Air Products has reported its first quarter fiscal 2014 results, with strong performances in its Electronics and Performance Materials, and Equipment and Energy business segments.
The company has seen cost reduction efforts contribute to higher operating income, while its project backlog is described as strong and even greater momentum is expected in the second half of the year.
This would build on first quarter (ended 31st December 2013) net income of $287m, which has itself risen 4% against the results of first quarter 2013.
Air Products revealed first quarter sales of $2.546m decreased 1% versus prior year on slightly lower volumes and stable pricing, partially offset by higher energy pass-through. Volumes were higher in Merchant Gases, Electronics and Performance Materials, and Equipment and Energy, while refinery customer outages impacted volumes in the Tonnage Gases segment.
Underlying sales, excluding the exit from the Polyurethane Intermediates Business (PUI), decreased 1%.
Sequentially, sales decreased 2%, with underlying sales down 3% mainly due to seasonality in Merchant Gases, and Electronics and Performance Materials, and outages.
Operating income of $386m increased 4% versus the prior year on strong results in Electronics and Performance Materials, and Equipment and Energy, while operating margin of 15.1% was up 60 basis points. Sequentially, operating income was down 8% and margin declined 120 basis points, primarily due to seasonal volumes and higher costs driven by Tonnage Gases maintenance outages.
Commenting on the quarter, John McGlade, Chairman, President and CEO, said, “We continue to execute against our 2014 priorities to deliver even greater value for our shareholders. In the first quarter, our cost reduction efforts contributed to higher operating income, further strong signings improved asset loadings, and we continued to execute on our strong backlog, bringing on major new plants in China.”
Looking ahead, he added, “We still see greater momentum in the second half of the year. Full year performance remains on track and we expect to drive earnings growth by continuing to focus on our priorities – improved asset utilisation, productivity and cost reduction, winning in the marketplace and disciplined project execution.”
When looking at first quarter performance by business segment, Merchant Gases sales of $1.048m increased 4% versus the prior year on higher volumes.
Liquid oxygen, nitrogen and argon volumes were up in all regions, partially offset by weaker packaged gases demand in Europe and lower helium volumes due to global supply constraints.
Operating income of $169m decreased 1% versus the prior year, with the positive impact from higher volumes more than offset by under-recovery of higher power and fuel costs. Sequentially, sales decreased one percent on lower seasonal volumes in US/Canada and helium availability.
A sharp decrease was seen in Tonnage Gases sales of $808m, which fell 10% versus last year; while there was continued strong demand in the US Gulf Coast, this was more than offset by plant outages and lower Latin America volumes. Sales decreased sequentially by 3%, primarily on lower volumes due to the outages. Operating income of $118m was down 15% versus prior year and 13% sequentially.
Electronics and Performance Materials sales of $579m increased 5% versus the prior year, on 6% higher volumes. Electronics sales rose 4%, driven by higher equipment and onsite sales, and Performance Materials was up 8% with all product lines and all major regions showing positive growth. Operating income of $84m increased 36% versus prior year. Sequentially, sales were unchanged with currency offsetting lower volumes.
Sales of $111m in Equipment and Energy increased 4% versus prior year and were down 6% sequentially. Operating income of $21m was unchanged sequentially and up 144% versus the prior year, driven by LNG projects. The sales backlog of $343m decreased 12% versus the prior year and 15% versus last quarter.