Conference Call FY Results 08 March 2018
Disclaimer Forward-looking Statements This discussion may contain forward-looking statements about Linde and its businesses, including statements concerning its strategies, future growth potential of markets and products, profitability in specific areas, future product portfolio, and development of and competition in economics and markets, as well as statements concerning the proposed business combination between Linde and Praxair. Any such forward-looking statements involve known and unknown risks which may cause actual results to differ significantly from any future results expressed or implied. While we believe that the assumptions made and the expectations reflected in today's discussion are reasonable, no assurance can be given that such assumptions or expectations will prove to have been correct. We undertake no obligation to update or revise the forward-looking statements in today's discussion. 2
Agenda Part 1 Strategic plan Performance focus Quality growth Value creation Aldo Belloni Part 2 FY Results Sven Schneider Part 3 Outlook 2018 Sven Schneider Appendix 3 3
Performance FY Highlights [EUR] FY 2016 FY yoy [%] yoy [%] adj.for FX Revenue [m] 16,948 17,113 +1.0 +2.1 Operating profit [m] 4,098 4,213 +2.8 +4.1 Operating margin [%] 24.2 24.6 +40bp Operating cash flow [m] 3,400 3,478 +2.3 EPS before special items (undiluted) 7.00 9.04 +29.1 Revenue growth driven by industrial gases business and higher contribution from Engineering Improved operating margin in Gases (+20bp) and Engineering (+90bp) Higher Group cash flow supported by increase in Q4 of +28% versus prior year quarter Increase in EPS before special items (undiluted) due to one-time deferred tax income of EUR 250m resulting from reduction in the US tax rate ROCE up from 9.4% to 10.2% All figures from continuing operations. Please see definitions of key financial figures in the appendix. 4
Strategic plan Performance focus Ahead of plan to deliver targeted savings LIFT (2016 2019) Implementation of LIFT measures ahead of plan: EUR 40m of savings planned for 2018 realised in Expected net cost savings ~160 ~90 ~550 SG&A expenditures before special items down year on year by 7.4% in FY Number of employees reduced by 2,110 versus year-end 2016 Total restructuring costs of EUR 396m recognized as special items during 2016- in line with expectations ~160 ~370 FOCUS (2015 ) ~100 Achieved targeted cost savings of EUR ~180m by end of ~40 ~180 2015 2016 2018 2019 Total LIFT Savings realised ahead of plan LIFT FOCUS 5
Strategic plan Quality growth Using innovation to drive efficiency and open new markets Automated Filling Plants Digitalisation Hydrogen Mobility 3 pilot plants on-stream in Automation of sorting, inspecting, transporting and filling End-to-end cylinder processing time reduced to only 40 minutes Savings from consolidation of filling plants Modular and scalable concept Adaptable to local market situation (i.e. customer requirements, competitive landscape, cost conditions) Predictive maintenance Leverage decades of experience in plant engineering and apply proprietary build algorithms on big data from Remote Operating Centres Pilots running, targeting millions in savings in 2018 EVOS DCi Integrated, cloud-based tracking of cylinder location and status Benefits include reduced costs, higher efficiency and improved safety & handling World s first hydrogen train Partnership with Alstom for emission-free commuter trains running in Lower Saxony (Germany) Linde awarded long-term hydrogen fuel supply contract Hydrogen fueling stations Acquired new customers for filling station technology in Europe, US, China and South Korea 6
