Praxair Reports Second-Quarter 2014 Results
July 23, 2014
- Sales of $3.1 billion, 3% above prior-year quarter
- EPS of $1.58, up 6% versus prior-year quarter
- Strong operating and EBITDA* margins of 22.4% and 32.1%, respectively
- Cash flow from operations strong at $847 million, 27% of sales
- $1.9 billion project backlog; bid activity strongest in North America and Asia
- EPS guidance: 2014 full-year $6.30 to $6.45, up 6% to 9% year-over-year,* and 3Q14 $1.58 to $1.65
DANBURY, Conn., July 23, 2014 -- Praxair, Inc. (NYSE: PX) reported second-quarter net income of $467 million and diluted earnings per share of $1.58, 5% and 6% above the prior-year quarter, respectively.
Sales in the second quarter were $3,113 million, 3% above the prior-year quarter, and up 5% excluding foreign currency. Organic sales grew 4% driven by new project start-ups, primarily in North America and Asia, and price across all operating segments. By end-market, sales growth was strongest for metals, energy and food & beverage customers. Acquisitions contributed 1% growth in the quarter.
Operating profit in the second quarter was $697 million, 5% above the prior-year quarter. Excluding negative currency translation impacts, operating profit rose 7% primarily driven by higher pricing and productivity gains. Operating profit as a percentage of sales was a strong 22.4% and EBITDA margin grew to 32.1%.*
Second-quarter cash flow from operations was $847 million and funded capital expenditures of $384 million, primarily for new production plants under long-term contracts with customers. Acquisition expenditures in the quarter were $46 million, primarily related to U.S. packaged gas businesses. The company paid dividends of $190 million and repurchased $140 million of stock, net of issuances. The after-tax return on capital and return on equity for the quarter were 12.6% and 28.3%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair delivered another solid quarter with operating profit growth of 7%, outpacing sales growth of 5%, excluding currency headwinds, despite moderating growth in emerging markets. We achieved superior operating cash flow as a percentage of sales of 27% as a result of our consistent focus on high-quality growth and strong return on capital.
“Sales growth was driven by new projects in North America and Asia, as well as disciplined price execution across all of our operating segments. We grew the base business modestly in North America, Europe and Asia, but this growth was mitigated by weaker South American volumes as a result of negative industrial production in Brazil.
“As we look to the remainder of the year, we don’t anticipate significant economic improvement in the second half. However, Praxair’s relentless focus on operational excellence, project execution and financial discipline will continue to deliver increasing cash flow and earnings per share for our shareholders.”
For the third quarter of 2014, Praxair expects diluted earnings per share in the range of $1.58 to $1.65.
For the full year of 2014, Praxair expects sales in the range of $12.4 billion to $12.7 billion. The company expects diluted earnings per share to be in the range of $6.30 to $6.45, 6% to 9%* above the prior year. This year-over-year growth rate was reduced by approximately 2% negative foreign currency translation impact. Full-year capital expenditures are expected to be about $1.8 billion, and the effective tax rate is forecasted to remain at about 28%.
Following is additional detail on second-quarter 2014 results by segment.
In North America, second-quarter sales were $1,628 million, 5% above the prior-year quarter and up 7% excluding negative currency translation impacts. Organic sales growth was 5% driven primarily by higher pricing and increased sales to the energy end-market as on-site volumes increased from new project start-ups for hydrogen supply to refinery customers. Acquisitions contributed 1% growth. Operating profit of $398 million grew 4% from the prior year due to higher pricing, higher volumes and ongoing productivity initiatives.
In Europe, second-quarter sales were $408 million, up 7% versus the second quarter of 2013. Acquisitions, primarily Dominion Technology Gases, contributed 3% growth. Organic sales growth of 1% came from higher pricing. Operating profit of $78 million increased 13% versus the prior-year quarter, and was driven by positive currency translation, acquisitions and higher price.
In South America, second-quarter sales were $509 million. Sales grew 3% from the prior-year quarter, excluding an 8% negative currency impact, primarily due to higher overall pricing. Operating profit was $113 million, up 1% excluding currency effects, due to higher pricing partially offset by lower volumes in Brazil and cost inflation.
Sales in Asia were $394 million in the quarter, up 4% from the prior year driven by higher pricing and volume growth in India, China, Korea and Thailand. Sales growth came primarily from metals, energy and electronics customers. Operating profit was $76 million, 25% above the prior-year quarter due primarily to higher volumes, price and productivity initiatives.
Praxair Surface Technologies had second-quarter sales of $174 million, 5% above the prior year. Organic sales increased 4% primarily from higher price. Operating profit was $32 million, as compared to $31 million in the prior year, due primarily to higher price.
Praxair, Inc., a Fortune 250 company with 2013 sales of $12 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair 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, metals and many others. More information about Praxair, Inc. is available at www.praxair.com.
*See attachments for calculations of non-GAAP measures.
Attachments: Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, Non-GAAP Reconciliations and Appendix: Non-GAAP Measures.
Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, Non-GAAP Reconciliations, and Appendix: Non-GAAP Measures.
Teleconference presentation on Praxair's 2Q14 results
A teleconference about Praxair’s second-quarter results is being held this morning, July 23, at 11:00 am Eastern Daylight Time. The number is (617) 399-5137 -- Passcode: 64992155. The call also is 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 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; 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; 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 projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. 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 Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.