Air Products and Chemicals (NYSE:APD) reported fiscal third-quarter earnings per share of $3.47, up 12% from a year earlier and above its prior guidance range, as higher on-site volumes, new assets and equity affiliate contributions offset inflation-related costs and helium pressure.
Chief Executive Officer Eduardo Menezes said operating income increased 9% year over year, while operating margin improved by more than 100 basis points to 25.6%. Sales rose 5%, according to Chief Financial Officer Melissa Schaeffer. The company cited volume growth, pricing and favorable currency effects as key contributors.
Guidance Raised as New Assets Support Growth
Air Products raised its full-year fiscal 2026 adjusted earnings outlook to $13.39 to $13.49 per share, representing expected growth of 11% to 12% from the prior year. The company projected fourth-quarter adjusted earnings of $3.55 to $3.65 per share, up 5% to 8% year over year.
Management said earnings growth is expected to come from contributions from new assets, pricing actions and productivity measures, while noting continued macroeconomic uncertainty. The company expects helium to remain a headwind because of lower prices, despite improved volume and pricing in Asia.
Schaeffer said Air Products had recognized approximately $75 million in savings year to date under its headcount-reduction plan. The company also said it was free-cash-flow positive year to date, with operating cash flow exceeding maintenance and backlog-related capital spending.
- Americas operating income rose 6%, driven by on-site volume, including higher production at U.S. refinery assets and a new Gulf Coast hydrogen pipeline asset.
- Asia operating income increased 18%, benefiting from gasification assets held for sale, new assets and helium.
- Europe operating income rose 2%, as pricing actions and currency effects outweighed higher power and fixed costs.
- Middle East and India operating income was relatively flat, while equity affiliate income increased from Saudi Arabian joint ventures.
Project Portfolio Changes and Capital Spending
During the quarter, Air Products decided to exit its Louisiana project, the Casa Grande, Arizona project, and other smaller clean-energy distribution projects. The decisions resulted in a $2.9 billion pre-tax charge.
Menezes said the company is seeking opportunities to redeploy industrial gas assets and sell ammonia production assets associated with the Louisiana project. He described the equipment as high-quality assets with potential value for use in Air Products’ own operations, commercial sale as complete units, or potential future projects.
“Our objective is to recover as much money as we can” and generate new business for the company, Menezes said. Management did not provide a timeline or updated estimate for potential proceeds from the asset recovery effort.
The company reduced its fiscal 2026 capital expenditure outlook to approximately $3.5 billion, about $500 million lower than its prior outlook. Schaeffer attributed the reduction primarily to payment timing, lower anticipated maintenance spending and canceled projects.
Looking ahead, Air Products expects to invest about $1.5 billion annually in traditional industrial gas projects. Its traditional industrial gas backlog totals approximately $3 billion, with a significant portion aimed at electronics customers. Menezes said the company has secured more than $1.5 billion in project wins during the past six months, largely tied to the electronics market.
NEOM Agreement With Yara
Air Products also announced a marketing and distribution agreement with Yara covering renewable ammonia from the NEOM Green Hydrogen project in Saudi Arabia. Under the agreement, Yara will transport and commercialize renewable ammonia acquired by Air Products from the NEOM Green Hydrogen Company, or NGHC, that Air Products does not use to produce green hydrogen in Europe.
Menezes said the arrangement creates an integrated renewable-ammonia value chain using Yara’s distribution network and shipping capabilities. He said the agreement reduces Air Products’ volume risk because Yara will market and distribute the product, although Air Products will retain most of the price risk.
Management said it expects no material financial impact from the project in fiscal 2027, including no expected gain or loss on the income statement. Schaeffer said the company’s major funding contributions to the project are largely complete, while the facility will require a potentially extended commissioning process before reaching full production capacity.
Air Products returned $1.2 billion to shareholders through dividends year to date. Its net debt-to-EBITDA ratio stood at 2.1 times, including its proportionate ownership of NGHC assets under construction. Management said it remains committed to returning to an AA-2 credit rating over the long term and sees a potential path to share repurchases toward the end of 2027 or early 2028, subject to capital needs and investment opportunities.
About Air Products and Chemicals (NYSE:APD)
Air Products and Chemicals, Inc is a global supplier of industrial gases and related equipment and services, headquartered in Allentown, Pennsylvania. The company produces and delivers atmospheric gases such as oxygen, nitrogen and argon, as well as specialty and process gases used across a wide range of industrial applications. Air Products designs, builds and operates gas production facilities, merchant distribution networks and on-site gas systems for customers that require reliable, high-purity gases and integrated supply solutions.
The company’s product and service portfolio includes packaged and bulk gas supply, pipeline distribution, on-site generation, gas handling and storage equipment, and engineered systems for gas liquefaction and purification.
