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Air Products Reports Fiscal 2005 Sales Up 10%, Earnings Up 17% and Forecasts Continued Growth in Fiscal 2006

Published on 2005-10-27. Author : SpecialChem

LEHIGH VALLEY, Pa. -- Air Products (NYSE: APD - News) reported net income of $179 million or diluted earnings per share (EPS) of $.79 for its fourth fiscal quarter ended September 30, 2005. Net income increased six percent and diluted EPS was up eight percent compared with the prior year.

Revenues of $2,071 million were up five percent over the prior year on higher raw material and energy cost contractual pass-throughs and improved Chemicals pricing. Higher Gases and Equipment volumes were offset by lower Chemical volumes.

The impact of Hurricanes Dennis, Katrina and Rita reduced revenues in the quarter by approximately two percent. The hurricanes reduced operating income in the quarter by $20 million ($13 million in Gases and $7 million in Chemicals), or six cents per share.

For fiscal 2005, sales of $8.1 billion were up 10 percent and net income of $712 million was up 18 percent. Diluted EPS of $3.08 was up 17 percent. This strong performance was driven by higher Gases volumes, improved Chemicals pricing and strong Equipment performance, particularly in LNG.

John P. Jones, chairman and chief executive officer, said, "We performed well in the quarter despite three hurricanes and dramatic increases in energy prices. Our employees, with their focused and rapid response, returned plants to service as quickly as possible, innovatively sourced product, and overcame many logistical problems to minimize disruption to our customers. As a result of these exceptional efforts, we continued to deliver improved results for our shareholders and for the seventh consecutive quarter improved our return on capital."

Gases segment sales of $1,491 million were up seven percent over the prior year on higher volumes in Electronics, Asia and North America Gases, as well as higher natural gas cost contractual pass-throughs to customers. Operating income of $205 million decreased five percent from the prior year, as higher volumes were offset by higher operating costs, including the impacts of the recent hurricanes, and lower Electronics pricing.

Chemicals segment sales of $476 million declined two percent over the prior year, largely due to lower volumes and divestitures. Continuing the recovery seen in prior quarters, operating income of $43 million was up 59 percent over the prior year from increased pricing to recover higher raw material and energy costs. These results also included revenues from a polyurethane intermediates customer contract termination and a charge resulting from a decision to exit the company's fertilizer business.

Equipment segment revenues of $104 million rose five percent over the prior year and operating income of $20 million increased significantly. Higher LNG activity drove both the revenue and operating income increase. This quarter, the company secured two new traditional LNG heat exchanger orders, bringing the equipment backlog to a record $652 million.

2006 Outlook

Reflecting on the year, Jones said, "Our strategies paid off in fiscal 2005, as we posted significant improvements in sales, earnings and return on capital. Despite the impact of several unprecedented natural disasters, soaring energy and raw material costs, and pricing pressure in Electronics, we delivered on our commitments and positioned ourselves for further improvement in 2006.

"We have a significant amount of growth already under contract for next year. Some examples are the six hydrogen plants we are bringing on line, the 11 LNG heat exchangers we have in backlog, and the new contracts we have secured to supply Electronics customers in Asia."

The company will be adopting Statement of Financial Accounting Standards No. 123R and begin expensing stock options in fiscal 2006. The estimated impact to diluted EPS is $.13.

The company currently anticipates fiscal year 2006 EPS of $3.25 to $3.45 per share, including the $.13 accounting change noted above. This guidance includes continued business interruption costs resulting from the hurricanes offset by insurance recoveries. The company's forecast for worldwide manufacturing growth is approximately three percent. In the first quarter, the company expects continued negative impact on the U.S. economy from the hurricanes, which should be offset by stronger growth in the second half of the year due to rebuilding efforts.

For the first quarter, earnings per share are expected to be between $.75 and $.79 including a $.03 stock option expense, as the negative impact of the hurricanes and seasonal declines in Chemicals should be more than offset by growth in Gases volumes, continued good performance for Equipment, and insurance recoveries.

Air Products (NYSE: APD - News) serves customers in technology, energy, healthcare and industrial markets worldwide with a unique portfolio of products, services and solutions, providing atmospheric gases, process and specialty gases, performance materials and chemical intermediates. Founded in 1940, Air Products has built leading positions in key growth markets such as semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives. The company is recognized for its innovative culture, operational excellence and commitment to safety and the environment and is listed in the Dow Jones Sustainability and FTSE4Good Indices. The company has annual revenues of $8.1 billion, operations in over 30 countries, and over 20,000 employees around the globe.

NOTE: The forward-looking statements contained in this release are based on current expectations regarding important risk factors. Actual results may differ materially from those expressed. Factors that might cause forward- looking statements to differ materially from actual results include those specifically referenced as future events or outcomes that the company anticipates, as well as, among other things, overall economic and business conditions different than those currently anticipated and demand for Air Products' goods and services during that time; competitive factors in the industries in which it competes; interruption in ordinary sources of supply; the ability to recover unanticipated increased energy and raw material costs from customers; uninsured litigation judgments or settlements; changes in government regulations; consequences of acts of war or terrorism impacting the United States' and other markets; charges related to currently unplanned portfolio management and cost reduction actions; the success of implementing cost reduction programs; the timing, impact and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the impact of tax and other legislation and regulations in jurisdictions in which Air Products and its affiliates operate; the recovery of insurance proceeds; the impact of new financial accounting standards, including the expensing of employee stock options; and the timing and rate at which tax credits can be utilized. The company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements to reflect any change in the company's beliefs or expectations or any change in events, conditions or circumstances upon which any such statements are based.

Source: Air Products

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