Linde plc (LIN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook: strong growth in electronics and U.S. manufacturing, but challenges in Europe and APAC. Positive restructuring efforts and new customer wins are offset by management's unclear responses and flat sales in key areas. The Q&A reveals cautious optimism but lacks specifics on growth and profitability. With stable EPS guidance and no market cap information, the overall sentiment is neutral, suggesting limited short-term stock movement.
Key Financial Performance
Sales $8.8 billion, increased 6% year-over-year and 2% sequentially. The increase was driven by a 3% foreign currency tailwind due to a weaker U.S. dollar, 2% pricing aligned with global inflation, and 1% volume growth from project startups in Americas and APAC.
Operating Profit $2.6 billion, up 4% year-over-year, resulting in a 29.5% margin. The margin dilution was attributed to timing of other income, which was down over $30 million.
EPS (Earnings Per Share) $4.20, increased 6% year-over-year. The growth was supported by a lower share count, which offset the impact of a higher effective tax rate (ETR).
CapEx (Capital Expenditures) 17% growth year-over-year, driven by spending for the record project backlog and increased acquisitions. This led to more capital-intensive growth, negatively affecting Return on Capital (ROC).
Operating Cash Flow Exceeded $3 billion in the fourth quarter, supported by stronger collections and inventory management. Operating cash flow is seasonally stronger in the second half of the year due to timing of tax incentives and interest cash payments.
Return on Capital (ROC) 24.2%, leading the industry. However, it was negatively affected by increased capital-intensive growth and is expected to remain in the low to mid-20% range for the next few years.
Shareholder Returns More than $7 billion returned to shareholders through dividends and share repurchases, supported by disciplined management of operating and investing cash flows.
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Operating Highlights
New gas application wins: Signed more than 90 new gas application wins, many to help customers further decarbonize their operations.
Rocket propellant investment: Over $0.5 billion investment for rocket propellant to contracted space launch customers.
Clean energy projects: Two-thirds of the project backlog supports contracted clean energy projects.
Space launch sector: Continued investment in the space launch sector to expand network and support growth opportunities.
Advanced electronics fabs: Linde remains the anchor industrial gas supplier for some of the largest and most successful clean energy and advanced electronics fabs globally.
Safety performance: Achieved best-in-class safety performance, ensuring employees and contractors return home safely every day.
Environmental footprint: Increased active low-carbon power sourcing by 23%, enabling 50% of Linde's annual power consumption to be low carbon, and reduced absolute CO2 emissions by almost 2 million metric tons.
Financial performance: Achieved record levels for EPS, operating cash flow, and operating margins, with a 24.2% return on capital and over $7 billion returned to shareholders.
Restructuring actions: Initiated additional restructuring actions to align resources with uneven geographic growth, with benefits expected in the second half of 2026.
M&A pipeline: Robust pipeline for accretive tuck-in acquisitions to enhance supply density.
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Risk or Challenges
Economic Environment: The divergence in economic conditions, with strong investment in AI and digital infrastructure but weak performance in traditional industrial markets like manufacturing, metals, chemicals, and energy, creates challenges for customers and impacts Linde's operations.
Geographic Growth Disparities: Growth remains geographically uneven, with certain regions showing no signs of near-term recovery. This necessitates restructuring actions to align resources, which could involve costs and operational adjustments.
Industrial Softness in EMEA: Continued industrial softness in the EMEA region has negatively impacted base volume growth, posing a challenge to overall performance.
Capital-Intensive Growth: Increased capital expenditures for project backlogs and acquisitions have led to more capital-intensive growth, negatively affecting return on capital (ROC). This trend is expected to persist in the low to mid-20% range for the next few years.
China Deflationary Conditions: Deflationary conditions in China have created challenges, particularly in the APAC region, affecting pricing and volume growth.
Helium Supply Challenges: Challenges associated with helium supply in the APAC region have impacted operations and growth in that area.
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Guidance & Outlook
EPS Growth for 2026: Projected EPS growth for 2026 is in the range of $17.40 to $17.90, representing a 6% to 9% increase over 2025. This assumes a 1% FX tailwind and 0% base volume change at the midpoint.
