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Air Products Reports Q4 EPS of 58 Cents

Published on 2003-10-30. Author : SpecialChem

LEHIGH VALLEY, Pa. (October 28, 2003) - Air Products (NYSE:APD) today reported net income of $131 million, or diluted earnings per share (EPS) of $.58 for its fourth fiscal quarter ended September 30, 2003. Net income declined nine percent and diluted EPS was down 11 percent compared with prior year net income of $144 million and $.65 per share.

Sequentially, EPS was up $.46 from the prior quarter, which included a global cost reduction charge of $.43 per share.

Quarter revenues of $1,642 million were up 17 percent from the prior year. Two-thirds of this increase was associated with acquisitions and base business growth, while the remainder was due to higher natural gas costs passed through contractually to customers, favorable currency effects and divestitures. Sequentially, revenues increased one percent due to acquisitions.

Commenting on the quarter, John P. Jones, Air Products' chairman and chief executive officer, said, "Our results improved sequentially, with improved Gases performance in North America, and as we indicated in our prior earnings guidance, a lower tax rate in the quarter. We continued to make progress with our portfolio management actions, completing the acquisition of Ashland Specialty Chemical Company's Electronic Chemicals business. In addition, we're on track to achieve the savings associated with the global cost reduction plan we announced last quarter."

Gases segment sales of $1,145 million increased 18 percent over the prior year. Nearly two-thirds of this increase was associated with acquisitions and base business growth, while the remainder was due to higher natural gas costs passed through contractually to customers, favorable currency effects and divestitures. Gases operating income of $182 million was up five percent from the prior year. Favorable volumes across all businesses, improved liquid bulk pricing, acquisitions and favorable currency effects were partially offset by higher costs, including pension and SAP implementation expenses, and lower average selling prices in the company's electronics business.

Sequentially, Gases revenues increased one percent due to acquisitions. Operating income increased by $103 million. The prior quarter operating income included the Gases portion of the global cost reduction charge of $92 million. Other factors contributing to this improved profitability included higher volumes in the company's North American liquid bulk business and lower operating costs, including the benefits of plant closures announced last quarter. Electronics specialty materials volumes also continued to improve sequentially.

Chemicals segment sales of $418 million increased 16 percent versus the prior year. Three-fourths of this increase was associated with base business growth and acquisitions, while the remainder was due to higher natural gas costs passed through contractually to customers, favorable currency effects and divestitures. Base business growth was led by improved volumes, principally in the company's chemicals intermediates businesses, as well as improved pricing in Performance Polymers (emulsions). Operating income of $29 million declined 30 percent versus the prior year, as higher volumes and favorable currency effects were more than offset by higher raw material, energy and plant costs.

Sequentially, Chemicals revenues decreased one percent, principally due to seasonally lower sales of higher amines. Operating income increased by $59 million. The prior quarter included the Chemicals portion of the global cost reduction charge of $58 million.

Equipment segment sales of $80 million increased 11 percent over the prior year on higher air separation plant sales, partially offset by lower liquefied natural gas (LNG) heat exchanger sales. As expected, the segment incurred a modest operating loss in the quarter, mainly due to reduced LNG sales and lower margins in other equipment product lines.

Corporate and Other costs increased $17 million versus prior year. This reflected expenses associated with portfolio management activities in the current quarter and favorable adjustments recorded last year related to a divested business and an insurance settlement.

Earnings for the quarter benefited from a reduction in the annual effective tax rate. This was principally due to favorable credits and adjustments and a lower than originally forecast profit before tax, resulting in a lower average rate.

For fiscal 2003, Air Products' sales of $6.3 billion increased 17 percent. Two-thirds of this increase was associated with acquisitions and base business growth, while the remainder was due to higher natural gas costs passed through contractually to customers, favorable currency effects and divestitures. Improved volumes in Gases and Chemicals led the base business growth. Net income of $397 million included after tax charges of $96.6 million in the third quarter for the global cost reduction plan and $2.9 million in the first quarter for the cumulative effect of an accounting change.

Commenting on these results, Mr. Jones said, "It was a challenging year. The programs we have implemented to improve our businesses were overshadowed by the weak manufacturing environment and high raw material and energy costs. Looking forward, we are confident that our growth strategies, market positions, operating leverage and continued capital discipline will improve profitability in fiscal 2004."

Mr. Jones added, "While we're in the early stages of a recovery in most of our end markets, it's difficult to predict the pace at which manufacturing activity will improve. As a result, we are providing a guidance range for fiscal year 2004 EPS of $2.35 to $2.65. This includes an increase in estimated pension expense of approximately $.15 EPS. We expect fiscal first quarter EPS in the range of $.55 to $.59, which takes into account seasonally lower volumes in certain businesses, and anticipated plant maintenance expenses."

Mr. Jones added that Air Products will continue to drive portfolio management and cost reduction actions, and noted that upfront costs associated with such actions could reduce Air Products' earnings outlook.

Air Products (NYSE:APD) 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 and is recognized for its innovative culture, operational excellence and commitment to safety and the environment. With annual revenues of $6.3 billion and operations in over 30 countries, the company's 17,400 employees build lasting relationships with their customers and communities based on understanding, integrity and passion. For more information, visit www.airproducts.com.

Source: Air Products


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