Industrial gas giant
Air Products and Chemicals Inc.
(
APD
) logged fourth-quarter fiscal 2012 (ended September 30) adjusted
earnings from continued operations of $1.42 a share, missing the
Zacks Consensus Estimate by a couple of cents.
The adjusted earnings exclude one-time items including impairment
charges of $127 million (post-tax) associated with the
restructuring of the company's photovoltaic business. Air
Products, which supplies the photovoltaic market with gases
including silane, is seeing weak demand in this market. The
charges also include the cost associated with the company's move
to exit the polyurethane intermediates business.
Consolidated net income, as reported, plunged 57% year over year
to $138.7 million (or 65 cents a share), pummeled by the hefty
charges. The company reported a profit of $324.8 million (or
$1.51 a share) a year ago.
Revenues rose 4% year over year to $2,606 million, beating the
Zacks Consensus Estimate of $2,574 million. Sales were aided by
higher volumes in the Tonnage Gases, Equipment and Energy and
Electronics and Performance Materials divisions and acquisitions,
partly offset by unfavorable currency impact. The company
witnessed sluggish manufacturing activity in the quarter.
For fiscal 2012, adjusted earnings of $5.40 a share missed the
Zacks Consensus Estimate of $5.42 and exceeded the year-ago
adjusted earnings of $5.36 a share. Sales for the year edged down
1% year over year to $9,612 million, but beat the Zacks Consensus
Estimate of $9,577 million.
Separately, Air Products announced the retirement of its senior
vice president and chief financial officer Paul E. Huck effective
February 28, 2013. Its Board has chosen the incumbent vice
president, Scott Crocco, as his successor.
Segmental Highlights
Revenues from the core Merchant Gases segment sales climbed 8%
year over year to $1,017 million in the fourth quarter on the
back of Indura acquisition, partly marred by currency headwinds.
Sales from the Tonnage Gases division fell 4% to $846 million as
lower energy pass-through and negative currency impact more than
offset higher volume.
Revenues from the Electronics and Performance Materials segment
rose 5% year over year at $617 million, supported by the
acquisition of DA NanoMaterials. The Equipment and Energy
division saw solid growth in the quarter with sales surging 32%
to $126 million, boosted by an increase in large air separation
unit revenues.
Financial Position
Air Products exited fiscal 2012 with cash and cash equivalents of
$454.4 million, up roughly 8% year over year. Long-term debt
increased 16% year over year to $4,658.5 million.
Outlook
For fiscal 2013, Air Products plans to take a number of steps
including execution of its new Tonnage investments and sustained
improvement in its Electronics and Performance Materials unit to
attain better productivity. The company expects that its recent
strategic moves will position it for future growth and
profitability despite the weak macroeconomic backdrop.
The company anticipates earnings for fiscal 2013 to be in the
range of $5.65 and $5.85 per share. For first-quarter fiscal
2013, earnings are expected in the band of $1.26 to $1.31 per
share. Air Products expects capital expenditure of between $2
billion and $2.2 billion for fiscal 2013.
Our Recommendation
Air Products' healthy project backlog strongly positions it to
achieve its long-term growth target. Given its leading position
in the gases business, the company is well positioned to
capitalize on the cyclical recovery in its core industrial end
markets.
New business wins in the Merchant Gases segment should drive
results moving ahead. We are also encouraged by the increasing
opportunities in liquefied natural gas (LNG) market. However, Air
Products remains exposed to raw material inflation.
Air Products, which competes with
Praxair Inc.
(
PX
), currently holds a short-term Zacks #2 Rank (Buy). We have a
long-term Neutral recommendation on the stock.
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