Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows a consistent upward trend over the five-year period. Starting at 2,699 million US dollars in 2020, it rises steadily each year, reaching 6,814 million US dollars by 2024. This indicates an overall improvement in operational profitability.

Cost of Capital

The cost of capital shows a slight increasing trend from 12.69% in 2020 to a peak of 13.28% in 2023, followed by a modest decline to 13.17% in 2024. The variations are relatively minor, suggesting a mostly stable but slightly rising cost of financing over the period.

Invested Capital

Invested capital begins at 78,771 million US dollars in 2020 and declines to 72,341 million US dollars by the end of 2022. Subsequently, there is a gradual recovery and increase, reaching 74,884 million US dollars in 2024. This pattern indicates a reduction in capital deployment during the earlier years followed by moderate reinvestment or asset growth in later years.

Economic Profit

Economic profit remains negative throughout the period but exhibits a clear improving trend. It starts at a low of -7,301 million US dollars in 2020 and improves significantly to -3,045 million US dollars by 2024. Although economic profit is still negative, the reduction in losses suggests improving value creation relative to the company’s cost of capital.

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 Trend

The economic profit demonstrates a consistent pattern of negative values throughout the analyzed period. However, there is a noticeable improvement as the magnitude of the loss decreases from -7301 million US dollars in 2020 to -3045 million US dollars in 2024. This indicates a gradual reduction in economic losses, suggesting improving operational efficiency or profitability factors over time.

Invested Capital Trend

The invested capital shows relatively stable figures with a slight overall increase from 78,771 million US dollars in 2020 to 74,884 million US dollars in 2024. While there was a decrease observed between 2020 and 2022, the capital base starts to grow again in the subsequent years. This stability and marginal growth imply steady asset investment or capital allocation during the period.

Economic Spread Ratio Trend

The economic spread ratio remains negative throughout the period analyzed, starting from -9.27% in 2020 and improving consistently to -4.07% in 2024. Such improvement indicates a decreasing gap between the return on invested capital and the cost of capital, suggesting enhanced value creation potential despite continuing to operate below the cost of capital threshold.

Overall Insights

The overall financial dynamics reveal that although the company continues to experience negative economic profit and economic spread ratios, both metrics show improvement trends. This suggests progress towards profitability and capital efficiency. The relatively stable invested capital base supports the notion of controlled investment levels. Continued focus on operational efficiencies and return enhancement may further reduce losses and potentially lead to positive economic profits in the future.

Sales

Sales showed a consistent upward trend over the five-year period. Starting from approximately 27.2 billion US dollars in 2020, sales increased each year until reaching around 33 billion US dollars by 2024. This indicates steady revenue growth, though the rate of increase appears to moderate slightly after 2022, with sales stabilizing near the 33 billion mark in 2023 and 2024.

Economic Profit

Economic profit remained negative throughout the period, signaling that the company did not generate profit above its cost of capital. However, the magnitude of the negative economic profit improved significantly over time. In 2020, the economic loss was around -7.3 billion US dollars, reducing to approximately -3 billion US dollars by 2024. This improvement suggests progress in operational efficiency or capital management, though the company still faced economic losses in the final reported year.

Economic Profit Margin

The economic profit margin also showed a marked positive trend, although it stayed in negative territory. Beginning at -26.8% in 2020, the margin improved each year to reach -9.23% in 2024. This indicates that while the company was still not generating economic profit per unit of sales, the losses relative to sales volume have diminished considerably over the timeframe.

Overall Analysis

The company’s financial data reveal consistent growth in sales accompanied by a notable reduction in economic losses and negative margins. This suggests improving profitability dynamics despite ongoing challenges in attaining positive economic profit. The trends imply enhancements in operational performance or capital efficiency, though the firm has yet to fully overcome economic profit deficits as of the latest period.