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Linde Profit Beats Estimates as Lincare Takeover Helps Sales

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May 6 (Bloomberg) -- Linde AG, the German industrial gases company that bought U.S. oxygen-services provider Lincare last year, reported first-quarter profit that beat analyst estimates, helped by takeovers.

Operating profit climbed 13 percent to 953 million euros ($1.25 billion), the Munich-based company said today in a statement. That exceeded the 935 million-euro average estimate of eight analysts surveyed by Bloomberg. The stock climbed as much as 3.2 percent, the most in six months.

“The numbers are clearly better than expected, and the background is the gases sector,” said Eggert Kuls, a Hamburg-based Warburg Research analyst who recommends buying Linde shares. “There are new plants and new customers.”

The $3.8 billion acquisition of Clearwater, Florida-based Lincare doubled North America gases sales, and Linde also bought the former home-care business of Air Products & Chemicals Inc. in January 2012. Chief Executive Officer Wolfgang Reitzle is malso pursuing savings intended to cut as much as 900 million euros in costs and boost earnings by almost half by 2016.

Linde shares traded 3.2 percent higher at 147.25 euros as of 9:49 a.m. in Frankfurt. The stock has gained 11 percent this year, valuing the company at 27 billion euros.

“Despite less than favorable conditions, especially in the mature markets, we have continued to achieve profitable growth,” Reitzle said in the statement.

Profit Target

Linde reiterated this year’s target of at least 4 billion euros in operating profit, which the company defines as earnings before interest, taxes, depreciation and amortization, and is seeking a return on capital employed of about 14 percent in 2016. CEO Reitzle is set to step down in May 2014.

Revenue increased 10 percent to 3.99 billion euros. Air Liquide SA, the French company Linde is competing with for the rank of the world’s largest industrial gas producer, has reported first-quarter sales that missed analyst estimates, falling 2.1 percent to 3.7 billion euros, with the Paris-based company citing currency effects and natural gas prices.

Lincare contributed 397 million euros to Linde’s sales in the quarter, helping boost revenue in the gases division by 15 percent, while profit in the segment increased by the same percentage to 942 million euros. Excluding Lincare, currency shifts and natural gas price effects, the division’s revenue grew 3.7 percent. Profit at the engineering division fell to 66 million euros from 73 million euros a year earlier.

The gases unit’s revenue and profit will both increase this year, while the engineering unit should achieve an operating margin of about 10 percent this year as sales are expected to be little changed, Linde said. The engineering division had an order backlog of 4.6 billion euros at the end of the quarter, compared with 3.7 billion euros at the end of December.

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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