Air Products and Chemicals, Inc. (APD) 2024 Q3 Earnings Call Summary

Optimistic Highlights

• Record on Safety

  Air Products has significantly improved its employee loss time and recordable injury rates since 2014, boasting the best safety record in the industry.

• Strong Q3 Earnings

  Q3 adjusted earnings per share of $3.20 exceeded guidance, reflecting strong performance in the Americas and Europe, driven by price and productivity actions.

• Green Hydrogen Supply Agreement with TotalEnergies

  Announced a large-scale, long-term green hydrogen supply agreement with TotalEnergies, validating Air Products' strategy and demonstrating strong demand for green hydrogen.

• Sale of LNG Business to Honeywell

  The planned sale of the LNG process technology and equipment business to Honeywell for approximately $1.8 billion will focus on core business and improve the balance sheet.

• Collaboration with Mercedes-Benz

  Announced collaboration with Mercedes-Benz to decarbonize the heavy transport sector, including taking delivery of hydrogen fuel cell trucks and planning a network of hydrogen fueling stations.

Pessimistic Highlights

• Volume Slowdown

  Overall volume was flat due to lower demand for merchant products, with a slowdown in volume and price change observed across the industrial gas industry.

• Challenges in China

  A slowdown in China affects overall numbers, with weak growth in the electronics sector and challenges in the market.

Company Outlook

• Full Year Guidance Maintained

  Maintaining full-year adjusted earnings per share guidance of $12.20 to $12.50, with CapEx expected to be in the range of $5 billion to $5.5 billion.

• Focus on Growth Strategy

  Committed to a two-pillar growth strategy focusing on operational excellence and growth in the industrial gas business, alongside executing energy transition projects.

• Future Project Considerations

  Future clean-energy project announcements are contingent on securing offtake agreements for existing projects, with a cautious approach towards new FIDs.

Q & A Highlights

• Q: Can you speak to the green hydrogen announcement with Total and the potential for further offtake arrangements? (John McNulty, BMO Capital Markets)

  A: The agreement with TotalEnergies validates Air Products' strategy, with significant interest from other customers following the announcement. Future contracts will be announced as they are finalized.

• Q: Update on the progress of the Louisiana project and the market opening up for blue hydrogen? (John McNulty, BMO Capital Markets)

  A: The Louisiana project is moving well, with the Class 6 permit filed. The demand for blue hydrogen is expected to grow, particularly for decarbonizing refineries and power plants in Japan and Korea.

• Q: Is the NEOM project still on track for end of 2026 start-up? What about hydrogen dissociation technology? (Jeff Zekauskas, JPMorgan)

  A: NEOM is on schedule for a 2026 start-up, with hydrogen dissociation technology proven and ready for deployment.

• Q: Can you discuss the sequential change in merchant prices and overall volume slowdown? (Jeff Zekauskas, JPMorgan)

  A: The slowdown in volume, particularly in China, affects overall numbers, but the U.S. and Europe are performing well. Price increases have reached a point where further hikes could be demand destructive.

• Q: Update on the sustainable aviation fuel project in Los Angeles? (Vincent Andrews, Morgan Stanley)

  A: The project with World Energy is on hold until permits are obtained, with SAF demand growing globally. The timeline for permits is expected to be around one year.

• Q: Tax rate in the quarter was lower than expected. Should the same rate be assumed for Q4? (Vincent Andrews, Morgan Stanley)

  A: The full-year effective tax rate is expected to be about 18%, with one-time items contributing to a lower rate this quarter.