10-KPeriod: FY2002

Air Products & Chemicals, Inc. Annual Report, Year Ended Sep 30, 2002

Filed December 13, 2002For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) in its 2002 10-K filing demonstrates a diversified business model focused on industrial gases, chemicals, and equipment. The company's gas segment is a significant revenue driver, with substantial sales derived from oxygen, nitrogen, argon, and hydrogen supplied through on-site pipelines, liquid bulk, and packaged deliveries. The chemicals segment focuses on performance materials and intermediates, leveraging proprietary technology and scale. The equipment segment designs and manufactures critical industrial process equipment. While the filing highlights the company's global presence and ongoing technology development, it also acknowledges potential risks. These include economic conditions, competition, raw material and energy cost volatility (particularly natural gas and electricity), environmental regulations, and the success of acquisitions. The company's strategy involves long-term contracts for gas supply, which help mitigate some price volatility, and a focus on differentiated products in its chemical segment. Investors should note the company's commitment to dividends and its global operational footprint.

Key Highlights

  • 1Diversified revenue streams from Industrial Gases, Chemicals, and Equipment segments.
  • 2Significant portion of industrial gas sales derived from long-term 'on-site/pipeline' contracts, providing revenue stability.
  • 3Chemicals segment focuses on high-performance materials and intermediates, distinguishing itself through technology and service.
  • 4Global presence with operations and joint ventures in approximately 35 countries outside the U.S.
  • 5Investments in technology development across all segments, with $121 million spent in fiscal year 2002.
  • 6Acknowledges potential risks including economic downturns, competitive pressures, energy cost fluctuations, and environmental regulations.
  • 7Company intends to continue paying consistent cash dividends.

Frequently Asked Questions

The primary revenue drivers for Air Products and Chemicals, Inc. are its three main business segments: Industrial Gases, Chemicals, and Equipment. The Industrial Gases segment, which includes products like oxygen, nitrogen, argon, and hydrogen, is a major contributor, with significant sales coming from long-term 'on-site/pipeline' supply agreements to large industrial users.

The filing identifies several potential risks, including overall economic and business conditions, demand for its products, competitive factors, interruptions in supply, the ability to recover increased energy and raw material costs, spikes in natural gas pricing, changes in government regulations, and the consequences of acts of terrorism. Additionally, the success of cost reduction programs, acquisitions/divestitures, fluctuations in interest rates and foreign currencies, and tax legislation are also noted as potential risks.

For its industrial gas business, Air Products utilizes long-term contracts, particularly for 'on-site/pipeline' supply, which often include provisions for passing through increased energy and raw material costs to customers. However, the filing notes that electricity is a significant cost input, and price increases that cannot be passed on could adversely affect profitability in the liquid bulk gas business. The company also relies on multiple suppliers for most chemical intermediates, reducing dependence on any single source, except for vinyl acetate monomer used in its polymer business.

Air Products maintains a market-oriented approach to technology development, investing $121 million in fiscal year 2002. R&D efforts are focused on developing new and improved processes and equipment for gas production and delivery, creating new products, and identifying new applications for industrial gases, particularly for the electronics and chemical process industries. In the chemicals segment, R&D aims to strengthen positions in performance materials and polymers and improve manufacturing technology. A corporate research group also supports long-term growth areas.