Commenting on the results, Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi said, "The committed, motivated and talented people of Air Products once again delivered excellent results for the quarter. Pricing and volumes were up in every region. We generated significant free cash flow, and we continue to successfully execute our megaprojects to decarbonize the world. Based on this performance, we have again increased our guidance for the full year. I would like to thank our employees for their dedication and hard work.”
Fiscal 2023 Third Quarter Results by Business Segment
- Americas sales of $1.3 billion were down 11 percent versus the prior year, as six percent higher volumes and four percent higher pricing were more than offset by 21 percent lower energy cost pass-through. Operating income of $375 million increased 25 percent and adjusted EBITDA of $568 million increased 18 percent, in each case due to higher pricing and higher volumes, partially offset by higher costs. Operating margin of 29.7 percent increased 860 basis points and adjusted EBITDA margin of 45.0 percent increased 1,110 basis points, driven primarily by lower energy cost pass-through.
- Asia sales of $823 million increased 10 percent over the prior year, as eight percent higher volumes, four percent higher pricing and three percent higher energy cost pass-through more than offset five percent unfavorable currency. Operating income of $241 million increased 14 percent and adjusted EBITDA of $357 million increased 10 percent, in each case due to the favorable volumes and pricing, partially offset by unfavorable currency impacts and higher costs. Operating margin of 29.3 percent increased 130 basis points and adjusted EBITDA margin of 43.3 percent increased 20 basis points.
- Europe sales of $707 million decreased four percent from the prior year, as six percent higher pricing, two percent favorable currency and one percent higher volumes were more than offset by 13 percent lower energy cost pass-through. Operating income of $176 million increased 28 percent and adjusted EBITDA of $254 million increased 23 percent, in each case primarily driven by higher pricing and higher volumes, partially offset by higher costs. Operating margin of 24.9 percent increased 630 basis points and adjusted EBITDA margin of 35.9 percent increased 790 basis points, driven primarily by higher pricing and lower energy cost pass-through.
- Middle East and India equity affiliates' income of $96 million increased 42 percent compared to the prior year, primarily due to the second phase of the Jazan project, which was completed in January 2023.
- Corporate and other sales of $204 million decreased 17 percent compared to the prior year, driven by lower sale of equipment activity.
Air Products provides adjusted EPS guidance on a continuing operations basis, excluding the impact of certain items that management believes are not representative of the Company's underlying business performance, such as the incurrence of costs for cost reduction actions and impairment charges, or the recognition of gains or losses on certain 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. Similarly, it is not possible, without unreasonable efforts, to reconcile forecasted capital expenditures to future cash used for investing activities because management is not able to identify the timing or occurrence of future investment activity, which is driven by management's assessment of competing opportunities at the time the Company enters into transactions. 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 the Company's future GAAP results. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS or capital expenditures to a comparable GAAP range.
Air Products expects increased full-year fiscal 2023 adjusted EPS guidance of $11.40 to $11.50, up 11 to 12 percent over prior year adjusted EPS. For the fiscal 2023 fourth quarter, Air Products' adjusted EPS guidance is $3.04 to $3.14, up seven to 10 percent over fiscal 2022 fourth quarter adjusted EPS.
Effective beginning in the first quarter of fiscal year 2023, management reviews adjusted EPS excluding the impact of non-service related components of the net periodic benefit/cost for the Company's defined benefit pension plans. The projected percentage increase in adjusted EPS for full year fiscal 2023 and fiscal 2023 fourth quarter is calculated using recast fiscal 2022 results to provide a consistent basis for comparison. Refer to the reconciliations of GAAP to non-GAAP historical results below for additional information.
Air Products continues to expect capital expenditures of $5.0 billion to $5.5 billion for full-year fiscal 2023.
Access the fiscal 2023 third quarter earnings teleconference scheduled for 8:30 a.m. Eastern Time on August 3, 2023 by calling 323-994-2093 and entering passcode 3546489 or by accessing the Event Details page on Air Products’ Investor Relations website.