Sign in
AP

Air Products & Chemicals, Inc. (APD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 reflected a dual story: reported GAAP loss per share of ($7.77) and net loss of $1.7B driven by an after-tax charge of $2.3B for business and asset actions, while non-GAAP adjusted EPS was $2.69 on sales of $2.92B .
  • Management revised FY25 adjusted EPS guidance to $11.85–$12.15 (from $12.70–$13.00), and introduced Q3 FY25 adjusted EPS guidance of $2.90–$3.00; FY25 capex outlook set at approximately $5B .
  • Strategic refocus under new CEO Eduardo Menezes: exit of three U.S. projects, derisking of Louisiana blue hydrogen scope, and “back to basics” prioritizing core industrial gases with take-or-pay offtake; 1,300 headcount reductions underway, with a run-rate savings target of ~$100M from FY25 actions .
  • Dividend increased to $1.79 per share (43rd consecutive annual increase); payable August 11, 2025 to holders of record July 1, 2025 .
  • Stock narrative drivers: a significant non-GAAP miss vs prior guidance and consensus on Q2 adjusted EPS, strategic project resets (Alberta overruns and timing, Louisiana scope changes), and credible cost/productivity roadmap with segment resilience .

What Went Well and What Went Wrong

What Went Well

  • Pricing strength in non‑helium merchant products offset some volume/cost pressure; total company price +1% YoY (merchant +3%), with Europe price +4% and Americas non‑helium pricing cited as tailwinds .
  • Segment resilience: Europe adjusted EBITDA +6% YoY; Americas achieved a favorable one‑time customer contract amendment and maintained strong hydrogen demand trends .
  • Clear strategic reset: “The products will get back to basics… invest about $1.5 billion per year for industrial gas projects… opportunities that meet high return thresholds with contracted take-or-pay offtake” (CEO Menezes) .

What Went Wrong

  • Volume declines (-3%) from LNG divestiture and lower global helium demand, compounded by inflation and higher maintenance/depreciation; adjusted EPS down 6% YoY to $2.69 and adjusted EBITDA down 3% .
  • Adjusted EPS missed prior guidance ($2.69 vs $2.75–$2.85); causes: changes in cost estimates on a U.S. sale-of-equipment project and lower-than-forecast helium contribution (CFO Schaeffer) .
  • Underperforming projects: Alberta cost nearly doubled with ~2‑year delay; CEO cited “self‑inflicted issues” (sequencing, low productivity, capitalized interest) necessitating management/contractor changes and resequencing .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.19 $2.93 $2.92
GAAP EPS ($)$8.81 $2.77 ($7.77)
Adjusted EPS ($)$3.56 $2.86 $2.69
Adjusted EBITDA ($USD Billions)$1.41 $1.19 $1.17
KPI (Company-level)Q4 2024Q1 2025Q2 2025
Energy Cost Pass-through (YoY)-2% n/a+4%
Price (YoY)+1% +1% +1%
Volume (YoY)+1% -2% -3%
Currency (YoY)n/a-1% -2%
Q2 2025 vs Estimates (S&P Global)Consensus*Actual
Adjusted/Primary EPS ($)2.83*2.69
Revenue ($USD Billions)$2.93*$2.92

Values with * retrieved from S&P Global.

Segment Breakdown (Q2 2025 vs Q2 2024)

Segment Sales ($USD Billions)Q2 2024Q2 2025
Americas$1.25 $1.29
Asia$0.78 $0.77
Europe$0.67 $0.73
Middle East & India (sales/equity income)$0.04 / $0.07 $0.03 / $0.08
Corporate & Other$0.20 $0.09
Segment Operating Income ($USD Millions)Q2 2024Q2 2025
Americas$372 $366
Asia$204 $191
Europe$201 $196
Middle East & India$6 ($3)
Corporate & Other($88) ($118)
Segment Operating Margin (%)Q2 2024Q2 2025
Americas29.9% 28.4%
Asia26.1% ; margin stated for Q2 2025 only]24.7%
Europe30.1% ; margin stated for Q2 2025 only]26.9%
Segment Adjusted EBITDA ($USD Millions)Q2 2024Q2 2025
Americas$590 $575
Asia$328 $334
Europe$264 $280

Notes: Operating margin deltas reflect energy pass-through impacts (Americas ~100 bps; Europe ~150 bps) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025$12.70–$13.00 $11.85–$12.15 Lowered
Adjusted EPSQ3 2025n/a$2.90–$3.00 New
Capital ExpendituresFY 2025$4.5–$5.0B ~$5.0B Tightened to upper end
Dividend (Quarterly)Ongoing$1.77 (FY24) $1.79; payable Aug 11, 2025 Raised

Company also disclosed Q2 adjusted EPS came in below prior Q2 guidance of $2.75–$2.85 , delivering $2.69 .

