リンデ（「リンデ」とも「同社」とも呼ばれる）はアイルランドの法律に基づいて設立された株式会社です。リンデの登記所在地は、アイルランドのダブリン2、D02 T380にあるTen Earlsfort Terraceです。リンデの本社は、イギリスのサリー州ウォーキングのChurch Street West 43番地にあるForge、およびアメリカ合衆国コネチカット州ダンバリーのRiverview Drive 10番地にあります。
The components of Accumulated other comprehensive income (loss) are as follows:
(Millions of dollars)
September 30, 2024
December 31, 2023
Cumulative translation adjustment - net of taxes:
Americas
$
(4,074)
$
(3,618)
EMEA
(679)
(737)
APAC
(848)
(1,037)
Engineering
(39)
(93)
Other
19
113
(5,621)
(5,372)
Derivatives - net of taxes
7
7
Pension / OPEB (net of $67 million and $60 million tax benefit at September 30, 2024 and December 31, 2023, respectively)
(445)
(440)
$
(6,059)
$
(5,805)
11. Revenue Recognition
Revenue is accounted for in accordance with ASC 606. Revenue is recognized as control of goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.
Contracts with Customers
Linde serves a diverse group of industries including healthcare, chemicals and energy, manufacturing, metals and mining, food and beverage, and electronics.
Industrial Gases
Within each of the company’s geographic segments for industrial gases, there are three basic distribution methods: (i) on-site or tonnage; (ii) merchant or bulk liquid; and (iii) packaged or cylinder gases. The distribution method used by Linde to supply a customer is determined by many factors, including the customer’s volume requirements and location. The distribution method generally determines the contract terms with the customer and, accordingly, the revenue recognition accounting practices. Linde's primary products in its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (hydrogen, carbon dioxide, helium, electronic gases, specialty gases, acetylene). These products are generally sold through one of the three distribution methods.
Following is a description of each of the three industrial gases distribution methods and the respective revenue recognition policies:
On-site. Customers that require the largest volumes of product and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants. Linde constructs plants on or adjacent to these customers’ sites and supplies the product directly to customers by pipeline. Where there are large concentrations of customers, a single pipeline may be connected to several plants and customers. On-site product supply contracts generally are total requirement contracts with terms typically ranging from 10-20 years and contain minimum purchase requirements and price escalation provisions. Many of the cryogenic on-site plants also produce liquid products for the merchant market. Therefore, plants are typically not dedicated to a single customer. Additionally, Linde is responsible for the design, construction, operations and maintenance of the plants and our customers typically have no involvement in these activities. Advanced air separation processes also allow on-site delivery to customers with smaller volume requirements.
The company’s performance obligations related to on-site customers are satisfied over time as customers receive and obtain control of the product. Linde has elected to apply the practical expedient for measuring progress towards the completion of a performance obligation and recognizes revenue as the company has the right to invoice each customer, which generally corresponds with product delivery. Accordingly, revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with the contract terms. Consideration in these contracts is generally based on pricing which fluctuates with various price indices. Variable components of consideration exist within on-site contracts but are considered constrained.
Merchant. Merchant deliveries generally are made from Linde's plants by tanker trucks to storage containers at the customer's
site. Due to the relatively high distribution cost, merchant oxygen and nitrogen generally have a relatively small distribution radius from the plants at which they are produced. Merchant argon, hydrogen and helium can be shipped much longer distances. The customer agreements used in the merchant business are usually three-to seven-year supply agreements based on the requirements of the customer. These contracts generally do not contain minimum purchase requirements or volume commitments.
The company’s performance obligations related to merchant customers are generally satisfied at a point in time as the customers receive and obtain control of the product. Revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with the contract terms.
Packaged Gases. Customers requiring small volumes are supplied products in containers called cylinders, under medium to high pressure. Linde distributes merchant gases from its production plants to company-owned cylinder filling plants where cylinders are then filled for distribution to customers. Cylinders may be delivered to the customer’s site or picked up by the customer at a packaging facility or retail store. Linde invoices the customer for the industrial gases and the use of the cylinder container(s). The company also sells hardgoods and welding equipment purchased from independent manufacturers. Packaged gases are generally sold under one to three-year supply contracts and purchase orders and do not contain minimum purchase requirements or volume commitments.
The company’s performance obligations related to packaged gases are satisfied at a point in time. Accordingly, revenue is recognized when product is delivered to the customer or when the customer picks up product from a packaged gas facility or retail store and the company has the right to payment from the customer in accordance with the contract terms.
Engineering
The company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers. Sale of equipment contracts are generally comprised of a single performance obligation. Revenue from sale of equipment is generally recognized over time as Linde has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use. For contracts recognized over time, revenue is recognized primarily using a cost incurred input method. Costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer. Changes to cost estimates and contract modifications are typically accounted for as part of the existing contract and are recognized as cumulative adjustments for the inception-to-date effect of such change.
Contract Assets and Liabilities
Contract assets and liabilities result from differences in timing of revenue recognition and customer invoicing. Contract assets primarily relate to sale of equipment contracts for which revenue is recognized over time. The balance represents unbilled revenue which occurs when revenue recognized under the measure of progress exceeds amounts invoiced to customers. Customer invoices may be based on the passage of time, the achievement of certain contractual milestones or a combination of both criteria. Contract liabilities include advance payments or right to consideration prior to performance under the contract. Contract liabilities are recognized as revenue as performance obligations are satisfied under contract terms. Linde has contract assets of $255 million and $196 million at September 30, 2024 and December 31, 2023, respectively. Total contract liabilities are $2,791 million at September 30, 2024 (current contract liabilities of $1,727 million and $1,064 million within other long-term liabilities in the condensed consolidated balance sheets). As of September 30, 2024, Linde has approximately $409 million recorded in contract liabilities related to engineering projects in Russia subject to sanctions. Total contract liabilities were $2,950 million at December 31, 2023 (current contract liabilities of $1,901 million and $1,049 million within other long-term liabilities in the condensed consolidated balance sheets). Revenue recognized for the nine months ended September 30, 2024 that was included in the contract liability at December 31, 2023 was $959 million. Contract assets and liabilities primarily relate to the Engineering business and customer prepayments for certain on-site supply agreements.
