Air Products And Chemicals, Inc. · NYSE:APD
Air Products And Chemicals — Investor Day (2011)
67 slides from Air Products And Chemicals's investor day presentation, 2011
Slide 1: Investor Conference: Innovation, Integration and Improvement
Investor Conference Innovation, Integration and Improvement Simon Moore Director, Investor Relations Forward-Looking Statements Note: This presentation contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including earnings
Slide 2: Agenda and Today's Speakers
Agenda Time Presentation Presenter 8:30 Welcome Simon Moore 8:35 Strategy for Success John McGlade Commitment to Success Paul Huck 9:30 Q&A John McGlade Paul Huck 9:50 Break 10:05 Business Presentations and Q&A Business Leaders 11:45 Closing John McGlade 12:00 Lunch Management Team Display Interacti
Slide 3: Strategy for Success: Delivering on Our Future
Investor Conference Innovation, Integration and Improvement Strategy for Success John McGlade Chairman, h President d and d CEO Delivering on Our Future People • Culture of Improvement • Accountability • Talent Development Accelerating Superior Growth Financial Returns • Energy • Accelerating Produc
Slide 4: A Strategy for Success
A Strategy for Success Winning in energy, environmental and emerging Markets Executing on innovation, integration and improvement Actions Delivering e e g on revenue, margin and return G l Goals Generating Shareholder Value Winning inandenergy, environmental emerging Markets
Slide 5: Winning in the Markets
Winning in the Markets Accelerating Growth Air Products Advantage Global Trends Customers Productivity Quality Industrial Gas Fundamentals Applications Environmental Needs Efficiency Global Trends Accelerate Growth Trend Market Air Products Increasing Energy Demand Opportunity • Refining • Hydrogen
Slide 6: Global Trends Accelerate Growth
Global Trends Accelerate Growth Trend Market Air Products Environmental Focus Opportunity • Refining • Hydrogen • Glass • Oxygen • Coatings & • Performance Construction Materials Global Trends Accelerate Growth Trend Market Air Products Emerging Opportunity Markets • Metals • Chemicals • Gases • Foo
Slide 7: Global Trends; Hydrogen Leadership
Global Trends Accelerate Growth Trend Market Air Products Digital Revolution Opportunity • Onsite Nitrogen • Semiconductor • Liquid Products • Display • Electronic Materials • Equipment Air Products Advantage: Hydrogen Leadership 12 Major Hydrogen Pipelines Onsite H2 Market 10 8 BSCFD 6 • US Gulf Co
Slide 8: Electronics Leadership and Asia Merchant Leadership
Air Products Advantage: Electronics Leadership #1 in Taiwan ROW #1 #1 in U.S. in Korea 300mm Fab Capacity Key customer and geographic positions Air Products Advantage: Asia Merchant Leadership Korea China India Taiwan #1 positions in high growth markets
Slide 9: Profitable Joint Ventures in High Growth Regions
Air Products Advantage: Profitable Joint Ventures in High Growth Regions Mexico Italy South Africa India Thailand $2.3B revenue on 100% basis Executing E i on innovation, integration and improvement Actions
Slide 10: Innovation Built on Core Competencies; Integrated Industrial Gas Model
Innovation Built on Core Competencies Core Competencies Key Offerings Markets Combustion Gas Applications Refining Oxy-Fuel Oxy Fuel Burner Design Gasification Process Chemicals Gas Production & Delivery Technology Steel ASU, SMR, LNG, ITM Glass Food Separations Electronics Thin film precursors Fabr
Slide 11: A Culture of Improvement Delivers Results
