Linde AG Chief Executive Officer Wolfgang Reitzle said his final year in charge will be spent pursuing savings under a plan that promises to cut as much as 900 million euros ($1.17 billion) in costs and boost earnings by almost one-half by 2016.
The German supplier of oxygen, currently tied with Air Liquide SA as the world’s biggest industrial gas company by sales, is seeking to lower costs related to purchasing, computer systems as well as the supply chains of both liquefied and cylinder gas, said Reitzle, who will step down in May 2014.
Reitzle forecast earnings before interest, taxes, depreciation and amortization of at least 5 billion euros in 2016 compared with 3.5 billion euros in 2012. 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. The CEO is also budgeting for about 2.1 billion euros in investment this year.
“We plan to invest more heavily this year than last year’s record figure simply because we have so many opportunities,” Reitzle said. “We don’t plan to pay off debts yet, that will come in the coming years.”
Shares of Munich-based Linde declined 0.4 percent to 139.75 euros as of 11:30 a.m., after it reported profit just shy of analysts predictions. Fourth-quarter earnings before interest, tax, depreciation and amortization rose 14 percent to 967 million euros. Analysts predicted 976 million euros.
Linde proposed an annual dividend of 2.70 euros a share.
Reitzle reiterated a target of 4 billion euros in operating profit this year, while seeking at least 750 million euros in further savings by 2016.
The CEO said he’s stepping down with the regret that current regulations prevent him from joining the supervisory board immediately, given that a sufficient number of investors would back such a move. While the mandatory two-year cooling off period is “nonsense” and deprives Linde from key operational experience, Reitzle said he wouldn’t want to put himself or the company “in the limelight” by challenging it.
Linde will probably look externally for its next CEO, and has two candidates lined up, according to comments from supervisory board Chairman Manfred Schneider. Reitzle said he won’t remain idle, yet declined to comment on future plans.
Head to Head
Reitzle said his main concern is for a smooth transition, leaving his successor with the tools to meet a target for capital employed of at least 14 percent from 2016.
“I have just one priority, that the whole handover process should be as short, clean and elegant as possible, in order to ensure that nothing changes in performance terms and that there is continuity,” the CEO said.
Sales increased to 15.3 billion euros, matching that of competitor Air Liquide.
The French gas supplier, based in Paris, said last month that fluctuating global market conditions may mean it reviews its target of boosting sales by 8 percent to 10 percent through 2015. The development of cheap U.S. shale gas and of coal in China, as well as an “upheaval” in nuclear energy, may force Air Liquide to follow customers such as steelmakers and chemical producers that are shifting production to low-cost regions, CEO Benoit Potier said.