Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Air Products & Chemicals Inc (APD, Financial) reported a 13% increase in adjusted earnings per share for the fourth quarter, reaching $3.56, which was at the upper end of their guidance range.
- The company successfully completed the $1.8 billion sale of its LNG process, technology, and equipment business, which contributed positively to the fiscal year 2024 results.
- Adjusted EBITDA margin improved by 460 basis points, and adjusted operating margin increased by 350 basis points compared to the previous year.
- Air Products & Chemicals Inc (APD) has achieved a 10% annual growth rate in adjusted earnings per share since 2014, demonstrating consistent performance despite economic fluctuations.
- The company plans to return approximately $1.6 billion to shareholders in dividend payments this year, continuing a 42-year streak of increasing quarterly dividends.
Negative Points
- The sale of the LNG business will no longer contribute to earnings going forward, posing a potential headwind for future financial performance.
- Economic activity in China remains uncertain, and the company has taken a conservative approach in its fiscal year 2025 guidance due to potential weakness in this market.
- The World Energy Project in California is on hold due to permitting challenges, which could delay potential revenue streams.
- The company faces challenges in the Middle East and India segment, with lower merchant volume impacting sales and adjusted EBITDA.
- There is a significant headwind of approximately 4% or 49 cents per share for fiscal year 2025 due to the absence of the LNG business.
Q & A Highlights
Q: Can you provide a breakdown of the growth expectations for 2025, considering the challenging environment?
A: Seifollah Ghasemi, Chairman, President, and CEO, explained that the growth for fiscal 2025 is expected to come from a mix of price increases (1-2%), volume growth aligned with GDP and industrial production forecasts (around 2-3%), and contributions from smaller projects. The company is cautious about the economic activity in China, which is a significant unknown factor.
Q: Regarding the Louisiana project, what is the ideal equity partnership arrangement you are pursuing?
A: Seifollah Ghasemi stated that the ideal partnership would involve equity participation from a partner who is also an offtake customer. However, they are open to partnerships with entities interested in equity participation alone.
Q: How does Air Products respond to activist investors' suggestions, particularly regarding project de-risking?
A: Seifollah Ghasemi emphasized that Air Products listens to all investors and considers their views seriously. The company focuses on its core industrial gases business and responsibly invests in clean hydrogen, aligning with investor expectations.
Q: With the LNG business divested, what should we expect in terms of corporate line cost reductions for 2025?
A: Melissa Schaeffer, CFO, noted that the LNG business contributed about 4% to earnings, and its absence will be a headwind in 2025. However, productivity actions and growth from smaller projects are expected to offset this impact.
Q: Can you provide an update on the World Energy Project and the permitting process?
A: Seifollah Ghasemi explained that the permitting process is delayed due to challenges from environmental groups. Air Products is ensuring all permits are secured before proceeding. The relationship with World Energy remains strong, and alternative options for the project are being considered.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
