Linde Reports Second-Quarter 2021 Results

• Sales $7.6 billion, up 19% versus prior-year quarter
• Operating profit $1.1 billion; adjusted operating profit $1.8 billion, up 39%
• Operating profit margin 15.1%; adjusted operating profit margin 24.2%, up 350 basis points
• EPS $1.60, up 84%; adjusted EPS $2.70, up 42%
• Increased full-year 2021 adjusted EPS guidance to $10.10 – $10.30, representing 23% to 25% growth year-over-year

Linde plc (NYSE: LIN; FWB: LIN) today reported second-quarter 2021 income from continuing operations of $840 million and diluted earnings per share of $1.60, an increase of 84% versus prior year. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,415 million, up 41% versus prior year and 8% sequentially. Adjusted earnings per share was $2.70, 42% above prior year and 8% higher sequentially.

Linde’s sales for the second quarter were $7,584 million, 19% above prior year and up 5% sequentially. Compared to prior year, underlying sales increased 18%, including 3% price attainment and 15% higher volumes. Volume growth was broad-based across all geographic segments and end markets. Sequentially, underlying sales increased 5% driven by higher volume and price.

Second-quarter operating profit was $1,142 million. Adjusted operating profit of $1,837 million was up 39% versus prior year led by higher price, strong volumes and continued productivity initiatives across all segments. Adjusted operating margin of 24.2% expanded 350 basis points versus prior year and 90 basis points sequentially.

Second-quarter operating cash flow of $1,827 million increased 4% versus prior year. After capital expenditures of $744 million, free cash flow was $1,083 million, up 10% versus prior year. During the quarter, the company returned $1,748 million to shareholders through dividends and stock repurchases, net of issuance.

In addition, the company ended the second quarter with a total backlog of approximately $7.5 billion which includes both sale of gas and sale of plant projects, all contractually secured with high-quality customers.

Commenting on the financial results and business outlook, Chief Executive Officer Steve Angel said, "Linde employees delivered another quarter of record breaking financial results with operating profit margins expanding 350 basis points, ROC improving to 15.7% and EPS growing 42%, reaching an all-time high of $2.70. Our team continues to execute well against our core strategy, producing industry leading performance."

Angel continued, "Looking ahead, I’m confident the company will deliver another outstanding year."

For third quarter 2021, Linde expects adjusted diluted earnings per share in the range of $2.60 to $2.70, up 34% to 39% versus the same quarter in 2019 and 21% to 26% versus prior-year quarter. This guidance assumes 3% currency tailwind versus prior year and 1% headwind sequentially.

For full year 2021, the company has updated its adjusted diluted earnings per share guidance to be in the range of $10.10 to $10.30, up 38% to 40% versus 2019 and 23% to 25% versus prior year. This guidance assumes 3% currency tailwind versus 2020. Full-year capital expenditures are expected to be in the range of $3.0 billion to $3.4 billion to support maintenance and growth requirements including the contractual project backlog.

Second-Quarter 2021 Results by Segment
Americas sales of $3,020 million were 25% above prior year. Underlying sales increased 21% driven by 3% higher pricing and 18% higher volume, led by stronger demand across all end markets and project start-ups. Sequentially, price increased 1% and volumes grew 5%, led primarily by higher demand in the cyclical end markets. Operating profit of $871 million was 28.8% of sales, up 310 basis points versus prior year.

APAC (Asia Pacific) sales of $1,544 million were 19% above prior year. Underlying sales grew 21% driven by 2% price attainment and 19% volume growth, led by higher demand across all end markets, plus project start-ups. Sequentially, price increased 1% and volume grew 7%, led by electronics and cyclical end markets. Divestitures were driven by an accounting deconsolidation of a joint venture which reduced sales 12% versus prior year, but had no impact on earnings per share. Operating profit of $389 million was 25.2% of sales, up 250 basis points versus prior year.

EMEA (Europe, Middle East & Africa) sales of $1,875 million were up 29% versus prior year. Underlying sales grew 16% from 4% higher pricing and 12% higher volumes across all end markets. Sequentially, underlying sales were up 3% from 1% pricing and 2% volumes. Operating profit of $487 million was 26.0% of sales, up 510 basis points versus prior year.

Linde Engineering sales were $646 million, 20% below prior year largely due to the timing of plant completion and operating profit was $108 million or 16.7% of sales. Order intake for the quarter was $355 million and third-party sale of plant backlog was $4.1 billion.

*Note: We are providing adjusted earnings per share ("EPS") guidance for 2021. This is a non-GAAP financial measure that represents diluted earnings per share from continuing operations (a GAAP measure) but excludes the impact of certain items that we believe are not representative of our underlying business performance, such as cost reduction and other charges, the impact of potential divestitures or other potentially significant items. Given the uncertainty of timing and magnitude of such items, we cannot provide a reconciliation of the differences between the non-GAAP adjusted EPS guidance and the corresponding GAAP EPS measure without unreasonable effort.

Forward-looking Statements
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast, and similar expressions. They 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, including trade conflicts and tariffs; 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, pandemics such as COVID-19 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; 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 accounting principles generally accepted in the United States of America, International Financial Reporting Standards or adjusted projections, estimates or other forward-looking statements.

Linde plc 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 Linde plc’s Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021 which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.