Commenting on the results, Air Products' Chairman, President and Chief Executive Officer Seifi Ghasemi said, "The committed team at Air Products worked hard to deliver strong results this quarter, overcoming significant economic weakness, currency challenges and other headwinds. We are proud to have reached significant project milestones, including completing the second phase of the $12 billion Jazan gasification and power project, continuing to make good progress on the project financing for the NEOM green hydrogen project, and announcing plans for the largest green hydrogen project in the U.S. to be located in Texas. Importantly, we again increased the dividend, as we have done for more than 40 consecutive years and expect to pay out more than $1.5 billion to our shareholders in 2023."
Fiscal 2023 First Quarter Results by Business Segment
- Americas sales of $1,384 million were up 13 percent over the prior year on nine percent higher pricing and six percent higher volumes, partially offset by one percent lower energy cost pass-through and one percent unfavorable currency. Operating income of $343 million increased 28 percent and adjusted EBITDA of $515 million increased 13 percent, in each case due to the higher pricing and higher volumes, partially offset by higher costs. Adjusted EBITDA also reflects lower equity affiliates' income. Operating margin of 24.8 percent increased
30 basis points primarily due to higher pricing, while adjusted EBITDA margin of 37.2 percent decreased 10 basis points as the improved pricing was offset by lower equity affiliates' income.
- Asia sales of $778 million were flat versus the prior year as seven percent higher volumes, two percent higher energy cost pass-through and one percent higher pricing were offset by 10 percent unfavorable currency. Operating income of $236 million increased seven percent and adjusted EBITDA of $345 million increased two percent, in each case due to the favorable volumes and pricing, partially offset by unfavorable currency. Operating margin of 30.3 percent increased 200 basis points and adjusted EBITDA margin of 44.4 percent increased 100 basis points, primarily due to higher pricing and volumes.
- Europe sales of $792 million increased six percent over the prior year driven by 14 percent higher pricing and nine percent higher energy cost pass-through, partially offset by 11 percent unfavorable currency and six percent lower volumes. Operating income of $146 million increased 47 percent and adjusted EBITDA of $208 million increased 28 percent, in each case primarily driven by higher pricing, partially offset by lower volumes, unfavorable currency, and higher costs. Operating margin of 18.4 percent increased 510 basis points and adjusted EBITDA margin of 26.2 percent increased 430 basis points.
- Middle East and India equity affiliates' income of $64 million decreased 31 percent compared to the prior year, primarily from the prior-year one-time benefit associated with finalizing the Jazan ASU joint venture.
- Corporate and other sales of $179 million decreased 19 percent compared to the prior year, driven by lower sale of equipment activity.
Outlook
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 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 the 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. Management therefore is unable to reconcile, without unreasonable effort, the Company’s forecasted range of adjusted EPS or the capital expenditures to a comparable GAAP range.
Air Products continues to expect full-year fiscal 2023 adjusted EPS guidance of $11.20 to $11.50, up nine to 12 percent over prior year adjusted EPS. For the fiscal 2023 second quarter, Air Products' adjusted EPS guidance is $2.50 to $2.70, up seven to 15 percent over fiscal 2022 second quarter adjusted EPS.
Effective beginning in the first quarter of fiscal year 2023, management reviews adjusted earnings per share excluding the impact of non-service related components of the net periodic benefit/cost for the Company's defined benefit pension plans. The projected percentage increase in adjusted EPS for full year fiscal 2023 and fiscal 2023 second quarter is calculated using adjusted fiscal 2022 results in order to present this information on a consistent basis using the calculation of adjusted EPS that is being applied for the first time in fiscal year 2023. Refer to the reconciliations of GAAP to
non-GAAP historical results below for additional information.
Air Products continues to expect capital expenditures of $5.0 - $5.5 billion for full-year fiscal 2023.
Earnings Teleconference
Access the fiscal 2023 first quarter earnings teleconference scheduled for 8:30 a.m. Eastern Time on February 2, 2023 by calling 323-994-2093 and entering passcode 3216168 or by accessing the Event Details page on Air Products’ Investor Relations website.