10-KPeriod: FY2019

Air Products & Chemicals, Inc. Annual Report, Year Ended Sep 30, 2019

Filed November 26, 2019For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported flat sales for fiscal year 2019, with revenue of $8.9 billion, primarily due to a balance of positive pricing and volume growth offset by unfavorable currency impacts and a contract modification. The company demonstrated strong operational performance, with operating income increasing by 9% and net income rising by 18% year-over-year, leading to a significant improvement in margins. Adjusted EBITDA also saw a healthy increase of 11%, reflecting effective cost management and business execution. APD's strategic focus on large, complex industrial gas projects, including gasification initiatives, continues to drive growth. The company highlighted its ongoing commitment to shareholder returns through a 5% increase in its quarterly dividend, marking its 37th consecutive annual increase. Looking ahead to fiscal year 2020, Air Products anticipates further earnings growth, supported by its strong financial position and planned investments in key growth projects.

Financial Highlights

58 data points
Beta

Revenue

$8.92B

32.7% Gross Margin

Net Income

$1.76B

19.7% Net Margin

EPS (Diluted)

$7.94

Total Assets

$18.94B

Cash & Equivalents

$2.25B

Free Cash Flow

$980.20M

Financial Statements
Beta
Revenue$8.92B
Cost of Revenue$5.98B
Gross Profit$2.91B
R&D Expenses$72.90M
SG&A Expenses$750.00M
Operating Income$2.14B
Interest Expense$137.00M
Net Income$1.76B
EPS (Basic)$7.99
EPS (Diluted)$7.94
Shares Outstanding (Basic)220.30M
Shares Outstanding (Diluted)221.60M

Key Highlights

  • 1Sales remained flat at $8.9 billion in fiscal year 2019, with a 3% increase in pricing and a 2% increase in volumes offset by a 3% negative currency impact and a 2% impact from a contract modification.
  • 2Operating income increased by 9% to $2.14 billion, and operating margin improved by 200 basis points to 24.0%.
  • 3Net income rose by 18% to $1.81 billion, and net income margin improved by 310 basis points to 20.3%.
  • 4Adjusted EBITDA increased by 11% to $3.47 billion, with adjusted EBITDA margin improving by 400 basis points to 38.9%.
  • 5Diluted EPS increased by 20% to $7.94, and adjusted diluted EPS increased by 10% to $8.21.
  • 6The company increased its quarterly dividend by 5% to $1.16 per share, marking the 37th consecutive year of dividend increases.
  • 7Capital expenditures in fiscal year 2020 are projected to be approximately $4 billion to $4.5 billion, reflecting significant investments in growth projects like the Jazan gas and power project.

Frequently Asked Questions

Key drivers of financial performance in fiscal year 2019 included favorable pricing, higher volumes from new projects (notably the Lu'An project), and improvements in equity affiliates' income. These positive factors were partially offset by unfavorable currency impacts and a contract modification in India.

Air Products continued to focus on improving its existing businesses while deploying capital into larger, more complex industrial gas projects, such as gasification projects. The company also emphasized returning capital to shareholders through dividend payments and maintained a strong balance sheet.

For fiscal year 2020, Air Products expects earnings to grow, driven by continued improvement in its base businesses and strategic capital deployment. This growth is anticipated to be supported by an investment in a new equity affiliate for the Jazan gas and power project in Saudi Arabia.

The U.S. Tax Cuts and Jobs Act, enacted in December 2017, significantly changed U.S. tax laws, including lowering the corporate income tax rate. This resulted in a discrete net income tax expense of $43.8 million in fiscal year 2019 related to the reversal of a prior year benefit and adjustments to estimated tax costs. The company is paying the deemed repatriation tax in installments over several years.