Air Products reported net income of $305 million and diluted earnings per share (EPS) of $1.42 on a non-GAAP, continuing operations basis, for its fiscal fourth quarter ended September 30, 2012.
This excludes: an after-tax impairment charge of $127 million, or $0.59 per share, for the restructuring of our photovoltaic business; an after-tax charge of $35 million, or $0.16 per share, for exiting the polyurethane intermediates business; and an after-tax charge of $6 million, or $0.03 per share, to write-down assets following a customer bankruptcy and mill shutdown.
On a GAAP basis, net income and diluted EPS from continuing operations were $137 million and $0.64, respectively, for the quarter.
The discussion of fourth quarter results and guidance in this release is based on non-GAAP continuing operations. A reconciliation to GAAP results can be found at the end of this release.
Fourth Quarter Financial Results
Fourth quarter revenues of $2,606 million increased four percent versus prior year. On an underlying basis, sales were up four percent on higher volumes in the Tonnage Gases, Equipment and Energy, and Electronics and Performance Materials segments. Acquisitions contributed six percent, which was offset by lower energy pass-through and a stronger dollar. Operating income of $408 million was up three percent versus prior year. Operating margin of 15.7 percent was down 10 basis points.
Sequential sales grew 11 percent, with underlying sales up three percent on higher volumes in the Tonnage Gases, Equipment and Energy, and Electronics and Performance Materials segments. Acquisitions contributed six percent. Operating income grew three percent sequentially.
For fiscal 2012, sales of $9,612 million decreased one percent, with base volume growth and acquisitions more than offset by lower energy pass-through and a stronger dollar. Operating income of $1,534 million was down one percent and diluted EPS of $5.40 increased one percent from the prior year.
Commenting on the fiscal year, John McGlade, chairman, president and chief executive officer, said, “The fourth quarter was a continuation of the economic trends that we have seen throughout the year, with global manufacturing growth continuing to slow. This has led to weak volumes in 2012, which we have been able to offset with increased productivity and cost reductions.
“During this past year we made a number of portfolio moves, including selling our European homecare business, purchasing Indura to enhance our Latin American position; buying the other half of our DA NanoMaterials joint venture; and taking a 25% stake in AHG, the largest industrial gases company in Saudi Arabia. In this most recent quarter, we continued our efforts to further position ourselves for the future by exiting our polyurethane intermediates business and restructuring our photovoltaic businesses.”
Merchant Gases sales of $1,017 million increased eight percent on the prior year primarily due to the Indura acquisition, which was partially offset by a stronger dollar. Underlying sales decreased three percent, with positive pricing more than offset by weaker volumes. Operating income of $161 million declined five percent versus prior year. Sequential sales increased 16%, again due to Indura, with modest volume gains offset by a stronger dollar. Sequential operating income declined two percent.
Tonnage Gases sales of $846 million decreased four percent versus the prior year, with higher base business and new project volumes more than offset by lower energy pass-through and a stronger dollar. Operating income of $141 million was down seven percent versus prior year, with volume growth and lower operating costs offset by less income from polyurethane intermediates and favorable prior year contract modifications. Sequential sales increased 10 percent, driven by higher volumes and higher energy pass-through. Sequential operating income was up five percent, with higher volumes more than offsetting lower income from polyurethane intermediates.
Electronics and Performance Materials sales of $617 million were up five percent versus prior year, with the DA NanoMaterials acquisition contributing four percent. Underlying volumes were four percent higher and more than offset lower pricing and a stronger dollar. Operating income of $85 million was down seven percent versus prior year, with higher volumes and improved productivity offset by higher inventory costs. Sequential sales were up two percent on higher volumes and operating income decreased six percent, again due to the inventory impact.
Equipment and Energy sales of $126 million and operating income of $18 million increased 32 percent and 54 percent respectively, due to higher sales from large air separation units and better cost performance. Sequentially, sales increased 33 percent on higher ASU and LNG activity and operating income was up 81 percent on higher LNG activity. The sales backlog is up 35 percent versus prior year on continued LNG project orders.
Looking ahead, McGlade said, “We are starting our 2013 fiscal year with weak economic momentum worldwide. Our focus will be on taking actions in the areas that we believe can have the greatest impact on improving margins and returns. They include loading our Merchant assets, executing our new Tonnage investments on time and on budget; continuing to make improvements in our Electronics and Performance Materials segment and achieving even better productivity.”
The company announced initial guidance for fiscal year 2013 EPS in the range of $5.65 to $5.85 per share. For the first quarter of fiscal 2013 ending December 31, 2012, EPS is expected to be between $1.26 and $1.31 per share.
The company also announced that it expects capital spending in fiscal year 2013 to be between $2.0 and $2.2 billion.
LNG World News Staff, October 23, 2012; Image: Air Products