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Item 7. Management’s Discussion and Analysis

2024-02-28 compared with 2023-02-28 · 164 added, 171 removed, 599 unchanged (36% of the section changed)

18 unchanged sentences

The diversity of end-markets supports financial stability for Linde in varied business cycles.

Linde generates most of its revenues and earnings in the following geographies where the company has its strongest market positions and where distribution and production operations allow the company to deliver the highest level of service to its customers at the lowest cost.

Linde's industrial gas business generates most of its revenues and earnings in the following geographies where the company has its strongest market positions and where distribution and production operations allow the company to deliver the highest level of service to its customers at the lowest cost.

North and South America ("Americas") Europe, Middle East and Africa (“EMEA”) Asia and Pacific

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2023 Year in review

• Sales of $33,364 million were 8% above 2021 sales of $30,793 million.

Higher pricing across all geographic segments contributed 7% to sales.

Cost pass-through increased sales by 6% with minimal impact on operating profit.

Volume increased sales by 1%.

Currency translation decreased sales by 5%, largely in EMEA and APAC.

Divestitures decreased sales by 1%.

• Sales of $32,854 million were 2% below 2022 sales of $33,364 million.

Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, decreased sales by 3% with minimal impact on operating profit.

Engineering decreased sales by 2%.

Volumes decreased sales by 1%.

Currency translation decreased sales by 1%, largely in APAC.

Divestitures, net of acquisitions, decreased sales by 1% primarily due to the divestment of the GIST business, partially offset by the nexAir, LLC acquisition.

The aforementioned drivers were partially offset by 6% higher price attainment across all geographic segments.

• Reported operating profit of $8,024 million was 49% above 2022.

Adjusted operating profit of $9,070 million was 15% above 2022.

The increase in the reported operating profit was primarily due to higher pricing, productivity initiatives and lower depreciation and amortization driven by merger related assets, which more than offset Russia-Ukraine conflict and other charges and the adverse impacts of inflation and currency in the year.

The increase in adjusted operating profit increase was primarily due to higher pricing and productivity initiatives, which more than offset the adverse impacts of inflation and currency in the year.*

• Income from continuing operations of $4,147 million and diluted earnings per share from continuing operations of $8.23 increased from $3,821 million and $7.32, respectively in 2021.

Adjusted income from continuing operations of $6,195 million and adjusted diluted earnings per share from continuing operations of $12.29 were 11% and 15%, respectively above 2021 adjusted amounts.*

• Cash flow from operations of $8,864 million was $861 million below 2021.

The decrease was driven by higher working capital requirements, including lower inflows from contract liabilities from engineering customer advanced payments, partially offset by higher net income adjusted for non cash charges.

The increase in the reported operating profit was primarily driven by the Russia-Ukraine conflict and other charges recorded in 2022 and included higher pricing, savings from productivity initiatives, and lower depreciation and amortization driven by merger related intangible assets.

These increases more than offset the adverse impacts of cost inflation and lower volumes in the year.

The adjusted operating profit increase was primarily due to higher pricing and productivity initiatives, which more than offset the effects of cost inflation and lower volumes during the year.*

• Net income - Linde plc of $6,199 million and diluted earnings per share of $12.59 increased from $4,147 million and $8.23, respectively in 2022.

Adjusted net income - Linde plc of $6,989 million and adjusted diluted earnings per share of $14.20 were 13% and 16%, respectively above 2022 adjusted amounts.*

• Cash flow from operations of $9,305 million was $441 million above 2022.

The increase was driven by higher net income partially offset by higher net working capital requirements, including lower inflows from contract liabilities from engineering customer advanced payments.

Capital expenditures were $3,787 million;

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Depreciation and amortization $ 3,816 $ 4,204 (9) %

Russia-Ukraine conflict and other charges (a) $ 1,029 $ 273 —

Other charges (a) $ 40 $ 1,029 —

Operating Profit $ 8,024 $ 5,369 49 %

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Income from equity investments $ 167 $ 172 (3) %

Noncontrolling interests from continuing operations $ (134) $ (135) (1) %

Income from continuing operations $ 4,147 $ 3,821 9 %

Diluted earnings per share from continuing operations $ 8.23 $ 7.32 12 %

Noncontrolling interests $ (142) $ (134) 6 %

Net Income - Linde plc $ 6,199 $ 4,147 49 %

Diluted earnings per share $ 12.59 $ 8.23 53 %

Diluted shares outstanding 492,290 504,038 (2) %

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Operating margin 27.6 % 23.7 %

Income from continuing operations $ 6,195 $ 5,579 11 %

Diluted earnings per share from continuing operations $ 12.29 $ 10.69 15 %

Net Income - Linde plc $ 6,989 $ 6,195 13 %

Diluted earnings per share $ 14.20 $ 12.29 16 %

Other Financial Data (b)

EBITDA from continuing operations $ 9,745 $ 9,738 — %

EBITDA $ 12,007 $ 9,745 23 %

As percent of sales 36.5 % 29.2 %

Adjusted EBITDA from continuing operations $ 10,873 $ 10,179 7 %

Adjusted EBITDA $ 12,133 $ 10,873 12 %

As percent of sales 36.9 % 32.6 %

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2023 Compared With 2022

Linde sales increased $2,571 million, or 8%, for the 2022 year versus 2021.

Linde sales decreased $510 million, or 2%, for the 2023 year versus 2022.

