Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates a consistent upward trend over the five-year period. Starting at 2,699 million US dollars in 2020, it increased substantially to 6,814 million US dollars by 2024. The most notable jump occurred between 2022 and 2023, where NOPAT rose from 3,833 million to 6,386 million US dollars, indicating improved operational efficiency or higher profitability.

Cost of Capital

The cost of capital experienced a gradual increase from 12.77% in 2020, peaking at 13.36% in 2023, before decreasing slightly to 13.24% in 2024. This trend suggests a modest rise in the company’s required rate of return, potentially reflecting changes in market conditions or risk perception over time.

Invested Capital

Invested capital showed a slight decrease from 78,771 million US dollars in 2020 to 72,341 million in 2022, suggesting some divestments or asset reductions during this period. However, it picked up again in subsequent years, reaching 74,884 million US dollars by 2024. This pattern indicates a stabilization and moderate growth in the base of capital employed by the company.

Economic Profit

Economic profit remained negative throughout the five years but showed a clear improvement over time. The deficit narrowed from -7,358 million US dollars in 2020 to -3,101 million in 2024. Despite continuing to be below zero, the reduction in the negative economic profit implies progress towards generating returns exceeding the cost of capital, possibly due to higher profitability and controlled capital investment.

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. Starting from a significant negative value of -7,358 million US dollars in 2020, the loss decreases steadily each year, reaching -3,101 million US dollars by 2024. This trend indicates a gradual reduction in value destruction, suggesting potential improvements in operational efficiency or profitability despite remaining in negative territory.

Invested Capital

The amount of invested capital exhibits relative stability with slight fluctuations. It decreases from 78,771 million US dollars in 2020 to 72,341 million in 2022, followed by a modest increase, reaching 74,884 million US dollars in 2024. This pattern reflects a potential cautious approach to capital deployment or divestments followed by renewed investments or asset growth toward the end of the period.

Economic Spread Ratio

The economic spread ratio improves notably over the period but remains negative throughout. It starts at -9.34% in 2020 and trends upward steadily to -4.14% by 2024. This improvement indicates a narrowing gap between the company's return on invested capital and its cost of capital, signifying a reduction in value erosion and enhanced financial performance, albeit not yet reaching positive value creation.

Overall Analysis

Collectively, the data reveal a company experiencing ongoing challenges in creating economic value but making consistent progress toward reducing losses. The narrowing negative economic spread ratio and improving economic profit imply enhanced efficiency or profitability. The relatively stable invested capital suggests controlled asset management during the period. Continued focus on operational improvements and capital allocation efficiency may potentially lead to positive economic profit in future periods.

Sales Trend

The company's sales demonstrated a general upward trajectory over the five-year period under review. Starting from approximately $27.2 billion at the end of 2020, sales increased consistently each year, reaching around $33.0 billion by the end of 2024, indicating steady growth in revenue generation.

Economic Profit Evolution

Economic profit figures, measured in millions of US dollars, reveal a persistent negative performance throughout the years, albeit with notable improvement. The loss decreased from about -$7.36 billion in 2020 to roughly -$3.10 billion in 2024. This trend suggests a progressive reduction in value erosion, implying that the company is moving closer to breaking even economically, though it remains in a deficit position.

Economic Profit Margin Pattern

The economic profit margin followed a similar positive trend toward improvement, although it stayed in negative territory. Starting at approximately -27.01% in 2020, the margin narrowed significantly over the period, reaching -9.4% by 2024. This indicates enhanced operational efficiency or better capital utilization relative to sales, contributing to less negative returns on invested capital over time.

Overall Interpretation

While sales growth has been consistent, the company continued to experience economic losses during the period analyzed. However, the persistent improvement in economic profit and its margin suggests a positive direction in financial health, with the potential for achieving economic profitability if the trends continue. The narrowing losses indicate successful initiatives to enhance profitability and manage costs or capital more effectively.