Q2 FY21 (comparisons versus prior year):
- GAAP EPS of $2.13, down four percent; GAAP net income of $477 million, down three percent; and GAAP net income margin of 19.1 percent, down 300 basis points. These results include an estimated $0.10-$0.15 per share negative impact from COVID-19.
- Adjusted EPS* of $2.08, up two percent; adjusted EBITDA margin* of 37.3 percent, down 300 basis points. These results include an estimated $0.10-$0.15 per share negative impact from COVID-19.
Q2 FY21 Highlights
- Delivered base business excellence: Brought onstream sixth air separation unit in Chandler, Arizona and first cryogenic nitrogen plant in the Bayan Lepas Free Industrial Zone, Penang, Northern Malaysia to increase capacity to serve fast-growing electronics and other end-market demand
- Extended gasification leadership: Acquired remaining 50 percent equity stake in gasification technology joint venture from China Shenhua Coal to Liquid and Chemical Co. Ltd.
- Advanced the energy transition: Inaugurated state-of-the-art hydrogen fueling station for Ulsan City, South Korea, one of the three pilot cities in the country's hydrogen economy roadmap; hosted multi-city U.S. tours to demonstrate the benefits of fuel cell electric buses powered with Air Products’ hydrogen
- Continued sustainability commitments and growth: Signed long-term, virtual power purchase agreement in Poland; named Top Climate-Aligned Company on Barron’s 2021 Ranking of the Most Sustainable Companies in America
Major Project Updates
- Lu'An: Customer has requested start-up of the facility; commissioning is underway following the extended downtime
- Jazan: In final stages of project financing; barring unforeseen circumstances, expect to close during this fiscal year
- Fiscal 2021 full-year adjusted EPS guidance* of $8.95 to $9.10, up seven to nine percent over prior year adjusted EPS*; fiscal 2021 third quarter adjusted EPS guidance* of $2.30 to $2.40, up 14 to 19 percent over prior year third quarter adjusted EPS*. This guidance does not include the Jazan transaction or the expected restart of the Lu’An facility.
- Expect fiscal year 2021 capital expenditures* of approximately $2.5 billion. This guidance does not include the Jazan transaction.
#Earnings per share is calculated and presented on a diluted basis from continuing operations and attributable to Air Products.
*Certain results in this release, including in the highlights above, include references to non-GAAP financial measures on a consolidated, continuing operations basis 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 second quarter fiscal 2021 GAAP EPS from continuing operations of $2.13, down four percent; GAAP net income of $477 million, down three percent; and GAAP net income margin of 19.1 percent, down 300 basis points, each versus prior year. These results include an estimated $0.10 to $0.15 per share negative impact from COVID-19.
On a non-GAAP basis, adjusted EPS from continuing operations of $2.08 was up two percent; adjusted EBITDA* of $934 million was up five percent; and adjusted EBITDA margin of 37.3 percent was down 300 basis points, each versus prior year. These results include an estimated $0.10 to $0.15 per share negative impact from COVID-19. Non-GAAP adjusted EPS excludes a $0.12 gain on an exchange with a joint venture partner, partially offset by an $0.08 negative impact from a facility closure.
Second quarter sales of $2.5 billion increased thirteen percent due to seven percent higher energy cost pass-through, four percent favorable currency, and two percent higher pricing. Volumes were flat, as new plants, acquisitions and increased sale-of-equipment activities were offset by reduced contributions from the Lu'An gasification project in Asia ("Lu'An"), lower merchant demand from COVID-19, and the severe Winter Storm Uri that affected the U.S. Gulf Coast.
Commenting on the results, Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi said, "Despite ongoing challenges from COVID-19 globally and the severe winter storm in the U.S. Gulf Coast during the quarter, our talented, committed and dedicated team continued to work tirelessly, supporting our customers and successfully executing our megaprojects. Adjusted EPS improved over the prior year, we continued to improve pricing, and we again generated strong cash flow. Meanwhile, Air Products continues to lead with world-scale energy transition projects in gasification, carbon capture and carbon-free hydrogen."
Fiscal Second Quarter Results by Business Segment
- Industrial Gases - Americas sales of $1,056 million were up 13 percent over the prior year. Fifteen percent higher energy cost pass through, primarily driven by the winter storm; three percent higher pricing; and one percent favorable currency were partially offset by six percent lower volumes, primarily due to the impact of COVID-19 and the winter storm. Operating income of $263 million decreased two percent, due to lower volumes, partially offset by higher pricing. Operating margin of 24.9 percent decreased 380 basis points, driven by the higher energy cost pass-through, which negatively impacted margin by about 430 basis points. Adjusted EBITDA of $449 million increased six percent, as higher pricing, the acquisition of hydrogen assets and higher equity affiliates' income more than offset the lower volumes. Adjusted EBITDA margin of 42.5 percent decreased 310 basis points, driven by the higher energy cost pass-through, which negatively impacted margin by about 650 basis points.
Sequentially, sales increased 13 percent on 10 percent higher energy cost pass-through, two percent higher volumes, and one percent higher pricing.
- Industrial Gases - EMEA sales of $585 million increased 19 percent over the prior year on nine percent favorable currency; five percent higher volumes, driven primarily by acquisitions and higher onsite volumes, but partially offset by lower demand from COVID-19; three percent higher energy cost pass-through; and two percent higher pricing. Operating income of $140 million increased 12 percent, primarily due to higher pricing, higher volumes and favorable currency. Operating margin of 23.9 percent decreased 140 basis points. Adjusted EBITDA of $218 million increased 17 percent, primarily due to higher pricing and volumes, favorable currency, and equity affiliates' income. Adjusted EBITDA margin of 37.2 percent decreased 50 basis points.
Sequentially, sales increased four percent, as two percent favorable currency, two percent higher energy cost pass-through, and one percent higher pricing more than offset one percent lower volumes.
- Industrial Gases - Asia sales of $698 million increased six percent from the prior year on seven percent favorable currency and one percent higher pricing, partially offset by two percent lower volumes. Higher merchant volumes and new plants partially offset reduced contributions from Lu'An. Operating income of $199 million decreased five percent and operating margin of 28.5 percent decreased 330 basis points, both primarily due to reduced contributions from Lu'An. Adjusted EBITDA of $324 million decreased one percent and adjusted EBITDA margin of 46.4 percent decreased 330 basis points, both primarily due to Lu'An.
Sequentially, sales decreased three percent, as one percent favorable currency was more than offset by four percent lower volumes, primarily due to the Lunar New Year impact.
Air Products expects full-year fiscal 2021 adjusted EPS guidance of $8.95 to $9.10, up seven to nine percent over prior year adjusted EPS. For the fiscal 2021 third quarter, Air Products' adjusted EPS guidance is $2.30 to $2.40, up 14 to 19 percent over fiscal 2020 third quarter adjusted EPS. This guidance does not include the Jazan transaction or the expected restart of the Lu’An facility.
Air Products expects capital expenditures of approximately $2.5 billion for full-year fiscal 2021. This guidance does not include the Jazan transaction.
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.
Access the Q2 earnings teleconference scheduled for 8:30 a.m. Eastern Time on May 10, 2021 by calling 323-794-2093 and entering passcode 6765127 or access the Event Details page on Air Products’ Investor Relations website.