01—Abstract
Summary
Summary of the 8-K filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Air Products (APD) reported fiscal Q4 and full-year 2024 results on November 7, 2024.
Headline GAAP figures are inflated by a one-time gain: the company completed the sale of its LNG process technology business to Honeywell on September 30, 2024 for about $1.8 billiona in cash, booking a pre-tax gain of $1,575.6 million ($1,198.4 million after tax, or $5.38 per share). Excluding that gain and other items, full-year adjusted EPS from continuing operations was $12.43, up 8%, and adjusted EBITDA was $5.0 billion, up 7%, with adjusted EBITDA margin expanding 440 basis points to 41.7%. Fourth-quarter adjusted EPS was $3.56, up 13%, on an adjusted EBITDA margin of 44.1%.
Much of the margin gain reflected lower energy cost pass-through (about 200 basis points for the year), so underlying pricing and volume contributions were more modest. Full-year sales fell 4% to $12.1 billionb, driven by a 5% decline in energy cost pass-through, partly offset by 1% higher pricing. Management guided fiscal 2025 adjusted EPS to $12.70 to $13.00, implying 2% to 5% growth.
The guidance excludes the divested LNG business, which contributed roughly $135 millionc of operating income in fiscal 2024, so the reported base is not perfectly comparable. Fiscal 2025 capital expenditures are expected at $4.5 billion to $5.0 billion, versus about $5.2 billion in fiscal 2024. Long-term debt rose to about $13.4 billion from $9.3 billion, and cash on hand increased to about $3.0 billion.
The company expects to pay roughly $1.6 billiond in dividends in 2024, and the quarterly dividend was raised to an annualized $1.77 per share. Investors should watch the pace of large projects such as NEOM Green Hydrogen, the TotalEnergies green hydrogen supply deal starting in 2030, and whether earnings growth can be sustained after the divestiture.
02—Key points
Key Highlights
- Fiscal 2024 GAAP EPS was $17.24, up 67%, but this was driven by a $5.38 per share after-tax gain from the LNG business sale to Honeywell (~$1.8 billion cash proceeds).
- Adjusted EPS from continuing operations was $12.43 for FY2024 (up 8%), and Q4 adjusted EPS was $3.56 (up 13%).
- Adjusted EBITDA reached $5.0 billion (up 7%) with a 41.7% margin (up 440 bps), though about 200 bps of the margin gain came from lower energy cost pass-through.
- FY2024 sales declined 4% to $12.1 billion, reflecting 5% lower energy cost pass-through partly offset by 1% higher pricing.
- FY2025 adjusted EPS guidance is $12.70 to $13.00 (2% to 5% growth), excluding the divested LNG business; Q1 FY2025 guidance is $2.75 to $2.85.
- FY2025 capital expenditures are guided to $4.5 billion to $5.0 billion, versus roughly $5.2 billion in FY2024.
- Dividend increased to $1.77 per share annualized, with about $1.6 billion paid to shareholders in 2024; long-term debt rose to $13.4 billion from $9.3 billion.
03—Questions
Frequently Asked Questions
Why are GAAP earnings so much higher than adjusted earnings in fiscal 2024?
The difference is mainly a one-time $1,575.6 million pre-tax gain ($1,198.4 million after tax, or $5.38 per share) recorded on the September 30, 2024 sale of the LNG process technology and equipment business to Honeywell. Adjusted EPS excludes this gain, along with a $0.20 per share business and asset action charge, $0.34 per share of non-service pension costs, and a $0.02 per share loss on de-designated cash flow hedges. On an adjusted basis, FY2024 EPS was $12.43.
Does the guidance include the LNG business that was sold?
No. The company states that the LNG business will not contribute to fiscal 2025 results and is not reflected in the fiscal 2025 guidance. In fiscal 2024, the business generated approximately $135 million of operating income for the Corporate and other segment, so the year-over-year comparison in earnings will be affected by this loss of contribution.
How much of the margin improvement was from underlying operations?
Only part of it. Full-year adjusted EBITDA margin rose 440 basis points to 41.7%, but lower energy cost pass-through contributed about 200 basis points. The remaining improvement came from positive pricing net of variable costs, favorable business mix and productivity, partly offset by inflation and higher planned maintenance. Investors may want to separate pass-through effects from core performance when assessing sustainability.
What are the main capital allocation priorities and risks ahead?
Capital expenditures are guided to $4.5 billion to $5.0 billion for fiscal 2025, following about $5.2 billion in fiscal 2024. Debt increased to roughly $13.4 billion long-term from $9.3 billion, mainly reflecting financing for large projects, and the company continues to fund its dividend (about $1.6 billion paid in 2024). Key risks include execution on large-scale hydrogen and industrial gas projects, the timing of the NEOM-related hedge re-qualification and fair value swings, cost overruns, and exposure to energy price volatility.
What growth opportunities did management highlight?
Management highlighted a 15-year agreement to supply 70,000 tons of green hydrogen annually to TotalEnergies beginning in 2030, new air separation units in Conyers, Georgia and Reidsville, North Carolina, and a $70 million expansion of membrane production in Missouri. Management also cited clean hydrogen refueling network plans and a commitment to quadruple renewable energy use by 2030 compared with 2023. Whether these projects translate into earnings growth will depend on execution and timing, and the company notes that its forward-looking statements carry material uncertainty.
04—Continue