Air Products and Chemicals(APD) - 2024 Q3 - Quarterly Results

Fiscal 2024 Third Quarter Financial & Operational Overview Q3 FY2024 Financial Highlights Air Products reported strong year-over-year growth in profitability for the third quarter of fiscal 2024. GAAP EPS increased by 17% and adjusted EPS grew by 7%. The company also achieved significant margin expansion, with GAAP net income margin up 360 basis points and adjusted EBITDA margin up 260 basis points Q3 FY2024 Key Financial Metrics (vs. Q3 FY2023) | Metric | Q3 FY2024 | Change (YoY) | | :--- | :--- | :--- | | GAAP EPS | $3.13 | +17% | | Adjusted EPS* | $3.20 | +7% | | GAAP Net Income | $709 million | +16% | | Adjusted EBITDA* | $1.3 billion | +5% | | GAAP Net Income Margin | 23.7% | +360 bps | | Adjusted EBITDA Margin* | 42.4% | +260 bps | Recent Operational & Strategic Highlights The company announced significant strategic moves in its clean energy and core industrial gas businesses. Key developments include a long-term green hydrogen supply agreement with TotalEnergies, the divestiture of its LNG business to Honeywell, and investments to expand production capacity and serve growing markets in the U.S. - Signed a 15-year agreement to supply 70,000 tons of green hydrogen annually to TotalEnergies' Northern European refineries starting in 2030[2] - Announced an all-cash transaction to divest its liquefied natural gas (LNG) technology and equipment business to Honeywell for $1.81 billion, expected to close before the end of the calendar year[2] - Plans to build new air separation units in Georgia and North Carolina and invest $70 million to expand its gas separation membrane manufacturing center in Missouri to meet growing demand in biogas, hydrogen recovery, and aerospace[3] - Announced plans to build commercial-scale hydrogen refueling station networks in California and along major European transportation corridors[2] Fiscal 2024 & Q4 Outlook Air Products confirmed its full-year fiscal 2024 guidance for adjusted EPS and capital expenditures. The company also issued adjusted EPS guidance for the fourth quarter, projecting continued growth FY2024 and Q4 Guidance | Metric | Guidance Range | Implied Growth (YoY) | | :--- | :--- | :--- | | Full-Year FY2024 | | | | Adjusted EPS | $12.20 to $12.50 | 6% to 9% | | Capital Expenditures | $5.0 billion to $5.5 billion | - | | Q4 FY2024 | | | | Adjusted EPS | $3.33 to $3.63 | 6% to 15% (vs. Q4'23 Adj. EPS of $3.15) | Detailed Financial Performance Consolidated Results of Operations (Q3 FY2024) In Q3 FY2024, consolidated sales decreased by 2% to $3.0 billion, primarily due to unfavorable currency and lower energy cost pass-through. Despite the sales decline, GAAP net income rose 16% to $709 million, and adjusted EBITDA grew 5% to $1.3 billion, driven by favorable pricing, improved business mix, and productivity gains that offset higher maintenance costs and inflation Q3 FY2024 Consolidated Performance | Metric | Q3 FY2024 | Change (YoY) | Key Drivers | | :--- | :--- | :--- | :--- | | Sales | $3.0 billion | -2% | -2% currency, -1% energy pass-through, +1% pricing | | GAAP Net Income | $709 million | +16% | Favorable pricing, favorable mix, prior year charge for business actions | | Adjusted EBITDA | $1.3 billion | +5% | Positive pricing, favorable mix, improved productivity | Segment Performance (Q3 FY2024) Segment performance was mixed in the third quarter. The Americas and Europe delivered strong adjusted EBITDA growth of 6% and 12% respectively, driven by higher pricing and volumes from new assets. Conversely, Asia's adjusted EBITDA declined by 9% due to planned maintenance outages and lower merchant product demand. Middle East and India equity affiliates' income also decreased by 7% Q3 FY2024 Performance by Business Segment (vs. Q3 FY2023) | Segment | Sales | Sales Change | Adjusted EBITDA | Adj. EBITDA Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $1.2B | -2% | $604M | +6% | Higher pricing, offset by lower energy pass-through and volumes | | Asia | $790M | -4% | $324M | -9% | Planned maintenance outages, unfavorable currency | | Europe | $693M | -2% | $283M | +12% | Increased volume from new assets, pricing net of variable costs | | Middle East & India | N/A | N/A | N/A | -7% (Equity Income) | Higher costs | Consolidated Financial Statements (Unaudited) Consolidated Income Statements For the