Currency Impact: A 1% currency tailwind is expected for the full year 2026, with a 3% FX tailwind anticipated in the first quarter due to a weaker U.S. dollar baseline in Q1 2025.
Capital Expenditures and Growth Investments: Capital expenditures are expected to remain high, driven by a record project backlog of $10 billion and increased acquisitions. This trend is anticipated to result in capital-intensive growth, with return on capital (ROC) projected to stay in the low to mid-20% range for the next few years.
Project Backlog and Clean Energy Investments: The company has a record project backlog of $10 billion, with two-thirds supporting contracted clean energy projects. Over $0.5 billion is allocated for investments in rocket propellant for contracted space launch customers. Continued investment in clean energy and advanced electronics fabs is expected, with new signature fab wins anticipated in the coming months.
Restructuring Actions for 2026: Additional restructuring actions have been initiated to align resources with uneven geographic growth. The benefits of these actions are expected to materialize in the second half of 2026, complementing existing productivity initiatives.
Market Conditions and Volume Assumptions: The company assumes 0% base volume change for 2026 at the midpoint of guidance, reflecting cautious expectations amid uncertain macroeconomic conditions.
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Shareholder Return Plan
Dividend Payments: Another $7.4 billion was returned to owners as dividends or share repurchases. This level of distribution requires a focused and disciplined management of both operating and investing cash flows.
Share Repurchase Program: Though, we stepped up share repurchases in the fourth quarter to $1.4 billion, as we saw an attractive buying opportunity from the stock decline. Sustainable stock repurchase programs are anchored by consistent excess free cash flow after dividend payments, something Linde has demonstrated for several decades.
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Key Q&A
Q:Are there signs of progress in Europe, and can pricing reach roughly +2% in the region during 2026?
A:The market in Europe continues to see broad-based weakness, with some bright spots in Scandinavia and cautious optimism in Germany. Pricing in Europe has a strong track record, and the expectation is to find pricing in line with weighted CPI in 2026.
Q:What are the growth expectations for different end markets and geographies globally?
A:The U.S. market remains resilient with growth in electronics and commercial space. LATAM sales are stable, with strong performance in Brazil but flat in Canada. In APAC, China shows signs of bottoming out, with growth in merchant business and optimism in India due to trade agreements. Australia is stabilizing, and ASEAN remains flat. Electronics is a standout growth area globally.
Q:What is the trajectory of the sale of gas backlog, and can it return to $7 billion?
A:The backlog is expected to shrink as projects worth $2.5 billion to $3 billion start contributing to revenue in 2026. The target is to grow the backlog back to $7 billion, with optimism about large projects in the pipeline.
Q:Can the $230 million restructuring in Q4 lead to a 70 basis point margin uplift in 2026?
A:Restructuring paybacks typically occur over two years. The expectation is to exceed the long-term margin range of 30 to 50 basis points in 2026.
Q:What is the view on the space opportunity and its contribution to growth?
A:The space opportunity is a secular growth area, with Linde supplying 65%-75% of launches. Investments in Texas and Florida support this growth. While it is factored into guidance, it is not yet large enough to significantly impact overall company performance.
Q:What is the impact of 90 new customer wins in oxyfuel combustion?
A:The wins are spread globally, with a concentration in China. The technology helps reduce emissions and natural gas consumption, contributing to growth and customer satisfaction.
Q:What is the impact of $400 million in bolt-on acquisitions in 2025, and are there opportunities for more?
A:The acquisitions contributed 1% to sales in 2025, with similar expectations for 2026. Opportunities for bolt-ons remain, particularly in North America and parts of Asia, with a focus on synergies and core strengths.
Q:What is the status of the new 6-point blueprint for growth?
A:The Growth Six has been formalized and rolled out, focusing on areas like small on-site projects, acquisitions, and application sales. Progress is being measured, and the organization is aligned with these goals.
Q:What are the challenges in APAC manufacturing, and what is driving growth in the 'other' segment?
