World No. 2 industrial gases group Linde said cost cuts would boost earnings across the group this year and profit at its gases business would hit a fresh high, although the broader economy remains fragile.

"The measures we have adopted to achieve sustainable efficiency improvements will continue to have an effect," Chief Executive Wolfgang Reitzle told reporters on Wednesday.

Linde supplies the steel and chemicals sectors, with other industrial gases used to process solar cells, make LCD flat screens, snap-freeze food, put fizz in drinks and power gas barbecues and patio heaters.

Reitzle said although there was still no sustainable recovery in the economy, industrial production data showed the steel and chemical sectors, badly hit last year, would improve this year.

Europe's steel body Eurofer said output worldwide was expected to grow by 0.6% in 2010 while German chemical industry body VCI said it expected revenue in the country's chemicals sector to decline 6% this year, the worst drop in more than 20 years.

Operating profit in Linde's gases division last year was down 1.6% at €2.4 billion from 2008, a record year for the group whose stable gas earnings in the healthcare, food and drinks industries left the world's number two industrial gases producer relatively unscathed in 2009.

Linde Won't Change U.S. Strategy
Linde managed to eke out a group operating margin that was a tad higher than a year earlier, at 21.3% compared with 20.2%, despite a nearly 7% fall in operating profit thanks to cost cuts of more than €300 million.

Reitzle said cost cuts this year could total €150-200 million and another €150-200 million next year. Analysts are pencilling in 6% sales growth for Linde in 2010 and operating profit of €2.616 billion compared to the record €2.555 billion in 2008.

Chief Financial Officer Georg Denoke declined comment on the sales forecast, telling Reuters only that Linde generated 30% of revenue from emerging markets, putting it ahead of rivals.

Commenting on U.S. rival Airgas' ongoing efforts to fend off a takeover bid from Air Products, Reitzle said Linde would not change its U.S. strategy whatever the outcome of that battle.

Linde sold its U.S. cylinder business to Airgas to meet anitrust conditions after Linde acquired British rival BOC in 2006.

"We are watching what's happening there in a relaxed way," he said, adding he believed the whole saga would drag on for quite a while because Airgas was "severely resisting" Air Products. Airgas had urged its shareholders to reject a $5.1 billion tender offer from Air Products, arguing the offer substantially undervalues the industrial gas supplier.

Number one industrial gases producer Air Liquide's chief executive said in February it was too early to talk about possible purchase of Airgas assets.