INSIGHT: Linde’s engineering wins show investment on the rise

02 November 2010 16:51  [Source: ICIS news]

By Nigel Davis

BRUSSELS (ICIS)--The increasing strength of the economic recovery, and its breadth, are reflected in Linde’s third-quarter and nine-months financial results. Sales and profits over both periods are sharply up compared with the year before but that is hardly surprising. Linde is a gases and engineering firm and the uptick in both parts of the business is encouraging.

The company says that engineering construction demand has “increasingly stabilised” over the course of 2010. Investment activity has improved in its four major businesses: olefins plants, natural gas plants, air separation units and hydrogen and synthesis gas facilities.

The company benefited from the fact that, increasingly, small and medium-sized projects were being commissioned.

It has signed some blockbuster deals in the past but its order intake also looks as though it has become more broad-based.

The engineering division’s sales in the first nine months of the year were on a par with those made in the similar period of 2009: at €1.67bn ($2.32bn) from €1.68bn but operating profits were up 26.9% at €184m as a number of individual projects were executed.

“The breadth of the nascent economic recovery can be seen from the regional spread of order intake,” Linde says.

New orders after nine months were 1.6% up at €1.54bn and they came from an increased number of individual projects. The figure for last year included the €1.08bn deal to construct the 1.5m tonne/year cracker for the Borouge 3 project in Abu Dhabi.

Among the projects won this year are a joint engineering, procurement and construction contract with South Korea’s Samsung Engineering for the Tasnee Sahara Olefins complex in Saudi Arabia. Linde is also going to build the first part of an acrylic acid complex in Al Jubail for Dow Chemical and expects follow-on deals from the project.

Geographically, project wins were made in Asia Pacific and the Middle East which accounted respectively for 35.1% and 16.2% of the total. But 25.8% of new orders came from Europe, 11.6% from Africa and 9.0% from North America.

“This is the first sign that the willingness to invest is gradually increasing, even in the mature western economies,” Linde says.

The company says it has been taking most orders for air separation and olefins plants - both close to 30% each of the total with the remainder split 13.3% for natural gas facilities and 18.1% for hydrogen and synthesis gas plants.

It looks as though the engineering division’s sales in 2010 will be at least as great as those in 2009 which is no mean feat, and the order backlog after nine months of €4.14bn compares with a backlog of €4.22bn at the end of 2009.

The division was able to lift the operating margin to 10% over the period versus a target of 8% which shows how successfully efficiencies have been pushed through this year.

($1 = €0.72)

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By: Nigel Davis
+44 20 8652 3214



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