Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes has shown a consistent upward trend from 2020 to 2024. It increased significantly from $2,699 million in 2020 to $6,814 million in 2024, indicating a strong improvement in operating profitability over the five-year period.

Cost of Capital

The cost of capital has experienced slight fluctuations during the examined timeframe. It rose from 12.49% in 2020 to a peak of 13.07% in 2023 before slightly declining to 12.96% in 2024. Overall, the cost of capital remained relatively stable around the 13% mark.

Invested Capital

Invested capital has seen moderate variability with a general trend of slight decline and subsequent recovery. It decreased from $78,771 million in 2020 to $72,341 million in 2022, then gradually increased to $74,884 million by 2024. This pattern indicates some capital restructuring or asset base adjustments during the period.

Economic Profit

Economic profit remained negative throughout the observed years, although there was a clear trend of improvement. The loss narrowed significantly from -$7,141 million in 2020 to -$2,888 million in 2024. This reduction in negative economic profit suggests increasing value creation or improved efficiency in the use of capital, despite not yet reaching positive economic profit levels.

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

The economic profit shows a consistent improvement trend over the five-year period. Starting from -7,141 million USD in 2020, the negative economic profit decreases steadily each year, reaching -2,888 million USD in 2024. Although still negative, the reduction in economic loss indicates gradual progress toward profitability.

Invested Capital

Invested capital fluctuates slightly but remains relatively stable over the timeline. It declined from 78,771 million USD in 2020 to 72,341 million USD in 2022, then experienced a modest increase to 74,884 million USD by 2024. This suggests the company maintains a substantial investment base with minor adjustments over the years.

Economic Spread Ratio

The economic spread ratio improves progressively from -9.07% in 2020 to -3.86% in 2024. The consistent reduction in the negative spread points to better capital efficiency and reduced economic losses relative to invested capital, reflecting more favorable economic returns over time.

Summary of Trends

Overall, the data indicate a positive trajectory in financial performance, characterized by a steady decrease in economic losses and an improving economic spread ratio. The invested capital experiences minor fluctuations but remains fairly stable. These patterns suggest ongoing enhancements in value generation and capital utilization efficiency, although the company has yet to achieve positive economic profit.

Sales Trends

The sales figures showed a consistent upward trend from 2020 to 2022, increasing from approximately 27,243 million US dollars to 33,364 million US dollars. Although there was a slight decline in 2023, sales remained relatively stable at around 32,854 million US dollars and saw a modest increase again in 2024, reaching 33,005 million US dollars. Overall, the sales growth indicates a generally positive revenue development over the five-year period.

Economic Profit Trends

The economic profit values remained negative throughout the period, indicating that the company did not generate economic profit. However, there is a notable improvement as losses decreased substantially from -7,141 million US dollars in 2020 to -2,888 million US dollars in 2024. This trend suggests a reduction in economic inefficiency or a possible improvement in operational or financial performance over time.

Economic Profit Margin Trends

Reflecting the pattern in economic profit, the economic profit margin, expressed as a percentage, showed a consistent upward trajectory, improving from -26.21% in 2020 to -8.75% in 2024. This progression indicates a decreasing proportion of economic losses relative to sales, pointing to enhanced margin management or cost control despite still being negative.

Summary

Across the period analyzed, the company witnessed steady sales growth with a minor dip in one year, while economic profit losses were substantially reduced. The improving economic profit margin underscores a positive trend in operational efficiency or financial discipline. Despite continued negative economic profit, the company is moving towards reducing its losses in economic terms, which could be a favorable sign for future profitability if the trend persists.