Matt White
Executive Vice President and Chief Financial Officer at Linde
Thanks, Sanjiv.
Slide 4 provides an overview of second quarter results. Sales of $8.2 billion, are down 3% to last year, but flat sequentially. The comparison has some noise related to movements in FX translation, engineering project timing, divestitures and cost pass-through. As you know, we contractually pass through energy variances, which can cause fluctuations to revenue, but have no impact to profit dollars. Excluding these items, underlying price and volume are up 6% versus prior year and 3% versus first quarter.
Higher prices are the main driver of underlying sales growth with an increase of 7% versus 2022 and 1% sequentially. Consistent with prior years, pricing trends are representative of the weighted inflation rates across our countries of operation. And while we're seeing some disinflation in more developed regions, we're not seeing deflation. If the disinflation persists, I'd expect moderating price increases going forward, especially as we lap prior year comps.
From a volume perspective, sequential trends played out as expected with a 2% seasonal improvement, but year-over-year is down 1% despite positive contribution from the project backlog. There are two contributing factors to the base volume decline. About a quarter relates to lower on-site volumes in the US Gulf Coast, where customers took more outages than last year. Most customers are back up and running, so we anticipate sequential volume growth into Q3. The remaining decline primarily relates to EMEA, which had a 4% volume decrease led by on-site customers.
Despite the lower year-over-year volumes, operating profit of $2.3 billion increased 15%, and resulted in an operating margin of 27.9%, representing an increase of 440 basis points or 350 basis points when excluding cost pass-through. This profit growth was achieved from a combination of higher pricing, fixed payment contracts to mitigate volume decline and a stable cost structure. Every region achieved triple-digit basis point margin increases when excluding cost pass-through effects.
EPS of $3.57, rose 15% from prior year or 16% when excluding the effects of currency. As Sanjiv mentioned, we remain confident in our ability to deliver an average EPS growth rate of double-digit percent. Project capex is increasing from a larger sale of gas backlog, a trend I expect to continue. However, despite the higher capex, return on capital reached another new high at 24.9% as our NOPAT continues to grow at a rate faster than the capital base.
Slide 5 provides more color on capital management, including cash trends. Second quarter operating cash flow of $2.2 billion was only up 1% from last year despite the higher earnings. This is due to unfavorable cash tax timing, which increased almost $300 million in the quarter. These outflows will stabilize for the second half, and so I expect the OCF to EBITDA ratio for the balance of the year to be closer to the expected low 80% range.
Available operating cash flow, which we define as OCF less base capex remained steady at $1.6 billion per quarter, and thus provides ample liquidity to pursue our capital allocation policy, which you can see in the pie chart. Through six months, we generated $5.4 billion of capital and returned a little more than half to shareholders while investing the balance back into the business. We believe this is a healthy ratio to achieve quality growth while rewarding owners. And to be clear, we are not capital constrained in any way, and thus, we'll pursue all growth investments, which meet our criteria.
I'll wrap up with guidance on Slide 6. We're raising full year guidance to a new range of $13.80 to $14.00, or 12% to 14% growth over 2022. This represents an increase of $0.35 on the bottom end and $0.15 on the top end. The top end increase is primarily attributed to the better Q2 results, while the second half assumption is consistent with last quarter. Therefore, the $14 figure assumes no economic improvement for the remainder of the year. The bottom end increased more as we tightened the range from greater confidence in the year. By default, the bottom end assumes economic contractions and more negative volumes going forward. Consistent with prior guidance, this does not represent our economic view, but rather is the baseline for the assumption. Irrespective of what happens, we'll manage the business accordingly.
For the third quarter, we're providing an EPS guidance range of $3.48 to $3.58, up 12% to 15% versus prior year. Consistent with the full year assumption, the top end assumes a flat economy and below that implies more recessionary conditions. Note that FX is a 2% tailwind for the third quarter but has no impact to the full year.
To sum it up, regardless of the economic rhetoric or latest opinion on what part of the cycle we're in, Linde employees will continue to do what they do best, efficiently run the world's leading industrial gas and engineering company, while creating long-term compounding shareholder value.
I'll now turn the call over to Q&A.
