(Archived) Praxair Reports Second-Quarter 2009 Results

• Sales of $2.1 billion down 26% from prior year; down 12% ex-currency and cost pass-through. Sequentially, sales were even with the first quarter.
• Operating profit margin increased to 20.9% from cost reduction and ongoing productivity savings
• Diluted EPS of 96 cents down 11% from prior year and up 3% from first quarter
• Strong cash flow from operations of $563 million
• Third-quarter diluted EPS guidance of $.95 to $1.00; full-year $3.85 to $4.05

DANBURY, Conn., July 29, 2009 — Praxair, Inc. (NYSE: PX) reported net income attributable to Praxair and diluted earnings per share of $299 million and 96 cents, respectively, in the second quarter, compared to $349 million and $1.08 in the second quarter of 2008.

Reported sales in the second quarter were $2,138 million, 26% below $2,878 million in the second quarter of 2008. Underlying sales were 12% below the prior year, excluding the negative effects of foreign currency and cost pass-through. Overall volumes declined by 14%, and were partially offset by higher pricing.

Operating profit in the second quarter was $447 million, 18% below the prior-year period and sequentially unchanged from the first quarter. Operating margin improved to 20.9% as cost reductions more than offset volume declines.

The company generated strong cash flow from operations of $563 million in the quarter which funded $370 million of capital expenditures, supporting the construction of new production plants around the world under long-term contracts for customers. The company repurchased $64 million of stock, net of issuances, and paid $123 million of dividends. The after-tax return-on-capital ratio and return on equity for the quarter were 13.8%, and 27.5%, respectively.*

Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Challenging economic conditions persisted globally in the quarter, resulting in overall volumes on par with the first quarter. We have begun to see pockets of sequential improvement in Asia and South America, where economic activity appears to be reacting positively to fiscal and monetary stimulus programs. In Europe and North America, the overall industrial environment remains very weak, although volumes appear to have stabilized.

"We have held a tight rein on costs, and have continued to realize savings from our ongoing productivity initiatives. These actions have offset a substantial amount of the impact of lower volumes and will give us significant operating leverage when volume growth resumes. In spite of the uncertain economic environment, we are continuing to evaluate a large number of new project proposals, and we signed several new contracts this quarter for on-site projects in emerging economies."

For the third quarter of 2009, Praxair expects diluted earnings per share in the range of 95 cents to $1.00.

For the full year of 2009, Praxair expects sales to be in the area of $9 billion. The company expects diluted earnings per share to be in the range of $3.85 to $4.05. Full-year capital expenditures are expected to be in the area of $1.4 billion, supporting the construction of 42 on-site production plants under contract which will come on-stream in 2009 through 2011.

The following provides additional detail on second-quarter 2009 results by geographic region and for Praxair Surface Technologies.

In North America, second-quarter sales were $1,120 million, 29% below the second quarter of 2008. Excluding the negative effect of currency and cost pass-through, underlying sales declined 15% due to lower volumes, partially offset by higher overall pricing. Higher refinery hydrogen volumes were offset by lower volumes to chemicals, metals, electronics and manufacturing markets. Operating profit of $264 million was only 4% below the prior-year quarter due to significantly lower fixed and variable costs.

In Europe, second-quarter sales were $306 million, 25% below the prior year. Negative currency translation effects reduced sales by 14%. Underlying sales were 11% below the prior year due to lower volumes in most end markets. Sequentially, overall volumes were relatively stable compared to the first quarter. Operating profit was $61 million in the quarter, compared to $99 million in the prior-year quarter due to lower volumes and currency effects.

In South America, second-quarter sales were $395 million, 23% below the prior-year period, primarily due to the negative impact of currency translation which reduced sales by 19%. Underlying sales were 5% below the prior-year quarter. Sales to food and beverage and healthcare markets were relatively stable. Sales to metals and manufacturing markets were weak, compared to the prior year, but showed modest sequential improvement. Operating profit in the second quarter was $70 million as compared to $102 million in the prior-year period, as higher pricing and cost reduction were offset by negative currency effects.

Sales in Asia were $199 million in the quarter, 14% below the 2008 quarter. Excluding negative currency translation effects, sales declined 5% on a year-over-year basis. Sales grew 11% from the first quarter, as business conditions improved in manufacturing, metals and electronics markets. Operating profit was $33 million, down 18% from the prior-year quarter but up 27% sequentially.

Praxair Surface Technologies had second-quarter sales of $118 million versus $153 million in the prior-year quarter. Excluding the negative impact of currency translation, sales were 14% below the prior-year quarter. Strong coatings volumes for jet engines and natural gas turbines were more than offset by lower coatings for general manufacturing markets in the U.S. and Europe. Operating profit was $19 million in the quarter versus $27 million in the prior-year period and $22 million in the first quarter of 2009. The July 1 acquisition of Sermatech International, a global supplier of protective coatings and advanced processes used on industrial and aviation gas turbines, will expand Praxair Surface Technologies' product offerings for jet engines and industrial gas turbines beginning in the third quarter of this year.

Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2008 sales of $10.8 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 after-tax return-on-capital; return-on-equity; and debt-to-capital ratios.

A teleconference on Praxair's second-quarter results is being held this morning, July 29, at 11:00 a.m. Eastern Time. The number is (857) 350-1591 -- Passcode: 69882993. 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 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.