10-QPeriod: Q3 FY2022

Air Products & Chemicals, Inc. Quarterly Report for Q3 Ended Jun 30, 2022

Filed August 4, 2022For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported strong revenue growth in the third quarter of fiscal year 2022, with sales increasing by 22% year-over-year to $3.19 billion. This growth was driven by a combination of higher energy cost pass-throughs, positive pricing actions, and increased volumes across various segments. The company also saw a significant increase in equity affiliates' income, largely due to the Jazan Integrated Gasification and Power Company (JIGPC) joint venture. Despite the robust top-line performance, operating income saw a more modest increase of 9%, with operating margins declining due to the impact of higher energy cost pass-throughs which increase sales but not operating income, alongside inflationary pressures and supply chain challenges. Net income increased by 10% to $587.1 million, resulting in diluted EPS of $2.62. The company also highlighted its commitment to shareholder returns by increasing its quarterly dividend for the 40th consecutive year.

Financial Highlights

57 data points
Beta

Revenue

$3.19B

26.6% Gross Margin

Net Income

$582.10M

18.3% Net Margin

EPS (Diluted)

$2.62

Total Assets

$27.49B

Cash & Equivalents

$2.96B

Free Cash Flow

$202.70M

Financial Statements
Beta
Revenue$3.19B
Cost of Revenue$2.34B
Gross Profit$847.20M
R&D Expenses$24.80M
SG&A Expenses$216.90M
Operating Income$627.40M
Interest Expense$32.70M
Net Income$582.10M
EPS (Basic)$2.62
EPS (Diluted)$2.62
Shares Outstanding (Basic)222.00M
Shares Outstanding (Diluted)222.50M

Key Highlights

  • 1Sales grew 22% year-over-year to $3.19 billion, driven by energy cost pass-through, pricing, and volume increases.
  • 2Operating income increased 9% to $627.4 million, though operating margin decreased due to higher energy cost pass-through and other inflationary factors.
  • 3Net income attributable to Air Products rose 10% to $582.1 million ($2.62 diluted EPS).
  • 4Equity affiliates' income significantly increased by 84% to $116.1 million, primarily due to the JIGPC joint venture.
  • 5The company increased its quarterly dividend by 8% to $1.62 per share, marking the 40th consecutive year of dividend increases.
  • 6Capital expenditures were substantial at $3.86 billion for the first nine months, primarily driven by investments in joint ventures.
  • 7Cash provided by operating activities was $2.21 billion for the first nine months of the fiscal year.

Frequently Asked Questions

The 22% increase in sales to $3.19 billion was driven by a combination of factors: 15% from higher energy cost pass-through to customers due to rising energy prices, 7% from positive pricing actions, and 5% from increased volumes. Unfavorable currency movements partially offset this growth.

The operating margin decreased by 250 basis points to 19.7%. This was primarily due to the higher energy cost pass-through, which boosts sales but does not proportionally increase operating income. Additionally, higher planned maintenance, inflation, supply chain challenges, and unfavorable currency impacts also contributed to margin compression.

The Jazan Integrated Gasification and Power Company (JIGPC) joint venture, which began contributing in late October 2021, has significantly boosted equity affiliates' income. Equity affiliates' income increased by 84% year-over-year for the quarter and by 90% year-over-year for the nine months, largely driven by JIGPC's performance.

Air Products made substantial capital expenditures of $3.86 billion in the first nine months of the fiscal year, a significant increase from the prior year, largely due to a $1.6 billion investment in the JIGPC joint venture. The company expects full-year capital expenditures for fiscal year 2022 to exceed $4.5 billion, indicating a strong focus on strategic investments and growth projects.