For our Engineering Division, 2008 was a very successful year in every respect. We met all our targets and once again achieved growth in sales and earnings, following on from a very successful year in 2007. Sales increased in 2008 by 9.7 percent to EUR 3.016bn, compared to EUR 2.750bn in 2007, exceeding the EUR 3bn threshold for the first time. Operating profit (EBITDA (Glossary)) rose at a faster rate than sales, increasing by 11.3 percent to EUR 267m (2007: EUR 240m). The operating margin was 8.9 percent of sales, significantly above our target figure of 8 percent.

The latest jump in sales and earnings is the result of high demand worldwide for our plants and technologies in all four main operating areas in the division (olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants). The profit arising on the sale of MAPAG Valves GmbH also had a positive impact on operating profit. The market environment in international plant construction remained positive during the financial year, which was also reflected in the order intake for our four core product segments. At EUR 3.057bn, the level of orders was EUR 126m above the prior year figure. The order backlog barely changed in the 2008 financial year. It stood at EUR 4.436bn at 31 December 2008 (31 December 2007: EUR 4.391bn).

These figures confirm our strategy, especially in the growth markets of the Middle East, Eastern Europe and Asia. At the heart of this strategy is our objective of achieving synergies between the Gases and Engineering Divisions, by not only designing and building plants, but also by offering reliable plant operation and management under long-term delivery contracts. During the year, we benefited in particular from the rapidly increasing demand for energy and were awarded major contracts by companies which operate in this promising sector. The analysis of sales by principal market in the 2008 financial year and the comparison with the prior year figures show that the Middle East region in particular saw sales growth and therefore made a major contribution to the increase in sales in the Engineering Division as a whole (see tables and diagrams).

The order intake was spread very evenly across our major regional markets. In the 2008 financial year, 29.6 percent of new business came from Europe (EUR 903m), 33.2 percent from the Asia-Pacific region (EUR 1.016bn) and 26.2 percent from the Middle East (EUR 802m). In comparison with the prior year, the Asia-Pacific region saw the greatest increase and North America the greatest decrease in new business. Europe and the Middle East remained at around the same level as in the previous year.

The analysis of new business by plant type makes clear that almost half the order intake in 2008 related to air separation plants (EUR 1.345bn or 44.0 percent). This trend is likely to continue in future, because the oxygen and nitrogen we produce from air separation units is required primarily by oil companies to develop and exploit oilfields and natural gas fields to meet the rising demand for energy worldwide.

In 2008, olefin plants were in second place in terms of order intake (EUR 750m or 24.5 percent). In 2007, most of our new business related to this type of plant. General trends cannot always be read into these figures, as the contract volumes for individual types of plant are so huge that a single order for a large-scale plant can completely distort the figures. This applies particularly to the major contract signed in the first half of the year with the Abu Dhabi National Oil Company (ADNOC) for around USD 800m, which provides for the construction of large air separation plants and had a significant impact on the order intake for this type of plant. In the case of olefin plants, it was in particular a commission from India which led to a substantial increase in order intake. In December 2008, we and our consortium partner Samsung Engineering, South Korea, were awarded the contract for the turnkey construction of an ethylene plant in Dahej. The plant was commissioned by the Indian company OPAL. The contract is worth around EUR 1.030bn in total, of which Linde’s share is EUR 350m. The plant will be the largest of its kind in India and one of the largest plants in the world.

In the analysis of sales by plant type, air separation plants and olefin plants led the way in 2008, with just under EUR 1bn in sales each. Sales revenue from natural gas plants (EUR 367m) and synthesis gas plants (EUR 384m) was much lower.