Praxair Reports Fourth Quarter and Full Year 2008 Results (posted 2/2/09)
For the full year of 2008, reported net income was $1,211 million, and diluted earnings per share were $3.80. Excluding the fourth quarter charge and a $.03 impact of a pension settlement charge taken in the first quarter, net income was $1,336 million, and diluted earnings per share were $4.20. This represents growth of 14% and 16%, respectively, vs. 2007.
Sales in the fourth quarter were $2,403 million compared to $2,523 million in the prior-year quarter. Excluding the negative effect of foreign currency translation, sales were 2% above the prior year. Higher product pricing was offset by a sharp decline in volumes beginning in November, due to significant production cutbacks by customers around the world. For the full year of 2008, sales were $10,796 million, up 15% vs. 2007, primarily from new business, new plant start-ups and higher pricing.
Operating profit in the fourth quarter was $314 million. Excluding the charge, adjusted operating profit was $491 million, compared to $484 million in the fourth quarter of 2007. The company more than offset the sharp drop in base-business volumes by higher pricing and realized cost reductions. For the full year, reported operating profit was $1,883 million. Excluding the charges in the first and fourth quarters, adjusted operating profit of $2,077 million grew 16% from 2007. Higher pricing, new business and productivity programs drove the operating leverage.
The company generated record cash flow from operations in both the fourth quarter and for the full year. Fourth-quarter cash flow of $640 million funded $482 million of capital expenditures, largely for new production plants under contract for customers in North and South America, China and India. Also in the fourth quarter, the company repurchased $177 million of stock, net of issuances. Debt levels increased to finance the share repurchases, resulting in a modestly higher debt-to-capital ratio of 53.8%. For the full year, the company generated cash flow from operations of $2,038 million, or 19% of sales. The after-tax return on capital ratio and return on equity for the year were 15.3% and 26.8%, respectively.
Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “As we anticipated, volumes dropped dramatically in November and December as our customers in the electronics, chemicals and metals industries cut production in the face of falling commodity prices and weakening demand. Other end markets, including food and beverage, healthcare, energy and environmental, remained relatively stable.
“Our outlook for 2009 is cautious as we expect the global economy to remain weak. We moved quickly in the fourth quarter to reduce our cost structure and we will continue to drive our costs lower in 2009 by accelerating our productivity initiatives.”
For the first quarter of 2009, Praxair expects diluted earnings per share in the range of $.90 to $.95. This guidance assumes a sequential slowdown in volumes and a negative currency impact of about 8% vs. the first quarter of 2008 based on current exchange rates.
For the full year of 2009, Praxair expects sales in the range of $9.5 billion to $10 billion. The company expects diluted earnings per share to be in the range of $3.80 to $4.20. Full-year capital expenditures are expected to be $1.4 billion to $1.5 billion, supporting the current backlog of 42 on-site production plants under contract around the world that will come on-stream and underpin revenue and earnings growth in the 2009-2011 period.
Additional details are available at www.praxair.com.