Strategic plan Quality growth Increased backlog from project wins of EUR ~600m in Total investments for committed projects by on-stream date Committed projects by region ~600 ~550 ~400 ~800 ~25% ~55% ~20% 2016 2018E 2019E 2018E Projects > 10m Euros EMEA APAC Americas Major on-streams in FY ASU for ArcelorMittal steelworks in Eisenhüttenstadt, Germany JV to supply JSC KuibyshevAzot s chemicals production in Samara, Russia Spectra plant to supply Electronics customer BOE s new display production in Fujian, China Major wins in FY 6 th JV with Sinopec to supply customer ZRCC and pipeline network in Ningbo cluster, China New ASU to expand on-site production capacity in central Malaysia to support economic and export growth Additional ASU for ArcelorMittal in Temirtau, Kazakhstan Expected major on-streams in 2018 JV with Erdemir Group for new ASU in Iskenderun, Turkey Decaptivation of 2 ASUs via Sinopec JV for ZRCC in Ningbo, China Spectra-N on-site nitrogen generators to supply display fabs in Chengdu and Xianyang administered by the China Electronics Corporation 7
Strategic plan Quality growth Gases capex/sales ratio of 12-14% in 2018 Gases capex/sales ratio 15.9% 16.1% 13.0% 13.0% 13.5% 12.4% 11.1% 11.7% 11.0% Gases capex 1,029 1,326 1,439 2,005 2,254 1,890 1,881 1,660 1,752 ~12 14% of Gases sales 2009 2010 2011 2012 2013 2014 2015 2016 2018E 8
Strategic plan Sound financial position Strong operating cash flow & further deleveraging in Operating cash flow Operating profit Change in working capital FY 2016 4,098 +279 FY 4,213 +216-901 Net debt / operating profit 2.3 x 2.1 x 2.1 x 1.9 x 1.7 x 1.4 x Income taxes paid -446-453 Other changes -531-498 733 Operating cash flow from continuing operations 3,400 3,478 2012 2013 2014 2015 2016 Group cash flow up year-on-year by 2.3% supported by higher operating profit and efficient working capital management Other changes include special items related to restructuring and planned merger Financing activities in include issue of EUR 1bn senior bond (5 year duration, 0.25% fixed coupon) and redemption of EUR 1bn and NOK 2bn bonds Net financial debt of EUR 5.9bn as of 31 st of December 9
Strategic plan Value creation Proposed dividend of EUR 7.00 includes E & ¾ of 2018E Dividend development [EUR per share] 7.00 3.10 ¾ of 2018E 1.80 stable 1.80 22.2% 2.20 13.6% 2.50 8.0% 2.70 11.1% 3.00 5.0% 3.15 9.5% 3.45 7.2% +5.4% 3.70 3.90 Full year E 2008 2009 2010 2011 2012 2013 2014 2015 2016 E Payout ratio* 42% 51% 37% 37% 41% 42% 44% 51% 53% 43% 2015, 2016 and figures from continuing operations. 2015, 2016 *Based and on EPS before figures special from continuing items. operations. *Based on EPS before special items for each respective year. 10
Agenda Part 1 Strategic plan Performance focus Quality growth Value creation Aldo Belloni Part 2 FY Results Sven Schneider Part 3 Outlook 2018 Sven Schneider Appendix 11 11
Group Revenue and operating profit by division Margin expansion in both Gases and Engineering Revenue Operating profit 16,948 +1.0% 17,113 24.2% 4,098 +2.8% 4,213 24.6% 14,892 +0.6% 14,988 28.3% 4,210 +1.4% 4,268 28.5% 2,351-295 +1.6% 2,388-263 8.3% +12.2% 196 220-308 -275 FY 2016 FY FY 2016 FY 9.2% Gases Engineering Other/Cons. Gases Revenue driven by organic growth and natural gas price effects but restrained by currency Gases Engineering Other/Cons. Gases Margin improvement of 40bp to 28.7% after adjusting for higher natural gas prices Engineering Revenue at upper end of guidance range Operating profit margin Reported growth Engineering Margin improvement due to successful project execution and improved capacity utilisation 12
Gases Division Revenue bridge Price/Volume increase of +1.5% in Q4 14,988 14,892-1.0% +0.6% -1.2% +1.2% + 2.8% 14,816 FY 2016 Natural Gas Currency FY 2016 comparable Price/Volume FY 13
Gases Division Revenue by product area Comparable growth excluding Healthcare of +4.3% Comparable growth* +4.3%** Comments / Additional effects Healthcare 14,816 3,673 +1.2% -8.5% 14,988 3,361 Healthcare Development impacted by Competitive Bidding and divestment of Specialty Pharma, -5.7% excluding consolidation effects On-site 3,800 +5.1% 3,994 On-site Solid growth from start-ups and ramp-ups in all operating segments Bulk 3,563 +5.7% 3,767 Bulk Positive growth development in all geographies, most notably in Asia Cylinder 3,780 +2.3% 3,866 Cylinder Positive growth momentum in EMEA and Asia FY 2016 FY *Excludes currency and natural gas price effects. **Comparable growth excluding Healthcare. 14