A Culture of Improvement Delivers Results • Investment in people, process and tools • Leadership accountability and individual responsibility • Data-driven Growth Productivity Pricing • New offerings • Product cost reduction • Pricing tools and • Capacity expansions • Distribution efficiency skills
Slide 12: We Deliver on Our Commitments
We Deliver on Our Commitments ORONA Operating Margin 15 13 12.5% Goal 18 16 17% Goal 11 14 Percent Percent 9 12 7 10 5 8 2004 2007 2007 2011 See appendix for GAAP reconciliation 2015 2015 by $15+ Billion in Sales 20% Operating Margin 15% Return on Capital Employed
Slide 13: Thank you... tell me more
Thank you... tell me more
Slide 14: Commitment to Success
Investor Conference Innovation, Integration and Improvement Commitment to Success Paul Huck Senior Vice President d and d Chief Financial Officer Revenue Operating Return on Growth Margin Capital 11%-13% per year 20% 15% From $9B From 16.5% From 12.5% in 2010 in 2010 in 2010 to to to $15B+ in 2015 2
Slide 15: Revenue Growth; Global Industrial Gas Market
Revenue Growth 11%-13% Revenue Operating Return on Growth Margin Capital per year 11%-13% 20% 15% From $9B per year in 2010 From $9B From 16.5% From 12.5% to in 2010 in 2010 in 2010 $15B+toin 2015 to to $15B+ in 2015 20% in 2015 15% in 2015 See appendix for GAAP reconciliation Global Industrial Gas
Slide 16: Global Industrial Gas Market Growth
Global Industrial Gas Market Growth Annual Growth 9% $96 Billion 35 Energy Electronics 6% 7% 10% 11% 30 Food 10% 8% 25 Chemicals Billions ($) 9% Healthcare 14% 20 12% 7% 15 12% 10 Metals 12% 5 8% Manufacturing 0 38% Sales Growth 2015 Global Industrial Gas Geographies $63 Billion Developing Asia 10%
Slide 17: Global Industrial Gas Geographic Growth
Global Industrial Gas Geographic Growth Annual Growth 9% $96 Billion Developing Asia 35 12% 15% US / Canada 16% China 25% 30 13% 11% C/E Europe 25 4% Billions ($) 14% Africa/ME 20 3% 19% 15 S/C America 4% 9% 10 5% W Europe 5 Japan 22% 8% 14% 0 Sales Growth 2015 Air Products Market Exposure 2010 Mark
Slide 18: Accelerating Air Products Growth
Accelerating Air Products Growth Growth Component % Increase Market Growth 9% Air Products Market Position 1%-2% Consolidation / M&A 1%-2% Total 11-13% Air Products Growth Advantage 14 APD Advantage: 13% 12 12% • Hydrogen Prrojected Growth (%) 11% • Energy 10 10% • Electronics El t i • Asia Markets
Slide 19: Operating Margin: Roadmap to 20%
Operating Margin Revenue Operating Return on Growth 20% Margin Capital 11%-13% per year From20%16.5% 15% From $9B in 2010 From 16.5% From 12.5% in 2010 to in 2010 in 2010 to 20% into 2015 to $15B+ in 2015 20% in 2015 15% in 2015 See appendix for GAAP reconciliation Roadmap to 20% 22 20% 20 perating
Slide 20: Growth Leverage; Cost Profile
Growth Leverage Existing Asset Loading 25% New Asset Fixed Cost Leverage 75% 200 Basis Point Margin Improvement Air Products Cost Profile = $7.5B Depre- ciation 11% Cash Fixed Variable Costs Costs 32% 57%
Slide 21: Variable Cost Profile and Leverage
Air Products Variable Cost Profile = $4.3B Depre- Other Power i i ciation 22% 11% 22% Cash Variable Fixed Costs Costs 57% Raw 32% Materials Natural Gas 25% 26% Total Energy E = 53% Fuel 5% Variable Cost Leverage 1.00 Hydrogen Efficiency 0.96 Operating Service Center 0.92 0.88 1993 1999 2005 2011 201
Slide 22: Fixed Cost Profile and Leverage
