Air Products And Chemicals, Inc. · NYSE:APD
Air Products And Chemicals — Q3 2016 Earnings Presentation
39 slides from Air Products And Chemicals's earnings presentation, Jul 28, 2016
Slide 1: Q3 FY'16 Earnings Conference Call
Moving forward Create Shareholder Value Q3 FY’16 Earnings Conference Call July 28 2016
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 and business outlook. These forward-looking statements are based o
Slide 3: Safety results
Moving forward Safety results FY15 FY16 Change Q3 Q3 Employee Lost Time Injury Rate 0.19 0.07 63% better Employee Recordable Injury Rate 0.51 0.43 16% better 3
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 Focus Capital allocation is the most important job of 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: Q3 Summary
Moving forward Q3 Summary FY15 FY16 Q3 Q3 Change Sales $millions $2,470 $2,434 (1%) EBITDA $millions $760 $833 10% EBITDA % margin 30.8% 34.2% +340bp Adjusted EPS $/share $1.66 $1.92 +16% ROCE 11.5% 13.5% +200bp Based on continuing ops, non-GAAP measures, 7 diluted shares, see appendix for reconcili
Slide 8: EBITDA Margin Trend
Moving forward EBITDA Margin Trend 36% 35.1% 34.2% 34% 33.5% 32.2% 32% 30.8% 30% 29.5% 28.7% 28.3% 28% 26.5% 26% 25.1% 24% Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Based on continuing ops, non-GAAP 8 measures, see appendix for reconciliation FY14 information not audited
Slide 9: Our key profitability metrics
Moving forward Our key profitability metrics FY16 Q3 EBITDA % margin 34.2% Operating % margin 23.0% ROCE 13.5% Based on continuing ops, non-GAAP 9 measures, see appendix for reconciliation
Slide 10: Q3 Results
Moving forward Q3 Results Fav/(Unfav) vs. ($ million) Q3 FY16 Q3 FY15 Q2 FY16 Sales $2,434 (1%) 7% - Volume 4% 8% - Price -% (1%) - Energy/Raw Mat’l pass-thru (3%) (1%) - Currency (2%) 1% EBITDA $833 10% 5% - EBITDA Margin 34.2% 340bp (90bp) Operating Income $560 16% 5% - Operating Margin 23.0% 340b
Slide 11: Q3 Cash Flow Focus
Moving forward Q3 Cash Flow Focus ($ million) Q3 FY15 Q3 FY16 Change EBITDA $760 $833 $73 Interest (28) (35) (7) Cash Tax (106) (152) (46) Maintenance Capex (56) (70) (14) Distributable Cash Flow $570 $576 $6 Growth Capex (300) (199) 101 Dividends (174) (186) (12) Free Cash Flow $96 $191 $95 Incre
Slide 12: Q3 EPS Analysis
Moving forward Q3 EPS Analysis Q3 FY15 Q3 FY16 Change GAAP EPS $1.48 $1.63 less non-GAAP items (0.18) (0.29) Adjusted EPS $1.66 $1.92 $0.26 Volume 0.01 Price / raw materials 0.04 $0.30 Cost 0.25 Currency/FX (0.05) Equity affiliate income - Higher interest expense (0.02) Tax rate 0.01 $0.01 Lower non
Slide 13: Gases Americas
Moving forward Gases Americas Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $832 (7%) 4% - Volume (1%) 4% - North America impact 1% - South America impact (2%) - Price 1% -% - Energy/Raw Mat’l pass-thru (5%) (1%) - Currency (2%) 1% EBITDA $362 11% 6% - EBITDA Margin 43.5% 700bp 70bp Operating Income
Slide 14: Gases EMEA
Moving forward Gases EMEA Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $427 (6%) 2% - Volume (1%) 1% - Price 1% -% - Energy/Raw Mat’l pass-thru (5%) (1%) - Currency (1%) 2% EBITDA $160 9% 10% - EBITDA Margin 37.4% 520bp 290bp Operating Income $103 18% 16% - Operating Margin 24.2% 500bp 290bp • 6th
Slide 15: Gases Asia
Moving forward Gases Asia Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $448 7% 10% - Volume 14% 10% - Price (2%) (1%) - Energy/Raw Mat’l pass-thru -% -% - Currency (5%) 1% EBITDA $182 10% 7% - EBITDA Margin 40.7% 110bp (120bp) Operating Income $118 17% 13% - Operating Margin 26.4% 220bp 70bp • Stro
Slide 16: Materials Technologies
