Praxair Distribution Investor Trip The Leader in Solutions Selling September 10, 2004 Toronto, Ontario Wayne J. Yakich President, Praxair Distribution, Inc. www.praxair.com
2 Forward Looking Statements The forward-looking statements contained in this announcement concerning demand for products and services, the expected macroeconomic environment, sales and earnings growth, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These include the impact of changes in worldwide and national economies, the cost and availability of electric power, natural gas and other materials, development of operational efficiencies, changes in foreign currencies, changes in interest rates, the continued timely development and acceptance of new products and processes, the impact of competitive products and pricing, and the impact of tax and other legislation and regulation in the jurisdictions in which the company operates.
3 Agenda 7:45 am 9:45 am 11:15 am 12:30 am 1:30 pm 2:30 pm 3:30 pm 4:00 pm Business Presentation - Praxair Canada Offices - Mississauga Board Bus / Depart for Paris Plant Arrive Paris, Ontario - Tour Industrial and Specialty Gas Plants Board bus Box lunch provided Arrive PDI Cambridge Store Board Bus Depart Cambridge for Toronto Pearson Airport Arrive Airport Bus will return to Glenerin Inn
4 Praxair Distribution, Inc. (PDI) 2004 Investor Conference Meeting Participants Wayne Yakich President Janet Coffman - Vice President Marketing Pat Heffernan - Vice President and General Manager Karl Mack - Director of Finance Dick Marini - Vice President, Operations Eduardo Menezes, Vice President and General Manager Jim McKay, Director Cylinder Operations Don Pilon, Division General Manager
5 Praxair Distribution, Inc. (PDI) PDI is Praxair s direct channel for delivering welding, cutting, specialty and medical gases and related products & services in the US and Canada Serving 400,000 customers in the manufacturing, healthcare, biotech, and food & beverage markets 3800 employees 400+ locations 500,000 transactions/month Best in class safety record 75% 2003 Sales $900MM 12% 13% Industrial (Met Fab) Specialty and Dry Ice Institutional Healthcare
6 Geographic Footprint PDI Direct Coverage
7 Strong Distributor Network PDI Direct Coverage Distributors NAIG-Small Bulk Praxair Coverage PDI Coverage Distributors NA IG
8 Profitable Growth Sales ($MM) 700 650 600 550 500 450 400 350 300 250 200 CAGR Gases 4% Hardgoods 0% Manuf. IP 1% PDI Sales 1999 2000 2001 2002 2003 2004F 130 125 120 115 110 105 100 Manufacturing IP Hardgoods Gases Manufacturing IP Operating profit margin has improved to to 12% in in 2004
9 Same Store Sales Reflect Industry Leadership 20.0% PDI SAME STORE SALES BY SEGMENT Year Over Year Growth 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% FY 01 FY 02 FY 03 Q1-04 Q2-04 Gas &Rent 3.6% 0.6% 3.1% 5.0% 5.8% Hardgoods -8.7% -8.2% -3.5% 8.0% 18.5% Total PDI -1.5% -2.8% 0.8% 6.0% 10.1% Focus on gases; hardgoods support gas sales
10 Committed to Being the Industry Leader Focusing on a fragmented industry opportunity to grow Vigorously executing a well-defined, transformational, business model Providing solutions Having dedicated, talented people to meet customer needs Being big, but acting small
11 Industry Dynamics Room For Growth Share in a $9 Billion market US - $8 Billion Canada - $700 Million (USD) Distributors 46% PX Distributors 8% PDI 8% AL 29% PX Distributors 1% PDI 35% Airgas 26% Distributors 8% BOC 25%
12 The New PDI Business Model New, lower cost, channels to market Superior sales and marketing capabilities Step change packaged gas production and distribution simplification Significantly reduced transaction processing effort Being the most desirable place to work in the industry Capable of growing sales 8-10% per year; net income 10-12% per year
13 New Distribution Channels Store within a Store Turn-key Praxair Store within a Store Praxair s unique Star family of gases & blends Praxair s exclusive ProStar brand of welding & cutting products Signed with TSC in Canada New retail channel to to market providing full solutions selling
14 New Distribution Channels Cylinder Exchange Program Market share growth through increased penetration of retail market segment Pilot with Home Depot Allows for potential rationalization of PDI stores Retail customer convenience and low cost channel to market for Praxair
15 Mobile On-Site Supply Solution - Industrial and Specialty Gases In 2003, 34 trucks generated 3900 new accounts Increasing market penetration
16 Achieving Growth through Solutions Selling Bulk Gases Delivery & Storage Microbulk Delivery System Gas Cylinders Robotic Solution G-Tec Natural Gas Booster Prostar Consumables Starsolver Productivity Enhancement Program Nitrogen Generation & Air Drying Cloos MIG/MAG Tandem Laser System
17 The Results Increased productivity by 20%- 40% (with little or no capital investment) Improved product quality Reduced welding costs Our customers achieve their objectives faster, better and at at lower cost