Higher pricing across all geographic segments contributed 6% to sales.

Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, increased sales by 6%, with minimal impact on operating profit.

Volume growth in all end markets, except healthcare, and startups increased sales by 1%.

Currency translation decreased sales by 5%, largely in EMEA and APAC, driven by the weakening of the Euro, Chinese yuan, British pound and Australian dollar against the U.S.

The impact of divestitures decreased sales by 1%.

Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, decreased sales by 3%, with minimal impact on operating profit.

Volumes decreased sales by 1% primarily driven by the electronics and metals and mining end markets.

The impact of divestitures, net of acquisitions decreased sales by 1%.

Currency translation decreased sales by 1%, largely in APAC, driven by the weakening of the Chinese yuan and Australian dollar against the U.S.

dollar, partially offset by EMEA, driven by the strengthening of the Euro and British pound.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization, increased $1,907 million, or 11%, for the year primarily due to inflation and higher volumes, partially offset by productivity gains and currency effects.

Cost of sales, exclusive of depreciation and amortization, decreased $1,958 million, or 10%, for the year primarily due to lower cost pass-through and volumes, the net impact of acquisitions and divestitures and productivity gains which more than offset cost inflation.

Cost of sales, exclusive of depreciation and amortization, was 53.2% and 58.3% of sales, respectively, in 2023 compared to 2022.

The increase as a percentage of sales was due primarily to higher cost pass-through to customers.

The decrease as a percentage of sales was primarily due to higher pricing and lower cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") decreased $82 million, from $3,189 in 2021 to $3,107 million in 2022.

Selling, general and administrative expense ("SG&A") increased $188 million, from $3,107 in 2022 to $3,295 million in 2023.

SG&A was 10.0% of sales in 2023 versus 9.3% in 2022.

Currency impacts decreased SG&A by approximately $3 million in 2023.

Excluding currency impacts, underlying SG&A increased primarily due to higher costs.

Excluding currency impacts, underlying SG&A increased primarily due to higher costs including the acquisition of nexAir.

Depreciation and amortization

Reported depreciation and amortization expense decreased $388 million, or 9% versus 2022.

The decrease is primarily due to lower depreciation and amortization of assets acquired in the merger and currency impacts.

On an adjusted basis, depreciation and amortization expense decreased $49 million, or 2%, versus 2021.

The decrease is primarily due to lower depreciation and amortization of assets acquired in the merger.

On an adjusted basis, depreciation and amortization expense increased $102 million, or 4%, versus 2022.

Currency impacts decreased depreciation and amortization by $29 million in 2023.

Excluding currency impacts, underlying depreciation and amortization increased including new project start ups.

Russia-Ukraine conflict and other charges

Russia-Ukraine conflict and other charges were $1,029 million and $273 million for 2022 and 2021, respectively.

Excluding currency, underlying depreciation and amortization increased due to the net impact of acquisitions and new project start ups.

Other charges

Other charges were $40 million and $1,029 million for 2023 and 2022, respectively.

In 2023, the costs primarily related to severance in the Engineering segment and expenses incurred due to the intercompany reorganization.

The charge for 2022 relates primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions recorded as of June 30, 2022.

2021 charges relate to cost reduction program and other charges, primarily severance (see Note 3 to the condensed consolidated financial statements).

On an adjusted basis, these benefits and costs have been excluded in both periods.

On an adjusted basis, these charges have been excluded in both periods.

Operating profit

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On an adjusted basis, operating profit increased $1,166 million, or 15%, for 2023 versus 2022.

On a reported basis, operating profit increased $385 million, or 8% in 2022.

The increase was primarily due to higher pricing, volumes, savings from productivity initiatives, and lower depreciation and amortization driven by merger related

These increases more than offset the adverse impacts of inflation and currency in the year as well as the Russia-Ukraine conflict and other charges of $1,029 million.

Cost reduction programs and other charges was $273 million in 2021.

On an adjusted basis, which excludes the impacts of purchase accounting as well as Russia-Ukraine conflict and other charges, operating profit increased $728 million, or 10%.

Operating profit growth was driven by higher pricing, volumes and productivity initiatives, which more than offset the effects of inflation and currency during the period.

On a reported basis, the increase was primarily driven by Russia-Ukraine conflict and other charges recorded in 2022 and included higher pricing, savings from productivity initiatives, and lower depreciation and amortization driven by merger related intangible assets.

These increases more than offset the adverse impacts of inflation and currency in the year as well as other charges of $40 million.

On an adjusted basis, which excludes the impacts of purchase accounting as well as other charges, operating profit increased $1,166 million, or 15%.

Operating profit growth was driven by higher pricing, and productivity initiatives, partially offset by cost inflation and lower volumes.

A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense – net in 2022 decreased $14 million, or 18%, versus 2021.

On an adjusted basis interest expense decreased $32 million, or 25% in 2022 as compared to 2021.

On both a reported and adjusted basis, the decrease year over year was driven primarily by higher interest income on cash deposits, partially offset by higher borrowing costs on short-term debt.

Reported interest expense – net in 2023 increased $137 million, or 217%, versus 2022.

On an adjusted basis interest expense increased $118 million, or 120% in 2023 as compared to 2022.

The increase was driven primarily by higher interest rates on debt and included approximately $28 million of devaluation impacts from hyperinflationary countries.

