01—Abstract
Summary
Summary of the 10-K filed November 26, 2019. Cited figures are marked; the original filing is the authoritative source.
Air Products & Chemicals, Inc. (APD) reported flat sales for fiscal year 2019, with revenue of $8.9 billiona, 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%b 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%c 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.
02—Key points
Key Highlights
- Sales 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.
- Operating income increased by 9% to $2.14 billion, and operating margin improved by 200 basis points to 24.0%.
- Net income rose by 18% to $1.81 billion, and net income margin improved by 310 basis points to 20.3%.
- Adjusted EBITDA increased by 11% to $3.47 billion, with adjusted EBITDA margin improving by 400 basis points to 38.9%.
- Diluted EPS increased by 20% to $7.94, and adjusted diluted EPS increased by 10% to $8.21.
- The company increased its quarterly dividend by 5% to $1.16 per share, marking the 37th consecutive year of dividend increases.
- Capital 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Air Products & Chemicals, Inc. kept $0.20.
- Revenue$8.92B100.0%
- Cost of revenue−$6.00B67.3%
- Gross profit$2.91B32.7%
- Operating costs−$770.0M8.6%
- Operating income$2.14B24.0%
- Interest, other & tax−$384.4M4.3%
- Net income$1.76B19.7%
Where FY2019 revenue went
$8.92B- Cost of revenue: $5.98B, 67% of revenue
- Net income: $1.76B, 20% of revenue
- R&D: $72.9M, 0.8% of revenue
- SG&A: $750.0M, 8.4% of revenue
- Interest, other & tax: $384.4M, 4.3% of revenue
Kept 20% as net incomeR&D $72.9M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed November 26, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $8.92B$8.93B | −0.1% |
| Cost of Revenue | $5.98B$6.19B | −3.5% |
| Gross Profit | $2.91B$2.74B | +6.3% |
| R&D Expenses | $72.90M$64.50M | +13.0% |
| SG&A Expenses | $750.00M$760.80M | −1.4% |
| Operating Income | $2.14B$1.97B | +9.1% |
| Interest Expense | $137.00M$130.50M | +5.0% |
| Net Income | $1.76B$1.50B | +17.5% |
| EPS (Basic) | $7.99$6.83 | +17.0% |
| EPS (Diluted) | $7.94$6.78 | +17.1% |
| Shares Outstanding (Basic) | 220.30M219.30M | +0.5% |
| Shares Outstanding (Diluted) | 221.60M220.80M | +0.4% |
05—Questions
Frequently Asked Questions
What were the key drivers of Air Products' financial performance in fiscal year 2019?
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.
How did the company's capital allocation strategy evolve in fiscal year 2019?
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.
What is the company's outlook for fiscal year 2020?
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.
How did the U.S. Tax Cuts and Jobs Act impact the company's financial results?
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.
06—Continue