(Archived) Praxair Second Quarter 2005 EPS Rises 19% To 63 Cents

DANBURY, Conn., July 27, 2005 — Praxair, Inc. (NYSE: PX) reported record second-quarter net income of $209 million, versus $175 million earned in the second quarter of 2004. Diluted earnings per share grew 19% to 63 cents, compared to 53 cents in last year’s quarter. Net income grew due to strong growth in sales and operating profit compared to the year-ago quarter.

Sales in the quarter rose 20% to $1,919 million, compared to $1,603 million in the 2004 period. Operating profit of $322 million grew 18% from $274 million in the second quarter of 2004. Sales and operating profit were higher in every geographic region. By end market, the strongest sales growth came from global energy and manufacturing markets.

"We continued to deliver strong results in the second quarter," said Dennis H. Reilley, chairman and chief executive officer. "While we have seen a slowdown in the steel and electronics markets, solid execution of our growth programs is more than making up for the difference."

In North America, sales in the second quarter of $1,153 million were up 13% from $1,016 million in the year-ago quarter. Sales grew in most end markets including manufacturing and oil and gas well services. Operating profit grew from $156 million a year ago to $161 million, including the effect of an $8 million charge related to a distribution facility.

In Europe, sales grew 42% to $293 million in the quarter. Excluding the effect of a stronger euro, sales grew 36% due primarily to the purchase of industrial gas business in Germany. Modest growth in Spain was partially offset by a slowing economy in Italy.  Sales were higher to chemicals and manufacturing markets. Operating profit grew 38% to $72 million, from $52 million in the year-ago quarter.  

In South America, sales of $274 million grew 30%, and 11% excluding currency effects. Underlying sales growth reflected higher volumes and higher pricing as compared to the 2004 period, due to growth in metals and manufacturing markets. Operating profit rose 31% to $51 million from $39 million in last year’s quarter.

Sales in Asia grew 13% to $137 million, from higher sales in China, India, and Korea driven by electronics and metals markets, including new plant start-ups. Operating profit rose 26% to $24 million.

Praxair Surface Technologies’ sales in the quarter grew to $124 million, 12% above the prior year. Operating profit was $14 million versus $8 million in the prior year. OEM aviation coatings markets continue to be strong, and higher volumes of industrial coatings and powders for gas turbines and oil well service parts contributed to the sales increase.

Cash flow from operations in the quarter was $390 million, and capital expenditures were $198 million. The after-tax-return-on-capital* ratio increased to 13.7%, and the debt-to-capital ratio* improved to 45%. The tax rate during the quarter was 23%, including a favorable tax benefit.  

For the third quarter of 2005, Praxair expects diluted earnings per share in the range of 61 to 64 cents, 15% to 21% above the prior year.

For the full year of 2005, Praxair expects sales growth of 14% to 16%, and operating profit growth of 15% to 18%, versus 2004. Diluted earnings per share are expected to be in the range of $2.44 to $2.50, an increase of 16% to 19% versus 2004. Full-year capital expenditures are expected to be in the area of $800 million.

During the third quarter, Praxair expects to finalize its analysis of the applicability of the repatriation provisions of the American Jobs Creation Act of 2004. Pursuant to the Act, Praxair may repatriate up to $1.1 billion with an estimated one-time tax expense for the repatriation and adjustments to tax reserves of up to $90 million, which is not included in the aforementioned earnings guidance. Praxair does not plan to begin expensing stock options until its 2006 fiscal year.

Commenting on the business outlook, Reilley said, "We expect sales to continue to be strong in the second half of the year in most of our major end-markets, and new business activity continues to be robust. A record number of new projects under construction will continue to add to earnings and cash flow growth in 2006 and beyond."

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

A teleconference on Praxair’s second-quarter results is being held this morning, July 27, at 9:00 am Eastern Time. The number is (617) 614 -3946 — Passcode: 32137541. The call also is available as a web cast. Materials to be used in the teleconference are available on www.praxair.com/investors.

The forward-looking statements contained in this document concerning demand for products and services, the expected macroeconomic environment, sales, margins and earnings growth rates, projected capital and acquisition spending, the impact of required changes in accounting, the impact of accounting and other estimates, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These risk factors include the impact of changes in worldwide and national economies, the performance of stock markets, the cost and availability of electric power, natural gas and other materials, and the ability to achieve price increases to offset such cost increases, inflation in wages and other compensation, 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, accounting and other legislation, litigation, government regulation in the jurisdictions in which the Company operates and the effectiveness and speed of integrating new acquisitions into the business.