Linde plc (NASDAQ:LIN)

The provision for income taxes demonstrates a generally increasing trend over the five-year period. However, this overall increase is influenced by offsetting movements in current tax expense and deferred tax benefits.

Current Tax Expense

Current tax expense exhibits a consistent upward trajectory, rising from US$1,516 million in 2021 to US$2,454 million in 2025. This represents a cumulative increase of approximately 62.1% over the period. The year-over-year increases are relatively stable, suggesting a correlation with underlying profitability.

Deferred Tax Benefit

The deferred tax benefit fluctuates considerably. Initially, the benefit is negative, indicating a deferred tax expense, at -US$254 million in 2021. This increases in magnitude to -US$383 million in 2022, before becoming significantly less negative at -US$84 million in 2023 and -US$142 million in 2024. However, in 2025, the deferred tax benefit returns to a more substantial negative value of -US$465 million. This volatility suggests changes in temporary differences between book and tax bases of assets and liabilities, or changes in tax planning strategies.

Provision for Income Taxes (Net)

The provision for income taxes, representing the net of current tax expense and deferred tax benefits, increased from US$1,262 million in 2021 to US$2,002 million in 2024, a rise of 58.7%. While continuing to increase, the rate of growth slows in 2025, with the provision decreasing slightly to US$1,989 million. This slowdown is attributable to the larger deferred tax benefit recorded in 2025, partially offsetting the increase in current tax expense.

The increasing current tax expense suggests growing taxable income. The fluctuating deferred tax benefit introduces complexity, requiring further investigation to understand the underlying drivers of these changes and their impact on the effective tax rate.

The effective income tax rate exhibited fluctuations over the five-year period. While the U.S. federal statutory income tax rate remained constant at 21.00%, the effective tax rate varied annually.

Effective Tax Rate Trend

The effective tax rate increased from 24.70% in 2021 to 25.90% in 2022, representing a rise of 1.20 percentage points. A subsequent decrease was observed in 2023, with the rate falling to 22.70%. This downward movement continued, albeit at a slower pace, to 23.40% in 2024. The final year presented in the information, 2025, saw a further slight decline to 22.40%.

The consistent difference between the effective tax rate and the statutory rate suggests the presence of factors influencing the company’s tax obligations beyond the standard corporate tax rate. These factors could include tax credits, deductions, differing tax rates in international jurisdictions where the company operates, or changes in the mix of taxable income.

Rate Differential

Throughout the period, the effective tax rate consistently exceeded the U.S. federal statutory rate. The largest differential occurred in 2022, where the effective rate was 4.90 percentage points higher than the statutory rate. The smallest differential was observed in 2025, at 1.40 percentage points.

The observed fluctuations in the effective tax rate warrant further investigation to understand the underlying drivers and potential implications for future tax liabilities.

The composition of deferred tax assets and liabilities exhibits several notable trends over the five-year period. Overall, a net deferred tax liability is consistently present, though it demonstrates a gradual decrease in absolute value. The components contributing to both deferred tax assets and liabilities have experienced fluctuations throughout the period.

Deferred Tax Assets - Components

Carryforwards decreased from US$358 million in 2021 to US$285 million in 2023, then increased significantly to US$505 million in 2024 before declining to US$380 million in 2025. Benefit plans and related deferred tax assets experienced a substantial decrease from US$607 million in 2021 to US$165 million in 2022, followed by a moderate increase to US$243 million in 2023, and a sharp decline to US$16 million in 2024, with no value reported for 2025. Inventory-related deferred tax assets show a consistent upward trend, increasing from US$57 million in 2021 to US$87 million in both 2024 and 2025. Accruals and other deferred tax assets remained relatively stable, fluctuating between US$827 million and US$1,042 million. The valuation allowance against deferred tax assets decreased from US$235 million in 2021 to US$146 million in 2023, then increased slightly to US$151 million in 2025.

