Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

Non-GAAP Measures

Throughout MD&A, the company provides adjusted operating results exclusive of certain items such as Other charges, net gains or losses on sale of businesses, purchase accounting impacts of the Linde AG merger and pension settlement charges. Adjusted amounts are non-GAAP measures which are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management find useful in evaluating the company’s operating performance. Items which the company does not believe to be indicative of on-going business performance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. In addition, operating results, excluding these items, is important to management's development of annual and long-term employee incentive compensation plans. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.

The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled "Non-GAAP Measures and Reconciliations."

Consolidated Results

The following table provides summary information for the quarters and six months ended June 30, 2023 and 2022. The reported amounts are GAAP amounts from the Consolidated Statements of Income. The adjusted amounts are intended to supplement investors' understanding of the company's financial information and are not a substitute for GAAP measures:

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars, except per share data)			2023						2022						Variance						2023						2022						Variance
Sales			$	8,204					$	8,457					(3)		%				$	16,397					$	16,668					(2)		%
Cost of sales, exclusive of depreciation and amortization			$	4,316					$	4,940					(13)		%				$	8,747					$	9,738					(10)		%
As a percent of sales			52.6		%				58.4		%										53.3		%				58.4		%
Selling, general and administrative			$	833					$	771					8		%				$	1,655					$	1,573					5		%
As a percent of sales			10.2		%				9.1		%										10.1		%				9.4		%
Depreciation and amortization			$	960					$	1,091					(12)		%				$	1,908					$	2,203					(13)		%
Other charges (b)			$	22					$	993					(98)		%				$	40					$	989					(96)		%
Other income (expense) - net			$	(27)					$	(36)					25		%				$	(32)					$	(24)					(33)		%
Operating profit			$	2,011					$	589					241		%				$	3,944					$	2,069					91		%
Operating margin			24.5		%				7.0		%										24.1		%				12.4		%
Interest expense - net			$	52					$	5					940		%				$	89					$	14					536		%
Net pension and OPEB cost (benefit), excluding service cost			$	(45)					$	(62)					(27)		%				$	(90)					$	(126)					(29)		%
Effective tax rate			21.9		%				44.3		%										22.0		%				30.0		%
Income from equity investments			$	46					$	50					(8)		%				$	87					$	94					(7)		%
Noncontrolling interests			$	(37)					$	(38)					(3)		%				$	(73)					$	(74)					(1)		%
Net Income – Linde plc			$	1,575					$	372					323		%				$	3,091					$	1,546					100		%
Diluted earnings per share			$	3.19					$	0.74					331		%				$	6.25					$	3.04					106		%
Diluted shares outstanding			493,549						505,269						(2)		%				494,685						508,432						(3)		%
Number of employees			66,270						72,438						(9)		%				66,270						72,438						(9)		%
Adjusted Amounts (a)
Operating profit			$	2,286					$	1,988					15		%				$	4,492					$	3,893					15		%
Operating margin			27.9		%				23.5		%										27.4		%				23.4		%
Effective tax rate			23.7		%				24.5		%										23.9		%				24.4		%
Net Income – Linde plc			$	1,760					$	1,566					12		%				$	3,453					$	3,066					13		%
Diluted earnings per share			$	3.57					$	3.10					15		%				$	6.98					$	6.03					16		%
Other Financial Data (a)
EBITDA			$	3,017					$	1,730					74		%				$	5,939					$	4,366					36		%
As percent of sales			36.8		%				20.5		%										36.2		%				26.2		%
Adjusted EBITDA			$	3,059					$	2,746					11		%				$	6,022					$	5,409
As percent of sales			37.3		%				32.5		%										36.7		%				32.5		%

(a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

(b) See Note 2 to the condensed consolidated financial statements.

Reported

In the second quarter of 2023, Linde's sales were $8,204 million, $253 million below prior year. Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, decreased sales by 4% in the quarter, with minimal impact on operating profit. Divestitures, net of acquisitions, decreased sales by 2% in the quarter, primarily due to the divestment of the GIST business, partially offset by the nexAir, LLC acquisition. Engineering decreased sales by 2% in the quarter. Currency translation decreased sales by 1% in the quarter. Volumes decreased sales by 1% in the quarter versus the 2022 respective period. Higher price attainment increased sales by 7% in the quarter.

Reported operating profit for the second quarter of 2023 of $2,011 million, or 24.5% of sales, was 241% above prior year. The reported year-over-year increase was primarily due to charges recorded in second quarter 2022 relating to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions. In addition, the increase in the quarter was also driven by higher pricing, productivity initiatives and lower depreciation and amortization driven by merger related intangible assets, which more than offset adverse impacts from cost inflation and currency. The reported effective tax rate ("ETR") of 21.9% in the second quarter 2023 related to higher tax benefits from share based compensation

and a tax refund relating to a prior period versus 44.3% in the second quarter 2022. Second quarter 2022 ETR was impacted by the non-deductibility of the charges related to the deconsolidation and impairment of Linde's Russian subsidiaries which were partially offset by the reversal of a related deferred tax liability. Diluted earnings per share ("EPS") was $3.19, or 331% above EPS of $0.74 in the second quarter of 2022, primarily due to higher net income - Linde plc and lower diluted shares outstanding.