A:APAC manufacturing faces weakness in ASEAN and South Pacific, with some strength in China and India. The 'other' segment includes helium supply, materials for aerospace and 3D printing, and corporate overhead, with materials performing well.
Q:What is the impact of U.S. manufacturing PMIs turning positive, and how is helium expected to perform?
A:It is too early to tell the impact of positive PMIs, but there is cautious optimism for U.S. manufacturing growth. Helium remains a low single-digit business, with pricing showing high single-digit negatives and no significant changes expected in 2026.
Q:What are the trends in the U.S. packaged gas business and other leading indicators?
A:Hard goods automation equipment sales are up, indicating preparation for growth. Consumables and gas sales remain flat. Automotive and large ag equipment are cautious but expect improvement in the second half of the year.
Q:Are the restructuring efforts addressing cyclical or structural issues?
A:The restructuring is structural, focusing on headcount and organizational changes, particularly in the Engineering segment. This positions the company for leverage when volumes pick up.
Q:What is the timeline for TSMC's Arizona Fab 2, and how does gas intensity impact profitability?
A:Fab 2 is ramping up as planned, with higher gas intensity due to advanced nodes and new gases. This contributes positively to profitability.
Q:What are the pricing expectations for Americas and APAC in 2026?
A:Pricing is expected to align with globally weighted CPI, consistent with the company's long-term trend of positive pricing.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the following: 1) Specific growth rates for different geographies and end markets, citing the dynamic nature of the market and the need for more data in April. 2) Detailed timeline and profitability impact of TSMC's Arizona Fab 2 ramp-up. 3) Exact contribution of bolt-on acquisitions to EPS growth. 4) Specific details on the Growth Six blueprint and its measurable outcomes. 5) Clear guidance on helium's performance beyond general trends.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI infrastructure
CEO Chairman
Chairman environment
Communities employee
Communities stewardship
Linde citizen
Linde gas
Linde laser
Linde power
Linde record
Linde tenure
Linde term
Pelaez Head
People Communities
QA CEO
Relations webcast
SP manufacturing
Slide enterprise
accolade neighbor
accomplishment Slide
acquisition supply
action cash
action footprint
action resource
activity hand
addition community
addition gas
appendix Vice
application win
approach foundation
area owner
carbon
level
project addition
reduction
sector
shareholder
LIN Transcript
Linde plc (LIN) Q4 2025 Earnings Call Transcript
Unknown2-5
The earnings call presents a mixed outlook: strong growth in electronics and U.S. manufacturing, but challenges in Europe and APAC. Positive restructuring efforts and new customer wins are offset by management's unclear responses and flat sales in key areas. The Q&A reveals cautious optimism but lacks specifics on growth and profitability. With stable EPS guidance and no market cap information, the overall sentiment is neutral, suggesting limited short-term stock movement.
Linde plc (LIN) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary indicates a generally positive outlook, with strong financial performance and optimistic guidance. The Q&A section reveals concerns about pricing and market risks, but management's responses suggest confidence in overcoming these challenges. Key positive factors include a strong project backlog, strategic investments, and growth in key sectors like AI and semiconductors. The overall sentiment is positive, with expectations of continued growth and resilience against economic uncertainties.
Linde plc (LIN) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call summary indicates strong financial performance with record backlog, increased dividends, and stock repurchase. The Q&A reveals management's confidence in project pipeline, strong EBIT growth in Europe, and strategic positioning for industrial recovery. Despite some bearishness on Europe, long-term prospects are positive. The guidance is optimistic, and strategic investments are ongoing. These factors suggest a positive stock price movement.
Linde plc (LIN) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call presents a mixed outlook. Financial performance shows stability with some growth, but economic uncertainties, competitive pressures, and supply chain challenges pose risks. The Q&A reveals cautious optimism about clean energy projects and EMEA margins. Positive shareholder returns through dividends and buybacks are offset by weak guidance and economic headwinds. The absence of a new partnership announcement and the currency headwind further neutralize the sentiment. Given the balanced positives and negatives, the stock price is likely to remain stable, resulting in a neutral outlook.
LIN Report
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