18 Solutions Selling Specialty Gases & Equipment The Full Spectrum of Solutions We serve a multitude of industries with a variety of products We offer leading edge, applications based technology Reliable production and distribution network Worldwide coverage In 2003, specialty gas sales grew 10%, vs. the market growth of 3%
19 Solutions Selling Specialty Gases & Equipment Pure gases and blends Gas handling equipment Cryogenic products Gas detection systems Safety apparatus We touch all aspects of of our customers work
20 Praxair Only National Integrated Supplier Many packaged gas customers grow to become merchant customers 95% of merchant customers use packaged gases The ability to cross-sell with other Praxair businesses substantially increases market penetration. National Accounts Program - dedicated Praxair/PDI sales resources Global applications sharing
21 Blue Rhino Growth Opportunity Blue Rhino s exclusive distributor with major retailers in Ontario, Quebec, British Columbia, Manitoba, Saskatchewan and Alberta Walmart implementation underway In 2004, propane cages will be installed in 40% of PDI retail locations in North America Extension into industrial propane Significant growth utilizing existing distribution capabilities
22 ProStar Brand Products Praxair s exclusive ProStar brand of welding & cutting products High quality product at a competitive price Has grown from 20 to 2,200 items Gas apparatus Consumables Safety equipment Accessories Low cost country sourcing strategy Available in the US, Canada, Mexico and Brazil Brand recognition creates customer loyalty
23 The New PDI Business Model New, lower cost, channels to market Superior sales and marketing capabilities Step change packaged gas production and distribution simplification Significantly reduced transaction processing effort Being the most desirable place to work in the industry Capable of growing sales 8-10% per year; net income 10-12% per year
24 StarDirect Operating Model Order Order Placement/Fulfillment PX/OKI Distribution Center Hardgoods PRAXAIR PRAXAIR Customer PRAXAIR Customer PX Solution Center Gases Praxair Packaged Gas Plant
25 Praxair s StarDirect Order Processing and Tracking System Largest and best performing hardgoods distribution network in North America. by Praxair Over 500,000 square feet of warehouse space in 25 distribution centers. North America s largest inventory of welding products. Guaranteed 24-hour delivery Inventory turns approaching 10 times 25 Superior customer service and best in in class inventory turnover
26 Employing State Of The Art Technology Building the Base Automate Processes Dynamic Delivery System * * Delivery territories/scenarios Standard routes *purchased from UPS Eliminate driver paperwork Reduce errors Reduce time from order to invoice Reduce fleet miles Improve customer service Improve resource utilization Doing business differently than the rest of of the industry
27 Optimizing Distribution Roadnet Optimizes Daily Routes Roadnet Identifies Over / Under Utilized Trucks and Drivers Daily
28 Integrating Technology With Work Process Improvement
29 Positioned for Growth in Metal Fabrication 12.0% 8.0 7.7 7.4 7.7 2005F 8.0 2006F 8.0% 7.1 7.1 4.0% 0.0% 2000 2001 2002 2003 2004F -4.0% -8.0% Source: Praxair estimates Mrkt Growth PDI Growth Market Size ($B)
30 Positioned for Growth in Specialty Gases 20% 1,400 1,300 1,200 15% 10% 960 989 1,018 1,050 1,100 900 800 700 600 1,200 2006F 1,000 500 5% 400 300 200 0% 2001 2002 2003 2004F Mrkt Growth PDI Growth Mrkt Size ($MM) 100 - Source: Praxair estimates
31 Superior Sales Trend... 12.0% TOTAL SAME STORE SALES (SSS) TREND 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% PDI-SSS Primary competitor -6.0% 1Q'01 2Q'01 3Q'01 4Q'01 1Q'02 2Q'02 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04
32 Especially in gases 10.0% 8.0% GAS SAME STORE SALES (SSS) TREND PDI-SSS Primary competitor 6.0% 4.0% 2.0% 0.0% -2.0% 25.0% 1Q'01 2Q'01 3Q'01 4Q'01 1Q'02 2Q'02 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04 HARDGOODS SAME STORE SALES (SSS) TREND 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% 1Q'01 2Q'01 3Q'01 4Q'01 1Q'02 2Q'02 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04
33 Acquisition Strategy Opportunistic economically motivated Ensure strong relationship with PX s preferred distributors Small, high return, bolt-on independent distributors Customer list Synergies in production, distribution, and store locations Not a major strategic driver of top-line growth
34 Summary Strong management team Best in class financial and safety performance Implementing innovative solutions Best positioned to exploit the economic upturn Strong packaged business supports strong bulk and healthcare businesses Growing faster than our competition We will be the best, not necessarily the biggest