Air Products reports strong sales in Q3 2022 results

Air Products has reported yet another successful quarter, with its latest third quarter (Q3) financials highlighting sales of $3.2bn, a 22% increase over the prior year.

Publishing its results on Thursday (4^th August), the industrial gas giant said on a non-GAAP basis, adjusted EPS from continuing operations of $2.62 increased 13% in the quarter, over the prior year, and adjusted EBITDA of $1bn was up 11%.

Adjusted EBITDA margin of 33.9% decreased 360 basis points, primarily driven by higher energy cost pass-through, which negatively impacted margin by approximately 500 basis points.

Hydrogen has been identified by Air Products as one of its biggest growth areas, especially in the Americas, due to more merchant demand and higher sale of equipment activity.

Pricing also improved in the Americas, Asia and Europe – the company’s largest segments.

SeifiGhasemi, Chairman, President and CEO of Air Products, said, “Our people across the globe are executing on our strategy, which is fundamentally based on doing two things at the same time: running our base industrial gas business efficiently and continuing to invest in and grow it, while also being the first-mover in low- and zero-carbon hydrogen projects that help the world decarbonise and drive the broader energy transition.”

“Despite significant, continued challenges in the world, our team’s hard work and commitment are enabling the strength and stability of our business to shine through, as evidenced in our results this quarter.”

Results by segment

Americas sales of $1.4bn were up 33% over the prior year on 22% higher energy cost pass-through, 8% higher pricing, and 4% higher volumes, partially offset by 1% unfavourable currency.

Operating income of $299 increased 5% and adjusted EBITDA of $481m increased 3% on the higher pricing and higher volumes in the base business, partially offset by costs for inflation, higher planned maintenance, and higher supply chain costs as well as favourable one-time items in the prior year.

Operating margin of 21.1% decreased 580 basis points and adjusted EBITDA margin of 33.9% decreased 980 basis points, primarily due to higher energy cost pass-through, which lowered operating margin and adjusted EBITDA margin by approximately 450 basis points and 800 basis points, respectively.

Asia sales of $751m were flat versus the prior year, as 2% higher volumes and 2% higher pricing were offset by 4% percent unfavourable currency.

Operating income of $211m decreased 4% and adjusted EBITDA of $324m decreased 5%, as the favourable volumes and pricing were more than offset by unfavourable currency as well as costs for higher planned maintenance, inflation, and higher supply chain costs.

Operating margin of 28% decreased 110 basis points and adjusted EBITDA margin of 43.1% decreased 230 basis points.

Europe sales of $740m increased 23% over the prior year on 24% higher energy cost pass-through and 17% higher pricing across all product lines and sub-regions, partially offset by 15% unfavourable currency and 3% lower volumes. 

Operating income of $137m increased 3% and adjusted EBITDA of $207m increased 4%, primarily driven by higher pricing, which more than offset lower volumes, higher power costs and unfavourable currency. 

Adjusted EBITDA was also positively impacted by higher equity affiliates’ income. Operating margin of 18.6% decreased 380 basis points and adjusted EBITDA margin of 28% decreased 500 basis points, predominantly due to the higher energy cost pass-through, which lowered operating margin and adjusted EBITDA margin by approximately 450 basis points and 700 basis points, respectively.

Middle East and India equity affiliates’ income of $67m was up $50m over the prior year, primarily from the Jazan joint venture.

Corporate and other sales of $247m increased 48% over the prior year, driven by higher sale of equipment activity. This activity drove improvements in both operating income and adjusted EBITDA.

Outlook

Air Products has maintained full-year fiscal 2022 adjusted EPS guidance of $10.20 to $10.40, up 14% at midpoint, over prior year adjusted EPS.

For the fiscal 2022 Q4, Air Products’ adjusted EPS guidance is $2.68 to $2.88, up 7-15% over fiscal 2021 fourth quarter adjusted EPS.

Air Products expects capital expenditures of over $4.5bn for full-year fiscal 2022.