On August 1, 2024, Air Products & Chemicals Inc (APD, Financial) released its 8-K filing for the third quarter of fiscal 2024. The company reported GAAP earnings per share (EPS) of $3.13, up 17% year-over-year, and adjusted EPS of $3.20, up 7%. However, these figures fell short of the analyst estimates of $3.42. Revenue for the quarter was $2.99 billion, a 2% decrease from the prior year, missing the estimated $3.31 billion.
Company Background
Since its founding in 1940, Air Products & Chemicals Inc (APD, Financial) has grown into one of the leading industrial gas suppliers globally, operating in 50 countries with 19,000 employees. The company is the largest supplier of hydrogen and helium worldwide, serving industries such as chemicals, energy, healthcare, metals, and electronics. In fiscal 2023, Air Products generated $12.6 billion in revenue.
Performance and Challenges
Air Products & Chemicals Inc (APD, Financial) reported a GAAP net income of $709 million, up 16% from the prior year, primarily due to favorable pricing and business mix. However, higher costs driven by planned maintenance and inflation partially offset these gains. The GAAP net income margin improved by 360 basis points to 23.7%. Adjusted EBITDA was $1.3 billion, up 5%, with an adjusted EBITDA margin of 42.4%, up 260 basis points.
Despite these improvements, the company faced challenges such as unfavorable currency impacts and lower energy cost pass-through, which contributed to the 2% decline in sales. These challenges highlight the importance of managing operational efficiencies and cost structures in a volatile economic environment.
Financial Achievements
Air Products & Chemicals Inc (APD, Financial) achieved several financial milestones in Q3 FY2024. The company signed a 15-year agreement to supply 70,000 tons of green hydrogen annually starting in 2030, helping to decarbonize TotalEnergies' Northern European refineries. Additionally, Air Products announced the divestiture of its liquefied natural gas (LNG) process technology and equipment business to Honeywell for $1.81 billion, expected to close by the end of the calendar year.
These achievements are crucial for the company's long-term strategy, particularly in the clean hydrogen market, which is expected to grow significantly. The divestiture will also provide additional capital for future investments and operational improvements.
Income Statement Highlights
| Metric | Q3 FY2024 | Q3 FY2023 |
|---|---|---|
| Sales | $2.99 billion | $3.03 billion |
| Cost of Sales | $2.01 billion | $2.07 billion |
| Operating Income | $737.6 million | $644.2 million |
| Net Income | $708.9 million | $610.5 million |
Balance Sheet and Cash Flow
As of June 30, 2024, Air Products & Chemicals Inc (APD, Financial) reported total assets of $36.97 billion, up from $32.00 billion as of September 30, 2023. The company's cash and cash items increased to $2.38 billion from $1.62 billion. Total liabilities stood at $20.29 billion, up from $16.34 billion, primarily due to an increase in long-term debt.
Cash provided by operating activities for the nine months ended June 30, 2024, was $2.69 billion, compared to $2.20 billion for the same period in 2023. However, cash used for investing activities increased to $4.77 billion from $4.40 billion, reflecting higher capital expenditures.
Segment Performance
In the Americas, sales were $1.23 billion, down 2% year-over-year, while operating income increased by 4% to $391 million. In Asia, sales decreased by 4% to $790 million, with operating income down 17% to $200 million. Europe saw a 2% decline in sales to $693 million, but operating income increased by 16% to $205 million.
Commentary
"Our third quarter adjusted EPS of $3.20 exceeded our previous guidance and increased seven percent over the prior year, driven by Americas and Europe operating performance as well as pricing and productivity actions. The results demonstrate our focus on running our core industrial gas business, and our adjusted EBITDA margin is the best in the industry," said Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi.
Outlook
Air Products & Chemicals Inc (APD, Financial) confirmed its previous fiscal 2024 full-year adjusted EPS guidance of $12.20 to $12.50, up 6% to 9% over the prior year. The company also expects capital expenditures for the fiscal year to be in the range of $5.0 billion to $5.5 billion.
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Air Products & Chemicals Inc for further details.
