Air Products Reports Strong First Quarter Fiscal 2015 Results

Air Products reported net income of $335 million, up 17% versus prior year, and diluted earnings per share (EPS) of $1.55, up 16% versus prior year, on a non-GAAP continuing operations basis for its fiscal first quarter ended Dec. 31, 2014.
 
On a GAAP basis, net income and diluted EPS from continuing operations were $325 million and $1.50, respectively, for the quarter.
 
First quarter sales of $2,561 million increased 1% versus prior year, as higher volumes and pricing were largely offset by unfavorable currency impacts and the exit from the Polyurethane Intermediates Business (PUI). Excluding these impacts, underlying sales increased 5% on 4% higher volumes with strength across most of the segments. Sequentially, sales declined 4% on lower seasonal volumes and unfavorable currency impacts.
 
Operating income of $445 million increased 15% versus prior year as higher volumes, favorable cost performance, and stronger pricing more than offset unfavorable currency impacts. Operating margin of 17.4% improved 230 basis points. Adjusted EBITDA of $723 million increased 10%, and EBITDA margin of 28.2% improved 240 basis points over prior year. Sequentially, operating income declined 6%, mainly due to lower seasonal volumes and unfavorable currency impacts.
 
“We started fiscal 2015 strong, delivering double-digit EBITDA and earnings growth,” said Seifi Ghasemi, chairman, president and CEO. “These results clearly demonstrate our people’s focus on safety, cost, and serving our customers in the new organization. Despite economic uncertainty, we are greatly encouraged by these results, and the team is focused on the actions we can control to deliver on our commitments.”
 
First Quarter Results by Business Segment:
• Industrial Gases – Americas sales of $1,003 million increased 6% versus prior year, primarily on higher North America volumes and stronger pricing. Sequentially, underlying sales declined 1%, primarily due to seasonality in North America. Operating income of $211 million increased 14%, and operating margin of 21.1% improved 160 basis points over prior year on higher North America volumes, pricing, and favorable cost performance. Adjusted EBITDA of $332 million increased eight%, and EBITDA margin of 33.1% improved 70 basis points over prior year.
• Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $501 million declined nine% versus last year, primarily on a seven% unfavorable currency impact. Underlying sales were flat, with modest liquid bulk volume growth offset by weaker packaged gases. Operating income of $81 million and adjusted EBITDA of $143 million were both down 5% versus prior year, primarily due to the unfavorable currency impact. Operating margin of 16.2% improved 70 basis points, and EBITDA margin of 28.5% improved 130 basis points over prior year.
• Industrial Gases – Asia sales of $399 million increased 1% versus prior year. Volumes increased 6%, primarily from new plants coming onstream, partially offset by lower energy pass-through and currency. Operating income of $91 million increased 9%, and operating margin of 22.7% improved 180 basis points over prior year due to higher volumes and favorable cost performance. Adjusted EBITDA of $155 million increased 12%, and EBITDA margin of 38.8% improved 370 basis points over prior year.
• Materials Technologies sales of $524 million increased 9% versus prior year on 11% higher volumes. Electronics Materials sales were up 13% and Performance Materials sales increased 6% over prior year on volume growth in all business units. Sequentially, sales decreased 7% on Performance Materials volume seasonality and strong prior quarter equipment sales in Electronics. Operating income of $105 million increased 63%, and operating margin of 20% improved 660 basis points versus prior year, primarily due to higher volumes and favorable cost performance. Adjusted EBITDA of $129 million increased 45%, and EBITDA margin of 24.7% improved 610 basis points over prior year.
 
Non-GAAP results for the company exclude a pre-tax charge of $32.4 million, or $0.10 per share, for business restructuring and cost reduction actions, and a pre-tax gain of $17.9 million, or $0.05 per share, on the revaluing of a previously held equity interest.
 
The capital expenditure forecast for the fiscal year 2015 remains between $1.7 billion and $1.9 billion. Looking ahead, Air Products expects second quarter EPS from continuing operations to be between $1.50 and $1.55 per share, and guidance for continuing operations for fiscal 2015 of $6.35 to $6.55 per share.