Air Products and Chemicals, Inc.
CEO : Mr. Seifollah Ghasemi
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q1 | 6.0% YoY | 24.7% | 2.0% | 2023-02-02 |
Seifi Ghasemi says,
Financial Performance and Guidance:
- Earnings per share was $2.64, an improvement of 6% versus last year.
- Guidance for the first quarter was to deliver earnings per share of 2.60 to 2.80.
- The principal reason for being at the lower end is due to the weaker Chinese and European economies.
- Quarterly dividend was increased by 8% to $1.75 per share per quarter.
- Expected to pay out more than $1.5 billion to shareholders in 2023.
Project Milestones:
- Air Products announced a $4 billion green hydrogen project in Northern Texas, the largest in the United States.
- The second phase of the $12 million Jazan gasification and power project was completed with a total cash contribution of $2.5 billion.
- The NEOM green hydrogen project is progressing, with engineering being 30% complete, all major subcontracts awarded, land preparation done, and construction started.
Project Financing:
- Partners will contribute 25% cash and the remaining 75% will be non-recourse project financing for the NEOM project.
- Received commitments from over 20 global financial institutions for project financing, which is more than 2x over-subscribed.
- Total funding needed for the project is $8.5 billion, made up of $6.2 billion of non-recourse debt and $2.3 billion of cash from the three partners.
- Air Products’ cash contribution to the project will be less than $800 million, which is significantly less than the $1.7 billion originally expected.
Sustainability and Growth Strategy:
- Air Products core industrial gas business provides critical products and services that lower emissions and increase efficiency and productivity in dozens of industries.
- The company will commit more than $15 billion by 2027 to deliver clean hydrogen at scale through Blue and Green hydrogen projects of the future.
Management Principles:
- Air Products’ management principles are critical to the company’s success and will continue to guide them in the future.
Dr. Samir Serhan says,
Americas Results
- Underlying sales increased by 15% despite severe weather in December.
- Price improved for the region by 9%, equivalent to 26% increase in the merchant business.
- Volume grew 6%, primarily from better merchant and on-site resulting from a new short-term agreement.
- Operating income was up almost 30% over last year, and operating margin improved 300 basis points.
- EBITDA improved less than operating income due to lower equity affiliate income and lower medical oxygen volume in Mexico.
Sequential Performance
- Merchant price was up 7%, but volume was down 3% following a strong previous quarter.
- EBITDA margin improved around 400 basis points primarily due to lower energy cost pass-through.
- Planned maintenance activity is expected to increase next quarter parallel with customers’ plan turnaround.
Q & A sessions,
Asia Q1 2023 Results
- Positive volume and price despite COVID impact in certain parts of China
- Volume improved 7% supported by new assets
- Price was up 1% in total, translating to 3% in merchant business
- Higher price and volume drove margin improvement
- Negative currency reduced operating income and EBITDA each by about 10%
European Outlook
- The economy was weaker than expected in the first quarter
- Energy and power prices have stabilized, but natural gas prices have not yet
- Confident in Air Products and prospects despite significant uncertainties
- Left guidance unchanged for fiscal year 2023
- Earnings per share guidance for Q2 2023 is $2.50 to $2.70, up 7% to 15% over last year
Capital Deployment Strategy
- CAPex at $5 billion to $5.5 billion for the year, including the completion of the Jazan project
- Building diverse and inclusive culture with a mission to bring people together to collaborate and innovate on sustainability challenges
IRA Benefits
- Carbon capture on existing facilities to reduce CO2 emissions and sell lower carbon hydrogen at higher prices
- Benefits from Louisiana project that has completed with $35 more returns due to IRA registration
- Significant amount of green projects in the United States to produce green hydrogen
- Opportunities for Air Products to benefit from European Union’s program to promote renewable energy
NEOM Project Infrastructure
- Best estimate is $2 billion for infrastructure to use the capacity of NEOM
- Infrastructure cost is dependent on the exact kind of customers Air Products will have
- Option to use own cash or raise money by going to the market and raising bonds
- Will most probably look at project finance for $4 billion project in the future
No bad stock 