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Air Products and Chemicals(APD) - 2023 Q2 - Quarterly Report
APDAir Products and Chemicals(APD)2023-05-08 16:00
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Earnings and Net Income - Basic earnings per share attributable to Air Products decreased from 2.39to2.39 to 1.98, while diluted earnings per share decreased from 2.38to2.38 to 1.97[13] - Net income for 2023 was 449.9million,downfrom449.9 million, down from 536.8 million in 2022[17] - Comprehensive income attributable to Air Products increased to 494.8millionin2023from494.8 million in 2023 from 477.2 million in 2022[17] - Net income for the six months ended 31 March 2023 was 1,012.0million,comparedto1,012.0 million, compared to 1,090.9 million for the same period in 2022[26][27] - Net income for the three months ended 31 March 2023 was 439.8million,downfrom439.8 million, down from 530.5 million in the same period in 2022[30][31] - Net income attributable to Air Products for Q1-Q2 FY2023 was 1,012.0million,withdilutedEPSof1,012.0 million, with diluted EPS of 4.54[144] - Diluted EPS for the second quarter of 2023 decreased 17% to 1.97,whileadjusteddilutedEPSincreased171.97, while adjusted diluted EPS increased 17% to 2.74[167] - Diluted EPS decreased by 0.41to0.41 to 1.97, a 17% decline from the prior year[170][171] - Diluted EPS for the first six months 2023 decreased by 7% to 4.54,whileadjusteddilutedEPSincreasedby124.54, while adjusted diluted EPS increased by 12% to 5.38[205][209] Assets and Liabilities - Total assets increased to 29.435billionin2023from29.435 billion in 2023 from 27.193 billion in 2022[21] - Cash and cash items decreased to 2.242billionin2023from2.242 billion in 2023 from 2.711 billion in 2022[21] - Long-term debt increased to 8.272billionin2023from8.272 billion in 2023 from 6.434 billion in 2022[21] - Total equity increased to 14.690billionin2023from14.690 billion in 2023 from 13.702 billion in 2022[21] - Total equity as of 31 March 2023 was 14,690.2million,comparedto14,690.2 million, compared to 14,510.7 million as of 31 March 2022[26][31] - Total assets increased to 809.2millionin2023from809.2 million in 2023 from 519.7 million in 2022, driven by growth in plant and equipment, which rose to 613.3millionfrom613.3 million from 218.8 million[45] - Total forward exchange contracts increased from 5,601.5millionat30September2022to5,601.5 million at 30 September 2022 to 6,331.3 million at 31 March 2023, with cash flow hedges accounting for 4,628.7million[74]−Designatedforeigncurrency−denominateddebtincreasedfrom€1,265.4million(4,628.7 million[74] - Designated foreign currency-denominated debt increased from €1,265.4 million (1,240.4 million) at 30 September 2022 to €1,979.9 million (2,146.1million)at31March2023[74]−Totalderivativesdesignatedashedginginstrumentsdecreasedfrom2,146.1 million) at 31 March 2023[74] - Total derivatives designated as hedging instruments decreased from 364.3 million at 30 September 2022 to 165.1millionat31March2023[84]−TotalAssetsatFairValuedecreasedfrom165.1 million at 31 March 2023[84] - Total Assets at Fair Value decreased from 189.1 million as of 30 September 2022 to 125.8millionasof31March2023[106]−TotalLiabilitiesatFairValuedecreasedfrom125.8 million as of 31 March 2023[106] - Total Liabilities at Fair Value decreased from 366.5 million as of 30 September 2022 to 169.8millionasof31March2023[106]−Totaldebtowedtorelatedpartiesincreasedfrom169.8 million as of 31 March 2023[106] - Total debt owed to related parties increased from 781.0 million as of 30 September 2022 to 822.1millionasof31March2023[111]−Borrowingsundercreditfacilitiesforforeignsubsidiariesincreasedfrom822.1 million as of 31 March 2023[111] - Borrowings under credit facilities for foreign subsidiaries increased from 457.5 million as of 30 September 2022 to 823.5millionasof31March2023[112]CashFlowandDividends−Cashprovidedbyoperatingactivitieswas823.5 