Payment Terms and Other
Linde generally receives payment after performance obligations are satisfied, and customer prepayments are not typical for the industrial gases business. Payment terms vary based on the country where sales originate and local customary payment practices. Linde does not offer extended financing outside of customary payment terms. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue producing transactions are presented on a net basis and are not included in sales within the consolidated statement of income. Additionally, sales returns and allowances are not a normal practice in the industry and are not significant.
As described above and in Note 19 to Linde plc's 2023 Annual Report on Form 10-K, the company manages its industrial gases business on a geographic basis, while the Engineering and Other businesses are generally managed on a global basis. Furthermore, the company believes that reporting sales by distribution method by reportable geographic segment best illustrates the nature, timing, type of customer, and contract terms for its revenues, including terms and pricing.
The following tables show sales by distribution method at the consolidated level and for each reportable segment and Other for the quarter and nine months ended September 30, 2024, and September 30, 2023.
(Millions of dollars)
Quarter Ended September 30, 2024
Sales
Americas
EMEA
APAC
Engineering
Other
Total
%
Merchant
$
1,160
$
704
$
589
$
—
$
48
$
2,501
30
%
On-Site
799
441
680
—
—
1,920
23
%
Packaged Gas
1,602
954
371
—
8
2,935
35
%
Other
57
12
76
611
244
1,000
12
%
Total
$
3,618
$
2,111
$
1,716
$
611
$
300
$
8,356
100
%
(Millions of dollars)
Quarter Ended September 30, 2023
Sales
Americas
EMEA
APAC
Engineering
Other
Total
%
Merchant
$
1,131
$
685
$
564
$
—
$
53
$
2,433
30
%
On-Site
843
473
651
—
—
1,967
24
%
Packaged Gas
1,599
936
352
—
8
2,895
35
%
Other
56
11
72
467
254
860
11
%
Total
$
3,629
$
2,105
$
1,639
$
467
$
315
$
8,155
100
%
(Millions of dollars)
Nine Months Ended September 30, 2024
Sales
Americas
EMEA
APAC
Engineering
Other
Total
%
Merchant
$
3,455
$
2,081
$
1,686
$
—
$
155
$
7,377
30
%
On-Site
2,388
1,294
2,016
—
—
5,698
23
%
Packaged Gas
4,825
2,874
1,041
—
22
8,762
35
%
Other
165
44
221
1,694
762
2,886
12
%
Total
$
10,833
$
6,293
$
4,964
$
1,694
$
939
$
24,723
100
%
(Millions of dollars)
Nine Months Ended September 30, 2023
Sales
Americas
EMEA
APAC
Engineering
Other
Total
%
Merchant
$
3,268
$
2,089
$
1,685
$
—
$
161
$
7,203
29
%
On-Site
2,403
1,504
1,972
—
—
5,879
24
%
Packaged Gas
4,875
2,810
1,072
—
40
8,797
36
%
Other
175
39
191
1,502
766
2,673
11
%
Total
$
10,721
$
6,442
$
4,920
$
1,502
$
967
$
24,552
100
%
Remaining Performance Obligations
As described above, Linde's contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase their requirements from Linde and also have minimum purchase requirements. Additionally, plant sales from the Linde Engineering business are primarily contracted on a fixed price basis. The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately $59 billion. This amount excludes all on-site sales above minimum purchase requirements, which can be significant depending on customer needs. In the
future, actual amounts will be different due to impacts from several factors, many of which are beyond the company’s control including, but not limited to, timing of newly signed, terminated and renewed contracts, inflationary price escalations, currency exchange rates, and pass-through costs related to natural gas and electricity. The actual duration of long-term supply contracts ranges up to twenty years. The company estimates that approximately half of the revenue related to minimum purchase requirements will be earned in the next six years and the remaining thereafter.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")
Non-GAAP Measures
Throughout MD&A, the company provides adjusted operating results exclusive of certain items such as Cost reduction program and other charges, purchase accounting impacts of the Linde AG merger and pension settlement charges. Adjusted amounts are non-GAAP measures which are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management find useful in evaluating the company’s operating performance. Items which the company does not believe to be indicative of on-going business performance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. In addition, operating results, excluding these items, is important to management's development of annual and long-term employee incentive compensation plans. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.
The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled "Non-GAAP Measures and Reconciliations."