Net pension and OPEB cost (benefit), excluding service cost

Reported net pension and OPEB cost (benefit), excluding service cost were benefits of $164 million and $237 million in 2023 and 2022, respectively.

The increase in benefit primarily relates to lower amortization of deferred losses, partially offset by higher interest cost reflective of the higher discount rate environment year-over-year (see Note 16 to the consolidated financial statements).

The decrease in benefit primarily relates to higher interest cost reflective of the higher discount rate environment year-over-year (see Note 16 to the consolidated financial statements).

Effective tax rate

The reported effective tax rate ("ETR") for 2023 was 22.7% versus 25.9% in 2022.

The increase in the rate is primarily related to the net tax expense resulting from the deconsolidation and impairment of the company’s business in Russia in 2022.

2021 included a deferred income tax charge related to the revaluation of net deferred tax liabilities for a tax rate increase in the United Kingdom (see Note 5 to the consolidated financial statements).

The decrease in the rate is primarily related to a net decrease in the company's uncertain tax positions and the absence of the net unfavorable tax expense resulting from the Russia impairment and deconsolidation in 2022 (see Note 3 to the consolidated financial statements).

On an adjusted basis, the ETR for 2023 was 23.6% versus 24.2% in 2022.

The decrease includes higher tax benefits from share based compensation.

Income from equity investments

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On an adjusted basis, income from equity investments for 2023 was $239 million versus $247 million in 2022.

On a reported basis, the year-over-year increase in income from equity investments was due to a $35 million impairment charge taken in the third quarter of 2021 related to a joint venture in the APAC segment.

On an adjusted basis, the year-over-year increase in income from equity investments was primarily driven by the overall performance of investments in APAC.

Noncontrolling interests from continuing operations

On an adjusted basis, the year-over-year decrease in income from equity investments was primarily driven by the overall performance of investments in APAC.

Noncontrolling interests

At December 31, 2023, noncontrolling interests from continuing operations consisted primarily of noncontrolling shareholders’ investments in APAC (primarily in China).

Reported noncontrolling interests from continuing operations decreased $1 million, from $135 million in 2021 to $134 million in 2022.

Adjusted noncontrolling interests from continuing operations increased $6 million in 2022 as compared to 2021.

Income from continuing operations

Reported income from continuing operations increased $326 million, or 9%.

On an adjusted basis, which excludes the impacts of purchase accounting and Russia-Ukraine conflict and other charges, income from continuing operations increased $616 million, or 11%, in 2022 versus 2021.

Reported noncontrolling interests from continuing operations increased $8 million, from $134 million in 2022 to $142 million in 2023.

Adjusted noncontrolling interests from continuing operations decreased $2 million in 2023 as compared to 2022.

Net Income - Linde plc

Reported net income - Linde plc increased $2,052 million, or 49%.

On an adjusted basis, which excludes the impacts of purchase accounting and other charges, net income - Linde plc increased $794 million, or 13%, in 2023 versus 2022.

On both a reported and adjusted basis, the increase was driven by higher operating profit.

Diluted earnings per share from continuing operations

Reported diluted earnings per share from continuing operations increased $0.91, or 12%, in 2022 as compared to 2021.

Diluted earnings per share

Reported diluted earnings per share increased $4.36, or 53%, in 2023 as compared to 2022.

On an adjusted basis, diluted EPS of $14.20 in 2023 increased 16% versus 2022.

The increase on both reported and adjusted basis was primarily due to higher income from continuing operations and lower diluted shares outstanding.

The number of employees at December 31, 2022 was 65,010, a decrease of 10%, or 7,317 employees from 2021, primarily driven by the sale of GIST business, cost reduction initiatives and the deconsolidation of Russian subsidiaries in the EMEA and Engineering segments.

The increase on both a reported and adjusted basis is primarily due to higher net income - Linde plc and lower diluted shares outstanding.

The number of employees at December 31, 2023 was 66,323, an increase of 2%, or 1,313 employees from 2022, driven primarily by the acquisition of nexAir.

Other Financial Data

EBITDA from continuing operations increased to $9,745 million in 2022 from $9,738 million in 2021.

Adjusted EBITDA from continuing operations increased to $10,873 million for 2022 as compared to $10,179 million in 2021, primarily due to higher adjusted income from continuing operations plus depreciation and amortization versus the prior period.

EBITDA increased to $12,007 million in 2023 from $9,745 million in 2022.

Adjusted EBITDA increased to $12,133 million for 2023 as compared to $10,873 million in 2022.

The increase in both periods was driven by higher net income - Linde plc versus prior year.

See the "Non-GAAP Financial Measures" section for definitions and reconciliations of these non-GAAP measures to reported GAAP amounts.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) for the year ended December 31, 2022 was a loss of $778 million resulted primarily from currency translation adjustments of $1,835 million, partially offset by an increase in the funded status of the company's retirement obligations of $1,070 million driven by a higher discount rate environment.

Other comprehensive income (loss) for the year ended December 31, 2023 was a loss of $35 million resulted primarily from losses related to the change in funded status of retirement plans of $380 million and derivative losses of $55 million largely offset by currency translation adjustments of $400 million.

The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S.

dollars, and are largely driven by the movement of the U.S.

dollar against major currencies including the Euro, the Chinese yuan and the British pound.

See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 7 to the consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income by segment.

dollar against major currencies including the Euro, British pound and the Chinese yuan.

