DANBURY, Conn., July 26, 2006 — Praxair, Inc. (NYSE: PX) announced record second-quarter net income of $247 million, and diluted earnings per share of 75 cents. Net income grew 22%, and earnings per share grew 23% on a comparable basis including stock option expense in the prior year.*
Sales in the second quarter rose 8% to $2,076 million, compared to $1,919 million in the 2005 quarter. Operating profit grew to $382 million from $311 million in the prior year on a comparable basis. The strong growth in operating profit was due to new business development, higher prices and productivity improvement. Operating profit in the quarter also included $15 million from insurance recoveries.
"While some macro-economic indicators point to a slowdown, we have not seen any significant decline in demand from our customers," said Dennis H. Reilley, chairman and chief executive officer.
In North America, second-quarter sales of $1,158 million rose 6% from $1,097 million in the year-ago quarter from higher sales to manufacturing, metals and electronics markets, and higher prices. Operating profit grew to $215 million, from $155 million in the prior-year period on a comparable basis. The strong growth in operating profit came primarily from higher sales, strong pricing and productivity gains.
In Europe, sales of $296 million were 3% above the prior year, and increased 6% excluding the effect of a weaker euro. Underlying sales growth came from higher pricing and gases volume growth in Spain and Italy. Operating profit was $65 million.
In South America, sales of $340 million grew 24% versus the year-ago quarter, and 13% excluding currency effects, from higher pricing and higher sales volumes. Sales growth came from energy, healthcare and metals markets. Operating profit rose to $58 million, an increase of 18% versus last year's quarter on a comparable basis.
Sales in Asia grew 13% to $155 million, from $137 million in the year-ago quarter. Sales to electronics and metals markets drove the increase. Operating profit increased to $28 million, from $23 million in the prior-year period on a comparable basis.
Praxair Surface Technologies' sales in the quarter grew to $127 million. Excluding currency effects, quarter-over-quarter sales growth was 4%, due to continued strong demand for OEM aviation coatings and higher pricing. Operating profit grew to $16 million, an increase of 23% on a comparable basis due to higher sales volumes and fixed cost control.
Cash flow from operations was $392 million in the second quarter. Capital expenditures were $270 million. The company's after-tax return-on-capital ratio* improved to 14.5% for the quarter.
For the third quarter of 2006, Praxair expects diluted earnings per share in the range of 70 cents to 73 cents, 19% to 24% above the third quarter of 2005, on a comparable basis.
For the full year of 2006, Praxair expects year-over-year sales growth in the area of 10%. Raising its earnings guidance, Praxair expects diluted earnings per share to be in the range of $2.85 to $2.90, representing 18% to 20% growth versus the prior year on a comparable basis. Full-year capital expenditures are expected to be in the area of $1 billion, supporting a growing backlog of new projects across all geographic regions, which will come on-stream in 2007 and 2008.
Commenting on Praxair's business outlook, Reilley said, "We are evaluating a significant number of new project opportunities across our business, fueled by the secular growth trends in infrastructure building and energy production. Our backlog of projects is steadily increasing, which we expect to drive sustainable earnings growth for the foreseeable future."
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2005 sales of $7.7 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.
*See the attachments for calculations of non-GAAP measures related to operating profit, net income, earnings per share, after-tax return-on-capital, and debt-to-capital ratios. All year-over-year comparisons use 2005 results adjusted to include stock option expense, and exclude the $92 million income tax charge in the third quarter.
|Praxair 2Q06 Earnings Release Tables (98 KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 2Q06 Teleconference Slides (154 KB)||Teleconference presentation on Praxair's 2Q06 results.|
A teleconference on Praxair's second-quarter results is being held this morning, July 26, at 11:00 am Eastern Time. The number is (617) 213-8056 – Passcode: 68121021. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are also available.
This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of tax and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of litigation and regulatory agency actions; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company's latest Annual Report on Form 10-K filed with the SEC which should be reviewed carefully. Please consider the company's forward-looking statements in light of those risks.