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Linde Joins Raft of Euro Losers as It Trims Profit Forecast

Linde AG (LIN), vying with Air Liquide SA (AI) for the top spot in the industrial gas industry, cut its full-year profit outlook as the strengthening euro sapped foreign earnings, offsetting sales of oxygen and ventilators to patients at home.

Operating profit will be about 4 billion euros ($5.5 billion), an amount that Linde had earlier set as a minimum goal, the Munich-based company said today. Third-quarter operating profit climbed 9 percent to 1.03 billion euros, exceeding the 990 million-euro estimate of 13 analysts in a Bloomberg survey.

“We have fared quite well,” Chief Executive Officer Wolfgang Reitzle said in the statement. “Economic trends have been anything but dynamic and exchange rates have increasingly moved against us.”

Reitzle has pushed Linde into new markets to reduce reliance on more cyclical products such as supplying oxygen and other gases to welders and steel plants. The $3.8 billion acquisition of Clearwater, Florida-based Lincare doubled Linde’s North America gas sales, while it also bought the former home-care business of Air Products & Chemicals Inc. (APD) in January 2012. Reitzle, 64, will step down next May to be replaced by Wolfgang Buechele, currently CEO of Kermira Oyj.

Linde joins other European companies from Unilever Plc to Deutsche Lufthansa AG (LHA) reeling from the euro’s advance, with a 5.2 percent gain against the dollar in the year through September. Revenue increased 5.4 percent to 4.3 billion euros.

Shares of the German company were little changed at 145.95 euros as of 9:21 a.m. in Frankfurt.

Dividend

Currency effects clipped 243 million euros from earnings, led by impact of the Australian dollar, and to a lesser extent the dollar, South Africa’s rand and the British pound.

Australia is a drag really, they make a lot of sales there,” John Philipp Klein, a London-based Berenberg analyst who recommends buying Linde shares, said by telephone.

Linde received a 57 million-euro dividend payment from Ikaria Inc., a Hampton, New Jersey-based biotherapeutics company in which it has a 17 percent stake.

Growth in the U.S. “would not have looked as good if it weren’t for that,” Klein said.

Gas division sales in the U.S. increased 11 percent to 1.05 billion euros in the quarter, the only regional increase. The gas unit’s sales as a whole were flat at 3.49 billion euros, while profit increased 7.5 percent to 998 million euros. Operating profit at the engineering division jumped 22 percent to 77 million euros on sales which soared 61 percent to 820 million euros.

Linde said its 2016 target of at least 5 billion euros in operating profit, defined as earnings before interest, taxes, depreciation and amortization, is dependent upon exchange rates remaining at a similar level to those when the target was set at the end of 2012. If they remain at current levels, they will reduce the figure by about 250 million euros. That also applies to a goal of return on capital employed of about 14 percent the same year.

Reitzle is also pursuing savings intended to cut as much as 900 million euros in costs.

To contact the reporter on this story: Alex Webb in Munich at awebb25@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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