Related Party Transactions

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Environmental Matters

Linde’s principal operations relate to the production and distribution of atmospheric and other industrial gases, which for the most part are used to help customers reduce their emissions.

Linde’s principal operations relate to the production and distribution of atmospheric and other industrial gases, many of which are used to help customers reduce their emissions.

Worldwide costs relating to environmental protection may continue to grow due to increasingly stringent laws and regulations.

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Environmental Protection Agency ("EPA") has promulgated rules requiring reporting of GHG emissions to which Linde, its suppliers and customers are subject to.

EPA has also promulgated regulations to restrict GHG emissions, including final rules regulating GHG emissions from light-duty vehicles and certain large manufacturing facilities, many of which are Linde suppliers or customers.

In addition to these developments in the United States, several other countries worldwide have already implemented carbon taxation or trading systems which impact the company and its customers, including regulations in China, Singapore and the European Union.

In addition to these developments in the United States, several other countries worldwide have implemented carbon taxation or trading systems which impact the company and its customers, including regulations in China, Singapore and the European Union.

Among other impacts, such regulations are expected to raise the cost of energy, which is a significant cost for Linde.

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Linde anticipates continued growth in hydrogen sales due to increased focus on decarbonization projects.

Traditionally, hydrogen production plants and a large number of other manufacturing and electricity-generating plants have been identified in California and the European Union as a source of carbon dioxide emissions and these plants are subject to cap-and-trade regulations in those jurisdictions.

Traditionally, hydrogen production plants and a large number of other manufacturing and electricity-generating plants have been identified as sources of carbon dioxide emissions and these plants are subject to cap-and-trade regulations in jurisdictions including California and the European Union.

Linde believes it will be able to mitigate the costs of these regulations through the terms of its product supply contracts.

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Although there are considerable uncertainties, Linde believes that the business risk from potential regulations can be effectively managed through its commercial contracts.

Additionally, Linde does not anticipate any material effects regarding its plant operations or business arising from potential physical risks of climate change.

Additionally, Linde’s plant design, operations, and risk management teams are

engaged to manage and mitigate losses from physical climate change, and the company does not anticipate any material effects regarding its plant operations or business arising from potential physical risks of climate change.

Linde continuously seeks opportunities to optimize energy use and GHG emissions through research and development in customer applications and rigorous operational energy efficiency, sourcing low-carbon source energy, and purchasing hydrogen as a chemical byproduct where feasible.

Linde tracks GHG emission performance versus targets and reports regularly to business management and annually to Linde's Board of Directors.

In 2021, a new Sustainability Committee was created.

The Committee is responsible for oversight of the Company's programs, policies and strategies related to environmental matters, including climate change, greenhouse gas reduction goals and decarbonization solutions, such as clean energy and carbon management.

The Sustainability Committee is responsible for oversight of the Company's programs, policies and strategies related to environmental matters, including climate change, greenhouse gas reduction goals and decarbonization solutions, such as clean energy and carbon management.

At the same time, external factors may provide Linde with future business opportunities.

For example, in 2022, several pieces of legislation were enacted, including the Inflation Reduction Act in the U.S., which provides for investments in decarbonization opportunities including hydrogen projects.

Examples include current legislation, such as the Inflation Reduction Act in the U.S., which provides for investments in production of clean hydrogen and decarbonization technologies.

Other factors include governmental regulation of GHG and other emissions;

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The funded status for non-U.S.

plans was a surplus of $208 million and deficit of $1,430 million at December 31, 2022 and 2021, respectively.

Both the U.S.

plans derived the benefit from a lower PBO due to an increase in discount rates.

plans was a deficit of $207 million and surplus of $208 million at December 31, 2023 and 2022, respectively.

plan derived a benefit from the actual return on plan assets.

plans also experienced an increase in plan assets, offset by unfavorability generated from a higher PBO due to a decrease in discount rates.

Global pension contributions were $46 million in 2023, $51 million in 2022, and $42 million in 2021.

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Currently, the company self retains up to $10 million per occurrence for vehicle liability in the United States, $5 million per occurrence for workers' compensation and general liability.

In addition, the company self retains risk up to €5 million at its various properties worldwide for property damage resulting from fire, flood and other perils affecting its properties along with a separate €5 million deductible on all business interruption resulting from a major peril loss.

In addition, the company self retains risk up to €5 to €7.5 million at its various properties worldwide for property damage resulting from fire, flood and other perils affecting its properties along with a separate €5 to €7.5 million deductible on business interruption resulting from a major peril loss.

To mitigate its aggregate loss potential above these retentions, the company purchases catastrophic insurance coverage from highly rated insurance companies.

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Reconciliation to reported operating profit :

Russia-Ukraine conflict and other charges (Note 3)

(1,029) (273)

Other charges (Note 3)

Purchase accounting impacts - Linde AG (1,006) (1,506)

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Higher pricing contributed 6% to sales.

Higher volumes increased sales by 4%, driven by higher demand across all end markets except healthcare, led by chemicals and energy.

Cost past-through increased sales by 5% with minimal impact on operating profit.

The impact of net acquisitions increased sales by 3% primarily due to the acquisition of nexAir, LLC (See Note 2 to the consolidated financial statements).

Cost past-through decreased sales by 6% with minimal impact on operating profit.

Volumes and currency translation remained flat.

