Linde plc — Q1 2024 Form 10-Q
Reporting period: Quarter ended March 31, 2024. Amounts are in U.S. dollars; financial statement amounts are in millions unless stated otherwise. Comparisons are with Q1 2023 unless noted.
Business context and results
Linde supplies industrial gases and related engineering services globally. Sales were $8.10 billion, down 1%. Lower volumes reduced sales by 1% and lower energy cost pass-through by 2%; higher price attainment added 2%. Currency translation was flat.
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Sales | $8,100 | $8,193 | (1)% |
| Operating profit, GAAP | $2,095 | $1,933 | 8% |
| Operating margin, GAAP | 25.9% | 23.6% | +2.3 pts |
| Net income attributable to Linde | $1,627 | $1,516 | 7% |
| Diluted EPS, GAAP | $3.35 | $3.06 | 9% |
| Adjusted operating profit | $2,341 | $2,206 | 6% |
| Adjusted operating margin | 28.9% | 26.9% | +2.0 pts |
| Adjusted diluted EPS | $3.75 | $3.42 | 10% |
Adjusted measures are non-GAAP and exclude specified items, principally Linde AG purchase-accounting impacts; adjusted EPS also excludes other charges. Management attributed profit growth to pricing and productivity, which more than offset inflation and lower volumes. GAAP operating profit also benefited from the absence of $18 million of prior-year other charges and $58 million of net other income, including $43 million of insurance recoveries.
Segments and material changes
- Americas: Sales $3.56 billion, approximately flat; operating profit $1.09 billion, up 6%.
- EMEA: Sales $2.09 billion, down 4%, including a 5% reduction from cost pass-through; operating profit $687 million, up 13%.
- APAC: Sales $1.59 billion, approximately flat; operating profit $447 million, up 6%. Sales benefited from 3% volume growth but were reduced 4% by currency translation.
- Engineering: Sales $539 million, approximately flat; operating profit $100 million, down 33%, reflecting a prior-year benefit from higher-margin lawful wind-down of Russia projects subject to sanctions.
Cost of sales fell 5% to $4.22 billion and declined to 52.0% of sales from 54.1%. SG&A rose 5% to $860 million and increased to 10.6% of sales from 10.0%. Interest expense rose 76% to $65 million, primarily due to higher debt interest rates. Diluted weighted-average shares declined 2%, contributing to EPS growth. Other comprehensive loss was $738 million, primarily from $744 million of foreign-currency translation adjustments.
Cash flow, debt and liquidity
- Operating cash flow was $1.95 billion, up 2%; working capital and other cash requirements were a $553 million use.
- Capital expenditures were $1.05 billion, up $219 million year over year, mainly for new plants and production equipment. Investing cash outflow was $1.04 billion; there were no acquisitions in the quarter.
- Cash dividends were $669 million and net ordinary-share purchases were $1.03 billion. Cash increased $184 million to $4.85 billion.
- Total debt was $20.32 billion, versus $19.37 billion at year-end 2023; net debt was $15.47 billion, versus $14.71 billion. Short-term debt was $4.05 billion and long-term debt was $15.23 billion.
- Linde issued euro-denominated notes in February 2024 and repaid €550 million of notes that matured. It had no borrowings under its $5.0 billion and $1.5 billion revolving credit facilities, which management described as undrawn and without financial covenants.
Management stated it believes cash, operating flexibility and available funding are sufficient for business needs and that it does not anticipate limitations on capital-market access.
Outlook, risks and contingencies
The 10-Q gives no specific earnings or EPS guidance; it directs investors to quarterly earnings releases and investor calls for guidance and updates. Management cited pricing, productivity, inflation, volumes, energy costs and currency movements as relevant performance drivers. The filing identifies risks including economic and geopolitical developments, tariffs, foreign exchange and interest rates, energy and raw-material costs, regulation, litigation, cybersecurity and project execution. The company reported no material change in its previously disclosed annual-report risk factors.
- Russia proceedings: A Russian court ruled for RusChemAlliance on the GPP claim; Linde appealed. Related injunctions affecting Russian assets remained in place despite favorable Hong Kong court orders. Linde recorded a $1.2 billion contingent liability in other long-term liabilities; management said it did not expect a material earnings impact from the decision given that recorded liability and the immaterial remaining investment value in deconsolidated Russian subsidiaries. Timing and outcome remain uncertain.
- Brazil tax matters: Estimated exposure for certain state VAT claims was approximately $115 million, with no liability recorded based on management’s judgment and external counsel. Other Brazilian tax disputes remain unresolved.
- German appraisal proceedings: Former Linde AG shareholders appealed a court decision rejecting their claims for higher merger consideration; no reserve was established.
- Management cautioned that litigation losses could exceed accrued liabilities and could significantly affect results in an individual period, although it did not expect aggregate losses from ordinary-course matters to materially affect consolidated financial position or liquidity.
Estimated 2024 pension contributions are $30–$40 million; $11 million had been contributed by March 31. The large-project sale-of-gas backlog under construction was approximately $4.9 billion. Remaining performance obligations were estimated at approximately $48 billion, with about half of minimum-purchase revenue expected over the next five years; actual amounts may vary.
Important facts for investors to verify
- Reconcile GAAP results with adjusted results, particularly the recurring $246 million quarterly purchase-accounting adjustment and the effect of insurance recoveries on reported profit.
- Track debt growth, refinancing costs, maturities and cash deployment, including substantial share repurchases and capital spending.
- Monitor volume trends and pricing versus inflation and cost pass-through, especially across EMEA and Engineering.
- Follow developments in the Russian claims and Brazilian tax disputes, including whether recorded or unrecorded exposures change.
- Review subsequent earnings releases for formal guidance; this filing itself provides no numerical earnings outlook.