01—Abstract
Summary
Summary of the 10-K filed November 16, 2017. Cited figures are marked; the original filing is the authoritative source.
Air Products & Chemicals, Inc. (APD) reported strong performance in its fiscal year 2017, demonstrating resilience through strategic divestitures and a focus on its core industrial gases business.
The company successfully completed the spin-off of its Electronic Materials business (Versum Materials, Inc.) and the sale of its Performance Materials business to Evonik Industries AG. These actions have streamlined operations, allowing APD to concentrate on growth opportunities within its Industrial Gases segments across the Americas, EMEA, and Asia. Sales increased by 9%a, driven by volume growth from new project on-streams and underlying business expansion, partially offset by lower LNG equipment sales.
Management highlighted improved adjusted EBITDA margins and a continued commitment to shareholder returns through a 10%b increase in its quarterly dividend, marking the 35th consecutive year of dividend increases. Despite facing some headwinds, such as a goodwill impairment charge in Latin America and currency fluctuations, APD's core industrial gas operations showed robust underlying volume growth.
The company's strategic focus on key growth markets, coupled with operational efficiencies and a strong balance sheet, positions it well for future expansion and value creation for its shareholders. Investors can look forward to continued investment in core business areas and potential strategic acquisitions.
02—Key points
Key Highlights
- Completed significant portfolio restructuring by spinning off Electronic Materials (Versum) and selling Performance Materials, sharpening focus on core industrial gases.
- Achieved a 9% increase in sales, reaching $8.2 billion, driven by strong underlying volume growth and new project contributions, particularly the Jazan project.
- Demonstrated consistent dividend growth, increasing the quarterly dividend by 10% to $0.95 per share, marking 35 consecutive years of dividend increases.
- Reported a 7% increase in Adjusted EBITDA to $2.8 billion, reflecting operational improvements and cost management, though Adjusted EBITDA margin saw a slight decrease due to energy cost pass-through impacts.
- Managed a goodwill impairment charge of $145.3 million related to its Latin America reporting unit due to weaker economic conditions in the region.
- Maintained a strong financial position with a significant increase in cash and cash items due to the sale of Performance Materials, improving liquidity and financial flexibility.
- Continued strategic investments in new plant construction and facility improvements, with capital expenditures on a GAAP basis totaling $1.06 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Air Products & Chemicals, Inc. kept $0.37.
- Revenue$8.19B100.0%
- Cost of revenue−$5.75B70.2%
- Gross profit$2.44B29.8%
- Operating costs−$996.1M12.2%
- Operating income$1.44B17.6%
- Interest, other & tax$1.56B19.1%
- Net income$3.00B36.6%
Where FY2017 revenue went
$8.19B- Cost of revenue: $5.75B, 70% of revenue
- Operating income: $1.44B, 18% of revenue
- R&D: $57.6M, 0.7% of revenue
- SG&A: $713.5M, 8.7% of revenue
- Other operating costs: $225.0M, 2.7% of revenue
Kept 18% as operating incomeR&D $57.6M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed November 16, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $8.19B$7.50B | +9.1% |
| Cost of Revenue | $5.75B$5.18B | +11.1% |
| Gross Profit | $2.44B$2.33B | +4.7% |
| R&D Expenses | $57.60M$71.80M | −19.8% |
| SG&A Expenses | $713.50M$683.80M | +4.3% |
| Operating Income | $1.44B$1.54B | −6.2% |
| Interest Expense | $120.60M$115.20M | +4.7% |
| Net Income | $3.00B$631.10M | +375.4% |
| EPS (Basic) | $13.76$2.92 | +371.2% |
| EPS (Diluted) | $13.65$2.89 | +372.3% |
| Shares Outstanding (Basic) | 218.00M216.40M | +0.7% |
| Shares Outstanding (Diluted) | 219.80M218.30M | +0.7% |
05—Questions
Frequently Asked Questions
What were the major strategic actions taken by Air Products in fiscal year 2017?
In fiscal year 2017, Air Products completed two major strategic actions: the spin-off of its Electronic Materials business into Versum Materials, Inc., and the sale of its Performance Materials business to Evonik Industries AG. These divestitures allowed the company to streamline its operations and focus on its core industrial gases business.
How did the company's financial performance fare in fiscal year 2017?
Air Products reported a 9% increase in sales, reaching $8.2 billion, driven by strong volume growth in its industrial gases segments. Adjusted EBITDA increased by 7% to $2.8 billion. However, net income was significantly impacted by a large after-tax gain on the sale of Performance Materials ($1.8 billion), leading to a reported net income attributable to Air Products of $3.0 billion, a substantial increase from the previous year.
What are the key drivers of growth for Air Products?
The company's growth is primarily driven by its core industrial gases business, which supplies essential gases to a wide range of industries including refining, chemicals, metals, and electronics. Key growth drivers include new project on-streams, underlying volume growth in existing businesses across its regional segments (Americas, EMEA, Asia), and strategic investments in growth markets and technologies.
Did the company face any significant challenges or impairments in fiscal year 2017?
Yes, Air Products recorded a goodwill impairment charge of $145.3 million related to its Latin America reporting unit, primarily due to weaker economic conditions and projected volume weakness in the region. Additionally, currency fluctuations had an unfavorable impact on sales.
06—Continue