Operating Profit

Operating profit in the Americas segment increased $364 million, or 11%, in 2022 versus 2021 driven primarily by higher pricing, volumes and continued productivity initiatives which more than offset inflation.

Operating profit in the Americas segment increased $512 million, or 14%, in 2023 versus 2022 driven primarily by higher pricing, acquisitions and continued productivity initiatives which more than offset cost inflation the year.

(Dollar amounts in millions) Variance

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Cost pass-through (3) %

Currency (11) %

Acquisitions/Divestitures (2) %

The EMEA segment includes Linde's industrial gases operations in approximately 45 European, Middle Eastern and African countries including Germany, the U.K., France, Sweden and the Republic of South Africa.

EMEA segment sales increased $800 million, or 10%, in 2022 versus 2021.

EMEA segment sales increased by $99 million, or 1%, in 2023 versus 2022.

Higher price attainment increased sales by 9%.

Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, increased sales by 13% with minimal impact on operating profit.

Currency translation decreased sales by 11% due largely to the weakening of the Euro and British pound against the U.S.

Volume decreased sales by 3%.

The impact of net divestitures decreased sales by 2% primarily due to the deconsolidation of Russian subsidiaries as of June 30, 2022.

Volumes decreased sales by 4% led by the chemicals and energy end market.

Cost pass-through decreased sales by 3% with minimal impact on operating profit.

Currency translation increased sales by 1% du e largely to the strengthening of the Euro and British pound against the U.S.

The impact of net divestitures decreased sales by 2% primarily due to the deconsolidation of the Russian subsidiaries in June 2022.

Operating Profit

Operating Profit for the EMEA segment increased $473 million, or 23%, in 2023 versus 2022.

The increase was driven largely by higher pricing and continued productivity initiatives which more than offset currency, inflation and divestitures.

The increase was driven primarily by higher pricing and continued productivity initiatives, partially offset by cost inflation, lower volumes and divestitures.

(Dollar amounts in millions) Variance

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Higher price increased sales by 4%.

Cost pass-through increased sales by 2% with minimal impact on operating profit.

Currency translation decreased sales by 6% driven primarily by the weakening of the Australian dollar, Korean won and Chinese Yuan against the U.S.

Cost pass-through decreased sales by 1% with minimal impact on operating profit.

Currency translation decreased sales by 4% driven primarily by the weakening of the Australian dollar, Indian rupee and Chinese Yuan against the U.S.

Operating Profit

Operating profit in the APAC segment increased $136 million, or 8%, in 2023 versus 2022.

The increase was primarily driven by higher volumes and pricing and continued productivity initiatives which more than offset the impact of currency and inflation.

The increase was primarily driven by higher pricing and continued productivity initiatives which more than offset the impact of currency and cost inflation.

(Dollar amounts in millions) Variance

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Factors Contributing to Changes - Sales

Currency (9) %

Engineering segment sales decreased $602 million, or 22%, in 2023 versus 2022 .

The decrease was driven by project timing and negative currency translation, partially offset by a $321 million project progress recognition during the third quarter.

Projects for Russia that were sanctioned and have been wound down represented approximately $894 million of the Engineering segment sales during 2022.

The decrease was driven by project timing.

Projects for Russia that were sanctioned, and therefore terminated or suspended, have been lawfully wound down and represented approximately $238 million and $894 million of the Engineering segment sales during 2023 and 2022, respectively.

Operating profit

Engineering segment operating profit increased $82 million, or 17%, in 2022 versus 2021 driven by the aforementioned third quarter project and a fourth quarter project settlement, partially offset by other project timing and currency impacts.

Engineering segment operating profit decreased $64 million, or 12%, in 2023 versus 2022.

The decline from lower sales was partially offset by higher margin on wind down of terminated or suspended projects sanctioned in Russia.

(Dollar amounts in millions) Variance

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Volume/Price 2 %

Cost pass-through 1 %

Currency (4) %

Acquisitions/Divestitures (31) %

Other consists of corporate costs and a few smaller businesses including:

Surface Technologies, GIST and global helium wholesale;

Linde Advanced Materials Technology and global helium wholesale;

which individually do not meet the quantitative thresholds for separate presentation.

Sales for Other decreased $516 million, or 29%, in 2023 versus 2022.

Divestitures decreased sales by 12% due primarily to the sale of the GIST business as of September 30, 2022.

Currency translation decreased sales by 4%.

Underlying sales increased 3% in the year driven primarily by price and higher volumes of aviation and electronic sales in the coatings business.

Cost pass-through increased sales by 1% in 2022.

Sales of the GIST business which was divested as of September 30, 2022 represented approximately $630 million of Other sales during the nine months ended September 30, 2022.

Divestitures decreased sales by 31% primarily due to sale of GIST business in third quarter of 2022.

Volume/Price increased sales by 2% driven primarily by price in the coatings and global helium businesses, partially offset by lower coatings volumes.

Operating profit

Operating profit in Other decreased $10 million, or 18%, in 2022 versus 2021 due primarily to higher sourcing costs in the global helium business and the impact of divestitures, partially offset by lower corporate costs .

Operating profit in Other increased $109 million, or 165%, in 2023 versus 2022 d riven primarily by higher pricing in global helium and coatings and lower corporate costs which more than offset the impact of divestitures and lower volumes.

The results of Linde’s non-U.S.