Moving forward Materials Technologies Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $520 (4%) 5% - Volume (1%) 6% - Price (2%) (2%) - Currency (1%) 1% EBITDA $154 -% 3% - EBITDA Margin 29.7% 110bp (50bp) Operating Income $135 3% 5% - Operating Margin 26.0% 160bp (20bp) Based on continuing ops, non-G
Slide 17: Materials Technologies Performance Materials
Materials Technologies Moving forward Performance Materials Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Sales $277 -% - Volume 4% - Price (4%) - Currency -% EBITDA $69 6% - EBITDA Margin 24.9% 130bp Operating Income $63 9% - Operating Margin 22.7% 180bp • Epoxy & Polyurethane Additives driving positive volume •
Slide 18: Versum Materials
VERSUM MATERIALS BEST IN CLASS ELECTRONIC MATERIALS COMPANY Leadership positions in a profitable and complex semiconductor materials industry Strong technology, commercial and operations capabilities Solid growth Global infrastructure High margins Compelling growth platforms with Low capital i
Slide 19: Reaching Higher Levels of Performance
REACHING HIGHER LEVELS OF PERFORMANCE SELF-HELP ACTIONS DRIVING SUSTAINABLE MARGIN IMPROVEMENT 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% FY13Q1 FY13Q2 FY13Q3 FY13Q4 FY14Q1 FY14Q2 FY14Q3 FY14Q4 FY15Q1 FY15Q2 FY15Q3 FY15Q4 FY16Q1 FY16Q2 FY16Q3 Electronic Materials Adj EBITDA Margin As reported for EMD withi
Slide 20: Materials Technologies Electronic Materials
Materials Technologies Moving forward Electronic Materials Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Sales $243 (8%) - Volume (6%) - Materials impact 0% - DS&S impact (6%) - Price -% - Currency (2%) EBITDA $86 (7%) - EBITDA Margin 35.3% 20bp Operating Income $73 (5%) - Operating Margin 30.0% 80bp • Overall Ma
Slide 21: Versum Materials: A Portfolio of World Class Businesses
VERSUM MATERIALS A PORTFOLIO OF WORLD CLASS BUSINESSES Sales: $954 EBITDA: $344 EBITDA Margin: 36.0% Op Income: $289 Op Margin: 30.3% Materials Delivery Systems 74% of sales 26% of sales % of FY15 sales Europe 9% Solid growth Americas 30% High margins Low capital intensity Asia 61% Strong free cash
Slide 22: Significant Cash Generation
SIGNIFICANT CASH GENERATION ($ million) Adj EBITDA $313 Est. Interest $69 Est. Cash Taxes $50 Est. Maintenance Capex $15 Est. Distributable Cash Flow $180 Est. Growth Capex $15 Est. Free Cash Flow (before dividend) $165 •Adj EBITDA = June 30 2016 TTM for EMD as reported within MT of $344, minus $20
Slide 23: Outlook
Moving forward Outlook FY2016 Q4 EPS $1.91 - $2.01, up 4% - 10% vs PY FY2016 EPS $7.45 - $7.55, up 13% - 14% vs PY Capital Spending Approx. $1.2 billion Based on continuing ops, non-GAAP measures, see appendix for reconciliation 23 Capex includes $0.1 billion in EfW
Slide 24: Appendix Slides
Appendix Slides
Slide 25: Global Gases
Moving forward Global Gases Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $151 $79.5 $64 EBITDA ($12) $8 ($3) Operating Income ($14) $10 ($3) • Sales up on higher ASU activity • Profits up on lower costs Based on continuing ops, non-GAAP 25 measures, see appendix for reconciliation
Slide 26: Corporate and other
Moving forward Corporate and other Fav/(Unfav) vs. Q3 FY16 Q3 FY15 Q2 FY16 Sales $56 ($32) ($9) EBITDA ($14) $1 ($13) Operating Income ($18) $- ($13) • LNG sales down vs prior year • Profits flat with lower costs Based on continuing ops, non-GAAP 26 measures, see appendix for reconciliation
Slide 27: Major Projects
Major Projects Moving forward Plant Location Capacity Timing Market ONSTREAM (last five quarters) ASU/Liquid Zhengyuan, Hebei, China 2,000 TPD O2 Onstream Gasif to Fertilizer Helium Colorado 230 MMSCFY Onstream Merchant Helium ASU Yankuang, Yulin, China 12,000 TPD O2 Onstream Gasif to CTL H2 Scotfor
Slide 28: Capital Expenditure
