Praxair Reports Second-Quarter 2018 Results
July 26, 2018
- Financial Highlights
- Sales $3.1 billion, 8% above prior-year quarter
- Operating profit $0.7 billion, 14% above prior-year quarter, adjusted operating profit 15% higher
- EPS $1.65, up 17% versus prior-year quarter, adjusted EPS $1.72, 18% above prior-year quarter
- Operating cash flow of $0.8 billion, 26% of sales
- Backlog $1.7 billion, up $200 million versus prior quarter
- Won three new onsite projects: two in Asia, one in North America
- Started up China National Offshore Oil Corporation (CNOOC) project
- Continued Progress on Merger with Linde AG
- Executed European divestiture agreement
- Regulatory filings progressing
DANBURY, Conn., July 26, 2018 – Praxair, Inc. (NYSE: PX) today reported second-quarter net income of $480 million and diluted earnings per share of $1.65. These results include transaction costs and other charges of $21 million after-tax, or 7 cents of diluted earnings per share, related to the proposed merger with Linde AG. Excluding these costs, adjusted net income was $501 million and diluted earnings per share was $1.72, up 19% and 18% respectively versus the prior year.
Praxair’s sales in the second quarter were $3,061 million, 8% above the prior-year quarter, driven by 2% higher pricing and 5% volume growth across all segments.
Second quarter reported operating profit was $689 million, 14% above the prior-year quarter. Excluding transaction costs and other charges, adjusted operating profit was $713 million, 15% above last year. Reported and adjusted operating profit margins were 22.5% and 23.3%, respectively, improving from 21.4% and 21.9% in the prior-year quarter. For the second quarter, EBITDA margin was 33.1% and adjusted EBITDA margin was 33.9%.
The company generated second-quarter operating cash flow of $790 million, 26% of sales. Capital expenditures were $351 million, dividends paid were $237 million and the company decreased net debt by $318 million.
Commenting on the financial results, Chairman and Chief Executive Officer Steve Angel said, “We continue to see positive economic activity, primarily in Asia and North America where overall business sentiment remains high. This led to strong sales growth across all geographic segments and supported a project backlog increase to $1.7 billion from new on-site wins in electronic and chemical end-markets.
“In the second quarter, we delivered record earnings per share of $1.72 which was 18% above prior year. Operating and EBITDA margins expanded to 23.3% and 33.9% respectively, as incremental volumes and price actions outpaced cost inflation. This profit growth coupled with prudent capital management improved return on capital 150 basis points to 13.6%.
“In addition to the strong performance, we made substantial progress on the merger with Linde. We achieved additional regulatory approvals and earlier this month, we announced an agreement to sell the majority of our European business in support of our efforts to gain EC approval.
“I am proud of the accomplishments and focus from Praxair employees worldwide and look forward to integrating our organization with Linde to create an even more valuable, high-performing company.”
Following is additional detail on second-quarter 2018 results by segment.
In North America, second-quarter sales were $1,594 million, 6% 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 $432 million grew 14% above the prior year due to higher volumes and price.
Europe sales grew 16% in the second quarter to $444 million or 5% excluding currency effects and higher cost pass-through. Underlying sales growth reflects increased business activity and higher pricing in Italy, Spain and Germany. Second-quarter operating profit of $87 million rose 18% from the prior-year period driven by higher volumes to all major end-markets and price.
In South America, second-quarter sales were $349 million, 4% above the prior-year quarter, excluding currency translation. Sales growth was driven by higher volumes to metals and healthcare end-markets. Operating profit was $56 million.
Sales in Asia were $502 million in the quarter, up 19% from the prior year. Excluding currency and higher cost pass-through, 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 $107 million, 34% above prior year, reflecting continued strong operating leverage from incremental volume, price and ongoing productivity initiatives.
Praxair Surface Technologies had second-quarter sales of $172 million, up 14% from prior-year quarter. Overall strong pricing and demand, including further ramping of EBPVD coating capacity serving the aviation market, drove higher sales and margin expansion. Operating profit of $31 million was up 24% versus prior-year quarter.
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.
|Praxair 2Q18 Earnings Release - Tables (273KB)||Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.|
|Praxair 2Q18 Teleconference Slides (955KB)||Teleconference presentation on Praxair's 2Q18 results.|
A teleconference about Praxair’s second-quarter results is being held this morning, July 26, 2018 at 11:00 am Eastern Time. The number is (631) 485-4849 – Conference ID: 6768465. 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.