Air Products And Chemicals, Inc. · NYSE:APD
Air Products And Chemicals — Q4 2017 Earnings Presentation
42 slides from Air Products And Chemicals's earnings presentation, Oct 26, 2017
Slide 1: Create Shareholder Value: Q4 FY17 Earnings Conference Call
Moving forward Create Shareholder Value Q4 FY17 Earnings Conference Call October 26 2017
Slide 2: Forward-looking statements
Forward-looking statements Moving forward This presentation contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance, business outlook and investment opportunities. These forward-look
Slide 3: Safety results
Moving forward Safety results FY17 vs FY14 FY16 FY17 FY14 Employee Lost Time Injury Rate 0.24 0.18 0.06 75% Better Employee Recordable Injury 0.58 0.44 0.34 41% Better Rate FY14 includes MT 3 FY16 & FY17 exclude MT
Slide 4: Our Goal
Moving forward Our Goal Air Products will be the safest and the most profitable industrial gas company in the world, providing excellent service to our customers 4
Slide 5: Creating shareholder value
Creating shareholder value Moving forward Management philosophy Shareholder Cash is king; cash flow drives long-term value. Value What counts in the long term is the increase in per share value of our stock, not size or growth. CEO Capital allocation is the most important job of Focus the CEO. Opera
Slide 6: Our Plan
Our Plan Moving forward 5 point plan summary Focus on Restructure Change Control Align the core organization culture capital/costs rewards Reward Industrial gases Decentralize Safety Capex performance Geographic EBITDA/value Key geographies Simplicity Hurdle rates alignment creation target Speed Cor
Slide 7: Three years ago we promised to
Moving forward Three years ago we promised to: 1 Be the safest Industrial Gas company in the world 2 Be the most profitable Industrial Gas company in the world 3 Divest non-core assets 4 sheet in the industry Have the best balance 5 every year Deliver 10% EPS growth 7
Slide 8: Three years later…
Moving forward Three years later… we promised to: we delivered 1 Be the safest Industrial Gas company in the world Done. We are the safest, with a 75% improvement in employee lost-time injury rate. 2 Be the most profitable Industrial Gas company Done. We are the most profitable, with an in the w
Slide 9: Three years later…
Moving forward Three years later… we promised to: we delivered 3 Divest non-core assets Done. Performance Materials business sold for 15.8x EBITDA Done. Electronic Materials business spun-off as Versum Materials, now trading at EV of 13.9x EBITDA Performance Materials multiple from May 6 2016 Ai
Slide 10: Three years later…
Moving forward Three years later… we promised to: we delivered 4 Have the best balance sheet in the industry Done. June 2014 Net Debt of $5.8 billion Sept 2017 investment capacity of ~$5.5 billion 5 Deliver 10% EPS growth every year Done. Annual EPS growth of 10%, 16%, 12% for FY15, FY16 & FY17
Slide 11: We have delivered what we promised
Moving forward Three years later… We have delivered what we promised. Now we are well positioned to drive growth. And we have the balance sheet to do it. 11
Slide 12: FY17 highlights
Moving forward FY17 • Focus on the core Industrial Gases - Completed spin-off of Versum Materials - Completed sale of PMD to Evonik • Major projects on-stream - BPCL India Hydrogen - Pyeongtaek Korea ASU - Yitai China ASU • Significant progress on Jazan project - Established Tech Center in Saudi Ara
Slide 13: Lu'An Clean Energy Project Expansion
Moving forward Lu’An Clean Energy Project Expansion: profitable growth aligned with our strategy Industrial Gases Expanded scope Onsite business model Shareholder value creation 13
Slide 14: Our key profitability metrics
Moving forward Our key profitability metrics Q4 Full Year FY17 FY17 EBITDA % margin 34.9% 34.1% Operating % margin 22.4% 21.6% ROCE 12.1% Based on continuing ops, non-GAAP 14 measures, see appendix for reconciliation
Slide 15: EBITDA Margin Trend
Moving forward EBITDA Margin Trend 35.9% 36% 35.2% 34.8% 34.7% 34.9% 33.9% 34.0% 34% 33.2% 32.9% 32% 31.1% 30% 29.6% 28.7% 28.8% 28% 26.5% 26% 25.1% 24% Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 FY15-17 based on continuing ops FY14 as previously reported, including M
Slide 16: Fiscal Year Results
Moving forward Fiscal Year Results ($ million) FY16 FY17 Change Sales $7,504 $8,188 9% - Volume 6% - Price 1% - Energy/Raw Mat’l pass-thru 3% - Currency (1%) EBITDA 2,622 2,795 7% - EBITDA Margin 34.9% 34.1% (80bp) Operating Income 1,620 1,770 9% - Operating Margin 21.6% 21.6% -0bp Net Income 1,230
Slide 17: Fiscal Year Cash Flow Focus
Moving forward Fiscal Year Cash Flow Focus ($ million) FY16 FY17 Change EBITDA $2,622 $2,795 $173 Interest (115) (92) 23 Cash Tax (374) (400) (26) Maintenance Capex (244) (377) (133) Distributable Cash Flow $1,889 $1,926 $37 DCF ($/share) $8.65 $8.76 Growth Capex (691) (689) 2 Dividends (721) (788)
Slide 18: Fiscal Year EPS Analysis
Moving forward Fiscal Year EPS Analysis FY16 FY17 Change As reported cont ops EPS $5.04 $5.16 less non-GAAP items (0.60) (1.15) Non-GAAP cont ops EPS $5.64 $6.31 $0.67 Volume 0.29 Price / raw materials 0.03 $0.56 Cost 0.24 Currency/FX (0.03) Equity affiliate income 0.04 Other non-operating income 0.