Adjusted

In the second quarter of 2023, adjusted operating profit of $2,286 million, or 27.9% of sales, was 15% higher as compared to the respective 2022 period, driven by higher pricing and productivity initiatives, partially offset by cost inflation. The adjusted ETR was 23.7% in the second quarter 2023 versus 24.5% in the 2022 quarter. On an adjusted basis, EPS was $3.57, 15% above the 2022 adjusted EPS of $3.10, driven by higher adjusted net income - Linde plc and lower diluted shares outstanding.

Outlook

Linde provides quarterly updates on operating results, material trends that may affect financial performance, and financial guidance via quarterly earnings releases and investor teleconferences. These updates are available on the company’s website, www.linde.com, but are not incorporated herein.

Results of operations

The changes in consolidated sales compared to the prior year are attributable to the following:

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			(1)		%				(1)		%
Price/Mix			7		%				7		%
Cost pass-through			(4)		%				(2)		%
Currency			(1)		%				(2)		%
Acquisitions/divestitures			(2)		%				(2)		%
Engineering			(2)		%				(2)		%
			(3)		%				(2)		%

Sales

Sales decreased $253 million or 3% for the second quarter of 2023 and decreased $271 million or 2% for six months ended June 30, 2023 versus the respective 2022 periods. Cost pass-through decreased sales by 4% in the quarter and 2% in the year-to-date period, with minimal impact on operating profit. The impact of divestitures, net of acquisitions decreased sales by 2% in the quarter and year-to-date period. Engineering decreased sales by 2% in the quarter and year-to-date period. Currency translation decreased sales by 1% in the quarter, driven by the weakening of the Chinese yuan and Australian dollar, and 2% in the year-to-date period, driven by the weakening of the Euro, Chinese yuan, British pound and Australian dollar against the U.S. dollar. Volumes decreased sales by 1% in the quarter and year-to-date period versus the respective 2022 periods. Higher pricing across all geographic segments contributed 7% to sales in the quarter and year-to-date period.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization decreased $624 million, or 13%, for the second quarter of 2023 and decreased $991 million, or 10% for the six months ended June 30, 2023 primarily due to currency, lower cost pass-through, the net impact of acquisitions and divestitures and productivity gains which more than offset cost inflation. Cost of sales, exclusive of depreciation and amortization was 52.6% and 53.3% of sales, respectively, for the second quarter and six months ended June 30, 2023 versus 58.4% for the respective 2022 periods. The decrease as a percentage of sales in the quarter and for the six months ended June 30, 2023 was primarily due to higher pricing and lower cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") increased $62 million, or 8%, for the second quarter of 2023 and increased $82 million or 5% for the six months ended June 30, 2023. SG&A was 10.2% of second quarter sales and 10.1% of the sales for the six months ended June 30, 2023 versus 9.1% and 9.4% for the respective 2022 periods. Currency impacts decreased SG&A by approximately $5 million and $24 million for the quarter and six months ended June 30, 2023. Excluding currency impacts, underlying SG&A increased in the second quarter and the six months ended June 30, 2023 primarily due to higher compensation and higher costs related to the acquisition of nexAir.

Depreciation and amortization

Reported depreciation and amortization expense decreased $131 million, or 12%, for the second quarter of 2023 and decreased $295 million, or 13%, for the six months ended June 30, 2023. The decrease is related primarily to lower depreciation and amortization of intangible assets acquired in the merger and currency impacts.

On an adjusted basis, depreciation and amortization increased $19 million, for the second quarter of 2023 and increased $23 million for the year-to-date period. Currency impacts decreased depreciation and amortization by $7 million and $28 million for the quarter and six months ended June 30, 2023, respectively. Excluding currency, underlying depreciation and amortization increased due to the net impact of acquisitions and new project start ups.

Other charges

Other charges were $22 million and $40 million for the second quarter and six months ended June 30, 2023, respectively, and $993 million and $989 million for the respective 2022 periods. The charge for the quarter relates primarily to severance in the Engineering segment. The charge for the six months ended June 30, 2023 includes charges associated with the intercompany reorganization that occurred in the first quarter of 2023. 2022 charges relate primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions (see Note 2 to the condensed consolidated financial statements).

On an adjusted basis, these benefits and costs have been excluded in both periods.

Operating profit

On a reported basis, operating profit increased $1,422 million, or 241%, for the second quarter of 2023 and increased $1,875 million, or 91%, for the six months ended June 30, 2023. The increase was primarily due to Russia-Ukraine conflict and other charges recorded in the second quarter of 2022 and higher pricing, savings from productivity initiatives, and lower depreciation and amortization driven by merger related intangible assets in 2023. These increases more than offset the adverse impacts of cost inflation and currency in the second quarter and year-to-date period of 2023.

On an adjusted basis, which excludes the impacts of merger-related purchase accounting as well as other charges, operating profit increased $298 million, or 15% in the second quarter of 2023 and increased $599 million, or 15% for the six months ended June 30, 2023. Operating profit growth was driven by higher pricing and productivity initiatives, which more than offset the effects of cost inflation and currency during the periods. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense - net increased $47 million for the second quarter of 2023 and increased $75 million for the six months ended June 30, 2023. On an adjusted basis, interest expense increased $42 million for the second quarter of 2023 and increased $69 million for the six months ended June 30, 2023 versus the respective 2022 periods. The increase in both periods was driven primarily by higher interest rates on short-term debt.