The overall deferred tax assets, before considering the valuation allowance, decreased from US$2,064 million in 2021 to US$1,435 million in 2024, remaining constant at US$1,435 million in 2025. After applying the valuation allowance, the net deferred tax assets decreased from US$1,829 million in 2021 to US$1,284 million in 2025.

Deferred Tax Liabilities - Components

Fixed assets consistently represent the largest component of deferred tax liabilities, decreasing from -US$3,177 million in 2021 to -US$2,462 million in 2025. Goodwill-related deferred tax liabilities decreased from -US$166 million in 2021 to -US$263 million in 2025. Other intangible assets also contributed significantly to deferred tax liabilities, decreasing from -US$3,263 million in 2021 to -US$2,672 million in 2025. Subsidiary/equity investments show a decreasing trend, moving from -US$586 million in 2021 to -US$492 million in 2025. A liability related to benefit plans and related items of -US$40 million appeared in 2025. Other deferred tax liabilities decreased from -US$634 million in 2021 to -US$456 million in 2023, then increased to -US$736 million in 2024 before decreasing to -US$488 million in 2025.

The total deferred tax liabilities decreased from -US$7,826 million in 2021 to -US$6,417 million in 2025. The net deferred tax assets (liabilities) decreased in absolute value from -US$5,997 million in 2021 to -US$5,133 million in 2025, indicating a reduction in the overall net liability position.

Overall Trends

The reduction in net deferred tax liabilities is primarily driven by decreases in the deferred tax liability components, particularly fixed assets and intangible assets. The fluctuations in carryforwards and benefit plans within deferred tax assets warrant further investigation to understand the underlying business events driving these changes. The consistent presence of a valuation allowance suggests some uncertainty regarding the realization of the deferred tax assets.

The deferred tax asset balance exhibited a fluctuating pattern over the five-year period. Initially, a decrease is observed from 2021 to 2023, followed by a substantial increase in 2024, and a slight decrease in 2025. Conversely, the deferred tax liability balance demonstrated a consistent downward trend throughout the period.

Deferred Tax Assets

The deferred tax asset balance began at US$242 million in 2021, declining to US$226 million by 2023. A significant increase to US$428 million occurred in 2024, before settling at US$423 million in 2025. This suggests a potential change in the sources or valuation of deductible temporary differences, or the realization of tax benefits in 2024, followed by a minor adjustment in the subsequent year.

Deferred Tax Liabilities

The deferred tax liability balance decreased steadily from US$6,239 million in 2021 to US$5,556 million in 2025. This consistent reduction indicates a decrease in taxable temporary differences over time, potentially due to the recognition of revenue or the reversal of previously deferred tax obligations. The annual decreases ranged from approximately US$73 million to US$183 million.

The contrasting trends in deferred tax assets and liabilities suggest evolving tax positions. The substantial increase in deferred tax assets in 2024, coupled with the continued decline in deferred tax liabilities, warrants further investigation to understand the underlying drivers of these changes and their potential impact on future tax payments.

Net Deferred Tax Position

The net deferred tax liability (deferred tax liabilities less deferred tax assets) decreased from US$5,997 million in 2021 to US$5,133 million in 2025. This reduction is primarily driven by the decrease in deferred tax liabilities, although the fluctuation in deferred tax assets also contributes to the overall change. The narrowing of the net deferred tax liability could indicate a reduced future tax burden.

The financial information reveals adjustments made to reported figures, primarily concerning the removal of deferred tax assets and liabilities. These adjustments impact total assets, total liabilities, shareholders’ equity, and net income over the five-year period from 2021 to 2025. A consistent pattern emerges where reported figures are modified to arrive at adjusted values, suggesting a significant impact from deferred tax accounting.

