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Air Products and Chemicals(APD) - 2024 Q4 - Annual Report
APDAir Products and Chemicals(APD)2024-11-21 18:57
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Sales and Revenue - Air Products' industrial gases sales constituted over 90% of consolidated sales in fiscal years 2024, 2023, and 2022, with approximately half attributable to atmospheric gases[17]. - Approximately 50% of total company sales are generated from on-site gas supply contracts, which typically span 15 to 20 years[20]. - The sale of equipment supply mode constituted less than 10% of consolidated sales in fiscal years 2024, 2023, and 2022[24]. - No single customer accounts for more than 10% of consolidated sales, indicating a diversified customer base[25]. - Approximately 60% of the company's sales in fiscal year 2024 were derived from customers outside the United States[50]. - Total consolidated sales decreased by 4% to 12.1billion,primarilyduetoa512.1 billion, primarily due to a 5% lower energy cost pass-through driven by lower natural gas prices[112]. - Sales for fiscal year 2024 were 12.1 billion, a decrease of 4% or 499.4million,primarilyduetoa5499.4 million, primarily due to a 5% lower energy cost pass-through, partially offset by a 1% increase in pricing[100]. Financial Performance - Operating income increased by 79% to 4.5 billion, primarily due to a 1.6billiongainfromthesaleoftheLNGbusiness,withanoperatingmarginof36.91.6 billion gain from the sale of the LNG business, with an operating margin of 36.9%, up 1,710 basis points from the previous year[101]. - Net income rose by 65% to 3.9 billion, with a net income margin of 31.9%, an increase of 1,330 basis points from the prior year, largely due to the after-tax gain from the LNG business sale[102]. - Adjusted EBITDA for fiscal year 2024 was 5.0billion,a75.0 billion, a 7% increase, with an adjusted EBITDA margin of 41.7%, up 440 basis points from the previous year[103]. - The company returned approximately 1.6 billion to shareholders through dividend payments during fiscal year 2024[99]. - The effective tax rate increased to 19.6% from 19.1%, influenced by the recognition of the gain from the LNG business sale[126]. - The company reported a net income increase driven by strong operational performance and strategic adjustments, including a gain on the sale of business amounting to 1,575.6million[146].InvestmentsandProjects−Thecompanyisinvestinginprojectstocreateareliablesourceoflow−carbonhydrogen(bluehydrogen)andcarbon−freehydrogen(greenhydrogen)tosupportthetransitiontolow−andzero−carbonenergy[19].−Asignificantportionofthecompany′sbusinessinvolvescleanhydrogen,carboncapture,andgasificationprojects,whichrequireinvestmentsofbillionsofdollarsandfacecomplexregulatoryandoperationalrisks[51].−TheNEOMGreenHydrogenProjectisonscheduletocomeonstreamattheendof2026,withfirstproductdeliveryexpectedinearly2027[108].−TheNEOMGreenHydrogenProjectsecurednon−recourseprojectfinancingofapproximately1,575.6 million[146]. Investments and Projects - The company is investing in projects to create a reliable source of low-carbon hydrogen (blue hydrogen) and carbon-free hydrogen (green hydrogen) to support the transition to low- and zero-carbon energy[19]. - A significant portion of the company's business involves clean hydrogen, carbon capture, and gasification projects, which require investments of billions of dollars and face complex regulatory and operational risks[51]. - The NEOM Green Hydrogen Project is on schedule to come onstream at the end of 2026, with first product delivery expected in early 2027[108]. - The NEOM Green Hydrogen Project secured non-recourse project financing of approximately 6.1 billion, expected to fund about 73% of the project[172]. - The company issued 2.5billionofgreenseniornotestofundenvironmentallybeneficialprojectsunderitsGreenFinanceFramework[99].WorkforceandDiversity−AsofSeptember30,2024,thecompanyhadapproximately23,000employees,withover952.5 billion of green senior notes to fund environmentally beneficial projects under its Green Finance Framework[99]. Workforce and Diversity - As of September 30, 2024, the company had approximately 23,000 employees, with over 95% working full-time and about 75% located outside the United States[36]. - The company aims to achieve at least 28% female representation and at least 30% minority representation in professional and managerial roles in the U.S. by 2025[38]. - The company has collective bargaining agreements covering under 20% of its total workforce, with agreements expiring over the next four years[36]. - The total headcount of the company increased from approximately 16,300 at the end of fiscal 2018 to approximately 23,000 at the end of fiscal 2024, indicating significant growth in workforce[63]. Sustainability and Environmental Impact - The company is committed to sustainability, focusing on low- and zero-carbon hydrogen projects to address energy and environmental challenges[34]. - The company emphasizes a safety goal of zero accidents and incidents, supported by a global Environment, Health and Safety policy[37]. - The company’s sustainability strategy is detailed in its latest Sustainability Report, which outlines employee roles in achieving sustainability goals[34]. - The company does not expect material expenditures for capital projects related to pollution control in fiscal year 2025[33]. - The company continues to develop technologies for energy efficiency and emission reduction, particularly in hydrogen production and carbon capture[33]. - Legislative and regulatory efforts to address global climate change may impose additional costs on the company, particularly related to GHG emissions reporting and compliance[60]. Risks and Challenges - The company has experienced past difficulties related to project development, which may result in delays, scope changes, and additional costs, potentially impacting financial results[53]. - The company’s growth strategies depend on its ability to penetrate international markets and manage large-scale projects, which may involve significant risks[50]. - The company is exposed to fluctuations in foreign currency exchange rates, which can affect reported sales, net earnings, and cash flows[50]. - The company’s operations are subject to extensive government regulations, which can negatively impact financial condition and results of operations[55]. - The company may face challenges in successfully identifying, executing, or integrating acquisitions, which could adversely impact revenue and cash flow growth[55]. - Increased public concern and governmental action regarding GHG emissions could lead to higher operational costs and reduced demand for certain products[62]. Legal and Regulatory Matters - The company is involved in various legal proceedings, including a potential fine of approximately 33 million related to alleged anticompetitive activities in Brazil[85]. - The company’s financial results may be affected by various legal and regulatory proceedings, which could lead to material liabilities and impact cash flows[65]. - The company has established policies to protect the security and privacy of sensitive information, but breaches could result in legal liabilities and reputational harm[57]. Capital Structure and Financing - Total debt increased from 10,305.8millionasofSeptember30,2023,to10,305.8 million as of September 30, 2023, to 14,227.9 million as of September 30, 2024, largely due to the issuance of green U.S. Dollar-denominated fixed-rate notes[169]. - Cash provided by financing activities for fiscal year 2024 was 2,615.4million,primarilyfromlong−termdebtproceedsof2,615.4 million, primarily from long-term debt proceeds of 4,678.3 million[168]. - The company plans to permanently reinvest the majority of its foreign cash and cash items that would be subject to additional taxes outside the U.S.[159]. Cybersecurity - The Company achieved its primary cybersecurity risk management objective in fiscal year 2024 with no material cybersecurity incidents reported[72]. - The Company has not incurred material expenses from cybersecurity incidents over the past three years[72].