10-QPeriod: Q3 FY2019

Air Products & Chemicals, Inc. Quarterly Report for Q3 Ended Jun 30, 2019

Filed July 25, 2019For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported its results for the fiscal third quarter and the first nine months ended June 30, 2019. For the third quarter, the company saw a 2% decrease in sales to $2,224.0 million compared to the prior year, primarily due to unfavorable currency impacts and a contract modification in India. Despite the sales dip, operating income rose by 10% to $569.7 million, driven by strong pricing and a gain on the exchange of equity affiliate investments. Diluted EPS increased by 13% to $2.20. For the first nine months, sales remained flat at $6,635.7 million, while operating income saw an 8% increase to $1,541.2 million. Net income attributable to Air Products significantly grew by 25% to $1,256.8 million, leading to a diluted EPS of $5.68, a 25% increase year-over-year. The company also highlighted a 5% increase in its quarterly dividend to $1.16 per share, marking the 37th consecutive year of dividend increases.

Financial Highlights

57 data points
Beta

Revenue

$2.22B

34.1% Gross Margin

Net Income

$488.00M

21.9% Net Margin

EPS (Diluted)

$2.20

Total Assets

$19.53B

Cash & Equivalents

$2.70B

Free Cash Flow

$173.50M

Financial Statements
Beta
Revenue$2.22B
Cost of Revenue$1.47B
Gross Profit$758.00M
R&D Expenses$18.10M
SG&A Expenses$188.50M
Operating Income$569.70M
Interest Expense$34.20M
Net Income$488.00M
EPS (Basic)$2.21
EPS (Diluted)$2.20
Shares Outstanding (Basic)220.60M
Shares Outstanding (Diluted)221.90M

Key Highlights

  • 1Third-quarter sales decreased by 2% year-over-year to $2,224.0 million, impacted by currency fluctuations and a contract modification, though underlying business sales grew by 6%.
  • 2Despite lower sales, third-quarter operating income increased by 10% to $569.7 million, driven by improved pricing and a gain on equity affiliate investment exchange.
  • 3Diluted earnings per share (EPS) for the third quarter rose 13% to $2.20.
  • 4For the nine months ended June 30, 2019, sales were flat year-over-year at $6,635.7 million, while operating income increased by 8% to $1,541.2 million.
  • 5Net income attributable to Air Products for the nine-month period surged 25% to $1,256.8 million, with diluted EPS also increasing 25% to $5.68.
  • 6The company declared a quarterly dividend of $1.16 per share, a 5% increase, demonstrating continued confidence in financial strength and growth outlook.
  • 7The company reported a backlog of $624 million for sale of equipment orders and related process technologies as of June 30, 2019.

Frequently Asked Questions

Sales decreased by 2% to $2,224.0 million compared to the prior year. This was primarily due to unfavorable currency impacts (4%) and a contract modification to a tolling arrangement in India (3%). However, positive underlying sales of 6%, driven by 2% volume growth and 4% pricing improvement, partially offset these decreases.

Despite the slight decrease in sales, operating income increased by 10% to $569.7 million. This improvement was driven by strong pricing, net of power and fuel costs ($81 million increase), and a gain on the exchange of equity affiliate investments ($29 million). These were partially offset by a charge for cost reduction actions ($26 million) and unfavorable currency impacts ($12 million).

The company recognized a net gain of $29.1 million in the third quarter from exchanging its 50% interest in High-Tech Gases (Beijing) Co., Ltd. for its partner's 50% interest in WuXi Hi-Tech Gas Co., Ltd. This transaction simplified the corporate structure and allowed for more efficient operations in China. The gain is reported separately and excluded from segment operating income.

For fiscal year 2019, Air Products expects capital expenditures to be in the range of $2,400 million to $2,500 million. This includes investments in joint ventures, such as the Air Products Lu An (Changzhi) Co., Ltd. project.