January 25, 2019 Lehigh Valley, Pa.
Q1 FY19 (all from continuing operations; comparisons versus prior year):
- GAAP EPS of $1.57, up 124 percent; GAAP net income of $348 million
- Adjusted EPS of $1.86*, up four percent; adjusted EPS up nine percent excluding the impact of a plant sale in the prior-year quarter
- Adjusted EBITDA margin of 35.7 percent*, up 250 basis points
Q1 FY19 Highlights
- Lu'An gasification project continues to drive sales and profit growth
- Investments around the world, including second liquid hydrogen plant in California, new air separation unit (ASU) in Minnesota, ASU plant onstream in India, and helium investments in Algeria
- Awarded sixth on-site nitrogen facility in Tianjin, China to supply major electronic components manufacturer’s new production line
- 37th consecutive year of dividend increase, with $1 billion expected to be paid to shareholders in 2019
- Maintaining fiscal 2019 full-year adjusted EPS guidance of $8.05 to $8.30* per share, up 10 percent* at midpoint over prior year; fiscal 2019 second quarter adjusted EPS guidance of $1.80 to $1.90 per share*, up eight percent* at midpoint over fiscal 2018 second quarter
- Continue to expect fiscal year 2019 capital spending of $2.3 to $2.5 billion
*The results and guidance in this release, including in the highlights above, include references to non-GAAP continuing operations measures and are identified by the word “adjusted” preceding the measure. A reconciliation of GAAP to non-GAAP results can be found below.
Air Products (NYSE:APD) reported GAAP net income from continuing operations of $348 million and GAAP diluted EPS from continuing operations of $1.57 for its fiscal first quarter ended December 31, 2018. These results include a net $0.29 EPS charge from non-GAAP items.
On a non-GAAP basis, quarterly adjusted net income from continuing operations of $410 million and diluted adjusted EPS from continuing operations of $1.86 both increased four percent over the prior year. Excluding the impact of a plant sale in the prior year, diluted adjusted EPS from continuing operations increased nine percent.
First quarter sales of $2.2 billion were flat with the prior year, as one percent higher pricing and five percent higher energy pass-through were offset by three percent lower volumes and two percent unfavorable currency. In addition, a modification to an existing contract in India reduced sales by one percent but had no impact on profits. Excluding the prior-year plant sale, the India contract modification, and the Jazan project, sales were up nine percent. Excluding Jazan and the plant sale, volumes grew five percent, driven by positive base volumes in all three regions and the full onstream of the Lu'An gasification facility in Asia. Pricing improved in all three regions.
Adjusted EBITDA of $795 million increased eight percent over the prior year, driven by the higher volumes, positive pricing and higher equity affiliate income, partially offset by higher costs and unfavorable currency. Excluding the prior-year plant sale, adjusted EBITDA increased 12 percent. Adjusted EBITDA margin of 35.7 percent increased 250 basis points over the prior year.
Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, "Delivering our 19th consecutive quarter of adjusted EPS growth, Air Products colleagues are executing against our Five-Point Plan to sustain the lead and be the best performing industrial gas company in the world. On an underlying basis, we delivered nearly 10 percent adjusted EPS growth, despite a headwind from currency. I am very proud of the team's efforts to safely execute very large and complex projects while at the same time, continuing to serve and innovate for customers across dozens of industries. Meanwhile, with our very strong financial position and significant cash flow, we can continue to invest in value-creating projects to profitably grow the company while also continuing to return cash to our shareholders. With the dividend increase we announced yesterday, we expect to return about $4.64 per share, or about $1 billion in cash, to our shareholders over the next year," he added.
Air Products Q1FY19 Earnings Release – Tables
Reconciliation of Non-GAAP Measures, Consolidated Income Statements, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, Summary by Business Segments, Notes to Consolidated Financial Statements
Download PDF (420 KB)
First Quarter Results by Business Segment
- Industrial Gases – Americas sales of $989 million increased nine percent over prior year. Volumes and pricing each contributed two percent and higher energy pass-through added seven percent, partially offset by two percent unfavorable currency. New plants and merchant volumes were positive, partially offset by refinery customer planned maintenance outages. Adjusted EBITDA of $367 million increased four percent over the prior year, as the improved volumes and pricing, as well as higher equity affiliate income, were partially offset by increased costs. Adjusted EBITDA margin of 37.1 percent declined 180 basis points from the prior year; excluding the impact of higher energy pass-through, adjusted EBITDA margin was up 50 basis points.
