Gases Division

Linde’s revenue in the Gases Division in the first three months of 2016 was EUR 3.621 bn, a decrease of 1.4 percent when compared with the figure for the prior-year period of EUR 3.672 bn. After adjusting for exchange rate effects, revenue in the Gases Division increased by 1.8 percent. On a comparable basis (after also adjusting for changes in the price of natural gas), the growth in revenue was 2.9 percent. The contribution to revenue made by American HomePatient had a significant impact here, offsetting the negative effects of the price reductions in the Healthcare sector in North America.

Operating profit was EUR 1.006 bn, similar to the operating profit achieved in the first quarter of 2015 of EUR 1.008 bn. After adjusting for exchange rate effects, operating profit increased by 2.4 percent. The operating margin in the first quarter of 2016 rose to 27.8 percent (2015: 27.5 percent) due partly to lower prices for natural gas.

EMEA (Europe, Middle East, Africa)

In EMEA, Linde’s largest sales market, the Group generated revenue of EUR 1.410 bn in the first three months of 2016, which was 4.2 percent below the figure achieved in the first three months of 2015 of EUR 1.472 bn. On a comparable basis, revenue fell by 0.2 percent. Operating profit was EUR 430 m, a decrease of 2.5 percent when compared with the figure for the first quarter of 2015 of EUR 441 m. The operating margin rose to 30.5 percent (2015: 30.0 percent).

Different business trends were to be seen in the product areas of the various sub-regions of the EMEA segment. The on-site business, where Linde supplies gases on site to major customers, was affected in particular by the insolvency of a customer in the UK in the fourth quarter of 2015 which has already been disclosed. In the Middle East & Eastern Europe and in Northern Europe, the Group was able to achieve revenue growth in this product area. Against the prevailing backdrop of modest economic growth in the eurozone, revenue in the liquefied gases business was down on the prior-year period. The cylinder gas product area saw relatively stable trends.

During the reporting period, Linde brought on stream two air separation plants in Russia. The plants provide its customer SIBUR under a long-term gas supply agreement with up to 28,000 normal cubic metres of oxygen per hour at its Dzerzhinsk site. Total investment in the project was around EUR 70 m. SIBUR is the largest petrochemical group in Russia and Eastern Europe.

In the first quarter of 2016, Linde also agreed a Letter of Intent (LoI) with Turkish steel-producer Erdemir Group for the formation of a joint venture company to build an air separation plant in Iskenderun in southern Turkey. From 2017, the new plant (which will be the biggest air separation plant operated by a gas-producer in Turkey) will supply steelworks run by Erdemir’s subsidiary Isdemir with up to 1,700 tonnes of oxygen and nitrogen per day.

Asia/Pacific

Linde generated revenue in the Asia/Pacific segment in the three months to 31 March 2016 of EUR 969 m, which was 2.5 percent below the figure for the first three months of 2015 of EUR 994 m. On a comparable basis, revenue increased by 3.5 percent. Operating profit was EUR 254 m, similar to the figure for the prior-year period of EUR 252 m, while the operating margin rose to 26.2 percent (2015: 25.4 percent).

There were positive trends in virtually all the product areas of the Asia/Pacific segment. Volume increases were achieved in particular in the on-site business and in the liquefied gases business. In addition, revenue growth was to be seen in China in the cylinder gas business.

In the South Pacific, the prevailing weak economic environment in manufacturing industry and declining investment in the mining industry had an adverse impact on growth. Appropriate structural and organisational countermeasures have already been implemented as part of the Customer Focus Initiative. These should lead to cost savings and a higher rate of profitability in the region. The expiry of an on-site contract in the second quarter of 2015 also reduced revenue here.

Two large air separation plants built by Linde for Tata Steel Limited, one of the world’s biggest steel companies, at its site in the Kalinganagar industrial complex in Odisha, India, were successfully brought on stream during the first quarter of 2016. The plants were built by Linde’s Engineering Division and involved investment of around EUR 80 m. Linde’s Gases Division is now operating the plants under a long-term on-site gas supply contract. Each of the two new air separation plants has a production capacity of 1,200 tonnes of air gases per day and supplies gaseous oxygen, nitrogen and argon to Tata Steel’s steelworks. Liquefied gases are also produced for the regional market.

Americas

In the Americas segment, revenue increased in the first quarter of 2016 by 2.6 percent to EUR 1.284 bn (2015: EUR 1.252 bn). On a comparable basis, revenue rose by 5.6 percent. When compared with the prior-year period, operating profit increased by 2.2 percent to EUR 322 m (2015: EUR 315 m). The operating margin was 25.1 percent (2015: 25.2 percent).

In the Healthcare business in North America, the effects of the price reductions as a result of government tenders are now starting to be felt. Significant further price cuts are expected to take effect from 1 July 2016.

The acquisition of the company American HomePatient, Inc., which specialises in respiratory therapies, should contribute towards countering the negative impact of the price reductions by increasing the number of patients cared for by Linde. The contribution to revenue made by American HomePatient in the first quarter of 2016 was EUR 47 m. Linde also continually adapts its cost structures in this area and pursues a policy of organic growth.

Positive trends were again to be seen in the liquefied gases and cylinder gas business in North America, mainly as a result of the market for electronic and specialty gases.

The conditions in the individual countries in South America, especially in Brazil and Venezuela, continued to worsen in the first quarter of 2016. The economic situation in the region is characterised by high inflation and low growth rates. Although the trends in the product areas in South America were positive, the growth achieved is from a relatively low base in the prior-year period. However, solid trends were to be seen in the Healthcare business.

Product areas

Boosted by the acquisition of American HomePatient, Linde increased revenue in its Healthcare business in the first quarter of 2016 on a comparable basis by 8.9 percent to EUR 953 m (2015: EUR 875 m). After adjusting in addition for the contribution to revenue made by American HomePatient, revenue growth in this business was 3.3 percent.

In the on-site product area, revenue fell on a comparable basis by 0.3 percent to EUR 904 m (2015: EUR 907 m). After adjusting for the effects of the expiry of contracts, revenue in this product area was higher than in the first quarter of 2015.

Trends in the liquefied gases business were relatively steady. Revenue here increased slightly by 1.1 percent to EUR 831 m (2015: EUR 822 m). In the cylinder gas business, revenue on a comparable basis was EUR 933 m, which was 2.1 percent above the figure for the first three months of 2015 of EUR 914 m.

  (XLS:) Download

Gases Division: Revenue and operating profit by segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January to March 2016

 

January to March 2015

in € million

 

Revenue

 

Operating profit

 

Operating margin
in percent

 

Revenue

 

Operating profit

 

Operating margin in percent

EMEA

 

1,410

 

430

 

30.5

 

1,472

 

441

 

30.0

Asia/Pacific

 

969

 

254

 

26.2

 

994

 

252

 

25.4

Americas

 

1,284

 

322

 

25.1

 

1,252

 

315

 

25.2

Consolidation

 

–42

 

 

 

 

 

–46

 

 

 

 

Gases Division

 

3,621

 

1,006

 

27.8

 

3,672

 

1,008

 

27.5