Opportunities which might arise if the performance of the global economy were better than expected
Linde operates in more than 100 countries worldwide and supplies almost all industry sectors. Particularly in the faster-growing economies, Linde holds significant market shares in the relevant market areas. Linde is therefore particularly strong in those markets which are expected to expand at the fastest rate, even in the medium term. Global economic growth and worldwide industrial production have a decisive influence on growth in the Group’s revenue and earnings. In 2016, economists are forecasting that global gross domestic product in real terms will rise by 2.6 percent and that worldwide industrial production will also increase, namely by 2.3 percent. See Outlook. If the economy as a whole were to grow at a faster rate than that originally forecast, this could have a more positive impact on revenue and earnings trends in The Linde Group and the earnings trend in Linde AG than is being projected.
Opportunities arising from increased climate protection efforts and the growing importance of natural gas as a fuel
Modern society still depends on energy supplies which are affordable, reliable and environmentally friendly. Demand for energy around the world is continuing to rise, and this is also posing a threat to the climate and the environment. Achieving an economy increasingly based on clean energy necessitates the continued expansion of renewable energy sources and the use of new technologies to ensure that finite resources are utilised in the most environmentally friendly way possible. Linde has the technical skills required to benefit from the market opportunities in this area.
One example of this is the efficient exploitation of oil and natural gas reserves (Enhanced Oil and Gas Recovery: EOR and EGR) through the use of industrial gases such as nitrogen.
Linde is also well equipped for the rising demand for natural gas. The Group controls the technologies along the value added chain from the liquefaction and transport of natural gas to its safe delivery to the end user.
In the context of climate change, the greenhouse gas carbon dioxide (CO2) has a particular role to play. Linde provides the technologies to reduce and recycle CO2. In 2015, for example, Linde bought one of the largest plants for the separation and purification of carbon dioxide on stream for the Saudi-Arabian petrochemical company Sabic. Linde is developing, for example, plants for the purification of waste gases and capture of carbon dioxide in power stations. Linde is also involved in recycling CO2 in greenhouses through its Dutch subsidiary OCAP.
Hydrogen may assume a key function in the supply of energy in future, not only as a fuel but also as storage for electricity generated from renewable energy sources. Linde is a pioneer in the ongoing development of hydrogen technology and is supporting the breakthrough of this ecofriendly fuel in a wide variety of fields.
If global climate protection measures are expanded, the market for environmental technologies will continue to grow. This could have a more positive impact on revenue and earnings trends in The Linde Group and the earnings trend in Linde AG than is being projected.
Opportunities which might arise as a result of regulatory changes in the healthcare sector
The global growth area healthcare is driven by demographic trends and improvements in diagnostics and therapies, especially in the case of chronic respiratory disorders. In addition, increasing numbers of people are gaining access to healthcare, especially in the emerging economies. What is more, rising pressure on healthcare budgets is providing private companies with the opportunity to create new offerings that are both cost and benefit effective. As a result of the targeted acquisitions and investments it has made in the past few years, Linde is now a globally leading gases healthcare company specialising along an integrated respiratory care path.
The healthcare market is largely state-regulated and is governed by specific authorisation and licensing rules. If the relevant reimbursement policy enables more people to be offered access to wide-ranging medical services, especially in the emerging economies, this could have a more positive impact on revenue and earnings trends in The Linde Group and the earnings trend in Linde AG than is being projected. Infrastructure investment, progress in medical diagnostic procedures and increasing wealth in the emerging economies might also have a positive impact on revenue and earnings trends.
Opportunities resulting from innovation, research and development
A key element in Linde’s business success is its ability to bring innovations to the market which offer sustainable value added. Therefore, the Group is constantly working on improving the quality of its research and development activities and increasing the extent of its cooperation with customers and partners. A broader understanding of the term “innovation” and the resulting culture is creating scope for innovation projects that form an additional source of mobilisation for the company. If even greater progress is made in this area than is currently anticipated, this could mean that more new or improved products and services will be launched onto the market or will become available sooner than expected. This might lead to an increase in the revenue and earnings of The Linde Group and a more positive earnings trend in Linde AG.
Additional information about future R & D opportunities can be found in Research and development.
Movements in interest rates have an impact on Linde’s financial result. The Group keeps a close eye on events in the international financial markets, in order to identify and respond swiftly to any opportunities arising. See Financing and measures to safeguard liquidity.
Exchange rates also have an impact on Group revenue and Group operating profit. Currency differences arise as a result of the translation of various local currencies into the euro (the reporting currency). The greater the volatility of the euro in relation to other currencies, the more significant the impact of currency translation on Linde’s revenue and earnings.
If movements in interest rates and exchange rates prove more favourable to the Group than is currently being forecast, this could have a more positive impact on the financial result and/or the revenue and operating profit of The Linde Group and the earnings of Linde AG than is currently being projected.
Opportunities in purchasing
Purchase prices also have an impact on the profitability of the Group. This applies particularly to material groups which are dependent on raw materials such as steel, aluminium and brass as well as on energy costs. Linde pursues a portfolio purchasing strategy across the entire Group. Within the framework of its High Performance Organisation (HPO) concept, designed to achieve sustainable efficiency gains, the Group has taken organisational measures and has introduced improved processes in order to continue to improve its purchasing performance and to make controls in this area even more transparent. In 2015, Linde stabilised its procurement activities primarily in “best cost countries” at a high level, particularly in India, Korea and China.
If the measures introduced were to generate even greater improvements than are currently anticipated, and/or if the cost of raw materials were to fall, this could have a more positive impact on revenue and earnings trends in The Linde Group and the earnings trend in Linde AG than is being projected.
Opportunities arising from organisational and process-related improvements
Constant improvements in Linde’s business processes and strict cost management help to ensure that the Group’s profitability and competitiveness continue to be strengthened. Linde has established a holistic concept which is designed to achieve sustainable efficiency gains. This is linked to measurable targets. See Outlook. Linde sees the greatest potential for optimisation in the supply chain of its cylinder gas and liquefied gases business as well as in the areas of purchasing and IT. One example of this is the standardisation and automation of gas filling plants in various regions of the world.
If Linde were to exceed its targets in connection with efficiency gains, this would have a more positive impact on revenue and earnings trends in the Group and in Linde AG than is being projected.
Opportunities arising from acquisitions
The takeover of American HomePatient, which was completed with effect from 31 January 2016, will strengthen Linde’s presence in the homecare segment. The Group has a strong market position in the United States and Europe, the most important markets in this field. Further acquisitions in the regional industrial gases business or in the healthcare sector could have a more positive impact on revenue and earnings trends of The Linde Group and Linde AG than is currently being projected.