Danbury, CT - Praxair, Inc. reported first-quarter net income and diluted earnings per share of $448 million and $1.51, 8% and 9% above the prior-year quarter, respectively.*
Sales in the first quarter were $3,026 million, 5% above the prior-year quarter, and up 9%, excluding foreign currency. Organic sales grew 6% driven by higher on-site volumes from new project start-ups primarily in North America and Asia. By end-market, sales growth was strongest for energy, chemicals, and food and beverage customers, as compared to the prior-year quarter. Acquisitions contributed 2% growth in the quarter.
Operating profit in the first quarter was $675 million, 8% above the prior-year quarter. Excluding negative currency translation impacts, operating profit rose 12% driven by higher volumes, higher pricing, acquisitions and productivity gains. Operating profit as a percentage of sales was a strong 22.3% and the EBITDA margin grew to 32.0%.*
First-quarter cash flow from operations was $536 million and capital expenditures were $393 million, primarily for new production plants under long-term contracts with customers. Acquisition expenditures were $124 million, related primarily to Italian industrial gas and U.S. packaged gas businesses. The company paid dividends of $191 million and repurchased $237 million of stock, net of issuances. During the quarter, the company issued €600 million of 6-year notes with a 1.5% coupon. The after-tax return-on-capital and return on equity for the quarter were 12.6% and 28.7%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair delivered solid results in the first quarter with sales growth of 9% and operating profit growth of 12%, excluding the impact of currency headwinds. Organic growth of 6% reflected contributions from new projects in North America and Asia, as well as modest volume growth in our South America, Europe and Surface Technologies operating segments. Praxair’s relentless focus on achieving productivity benefits and higher price to offset cost inflation produced strong operating leverage and an operating margin of 22.3%.
We expect base volumes for the remainder of 2014 to continue to reflect modest growth in-line with the current macro-economic environment. Through continued operational excellence, project execution and financial discipline, we expect to continue to deliver increasing cash flow and earnings per share. We expect contribution from new projects and acquisitions to increase return on capital in the second half of the year.”
For the second quarter of 2014, Praxair expects diluted earnings per share in the range of $1.55 to $1.60.
For the full year of 2014, Praxair expects sales in the range of $12.4 billion to $12.8 billion. The company expects diluted earnings per share to be in the range of $6.30 to $6.50, 6% to 10% above the prior year.* Full-year capital expenditures are expected to be about $1.8 billion, and the effective tax rate is forecasted to remain at about 28%.
Following is additional detail on first-quarter 2014 results by segment.
In North America, first-quarter sales were $1,580 million, 8% above the prior-year quarter, and up 10% excluding negative currency translation impacts. Organic sales growth was 5%, driven primarily by higher sales to the energy end-market as on-site volumes increased from new project start-ups for hydrogen supply to refinery customers and higher pricing. Acquisitions contributed 3% growth. Operating profit was $378 million, 6% above prior-year.
In Europe, first-quarter sales were $397 million, up 7% versus the first quarter of 2013. Acquisitions, primarily Dominion Technology Gases, contributed 5% growth. Organic sales growth of 2% came from higher pricing and higher volumes. Operating profit was $79 million, an increase of 27% versus the prior-year quarter, including positive currency translation and acquisitions. Underlying operating profit growth was driven by higher volumes, higher price and lower costs.
In South America, first-quarter sales were $488 million. Sales grew 7% from the prior-year quarter, excluding a 15% negative currency impact, primarily due to volume growth and higher overall pricing. Operating profit was $113 million, up 16% excluding negative currency translation, due to higher volumes and higher pricing partially offset by cost inflation.
Sales in Asia were $392 million in the quarter, up 7% from the prior year driven by volume growth in India, China, and Korea and higher pricing for helium and rare gases. Sales growth came primarily from metals, energy and electronics customers. Operating profit was $75 million, an increase of 19% versus the prior-year period due primarily to volume growth and higher pricing.
Praxair Surface Technologies had first-quarter sales of $169 million, 4% above prior year. Organic sales increased 3% from higher volumes of aviation coatings and higher price. Operating profit was $30 million as compared to $26 million in the prior year, due primarily to higher volumes, price and productivity gains.