10-QPeriod: Q3 FY2023

Air Products & Chemicals, Inc. Quarterly Report for Q3 Ended Jun 30, 2023

Filed August 3, 2023For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported third-quarter results with a slight decrease in sales to $3,033.9 million, down 5% year-over-year, primarily due to lower energy cost pass-through and currency headwinds, partially offset by pricing actions and volume growth. Despite lower sales, operating income saw a modest increase of 3% to $644.2 million, driven by improved operating margins. Net income attributable to Air Products rose by 4% to $595.6 million, resulting in diluted EPS of $2.67, a 2% increase. The company also highlighted a significant 12% increase in Adjusted EBITDA, demonstrating strong operational efficiency and profitability. For the nine-month period, sales increased by 3% to $9,408.7 million, with operating income up 3% to $1,756.0 million. However, net income attributable to Air Products saw a 2% decrease to $1,607.6 million, with diluted EPS at $7.22, down 4%. This decline in net income was largely influenced by a $244.6 million charge for business and asset actions, alongside higher non-service pension costs and other operational expenses. The company continues to invest heavily in growth projects, with capital expenditures totaling $4,084.5 million for the nine-month period. Management remains focused on strategic growth and cost optimization, evidenced by increased R&D spending and a consistent dividend payout, with the 41st consecutive annual dividend increase.

Financial Statements
Beta

Key Highlights

  • 1Third-quarter sales decreased 5% to $3,033.9 million, mainly due to lower energy cost pass-through and currency impacts, though pricing and volume increased.
  • 2Operating income for the quarter rose 3% to $644.2 million, with operating margin improving to 21.2% driven by pricing actions and lower energy cost pass-through.
  • 3Net income attributable to Air Products increased 4% to $595.6 million for the quarter, leading to a 2% rise in diluted EPS to $2.67.
  • 4Adjusted EBITDA showed robust growth, increasing 12% to $1,208.1 million in the third quarter, with a significant 590 basis point expansion in adjusted EBITDA margin to 39.8%.
  • 5For the nine-month period, sales grew 3% to $9,408.7 million, and operating income increased 3% to $1,756.0 million.
  • 6A significant charge of $244.6 million for business and asset actions impacted the nine-month results, contributing to a 2% decrease in net income to $1,607.6 million and a 4% decrease in diluted EPS to $7.22.
  • 7Capital expenditures for the nine months totaled $4,084.5 million, reflecting ongoing investment in growth projects, and the company declared its 41st consecutive annual dividend increase.

Frequently Asked Questions

In the third quarter of fiscal year 2023, Air Products reported a 5% decrease in sales to $3,033.9 million, primarily due to lower energy cost pass-through and unfavorable currency movements, partially offset by positive pricing and volume growth. Despite lower sales, operating income increased by 3% to $644.2 million, and net income attributable to Air Products rose by 4% to $595.6 million, resulting in diluted earnings per share (EPS) of $2.67, up 2%.

The company recorded a charge of $59.0 million for strategic business and asset actions in the third quarter, impacting operating income and net income. For the nine-month period, this charge amounted to $244.6 million, which was a significant factor in the decrease in net income and diluted EPS for that period.

Air Products continues to invest significantly in growth projects, with capital expenditures totaling $4,084.5 million for the first nine months of fiscal year 2023. The company expects full-year 2023 capital expenditures to be between $5.0 billion and $5.5 billion. Additionally, Air Products demonstrated its commitment to shareholder returns by declaring its 41st consecutive annual dividend increase.

The NEOM Green Hydrogen Project is progressing as planned. The joint venture secured approximately $6.1 billion in non-recourse project financing, and as of June 30, 2023, no borrowings were outstanding. The project is expected to be on-stream in 2026. Air Products' role as EPC contractor and system integrator is a key aspect of this significant global initiative.