The following table provides summary information for the quarters and nine months ended September 30, 2024 and 2023. The reported amounts are GAAP amounts from the Consolidated Statements of Income. The adjusted amounts are intended to supplement investors' understanding of the company's financial information and are not a substitute for GAAP measures:
Quarter Ended September 30,
Nine Months Ended September 30,
(Millions of dollars, except per share data)
2024
2023
Variance
2024
2023
Variance
Sales
$
8,356
$
8,155
2
%
$
24,723
$
24,552
1
%
Cost of sales, exclusive of depreciation and amortization
$
4,356
$
4,314
1
%
$
12,823
$
13,061
(2)
%
As a percent of sales
52.1
%
52.9
%
51.9
%
53.2
%
Selling, general and administrative
$
823
$
808
2
%
$
2,523
$
2,463
2
%
As a percent of sales
9.8
%
9.9
%
10.2
%
10.0
%
Depreciation and amortization
$
960
$
959
—
%
$
2,867
$
2,867
—
%
Cost reduction program and other charges
$
145
$
2
7,150
%
$
145
$
42
245
%
Other income (expense) - net
$
51
$
16
219
%
$
111
$
(16)
794
%
Operating profit
$
2,086
$
2,052
2
%
$
6,365
$
5,996
6
%
Operating margin
25.0
%
25.2
%
25.7
%
24.4
%
Interest expense - net
$
68
$
40
70
%
$
203
$
129
57
%
Net pension and OPEB cost (benefit), excluding service cost
$
(45)
$
(35)
29
%
$
(144)
$
(125)
15
%
Effective tax rate
24.1
%
23.8
%
23.3
%
22.6
%
Income from equity investments
$
38
$
41
(7)
%
$
131
$
128
2
%
Noncontrolling interests
$
(53)
$
(36)
47
%
$
(128)
$
(109)
17
%
Net Income – Linde plc
$
1,550
$
1,565
(1)
%
$
4,840
$
4,656
4
%
Diluted earnings per share
$
3.22
$
3.19
1
%
$
10.02
$
9.43
6
%
Diluted shares outstanding
480,898
491,076
(2)
%
483,186
493,567
(2)
%
Number of employees
65,596
66,442
(1)
%
65,596
66,442
(1)
%
Adjusted Amounts (a)
Operating profit
$
2,477
$
2,306
7
%
$
7,240
$
6,798
7
%
Operating margin
29.6
%
28.3
%
29.3
%
27.7
%
Effective tax rate
23.6
%
23.7
%
23.3
%
23.8
%
Net Income – Linde plc
$
1,896
$
1,783
6
%
$
5,576
$
5,236
6
%
Diluted earnings per share
$
3.94
$
3.63
9
%
$
11.54
$
10.61
9
%
Other Financial Data (a)
EBITDA
$
3,084
$
3,052
1
%
$
9,363
$
8,991
4
%
As percent of sales
36.9
%
37.4
%
37.9
%
36.6
%
Adjusted EBITDA
$
3,253
$
3,074
6
%
$
9,575
$
9,096
5
%
As percent of sales
38.9
%
37.7
%
38.7
%
37.0
%
(a)Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.
Reported
In the third quarter of 2024, Linde's sales were $8,356 million, $201 million above prior year. The increase in sales was driven by 2% higher price attainment. Engineering increased sales by 2% in the quarter. Volumes were flat in the quarter versus the 2023 respective period, as base volume declines were largely offset by new project start-ups. Currency translation decreased sales by 1% in the quarter driven primarily by the weakening of the Brazilian real and Mexican peso against the U.S. Dollar. Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, decreased sales by 1% in the quarter, with minimal impact on operating profit.
Reported operating profit for the third quarter of 2024 of $2,086 million, or 25.0% of sales, was 2% above prior year. The reported year-over-year increase was primarily driven by higher pricing and productivity initiatives which more than offset
adverse impacts from cost inflation, cost reduction program and other charges and currency translation. The reported effective tax rate ("ETR") was 24.1% in the third quarter 2024 versus 23.8% in the third quarter 2023. Diluted earnings per share ("EPS") was $3.22, or 1% above EPS of $3.19 in the third quarter of 2023, primarily due to lower diluted shares outstanding partially offset by lower net income - Linde plc.
Adjusted
In the third quarter of 2024, adjusted operating profit of $2,477 million, or 29.6% of sales, was 7% higher as compared to 2023, driven by higher pricing, and productivity initiatives, partially offset by cost inflation and currency translation. The adjusted ETR was 23.6% in the third quarter 2024 versus 23.7% in the 2023 quarter. On an adjusted basis, EPS was $3.94, 9% above the 2023 adjusted EPS of $3.63, driven by higher adjusted net income - Linde plc and lower diluted shares outstanding.
Outlook
Linde provides quarterly updates on operating results, material trends that may affect financial performance, and financial guidance via quarterly earnings releases and investor teleconferences. These updates are available on the company’s website, www.linde.com, but are not incorporated herein.
The changes in consolidated sales compared to the prior year are attributable to the following:
Quarter Ended September 30, 2024 vs. 2023
Nine Months Ended September 30, 2024 vs. 2023
% Change
% Change
Factors Contributing to Changes - Sales
Volume
—
%
—
%
Price/Mix
2
%
2
%
Cost pass-through
(1)
%
(1)
%
Currency
(1)
%
(1)
%
Acquisitions/divestitures
—
%
—
%
Engineering
2
%
1
%
2
%
1
%
Sales
Sales increased $201 million or 2% for the third quarter of 2024 and increased $171 million, or 1% for the nine months ended September 30, 2024 versus the respective 2023 periods. Higher pricing contributed 2% to sales in both the quarter and year-to-date periods. Engineering increased sales by 2% in the quarter and 1% in the year-to-date period. Currency translation decreased sales by 1% in the quarter primarily driven by weakening of the Brazilian real and Mexican peso, partially offset by a strengthening of the Euro against the U.S. Dollar. Currency translation decreased sales by 1% in the year-to-date period driven primarily by the weakening of the Brazilian real, Chinese yuan, and Korean won. Cost pass-through decreased sales by 1% in both the quarter and year-to-date periods, with minimal impact on operating profit. Volumes were flat in both the quarter and year-to-date periods versus the respective 2023 periods, as base volume declines were largely offset by new project start-ups.
