DANBURY, Conn., January 27, 2004 — Praxair, Inc. (NYSE: PX) reported record net income of $155 million for the fourth quarter of 2003, and diluted earnings per share of 47 cents, compared to $140 million and 43 cents per diluted share in the 2002 fourth quarter, adjusted to reflect the two-for-one stock split which occurred on December 15, 2003. Growth in net income was due to higher sales, higher operating profit and lower interest expense, partially offset by a higher effective tax rate.
Sales for the quarter of $1,461 million grew 13% from 2002 as a result of volume growth in all geographic regions, higher overall pricing and stronger currencies in Europe and South America. Operating profit was $244 million, up 7% from $227 million in the prior year, driven by strong revenue growth.
For the full year 2003, Praxair reported net income of $585 million, and diluted earnings per share of $1.77, an increase of 7% from $548 million* and $1.66*, adjusted for the stock split. Full-year sales were $5,613 million, an increase of 9% from 2002. Full-year operating profit was $922 million compared to $923 million in 2002. Excluding the effects of net income hedges in both years, and a litigation settlement gain in 2002, operating profit grew 4%.
Commenting on the results, Chairman and Chief Executive Officer Dennis H. Reilley said, "Our strong performance during the economic downturn validates that our business strategy is robust, and demonstrates our ability to execute well in the marketplace. During 2003, we won significant new business and we are well on our way to implementing our growth strategies in refinery hydrogen, healthcare, electronics and China."
In the fourth quarter, sales in North America of $923 million grew 8% from the prior year. The growth in sales came from new business and higher pricing. On-site, merchant and packaged gases volumes were higher than the prior year, and grew sequentially from the third quarter. Operating profit was $141 million, comparable to the prior year, as higher energy costs offset some of the volume gains.
In Europe, sales rose 22% to $191 million. Excluding the effect of the stronger Euro and a divestiture, sales grew 6% from higher price and volumes across the region. Operating profit grew 21% to $47 million, in line with sales growth.
In South America, sales of $188 million grew 38%, or 18% excluding the effect of currency appreciation. Sales grew as a result of higher pricing and higher volumes. Operating profit was $30 million, 15% above the prior year.
Sales in Asia grew 25% to $110 million, primarily from strong volume demand, particularly in China. Excluding the effect of a business consolidation, sales grew 19%. Operating profit grew to $19 million from $14 million a year ago.
Praxair Surface Technologies’ sales for the quarter were $104 million, and operating profit was $7 million, compared to $97 million and $6 million in 2002. Sales reflect the stronger Euro and relatively flat volumes in global coatings and aviation markets compared to the previous year.
Cash flow from operations for the quarter and full year were $387 million and $1,137 million, respectively. Capital expenditures during the quarter were $199 million, reflecting increased investment in the U.S. Gulf Coast hydrogen complex. Full-year capital expenditures were $644 million, excluding the purchase of leased assets. At year-end, Praxair’s debt-to-capital ratio was reduced to 46.2%**, and in the fourth quarter its after-tax return-on-capital ratio improved to 12.5%**.
For the first quarter of 2004, Praxair expects sales to grow 8% to 12%, and operating profit to grow 10% to 14% versus the first quarter of 2003. Diluted earnings per share are expected to be in the range of 43 cents to 47 cents, an increase of 10% to 20% from the prior year. This reflects an effective tax rate of 25%, slightly higher than the tax rate in 2003.
For the full year of 2004, Praxair expects sales growth in the range of 6% to 10%, and operating profit growth of 8% to 14% from 2003. Guidance for earnings per share is $1.90 to $2.05, reflecting growth of 8% to 15%, and assuming a higher effective tax rate of 25%. Full-year capital expenditures are expected to be in the range of $700 million, anticipating additional investment in hydrogen infrastructure, significant investment in China to supply new contracts awarded in 2003, and business won in North America.
"2003 started on a very weak note, but business around the world began to pick up in the third and fourth quarters. We achieved record results by gaining new business around the world and by continuing to focus on productivity," said Reilley. "As we begin 2004, we remain cautiously optimistic. Business conditions are much improved versus this time last year, particularly in the United States. However, we are concerned about whether the level of economic stimulus that was required to ignite the U.S. economy can be maintained. Nonetheless, our focus on productivity improvements in our base business, and disciplined capital investment will drive strong cash flow and higher returns on capital in 2004."
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.
*Excluding the cumulative effect of an accounting change for goodwill of $139 million, or 42 cents per diluted share.
**Non GAAP measure: See quarterly Financial Summary and Appendix: Non-GAAP measures
|Praxair 4Q03 Earnings Release Tables (48 KB)||Statement of Income, Balance Sheets, Statement of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 4Q03 Teleconference Presentation (107 KB)||Teleconference presentation on Praxair's 4Q03 results.|
A teleconference on Praxair’s fourth-quarter and full-year 2003 results is being held this morning, January 28, at 9:00 am Eastern Standard Time. The number is (617) 786-4512 — Passcode: 55638504. The call also is available as a web cast.Materials to be used in the teleconference are also available on www.praxair.com/investors.
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.