Net pension and OPEB cost (benefit), excluding service cost

Reported net pension and OPEB cost (benefit), excluding service cost were benefits of $45 million and $90 million for the quarter and six months ended June 30, 2023, respectively, versus $62 million and $126 million for the respective 2022 periods. The decrease in benefit primarily relates to higher interest cost reflective of the higher discount rate environment year-over-year.

Effective tax rate

The reported effective tax rate ("ETR") for the quarter and six months ended June 30, 2023 was 21.9% and 22.0%, respectively, versus 44.3% and 30.0% for the respective 2022 periods. The decrease in the quarter rate is primarily related to a higher tax benefit from share based compensation, a tax refund relating to a prior period and the absence of the net unfavorable tax expense resulting from the Russia deconsolidation in 2022 (see Note 2 to the condensed consolidated financial statements). The decrease in the year to date rate is primarily related to a net decrease in the company's uncertain tax positions, partially offset by additional accruals in several non-U.S. jurisdictions, a tax refund related to a period period and the absence of the net unfavorable tax expense resulting from the Russia deconsolidation in 2022.

On an adjusted basis, the ETR for the quarter and six months ended June 30, 2023 was 23.7% and 23.9%, respectively, versus 24.5% and 24.4% for the respective 2022 periods. The decrease in both periods is primarily due to higher tax benefits from share based compensation.

Income from equity investments

Reported income from equity investments for the second quarter of 2023 and six months ended June 30, 2023 was $46 million and $87 million, respectively, versus $50 million and $94 million for the respective 2022 periods.

On an adjusted basis, income from equity investments for the second quarter and six months ended June 30, 2023 was $64 million and $123 million, respectively, versus $69 million and $133 million in the respective 2022 periods.

Noncontrolling interests

At June 30, 2023, noncontrolling interests consisted primarily of non-controlling shareholders' investments in APAC (primarily China). Reported noncontrolling interest was flat for the quarter and six months ended June 30, 2023 versus the respective 2022 periods.

Net Income – Linde plc

Reported net income - Linde plc increased $1,203 million, or 323%, for the second quarter of 2023 and increased $1,545 million, or 100% for the six months ended June 30, 2023 versus the respective 2022 periods.

On an adjusted basis, which excludes the impacts of purchase accounting and other charges, net income - Linde plc increased $194 million, or 12%, for the quarter and increased $387 million, or 13%, for the six months ended June 30, 2023 versus the respective 2022 periods.

On both a reported and adjusted basis, the increase was driven by higher operating profit.

Diluted earnings per share

Reported diluted earnings per share increased $2.45, or 331%, for the second quarter of 2023 and increased $3.21, or 106%, for the six months ended June 30, 2023 versus the comparable 2022 periods.

On an adjusted basis, diluted EPS increased $0.47, or 15%, for the second quarter of 2023 and increased $0.95, or 16% versus the respective 2022 periods.

The increase on both a reported and adjusted basis is primarily due to higher net income - Linde plc and lower diluted shares outstanding.

Employees

The number of employees at June 30, 2023 was 66,270, a decrease of 6,168 employees from June 30, 2022, driven primarily by the sale of the GIST business, cost reduction initiatives and the deconsolidation of Russian subsidiaries in the EMEA and Engineering segments, partially offset by the acquisition of nexAir.

Other Financial Data

EBITDA was $3,017 million for the second quarter of 2023 as compared to $1,730 million in the respective 2022 period. EBITDA was $5,939 million for the six months ended June 30, 2023 as compared to $4,366 million in the respective 2022 period. The increase in both periods was driven by higher net income - Linde plc versus prior year.

Adjusted EBITDA increased to $3,059 million for the second quarter 2023 from $2,746 million in the respective 2022 period. Adjusted EBITDA was $6,022 million for the six months ended June 30, 2023 as compared to $5,409 million in the respective 2022 period. The higher EBITDA was primarily due to higher net income - Linde plc versus the respective prior period.

See the "Non-GAAP Measures and Reconciliations" section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAP amounts.

Other Comprehensive Income (Loss)

Other comprehensive losses for the second quarter and six months ended June 30, 2023 were $112 million and $142 million, respectively. The loss in the quarter resulted primarily from currency translation adjustments of $95 million. The loss during the six months ended June 30, 2023 resulted from $205 million associated with retirement programs and $71 million relating to current unrealized loss on derivatives instruments, partially offset by favorable currency translation adjustments of $134 million. The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S. dollars, and are largely driven by the movement of the U.S. dollar against major currencies including the Euro, British pound and the Chinese yuan. See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 11 to the condensed consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income (loss) by segment.

Segment Discussion

The following summary of sales and operating profit by segment provides a basis for the discussion that follows. Linde plc evaluates the performance of its reportable segments based on operating profit, excluding items not indicative of ongoing business trends. The reported amounts are GAAP amounts from the Consolidated Statements of Income.