Air Products Fixed Cost Profile = $2.4B R&D 5% Operating Labor / S Supplies li Cash 23% Fixed SG&A Costs 37% Variable 32% Costs Maintenance 57% 13% Depre- ciation 11% Other Distribution 14% 8% Fixed Cost Leverage Global Business Support Services Cost / Invoice $60 Operating Service Center $55 $50 $4
Slide 23: Fixed Cost Leverage; Pricing vs. Raw Materials
Fixed Cost Leverage SG&A as a % of Sales 14% Operating Service Center 13% 12% 11% 10% 9% 2004 2011 $50MM/year improvement Pricing vs. Raw Materials $400 $200 $MM $- Price $(200) Raw Materials Net Margin $(400) 2006-2010 2011-2015 $35MM/year improvement
Slide 24: Return on Capital: Driving Returns Higher
Return on Capital Revenue Operating Return on Growth Margin 15% Capital 11%-13% 20% 15% per year From 12.5% From $9B From 16.5% in 2010 From 12.4% in 2010 in 2010 to in 2010 to to 15% into 2015 $15B+ in 2015 20% in 2015 15% in 2015 See appendix for GAAP reconciliation Driving Returns Higher 16 15 15
Slide 25: Driving Capital Cost Lower; Delivering Higher Returns
Driving Capital Cost Lower Large ASU Electronics Nitrogen 120 120 >50% >30% ex Capital Cost Index x apital Cost Inde 100 100 Savings Savings 80 80 60 60 40 40 Ca 20 20 2009 2010 2012 2015 2009 2010 2012 2015 Delivering Higher Returns 18% 16% CE Comp A 4 Qtr Trailing ROC 14% 12% APD 10% Comp B 8% Com
Slide 26: Disciplined Investment; Cash Priorities
Strong Growth Opportunities Drive Disciplined Investment Maintenance 15% Acquisition 15% Growth 70% $13-14B Capital Spending - 2011 to 2015 Cash Priorities Remain Consistent 29 years of • Invest in the best $2.00 dividend increase return projects $1.50 • Maintain A bond rating • Dividend increase $1
Slide 27: Shareholder Rewards: Cash Flow and EPS
Shareholder Rewards: Operating Cash Flow 4.0 $3 2 $3.2 3.0 16% Growth Billion ($) per year 2.0 $1.5 1.0 0.0 2010 2015 Shareholder Rewards: Earnings Per Share $12 $10 $10 15% Growth $8 per year $6 $5.02 t $4 $2 $0 2010 2015
Slide 28: 2015 Goals: Thank you... tell me more
2015 2015 by $15+ Billion in Sales 20% Operating Margin 15% Return on Capital Employed Thank you… tell me more
Slide 29: Appendix – Non GAAP Results
Appendix Appendix – Non GAAP Results 1) FY06-FY10 Non GAAP Operating Income/Operating Margin ($m m ) FY06 FY07 FY08 FY09 FY10 Sales 7,885.0 9,148.2 10,414.5 8,256.2 9,026.0 GAAP Operating Income 1,042.0 1,375.6 1,495.8 846.3 1,389.0 Non GAAP Adjustments Global Cost Reduction Plan 72.1 13.7 298.2 Gai
Slide 30: Appendix – Non GAAP Results (ROCE, Tax Rate)
Appendix – Non GAAP Results $ Millions ROCE Calculation $ Millions Tax Rate Calculation Quarter Ended Q409 Q110 Q210 Q310 Q410 Quarter Ended Q110 Q210 Q310 Q410 Numerator Reported Operating Income Reported 345.0 340.6 336.4 367.0 Income Before Taxes 340.3 343.3 338.9 371.5 Equity Affiliate Income 26
Slide 31: Investor Conference: Forward-Looking Statements
Investor Conference Innovation, Integration and Improvement Simon Moore Director, Investor Relations Forward-Looking Statements Note: This presentation contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including earnings
Slide 32: Agenda
Agenda Time Presentation Presenter 8:30 Welcome Simon Moore 8:35 Strategy for Success John McGlade Commitment to Success Paul Huck 9:30 Q&A John McGlade Paul Huck 9:50 Break 10:05 Business Presentations and Q&A Business Leaders 11:45 Presentation Wrap-up John McGlade 12:00 Lunch Management Team Disp
Slide 33: Merchant Gases
Investor Conference Innovation, Integration and Improvement Merchant Gases Bob Dixon Senior S i Vice-President iV P id t andd General Manager Merchant Gases Winning inandenergy, environmental emerging Markets
