Industrial gas giant
Air Products and Chemicals Inc.
) logged fourth-quarter fiscal 2013 (ended Sep 30, 2013) adjusted
earnings from continued operations of $1.47 a share, up 3.5% from
the year-ago earnings of $1.42. The results were at par with the
Zacks Consensus Estimate
The adjusted earnings exclude after-tax charges of $164 million
(or 77 cents per share) mainly associated with cost reduction,
and asset and product rationalization actions in the company's
Electronics and Merchant Gases businesses, and for streamlining
Consolidated net income, as reported, decreased 1.2% year over
year to $137.1 million (or 64 cents a share) from $138.7 million
(or 65 cents a share) a year ago.
Revenues declined 0.7% year over year to $2,586.5 million,
missing the Zacks Consensus Estimate of $2,681 million. The
decline was due to lower base volumes and a negative impact
resulting from the exit decision of the Polyurethane
Intermediates (PUI) business, partly offset by higher energy
pass-through and favorable currency translation.
For fiscal 2013, adjusted earnings of $5.50 a share was at par
with the Zacks Consensus Estimate and exceeded the year-ago
adjusted earnings of $5.40 a share. Sales for the year increased
around 6% year over year to $10,180.4 million, beating the Zacks
Consensus Estimate of $10,264 million.
Sales for fiscal 2013 were boosted by acquisitions and higher
energy cost pass-through, partly offset by lower volumes driven
by the PUI business exit. Acquisitions and higher energy cost
pass-through boosted sales. Underlying sales barring the PUI
business impact increased 1% due to higher North America and Asia
Tonnage Gases volumes, higher Performance Materials volumes, and
LNG equipment activity.
Revenues from the core Merchant Gases segment increased 4% year
over year to $1,054 million in the fourth quarter on account of
higher volumes and improved pricing.
Sales from the Tonnage Gases division were down 1% to $835
million as lower PUI volumes offset higher energy pass through
and favorable currency impact.
Revenues from the Electronics and Performance Materials segment
fell 6% year over year to $580 million, affected by lower
electronics equipment sales.
In the Equipment and Energy division sales declined 7% year over
year to $118 million due to lower ASU sales, partly offset by
higher LNG project activity.
Air Products' cash and cash equivalents stood at $450.4 million
as of Sep 30, 2013, down 0.8% from $454.4 million as of Sep 30,
2012. Long-term debt stood at $5,056.3 million as of Sep 30,
2013, up 10.2% from $4,584.2 million as of Sep 30, 2012.
Air Products and its unit Air Products Canada Ltd. recently
signed a long-term contract with North West Redwater Partnership.
Under the terms of this contract, the company will supply around
25 million standard cubic feet per day (MMSCFD) hydrogen to North
West's Sturgeon Refinery near Edmonton, Alberta, Canada.
The supply of hydrogen will come from Air products' existing
Canada's Heartland Hydrogen Pipeline as well as the new
world-scale hydrogen production plant Air Products Canada will
construct in Scotford, Canada. This new plant will be
constructed, owned and operated by the company and located
adjacent to Shell Canada's Scotford facility, northeast of
For fiscal 2013, Air Products plans to take a number of steps
including execution against backlog, winning profitable new
projects, loading existing assets, and implementing further
productivity and cost initiatives measures. The company expects
that its recent strategic moves will position it for future
growth and profitability and help to build momentum and
accelerate earnings growth despite the weak macroeconomic
The company anticipates earnings for fiscal 2014 from continuing
operations to be in the range of $5.70 and $5.90 per share. For
first-quarter fiscal 2014, earnings are expected in the band of
$1.30 to $1.35 per share.
Air Products is well positioned to capitalize on the cyclical
recovery in its core industrial end-markets. It has sufficient
capacity to meet the expected upturn in demand without incurring
additional capital expenditures.
New business wins in the Merchant Gases segment should drive
results in the near term. The acquisition of EPCO is an excellent
fit for the Air Products' North American Merchant Gases set of
core competencies. It will also help expand the company's market
share by offering an extended product portfolio to existing and
new customers. It will also provide cost and revenue synergy
benefits to Air Products.
In Equipment and Energy, Air Products is encouraged by the
opportunities in liquefied natural gas (LNG) market with Air
Products chosen for a major off-shore LNG project in Malaysia. To
address the growing demand for LNG technology and equipment, Air
Products is also building a new manufacturing facility in Manatee
However, sluggish economic conditions across the U.S. and
Europe may continue to impact the demand for the company's
products. Soaring energy costs pose a risk to margin
Air Products currently holds a Zacks Rank #2 (Buy).
Other companies in the chemical industry worth considering are
E. I. du Pont de Nemours and Company
). All of them hold a Zacks Rank #2 (Buy).
AIR PRODS & CHE (APD): Free Stock Analysis
DU PONT (EI) DE (DD): Free Stock Analysis
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PRAXAIR INC (PX): Free Stock Analysis Report
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