May 7, 2020 / 11:38 AM / 19 days ago

UPDATE 3-Industrial gas producer Linde targets growth in health and electronics

* Cuts 2020 earnings target, citing coronavirus pandemic

* Beats first-quarter earnings forecast (Adds CEO comments, background)

By Zuzanna Szymanska

May 7 (Reuters) - Linde is targeting growth opportunities in the semiconductor and healthcare sectors, the industrial gas producer said as it reported slightly better than expected quarterly earnings, citing its balanced contract portfolio.

The U.S.-German company and its biggest competitor, France-based Air Liquide, have been in talks with European authorities to boost output of hospital oxygen after demand has increased sixfold in Italy and 40% across Europe since the start of the coronavirus pandemic, analysts have said.

Linde's first-quarter earnings per share (EPS) came in at $1.89, it said on Thursday, against the $1.84 expected by analysts in a Refinitiv poll.

Sales rose 1% to $6.74 billion as a 2% rise in selling prices offset a 1% fall in volumes because of the coronavirus crisis, which the company expects to hamper performance further in 2020.

Linde lowered its 2020 EPS outlook to between medium and high single-digit growth if the economy recovers at the start of the third quarter, compared with a previous forecast of 10-13% growth.

If a recovery does not happen until the middle of the fourth quarter, Linde's EPS would remain flat or fall by a low single-digit percentage, but its balanced portfolio and new opportunities to win or extend contracts should help it to weather the crisis, the company said.

"Linde entered 2020 with a very robust balance sheet, $10 billion of contractually secured backlog and significant opportunities to enhance the portfolio and overall business quality - all of which will serve us well during these uncertain times," CEO Steve Angel said in a statement.

The company expects growth opportunities in the semiconductor industry thanks to rising demand for IT infrastructure as the economy shifts towards remote working, with the healthcare sector's needs for medical oxygen and nitric oxide for COVID-19 therapy providing another area for growth, Angel told a conference call.

Linde's contract conditions guarantee a take-or-pay arrangement when the company is ready to supply the ordered product as opposed to when the customer is ready to receive it, Angel said, adding that he expects some delivery delays but no cancellactions.

The supplier of gases has large, long-term contracts in industries such as healthcare, food, beverages and electronics.

Rival Air Liquide expects to improve its operating margin in 2020 after coping relatively well with the COVID-19 crisis in the first quarter, it said last month, while smaller U.S. rival Air Products also reported slightly better than expected earnings. (Reporting by Zuzanna Szymanska in Gdansk Editing by David Goodman)

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