Danbury, CT - Praxair, Inc. reported third-quarter net income and diluted earnings per share of $430 million and $1.43, respectively. These results include an income tax benefit, cost reduction charges taken primarily in Europe, and a pension settlement charge. Excluding these items, adjusted net income and diluted earnings per share were $419 million and $1.39, 2% and 1% below the prior-year quarter, respectively.*
Sales in the third quarter were $2,774 million, 4% below the prior-year quarter. Sales growth was 4%, excluding negative foreign currency translation and cost pass-through effects. Underlying sales grew in all geographic segments except Europe. North American sales growth reflects higher price and solid demand from the manufacturing, energy and metals markets. Sales growth in Asia reflects new plant start-ups for chemicals and metals customers partially offset by reduced shipments to the electronics and photovoltaic industries. Europe and South America sales were negatively impacted by weak macro-economic conditions and significant foreign currency headwinds.
Reported operating profit in the third quarter was $558 million. Adjusted operating profit of $623 million was 1% below the prior-year quarter of $632 million. Excluding currency effects, operating profit grew 7% from price, productivity gains and acquisitions. Adjusted operating margin as a percentage of sales was 22.5%.*
Third-quarter cash flow from operations was a record $746 million and capital expenditures were $547 million, primarily for new production plants under long-term contracts with customers. The backlog of new projects under construction for on-site customers was $2.6 billion with new project signings during the quarter in China and Brazil. The company paid dividends of $164 million and repurchased $106 million of stock, net of issuances. The debt-to-capital ratio was 51.6% and debt-to-EBITDA was 1.9x.* The after-tax return-on-capital and return on equity were 14.2% and 29.2%, respectively.*
Commenting on the financial results and business outlook, chairman, president and chief executive officer Steve Angel said, “Praxair’s relentless focus on operational excellence, project execution and financial discipline will continue to deliver increasing cash flow and earnings per share for our shareholders.
While we are expecting that macro-economic conditions overall may continue to weaken in the near-term, we will continue to drive long-term growth through our strategy of focusing on energy, environmental and emerging markets opportunities.”
For the fourth quarter of 2012, Praxair expects diluted earnings per share to be in the range of $1.35 to $1.40.
For the full year of 2012, Praxair expects sales in the area of $11.2 billion, which on a year-over-year comparison basis reflects negative currency effects and cost pass-through. For the full year of 2012, the company expects adjusted diluted earnings per share to be in the range of $5.54 to $5.59.* Excluding the impact of currency, adjusted full-year diluted earnings per share growth would be approximately 7% to 8% versus 2011.* Full-year capital expenditures are expected to be about $2.2 billion and the adjusted effective tax rate is forecasted to be about 28%.*
Following is additional detail on third-quarter 2012 results by segment.
In North America, third-quarter sales were $1,391 million, 2% below the prior-year quarter. Excluding the effects of lower cost pass-through and currency translation, sales grew 4% primarily from higher pricing and acquisitions of packaged gas distributors. Sales grew to the manufacturing, energy and metals markets. Operating profit of $374 million grew 10% from the prior year due primarily to higher pricing and ongoing productivity initiatives.
In Europe, third-quarter sales were $352 million. Sales were 2% below the prior-year quarter due primarily to negative currency translation which decreased sales by 13%. Lower underlying volumes, primarily in Spain and Italy, were offset by higher price and the consolidation of an acquisition in Scandinavia in 2011. Operating profit of $60 million was $8 million below the prior-year quarter, due to negative currency translation and lower volumes.
In South America, third-quarter sales were $516 million, 15% lower than the prior-year quarter due to the impact of negative currency translation. Underlying sales increased 1% versus the prior-year quarter. Operating profit was $112 million as compared to $140 million in the prior-year period due to negative currency translation and lower merchant and packaged gas volumes.
Sales in Asia were $358 million, up 3% from the prior-year quarter. Higher on-site sales in China from new plant start-ups were partially offset by lower merchant sales to the electronics and photovoltaic industries. Operating profit was $52 million, as compared to $58 million in the prior-year, due to negative currency translation and lower pricing.
Praxair Surface Technologies third-quarter sales were $157 million compared to $163 million in the prior-year quarter. Sales grew 2%, excluding currency translation impact, primarily from higher jet engine and energy coatings. Operating profit was $25 million with underlying growth offset by currency translation impacts and cost increases.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technologies are making the planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. More information on Praxair is available on the Internet at www.praxair.com.
*See the attachments for calculations of non-GAAP measures. Third-quarter 2012 results are adjusted to exclude cost reduction charges, a pension settlement charge and an income tax benefit.