10-QPeriod: Q2 FY2019

Air Products & Chemicals, Inc. Quarterly Report for Q2 Ended Mar 31, 2019

Filed April 24, 2019For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported solid financial results for the quarter and six months ended March 31, 2019. Sales saw a modest increase driven by higher underlying volumes and pricing, partially offset by currency headwinds and a contract modification. Operating income and margins showed significant improvement, reflecting strong operational performance across key segments, particularly in Asia. The company also demonstrated continued financial strength through a 5% increase in its quarterly dividend, marking the 37th consecutive year of dividend growth. Key operational drivers included growth from new project onstreams, notably the Lu'An project in Asia, and positive base business growth. The company also made strategic acquisitions, including the purchase of ACP Europe SA, to expand its European footprint. While facing some challenges like unfavorable currency movements and a customer facility shutdown impacting a specific charge, APD's overall performance indicates resilience and a positive outlook.

Financial Highlights

57 data points
Beta

Revenue

$2.19B

32.6% Gross Margin

Net Income

$421.30M

19.3% Net Margin

EPS (Diluted)

$1.90

Total Assets

$19.24B

Cash & Equivalents

$2.74B

Free Cash Flow

$70.50M

Financial Statements
Beta
Revenue$2.19B
Cost of Revenue$1.47B
Gross Profit$713.00M
R&D Expenses$16.90M
SG&A Expenses$190.00M
Operating Income$516.50M
Interest Expense$35.40M
Net Income$421.30M
EPS (Basic)$1.91
EPS (Diluted)$1.90
Shares Outstanding (Basic)220.20M
Shares Outstanding (Diluted)221.40M

Key Highlights

  • 1Sales increased by 1% to $2,187.7 million for the three months ended March 31, 2019.
  • 2Operating income increased by 13% to $516.5 million for the three months ended March 31, 2019, with operating margin improving by 250 basis points.
  • 3Diluted EPS increased by 1% to $1.90 for the three months ended March 31, 2019.
  • 4The company increased its quarterly dividend by 5% to $1.16 per share, demonstrating consistent shareholder returns.
  • 5Acquisition of ACP Europe SA for $106.3 million in the second quarter of fiscal year 2019 to enhance European presence.
  • 6Six-month sales increased by 1% to $4,411.7 million, while operating income saw a 6% increase to $971.5 million.
  • 7Strong growth in the Industrial Gases – Asia segment, with sales up 12% and operating income up 34% for the quarter.

Frequently Asked Questions

The sales increase was primarily driven by higher underlying sales of 6%, stemming from favorable volumes (up 3%) and positive pricing (up 3%). New project onstreams, particularly the Lu'An project in Asia, and growth in the base business were significant contributors. However, these positive factors were partially offset by unfavorable currency impacts (down 4%) and a contract modification in India.

Profitability improved significantly. Operating income rose by 13% to $516.5 million, with the operating margin expanding by 250 basis points to 23.6%. This improvement was attributed to favorable pricing, increased volumes, and cost management, despite some currency headwinds and higher operating costs.

Yes, Air Products acquired ACP Europe SA for $106.3 million in the second quarter of fiscal year 2019. This acquisition is expected to strengthen their position in the European market by enabling them to better serve existing customers and pursue new growth opportunities.

Performance varied by region. The Industrial Gases – Americas segment saw a 9% sales increase driven by volumes and pricing. The Industrial Gases – Asia segment showed robust growth with a 12% sales increase and a 34% surge in operating income, largely due to new projects coming online. The Industrial Gases – EMEA segment experienced a 12% decrease in sales, primarily due to unfavorable currency impacts and a contract modification, though operating income still saw a modest 5% increase.