Praxair Reports Record Second-Quarter 2008 Results; Raises Full-Year Guidance
July 23, 2008
Diluted EPS of $1.08 up 21% versus prior year
Sales growth of 23% versus 2007; strong results in all geographies
Operating cash flow of $389 million; return on capital of 15.4%*
Increased FY 2008 EPS guidance to $4.20 – $4.30*
New $1 billion share repurchase program authorized
DANBURY, Conn., July 23, 2008 — Praxair, Inc. (NYSE: PX) reported second-quarter net income of $349 million and diluted earnings per share of $1.08, compared to $291 million and 89 cents, respectively, in the prior-year quarter. This represents net income and earnings per share growth of 20% and 21%, respectively, versus the prior-year quarter.
Sales in the second quarter were $2,878 million, up 23% from $2,332 million in the second quarter of 2007. Praxair achieved strong sales growth in every geographic region, led by South America and Asia.
Operating profit was a record $543 million, 24% above $439 million in the prior-year quarter. Higher pricing and cost savings from productivity programs offset inflationary cost increases.
Cash flow from operations was $389 million. Capital expenditures of $380 million largely supported the construction of new on-site supply systems under contract for customers. The company invested $30 million in acquisitions, primarily industrial packaged gas businesses in North America. The debt-to-capital ratio was 43.4% at the end of the quarter. The after-tax return-on-capital ratio was 15.4%, and return on equity was 25.7%*.
Due to strong cash flow generation from operations, the company has completed to date $931 million of stock repurchases under the $1 billion repurchase program authorized in July 2007. The company announced this morning a new $1 billion stock repurchase program which has been authorized by Praxair's board of directors, based on a positive outlook for continued strong growth in earnings and cash flow generation.
In North America, second-quarter sales reached $1,573 million, 22% above the prior year. Excluding the effect of higher natural gas prices passed through to customers in hydrogen prices, sales growth was 18%, led by higher sales to energy and general manufacturing markets. Operating profit grew 19% to $275 million.
In Europe, sales in the second quarter of $406 million grew 21% from $336 million in the prior-year quarter. Currency effects contributed 16% to sales growth. Underlying sales growth came primarily from growth in merchant and packaged gases volumes in Germany and Italy. Second-quarter operating profit of $99 million rose 25% from the prior-year period.
In South America, second-quarter sales of $514 million grew 31% versus the prior-year quarter due to higher prices and volumes, and favorable currency effects of 16%. Sales growth came primarily from higher sales to metals and manufacturing markets. Operating profit rose 34% to $102 million in the quarter.
Sales in Asia grew 30% to $232 million in the quarter, attributable primarily to strong volume growth from new plant start-ups and higher sales to the electronics, manufacturing and metals markets. Operating profit in the quarter grew 33% to $40 million from the prior-year period.
Praxair Surface Technologies had second-quarter sales of $153 million, 17% above the prior-year quarter. Sales growth was driven by higher sales to aerospace and energy markets. Operating profit of $27 million was 17% above the 2007 quarter.
For the third quarter of 2008, Praxair expects diluted earnings per share in the range of $1.06 to $1.10. This represents earnings growth of 13% to 17% above the third quarter of 2007.
For the full year of 2008, Praxair expects year-over-year sales growth in the range of 16% to 20%. The company expects diluted earnings per share to be in the range of $4.20 to $4.30, excluding the impact of the 3-cent pension settlement charge which occurred in the first quarter of 2008. This represents 16% to 19% growth from 2007*. Full-year capital expenditures are expected to be about $1.5 billion, supporting an increasing number of contracts for on-site production plants globally which will come on-stream over the next several years, generating strong revenue and earnings growth.
Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, "We had another strong quarter. Our results reflect strong sales growth in Asia and South America due to the high level of investment by our customers in these developing economies. In North America, we are continuing to see strong demand from the energy sector and steady growth in our base business. We therefore expect that our results will continue to reflect strong year-over-year growth in sales and earnings.
"The new stock repurchase program which we announced today reflects our positive outlook. We expect to fund this repurchase program largely out of operating cash flow, while simultaneously investing in a record number of new on-site projects for our customers."
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2007 sales of $9.4 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 related to 2008 operating profit, net income, and diluted earnings per share adjusted to exclude a $17-million pension-settlement charge in the first quarter, $11 million after-tax, 3 cents EPS. All full year-over-year comparisons, including percentage changes, are based on adjusted amounts for 2008 which exclude the pension-settlement charge. The attachments also include calculations of non-GAAP measures related to after-tax return-on-capital; return on equity; and debt-to-capital ratios.
|Praxair 2Q 2008 Earnings Release Table (52KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 2Q 2008 Teleconference Slides (94KB)||Teleconference presentation on Praxair's 2Q08 results.|
A teleconference on Praxair's second-quarter results is being held this morning, July 23, at 11:00 a.m. Eastern Time. The number is (617) 597-5395 — Passcode: 77241552. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are 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 tax, environmental, home 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) in the company's latest Annual Report on Form 10-K filed with the SEC which should be reviewed carefully. Please consider the company's forward-looking statements in light of those risks.