Air Products and Chemicals, Inc. Q3 FY2025 earnings call

• The Air Products team achieved solid third - quarter results with adjusted earnings per share exceeding guidance. - The global cost reduction plan is on track and is expected to generate annual savings of $185 million to $195 million once fully executed. - Air Products has the lowest SG&A as a percentage of sales in the industry and is continuously improving this metric. - The company is investing in bringing additional AI and digital transformation tools to most employees for their day - to - day work. - Committed to project execution and capital discipline, expecting to finalize current energy transition projects in line with previous guidance and continuing to invest in growth to strengthen the core industrial gas business.

Air Products delivered solid fiscal third quarter results. Adjusted earnings per share was $3.09, exceeding the guidance. Sales volume decreased by 4% mainly due to the sale of the LNG business, lower helium demand, and project exits, while on - site volumes were favorable. Adjusted operating income was unchanged as strong base business performance was offset by the sale of the LNG business and exited projects. Adjusted operating margin was flat but improved by approximately 300 basis points sequentially due to favorable volume and productivity improvements.

• Fiscal full - year adjusted earnings per share guidance is in the range of $11.90 to $12.10, with the midpoint remaining unchanged at $12. - Capital expenditures guidance stays at approximately $5 billion for the year. - The objective for the next 5 years, starting from fiscal year 2026, is to consistently achieve high single - digit or better adjusted EPS growth rate while maintaining or reducing financial leverage, and to achieve an operating margin of 30% and ROCE in the mid - to high - teens by 2030.

• Significant global economic uncertainties. - Helium market cycle and its impact on earnings. - Inflation and tariffs affecting costs and pricing. - Uncertainties in project execution.

Q: Could you give us an update on the plan to use third parties at Darrow for both ammonia and the carbon capture and sequestration?

A: We are working to get these partnerships done by the end of the current year. We are reasonably optimistic we'll get there. Our numbers for the project in terms of CapEx for capacity are better compared to other blue ammonia projects, validating the competitiveness of our project. We are also working on finding the right partnerships and negotiating agreements.

Q: A 2 - part question. Your average prices year - over - year were up 1%. If you took out the drag from helium, how much would your average prices have been up? And then secondly, the dissociation characteristics of hydrogen from ammonia.

A: Melissa talked about the helium impact in terms of EPS, and Eduardo mentioned that we are working on R&D in our organization and engineering for ammonia dissociation. Projects in Europe to dissociate ammonia depend on EU regulations.

Q: Maybe digging in a little bit more into the cost opportunities. Is that in addition to previous outlined opportunities and talk about heavy lifting?

A: Melissa said the cost savings is on top of the previously announced headcount and productivity actions. Eduardo added it's on top of the initial productivity projects.

Q: Would it be possible to just get a bit more color on the 6% decline in Americas volume. How that compared to original expectation and break out base volumes versus project exits?

A: Melissa said the downturn was largely due to the World Energy project exit and helium demand, with strong on - site and merchant volumes outside of those factors.

Q: I actually wanted to follow - up on that same question. If the World Energy is the main project exit, what percent we should assume that is in volume declines? And is there any income associated with that?

A: Melissa said last year World Energy contributed about $24 million, which was a one - time item, and not expected to continue as a headwind.

Q: In terms of the core business, have any update on $1.5 billion in low - risk projects?

A: Eduardo said we are continuing to see project activities on small plants. Electronics in Asia is moving forward, and we have a strong position in Asia with cryogenic equipment manufacturing.

Q: Eduardo, you alluded to some of the larger project announcements in the Gulf Coast for blue ammonia. Does this change the dynamic for Air Products?

A: Eduardo said the ammonia market is large, demand for clean ammonia is there, and our project in the Gulf Coast is competitive in Europe.

Q: On Slide 4, just wondering why NEOM is more of a consideration for the 2030 profile?

A: Eduardo said the 2030 number more comes from Darrow, but NEOM is also expected to come online in 2030. NEOM is progressing well, expected to start up in 2027, and we are working on commercializing green ammonia from NEOM starting 2027.

Q: Eduardo, you laid out a helpful breakdown of CapEx a few months ago. Any update on progress of hitting those targets? Any thought on CapEx and uses for cash?

A: Eduardo said there are no major updates, our intent is to be cash neutral for the next 3 years, balancing cash sources and uses, and priority is to match CapEx with cash generation.

Q: You laid out a long - term return on capital employed goal in the mid - to high - teens. When might we turn the corner and rank order the most important drivers?

A: Melissa said our ROC is around 11.1% due to construction processes, ex - NEOM would improve it greatly. As CIP reduces and capital allocation is disciplined, ROCE will improve. Eduardo added a lot of influence from construction progress on the numbers.

Q: In your opening remarks, you mentioned inflation being somewhat of a headwind. What exactly is that and what you expect going forward in terms of costs?

A: Eduardo said we continue to see inflation, tariffs impact costs and pricing, and we need to stay ahead in the battle between price and inflation.

Q: Can we have an update on the other underperforming projects in Edmonton, Rotterdam, Arizona? Is there any way that these can be delayed?

A: Eduardo said these projects have schedules of 3 years or more, and our forecast and schedule are the same as last quarter. Melissa added those projects are underpinned by customers.