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Praxair reports results

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Hydrocarbon Engineering,

Praxair, Inc. reported fourth quarter (4Q16) net income and diluted earnings per share of US$406 million and US$1.41, respectively. Sales in the (4Q16) were US$2.644 billion, 2% above the prior-year quarter. Excluding negative currency translation effects and higher cost pass through, sales were 2% higher than the prior-year quarter due to growth from acquisitions, largely a carbon dioxide business in Europe, and higher pricing. Overall volumes were comparable to the prior-year quarter. Volume growth from new on-site projects in Europe, South America and Asia was offset by lower base business volumes in North America, due primarily to weaker manufacturing and energy activity.

Operating profit in the 4Q16 was US$599 million, 4% below the prior-year quarter. Excluding 1% headwind from foreign currency translation and a gain on asset sale in the prior year, operating profit was comparable with the prior-year quarter. Operating profit as a percentage of sales was 22.7% and EBITDA margin was 33.8%. 4Q16 cash flow from operations was US$726 million, 27% of sales. Capital expenditures were US$409 million and the company paid US$214 million of dividends. For the full year of 2016, reported net income was US$1500 million and diluted earnings per share was US$5.21. On an adjusted basis, full-year net income was US$1576 million and diluted earnings per share was US$5.48.

Full-year sales were US$10 534 million, 2% below 2015 due to the impacts of negative currency translation and lower cost pass-through, primarily natural gas. Underlying sales were 2% above prior year as growth from positive price, new project start-ups globally and acquisitions were partially offset by lower base volumes primarily in North America due to weaker upstream energy and manufacturing end-markets. Reported operating profit was US$2238 million, 4% below prior year. Adjusted operating profit of US$2338 million was 3% below 2015, excluding negative currency translation.

For full-year 2016, Praxair generated strong operating cash flow of US$2773 million, 26% of sales, and free cash flow of US$1308 million. The company invested US$363 million in acquisitions, primarily a carbon dioxide business in Europe, paid dividends of US$856 million, repurchased US$89 million of stock, net of issuances and reduced net debt. Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “During 2016, Praxair employees demonstrated operational excellence by again delivering high quality results despite facing another challenging global economic year. We gained traction on our core strategy and generated record operating cash flow of 26% of sales and free cash flow of US$1.3 billion. As a result, we have announced an increase in our dividend for the 24th consecutive year.

“Expanding our presence in more resilient end-markets including food, beverage, healthcare and aerospace is a key component of our strategy. We completed our carbon dioxide acquisition in Europe which will strengthen our food and beverage growth platform and began the PST joint venture with GE on aircraft coatings which we expect will triple the size of that business in a few years. Another important element of our strategy is to execute our backlog and capitalise on the additional project opportunities driven by the low cost feedstock advantage in the US Gulf Coast. We won seven new large onsite projects during the year that brought our backlog to just over US$1.5 billion, with 70% of that value supporting our extensive network in the US Gulf Coast".

“The year culminated in a non-binding agreement in principal to merge with Linde. We view this as a compelling opportunity to create substantial value for stakeholders. This announcement is the first step in a process that will take some time to complete. While we pursue this opportunity, rest assured our employees will remain laser focused on operational excellence and executing our core strategy.”

For full-year 2017, Praxair expects diluted earnings per share to be in the range of US$5.45 to US$5.80, 2 - 9% growth excluding currency vs 2016. This guidance assumes a negative currency impact of approximately 3%. Full-year capital expenditures are expected to be approximately US$1.4 billion and the effective tax rate is forecast to remain at approximately 28%. For the first quarter of 2017 (1Q17), Praxair expects diluted earnings per share in the range of US$1.28 to US$1.35. This EPS guidance assumes a negative currency impact of approximately 1%.

Following is additional detail on 4Q16 results by segment.

  • In North America, 4Q16 sales were US$1397 million, down 2% from the prior-year quarter. Sales growth from higher pricing and stronger volumes to metals, food and beverage and healthcare customers were more than offset by weaker volumes in energy and manufacturing end-markets. Operating profit was US$359 million.
  • In Europe, 4Q16 sales were US$351 million, 9% above the prior-year quarter excluding negative currency translation. Acquisitions contributed 8% growth, primarily related to a carbon dioxide business largely serving the food and beverage end-market. Volume was up 1% primarily due to new project start-ups. Operating profit of US$71 million grew 15% from the prior year, primarily due to lower cost, higher volumes and acquisitions.
  • In South America, 4Q16 sales were US$352 million, 18% above the prior-year quarter. Sales, excluding positive currency translation, grew 9% as a result of higher price, new on-site project volumes and higher sales to healthcare and food and beverage end-markets. Operating profit was US$64 million.
  • Sales in Asia were US$395 million in the quarter, 1% below the prior-year quarter. Excluding negative currency translation and a prior quarter divestiture, sales grew 5%. Operating profit of US$78 million grew 8%, excluding currency translation.
  • Praxair Surface Technologies had 4Q16 sales of US$149 million as compared to US$152 million in the prior-year quarter. Excluding negative currency translation and cost pass-through, sales were comparable to the prior-year period. Favourable price and higher aerospace volumes were offset by weaker sales primarily to the energy end markets. Operating profit was US$27 million.


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