Q3 FY21 (comparisons versus prior year):
- GAAP EPS of $2.36, up 17 percent; GAAP net income of $532 million, up 16 percent; and GAAP net income margin of 20.4 percent, down 170 basis points.
- Adjusted EPS* of $2.31, up 15 percent; adjusted EBITDA margin* of 37.5 percent, down 520 basis points.
Q3 FY21 Highlights
- Advancing the hydrogen energy transition:
- Announced plans to build landmark net-zero hydrogen energy complex in Edmonton, Alberta, Canada, setting the stage for Air Products to operate the most competitive and lowest-carbon-intensity hydrogen network in the world; the facility’s combination of advanced hydrogen reforming technology, carbon capture and storage, and hydrogen-fueled electricity generation makes net-zero possible.
- Formed strategic global collaboration with Baker Hughes to develop next generation hydrogen compression to lower the cost of production and accelerate the adoption of hydrogen as a zero-carbon fuel; Baker Hughes will provide Air Products with advanced hydrogen compression and gas turbine technology for global projects, including NovaLT16 turbines for the net-zero hydrogen energy complex in Edmonton and advanced compression technology for the NEOM carbon-free hydrogen project.
- Announced memorandum of understanding with Cummins Inc. to accelerate the integration of hydrogen fuel cell trucks in the Americas, Europe and Asia; Cummins will provide hydrogen fuel cell electric powertrains integrated into selected OEM partners’ heavy-duty trucks for Air Products, as Air Products begins the process of converting its global fleet of distribution vehicles to hydrogen fuel cell vehicles.
- Announced CFO succession plan that will see Scott Crocco retiring on September 30, 2021 following a distinguished, 31-year career with the Company, and Melissa Schaeffer assuming leadership responsibility for Air Products’ worldwide Finance organization on August 10, 2021.
- Updated Capital Deployment Scorecard, demonstrating that the original capital deployment commitment was met and significant investment capacity remains for sustainability-driven growth projects.
- Published 2021 Sustainability Report, providing stakeholders with economic, environmental and social performance data and highlighting the Company’s sustainability goals and growth opportunities.
Major Project Updates
- Lu’An: Facility is operating.
- Jazan: Expect to close during this fiscal year.
Guidance
- Fiscal 2021 full-year adjusted EPS guidance* of $8.95 to $9.05, up approximately eight percent over prior year adjusted EPS*; fiscal 2021 fourth quarter adjusted EPS guidance* of $2.44 to $2.54, up 11 to 16 percent over prior year fourth quarter adjusted EPS*. This guidance does not include the Jazan transaction.
- Expect fiscal year 2021 capital expenditures* of approximately $2.5 billion. This guidance does not include the Jazan transaction.
#Earnings per share is calculated and presented on a diluted basis from continuing operations attributable to Air Products.
*Certain results in this release, including in the highlights above, include references to non-GAAP financial measures on a consolidated, continuing operations basis and a segment basis. Additional information regarding these measures and reconciliations of GAAP to non-GAAP historical results can be found below. In addition, as discussed below, it is not possible, without unreasonable efforts, to identify the timing or occurrence of events and transactions that could significantly impact future GAAP EPS or cash flow used for investing activities if they were to occur.
Air Products (NYSE:APD) today reported third quarter fiscal 2021 GAAP EPS from continuing operations of $2.36, up 17 percent; GAAP net income of $532 million, up 16 percent; and GAAP net income margin of 20.4 percent, down 170 basis points, each versus prior year.
On a non-GAAP basis, adjusted EPS from continuing operations of $2.31 was up 15 percent; adjusted EBITDA* of $976 million was up 11 percent; and adjusted EBITDA margin of 37.5 percent was down 520 basis points, each versus prior year. Non-GAAP adjusted EPS excludes a $0.05 tax benefit, primarily resulting from reserve adjustments related to a 2017 tax election on a non-U.S. subsidiary.
Third quarter sales of $2.6 billion increased 26 percent on 12 percent higher volumes, six percent higher energy cost pass-through, six percent favorable currency, and two percent higher pricing. Volumes increased as COVID-19 recovery, new plants, and acquisitions more than offset reduced contributions from the Lu’An facility in China.
