Air Products reported third quarter results led by strong performance in Merchant Gases, and Electronics and Performance Materials. For the quarter ended June 30, 2014, net income was $314 million, up 9%, and diluted earnings per share (EPS) was $1.46, an increase of 7%, compared with results for the third quarter of 2013.
Third quarter sales of $2,635 million increased 3% versus prior year, driven by higher volumes across all business segments. Excluding the prior exit from the Polyurethane Intermediates business (PUI), underlying sales improved four% versus prior year on 3% higher volumes. Sequentially, sales increased 2% on 4% higher volumes in Electronics and Performance Materials, Tonnage Gases, and Merchant Gases.
Operating income of $414 million increased 8% versus prior year, largely on higher volumes in Electronics and Performance Materials, and better pricing in Merchant Gases. Operating margin of 15.7% improved 70 basis points, with positive volumes more than offsetting higher costs, primarily from maintenance outages. Adjusted EBITDA for the third quarter was $653 million, up 7% versus prior year and 6% sequentially.
Third Quarter Results by Business Segment:
• Merchant Gases sales of $1,077 million increased 4% versus prior year, primarily on higher volumes in Asia and U.S./Canada. Liquid oxygen and nitrogen volumes increased in all regions, partially offset by lower global helium volumes. Operating income of $174 million increased 5% versus prior year, largely on higher volumes and better pricing. Sequential operating income improved 21%, due mainly to recovery of weather-related costs incurred in the second quarter. Operating margin of 16.1% was up 10 basis points versus last year and up 230 basis points sequentially.
• Tonnage Gases sales of $835 million decreased 1% versus prior year. Excluding PUI, volumes grew 2% on continued hydrogen demand in the U.S. Gulf Coast and the contributions from new plants. Operating income of $118 million was up three% versus prior year, excluding the effect of the PUI business exit, as contributions from new plants more than offset higher maintenance costs.
• Electronics and Performance Materials sales of $618 million increased 9% versus prior year on 9% higher volumes. Electronics sales were up 6% on strong growth in all segments. Performance Materials sales increased 12% on higher volumes in all regions and across all product lines. Operating income was up 23%, and operating margin improved 200 basis points versus prior year on higher volumes and better cost performance.
• Equipment and Energy sales of $104 million increased 1%, and operating income of $17 million increased 9% versus prior year, driven largely by LNG project activity. The sales backlog of $584 million increased 78% versus prior year on several new large orders.