Praxair Reports First-Quarter 2010 Results
April 28, 2010
Sales of $2.4 billion, 14% above prior-year quarter
Adjusted net income of $340 million and adjusted diluted EPS of $1.09, up 17%*
Raises full-year adjusted diluted EPS guidance to $4.50 - $4.65*. Second-quarter diluted EPS guidance of $1.10 to $1.15
DANBURY, Conn., April 28, 2010 — Praxair, Inc. (NYSE: PX) reported first-quarter net income and diluted earnings per share of $314 million and $1.01, respectively. These results include the impact of a $27 million pre-tax charge, or 8 cents of diluted earnings per share, related to currency devaluation in Venezuela. Excluding this charge, adjusted net income and earnings per share were $340 million and $1.09, 17% above the prior-year quarter.*
Sales in the first quarter were $2,428 million, 14% above the previous-year quarter. Sales growth came primarily from higher overall volumes in all geographic regions and foreign currency appreciation. Volume growth was broad-based across most end-markets. Chemicals, metals and electronics showed the strongest pick-up, while growth in manufacturing is lagging. Similarly, adjusted operating profit in the first quarter of $506 million grew 14% from the prior-year quarter.*
The company generated strong cash flow from operations in the quarter. First-quarter cash flow of $483 million funded $288 million of capital expenditures, primarily for new production plants under long-term contracts with customers. The company paid dividends of $138 million and repurchased $68 million of stock, net of issuances. The company issued $500 million of 2.125% notes maturing in 2013 to refinance a note maturing in May 2010. The after-tax return-on-capital ratio and return on equity for the quarter were 13.6%, and 25.4%, respectively.*
Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “We are seeing signs of volume recovery in all our end markets, though the strength varies significantly by geography. Asia and South America showed the strongest underlying sequential growth, while in the US and Europe, recovery was slower but began to accelerate in March.
"For the balance of 2010, we are optimistic that growth in the US and Europe will continue to improve, but at a modest pace. In Brazil, China, India, and Mexico, we are seeing robust business-development activity and a strong recovery of base-business volumes. We added several new projects in South America and India to our large project backlog this quarter, which extends the visibility of our sales and earnings growth out into 2012 and beyond. Our business strategy of disciplined and selective project investment in key emerging markets where we have a strong presence and can generate high returns on our capital is serving us well. In addition, our focus on pricing and gains from productivity programs in our base business will continue to support our strong earnings."
For the second quarter of 2010, Praxair expects diluted earnings per share in the range of $1.10 to $1.15.
For the full year of 2010, Praxair expects sales in the area of $10 billion. The company expects adjusted diluted earnings per share to be in the range of $4.50 to $4.65,* excluding the 8-cent impact from Venezuela currency devaluation in the first quarter. 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 first-quarter 2010 results by segment.
In North America, first-quarter sales were $1,238 million, 6% above the prior-year period due primarily to volume growth. By end-market, the strongest sales growth was to chemicals, metals, and electronics markets. Operating profit of $277 million grew 8% from the prior-year quarter due to higher volumes and lower fixed costs. Sequentially, sales grew 5% from the 2009 fourth quarter due primarily to improving merchant liquid volumes.
In Europe, first-quarter sales were $338 million compared to $303 million in the prior year. Excluding currency effects, sales grew 7% primarily from higher volumes in Spain and Germany. Operating profit was $67 million in the quarter, compared to $63 million in the prior-year quarter due to higher volumes and currency effects. Compared to the 2009 fourth quarter, sales and operating profit declined as the depreciation of the euro offset modest sequential volume growth.
In South America, first-quarter sales were $458 million compared to $353 million in the prior-year period. Excluding positive currency effects, sales grew 9% due primarily to higher volumes to metals and manufacturing customers, and higher overall pricing. Operating profit was $109 million, compared to $75 million the prior-year period due to currency effects, higher volumes, and higher pricing.
Sales in Asia grew 43% from the prior-year quarter to $258 million. Excluding currency and cost pass-through effects, underlying sales grew 29% from sharply higher volumes. Sales growth was primarily driven by electronics, higher on-site and merchant volumes across the region and new plant start-ups. Operating profit was $34 million, 31% above the prior-year quarter. Underlying growth in China, India, and Korea remains strong; sales were lower sequentially due to typical seasonal effects of the Chinese New Year.
Praxair Surface Technologies had first-quarter sales of $136 million compared to $123 million in the prior-year quarter. Sales growth was attributable primarily to an acquisition in 2009, partially offset by lower volumes of industrial gas turbine coatings. Operating profit was $19 million in the quarter versus $22 million in the prior-year period and in the 2009 fourth quarter, due to acquisition integration expenses and lower volumes, partially offset by strong 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, income taxes, net income, diluted earnings per share and full-year 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 1Q 2010 Earnings Release Table (75KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, and Appendix: Non-GAAP Measures.|
|Praxair 1Q 2010 Teleconference Slides (272KB)||Teleconference presentation on Praxair's 1Q10 results.|
A teleconference on Praxair’s first-quarter results is being held this morning, April 28, at 11:00 am Eastern Time. The number is (617) 597-5361 — Passcode: 69131398. 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 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.