First half of 2013: Linde continues its steady business performance and confirms its outlook

• Group revenue up 10.5 percent to EUR 8.207 bn

• Group operating profit1 increases by 13.6 percent to EUR 1.966 bn

• Group operating margin rises to 24.0 percent (2012: 23.3 percent)

• Short-term and medium-term Group outlook confirmed:

- 2013: Increase in revenue; operating profit of at least EUR 4 bn

- 2016: Operating profit of at least EUR 5 bn; ROCE2 of around 14 percent



Munich – In the second quarter of 2013, the technology company The Linde Group built on its solid business performance in the first quarter of the year. In the six months ended 30 June 2013, it once again achieved increases in Group revenue and Group operating profit. “We have held our own quite well in the first half of the year, in an environment which is proving challenging to everyone,” commented Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG, on the interim report. “Although the economic tailwind has subsided somewhat, we have continued to achieve profitable growth. The expansion of our Healthcare operations in particular made the greatest contribution here.”

Linde is equipped for the rest of the financial year and confirms its outlook. “We want to achieve a higher level of Group revenue in 2013 than in 2012 and to generate Group operating profit in the current year of at least EUR 4 bn,” explained CEO Reitzle. The Group also believes that it remains on track to achieve its medium-term targets: Linde is still seeking to generate Group operating profit of at least EUR 5 bn in the 2016 financial year. Return on capital employed (ROCE) should be around 14 percent in the same year.

In the first half of 2013, Group revenue rose by 10.5 percent to EUR 8.207 bn, compared with EUR 7.425 bn in the first half of 2012. Exchange rate effects had an impact on revenue trends. During the reporting period, some currencies (especially those in emerging economies, the British pound and the Australian dollar) lost value against the euro. After adjusting for these exchange rate effects, the increase in revenue was 12.7 percent. US homecare company Lincare, acquired by Linde in August 2012, contributed revenue of EUR 792 m to the growth of the Group.

Linde was able to reinforce its profitability at a high level and increased its Group operating profit by 13.6 percent to EUR 1.966 bn (2012: EUR 1.731 bn). As a result, the Group operating margin rose to 24.0 percent (2012: 23.3 percent).

Profit for the period increased in the first half of 2013 by 11.4 percent to EUR 715 m (2012: EUR 642 m). After adjusting for non-controlling interests, profit for the period attributable to Linde AG shareholders was EUR 660 m (2012: EUR 586 m). This gives earnings per share of EUR 3.56 (2012: EUR 3.42).



Gases Division

Linde achieved 14.5 percent revenue growth in the Gases Division in the six months to 30 June 2013 to EUR 7.021 bn, when compared with revenue of EUR 6.131 bn in the first half of 2012. During the reporting period, the Lincare business contributed EUR 792 m to the total revenue of the Gases Division. On a comparable basis (i.e. after adjusting for exchange rate effects, changes in the price of natural gas and the effect of the Lincare acquisition on the consolidation), the increase in revenue was 3.6 percent. Within the Gases Division, Lincare is included in the Americas segment and the Healthcare product area.

Linde’s Gases Division saw a 14.1 percent increase in operating profit to EUR 1.915 bn (2012: EUR 1.679 bn). This gives an operating margin of 27.3 percent (2012: 27.4 percent).

Business trends in the individual segments in the Gases Division varied in each case, depending on prevailing economic conditions.

In the EMEA segment (Europe, Middle East, Africa), revenue rose by 2.4 percent in the first half of 2013 to EUR 3.046 bn (2012: EUR 2.974 bn). On a comparable basis, the increase in revenue was 4.4 percent. Operating profit improved by 3.8 percent to EUR 876 m (2012: EUR 844 m). The operating margin therefore rose to 28.8 percent (2012: 28.4 percent).

Business in the EMEA region was strengthened in particular as a result of the contribution made by the Continental European homecare operations acquired by Linde from Air Products in April 2012.