			Quarter Ended June 30,									Six Months Ended June 30,
(Millions of dollars)			2023			2022			Variance			2023			2022			Variance
SALES
Americas			$	3,541		$	3,518		1		%	$	7,092		$	6,759		5		%
EMEA			2,160			2,144			1		%	4,337			4,292			1		%
APAC			1,683			1,651			2		%	3,281			3,253			1		%
Engineering			495			644			(23)		%	1,035			1,372			(25)		%
Other			325			500			(35)		%	652			992			(34)		%
Total sales			$	8,204		$	8,457		(3)		%	$	16,397		$	16,668		(2)		%
SEGMENT OPERATING PROFIT
Americas			$	1,070		$	910		18		%	$	2,095		$	1,814		15		%
EMEA			630			536			18		%	1,237			1,039			19		%
APAC			472			426			11		%	895			825			8		%
Engineering			107			105			2		%	256			248			3		%
Other			7			11			(36)		%	9			(33)			127		%
Segment operating profit			$	2,286		$	1,988		15		%	$	4,492		$	3,893		15		%
Reconciliation to reported operating profit:
Other charges (Note 2)			(22)			(993)						(40)			(989)
Purchase accounting impacts - Linde AG			(253)			(406)						(508)			(835)
Total operating profit			$	2,011		$	589					$	3,944		$	2,069

Americas

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2023						2022						Variance						2023						2022						Variance
Sales			$	3,541					$	3,518					1		%				$	7,092					$	6,759					5		%
Operating profit			$	1,070					$	910					18		%				$	2,095					$	1,814					15		%
As a percent of sales			30.2		%				25.9		%										29.5		%				26.8		%

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			(1)		%				—		%
Price/Mix			6		%				7		%
Cost pass-through			(7)		%				(5)		%
Currency			—		%				—		%
Acquisitions/divestitures			3		%				3		%
			1		%				5		%

The Americas segment includes Linde's industrial gases operations in approximately 20 countries including the United States, Canada, Mexico, and Brazil.

Sales

Sales for the Americas segment increased $23 million, or 1%, in the second quarter and increased $333 million, or 5% for the six months ended June 30, 2023 versus the respective 2022 periods. Higher pricing contributed 6% to sales in the quarter and 7% in the year-to-date period. The impact of net acquisitions increased sales by 3% in the second quarter and six months ended June 30, 2023, primarily due to the acquisition of nexAir, LLC (See Note 13 to the condensed consolidated financial statements). Cost pass-through decreased sales by 7% for the second quarter and 5% for the six months ended June 30, 2023 with minimal impact on operating profit. Volumes decreased sales by 1% for the second quarter and remained flat for the six months ended June 30, 2023 driven primarily by customer outages in the chemicals and energy end market.

Operating profit

Operating profit in the Americas segment increased $160 million, or 18%, in the second quarter and increased $281 million, or 15% for the six months ended June 30, 2023 versus the respective 2022 periods, driven primarily by higher pricing, acquisitions and continued productivity initiatives which more than offset cost inflation during the quarter and year-to-date period.

EMEA

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2023						2022						Variance						2023						2022						Variance
Sales			$	2,160					$	2,144					1		%				$	4,337					$	4,292					1		%
Operating profit			$	630					$	536					18		%				$	1,237					$	1,039					19		%
As a percent of sales			29.2		%				25.0		%										28.5		%				24.2		%

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			(4)		%				(4)		%
Price/Mix			11		%				12		%
Cost pass-through			(3)		%				(1)		%
Currency			—		%				(3)		%
Acquisitions/divestitures			(3)		%				(3)		%
			1		%				1		%

The EMEA segment includes Linde's industrial gases operations in approximately 45 European, Middle Eastern and African countries including Germany, United Kingdom, France, the Republic of South Africa and Sweden.

Sales

EMEA segment sales increased by $16 million, or 1%, in the second quarter and increased $45 million for the six months ended June 30, 2023 as compared to the respective 2022 periods. Higher price attainment increased sales by 11% in the quarter and 12% in the year-to-date period. Volumes decreased sales by 4% in the quarter and year-to-date period led by the manufacturing and chemicals and energy end markets. Cost pass-through decreased sales by 3% in the quarter and 1% in the year-to-date period, with minimal impact on operating profit. The impact of currency translation on sales was flat in the quarter and 3% in the year-to-date period, due largely to the weakening of the Euro and British pound against the U.S. Dollar. The impact of net divestitures decreased sales by 3% in the quarter and year-to-date period, primarily due to the deconsolidation of the Russian subsidiaries in June 2022.

Operating Profit

Operating profit for the EMEA segment increased by $94 million, or 18%, in the second quarter and increased by $198 million, or 19% for the six months ended June 30, 2023, as compared to the respective 2022 periods. The increase in operating profit in the quarter and year-to-date period was driven primarily by higher pricing and continued productivity initiatives, partially offset by cost inflation, lower volumes and divestitures.

