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Air Products Reports Fiscal 2016 First Quarter EPS Up 15* Percent

  • Quarterly EPS of $1.78 up 15 percent versus prior year despite currency headwinds
  • Quarterly adjusted EBITDA margin of 33.4 percent up 520 basis points, and ROCE of 11.7 percent up 160 basis points versus prior year
  • GAAP quarterly EPS of $1.67 versus prior year of $1.50
  • Fiscal 2016 second quarter EPS guidance of $1.78 to $1.83, up 15 to 18 percent versus prior year
  • Maintaining fiscal full-year 2016 EPS guidance of $7.25 to $7.50, up 10 to 14 percent
  • On track for the spin-off of Versum Materials prior to September 2016

*The results and guidance in this release, including in the highlights above, 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.

Air Products (NYSE: APD) today reported net income of $387 million and earnings per share (EPS) of $1.78, both up 15 percent versus prior year for its fiscal first quarter ended December 31, 2015. 

On a GAAP basis, net income was $364 million and EPS was $1.67 for the quarter. 

First quarter sales of $2,356 million decreased eight percent from the prior year, as unfavorable currency and lower energy pass-through of five percent each more than offset volume and pricing increases of one percent each. 

Operating income of $519 million increased 17 percent versus prior year, and record operating margin of 22.0 percent improved 460 basis points. Adjusted EBITDA of $786 million increased nine percent over prior year, and record EBITDA margin of 33.4 percent improved 520 basis points. Profit improvement was driven by good cost performance and higher pricing.

Commenting on the quarter, Seifi Ghasemi, chairman, president and chief executive officer, said, “The Air Products teams around the world continue to execute our five-point plan and control what they can control, regardless of challenging economic conditions and currency headwinds. You can see their focus and commitment reflected in our very strong financial results, including EBITDA margin of 33.4 percent, up over 500 basis points, and return on capital employed of 11.7 percent, up 160 basis points.”

First Quarter Results by Business Segment

  • Industrial Gases – Americas sales of $836 million decreased 17 percent versus prior year, as lower energy pass-through reduced sales by 12 percent and currency reduced sales by four percent. Volumes decreased three percent on lower demand in Latin America and weaker North American steel and oilfield services markets. Pricing increased two percent. Operating income of $212 million was flat to last year, and adjusted EBITDA of $335 million increased one percent, as higher pricing, restructuring benefits, and lower maintenance costs were offset by headwinds from currency, lower energy pass-through, and lower volumes. Operating margin of 25.3 percent improved 420 basis points, and EBITDA margin of 40.1 percent improved 700 basis points over prior year.
  • Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $438 million declined 12 percent versus last year, primarily driven by 10 percent unfavorable currency. Underlying sales were unchanged, as one percent higher pricing was offset by one percent lower volumes. Operating income of $92 million increased 13 percent from the prior year. On a constant currency basis, operating income was up 22 percent. Operating margin of 20.9 percent increased 470 basis points, and EBITDA margin of 33.3 percent increased 480 basis points over the prior year. Adjusted EBITDA of $146 million increased two percent versus prior year. This profit improvement was driven primarily by the benefits of restructuring actions, as well as higher pricing. 
  • Industrial Gases – Asia sales of $413 million increased four percent versus prior year, as volume growth of 11 percent, driven by both strong underlying business and new plants, was partially offset by six percent unfavorable currency. Operating income of $117 million increased 29 percent, and operating margin of 28.2 percent improved 550 basis points over prior year. Adjusted EBITDA of $180 million increased 16 percent, and EBITDA margin of 43.6 percent increased 480 basis points. This profit improvement was due to higher volumes and strong cost performance.
  • Materials Technologies sales of $490 million decreased six percent versus the prior year as positive pricing and mix of two percent was more than offset by six percent lower volumes and two percent unfavorable currency. Operating income of $127 million was up 22 percent from prior year, and operating margin of 26 percent was up 600 basis points. Adjusted EBITDA was $147 million, and EBITDA margin of 30.0 percent was up 530 basis points.
    • Electronic Materials sales of $245 million declined four percent from the prior year, as higher pricing and mix was more than offset by lower volumes and unfavorable currency. Excluding delivery systems, volumes would have been flat. Operating margin was up over 1,000 basis points, driven by higher pricing and mix and the benefits of restructuring actions.
    • Performance Materials sales of $245 million decreased nine percent from the prior year on lower volumes, unfavorable currency and lower pricing. Operating margin was up slightly, driven by lower raw material costs and the benefits of restructuring actions. 

In the fiscal first quarter of 2016, non-GAAP results for the Company exclude $14 million, or $0.05 per share, for project suspension costs and $12 million, or $0.06 per share, in legal and advisory fees related to the intended separation of the Company’s Materials Technologies business.

Outlook

The capital expenditure forecast for fiscal year 2016 is approximately $1.3 billion. 

Air Products expects fiscal 2016 second quarter EPS from continuing operations to be between $1.78 and $1.83 per share, up 15 to 18 percent versus prior year. 

The Company is maintaining its full-year fiscal 2016 guidance of $7.25 to $7.50 earnings per share, which at midpoint, would be a 12 percent increase. 

Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 29 by calling 913-312-1411 and entering passcode 8688406, or access the Event Details page on Air Products’ Investor Relations web site. 

View entire earnings release with all financial tables.