Linde plc

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2019 Lennon Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker for today, Mr. Juan Perez. Please go ahead.

Thanks, Michelle. Good morning, everyone, and thank you for attending our third quarter earnings call webcast. Once again, this is Juan Pelaez, head of investor relations, and I am joined this morning by Steve Angel, chief executive officer, and Matt White, chief financial officer. Today's presentation materials are available on our website at lindy.com in the investor section. Please read the forward-looking statement disclosure on page two of the slides and note that it applies to all statements made during this conference. The reconciliations of the performance numbers are in the appendix to this presentation. Steve and Matt will now give us an update on Lindy. We will then be available to answer questions. Let me turn the call over to Steve.

Thank you, Juan. The team delivered very strong results for the quarter. We saw operating profit and operating profit margins improve both sequentially and year-over-year in every segment. EPS improved substantially year-over-year and sequentially. Cash flow came through nicely as we had expected. Project CapEx grew while base CapEx shrank, which reflects spend against our large project backlog and CapEx efficiencies. ROC percent, the single most important metric in a capital-intensive business, continued to improve. The cell gas backlog remains strong at $5 billion, which gives us a nice foundation for future growth. We raised our guidance again, which reflects our positive momentum, the opportunities we see to continue to improve the quality of our business and the resiliency of our business model. And, of course, this is against a backdrop of softening worldwide demand. A few comments on the segments. In the Americas, which represents nearly 40% of our total sales and nearly half of our overall operating profit, we saw good organic sales year-over-year driven by price, but flat sales sequentially. Strength in food and beverage and healthcare is offsetting weakness in metals and manufacturing. Operating margins continue to improve. as we drive efficiencies across the region. In Europe, we saw evidence of better execution as operating margins reached 20.5%, despite a weaker macro. The weakness we saw in the quarter continued through September and October. In APAC, operating margins are climbing nicely, up 450 basis points year-over-year and 70 basis points sequentially. as the team continues to do an excellent job delivering on merger efficiencies. Volumes are impacted by slowing China, Australia, and turnarounds in Southeast Asia. In Lean Engineering, we saw record margins driven by excellent execution, cost absorption, and timing as we were able to close out key projects during the quarter. Though backlogs remain strong, I don't see this level of operating margin as sustainable. This is a business that should trend closer to low double-digit percents through the cycle. The global other segment reflects ongoing merger efficiencies as you would expect. Our focus, successful integration, improve the quality of each and every business, Optimize our portfolio around core cell of gas regions and businesses, and then drive network density. Facilitate growth synergies and drive operational excellence in everything we do. Final comment before I turn it over to Matt. We have a resilient business model, which generates strong cash flow through the economic cycle. In periods of expansion, we invest for growth. And when the macro weakens, we return that cash to shareholders. You add to that the value created by a merger, and you can see why we are an investment for all seasons and why I wouldn't trade places with anyone. Matt. Thanks, Steve.