Linde Fourth-Quarter Profit Misses Estimates on Euro’s Gain

Linde AG, the world’s largest industrial-gas producer, reported fourth-quarter profit that missed analyst estimates as a stronger euro held back sales growth.

Earnings before interest, taxes, depreciation and amortization fell 3.6 percent to 970 million euros ($1.35 billion), Munich-based Linde said today. The average of eight analyst estimates in a survey compiled by Bloomberg was 992.3 million euros. Sales slipped 4.1 percent to 4.2 billion euros.

“Conditions have been unfavorable and exchange rate effects have had an adverse impact on our growth,” Chief Executive Officer Wolfgang Reitzle said in a statement. “After adjusting for exchange rate effects, we are expecting solid growth in group revenue in the 2014 financial year.”

Reitzle, 65, said he’s budgeting for a “moderate improvement” in operating profit this year as he prepares to retire in May and end an 11-year term at the company in which he focused a once-diversified company on industrial gases, tripling the share price in the process. The CEO has pushed the 135-year-old manufacturer into new segments such as health care to reduce reliance on more cyclical markets such as oxygen for welding and steelmaking. Kemira Oyj CEO Wolfgang Buechele will succeed Reitzle.

Acquisitions under Reitzle included the purchases in 2012 of Clearwater, Florida-based household oxygen and respiratory-therapy provider Lincare and the former home-care business of Allentown, Pennsylvania-based Air Products & Chemicals Inc.

Dividend Surprise

Linde proposed paying a 3-euro dividend. The shares declined as much as 3.2 percent, the most in six weeks, and were trading 2.8 percent, or 4 euros, lower at 139.70 euros as of 9:10 a.m. in Frankfurt. That values the company at 25.9 billion euros.

“We continue to prefer Air Liquide over Linde at this stage given its higher exposure to southern Europe,” J.P. Morgan analysts including Marcus Diebel, who rate Linde neutral, said in a note today. While Linde’s dividend proposal exceeded expectations, the 2014 forecast “is weak.”

Annual operating profit rose 7.6 percent to 3.97 billion euros, compared with the “around” 4 billion euros that Linde forecast in October, when it reduced the prediction because of the euro’s gains against the U.S. and Australian dollars, the U.K. pound and currencies in emerging markets.

Currency Burden

The company reiterated a target today of boosting profit to at least 5 billion euros by 2016, based on exchange rates at the end of 2012. If the “unfavorable” exchange rates at the end of 2013 continue to apply, operating profit would be reduced by about 400 million euros, Linde said today.

The development of the euro, which climbed 4.2 percent against the dollar in 2013, shaved 656 million euros from revenue last year, with the trend against the Australian dollar subtracting 140 million euros from sales. The rand, dollar and pound sheared off 107 million euros, 103 million euros and 46 million euros respectively.

In the gases division, whose 933 million euros in fourth quarter profit represented 96 percent of the company total, saw profit decline 13 percent in the Americas region, compared with a 0.7 percent increase in Europe, the Middle East and Africa, and a 2 percent climb in the Asia Pacific region.

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