Earnings Call Excerpt
Praxair, Inc. (PX)
Q4 FY07 Earnings Call
January 23, 2008, 11:00 AM ET
Executives
James S. Sawyer - EVP and CFO
Elizabeth T. Hirsch - Director of IR
Analysts
David Begleiter - Deutsche Bank Securities
Michael Sison - Keybanc Capital Markets
Edward Yang - Oppenheimer & Co.
PJ Juvekar - Citigroup
Kevin McCarthy - Banc Of America Securities
Chris Shaw - UBS
Laurence Alexander - Jefferies & Co.
Jeffrey Zekauskas - J.P. Morgan
John McNulty - Credit Suisse
Christopher Lewis - Impala Asset Management
Presentation
Operator
Good day, ladies and gentlemen and welcome to the fourth quarter, 2007 Praxair, Inc. earnings conference call. My name is Amanda and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of today's conference. If at anytime during the call you require audio assistance, press star zero and an operator will be happy to assist you. I would now like to turn the call over to your host for today, Mr. James Sawyer, Executive Vice President and Chief Financial Officer. Please proceed sir.
James S. Sawyer - Executive Vice President and Chief Financial Officer
Thank you, Amanda and good morning to all of you out there, and thanks for attending the earnings call and webcast. Pat Clark, Vice President and Controller, and Liz Hirsch, Director of Investor Relations are with me. I will begin by giving an overview of our 2007 results, Liz will then review the fourth quarter, and afterward I will discuss our business outlook and earnings guidance for 2008, and then we will be available to answer questions. Today's presentation material is available on our website at www.praxair.com in the Investor section. Please read the forward-looking statement disclosure on page 2 and note that it applies to all statements made during this teleconference.
Turn to page 3 for our full-year summary. Praxair had another year of outstanding results. We reported record sales, earnings, and cash flow. Sales reached $9.4 billion, 13% above 2006. Sales growth came primarily from volume growth and higher pricing. In addition, several core business acquisitions we made during the year contributed 2% to sales growth and we also had positive currency impact. We grew operating profit 18% to $1.8 billion. The faster growth in operating profit as compared to the growth in sales came primarily from a 60 basis point increase in gross margin. We continued to drive this margin up through our focus on higher pricing and good cost control. Productivity programs and a tight reign on SG&A expenses also contributed to the overall improvement in operating margin to 19% for the year. Full-year net income was $1.2 billion, 19% above net income in 2006. Earnings per share were $3.62, grew 21% versus the prior year, again demonstrating our ability to grow earnings faster than sales. Our higher earnings, combined our capital investment discipline, resulted in improvement in our after-tax return on capital from 14.6% to 15.3% for the year.
In the fourth quarter, we closed a joint venture in Scandinavia with Yara International
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