- Diluted EPS of $1.42, up 3% versus prior-year quarter
- Sales of $2.8 billion, down 2% from prior-year quarter; up 6% excluding negative currency translation and cost pass-through
- Record operating cash flow of $725 million; capex of $564 million
- Full-year 2012 diluted EPS guidance reduced to $5.60 to $5.70 on lower currency translation
- Third-quarter diluted EPS guidance of $1.35 to $1.40
DANBURY, Conn., July 25, 2012 — Praxair, Inc. (NYSE: PX) reported second-quarter net income and diluted earnings per share of $429 million and $1.42, 1% and 3% above the prior-year quarter, respectively.
Sales in the second quarter were $2,811 million, 2% below the prior-year quarter. Sales growth was 6%, excluding negative foreign currency translation and cost pass-through effects. Underlying sales growth was driven by strong volumes and higher pricing in North America in most end markets, including energy, manufacturing and metals. Sales in Asia reflect slower growth offset by new plant start-ups for chemicals and metals customers. Europe and South America sales continued to be impacted by overall weak macro-economic conditions and significant foreign currency headwinds.
Operating profit in the second quarter was $636 million, compared to $627 million in the prior-year quarter. The increase was driven by higher overall volumes, higher pricing and productivity, partially offset by currency translation effects. Operating profit in North America grew by 11%, but was partially offset by lower operating profit in the other geographic segments.
Second-quarter cash flow from operations was a record $725 million and capital expenditures were $564 million, primarily for new production plants under long-term contracts with customers. The company paid dividends of $164 million and repurchased $104 million of stock, net of issuances. The debt-to-capital ratio was 53.3% and debt-to-EBITDA was 1.9x*. The after-tax return-on-capital and return on equity for the quarter were 14.2% and 29.7%, respectively*.
Commenting on the financial results and business outlook, chairman, president and chief executive officer Steve Angel said, “North America, our largest region, experienced solid growth and improved operating leverage. Europe and South America were negatively impacted by weaker currencies and macro-economic conditions. Asia sales benefited from new project start-ups to supply customers under long-term contracts.”
“Our backlog of large projects with customer contracts remains strong at $2.5 billion and new customer proposal activity remains at healthy levels.”
For the third quarter of 2012, Praxair expects diluted earnings per share in the range of $1.35 to $1.40, reflecting weaker foreign exchange rates both sequentially and year-over-year. For the full year of 2012, the company expects diluted earnings per share to be in the range of $5.60 to $5.70 at current exchange rates. Excluding the impact of currency, full-year diluted earnings per share growth would be approximately 9% to 11% versus 2011*. The third quarter and 2012 full-year diluted earnings per share guidance excludes the impact of potential restructuring and pension settlement costs and assumes an effective tax rate of about 28%.
For the full year of 2012, Praxair expects sales in the range of $11.2 to $11.5 billion, which on a year-over-year comparison basis reflects negative cost pass-through and currency effects. Full-year capital expenditures are expected to be in the range of $2.1 to $2.4 billion.
Following is additional detail on second-quarter 2012 results by segment.
In North America, second-quarter sales were $1,393 million up 2% from the prior-year quarter. Excluding the effects of lower cost pass-through and currency translation, underlying sales grew 6% from higher volumes and price. Acquisitions of packaged gas distributors contributed 2% growth. Volume growth was largely attributable to the energy, manufacturing and metals markets. Operating profit of $363 million grew 11% from the prior year due primarily to higher volumes, price and ongoing productivity initiatives.
In Europe, second-quarter sales were $382 million. Sales were 3% above the prior-year quarter due primarily to the previous consolidation of an industrial gas business in Scandinavia, partially offset by negative currency translation and lower volumes, primarily in Spain and Italy. Operating profit declined 6% to $68 million, compared to the prior-year quarter, due to negative currency translation and lower volumes.
In South America, second-quarter sales were $520 million, 15% lower than the prior-year quarter due to the impact of negative currency translation. Operating profit was $110 million as compared to $139 million in the prior-year period due to negative currency translation and lower liquid and packaged gas volumes.
Sales in Asia were $348 million in the quarter, in line with the prior-year quarter. Higher on-site sales in China, India and Korea, including new plant start-ups, were primarily offset by negative currency translation in Korea and India. Operating profit was $68 million, as compared to $63 million in the prior-year.
Praxair Surface Technologies had second-quarter sales of $168 million, in-line with the prior-year quarter. Sales grew 4%, excluding negative currency impact, primarily from higher jet-engine and energy coatings. Operating profit was steady at $27 million with growth from price and volume offset by currency translation impacts and cost increases.
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 are making our planet more productive by bringing efficiency 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. Full-year 2011 results are adjusted to exclude a gain on acquisition and other restructuring charges.
|Praxair 2Q12 Earnings Release -Tables (PDF=124KB)||Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, and Appendix: Non-GAAP Measures.|
|Praxair 2Q12 Teleconference Slides (PDF=586KB)||Teleconference presentation on Praxair's
A teleconference on Praxair’s second-quarter results is being held this morning, July 25, at 11:00 am Eastern Time. The number is (857) 350-1599 – Passcode: 81642533. 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 changes in pension plan liabilities; the impact of tax, environmental, 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 Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.