DANBURY, Conn., January 24, 2007 — Praxair, Inc. (NYSE: PX) reported record sales and earnings in the fourth quarter and full year of 2006. Fourth-quarter and full-year diluted earnings per share grew 26% and 24% on a comparable basis,* to 82 cents and $3.00, respectively.
Sales in the fourth quarter were $2,123 million, and for the year were $8,324 million, the highest in the company's history. Praxair achieved strong growth from new business and the start-up of new supply systems in every geography and end market. Sales growth was 9% in the fourth quarter and 10% for the full year, excluding the effect of lower natural gas prices passed through in hydrogen prices.
Operating profit grew 17% in the fourth quarter and 21% for the year. The fourth-quarter operating margin improved to 18.5% from 16.6%. The mix of higher-margin business and substantial cost savings from productivity programs drove this improvement.
For the full year, cash flow from operations was $1,752 million. Capital expenditures were $1,100 million, and the company spent $220 million repurchasing stock, net of issuances. Praxair's debt-to-capital ratio improved to 39.9%. After-tax return-on-capital ratio* increased to 14.6% for the year.
Commenting on the results, Chief Executive Officer Stephen F. Angel said, "We finished an outstanding year with a strong fourth quarter. We leveraged solid underlying sales growth in all our core geographies into record earnings due to our intensive focus on pricing, productivity improvements, capital discipline, and excellent project execution. We signed a significant number of new contracts around the world, and we are working on a record number of projects going into 2007."
In North America, fourth-quarter and full-year sales reached $1,182 million and $4,696 million, respectively. Sales growth occurred in most major end markets and the company completed seven major projects in 2006. Additionally, the number of new projects underway and set to come on stream in the next several years increased significantly over the course of the year. Overall sales in North America grew 6% in the fourth quarter and 8% for the full year, excluding the effect of lower natural gas prices passed through in hydrogen prices.
This sales comparison is against an unusually strong fourth quarter of 2005 when the company had significant sales to competitors in the aftermath of the U.S. Gulf Coast hurricanes. Operating profit grew 9% in the fourth quarter and 24% for the full year, compared to the prior-year periods.
In Europe, sales in the fourth quarter of $306 million grew 19%, and increased 11% excluding currency effects. For the year, sales reached $1,163 million, representing 7% growth excluding currency effects. Underlying sales growth came primarily from increased business activity in Spain and Italy. Fourth-quarter operating profit of $73 million rose 22% from the prior-year period. A sharp focus on pricing and productivity improvements contributed to the strong operating leverage. Full-year operating profit increased to $266 million.
In South America, fourth-quarter sales of $351 million grew 12% versus the prior year quarter, and 8% excluding currency effects. Full-year sales were $1,348 million, up 11% excluding currency. Sales growth continues to outpace underlying industrial production due to higher sales to the energy sector and new project start-ups, including the first plant in Brazil to supply liquefied natural gas for commercial and industrial customers. Operating profit rose 24% to $68 million in the quarter, and 28% to $252 million for the year.
Sales in Asia grew 14% to $169 million in the quarter, and grew 17% to $636 million for the year. Sales to electronics markets continued to be strong and contributed to the double-digit sales growth in the region. Operating profit in the quarter grew 38% to $33 million from the prior-year period, and the operating margin reached 19.5%. For the full year, operating profit was $111 million, 22% above 2005.
Praxair Surface Technologies' sales in the quarter were $115 million, and were $481 million for the year. Excluding the effects of a business divestiture and currency, fourth-quarter sales growth was 10%, and full-year growth was 9%. Strong coatings demand from aerospace customers and higher pricing generated the higher sales. Operating profit increased to $16 million from $9 million in the 2005 quarter, and the operating margin improved to 13.9% from 7.8%. For the full year, operating profit grew 55% to $68 million.
For the first quarter of 2007, Praxair expects diluted earnings per share in the range of 77 cents to 80 cents, 13% to 18% above the first quarter of 2006.
For the full year of 2007, Praxair expects year-over-year sales growth in the range of 8% to 10%. The company expects diluted earnings per share to be in the range of $3.30 to $3.45, representing 10% to 15% growth from 2006. Full-year capital expenditures are expected to be in the range of $1.1 billion to $1.2 billion, supporting an increasing number of new on-site projects under long-term contract with customers across all geographic regions. These projects will start up over the next three years and provide strong revenue and earnings growth through the end of the decade.
Commenting on Praxair's business outlook, Angel said, "Global industry fundamentals remain strong. Demand for new energy supplies combined with tightening environmental standards globally creates significant new business opportunities for Praxair."
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide. 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 before accounting change adjusted to include stock option expense, and exclude the $92 million income tax charge in the third quarter.
|Praxair 4Q06 Earnings Release Tables (59 KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measure|
|Praxair 4Q06 Teleconference Slides (221 KB)||Teleconference presentation on Praxair's 4Q06 results.|
A teleconference on Praxair's fourth-quarter results is being held this morning, January 24, at 11:00 am Eastern Time. The number is (617) 597-5376 -- Passcode: 92536028. 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.