Key Statistics
EV/EBIT = 27.5x
ROE = 16.35%
Debt/Equity = 57%
FCF Yield = 2.25%
Dividend Yield = 1.2%
Market Cap = $217.6 billion
The Company
Linde plc (LIN) is an industrial gas company, supporting a wide variety of industries, including healthcare, energy, manufacturing, and food processing.
I first encountered Linde while analyzing competitors to Air Products & Chemicals (APD), a report I published about a month ago. Examining APD highlighted the remarkable economic moats that define the industrial gases industry. I wanted to learn about more of these companies.
The gases division is the backbone of Linde’s business. It produces and distributes gases such as oxygen, nitrogen, and argon, as well as process gases like carbon dioxide, helium, hydrogen, and specialty gases. These products are essential to the industries it supports.
Gases are delivered through pipelines, liquefied bulk deliveries, or high-pressure cylinders, depending on the customer’s needs.
Linde uses advanced production methods to meet its customers’ needs. Cryogenic processes, for instance, cool air to extremely low temperatures, allowing gases like oxygen, nitrogen, and argon to liquefy and be separated. Rare gases such as krypton and xenon are also produced through this method.
While cryogenic air separation is ideal for large-scale production, it requires significant energy. To address this, Linde has developed non-cryogenic methods, such as vacuum pressure swing adsorption (VPSA) and membrane separation. These processes are more energy-efficient and better suited for smaller-scale production, opening new opportunities and lowering costs.
Linde is also a leader in hydrogen production, a critical component of the global energy transition. Hydrogen production is categorized into three types based on environmental impact: gray, blue, and green hydrogen. Gray hydrogen, the most common, is made by reforming natural gas or methane without capturing carbon emissions. Blue hydrogen follows a similar process but incorporates carbon capture and storage, significantly reducing emissions. Green hydrogen, the cleanest option, is produced via water electrolysis powered by renewable energy or through biomethane reforming, emitting no greenhouse gases. Linde’s investment in clean hydrogen positions it as a key player in the shift toward sustainable energy.
The company serves a wide range of industries with its comprehensive product offerings. Atmospheric gases like oxygen are vital in healthcare and manufacturing, while nitrogen supports food preservation and chemical processes. Process gases, such as carbon dioxide for carbonated drinks, helium for medical imaging and aerospace, and acetylene for welding, are critical in various applications. Specialty gases tailored for electronics and other industries further demonstrate Linde’s commitment to innovation.
Founded on June 21, 1879, by Carl von Linde, the company originally focused on mechanical refrigeration systems for the brewing and food industries. Linde’s innovations led to the development of air liquefaction technologies, earning a patent in 1895 and paving the way for the separation of air into its components. The first large-scale air separation plant was established in 1903 near Munich.
In 1906, the company expanded overseas, opening a plant in Buffalo, New York, marking its entry into the American market. Around the same time, Linde developed processes for producing hydrogen and carbon monoxide, key feedstocks for the emerging chemical industry.
During World War II, Linde played a complex role, benefiting from Germany’s war economy while facing destruction of many facilities by the end of the war. Afterward, the company rebuilt and pursued global growth, acquiring notable firms such as Sweden’s AGA AB in 2000. In 2006, Linde made a significant move by acquiring BOC for €11.7 billion, expanding its industrial gas operations. The 2018 merger with Praxair created the modern Linde plc, combining innovation, global reach, and decades of expertise.
The Praxair merger turned the firm into the world’s largest industrial gas company. This strategic consolidation was driven by the need to enhance scale, operational efficiency, and innovation. By merging complementary geographic footprints, the partnership achieved significant cost reductions, expanded market reach, strengthened pricing power, and bolstered its ability to deliver essential gases to critical industries such as healthcare and energy. This merger elevated Linde’s global profile and reinforced its leadership in the industrial gas sector.
