Linde : Annual Report 2020

Making our world more productive

	He
Delivering Sustainable Value
Annual Report 2020	N2

Financial Highlights

Year ended December 31	2020	2019
Dollar amounts in millions, except per share data	$	$

Reported

Sales	27,243	28,228
Operating Profit	3,322	2,933
Income from Continuing Operations	2,497	2,183
Diluted Earnings Per Share from Continuing Operations	4.70	4.00

Adjusted¹

Sales	27,243	28,163
Operating Profit	5,797	5,272
Income from Continuing Operations	4,371	4,003
Diluted Earnings Per Share from Continuing Operations	8.23	7.34
After-Tax Return on Capital²	13.4 %	11.6 %

Other Information

Cash Flow from Operations	7,429	6,119
Capital Expenditures	3,400	3,682

2020 Sales

End Markets³				Business Segments				Distribution Mode³
	Healthcare			Electronics			Americas			APAC (Asia, Pacific)			Packaged		On-Site
	Manufacturing			Food & Beverage			EMEA (Europe,			Linde Engineering			Merchant		Other
	Chemicals & Refining			Others			Middle East & Africa)			Global Other
	Metals				7 %				8 %
9 %
		20 %	10 %
10 %										24 %
								38 %	40 %
10 %				21 %
		19 %
13 %
		19 %					24 %		28 %

¹ Adjusted amounts are non-GAAP measures and are reconciled to reported amounts in the "Non-GAAP Financial Measures" Section in Item 7.

• Adjusted after-tax return on capital is a non-GAAP measure. For definition and reconciliation, please see Appendix to the Investor Teleconference Presentation Fourth Quarter 2020.

³ Total sales excluding Linde Engineering.

Letter to Shareholders

Dear

Shareholders,

After a year impacted by COVID-19, I want to recognize the outstanding performance of Linde employees around the world who, despite challenging conditions, kept our plants running reliably, maintained excellent service to our customers and completed important projects with minimal delays. They developed new protocols to take care of our patients, installed equipment for emergency and temporary care facilities and increased the supply of medical oxygen to help our communities. Our homecare business became a second line of defense in the fight against the virus, treating more than 100,000 COVID-19 patients and freeing up much-needed capacity in overburdened hospitals. Our people achieved all of this and more while maintaining a best-in-class safety performance. I would like to personally thank them for their dedication and perseverance during these unprecedented times.

This past year has demonstrated the resilience of not only Linde's employees, but also our business model. We quickly adjusted cost structures in line with local market conditions. Our strong commercial terms and conditions shielded us from volume disruptions, and we capitalized on more robust growth opportunities in markets like healthcare, electronics and food freezing. The successful merger integration, plus ongoing productivity and efficiency initiatives continued to deliver sustainable value. Excluding the effects of currency, earnings per share grew 13% while sales were down 2%. Gross operating cash flow grew 21% and we returned $4.4 billion to our shareholders between dividends and share repurchases. Return on capital, the single most important metric for a capital-intensive business, grew 180 basis points to 13.4 %. Based on our ability to expand free cash flow during the most challenging of economic conditions, we increased our dividend by another 10 % - representing the 28th consecutive year of dividend increases. These results are a testament to our ability to outperform in any macro-economic environment.

While we are proud of our performance, we were not immune to the devastating effects of this virus on our people. As I write this, twenty of our colleagues around the world tragically lost their battle against COVID-19. Our thoughts and prayers go out to their families. Moreover, this pandemic exposed inequalities in our society. In response, we expanded Linde's Global Giving program to over $10 million, donating to the most vulnerable in our communities. We continued to prioritize inclusion and I am very pleased to report we are on track to exceed our gender diversity goal of 30 % female employees by 2030. Our recent global employee survey results show we have a highly engaged workforce which appreciates our focus on both core values and performance.

