Despite unfavourable currency and the extreme exit of its Energy-from-Waste (EfW) business, Tier One player, Air Products, has achieved its seventh consecutive quarter of delivering double-digit revenue growth in its latest fiscal quarter, ending 31st March, 2016.
Strong operations across its Asian business unit seemingly saved the day for the industrial gas corporation, as it reported shaky and mixed results across all its other regional procedures. And despite the recent price hike for industrial gases products, pricing overall was flat in the US, and the Europe, Middle East and Africa (EMEA) territory.
Air Products’ drastic termination of its EfW business on 4th April has been accounted for as a discontinued operation in these quarterly results, and as a result, the company has recorded a loss of $946m pre-tax.
In the face of challenging economic conditions and a weak manufacturing environment, Air Products again posted significant profit improvement…We have now delivered seven consecutive quarters of double-digit EPS growth
Continuing the downward trend, second quarter sales decreased overall by 6% versus the previous fiscal year and totalled $2.3bn, which the Tier One business puts down to unfavourable currency and a lower energy pass-through of 3% each. But despite this, adjusted net income from continuing operations was up 18% for the industrial gas corporation from the previous year, sitting at $397m.
The mixed results continued with the company reporting an adjusted operating income of $532m, which increased by 20% compared to the previous year, and a recorded adjusted operating margin of 23.4% improved by 500 basis points. Its EBITDA revenue also increased by 12%, standing at $797m.
Broken down into geographical segments, revenue for individual business units are outlined as below;
In the US industrial gases segment, sales decreased by 10% to a total of $798m, with volumes decreasing by 2% due to lower demand in Latin America, and weakness in the oil field services and North American steel markets. However, a price increase of 1% helped the company achieve an operating income of $224m – increasing 23% from the previous year.
In its EMEA industrial gases unit sales stood at $420m – a decrease of 6% from the previous year. Despite this, underlying sales were up by 1% and operating income totalled $89m – an increase of 26%. Air Products attributes this to the benefits from restructuring and pricing actions.
Its industrial gas business in Asia was its shining star this quarter, demonstrating an increased revenue of 3% compared to the previous fiscal year, with sales totalling $406m. Undoubtedly contributing to this drastic increase was the commissioning of its air separation unit (ASU) trains for Shaanxi Future Energy Chemical Co., Ltd, in the Shaanxi Province of China, which came on-stream in January. The project is capable of producing 12,000 tonnes per day of oxygen (O2) and represents one of the largest, single, on-site ASU orders ever committed to an industrial gas company.
In the Asia region, operating income of $104m increased 23%, and adjusted EBITDA of $170m increased 18%, benefitting from restructuring actions and higher volumes.
Its materials technologies unit also showed a revenue decrease, with sales down 7% to $494m across 6% lower volumes. However, its operating income of $129m was up 4% and adjusted EBITDA of $150m was up 1% from the previous year, with price and raw materials management, mix and restructuring actions driving the profit improvement.
Optimism amidst uncertainty
Seifi Ghasemi, Chairman, President and CEO of the US-based enterprise, enthused about his company’s quarterly performance despite the fiscal uncertainty, “With their sharp focus on executing our strategic five-point plan by controlling what they can control, the committed and motivated team at Air Products delivered excellent results again this quarter.”
“In the face of challenging economic conditions and a weak manufacturing environment, Air Products again posted significant profit improvement, with EPS up 17% and record EBITDA margin of 35.1%, up 560 basis points. We have now delivered seven consecutive quarters of double-digit EPS growth.”
Looking ahead, the company is optimistic and predicts a capital expenditure forecast for fiscal year 2016 of approximately $1.2bn. Overall, Air Products has increased its previous estimations for both third quarter and full year expected revenues on the back of such strong growth in this quarter.