million as of 31 March 2023[112] Cash Flow and Dividends - Cash provided by operating activities was 1.358 billion in 2023, compared to 1.305billionin2022[23]−Cashusedforinvestingactivitieswas1.305 billion in 2022[23] - Cash used for investing activities was 2.476 billion in 2023, compared to 2.636billionin2022[23]−Dividendspaidtoshareholdersincreasedto2.636 billion in 2022[23] - Dividends paid to shareholders increased to 719.2 million in 2023 from 664.7millionin2022[23]−Dividendsoncommonstockforthesixmonthsended31March2023totaled664.7 million in 2022[23] - Dividends on common stock for the six months ended 31 March 2023 totaled 748.5 million, up from 691.8millioninthesameperiodin2022[26][27]−Dividendsoncommonstockforthethreemonthsended31March2023totaled691.8 million in the same period in 2022[26][27] - Dividends on common stock for the three months ended 31 March 2023 totaled 388.7 million, up from 359.3millioninthesameperiodin2022[30][31]−Cashcontributionstofundedpensionplansandbenefitpaymentsunderunfundedpensionplanswere359.3 million in the same period in 2022[30][31] - Cash contributions to funded pension plans and benefit payments under unfunded pension plans were 15.4 million for the six months ended 31 March 2023, compared to 16.1millionforthesameperiodin2022[116]−Incometaxpayments,netofrefunds,were16.1 million for the same period in 2022[116] - Income tax payments, net of refunds, were 327.0 million for the six months ended 31 March 2023, up from 236.9millioninthesameperiodin2022[146]JointVenturesandInvestments−ThecompanyistheprimarybeneficiaryoftheNEOMGreenHydrogenCompanyjointventure,whichisconsolidatedinitsMiddleEastandIndiasegment[44]−TheNEOMGreenHydrogenProject,amultibillion−dollarinitiative,isexpectedtobeoperationalby2026andwillproducegreenammoniaforglobaltransportationmarkets[46][47]−AirProductsconsolidatedNGHCwithintheMiddleEastandIndiasegmentstartingQ32022,asitholdsone−thirdofthevotinginterestsbuthassignificantcontroloverkeyactivities[48]−AirProductsinvested236.9 million in the same period in 2022[146] Joint Ventures and Investments - The company is the primary beneficiary of the NEOM Green Hydrogen Company joint venture, which is consolidated in its Middle East and India segment[44] - The NEOM Green Hydrogen Project, a multibillion-dollar initiative, is expected to be operational by 2026 and will produce green ammonia for global transportation markets[46][47] - Air Products consolidated NGHC within the Middle East and India segment starting Q3 2022, as it holds one-third of the voting interests but has significant control over key activities[48] - Air Products invested 2,724.0 million in the Jazan Integrated Gasification and Power Company (JIGPC) joint venture as of 31 March 2023, with an additional 115millionexpectedlaterin2023[61][62]−JIGPCsigneda25−yearagreementtosupplyelectricity,steam,hydrogen,andutilitiestoAramco′srefineryandterminalcomplex,withprojectassetsvaluedat115 million expected later in 2023[61][62] - JIGPC signed a 25-year agreement to supply electricity, steam, hydrogen, and utilities to Aramco's refinery and terminal complex, with project assets valued at 12 billion[64] - Equity affiliates' income increased 37% to 165.9millioninthesecondquarterof2023,primarilyduetohighercontributionsfromtheJIGPCjointventure[166]−Equityaffiliates′incomeincreasedby37165.9 million in the second quarter of 2023, primarily due to higher contributions from the JIGPC joint venture[166] - Equity affiliates' income increased by 37% to 165.9 million, primarily due to higher contributions from the JIGPC joint venture[173][182] Sales and Revenue - Revenue from on-site gas supply increased to 1,574.4millioninQ22023,representing491,574.4 million in Q2 2023, representing 49% of total revenue, up from 1,486.2 million (51%) in Q2 2022[52] - Total sales for 2023 increased to 3,200.1millionfrom3,200.1 million from 2,945.1 