Business trends in the EMEA segment were adversely affected by the prevailing unfavourable economic conditions in the eurozone. Demand in the liquefied gases and cylinder gas product areas was accordingly modest. However, positive trends were to be seen in the on-site business throughout the EMEA region.

The market environment in Eastern Europe (with the exception of Russia) was characterised by a slowdown in economic activity. The economy in the Middle East on the other hand remained robust.

In the Asia/Pacific segment, revenue rose by 2.3 percent in the six months to 30 June 2013 to EUR 1.897 bn (2012: EUR 1.855 bn). On a comparable basis, the increase in revenue was 4.4 percent. In particular, growth in the first half of the year was adversely affected by the weaker economic environment in manufacturing industry as well as in the mining industry in the South Pacific region. Operating profit was up 2.7 percent to EUR 497 m (2012: EUR 484 m). This resulted in an operating margin of 26.2 percent (2012: 26.1 percent).

Within the Asia/Pacific segment, the most positive trends were to be seen in the business in the South & East Asia region, where there was double-digit growth. Linde achieved volume increases here in all product areas, especially in the on-site business. Linde also generated further revenue growth in the Greater China region, whereas the market in the South Pacific region was characterised by declining volumes.

In the Americas segment, Linde generated revenue growth in the first half of 2013 of 58.1 percent to EUR 2.137 bn (2012: EUR 1.352 bn). This significant increase was due above all to the contribution made by US homecare company Lincare. Lincare operates solely in North America and contributed revenue of EUR 792 m in the first six months of 2013 to the total revenue of the Americas segment. On a comparable basis (i.e. after adjusting for exchange rate effects, changes in the price of natural gas and the effect of the Lincare acquisition on the consolidation), the increase in revenue in the Americas segment was 2.3 percent. Operating profit rose by 54.4 percent to EUR 542 m (2012: EUR 351 m), mainly as a result of the Lincare business. The operating margin was 25.4 percent (2012: 26.0 percent).

In North America, there were positive trends in Linde’s electronic gases business and the Group also achieved growth in its on-site business. Linde was able to continue to strengthen its business in South America, generating increased revenue in Venezuela and Argentina in particular. Compared with its performance in these countries, growth in business was much more modest in Brazil.

A comparison of the various product areas in the Gases Division reveals that, as expected, the fastest rate of growth was in the Healthcare business, following the acquisitions made by the Group in the course of 2012. Here, Linde generated revenue in the first half of 2013 of EUR 1.529 bn, more than double the figure achieved in the first half of 2012 of EUR 664 m. After adjusting for exchange rate effects and the effect of the Lincare acquisition on the consolidation, revenue growth in the Healthcare product area was 7.8 percent.

In the cylinder gas product area, revenue generated in the six months to 30 June 2013 was EUR 2.053 bn. On a comparable basis, this was 0.6 percent higher than the figure for the first half of 2012 of EUR 2.040 bn. In the liquefied gases product area, Linde achieved an increase in revenue in the first half of 2013 of 1.5 percent on a comparable basis to EUR 1.659 bn (2012: EUR 1.634 bn). In the on-site business (where Linde supplies gases on site to major customers), revenue rose on a comparable basis by 5.8 percent to EUR 1.780 bn (2012: EUR 1.682 bn).



Gases Division – Outlook

Recent economic forecasts indicate that the rate of growth in the global gases market in 2013 will be similar to the rate seen in 2012. Linde remains committed to its original target in the gases business of outperforming the market and continuing to increase productivity.

In its on-site business, Linde has a healthy project pipeline, which will contribute to increases in revenue and earnings over the remaining part of the 2013 financial year. The Group expects its liquefied gases and cylinder gas product areas to perform in line with macroeconomic trends. In the Healthcare product area, Linde is expecting to achieve significant increases in revenue and earnings as a result of the acquisitions it has concluded, especially that of Lincare.

Against this background, Linde continues to expect that revenue generated by the Gases Division in the 2013 financial year will be higher than that achieved in 2012 and that operating profit will increase in the current year.



