Air Products Reports Fiscal 2018 Full-Year GAAP EPS of $6.59, Up 28 Percent, and Record Adjusted Full-Year EPS of $7.45*, Up 18 Percent

Fiscal 2018 (all from continuing operations; comparisons versus prior year):

• GAAP EPS of $6.59, up 28 percent
• Record adjusted EPS of $7.45*, up 18 percent
• Record adjusted EBITDA margin of 34.9 percent*, up 70 basis points

Q4 FY18 (all from continuing operations; comparisons versus prior year):

• GAAP EPS of $2.05, down five percent
• Record adjusted EPS of $2.00*, up 14 percent
• Adjusted EBITDA margin of 35.8 percent*, up 90 basis points

Fiscal 2018 Highlights

• Executed on gasification strategy: acquired gasification technologies; brought Lu'An onstream; announced Jazan, Yankuang and Juitai projects
• Successfully executed complex megaprojects around the world and won major new projects in India, Saudi Arabia, Korea, China and the U.S. Gulf Coast
• Expanded company's core engineering and technology capabilities in Saudi Arabia, India and China
• Increased dividend 16 percent to $4.40 per share annually, the 36th consecutive year of increases

Guidance

• 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 first quarter adjusted EPS guidance of $1.85 to $1.90 per share*, up five percent* at midpoint over fiscal 2018 first quarter.
•  Expected 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. 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 $1.5 billion and GAAP diluted EPS from continuing operations of $6.59, both up 28 percent, for its fiscal year ended September 30, 2018.

For the year, on a non-GAAP basis, record adjusted diluted EPS from continuing operations of $7.45 was up 18 percent, the fourth consecutive year of double-digit annual growth.

Full-year sales of $8.9 billion increased nine percent on six percent higher volumes, one percent higher pricing and two percent favorable currency. Volumes were higher across all three regions, partially offset by lower activity from the Jazan project; excluding Jazan, volumes for the year were up 10 percent. The higher pricing was driven by the China and Europe merchant businesses.

Adjusted EBITDA of $3.1 billion for the year increased 11 percent, led by strong volume growth, positive pricing, currency and equity affiliate income, partially offset by higher costs. Record adjusted EBITDA margin of 34.9 percent for the year increased 70 basis points.

Fourth Quarter Results (Q4 FY18)

Air Products reported GAAP net income from continuing operations of $453 million and GAAP diluted EPS from continuing operations of $2.05 for its fiscal fourth quarter ended September 30, 2018. These results include a net $0.05 EPS benefit from tax reform items, a pension settlement, and a change in an inventory accounting policy resulting in a valuation change.

For the quarter, on a non-GAAP basis, adjusted net income from continuing operations of $442 million and record diluted adjusted EPS from continuing operations of $2.00 both increased 14 percent over the prior year.

Fourth quarter sales of $2.3 billion increased four percent from the prior year on three percent higher volumes, one percent higher pricing and one percent favorable energy pass-through, partially offset by one percent unfavorable currency. Volumes were higher in the Americas and Asia, partially offset by lower activity from the Jazan project; excluding Jazan, volumes were up six percent. Pricing increased one percent, driven primarily by the China merchant business.

For the quarter, adjusted EBITDA of $822 million increased seven percent over the prior year, driven by the higher volumes and higher equity affiliate income, partially offset by higher costs. Adjusted EBITDA margin of 35.8 percent increased 90 basis points over the prior year.

Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, "The talented and focused team at Air Products has again delivered the strongest safety and financial performance in the industry, all while successfully executing some of the largest and most complex industrial gas projects in the world. Our significant cash generation and strong balance sheet enabled us to invest in new projects while returning nearly $900 million to our shareholders this year via dividends. From this position of strength, we continue to execute on our gasification strategy and win profitable projects, enabling us to commit significant capital to grow Air Products."

Fourth Quarter Results by Business Segment

• Industrial Gases – Americas sales of $987 million increased four percent over prior year, with four percent higher volumes and one percent higher pricing, partially offset by one percent unfavorable currency. Hydrogen demand remained strong, and merchant gases volumes were positive. Adjusted EBITDA of $398 million decreased one percent from the prior year, as the improved volumes and pricing as well as higher equity affiliate income were offset by increased costs.

• Industrial Gases – EMEA sales of $555 million increased eight percent over prior year, driven primarily by seven percent favorable energy pass-through, mainly due to a significant increase in natural gas prices in India. Positive volumes contributed two percent and pricing added one percent, partially offset by unfavorable currency of two percent. Adjusted EBITDA of $174 million decreased five percent from the prior year. Adjusted EBITDA margin of 31.4 percent decreased 410 basis points; excluding the impact of higher energy pass-through, adjusted EBITDA margin was down 180 basis points, primarily due to higher power costs.

• Industrial Gases – Asia sales of $633 million increased 15 percent over prior year, driven by strong volumes and higher pricing. Volumes increased 14 percent, with new projects, primarily Lu'An, driving about 10 percent of the increase. Pricing increased three percent, mainly due to China merchant pricing. Adjusted EBITDA of $271 million increased 21 percent and adjusted EBITDA margin of 42.8 percent was up 210 basis points over prior year on the strong volumes and higher pricing.

Outlook

Ghasemi said, "With our safety, productivity and operating performance as the foundation, I remain very confident in our ability to deliver on our commitments. We continue to deploy capital into value-creating projects in our industrial gas business; in fact, we have already committed over $7 billion. While we cannot predict or control political or economic developments, we do have control over the operational performance and growth of Air Products. Our fiscal 2019 guidance demonstrates our commitment to delivering at least 10 percent annual EPS growth over the long term. Our strategic Five-Point Plan is the roadmap for driving safety, inclusion, profitability and sustainability as we grow."

Air Products expects 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 first quarter, Air Products expects adjusted EPS of $1.85 to 1.90 per share, up five percent at midpoint over the fiscal 2018 first quarter.

The capital expenditure forecast for fiscal year 2019 is expected to be in the range of $2.3 to $2.5 billion.

Management has provided adjusted EPS and adjusted tax rate guidance 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. Accordingly, management is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS or the impact of the adjusted tax rate to a comparable GAAP range.

Earnings Teleconference
Access the Q4 earnings teleconference scheduled for 10:00 a.m. Eastern Time on November 6 by calling 323-994-2093 and entering passcode 7681063, or access the Event Details page on Air Products’ Investor Relations web site.

View entire earnings release with all financial tables.