Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

There is a clear upward trend in NOPAT over the analyzed period, increasing from $2,699 million in 2020 to $6,814 million in 2024. This represents a substantial improvement, with the most significant jump occurring between 2022 and 2023. The continuous growth in NOPAT suggests enhanced operational efficiency or increased revenue generation.

Cost of Capital

The cost of capital exhibits a slight upward trend from 12.7% in 2020 to a peak of 13.28% in 2023, before marginally declining to 13.17% in 2024. While the changes are relatively small, the increasing trend might indicate marginally higher risk or market-driven changes in capital costs over time.

Invested Capital

Invested capital decreased from $78,771 million in 2020 to $72,341 million in 2022, showing a reduction in capital deployment. Following this period, it slightly increased each year to reach $74,884 million in 2024, suggesting a cautious reinvestment strategy after initial contraction.

Economic Profit

Economic profit remains negative throughout the period, although the magnitude of the negative value decreases significantly from -$7,302 million in 2020 to -$3,046 million in 2024. This improvement indicates a reduction in value destruction, potentially driven by increasing profitability (as seen in NOPAT) and a relatively stable invested capital base, despite cost of capital slightly rising.

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 demonstrates a consistent improvement over the observed period. Starting from a significant negative value of -7,302 million US dollars in 2020, it decreased in negative magnitude to -5,657 million in 2021 and remained relatively stable in 2022 at -5,663 million. A notable further reduction in negative economic profit occurred in 2023 and 2024, reaching -3,364 million and -3,046 million respectively. This trend indicates a gradual narrowing of losses and improving profitability.

Invested Capital

Invested capital shows minor fluctuations but overall remains relatively stable with a slight increasing tendency toward the end of the period. Starting at 78,771 million US dollars in 2020, it decreased to approximately 72,341 million in 2022, before modestly increasing to 73,409 million in 2023 and reaching 74,884 million by the end of 2024. This suggests that the company maintained a relatively steady capital base with slight growth in recent years.

Economic Spread Ratio

The economic spread ratio follows an improving trend corresponding with the reduction in economic losses. Initially negative at -9.27% in 2020, the ratio improved to -7.8% in 2021, remaining similar at -7.83% in 2022. In 2023, the economic spread ratio significantly improved to -4.58% and continued to a lesser negative value of -4.07% in 2024. Despite remaining negative, the ratio’s upward movement indicates enhanced efficiency or returns relative to cost of capital over time.

Summary Insights

The data reflects a positive trajectory in financial performance marked by a reduction in economic losses and improvement in profitability indicators. The consistent decline in negative economic profit and economic spread ratio suggests effective management efforts to enhance operational efficiency or cost controls. While invested capital remains relatively stable with slight increases, the company’s financial health appears to be strengthening, though it has yet to reach positive economic profit. Overall, the trends denote progress in closing the gap between returns and invested capital costs.

The financial data shows significant improvement in the economic profitability of the company over the five-year period. Despite consistently positive sales figures, economic profit has fluctuated negatively throughout, though the magnitude of economic losses has diminished considerably.

Sales Trend

Sales increased steadily from 27,243 million US dollars in 2020 to 33,005 million US dollars in 2024. This represents a growth of approximately 21.2% over the period, reflecting a continuing upward trend in revenue generation.

Economic Profit Trend

Economic profit, which measures profit after accounting for the cost of capital, has been negative in all reported years but shows a clear trend of decreasing losses. The economic loss declined from -7,302 million US dollars in 2020 to -3,046 million US dollars in 2024. This indicates a substantial improvement in the company’s ability to generate value above its cost of capital, although it has not yet achieved positive economic profit.

Economic Profit Margin

The economic profit margin, expressed as a percentage of sales, improved markedly from -26.8% in 2020 to -9.23% in 2024. This margin improvement is consistent with the reduction in economic profit losses and indicates increasing operational efficiency or improved capital deployment over time.

Overall, the data suggest that while the company continues to operate at an economic loss, its financial performance is on an upward trajectory. Sales growth combined with the reduction in economic loss and the narrowing negative profit margin indicate progress towards achieving sustainable value creation.