Air Products Reports Fiscal 2023 Second Quarter GAAP EPS of $1.97 and Adjusted EPS of $2.74

Q2 FY23 (comparisons versus prior year):

• GAAP EPS# of $1.97, down 17 percent; GAAP net income of $450 million, down 16 percent; and GAAP net income margin of 14.1 percent, down 410 basis points
• Adjusted EPS* of $2.74, up 17 percent; adjusted EBITDA* of $1,151 million, up 13 percent; and adjusted EBITDA margin* of 36.0 percent, up 140 basis points
• Higher pricing and volume drove improved results in all regional segments

Recent Highlights

• Completed Jazan Phase II in January 2023, which began contributing to equity affiliates' income during the second quarter
• Issued inaugural green bonds in $600 million and €700 million debt offerings, making Air Products the first U.S. chemical company to qualify green and blue hydrogen projects as an eligible expenditure category
• Continued to drive the Company's hydrogen leadership through first-mover low-carbon intensity and zero-carbon energy transition mega projects globally; brought over 30 new assets on-stream in Asia
• Signed four LNG process technology and equipment agreements during the quarter, including with Bechtel Energy, Inc. for Sempra Infrastructure’s Port Arthur LNG Phase 1 Project in Jefferson County, Texas and with Technip Energies for the Xi'An LNG Emergency Reserve & Peak Regulation Project with Shaanxi LNG Reserves & Logistics Company Ltd. in ShaanXi Province, China  
• Announced two new world-scale carbon monoxide projects in Texas with secured, long-term off-take contracts from Eastman and LyondellBasell

Guidance

• Increased fiscal 2023 full-year adjusted EPS guidance* to $11.30 to $11.50, up 10 to 12 percent over prior year adjusted EPS* calculated on the same basis; fiscal 2023 third quarter adjusted EPS guidance* of $2.85 to $2.95, up 10 to 14 percent over prior year third quarter adjusted EPS* calculated on the same basis
• Continue to expect fiscal year 2023 capital expenditures* of $5.0 - $5.5 billion 

#Earnings per share is calculated and presented on a diluted basis from continuing operations attributable to Air Products. 

*Certain results in this release, including in the highlights above, include references to non-GAAP financial measures on a consolidated, continuing operations basis and a segment basis. Additional information regarding these measures and reconciliations of GAAP to non-GAAP historical results can be found below. In addition, as discussed below, it is not possible, without unreasonable efforts, to identify the timing or occurrence of future events, transactions, and/or investment activity that could have a significant effect on the Company's future GAAP EPS or cash flow used for investing activities if any of these events were to occur.

Air Products (NYSE:APD) today reported second quarter fiscal 2023 results, including GAAP EPS from continuing operations of $1.97, down 17 percent from prior year. This includes an unfavorable $0.77 per share impact, primarily from business and asset actions related to the Company's withdrawal from projects in Indonesia and Ukraine. GAAP net income of $450 million was down 16 percent and GAAP net income margin of 14.1 percent decreased 410 basis points from the prior year as higher costs, including the charge for business and asset actions, were only partially offset by higher pricing and higher volumes, as well as higher equity affiliates' income from the Jazan project.

For the quarter, on a non-GAAP basis, adjusted EPS from continuing operations of $2.74 increased 17 percent over the prior year. Adjusted EBITDA of $1,151 million was up 13 percent and adjusted EBITDA margin of 36.0 percent increased 140 basis points over the prior year, as higher pricing, higher volumes, and higher equity affiliates' income more than offset higher costs. 

Second quarter sales of $3.2 billion increased nine percent over the prior year on eight percent higher pricing and six percent higher volumes, partially offset by four percent unfavorable currency and one percent lower energy cost pass-through. Higher pricing across the regions and higher on-site volumes drove the results.

Commenting on the results, Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi said, "Our team successfully drove pricing and volumes in our base business, delivering critical productivity, efficiency and sustainability benefits for our customers. The team also continued to advance our first-mover clean hydrogen mega projects that will decarbonize heavy transportation and industrial sectors globally. I am proud of the continued achievements of our team who delivered outstanding results despite the ongoing economic and geopolitical challenges in the world.”

Fiscal 2023 Second Quarter Results by Business Segment 

• Americas sales of $1,373 million were up 16 percent over the prior year on nine percent higher volumes and eight percent higher pricing, partially offset by one percent unfavorable currency. Operating income of $324 million increased 18 percent and adjusted EBITDA of $514 million increased 14 percent, in each case due to higher pricing and higher volumes, partially offset by higher costs. Operating margin of 23.6 percent increased 40 basis points primarily due to higher pricing, while adjusted EBITDA margin of 37.4 percent decreased 50 basis points.

• Asia sales of $814 million increased eight percent over the prior year, as seven percent higher volumes, five percent higher pricing and three percent higher energy cost pass-through more than offset seven percent unfavorable currency. Operating income of $233 million increased 14 percent and adjusted EBITDA of $350 million increased nine percent, in each case due to the favorable volumes and pricing, partially offset by higher costs and unfavorable currency. Operating margin of 28.6 percent increased 150 basis points and adjusted EBITDA margin of 43.0 percent increased 20 basis points.

• Europe sales of $753 million increased two percent over the prior year, driven by 11 percent higher pricing and three percent higher volumes, partially offset by six percent lower energy cost pass-through and six percent unfavorable currency. Operating income of $173 million increased 49 percent and adjusted EBITDA of $251 million increased 32 percent, in each case primarily driven by higher pricing. Operating margin of 23.0 percent increased 720 basis points and adjusted EBITDA margin of 33.3 percent increased 760 basis points.

• Middle East and India equity affiliates' income of $99 million increased 39 percent compared to the prior year, primarily due to the completion of the second phase of the Jazan project.

• Corporate and other sales of $215 million decreased 10 percent compared to the prior year, driven by lower sale of equipment activity. 

Outlook

Air Products provides adjusted EPS guidance on a continuing operations basis, excluding the impact of certain items that management believes are not representative of the Company's underlying business performance, such as the incurrence of costs for cost reduction actions and impairment charges, or the recognition of gains or losses on disclosed items. It is not possible, without unreasonable efforts, to predict the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS. Similarly, it is not possible, without unreasonable efforts, to reconcile the forecasted capital expenditures to future cash used for investing activities because management is not able to identify the timing or occurrence of future investment activity, which is driven by management's assessment of competing opportunities at the time the Company enters into transactions. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on the Company's future GAAP results. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS or the capital expenditures to a comparable GAAP range.

Air Products expects full-year fiscal 2023 adjusted EPS guidance of $11.30 to $11.50, up 10 to 12 percent over prior year adjusted EPS. For the fiscal 2023 third quarter, Air Products' adjusted EPS guidance is $2.85 to $2.95, up 10 to 14 percent over fiscal 2022 third quarter adjusted EPS.

Effective beginning in the first quarter of fiscal year 2023, management reviews adjusted EPS excluding the impact of non-service related components of the net periodic benefit/cost for the Company's defined benefit pension plans. The projected percentage increase in adjusted EPS for full year fiscal 2023 and fiscal 2023 third quarter is calculated using fiscal 2022 results recast on a consistent basis. Refer to the reconciliations of GAAP to non-GAAP historical results below for additional information.

Air Products continues to expect capital expenditures of $5.0 - $5.5 billion for full-year fiscal 2023.

Earnings Teleconference
Access the fiscal 2023 second quarter earnings teleconference scheduled for 8:30 a.m. Eastern Time on May 9, 2023 by calling 323-701-0225 and entering passcode 4444766 or by accessing the Event Details page on Air Products’ Investor Relations website.