Air Products & Chemicals, Inc. Q1 FY2025 earnings call

• Wayne Smith introduced new leadership, including Eduardo Menezes as the new CEO effective February 7, 2025, and highlighted the reconstituted board's key decisions.
• Melissa Schaeffer discussed first-quarter results: adjusted earnings per share of $2.86 exceeded guidance, adjusted EBITDA margin up 140 basis points. She emphasized safety as a top priority and the focus on productivity and cost reduction.
• Mentioned monitoring of the strengthening U.S. dollar, tariffs, and the global helium market for potential impacts.

Americas

• Overall pricing 2% higher, with 4% merchant pricing gain across most product lines.
• 3% volume improvement driven by a significant non-recurring sale of helium to a merchant customer.
• Adjusted EBITDA 6% higher, adjusted EBITDA margin up 150 basis points.

Asia

• 2% volume improvement from contributions of new assets.
• Adjusted EBITDA increased 7%, primarily due to favorable volumes, costs, and equity affiliate income.
• Adjusted EBITDA margin up 160 basis points.

Europe

• Broad-based pricing improved 1%.
• Volume down 5% due to lower onsite and continued weakness in merchant demand (especially helium).
• Adjusted EBITDA 3% lower, with weaker volume partially offset by higher price and favorable cost.

Middle-East and India

• Lower merchant volume was a headwind for sales and adjusted EBITDA.
• Adjusted EBITDA negatively impacted by unfavorable equity affiliate income and cost.

Corporate and Other

• Sales and profits lower this quarter primarily due to the sale of the LNG business.

• Maintained fiscal 2025 full-year guidance.
• Q2 adjusted earnings per share expected to be in the range of $2.75 to $2.85.
• Continues to monitor the strengthening U.S. dollar, tariffs, and global helium market.
• Focus on driving productivity and evaluating actions to reduce costs and improve customer services.

• Strengthening U.S. dollar, tariffs, and global helium market could impact financial results.
• Permitting issues for certain projects, such as the World Energy permitting project and the Alberta project's permitting status.

Q: Just given all the moving parts in Asia, how should the Street be thinking about past headwinds in the helium business and electronics recovery and general macroeconomic conditions in China?

A: China is still challenging with no material improvement seen, market remains tough, and watching tariffs and China stimulus impact. Focus remains on productivity and customer delivery.

Q: Can we get a quick update on the Alberta project?

A: No new updates from previous disclosures; will provide information when available.

Q: At the midpoint of both Q2 and full-year, need second-half to be about $1.50 per share better than first half. How much is seasonality and stuff like Uzbekistan plant coming back?

A: Split relatively consistent with past quarters, seasonality in Q1 and Q2, Uzbekistan plant expected to return to normal operation near full run-rate in Q3, focusing on pricing action and productivity initiatives.

Q: Breakdown on CapEx outlook for fiscal year, $4.5B to $5B? How deployed?

A: Vast majority for large projects, ~$750M for ongoing maintenance, ~$1B for traditional industrial gas business; still forecasting $4.5B to $5B for fiscal year.

Q: Update on the permitting project in World Energy?

A: Project still on hold awaiting permits; will provide updates when available.

Q: What was the helium EBITDA contribution in the Americas in the quarter from the outsized sale?

A: Helium not broken out, but the one-time outsized sale contributed ~$0.10 to EPS.

Q: On the 2Q guide, what's sequentially getting better or worse?

A: Expect headwinds from Uzbekistan, but improved volumes in Americas, focus on pricing in Europe, and productivity programs starting to show through.

Q: Is full-year guidance assuming no contribution from the Alberta project this year?

A: Correct, full-year guidance does not assume contribution from Alberta project this year.

Q: Thoughts on tariff impact from customers, short-term negative to production and long-term benefit of higher manufacturing in Americas?

A: Tariffs likely have little impact on localized industrial gas business, could have moderate impact on projects, and have a global diversified supply chain; staying close to customers to update forecast.

Q: Update on blue hydrogen project in Louisiana and partnerships?

A: Project on normal course, active conversations with parties for equity partnerships and offtake, focusing largely in Asia; will provide updates when progress is made.

Q: Update on free cash flow trajectory towards being free-cash flow positive in fiscal 2027?

A: Still projecting net cash-flow positive in FY2027, having active conversations for equity partnerships and offtake, will provide updates as progress is made.

Q: Are you pushing for higher pricing in Americas and Asia as well as Europe?

A: Absolutely, teams are actively working on pricing across all regions, not just Europe.

Q: Capital intensity of Uzbekistan upgrade?

A: Upgrades were negotiated into the acquisition price, no additional capital outlay; will be a discount to the $100M outstanding on the acquisition.

Q: Benefit of cost-cutting initiatives in 2025 and how it sequences through the year?

A: Took about 5% of workforce down, aggregate savings ~$75M, cost productivity expected to ramp up in the back half of the fiscal year, with some impact in Q1 and Q2 but not full ramp.