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Weak Manufacturing Sector Hurts Praxair’s North American Revenues in 3Q16

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Praxair’s North America segment in 3Q16

Praxair’s (PX) North America segment reported revenue of $1.43 billion in 3Q16, as compared to $1.46 billion in 3Q15, which implies a 2.2% fall on a YoY (year-over-year) basis. As Praxair’s largest revenue generator, the North American segment represented ~52.8% of Praxair’s total revenue in 3Q16.

Praxair’s North America segment reported an operating profit of $363 million in 3Q16, as compared to $385 million in 3Q15, implying a 5.7% YoY fall. The segment’s operating profit margin fell 90 basis points YoY.

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Driving factors

The North America segment’s sales volume remained constant on a YoY basis. By end market, the businesses of food and beverage, healthcare, and refineries grew, whereas the manufacturing, metals, and upstream energy businesses witnessed weaker sales. Sales volumes, pass-through costs, and currency exchanges hurt sales by 1% apiece. Higher prices had a 1% impact on the segment’s sales. Notably, the segment is expected to win large contracts by the end of the year.

Meanwhile, the North America segment’s operating profit margin fell 7% on low volumes, and currency translations contributed to a 1% fall in the profit margin. Higher prices contributed to a 3% rise in the profit margin.

Notably, investors can indirectly hold Praxair by investing in the iShares US Basic Materials ETF (IYM), which had 6.3% of its portfolio in Praxair as of October 28, 2016. The other top holdings of the fund include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON), which had weights of 11.6%, 11.5%, and 8.3%, respectively, as of October 28, 2016.

In the next part, we’ll analyze the performance of the Praxair’s Europe segment in 3Q16.

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