Lehigh Valley Pennsylvania

Air Products Reports Fiscal 2015 Third Quarter EPS Up 13 Percent*

  • EPS of $1.65*, up 13 percent* versus prior year on a non-GAAP diluted basis despite significant currency headwinds
  • Adjusted EBITDA margin of 30.7* percent up 430* basis points versus prior year
  • Accelerating benefits from restructuring, enabled by the new organization
  • Awarded major gases supply contract for new semiconductor giga fab in South Korea
  • EPS of $1.47 versus prior year of $1.46 on a GAAP diluted basis

Air Products (NYSE: APD) today reported net income of $359 million*, up 14 percent* versus prior year, and diluted earnings per share (EPS) of $1.65*, up 13 percent* versus prior year for its fiscal third quarter ended June 30, 2015. 

On a GAAP basis, net income and diluted EPS from continuing operations were $319 million and $1.47, respectively, for the quarter. 

*The results and guidance in this release, unless otherwise indicated, are based on non-GAAP continuing operations. A reconciliation of GAAP to non-GAAP results can be found at the end of this release. 

Third quarter sales of $2,470 million decreased six percent versus prior year, as underlying sales growth of four percent was offset by unfavorable currency and lower energy pass-through. Volumes increased three percent, primarily in Industrial Gases–Asia, Materials Technologies and the LNG business, and pricing was up one percent. 

Operating income of $482 million increased 17 percent versus prior year, and operating margin of 19.5 percent improved 380 basis points, driven by cost performance, higher pricing and higher volumes. Adjusted EBITDA of $758 million increased nine percent over prior year, and EBITDA margin of 30.7 percent improved 430 basis points, reflecting strong operating leverage. 

Commenting on the quarter, Seifi Ghasemi, chairman, president and chief executive officer, said, “The Air Products team delivered another quarter of great results, with particular strength in our regional Industrial Gases segments, while Materials Technologies continued to improve. We again showed strong improvement in safety, and despite significant currency headwinds and stagnant economic conditions around the globe, our earnings per share were up by 13 percent, EBITDA margins increased to more than 30 percent, and this quarter’s operating margin is the highest in more than 25 years. This significant improvement is a direct result of our people executing our five-point strategy. As a result, we have again increased our full year guidance to $6.50 - $6.60, which at midpoint is up 13% over last year.”

Third Quarter Results by Business Segment:

  • Industrial Gases – Americas sales of $898 million decreased 16 percent versus prior year on 13 percent lower energy pass-through and three percent unfavorable currency. Underlying sales were flat, as higher pricing offset lower volumes. Operating income of $207 million increased nine percent. Operating margin of 23 percent improved 520 basis points over prior year, driven by cost performance, lower energy pass-through, and higher pricing. Adjusted EBITDA of $328 million increased six percent, and EBITDA margin of 36.5 percent improved 740 basis points over prior year. Sequentially, operating income increased 13 percent on higher volumes and price and lower costs. 
  • Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $455 million declined 15 percent versus last year, driven by 16 percent unfavorable currency. Volumes and pricing were both up one percent. Operating income of $88 million increased two percent as strong cost performance was largely offset by unfavorable currency, while record operating margin of 19.2 percent increased 330 basis points. Adjusted EBITDA of $147 million decreased five percent versus prior year, and record EBITDA margin of 32.2 percent increased 350 basis points.
  • Industrial Gases – Asia sales of $418 million increased 14 percent versus prior year, primarily on 11 percent volume growth mainly from new plants. Unfavorable currency impacts reduced sales by three percent. Operating income of $101 million increased 20 percent, and operating margin of 24.2 percent improved 130 basis points over prior year due to higher volumes from the new plants and strong cost performance overcoming negative pricing. Adjusted EBITDA of $166 million increased 12 percent. Sequentially, operating income increased 19 percent on strong cost performance and higher seasonal volumes. 
  • Materials Technologies sales of $540 million increased three percent over the prior year. Underlying sales were up seven percent on four percent higher volume growth and three percent positive pricing, partially offset by unfavorable currency of four percent. On a constant currency basis, Electronics Materials sales were up 18 percent on strong volume growth and positive price. On a constant currency basis, Performance Materials sales declined two percent from the prior year on softer volumes. Record operating income of $132 million increased 36 percent, and record operating margin of 24.4 percent improved 600 basis points versus prior year, primarily due to higher pricing and volumes. Record adjusted EBITDA of $155 million increased 27 percent, and record EBITDA margin of 28.6 percent improved 540 basis points over prior year.

Non-GAAP results for the company exclude a pre-tax charge of $59.8 million, or $0.18 per share, for business restructuring and pension settlement.

Outlook

Looking ahead, Air Products expects fourth quarter EPS from continuing operations to be between $1.75 and $1.85 per share. For the full fiscal year, the Company is raising its guidance from continuing operations to $6.50 to $6.60 per share, which at the midpoint, represents a 13 percent increase over fiscal 2014.

Subsequent Event

Earlier in July, Air Products acquired 30.5 percent of the outstanding shares of Indura−an industrial gas business in Latin America−increasing its ownership position to 97.8 percent. The valuation was agreed at the time of initial purchase in 2012 and will be a use of cash of $278 million in the company’s fiscal fourth quarter.

Access the Q3 earnings teleconference scheduled for 10:00 a.m. Eastern Time on July 30 by calling 888-500-6954 (domestic) or 719-457-2715 (international) and entering passcode 1083893, or access the Event Details page on Air Products’ Investor Relations web site. 

View entire earnings release with all financial tables.