Cost of sales, exclusive of depreciation and amortization
Cost of sales, exclusive of depreciation and amortization increased $42 million, or 1%, for the third quarter of 2024 primarily due to higher Engineering sales and decreased $238 million, or 2% for the nine months ended September 30, 2024 primarily due to lower cost pass-through and productivity gains which more than offset cost inflation. Cost of sales, exclusive of depreciation and amortization was 52.1% and 51.9% of sales, respectively, for the third quarter and nine months ended September 30, 2024 versus 52.9% and 53.2% for the respective 2023 periods. The decrease as a percentage of sales in the quarter was primarily due to higher pricing and lower cost pass-through.
Selling, general and administrative expenses
Selling, general and administrative expense ("SG&A") increased $15 million, or 2%, for the third quarter of 2024 and increased $60 million or 2% for the nine months ended September 30, 2024 driven by higher costs. SG&A was9.8% and 10.2% of third quarter and nine months ended September 30, 2024 sales, respectively versus 9.9% and 10.0% of the respective 2023 periods.
Depreciation and amortization
Reported depreciation and amortization expense increased $1 million for the third quarter of 2024 and remained flat for the nine months ended September 30, 2024.
On an adjusted basis, depreciation and amortization increased $10 million, for the third quarter of 2024 and increased $33 million for the year-to-date period driven by new project start ups.
Cost reduction program and other charges
Cost reduction program and other charges were $145 million for the quarter and nine months ended September 30, 2024 and $2 million and $42 million for the respective 2023 periods. 2024 includes severance charges of $148 million and $165 million for
the quarter and year to date periods, other cost reduction charges of $40 million and $23 million for the quarter and year to date periods, and other benefit of $43 million for the quarter and year to date periods related to a divestiture in APAC.
Other income (expense) - net
Reported other income (expense) - net was a benefit of $51 million for the third quarter of 2024 and $111 million for the year-to-date period, including a benefit of $36 million related to a settlement with a supplier in the Americas, recognized during the third quarter, and $43 million in insurance recoveries, primarily within the Other segment, recognized during the first quarter.
Operating profit
On a reported basis, operating profit increased $34 million, or 2%, for the third quarter of 2024 and increased $369 million, or 6%, for the nine months ended September 30, 2024. The increase in the quarter and year-to-date periods of 2024 was primarily due to higher pricing, savings from productivity initiatives and, which more than offset the adverse impacts of cost inflation, cost reduction program and other charges and currency.
On an adjusted basis, which excludes the impacts of merger-related purchase accounting as well as cost reduction programs and other charges, operating profit increased $171 million, or 7% in the third quarter of 2024 and increased $442 million, or 7% for the nine months ended September 30, 2024. Operating profit growth was driven by higher pricing and productivity initiatives, which more than offset the effects of cost inflation and currency during the quarter and year-to-date periods of 2024. A discussion of operating profit by segment is included in the segment discussion that follows.
Interest expense - net
Reported interest expense - net increased $28 million for the third quarter of 2024 and increased $74 million for the nine months ended September 30, 2024. The increase in both periods was driven primarily by higher interest rates on debt.
Net pension and OPEB cost (benefit), excluding service cost
Reported net pension and OPEB cost (benefit), excluding service cost were benefits of $45 million and $144 million for the quarter and nine months ended September 30, 2024, respectively, versus $35 million and $125 million for the respective 2023 periods. The increase in the benefit primarily relates to higher expected return on assets and lower amortization of deferred losses year-over-year.
Effective tax rate
The reported effective tax rate ("ETR") for the quarter and nine months ended September 30, 2024 was 24.1% and 23.3% versus 23.8% and 22.6% for the respective 2023 periods. The increase in the quarter rate is primarily related to tax effects of cost reduction program and other charges. The increase in the year to date rate is primarily related to a prior year benefit from a net decrease in the company’s uncertain tax positions and a tax refund, partially offset by tax benefits from a repatriation in the current year. Effective January 1, 2024, Linde is subject to the 15% global minimum tax rate provisions of the OECD’s framework for Pillar Two, the implementation of which did not have a significant impact on the effective tax rate for the quarter or year-to-date periods.
On an adjusted basis, the ETR for the quarter and nine months ended September 30, 2024 was 23.6% and 23.3% versus 23.7% and 23.8% for the respective 2023 periods. The decrease in the year-to-date rate is primarily due to tax benefits from a repatriation.
Income from equity investments
Reported income from equity investments for the third quarter and nine months ended September 30, 2024 was $38 million and $131 million versus $41 million and $128 million for the respective 2023 periods.
On an adjusted basis, income from equity investments for the third quarter and nine months ended September 30, 2024 was $56 million and $185 million versus $59 million and $182 million for the respective 2023 periods.
Noncontrolling interests
At September 30, 2024, noncontrolling interests consisted primarily of non-controlling shareholders' investments in APAC (primarily China). Reported noncontrolling interests income was $53 million and $128 million for the third quarter and nine months ended September 30, 2024 and included the impact of a divestiture in the APAC segment. Noncontrolling interest was $36 million and $109 million for the the respective 2023 periods.
Reported net income - Linde plc decreased $15 million, or 1%, for the third quarter of 2024 and increased $184 million, or 4%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The decrease for the third quarter of 2024 was primarily driven by higher cost reduction program and other charges. The increase for nine months was driven by higher operating profit.
