core sector communique

January to March 2012: Linde continues to achieve profitable growth

·         Group revenue up 5.4 percent to EUR 3.505 bn

·         Group operating profit¹ increases by 6.2 percent to EUR 808 m

·         Group operating margin rises to 23.1 percent (2011: 22.9 percent)

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

• 2012: Increase in revenue and operating profit expected
• 2014: Targets for operating profit¹ of at least EUR 4 bn and ROCE² of at least 14 percent

Munich, 4 May 2012 – The technology company The Linde Group continued to see profitable growth in the first quarter of 2012, with increases in Group revenue and Group operating profit. "We have made a good start to the new financial year and are confident of meeting our targets," said Professor Dr Wolfgang Reitzle, Chief Executive Officer of Linde AG. "Even if global economic trends are not as dynamic in 2012 as in 2011, we continue to assume that we will achieve increases in Group revenue and Group operating profit when compared with the prior year."

Linde believes that it is also on track for the coming years. "We stand for continuity and reliability and are pleased to confirm our medium-term targets," declared CEO Reitzle. "In the 2014 financial year, we will be aiming to generate Group operating profit of at least EUR 4 bn and ROCE (return on capital employed) of at least 14 percent."

In the first quarter of 2012, Group revenue rose by 5.4 percent to EUR 3.505 bn, compared with EUR 3.325 bn for the first three months of 2011. After adjusting for exchange rate effects, the increase in revenue was 3.1 percent. Linde increased Group operating profit by 6.2 percent to EUR 808 m (2011: EUR 761 m), partly as a result of the rigorous implementation of its HPO (High Performance Organisation) programme, a holistic concept for sustainable process optimisation and productivity gains. The Group operating margin rose by 20 basis points as a result, to 23.1 percent (2011: 22.9 percent).

Profit for the period increased slightly in the first quarter of 2012, by 1.7 percent to EUR 308 m (2011: EUR 303 m). It should be noted here that positive one-off items contributed to the high figure for the first quarter of 2011. Profit attributable to Linde AG shareholders was EUR 287 m (2011: EUR 284 m). This gives earnings per share of EUR 1.68 (2011: EUR 1.67). On an adjusted basis, i.e. after adjusting for the effects of the purchase price allocation from the BOC acquisition, earnings per share stood at EUR 1.89 (2011: EUR 1.88).

Gases Division

The slight increase in economic output in the first quarter of 2012 compared with the first quarter of 2011 also fuelled demand for gases worldwide. Linde was able to benefit from this positive trend in all product areas. The Group has a global footprint and a strong market position especially in the emerging economies.

Revenue in the Gases Division in the first three months of 2012 grew 7.3 percent to EUR 2.855 bn, compared with a figure of EUR 2.662 bn for the prior-year period. On a comparable basis, i.e. after adjusting for exchange rate effects and changes in the price of natural gas, the increase in revenue was 4.1 percent. Linde’s Gases Division achieved a 7.8 percent increase in operating profit to EUR 784 m (2011: EUR 727 m). One of the factors which had a positive impact on this upward trend was the continuing implementation of Linde’s HPO measures. The operating margin rose to 27.5 percent, exceeding the high figure achieved in the first three months of 2011 of 27.3 percent.

Business trends in the individual segments in the Gases Division make it clear that the pace of economic recovery still varies from region to region. In the first three months of 2012, the highest growth rates were once again to be seen in the emerging economies. Robust trends were also visible in North America, whereas the increase in demand in Western Europe was relatively modest.

In the EMEA segment (Europe, Middle East, Africa), Linde achieved revenue growth of 3.7 percent in the first quarter of 2012 to EUR 1.445 bn (2011: EUR 1.393 bn). On a comparable basis, the growth in revenue was 3.3 percent. Operating profit increased by 4.8 percent to EUR 414 m (2011: EUR 395 m). This resulted in an operating margin of 28.7 percent (2011: 28.4 percent). Here too, the continuous implementation of the various productivity improvement and process standardisation initiatives under the HPO programme contributed to the positive trend.

In Saudi Arabia, the Group entered into a major contract during the reporting period with Sadara Petrochemical Company (Sadara) for the supply of gases on site. Linde will invest USD 380 m to provide Sadara with long-term supplies of carbon monoxide, hydrogen and ammonia on the Jubail site, at one of the largest chemical complexes in the world (see also the information given about the Engineering Division below).

In the Asia/Pacific segment, Linde achieved revenue growth of 14.3 percent in the first three months of 2012 to EUR 808 m (2011: EUR 707 m). On a comparable basis, the increase in revenue was 4.8 percent. Growth in the first quarter was adversely impacted by stagnating demand in the market for electronic gases. Revenue trends during the reporting period were also affected by plant stoppages in South and East Asia.

