Praxair Investor Day 2013 Morning Session PresentationNew York City
Topic Speaker
Mexico – Well-Positioned for Growth
Agenda – Afternoon Session 2:00pm to 4:00pm
Topic
South America – Valuable Long-Term Franchise
Asia – Growing Profitably
Welcome Kelcey Hoyt
Director, Corporate Accounting & SEC Reporting
Manager, Corporate Accounting
2009
2008
2004
2002
1992-2001
Forward Looking Statement
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
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Why Praxair?
Steve Angel
Prior experience General Electric
2006
2001
1979-2000
Loyola University Maryland, MBA
Industry-leading Results
$2.8B
Praxair 22%
*Praxair 2012 non-GAAP measure; refer to Annual Report for reconciliation
Short-Term (2012) Long-Term
12%
CAGR
Sustaining a Competitive Advantage
High performance culture… takes years to build… tough to emulate
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1-2%
Excludes foreign currency and divestitures 8 | Praxair Investor Day | 9/16/2013
Managing the Business
VP, West Region, US Industrial Gases
Prior Praxair experience US and Brazil
EVP & President, North America since 2010
2007
2004
2003
2000
1986-1999
State University of New York at Buffalo, MBA
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Organizational Considerations
Supply Mode
Country
Regional
Global
1. Regional business model
dimensions, as appropriate
Geographically Prioritized Organization
Country A
P&L accountability key to Praxair’s superior financial performance
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US Organization – Regionally Executed, Centrally Controlled
3 Regions
GH2 GO2
Energy Management Maintenance & Reliability Productivity Technical Applications
Marketing
4 Regions
12 Divisions
Advantages of Praxair’s US Integrated Model
versus Packaged focused
customers
Maximum co-product economics
Larger sales force
(pkg dewars microbulk bulk)
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US Industrial Gases - World-Class Product & Energy Management
Scott Kaltrider
National Product Manager
Vice President Business Management, USIG since 2010 Product & Energy Management, Helium & Rare Gas and Oil & Gas
2007
2003
2001
2000
1982-1999
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NG Processing
Oxygen Nitrogen Argon
By-product
Process for management of diverse and complex set of products
Air Separation
US Contract Management by Supply Mode
Contract strategy secures price attainment and cost recovery
Long-term: 15 – 20 years
Pass-through escalation formulas for energy and inflation preserve return throughout project life
O2 / N2 & H2
Medium-term: 3 – 7 years
Requirements contracts with mix of open contracts, formula and other terms that anticipate changing market conditions
Low-cost energy purchase & efficient production drives profitability
Short-term: 1 – 3 years or purchase order contracts
Bundle gas, rent, services, equipment and technology to maximize customer value
C a p
Merchant Pricing Dynamics
Essential to customer’s process
Product reliability is key
travel
P ra
x a
ir L
O X
/L IN
Discipline drives global Praxair price attainment ~2% annually
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World Class US Energy Optimization
$2B Global
Energy Spend
120
80
40
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Operations Reliability & Productivity
Director, Global Supply Systems
Director, Global Capital Projects
Vice President Operations, USIG since 2010
2009
2008
2006
2005
1992-2004
State University of New York at Buffalo, MBA
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Productivity & Reliability
D A I L Y O P E R A T I O N S
Production Distribution Customers Suppliers
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Distribution Productivity Analysis
Minimize Cost Per Mile Maximize Pounds Per Mile (pounds per trip ÷ miles per trip)
Breakdown
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Production Productivity Recent Examples
1. Turbine Upgrade Programs
• Upgraded piping, seals, compressor
• Replication underway
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Productivity Sources Over the Next Several Years
$400-450 MM
- Turbomachinery upgrades
- Mobile filling station / automation
- Vibration monitoring platform
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US Packaged Gases – Growth & Profitability
John Panikar
VP, Product Management & Helium, US Industrial Gases
Managing Director, India
Business Development, Asia
President, Praxair Distribution since 2010
2009
2008
2004
2002
1991-2001
Harvard University, Advanced Management Program
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Gas & Rent 65% of sales
Gov’t
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US Packaged Gases Growth Drivers
Metal Fabrication Specialty Gases
$250+ million organic sales growth over the next five years
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Improving Quality of Our US Packaged Gases Business
Praxair Accomplishments
2012 2001
Operating margin %*
Canada/
Mexico
Houston
Austin
San
Antonio
Dallas
ASU
Petchem & Refinery – Pursuing New
Prior Praxair experience in Engineering
President, Global Hydrogen since 2009
2005
2004
2000
1998
1979-1997
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Updated Hydrogen Demand Outlook
+Diesel demand growing globally
- China coal gasification versus SMR
+Creating oxygen opportunities
US refining / chemicals competiveness
usage
robust industrial gas demand
0
0.9
1.8
84%
$B
Praxair Hydrogen Projects Update
Plant complete: April 2013
IG Opportunities in US Petchem Industry
SMR steam methane reforming
GTL gas to liquids
Potential for $1B to $2B in IG industry capex going forward
PSA
H2/CO
H2
O2
CO
Canada – Growth through
Finance & Engineering roles at Fisher Scientific, GenTek,
WL Gore
2010
2008
2004
1995-2003
University of Delaware, MBA Finance
Chartered Financial Analyst
Certified Public Accountant
Praxair Canada Overview
$300+ million in sales growth over the next 5 years
Oil sands production
Packaged gases & hardgoods
Oil & Gas Metals & Mining
O2: smelting / leaching
North West Redwater Partnership (NWR)
Large project…further opportunities in the energy sector
NWR 50:50 JV - North West
Upgrading & Canadian Natural
– Government secured 30-year
feedstock supply & processing
20-year take-or-pay contract
Mexico – Well-Positioned for Growth
Business Development, SA
Marketing Director, SA
2004
2003
2001
1997
1986-1996
Wharton School at the University of Pennsylvania, Strategic Planning and
Industrial Marketing Program
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Sabinas
Veracruz
Southeastern
Burgos
$2.2 $2.4
Manufacturing
46%
Constr./Mining/Util.
10%
Financial
14%
Other
31%
Source: INEGI, National Bureau of Statistics of China
Very Open Economy # International Trade Agreements
44 Mexico
China ~20
Brazil ~15
Source: FT, U.S. Census Bureau, Foreign Trade
Large Energy Sector, Good Growth Potential
Source: EIA
World’s 6th largest estimated shale gas
reserves
conventional reserves
Praxair in Mexico
Fully-integrated player
Hardgoods and safety equipment
branches
Monterrey
Packaged
Merchant
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Praxair Mexico Packaged Gases Business
Multi-year contracts
Applications technology in metal fab
– Welding mixtures, new processes, laser OEM´s
Specialty gases
Cost to serve Lower
2009 2012 2017F
Energy Sector in Mexico
products / services
maintenance