Slide 34: Global Trends Accelerate Merchant Growth
Global Trends Accelerate Merchant Growth Trend Market Merchant Gases Rising energy demand and cost Opportunity • Glass • Oxygen for • Cement enrichment and oxy-fuel applications • Metals • Proprietary burners • Oil Field Services • Nitrogen Global Trends Accelerate Merchant Growth Trend Market Merch
Slide 35: Expanding Middle Class; Asia Leadership
Global Trends Accelerate Merchant Growth Trend Market Merchant Gases Expanding Middle Class Opportunity • Construction • Cylinder gases for • Fabricated construction Products • Argon for welding • Nitrogen and gas • Food Freezing and mixtures for food Packaging Air Products Advantage: Asia Leadershi
Slide 36: Asia Leadership
Air Products Advantage: Asia Leadership Asia 2011 Manufacturing Output #1 China #1 Korea #1 India #1 Taiwan 70% Countries #2 Thailand where #2 Air Products has #1 or #2 Malaysia positions Air Products Advantage: Asia Leadership Air Products Installed Capacity 15000 +60% 10000 Tangshan 5000 0 2011 20
Slide 37: Asia Leadership: Plants in Build
Air Products Advantage: Asia Leadership L200 Plant 3 x L200 in build 3x L200 in build 1st On-Stream 6HSW 2011 Executing E i on innovation, integration and improvement Actions
Slide 38: Driving Profits through Innovation
Driving Profits through Innovation Responding to Market Needs Low cost start-up Safer, more convenient Improved yield, lower emission food freezing solutions welding & cutting aluminum production Advanced Low Freshline® QS Freezer Integra® Cylinder Emission Aluminum Melting Driving Profits through I
Slide 39: Bringing Supply Convenience to Customers
Driving Profits through Innovation Bringing Supply Convenience to Customers CryoEase® 80 cylinders Microbulk Solutions 80 cylinders Integrated Industrial Gas Model Packaged Gas Onsite Plant Liquifier Transfill • Full market access • Capital leverage • Lower supply chain costs • Global best practices
Slide 40: Integrated Industrial Gas Model; Success in Past, Present, Future
Integrated Industrial Gas Model Providing Real Benefits –Locally and Globally Fully Integrated Industrial Gases • Full market Merchant Gases e access Packaged Gases • Capital leverage • Lower supply chain Gen Gas brings onsite to costs liquid customers CryoEase® Onsite Liquid Solutions brings liquid
Slide 41: Driving Profits through Improvement
Driving Profits through Improvement Operating Service Center Argon Recovery Combining for a Customer Win Industry World Class Experts Facilities Winning Customer Solutions Knowledge
Slide 42: Merchant Gases Commitments
Delivering on growth, margin and return Goals Merchant Gases Commitments Revenue Growth Operating Margin 80 8.0 25 21% to 24% 7.0 by 2015 10% to 13% 19.6% 6.0 20 Billion ($) per year Percent 5.0 4.0 $3.7 15 3.0 2.0 10 2010 2015 2010 2015
Slide 43: A Strategy for Success
A Strategy for Success Winning in energy, environmental and emerging Markets Executing on innovation, integration and improvement Actions Delivering e e g on revenue, margin and return G l Goals Generating Shareholder Value A Strategy for Success Winning • Strong market fundamentals • Positioned in
Slide 44: Thank you... tell me more
Thank you... tell me more
Slide 45: Tonnage Gases, Equipment and Energy
Investor Conference Innovation, Integration and Improvement Tonnage Gases, Equipment and Energy Steve Jones Senior S i Vice-President iV P id t anddGeneral G lMManager Tonnage Gases, Equipment and Energy Winning inandenergy, environmental emerging Markets
