DANBURY, Conn., July 25, 2007 — Praxair, Inc. (NYSE: PX) announced record second-quarter sales and earnings. Net income grew 18% to $291 million, and diluted earnings per share grew 19% to 89 cents. Sales in the second quarter increased to $2,332 million, 12% above the prior-year quarter. Sales growth was led by significant new business coming on-stream in the energy sector and new business in Asia and South America.
Second-quarter operating profit grew 15% to $439 million as a result of new business combined with operating leverage from more favorable pricing and cost productivity.
In North America, second-quarter sales reached $1,293 million, 12% above the prior-year quarter. Sales growth came primarily from higher sales to energy and general manufacturing markets, followed by electronics, healthcare and food and beverage. Operating profit in the quarter grew to $231 million from $215 million in the second quarter of 2006. This represented 16% growth versus the prior year, excluding a $15-million benefit from insurance recoveries in the 2006 period.
In Europe, sales in the quarter of $336 million grew 14%, and increased 6% excluding currency effects, as compared to the prior year. Underlying sales growth was broad-based across Europe and most major end markets. Second-quarter operating profit rose 22% to $79 million, from $65 million in the prior-year quarter.
In South America, second-quarter sales of $393 million grew 16% from the prior-year quarter, and 8% excluding currency effects. Underlying sales growth came from most major end markets including general manufacturing, metals and food and beverage. Operating profit rose 31% to $76 million. Strong operating leverage was achieved by higher sales volumes, higher pricing and cost-efficiency programs.
Sales in Asia grew 15% to $179 million, from $155 million in the year-ago quarter. Higher sales in China, India and Korea, primarily to metals and electronics markets, drove the increase. Operating profit in the quarter grew to $30 million.
Praxair Surface Technologies' sales in the quarter grew to $131 million, up 12% from the prior-year quarter, excluding the effects of a business divestiture and currency. Sales growth came primarily from higher sales of OEM aviation coatings and industrial coatings for the power turbine market. Operating profit increased sharply to $23 million from $16 million in the 2006 quarter. The operating margin improved to 17.6% from 12.6%, primarily from higher sales and higher pricing.
Cash flow from operations in the quarter was $481 million. Capital expenditures were $329 million. The after-tax return-on-capital ratio* improved to 15.3% for the quarter and return on equity* increased to 25%.
Commenting on the results, Chairman and Chief Executive Officer Steve Angel said, "I am pleased that our growth initiatives are continuing to gain traction with our customers. The outlook for our products and technologies continues to brighten, particularly in the energy sector and in emerging markets. In addition, our operating team is continuing to refine our production and delivery systems to improve quality for our customers while generating productivity improvements which reduce both capital and operating costs. As a result of new project commitments from customers, we are increasing our forecast for capital expenditures. Simultaneously, we are announcing a new stock repurchase program which we expect to fund largely out of operating cash flow."
For the third quarter of 2007, Praxair expects diluted earnings per share in the range of 89 cents to 91 cents, 19% to 21% above the third quarter of 2006.
For the full year of 2007, Praxair expects year-over-year sales growth in the range of 10% to 12%. The company expects diluted earnings per share to be in the range of $3.50 to $3.55, representing 17% to 18% growth from 2006. Full-year capital expenditures are expected to be in the range of $1.2 billion to $1.3 billion. This capital investment supports a growing number of new projects under long-term contracts with customers which will underpin revenue and earnings growth over the next three years.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2006 sales of $8.3 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.
|Praxair 2Q07 Earnings Release Tables (375 KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures|
|Praxair 2Q07 Teleconference Slides (160 KB)||Teleconference presentation on Praxair's 2Q07results.|
A teleconference on Praxair's second-quarter 2007 results is being held this morning, July 25, at 11:00 am Eastern Time. The number is (617) 614-3528 — Passcode: 39150012. 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 including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of tax, environmental, home healthcare 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.
Susan Szita Gore