Air Products Reports Fiscal 2024 Third Quarter GAAP EPS of $3.13 and Adjusted EPS of $3.20

Air Products Reports Fiscal 2024 Third Quarter GAAP EPS of $3.13 and Adjusted EPS of $3.20

Q3 FY24 (comparisons versus prior year):

• GAAP EPS# of $3.13, up 17 percent; GAAP net income of $709 million, up 16 percent; and GAAP net income margin of 23.7 percent, up 360 basis points
• Adjusted EPS* of $3.20, up seven percent; adjusted EBITDA* of $1.3 billion, up five percent; and adjusted EBITDA margin* of 42.4 percent, up 260 basis points

Recent Highlights

Clean hydrogen / energy transition

• Signed a 15-year agreement to supply 70,000 tons of green hydrogen annually starting in 2030, helping to decarbonize TotalEnergies' Northern European refineries and avoid approximately 700,000 tons of CO₂ each year
• Announced agreement to divest Air Products' liquefied natural gas (LNG) process technology and equipment business to Honeywell for $1.81 billion in an all-cash transaction; closing is expected before the end of the calendar year, subject to customary closing conditions, including receipt of certain regulatory approvals
• Announced plans to build networks of permanent, commercial-scale, multi-modal hydrogen refueling stations from Northern California to Southern California, and along major transportation corridors near the Trans-European Transport Network
• Announced trial of a Daimler Mercedes-Benz GenH2 truck, aligned with Air Products' goal to convert its distribution fleet to hydrogen powered vehicles

Core industrial gas business

• Announced plans to construct two new air separation units at the Company's existing Conyers, Georgia, and Reidsville, North Carolina, locations to replace older units and serve further merchant market growth
• Announced $70 million investment to expand gas separation and purification membranes at Company's Missouri manufacturing and logistics center, driven by growing product demand in biogas and hydrogen recovery applications, as well as customer needs for the use of nitrogen for the aerospace industry and cleaner fuels for the marine industry

Sustainability

• Awarded 'A' rating on MSCI's environmental, social and governance ratings

Guidance

• Confirmed previous fiscal 2024 full-year adjusted EPS guidance* of $12.20 to $12.50, up six to nine percent over prior year adjusted EPS*; fiscal 2024 fourth quarter adjusted EPS guidance* of $3.33 to $3.63
• Continue to expect fiscal year 2024 capital expenditures* in the range of $5.0 billion to $5.5 billion

#Earnings per share is calculated and presented on a diluted basis from continuing operations attributable to Air Products.

*Certain results in this release, including in the highlights above, include references to non-GAAP financial measures on a consolidated, continuing operations basis and a segment basis. Additional information regarding these measures and reconciliations of GAAP to non-GAAP historical results can be found below. In addition, as discussed below, it is not possible, without unreasonable efforts, to identify the timing or occurrence of future events, transactions, and/or investment activity that could have a significant effect on the Company's future GAAP EPS or cash flow used for investing activities if any of these events were to occur.

Fiscal 2024 Third Quarter Consolidated Results

Air Products (NYSE:APD) today reported third quarter fiscal 2024 results, including GAAP EPS from continuing operations of $3.13, up 17 percent from the prior year. GAAP net income of $709 million was up 16 percent over the prior year primarily due to a prior year charge for business and asset actions, favorable pricing, and favorable business mix. Higher costs driven by planned maintenance and inflation were partially offset by improved productivity. GAAP net income margin of 23.7 percent increased 360 basis points over the prior year primarily due to the lower business and asset actions and favorable pricing. Air Products' third quarter GAAP results for the current and prior year include items that are adjusted in the non-GAAP measures discussed below. Fiscal 2024 adjustments include a net cost of $0.07 per share, primarily for the non-service related components of the Company's defined benefit pension plans. Adjustments for the prior year quarter included a charge of $0.23 per share from business and asset actions as well as non-service pension costs of $0.07 per share.