third quarter ended June 30, 2024, sales were $2.99 billion, a slight decrease from $3.03 billion in the prior year. However, operating income increased to $737.6 million from $644.2 million, and net income attributable to Air Products rose to $696.6 million, or $3.13 per diluted share, compared to $595.6 million, or $2.67 per diluted share, in the same period last year Q3 Income Statement Highlights (in millions, except EPS) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sales | $2,985.5 | $3,033.9 | | Operating Income | $737.6 | $644.2 | | Net Income Attributable to Air Products | $696.6 | $595.6 | | Diluted EPS | $3.13 | $2.67 | Consolidated Balance Sheets As of June 30, 2024, the company's total assets grew to $37.0 billion from $32.0 billion at fiscal year-end 2023. This increase was primarily driven by a significant rise in net plant and equipment. Total liabilities also increased to $20.3 billion from $16.3 billion, largely due to a substantial increase in long-term debt Balance Sheet Summary (in millions) | Metric | June 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $5,677.4 | $5,200.5 | | Plant and equipment, net | $21,482.1 | $17,472.1 | | Total Assets | $36,974.3 | $32,002.5 | | Total Current Liabilities | $4,474.5 | $3,895.8 | | Long-term debt | $12,786.4 | $9,280.6 | | Total Liabilities | $20,287.3 | $16,342.2 | | Total Equity | $16,687.0 | $15,660.3 | Consolidated Statements of Cash Flows For the nine months ended June 30, 2024, cash provided by operating activities increased to $2.69 billion from $2.20 billion in the prior year. Cash used for investing activities rose to $4.77 billion, driven by higher additions to plant and equipment. Cash provided by financing activities was $2.85 billion, primarily from long-term debt proceeds used to fund investments Nine-Month Cash Flow Summary (in millions) | Metric | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $2,689.7 | $2,203.4 | | Cash Used for Investing Activities | ($4,773.8) | ($4,399.8) | | Cash Provided by Financing Activities | $2,847.7 | $1,098.9 | | Increase (Decrease) in cash | $758.7 | ($1,073.3) | Reconciliation of Non-GAAP Financial Measures Adjusted Diluted EPS Reconciliation The company reconciled its Q3 FY24 GAAP EPS of $3.13 to an adjusted EPS of $3.20. The net adjustment of $0.07 per share primarily reflects the exclusion of non-service related pension costs, partially offset by a gain from the de-designation of cash flow hedges. This compares to a prior-year adjustment of $0.31 per share, which included a significant charge for business and asset actions Q3 FY2024 GAAP to Non-GAAP EPS Reconciliation | Description | Per Share Impact | | :--- | :--- | | Q3 2024 GAAP Diluted EPS | $3.13 | | (Gain) Loss on de-designation of cash flow hedges | ($0.01) | | Non-service pension cost, net | $0.09 | | Q3 2024 Non-GAAP ("Adjusted") Diluted EPS | $3.20 | Adjusted EBITDA Reconciliation Consolidated adjusted EBITDA for Q3 FY24 was $1.27 billion, a 5% increase from $1.21 billion in the prior year. The adjusted EBITDA margin expanded by 260 basis points to 42.4%. The reconciliation starts with GAAP net income and adds back interest, taxes, depreciation & amortization, and other non-GAAP adjustments Q3 Consolidated Adjusted EBITDA Reconciliation (in millions) | Metric | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Net income | $708.9 | $610.5 | | Add: Interest, Taxes, D&A, etc. | $557.9 | $538.6 | | Add: Business and asset actions | - | $59.0 | | Adjusted EBITDA | $1,266.8 | $1,208.1 | | Adjusted EBITDA Margin | 42.4% | 39.8% | Capital Expenditures Reconciliation The company presents a non-GAAP capital expenditures figure of $3.88 billion for the first nine months of FY2024. This is reconciled from the GAAP measure 'Cash used for investing activities' by adjusting for investment purchases/proceeds and, most significantly, excluding expenditures for the NEOM Green Hydrogen project that were funded by joint venture partners rather than Air Products' own equity Nine-Month Capital Expenditures Reconciliation (in millions) | Description | Nine Months Ended June 30, 2024 | | :--- | :--- | | Cash used for investing activities (GAAP) | $4,773.8 | | Adjustments for investment proceeds/purchases, etc. | ($343.9) | | NGHC expenditures not funded by Air Products' equity | ($1,242.0) | | Capital expenditures (Non-GAAP) | $3,875.7 |