Air Products has reported strong fiscal 2017 fourth quarter (Q4) and full-year results, including a 64% rise in reported GAAP net income over the same period the prior year.
Fourth quarter sales of $2.2bn increased 13% from the prior year, on 9% higher volumes, 2% higher pricing, and favourable energy pass-through and currency of 1% each.
Significantly, Air Products reported volumes were higher in all three of its industrial gas regions.
For the quarter, adjusted EBITDA of $769m increased 13% over the prior year on strong volume growth, higher pricing and productivity. Adjusted EBITDA margin of 34.9% increased 10 basis points from the prior year and was negatively impacted by 30 basis points from higher energy pass-through; excluding this impact, adjusted EBITDA margin increased 40 basis points.
For the year as a whole, Air Products reported GAAP net income from continuing operations of $1.1bn and GAAP diluted EPS from continuing operations of $5.16, up 3% and 2%, respectively.
On a non-GAAP basis, adjusted diluted earnings per share from continuing operations of $6.31 was up 12% versus prior year, the third consecutive year of significant growth.
Sales of $8.2bn increased 9% over prior year, on 6% higher volumes, 3% higher energy pass-through and 1% higher pricing, partially offset by 1% unfavourable currency.
Adjusted EBITDA of $2.8bn increased 7% over the prior year, led by strong volume growth and productivity. Adjusted EBITDA margin of 34.1% decreased 80 basis points and was negatively impacted by 90 basis points from higher energy pass-through; excluding this impact, adjusted EBITDA margin was up 10 basis points.
Reflecting on a 14th consecutive quarter of year on year adjusted EPS growth, Chairman, President and CEO Seifi Ghasemi pointed to the focus on delivering strong performance across the company.
“The talented, committed and dedicated team at Air Products, our people, delivered an excellent set of results. For the fourth quarter of fiscal 2017, our adjusted EPS was up 18% versus the fourth quarter of fiscal 2016, and for fiscal 2017, adjusted EPS is 12 percent higher than last year,” he said. “This is the fourteenth consecutive quarter that we have reported year-on-year adjusted EPS growth. This is also the third consecutive year that we have delivered adjusted EPS growth of more than 10%.”
“We generated strong cash flow and returned about $800m of that to our shareholders through dividends. We continue to be the safest and most profitable industrial gas company in the world, with adjusted EBITDA margin of over 34%. We have a great team that is totally focused on delivering strong performance, day in and day out. Ultimately, our success is built on providing excellent service to our customers. We are committed to providing them with the right innovations and solutions to make their processes better.”
Fourth quarter results by business segment
Industrial Gases – Americas sales of $953m increased 9%, primarily driven by 7% higher volumes. Hydrogen demand was strong despite hurricane impacts on the Gulf Coast. Operating income of $266m increased 19 percent. Adjusted EBITDA of $402m increased 14% on higher volumes, lower maintenance costs and productivity actions. Adjusted EBITDA margin of 42.2% increased 220 basis points over the prior year. Higher energy pass-through negatively impacted adjusted EBITDA margin by 60 basis points; excluding energy pass-through, adjusted EBITDA margin increased 280 basis points.
Industrial Gases – EMEA sales of $515m increased 24% versus last year, driven by 18% higher volumes and 5% favourable currency. The higher volumes were primarily from a new hydrogen plant in India; merchant demand was also positive. Operating income of $119m increased 21%. Adjusted EBITDA of $180m increased 17% over the prior year, primarily from the India plant as well as higher merchant volumes, productivity and the positive currency impact. Adjusted EBITDA margin of 35% decreased 220 basis points from the prior year, driven by the India hydrogen plant. While this plant delivers strong returns, the significant energy pass-through is dilutive to margins.
Industrial Gases – Asia sales of $552m increased 23% over prior year, with volumes up 17% and pricing up 6%. Approximately two-thirds of this volume growth was from new plants, while the remaining third was from broad, base business growth. China merchant pricing drove the overall pricing improvement. Operating income of $152m increased 38%. Adjusted EBITDA of $224m increased 31%, and adjusted EBITDA margin of 40.6% increased 240 basis points on strong volumes and higher pricing.
Ghasemi continued, “We continue to be optimistic about the future performance of Air Products and the opportunities we see in front of us. We have the strongest balance sheet in the industry, with over $8bn available to invest over the next three years. We remain confident in our ability to create shareholder value by deploying this capital through acquisitions, asset buybacks and very large industrial gas projects around the world, driven by demand for more energy, cleaner energy and emerging market growth. We are committed to delivering excellent short-term and long-term performance by improving our adjusted EPS by 10% every year, as we have done in the past three years.”