Linde plc (LIN)

How it makes money

Most revenue comes from long-term, often 15-to-20-year, on-site contracts with take-or-pay minimums that pay Linde whether or not the customer uses the full volume, plus merchant sales of liquefied gas delivered by truck and cylinder gas sold to smaller accounts. Energy and raw-material costs are largely passed through to customers contractually. The Engineering segment instead books lumpy, project-based revenue as it designs and constructs plants, unrelated to the recurring gas-supply business.

Revenue by segment

Linde's on-site plants are built inside a customer's own facility and connected by pipeline, so switching supplier means relocating an entire gas plant — practically never done once a contract is signed. Combined with a dense, hard-to-replicate network of pipelines and distribution routes built up over decades, this gives Linde a durable, structural advantage over smaller or newer competitors.

Demand is a mix: healthcare and food-grade gases are fairly stable through economic cycles, while sales to chemicals, metals and mining, and energy customers rise and fall with those industries' own investment cycles. Long-term take-or-pay contracts smooth some of this volatility, but the Engineering segment's project backlog can still slow if large customers delay capital projects.

Key risks

• Energy is the largest cost input — Electricity, natural gas and diesel for distribution are Linde's single largest cost item; while contracts pass through much of this cost, unmitigated spikes or supply disruptions can still hurt margins.
• Cyclical industrial end markets — Customers in chemicals and energy, and metals and mining are cyclical businesses, and a downturn in these industries reduces the volumes Linde sells and can delay new on-site project starts.
• Large project backlog execution risk — Linde is building a multibillion-dollar backlog of large on-site and engineering projects; delays, cost overruns, or a customer's own project being cancelled or downsized would slow the growth these projects are meant to deliver.
• Global operating and regulatory exposure — Operating plants and distribution networks across dozens of countries exposes Linde to currency movements, local regulation and geopolitical disruption in any single market where it has significant invested capital.