Gases Division Revenue by operating segment Solid comparable growth in EMEA and Asia EMEA ASIA/PACIFIC AMERICAS Revenue Revenue Revenue 5,736 +2.4% +2.9% 5,876 4,109 +6.5% +6.7% 4,378 5,232-6.2% -5.4% 4,908 FY 2016 FY FY 2016 FY FY 2016 FY Highest growth contribution from Northern Europe, Middle East and Eastern Europe Positive growth development in all areas Positive growth development in Bulk and On-site in all regions 9.3% comparable growth in Asia Situation in South Pacific has stabilised on a low level Positive development in On-site and Bulk in North America Macro-economic situation in South America remains tepid Significant headwinds from Competitive Bidding, Specialty Pharma and Specialty Gases Reported growth Comparable growth: excluding currency and natural gas price effects 15
Gases Division Operating profit by operating segment Operating profit margin of 28.5 percent EMEA ASIA/PACIFIC AMERICAS Operating Profit Operating Profit Operating Profit 1,807 +3.7% 1,874 1,084 +10.9% 1,202 1,319-9.6% 1,192 31.5% 31.9% 26.4% 27.5% 25.2% 24.3% FY 2016 FY FY 2016 FY FY 2016 FY EMEA margin up by 40bp aided by LIFT savings, growth as well as pricing Higher margin in Asia/Pacific supported by volume growth, pricing, restructuring and sale of assets Margin in Americas supported by positive On-site and Bulk development but impacted by headwinds from Competitive Bidding, higher natural gas prices as well as Specialty Gases Reported growth Operating profit margin 16
Engineering Division Key figures Strong margin improvement by 90bp Revenue 2,351 2,388 Order intake Order backlog +1.6% 4,386 4,178 FY 2016 FY -4.7% Operating profit 2,257 2,390 196 220 +5.9% +12.2% 8.3% 9.2% FY 2016 FY FY 2016 FY 31/12/2016 31/12/ Revenue development in line with progress of projects Margin improvement due to successful project execution and improved capacity utilisation New project wins including polypropylene production for Braskem America in La Porte, Texas, USA and natural gas plants related to third phase of Gazprom s Amur GPP project Reported growth Operating profit margin 17
Agenda Part 1 Strategic plan Performance focus Quality growth Value creation Aldo Belloni Part 2 FY Results Sven Schneider Part 3 Outlook 2018 Sven Schneider Appendix 18 18
Outlook 2018 Group Revenue [EUR bn] Gases: ±0 to +4% versus adj. 17.1 Engineering: 2.2 to 2.6 bn -0.5-0.4 16.2 Group: ±0 to +4% versus adj. FX IFRS 15 adjusted Growth Outlook 2018 Dependent on economic development All figures from continuing operations and Linde on a standalone basis only. adjusted based on spot rates as of 31 December and IFRS 15 accounting adjustment. 19
Outlook 2018 2018 Group Revenue ±0 to +4% versus adjusted for FX and IFRS 15 Operating profit ROCE ±0 to +5% versus adjusted for FX Around 10 percent Gases Division Revenue ±0 to +4% versus adjusted for FX and IFRS 15 Operating profit ±0 to +5% versus adjusted for FX Engineering Division Revenue Operating margin EUR 2.2 to 2.6 billion Around 9 percent All figures from continuing operations and Linde on a standalone basis only. Please see definitions of key financial figures in the appendix. 20
Strategic plan Focus on LIFTing margins, returns and shareholder value Performance focus Cost management LIFT programme ahead of plan to deliver savings targets Portfolio optimisation Gases: Global portfolio optimisation and selective M&A Engineering: Realised capacity adjustments and efficiency gains Gist classified as discontinued operation Quality growth Leverage strengths Innovative initiatives for efficiency and growth in the fields of automation, digitalisation and hydrogen mobility Added EUR ~600m of growth projects to pipeline in Sound financial position Strong operating cash flow of EUR 3,478bn in FY Financial flexibility from strong cash flow and balance sheet Value creation Further increase in dividend proposed dividend up year on year by +5.4% LIFT operating profit margin LIFT return on capital employed LIFT shareholder value 21
