Summary
Air Products & Chemicals, Inc. (APD) announced a significant strategic decision via an 8-K filing on April 4, 2016, to exit its Energy-from-Waste (EfW) business. This includes discontinuing efforts to start up and operate two EfW projects in Tees Valley, UK. The company cited ongoing difficulties with the Tees Valley 1 project and the realization that substantial additional time and resources would be needed to bring the projects online. This strategic shift is aimed at sharpening the company's focus on its core Industrial Gases business. The exit is expected to result in a substantial charge to earnings, estimated between $950 million and $1.1 billion, primarily as losses from discontinued operations. The majority of this charge, between $900 million and $1.0 billion, is anticipated in the second fiscal quarter of 2016, with a significant portion attributed to the write-down of assets. Investors should monitor future filings for finalized figures and potential additional exit costs.
Key Highlights
- 1Air Products is exiting its Energy-from-Waste (EfW) business, including two projects in Tees Valley, UK.
- 2The decision stems from persistent start-up difficulties and the significant additional investment required for the EfW projects.
- 3The company is refocusing resources on its core Industrial Gases business.
- 4An estimated pre-tax charge of $950 million to $1.1 billion will be recorded as losses from discontinued operations.
- 5Approximately $900 million to $1.0 billion of the charge is expected in the second fiscal quarter of 2016.
- 6A substantial part of the Q2 charge ($850 million to $900 million) is due to the write-down of plant assets.
- 7The company is also evaluating the disposition of an air separation unit with a current value of approximately $60 million.