As predicted by Air Products, the company has experienced weaker volumes in its second quarter, resulting in a low point in its fiscal year.
Air Products has reported income from continuing operations of $189m, or diluted earnings per share (EPS) of $0.89, for its fiscal second quarter ended March 31, 2009.
Income from continuing operations decreased by 31% and diluted EPS from continuing operations decreased by 29% compared to the previous year.
Second quarter revenues of $1,955m declined 23% on weaker volumes, unfavorable currency, and lower natural gas and raw material cost pass-through.
Operating income of $260m was down 31% from the previous year on weaker volumes and unfavorable currency.
John McGlade, Chairman, President and Chief Executive Officer said, “The unprecedented deterioration in global manufacturing continued into our second quarter, as producers extended their holiday shutdowns. As expected, we saw weaker volumes, contributing to what we said would be our low point for our fiscal year. However, we were able to partially offset these declines with benefits from our cost and productivity actions.”
Merchant gases sales of $870m declined 14% on unfavorable currency, weaker volumes across end-markets globally, and the impact of extended customer outages, partially offset by continued strong pricing.
Tonnage gases sales of $625m were down 28%, principally on lower natural gas and raw material cost pass-through and a stronger dollar, and to a lesser extent, weaker volumes, particularly in steel and chemical end-markets.
In the company’s Electronics and Performance Materials sector, sales of $332m declined 41% and the segment saw an $11m operating loss, driven by significantly lower volumes in Electronics due to further declines in semiconductor and liquid crystal display manufacturing.
Performance Materials volumes were impacted by pronounced weakness in coatings, autos and housing end-markets, the business remained profitable in the quarter.
Equipment and Energy sales of $128m were up 22% on higher air separation unit activity; Operating income of $16m increased 63% from the previous year on favorable cost performance.
McGlade added, “In this economic environment, visibility is limited, and the business climate remains weak. We expect to see some seasonal volume pick up in Merchant Gases and Performance Materials, and a modest improvement in Electronics in the second half of our fiscal year.”
“Our continued discipline and cost reduction actions will also further benefit earnings. Despite the challenging environment, we continue to pursue profitable growth opportunities serving energy, environmental and emerging markets.”
Air Products now expects third quarter EPS from continuing operations to be between $0.93 and $1.02 per share and full-year EPS from continuing operations to be between $3.85 and $4.05 per share.
Given the lack of economic momentum, the company continues to look at additional cost actions that could result in a charge in its fiscal third quarter. This guidance excludes the impact of these potential cost reduction charges.