As the closing months of the year fast approach, Air Products has revealed a mixed bag of fourth quarter 2008 results impacted by both weaker demand in Electronics and lower volumes in Europe.
While the overall picture from 2008 appears as positive as ever, weaker demand in Electronics and softer-than-expected volumes in Europe impacted on the company’s fourth quarter results.
A suggested tighter control over discretionary spending and operating expenses throughout 2009 is perhaps indicative of the global economic predicament the world finds itself in, though Air Products remains resolute in its positive outlook for the year ahead.
The company reported net income of $262m, or diluted earnings per share (EPS) of $1.21, for its fiscal 2008 fourth quarter – compared with $293m and $1.31 for the fourth quarter of fiscal 2007.
Excluding five favourable benefits from fiscal 2007 fourth quarter results, 2008 fiscal fourth quarter income from continuing operations of $273m increased 7% and diluted EPS of $1.26 increased 10%.
Operating income of $373m rose 3%, while included in operating income was a $.05 per share loss related to a fire at the company’s nitrogen trifluoride (NF3) facility in Korea, and a $.05 per share unfavourable impact from the recent Gulf Coast hurricanes.
For fiscal 2008, sales of $10.4m were up 14% and income from continuing operations of just over $1.1m increased 16% over the prior year.
John McGlade, Chairman, President and CEO, reflected on the results, “Overall, 2008 represented another year of strong performance for the company, with 14% sales growth, 18% EPS growth and a 50 basis point improvement in ROCE to 13%, while continuing to drive improvements in our portfolio.”
“However, weaker demand in Electronics and softer-than-expected volumes in Europe impacted our fourth quarter results.”
Merchant Gases sales of $1.095m increased 15% and operating income of $196m increased 12% over the prior year on strong pricing, favourable currency and improved volumes.
The company recorded Tonnage Gases sales of $940m, with 21% growth on higher natural gas cost pass-through. Hurricane impacts reduced sales by 6% in the quarter, but operating income of $135m demonstrated a positive increase of 14% over the prior year, on lower maintenance and better operating efficiency.
Electronics and Performance Materials sales of $553m rose 6%, while Equipment and Energy sales of $126m were up 2% as higher air separation unit sales were offset by declines in LNG heat exchanger sales.
Sights set on strong growth
Looking forward to 2009 and remaining resolute despite the ongoing economic meltdown, Air Products indicated a tighter control on expenditure would be a central focus to complement the company’s target of delivering both improved margins, and strong earnings growth.
McGlade explained, “Despite the unprecedented volatility in the global economy, we remain committed to our long-term goals to improve our margins and returns, and capture the substantial growth opportunities that exist in our markets. We currently project our capital spending to be $1.6-1.8bn in 2009, up from $1.4bn in 2008.”
“Our project backlog is at an all-time high, and we announced this week two new agreements to supply hydrogen to ExxonMobil at their Baton Rouge and Baytown refineries. Our strong, predictable cash flow, coupled with our solid, well-managed balance sheet, allows us to finance the growth next year and continue to grow our capital spending in the future.”
McGlade concluded, “In the short term, we are very focused on controlling costs and are taking many actions to minimise discretionary spending. We are increasing the energy efficiency at our plants, lowering maintenance costs, and reducing distribution expense per unit of product delivered. Although we are likely to see a much weaker global economy in 2009, we remain committed to delivering consistent, strong earnings growth along with improved margins and returns throughout the economic cycle.”