uploads///Fiscal Q APD Asia

APD’s Industrial Gases–Asia Segment’s Operating Margin Rose in Q3

Peter Neil - Author
By

Jul. 31 2018, Updated 9:02 a.m. ET

Industrial Gases–Asia

Air Products and Chemicals’ (APD) Industrial Gases–Asia segment accounted for 27.6% of APD’s total revenues in the fiscal third quarter, expanding by 2.2 percentage points YoY (year-over-year) from 25.4%. The segment reported revenues of $623.8 million in the third quarter, compared with $538.3 million in the third quarter of 2017 for growth of 15.9% YoY.

The segment’s revenue growth was primarily driven by acquisitions, growth in its merchant business base, and the new plant coming online. The segment’s volumes grew 6.0%, and the price increase on several industrial gases helped the segment’s revenues grow 4.0%. The favorable impact of foreign currency—specifically, the yuan—resulted in 6.0% revenue growth.

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Operating income and margin

In the third quarter, the Industrial Gases–Asia segment’s operating income rose 24.0% YoY to $185.5 million from $149.5 million.

Revenue growth, favorable foreign currency, higher pricing, and lower operating costs boosted the segment’s operating income and margin. The segment’s operating margin expanded 190 basis points YoY to 29.7% from 27.8% in the fiscal second quarter of 2017.

Outlook

This segment is expected to continue its growth, driven by the addition of new contracts. Further, the Lu’An joint venture was completed and could contribute to the segment’s revenue growth.

Investors can get indirect exposure to Air Products and Chemicals through the Invesco WilderHill Clean Energy ETF (PBW), which invests 2.8% of its portfolio in Air Products and Chemicals. The fund’s other holdings include First Solar (FSLR), Albemarle (ALB), and Quanta Services (PWR), which had weights of 3.25%, 2.8%, and 2.8%, respectively, on July 26.

This series doesn’t cover APD’s small Industrial Gases–Global Segment, which reported revenues of just $100.0 million.

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