Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Air Products & Chemicals Inc (APD, Financial) reported a 7% increase in adjusted earnings per share, exceeding the upper end of their prior guidance range.
- The company announced a significant green hydrogen supply agreement with Total Energy, validating their long-term strategy and demonstrating strong demand for green hydrogen.
- APD is maintaining its full-year adjusted earnings per share guidance of $12.20 to $12.50 and expects CapEx to be in the range of $5 billion to $5.5 billion for fiscal year 2024.
- The company achieved a 42% EBITDA margin, leading the industry and demonstrating a persistent focus on profitability.
- APD announced the planned sale of its LNG Process Technology & Equipment business to Honeywell for approximately EUR 1.8 billion, which will bolster their balance sheet and liquidity position.
Negative Points
- Overall sales volume was flat due to lower demand for merchant products, despite strong demand for hydrogen.
- The company experienced a 2% reduction in top-line revenue primarily due to unfavorable currency impacts.
- The Middle East and India segments saw declines in sales and operating income due to unfavorable merchant price and volume.
- The Asia segment reported unfavorable EBITDA and EBITDA margin, primarily driven by planned maintenance outages and lower demand for merchant products.
- The company faces uncertainties related to geopolitical situations, Federal Reserve decisions, and the upcoming election cycle, which could impact future performance.
Q & A Highlights
Q: Can you speak to what brought the timing of the green hydrogen announcement with Total Energy forward and the potential for further offtake arrangements?
A: We have been in discussions with potential customers for hydrogen for several years. The timing of the announcement depends on various factors, including regulatory conditions and industry needs. The agreement with Total Energy validates our strategy and has generated significant interest from other customers, including refineries and steelmakers. We are being contacted by other potential customers, and while we are working on additional agreements, we will announce them when finalized.
Q: Can you provide an update on the progress of the Louisiana project and the demand for blue hydrogen?
A: The Louisiana project is progressing well, and we recently filed our Class six permit. We expect the project to be operational by 2028. The demand for blue hydrogen is strong, with plans to serve existing customers through our pipeline and convert a significant portion to ammonia for export to Japan and Korea to decarbonize their power plants.
Q: Is the NEOM project still on track to come on stream at the end of 2026, and what is the status of your hydrogen dissociation technology?
A: The NEOM project is on schedule, with expected mechanical completion and commissioning by December 2026, and product availability in early 2027. Our ammonia dissociation technology has been proven and will be deployed in various locations, including China.
Q: Can you discuss the sequential change in merchant prices and the overall volume slowdown in the industrial gas industry?
A: While there has been a slowdown in China, our merchant volumes in the US are stable, and Europe is holding steady. Pricing has its limits, and we have seen some stabilization. Overall, our volumes in the US are good, and we are managing well despite the challenges in China.
Q: Can you provide an update on the sustainable aviation fuel project in Los Angeles with World Energy?
A: Our relationship with World Energy is strong, but the project is on hold until we obtain the necessary permits. We expect the permitting process to take about a year. The demand for sustainable aviation fuel remains high, and we are optimistic about the project's future once permits are secured.
Q: What is the status of the Alberta project, and will it contribute to 2025 earnings?
A: The Alberta project is expected to come on stream in 2025. However, due to the uncertainties of construction during winter, we are conservative in our guidance and do not expect significant contributions to 2025 earnings until the project is fully operational.
Q: Can you discuss the wide range in Q4 guidance and what factors could influence the final results?
A: The wide range in Q4 guidance reflects the current geopolitical instability, election cycle, and Federal Reserve decisions. We prefer to focus on the full-year guidance, which remains between $12.20 and $12.50 per share. The final results will depend on various factors, including productivity actions and new project contributions.
Q: What are your expectations for earnings growth in 2025, and how will new projects contribute?
A: While it's early to provide specific details, we are committed to delivering at least 10% growth in earnings for 2025. We will provide more detailed guidance when we announce our fourth-quarter results.
Q: Can you provide an update on the green hydrogen project in upstate New York?
A: The green hydrogen project in upstate New York is progressing well, utilizing hydropower from Niagara Falls. The plant will produce 35 tons per day of liquefied green hydrogen, targeting the mobility market in the region. The project is on schedule for completion in 2027 or 2028.
Q: How do you view the impact of the upcoming election on the interpretation of the IRA rules, particularly for green hydrogen?
A: The interpretation of the IRA rules, especially the definition of green hydrogen, is critical. The current administration supports our view that green hydrogen should use green electricity. However, the final rules are pending, and any change in administration could impact the interpretation. We will wait for finalized rules before committing to new projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
