APD Air Products and Chemicals Inc

Praxair Inc. (PX) reported encouraging second quarter 2011 financial results. The company reported adjusted earnings per share of $1.38 for the quarter, above the Zacks Consensus Estimate of $1.37 and up 16% year over year. The results were in line with the higher end of management’s guidance range of $1.33-$1.38.

Revenue

Total revenue in the quarter was $2,858 million, up 13.1% year over year and above the Zacks Consensus Estimate of $2,793 million. Increased revenue was driven by an increased volume, as sales boosted in all geographical operating areas mainly in manufacturing, metals and chemicals. Sequential increase of 6% was due to higher volumes and prices. Project backlog at the end of the quarter was $2.7 billion.

In the quarter, North American revenue increased 7% year over year to $1,371 million. Revenue in Europe was up 10% and totaled $367 million; while in South America it was $611 billion, up 25% year over year. Sales in Asia were up 22% to $341 million. Surface Technologies revenue was $168 million in the quarter, up 19% year over year.   

Margins

Cost of sales in the quarter grew 14.1% year over year and represented 57.4% of total revenue. With an increased sales volume, prices and productivity, operating profit shot up by 14.6% year over year to $627 million. SG&A expense in the quarter was $309 million compared with $302 million and R&D expense was $23 million compared with $19 million in the year-ago quarter.

Balance Sheet

Exiting the second quarter, Praxair’s cash and cash equivalents plummeted 7% sequentially to $80 million while long-term debt increased 3.7% to roughly $5,685 million.

Cash Flow

In the second quarter, cash flow from operating activities was roughly $573 million versus $536 million in the year-ago quarter. Capital expenditure was $433 million versus $325 million in the second quarter of 2010.

Share Repurchases/Dividends

Praxair follows a consistent policy of returning cash to shareholders via dividend payments and share repurchases. During the second quarter of 2011, the company paid dividends amounting to $151 million and repurchased shares worth $205 million, net of issuances.

Outlook

For the third quarter of fiscal 2011, management provided its EPS guidance roughly in the $1.35-$1.40 range.

The company revised its fiscal year 2011 earnings per share guidance to $5.40-$5.50 versus the previous estimate of $5.35-$5.45. Sales are expected to be approximately $11.2 billion in comparison with $11 billion expected earlier.

Capital expenditure is expected to be approximately $1.8 billion versus a range of $1.6-$1.8 billion anticipated earlier. Effective tax rate for 2011 is likely to be about 28%.

Praxair is one of the leading companies engaged in the production and distribution of industrial gases, primarily catering to demands in North America, South America, Europe and Asia. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L'Air Liquide SA.

 
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