‘Back to basics’ Air Products posts $1.7bn Q2 loss after projects exit

Recently installed Air Products CEO Eduardo Menezes put a brave face on the company’s financial performance today, saying several times in a lengthy earnings call that it was going “back to basics” after posting a net loss of $1.7bn in the second quarter.

The result was severely impacted by $2.3bn in charges relating to three project cancellations: the World Energy Sustainable Aviation Fuel expansion project in Paramount, California; a green liquid hydrogen project in Massena, New York; and a carbon monoxide project in Texas.

And more tough decisions appear to lie in store for the industrial gas major.

One presentation slide highlighted $5bn-worth of “underperforming projects” comprising two blue hydrogen projects, in Edmonton and Rotterdam (combined capital expenditure exceeding $4bn), a green hydrogen project in Arizona ($360m), and other energy transition projects ($540m).

In another major development, the flagship joint venture Saudi project NEOM is now to focus on green ammonia project until regulations develop for green hydrogen around 2030.

Similarly, European downstream investments are to be delayed until regulatory frameworks are clarified and Air Products will continue to invest around $1.5bn per year in ‘lower risk projects’ with secure offtakes. At Darrow, Louisiana, it will pursue a carbon capture and sequestration and ammonia ‘derisking’ strategy.

Around 10% of the company’s staff has been cut since 2023, as part of the ongoing restructuring. This could yield up to $100m in savings on the full-year profit-and-loss account for 2025, said CFO Melissa Schaeffer. Approximately 2,500 staff will go in the next two to three years, with the long term objective of settling the company headcount at around 18,500 employees.

In terms of regional breakdowns, America sales rose 3% in the quarter to $1.3bn with operating income down 2% to $366m, Asia sales fell 1% to $774m with operating income falling 6% to $191m, and Europe dropped 9% to $727m. Middle East and India equity affiliates’ income rose 6% to $78m.

Corporate and other sales of $95m decreased 53% and operating loss of $118m increased 35% compared with the prior year, primarily due to the divestiture of the LNG business in the fourth quarter of fiscal 2024 to Honeywell.

Second quarter sales of $2.9bn were flat as 4% higher energy cost pass-through and 1% higher pricing were offset by 3% lower volumes, primarily due to the LNG divestiture, and 2% unfavourable currency. Adjusted EBITDA of $1.2bn was down 3%.

Menezes said, “We don’t expect a lot of help from the economy in the next two quarters. The tariff issue is a bit complicated – we don’t have a lot of [cross-border] trade. The main issue here is on the capital side. We have to order equipment and modules ahead, that normally takes six to 18 months … so it’s a little difficult trying to forecast what to do with our projects.”