Commenting on the results, Air Products’ Chairman, President and Chief Executive Officer Seifi Ghasemi said, “The stability of our business and the dedication of our people have been on full display, as we continue to deliver strong financial results despite the challenges of the pandemic. Our sales, adjusted EBITDA and adjusted EPS grew double digits this quarter versus prior-year quarter, and our price and volume continue to be strong. We continue to build on what we do best, driving the energy transition by developing, owning and operating world-scale, sustainability-driven projects and forming strategic partnerships that enhance our leadership positions.”
Fiscal Third Quarter Results by Business Segment
- Industrial Gases – Americas sales of $1,063 million were up 25 percent over the prior year on 10 percent higher energy cost pass-through; nine percent higher volumes, driven by merchant COVID-19 recovery, higher medical oxygen sales in South America, and one-time items; four percent higher pricing; and two percent favorable currency. Operating income of $286 million increased 15 percent and adjusted EBITDA of $465 million increased 13 percent, as higher volumes, pricing and one-time items more than offset power and other cost inflation and higher maintenance costs. Operating margin of 26.9 percent decreased 230 basis points, with higher energy cost pass-through accounting for approximately 250 basis points of the decline. Adjusted EBITDA margin of 43.7 percent decreased 470 basis points, with higher energy cost pass-through accounting for approximately 400 basis points of the decline.
- Industrial Gases – EMEA sales of $623 million increased 45 percent over the prior year on 24 percent higher volumes, driven primarily by COVID-19 recovery and acquisitions; 12 percent favorable currency; eight percent higher energy cost pass-through; and one percent higher pricing. Operating income of $140 million increased 33 percent and adjusted EBITDA of $212 million increased 25 percent, primarily driven by the higher volumes. Operating margin of 22.5 percent decreased 200 basis points, with higher energy cost pass-through accounting for approximately 100 basis points of the decline and the remainder mainly due to power and other cost inflation. Adjusted EBITDA margin of 34.1 percent decreased 540 basis points, with higher energy cost pass-through accounting for approximately 200 basis points of the decline and the remainder mainly due to power and other cost inflation.
- Industrial Gases – Asia sales of $752 million increased 15 percent from the prior year on eight percent favorable currency, six percent higher volumes, and one percent higher pricing. Higher merchant volumes and new plants were partially offset by reduced contributions from Lu’An. Operating income of $219 million decreased one percent, as reduced contributions from Lu’An and higher costs were mostly offset by favorable currency and higher volumes from merchant and new plants. Operating margin of 29.1 percent decreased 490 basis points. Adjusted EBITDA of $356 million increased nine percent, as higher volumes, equity affiliate income, and favorable currency more than offset the reduced contributions from Lu’An and higher costs. Adjusted EBITDA margin of 47.4 percent decreased 270 basis points.
Outlook
Air Products expects full-year fiscal 2021 adjusted EPS guidance of $8.95 to $9.05, up approximately eight percent over prior year adjusted EPS. For the fiscal 2021 fourth quarter, Air Products’ adjusted EPS guidance is $2.44 to $2.54, up 11 to 16 percent over fiscal 2020 fourth quarter adjusted EPS. This guidance does not include the Jazan transaction.
Air Products expects capital expenditures of approximately $2.5 billion for full-year fiscal 2021. This guidance does not include the Jazan transaction.
Management has provided adjusted EPS guidance on a continuing operations basis, which excludes the impact of certain items that we believe are not representative of our underlying business performance, such as the incurrence of additional costs for cost reduction actions and impairment charges, or the recognition of gains or losses on disclosed items. It is not possible, without unreasonable efforts, to predict the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS or the effective tax rate. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on our future GAAP EPS. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS and effective tax rate to a comparable GAAP range.
Earnings Teleconference
Access the Q3 earnings teleconference scheduled for 8:30 a.m. Eastern Time on August 9, 2021 by calling 323-994-2093 and entering passcode 7037306 or access the Event Details page on Air Products’ Investor Relations website.
