Linde plc (NASDAQ:LIN)

Net operating profit after taxes (NOPAT)

The NOPAT demonstrates a consistent upward trend over the analyzed periods, increasing from 2,699 million USD in 2020 to 6,814 million USD in 2024. This represents more than a doubling in profit, indicating improved operational efficiency or revenue growth.

Cost of capital

The cost of capital shows a slight upward trend initially, rising from 12.55% in 2020 to a peak of 13.13% in 2023, followed by a marginal decrease to 13.02% in 2024. These fluctuations suggest minor changes in the risk profile or market conditions affecting the company’s capital expenses.

Invested capital

Invested capital exhibits a declining pattern between 2020 and 2022, falling from 78,771 million USD to 72,341 million USD, then slightly increasing to 73,409 million USD in 2023 and further to 74,884 million USD in 2024. The initial decline might reflect asset disposals or divestitures, while recent increases could indicate new investments or acquisitions.

Economic profit

Economic profit remains negative throughout the periods but shows a clear trend of improvement. The loss narrows significantly from -7,186 million USD in 2020 to -2,933 million USD in 2024. Despite operating profit growth, the sustained negative economic profit indicates that returns have not yet exceeded the cost of capital, although the gap is closing.

Net Income Trend

The net income exhibited a consistent upward trajectory across the periods analyzed. Starting at 2,501 million US dollars at the end of 2020, it increased notably to 3,826 million in 2021. The growth trend continued, reaching 4,147 million in 2022. The most substantial rise occurred between 2022 and 2023, with net income climbing sharply to 6,199 million. The upward trend persisted into 2024, culminating in a net income of 6,565 million. This steady increase suggests enhanced profitability and potentially successful operational strategies or favorable market conditions over these years.

Net Operating Profit After Taxes (NOPAT) Trend

Similar to net income, NOPAT showed generally favorable growth during the observed timeframe. Beginning at 2,699 million US dollars at the end of 2020, it rose to 3,800 million in 2021, nearly matching the growth pace of net income during the same period. From 2021 to 2022, growth slowed considerably, with NOPAT increasing marginally to 3,833 million. However, the year 2023 marked a sharp increase to 6,386 million, paralleling the significant jump in net income. The upward momentum continued into 2024, with NOPAT reaching 6,814 million. This pattern reflects improving operating efficiency and effective tax management, particularly highlighted by the strong rebound after 2022.

Comparative Observations

Both net income and NOPAT followed closely aligned trajectories, indicating that earnings growth was supported by operating performance improvements. The substantial increases in both metrics occurring between 2022 and 2023 suggest a pivotal year for operational and profitability enhancement. The consistent growth in both figures over the five-year period indicates stable financial health and profitability expansion.

The financial data showcases two key tax-related metrics for the analyzed periods: provision for income taxes and cash operating taxes, both expressed in millions of US dollars. Over the five-year horizon from the end of 2020 to the end of 2024, both metrics exhibit an upward trajectory indicating increasing tax liabilities and operational tax payments.

Provision for Income Taxes

The provision for income taxes shows a consistent increase each year. Starting at 847 million US dollars at the end of 2020, the figure rises to 1,262 million in 2021, reflecting approximately a 49% increase year over year. Subsequent increases are observed with values reaching 1,434 million in 2022, 1,814 million in 2023, and peaking at 2,002 million by the end of 2024. The incremental growth suggests higher taxable income or changes in tax rates or regulations affecting income tax provisions.

Cash Operating Taxes

Cash operating taxes also demonstrate a steady upward trend over the same period. Beginning at 1,245 million US dollars in 2020, this amount increases to 1,537 million in 2021, and rises further to 1,835 million in 2022. The upward momentum continues with 1,947 million recorded in 2023 and 2,205 million by the close of 2024. The progression suggests increased actual cash outflows related to operating tax obligations, consistent with or possibly exceeding the growth pattern of the income tax provision.

In summary, both tax provisions and actual tax payments display a pattern of continuous growth with cash operating taxes consistently higher than provisions for income taxes. This could indicate a timing difference between accrued taxes and cash payments, additional tax obligations beyond income tax, or other operating tax factors influencing the cash tax outflows. The rising trend across both lines suggests the company is experiencing increasing tax costs as part of its operational and profitability changes during the observed periods.