For the quarter, on a non-GAAP basis, adjusted EPS from continuing operations of $3.20 increased seven percent over the prior year. Adjusted EBITDA of $1.3 billion was up five percent over the prior year due to positive pricing, favorable business mix, and improved productivity, which were partially offset by higher planned maintenance and inflation. Adjusted EBITDA margin of 42.4 percent increased 260 basis points over the prior year.

Third quarter sales of $3.0 billion decreased two percent from the prior year due to two percent unfavorable currency and one percent lower energy cost pass-through, partially offset by one percent higher pricing.

Commenting on the results, Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi said, "Our third quarter adjusted EPS of $3.20 exceeded our previous guidance and increased seven percent over the prior year, driven by Americas and Europe operating performance as well as pricing and productivity actions. The results demonstrate our focus on running our core industrial gas business, and our adjusted EBITDA margin is the best in the industry. We announced significant milestones during the quarter, including the long-term renewable hydrogen supply agreement with TotalEnergies, which validates our strategy and the expected growth in the clean hydrogen market. As always, our results reflect the hard work of our dedicated and talented employees, and I want to thank them for their contributions."

Fiscal 2024 Third Quarter Results by Business Segment

• Americas sales of $1.2 billion were down two percent versus the prior year due to three percent lower energy cost pass-through, one percent lower volumes, and one percent unfavorable currency, which were partially offset by three percent higher pricing. Operating income of $391 million increased four percent and adjusted EBITDA of $604 million increased six percent, in each case primarily due to higher pricing. Operating margin of 31.7 percent increased 200 basis points and adjusted EBITDA margin of 48.9 percent increased 390 basis points, each of which included positive impacts of approximately 100 basis points from lower energy cost pass-through.

• Asia sales of $790 million decreased four percent from the prior year primarily due to four percent unfavorable currency and one percent lower volumes, as lower demand for merchant products and planned maintenance outages were partially offset by new assets. These impacts were partially offset by one percent higher energy cost pass-through. Operating income of $200 million decreased 17 percent and adjusted EBITDA of $324 million decreased nine percent, in each case primarily due to the planned maintenance outages. Operating margin of 25.3 percent decreased 400 basis points and adjusted EBITDA margin of 41.1 percent decreased 220 basis points.

• Europe sales of $693 million decreased two percent from the prior year as two percent lower energy cost pass-through and one percent unfavorable currency were partially offset by one percent higher volumes. Operating income of $205 million increased 16 percent and adjusted EBITDA of $283 million increased 12 percent, in each case primarily due to increased volume, primarily from new assets, and pricing, net of variable costs. Operating margin of 29.5 percent increased 460 basis points and adjusted EBITDA margin of 40.8 percent increased 490 basis points.

• Middle East and India equity affiliates' income of $89 million decreased seven percent compared to the prior year, primarily due to higher costs.

• Corporate and other sales of $235 million increased 15 percent compared to the prior year, primarily due to higher LNG and other sale of equipment activity.

Outlook

Air Products confirms its previous fiscal 2024 full-year adjusted EPS guidance* of $12.20 to $12.50, up six to nine percent over prior year adjusted EPS. For the fourth quarter of fiscal 2024, Air Products' adjusted EPS guidance* is $3.33 to $3.63.

Air Products continues to expect capital expenditures* in the range of $5.0 billion to $5.5 billion for full-year fiscal 2024.

*Management is unable to reconcile, without unreasonable effort, the Company's forecasted range of adjusted EPS or capital expenditures to a comparable GAAP range. Air Products provides adjusted EPS guidance on a continuing operations basis, excluding the impact of certain items that management believes are not representative of the Company's underlying business performance, such as the incurrence of costs for cost reduction actions and impairment charges, or the recognition of gains or losses on certain disclosed items. It is not possible, without unreasonable efforts, to predict the timing or occurrence of these events or the potential for other transactions that may impact future GAAP EPS. Similarly, it is not possible, without unreasonable efforts, to reconcile forecasted capital expenditures to future cash used for investing activities because management is not able to identify the timing or occurrence of future investment activity, which is driven by management's assessment of competing opportunities at the time the Company enters into transactions. Furthermore, it is not possible to identify the potential significance of these events in advance, but any of these events, if they were to occur, could have a significant effect on the Company's future GAAP results.