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Non-cash charges (credits):

Russia-Ukraine and other charges, net of payments (a) 902 98

Other charges, net of payments (a) (118) 902

Depreciation and amortization 3,816 4,204

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Working capital (483) (310)

Other (305) 163

Net cash provided by (used for) operating activities $ 9,305 $ 8,864

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(a) See Note 3 to the consolidated financial statements.

Cash increased $2,613 million in 2022 versus 2021.

Cash decreased $772 million in 2023 versus 2022.

The primary sources of cash in 2023 were cash flows from operations of $9,305 million and debt borrowings, net of $1,060 million.

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Cash Flows From Operations

Cash flows from operations was $8,864 million, a decrease of $861 million from 2021.

The decrease was driven primarily by higher working capital requirements, including lower inflows from contract liabilities from engineering customer advanced payments, partially offset by higher net income adjusted for non cash charges.

Russia-Ukraine conflict and other charges, net of payments, were $902 million and $98 million for the years ended December 31, 2022 and 2021, respectively, representing charges of $1,029 million and $273 million net of related cash outflows of $127 million and $175 million, respectively, in each period.

As of December 31, 2022, Linde has approximately $1.7 billion recorded in contract liabilities within the consolidated balance sheet related to engineering projects in Russia.

Any obligation to satisfy the related residual contract liabilities may have an adverse effect on Linde’s cash flows.

Net cash used for investing activities was $3,088 million in 2022 compared to $3,007 million in 2021.

The increase was primarily driven by higher capital expenditures and acquisitions, partially offset by proceeds from divestitures, net of cash divested and asset sales.

Cash flows from operations was $9,305 million, an increase of $441 million from 2022.

The increase was driven primarily by higher net income adjusted for non-cash charges, partially offset by higher working capital requirements, including lower inflows from contract liabilities from engineering customer advanced payments and higher cash tax payments.

Other charges were $40 million and $1,029 million, for the years ended December 31, 2023 and 2022, respectively.

2022 charges related primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions.

Related Other charges cash outflows were $158 million and $127 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, Linde has approximately $418 million recorded in contract liabilities within the consolidated balance sheet related to suspended engineering projects in Russia.

Net cash used for investing activities was $4,670 million in 2023 compared to $3,088 million in 2022 due to higher acquisitions, net of cash acquired and higher capital expenditures.

Capital expenditures in 2023 were $3,787 million, an increase of $614 million from 2022.

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This represents the total estimated capital cost of large plants under construction.

Acquisitions, net of cash acquired for 2022 were $110 million, an increase of $22 million from 2021.

Acquisitions, net of cash acquired for the year ended December 31, 2021 were $88 million.

Acquisitions in each period related primarily to the Americas and EMEA.

On January 6, 2023, Linde purchased the remaining 77.2% ownership interest in nexAir, LLC in an all cash transaction with a total purchase price of approximately $0.8 billion (see Note 20 to the consolidated financial statements).

Acquisitions, net of cash acquired for 2023 were $953 million, an increase of $843 million from 2022, and related primarily to the acquisition of nexAir in the Americas (see Note 2 to the consolidated financial statements).

Acquisitions, net of cash acquired for the year ended December 31, 2022 were $110 million related primarily to the Americas and EMEA segments.

Divestitures and asset sales, net of cash divested in 2023 were $70 million as compared to $195 million in 2022.

Divestiture proceeds for the year include cash received from the sale of the company's GIST business of $184 million, net of cash divested of $75 million, for net proceeds of $109 million (See Note 2 to the consolidated financial statements).

Divestiture proceeds in 2022 include cash received from the sale of the company's GIST business of $184 million, net of cash divested of $75 million, for net proceeds of $109 million (see Note 2 to the consolidated financial statements).

Linde’s financing strategy is to secure long-term committed funding by issuing public notes and debentures and commercial paper backed by a long-term bank credit agreement.

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Cash used for financing activities was $5,400 million in 2023 compared to $3,089 million in 2022.

Cash provided by debt was $4,475 million in 2022 versus cash used for debt of $514 million in 2021 primarily driven by higher commercial paper borrowings and debt issuances in 2022.

Cash provided by debt was $1,060 million in 2023 versus $4,475 million in 2022, driven primarily by lower inflows from commercial paper borrowings and lower net debt issuances in 2023.

In February 2023, Linde repaid $500 million of 2.70% notes that became due.

In April 2023, Linde repaid €650 million of 2.00% notes and £300 million of 5.875% notes that became due.

In June 2023, Linde issued €500 million of 3.625% notes due in 2025, €750 million of 3.375% notes due in 2029 and €650 million of 3.625% notes due in 2034.

In February 2024, Linde issued €700 million of 3.00% notes due in 2028, €850 million of 3.20% notes due in 2031 and €700 million of 3.40% notes due in 2036.

Net purchases of ordinary shares were $3,925 million in 2023 versus $5,132 million in 2022.

On October 23, 2023, the company's board of directors approved a new share repurchase program for up to $15 billion of Linde's ordinary shares.

For additional information related to share repurchase programs, see Part II Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Cash dividends increased to $2,482 million in 2023 versus $2,344 million in 2022 driven primarily by a 9% increase in dividends per share to $5.10 per share from $4.68 per share, partially offset by lower shares outstanding.

