OVERVIEW
Praxair is the largest industrial gases supplier in North and South America, is rapidly growing in Asia, and has strong, well-established businesses in Southern Europe. The company’s primary products are oxygen, nitrogen, argon, carbon dioxide, helium, hydrogen, electronics gases and a wide range of specialty gases. Praxair Surface Technologies supplies high-performance coatings that protect metal parts from wear, corrosion and high heat. All together, Praxair serves approximately 25 industries as diverse as healthcare and petroleum refining; computer-chip manufacture and beverage carbonation; fiber optics and steel making; and aerospace, chemicals and water treatment. In 2003, 93% of sales was generated from industrial gases in four regional segments (North America, Europe, South America and Asia), with the balance generated from the Surface Technologies segment.

Praxair manufactures and distributes its products through a network of hundreds of production plants, cylinder-filling stations and pipeline complexes in manufacturing enclaves. Major pipeline complexes are located in the United States, Brazil and Spain. This network is a competitive advantage for the company as it provides the foundation of reliability for product supply to our customer base.

Electricity, natural gas and diesel fuel are the largest cost elements in the production and distribution of industrial gases. Praxair minimizes the financial impact of variability in these costs through the management of customer contracts which typically have escalation and pass-through clauses.

Praxair performed well in 2003, despite a relatively weak U.S. economy in the first half. For the full year 2003, the company reported record net income of $585 million, and diluted earnings per share of $1.77, a 7% increase from $548 million and $1.66 per share in 2002, before an accounting change and adjusted for a stock split in December. Full-year sales were $5,613 million, 9% higher than 2002. Sales rose 5% excluding the impact of higher natural gas prices, which are passed through to hydrogen customers, and stronger currencies in Europe and South America. Underlying sales grew from higher volumes in all regions and higher overall pricing. Sales increased strongly to energy, metals, healthcare, and chemicals markets. Manufacturing and electronics sales were also higher versus 2002.