10-KPeriod: FY2012

Air Products & Chemicals, Inc. Annual Report, Year Ended Sep 30, 2012

Filed November 20, 2012For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported a challenging fiscal year 2012, with sales down 1% to $9.6 billion and operating income down 15% to $1.28 billion (or down 1% excluding special items). This performance was impacted by a tougher-than-expected global economic environment, particularly in Europe, and a stronger U.S. dollar, which offset modest underlying volume growth and strategic acquisitions. Key strategic moves in 2012 included the sale of the Homecare business (completed in Europe) and significant acquisitions in Latin America (Indura S.A.) and Saudi Arabia (Abdullah Hashim Industrial Gases & Equipment Co. Ltd.). The company also took steps to restructure its Polyurethane Intermediates and Photovoltaic businesses to align with market conditions. Despite the economic headwinds, APD continued its commitment to shareholders by increasing its quarterly dividend for the 30th consecutive year and maintained substantial share repurchase authorization. Looking ahead to 2013, APD anticipated modest economic growth globally, with potential earnings improvement from new plant onstreams and the Indura S.A. acquisition, tempered by higher pension expenses and ongoing restructuring impacts.

Financial Highlights

56 data points
Beta

Revenue

$9.61B

26.6% Gross Margin

Net Income

$1.17B

12.1% Net Margin

EPS (Diluted)

$5.44

Total Assets

$16.94B

Cash & Equivalents

$454.40M

Free Cash Flow

$244.10M

Financial Statements
Beta
Revenue$9.61B
Cost of Revenue$7.05B
Gross Profit$2.56B
R&D Expenses$126.40M
SG&A Expenses$946.80M
Operating Income$1.28B
Interest Expense$123.70M
Net Income$1.17B
EPS (Basic)$5.53
EPS (Diluted)$5.44
Shares Outstanding (Basic)211.20M
Shares Outstanding (Diluted)214.70M

Key Highlights

  • 1Sales for fiscal year 2012 were $9.61 billion, a slight decrease of 1% from the prior year, impacted by currency headwinds and lower energy cost pass-through.
  • 2Operating income on a GAAP basis was $1.28 billion, down 15%, but on a non-GAAP basis (excluding restructuring charges and other items), it decreased only 1% to $1.53 billion, indicating operational resilience.
  • 3The company completed the sale of its European Homecare business in April 2012 and recorded a gain of $207.4 million.
  • 4Significant strategic acquisitions were made in Latin America (Indura S.A.) and Saudi Arabia (Abdullah Hashim Industrial Gases & Equipment Co. Ltd.) to bolster its global presence.
  • 5APD increased its quarterly dividend to $0.64 per share, marking the 30th consecutive annual dividend increase.
  • 6Capital expenditures increased significantly to $2.56 billion (GAAP basis) and $2.78 billion (non-GAAP basis), driven largely by the Indura S.A. acquisition and new plant construction.
  • 7The company incurred substantial business restructuring and cost reduction charges totaling $327.4 million in 2012, primarily related to its Polyurethane Intermediates, Electronics, and European Merchant businesses.

Frequently Asked Questions

The company's financial performance in fiscal year 2012 was primarily driven by a challenging global economic environment, which led to slower demand, particularly in Europe. A stronger U.S. dollar also negatively impacted reported sales and earnings. Strategic acquisitions, such as Indura S.A., and ongoing operational initiatives provided some offset.

In 2012, Air Products took several key strategic actions. They initiated the sale of their Homecare business, completing the divestiture of European operations. They also acquired a controlling stake in Indura S.A., the largest independent industrial gas company in South America, and invested in Saudi Arabia's largest industrial gas company. Additionally, they restructured underperforming businesses, including their Polyurethane Intermediates and Photovoltaic operations.

On a GAAP basis, operating income decreased by 15% to $1.28 billion, and income from continuing operations decreased by 12% to $999 million. However, when excluding significant charges like business restructuring ($327.4 million) and other specific items, the non-GAAP operating income decreased by only 1% to $1.53 billion, and non-GAAP income from continuing operations saw a 1% increase to $1.16 billion, highlighting the underlying operational performance.

Air Products anticipated a modest global economic growth of 2%-4% in 2013, with specific regional expectations for the U.S. (2%-4%), Europe (flat), Asia (3%-5%), and South America (2%-4%). The company expected higher earnings from new plant onstreams and the Indura S.A. acquisition, partially offset by increased pension expenses, unfavorable currency impacts, and ongoing restructuring costs. They remained focused on productivity and cost management.