Airgas has reported fiscal 2016 first quarter sales of $1.3bn, 3% up over the prior year and including a 2% rise in organic sales compared to the previous year.

The company noted that sales to its customers in the energy, chemicals and manufacturing sectors remained challenging.

In the Distribution segment, organic sales were flat compared to the prior year, with gas and rent up 2% and hardgoods down 3%. In the All Other Operations segment, organic sales were up 16% – primarily driven by increased sales in the refrigerants, CO2 and dry ice businesses.

Acquisitions contributed sales growth of 1% in the quarter on both a consolidated basis and in the Distribution segment.

Airgas President and CEO Michael L. Molinini commented, “Cash flows were again strong, and we delivered earnings squarely in the middle of our guidance range. As anticipated, sales to our customers engaged in the energy and chemical and the manufacturing and metal fabrication sectors remained challenged through the quarter.”

“One bright spot is the continued strength we are seeing in non-residential construction. After a relatively slow calendar 2014, our March 2015 quarter saw year-over-year growth in non-residential construction of 5% and this quarter year-over-year growth reached 6%. We remain focused on things we can control including leveraging our industry leading platform and managing expenses.”

Results

Airgas, Inc. reported earnings per diluted share of $1.16 for its first quarter ended 30th June 2015, down 2% compared to the prior year earnings per diluted share of $1.18, in line with the company’s expectations and reflective of the challenging economic conditions.

Organic sales were up 2% over the prior year, with gas and rent up 5% and hardgoods down 3%. In the Distribution segment, organic sales were flat compared to the prior year, with gas and rent up 2% and hardgoods down 3%.

Selling, distribution, and administrative expenses increased 4% over the prior year, with operating costs associated with acquired businesses representing approximately 1% of the increase. The balance of the increase reflects normal inflation and rising healthcare costs, as well as the incremental costs to support strong sales growth in the All Other Operations segment. Selling, distribution, and administrative expenses in the Distribution segment increased 2% over the prior year, excluding the impact of operating costs associated with acquired businesses.

From the beginning of its fiscal year through to 27th July, the company has acquired nine businesses with aggregate annual sales of approximately $74m, including industrial gas and welding supply distributor Weldinghouse, Inc, and the nitrogen services business of Priority Energy Services, LLC.

“We share the Fed’s view of tempered optimism on the economic outlook in the near-term and the level of uncertainty in the marketplace makes it difficult for us to predict our near-term sales outlook”

Peter McCausland, Airgas Executive Chairman

Outlook

For the second quarter of fiscal year 2016, the company expects earnings per diluted share in the range of $1.28 to $1.33, while second quarter guidance assumes a year-over-year organic sales growth rate in the low single digits.

For the full fiscal year 2016, Airgas guidance assumes a year-over-year organic sales growth rate in the low to mid single digits.

“We share the Fed’s view of tempered optimism on the economic outlook in the near-term and the level of uncertainty in the marketplace makes it difficult for us to predict our near-term sales outlook,” said Airgas Executive Chairman Peter McCausland. “While we are encouraged by some bright spots, such as the increased activity of many of our construction customers, our strong cash flow and increased acquisition activity, the overall sluggishness in the industrial economy tempers our near-term optimism. Long-term, we believe the fundamental growth prospects for the US economy are strong.”

“The low end of our fiscal 2016 guidance assumes a very modest uptick in growth rates as the year progresses, with average organic sales growth in the low single digits for the full year. The high end assumes acceleration in growth rates over the course of the year, with average organic sales growth in the mid single digits for the full year.”