Air Products has reported strong fiscal 2018 first quarter (Q1) results, with a Q1 net income of $156m and diluted earnings per share (EPS) of $0.70.
These results included a net $239m, or $1.09 per share, charge related to the US Tax Cuts and Jobs Act.
For the quarter, on a non-GAAP basis, adjusted net income from continuing operations of $395m increased 23% and diluted adjusted EPS from continuing operations of $1.79 increased 22% over the prior year. Excluding a $.06 benefit from the new Tax Act, EPS increased 18%.
The adjusted EPS benefit from the Tax Act in the first quarter was $.06 per share. Air Products expects the full-year adjusted EPS benefit of the Tax Act to be $0.20 to $0.25 per share, with an expected adjusted full-year tax rate of 20-21%. Non-GAAP results for the company in the fiscal first quarter of 2018 exclude a net expense of $239m due to the Tax Act, which includes an expense of $453m for the cost of the deemed repatriation tax and adjustments to the future cost of repatriation from foreign investments, and a benefit of $214m, primarily from the re-measurement of the company’s net US deferred tax liabilities at the lower corporate tax rate.
First quarter sales of $2.2bn increased 18% from the prior year on 13% higher volumes, 2% higher pricing and 3% favourable currency. Volumes were higher in all three Industrial Gas regions, driven by new plants, a contract termination resulting in a plant sale in China, and base business growth.
For the quarter, adjusted EBITDA of $735m increased 12% over the prior year, driven by the higher volumes and Asia pricing. Adjusted EBITDA margin of 33.2% decreased 160 basis points from the prior year, primarily driven by the China contract termination/plant sale and higher energy pass-through, the Tier One company said.
Commenting on the results, Seifi Ghasemi, Air Products’ Chairman, President and CEO, said, “The committed and motivated team at Air Products delivered another excellent quarter of safety and financial results. Adjusted EPS of $1.79 was another quarterly record. This is also the 15th consecutive quarter that we have reported adjusted EPS growth. In addition, we are winning new projects and delivering on our growth strategy. We generated a significant amount of investable cash and announced a 16 percent increase to our quarterly dividend, making our annual dividend $4.40 per share.”
Results by business segment
Industrial Gases – Americas sales of $910m increased 5% over prior year, driven by higher volumes, primarily strong hydrogen demand. Adjusted EBITDA of $354m increased 1% over the prior year, with higher volumes more than offsetting costs from higher planned maintenance outages. Adjusted EBITDA margin of 38.9% decreased 160 basis points from the prior year.
Industrial Gases – EMEA sales of $516m increased 29% over prior year, driven by 17% higher volumes, as well as 9% favourable currency and 3% favourable energy pass through. The higher volumes were primarily from a new hydrogen plant in India; merchant volumes were also positive. Adjusted EBITDA of $167m increased 18% over the prior year, primarily driven by the volume increase and the positive currency impact. Adjusted EBITDA margin of 32.3% decreased 320 basis points from the prior year; excluding the impact of higher energy pass through and high natural gas prices in India, margins were roughly flat.
Industrial Gases – Asia sales of $644m increased 47% over prior year, mainly due to the contract termination/plant sale in China; excluding this, volumes were up 8% from both new plants and strong base merchant business. Pricing increased 7% over prior year, driven by China merchant pricing. Adjusted EBITDA of $247m increased 38% from the contract termination and plant sale, strong volumes, higher pricing and favorable currency. Excluding the contract termination/plant sale, adjusted EBITDA margins increased 240 basis points.
Ghasemi concluded, “We continue to be optimistic about the future of Air Products. We cannot predict, and do not have control, over worldwide political or economic developments. But we do have control over the operational and growth performance of Air Products, and we feel confident we can deliver on our goals.”
“We have a strong balance sheet – the best in the industry. We will continue to focus on safety, controlling our costs, and investing in the many strategic growth opportunities we see.”