Praxair Reports Record Third-Quarter 2010 Earnings
October 27, 2010
Sales of $2.5 billion, 11% above prior-year quarter
Net income of $377 million and diluted EPS of $1.21, up 19%*
Overall volume + 9% versus prior-year quarter. Strong growth in emerging markets and continued steady volume recovery in developed markets
Increases full-year adjusted diluted EPS guidance to $4.67 - $4.72*
Fourth-quarter diluted EPS guidance of $1.18 to $1.23
DANBURY, Conn., October 27, 2010 — Praxair, Inc. (NYSE: PX) reported third-quarter net income and diluted earnings per share of $377 million and $1.21, respectively, up 19% from the prior-year quarter.*
Third-quarter sales were $2,538 million, 11% above the previous-year quarter. Sales increased due primarily to strong volume growth in all geographic regions. Volume growth in Asia and South America was particularly robust, reflecting new plant start-ups and strong customer demand. By end market, sales growth was driven by chemicals, metals, electronics and manufacturing. Overall sales were comparable to sales in the second quarter of 2010 as continued sequential sales growth in Asia and South America was offset by seasonally lower sales in Europe.
Operating profit in the third quarter of $551 million grew 15% from the prior-year quarter, due primarily to higher volumes.*
The company generated strong cash flow from operations in the quarter of $596 million. Operating cash flow funded $324 million of capital expenditures, largely for new on-site plants. Acquisition expenditures in the quarter were $114 million, related primarily to the acquisition of an ownership interest in industrial gas businesses in the Middle East. The company paid $139 million of dividends and also repurchased $54 million of common stock, net of issuances. The after-tax return-on-capital ratio and return on equity for the quarter were 14.7%, and 26.4%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Our results this quarter reflect steadily improving base-business volumes and new plant start-ups. In line with our expectations, the pace of sequential growth has moderated, but we continue to see slow but steady improvement in all geographies. Looking forward, we expect our businesses in South America and in Asia to continue to grow more rapidly than the developed markets.
“We have now established a meaningful footprint in the Middle East via our partnership with the leading industrial gas company in the United Arab Emirates and Kuwait. This is a geography which we expect will provide strong growth for industrial gases due to large, planned investments in the energy sector and diverse manufacturing industries. In addition, we have established a presence in two key industrial regions in Russia. These two regions, combined with our existing businesses in Brazil, Mexico, China and India, give us a strong position in global emerging markets. Increasing consumer demand and investments in infrastructure and energy production in these geographies, combined with more outsourcing of industrial gas supply by customers, will continue to support strong new business activity.”
For the fourth quarter of 2010, Praxair expects diluted earnings per share in the range of $1.18 to $1.23.
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 $4.67 to $4.72.* 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 third-quarter 2010 results by segment.
In North America, third-quarter sales were $1,282 million, 10% above the prior-year period due primarily to 7% volume growth. Sales grew to chemicals, metals and manufacturing markets. Operating profit of $314 million was 19% above the prior-year quarter due primarily to higher volumes of on-site, merchant, and packaged gases.
In Europe, third-quarter sales were $322 million, comparable to $323 million in the prior year. Excluding currency effects, sales grew 10% primarily from higher overall sales in Germany, Italy and Spain. Sales in Germany to chemical customers were particularly strong. Operating profit was $59 million in the quarter compared to $68 million in the prior-year quarter due to currency effects and business-development related costs in the Middle East and Russia.
In South America, third-quarter sales of $506 million were 16% above the prior-year quarter due primarily to 12% organic growth. Sales growth was driven by metals and manufacturing customers and higher pricing. Operating profit was $117 million compared to $94 million in the prior-year period due to higher volumes and higher pricing.
Sales in Asia grew 24% from the prior-year quarter to $287 million. Excluding currency and cost pass-through effects, sales grew 15%, due primarily to robust volume growth. Growth came from new plant start-ups in China and Korea and strong sales to electronics, chemicals and steel customers. Operating profit was $38 million compared to $37 million in the prior-year quarter. Operating profit in the quarter reflects higher power costs and a larger mix of electronics sales.
Praxair Surface Technologies had third-quarter sales of $141 million compared to $135 million in the 2009 quarter. Sales grew 8% excluding negative currency effects due primarily to demand for aviation and industrial coatings. Operating profit of $23 million in the quarter grew 28% from the prior-year period due to higher volumes and 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. Full-year 2010 expected diluted earnings per share are adjusted to exclude the charge related to the Venezuela currency devaluation. Third-quarter and full-year 2009 results are adjusted to exclude the impact of the Brazil tax amnesty program and other charges.
|Praxair 3Q 2010 Earnings Release Table (238KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, and Appendix: Non-GAAP Measures.|
|Praxair 3Q 2010 Teleconference Slides (238KB)||Teleconference presentation on Praxair's 3Q10 results.|
A teleconference on Praxair's third-quarter results is being held this morning, October 27, at 11:00 am Eastern Time. The number is (617) 597-5391 — Passcode: 35806558. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are also available.