DANBURY, Conn., January 26, 2005 — Praxair, Inc. (NYSE: PX) reported record net income of $181 million and diluted earnings per share of 55 cents for the fourth quarter of 2004, 17% higher than $155 million and 47 cents, respectively, in 2003. Net income grew due to sharply higher sales and operating profit, partially offset by a slightly higher effective tax rate compared to the year-ago quarter.
Sales in the quarter were $1,786 million, 22% above $1,461 million in 2003. Operating profit grew 18% to $289 million from $244 million in 2003, and reflected an operating margin of 16.2%. Sales and operating profit were higher in every geographic region, with the strongest sales growth coming from global energy, metals, healthcare, and industrial manufacturing markets.
For the full year 2004, Praxair reported net income of $697 million, and diluted earnings per share of $2.10, an increase of 19% over $585 million, and $1.77 reported a year ago. Full-year sales were $6,594 million, 17% higher than in 2003.
Commenting on these results, Dennis H. Reilley, chairman and chief executive officer, said, "Our disciplined focus on profitable growth around the world continues to differentiate us from the competition."
In North America, sales in the fourth quarter of $1,130 million were up 22% from $923 million in the year-ago quarter. Operating profit grew to $161 million. Growth was driven by higher sales to energy markets, including hydrogen for refining, and products and services for oil and gas production. Healthcare sales were higher due to solid organic growth and a homecare acquisition in July. Overall, gases volumes remained strong throughout the quarter, reflecting the robust manufacturing environment throughout 2004.
In Europe, sales grew 23% to $234 million in the quarter. Excluding the effect of a stronger Euro, sales grew 14% from new business development and the purchase of an industrial gas business in Germany which closed in December. Operating profit grew 19% to $56 million, from $47 million in the year-ago quarter.
In South America, sales of $236 million grew 26%, and 22% excluding currency effects. Sales reflected strong industrial growth in the export sectors of the economy, which resulted in higher volumes and higher pricing, as compared to 2003. Operating profit rose 37% to $41 million from $30 million in last year’s quarter, and reflected a strong operating margin of 17.4%.
Sales in Asia grew 22% to $134 million, from higher sales in China, India, and Korea to electronics and metals markets, and the contribution of new plant start-ups. Operating profit of $24 million was 26% higher than in the prior period.
Praxair Surface Technologies’ sales in the quarter were $116 million, 12% above the prior year. Operating profit was $7 million, comparable to the prior year period. Aviation repair markets continued to be difficult, though the coatings business for OEM aircraft engine parts has improved.
Cash flow from operations in the quarter was $428 million, and capital expenditures were $243 million. Additionally, the company invested $667 million to acquire a German industrial gas business and spent $66 million on net common stock repurchases. Debt increased by $638 million, and the after-tax-return-on-capital* ratio was 12.7% at the end of the quarter.
For 2005, Praxair expects sales and operating profit growth in the range of 11% to 15% versus 2004. Diluted earnings per share are expected to be in the range of $2.33 to $2.45. The average effective tax rate is expected to increase to about 26%. Full-year capital expenditures are expected to be in the range of $700 million to $750 million. This guidance excludes the effect on reported earnings of expensing stock options, expected to begin in the third quarter. Praxair estimates that this expense would reduce reported diluted earnings per share by about 2 cents per quarter.
For the first quarter of 2005, Praxair expects fully diluted earnings per share to be in the range of 56 cents to 58 cents, an increase of 14% to 18% from the first quarter of 2004.
Commenting on the business outlook, Reilley said, "We expect continued strong growth in 2005, bolstered by our growing hydrogen business, the consolidation and integration of the acquired business in Germany, a record pipeline of new contracts and projects under construction, and increased price realization. We believe that economic activity in North America, South America and Asia will continue to be strong, while growth in Europe is likely to slow somewhat from 2004.
Yesterday we announced a 20% increase in the quarterly dividend, as testament to our continued confidence in our ability to grow earnings and cash flow," continued Reilley.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2004 sales of $6.6 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 4Q04 Earnings Release Tables (45 KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 4Q04 Teleconference Presentation (155 KB)||Teleconference presentation on Praxair's 4Q04 results.|
A teleconference on Praxair’s fourth-quarter results is being held this morning, January 26, at 9:00 am Eastern Time. The number is (617) 801-9712 — Passcode: 88282290. 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, margins, earnings growth rates, 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, the impact of tax, accounting and other legislation, litigation, government regulation and the effectiveness and speed of integrating new acquisitions into the business.
Susan Szita Gore