Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The NOPAT has shown a consistent upward trend over the five-year period. It increased from 2,699 million US dollars in 2020 to 6,814 million US dollars in 2024. Particularly notable is the sharp rise between 2022 and 2023, where NOPAT increased by approximately 2,553 million US dollars, indicating a significant improvement in operational profitability.

Cost of Capital

The cost of capital experienced a gradual increase from 12.65% in 2020 to a peak of 13.23% in 2023, followed by a slight decrease to 13.12% in 2024. This pattern signals a generally rising cost of financing over the period, with a minor easing in the most recent year.

Invested Capital

The invested capital shows a decreasing trend from 78,771 million US dollars in 2020 to 72,341 million in 2022, followed by a modest increase in 2023 and 2024 to 74,884 million US dollars. This suggests initial capital reduction or asset divestment, with later reinvestment or capital expansion in the last two years.

Economic Profit

Despite the increases in NOPAT, the economic profit remains negative throughout the period, starting at -7,266 million US dollars in 2020 and improving to -3,012 million in 2024. The negative values indicate that the returns have not yet covered the cost of capital. However, the narrowing deficit over time suggests an improving efficiency in generating returns above capital costs.

Overall Analysis

There is a clear improvement in profitability as evidenced by rising NOPAT and diminishing economic losses. The moderation in invested capital and rising cost of capital reflect dynamic changes in financing and asset management. Although the economic profit remains negative, the trend indicates progress toward generating value above the cost of capital.

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 over the five-year period, moving from a negative value of -7266 million US dollars in 2020 to -3012 million US dollars in 2024. Although the economic profit remains negative throughout, the magnitude of loss decreases each year, indicating a reduction in economic losses and a trend towards operating closer to breakeven or profitability.

Invested Capital

The invested capital exhibits a slight decrease from 78771 million US dollars in 2020 to 72341 million US dollars in 2022, followed by a moderate increase, reaching 74884 million US dollars in 2024. This pattern suggests an initial period of capital reduction or divestment, followed by renewed investments or capital accumulation in the latter years.

Economic Spread Ratio

The economic spread ratio, which is negative throughout, mirrors the trend observed in economic profit. It improves from -9.22% in 2020 to -4.02% in 2024. This improvement indicates that the return generated on the invested capital is moving closer to the cost of capital, although it remains below the threshold for positive economic value added.

Overall Trend and Insights

The data reveal a company undergoing gradual financial improvement. Despite continued negative economic profit and spread ratio, the narrowing gap suggests enhanced operational efficiency or cost management. The stabilization and subsequent increase in invested capital may support future growth or profitability. Persistent negative economic spread signals that while progress is made, the firm's returns have yet to exceed capital costs consistently.

Sales

The sales demonstrated a consistent upward trend from 2020 to 2022, increasing from US$27,243 million in 2020 to US$33,364 million in 2022. However, from 2022 to 2023, sales experienced a slight decline to US$32,854 million, followed by a modest recovery to US$33,005 million in 2024, indicating relative stabilization after prior growth.

Economic Profit

Economic profit remained negative throughout the observed period, indicating ongoing losses. Nonetheless, the losses reduced substantially over time, from a significant negative US$7,266 million in 2020 to a lesser negative US$3,012 million in 2024. This reflects an improving trend in economic profitability, although the figure remains in deficit.

Economic Profit Margin

The economic profit margin followed a similar improving trajectory as economic profit. Starting at -26.67% in 2020, the margin consistently improved year-over-year, narrowing the negative margin to -9.12% by 2024. This suggests that despite negative profitability, the company has been progressively mitigating losses relative to sales.

Overall Analysis

The company experienced growth in sales with minor fluctuations toward the end of the period, accompanied by persistent but decreasing economic losses. The trend highlights a positive movement toward improved financial performance, though economic profit remains negative, indicating the need for continued operational or strategic adjustments to achieve sustained profitability.