The Global Demographic Tailwind

[DewDiligence]

APD Raises Guidance While Investors Remain Focused on ARG Deal

[Despite APD’s posting very good numbers, its share price remains below where it was before the announcement of the hostile offer for ARG. Many shareholders continue to worry that APD will overpay for ARG, evidently.

Please see #msg-46518659 for how APD ties in with TGDT.]

http://finance.yahoo.com/news/Air-Products-Beats-Zacks-zacks-2109236301.html?x=0&.v=1

›April 23, 2010, 9:34 am EDT

Atmospheric and industrial gas producer Air Products and Chemicals announced operating results for the second quarter of fiscal 2010. Earnings for the quarter were $1.23 per share, beating the Zacks Consensus Estimate of $1.20, helped by improving volumes and cost-cutting efforts. Earnings were up 38.2% year over year from 89 cents reported in the year-ago quarter. The results benefited from an improving global economy and a lower cost structure.

Second quarter revenues of $2.25 billion were up 15% year over year, primarily due to favorable contribution from the lower energy and raw material cost pass-throughs and a favorable currency impact as well as improved volumes in Tonnage Gases, and Electronics and Performance Materials. Sequentially, sales improved 3%.

Operating income of $364 million was up 40% from the previous year on improved volumes and lower costs. The company cut its research and development spending by 11%, which was partially offset by an increase of 4.4% in selling and administrative costs in the quarter. As a result, operating margin came in at 16.2% in the quarter.

Segment Performance

Merchant Gas sales of $922 million increased 6% owing to favorable currency movements. Operating income of $178 million reflected a 14% increase from the prior year, due to significantly improved cost performance and favorable currency impact coupled with higher volumes.

Tonnage Gas sales of $757 million increased 21% [this is the segment with the greatest tie-in with TGDT] as sales volumes were up due to rebounding chemical and steel production and new plants going on stream as well as favorable currency movements and higher raw material costs pass-through. Operating income of $107 million increased 9% from the prior year primarily on higher volumes and new plants going on stream.

Electronics and Performance Materials sales of $454 million increased 36% on higher volumes. Operating income of $57 million was up from the previous year on improved volumes and lower costs.

Equipment and Energy sales of $119 million were down 7% on declining ASU orders. Operating income of $18 million increased 12% from the prior year on higher LNG activity.

Balance Sheet

Air Products ended the quarter with $230.9 million in cash and equivalents and $3.47 billion in long-term debt.

Raised Guidance for 2010

Air Products expects fiscal 2010 earnings to grow over 20% as the global economy, led by Asia, experiences gradual recovery, coupled with the leverage in its existing capacity, new projects being commissioned and improving productivity. As a result, Air Products lifted its guidance for fiscal 2010 again to $4.90 to $5.00, from its previous guidance of $4.75 - $4.95 per share. This represents a 21% to 23% year-over-year EPS growth.

Air Products expects third quarter EPS from continuing operations to be between $1.25 and $1.29. Air Products has consistently improved margins, and is on track to meet the 17% goal in 2011.

Air Products and Chemicals, an industrial gas producer, is benefiting from long-term take-or-pay contracts, a consolidated industry structure, a diverse customer base and sustained pricing power. Air Products’ aggressive cost cutting and productivity initiatives, combined with portfolio realignment efforts, have helped mitigate fixed cost headwinds, which is very encouraging.‹