Air Products today reported results for the quarter ended March 31, 2014. Net income of $284m and diluted earnings per share (EPS) of $1.32, were down 2% and 4%, respectively, compared with results for the second quarter of 2013.

Second quarter sales of $2,582m increased 4% versus prior year driven by higher energy pass-through and stronger underlying volumes in Merchant Gases, and Electronics and Performance Materials. Excluding the exit from the Polyurethane Intermediates Business (PUI), underlying sales improved 2% versus prior year and were down one percent sequentially.

Operating income of $385m decreased 1% versus prior year. Strong results in Electronics and Performance Materials, and Equipment and Energy, were more than offset by Merchant Gases and Tonnage Gases, which were impacted by adverse weather and planned outages, respectively. Operating margin of 14.9% was down 80 basis points, with the positive impact from higher volumes more than offset by higher costs, including weather impacts, and the dilutive effect of higher energy pass-through.

Commenting on the quarter, John McGlade, Chairman, President and Chief Executive Officer, said, “In the second quarter, Air Products delivered higher underlying volumes. We also executed well on our planned maintenance outages, and managed the additional challenge of adverse weather, the costs of which we are committed to recover in the second half of the year. We remain confident in the prospects for the business and, accordingly, we raised our quarterly dividend for the 32nd consecutive year.”

Second Quarter Results by Business Segment:

  • Merchant Gases sales of $1,040m increased four percent versus prior year, primarily on higher volumes in US/Canada, Asia and Latin America, partially offset by lower helium volumes due to continued global supply constraints. Operating income of $143m was down 15% versus prior year and operating margin of 13.8% was down 300 basis points, primarily due to higher costs, including weather-related impacts in US/Canada.
  • Tonnage Gases sales of $840m increased 4% versus prior year, as higher energy pass-through more than offset lower volumes due to planned customer outages, and the impact of the PUI business exit. Operating income of $112m was down 9% versus prior year primarily due to planned higher maintenance costs and the PUI exit.
  • Electronics and Performance Materials sales of $592m increased 8% versus prior year driven by nine percent higher volumes. Electronics sales improved 6% primarily due to higher sales of delivery systems. Performance Materials sales increased 10% versus prior year with growth across all product lines and all major regions. Operating income of $107m increased 38% and operating margin improved by 400 basis points versus prior year on cost actions and the strong volumes.
  • Equipment and Energy sales of $110m decreased 11% versus prior year, while operating income of $23m increased 11% versus prior year driven largely by strong LNG project activity. The sales backlog of $338m increased 3%.

Outlook

Looking ahead, McGlade said, “Air Products’ momentum will continue to increase as we load assets, win new business and bring projects on-stream. Going forward, we remain focused on continuing to increase productivity and generate benefits from further price and cost actions. We are confident in our ability to deliver strong earnings growth in the second half of this year.”