10-KPeriod: FY2009

Air Products & Chemicals, Inc. Annual Report, Year Ended Sep 30, 2009

Filed November 25, 2009For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) faced a challenging fiscal year 2009, significantly impacted by the global financial crisis and subsequent recession, leading to a 21% decline in sales and a 43% drop in operating income. Despite these headwinds, the company implemented a substantial global cost reduction plan, including workforce reductions, to improve its cost structure. APD also completed the divestiture of its U.S. Healthcare business, demonstrating a focus on strategic portfolio management. The company maintained a solid financial position throughout the year, with its liquidity remaining stable. Key segments like Merchant Gases and Tonnage Gases experienced volume declines due to reduced industrial activity, while the Electronics and Performance Materials segment was particularly hit by the downturn in the semiconductor and flat panel industries. Looking ahead, APD anticipates a gradual economic recovery with modest growth projections for fiscal year 2010, driven by Asia, and plans to focus on volume growth, cost management, and new plant startups to drive future earnings.

Financial Highlights

56 data points
Beta

Revenue

$8.26B

26.8% Gross Margin

Net Income

$631.30M

7.6% Net Margin

EPS (Diluted)

$2.96

Total Assets

$13.03B

Cash & Equivalents

$488.20M

Free Cash Flow

$150.30M

Financial Statements
Beta
Revenue$8.26B
Cost of Revenue$6.04B
Gross Profit$2.21B
R&D Expenses$116.30M
SG&A Expenses$943.40M
Operating Income$846.30M
Interest Expense$121.90M
Net Income$631.30M
EPS (Basic)$3.01
EPS (Diluted)$2.96
Shares Outstanding (Basic)209.90M
Shares Outstanding (Diluted)213.50M

Key Highlights

  • 12009 sales decreased 21% to $8.3 billion, driven by global economic recession and unfavorable currency impacts.
  • 2Operating income fell 43% to $846.3 million due to lower volumes, cost reduction plan charges, and currency headwinds.
  • 3Implemented a global cost reduction plan, incurring $298.2 million in charges for workforce reductions and business exits, aimed at lowering the cost structure.
  • 4Completed the divestiture of the U.S. Healthcare business.
  • 5Maintained a solid financial position with stable liquidity, despite the challenging economic environment.
  • 6Experienced significant volume declines across key segments like Merchant Gases, Tonnage Gases, and Electronics, reflecting the broader economic downturn.
  • 7Projected a gradual economic recovery for 2010 with modest growth, particularly in Asia, and expected benefits from new plant startups and cost reduction initiatives.

Frequently Asked Questions

The global financial crisis and subsequent recession significantly impacted Air Products. Sales declined 21% to $8.3 billion, and operating income fell 43% to $846.3 million. This was primarily due to reduced demand across most end markets, leading to lower volumes, especially in manufacturing, electronics, and industrial gas consumption.

Air Products implemented a comprehensive global cost reduction plan, which included eliminating approximately 12% of its global workforce (around 2,550 positions), business exits, and asset management actions. These initiatives aimed to lower the company's cost structure and better align its operations with the contracting global economy. Additionally, the company completed the divestiture of its U.S. Healthcare business.

Air Products projected a continued gradual and modest economic recovery for fiscal year 2010, with anticipated global manufacturing growth of 1-2%. The company expected Asia, led by China, to be the strongest region. Management anticipated improved operating margins through volume growth, effective cost management, new plant startups, and the full-year impact of its cost reduction plan. However, pension expense was expected to increase due to lower discount rates.

All segments were affected by the economic downturn. Merchant Gases sales fell 14% due to weak manufacturing demand, Tonnage Gases sales decreased 28% due to lower demand from steel and chemical customers and reduced energy cost pass-through, and Electronics and Performance Materials sales dropped 28% primarily due to a severe downturn in the semiconductor and flat panel industries. Equipment and Energy saw a modest 12% increase in sales due to higher air separation unit activity.