45
The Linde Group is exposed to market risk in respect of both purchases and sales.
As far as purchases are concerned, the potential risks to the Linde Group relate to the availability and cost of raw materials, energy, input materials and intermediate products.
We try to reduce these procurement and price risks on the purchasing side by sourcing materials worldwide, entering into long-term supply contracts and constantly optimizing our portfolio of suppliers. In addition, we make use of contracts with price escalation clauses to minimize the negative effects of changes in purchase prices.
When selecting suppliers, Linde prizes efficiency and quality. When significant components are purchased, Linde aims for close cooperation with the relevant supplier, including him in new developments at a very early stage in the project in order to ensure economic success. Collaborations such as these involve risks for Linde manifested in the dependency on the supplier.
We are countering the increasing competitive pressure in our divisions not only by constantly improving our products and services but also by implementing a number of projects to enhance our business processes and cost structures. Our optimization program TRIM.100 in the Material Handling business segment is one of the contributory factors here.
To improve efficiency in the Linde Gas division, we have launched a process optimization program. The measures included in this program are designed primarily to achieve improvements in production and distribution and further streamlining of administration and sales.
The consistent application across the Group of the Six Sigma (Glossary) program is enabling us to increase our competitiveness and to create the necessary conditions to counteract the risks of competition.
As well as the risks of competition described above, the Linde Group is also subject to customer risk, such as the loss or insolvency of major customers or an increase in downward pressure on prices as a result of customer purchasing power.