Engineering Division

In the Engineering Division, the dynamic trend in orders which characterised the first quarter of 2013 continued in the second quarter. In the period from April to June 2013, Linde was also awarded a number of major projects. As a result, there was a significant increase in order intake in the first half of 2013 to EUR 2.808 bn. This was almost twice the figure for new orders in the first half of 2012 of EUR 1.432 bn. Revenue and earnings reflected the expected progress made in individual plant construction projects. There was a slight rise in revenue in the first half of 2013 of 1.5 percent to EUR 1.248 bn (2012: EUR 1.229 bn), while operating profit for the same period was EUR 148 m (2012: EUR 151 m). The operating margin once again reached a very high level (11.9 percent in the first half of 2013, 12.3 percent in the first half of 2012).

As a result of projects won during the reporting period, Linde was able to continue to strengthen its position as a leading gases and engineering company especially in the growth markets of Russia and Asia. In a joint venture with chemical company JSC KuibyshevAzot, Linde will build and operate a large ammonia plant on the Togliatti site in Russia. Investment in this project will total around EUR 275 m. Under a long-term on-site agreement, Linde will supply gases to the petrochemical company SIBUR in Dzerzhinsk, Russia. To do so, it will build and operate two new air separation plants. Investment in this project is around EUR 70 m. Back in the first quarter of 2013, Linde was awarded a major contract by Reliance Industries Ltd. (RIL) to build six air separation plants for the production of gaseous oxygen at the Jamnagar refinery and petrochemical site in India. Under the terms of the contract, which is worth around EUR 450 m, Linde will also supply two synthesis gas purification units.

Given the very positive trend in order intake, the order backlog in the Engineering Division rose to a record high of EUR 5.189 bn at 30 June 2013 (31 December 2012: EUR 3.700 bn).



Engineering Division – Outlook

A relatively stable market environment is expected in the international large-scale plant construction business in the remaining part of 2013. The high order backlog creates a good basis for a solid business performance in the Engineering Division over the next two years. Linde continues to expect to generate the same level of revenue in its plant construction business in the 2013 financial year as in 2012 and anticipates that it will achieve an operating margin in the 2013 financial year of at least 10 percent.

Linde is well-positioned in the international market for olefin plants, natural gas plants, air separation plants and hydrogen and synthesis gas plants, and will derive lasting benefit in particular from investment in two structural growth areas: energy and the environment.

To coincide with the publication of the half-yearly financial report, a webcast for analysts will take place today at 2pm German time in English with Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to watch the webcast by following this link:

http://event.onlineseminarsolutions.com/r.htm?e=653923&s=1&k=0496A8D3BCB86CE144D1EA8CB9EE561D



About The Linde Group

The Linde Group is a world leading gases and engineering company with around 62,000 employees in more than 100 countries worldwide. In the 2012 financial year, Linde generated revenue of EUR 15.280 bn. The strategy of the Group is geared towards long-term profitable growth and focuses on the expansion of its international business with forward-looking products and services. Linde acts responsibly towards its shareholders, business partners, employees, society and the environment – in every one of its business areas, regions and locations across the globe. Linde is committed to technologies and products that unite the goals of customer value and sustainable development.

For more information, see The Linde Group online at http://www.linde.com/



N.B.: Linde has applied the new accounting standards IFRS 10 and IFRS 11 from 1 January 2013. The consolidation method applied to joint ventures has changed as a result. Some joint ventures are now fully consolidated in the Group financial statements and some are included on the basis of the share of equity held by The Linde Group. As these standards have been applied with retrospective effect from the date of acquisition or formation of the joint ventures and this has an impact on virtually all the items in the statement of financial position and the statement of profit or loss, the prior-year figures have been adjusted accordingly in the Group interim report. For more detail about the impact of the first-time adoption of IFRS 10 and IFRS 11, please see Note 1 “General accounting policies” in the Notes to the Group interim financial statements on pages 22 to 28 of the Group interim report.
1 Operating profit: EBITDA including share of profit or loss from associates and joint ventures.
2 Return on capital employed adjusted for the amortisation of fair value adjustments identified in the course of the BOC purchase price allocation.