Total Assets

Reported total assets experienced a slight decrease from 2021 to 2022, followed by an increase in 2023, a minor decrease in 2024, and a more substantial increase in 2025. The adjusted total assets demonstrate a similar trend, but the magnitude of the changes is generally smaller. The difference between reported and adjusted total assets remains relatively consistent across the period, ranging from approximately $232 million to $423 million, indicating a consistent, material deferred tax impact on asset valuation.

Total Liabilities

Reported total liabilities increased steadily from 2021 to 2025. However, the adjusted total liabilities show a considerably lower and more gradual increase. The difference between reported and adjusted liabilities widens over time, growing from approximately $6.2 billion in 2021 to approximately $5.5 billion in 2025. This suggests a substantial portion of the reported liabilities is related to deferred tax obligations that are removed in the adjusted figures.

Shareholders’ Equity

Reported shareholders’ equity decreased from 2021 to 2024, with a slight increase in 2025. Conversely, adjusted shareholders’ equity consistently exceeds reported equity, and the difference between the two widens from approximately $6.0 billion in 2021 to approximately $5.1 billion in 2025. This indicates that the removal of deferred tax liabilities results in a higher reported equity position.

Net Income

Reported net income increased each year from 2021 to 2025. The adjusted net income follows the same upward trend, but is consistently lower than the reported net income. The difference between reported and adjusted net income remains relatively stable, ranging from approximately $254 million to $465 million. This suggests that deferred tax expenses contribute to the reported net income, and their removal reduces the adjusted net income.

In summary, the adjustments consistently reduce reported asset and liability values, increase shareholders’ equity, and decrease net income. The magnitude of these adjustments remains material throughout the period, indicating a significant impact from deferred tax accounting on the company’s financial position and performance. The widening gap between reported and adjusted liabilities and equity suggests a growing deferred tax position over time.

The financial metrics demonstrate a consistent pattern between 2021 and 2025. Reported profitability ratios – net profit margin, return on equity (ROE), and return on assets (ROA) – generally exhibit an increasing trend. However, when adjusted for the removal of deferred tax impacts, these ratios show a more moderate increase, or in the case of adjusted net profit margin and adjusted ROE in 2025, a slight decrease. Asset turnover and financial leverage ratios show relatively stable trends in both reported and adjusted figures.

Profitability

Reported net profit margin increased from 12.42% in 2021 to 20.30% in 2025. The adjusted net profit margin, while following a similar upward trajectory, remained lower, increasing from 11.60% to 18.93% over the same period. This suggests that deferred tax assets or liabilities are positively impacting reported net income. A similar pattern is observed with ROE and ROA; reported values consistently exceed adjusted values, and the magnitude of the difference widens over time, indicating a growing influence of deferred taxes on reported profitability.

Asset Efficiency

Both reported and adjusted total asset turnover ratios remained relatively stable, fluctuating between 0.38 and 0.42 throughout the period. This indicates consistent efficiency in generating sales from the company’s asset base, irrespective of deferred tax adjustments.

Financial Leverage

Reported financial leverage increased steadily from 1.85 in 2021 to 2.27 in 2025. The adjusted financial leverage also increased, but at a slower pace, moving from 1.63 to 1.99. This suggests that deferred taxes are influencing the reported level of financial leverage, potentially through their impact on asset or equity values.

The consistent difference between reported and adjusted ratios highlights the significance of deferred taxes in the company’s financial reporting. While reported performance appears stronger, the adjusted figures provide a potentially more conservative view of underlying economic profitability and financial risk. The increasing divergence between reported and adjusted metrics warrants further investigation into the nature and magnitude of deferred tax items.

The period between 2021 and 2025 demonstrates a generally increasing trend in both reported and adjusted net income. However, the adjusted net profit margin exhibits a more nuanced pattern. Initial observations reveal a divergence between reported and adjusted profitability metrics, which widens over the observed timeframe.

Reported Net Profit Margin

The reported net profit margin increased consistently from 12.42% in 2021 to 20.30% in 2025. This represents a substantial improvement in profitability as measured by reported figures, with gains accelerating in the later years of the period. The increase suggests improved operational efficiency, favorable pricing strategies, or a reduction in reported expenses relative to revenue.

