(Archived) Praxair Reports Record Third-Quarter 2008 Results

• Diluted EPS of $1.11 up 18% versus prior year
• Sales growth of 20% versus 2007;  strong results in all geographies
• Operating cash flow of $630 million;  return on capital of 15.5%*
• Fourth-quarter 2008 EPS guidance of $1.03 to $1.08; full-year $4.21 to $4.26*
• Net share repurchases of $537 million
• Major new contract announcements in the quarter:
  • 200 MM SCFD hydrogen supply for BP Whiting, Indiana refinery
  • 3,000 TPD oxygen supply for Anhui Huayi coal gasification project in China

DANBURY, Conn., October 29, 2008 — Praxair, Inc. (NYSE: PX) reported record net income of $355 million and diluted earnings per share of $1.11 in the third quarter, compared to $305 million and 94 cents, respectively, in the prior year. This represents net income and earnings per share growth of 16% and 18%, respectively, versus the third quarter of 2007.

Sales in the third quarter were $2,852 million, up 20% from $2,372 million in the prior-year quarter. Praxair achieved strong sales growth in every geographic region, led by South America and Asia.

Operating profit was a record $544 million, 18% above $460 million in the prior-year quarter, driven by higher pricing and volume growth.

The company generated strong cash flow from operations of $630 million. Cash flow funded $405 million of capital expenditures, largely for new production plants under contract for customers in North and South America, China and India. The company also repurchased $537 million of stock, net of issuances. Debt levels increased to finance the share repurchases, resulting in a modestly higher debt-to-capital ratio of 48.7%. Due to the strong growth in net income and cash flow, the after-tax return-on-capital ratio improved to 15.5%, and return on equity increased to 26.9%.*

In North America, third-quarter sales were $1,557 million, 19% above the prior year. Excluding the effect of higher natural gas prices passed through to customers in hydrogen prices, sales growth was 14%. Acquisitions of U.S. packaged gas distributors contributed 4% to sales growth. Underlying growth of 9% was driven by diverse markets including energy, metals, manufacturing and chemicals. Operating profit grew 12% to $274 million.

In Europe, sales in the third quarter of $384 million grew 18% from $325 million in the prior-year quarter. Currency effects contributed 13% to sales growth. Underlying sales growth came primarily from higher merchant and on-site gases in Spain, Germany and Italy. Third-quarter operating profit of $96 million rose 23% from the prior-year period.

In South America, third-quarter sales of $527 million grew 26% versus the prior-year quarter. Higher prices and volumes drove 14% sales growth, and favorable currency effects contributed 12%. Sales growth came primarily from higher sales to customers in metals, food and beverage, and general manufacturing markets. Operating profit rose 32% to $111 million in the quarter, as higher prices and productivity programs more than offset cost inflation.

Sales in Asia rose 26% to $239 million in the quarter attributable primarily to new plant start-ups and growth in merchant liquid sales. Overall sales growth in the region was driven by demand from chemicals and electronics customers, and by applications in general industries such as food and water treatment. Operating profit in the quarter grew 27% to $38 million from the prior-year period.

Praxair Surface Technologies had third-quarter sales of $145 million, 10% above the prior-year quarter. Sales growth excluding currency effects was 3%, and was driven by higher sales to energy markets, partially offset by lower sales to aviation markets. Operating profit of $25 million was 4% above the 2007 quarter.

New business development was strong with a number of major new contracts including a second landmark coal gasification oxygen supply system in China and two world scale hydrogen plants for BP in Indiana. The company’s backlog of major new projects coming on stream over the next three years increased from 44 to 47 which will underpin growth and earnings stability due to take-or-pay contracts, and customers in diverse geographies and end markets.

Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “We had another very strong quarter despite some effect from the U.S. Gulf Coast hurricanes, and slowing macroeconomic growth in the U.S. and Europe. Due to the financial crisis, we expect to see a contraction in manufacturing output in the US and Europe, combined with slowing growth in Asia and South America for the next several quarters. Additionally, we expect the recent strengthening of the dollar to impact consolidated sales and earnings growth by about 8% at current exchange rates. Consequently, we will take appropriate measures to properly align our cost structure as necessary. We remain confident in our business strategy and the ability of the Praxair team to continue to perform given whatever economic challenges we face.”

For the fourth quarter of 2008, Praxair expects diluted earnings per share in the range of $1.03 to $1.08, excluding the impact of potential restructuring costs. This represents earnings growth of 5% to 10% above the fourth quarter of 2007 and assumes a negative impact due to currency translation in the area of 8% based on current exchange rates.

For the full year of 2008, Praxair expects sales of about $11 billion, representing year-over-year growth of about 17%. The company expects diluted earnings per share to be in the range of $4.21 to $4.26, excluding the impact of potential restructuring costs, and the 3 cent pension settlement charge which occurred in the first quarter of 2008. This represents growth of 16% to 18% versus 2007*. Full-year capital expenditures are expected to be about $1.5 billion, supporting an increasing number of contracts for on-site production plants globally which will come on-stream over the next several years.

Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2007 sales of $9.4 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 2008 operating profit, net income and diluted earnings per share adjusted to exclude a $17 million pension settlement charge in the first quarter, $11 million after-tax, 3 cents EPS. All full year-over-year comparisons, including percentage changes, are based on adjusted amounts for 2008 which exclude the pension settlement charge. The attachments also include calculations of non-GAAP measures related to after-tax return-on-capital; return-on-equity and debt-to-capital ratios.

A teleconference on Praxair's third-quarter results is being held this morning, October 29, at 11:00 a.m. Eastern Time. The number is (617) 597-5346 — Passcode: 65157179. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are 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 investigations, litigation and regulatory proceedings; 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.