Praxair Reports First-Quarter 2018 Results
April 26, 2018
- Financial Highlights
- Sales $3.0 billion, 10% above prior-year quarter
- Operating profit $0.7 billion, 15% above prior-year quarter, adjusted operating profit 17% higher
- EPS $1.59, up 18% versus prior-year quarter, adjusted EPS of $1.65, up 20% versus prior-year quarter
- Stable backlog of $1.5 billion:
- ($0.5) billion of start-ups, including Yara Freeport LLC
- +$0.5 billion of new wins, including largest-ever investment in one project
- Continued Progress on Merger with Linde AG
- Regulatory filings progressing
- Received indicative bids
DANBURY, Conn., April 26, 2018 – Praxair, Inc. (NYSE: PX) today reported first-quarter net income of $462 million and diluted earnings per share of $1.59. These results include transaction costs of $18 million after-tax and non-controlling interests, or 6 cents of diluted earnings per share, primarily related to the proposed merger with Linde AG. Excluding these costs, adjusted net income was $480 million and diluted earnings per share was $1.65, up 22% and 20% respectively versus prior year.
Praxair’s sales in the first quarter were $2,999 million, 10% above the prior-year quarter. After adjusting for positive currency translation, sales grew 7%, driven by price attainment and higher volumes across all segments and end-markets.
First quarter reported operating profit was $653 million, 15% above the prior-year quarter. Excluding transaction and other costs, adjusted operating profit was $672 million, 17% above prior-year quarter. Reported and adjusted operating profit margins were 21.8% and 22.4%, respectively, improving from 20.8% and 21.0% in the prior-year quarter. For the first quarter, EBITDA margin was 32.6% and adjusted EBITDA margin was 33.3%.
The company generated first-quarter operating cash flow of $688 million which included $65 million of foreign withholding tax payments. Capital expenditures were $325 million, dividends paid were $237 million and the company decreased net debt by $86 million.
Commenting on the financial results, Chairman and Chief Executive Officer Steve Angel said, “In the first quarter, Praxair employees delivered strong top-line and bottom-line growth resulting in a record $1.65 EPS. The 10% sales growth reflects solid recovery across all major end-markets and geographies, led by Asia and North America. As global industrial production rates continue to rise, we are well positioned to capture that growth and leverage it into higher operating margins.
“In addition to organic growth, we started up several large projects and added significant new wins to our backlog. The strength of our backlog and potential for new opportunities should continue to deliver approximately 3% EPS growth per year over the next three to four years.
“We continue to make progress on our merger with Linde and expect to close in the second half of the year. I look forward to bringing together two world-class, complementary organizations to create an even more valuable, high-performing industrial gas company.”
For second quarter 2018, Praxair expects diluted earnings per share in the range of $1.67 to $1.72, excluding transaction costs related to the proposed merger. The company’s effective tax rate is estimated to be in the range of 23% to 25%.
Following is additional detail on first quarter 2018 results by segment.
In North America, first-quarter sales were $1,563 million, 7% above the prior-year quarter, driven primarily by higher price attainment and strong volumes in the manufacturing, chemicals and food and beverage end-markets. Operating profit of $406 million was 14% above the prior-year quarter.
Europe sales grew 20% in the first quarter to $428 million or 3% excluding currency effects and higher cost pass-through. Underlying sales growth reflects increased business activity and higher pricing in Spain, Italy and Germany. First-quarter operating profit of $80 million rose 19% from the prior-year period.
In South America, first-quarter sales were $365 million, 2% above the prior-year quarter, excluding currency translation. Sales growth was driven mainly by price attainment and higher volumes to metals and healthcare end-markets. Operating profit was $54 million.
Sales in Asia were $476 million in the quarter, up 21% from the prior year. Excluding currency, sales grew 14% from the prior year, driven by 3% price, project start-ups and higher organic volumes in China, Korea and India. Operating profit was $104 million, 39% above prior-year quarter, reflecting strong operating leverage.
Praxair Surface Technologies had first-quarter sales of $167 million, up 11% from prior-year quarter. Strong coatings demand from aerospace and price drove higher sales. Operating profit of $28 million, up 8% versus prior-year quarter, was impacted by new project ramp-up costs.
Adjusted amounts, EBITDA, free cash flow and after-tax return on capital are non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations of non-GAAP measures.
Effective January 1, 2018, Accounting Standards Update 2017-07 requires that pension costs, excluding service cost, be reported below the operating profit line in the income statement. Previously, these pension accounting impacts were included in the income statement primarily in selling, general and administrative expenses. Accordingly, such costs have been reclassified to “Net pension and OPEB cost (benefit), excluding service cost” in the income statement. Also, prior period full-year and quarterly results, including the income statement and segment operating profit, have been reclassified to conform to the current year presentation. There was no impact on previously reported net income or earnings per share.
Attachments: Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.
Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.
Teleconference presentation on Praxair's 1Q18 results.
A teleconference about Praxair’s first-quarter results is being held this morning, April 26, 2018 at 11:00 am Eastern Time. The number is (631) 485-4849 – Conference ID: 6087208. The call is also available as a webcast live and on-demand at www.praxair.com/investors. Materials to be used in the teleconference are also available on the website.
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 expected timing and likelihood of the completion of the contemplated business combination with Linde AG, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals that could reduce anticipated benefits or cause the parties to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the business combination agreement; the ability to successfully complete the proposed business combination, regulatory or other limitations imposed as a result of the proposed business combination; the success of the business following the proposed business combination; the ability to successfully integrate the Praxair and Linde businesses; the risk that the combined company may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; 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, including the impact of the U.S. Tax Cuts and Jobs Act of 2017; the cost and outcomes of investigations, litigation and regulatory proceedings; the impact of potential unusual or non-recurring items; 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; the impact of information technology system failures, network disruptions and breaches in data security; 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 GAAP or adjusted 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) in the company’s latest Annual Report on Form 10-K filed with the SEC and in the proxy statement/prospectus included in the Registration Statement on Form S-4 (which Registration Statement was declared effective on August 14, 2017) filed by Linde plc with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
Praxair, Inc. is a leading industrial gas company in North and South America and one of the largest worldwide. With market capitalization of approximately $40 billion and 2017 sales of $11 billion, the company employs over 26,000 people globally and has been named to the Dow Jones® World Sustainability Index for 15 consecutive years. Praxair produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Our products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, primary metals and many others. For more information about the company, please visit our website at www.praxair.com.