million in 2022, representing an 8.7% growth[91] - Total sales for the six months ended 31 March 2023 were 6,374.8million,upfrom6,374.8 million, up from 5,939.3 million in the same period in 2022, a 7.3% increase[93] - Sales to related parties totaled 105millionand105 million and 185 million for the three and six months ended 31 March 2023, respectively, compared to 60millionand60 million and 125 million in the same periods in 2022[147] - Sales in the Americas segment for the three months ended 31 March 2023 were 1,373.1million,upfrom1,373.1 million, up from 1,186.6 million in the same period in 2022[152] - Sales for the second quarter of 2023 increased 9% to 3,200.1million,drivenbyhigherpricingandvolumes[165]−Salesincreasedby93,200.1 million, driven by higher pricing and volumes[165] - Sales increased by 9% to 3,200.1 million, driven by higher pricing (8%) and volumes (6%), partially offset by unfavorable currency impact (4%)[173][175] - Americas segment sales increased by 16% to 1,373.1million,drivenbyhighervolumes(91,373.1 million, driven by higher volumes (9%) and pricing (8%)[190][191] - Asia segment sales increased by 8% to 813.9 million, with operating margin improving 150 basis points to 28.6%[193] - Total Asia sales increased by 8% to 813.9million,drivenbyhighervolumes(7813.9 million, driven by higher volumes (7%), higher pricing (5%), and energy cost pass-through (3%), partially offset by a 7% unfavorable currency impact[194] - Europe sales increased by 2% to 752.9 million, with higher pricing (11%) and volumes (3%) offset by lower energy cost pass-through (6%) and unfavorable currency impact (6%)[198] - Middle East and India sales grew by 55% to 44.8million,drivenbyhighermerchantvolumes,butoperatingincomedecreasedby7344.8 million, driven by higher merchant volumes, but operating income decreased by 73% to 1.3 million due to higher maintenance costs[200] - Corporate and other segment sales decreased by 10% to 215.4million,withoperatinglosswideningby125215.4 million, with operating loss widening by 125% to 86.3 million due to lower project activity[202] - First six months 2023 sales increased by 7% to 6,374.8million,drivenbyhigherpricing(76,374.8 million, driven by higher pricing (7%), volumes (4%), and energy cost pass-through (1%), partially offset by a 5% unfavorable currency impact[203] Operating Income and Expenses - Total operating income for the three months ended 31 March 2023 was 645.4 million, down from 561.9millioninthesameperiodin2022[156]−Operatingincomedecreasedby18561.9 million in the same period in 2022[156] - Operating income decreased by 18% to 459.8 million, with operating margin declining 470 basis points to 14.4%[173][181] - Operating income in Asia increased by 14% to 233.0million,withoperatingmarginrisingto28.6233.0 million, with operating margin rising to 28.6% (up 150 basis points), driven by positive pricing and higher volumes[195] - Europe operating income surged by 49% to 173.2 million, with operating margin improving to 23.0% (up 720 basis points), primarily due to pricing improvements[199] - First six months 2023 operating income increased by 2% to 1,111.8million,withoperatingmargindecliningto17.41,111.8 million, with operating margin declining to 17.4% (down 90 basis points) due to higher costs and unfavorable currency[203] - Research and development expense increased by 15% to 27.2 million, remaining flat at 0.8% of sales[178] - Interest expense increased by 59% to 40.9million,drivenbyhigheraverageinterestratesonvariable−rateinstruments[183]−Changesinprojectcostestimatesunfavorablyimpactedoperatingincomeby40.9 million, driven by higher average interest rates on variable-rate instruments[183] - Changes in project cost estimates unfavorably impacted operating income by 35 million and 60millionforthethreeandsixmonthsended31March2023[149]EnvironmentalandPensionLiabilities−Environmentalaccrualswere60 million