Operating profit was up 11.2 percent to EUR 218 m (2011: EUR 196 m). This resulted in an operating margin of 27.0 percent (2011: 27.7 percent). When comparing the operating margin for the first three months of 2012 with that for the first three months of 2011, factors to be taken into account are the pass-through of increases in the price of natural gas and the up-front investment required to grow the business and employ new staff in the rapidly expanding Asian market, especially in China. To sustain high levels of profitability, Linde is also continuing with the rigorous implementation of its HPO concept in the Asia/Pacific segment.

In the Americas segment, Linde achieved revenue growth of 7.8 percent in the first three months of 2012 to EUR 625 m (2011: EUR 580 m). On a comparable basis, the increase in revenue was 5.9 percent. Linde was able to increase operating profit in this region at a faster rate than revenue, by 11.8 percent to EUR 152 m (2011: EUR 136 m). Factors contributing to the rise in earnings were higher capacity utilisation of plants and the progress made by Linde in the implementation of HPO. At 24.3 percent, the operating margin significantly exceeded the figure for the first three months of 2011 of 23.4 percent by 90 basis points.

All the product areas contributed to the positive trends overall in the Gases Division. Linde achieved its highest rate of growth in the liquefied gases business. Revenue in this product area rose on a comparable basis by 6.4 percent to EUR 811 m at 31 March 2012 (2011: EUR 762 m). The Group also achieved increases in revenue in its cylinder gas business and on-site business (where Linde supplies gases on site to major customers). In the cylinder gas product area, revenue rose to EUR 1.022 bn, 3.0 percent higher on a comparable basis than the figure for the first quarter of 2011 of EUR 992 m. The on-site business also achieved revenue growth of 3.0 percent on a comparable basis, with revenue rising to EUR 712 m (2011: EUR 691 m). The Healthcare product area, which supplies medical gases and provides related maintenance and advisory services, continued to give a robust performance, with revenue increasing by 4.0 percent on a comparable basis to EUR 310 m (2011: EUR 298 m).

Gases Division – Outlook

Linde remains committed to its original target for the gases business of growing at a faster pace than the market and continuing to increase productivity. In the on-site business, Linde has a healthy project pipeline, which will continue to make a substantial contribution to revenue and earnings trends for the rest of the 2012 financial year and especially in subsequent years. The Group expects its liquefied gases and cylinder gas business to perform in line with macroeconomic trends. In the Healthcare product area, Linde is anticipating continuing steady growth. Additional momentum will be generated here by the acquisition of Air Products’ Continental European homecare business.

Against this background, Linde continues to expect that revenue generated by the Gases Division in the 2012 financial year will exceed revenue generated in 2011 and that operating profit will improve.

Engineering Division

In the first quarter of 2012, the Engineering Division achieved a 1.7 percent increase in revenue to EUR 601 m (2011: EUR 591 m). The successful execution of a number of individual projects meant that Linde was able to increase operating profit at a faster rate than revenue, by 17.7 percent to EUR 73 m (2011: EUR 62 m). The operating margin rose to 12.1 percent (2011: 10.5 percent), again significantly exceeding the medium-term target of 8 percent.

Order intake was EUR 759 m in the quarter ended 31 March 2012, 70.9 percent above the figure for the first quarter of 2011 of EUR 444 m. The main reason for this increase was a major contract in Saudi Arabia acquired by Linde’s Engineering Division in the first quarter from the Group’s Gases Division. The USD 380 m order is for the turnkey construction of a HyCO plant plus an ammonia plant with a large storage tank. Linde will use the new plants to provide long-term supplies of industrial gases to Sadara Petrochemical Company (Sadara) in Jubail.

Order intake was characterised not only by this substantial project, but also, as in previous quarters, by a number of small and medium-sized new orders. Given the positive trend in orders, the order backlog in the Engineering Division grew in the course of the first quarter of 2012. At 31 March 2012, it had risen to EUR 3.695 bn (31 December 2011: EUR 3.600 bn).

Engineering Division – Outlook

The high order backlog creates a good basis for a solid business performance in the Engineering Division over the next two years. Linde expects to generate the same level of revenue in its plant construction business in the 2012 financial year as in 2011. Linde is still anticipating that it will achieve an operating margin in the current financial year 2012 of at least 10 percent. In the medium term, the target for the operating margin remains at 8 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 two structural growth areas: energy and the environment.

To coincide with the publication of the quarterly financial statements, a teleconference for analysts will take place today at 8am German time (due to the Annual General Meeting commencing at 10am) in English with Georg Denoke, CFO of Linde AG. Journalists will have the opportunity to listen to the conference live by dialling +49.69.589.99-0509. Please tell the operator your name and the name of your company.

The Linde Group is a world-leading gases and engineering company with around 50,500 employees in more than 100 countries worldwide. In the 2011 financial year, it generated revenue of EUR 13.787 bn. The strategy of The Linde 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. The Group is committed to technologies and products that unite the goals of customer value and sustainable development.