Linde Corporation Performance

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Table of Contents

The company industry
Linde Company’s structure
Prospects
Works Cited
Footnotes

The Linde Group is an international corporation which has been in business for very many decades or even over a century since its establishment in 1880s. The organization has therefore got a very strong historic background build upon its business operations and closely related business deals¹.

As a global organization, the company has grown and expanded over the years, thus becoming one of the famous and most admired organization, both by consumers and prospective investors interested in investing within the company’s industry.

The company occupies the eighth position in the recent Fortune’s ranking of companies, based on the company’s power to attract both clients and investors. On the side of other ranking factors of consideration such global competiveness and financial soundness, the organization falls under the top ten best performing organizations (The Linde Group).

In short, the Linde Corporation is a recognized as a world’s leading chemical and engineering organization. It engages mainly in the production of gases and other industrial chemical besides offering a range of engineering services. The organization is viewed to have its business segmented into three categories, namely: gases segment, engineering and logistic services, of which its core business operations are set around the first two segments mentioned above.

The Gases segment takes the largest portion of the company’s business operations, and its products and services are supplied in the regions of Europe, America, Asia and the developing countries of Africa. The Supply and distribution of the company’s products and service from the other segments mostly shares similar distribution pattern to the one of its core segment².

By the end of the year 2011, the organization had employed a workforce approximately to over 50, 000 employees to undertake the various company’s duties and responsibilities necessary for the realization of its business goals and mission. The employees are located in hundred plus states, where they have their daily and/or annual duties allocated (The Linde Group).

Depending the kind and nature of products and services offered by the organization, Linde Corporation has a number of other companies which it works and relates together in its business operation. Some of the organizations which are linked together with it come from the same sector of industrial category, while others are far from its core industry foundation.

The organization provides basic raw materials to most of its closest competitors, mainly chemicals products. It provides the far and non-competitor companies with products for consumption, hence, most organizations in the food processing and healthcare industries supports the organization’s business through the consumption of their products and services.

The focus on broad and diversified business operations have contributed to the advancement and development of the organization on a yearly basis. In 2010 fiscal year, the organization recorded approximately 12.8 billion from sales (Bloomberg). This was an increase from the previous year’s recorded figure of 2009. The trend on sales increment are been kept within the organization with similar high sales figure being realized in the year 2011.

The company industry

From the assessment of the business nature of Linde’s Company, the organization does not belong to a particular industrial category. It may therefore be evaluated through range of organizations belong to different industrial classification. The organization may precisely be placed under the group of integrated industries (Neely, 68).

Limiting the broad business nature of the organization to chemical and engineering industry, the company’s closest competitors include Air Products & Chemical Inc., AirGas Inc and Praxair Inc. The Praxair Inc. leads the group in terms of market capitalization with market capital estimated at 33.9 billion, while the overall market capitalization averages at 2.3 billion per organization³.

The leading company holds revenue of around 11 billion, while the average revenue held by companies under the chemical industry category is approximately 2.0 billion. It is lucid from the template below that Linde Company had a gross margin of about 20.0%, and the leading organization in gross margin had around 54. 0 %.

The mean gross margin of the organizations within similar category with Linde Corporation was set at almost 26. 0%. This shows that Linde organization was below to industry averaged by 5%. It was also established that the operating margin for the Linde organization was nearly 23.0 %, which was a jump from the previous figure of about 22.0 %.

This figure was a bit higher as compared to the overall mean operating margin percentage of the total number of organizations belonging to the industrial sector of comparison, whose figure was recorded as 7.8 % (Bloomberg).

Linde Company’s structure

In the general view, the organization is structured into three main segments. The three principal segments comprises of the gases, the engineering and final the gist or logistic segment.

However, the latter segment of the organization is almost obscured or dissolved within the first two segments, hence, making the organization mostly to be having two distinct business segments as it is confirmed in the template below.

From the table 1 shown below, it is over that there was sales increment in the fiscal year of 2011 for both of the business segments. The sales for the engineering division increased from 2,461 to 2,531, while sales increment for the gases division was from 10, 228 to 11,061.

The sales’ increments for the two segments of gases and engineering are accounted for by 8.1 and 2.8 percent (The Linde Group). The figures for both sales and change percentages clearly depicts that these are core segments of the organization, and more efforts are put in the gases segment ,of which it is the leading in the organization (Bernard, 97).

Table 1

Gases Division	Year 2011	Year 2010	Change
Sales	11,061	10,228	8.1%
Operating profit	3,041	2,766	9.9%
Operating margin	27.5%	27.0%	+50 bp²
Engineering Division
Sales	2,531	2,461	2.8%
Operating profit	304	271	12.2%
Operating margin	12.0%	11.0%	+100 bp²

The Linde Group.

