Value-based management of The Linde Group

Core financial performance indicators

One of the key elements of Linde’s corporate strategy is the pursuit of sustainable earnings-based growth, with the aim of achieving a steady increase in corporate value. To measure the medium-term and long-term financial success of this value-based management strategy, the Group uses the following core performance indicators:

  • Group revenue and the revenue of the Gases Division and the Engineering Division,
  • Group operating profit (Earnings Before Interest, Tax, Depreciation and Amortisation, EBITDA) and the operating profit of the Gases Division and the Engineering Division,
  • the operating margin for the EMEA, Asia/Pacific and Americas reportable segments and
  • return on capital employed (ROCE) for the Group.

These performance indicators are submitted on a regular basis to the entire Executive Board and are used for internal management purposes. The variable remuneration of the Executive Board is also based on these performance indicators. See Remuneration report. The operating margin is derived from two of the performance indicators (revenue and operating profit) and is also a key financial figure.

Other financial and non-financial indicators

To manage its operating business and represent its performance, Linde also uses other indicators such as EBIT (Earnings Before Interest and Tax), free cash flow before financing activities (operating free cash flow) and segment-specific performance indicators such as order intake in the Engineering Division. Order intake is a key indicator of future business performance in the plant construction business, which is geared towards the long term. Another financial indicator used is earnings per share (EPS). Since this figure is based on post-tax earnings, it also takes account of financing and fiscal components.

The calculations of operating free cash flow and of earnings per share are given in the Group statement of cash flows and Note [13] of this financial report.

Other non-financial indicators include the number of serious transport incidents, the number of work-related accidents, CO2 emissions, and water and energy consumption. Further information on these figures is given in chapters Employees and society and Safety and environmental protection of this financial report.

Calculation of the core financial performance indicators

The core performance indicator ROCE is calculated as EBIT adjusted for non-recurring items divided by capital employed. In the 2014 financial year, ROCE calculated in this way was 9.5 percent (2013: 9.7 percent).

The calculation of ROCE for The Linde Group can be summarised as follows:


Each calculated on the basis of the average of the figures at the balance sheet date for the current year and previous year.

Definition of ROCE




(including share of profit or loss from associates and joint ventures)


+ / –


Non-recurring items




Capital Employed 1






Financial debt




Liabilities from finance leases




Net pension obligations



Cash & cash equivalents and securities



Receivables from finance leases


Until now, the ROCE, EBIT and EPS performance indicators have also been disclosed after eliminating the amortisation of fair value adjustments identified in the course of the BOC purchase price allocation (adjusted financial performance indicators). The acquisition of BOC in the 2006 financial year resulted on the one hand in an increase in capital employed. On the other hand, earnings were adversely affected, particularly in past years, by the amortisation of fair value adjustments identified in the course of the purchase price allocation. This reduced the figures for earnings and return on capital, although Linde’s operating performance did not change as a result of the identification of fair value adjustments and their amortisation. The adjustment was necessary, especially in the first few years after the acquisition, in order to present the operating performance of the Group in a manner which was transparent and allowed comparisons with major competitors. However, as the adjustment required has continued to diminish over the years and therefore no longer has a significant impact on the Group performance indicators, Linde has decided to desist from disclosing the adjusted figures.

Group operating profit (EBITDA) is calculated by adjusting Group EBIT for non-recurring items and for the amortisation of intangible assets and depreciation of tangible assets. The amortisation of intangible assets and depreciation of tangible assets are included in functional costs. They are disclosed in the segment information.

EBIT is calculated as Group revenue less cost of sales and other functional costs (marketing and selling expenses, research and development costs, administration expenses) less other operating expenses. In addition, the figure includes other operating income and the share of profit or loss from associates and joint ventures. See table Results of operations of the Linde Group. EBIT is also adjusted for non-recurring items. Non-recurring items are items which, due to their nature, frequency and/or extent, are likely to have an adverse impact on how accurately the financial performance indicators reflect the sustainability of The Linde Group’s earning capacity in the capital market.

During the reporting period, non-recurring items comprised not only impairment losses recognised but also restructuring costs.

A reconciliation between the reported performance indicators and the performance indicators after adjusting for non-recurring items is given in Note [40] of the Notes to the Group financial statements.