Linde Pakistan Limited

Linde Pakistan Limited (LPL) is primarily involve in manufacturing and distribution of industrial, medical and speciality gases as well as welding products. It also provides a broad range of related services including the installation of on-site plants, gas equipment, pipelines and associated engineering services.
A company of BOC Group Limited, UK, the majority shareholder of Linde Pakistan Limited is a wholly owned subsidiary of Linde AG, Germany. Accordingly, Linde AG is the ultimate parent company of Linde Pakistan Limited. The company has a quite long history in Pakistan. First in 1946 opened its liaison office in Karachi, and the Company changed its name after the creation of Pakistan; it is registered as Pakistan Oxygen and Acetylene Company (Pvt) Limited. Later on, it changed its name again to Pakistan Oxygen Limited (POL) and became a public limited company with 60 percent BOC Group holding and 40 percent local public shareholding. Once again in 1995, Gas company got a new identity and became BOC Pakistan Ltd.
In 1997, BOC Pakistan became a strategic partner for Lotte PTA for nitrogen and hydrogen supply. They installed Pakistan's largest Air Separation Unit at that time capable of producing up to 100 tons per day of oxygen, nitrogen and argon, and the company also invested in an Electrolytic Hydrogen Plant. In 2011, the BOC Pakistan re-branded as Linde Pakistan.
PRIOR PERFORMANCE The year 2010 was a tough year for the firm, especially in the first quarter. Linde, which was known as BOC Pakistan Limited at that time, suffered multiple setbacks. The energy crisis was at its peak during the period under discussion, and that increased the frequency of plant shut down, exerting adverse effects on the productivity of the company.
During the period, the government had put restrictions on the procurement of ammonium nitrate, which is the main ingredient in the production of nitrous oxide. According to the company, ammonium nitrate is only available from one source in Pakistan and that it has to be imported at a higher cost. The floods during the year also wreaked havoc with Linde's distribution channels. Furthermore, lower demand from ship-breaking sector put significant pressure on the firm's bottomline during the year.
2011 and 2012 were crucial years for the gas company. After rebranding as Linde Pakistan in 2011, the firm saw its sales double from the previous year. However, it faced higher core cost which brought down the gross margin for the period. Despite greater competition the firm was able to charge optimal pricing for its product thanks to improved carbon dioxide (CO2) prices and higher demand from the ship-breaking sector. In 2012, Linde Pakistan inaugurated Pakistan's largest state-of-the-art Air Separation Unit (ASU) at Sundar Industrial Estate, Lahore, with a capacity of up to 150 tons per day.
This addition has improved the productivity of the gas company by broadening its consumer base in health care segment. However, operating cost during the period was on the higher side. Finance charge also went up in 2012 compared to the previous year due to the long-term financing obtained for the new Lahore ASU Plant.
Achieving higher profitability in 2013 remained quite a challenge for Linde Pakistan despite a decent topline growth. Similar to its major competitors Ghani Gases, it blamed on the rapid and abnormal increase in electricity tariff of approximately 60 percent in mid-2013, which increased the total fuel and power cost of the company by 45 percent compared to a much lower 20 percent increase in the previous year.
During, the year Linde installed rented diesel generators at the Lahore ASU (Air Separation Unit) Plant and that also put another dent on its cost. It also faced raw CO2, due to natural gas shortages, which kept the Multan plant idle for the whole year.
The shutdown of industry in Punjab due to the scarcity of natural gas in the country affected demand for raw materials and other inputs. It also put stress on Linde's topline. However, the gases volumes (oxygen, nitrogen and argon) showed an increase of 8 percent, despite a lack of sale growth. But at the same time, prices remained under intense pressure due to excess market supply, lower demand and greater competition, especially in the ship breaking and health care sector.
Besides these challenges the company's profit margins were also squeezed due to a lower demand versus a higher product supply, and a higher cost of production due to rising input costs and a full year impact of increased tariffs for power and gas.
RECENT PERFORMANCE The performance of the company is not up to the par during the nine months ended September 2015. The bottomline of the Company saw a dip of 19 percent year-on-year. The revenue stream of the company also lost one percent year-on-year.
However, the firm was able to keep a lid on its core expenses. Linde was unable to control its distribution costs despite low fuel prices and at the same time it saw its other income decline quite significantly.
OUTLOOK Going forward, Linde Pakistan Limited is focused on developing its PGP portfolio through new product introductions in both the gases and welding business.
These would further add to the company's value proposition to the customer and would allow Linde to grow in new businesses areas, which is expected to consolidate and maximise profitability and enhance competitiveness. However, similar to Ghani Gases, Linde has to find a way to power its plants via alternative fuel. In every annual report in last five years, Linde has lost significant productivity due to the power.

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Linde Pakistan Limited

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Rs(mn)                             9MCY14       9MCY15          YoY

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Net sales                           2,997        2,972          -1%

Cost of sales                       2,424        2,336          -4%

Gross profit                          572          636          11%

Distribution and marketing expenses   175          199          14%

Administrative expenses               178          170          -4%

Other operating expenses               21           19         -10%

Other income                           58           16         -72%

Finance cost                           90           97           8%

Profit before taxation                167          128         -23%

Taxation                               52           35         -33%

Profit for the period                 115           93         -19%

EPS                                  4.59         3.72            ?

Net profit margin                       4%          3% Down 100 BPS

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