Air Products and Chemicals, Inc. is a world-leading industrial gases company in operation for nearly 80 years. Air Products serves customers globally with a portfolio of products that include atmospheric gases, process and specialty gases, equipment, and services. Air Products is the world’s largest supplier of hydrogen and has leading positions in growth markets such as helium and liquefied natural gas ("LNG") process technology and equipment. The Company also develops, engineers, builds, owns and operates some of the world's largest industrial gas projects, including gasification projects that sustainably convert abundant natural resources into syngas for the production of high-value power, fuels and chemicals. The Company conducts business in the USA and in 53 countries outside the United States and has approximately 19,275 employees worldwide.
The Company has five reporting: Industrial Gases – Americas; Industrial Gases – EMEA (Europe, Middle East, and Africa); Industrial Gases – Asia; Industrial Gases – Global; and Corporate and other.
According to the Company´s Annual Financial Report in 2020, Air Products reached sales of $8.9 billion, of which over 60% were derived from customers outside the United States. With operations in 53 countries the Company had assets of $25.2 billion in 2020.
Compared to the prior year sales of $8,856 million decreased by 1%, or by $62.6 million due to 3% higher pricing and 2% favourable volumes. COVID-19 negatively impacted overall sales by approximately 4%, primarily driven by lower volumes in merchant business in the regional industrial gas segments. The unfavourable currency impact was driven by the Chilean Peso.
Operating income of $2,237 million increased by 4%, or by $93.2 million, due to positive pricing, net of power and fuel costs, of $212 million, income associated with the company headquarters relocation of $34 million, and prior year charges for a facility closure of $29 million and cost reduction actions of $26 million.
Operating margin of 25.3% increased 130 bp, primarily due to positive pricing, lower energy and natural gas cost pass-through to customers, the impact of income associated with the company headquarters relocation, and prior year charges for a facility closure and cost reduction actions.
Net income of $1,931 million increased by 7%, or by $121.7 million, primarily due to higher pricing and income from the sale of property at current corporate headquarters. In addition, the prior year was negatively impacted by a facility closure, cost reduction actions, and the U.S. Tax Cuts and Jobs Act. Net income margin of 21.8% increased by 150 bp, primarily due to the factors noted above as well as lower energy and natural gas cost pass-through to customers.
Adjusted EBITDA amounted for $3,619.8 million and increased by 4%, or by $151.8 million, primarily due to higher pricing, partially offset by higher operating costs. Adjusted EBITDA margin of 40.9% increased by 200 bp, primarily due to the higher pricing and lower energy and natural gas cost pass-through to customers, partially offset by unfavourable volume mix and higher operating costs.
Diluted EPS of $8.55 increased by 8%, or by $0.61, and adjusted diluted EPS of $8.38 increased by 2%, or by $0.17. COVID-19 negatively impacted EPS by approximately $0.60-$0.65 per share.
In 2020 the Company increased its quarterly dividend by over 15% from $1.16 to $1.34 per share, representing the largest dividend increase in the 80-year history of the Company.
Cost of sales of $5,858.1 million decreased by 2%, or by $146.4 million in 2020, from total cost of sales of $6,004.5 million in the prior year, which included the facility closure. The decrease from the prior year was driven by lower energy and natural gas cost pass-through to customers of $314 million, positive currency impacts of $73 million, the favourable impact from the India contract modification of $41 million, and the prior year facility closure of $29 million. Gross margin of 33.9% increased by 120 bp from 32.7% in the prior year, primarily due to positive pricing, lower energy and natural gas cost pass-through to customers, and the prior year facility closure.
Selling and administrative expense of $775.9 million increased by 3%, or by $25.9 million, due to higher business development costs to support the Company´s growth strategy. Selling and administrative expense, as a percentage of sales, increased from 8.4% to 8.8%.
Research and development expense of $83.9 million increased by 15%, or by $11.0 million, primarily due to higher product development costs. Research and development expense as a percentage of sales increased from 0.8% to 0.9%.