for the three and six months ended 31 March 2023[149] Environmental and Pension Liabilities - Environmental accruals were 68.9 million as of 31 March 2023, with a reasonably possible upper exposure of 82million[124]−Thecompanyisinvolvedin28environmentalsiteswherefinalsettlementorremediationhasnotbeenachieved,withanaccrualof82 million[124] - The company is involved in 28 environmental sites where final settlement or remediation has not been achieved, with an accrual of 37.7 million related to the Pace facility as of 31 March 2023[123][127] - Environmental accrual for the Pace facility increased by 19millionincontinuingoperationsandrecognizedabefore−taxexpenseof19 million in continuing operations and recognized a before-tax expense of 19 million in discontinued operations for Q2 FY2020[128] - The environmental accrual related to the Piedmont site was 6.9millionasof31March2023[130]−RemediationatthePiedmontsiteisexpectedtocontinuethrough2029,withmonitorednaturalattenuationthrough2047[131]−TheenvironmentalaccrualrelatedtothePasadenasitewas6.9 million as of 31 March 2023[130] - Remediation at the Piedmont site is expected to continue through 2029, with monitored natural attenuation through 2047[131] - The environmental accrual related to the Pasadena site was 10.7 million as of 31 March 2023[133] - The pump and treat system at the Pasadena site is estimated to operate until 2042[133] - Net Periodic Cost for defined benefit pension plans was 28.9millionforthethreemonthsended31March2023,comparedtoabenefitof28.9 million for the three months ended 31 March 2023, compared to a benefit of 1.5 million for the same period in 2022[115] - The company amended an international defined benefit pension plan, resulting in a 1.9millioncurtailmentgainandanetdecreaseof1.9 million curtailment gain and a net decrease of 9.1 million to the projected benefit obligation[117] Share-Based Compensation and Taxes - Share-based compensation for the six months ended 31 March 2023 was 29.0million,comparedto29.0 million, compared to 25.7 million in the same period in 2022[26][27] - Before-tax share-based compensation cost for Q1-Q2 FY2023 was 32.4million,withanafter−taxcostof32.4 million, with an after-tax cost of 24.5 million[136] - 85,612 market-based deferred stock units were granted with an estimated grant-date fair value of 502.03perunit[137]−113,134time−baseddeferredstockunitsweregrantedataweightedaveragegrant−datefairvalueof502.03 per unit[137] - 113,134 time-based deferred stock units were granted at a weighted average grant-date fair value of 309.75[138] - Effective tax rate for the three and six months ended 31 March 2023 was 21.2% and 19.9%, respectively, compared to 18.6% and 17.8% for the same periods in 2022[145] - Effective tax rate increased to 21.2% from 18.6% in the prior year, primarily due to the impact of business and asset actions[188][189] Derivatives and Hedging - Interest rate swaps (fair value hedge) remained stable at 800.0million,withanaveragepayrateof1.64800.0 million, with an average pay rate of 1.64% and an average maturity of 4.5 years[79] - Cross currency interest rate swaps (cash flow hedge) decreased from 785.7 million to 630.3million,withanaveragepayrateof4.75630.3 million, with an average pay rate of 4.75% and an average maturity of 2.4 years[79] - Net amount recognized in OCI for net investment hedging relationships decreased from 50.9 million at 30 September 2022 to (171.3)millionat31March2023[87]−NetamountrecognizedinOCIforcashflowhedgingrelationshipsincreasedfrom(171.3) million at 31 March 2023[87] - Net amount recognized in OCI for cash flow hedging relationships increased from (39.9) million at 30 September 2022 to 106.4millionat31March2023[88]−Thenetliabilitypositionofderivativeswithcreditrisk−relatedcontingentfeatureswas106.4 million at 31 March 2023[88] - The net liability position of derivatives with credit risk-related contingent features