Slide 19: Q4 Results
Moving forward Q4 Results Fav/(Unfav) vs. ($ million) Q4FY17 Q4FY16 Q3FY17 Sales $2,203 13% 4% - Volume 9% 2% - Price 2% 1% - Energy cost pass-thru 1% (1%) - Currency 1% 2% EBITDA $769 13% 6% - EBITDA Margin 34.9% 10bp 90bp Operating Income $493 16% 6% - Operating Margin 22.4% 50bp 60bp Net Income $
Slide 20: Q4 Cash Flow Focus
Moving forward Q4 Cash Flow Focus ($ million) Q4FY16 Q4FY17 Change EBITDA $677 $769 $92 Interest, net (32) (21) 11 Cash Tax (97) (45) 52 Maintenance Capex (69) (87) (18) Distributable Cash Flow $479 $616 $137 Growth Capex (140) (157) (17) Dividends (186) (207) (21) Free Cash Flow $153 $252 $99 • Inc
Slide 21: Q4 EPS Analysis
Moving forward Q4 EPS Analysis Q4FY16 Q4FY17 Change As reported cont ops EPS $1.32 $2.15 less non-GAAP items (0.17) 0.39 NonGAAP cont ops EPS $1.49 $1.76 $0.27 Volume 0.09 Price / raw materials 0.07 $0.22 Cost 0.06 Currency/FX 0.02 Equity affiliate income 0.02 Other non-operating income 0.03 Interes
Slide 22: Balance Sheet update
Balance Sheet update Moving forward ($B) 30 Sept Total cash $3.7 Operating cash required ~$0.2 Cash available to invest ~$3.5 Total debt ($4.0) Debt capacity $5.5 - $7.0 Debt capacity available to invest $1.5 - $3.0 Total current investment capacity ~$5.5 • Commitment to manage debt balance to maint
Slide 23: Regional Industrial Gases EBITDA
Moving forward Regional Industrial Gases EBITDA FY16 FY17 Delta Gases Americas $1,390 $1,473 +$83 Gases EMEA $607 $611 +$4 Gases Asia $707 $788 +$81 • Volume and productivity programs drive profits Based on continuing ops, non-GAAP 23 measures, see appendix for reconciliation
Slide 24: Gases Americas
Moving forward Gases Americas Fav/(Unfav) vs. Q4FY17 Q4FY16 Q3FY17 Sales $953 9% 2% - Volume 7% 2% - Price -% -% - Energy cost pass-thru 1% (1%) - Currency 1% 1% EBITDA $402 14% 9% - EBITDA Margin 42.2% 220bp 270bp Operating Income $266 19% 13% - Operating Margin 27.9% 240bp 250bp • Strong hydrogen
Slide 25: Gases EMEA
Moving forward Gases EMEA Fav/(Unfav) vs. Q4FY17 Q4FY16 Q3FY17 Sales $515 24% 14% - Volume 18% 10% - Price -% -% - Energy cost pass-thru 1% (1%) - Currency 5% 5% EBITDA $180 17% 16% - EBITDA Margin 35.0% (220bp) 70bp Operating Income $119 21% 26% - Operating Margin 23.0% (70bp) 220bp • New hydrogen
Slide 26: Gases Asia
Moving forward Gases Asia Fav/(Unfav) vs. Q4FY17 Q4FY16 Q3FY17 Sales $552 23% 3% - Volume 17% (3%) - Price 6% 4% - Energy cost pass-thru -% -% - Currency -% 2% EBITDA $224 31% 6% - EBITDA Margin 40.6% 240bp 140bp Operating Income $152 38% 2% - Operating Margin 27.5% 300bp (20bp) • Volume growth driv
Slide 27: Global Gases
Moving forward Global Gases Fav/(Unfav) vs. Q4FY17 Q4FY16 Q3FY17 Sales $171 $14 ($16) EBITDA $16 ($10) ($15) Operating Income $12 ($10) ($16) • Profit down due to significant Jazan profit recorded in Q4FY16 Based on continuing ops, non-GAAP 27 measures, see appendix for reconciliation
Slide 28: Corporate and other
Moving forward Corporate and other Fav/(Unfav) vs. Q4FY17 Q4FY16 Q3FY17 Sales $12 ($36) ($2) EBITDA ($54) ($28) ($12) Operating Income ($56) ($27) ($12) • LNG activity down significantly Based on continuing ops, non-GAAP 28 measures, see appendix for reconciliation
Slide 29: Outlook
Moving forward Outlook FY17 Q1 FY18 Q1 FY17 FY18 EPS EPS Delta EPS EPS Delta $1.60 to Up 9% $6.85 to Up 9% $1.47 $6.31 $1.70 to 16% $7.05 to 12% FY18 Capital Spending = $1 - $1.2 billion EPS and Capex Guidance excludes Lu’An or any other significant acquisitions Based on continuing ops, non-GAAP 29