Adjusted Net Profit Margin

The adjusted net profit margin initially decreased from 11.60% in 2021 to 11.28% in 2022. A significant increase then occurred, rising to 18.61% in 2023 and 19.46% in 2024. However, the adjusted net profit margin experienced a slight decline in 2025, settling at 18.93%. This pattern suggests that adjustments made to net income have a considerable impact on the overall profitability picture, and that these adjustments are not consistently positive. The 2025 decrease warrants further investigation to determine the underlying cause.

Relationship Between Reported and Adjusted Margins

The difference between the reported and adjusted net profit margins widened from approximately 0.82 percentage points in 2021 to over 1.37 percentage points in 2025. This indicates that the adjustments made to reported net income to arrive at adjusted net income are becoming increasingly substantial and have a growing effect on the overall profitability assessment. The nature of these adjustments should be examined to understand their impact on the company’s true economic performance.

In summary, while both reported and adjusted net income increased over the period, the adjusted net profit margin experienced a period of initial decline followed by strong growth and a recent slight decrease. The growing disparity between reported and adjusted profitability metrics suggests that the adjustments made to net income are a significant factor in the company’s financial performance and require further scrutiny.

The reported and adjusted total asset turnover ratios for the period under review exhibit a relatively stable pattern. Both metrics demonstrate similar behavior over the five-year period, suggesting that adjustments to total assets do not materially impact the turnover calculation in this instance.

Reported Total Asset Turnover

The reported total asset turnover ratio began at 0.38 in 2021, increased to 0.42 in 2022, and then remained consistent at 0.41 for both 2023 and 2024. A slight decrease to 0.39 is observed in 2025. This indicates a generally efficient use of assets to generate sales, with a minor reduction in efficiency in the most recent year.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio mirrors the reported ratio closely. It started at 0.38 in 2021, rose to 0.42 in 2022, and held steady at 0.41 for 2023 and 2024. The ratio concludes the period at 0.39 in 2025, aligning with the trend observed in the reported ratio. The consistency between the reported and adjusted figures suggests that the adjustments made to total assets are not significantly altering the overall assessment of asset utilization.

Total Assets

Reported total assets decreased from US$81,605 million in 2021 to US$79,658 million in 2022, then increased to US$80,811 million in 2023, slightly decreased to US$80,147 million in 2024, and finally rose to US$86,817 million in 2025. Adjusted total assets follow a similar pattern, remaining close to the reported values throughout the period.

Overall, the asset turnover ratios suggest a consistent level of operational efficiency, with a minor dip in the final year. The close alignment between reported and adjusted figures indicates that the adjustments to total assets do not fundamentally change the interpretation of asset utilization performance.

An examination of the financial information reveals trends in both reported and adjusted financial leverage over the five-year period. Reported total assets experienced a slight decrease between 2021 and 2022, followed by a modest increase in 2023, a slight decrease in 2024, and a more substantial increase in 2025. Reported total Linde plc shareholders’ equity consistently declined from 2021 to 2024, with a minimal increase in 2025.

Reported Financial Leverage

Reported financial leverage exhibited an increasing trend throughout the period. Starting at 1.85 in 2021, it rose to 1.99 in 2022, 2.03 in 2023, 2.10 in 2024, and reached 2.27 in 2025. This indicates a growing proportion of assets financed by equity holders over time.

Adjusted Financial Leverage

Adjusted financial leverage also demonstrated an upward trend, though at a slower pace than the reported leverage. It began at 1.63 in 2021, increasing to 1.74 in 2022, 1.78 in 2023, 1.84 in 2024, and concluding at 1.99 in 2025. The adjusted leverage consistently remained lower than the reported leverage throughout the observed period.

