair's six wholly-owned companies and seven joint ventures have established a leading position for Praxair in China, where we are focusing on new opportunities in higher-growth markets.

In three important base-business industry segments- metal fabrication, primary metals and chemicals and refining- we shifted from global to regional management, allowing for more efficient allocation of resources. Metal fabrication offers growth opportunities through welding-productivity programs. Hydrogen demand from refining customers was up substantially during 2000, and is expected to continue at high levels as that industry responds to clean-air requirements. For refining, chemicals and primary metals, we will focus on expanding regional pipeline complexes, and will invest only very selectively in new, stand-alone, on-site projects. Praxair operates such complexes on the Texas-Louisiana Gulf Coast; in northern Indiana; western Canada; Salvador, Brazil; Antwerp, Belgium; northern Spain; and Beijing, China.

Less capital-intensive growth portfolio To augment our base business, we are developing unconventional sources of growth- sources that leverage our strengths, but also take full advantage of our considerable intellectual capital- as a means to develop new revenue streams. Today, aside from Praxair Surface Technologies, services and technology-licensing account for about 3% of sales. By the end of 2004, we expect this to grow to 14% of sales. We do not underestimate the challenge of repositioning an industrial company as a more service-oriented business, but we are confident that we have the skill, ingenuity and knowledge to get the job done.