Praxair, Inc. has reported its first quarter net income and diluted earnings per share of US$356 million and US$1.24, respectively. These results include the impact of a US$16 million charge to interest expense (US$10 million after tax) or US$0.04 of diluted earnings per share, related to a bond redemption prior to maturity. Excluding this charge, adjusted net income and diluted earnings per share were US$366 million and US$1.28, respectively.
Praxair’s sales in the first quarter were US$2509 million, 9% below the prior year quarter, primarily due to the impacts of negative currency translation and lower cost pass through, which reduced sales by 7% and 1%, respectively. Organic sales were 1% below the prior year quarter. Growth from higher pricing, new project startups, and healthcare and food and beverage end markets, was more than offset by lower volumes to energy, metals and manufacturing end markets, primarily in North America.
Operating profit in the first quarter was US$554 million, 11% below the prior year quarter. Excluding currency effects, operating profit was 4% below the prior year period. The operating profit margin was 22.1% and the EBITDA margin grew to 33.3%.
First quarter cash flow from operations was US$547 million, 8% above the prior year quarter. Capital expenditures were US$323 million and the company invested US$63 million in acquisitions for several packaged gas businesses, primarily in North America. The company paid US$214 million of dividends. During the quarter, the company issued €550 million of 1.20% Euro denominated notes due 2024 and US$275 million of 3.2% notes due 2026. In addition, the company repaid US$400 million of 0.75% notes that became due and redeemed US$325 million of 5.2% notes due in 2017. After tax return on capital and return on equity for the quarter were 12.4% and 34.6%, respectively.
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair’s strategy of optimising the base business, growing resilient end markets, executing the project backlog and capitalising on acquisition and project opportunities reflected positively in our first quarter results and continues to drive long term value creation. Praxair employees again delivered high quality results with an operating margin of 22% and growth in operating cash flow of 8%, against a difficult macro-economic environment. Consistent high quality results and strong cash flow affords us the long term ability to invest in high quality projects and acquisitions that align with our strategic objectives and meet our investment criteria as well as return value to our shareholders in the form of higher dividends and share repurchases.”
For the 2Q16, Praxair expects diluted earnings per share in the range of US$1.32 - 1.39.For full year 2016, Praxair expects adjusted diluted earnings per share to be in the range of US$5.35 - 5.70, -2% to +4% ex-currency from 2015. Full year capital expenditures are expected to be approximately US$1.5 billion and the effective tax rate is forecasted to remain at approximately 28%.
1Q16 results by segment
In North America, first quarter sales were US$1.353 billion, down 4% from the prior year quarter excluding lower cost pass through, negative currency translation and net divestitures. Organic sales growth from higher pricing and food and beverage end markets was more than offset by weaker volumes in energy, metals and manufacturing end markets. Operating profit of US$349 million was down 4% versus the prior year quarter, excluding currency translation and net divestitures, due primarily to lower volumes partially offset by price and productivity.In Europe, first quarter sales were US$320 million, 2% below the prior year quarter. Excluding currency, organic sales grew 2% from the prior year due to higher volumes, including new project startups. Operating profit of US$62 million grew 3% from the prior year, excluding currency translation, from operating leverage on volume growth.
In South America, first quarter sales were US$311 million, 22% below the prior year quarter. Excluding negative currency translation and cost pass through, sales grew 2% from acquisitions, higher price, and growth to food and beverage and healthcare end markets, partially offset by lower volumes to the manufacturing end market. Operating profit was US$55 million.
Sales in Asia were US$376 million in the quarter, 6% above the prior year excluding currency and cost pass through. Volume growth included new plant startups in China and India. Operating profit was US$63 million.
Praxair Surface Technologies had first quarter sales of US$149 million as compared to US$160 million in the prior year quarter. Excluding negative currency translation and cost pass through, sales were 4% below the prior year period. Favourable price was more than offset by lower volumes. Sales were primarily lower to the energy and manufacturing end markets. Operating profit was US$25 million.
Adjusted amounts are non-GAAP measures. 1Q16 results are adjusted to exclude the impact of a bond redemption charge. Additionally, measures such as EBITDA, free cash flow, after tax return on capital, return on equity and debt to capital are also non-GAAP measures. See the attachments for a summary of non-GAAP Reconciliations and calculations of non-GAAP measures.
Adapted from press release by Francesca Brindle
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