Q4 FY17 (all from continuing operations):
- GAAP EPS of $2.15, up 63 percent versus the prior year; GAAP net income of $474 million
- Adjusted EPS of 1.76*, up 18 percent versus prior year; previous adjusted guidance of $1.65 to $1.70
- Adjusted EBITDA margin of 34.9 percent*
Fiscal 2017 (all from continuing operations):
- GAAP EPS of $5.16, up two percent versus prior year; GAAP net income of $1.1 billion
- Adjusted EPS of $6.31*, up 12 percent versus prior year
- Adjusted EBITDA margin of 34.1 percent*
- Completed spin-off of Versum Materials and sale of Performance Materials business
- Brought major projects onstream, including large hydrogen plant for BPCL in India; large air separation unit (ASU) in Pyeongtaek City, South Korea; and large ASU for Yitai in China
- Made significant progress on the world's largest industrial gas complex in Jazan, Kingdom of Saudi Arabia (KSA)
- Signed agreement to form $1.3 billion joint venture for Lu'An coal-to-syngas project in China
- New project wins around the world for key customers in the electronics, manufacturing and chemical markets
- Fiscal 2018 adjusted EPS guidance of $6.85 to $7.05 per share, up nine to 12 percent over prior year; fiscal 2018 first quarter adjusted EPS guidance of $1.60 to $1.70 per share, up nine to 16 percent over the fiscal 2017 first quarter. This guidance excludes the Lu'An project and any other significant acquisitions.
*The results and guidance in this release, including in the highlights above, include references to non-GAAP continuing operations measures. These exclude discontinued operations 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) today reported GAAP net income from continuing operations of $474 million and GAAP diluted earnings per share (EPS) from continuing operations of $2.15, up 64 percent and 63 percent, respectively, from the prior year, for its fiscal fourth quarter ended September 30, 2017.
On a non-GAAP basis, quarterly adjusted diluted earnings per share from continuing operations of $1.76 showed very strong growth, up 18 percent versus prior year.
Fourth quarter sales of $2,203 million increased 13 percent from the prior year, on nine percent higher volumes, two percent higher pricing, and favorable energy pass-through and currency of one percent each. Volumes were higher in all three Industrial Gas regions.
For the quarter, adjusted EBITDA of $769 million increased 13 percent over the prior year on strong volume growth, higher pricing and productivity. Adjusted EBITDA margin of 34.9 percent increased 10 basis points from the prior year and was negatively impacted by 30 basis points from higher energy pass-through; excluding this impact, adjusted EBITDA margin increased 40 basis points.
For the year, Air Products reported GAAP net income from continuing operations of $1.1 billion and GAAP diluted EPS from continuing operations of $5.16, up three percent and two percent, respectively.
On a non-GAAP basis, adjusted diluted earnings per share from continuing operations of $6.31 was up 12 percent versus prior year, the third consecutive year of significant growth.
Sales of $8.2 billion increased nine percent over prior year, on six percent higher volumes, three percent higher energy pass-through and one percent higher pricing, partially offset by one percent unfavorable currency.
Adjusted EBITDA of $2.8 billion increased seven percent over the prior year, led by strong volume growth and productivity. Adjusted EBITDA margin of 34.1 percent decreased 80 basis points and was negatively impacted by 90 basis points from higher energy pass-through; excluding this impact, adjusted EBITDA margin was up 10 basis points.
Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, "The talented, committed and dedicated team at Air Products, our people, delivered an excellent set of results. For the fourth quarter of fiscal 2017, our adjusted EPS was up 18 percent versus the fourth quarter of fiscal 2016, and for fiscal 2017, adjusted EPS is 12 percent higher than last year. This is the fourteenth consecutive quarter that we have reported year-on-year adjusted EPS growth. This is also the third consecutive year that we have delivered adjusted EPS growth of more than 10 percent.
"We generated strong cash flow and returned about $800 million of that to our shareholders through dividends. We continue to be the safest and most profitable industrial gas company in the world, with adjusted EBITDA margin of over 34 percent. We have a great team that is totally focused on delivering strong performance, day in and day out. Ultimately, our success is built on providing excellent service to our customers. We are committed to providing them with the right innovations and solutions to make their processes better."
Fourth Quarter Results by Business Segment
- Industrial Gases – Americas sales of $953 million increased nine percent, primarily driven by seven percent higher volumes. Hydrogen demand was strong despite hurricane impacts on the Gulf Coast. Operating income of $266 million increased 19 percent. Adjusted EBITDA of $402 million increased 14 percent on higher volumes, lower maintenance costs and productivity actions. Adjusted EBITDA margin of 42.2 percent increased 220 basis points over the prior year. Higher energy pass-through negatively impacted adjusted EBITDA margin by 60 basis points; excluding energy pass-through, adjusted EBITDA margin increased 280 basis points.
- Industrial Gases – EMEA sales of $515 million increased 24 percent versus last year, driven by 18 percent higher volumes and five percent favorable currency. The higher volumes were primarily from a new hydrogen plant in India; merchant demand was also positive. Operating income of $119 million increased 21 percent. Adjusted EBITDA of $180 million increased 17 percent over the prior year, primarily from the India plant as well as higher merchant volumes, productivity and the positive currency impact. Adjusted EBITDA margin of 35.0 percent decreased 220 basis points from the prior year, driven by the India hydrogen plant. While this plant delivers strong returns, the significant energy pass-through is dilutive to margins.
- Industrial Gases – Asia sales of $552 million increased 23 percent over prior year, with volumes up 17 percent and pricing up six percent. Approximately two-thirds of this volume growth was from new plants, while the remaining third was from broad, base business growth. China merchant pricing drove the overall pricing improvement. Operating income of $152 million increased 38 percent. Adjusted EBITDA of $224 million increased 31 percent, and adjusted EBITDA margin of 40.6 percent increased 240 basis points on strong volumes and higher pricing.
Ghasemi said, “We continue to be optimistic about the future performance of Air Products and the opportunities we see in front of us. We have the strongest balance sheet in the industry, with over $8 billion available to invest over the next three years. We remain confident in our ability to create shareholder value by deploying this capital through acquisitions, asset buybacks and very large industrial gas projects around the world, driven by demand for more energy, cleaner energy and emerging market growth. We are committed to delivering excellent short-term and long-term performance by improving our adjusted EPS by 10 percent every year, as we have done in the past three years."
Air Products expects fiscal 2018 adjusted EPS of $6.85 to $7.05 per share, up nine to 12 percent over last year. For the fiscal 2018 first quarter, Air Products expects adjusted EPS from continuing operations of $1.60 to $1.70 per share, up nine to 16 percent over last year. This guidance excludes the Lu'An project and any other significant acquisitions.
The capital expenditure forecast for fiscal year 2018 is expected to be in the range of $1 to $1.2 billion on a GAAP and non-GAAP basis. This guidance excludes Lu'An and any other significant acquisitions.
Management has provided adjusted EPS guidance on a continuing operations basis. While Air Products might 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. Management does not believe these items to be representative of underlying business performance. Accordingly, management is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS to a comparable GAAP range.
Access the Q4 earnings teleconference scheduled for 10:00 a.m. Eastern Time on October 26 by calling (323) 794-2093 and entering passcode 9786557, or access the Event Details page on Air Products’ Investor Relations web site.
View entire earnings release with all financial tables.