10-QPeriod: Q2 FY2023

Air Products & Chemicals, Inc. Quarterly Report for Q2 Ended Mar 31, 2023

Filed May 9, 2023For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported mixed financial results for the second quarter and first six months of fiscal year 2023. While sales showed a healthy increase driven by pricing and volume growth across most segments, net income declined year-over-year primarily due to a significant $185.6 million charge related to business and asset actions (withdrawal from projects in Indonesia and Ukraine). Despite this, the company demonstrated resilience with an increase in Adjusted EBITDA, highlighting operational efficiency and cost management. Key financial developments include a substantial increase in equity affiliates' income, largely driven by the Jazan Integrated Gasification and Power Company (JIGPC) joint venture. The company also continued its commitment to returning capital to shareholders, increasing its quarterly dividend for the 41st consecutive year. APD's strong balance sheet and cash flow generation remain robust, positioning it to navigate current economic conditions and fund future growth initiatives, including significant capital expenditures planned for fiscal year 2023.

Financial Highlights

57 data points
Beta

Revenue

$3.20B

28.7% Gross Margin

Net Income

$439.80M

13.7% Net Margin

EPS (Diluted)

$1.97

Total Assets

$29.44B

Cash & Equivalents

$2.24B

Free Cash Flow

-$368.20M

Financial Statements
Beta
Revenue$3.20B
Cost of Revenue$2.28B
Gross Profit$917.30M
R&D Expenses$27.20M
SG&A Expenses$251.20M
Operating Income$459.80M
Interest Expense$40.90M
Net Income$439.80M
EPS (Basic)$1.98
EPS (Diluted)$1.97
Shares Outstanding (Basic)222.30M
Shares Outstanding (Diluted)222.70M

Key Highlights

  • 1Sales increased by 9% to $3,200.1 million for the second quarter and 7% to $6,374.8 million for the first six months, driven by pricing and volume growth.
  • 2Net income decreased by 16% to $449.9 million for the second quarter and 5% to $1,033.7 million for the first six months, largely impacted by a $185.6 million charge for business and asset actions.
  • 3Equity affiliates' income saw a substantial increase of 37% for the second quarter and 3% for the first six months, primarily due to contributions from the JIGPC joint venture.
  • 4Adjusted EBITDA showed strong growth, increasing by 13% to $1,150.9 million for the second quarter and 11% to $2,234.4 million for the first six months, indicating improved underlying operational performance.
  • 5Diluted EPS decreased by 17% to $1.97 for the second quarter and 7% to $4.54 for the first six months, with a significant portion of the decrease attributed to the business and asset actions charge.
  • 6The company increased its quarterly dividend by 8% to $1.75 per share, marking its 41st consecutive annual dividend increase, signaling confidence in future performance.
  • 7Cash provided by operating activities increased to $1,358.0 million for the first six months, supporting investments and financial flexibility.

Frequently Asked Questions

The decrease in net income for the second quarter of fiscal year 2023 was primarily driven by a significant noncash charge of $185.6 million related to business and asset actions. This charge resulted from the company's decision to withdraw from certain projects in Indonesia and Ukraine.

The JIGPC joint venture performed strongly, with its contribution to equity affiliates' income increasing substantially. This was largely due to the completion of the second phase of the Jazan gasification and power project in January 2023, leading to higher income from this key affiliate.

Air Products expects capital expenditures for fiscal year 2023 to be in the range of $5 billion to $5.5 billion. This includes significant investments in plant and equipment and advances to unconsolidated affiliates, supporting the company's long-term growth strategy.

The company is exposed to foreign currency risk and uses strategies such as forward exchange contracts to manage these exposures. For the quarter, currency movements had an unfavorable impact on sales due to the strengthening of the U.S. Dollar against major currencies.