Once again during the reporting period there was a positive trend in cash flow from operating activities. In the first nine months of 2016, it increased by 4.7 percent to EUR 2.503 bn (2015: EUR 2.390 bn). The change in working capital was EUR 8 m as a result of the higher figure for advance payments received from plant construction customers (2015: EUR –185 m). In addition, income taxes paid fell as a result of tax repayments by EUR 43 m to EUR 327 m (2015: EUR 370 m).
Linde spent a total of EUR 1.270 bn during the reporting period on investments in tangible assets, intangible assets and financial assets, which was below the figure for the first nine months of 2015 of EUR 1.356 bn. Payments made for investments in consolidated companies rose to EUR 190 m (2015: EUR 109 m), most of which related to the acquisition of US company American HomePatient, Inc. The net cash outflow from investing activities during the reporting period was EUR 1.217 bn, which was EUR 182 m lower than the net cash outflow from investing activities in the prior-year period of EUR 1.399 bn. At 30 September 2016, free cash flow was EUR 1.286 bn (2015: EUR 991 m).
Within cash flow from financing activities, the amount by which loan proceeds exceeded loan redemptions remained virtually unchanged at EUR 12 m (2015: EUR 11 m). The net cash outflow from financing activities in the first nine months of 2016 was EUR 1.004 bn (2015: EUR 941 m).
Total assets fell by EUR 840 m, from EUR 35.347 bn at 31 December 2015 to EUR 34.507 bn at 30 September 2016. Almost all the balance sheet items felt the impact of adverse exchange rate effects.
At 30 September 2016, goodwill stood at EUR 11.333 bn, which was EUR 271 m below the figure at 31 December 2015 of EUR 11.604 bn. The decrease in goodwill was mainly due to two opposing factors. Adverse exchange rate effects of EUR 358 m reduced the goodwill figure, while additions as a result of acquisitions of EUR 121 m led to an increase in the goodwill figure.
Other intangible assets, comprising customer relationships, brand names and sundry intangible assets, decreased by EUR 280 m, from EUR 2.760 bn at 31 December 2015 to EUR 2.480 bn at 30 September 2016. Negative exchange rate effects of EUR 126 m and amortisation of EUR 218 m were set against additions of EUR 78 m.
Tangible assets are stated at a carrying amount of EUR 12.340 bn at 30 September 2016 (31 December 2015: EUR 12.782 bn). The decrease of EUR 442 m was partly due to adverse exchange rate effects of EUR 274 m. Depreciation was EUR 1.176 bn, whereas acquisitions and investments resulted in an increase in tangible assets of EUR 1.144 bn.
Group equity at 30 September 2016 was EUR 14.236 bn (31 December 2015: EUR 15.449 bn). The profit for the period increased equity by EUR 1.034 bn. Factors with a negative impact on equity were adverse exchange rate effects of EUR 964 m and the effects of the remeasurement of pension plans of EUR 775 m. The payment of the dividend for 2015 to Linde AG shareholders of EUR 640 m also reduced equity. The equity ratio at 30 September 2016 was 41.3 percent (31 December 2015: 43.7 percent).
Provisions for pensions and similar obligations rose by EUR 965 m to EUR 2.033 bn at 30 September 2016 (31 December 2015: EUR 1.068 bn). This increase was mainly due to the change in actuarial assumptions. Asset cover for the defined benefit obligation of The Linde Group is 75.2 percent (31 December 2015: 86.4 percent). The reduction in the asset cover is mainly due to the increase in the pension obligation. This is primarily the result of the decrease in discount rates.
Net financial debt comprises gross financial debt less short-term securities and cash and cash equivalents. At 30 September 2016, net financial debt was EUR 7.169 bn (31 December 2015: EUR 7.645 bn). The decrease of EUR 476 m was due to a variety of effects in different directions. Net financial debt increased as a result of the dividend payment of EUR 640 m to Linde AG shareholders, while on the other hand the good figure for cash flow from operating activities and exchange rate effects and valuation effects reduced the figure for net financial debt.
Gross financial debt fell during the reporting period by EUR 203 m to EUR 9.280 bn (31 December 2015: EUR 9.483 bn). In the third quarter, two hybrid bonds were repaid: a EUR 700 m bond and a GBP 250 m bond. Both bonds were redeemed at 100 percent of their nominal value. Linde exercised its right to repay the bonds at the earliest opportunity on 14 July 2016 which is ten years after they were originally issued. At 30 September 2016, current financial debt was EUR 2.630 bn (31 December 2015: EUR 1.023 bn). The increase in the figure is mainly due to the reclassification of other bonds due for repayment within the next twelve months. Non-current financial debt fell as a result by EUR 1.810 bn to EUR 6.650 bn (31 December 2015: EUR 8.460 bn).
Available liquidity for Linde comprises short-term securities of EUR 430 m, cash and cash equivalents of EUR 1.681 bn and its EUR 2.5 bn syndicated credit facility less current financial debt. The liquidity available to Linde at 30 September 2016 was therefore EUR 1.981 bn (31 December 2015: EUR 3.315 bn).
The dynamic indebtedness factor (net financial debt to operating profit for the last twelve months) was 1.8 at 30 September 2016, slightly below the figure of 1.9 at 31 December 2015. The Group’s gearing (the ratio of net debt to equity) changed in the first nine months of 2016 to 50.4 percent (31 December 2015: 49.5 percent).
Since 1999, the creditworthiness of The Linde Group has been rated by the leading international rating agencies Moody’s and Standard & Poor’s (S & P). Both rating agencies confirmed their long-term ratings for Linde during the reporting period. S & P rates the creditworthiness of The Linde Group at A+, Moody’s at A2, both with a stable outlook.
In August 2016, the European rating agency Scope published its first rating for The Linde Group, A+ (long-term) with a stable outlook. Its short-term rating of the creditworthiness of The Linde Group was S-1+, the highest category in Scope’s rating methodology.