APAC

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2023						2022						Variance						2023						2022						Variance
Sales			$	1,683					$	1,651					2		%				$	3,281					$	3,253					1		%
Operating profit			$	472					$	426					11		%				$	895					$	825					8		%
As a percent of sales			28.0		%				25.8		%										27.3		%				25.4		%

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Volume/Equipment			3		%				2		%
Price/Mix			5		%				5		%
Cost pass-through			(1)		%				(1)		%
Currency			(5)		%				(5)		%
Acquisitions/divestitures			—		%				—		%
			2		%				1		%

The APAC segment includes Linde's industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China, Australia, India, and South Korea.

Sales

Sales for the APAC segment increased $32 million, or 2%, in the second quarter and increased $28 million, or 1% for the six months ended June 30, 2023 versus the respective 2022 periods. Higher pricing contributed 5% to sales in the quarter and year-to-date period. Volumes increased 3% in the quarter and 2% in the year-to-date period including project start-ups in the electronics and chemicals and energy end markets. Currency translation decreased sales by 5% in quarter and year-to-date period, driven primarily by the weakening of the Australian dollar, Indian rupee and Chinese yuan against the U.S. dollar. Cost pass-through decreased sales by 1% in the quarter and year-to-date period.

Operating profit

Operating profit in the APAC segment increased $46 million, or 11%, in the second quarter and increased $70 million, or 8% in the six months ended June 30, 2023 versus the respective 2022 periods, driven by higher pricing, volumes and continued productivity initiatives which more than offset the impact of currency and cost inflation during the quarter and year-to-date period.

Engineering

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2023						2022						Variance						2023						2022						Variance
Sales			$	495					$	644					(23)		%				$	1,035					$	1,372					(25)		%
Operating profit			$	107					$	105					2		%				$	256					$	248					3		%
As a percent of sales			21.6		%				16.3		%										24.7		%				18.1		%

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Currency			2		%				(2)		%
Other			(25)		%				(23)		%
			(23)		%				(25)		%

Sales

Engineering segment sales decreased $149 million in the second quarter and decreased $337 million in the six months ended June 30, 2023 as compared to the respective 2022 periods. The decrease in both periods were driven primarily by project timing.

Projects for Russia that were sanctioned and have been wound down represented $26 million and $87 million of the Engineering segment sales during the second quarter and six months ended June 30, 2023, respectively, and $300 million and $650 million during the respective 2022 periods.

Operating profit

Engineering segment operating profit increased, $2 million in the second quarter and increased $8 million in the six months ended June 30, 2023 as compared to the respective 2022 periods. The decline from lower sales was more than offset by higher margin on wind down of projects subject to sanctions in Russia in both the quarter and year-to-date period.

Other

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2023						2022						Variance						2023						2022						Variance
Sales			$	325					$	500					(35)		%				$	652					$	992					(34)		%
Operating profit (loss)			$	7					$	11					(36)		%				$	9					$	(33)					127		%
As a percent of sales			2.2		%				2.2		%										1.4		%				(3.3)		%

			Quarter Ended June 30, 2023 vs. 2022						Six Months Ended June 30, 2023 vs. 2022
			% Change						% Change
Factors Contributing to Changes - Sales
Volume/price			4		%				5		%
Currency			—		%				—		%
Acquisitions/divestitures			(39)		%				(39)		%
			(35)		%				(34)		%

Other consists of corporate costs and a few smaller businesses including Surface Technologies and global helium wholesale, which individually do not meet the quantitative thresholds for separate presentation.

Sales

Sales for Other decreased $175 million for the second quarter and decreased $340 million for the six months ended June 30, 2023 versus the respective 2022 periods. The impact of net divestitures decreased sales by 39% in the quarter and year-to-date period versus the respective 2022 periods, primarily due to sale of GIST business in third quarter of 2022. Underlying sales increased 4% in the quarter and 5% in the year-to-date period, driven primarily by price in the coatings and global helium businesses. Currency translation impacts were flat in the quarter and year-to-date period.

Operating profit

Operating profit in Other decreased $4 million, or 36% in the second quarter and increased $42 million, or 127% in the six months ended June 30, 2023 versus the respective 2022 periods. The decrease in the quarter was driven by divestitures, partially offset by higher pricing. In the year-to-date period, higher pricing and lower corporate costs more than offset the impact of divestitures.

Currency

The results of Linde's non-U.S. operations are translated to the company’s reporting currency, the U.S. dollar, from the functional currencies. For most operations, Linde uses the local currency as its functional currency. There is inherent variability and unpredictability in the relationship of these functional currencies to the U.S. dollar and such currency movements may materially impact Linde's results of operations in any given period.