On an adjusted basis, which excludes the impacts of purchase accounting and cost reduction program and other charges, net income - Linde plc increased $113 million, or 6%, for the third quarter of 2024 and increased $340 million, or 6%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The increase was driven by higher adjusted operating profit.
Diluted earnings per share
Reported diluted earnings per share increased $0.03, or 1%, for the third quarter of 2024 primarily due to lower diluted shares outstanding partially offset by lower net income. Reported diluted earnings increased $0.59, or 6%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The increase is due to higher net income - Linde plc and lower diluted shares outstanding.
On an adjusted basis, diluted EPS increased $0.31 and $0.93 for the third quarter and nine months ended September 30, 2024, or 9% respectively. The increase is primarily due to higher adjusted net income - Linde plc and lower diluted shares outstanding.
Employees
The number of employees at September 30, 2024 was 65,596, a decrease of 846 employees from September 30, 2023 including the impact of ongoing cost reduction programs and a divestiture in APAC.
Other Financial Data
EBITDA was $3,084 million for the third quarter of 2024 as compared to $3,052 million in the respective 2023 period. EBITDA was $9,363 million for the nine months ended September 30, 2024 as compared to $8,991 million in the respective 2023 period. The increase was driven by higher operating profit versus prior year.
Adjusted EBITDA increased to $3,253 million for the third quarter 2024 from $3,074 million in the respective 2023 period. Adjusted EBITDA was $9,575 million for the nine months ended September 30, 2024 as compared to $9,096 million in the respective 2023 period. The higher EBITDA was primarily due to higher adjusted operating profit versus the respective prior periods.
See the "Non-GAAP Measures and Reconciliations" section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAP amounts.
Other Comprehensive Income (Loss)
Other comprehensive income for the third quarter of 2024 was $764 million and loss for the nine months ended September 30, 2024 was $250 million. The income in the quarter and loss for the year-to-date period resulted primarily from currency translation adjustments of $773 million and $245 million, respectively. The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S. dollars, and are largely driven by the movement of the U.S. dollar against major currencies including the Euro, British pound and the Chinese yuan. See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 10 to the condensed consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income (loss) by segment.
The following summary of sales and operating profit by segment provides a basis for the discussion that follows. Linde plc evaluates the performance of its reportable segments based on operating profit, excluding items not indicative of ongoing business trends.The reported amounts are GAAP amounts from the Consolidated Statements of Income.
The Americas segment includes Linde's industrial gases operations in approximately 20 countries including the United States, Canada, Mexico, and Brazil.
Sales
Sales for the Americas segment decreased $11 million in the third quarter and increased $112 million, or 1%, for the nine months ended September 30, 2024 versus the respective 2023 periods. Higher pricing contributed 2% to sales in the quarter and 3% in the year-to-date period. Volumes increased 1% in the third quarter and remained flat year-to-date largely due to project start-ups. Cost pass-through decreased sales 1% in the third quarter and year-to-date period with minimal impact on operating profit. Currency translation decreased sales by 3% in third quarter and 1% in the year-to-date period driven primarily by the weakening of the Brazilian real and Mexican peso against the U.S. Dollar.
Operating profit
Operating profit in the Americas segment increased $79 million, or 7%, in the third quarter and increased $231 million, or 7%, for the nine months ended September 30, 2024 versus the respective 2023 periods, driven primarily by higher pricing, continued productivity initiatives and a settlement gain with a supplier, which more than offset cost inflation.
The EMEA segment includes Linde's industrial gases operations in approximately 45 European, Middle Eastern and African countries including Germany, United Kingdom, France, the Republic of South Africa and Sweden.
Sales
EMEA segment sales were flat in the third quarter and decreased $149 million, or 2%, for the nine months ended September 30, 2024 compared to the respective 2023 periods. Higher price attainment increased sales by 4% in the quarter and 3% in the year-to-date period. Currency translation was flat in the third quarter and nine months ended September 30, 2024. Cost pass-through decreased sales by 3% in the quarter and 4% in the year-to-date period with minimal impact on operating profit. Volumes decreased sales by 1% in the quarter and year-to-date periods, primarily driven by the manufacturing and chemicals and energy end markets.
Operating Profit
Operating profit for the EMEA segment increased by $69 million, or 11%, in the third quarter and increased by $223 million, or 12%, for the nine months ended September 30, 2024 compared to the respective 2023 periods. The increase in operating profit in the third quarter and year-to-date period was driven primarily by higher pricing and continued productivity initiatives, partially offset by cost inflation and lower volumes.
APAC
Quarter Ended September 30,
Nine Months Ended September 30,
(Millions of dollars)
2024
2023
Variance
2024
2023
Variance
Sales
$
1,716
$
1,639
5
%
$
4,964
$
4,920
1
%
Operating profit
$
497
$
459
8
%
$
1,418
$
1,354
5
%
As a percent of sales
29.0
%
28.0
%
28.6
%
27.5
%
Quarter Ended September 30, 2024 vs. 2023
Nine Months Ended September 30, 2024 vs. 2023
% Change
% Change
Factors Contributing to Changes - Sales
Volume/Equipment
3
%
2
%
Price/Mix
—
%
—
%
Cost pass-through
1
%
—
%
Currency
1
%
(2)
%
Acquisitions/divestitures
—
%
1
%
5
%
1
%
The APAC segment includes Linde's industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China, Australia, India, and South Korea.
