DANBURY, Conn., July 28, 2004 — Praxair, Inc. (NYSE: PX) reported record net income of $175 million and diluted earnings per share of 53 cents for the second quarter of 2004, compared to $150 million and 45 cents, respectively, in 2003. Growth in net income was due to higher sales revenue and higher operating profit, partially offset by a higher effective tax rate compared to the year-ago period.
Sales for the quarter were $1,603 million compared to $1,401 million in 2003. Sales rose 14% on a reported basis, and 13% excluding the effect of currency appreciation. Operating profit of $274 million grew 23% from $223 million in 2003. Sales and operating profit were higher in every geographic region, due to new projects and new business. The strongest sales growth came from energy, electronics, metals, and manufacturing markets. The overall operating margin rose to 17.1%, reflecting the benefits of improved operating leverage and productivity gains.
Commenting on the quarter, Dennis H. Reilley, chairman and chief executive officer, said, “Our results achieved record levels driven by improving global business conditions combined with significant new business in energy, healthcare, electronics and China.”
In North America, sales of $1,016 million were 14% higher than $893 million in the year-ago quarter. Excluding the effects of higher natural gas prices contractually passed on to customers, sales rose 13%. Growth came from higher sales of on-site, merchant, and packaged gases. Sales grew strongly year-over-year to the energy, healthcare, metals and general manufacturing markets. Operating profit of $156 million grew 16%, benefiting from volume gains and productivity improvement.
In Europe, reported sales grew 18% to $207 million. Excluding the effect of a stronger Euro and the consolidation of a joint venture, sales grew 7% from higher pricing and volumes. Operating profit grew 27% to $52 million, from $41 million in the year-ago period, primarily from higher volumes, currency effects and cost-reduction programs.
In South America, sales of $211 million grew 14% on a reported basis, and 16% excluding currency effects. Underlying sales increased from higher volumes and higher pricing, reflecting a strengthening economic environment. Operating profit was $39 million compared to $26 million in 2003.
Sales in Asia grew 32% to $121 million, primarily from strong sales in China and Korea to electronics and metals markets. Higher pricing also contributed to sales growth, as well as to higher operating profit. Operating profit of $19 million grew 27% from $15 million in the prior period.
Praxair Surface Technologies’ sales for the quarter of $111 million grew 12% from the prior year due to an improved market for industrial and aviation coatings and a stronger Euro. Operating profit was $8 million, versus $6 million in the year-ago period, reflecting stronger business conditions and the benefits of previous cost-reduction actions.
Cash flow from operations for the quarter was $252 million. Capital expenditures were $140 million. In June, Praxair completed the acquisition of Home Care Supply, a home-healthcare company headquartered in Texas, for $245 million. Total debt increased to finance the acquisition, and the company’s debt-to-capital ratio* rose slightly to 47.2%. After-tax-return-on-capital* increased to 13.5% due to growth in operating profit and a strict focus on capital spending discipline.
In the third quarter of 2004, Praxair expects sales and operating profit to grow 12% to 15% versus the third quarter of 2003. Diluted earnings per share are expected to be between 51 cents and 53 cents. For the full year of 2004, Praxair expects sales growth in the range of 13% to 15% and operating profit growth in the range of 15% to 18%. Diluted earnings per share are expected to be in the range of $2.03 to $2.09. Full-year capital expenditures are expected to be in the area of $700 million.
Commenting on the business outlook, Reilley said, “Our business is strong globally, and we are executing well in our key growth areas. We closed an important home healthcare acquisition in the quarter, and have recently started up two new hydrogen production plants on the U.S. Gulf Coast. We expect economic growth may moderate as the year progresses, but are confident that Praxair will continue to deliver higher sales, earnings and cash flow.”
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 2Q04 Earnings Release Tables (56 KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 2Q04 Teleconference Slides (93 KB)||Teleconference presentation on Praxair's 2Q04 results.|
A teleconference on Praxair’s second-quarter results is being held this morning, July 28, at 9:00 am Eastern Time. The number is (617)786-2903 — Passcode: 55724231. The call also is available as a web cast at www.praxair.com/investors as well as materials to be used in the teleconference.
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.
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