Praxair Reports Record Second-Quarter 2010 Earnings
July 28, 2010
Sales of $2.5 billion, 18% above prior-year quarter
Net income of $371 million and diluted EPS of $1.19, up 24%
Strong volume growth in all geographies. Overall volumes up 12%
Increases full-year adjusted diluted EPS guidance to $4.60 - $4.70*
Third-quarter diluted EPS guidance of $1.15 to $1.20
New $1.5 billion share repurchase program authorized
DANBURY, Conn., July 28, 2010 — Praxair, Inc. (NYSE: PX) reported second-quarter net income and diluted earnings per share of $371 million and $1.19, respectively, both up 24% from the prior-year quarter.
Second-quarter sales were $2,527 million, 18% above the previous-year quarter. Sales increased due to double-digit volume growth in all geographic regions, led by South America and Asia. By end market, sales to chemicals, metals and electronics showed the strongest growth compared to the prior year. Compared to the first quarter of 2010, overall sales growth was 4%, and was broad-based across all major end-markets.
Operating profit in the second quarter of $547 million grew 22% from the prior-year quarter, and 8% sequentially*, reflecting higher volumes and the benefits of previous cost-reduction actions.
The company generated strong cash flow from operations in the quarter of $536 million. Operating cash flow funded $325 million of capital expenditures, primarily for new production plants under long-term contracts with customers, and dividends of $137 million. The after-tax return-on-capital ratio and return on equity for the quarter both increased, to 14.7% and 27.4%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, "The global economic environment continued to improve this quarter, with South America and Asia showing the strongest recovery. Our sales growth reflects strengthening global demand and new project start-ups. We leveraged our strong sales growth into higher earnings growth as a result of continued productivity improvements and prior-year cost reduction.
"We expect volume growth to continue in the second half of 2010, perhaps at a more modest pace. We are keeping a sharp focus on our costs, and executing well on our productivity initiatives, which will continue to allow us to leverage earnings growth. We are encouraged by the number of new large-project opportunities which we are pursuing around the world, primarily in the emerging markets. Our project backlog continues to increase, which will contribute significantly to sales and earnings growth in 2012 and beyond.
"The new stock repurchase program which we announced today reflects the confidence we have in our long-term growth outlook. We expect that our cash-flow generation will continue to exceed our capital investment requirements, due to our high return on capital."
For the third quarter of 2010, Praxair expects diluted earnings per share in the range of $1.15 to $1.20.
For the full year of 2010, Praxair expects sales in the area of $10 billion. The company is raising its guidance for adjusted diluted earnings per share to a range of $4.60 to $4.70.* Full-year capital expenditures are expected to be about $1.4 billion, and the effective tax rate is forecasted to remain at about 28%.
Following is additional detail on second-quarter 2010 results by segment.
In North America, second-quarter sales were $1,281 million, 14% above the prior-year period due primarily to 12% volume growth. Sales grew to chemicals, metals and energy markets, principally hydrogen for refining. Operating profit of $294 million was 11% above the prior-year quarter due to higher volumes and lower fixed costs. Sequentially, sales were 3% above the first quarter from higher on-site, merchant-liquid, and packaged-gas volumes.
In Europe, second-quarter sales were $335 million compared to $306 million in the prior year. Excluding currency effects, sales grew 12%, primarily from higher on-site and merchant-liquid volumes in Germany, Italy and Spain. Operating profit was $73 million in the quarter, compared to $61 million in the prior-year quarter due to higher volumes and currency effects. Sequentially, sales declined slightly as the depreciation of the euro offset 5% underlying growth.
In South America, second-quarter sales of $490 million were 24% above the prior-year quarter due to volume growth and currency effects. Excluding currency effects, sales grew 12%, due primarily to higher volumes to metals, manufacturing and healthcare customers, and higher pricing. Operating profit was $114 million, compared to $70 million in the prior-year period due to currency effects, higher volumes and higher pricing. Sequentially, sales grew 7% due to broad-based volume growth.
Sales in Asia grew 41% from the prior-year quarter to $280 million. Excluding currency and cost pass-through effects, underlying sales grew 26% from robust volume growth across the region. The strongest sales growth came from the electronics, chemicals and metals end-markets. Operating profit was $44 million, 33% above the prior-year quarter. Sequentially, sales grew 9% due to continued growth in gases volumes in all major end markets.
Praxair Surface Technologies had second-quarter sales of $141 million compared to $118 million in the 2009 quarter. Sales growth was attributable primarily to an acquisition in 2009. Aviation coatings volumes increased, partially offset by weaker industrial coatings, particularly in Europe. Operating profit was $22 million in the quarter versus $19 million in the prior-year period, primarily due to productivity gains.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2009 sales of $9 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technologies bring productivity and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. More information on Praxair is available on the Internet at www.praxair.com.
*See the attachments for calculations of non-GAAP measures. First-quarter operating profit and full-year expected diluted earnings per share are adjusted to exclude a charge of $27 million ($26 million after-tax, or 8 cents per diluted share) due primarily to the Venezuela currency devaluation.
|Praxair 2Q 2010 Earnings Release Table (281KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, and Appendix: Non-GAAP Measures.|
|Praxair 2Q 2010 Teleconference Slides (214KB)||Teleconference presentation on Praxair's 2Q10 results.|
A teleconference on Praxair's second-quarter results is being held this morning, July 28, at 11:00 am Eastern Time. The number is (617) 597-5360 -- Passcode: 79770262. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are also available.
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) included in the company's Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company's forward-looking statements in light of those risks.