Cash used for Noncontrolling interest transactions and other was $88 million for the year ended December 31, 2022 versus cash used of $323 million for the respective 2021 period primarily due to the settlement of the buyout of minority interests in the Republic of South Africa in 2021.

Cash used for Noncontrolling interest transactions and other was $53 million for the year ended December 31, 2023 versus cash used of $88 million for the respective 2022 period.

Linde’s total net debt outstanding at December 31, 2023 was $14,709 million, $2,231 million higher than $12,478 million at December 31, 2022.

The December 31, 2023 net debt balance includes $18,907 million in public securities, and $466 million representing primarily worldwide bank borrowings, net of $4,664 million of cash.

Linde’s global effective borrowing rate was approximately 2.6% for 2023.

The company believes that it has sufficient operating flexibility, cash reserves, and funding sources to maintain adequate amounts of liquidity to meet its business needs around the world.

At December 31, 2023, Linde's credit ratings as reported by Standard & Poor’s and Moody’s were A-1 and P-1 for short-term debt, respectively, and A and A2 for long-term debt, respectively.

Note 11 to the consolidated financial statements includes information with respect to the company’s debt activity in 2022, current debt position, debt covenants and the available credit facilities;

The company maintains a $5 billion and a $1.5 billion unsecured and undrawn revolving credit agreements with no associated financial covenants.

No borrowings were outstanding under the credit agreements as of December 31, 2023.

The company does not anticipate any limitations on its ability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moody’s and Standard & Poor’s.

Note 11 to the consolidated financial statements includes information with respect to the company’s debt activity, current debt position, debt covenants and the available credit facilities;

and Note 12 includes information relating to derivative financial instruments.

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The company was in compliance with these covenants at December 31, 2023 and expects to remain in compliance for the foreseeable future.

The company maintains a $5 billion and a $1.5 billion unsecured and undrawn revolving credit agreements with no associated financial covenants.

No borrowings were outstanding under the credit agreements as of December 31, 2022.

Linde’s total net debt outstanding at December 31, 2022 was $12,478 million, $1,094 million higher than $11,384 million at December 31, 2021.

The December 31, 2022 net debt balance includes $17,561 million in public securities, and $353 million representing primarily worldwide bank borrowings, net of $5,436 million of cash.

Linde’s global effective borrowing rate was approximately 1.7% for 2022.

In January 2022, Linde repaid €1.0 billion of 0.250% notes that became due.

In March 2022, Linde issued €500 million of 1.000% notes due 2027, €750 million of 1.375% notes due 2031, and €800 million of 1.625% notes due 2035.

In May 2022, Linde repaid $500 million of 2.20% notes due in August 2022.

In November 2022, Linde issued $300 million of 4.80% notes due in 2024 and $600 million of 4.70% notes due in 2025.

On February 28, 2022, the company’s Board of Directors approved the additional repurchase of $10.0 billion of its ordinary shares.

For additional information related to the share repurchase programs, see Part II Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

OFF-BALANCE SHEET ARRANGEMENTS

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The actuarial models also use assumptions for various other factors, including long-term inflation rates, employee turnover, retirement age, and mortality.

Linde management believes the assumptions used in the actuarial calculations are reasonable, reflect the company’s experience and expectations for the future and are within accepted practices in each of the respective geographic locations in which it operates.

geographic locations in which it operates.

Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

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plans and 5.64% for non-U.S.

plans for the year ended December 31, 2022 (7.00% and 5.28%, respectively at December 31, 2021).

plans at December 31, 2023 (7.00% and 5.60%, respectively at December 31, 2022).

The expected long-term rate of return on the U.S.

plan assets is estimated based on the plans' investment strategy and asset allocation, historical capita l market performance and, to a lesser extent, historical plan performance.

A 0.50% change in these expected long-term rates of return, with all other variables held constant, would change Linde’s pension expense by approximately $44 million.

A 0.50% change in these expected long-term rates of return, with all other assumptions held constant, would change Linde’s pension expense by approximately $44 million.

The company has consistently used a market-related value of assets rather than the fair value at the measurement date to determine annual pension expense.

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The consolidated market-related value of assets was $9,180 million, or $952 million higher than the fair value of assets of $8,228 million at December 31, 2023.

These net deferred investment gains of $1,213 million wil l be recognized in the calculation of the market-related value of assets ratably over the next four years and will impact future pension expense.

These net deferred investment lo of $952 million wil l be recognized in the calculation of the market-related value of assets ratably over the next four years and will impact future pension expense.

Future actual investment gains or losses will impact the market-related value of assets and, therefore, will impact future annual pension expense in a similar manner.

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Although the 2023 assessment indicated that it is more likely than not that the fair value of each reporting unit exceeded its carrying value, changes in circumstances or conditions affecting this analysis could have a significant impact on the fair value determination, which could then result in a material impairment charge to the company's results of operations.

Reporting units with greater concentration of Linde AG assets fair valued during the 2018 Praxair, Inc.

and Linde AG merger are at greater risk of impairment in future periods.

Other indefinite-lived intangible assets are evaluated for impairment on an annual basis or more frequently if events and circumstances indicate that an impairment loss may have been incurred, and no impairments were indicated.

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These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others (see Note 17 to the consolidated financial statements).

Such contingencies are significant and the accounting requires considerable management judgments in analyzing each matter to assess the likely outcome and the need for establishing appropriate liabilities and providing adequate disclosures.