Asset and Equity Adjustments

Adjusted total assets were consistently lower than reported total assets in each year, suggesting a reduction in asset values through the adjustment process. Conversely, adjusted total Linde plc shareholders’ equity was consistently higher than reported equity, indicating an increase in equity values through the adjustment process. The difference between reported and adjusted values narrowed slightly between 2021 and 2025 for both assets and equity.

The divergence between reported and adjusted financial leverage suggests that the adjustments to assets and equity have a material impact on the calculated leverage ratio. The consistent increase in both reported and adjusted financial leverage warrants further investigation to understand the underlying drivers of these changes and their potential implications for the company’s financial risk profile.

Reported net income demonstrates a consistent upward trend over the five-year period, increasing from US$3,826 million in 2021 to US$6,898 million in 2025. Adjusted net income follows a similar pattern, rising from US$3,572 million in 2021 to US$6,433 million in 2025, though the magnitude of increase is slightly less than that of reported net income. Shareholders’ equity, based on reported figures, exhibits a decline from 2021 to 2024, before stabilizing in 2025. Conversely, adjusted shareholders’ equity shows a peak in 2021, followed by a decreasing trend through 2025.

Reported Return on Equity (ROE)

Reported ROE shows a steady and substantial increase throughout the period, beginning at 8.69% in 2021 and reaching 18.04% in 2025. This growth is attributable to the increasing net income coupled with the initial decline and subsequent stabilization of shareholders’ equity. The rate of increase appears to decelerate slightly between 2023 and 2025.

Adjusted Return on Equity (ROE)

Adjusted ROE also demonstrates an upward trend, though less pronounced than the reported ROE. It rises from 7.14% in 2021 to 14.83% in 2025, remaining constant between 2024 and 2025. The adjusted ROE is consistently lower than the reported ROE across all years, reflecting the impact of the adjustments made to net income and shareholders’ equity. The difference between reported and adjusted ROE widens over time.

The divergence between reported and adjusted ROE suggests that adjustments to net income and shareholders’ equity have a significant impact on the overall profitability assessment. The decline in reported shareholders’ equity, despite increasing net income, contributes to the higher reported ROE. The adjusted figures, utilizing a different equity base, present a more conservative view of the company’s return on equity. The stabilization of both net income and adjusted shareholders’ equity in the later years suggests a potential plateauing of growth in profitability as measured by these metrics.

Reported net income demonstrates a consistent upward trend over the five-year period, increasing from US$3,826 million in 2021 to US$6,898 million in 2025. Adjusted net income follows a similar pattern, rising from US$3,572 million to US$6,433 million during the same timeframe. Reported total assets experienced a slight decrease between 2021 and 2022, followed by relative stability before increasing notably in 2025 to US$86,817 million. Adjusted total assets mirrored this pattern, reaching US$86,394 million in 2025.

Reported Return on Assets (ROA)

Reported ROA exhibits an increasing trend from 4.69% in 2021 to a peak of 8.19% in 2024, before decreasing slightly to 7.95% in 2025. The increase suggests improving profitability relative to the company’s asset base. The minor decline in 2025 warrants further investigation, though it does not negate the overall positive trend.

Adjusted Return on Assets (ROA)

Adjusted ROA also shows an upward trajectory, moving from 4.39% in 2021 to 8.06% in 2024, and then decreasing to 7.45% in 2025. The adjusted ROA consistently remains below the reported ROA throughout the period. The decrease in 2025 is more pronounced than the decrease observed in the reported ROA, indicating that adjustments to net income and/or total assets have a greater impact on the calculated return in that year.

The difference between reported and adjusted ROA values suggests that certain items are being adjusted for when calculating the latter. The consistent difference between the two metrics indicates a systematic adjustment process. The observed trends in both reported and adjusted ROA suggest improving asset utilization and profitability, although the 2025 figures indicate a potential stabilization or slight reversal of this trend. Further analysis would be required to determine the underlying drivers of these changes and the nature of the adjustments made to arrive at the adjusted figures.