Earnings Teleconference
Access the fiscal 2024 third quarter earnings teleconference scheduled for 8:30 a.m. Eastern Time on August 1, 2024 by calling 773-305-6867 and entering passcode 2796775 or by accessing the Event Details page on Air Products' Investor Relations website.

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About Air Products
Air Products (NYSE:APD) is a world-leading industrial gases company in operation for over 80 years focused on serving energy, environmental, and emerging markets. The Company has two growth pillars driven by sustainability. Air Products' base business provides essential industrial gases, related equipment and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, and food. The Company also develops, engineers, builds, owns and operates some of the world's largest clean hydrogen projects supporting the transition to low- and zero-carbon energy in the heavy-duty transportation and industrial sectors. Additionally, Air Products is the world leader in the supply of liquefied natural gas process technology and equipment, and provides turbomachinery, membrane systems and cryogenic containers globally.

The Company had fiscal 2023 sales of $12.6 billion from operations in approximately 50 countries and has a current market capitalization of approximately $60 billion. Approximately 23,000 passionate, talented and committed employees from diverse backgrounds are driven by Air Products' higher purpose to create innovative solutions that benefit the environment, enhance sustainability and reimagine what's possible to address the challenges facing customers, communities, and the world. For more information, visit airproducts.com or follow us on LinkedIn, X, Facebook or Instagram.

Cautionary Note Regarding Forward-Looking Statements
This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings and capital expenditure guidance, business outlook and investment opportunities. Forward-looking statements are based on management's expectations and assumptions as of the date of this release and are not guarantees of future performance. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation: changes in global or regional economic conditions, inflation, and supply and demand dynamics in the market segments we serve, including demand for technologies and projects to limit the impact of global climate change; changes in the financial markets that may affect the availability and terms on which we may obtain financing; the ability to implement price increases to offset cost increases; disruptions to our supply chain and related distribution delays and cost increases; risks associated with having extensive international operations, including political risks, risks associated with unanticipated government actions and risks of investing in developing markets; project delays, scope changes, cost escalations, contract terminations, customer cancellations, or postponement of projects and sales; our ability to safely develop, operate, and manage costs of large-scale and technically complex projects; the future financial and operating performance of major customers, joint ventures, and equity affiliates; our ability to develop, implement, and operate new technologies and to market products produced utilizing new technologies; our ability to execute the projects in our backlog and refresh our pipeline of new projects; tariffs, economic sanctions and regulatory activities in jurisdictions in which we and our affiliates and joint ventures operate; the impact of environmental, tax, safety, or other legislation, as well as regulations and other public policy initiatives affecting our business and the business of our affiliates and related compliance requirements, including legislation, regulations, or policies intended to address global climate change; changes in tax rates and other changes in tax law; safety incidents relating to our operations; the timing, impact, and other uncertainties relating to acquisitions and divestitures, including statements related to the pending sale of our LNG process technology and equipment business and its expected impact and timing as well as our ability to integrate acquisitions and separate divested businesses, respectively; risks relating to cybersecurity incidents, including risks from the interruption, failure or compromise of our information systems or those of our business partners or service providers; catastrophic events, such as natural disasters and extreme weather events, pandemics and other public health crises, acts of war, including Russia's invasion of Ukraine and new and ongoing conflicts in the Middle East, or terrorism; the impact on our business and customers of price fluctuations in oil and natural gas and disruptions in markets and the economy due to oil and natural gas price volatility; costs and outcomes of legal or regulatory proceedings and investigations; asset impairments due to economic conditions or specific events; significant fluctuations in inflation, interest rates, and foreign currency exchange rates from those currently anticipated; damage to facilities, pipelines or delivery systems, including those we are constructing or that we own or operate for third parties; availability and cost of electric power, natural gas, and other raw materials; the success of productivity and operational improvement programs; and other risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and subsequent filings we have made with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on our forward-looking statements. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.