Industrial gas giant
Air Products and Chemicals Inc.
) logged third-quarter fiscal 2013 (ended Jun 30, 2013) earnings
from continued operations of $1.36 a share. The results were at
par with the Zacks Consensus Estimate, but dropped from the
year-ago earnings of $1.66 (or $1.41 per share as adjusted).
Productivity and strong execution of plans, which offset the
continued economic weakness, helped Air Products to deliver
earnings within guidance. However, net income from continuing
operation decreased 19% year over year to $287.8 million.
Revenues rose 9% year over year to $2,547.3 million, beating the
Zacks Consensus Estimate of $2,543 million. Acquisitions and
higher energy cost pass-through boosted sales. Underlying sales
declined 2% due to Air Products' previously announced decision to
exit the Polyurethane Intermediates business.
Revenues from the core Merchant Gases segment increased 18% year
over year to $1,033 million in the second quarter on the back of
Indura acquisition and stronger volumes.
Sales from the Tonnage Gases division rose 10% to $846 million
driven by higher energy pass through, partially offset by lower
Revenues from the Electronics and Performance Materials segment
fell 6% year over year to $566 million, affected by lower
electronics process materials volumes and equipment sales.
The Equipment and Energy division saw healthy gains in the
quarter with sales surging 9% to $104 million, boosted by higher
LNG project activity. Air Products received two new LNG heat
exchanger orders for a liquefaction project in the quarter.
Air Products' cash and cash equivalents stood at $418.8 million
as of Jun 30, 2013, compared with $361.2 million as of Jun 30,
2012. Long-term debt stood at $4,648.2 million as of Jun 30,
2013, compared with $3,795.5 million as of Jun 30, 2012.
Air Products acquired EPCO Carbon Dioxide Products, Inc., a
privately-held company that makes liquid carbon dioxide (CO2), on
Jun 3, 2013. The buyout also included Louisiana Leasing, Ltd., an
affiliate to EPCO that owns liquid CO2 distribution assets solely
leased to the host company. The transaction cost for this buyout
was not revealed.
The EPCO buyout complements Air Products' aim of expanding its
portfolio of industrial gases offerings in North America, mainly
liquid CO2, via EPCO's 12 CO2 purification and liquefaction
plants situated in the central part of the U.S.
Air Products narrowed its earnings expectations for fiscal 2013
factoring in the challenging economic conditions. However, Air
Products' commitment to increase shareholders value remains in
place. The company now anticipates earnings for fiscal 2013 to be
in the range of $5.47 to $5.53 per share. Earlier, it expected
earnings of between $5.45 and $5.60 per share. For fourth-quarter
fiscal 2013, earnings are expected in the band of $1.44 to $1.50
Air Products remains focused on cost optimization, disciplined
project execution, capital allocation and further productivity
improvements. The company expects that its projected record
backlog and the significant leverage in the existing assets are
solid prospects for future growth.
Air Products' healthy project backlog strongly positions it to
achieve its long-term growth target. Given its leading position
in the gas 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 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.
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 maintains a Zacks Rank #4 (Sell).
Other companies in the chemical industry having favorable
Zacks Rank are
Cytec Industries Inc.
Northern Technologies International Corp.
PPG Industries Inc.
). While Cytec and Northern Technologies carry a Zacks Rank #1
(Strong Buy), PPG Industries retains a Zacks Rank #2 (Buy).
AIR PRODS & CHE (APD): Free Stock Analysis
CYTEC INDS INC (CYT): Free Stock Analysis
NORTHERN TECH (NTIC): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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