Business Intelligence Financial – Air Products – Q3 2016

gasworld Business Intelligence provides you with the latest analysis of Air Products’ Q3 2016 earnings report. (Fiscal Q4)

Headlines

• Total reported sales marginally up YoY in CYQ3 by 0.5% at $2.46bn. This is follows the slowing rate of decline in recent quarters.
• Operating income at $547m in Q3 maintains growth at around +15% YoY, close to its best performance in nearly 5 years.
• Jazan project in Saudi Arabia was a key sales and income growth driver in Q3.
• Significant non-GAAP items in Q3 included $11m for cost reduction actions and $23m separation costs for Materials Technologies.

• Operating margin improved slightly towards 24%, reaching its highest rate in over 25 years. This was helped by lower energy cost pass-through, up 240bp excluding impact of lower energy pass-through.
• Equity affiliates incomes (highest amongst peers) up over +10% YoY at $40m in Q3.
• Selling and admin costs up nearly +10% YoY in Q3, whilst cost of sales were down less than -3%, a smaller reduction than in recent quarters.
• Focus on EBITDA reflected in +9% growth YoY in CYQ3 and 250 bp improvement in EBITDA margin at over 34% of sales, close to recent peak. Free cash flow more than doubled in FY2016 due to higher EBITDA and lower growth capex.
• Reported ROCE for FY2016 up 200bp at 12.8%.
• EPS up +16% YoY in third quarter of CY2016, top end of estimates on adjusted basis. EPS outlook for FY2017 indicates a rise of +9% to +13%, excluding Electronic Materials and Performance Materials.
• The company completed the spin off of Electronic Materials business (as Versum) and is progressing with the sale of the Perfomance Materials business. Together, these two business units represent the company’s Materials Technologies business. The major restructuring of the company stated to be completed.