Air Products and Chemicals, Inc. Q2 FY2026 earnings call

On unlocking earnings growth, they are raising full-year earnings guidance implying 8% to 10% improvement at midpoint. Expect EPS growth via pricing, productivity, new asset contributions. Second half expected to have favorable operating environment in refining, electronics, aerospace. On optimizing large project portfolio, NEON negotiations with FIARA progressing, activities not impacted by Middle East events. Louisiana project requires reliable capital cost estimate and construction agreements meeting return requirements. On maintaining capital discipline, expect to reduce capital expenditure by ~$1 billion in fiscal 2026. Investing in traditional industrial gas projects and strengthening pipeline in electronics and aerospace. Announced projects in Asia with Samsung and Florida ASU for space launch customers. Returned $800 million to shareholders in first half of fiscal 2026 via dividends

For the second quarter, America's operating income growth of 2% was primarily driven by onsite volume. Merchant volume was also up, including helium supplied for the space launches Additionally, non-helium merchant price contributed to the results. This improvement was partially offset by prior year income from a one-time customer contract addendum, lower price in helium and higher power costs, and maintenance turnarounds in the quarter. Operating income grew 25% in our Asia segment, primarily due to continued productivity improvements and favorable on-site and helium volumes. we saw a modest contribution from our new assets as they continued to ramp up, which we expect to further contribute in the second half of our fiscal year. Additionally, reduced depreciation from certain gasification assets classified as held for sale also benefited our results. This improvement was partially offset by a headwind from helium pricing. Europe operating income increased 8% due to the favorable onsite volume, including a prior year turnaround. as well as favorable currency and non-helium price. We saw higher costs in the segment, including depreciation and fixed cost inflation, as well as a helium volume and pricing headwind. In our Middle East and India segment, operating income improved on lower costs, while equity affiliate income was slightly positive. Lastly, the corporate and other segment results improved due to lower sale of equipment cost headwinds as well as continued strong productivity

Raised full-year fiscal guidance to $13 to $13.25, 8% to 10% growth from prior year. Third quarter expected EPS in range of $3.25 to $3.35, 5% to 8% growth from prior year. Maintaining capital expenditure guidance at approximately $4 billion for the fiscal year

Middle East conflict impacting helium supply chain. Uncertain macroeconomic environment in Europe and Asia. Potential impact of cost inflation on business operations

Q: Since the last call, Middle East conflict has changed things. Update on Neom project and green ammonia demand environment?

A: Neom project on west coast of Saudi Arabia not affected by conflict, renewable power side done, progressing as expected. Green ammonia price spike, but it's a temporary effect, long-term advantage of U.S. natural gas supply and green ammonia in Saudi Arabia is early to assess.

Q: Surprised helium still expected to be a 4% drag on EPS. Explain helium market and long-term agreements?

A: Helium market was structurally long before war, Qatar represents third of world's helium volume. Air Products has resilient system, but temporary period, focusing on signing longer-term agreements, volumes for helium in Asia for electronics to more than double in next four years, but spot market impact not included in forecast as market conditions uncertain.

Q: DARO project, possibility of downsizing?

A: DARO plant has multiple process units, difficult to downsize half, would increase cost significantly.

Q: YARA discussions, CBAM issue?

A: CBAM not part of agreement with YARA, agreement is U.S. agreement for hydrogen and nitrogen, CBAM not a key issue in discussions.

Q: Darrow project, base case and capital pivot?

A: Base case is not moving forward, but reviewing economics from construction bids. Capital could pivot to Samsung project in electronics space.

Q: Americas margins lowest in three years, expect recovery in FQ3?

A: Americas margins affected by energy cost pass-through, strong contributions from hyco assets, expect margins to improve as energy costs subside and productivity continues.

Q: Coal gasification plants in China, benefit from DNA and economics?

A: Two coal gasification assets held for sale in China, impact to quarter includes reduced depreciation and collection of past dues, tailwind of 1% to 1.5%, actively pursuing sale of assets.

Q: Helium pricing stop being negative, scenarios?

A: Expect helium to bottom by end of year, system has cost, focusing on long-term agreements, conversations easier now but market still long-term.

Q: Second half EPS guidance, low single-digit growth?

A: Strong first half, expect continued market volume improvement in Americas, new asset contributions, but uncertain macroeconomic environment in Asia and Europe, monitoring customer supply chain and turnarounds.

Q: Samsung project, investment size?

A: Largest investment in electronic side, phases getting larger, volumes under agreement when built three times larger than phase one.

Q: Corporate and other segment operating income, back half run rate?

A: Corporate and other segment improvement due to prior year sale of equipment cost, strong productivity continues, tax rate expected to be ~18% for rest of year.

Q: Non-helium gas pricing dynamics, Asia?

A: Asia is hyper-competitive market, difficult to keep prices stable, Europe and U.S. focus on passing inflation to pricing, helium headwind expected to subside by end of year.

Q: Helium supply side degrees of freedom, prolonged conflict?

A: Flexibility from Kansas inventory buffer, working to maximize supply chain, constraint in moving product from Texas to Kansas and liquefaction capacity, market will find way to supply customers needing product most.

Q: Volume growth in back half, financial guidance?

A: Adjusted guidance based on second quarter beat, but uncertainty in market, prudent to keep second half guidance as before.

Q: Helium supply disruption, customers on allocation?

A: Have enough product to supply customers, will continue to do so. Update on Alberta project?

A: No updates, working with Canadian and Alberta governments to improve project conditions.

Q: Backlog of profit-contributing projects, excluding Neom, Darrow?

A: Little over two and a half billion in traditional industrial gas backlog, significant portion in electronic space.

Q: Thoughts on space sector business?

A: Space sector growing fast, Air Products has traditional business in aerospace, working to increase share with commercial launchers, but specific details not provided