Linde plc — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; this annual filing reports full-year results, not standalone fourth-quarter results. Filed February 28, 2024. Linde is a global industrial gases and engineering company serving diverse end markets. About 68% of sales were generated outside the United States.
Financial results and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Sales | $32.854 billion | $33.364 billion | (2%) |
| GAAP operating profit / margin | $8.024 billion / 24.4% | $5.369 billion / 16.1% | 49% increase |
| Adjusted operating profit / margin | $9.070 billion / 27.6% | $7.904 billion / 23.7% | 15% increase |
| Net income attributable to Linde | $6.199 billion | $4.147 billion | 49% increase |
| Diluted EPS | $12.59 | $8.23 | 53% increase |
| Adjusted diluted EPS | $14.20 | $12.29 | 16% increase |
| Cash from operating activities | $9.305 billion | $8.864 billion | +$441 million |
Adjusted figures are non-GAAP measures; they exclude specified items, including Linde AG purchase-accounting impacts and other charges. Cost of sales fell 10% to $17.492 billion, while SG&A rose 6% to $3.295 billion. Reported depreciation and amortization decreased 9% to $3.816 billion, largely reflecting lower merger-related amortization.
Capital expenditures were $3.787 billion, up from $3.173 billion. Cash dividends were $2.482 billion, and net purchases of ordinary shares were $3.925 billion. Cash and equivalents ended the year at $4.664 billion, down $772 million. Total debt was $19.373 billion and net debt was $14.709 billion, up from $12.478 billion a year earlier. Linde reported a 2.6% global effective borrowing rate and had $6.5 billion of undrawn revolving credit facilities; no amounts were drawn at year-end. Long-term debt ratings were A (S&P) and A2 (Moody’s).
Business and changes versus 2022
- Pricing across geographic segments contributed 6% to sales; cost pass-through reduced reported sales by 3%, with minimal operating-profit effect. Volumes reduced sales by 1%, and currency translation and net divestitures reduced sales by 1% each. Engineering activity reduced sales by 2%.
- Americas sales rose 3% to $14.304 billion and segment operating profit rose 14% to $4.244 billion. EMEA sales increased 1% to $8.542 billion and segment profit rose 23% to $2.486 billion. APAC sales increased 1% to $6.559 billion and segment profit rose 8% to $1.806 billion.
- Engineering sales fell 22% to $2.160 billion, primarily due to project timing; segment operating profit declined 12% to $491 million. Sales from Russia-related sanctioned projects were approximately $238 million in 2023 versus $894 million in 2022.
- Reported operating profit growth partly reflected the $1.029 billion of 2022 charges, principally Russia-related deconsolidation and impairment charges, versus $40 million of charges in 2023. In 2023, higher pricing and productivity gains supported adjusted profit growth and offset cost inflation and lower volumes.
- Linde completed its acquisition of nexAir in January 2023 for $866 million; the acquired business contributed $408 million of 2023 sales. The 2022 GIST divestiture reduced 2023 sales comparisons. Diluted shares outstanding declined 2% year over year.
Outlook, risks and unusual items
The supplied filing text gives no numerical 2024 earnings or sales guidance. It says Linde provides quarterly updates and guidance through earnings releases and investor calls. Management cites long-term contracts, pricing mechanisms and productivity as business supports, and identifies growth opportunities in clean hydrogen, decarbonization, healthcare, electronics and other end markets.
- Russia-related contingency: Linde recorded a $1.1 billion contingent liability at December 31, 2023 related to advance payments on terminated Russian engineering projects. A Russian court ruled for RusChemAlliance in February 2024; Linde said it planned to appeal. The company said it did not expect an earnings impact from that decision given the recorded liability, but litigation and enforcement remain unresolved.
- Other exposures: Risks include economic cyclicality, energy and raw-material costs and availability, foreign exchange, interest rates, regulation and taxes, operational incidents, cybersecurity, pension assumptions, litigation, and execution of engineering projects. A 100-basis-point rate increase was estimated to raise after-tax earnings and cash-flow exposure on floating-rate debt by about $50 million.
- Asset concentration and estimates: Goodwill was $26.751 billion and other indefinite-lived intangible assets were $1.745 billion. The 2023 impairment assessment found no impairment; adverse changes in outlook could still lead to charges. Engineering contract revenue relies on estimated costs to completion, identified by the auditor as a critical audit matter.
- Other legal matters: Brazilian state VAT claims were estimated at approximately $115 million; Linde recorded no liability, citing management judgment and outside counsel. The filing says aggregate litigation losses are not expected to materially affect financial position or liquidity, though outcomes could significantly affect results in a period.
- Environmental protection costs were not significant in 2023, and management expects similar annual spending absent major regulatory changes. The company also notes uncertainty from climate rules, energy costs and physical climate risks.
PricewaterhouseCoopers issued unqualified opinions on the financial statements and internal control over financial reporting; management and the auditor concluded controls were effective at year-end.
Investor facts to verify
- Whether pricing, productivity and contract pass-through continue to offset inflation, weaker volumes and currency effects, and how segment trends develop.
- Engineering project timing, cost-to-completion estimates, remaining Russian project balances and the status and potential outcomes of the RusChemAlliance dispute and appeal.
- Debt maturities, refinancing costs, net-debt movement and actual use of the revolving facilities; the company issued additional euro-denominated notes in February 2024.
- Capital spending, the approximately $4.9 billion large-project construction backlog, and the returns and integration progress from the nexAir acquisition.
- Assumptions supporting the substantial goodwill and intangible-asset balances, along with pension funding and tax contingencies.