Such contingencies are significant and the accounting requires considerable management judgments in analyzing each matter to assess the likely outcome and the need for

establishing appropriate liabilities and providing adequate disclosures.

Linde believes it records and/or discloses such contingencies as appropriate and has reasonably estimated its liabilities.

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Reported operating profit $ 8,024 $ 5,369

Russia-Ukraine conflict and other charges (a) 1,029 273

Other charges (a) 40 1,029

Purchase accounting impacts - Linde AG (c) 1,006 1,506

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Pension settlement charges 3 1

Russia-Ukraine conflict and other charges (a) 136 29

Other charges (a) 81 136

Total adjustments 316 511

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Purchase accounting impacts - Linde AG (c) 990 1,471

Russia-Ukraine conflict and other charges (a) 1,029 273

Other charges (a) 40 1,029

Total adjustments 1,046 2,506

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Reported income from equity investments $ 167 $ 172

Russia-Ukraine conflict and other charges (d) — 35

Purchase accounting impacts - Linde AG (c) 72 75

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Adjusted income from equity investments $ 239 $ 247

Adjusted Noncontrolling Interests from Continuing Operations

Reported noncontrolling interests from continuing operations $ (134) $ (135)

Adjusted Noncontrolling Interests

Reported noncontrolling interests $ (142) $ (134)

Purchase accounting impacts - Linde AG (c) (12) (22)

Adjusted noncontrolling interests from continuing operations $ (156) $ (150)

Adjusted Income from Continuing Operations (b)

Reported income from continuing operations $ 4,147 $ 3,821

Adjusted noncontrolling interests $ (154) $ (156)

Adjusted Net Income - Linde plc (b)

Reported net income $ 6,199 $ 4,147

Pension settlement charge 13 5

Russia-Ukraine conflict and other charges (a) 893 279

Other charges (a) (41) 893

Purchase accounting impacts - Linde AG (c) 818 1,150

Total adjustments 790 2,048

Adjusted income from continuing operations $ 6,195 $ 5,579

Adjusted Diluted EPS from Continuing Operations (b)

Reported diluted EPS from continuing operations $ 8.23 $ 7.32

Adjusted net income - Linde plc $ 6,989 $ 6,195

Adjusted Diluted EPS (b)

Reported diluted EPS $ 12.59 $ 8.23

Pension settlement charge 0.03 0.01

Russia-Ukraine conflict and other charges (a) 1.77 0.53

Other charges (a) (0.08) 1.77

Purchase accounting impacts - Linde AG (c) 1.66 2.28

Total adjustments 1.61 4.06

Adjusted diluted EPS from continuing operations $ 12.29 $ 10.69

Adjusted diluted EPS $ 14.20 $ 12.29

Reported percentage change 53 %

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Adjusted EBITDA and % of Sales

Income from continuing operations $ 4,147 $ 3,821

Noncontrolling interests related to continuing operations 134 135

Net Income - Linde plc $ 6,199 $ 4,147

Noncontrolling interests 142 134

Net pension and OPEB cost (benefit), excluding service cost (164) (237)

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Depreciation and amortization 3,816 4,204

EBITDA from continuing operations 9,745 9,738

Russia-Ukraine conflict and other charges (a) 1,029 308

EBITDA 12,007 9,745

Other charges (a) 40 1,029

Purchase accounting impacts - Linde AG (c) 86 99

Total adjustments 126 1,128

Adjusted EBITDA from continuing operations $ 10,873 $ 10,179

Adjusted EBITDA $ 12,133 $ 10,873

Reported sales $ 32,854 $ 33,364

EBITDA from continuing operations 29.2 % 31.6 %

Adjusted EBITDA from continuing operations 32.6 % 33.1 %

EBITDA 36.5 % 29.2 %

Adjusted EBITDA 36.9 % 32.6 %

(a) The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.

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Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.

(d) Impairment charge related to a joint venture in the APAC segment.

Net Debt and Adjusted Net Debt

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SUPPLEMENTAL GUARANTEE INFORMATION

On June 6, 2020, the company filed a Form S-3 Registration Statement with the SEC (the "Registration Statement").

On May 3, 2023, the company filed a Form S-3 Registration Statement with the SEC ("the Registration Statement").

Linde plc may offer debt securities, preferred shares, depositary shares and ordinary shares under the Registration Statement, and debt securities exchangeable for or convertible into preferred shares, ordinary shares or other debt securities.

Debt securities of Linde plc may be guaranteed by Linde Inc.

(previously Praxair, Inc.) and/or Linde GmbH (previously Linde AG).

Debt securities of Linde plc may be guaranteed by Linde Inc and/or Linde GmbH.

Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc.

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will be guaranteed by Linde plc, and such guarantees by Linde plc may be guaranteed by Linde GmbH.

may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.

may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.

Linde Finance B.V.

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or Linde Finance offered under the Registration Statement.

In September 2019, Linde plc provided downstream guarantees of all of the pre-business combination Linde Inc.

In September 2019, Linde plc provided downstream guarantees of all pre-existing Linde Inc.

and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.

Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a €10.0 billion debt issuance program, under which Linde plc may offer debt securities.

and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the European debt program.

For further information about the guarantees of the debt securities registered under the Registration Statement (including the ranking of such guarantees, limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released), see “Description of Debt Securities – Guarantees” and “Description of Debt Securities – Ranking” in the Registration Statement, which subsections are incorporated herein by reference.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis