Air Products And Chemicals, Inc. · NYSE:APD
Air Products And Chemicals — Q3 FY2017 Earnings Presentation
36 slides from Air Products And Chemicals's earnings presentation, Aug 1, 2017
Slide 1: Create Shareholder Value
Moving forward Create Shareholder Value Q3 FY17 Earnings Conference Call August 1 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: 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 Deliver 10% EPS growth 3
Slide 4: 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 an 83% 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
Slide 5: 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 13.4x EBITDA Performance Materials multiple from May 6 2016 Ai
Slide 6: 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 June 2017 investment capacity of ~$5 billion 5 Deliver 10% EPS growth Done. Annual EPS growth of 10%, 16%, 10% for the last three years FY15, FY16
Slide 7: 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. 7
Slide 8: Major projects around the world…
Major projects around the world… Inner Mongolia, China Glenmont, New York 3 ASUs / 9000 TPD of O2 + 1,100 TPD ASU / liquefier N2 / air for Yitai Chemical fine serving merchant market chemical coal gasification Tianjin, China N2 plant / liquid bulk supply to SMIC’s semi foundry fab BPCL Kochi, India
Slide 9: Safety results
Moving forward Safety results Q317 FY17 vs FY14 FY16 YTD FY14 Employee Lost Time Injury Rate 0.24 0.18 0.04 83% Better Employee Recordable Injury 0.58 0.44 0.29 50% Better Rate FY14 includes MT 9 FY16 & FY17 exclude MT
Slide 10: 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 10
Slide 11: 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 12: 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 13: Our key profitability metrics
Moving forward Our key profitability metrics Q3 FY17 EBITDA % margin 34.0% Operating % margin 21.8% ROCE 12.2% Based on continuing ops, non-GAAP 13 measures, see appendix for reconciliation
Slide 14: EBITDA Margin Trend
Moving forward EBITDA Margin Trend 35.9% 36% 35.2% 34.8% 34.7% 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 FY15-17 based on continuing ops FY14 as previously reported, including MT 14 Non-GA
Slide 15: Q3 Results
Moving forward Q3 Results Fav/(Unfav) vs. ($ million) Q3FY17 Q3FY16 Q2FY17 Sales $2,122 11% 7% - Volume 8% 6% - Price -% -% - Energy cost pass-thru 5% -% - Currency (2%) 1% EBITDA $722 7% 11% - EBITDA Margin 34.0% (120bp) 110bp Operating Income $463 11% 14% - Operating Margin 21.8% - bp 130bp Net In
Slide 16: Q3 Cash Flow Focus
Moving forward Q3 Cash Flow Focus ($ million) Q3FY16 Q3FY17 Change EBITDA $674 $722 $48 Interest, net (35) (20) 15 Cash Tax (127) (82) 45 Maintenance Capex (63) (109) (46) Distributable Cash Flow $449 $511 $62 Growth Capex (171) (165) 6 Dividends (186) (207) (21) Free Cash Flow $92 $139 $47 • Increa
Slide 17: Non-GAAP items
Non-GAAP items total charge of $210MM OI, $1.18/share • Latin America impairment ($162MM, $0.70) - FY17YTD volumes and current outlook below 2014 forecast - FY15 and FY16 performance consistent with 2014 forecast – no impairment • AHG investment impairment ($80MM, $0.36) - Purchased 25% equity inter
Slide 18: Q3 EPS Analysis
Moving forward Q3 EPS Analysis Q3FY16 Q3FY17 Change As reported cont ops EPS $1.15 $0.47 less non-GAAP items (0.29) (1.18) NonGAAP cont ops EPS $1.44 $1.65 $0.21 Volume 0.19 Price / raw materials (0.01) $0.16 Cost (0.02) Currency/FX (0.01) Equity affiliate income - Other non-operating income 0.03 In
Slide 19: Balance Sheet update
Balance Sheet update Moving forward ($B) 30 June Total cash $3.3 Tax to be paid on PMD sale gain $0.2 Operating cash required ~$0.2 Cash available to invest ~$2.9 Total debt ($3.9) Debt capacity $5.4 - $6.8 Debt capacity available to invest $1.5 - $2.9 Total current investment capacity ~$5 • Commitm
Slide 20: Gases Americas
Moving forward Gases Americas Fav/(Unfav) vs. Q3FY17 Q3FY16 Q2FY17 Sales $930 12% 4% - Volume 3% 4% - Price -% -% - Energy cost pass-thru 9% -% - Currency -% -% EBITDA $367 1% 4% - EBITDA Margin 39.5% (400bp) (20bp) Operating Income $236 1% 5% - Operating Margin 25.4% (270bp) 20bp • North American v
Slide 21: Gases EMEA
