Linde plc (NASDAQ:LIN)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a consistent upward trend over the five-year period. Starting at 2,699 million US dollars in 2020, it increased significantly to 3,800 million in 2021 and continued to rise steadily through 2022 and 2023, reaching 6,814 million in 2024. This indicates improved operational profitability and potentially enhanced efficiency or higher revenue generation during this timeframe.

Cost of Capital

The cost of capital exhibits a gradual increase from 12.66% in 2020 to a peak of 13.24% in 2023, followed by a slight decrease to 13.13% in 2024. This upward movement could reflect changes in market conditions or increased perceived risk, which may impact investment decisions and valuation assessments.

Invested Capital

Invested capital declined modestly from 78,771 million US dollars in 2020 to 72,560 million in 2021, stabilizing around 72,341 million in 2022 and showing a gradual increase thereafter to 74,884 million in 2024. This suggests a degree of capital efficiency improvement in the initial years, followed by moderate reinvestment or asset acquisitions in more recent periods.

Economic Profit

Economic profit remains negative throughout the observed period, indicating that returns did not exceed the cost of capital. However, the negative value becomes less severe, improving from -7,270 million US dollars in 2020 to -3,015 million in 2024. This improvement points toward enhanced value creation efforts, although full value generation above the cost of capital has not yet been achieved.

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.

The data reflects the financial performance and capital efficiency over a five-year period.

Economic Profit

Economic profit has remained negative throughout the observed period, indicating that the returns generated were insufficient to cover the cost of capital. Although the losses were significantly large in 2020 at -7270 million US dollars, there is a consistent improvement trend, with the economic profit losses decreasing year over year and reaching -3015 million US dollars by 2024. This suggests a gradual reduction in economic value destruction.

Invested Capital

The level of invested capital shows a modest fluctuation over the years. It declined from approximately 78,771 million US dollars in 2020 to nearly 72,341 million US dollars in 2022, then exhibited a slight upward movement, reaching 74,884 million US dollars by 2024. The relative stability of invested capital suggests that changes in economic profit are driven more by profitability than by shifts in the scale of invested assets.

Economic Spread Ratio

The economic spread ratio, which measures the spread between returns and costs relative to invested capital, remains negative across all periods, reinforcing the observation of economic value loss. However, similar to economic profit, this ratio shows a consistent improvement—from a negative 9.23% in 2020 to a negative 4.03% in 2024. This positive movement indicates reduced inefficiency and improving returns relative to capital costs over time.

Overall, the financial indicators suggest a company gradually improving its capital efficiency and reducing economic losses, despite still operating below the threshold required to generate positive economic profit. The sustained negative economic spread ratio highlights ongoing challenges in achieving profitability sufficient to surpass capital costs, although the trend indicates progress toward mitigating these issues.

The financial data reveals several noteworthy trends over the five-year period ending December 31, 2024.

Sales

Sales showed a generally positive trend, increasing from approximately 27.2 billion US dollars in 2020 to around 33.0 billion US dollars in 2024. Despite a minor dip in 2023 compared to 2022, the overall trajectory is upward, indicating steady revenue growth over the period.

Economic Profit

The economic profit values, however, remained negative throughout the period, indicating that the company did not generate profit exceeding its cost of capital. Although economic profit was deeply negative in 2020 at -7.27 billion US dollars, there was a marked improvement by 2024, reaching a negative level of approximately -3.02 billion US dollars. This suggests a gradual reduction in economic losses year over year.

Economic Profit Margin

In line with the economic profit values, the economic profit margin also remained negative but showed consistent improvement. The margin improved from -26.69% in 2020 to -9.14% by 2024, reflecting enhanced operational efficiency or cost management relative to sales, even though the margin remains negative.

Overall Insight

The data reflects an organization with increasing sales but continuing challenges in generating positive economic profit. The improving trend in both economic profit and its margin signifies that financial performance is gradually moving toward a breakeven or potentially profitable state, although it has not been achieved yet within the period observed.