Air Products is a world-leading Industrial Gases company operating for over 75 years. The Company’s core industrial gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. Air Products is also the world’s leading supplier of liquefied natural gas process technology and equipment. The Company is the world’s largest supplier of hydrogen and has built leading positions in growth markets such as helium, refinery hydrogen, semi-conductor materials, natural gas liquefaction, and advanced coatings and adhesives. The Company also designs and manufactures equipment for natural gas liquefaction and helium distribution.
Air Products manufactures and distributes products in two principal lines of business: Industrial Gases and Materials Technologies. Industrial Gases’ primary products are atmospheric gases (oxygen, nitrogen, argon, and rare gases), process gases (hydrogen, helium, carbon dioxide, carbon monoxide, syngas and custom-made gases) and equipment for air separation. Materials Technologies’ primary products are performance materials and chemicals, such as epoxy amine curing agents, polyurethane catalysts, additives, and custom-made surfactants, and electronic materials such as custom-made gases, chemical-mechanical planarization slurries, and custom-made chemicals.
At the beginning of 2016, the Company reported its business in seven reporting segments: Industrial Gases –Americas; Industrial Gases – EMEA (Europe, Middle East, and Africa); Industrial Gases – Asia; Industrial Gases – Global; Materials Technologies; Energy-from-Waste [1]; and Corporate and other.
Each of the three regional Industrial Gases segments (Americas, EMEA,Asia) includes onsite air separation units (ASUs) (primarily producing oxygen, nitrogen and argon), hydrogen/HyCO plants (primarily producing hydrogen, carbon monoxide, syngas and steam), and the regional merchant gases business (including liquid/bulk, packaged gases and related equipment).The Industrial Gases – Global segment includes atmospheric sale of equipment businesses, such as ASUs and non-cryogenic generators, as well as global resources associated with the Industrial Gases business. The Corporate and other segment include two global businesses: the liquefied natural gas (LNG) sale of equipment and process technology business, and the helium storage and distribution vessel sale of equipment business.
Despite weaker than forecast economic activity, Air Product delivered strong results driven by cost improvement actions and significantly improved the Company´s profitability as measured by operating income, operating margin, and adjusted EBITDA. According to the Company´s Annual Report in 2016, Air Product increased its adjusted operating income by 16% from $1 893 million in 2015 to $2 199 million in 2016. The Company recorded a small drop of 4% in the sales turnover, which amounted to $9 524 million in 2016 compared to $9 895 million in 2015.The Company´s adjusted EBITDA rose by 10% in 2016 from $2 984 million in 2015 to $3 273 million in 2016, primarily due to favourable costs and favourable pricing. During the last 5 years the Company´s adjusted EBITDA increased by 30% from $2 528 in 2012 to $3 273 million in 2016, primarily due to energy, fuel, and raw material costs.In 2016 the Company improved profitability by increasing its adjusted EBITDA margin from 30.2% (in 2015) to 34.4% (in 2016). In 2016 the Company succeeded in increasing an adjusted EPS up to $7.55 per share, which represented a 14% improvement compared to an adjusted EPS of $6.60 per share in 2015.
Regional sales of industrial gases [2] constituted approximately 76% of consolidated sales in 2016 and remained at the same level compared to 2015 (76%) and 2014 (77%).
Tonnage sales of hydrogen and related products slightly decreased in 2016 and constituted 17% of consolidated sales compared to 19% in 2015, and 22% in 2014.
Sales of atmospheric gases have increased steadily within the last three years and constituted 36% of consolidated sales in 2016, 35% in 2015 and 33% in 2014.
By segments the Company achieved the following financial results in 2016 / 2015 / 2014 (in millions of US$):
Industrial Gases – Americas
Sales: $3,343.6 (2016) / $3,693.9 (2015) / $4,078.5 (2014);
Operating income: $895.2 (2016) / $808.4 (2015) / $762.6 (2014)
Operating margin: 26.8 % (2016) / 21.9 % (2015) / 18.7 % (2014)
Adjusted EBITDA: $1,390.4 (2016) / $1,289.9 (2015) / $1,237.9 (2014)
Industrial Gases – EMEA
Sales: $1,700.3 (2016) / $1,864.9 (2015) / $2,150.7 (2014)
Operating income: $382.8 (2016) / $330.7 (2015) / $351.2 (2014)
Operating margin: 22.5 % (2016) / 17.7 % (2015) / 16.3 % (2014)
Adjusted EBITDA: $605.0 (2016) / $567.4 (2015) / $615.5 (2014)
Industrial Gases – Asia
Sales: $1,716.1 (2016) / $1,637.5 (2015) / $1,527.0 (2014)
Operating income: $449.1 (2016) / $380.5 (2015) / $310.4 (2014)
Operating margin: 26.2 % (2016) / 23.2 % (2015) / 20.3 % (2014)
Adjusted EBITDA: $704.0 (2016) / $629.5 (2015) / $553.7 (2014)
Industrial Gases – Global
Sales: $498.8 (2016) / $286.8 (2015) / $296.0 (2014)
Operating loss: ($21.3) (2016) / ($51.6) (2015) / ($57.3) (2014)
Adjusted EBITDA: ($13.5) (2016) / ($35.9) (2015) / ($44.4) (2014)
The Industrial Gases – Global segment includes sales of cryogenic and gas processing equipment for air separation and centralized global costs associated with management of all the Industrial Gases segments. The 74% increase in sales was driven by a contract to sell equipment for multiple air separation units that will serve Saudi Aramco’s Jazan oil refinery and power plant in Saudi Arabia Operating loss of $21.3 decreased by 59%, or by $30.3 million, primarily from income on the Jazan project and from project activity in the sale of other equipment.
Materials Technologies
Sales: $2,019.5 (2016) / $2,087.1 (2015) / $2,064.6 (2014)
Operating income: $530.2 (2016) / $476.7 (2015) / $379.0 (2014)
Adjusted EBITDA:$609.3 (2016) / $571.7 (2015) / $480.7 (2014)
Adjusted EBITDA margin: 30.2 % (2016) / 27.4 % (2015) / 23.3 % (2014)
Corporate and other
Sales $246.1 (2016) / $324.7 (2015) / $322.2 (2014)
Operating loss ($37.5) (2016) / ($51.5) (2015) / ($78.5) (2014)
Adjusted EBITDA ($22.2) (2016) / ($38.5) (2015) / ($67.7) (2014)
Sales of $246.1 decreased 24%, primarily due to activity in the sale of lower liquefied natural gas (LNG) equipment. Operating loss of $37.5 decreased 27%, due to benefits from recent cost reduction actions and lower foreign exchange losses, partially offset by lower LNG activity.
Research and development expenditure was $132.0 million during 2016, $137.1 million during 2015, and $139.8 million in 2014. Research and development expense of $132.0 decreased by $5.1 million, or 4% compared to 2015, and represented 1.4% of total sales. In addition, the Company expended approximately $1 million on customer sponsored research activities during 2016, $6 million during the 2015 fiscal year, and $19 million in the 2014 fiscal year.
The Company owns approximately 970 patents in the United States, approximately 3,900 foreign patents, and is a licensee under certain patents owned by others.
[1] On 29 March 2016, the Board of Directors approved the Company’s exit from its Energy-from-Waste business based on continued difficulties in making its two Energy-from-Waste projects operational. The Energy-from-Waste segment is presented in the financial report as a discontinued operation.
[2] The regional Industrial Gases segments also include the Company´s share of the results of several joint ventures. The largest of these joint ventures operate in Mexico, Italy, South Africa, India, Saudi Arabia and Thailand.