Sales
Sales for the APAC segment increased $77 million, or 5%, in the third quarter and increased $44 million, or 1%, for the nine months ended September 30, 2024 versus the respective 2023 periods. Volumes increased 3% in the quarter and increased 2%
for year-to-date period including project start-ups in the electronics end market. Currency translation increased sales by 1%, in the quarter primarily driven by strengthening of the Australian dollar and Chinese yuan against the U.S. dollar and decreased 2% for the year-to-date period driven primarily by the weakening of the Australian dollar, Korean won and Chinese yuan against the U.S. dollar. Cost pass-through increased sales 1% in the third quarter and was flat in the year-to-date period. Pricing was flat in the quarter and year-to-date period.
Operating profit
Operating profit in the APAC segment increased $38 million, or 8%, in the third quarter driven primarily by productivity initiatives, which more than offset cost inflation. Operating profit increased $64 million, or 5%, in the nine months ended September 30, 2024 versus 2023 period, driven primarily by continued productivity initiatives, which more than offset cost inflation.
Engineering
Quarter Ended September 30,
Nine Months Ended September 30,
(Millions of dollars)
2024
2023
Variance
2024
2023
Variance
Sales
$
611
$
467
31
%
$
1,694
$
1,502
13
%
Operating profit
$
108
$
116
(7)
%
$
304
$
372
(18)
%
As a percent of sales
17.7
%
24.8
%
17.9
%
24.8
%
Quarter Ended September 30, 2024 vs. 2023
Nine Months Ended September 30, 2024 vs. 2023
% Change
% Change
Factors Contributing to Changes - Sales
Currency
1
%
—
%
Other
30
%
13
%
31
%
13
%
Sales
Engineering segment sales increased $144 million, or 31%, in the third quarter and increased 192 million, or 13%, in the nine months ended September 30, 2024 as compared to the respective 2023 periods driven by project timing. Currency translation increased sales by 1% in the quarter, primarily driven by the strengthening of the Euro against the U.S. dollar. Currency translation for the year-to-date period was flat.
Operating profit
Engineering segment operating profit decreased $8 million, or 7%, in the third quarter and decreased $68 million or 18%, in the nine months ended September 30, 2024 compared to the respective 2023 period due to prior year's benefit from higher margin on lawful wind down of projects subject to sanctions in Russia.
Other consists of corporate costs and a few smaller businesses including Linde Advanced Material Technologies (LAMT) and global helium wholesale, which individually do not meet the quantitative thresholds for separate presentation.
Sales
Sales for Other decreased $15 million for the third quarter and decreased $28 million for the nine months ended September 30, 2024 versus the respective 2023 periods. Underlying sales decreased 6% in the quarter and 3% in the year-to-date periods primarily due to lower volumes in global helium and LAMT. The impact of currency translation was flat in the quarter and year-to-date periods.
Operating profit
Operating profit in Other decreased $7 million in the third quarter and decreased$8 million, or 25%, in the nine months ended September 30, 2024 versus the respective 2023 periods. The decrease in the quarter was driven by higher costs due to helium, which was partially offset by an insurance recovery for the LAMT coatings business in the year-to-date period.
Currency
The results of Linde's non-U.S. operations are translated to the company’s reporting currency, the U.S. dollar, from the functional currencies. For most operations, Linde uses the local currency as its functional currency. There is inherent variability and unpredictability in the relationship of these functional currencies to the U.S. dollar and such currency movements may materially impact Linde's results of operations in any given periods.
To help understand the reported results, the following is a summary of the significant currencies underlying Linde's consolidated results and the exchange rates used to translate the financial statements (rates of exchange expressed in units of local currency per U.S. dollar):
Liquidity, Capital Resources and Other Financial Data
The following selected cash flow information provides a basis for the discussion that follows:
(Millions of dollars)
Nine Months Ended September 30,
2024
2023
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (including noncontrolling interests)
$
4,968
$
4,765
Non-cash charges (credits):
Add: Depreciation and amortization
2,867
2,867
Add: Deferred income taxes
(308)
(172)
Add: Share-based compensation
120
102
Add: Cost reduction program and other charges, net of payments
52
(91)
Net income adjusted for non-cash charges
7,699
7,471
Less: Working capital
(916)
(535)
Less: Pension contributions
(29)
(35)
Other
(140)
(323)
Net cash provided by (used for) operating activities
$
6,614
$
6,578
INVESTING ACTIVITIES
Capital expenditures
(3,247)
(2,636)
Acquisitions, net of cash acquired
(175)
(842)
Divestitures, net of cash divested and asset sales
154
34
Net cash provided by (used for) investing activities
$
(3,268)
$
(3,444)
FINANCING ACTIVITIES
Debt increase (decrease) - net
2,628
227
Issuances (purchases) of common stock - net
(3,120)
(2,900)
Cash dividends - Linde plc shareholders
(1,996)
(1,866)
Noncontrolling interest transactions and other
(261)
(81)
Net cash provided by (used for) financing activities
$
(2,749)
$
(4,620)
Effect of exchange rate changes on cash and cash equivalents
$
(74)
$
(56)
Cash and cash equivalents, end-of-period
$
5,187
$
3,894
Cash Flow from Operations
Cash provided by operations of $6,614 million for the nine months ended September 30, 2024 increased $36 million, or 1% versus 2023. The increase was driven primarily by higher net income adjusted for non-cash charges, partially offset by higher net working capital requirements including lower inflows from contract liabilities from engineering customer advance payments and higher cash taxes.
Linde estimates that total 2024 required contributions to its pension plans will be in the range of approximately $30 million to $40 million, of which $29 million has been made through September 30, 2024.
Investing
Net cash used for investing activities of $3,268 million for the nine months ended September 30, 2024 decreased $176 million versus 2023, due to lower acquisitions, net of cash acquired, and higher divestiture proceeds, net of cash provided, largely offset by higher capital expenditures.
