Air Products today reported net income of $336m, up 19% versus prior year, and diluted earnings per share (EPS) of $1.55*, up 17% versus prior year for its fiscal second quarter ended March 31, 2015.

On a GAAP basis, net income and diluted EPS from continuing operations were $290m and $1.33, respectively, for the quarter.

Second quarter sales of $2.415bn decreased 6% versus prior year, as underlying sales growth of 5% was more than offset by unfavorable currency and lower energy pass-through. Volumes increased 4%, primarily in Industrial GasesAsia and Materials Technologies, and pricing was up 1%. Sequentially, sales declined 6% on unfavorable currency and lower energy pass-through.

Operating income of $442m increased 15% versus prior year, and operating margin of 18.3% improved 340 basis points. Adjusted EBITDA of $709m increased 10% over prior year, and EBITDA margin of 29.4% improved 440 basis points, reflecting strong operating leverage.

Commenting on the quarter, Seifi Ghasemi, Chairman, President and CEO, said, “I am, once again, very proud of the Air Products team, whose hard work and focus on our five-point plan have enabled us to deliver these strong results, even in the face of significant currency headwinds.”

“Despite economic uncertainty, we remain laser focused on the things we can control and are maintaining our full-year guidance.”

 

Second Quarter Results by Business Segment:

  • Industrial Gases – Americas sales of $890m decreased 14% percent versus prior year on 13% lower energy pass-through and 3% unfavorable currency. Underlying sales were up 2%, primarily on higher North America liquid bulk and hydrogen volumes. Despite energy and currency headwinds, operating income of $182m increased 7% on improved cost performance and higher volumes and pricing. Operating margin of 20.4% improved 400 basis points over prior year. Adjusted EBITDA of $300m increased 7%, and EBITDA margin of 33.7% improved 640 basis points over prior year. Sequentially, operating income decreased 14% as the benefit of restructuring actions was more than offset by the impact from currency, lower volumes and energy pass-through.
  • Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $449m declined 17% versus last year on 15% unfavorable currency. Underlying sales were flat, as higher pricing offset lower volumes. Operating income of $71m decreased 19% and adjusted EBITDA of $127m decreased 17% versus prior year, primarily on the significant unfavorable currency impact.
  • Industrial Gases – Asia sales of $393m increased 7% versus prior year despite the negative impact of currency and energy pass-through. Volumes increased 15%, primarily on strong volume growth from new plants. Operating income of $85m increased 19%, and operating margin of 21.6% improved 210 basis points over prior year due to higher volumes from the new plants and favorable cost performance. Adjusted EBITDA of $144m increased 14%, and EBITDA margin of 36.7% improved 200 basis points over prior year. Sequentially, operating income decreased 6% on higher costs, unfavorable currency and lower pricing.
  • Materials Technologies sales of $533m increased 7% over the prior year. Underlying sales were up 11% on 9% higher volume growth and 2% positive pricing. Electronics Materials sales were up 16% on strong volume growth in all business units and positive price. Performance Materials sales declined 1% from the prior year as 4% underlying sales growth was offset by currency impacts. Operating income of $124m increased 32%, and operating margin of 23.3% improved 450 basis points versus prior year, primarily due to higher volumes and pricing. Adjusted EBITDA of $148m increased 27%, and EBITDA margin of 27.8% improved 440 basis points over prior year.

Outlook

Air Products now expects capital expenditures for fiscal year 2015 of about $1.7bn, at the low-end of its previous forecast.

Looking ahead, Air Products expects third quarter EPS from continuing operations to be between $1.55 and $1.60 per share. For the full fiscal year, the company is maintaining its guidance from continuing operations of $6.35 to $6.55 per share, which at the midpoint, represents a 12% increase over fiscal 2014.