Slide 30: We have delivered what we promised
Moving forward Three years later… We have delivered what we promised. Now we are well positioned to drive growth. And we have the balance sheet to do it. 30
Slide 31: Our Goal
Moving forward Our Goal Air Products will be the safest, most diverse and most profitable industrial gas company in the world, providing excellent service to our customers 31
Slide 32: Appendix Slides
Appendix Slides
Slide 33: Major Projects
Major Projects Moving forward Plant Location Capacity Timing Market ONSTREAM (last five quarters) ASU/Liquid Big River Steel, Arkansas World Scale OS Q416 Steel ASU/H2/Liq. Pyeongtaek, Korea – Ph 1 World Scale OS Q217 Electronics H2/ASU BPCL, India 165 MMSCFD H2 OS Q317* Refinery / Chems ASU Yitai C
Slide 34: Air Products EPS
Air Products EPS Moving forward FY14 FY15 FY16 FY17 FY18 Q1 $1.35 $1.47 $1.60-$1.70 Q2 $1.37 $1.43 - Q3 $1.44 $1.65 - Q4 $1.49 $1.76 - FY $4.42 $4.88 FY $5.64 $6.31 $6.85-$7.05 $8.00 $7.00 $6.00 $5.00 $4.00 +9%-12% $3.00 +12% +16% +10% $2.00 $1.00 $- FY14 FY15 FY16 FY17 FY18 Guidance 34 Based on con
Slide 35: Capital Expenditure
Moving forward Capital Expenditure FY $MM 2018 Forecast $1 - $1.2 billion 2017 $1,066 2016 $935 2015 $1,299 2014 $1,495 2013 $1,740 2012 $1,749 Non-GAAP - includes Capital Expenditures - GAAP basis, plus Capital Lease expenditures and Purchase of non-controlling interests. Excludes $0.7B in 2012 and
Slide 36: Q4FY17 Non-GAAP items
Moving forward Q4FY17 Non-GAAP items ($MM or $/share) Op Inc Tax NI EPS Tax election benefit related — (111.4) (111.4) (0.50) to a non-U.S. subsidiary Gain on land sale (12.2) 4.6 (7.6) (0.03) Cost reduction and asset 48.4 (17.5) 30.9 0.14 actions Pension settlement loss 0.9 (0.3) 0.6 — $37.1 ($124.
Slide 37: Appendix: Q417 and Full Year FY17 Results
Appendix: Q417 and Full Year FY17 Results Moving forward ($ Millions, except per share data) GAAP Measure Non GAAP Adjusts. Non GAAP Measure $ % $ % Q417 vs. Q416 - Total Company Q417 Q416 Change Change Q417 (2) Q416 (2) Q417 Q416 Change Change Sales 2,203.1 1,945.5 257.6 13% 2,203.1 1,945.5 257.6 1
Slide 38: Appendix: Adjusted EBITDA Trend
Appendix: Adjusted EBITDA Trend Moving forward Q417 vs PY Q417 vs PQ FY17 vs FY16 $ Millions Q116 Q216 Q316 Q416 FY16 Q117 Q217 Q317 Q417 FY17 $ % $ % $ % Income From Continuing Operations 287.2 284.7 255.7 294.4 1,122.0 258.2 310.1 106.4 480.5 1,155.2 Add: Interest expense 22.2 25.7 35.1 32.2 115.2
Slide 39: Appendix: Adjusted EBITDA by Segment
Appendix: Adjusted EBITDA by Segment Moving forward Q417 vs PY Q417 vs PQ FY17 vs FY16 $ Millions Q116 Q216 Q316 Q416 FY16 Q117 Q217 Q317 Q417 FY17 $ % $ % $ % Gases - Americas Operating Income 211.6 223.5 234.0 224.1 893.2 223.8 224.5 236.2 266.1 950.6 Add: Depreciation and amortization 109.0 109.8
Slide 40: Appendix: ROCE
Appendix: ROCE Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Moving forward Q2 17 Q3 17 Q4 17 Numerator GAAP Net Income from continuing operations attributable to Air Products (193.8) 249.7 188.4 221.5 273.7 280.9 278.9 250.3 289.4 251.6 304.4 104.2 474.2 Add Interest Expense Impact Be
Slide 41: Appendix: FY18 EPS Outlook
Appendix: FY18 EPS Outlook Moving forward EPS Outlook Diluted Q118 Guidance vs Prior Year EPS (1) Q117 GAAP $1.15 Business separation costs $0.12 Tax costs associated with business separation $0.01 Business restructuring and cost reduction actions $0.19 Q117 Non GAAP $1.47 Q118 Guidance (2) $1.60-$1
Slide 42: Thank you
Moving forward Thank you tell me more
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