Air Products Sales Deflate from Strong Dollar in First-Quarter 2015, Full-Year Capex Estimated at $1.7 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite strong underlying sales growth from improved pricing and volumes, industrial gases manufacturer Air Products (NYSE:APD) (Lehigh Valley, Pennsylvania) reported a drop in overall sales for the second quarter of its 2015 fiscal year, largely due to the strengthening U.S. dollar. Still, profits generally improved as the company continued its efforts to reduce costs. Net income was reported to be $290 million, a 2.29% increase from second-quarter 2014.

Industrial Info is tracking more than $798 million in active projects involving Air Products, including the $32 million construction of a liquid nitrogen plant in Odessa, Texas. The planned facility will produce 250 tons per day of liquid nitrogen in a major area of the Permian Basin, as well as expand the reach and capacity for liquid nitrogen distribution in Texas, New Mexico, Oklahoma and Kansas, in conjunction with Air Products' nitrogen plant in Mooreland, Oklahoma.

Total sales stood at $2.41 billion, a 6.48% decrease from the same period last year. The biggest obstacle throughout the second quarter was the strengthening U.S. dollar, which weighed down otherwise positive results in two of the company's major segments. The Industrial Gases - Americas segment reported stronger sales volumes from North American liquid bulk and hydrogen products, and benefited from higher pricing; the Industrial Gases - Europe, Middle East and Africa segment reported no significant change in underlying sales. Both, however, had weaker overall sales performances due to unfavorable currency effects, with the Americas segment also taking a hit from weaker energy pass-through revenues.

However, the Industrial Gases - Asia segment saw its sales increase amid strong volume growth from new facilities and a favorable cost performance. The Materials Technologies segment benefited from its electronics materials business, which reported solid volume growth.

Capital expenditures, including capital lease costs, were reported to be $398.3 million, compared with $462.1 million in second-quarter 2014.

"The price of oil stayed in the $45- to $55-per-barrel range during the quarter, about half the price as a year ago," said Corning Painter, the executive vice president of Air Products, in a conference call. "As a reminder, we have very little direct exposure to oil exploration and production, probably $30 million to $40 million a year of sales, but we have begun to see a few modest impacts: some reduction in our liquid nitrogen volumes to the oil field services market, and some impact on our business to the offshore market."

He added: "We have seen a few customers delaying project decisions, although it is always difficult to know exactly why. But very importantly, we have not seen any drop in the underlying hydrogen demand in the Americas, as our refinery customers continue to run hard."

Capital expenditures for full-year 2015 are expected to be about $1.7 billion, an estimate that is basically unchanged from --but at the lower end of--previous forecasts.

Saudi Aramco (Riyadh, Saudi Arabia) recently awarded Air Products a contract for the world's largest industrial gas complex in Jazan, Saudi Arabia. The planned, 400,000-barrel-per-day refinery and power plant will be owned and operated by a joint venture between Air Products (25%) and ACWA Power (Riyadh) (75%), which is owned by the Public Investment Fund of Saudi Arabia and the World Bank's International Finance Corporation (Washington D.C.). The estimated cost is $2.1 billion, a major part of which is Air Product's sale of six large air-separation units to the joint venture.

"We continue to enjoy a robust backlog with a high level of secure on-site pipeline projects," said Seifi Ghasemi, the chairman, president and chief executive officer of Air Products, in the conference call. "The backlog of $3.2 billion remains unchanged from last quarter." This amount did not include the Jazan industrial gas complex, he noted.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.