Linde plc(US:LIN)2022-07-28 19:14Financial Data and Key Metrics Changes - Sales for Q2 2022 reached $8.5 billion, a 12% increase year-over-year and a 3% sequential increase [32] - Organic sales increased by 9% year-over-year and 4% sequentially, with gas volumes up by 2% primarily due to project startups [33] - Operating profit was $2 billion, resulting in a 23.5% margin, with operating margins expanding by 100 basis points year-over-year and 80 basis points sequentially [34][35] - EPS of $3.10 increased by 15% year-over-year, or 20% excluding foreign exchange impacts [39] Business Line Data and Key Metrics Changes - EMEA region saw volumes down 1% year-over-year but prices increased by 12% [14] - APAC segment reported a 3% increase in volumes year-over-year and a 5% sequential increase, with prices improving by 5% [18] - The Americas segment experienced organic growth of 9% year-over-year, driven by a 3% increase in volume and a 6% increase in price [22] Market Data and Key Metrics Changes - EMEA's on-site volumes remained stable, while merchant and packaged gases saw slight declines due to reduced COVID-related oxygen demand [15] - In July, China merchant volumes recovered to normal levels, indicating resilience despite previous lockdowns [20] - The U.S. packaged gas business grew by 16% year-over-year, led by sectors such as aerospace and construction [23] Company Strategy and Development Direction - The company emphasizes a resilient business model with two-thirds of its business protected through contractual fixed payments [10] - Focus on sustainability with a target to reduce absolute greenhouse gas emissions by 35% by 2035 [26] - The company is actively managing costs and pricing to maintain margins amid inflationary pressures [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges posed by high energy prices and geopolitical tensions, particularly in Europe [12][51] - The company anticipates continued growth opportunities in the Americas, particularly in electronics and hydrogen projects [24][70] - Management highlighted the importance of maintaining a strong capital allocation strategy while pursuing growth opportunities [79] Other Important Information - A $1 billion charge was recorded due to the deconsolidation of Russian subsidiaries, impacting financial reporting but not operational resilience [6][30] - The company reported a reduction of 31% in GHG emissions compared to the 2018 baseline, ahead of its 2028 target [25] Q&A Session Summary Question: Visibility on non-pass through costs and pricing - Management indicated strong visibility on managing pricing against cost inflation, with a positive spread expected to continue [49] Question: Impact of high energy prices on customer viability - Management noted that while energy prices are high, most customers are adapting and finding ways to manage costs without significant business viability issues [51] Question: Take or pay contracts and operational reliability - Management explained that a significant portion of sales in Germany is protected by contracts, minimizing exposure to operational disruptions [55] Question: Long-term investment decisions in Europe - Management observed that customers are still considering investments in Europe, albeit with a focus on understanding risks associated with energy costs [60] Question: Rightsizing measures in engineering and other segments - Management confirmed ongoing rightsizing efforts across various segments, including engineering, to remain competitive [62][64] Question: Outlook for the electronics market - Management expressed optimism about the electronics market, highlighting strong customer relationships and technology advantages [70] Question: Return on capital and project returns - Management clarified that the high return on capital is driven by the integrated business model, which supports cash generation without heavy capital investment [85]