was 111.5 million as of 31 March 2023[96] - Counterparties would be required to post collateral of 37.3millionasof31March2023iftheircreditratingfallsbelowpre−establishedthresholds[97]−Thefairvalueofforwardexchangecontractsasof31March2023was37.3 million as of 31 March 2023 if their credit rating falls below pre-established thresholds[97] - The fair value of forward exchange contracts as of 31 March 2023 was 110.2 million, matching the carrying value[104] - The fair value of long-term debt, including the current portion and related party, was 8,409.1millionasof31March2023,comparedtoacarryingvalueof8,409.1 million as of 31 March 2023, compared to a carrying value of 9,133.9 million[104] Other Financial Metrics - Other comprehensive income for the six months ended 31 March 2023 was 622.8million,asignificantincreasefrom622.8 million, a significant increase from 10.3 million in the same period in 2022[26][27] - Other comprehensive income for the three months ended 31 March 2023 was 55.0million,comparedtoalossof55.0 million, compared to a loss of 53.3 million in the same period in 2022[30][31] - Investments by noncontrolling interests for the six months ended 31 March 2023 were 72.8million,asignificantincreasefrom72.8 million, a significant increase from 3.6 million in the same period in 2022[26][27] - Remaining performance obligations as of 31 March 2023 are estimated at 24billion,withapproximatelyhalfexpectedtoberecognizedoverthenextfiveyears[55]−Contractliabilitiesdecreasedto24 billion, with approximately half expected to be recognized over the next five years[55] - Contract liabilities decreased to 396.0 million in March 2023 from 439.1millioninSeptember2022,primarilyduetotherecognitionof439.1 million in September 2022, primarily due to the recognition of 165 million in sales from equipment contracts[58] - Inventories rose to 645.6millioninMarch2023from645.6 million in March 2023 from 514.2 million in September 2022, with finished goods accounting for 239.1million[59]−Goodwillchangesbysegmentforthesixmonthsended31March2023weredetailed,thoughspecificfigureswerenotprovidedinthecontent[67]−Goodwillincreasedfrom239.1 million[59] - Goodwill changes by segment for the six months ended 31 March 2023 were detailed, though specific figures were not provided in the content[67] - Goodwill increased from 823.0 million at 30 September 2022 to 883.9millionat31March2023,withsignificantgrowthinEuropefrom883.9 million at 31 March 2023, with significant growth in Europe from 457.5 million to 505.4million[68]−Accumulatedimpairmentlossesforgoodwillincreasedfrom505.4 million[68] - Accumulated impairment losses for goodwill increased from 273.0 million to 334.1million,primarilyduetotheLatinAmericareportingunit[69]−Net(Gain)LossReclassifiedfromOCItoIncomefor2023was334.1 million, primarily due to the Latin America reporting unit[69] - Net (Gain) Loss Reclassified from OCI to Income for 2023 was 0.1 million, compared to 0.2millionin2022[91]−Net(Gain)LossReclassifiedfromOCItoIncomeforthesixmonthsended31March2023was0.2 million in 2022[91] - Net (Gain) Loss Reclassified from OCI to Income for the six months ended 31 March 2023 was 0.1 million, compared to 0.5millionin2022[93]−Thecompanyissuedmulti−currencygreenbondstotaling0.5 million in 2022[93] - The company issued multi-currency green bonds totaling 600 million in U.S. Dollars and €700 million in Euros under its Green Finance Framework[108] Adjusted EBITDA and Margins - Adjusted EBITDA for the second quarter of 2023 increased 13% to 1,150.9million,withanadjustedEBITDAmarginof36.01,150.9 million, with an adjusted EBITDA margin of 36.0%[166] - Adjusted EBITDA increased by 13% to 1,150.9 million, with adjusted EBITDA margin improving 140 basis points to 36.0%[173][186] - Adjusted EBITDA for the first six months 2023 increased by 11% to $2,234.4 million, with adjusted EBITDA margin rising to 35.1% (up 110 basis points)[204]