01—Abstract
Summary
Summary of the 10-K filed November 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Air Products & Chemicals, Inc. (APD) reported strong financial performance for the fiscal year ended September 29, 2018.
The company saw a significant increase in sales, driven by higher volumes and new large industrial gas projects coming online. This growth was complemented by strategic advancements, including the completion of a syngas supply joint venture in China and new gasification projects announced in China and Saudi Arabia. The company also demonstrated a commitment to shareholder returns by increasing its quarterly dividend by 16%a, marking the 36th consecutive year of dividend increases.
Operationally, APD highlighted improvements in operating income and adjusted EBITDA, alongside a robust growth in diluted earnings per share. The company's diversified industrial gases business, with operations across the Americas, EMEA, and Asia, remains the core driver of its performance.
While the company faces various risks including economic conditions, international operations, and regulatory changes, its strong execution and strategic investments position it for continued growth. The outlook for fiscal year 2019 remains positive, with continued focus on base business improvements and the integration of new large-scale projects.
02—Key points
Key Highlights
- Sales increased by 9% to $8.93 billion, driven by underlying volume growth and favorable currency impacts.
- Operating income surged by 37% to $1.97 billion, with an operating margin of 22.0%.
- Diluted EPS from continuing operations increased by 28% to $6.59.
- Adjusted EBITDA grew by 11% to $3.12 billion, with an improved margin of 34.9%.
- The company increased its quarterly dividend by 16% to $1.10 per share, continuing its track record of 36 consecutive annual dividend increases.
- Significant strategic progress was made with the completion of a syngas supply joint venture in China and announcements of new large gasification projects.
- International operations continue to be a substantial contributor, with over 60% of sales derived from outside the United States.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Air Products & Chemicals, Inc. kept $0.17.
- Revenue$8.93B100.0%
- Cost of revenue−$6.19B69.3%
- Gross profit$2.74B30.7%
- Operating costs−$775.1M8.7%
- Operating income$1.97B22.0%
- Interest, other & tax−$467.8M5.2%
- Net income$1.50B16.8%
Where FY2018 revenue went
$8.93B- Cost of revenue: $6.19B, 69% of revenue
- Net income: $1.50B, 17% of revenue
- R&D: $64.5M, 0.7% of revenue
- SG&A: $760.8M, 8.5% of revenue
- Interest, other & tax: $467.8M, 5.2% of revenue
Kept 17% as net incomeR&D $64.5M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 20, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $8.93B$8.19B | +9.1% |
| Cost of Revenue | $6.19B$5.75B | +7.6% |
| Gross Profit | $2.74B$2.44B | +12.5% |
| R&D Expenses | $64.50M$57.60M | +12.0% |
| SG&A Expenses | $760.80M$713.50M | +6.6% |
| Operating Income | $1.97B$1.44B | +36.5% |
| Interest Expense | $130.50M$120.60M | +8.2% |
| Net Income | $1.50B$3.00B | −50.1% |
| EPS (Basic) | $6.83$13.76 | −50.4% |
| EPS (Diluted) | $6.78$13.65 | −50.3% |
| Shares Outstanding (Basic) | 219.30M218.00M | +0.6% |
| Shares Outstanding (Diluted) | 220.80M219.80M | +0.5% |
05—Questions
Frequently Asked Questions
What were the key drivers of Air Products' sales growth in fiscal year 2018?
Sales grew by 9% to $8.93 billion, primarily due to a 7% increase in underlying sales driven by higher volumes across all regional Industrial Gases segments and a 1% price increase. Favorable currency impacts contributed an additional 2% to sales growth.
How did the company manage its expenses and profitability?
Air Products reported a 37% increase in operating income to $1.97 billion, with an improved operating margin of 22.0%. This was driven by higher volumes, favorable currency impacts, and prior-year charges related to goodwill impairment and cost reduction actions. On a non-GAAP basis, adjusted operating income increased by 9% and the adjusted operating margin remained flat at 21.7%.
What is the company's strategy regarding large projects and future growth?
The company is actively executing its gasification strategy with recent project completions and announcements, including the Lu'An syngas joint venture and new gasifier/power projects. The outlook for fiscal year 2019 anticipates continued earnings growth through base business improvements and the contribution of new, large projects. The company intends to continue winning and investing in key growth projects, particularly large gasification projects.
What is the company's approach to returning capital to shareholders?
Air Products increased its quarterly dividend by 16% to $1.10 per share, demonstrating its commitment to shareholder returns. This marks the 36th consecutive year of dividend increases. The company also has an ongoing share repurchase program, with $485.3 million remaining authorization as of September 30, 2018.
06—Continue