Matthew White
Executive Vice President & Chief Financial Officer at Linde
Thanks, Sanjiv. Please turn to Slide 4 for an overview of the first quarter results. Sales of $8.2 billion increased 13% from prior year but declined 1% sequentially from the fourth quarter. Versus prior year, cost pass-through increased 6% from a contractual billing of higher energy costs, but currency translation reduced sales by 3% from a stronger U.S. dollar, primarily against the euro and pound sterling. Excluding these items, organic sales grew 9% from 3% more volume split between project backlog and base and 6% more pricing as we continue to price to inflation. Recall that actual price increases are much higher for the combined packaged and merchant gases.
Sequentially, when excluding the 1% currency headwind, organic sales increased 2% as 3% higher pricing was partially offset by a 1% decline in volume. The volume decline was driven by lower EMEA medical oxygen and seasonal effects from food and beverage, Chinese New Year and Southern Hemisphere LPG. Engineering volumes are up 1% from prior year, but down 2% sequentially as we have begun winding down several Russian projects, and we expect that trend to continue into Q2.
Operating profit of $1.9 billion increased 13% from 2021 and 3% sequentially. The operating margin of 23.2% is roughly flat with prior year, but up 100 basis points from the fourth quarter. The contractual cost pass-through has no effect on operating profit dollars, but will impact operating margins as we adjust both sales and cost with energy prices. Excluding this effect, operating margins are up 130 basis points from prior year and 120 basis points sequentially. You can see the table to the right, showing underlying margins by geographic segment, with almost all up triple digits across both periods.
Despite the unprecedented geopolitical events and subsequent inflationary pressure, the business quality continues to improve, and we anticipate that margins ex cost pass-through should increase going forward. You may have noticed the higher than normal engineering segment margins at 19.6% and lower-than-normal global other operating profit at a $44 million loss. These are driven by project timing differences and one-off costs, which both should return to normal run rate levels by the second quarter. EPS of $2.93 increased 18% from last year and 6% sequentially, as we continue to demonstrate strong leverage down the entire income statement.
Disciplined capital management is supporting lower interest costs and reduced share count, which I'll speak to more on the next slide. The final number I'd like to highlight is return on capital, which represents one of the most important financial metrics in our industry. Three years ago, this figure was 10.4%. Today, we're at 18.9% and still growing. This progress doesn't happen overnight. It requires a sustained high performance culture across all levels of the business. We're quite confident that Linde is and will continue to be a long-term value compounder with a healthy blend of high-quality growth, tremendous resilience and significant shareholder returns.
Slide 5 provides more color on our capital management trends. Q1 operating cash flow of $2 billion was slightly below last year, due to unfavorable working capital timing in January and February. While March was a much stronger month, it wasn't enough to catch up. I expect improvements in Q2 as our DSO and DPO levels are still quite stable. Also recall that Q1 tends to be one of the weakest quarters of the year due to cash payment timing.
Engineering cash flow was positive in Q1, but down year-over-year on project payment timing. In light of the accelerated Russian project wind downs, I expect more payment outflows to vendors as we close out several projects, consistent with how all projects are closed out, but at a significantly faster pace. Overall, I still anticipate a full year operating cash flow to EBITDA ratio in the low to mid-80% range.
As far as how we deploy that cash, we announced a 10% dividend increase for 2022, which marks the 29th consecutive year of dividend increases. We also announced a new $10 billion share repurchase program on February 28, of which we've already spent $1.7 billion by the end of April. And of course, we will always reinvest in the business, which is our priority for capital. Despite the economic challenges, we still have access to low-cost capital as evidenced by our most recent bond deal. We issued over EUR2 billion across 3 tranches. And as you can see, the attractive pricing, we had a weighted average maturity of 10 years with a weighted average coupon of 1.4%. Irrespective of the economic climate, we will maintain a steady and predictable capital allocation policy to invest in the business while rewarding shareholders.
I'll finish up on Slide 6, which provides the updated earnings outlook. Second quarter guidance range of $2.90 to $3, represents 7% to 11% growth over prior year or 10% to 14% when excluding currency translation impact. For the full year, the new guidance range is $11.65 to $11.90, a 9% to 11% growth rate from 2021 or 11% to 13% when adjusting for currency. Both estimates have two key underlying assumptions.
First, there is no assumed base economic growth at the midpoint. Consistent with last quarter, this is not our economic projection but rather a placeholder for the guidance. You can insert your own view of the economy. If it does better, we will do better. And if it does worse, we'll take actions to mitigate. Second, we have removed contribution of Russian earnings by the second half of the year. As we continue to wind down engineering projects, cease certain operations and sell industrial assets, we felt it was appropriate to remove Russian earnings from the outlook and associated projects from the backlog. These actions are ongoing. So we anticipate some residual earnings in Q2, which are projected to cease by Q3.
While this is a fluid situation with many complexities, we are committed to following all sanctions and scaling down operations in a safe manner. Overall, despite economic uncertainties, we are raising the full year outlook. In fact, as Sanjiv mentioned, Linde has demonstrated industry-leading performance year after year. We only need to look at the last 3 years to prove that. At the start of 2019, when some investors doubted the merits of the merger, we quickly came together as one and grew EPS 19%, finishing the year at an all-time high stock price.
Moving into 2020, when the pandemic struck Linde stock was sold off from apparent concerns of too much cyclicality without enough resiliency only to ultimately achieve 12% EPS growth and finished the year at a new all-time high stock price. And when 2021 began, Linde stock was once again sold off. This time, from apparent concerns of too much resiliency without enough cyclicality. And yet, we grew EPS by 30%, and once again, finished the year at another new all-time high stock price. Now in 2022, Linde stock has been sold off again from concerns of economic uncertainty and high inflation. Time will tell how we ultimately finish this year -- but personally, I like our odds. I'll now turn the call over to Q&A.
