Air Products today reported net income of $288m and diluted earnings per share (EPS) of $1.36, on a continuing operations basis, for its fiscal third quarter ended June 30, 2013, down 5% and 4% respectively versus prior year.
Third quarter revenues of $2,547m increased 9% versus prior year, with underlying sales down 2% due to the previously announced decision to exit the Polyurethane Intermediates (PUI) business. Acquisitions contributed 6% and higher energy cost pass-through increased sales 5%. Operating income of $383m decreased 3% versus prior year. Operating margin of 15% was down 200 basis points versus prior year, primarily on higher pension costs, higher energy pass-through, acquisitions and under-recovery of higher power costs in Merchant Gases. Sequential sales increased 3%, primarily due to seasonally stronger volumes in Merchant Gases and Performance Materials. Operating income declined 2% sequentially on higher Merchant costs and pension costs.
Commenting on the third quarter, John McGlade, Chairman, President and Chief Executive Officer, said, “Productivity and solid execution offset continued economic weakness, enabling us to deliver earnings within guidance. We remain focused on delivering on our commitments and executing on our $3bn backlog - and we expect these projects to be immediately accretive to earnings and cash flow as they come online. As stated previously, we are actively assessing additional actions that we can take that would result in increased value to our shareholders. While our review continues, we have already identified further actions we expect to take to improve margins and returns.”
Merchant Gases sales of $1,033m increased 18% versus the prior year on stronger volumes and the Indura acquisition.
Tonnage Gases sales of $846m increased 10% versus the prior year on higher energy pass-through, partially offset by lower PUI volumes..
Electronics and Performance Materials sales of $566m declined 6% versus prior year, primarily due to lower Electronics process materials volumes and equipment sales.
Equipment and Energy sales of $104m increased 9% versus prior year, primarily due to higher LNG project activity.
Looking ahead, McGlade said, “While our outlook for the remainder of our fiscal year continues to be tempered by the modest economic growth, our focus on increasing shareholder value remains unwavering. Our emphasis on cost reduction, productivity improvement and disciplined project execution remain key priorities. Our future prospects are solid given our record project backlog and the significant leverage in our existing assets.” Air Products expects fourth quarter adjusted EPS from continuing operations to be between $1.44 and $1.50 per share. The company’s adjusted guidance for continuing operations for fiscal 2013 is a range of $5.47 to $5.53 per share.