Performance of the Company

Table 2

	2011	2010	change
Sales revenue	13,787	12,868	7.1%
Operating profit	3,210	2,925	9.7%
Operating margin	23.3%	22.7%	+60
EBIT before amortization of fair value adjustments	2,152	1,933	11.3%
Earning after taxes on income	1,244	1,064	16.9%
Number of employees	50,417	48,430	4.1%

Table 3. Bloomberg.

Income statement	FY 2011	FY 2010
Sales revenue	13,787	12,868
-cost of revenue	8,766	8,347
Gross profit	5,012	4,521
+operating revenue	164	171
-operating expenses	3,384	3,091
Operating income	1,801	1,601
-interest expenses	391	401
–foreign exchange losses	13	15
-net non-operating losses	-222	-214
Pre-tax income	1,619	1,399
-income tax expenses	375	335
Income before XO items	1,244	1,064
-XO loss net of tax	0	0
-Minority interests	70	59
Net Income	1,174	1,005
Abnormal losses (Gains)	-46	-25
Normalized Income	1,138.66	985.99

For the fiscal year 2011, the Linde Group organization sales’ amounted to around 13.7 billion within which there was an increment of almost 7.0 percent. The 7.0 % reflected a great positive change of sales from the previous year’s amount of 12.8 billion, but these were the results prior making some crucial financial adjustments, especially those associated with foreign exchange rates effects. On making the adjustments, the sales increment was accounted for by about 7.5 %.

The overall outcomes of the sales increment indicated that the organization was growing in terms of its sales generation. Looking at the organization’s consolidated income statement shown in table3; the organization’s gross operating income went up from 1,601 to 1,801 in the fiscal year 2011. The increase represented an operating profit growth of 9.7 % (Bloomberg). On a comparative assessment of the figures on sales and operating profit growth, it is overt that the organization had stronger growth on operating profits than that of sales.

Table 4

Financial highlights: Linde, year ended 31 December, 2010

	2010	2009	2008	2007	2006
Sales (€ m)	12,868	11,211	12,663	12,306	8,113
EBIT (€ m)	1,399	838	1,006	1,591	605
Net Profit (€ m)	1,005	591	717	952	1,838
Total Assets (€ m)	26,888	24,381	23,824	24,955	27,918
Diluted earnings per share (€)	—	4.58	5.46	5.02	12.49
Number of Employees	48,430	47,731	51,908	50,485	51,038

ICIS.

In looking at the company’s financial information presented in table 4, the company sales have been increasing on yearly basis since 2006. The sales quantity increased several folds but the increasing trend on sales was altered in year 2009, when they decreased to 11, 211 from 12,663 of the previous year.

While the organization has realized increases in sales, but its net profits, total assets and earning per shares declined for next five year following the year 2006⁴. The company poor performance in these areas appeared to revive in the year 2010 except the earning per share which kept on further decreasing.

With the kind of data and information, the organization has negatively been impacted by the economic downturn even when its sales increased. As the financial crisis eases, the organization performance is improving in those sections in which its financial growth and expansion had been in the verge of collapsing.

Prospects

With the assumption that there will not be a significant deteriorating change in the business operating environments, that is, the business environments including major regional negative factors like increasing unemployment in European and US states and unstable political situation within Asian countries among other potential factors of dampening world’s economic growth will either remain stable, or have a positive improvement, we postulate that the organization will have a positive progression in the current year of 2012.

In this connection, the organization would increase its sales and operating profiting by focusing on gases product sales increment in developed regions of their business operations. It may also do so by putting much effort on the provision of healthcare services and products in the developing nations, especially in the regions of Africa and Asia where disease attacks are very high, hence, healthcare products/services are on demand to check the severe situation.

Works Cited

Bernard, Victor. Business analysis & valuation: using financial statements. Mason: Thomson, 2004. Print.

Bloomberg. Income Statement for Linde AG (LIN). 2011. Web.

ICIS.com. Linde: Strategy and Financial Highlights Information from ICIS. 2010. Web.

Neely, Andy. Business performance measurement: theory and practice. Cambridge: Cambridge University Press, 2002. Print.

The Linde Group. Linde financial highlights. financialreports.linde. 2011. Web.

Footnotes

The Linde Group historic growth and development.
The Linde Group. Linde business divisions and segmentations.
Bloomberg. Income Statement for Linde AG (LIN).
ICIS.com. Linde: Strategy and Financial Highlights Information from ICIS.

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