Slide 46: Global Trends Accelerate Growth
Global Trends Accelerate Growth Trend Market TGEE Opportunity Increasing Energy Demand • Higher Refinery Yields • Refining • Hydrogen • Use of Heavier Crude Oil • Coal Based • Oxygen • Use of Alternative Feedstocks Chemicals and • LNG Power • Natural N t l Gas G Global Trends Accelerate Growth Trend
Slide 47: Emerging Markets; Geographies Are Expanding
Global Trends Accelerate Growth Trend Market TGEE Emerging Markets Opportunity • Steel • Economic Growth • Refining • Oxygen • Infrastructure • Coal Based • Hydrogen • Use of Indigenous Energy Chemicals and Power Geographies Are Expanding over the Next Decade… Hydrogen Capacity 12 10 8 BSCFD 6 4 2 2
Slide 48: Geographies Are Expanding over the Next Decade
Geographies Are Expanding over the Next Decade… Oxygen Capacity 1,400 s) per Day (Thousands 1,200 1,000 800 600 400 Tons p 200 2020 2010 0 NAFTA LASA Europe Middle Asia East Geographies Are Expanding over the Next Decade… H2: Monsanto O2: Xingtai Steel Luling, Louisiana Hebei, China ASU O2: PCEC LaP
Slide 49: Innovation Drives Hydrogen Business and Global Leadership
Executing E i on innovation, integration and improvement Actions Innovation Drives Hydrogen Business and Global Leadership 2.5 • Pioneered new FD) business model from 2.0 Airr Products H2 (BSCF SOE to SOG 1.5 • Technip alliance 1.0 • Maintaining 40+% 0.5 market share 0.0 1990 1994 1998 2002 2006 201
Slide 50: Innovation in LNG; Responding to Market Needs
Innovation in LNG: Reshape Markets and Serve Emerging Needs • Full range of process options: from peak-shavers peak shavers to mega-trains • Mid-size plant under construction in China • Technology of choice for emerging floating LNG market World’s leading provider of LNG technology Innovation: Respo
Slide 51: Integrated Solutions; Gulf Coast Pipeline
Integrated Solutions to Win in Growing Markets Globally PetroChina - Sichuan, China • Focus on integrated solutions • Pipeline franchises in key locations globally • Growth with key customers Integrated Gulf Coast Pipeline Drives Efficiency and Reliability • >1 billion SCFD of capacity p y • >20 ope
Slide 52: Plant Efficiency Improvement
Improvement in Large ASU Delivering Low Cost and New Business Globally 120 >50% 50% pital Cost Index x 100 Savings 80 60 40 Cap 20 0 2009 2010 2012 2015 Dedicated to Hydrogen Plant Efficiency Improvement 1.00 ndex 0.98 Plant Efficiency In 0.96 0.94 0.92 0.90 P 0.88 1993 1995 1997 1999 2001 2003 2005
Slide 53: Tonnage Commitments
Delivering on revenue, margin and return Goals Tonnage Commitments Revenue Growth Operating Margin 60 6.0 20 17% to 20% 18 5.0 by 2015 Billion ($) 11% to 14% Percent per year 16 15% 4.0 14 30 3.0 $2 9 $2.9 12 2.0 10 2010 2015 2010 2015
Slide 54: A Strategy for Success
A Strategy for Success Winning in energy, environmental and emerging Markets Executing on innovation, integration and improvement Actions Delivering e e g on revenue, margin and return G l Goals Generating Shareholder Value A Strategy for Success Winning •• Global trends accelerate growth Expanding
Slide 55: Thank you... tell me more
Thank you... tell me more
Slide 56: Electronics
Investor Conference Innovation, Integration and Improvement Electronics Corning Painter Vi Vice-President P id t and d General G l Manager M Global Electronics Winning inandenergy, environmental emerging Markets