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Letter to Shareholders

During 2020, we made huge strides towards our climate change targets. We were included in the Dow Jones Sustainability World Index for the 18th consecutive year - the only chemical company in the world that can make that claim. Compared to our 2018 pre-merger baseline, we reduced our greenhouse gas intensity by more than 16 %, which places us well on track to meet our overall 35 % reduction goal by 2028. A key driver of this reduction is our focus on low-carbon power purchases. Today, low-carbon power represents a little over one-third of our global electricity purchases and we plan on doubling that amount by 2028.

In addition to reducing our own carbon footprint, we developed new applications to help our customers address their carbon emissions. We signed several agreements in Europe, where we will capture the carbon dioxide (CO₂) emissions from our customers' operations and then repurpose that CO₂ for commercial use, such as food freezing, dry ice, beverage carbonation and water treatment. We also made significant progress on our clean hydrogen initiative, forming a dozen partnerships with fuel cell electric vehicle manufacturers, energy companies and renewable power producers. Additionally, we funded groundbreaking projects in the U.S., China, South Korea and Germany which will largely serve heavy-duty mobility applications, like buses, trucks, trains and ferries.

In 2020, the Linde team delivered an outstanding performance during the most challenging of times. As the global economy recovers from the COVID-19 pandemic, we expect to see expanding volumes from our more cyclical markets plus continued growth in our resilient markets, such as healthcare and electronics. Our project backlog of over $8 billion will provide a solid foundation for growth as those projects start up. We are also excited about new opportunities in developing markets like aquaculture, biopharma and commercial space. The combination of stronger growth, disciplined price management and a robust productivity pipeline will deliver double-digit earnings growth on average for years to come.

On top of this, we are well positioned to capitalize on the transition to cleaner energy through our extensive hydrogen, oxygen and carbon capture technologies and capabilities. As the market for clean energy develops, we are confident in our ability to capture more than our fair share of this potentially massive opportunity, and at returns in line with our investment criteria.

I think you can see why we are all so excited about the future - it has never been brighter!

Sincerely,

Chief Executive Officer

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2020 Highlights

Build, Own

and Operate

World's Largest

PEM Electrolyzer

Scaling up the production of green hydrogen

The new 24-megawatt electrolyzer will produce green hydrogen to supply Linde's industrial customers through the company's existing pipeline network. In addition, Linde will distribute liquefied green hydrogen to refueling stations and other industrial & mobility customers, including to the world's first H₂ ferry. After start-up in 2022, it will be the world's largest PEM electrolyzer and is expected to avoid up to 40,000 MT CO₂e per year.

A Leader in

Diversity &

Inclusion

Recognized by external stakeholders globally

Inclusion is a corporate value at Linde, and the company has received several recognitions around the globe for its inclusive culture, initiatives, and performance in diversity metrics. In 2020, Linde achieved a score of 90 % on the Human Rights Campaign Foundation's Corporate Equality Index. For the fourth consecutive year, Linde was named on the Bloomberg Gender-Equality Index. The company has also been named a Top Noteworthy Company by DiversityInc.

Producing Green

H₂ in California

Supplying the mobility market with green hydrogen from bio-LNG

Following recent upgrades, Linde's Steam Methane Reformer in Ontario can now supply green hydrogen, meeting renewable requirements of the California Air Resources Board. In 2021, the facility will be ready to supply H₂ at pressures required by the latest generation of hydrogen refueling stations. With these investments, Linde will be able to provide green hydrogen to fuel up to 1,600 vehicles a day and help avoid up to 50,000 MT CO₂e per year.

Supporting

Samsung

Electronics'

Growth in South Korea

Linde's largest single electronics investment

Linde will build, own and operate several ASUs and H₂ plants to support the growing demand for Samsung's world-class semiconductor facilities in Pyeongtaek, South Korea. The project comprises of two phases and includes a long-term supply contract for various ultra-high purity industrial gases, including hydrogen. Once the project is commissioned, the Pyeongtaek complex will be Linde's single largest gases supply site in the world for an electronics customer.

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