Q1 FY20 (comparisons versus prior year):
- GAAP EPS of $2.14, up 36 percent; GAAP net income of $489 million, up 37 percent; and GAAP net income margin of 21.7 percent, up 570 basis points
- Adjusted EPS* of $2.14, up 15 percent; adjusted EBITDA margin* of 40.3 percent, up 460 basis points
Q1 FY20 Highlights
- Announced 18-cent, or more than 15 percent, dividend increase, marking 38 consecutive years of dividend increases
- Announced largest-ever U.S. investment of $500 million and long-term contract to supply Gulf Coast Ammonia’s world-scale Texas facility and extend Air Products' U.S. Gulf Coast hydrogen pipeline network
- Maintaining fiscal 2020 full-year adjusted EPS guidance* of $9.35 to $9.60 per share, up 14 to 17 percent over prior year adjusted EPS*; fiscal 2020 second quarter adjusted EPS guidance* of $2.10 to $2.20 per share, up nine to 15 percent over fiscal 2019 second quarter adjusted EPS*
- Continue to expect fiscal year 2020 capital expenditures* of approximately $4 billion to $4.5 billion
#Earnings per share is from continuing operations and attributable to Air Products.
*The identified results and guidance in this release, including in the highlights above, include references to non-GAAP financial measures on both a consolidated and a segment basis. Additional information regarding these measures and a reconciliation of GAAP to non-GAAP historical results can be found below. In addition, as discussed below, it is not possible, without unreasonable efforts, to identify the timing or occurrence of events and transactions that could significantly impact future GAAP EPS or cash flow used for investing activities if they were to occur.
Air Products (NYSE:APD) today reported first quarter fiscal 2020 results, including GAAP diluted EPS from continuing operations of $2.14, up 36 percent; GAAP net income of $489 million, up 37 percent, primarily driven by higher pricing and volumes in all three regions as well as prior year costs related to tax reform adjustments and a facility closure; and GAAP net income margin of 21.7 percent, up 570 basis points, each versus prior year.
For the quarter, on a non-GAAP basis, adjusted diluted EPS from continuing operations of $2.14 was up 15 percent; adjusted EBITDA of $908 million was up 14 percent, primarily driven by higher pricing and volumes in all three regions; and adjusted EBITDA margin of 40.3 percent was up 460 basis points, each versus prior year.
First quarter sales of $2.3 billion increased one percent versus prior year on six percent volume growth and three percent higher pricing, partially offset by five percent lower energy pass-through; one percent unfavorable currency; and two percent from a contract modification to a tolling agreement in India, which impacts sales but not profits. Volume growth was primarily driven by base business growth, new plants, acquisitions and a short-term contract in Asia.
Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, “I want to thank our talented Air Products team for delivering another set of strong results for the quarter. Our excellent financial position allows us to invest capital strategically, and this quarter we announced our largest-ever U.S. investment to supply Gulf Coast Ammonia in Texas. Meanwhile, we continue to return cash to our shareholders, announcing an 18-cent, or more than 15 percent, dividend increase that marks our 38th consecutive year of dividend increases.”
Fiscal First Quarter Results by Business Segment
(comparisons versus prior year)
- Industrial Gases - Americas sales of $936 million decreased five percent, as three percent higher pricing and one percent higher volumes were more than offset by eight percent lower energy pass-through and one percent unfavorable currency. Operating income of $257 million increased 17 percent, primarily driven by higher pricing, and operating margin of 27.5 percent increased 530 basis points. Adjusted EBITDA of $410 million increased 11 percent, primarily driven by higher pricing, and adjusted EBITDA margin of 43.8 percent increased 670 basis points.
- Industrial Gases - EMEA sales of $499 million decreased five percent. Volumes increased six percent and higher pricing contributed three percent. These results were more than offset by four percent lower energy pass-through, two percent unfavorable currency, and an eight percent decrease from the India contract modification. Operating income of $121 million increased 14 percent, primarily driven by higher pricing, and operating margin of 24.2 percent increased 410 basis points. Adjusted EBITDA of $188 million increased 14 percent, primarily driven by higher pricing, and adjusted EBITDA margin of 37.7 percent increased 610 basis points.
- Industrial Gases - Asia sales of $693 million increased 11 percent. Volumes increased nine percent, driven by new plants, base business growth and a short-term contract. Pricing increased four percent, while currency had a negative two percent impact. Operating income of $229 million increased 13 percent on improved volumes and pricing, and operating margin of 33.0 percent increased 80 basis points. Adjusted EBITDA of $347 million increased 16 percent on improved volumes and pricing, and adjusted EBITDA margin of 50.1 percent increased 260 basis points.
Ghasemi said, “The Air Products team remains focused on productivity, creating our own growth opportunities and delivering shareholder value. As we look ahead, we see significant opportunities to provide sustainable solutions for the world to meet its energy and productivity needs, and we are working hard to be at the heart of those opportunities.”
Air Products is maintaining full-year fiscal 2020 adjusted EPS guidance of $9.35 to $9.60 per share, up 14 to 17 percent over prior year. For the fiscal 2020 second quarter, Air Products' adjusted EPS guidance is $2.10 to $2.20 per share, up nine to 15 percent over fiscal 2019 second quarter adjusted EPS.
Air Products continues to expect capital expenditures of approximately $4 billion to $4.5 billion for full-year fiscal 2020.
Management has provided adjusted EPS guidance on a continuing operations basis, which excludes the impact of certain items that we believe are not representative of our underlying business performance, such as the incurrence of additional costs for cost reduction actions and impairment charges, or the recognition of gains or losses on disclosed items. It is not possible, without unreasonable efforts, to predict the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS or the effective tax rate. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on our future GAAP EPS. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS and effective tax rate to a comparable GAAP range.
New Accounting Guidance
Effective October 1, 2019, Air Products adopted accounting standards pertaining to leases and hedging activities. In accordance with the new lease guidance, we recorded lease liabilities and right-of-use assets on our consolidated balance sheets for operating leases where we are the lessee. In adopting the new hedging guidance, we presented the impacts of excluded components from our cash flow hedges on intercompany loans in other non-operating income (expense), net. In the prior year, these impacts were included in interest expense. The adoption of these accounting standards did not have a significant impact on the Company’s net income.
Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 24, 2020 by calling 323-994-2093 and entering passcode 5494582, or access the Event Details page on Air Products’ Investor Relations web site.
View entire earnings release with all financial tables.