Linde Targets Extra 900 Million Euros in Savings to Boost Profit

Linde AG (LIN), the industrial gas maker that’s set to overtake Air Liquide SA (AI) to become the world’s biggest, has extended a savings program until 2016 to boost profitability and counter an economic slowdown.

Linde plans to save an additional 750 million euros ($969 million) to 900 million euros in the next four years, the Munich-based company said today. The company’s acquisition of Lincare Holdings Inc. helped third-quarter operating profit beat analyst estimates on higher sales of oxygen to respiratory disease patients for treatment at home.

Linde has doubled its North America gases sales with the $3.8 billion purchase of Lincare in August and the acquisition of Air Products & Chemicals Inc.’s home care business in January. Chief Executive Officer Wolfgang Reitzle said today he will seek further savings in purchasing, information technology and the cylinder and liquefied gas supply chain.

“This will help to reinforce our high level of profitability even in a challenging environment,” Reitzle said in the statement. “We are still on track, even though the economic situation has worsened in the past few months.”

Linde shares gained as much as 2.1 percent, and were up 1.6 percent at 130.85 euros as of 9:27 a.m. in Frankfurt trading. The stock has increased 14 percent this year, boosting the company’s market value to 24 billion euros.

Echoing Rivals

Earnings before interest, tax, depreciation and amortization including joint ventures advanced to 908 million euros in the quarter. Analysts surveyed by Bloomberg had estimated 892 million euros. Sales rose 13 percent to 3.89 billion euros, beating a 3.80 billion-euro analyst estimate.

The Lincare acquisition contributed 231 million euros in revenue and boosted operating profit margins. Demand for gases in Europe was negatively affected by “unfavorable” economic conditions in the euro region, Linde said.

Linde’s comments echo those of Air Liquide, which on Oct. 25 reported higher-than-expected quarterly sales as demand in the U.S. and developing economies offset slowing revenue in western Europe and Japan. Smaller rival Air Products & Chemicals Inc. (APD) missed estimates on Oct. 19.

Linde today reiterated a goal for earnings and sales to increase this year as well as a target to reach 4 billion euros in operating profit in the 2013 financial year. Return on capital employed will be at least 14 percent in 2015, Linde reiterated.

Third-quarter net income gained 7.9 percent to 313 million euros, ahead of a 292 million-euro prediction in the Bloomberg survey. Earnings per share in the three months through September remained at 1.70 euros because Linde’s 1.4 billion-euro capital increase in July boosted the number of shares outstanding.

To contact the reporter on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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