The financial data over the five-year period exhibit notable trends in the company's capital structure and investment levels. The total reported debt and leases show a general upward trajectory, increasing from US$17,223 million in 2020 to US$22,609 million in 2024. This indicates a rising reliance on debt financing over the period, with a significant jump between 2021 and 2022, followed by continued growth in subsequent years.

Concurrently, shareholders' equity demonstrates a consistent decline from US$47,317 million in 2020 to US$38,092 million in 2024. This steady decrease suggests erosion in the company’s net equity base, which could reflect dividend distributions, share repurchases, or losses not apparent from the data provided but warrants further investigation. The reduction in equity, coupled with rising debt levels, points to a shifting balance of the company’s financing sources.

Invested capital remains relatively stable throughout the period, beginning at US$78,771 million in 2020 and experiencing minor fluctuations, ending slightly lower at US$74,884 million in 2024. The investment base appears largely maintained despite the changes in the composition of equity and debt. This stability in invested capital suggests that the company is sustaining its asset base or capital employed at a consistent level while adjusting its financing structures.

Debt Trend

Total reported debt & leases increased by approximately 31% over the five years, indicating enhanced leverage or increased borrowing capacity.

Equity Trend

Total shareholders' equity decreased by about 20%, which could impact the company’s financial flexibility and investor perception.

Invested Capital

Invested capital shows a slight decline of around 5%, suggesting stable asset deployment but potential changes in asset composition or valuation.

Overall Analysis

The simultaneous rise in debt and decline in equity, with stable invested capital, implies a strategic shift towards greater leverage. This could affect the risk profile and cost of capital, highlighting the importance of monitoring debt servicing capacity and equity trends in future periods.

Economic Profit Trend

The economic profit shows a consistent negative pattern throughout the analyzed period, indicating the company did not generate economic value above its cost of capital. However, there is a notable improvement over time, as the losses decrease from -7,186 million US dollars in 2020 to -2,933 million US dollars in 2024. This declining negative economic profit suggests gradual progress in operational or capital efficiency.

Invested Capital Analysis

The invested capital marginally decreased from 78,771 million US dollars in 2020 to 72,341 million US dollars in 2022, reflecting potential divestitures or capital optimization efforts. From 2022 onwards, the invested capital shows a moderate upward trend, reaching 74,884 million US dollars in 2024. This indicates a possible strategic reinvestment or growth-related capital deployment during the latter period.

Economic Spread Ratio Behavior

The economic spread ratio remains negative throughout, highlighting that returns on invested capital were consistently below the cost of capital. Nonetheless, there is a progressive improvement from -9.12% in 2020 to -3.92% in 2024. This diminishing negative spread aligns with the improvement observed in economic profit, pointing to an enhanced capital efficiency and reduced value destruction over time.

Overall Insight

The combined data suggests the company has been experiencing losses in economic profit but is trending towards better financial performance and capital utilization. The reduction in negative economic spread ratio and economic profit losses, alongside a relatively stable invested capital level, implies efforts to improve profitability and operational efficiency are yielding incremental positive results over the five-year span.

The financial data indicates several notable trends over the analyzed period from 2020 to 2024.

Sales

Sales figures show a consistent upward trajectory from 27,243 million US dollars in 2020 to a peak of 33,364 million US dollars in 2022. There is a slight decline in 2023 to 32,854 million US dollars, followed by a minor recovery to 33,005 million US dollars in 2024. Overall, sales have grown by approximately 21% over the five-year span, indicating general revenue expansion.

Economic Profit

Despite the growth in sales, economic profit remains negative throughout the period. However, it shows a clear trend of improvement, moving from -7,186 million US dollars in 2020 to -2,933 million US dollars in 2024. Notably, the largest yearly improvement occurred between 2022 and 2023, where economic losses decreased substantially by 2,302 million US dollars. This suggests that, although still operating at an economic loss, the company is reducing its deficit over time.

Economic Profit Margin

The economic profit margin follows a similar pattern to economic profit itself. It improves steadily from -26.38% in 2020 to -8.89% in 2024. This reduction in the negative margin by over 17 percentage points indicates an enhancement in the company's ability to generate profit relative to sales, despite the margin remaining below zero. The margin's improvement reflects increased operational efficiency or better cost management relative to the revenue generated.

In summary, the data reveals sales growth accompanied by a gradual reduction in economic losses and improvement in economic profit margin. While the company has yet to achieve positive economic profit or margin, the direction of change points to progress in financial performance over the analyzed timeframe.