uploads///APD Industrial Gases EMEA Q Post

APD’s Industrial Gases–EMEA Segment: Lowest Margin in Two Years

Peter Neil - Author

Nov. 12 2018, Updated 7:30 a.m. ET

Industrial Gases–EMEA segment

In the fourth quarter, Air Products and Chemicals’ (APD) Industrial Gases–EMEA segment’s total revenue contribution expanded by 0.7 percentage points YoY (year-over-year) from 23.4% to 24.1%. The segment reported revenues of $554.7 million, which implies YoY revenue growth of 7.8%. In the fourth quarter of 2017, the segment reported revenues of $514.8 million.

The segment’s revenues were driven by the higher increase in natural gas prices in India, which resulted in 7% revenue growth due to favorable energy pass-through. Higher volumes and increased pricing contributed 2% and 1%, respectively, to the segment’s growth. However, unfavorable foreign currency had a negative impact on the segment’s revenues by 2%.

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Operating income and margin

In the fourth quarter, the Industrial Gases–EMEA segment reported an operating income of $105.8 million. The operating income decreased 12.3% compared to $120.7 million in the fourth quarter of 2017. The increased power cost caused the segment’s operating income to decline. As a result, the segment’s operating income margin also declined. The segment’s operating profit margin contracted by 430 basis points YoY to 19.1% from 23.4%. The segment’s margin is at the lowest point in two years.


The segment’s revenues are expected to be driven by higher volumes and higher price realizations. However, the segment will likely continue the pressure the margin. The unfavorable currency could have a negative impact on the segment’s revenues and operating income margin.

Investors could hold Air Products and Chemicals indirectly through the PowerShares DWA Basic Materials Momentum Portfolio ETF (PYZ), which has 3.4% exposure to the company. The fund’s other holdings include Chemours (CC), LyondellBasell (LYB), and FMC (FMC) with weights of 4.9%, 4.6%, and 4.2%, respectively, as of November 8.


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