15:41 PM | April 23, 2013 | Lindsay Frost
Air Products reports that net income decreased slightly year-on-year (YOY)—down 1.6%, to $290.4 million. Adjusted earnings per share of $1.37/share, up 5.4% YOY, were in line with analyst estimates, according to Thomson Reuters (New York). Sales of $2.48 billion increased 6% YOY, although underlying sales fell because of the previously announced decision to exit the polyurethane intermediates business, while acquisitions contributed 6% to sales. Lower tonnage gases volumes also contributed negatively to sales, the company says.
"Good cost performance helped offset weaker than expected volumes in the second quarter. Global economic growth continued to be a challenge, with a slower US, contraction in Europe, softness in China, and an electronics market much weaker than we expected,” says John McGlade, chairman and CEO of Air Products. “Despite these difficult conditions, we were able to deliver bottom-line earnings growth in the first half of the year by focusing on superior execution and cost discipline."
The company’s acquisition of Indura, a Chilean industrial gas company, contributed to sales growth in its merchant gases segment. Net sales for the unit grew 14% YOY, to $1 billion—although positive pricing was more than offset by lower volumes in Europe and in helium globally. Operating income for the segment increased 10%, to $168 million, because of Indura and improved productivity—including benefits from cost reductions in Europe. This was partially offset by lower volumes and higher energy and distribution costs.
Tonnage gases reported an increase in sales—up 3%, to $809 million, because of new plant volumes and higher energy pass-through, partially offset by lower polyurethane intermediate volumes. Operating income fell 2%, to $123 million, including polyurethane intermediates—however, excluding polyurethane intermediates, operating income was up 3% on new plant volumes and better operating efficiencies. The company’s electronic and performance materials segment reported sales of $549 million, down 3% YOY with lower electronics materials and equipment sales partially offset by the acquisition of DA NanoMaterials, an electronic gases producer headquartered in Arizona.
McGlade indicates that the fiscal quarter ended 31 March was weak, and the company lowered its earnings forecast . The company expects adjusted earnings for the fiscal year ending ending 30 September to be between $5.45/ share and $5.60/share, down from previous estimates of $5.70–5.90/share. The decline at midpoint of the current and previous earnings forecast is 4.7%. "Given the weakness we saw coming out of [the quarter], we are tempering our expectations for economic growth in the second half of our fiscal year. We remain focused on those things within our control, including reliable plant operations, disciplined project execution, capital allocation, and further productivity improvements,” McGlade says. “In light of our view of continuing slow growth, we are actively assessing whether there are additional actions we can take that would result in increased value to our shareholders."