Capital expenditures for the nine months ended September 30, 2024 were $3,247 million, $611 million higher than the prior year due primarily to investments in new plant and production equipment for backlog growth requirements.
At September 30, 2024, Linde's sale of gas backlog of large projects under construction was approximately $7.0 billion. This represents the total estimated capital cost of large plants under construction.
Acquisitions, net of cash acquired were $175 million for the nine months ended September 30, 2024 and relate primarily to packaged gas businesses in the Americas. Acquisitions, net of cash acquired were $842 million, for the nine months ended September 30, 2023 and related primarily to the acquisition of nexAir in the Americas.
Divestitures, net of cash divested and asset sales for the nine months ended September 30, 2024 were $154 million primarily related to $69 million in net proceeds for a divestiture in APAC and settlement with a supplier in the Americas. 2023 divestitures, net of cash divested and asset sales were $34 million.
Financing
Cash used for financing activities was $2,749 million for the nine months ended September 30, 2024 as compared to $4,620 million for the nine months ended September 30, 2023. Cash provided by debt was $2,628 million in 2024 versus $227 million in 2023, driven primarily by higher net debt issuances. In February 2024, Linde repaid €550 million of 1.20% notes that became due and issued €700 million of 3.00% notes due in 2028, €850 million of 3.20% notes due in 2031 and €700 million of 3.40% notes due in 2036. In May 2024, Linde repaid €300 million of 1.875% notes that became due. In June 2024, Linde issued €750 million of 3.375% notes due in 2030, €750 million of 3.500% notes due in 2034 and €700 million of 3.75% notes due in 2044.
Net purchases of ordinary shares were $3,120 million in 2024 versus $2,900 million in 2023. For additional information related to the share repurchase programs, see Part II Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Cash dividends of $1,996 million increased $130 million from 2023 driven primarily by a 9% increase in quarterly dividends per share from $1.275 per share to $1.39 per share, partially offset by lower shares outstanding. Cash used for Noncontrolling interest transactions and other was $261 million for the nine months ended September 30, 2024 versus cash used of $81 million for the respective 2023 period.
The company continues to believe it has sufficient operating flexibility, cash, and funding sources to meet its business needs around the world. The company had $5.2 billion of cash as of September 30, 2024, and has a $5 billion and a $1.5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreements as of September 30, 2024. The company does not anticipate any limitations on its ability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moody’s and Standard & Poor’s.
Legal Proceedings
See Note 8 to the condensed consolidated financial statements.
The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance and liquidity. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.
Quarter Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Adjusted Operating Profit and Operating Margin
Reported operating profit
$
2,086
$
2,052
$
6,365
$
5,996
Add: Cost reduction program and other charges
145
2
145
42
Add: Pension settlement charges
—
—
—
—
Add: Purchase accounting impacts - Linde AG (c)
246
252
730
760
Total adjustments
391
254
875
802
Adjusted operating profit
$
2,477
$
2,306
$
7,240
$
6,798
Reported percentage change
2
%
6
%
Adjusted percentage change
7
%
7
%
Reported sales
$
8,356
$
8,155
$
24,723
$
24,552
Reported operating margin
25.0
%
25.2
%
25.7
%
24.4
%
Adjusted operating margin
29.6
%
28.3
%
29.3
%
27.7
%
Adjusted Depreciation and amortization
Reported depreciation and amortization
$
960
$
959
$
2,867
$
2,867
Less: Purchase accounting impacts - Linde AG (c)
(240)
(249)
(717)
(750)
Adjusted depreciation and amortization
$
720
$
710
$
2,150
$
2,117
Adjusted Other Income (Expense) - net
Reported Other Income (Expense) - net
$
51
$
16
$
111
$
(16)
Add: Purchase accounting impacts - Linde AG (c)
(6)
(3)
(13)
(10)
Adjusted Other Income (Expense) - net
$
57
$
19
$
124
$
(6)
Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost
Reported net pension and OPEB cost (benefit), excluding service cost
$
(45)
$
(35)
$
(144)
$
(125)
Add: Pension settlement charges
(6)
(12)
(6)
(12)
Adjusted Net Pension and OPEB cost (benefit), excluding service costs
Add: Net pension and OPEB cost (benefit), excluding service cost
(45)
(35)
(144)
(125)
Add: Interest expense
68
40
203
129
Add: Income taxes
498
487
1,469
1,355
Add: Depreciation and amortization
960
959
2,867
2,867
EBITDA
$
3,084
$
3,052
$
9,363
$
8,991
Add: Cost reduction program and other charges
145
2
145
42
Add: Purchase accounting impacts - Linde AG (c)
24
20
67
63
Total adjustments
169
22
212
105
Adjusted EBITDA
$
3,253
$
3,074
$
9,575
$
9,096
Reported sales
$
8,356
$
8,155
$
24,723
$
24,552
% of sales
EBITDA
36.9
%
37.4
%
37.9
%
36.6
%
Adjusted EBITDA as a % of Sales
38.9
%
37.7
%
38.7
%
37.0
%
(a) The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
(b) Net of income taxes which are shown separately in “Adjusted Income Taxes and Effective Tax Rate”.
(c) The company believes that its non-GAAP measures excluding Purchase accounting impacts - Linde AG are useful to investors because: (i) the 2018 business combination was a merger of equals in an all-stock merger transaction, with no cash consideration, (ii) the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchase accounting than others, causing results that are not comparable at the reportable segment level, therefore, the impacts of purchase accounting adjustments to each segment vary and are not comparable within the company and when compared to other companies in similar regions, (iii) business management is evaluated and variable compensation is determined based on results excluding purchase accounting impacts, and; (iv) it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.