Slide 57: Global Trends Accelerate Electronics Growth
Global Trends Accelerate Electronics Growth Trend Market Electronics • Mobile Revolution Opportunity • Cloud Computing • Integrated Circuit • Expanding Middle Class • Gases and • Display Materials • Equipment • Services Global Trends Accelerate Electronics Growth Trend Market Electronics • Increasin
Slide 58: Winning in the Marketplace; The Partner of Choice
Winning in the Marketplace Semiconductor Capital Spending Air Products Revenue Other Customers Intel (> 1000) Customer A Other Customer B Samsung Customer C tsmc Strategic Accounts (< 50) 2011 Top 10 Outlook 2010 The Partner of Choice What customers want What we provide Result • Basic manufacturing
Slide 59: Innovation: Customer-Focused Development Spurs Growth
Executing E i on innovation, integration and improvement Actions Innovation: Customer-Focused Development Spurs Growth 25000000 PDEMS Revenue DEMS® ILD Organic g Porogen g 20000000 Precursor Precursor 15000000 H3C O C H2C H3 Si CxHy H O C H2C H3 10000000 5000000 0 Low-K film 2007 2008 2009 2010 2011
Slide 60: Merchant and Electronics Integration
Merchant and Electronics Integration Fab Capacity #1 in Korea Electronics (300mm) Strength Korea More Merchant ROW #1 Reliable Success in Taiwan Taiwan More Plants Electronics anchors our leading position in Taiwan and Korea Driving Improvement – Tonnage Nitrogen Plant Cost Reduction 110 400 ex Inst
Slide 61: Price Stability Going Forward
Delivering on revenue, margin and return Goals Price Stability Going Forward 200 Nitrogen Trifluoride (NF3) 180 160 140 Price Index 120 100 80 60 40 20 - FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Slide 62: Electronics & Performance Materials Commitments
Electronics & Performance Materials Commitments Revenue Growth Operating Margin 40 4.0 25 3.5 20 Billion ($) 11% to 14% Percent 3.0 per year 18% to 21% by 2015 2.5 15 13% 2.0 $1.9 1.5 10 2010 2015 2010 2015 A Strategy for Success Winning in energy, environmental and emerging Markets Executing on inn
Slide 63: A Strategy for Success
A Strategy for Success Winning • Partner to Industry Leaders • Innovative materials Executing • Cost leadership • Emerging markets Delivering e e g • 2015 goals Generating Shareholder Value Thank you… tell me more
Slide 64: Strategy for Success: 2015 Goals
Investor Conference Innovation, Integration and Improvement Strategy for Success John McGlade Chairman, h President d and d CEO 2015 2015 by $15+ Billion in Sales 20% Operating Margin 15% Return on Capital Employed
Slide 65: A Strategy for Success
A Strategy for Success Winning in energy, environmental and emerging Markets Executing on innovation, integration and improvement Actions Delivering e e g on revenue, margin and return G l Goals Generating Shareholder Value Thank you… tell me more
Slide 66: Investor Conference: Closing and Agenda
Investor Conference Innovation, Integration and Improvement Simon Moore Director, Investor Relations Agenda Time Presentation Presenter 8:30 Welcome Simon Moore 8:35 Strategy for Success John McGlade Commitment to Success Paul Huck 9:30 Q&A John McGlade Paul Huck 9:50 Break 10:05 Business Presentati
Slide 67: Today's Display Sessions
Today’s Display Sessions How do we win in our target markets? Debbie McCullough John Marsland Delivering low-cost Vice President Sr. Vice President facilities S ppl Chain Supply Gl b l Engineering Global E i i How do we win in our target markets? Jeff Byrne Integrated project Vice President C.S. Saw