To help understand the reported results, the following is a summary of the significant currencies underlying Linde's consolidated results and the exchange rates used to translate the financial statements (rates of exchange expressed in units of local currency per U.S. dollar):

			Percentage of YTD 2023 Consolidated Sales						Exchange Rate for Income Statement												Exchange Rate for Balance Sheet
			Year-To-Date Average												June 30,						December 31,
Currency			2023						2022						2023						2022
Euro			19		%				0.93						0.91						0.92						0.93
Chinese yuan			8		%				6.93						6.47						7.25						6.90
British pound			5		%				0.81						0.77						0.79						0.83
Australian dollar			4		%				1.48						1.39						1.50						1.47
Brazilian real			4		%				5.07						5.06						4.79						5.28
Canadian dollar			3		%				1.35						1.27						1.32						1.36
Korean won			3		%				1,295						1,231						1,318						1,266
Mexican peso			3		%				18.15						20.26						17.12						19.50
Indian rupee			2		%				82.21						76.17						82.04						82.73
South African rand			1		%				18.19						15.39						18.85						17.04
Swedish krona			1		%				10.49						9.58						10.80						10.43
Thailand bhat			1		%				34.19						33.69						35.45						34.61

Liquidity, Capital Resources and Other Financial Data

The following selected cash flow information provides a basis for the discussion that follows:

(Millions of dollars)			Six months ended June 30,
			2023						2022
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (including noncontrolling interests)			$	3,164					$	1,620
Non-cash charges (credits):
Add: Depreciation and amortization			1,908						2,203
Add: Deferred income taxes			(61)						(221)
Add: Share-based compensation			66						51
Add: Other charges, net of payments (a)			(61)						922
Net income adjusted for non-cash charges			5,016						4,575
Less: Working capital			(640)						(497)
Less: Pension contributions			(25)						(19)
Other			(293)						74
Net cash provided by (used for) operating activities			$	4,058					$	4,133
INVESTING ACTIVITIES
Capital expenditures			(1,688)						(1,475)
Acquisitions, net of cash acquired			(834)						(49)
Divestitures, net of cash divested and asset sales			24						17
Net cash provided by (used for) investing activities			$	(2,498)					$	(1,507)
FINANCING ACTIVITIES
Debt increase (decrease) - net			(642)						2,760
Issuances (purchases) of common stock - net			(1,746)						(3,307)
Cash dividends - Linde plc shareholders			(1,246)						(1,177)
Noncontrolling interest transactions and other			(22)						(35)
Net cash provided by (used for) financing activities			$	(3,656)					$	(1,759)
Effect of exchange rate changes on cash and cash equivalents			$	17					$	(35)
Cash and cash equivalents, end-of-period			$	3,357					$	3,655

(a) See Note 2 to the condensed consolidated financial statements.

Cash Flow from Operations

Cash provided by operations of $4,058 million for the six months ended June 30, 2023 decreased $75 million, or 2%, versus 2022. The decrease was driven primarily by higher working capital requirements, including lower inflows from contract liabilities from engineering customer advanced payments and higher cash tax payments. Other charges were $40 million and $989 million, for the six months ended June 30, 2023 and 2022, respectively. 2022 charges related primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions. Related cash outflows were $101 million and $67 million for the six months ended June 30, 2023 and 2022, respectively.

Linde estimates that total 2023 required contributions to its pension plans will be in the range of approximately $40 million to $50 million, of which $25 million has been made through June 30, 2023.

As of June 30, 2023, Linde has approximately $1.7 billion recorded in contract liabilities within the condensed consolidated balance sheet related to engineering projects in Russia. Any obligation to satisfy the related residual contract liabilities may have an adverse effect on Linde’s cash flows.

Investing

Net cash used for investing of $2,498 million for the six months ended June 30, 2023 increased $991 million versus 2022, due to higher acquisitions, net of cash acquired and higher capital expenditures.

Capital expenditures for the six months ended June 30, 2023 were $1,688 million, $213 million higher than the prior year due primarily to investments in new plant and production equipment for operating and growth requirements.

At June 30, 2023, Linde's sale of gas backlog of large projects under construction was approximately $4.4 billion. This represents the total estimated capital cost of large plants under construction.

Acquisitions, net of cash acquired for the six months ended June 30, 2023 and 2022 were $834 million and $49 million, respectively, and related primarily to the acquisition of nexAir in the Americas (see Note 13 to the condensed consolidated financial statements).

Divestitures, net of cash divested and asset sales for the six months ended June 30, 2023 and 2022 were $24 million and $17 million, respectively.

Financing

Cash used for financing activities was $3,656 million for the six months ended June 30, 2023 as compared to $1,759 million for the six months ended June 30, 2022. Cash used for debt was $642 million in 2023 versus cash provided by debt of $2,760 million in 2022, driven primarily by lower commercial paper borrowings and lower net debt issuances in 2023. In February 2023, Linde repaid $500 million of 2.70% notes that became due. In April 2023, Linde repaid €650 million of 2.00% notes and £300 million of 5.875% notes that became due. In June 2023, Linde issued €500 million of 3.625% notes due in 2025, €750 million of 3.375% notes due in 2029 and €650 million of 3.625% notes due in 2034.

Net purchases of ordinary shares were $1,746 million in 2023 versus $3,307 million in 2022. On February 28, 2022, the company’s Board of Directors approved the additional repurchase of $10.0 billion of its ordinary shares. For additional information related to the share repurchase programs, see Part II Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Cash dividends of $1,246 million increased $69 million from 2022 driven primarily by a 9% increase in quarterly dividends per share from $1.17 per share to $1.275 per share, partially offset by lower shares outstanding. Cash used for Noncontrolling interest transactions and other was $22 million for the six months ended June 30, 2023 versus cash used of $35 million for the respective 2022 period.