Moving forward Capital Expenditure FY $MM 2016 Forecast Approx. $1.2 billion 2015 $1,749 2014 $1,885 2013 $1,997 2012 $2,088 2011 $1,539 2010 $1,298 2009 $1,475 2008 $1,355 2007 $1,635 Non-GAAP - includes Capital Expenditures - GAAP basis, plus Capital Lease expenditures and Purchase of non-controll
Slide 29: Air Products EPS
Moving forward Air Products EPS FY13 FY14 FY15 FY16 Q1 $1.55 $1.79 Q2 $1.56 $1.82 Q3 $1.66 $1.92 Q4 $1.83 $1.91-$2.01 FY $5.53 $5.81 FY $6.60 $7.45-$7.55 EfW Disc Ops Impact $0.03 $0.03 FY $0.03 Previously reported $5.50 $5.78 FY $6.57 Based on continuing ops, non-GAAP measures, see appendix for rec
Slide 30: Q3 Non-GAAP items
Moving forward Q3 Non-GAAP items Op Income Tax Net Income EPS $MM $MM $MM $/share - MT separation costs $9.5 ($1.0) $8.5 $0.04 - Korea dividend tax -- 45.7 45.7 0.21 Business separation costs 9.5 44.7 54.2 0.25 Cost reduction actions 14.2 (4.9) 9.3 0.04 Pension settlements 1.0 (0.4) 0.6 -- $24.7 $39
Slide 31: Appendix: Q316 Results
Appendix: Q316 Results Moving forward ($ Millions, except per share data) GAAP Measure Non GAAP Adjusts. (2) Non GAAP Measure $ % $ % Q316 vs. Q315 - Total Company Q316 Q315 Change Change Q316 Q315 Q316 Q315 Change Change Sales 2,434.4 2,470.2 (35.8) (1%) 2,434.4 2,470.2 (35.8) (1%) Operating Income
Slide 32: Appendix: Adjusted EBITDA Trend
Appendix: Adjusted EBITDA Trend Moving forward Q316 vs PY Q316 vs PQ $ Millions Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 $ % $ % Income From Continuing Operations 339.2 298.8 334.9 351.5 1,324.4 386.2 387.6 363.0 Add: Interest expense 29.1 23.4 28.2 22.8 103.5 22.2 25.7 35.0 Add: Income tax provision
Slide 33: Appendix: Adjusted EBITDA by Segment
Appendix: Adjusted EBITDA by Segment Moving forward Q316 vs PY Q316 vs PQ $ Millions Q115 Q215 Q315 Q415 FY15 Q116 Q216 Q316 $ % $ % Gases - Americas Operating Income 211.2 182.0 206.5 208.7 808.4 211.8 224.2 234.5 Add: Depreciation and amortization 103.6 103.3 103.9 106.1 416.9 108.8 109.4 111.9 Ad
Slide 34: Electronic Materials and Performance Materials EBITDA
Materials Technologies Moving forward Electronic Materials and Performance Materials EBITDA Fav/(Unfav) $ Millions Q315 Q316 vs. Q3 FY15 Electronic Materials Operating Income 76.9 72.7 (5.5%) Add: Depreciation and amortization 15.4 13.0 Add Equity Affiliates' Income 0.0 0.0 Adjusted EBITDA 92.3 85.7
Slide 35: Appendix: Adjusted EBITDA Versum Materials
Appendix: Adjusted EBITDA Versum Materials Moving forward $ Millions Quarter Ended Jun16 Sep15 Dec15 Mar16 Jun16 LTM Versum Materials GAAP Operating Income 63.0 83.3 70.3 72.7 289.3 Add: Depreciation and amortization 15.9 12.7 12.5 13.0 54.1 Add: Equity Affiliates' Income 0.3 0.2 0.0 0.0 0.5 Adjuste
Slide 36: Appendix: ROCE
Appendix: ROCE Moving forward $ Millions Quarter Ended Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Numerator Operating Income Reported 387.8 416.6 146.6 432.3 376.9 424.8 474.3 510.6 513.3 535.1 Equity Affiliate Income 30.4 43.1 39.7 43.1 33.0 42.4 36.0 33.7 32.5 42.4 Earnings before tax
Slide 37: Appendix: ROCE Tax Rate
Appendix: ROCE Tax Rate Moving forward ($ Millions) Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Reported Income Before Taxes 386.7 428.4 157.3 446.3 386.5 438.9 470.9 522.1 520.1 542.5 Tax Expense 93.0 103.0 78.1 107.1 87.7 104.1 119.4 135.9 132.5 179.5 Tax Rate Reported 24.0% 24.0% 49.7% 24.0
Slide 38: Appendix: EPS Guidance
Appendix: EPS Guidance Moving forward EPS Guidance Diluted Q416 Guidance vs PY EPS (1) Q415 GAAP $1.59 Business restructuring charge $0.25 Pension settlement loss $0.02 Business separation costs $0.03 Gain on land sales ($0.13) Loss on early retirement of debt $0.07 Q415 Non GAAP $1.83 Q416 Guidance
Slide 39: Thank you
Moving forward Thank you tell me more
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