Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a strong upward trend over the five-year period, increasing from $2,699 million in 2020 to $6,814 million in 2024. The most significant growth appears between 2022 and 2023, suggesting improved operational efficiency or higher profitability during this period.

Cost of Capital

The cost of capital shows a slight increasing trajectory from 12.7% in 2020 to a peak of 13.28% in 2023, before marginally decreasing to 13.17% in 2024. This relatively stable cost of capital indicates a consistent risk and financing profile over the years.

Invested Capital

Invested capital decreased from $78,771 million in 2020 to $72,341 million in 2022, reflecting a reduction in capital deployment or asset base during that time. From 2022 onward, it shows a mild recovery trend, rising to $74,884 million by 2024, but it remains below the initial 2020 level.

Economic Profit

Economic profit is negative throughout the period, indicating that the returns on invested capital have not exceeded the cost of capital during these years. Although economic losses are reducing, moving from -$7,301 million in 2020 to -$3,046 million in 2024, the company has yet to achieve positive economic profit. The narrowing gap suggests improving value creation but persistent challenges in surpassing the capital charge.

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 has shown a consistent improvement over the five-year period under review. Starting from a negative value of -7301 million US dollars in 2020, the loss has decreased annually, reaching -3046 million US dollars by the end of 2024. This trend suggests a gradual reduction in economic losses, indicating better profitability or improved efficiency in capital utilization over time.

Invested Capital

Invested capital values have exhibited minor fluctuations but an overall slight increase from 78771 million US dollars in 2020 to 74884 million US dollars in 2024. There is a trough observed in 2021 and 2022, with invested capital dipping to around 72560 and 72341 million US dollars, respectively, before rising moderately in subsequent years. This indicates relative stability in the scale of capital investment with some strategic adjustments during the period.

Economic Spread Ratio

The economic spread ratio, expressed as a percentage, has been consistently negative, though it shows a clear trend of improvement. Beginning at -9.27% in 2020, it gradually improves year on year to -4.07% by the end of 2024. This decreasing negativity reveals that the gap between the company’s return on invested capital and cost of capital is narrowing, which aligns with the diminishing economic losses observed in the economic profit figures.

Overall Analysis

The data presents a scenario of ongoing financial recovery with a reduction in economic losses and a shrinking negative economic spread ratio. While invested capital has remained relatively stable with slight variations, the improvements in economic profit and economic spread ratio suggest enhanced operational efficiency or possibly some improvements in market conditions or cost management strategies affecting the company’s financial performance across the years.

Sales

Sales exhibit a consistent upward trend over the five-year period. Starting at 27,243 million US dollars in 2020, sales increased steadily each year, reaching 33,005 million US dollars by 2024. This reflects overall growth in revenue with a minor dip in 2023 compared to 2022 but the level stabilizes and slightly increases again in 2024.

Economic Profit

Economic profit has shown a notable improvement from negative values throughout the period, indicating a reduction in economic losses. The loss was largest in 2020 at -7,301 million US dollars, improving to -3,046 million US dollars by 2024. Although economic profit remains negative, the trend indicates a gradual reduction in economic loss.

Economic Profit Margin

The economic profit margin mirrors the movement of the economic profit, showing a steady decrease in negative magnitude over the observed years. Starting at -26.8% in 2020, the margin improves to -9.23% in 2024. This represents a significant improvement in profitability margins, despite remaining in the negative range.

Overall Analysis

The company exhibits a strengthening financial position described by increasing sales revenue paired with a consistent improvement in economic profit and economic profit margin. Despite continued negative economic profit, the narrowing losses and margins suggest ongoing efforts to enhance operational efficiency or cost management are yielding positive results.