The company continues to believe it has sufficient operating flexibility, cash, and funding sources to meet its business needs around the world. The company had $3.4 billion of cash as of June 30, 2023, and has a $5 billion and a $1.5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreements as of June 30, 2023. The company does not anticipate any limitations on its ability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moody’s and Standard & Poor’s.

Legal Proceedings

See Note 9 to the condensed consolidated financial statements.

NON-GAAP MEASURES AND RECONCILIATIONS

(Millions of dollars, except per share data)

(UNAUDITED)

The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance and liquidity. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.

			Quarter Ended June 30,						Six Months Ended June 30,
			2023						2022			2023			2022
Adjusted Operating Profit and Operating Margin
Reported operating profit			$	2,011					$	589		$	3,944		$	2,069
Add: Other charges			22						993			40			989
Add: Purchase accounting impacts - Linde AG (c)			253						406			508			835
Total adjustments			275						1,399			548			1,824
Adjusted operating profit			$	2,286					$	1,988		$	4,492		$	3,893
Reported percentage change			241		%				(48)		%	91		%	(12)		%
Adjusted percentage change			15		%				8		%	15		%	10		%
Reported sales			$	8,204					$	8,457		$	16,397		$	16,668
Reported operating margin			24.5		%				7.0		%	24.1		%	12.4		%
Adjusted operating margin			27.9		%				23.5		%	27.4		%	23.4		%
Adjusted Depreciation and amortization
Reported depreciation and amortization			$	960					$	1,091		$	1,908		$	2,203
Less: Purchase accounting impacts - Linde AG (c)			(251)						(401)			(501)			(819)
Adjusted depreciation and amortization			$	709					$	690		$	1,407		$	1,384
Adjusted Other Income (Expense) - net
Reported Other Income (Expense) - net			$	(27)					$	(36)		$	(32)		$	(24)
Less: Purchase accounting impacts - Linde AG (c)			(2)						(5)			(7)			(16)
Adjusted Other Income (Expense) - net			$	(25)					$	(31)		$	(25)		$	(8)
Adjusted Interest Expense - Net
Reported interest expense - net			$	52					$	5		$	89		$	14
Add: Purchase accounting impacts - Linde AG (c)			4						9			13			19
Adjusted interest expense - net			$	56					$	14		$	102		$	33

Adjusted Income Taxes (a)
Reported income taxes			$	438					$	286		$	868		$	655
Add: Purchase accounting impacts - Linde AG (c)			67						108			124			216
Add: Other charges			34						104			79			101
Total adjustments			101						212			203			317
Adjusted income taxes			$	539					$	498		$	1,071		$	972
Adjusted Effective Tax Rate (a)
Reported income before income taxes and equity investments			$	2,004					$	646		$	3,945		$	2,181
Add: Purchase accounting impacts - Linde AG (c)			249						397			495			816
Add: Other charges			22						993			40			989
Total adjustments			271						1,390			535			1,805
Adjusted income before income taxes and equity investments			$	2,275					$	2,036		$	4,480		$	3,986
Reported Income taxes			$	438					$	286		$	868		$	655
Reported effective tax rate			21.9		%				44.3		%	22.0		%	30.0		%
Adjusted income taxes			$	539					$	498		$	1,071		$	972
Adjusted effective tax rate			23.7		%				24.5		%	23.9		%	24.4		%
Income from Equity Investments
Reported income from equity investments			$	46					$	50		$	87		$	94
Add: Purchase accounting impacts - Linde AG (c)			18						19			36			39
Adjusted income from equity investments			$	64					$	69		$	123		$	133
Adjusted Noncontrolling Interests
Reported noncontrolling interests			$	(37)					$	(38)		$	(73)		$	(74)
Add: Purchase accounting impacts - Linde AG (c)			(3)						(3)			(6)			(7)
Adjusted noncontrolling interests			$	(40)					$	(41)		$	(79)		$	(81)
Adjusted Net Income - Linde plc (b)
Reported net income - Linde plc			$	1,575					$	372		$	3,091		$	1,546
Add: Other charges			(12)						889			(39)			888
Add: Purchase accounting impacts - Linde AG (c)			197						305			401			632
Total adjustments			185						1,194			362			1,520
Adjusted net income - Linde plc			$	1,760					$	1,566		$	3,453		$	3,066

Adjusted Diluted EPS (b)
Reported diluted EPS			$	3.19					$	0.74		$	6.25		$	3.04
Add: Other charges			(0.02)						1.76			(0.08)			1.75
Add: Purchase accounting impacts - Linde AG (c)			0.40						0.60			0.81			1.24
Total adjustments			0.38						2.36			0.73			2.99
Adjusted diluted EPS			$	3.57					$	3.10		$	6.98		$	6.03
Reported percentage change			331		%				(54)		%	106		%	(12)		%
Adjusted percentage change			15		%				15		%	16		%	16		%
Adjusted EBITDA and % of Sales
Net Income - Linde plc			$	1,575					$	372		$	3,091		$	1,546
Add: Noncontrolling interests			37						38			73			74
Add: Net pension and OPEB cost (benefit), excluding service cost			(45)						(62)			(90)			(126)
Add: Interest expense			52						5			89			14
Add: Income taxes			438						286			868			655
Add: Depreciation and amortization			960						1,091			1,908			2,203
EBITDA			$	3,017					$	1,730		$	5,939		$	4,366
Add: Other charges			22						993			40			989
Add: Purchase accounting impacts - Linde AG (c)			20						23			43			54
Total adjustments			42						1,016			83			1,043
Adjusted EBITDA			$	3,059					$	2,746		$	6,022		$	5,409
Reported sales			$	8,204					$	8,457		$	16,397		$	16,668
% of sales
EBITDA			36.8		%				20.5		%	36.2		%	26.2		%
Adjusted EBITDA			37.3		%				32.5		%	36.7		%	32.5		%

