“Despite the global economic environment and significant energy, environmental and geopolitical challenges facing our world, the Air Products team continues to deliver on our commitments and our higher purpose as a company.”
Those were the words of Seifi Ghasemi, Chairman, President and CEO of Air Products, as he reflected on the company’s second quarter (Q2) fiscal 2022 results, highlighting GAAP net income of $537m and GAAP EPS from continuing operations of $2.38.
Q2 also saw sales of $2.9bn increase 18% over the prior year on 8% higher volumes, 6% higher pricing and 6% higher energy cost pass-through, partially offset by 2% unfavourable currency.
For the quarter, on a non-GAAP basis, adjusted EPS from continuing operations of $2.38 increased 14% over the prior year, and adjusted EBITDA of $1bn was up 9% over the prior year as higher volumes, pricing and equity affiliates’ income more than offset higher costs.
Adjusted EBITDA margin of 34.6% decreased 270 basis points, which included a decrease from higher energy cost pass through of about 200 basis points.
Ghasemi continued, “Our people are driving progress in our existing megaprojects while also developing and winning new ones, including the new $2bm investment for the sustainable aviation fuel expansion project at World Energy’s facility in California.”
“At the same time, the team is focused on the strength of our base business, signing new contracts and bringing facilities onstream across key markets. This includes electronics, where we announced $1.3bn of on-site awards demonstrating our continued lead4rship position serving the growing semiconductor industry.”
“I want to thank our dedicated people for contributing the technology, skills and expertise that benefit our customers and countries around the world, every day.”
Results by segment
Americas sales of $1.2bn were up 12% over the prior year on 6% higher volumes, primarily hydrogen recovery and improved merchant demand, 5% higher pricing and 2% higher energy cost pass-through, partially offset by 1% unfavourable currency.
Operating income of $276m increased 5%, as higher volumes and pricing more than offset higher energy, maintenance and other costs. Adjusted EBITA of $449m was flat on these same factors as well as lower equity affiliates’ income.
Operating margin of 23.2% decreased 170 basis points, as higher costs and negative volume mix were only partially offset by higher pricing. Adjusted EBITDA margin of 37.9% decreased 460 basis points on these same factors as well as lower equity affiliates’ income.
Asia sales of $751m increased 8% over the prior year on 6% higher volumes, particularly on-site volume from new, traditional industrial gas plants; 1% higher pricing; and 1% higher energy cost pass-through.
Operating income of $204m increased 3% and adjusted EBITDA of $322m increased 2%, as favourable volumes and pricing more than offset higher costs. Operating margin of 27.1% decreased 140 basis points and adjusted EBITDA margin of 42.8% decreased 240 basis points.
Europe sales of $739m increased 32% over the prior year on 24% higher energy cost pass-through; 14% higher pricing across all sub-regions; and 2% higher volumes, driven primarily by merchant demand, partially offset by 8% favourable currency.
Operating income of $116m decreased 12%, primarily driven by higher energy and other costs and unfavourable currency, partially offset by higher pricing. Adjusted EBITDA of $190m decreased 3% on these same factors, partially offset by favourable equity affiliates’’ income.
Operating margin of 15.8% decreased 800 basis points and adjusted EBITDA margin of 25.7% decreased 950 basis points, predominantly on the higher energy costs. Higher energy cost pass-through negatively impacted operating margin and adjusted EBITDA, margin by about 450 and 700 basis points, respectively.
Middle East and India equity affiliates’’ income of $71m was up $55m over the prior year, primarily from the Jazan joint venture.
Corporate and other sales of $240m increased 46% over the prior year, driven by higher sale of equipment activity. This activity drove improvements in both operating income and adjusted EBITDA.
Air Products continues to expect full-year fiscal 2022 adjusted EPS guidance of $10.20 to $10.40, up 13%-15% over prior year adjusted EPS. For the fiscal 2022 third quarter, Air Products’ adjusted EPS guidance is $2.55 to $2.65, up 10%-15% over fiscal 2021 third quarter adjusted EPS.
Air Products expects capital expenditures of $4.5bn-$5bn for full year fiscal 2022.