DANBURY, Conn., April 28, 2004 — Praxair, Inc. (NYSE: PX) reported record net income of $164 million for the first quarter of 2004, and diluted earnings per share of 49 cents. Net income and earnings per share rose 26% from $130 million and 39 cents per diluted share in the first quarter of 2003, adjusted to reflect the two-for-one stock split in December 2003. Growth in net income was due to higher sales revenue, higher operating profit and lower interest expense, partially offset by a slightly higher effective tax rate compared to the year-ago period.
Sales for the quarter were $1,531 million compared to $1,337 million in 2003. Sales rose 15% on a reported basis, and 9% excluding the effect of currency appreciation. Operating profit of $260 million grew 21% from $215 million in 2003. Sales and operating profit both grew from strong overall volume growth, higher pricing, and currency effects. The overall operating margin increased from 16.1% to 17%.
Commenting on the quarter, Dennis H. Reilley, chairman and chief executive officer, said, “Our strong results reflect continued pick-up in demand from most of our customers in all our end markets. Earnings grew as we achieved greater operating leverage and productivity across our system.”
In North America, sales of $960 million were 8% higher than $893 million in the year-ago quarter. Growth came from higher sales to all end markets, including energy, metals, electronics and healthcare. On-site, merchant and packaged gases all showed strong volume growth from the prior year. Operating profit of $149 million grew 14%, benefiting from volume gains and productivity improvements.
In Europe, reported sales grew 26% to $208 million. Excluding the effect of a stronger Euro, sales grew 10% primarily from higher volumes and pricing. Operating profit grew to $52 million from $38 million in the year-ago period, primarily from higher volumes and currency effects. Praxair’s volume growth in Europe continued to significantly outpace the overall level of economic growth.
In South America, sales of $200 million grew 35%, or 18% excluding currency effects. Underlying sales grew from higher volumes and higher pricing. Operating profit was $32 million compared to $29 million in 2003.
Sales in Asia grew 30% to $109 million, primarily from strong volume demand and production capacity additions in China. Operating profit of $17 million grew 31%, in line with sales growth.
Praxair Surface Technologies’ sales for the quarter of $111 million grew 13% from the prior year due to increased demand for global coatings in industrial and aviation markets, and a stronger Euro. Operating profit was $10 million, up strongly from $4 million in the year-ago period, reflecting improving business conditions and the benefits of cost-reduction actions taken in 2003.
Cash flow from operations for the quarter was $181 million, after a $60-million contribution to the U.S. pension plan. Capital expenditures were $124 million. The company’s after-tax return on capital* rose to 12.9%.
In the second quarter of 2004, Praxair expects sales to grow 11% to 13% and operating profit to grow 17% to 21% versus the second quarter of 2003. Diluted earnings per share are expected to be between 48 cents and 52 cents. For the full year of 2004, Praxair expects sales growth in the range of 9% to 13% and operating profit growth in the range of 13% to 17%. Diluted earnings per share are expected to be in the range of $1.98 to $2.08. Full-year capital expenditures are expected to be in the area of $700 million.
Commenting on the business outlook, Reilley said, “The U.S. economy has shown a dramatic turnaround over the past nine months, and our volume growth has outpaced industrial production. While we continue to see strong demand from our customers, high energy prices, a stronger U.S. dollar, and the potential for higher interest rates may moderate U.S. industrial activity later in the year. Our growth plans are moving forward, with new hydrogen capacity coming on stream, new semiconductor product offerings, and significant new business signed in China.”
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2003 sales of $5.6 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technologies bring productivity and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. More information on Praxair is available on the Internet at www.praxair.com.
*Non GAAP measure: See quarterly Financial Summary and Appendix: Non-GAAP measures
|Praxair 1Q04 Earnings Release Tables||Statement of Income, Balance Sheets, Statement of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 1Q04 Teleconference Presentation||Teleconference presentation on Praxair's 1Q04 results.|
A teleconference on Praxair’s first-quarter 2004 results is being held this morning, April 28, at 9:00 am Eastern Standard Time. The number is (617) 786-2905 — Passcode: 79692349. The call also is available as a web cast at www.praxair.com/investors as well as materials to be used in the teleconference. A telephone replay will be available for one week following the teleconference at (888) 286-8010 — Passcode: 65462968.
Forward Looking Statements: The forward-looking statements contained in this announcement concerning demand for products and services, the expected macroeconomic environment, sales and earnings growth, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These include the impact of changes in worldwide and national economies, the cost and availability of electric power, natural gas and other materials, development of operational efficiencies, changes in foreign currencies, changes in interest rates, the continued timely development and acceptance of new products and processes, the impact of competitive products and pricing, and the impact of tax and other legislation and regulation in the jurisdictions in which the company operates.