- Industrial Gases – EMEA sales of $524 million increased two percent over prior year. Positive pricing contributed two percent, higher volumes contributed one percent, and higher energy pass-through added six percent, partially offset by four percent unfavorable currency and three percent from the India contract modification. Adjusted EBITDA of $166 million decreased one percent from prior year, as good business performance was offset by unfavorable currency. Adjusted EBITDA margin of 31.6 percent decreased 70 basis points; excluding the impact of higher energy pass-through, adjusted EBITDA margin was up 80 basis points.
- Industrial Gases – Asia sales of $627 million decreased three percent from prior year. Excluding the impact of the prior-year plant sale, sales increased 16 percent, with volumes up 17 percent, largely from the Lu'An gasification project. Pricing increased one percent, representing the seventh consecutive quarter of year-over-year improvement, and currency was negative three percent. Adjusted EBITDA of $298 million increased 21 percent, and adjusted EBITDA margin of 47.5 percent was up 920 basis points over prior year. Excluding the prior-year plant sale, adjusted EBITDA increased 33 percent and adjusted EBITDA margin was up 470 basis points on strong volumes and higher pricing, as well as productivity.
Ghasemi said, "We do not control events that impact economies around the world, but we do control the operational performance of Air Products. Therefore, we continue to feel confident that we will deliver on our previous adjusted EPS guidance for fiscal year 2019."
Air Products continues to expect full-year fiscal 2019 adjusted EPS of $8.05 to $8.30 per share, up 10 percent at midpoint over prior year. For the fiscal 2019 second quarter, Air Products expects adjusted EPS of $1.80 to 1.90 per share, up eight percent at midpoint over the fiscal 2018 second quarter.
Air Products continues to expect capital expenditures in the range of $2.3 to $2.5 billion for full-year fiscal 2019.
Effective October 1, 2018, Air Products adopted the new revenue recognition standard, which had no material impact on the company’s financial statements. Management has provided adjusted EPS on a continuing operations basis. While Air Products might have additional impacts from the U.S. Tax Cuts and Jobs Act adopted in late 2017, or incur additional costs for items such as cost reduction actions and pension settlements in future periods, it is not possible, without unreasonable efforts, to identify the amount or significance of these events or the potential for other transactions that may impact future GAAP EPS or the effective tax rate. Management does not believe these items to be representative of underlying business performance. Management is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS to a comparable GAAP range.
Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 25, 2019 by calling 323-994-2093 and entering passcode 1982379, or access the Event Details page on Air Products’ Investor Relations web site.
About Air Products
Air Products (NYSE:APD) is a world-leading Industrial Gases company in operation for over 75 years. The Company provides industrial gases and related equipment to dozens of industries, including refining, chemical, metals, electronics, manufacturing, and food and beverage. Air Products is also the world’s leading supplier of liquefied natural gas process technology and equipment.
The Company had fiscal 2018 sales of $8.9 billion from operations in 50 countries and has a current market capitalization of about $35 billion. Approximately 16,000 passionate, talented and committed employees from diverse backgrounds are driven by Air Products’ higher purpose to create innovative solutions that benefit the environment, enhance sustainability and address the challenges facing customers, communities, and the world. For more information, visit www.airproducts.com.
NOTE: This release contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance, business outlook and investment opportunities. These forward-looking statements are based on management’s expectations and assumptions as of the date of this release and are not guarantees of future performance. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation: changes in global or regional economic conditions, supply and demand dynamics in market segments we serve, or in the financial markets; risks associated with having extensive international operations, including political risks, risks associated with unanticipated government actions and risks of investing in developing markets; project delays, contract terminations or customer cancellations or postponement of projects and sales; future financial and operating performance of major customers and joint venture partners; our ability to develop, implement, and operate new technologies, or to execute the projects in our backlog; tariffs, economic sanctions and regulatory activities in jurisdictions in which we and our affiliates and joint ventures operate; the impact of environmental, tax or other legislation, as well as regulations affecting our business and related compliance requirements, including regulations related to global climate change; changes in tax rates and other changes in tax law; the timing, impact and other uncertainties relating to acquisitions and divestitures, including our ability to integrate acquisitions and separate divested businesses, respectively; risks relating to cybersecurity incidents, including risks from the interruption, failure or compromise of our information systems; catastrophic events, such as natural disasters, acts of war, or terrorism; the impact of price fluctuations in natural gas and disruptions in markets and the economy due to oil price volatility; costs and outcomes of legal or regulatory proceedings and investigations; asset impairments due to economic conditions or specific events; significant fluctuations in interest rates and foreign currency exchange rates from those currently anticipated; damage to facilities, pipelines or delivery systems, including those we own or operate for third parties; availability and cost of raw materials; the success of productivity and operational improvement programs; and other risk factors described in the Company’s Form 10-K for its fiscal year ended September 30, 2018. Except as required by law, the Company disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in the assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.