Linde Plc Q4 FY2024 earnings call

• 2024 was a successful year for Linde, with thanks to over 65,000 employees. - Focus on people, communities, and sustainability: Strive to be good corporate citizens, prioritize safe and diverse workplaces, and have increased low carbon and renewable energy consumption. - Financial performance: Led the industry in key metrics, with 25.9% ROC, 29.5% EBIT margins, and 10% EPS growth. - Backlog and projects: Ended with over $10 billion in backlog, including a record $7 billion gas backlog. Signed 59 long-term agreements for small on-site plants and 18 small bolt-on acquisitions. - Capital allocation and management actions: Emphasized their role in EPS growth, with capital allocation including contractual project backlog, share repurchases, etc., and management actions like digital solutions and AI supporting productivity, price, and cost management.

In 2024, Linde showed strong financial performance. ROC was 25.9%, EBIT margins increased 190 basis points to 29.5%, and EPS grew 10%. Fourth quarter sales were $8.3 billion, flat year-over-year and down 1% sequentially. Excluding foreign exchange and cost pass-through, underlying sales grew 2% vs the prior year and were flat from the third quarter. Price increases tracked globally weighted inflation, and volume growth was flat with project backlog in the Americas and APAC offsetting lower base volumes in EMEA. In terms of revenue contribution, key metrics like ROC, EBIT margins, and EPS were industry-leading.

• Initiated full year EPS guidance of $16.15 to $16.55, representing 4%-7% growth or 8%-11% when excluding an estimated 4% currency headwind. - First quarter EPS guidance range is $3.85 to $3.95. - Capital allocation and management actions are expected to deliver 10+% EPS growth each year, with macro factors like foreign exchange rates and industrial production being uncontrollable. The midpoint of the 2025 guidance range assumes 0% IP growth environment.

• Macro economic factors: Uncertainty in foreign exchange rates and industrial production, which impact earnings. - Geopolitical and regulatory risks: Tariff potential, new administration policies, and regulatory framework uncertainty affecting project progress. - Market competition: Challenges from competitors and industry dynamic changes impacting market share and profitability.

Q: There's a lot of political noise out there right now between tariff potential, new administration, some pullback on green energy funding. How has your discussions with potential project partners evolved?

A: People are taking a bit more time and applying a bit more rigor before going to FID. There's uncertainty around the regulatory framework, but within the IRA, the 45Q provision (predating the IRA) is important and we feel confident it will remain.

Q: Roughly, what is the leverage if IP is up or down 1%? How much EPS does that generally drive for you?

A: Base volumes align with IP. In developing countries, there's higher IP leverage, while in more developed nations, it's closer to a 1:1 ratio. Specific leverage on EPS depends on the volume composition of project and base volumes.

Q: What are your concerns if any of the Linde play book will be now employed given the recent management change?

A: Linde has a leadership position built over decades that can't be replicated. Our operating rhythm, performance culture, and developed networks give us an edge that others can't duplicate.

Q: You talked about health care where you've been around 0% organic growth every quarter in 2024. What have you seen on price versus volumes? And thoughts for 2025?

A: Health care has long-term mid-single-digit growth. The health care sector has hospital care growing reasonably and home care moving forward. There was portfolio rationalization in the home care business out of the U.S., and in 2025, we expect to see the long-term growth trend resume after lapping the portfolio actions.

Q: Your competitor had a large nonrecurring helium sale in the quarter. Does that take down industry helium prices? Or how would you characterize the helium market?

A: The helium market continues to have parts of the world where helium is long (e.g., Asia). Demand is flattish with some softness in electronics and MRI. Pricing remains stable with no significant movements, and there are shifts in supply and demand constantly but nothing unexpected impacting the market.