Summary
Air Products & Chemicals, Inc. (APD) reported solid top-line growth in the third quarter and first nine months of fiscal year 2017, with sales increasing by 11% and 8% respectively, driven by higher volumes. However, profitability was significantly impacted by substantial non-cash impairment charges, including a $162.1 million goodwill and intangible asset impairment related to the Latin America region and a $79.5 million impairment of an equity investment in Saudi Arabia. These charges, along with business separation costs and cost reduction initiatives, led to a considerable decrease in reported operating income and net income from continuing operations. The company successfully completed the sale of its Performance Materials Division (PMD) in January 2017, generating significant cash proceeds and a substantial after-tax gain. The spin-off of Versum Materials was completed in the prior year. These divestitures align with APD's strategic focus on its core Industrial Gases businesses. Despite the reported profit decline, non-GAAP adjusted operating income and Adjusted EBITDA showed positive growth, indicating underlying operational strength. Investors should monitor the impact of ongoing cost reduction efforts and the performance of the core industrial gas segments, particularly in light of the significant impairment charges that have affected reported earnings.
Financial Highlights
56 data points| Revenue | $2.12B |
| Cost of Revenue | $1.49B |
| Gross Profit | $635.90M |
| R&D Expenses | $14.60M |
| SG&A Expenses | $184.10M |
| Operating Income | $258.70M |
| Interest Expense | $29.80M |
| Net Income | $101.90M |
| EPS (Basic) | $0.47 |
| EPS (Diluted) | $0.46 |
| Shares Outstanding (Basic) | 218.10M |
| Shares Outstanding (Diluted) | 219.80M |
Key Highlights
- 1Sales increased by 11% to $2,121.9 million for the third quarter and by 8% to $5,984.5 million for the first nine months, primarily driven by higher volumes.
- 2Reported operating income significantly decreased due to substantial non-cash impairment charges totaling $162.1 million for goodwill and intangible assets (Latin America) and $79.5 million for an equity investment (Saudi Arabia).
- 3Completed the sale of the Performance Materials Division (PMD) in January 2017 for $3.8 billion, recognizing a substantial after-tax gain of $1,833 million.
- 4On a non-GAAP basis, adjusted operating income increased by 11% for the quarter and 7% for the nine months, and Adjusted EBITDA grew by 7% and 4% respectively, indicating underlying operational strength.
- 5The company declared a quarterly dividend of $0.95 per share, marking the 35th consecutive year of dividend increases.
- 6Reduced total debt by $1.3 billion, leading to a lower debt-to-capitalization ratio of 29.2% as of June 30, 2017, down from 41.9% in September 2016.
- 7Secured a new $2.5 billion revolving credit facility, enhancing liquidity and supporting the commercial paper program.