Agenda Part 1 Strategic plan Performance focus Quality growth Value creation Aldo Belloni Part 2 FY Results Sven Schneider Part 3 Outlook 2018 Sven Schneider Appendix 22 22
Group Potential currency impact Potential impact on revenue and operating profit in 2018 Group revenue adjusted for FX* 17,113-260 -44-29 -19-17 -17-15 -12-10 -10-8 -7-7 -55 16,603 USD AUD CNY BRL TWD GBP ARS INR NZD CHF NOK SEK SAR Others adj. for FX* Group operating profit adjusted for FX* 4,213 Avg. rate adj. for FX* -54 USD -12 AUD -10 CNY -5 BRL -7 TWD -4 GBP -3 ARS 1.13 1.47 7.63 3.61 34.4 0.877 18.8 73.6 1.59 1.11 9.33 9.64 4.24 1.20 1.54 7.81 3.97 35.6 0.888 22.3 76.6 1.69 1.17 9.85 9.84 4.49 0 INR -4 NZD -2 CHF -3 NOK -1 SEK -3 SAR -19 Others 4,087 adj. for FX* All figures from continuing operations. *Based on spot rates as of 31 December. 23
Gases Division Potential currency impact Potential impact on revenue and operating profit in 2018 Gases revenue adjusted for FX* 14,988-244 -44-27 -19-17 -11-15 -12-10 -7-8 -7-7 -55 14,506 USD AUD CNY BRL TWD GBP ARS INR NZD CHF NOK SEK SAR Others adj. for FX* Gases operating profit adjusted for FX* 4,268 Avg. rate adj. for FX* -59 USD -12 AUD -10 CNY -5 BRL -7 TWD -4 GBP -3 ARS 1.13 1.47 7.63 3.61 34.4 0.877 18.8 73.6 1.59 1.11 9.33 9.64 4.24 1.20 1.54 7.81 3.97 35.6 0.888 22.3 76.6 1.69 1.17 9.85 9.84 4.49-2 INR -4 NZD -2 CHF -3 NOK -1 SEK -3 SAR -16 Others 4,138 adj. for FX* All figures from continuing operations. *Based on spot rates as of 31 December. 24
Group Currency impact Impact on revenue and operating profit in FX impact on Group revenue in FY -113 17 4-12 1 16 0-11 13-50 11-61 28-24 -181 USD TWD INR MYR COP RUB CAD ARS BRL CNY AUD GBP ZAR Other Total FX impact on Group operating profit in FY -26 5 1-4 0 2 0-2 2-12 3-22 7-4 -50 USD TWD INR MYR COP RUB CAD ARS BRL CNY AUD GBP ZAR Other Total All figures from continuing operations. 25
Group BOC PPA Expected depreciation & amortisation Development of depreciation and amortisation Impact in : EUR 165m Expected range adjusted due to exchange rate effects Expected range 2018 155 165 2019 140-155 BOC PPA Depreciation Planning 300 2022 < 120 250 200 150 100 50 0 All figures from continuing operations. Based on spot rates as of 31 December. 26
Group Definition of key financial figures Operating Profit Earnings per Share (EPS) before special items Earnings per Share (EPS) reported Return on Capital Employed (ROCE) Return Return Return Return EBIT before special items adjusted for amortisation of intangible assets and depreciation of tangible assets Profit for the period before special items attributable to Linde AG shareholders Profit for the period attributable to Linde AG shareholders EBIT before special items Shares Shares Average Capital Employed Number of weighted average outstanding shares Number of weighted average outstanding shares Equity (incl. non-controlling interests) + financial debt + liabilities from finance leases + net pension obligations - cash, cash equivalents and securities - receivables from finance leases 27
Investor Relations Financial calendar 08 Mar 2018 FY 25 April 2018 Q1 2018 03 May 2018 AGM Dec Jan 2018 Feb 2018 Mar 2018 April 2018 May 2018 Jun 2018 Jul 2018 Aug 2018 Sep 2018 Contact Phone: +49 89 357 57 1321 Email: investorrelations@linde.com Internet: www.linde.com Linde share (tendered) Type of share: Bearer shares Stock exchanges: All German stock exchanges Security reference number: ISIN DE000A2E4L75 CUSIP A2E4L7 Linde share (untendered) Type of share: Bearer shares Stock exchanges: All German stock exchanges Security reference number: ISIN DE0006483001 CUSIP 648300 28