(a) The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
(b) Net of income taxes which are shown separately in “Adjusted Income Taxes and Adjusted Effective Tax Rate”.
(c) The company believes that its non-GAAP measures excluding Purchase accounting impacts - Linde AG are useful to investors because: (i) the 2018 business combination was a merger of equals in an all-stock merger transaction, with no cash consideration, (ii) the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchase accounting than others, causing results that are not comparable at the reportable segment level, therefore, the impacts of purchase accounting adjustments to each segment vary and are not comparable within the company and when compared to other companies in similar regions, (iii) business management is evaluated and variable compensation is determined based on results excluding purchase accounting impacts, and; (iv) it is important to investors and analysts to understand the purchase accounting impacts to the financial statements. A summary of each of the adjustments made for Purchase accounting impacts - Linde AG are as follows: Adjusted Operating Profit and Margin: The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assets and intangible assets (primarily customer related) acquired in the merger and the allocation of fair value step-up for ongoing Linde AG asset disposals (reflected in Other Income/(Expense)). Adjusted Interest Expense - Net: Relates to the amortization of the fair value of debt acquired in the merger. Adjusted Income Taxes and Effective Tax Rate: Relates to the current and deferred income tax impact on the adjustments discussed above. The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts. Adjusted Income from Equity Investments: Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets. Adjusted Noncontrolling Interests: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.

Net Debt and Adjusted Net Debt

Net debt is a financial liquidity measure used by investors, financial analysts and management to evaluate the ability of a company to repay its debt. Purchase accounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.

			June 30, 2023						December 31, 2022
(Millions of dollars)
Debt			$	17,490					$	17,914
Less: cash and cash equivalents			(3,357)						(5,436)
Net debt			14,133						12,478
Less: purchase accounting impacts - Linde AG			(10)						(22)
Adjusted net debt			$	14,123					$	12,456

Supplemental Guarantee Information

On May 3, 2023, the company filed a Form S-3 Registration Statement with the SEC ("the Registration Statement").

Linde plc may offer debt securities, preferred shares, depositary shares and ordinary shares under the Registration Statement, and debt securities exchangeable for or convertible into preferred shares, ordinary shares or other debt securities. Debt securities of Linde plc may be guaranteed by Linde Inc and/or Linde GmbH. Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc. or Linde Finance under the Registration Statement.

Linde Inc. is a wholly owned subsidiary of Linde plc. Linde Inc. may offer debt securities under the Registration Statement. Debt securities of Linde Inc. will be guaranteed by Linde plc, and such guarantees by Linde plc may be guaranteed by Linde GmbH. Linde Inc. may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.

Linde Finance B.V. is a wholly owned subsidiary of Linde plc. Linde Finance may offer debt securities under the Registration Statement. Linde plc will guarantee debt securities of Linde Finance offered under the Registration Statement. Linde GmbH and Linde Inc. may guarantee Linde plc’s obligations under its downstream guarantee.

Linde GmbH is a wholly owned subsidiary of Linde plc. Linde GmbH may provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc. or Linde Finance offered under the Registration Statement.

In September 2019, Linde plc provided downstream guarantees of all pre-existing Linde Inc. and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.

Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a €10.0 billion debt issuance program, under which Linde plc may offer debt securities. Linde Inc. and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the European debt program.

For further information about the guarantees of the debt securities registered under the Registration Statement (including the ranking of such guarantees, limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released), see “Description of Debt Securities – Guarantees” and “Description of Debt Securities – Ranking” in the Registration Statement, which subsections are incorporated herein by reference.

The following tables present summarized financial information for Linde plc, Linde Inc., Linde GmbH and Linde Finance on a combined basis, after eliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.

(Millions of dollars)
Statement of Income Data			Six Months Ended June 30, 2023						Twelve Months Ended December 31, 2022
Sales			$	4,026					$	8,850
Operating profit			775						1,337
Net income			300						675
Transactions with non-guarantor subsidiaries			1,208						2,241
Balance Sheet Data (at period end)
Current assets (a)			$	4,896					$	11,478
Long-term assets (b)			13,264						13,949
Current liabilities (c)			9,647						11,767
Long-term liabilities (d)			50,170						48,210
(a) From current assets above, amount due from non-guarantor subsidiaries			$	3,034					$	7,260
(b) From long-term assets above, amount due from non-guarantor subsidiaries			495						1,982
(c) From current liabilities above, amount due to non-guarantor subsidiaries			1,363						1,334
(d) From long-term liabilities above, amount due to non-guarantor subsidiaries			34,087						33,268