A summary of each of the adjustments made for Purchase accounting impacts - Linde AG are as follows:
Adjusted Operating Profit and Margin: The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assets and intangible assets (primarily customer related) acquired in the merger and the allocation of fair value step-up for ongoing Linde AG asset disposals (reflected in Other Income/(Expense)).
Adjusted Interest Expense - Net: Relates to the amortization of the fair value of debt acquired in the merger.
Adjusted Income Taxes and Effective Tax Rate: Relates to the current and deferred income tax impact on the adjustments discussed above. The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
Adjusted Income from Equity Investments: Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.
Adjusted Noncontrolling Interests: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.
Net debt is a financial liquidity measure used by investors, financial analysts and management to evaluate the ability of a company to repay its debt. Purchase accounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.
On May 3, 2023, the company filed a Form S-3 Registration Statement with the SEC ("the Registration Statement").
Linde plc may offer debt securities, preferred shares, depositary shares and ordinary shares under the Registration Statement, and debt securities exchangeable for or convertible into preferred shares, ordinary shares or other debt securities. Debt securities of Linde plc may be guaranteed by Linde Inc and/or Linde GmbH. Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc. or Linde Finance under the Registration Statement.
Linde Inc. is a wholly owned subsidiary of Linde plc. Linde Inc. may offer debt securities under the Registration Statement. Debt securities of Linde Inc. will be guaranteed by Linde plc, and such guarantees by Linde plc may be guaranteed by Linde GmbH. Linde Inc. may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.
Linde Finance B.V. is a wholly owned subsidiary of Linde plc. Linde Finance may offer debt securities under the Registration Statement. Linde plc will guarantee debt securities of Linde Finance offered under the Registration Statement. Linde GmbH and Linde Inc. may guarantee Linde plc’s obligations under its downstream guarantee.
Linde GmbH is a wholly owned subsidiary of Linde plc. Linde GmbH may provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc. or Linde Finance offered under the Registration Statement.
In September 2019, Linde plc provided downstream guarantees of all pre-existing Linde Inc. and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.
Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a €15.0 billion debt issuance program, under which Linde plc may offer debt securities. Linde Inc. and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the European debt program.
For further information about the guarantees of the debt securities registered under the Registration Statement (including the ranking of such guarantees, limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released), see “Description of Debt Securities – Guarantees” and “Description of Debt Securities – Ranking” in the Registration Statement, which subsections are incorporated herein by reference.
The following tables present summarized financial information for Linde plc, Linde Inc., Linde GmbH and Linde Finance on a combined basis, after eliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.
(Millions of dollars)
Statement of Income Data
Nine Months Ended September 30, 2024
Twelve Months Ended December 31, 2023
Sales
$
5,865
$
8,143
Operating profit
1,140
1,656
Net income
(216)
735
Transactions with non-guarantor subsidiaries
2,313
3,004
Balance Sheet Data (at period end)
Current assets (a)
$
10,083
$
4,423
Long-term assets (b)
14,083
13,833
Current liabilities (c)
9,564
10,882
Long-term liabilities (d)
68,407
56,546
(a) From current assets above, amount due from non-guarantor subsidiaries
$
6,743
$
1,753
(b) From long-term assets above, amount due from non-guarantor subsidiaries
694
816
(c) From current liabilities above, amount due to non-guarantor subsidiaries
2,003
1,684
(d) From long-term liabilities above, amount due to non-guarantor subsidiaries
47,337
39,458
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to Item 7A. to Part II of Linde's 2023 Annual Report on Form 10-K for discussion.
Item 4. Controls and Procedures
(a)Based on an evaluation of the effectiveness of Linde's disclosure controls and procedures, which was made under the supervision and with the participation of management, including Linde's principal executive officer and principal financial officer, the principal executive officer and principal financial officer have each concluded that, as of the end of the quarterly period covered by this report, such disclosure controls and procedures are effective in ensuring that information required to be disclosed by Linde in reports that it files under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and accumulated and communicated to management including Linde's principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
(b)There were no changes in Linde's internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, Linde's internal control over financial reporting.
See Note 8 to the condensed consolidated financial statements for a description of current legal proceedings.
Item 1A. Risk Factors
Through the quarterly period covered by this report, there have been no material changes to the risk factors disclosed in Item 1A to Part I of Linde's Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities- Certain information regarding purchases made by or on behalf of the company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of its ordinary shares during the quarter ended September 30, 2024 is provided below:
Period
Total Number
of Shares
Purchased
(Thousands)
Average Price Paid Per Share
Total Numbers of Shares
Purchased as Part of
Publicly Announced
Program (1)
(Thousands)
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Program (2)
(Millions)
July 2024
389
$
440.01
389
$
13,750
August 2024
642
$
455.42
642
$
13,457
September 2024
441
$
466.63
441
$
13,251
Third Quarter 2024
1,472
$
454.71
1,472
$
13,251
(1)On October 23, 2023, the company's board of directors approved the repurchase of $15.0 billion of its ordinary shares ("2023 program") which could take place from time to time on the open market (and could include the use of 10b5-1 trading plans), subject to market and business conditions. The 2023 program began on October 23, 2023 and will terminate on the earlier of the date as the maximum authority under the 2023 program is reached or the board terminates the 2023 program.
(2)As of September 30, 2024, the company repurchased $1.7 billion of its ordinary shares pursuant to the 2023 share repurchase program. As of September 30, 2024, $13.3 billion of share repurchases remain authorized under the 2023 program.
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*Indicates a management contract or compensatory plan or arrangement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.