Disappointing 2009 for Air Products

Air Products Chemicals Inc. (APD - Snapshot Report) has reported results for the fourth quarter of 2009. Net earnings slipped 9.5% year over year to $1.14 per share in the last quarter of fiscal 2009. Reported earnings were, however, slightly higher than the Zacks Consensus Estimate of $1.12. For the full year, earnings of $3.05 per share were significantly down from the Zacks Consensus Estimate of $4.03. Year over year, earnings declined 40% following lower sales.

Revenues in the quarter tumbled 22% from the previous year to $2.1 billion, reflecting a negative impact of lower energy and raw material cost pass-throughs (12%) and unfavorable currency (3%). However, sales rose 7.7% sequentially, following demand from chemical makers, oil refiners and steel fabricators.

Merchant Gases Segment: Sales under the segment decreased 15% to $932 million on weak demand across manufacturing end-markets globally, including electronics and metals, besides the effect of unfavorable currency. Sequentially, sales increased 6% on improved volumes in the last couple of months.

Tonnage Gases segment: Sales of $640 million in the segment were down 32% from the prior year on lower energy and raw material cost pass-throughs.

However, sales and volumes were up 13% sequentially on stronger demand from chemical, refinery and steel customers.

Electronics and Performance Materials segment: Sales of $434 million declined 22%, primarily on lower volumes and pricing in Electronics. While sales in the Electronics division were down 27% year-on-year, it increased 3% sequentially due to improved customer operating rates. Performance Materials volumes improved 9% sequentially, reflecting seasonal improvement and stronger Asia sales, but declined 10% from the prior year on weaker demand from coatings, autos, housing and other end markets.

Equipment and Energy segment: Sales of $123 million in the segment showed a decline of 3% from the prior year. The company saw higher energy development cost in the segment, which impacted sales for the quarter.

Air Products, which manufactures atmospheric gases, process and specialty gases, is focusing on cost reduction. For the full year 2009, the company reported charges of about $298.2 million on divesting unprofitable business. The company has divested its Norwegian inert gas generation business. Earlier this quarter, it had shed its polyurethane prepolymers business to COIM USA Inc., a fully owned subsidiary of global polyurethane chemicals producer, COIM SpA. Recently, Air Products sold off more than half of its remaining U.S.Healthcare business to OptionCare Enterprises Inc., a subsidiary of Walgreen Co. and Landauer-Metropolitan Inc. for cash proceeds of $38.1 million. Through a series of transactions with Rotech Healthcare Inc. and Walgreen, the company sold its remaining U.S. Healthcare business for cash proceeds of $12.1 million.

Outlook
For the first quarter of fiscal 2010, Air Products expects earnings per share of $1.07 to $1.15. For the full year 2010, the company anticipates earnings in the range of $4.65 to $4.90 per share, representing a growth of 15% to 21% year-on-year. The company expects capital spending in fiscal 2010 to be between $1.3 and $1.5 billion, almost at par with fiscal 2009.