Moving forward Gases EMEA Fav/(Unfav) vs. Q3FY17 Q3FY16 Q2FY17 Sales $452 5% 9% - Volume 6% 5% - Price (1%) -% - Energy cost pass-thru 4% -% - Currency (4%) 4% EBITDA $155 (3%) 14% - EBITDA Margin 34.3% (310bp) 140bp Operating Income $94 (10%) 9% - Operating Margin 20.8% (350bp) (10bp) • Volume grow
Slide 22: Gases Asia
Moving forward Gases Asia Fav/(Unfav) vs. Q3FY17 Q3FY16 Q2FY17 Sales $538 20% 23% - Volume 20% 21% - Price 2% 1% - Energy cost pass-thru -% -% - Currency (2%) 1% EBITDA $211 15% 21% - EBITDA Margin 39.2% (160bp) (80bp) Operating Income $149 26% 33% - Operating Margin 27.7% 130bp 200bp • Strong volum
Slide 23: Global Gases
Moving forward Global Gases Fav/(Unfav) vs. Q3FY17 Q3FY16 Q2FY17 Sales $187 $37 ($29) EBITDA $31 $42 $6 Operating Income $28 $42 $5 • Sales and profits up on Jazan project Based on continuing ops, non-GAAP 23 measures, see appendix for reconciliation
Slide 24: Corporate and other
Moving forward Corporate and other Fav/(Unfav) vs. Q3FY17 Q3FY16 Q2FY17 Sales $14 ($39) ($9) EBITDA ($42) ($22) ($5) Operating Income ($44) ($20) ($4) • LNG activity down significantly Based on continuing ops, non-GAAP 24 measures, see appendix for reconciliation
Slide 25: Outlook
Moving forward Outlook FY16 Q4 FY17 Q4 FY16 FY17 EPS EPS Delta EPS EPS Delta $1.65 to Up 11% $6.20 to Up 10% $1.49 $5.64 $1.70 to 14% $6.25 to 11% FY17 Capital Spending = Approx. $1 billion Guidance does not include any significant acquisitions 25 Non-GAAP measures, see appendix for reconciliation
Slide 26: Appendix Slides
Appendix Slides
Slide 27: Major Projects
Major Projects Moving forward Plant Location Capacity Timing Market ONSTREAM (last five quarters) ASU/Liquid Big River Steel, Arkansas World Scale Onstream Steel ASU/H2/Liq. Pyeongtaek, Korea – Ph 1 World Scale Onstream Electronics H2/ASU BPCL, India 165 MMSCFD H2 Onstream Refinery / Chems ASU Yitai
Slide 28: Non-GAAP items
Moving forward Non-GAAP items Positive numbers on this slide represent losses. Based on continuing ops, non-GAAP measures, 28 see appendix for reconciliation
Slide 29: Air Products EPS
Air Products EPS Moving forward FY14 FY15 FY16 FY17 Q1 $1.35 $1.47 Q2 $1.37 $1.43 Q3 $1.44 $1.65 Q4 $1.49 $1.65 - $1.70 FY $4.42 $4.88 FY $5.64 $6.20 - $6.25 $7.00 $6.00 $5.00 $4.00 $3.00 +10-11% +16% +10% $2.00 $1.00 $- FY14 FY15 FY16 FY17 Guidance 29 Based on continuing ops, non-GAAP measures, see
Slide 30: Capital Expenditure
Moving forward Capital Expenditure FY $MM 2017 Forecast Approx. $1 billion 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 $0.3B in 2
Slide 31: Appendix: Q317 Results
Appendix: Q317 Results Moving forward ($ Millions, except per share data) GAAP Measure Non GAAP Adjusts. Non GAAP Measure $ % $ % Q317 vs. Q316 - Total Company Q317 Q316 Change Change Q317 (2) Q316 (2) Q317 Q316 Change Change Sales 2,121.9 1,914.5 207.4 11% 2,121.9 1,914.5 207.4 11% Operating Income
Slide 32: Appendix: Adjusted EBITDA Trend
Appendix: Adjusted EBITDA Trend Moving forward Q317 vs PY Q317 vs PQ $ Millions Q116 Q216 Q316 Q416 FY16 Q117 Q217 Q317 $ % $ % Income From Continuing Operations 287.2 284.7 255.7 294.4 1,122.0 258.2 310.1 106.4 Add: Interest expense 22.2 25.7 35.1 32.2 115.2 29.5 30.5 29.8 Less: Other non-operating
Slide 33: Appendix: Adjusted EBITDA by Segment
Appendix: Adjusted EBITDA by Segment Moving forward Q317 vs PY Q317 vs PQ $ Millions Q116 Q216 Q316 Q416 FY16 Q117 Q217 Q317 $ % $ % Gases - Americas Operating Income 211.6 223.5 234.0 224.1 893.2 223.8 224.5 236.2 Add: Depreciation and amortization 109.0 109.8 112.1 112.7 443.6 111.8 116.0 117.0 Ad
Slide 34: 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 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 Add Interest Expense Impact Before tax int
Slide 35: Appendix: FY17 EPS Outlook
Appendix: FY17 EPS Outlook Moving forward Diluted Q417 Guidance vs Prior Year EPS (1) Q416 GAAP $1.32 Business separation costs $0.09 Tax costs associated with business separation $0.02 Cost reduction and asset actions $0.03 Pension settlement loss $0.01 Loss on extinguishment of debt $0.02 Q416 Non
Slide 36: Thank you
Moving forward Thank you tell me more
Air Products and Chemicals — Q3 FY2017 Earnings Presentation on 6ix