Industrial gases producer Praxair Inc. (PX) on Wednesday posted higher profit for the fourth quarter, largely due to a cost reduction program charge in the prior-year quarter. Further, the company issued financial forecast for the first quarter and full-year 2010, as it increased the quarterly dividend by 13%.
The Danbury, Connecticut-based company's fourth-quarter net income was $340 million or $1.09 per share, higher than $200 million or $0.64 per share reported in the prior-year quarter.
On average, 17 analysts polled by Thomson Reuters expected the company to post earnings of $1.09 per share. Analysts' estimates typically exclude special items.
Sales for the latest quarter slightly improved to $2.41 billion from $2.40 billion in the same quarter of last year. Excluding foreign currency and cost pass-through effects, sales were 4% below last year due to lower volumes. Eleven Wall Street analysts had a consensus revenue estimate of $2.42 billion for the quarter.
Steve Angel, Chairman and Chief Executive Officer of Praxair, said, "So far, the rate of recovery from the recession has been mixed. Our businesses in Asia and South America are showing strong improvement. However, in North America and Europe our volumes are still sluggish in manufacturing, metal fabrication and non-residential construction markets. While sales to our steel and chemical customers have begun to pick up, they are still well below 2008 levels."
Operating profit for the quarter advanced to $512 million from $314 million reported in the quarter ended December 31, 2009.
Revenues from the North American operations increased to $1.18 billion from $1.36 billion a year ago, due to lower cost pass-through, with minimal impact on operating profit compared to 2008. Segment operating profit decreased to $261 million from $267 million last year, hurt by significantly lower fixed costs.
European operations generated fourth-quarter sales of $351 million, up from $322 million reported in the same period of 2008. Segment operating profit dropped to $76 million from $83 million in the same quarter of last year, due to lower volumes and currency effects.
Sales from South America advanced to $461 million from $382 million prior year. Segment operating profit totaled $111 million, up from $87 million earned in the comparable quarter of the previous year, led by currency effects and higher pricing.
In Asia, quarterly sales grew to $274 million from $209 million a year earlier, driven by higher on-site volumes in China, India and Korea to metals, chemicals, electronics and manufacturing customers and new plant start-ups. Segment operating profit increased to $42 million from $34 million last year.
Surface Technologies' sales improved to $141 million from $135 million reported a year ago, and operating profit rose to $22 million from $20 million in 2008.
For the full year 2009, the company reported net income of $1.25 billion or $4.01 per share, compared to $1.21 billion or $3.80 per share in 2008.
Adjusted net income totaled $1.247 billion or $3.99 per share, compared to $1.336 billion or $4.20 per share in the previous year. Analysts expected earnings of $4.00 per share for fiscal 2009.
Adjusted earnings per share, excluding a 2 cent tax benefit, was $3.99, 5% below the prior year excluding the 2008 cost reduction program and pension settlement charges.
Annual sales for fiscal 2009 declined 17% to $8.96 billion from $10.8 billion reported in the previous year, due to lower volumes and negative foreign currency and cost pass-through effects, partially offset by higher pricing. Street analysts had a consensus revenue estimate of $8.95 billion for the full year.
Looking forward to the first quarter, the company projects GAAP earnings in a range of $0.97 - $1.02 per share, and adjusted earnings to range between $1.05 and $1.10 per share. Analysts are looking for earnings of $1.09 per share for the quarter.
First-quarter outlook excludes the impact of an 8 cent one-time charge resulting from Venezuela currency devaluation, and any potential effect from participation in a tax amnesty program recently announced by the State of Rio de Janeiro, Brazil.
For fiscal 2010, Praxair expects GAAP earnings to range between $4.35 and $4.55 per share, and adjusted earnings in the range of $4.43 - $4.63 per share, on sales of $10 billion. Analysts expect the company to report earnings of $4.61 per share on revenue of $9.96 billion for fiscal 2010. Full-year capital expenditures are expected to be about $1.4 billion, and the effective tax rate is forecasted to remain at about 28%.
Steve Angel added, "For 2010, we are cautiously optimistic that growth in the U.S. and Europe will continue to improve, but we expect the climb to be slow and deliberate. We are therefore holding a tight rein on our costs which will give us strong operating leverage as volumes improve."
In the emerging economies of Brazil, China and India, the company expects its businesses to show strong sales growth in 2010, based on its existing project backlog and the current levels of new project and business development activity.
In addition, the company declared a quarterly dividend of $0.45 per share, up 13% from $0.40 per share in the previous quarter. The dividend is payable on March 15, 2010 to shareholders of record on March 5, 2010.
Praxair shares, which have been trading between $53.35 and $86.07 in the past 52 weeks, closed Tuesday's trading session at $78.66, down 77 cents or 0.97%. In the pre-market session, the stock is currently trading at $78.26, down 40 cents or 0.51%.
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