Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Linde PLC (LIN, Financial) achieved record highs in EPS, ROC, and operating margin despite challenging economic conditions.
- North America, particularly the US, showed positive growth and resilience, contributing significantly to global sales.
- Linde's project backlog reached $10 billion, including the largest sale of gas project in company history with Dow Chemical.
- The company is actively pursuing growth in consumer-related end markets, such as food and beverage and healthcare, which showed stability.
- Linde's disciplined investment approach and robust stock repurchases continue to support shareholder value.
Negative Points
- Economic weakness is anticipated to continue, prompting Linde to implement targeted cost reductions affecting 2% of its workforce.
- Industrial-related end markets have declined 1% to 2% sequentially, with significant pressure in EMEA and parts of APAC, especially China.
- Geopolitical tensions and economic uncertainty have suppressed large ticket purchases in industrial markets like steel and chemicals.
- The electronics market recovery is progressing slower than expected, impacting sequential growth.
- Linde's guidance assumes an economic contraction in the fourth quarter, reflecting a cautious outlook on the global economy.
Q & A Highlights
Q: Can you speak to where in your business, either regionally or end market, you are seeing the most macro pressures today?
A: Sanjiv Lamba, CEO, noted that the European market, particularly EMEA, is under pressure, as reflected in volume developments. China also shows industrial weakness despite initial optimism around stimulus. North America, especially the US, remains resilient, with India and Mexico benefiting from near-shoring strategies.
Q: Are you seeing more activity or interest in decaptivation in India due to economic weakness?
A: Sanjiv Lamba, CEO, explained that the recent decaptivation in India was driven by the customer's desire for Linde to integrate assets into its network. Globally, Linde assesses 8 to 10 decaptivation opportunities annually, pursuing those that enhance network density and value.
Q: Can you discuss the restructuring in the healthcare business and its growth outlook?
A: Sanjiv Lamba, CEO, stated that the pruning of the healthcare portfolio, particularly in the US home care segment, is largely complete. The healthcare business is expected to grow at a low to mid-single-digit rate going forward.
Q: Does the economic contraction in Q4 reflect seasonal slowdowns or extended shutdowns?
A: Matthew White, CFO, clarified that the contraction is sequential and not seasonal. Extended outages could indicate weakness, as customers may not have sufficient order intake. The guidance assumes a cautious view of the macro environment.
Q: Can you comment on the $8 billion to $10 billion investment target and hydrogen project developments?
A: Sanjiv Lamba, CEO, expressed confidence in reaching the investment target, with significant projects like Dow's Path2Zero in the backlog. He noted a reality check in the hydrogen sector, with substantive projects like blue hydrogen remaining viable due to mature technology and competitive costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