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Clean hydrogen (NEOM green, Louisiana blue)First‑mover strategy; NEOM ~60% construction; aim to load by 2027; TotalEnergies 15‑yr 70k t/yr starting 2030 Execution “normal course”; exploring equity/offtake partnerships (Japan/Korea); FCF positive by 2027 without PF assumptions NEOM progressing; expect product availability in 2027; delay downstream investment until EU regulatory clarity; derisk Louisiana scope to hydrogen/nitrogen; potential ammonia/CO2 partners; earliest start-up 2028/29 More conservative timing, derisking scope; nearer-term ammonia FOB strategy
Headcount/productivityNoted headcount increases for project engineering; plan to reduce; SG&A down YoY 5% workforce reduction over two years; ~$75M FY benefit ramping in H2 1,300 reductions in process; target run-rate ~$100M from FY25 actions; additional 2,500–3,000 eliminations 2026–2028 Accelerating rightsizing and savings specificity
Helium marketAsia price headwinds from Russian supply; cyclicality acknowledged One-time Americas helium sale added $0.10 EPS; market long; managing via cavern storage Helium contribution below forecast; ongoing headwinds expected 2026–2027; still above pre‑COVID OI levels Normalizing from post‑war spikes; sustained pressure near term
Tariffs/macroCautious view on China; no major help in near term Monitoring tariffs; localized supply model mitigates but macro knock-on risks remain Tariffs complicate project equipment timing/cost; macro assumptions neutral near-term Persisting uncertainty; emphasis on risk-sharing and pricing actions
Project portfolioSAF project on hold; Texas green hydrogen project stopped Uzbekistan planned maintenance; contribution phasing in Q3/Q4 Exit of three U.S. projects; Alberta overruns/delay; underperforming projects likely positive cash flow but minimal OI Prune non-core/overrun projects; focus on cash recovery

Management Commentary

  • “The products will get back to basics… invest about $1.5 billion per year for industrial gas projects… focus on opportunities that meet our high return thresholds… with contracted take-or-pay offtake” (CEO Menezes) .
  • “We canceled 3 significant U.S. projects in February… taking a more prudent approach to the Louisiana project… [underperforming projects] not expected to materially contribute to operating income… but provide positive cash flow” .
  • “Q2 adjusted EPS of $2.69 were below our previous guidance… primarily due to changes in cost estimates on a sale of equipment project in the U.S. and lower-than-forecasted helium contribution” (CFO Schaeffer) .
  • “We intend to identify another 2,500 to 3,000 positions… eliminated between 2026 and 2028… objective of reaching an employment level similar to 2018” (CEO Menezes) .
  • On NEOM ammonia pricing, “I was positively surprised… in the lower part of the range… price from the JV is basically fixed for the life… slight O&M adjustment” (CEO Menezes) .

Q&A Highlights

  • Alberta project overruns and delay: cost ballooned, two-year push; causes: sequencing loss, weather windows missed, low contractor productivity, capitalized interest; corrective actions: management/contractor replacement, resequencing .
  • Louisiana blue hydrogen derisking: focus scope on hydrogen/nitrogen; pursue partners for ammonia loop and CO2 sequestration; target total CapEx down to $5–$6B with firm offtake; earliest start-up 2028/29 .
  • Headcount savings: ~2,400 actions since FY23; ~$25M savings in FY25 from current tranche; run-rate ~$100M; additional ~$40M capitalized engineering cost reduction not flowing to P&L .
  • Free cash flow trajectory: aim to be positive as early as next year; net cash flow positive through 2028 and significantly positive thereafter (after dividends) .
  • Helium sizing/trend: still above pre‑COVID OI but headwinds in price through 2026–2027; managing cyclicality with cavern storage .

Estimates Context

  • Q2 FY25 delivered below S&P Global consensus on adjusted/primary EPS ($2.69 vs $2.83*) and slightly below on revenue ($2.92B vs $2.93B*) .
  • Forward look: Company guides Q3 FY25 adjusted EPS to $2.90–$3.00 ; S&P Global consensus for Q3 FY25 EPS is $2.99* and revenue $2.99B* (indicative of modest alignment with guidance midpoints).

Values with * retrieved from S&P Global.

Forward SnapshotQ3 2025 Consensus*Company Q3 2025 Guidance
EPS ($)2.99*$2.90–$3.00
Revenue ($USD Billions)$2.99*n/a

Key Takeaways for Investors

  • Non-GAAP print was modestly soft vs consensus and prior guidance, with helium and project-cost items the key variances; expect helium to remain a headwind into 2026–2027, but managed via storage and pricing actions .
  • Strategic refocus and portfolio pruning are tangible: project exits, Louisiana scope derisking, and underperforming projects reprioritized for cash recovery; watch for partnership announcements and scope resolution by year-end .
  • Cost/productivity program is credible and accelerating, with clear headcount reduction roadmap and identified savings; margin recovery hinges on pricing/actions and lower energy pass-through impacts, especially in Europe .
  • NEOM timeline remains 2027 product availability with fixed-cost power advantages; near-term strategy emphasizes ammonia FOB sales pending EU regulatory clarity; downstream spend paused to mitigate risk .
  • Guidance reset reduces FY25 expectations (11.85–12.15) amid LNG divestiture impact (~4% YoY headwind) and project cancellations (~3% headwind), but base business growth of 2–5% is targeted .
  • Dividend durability remains intact (raised to $1.79), supported by aim to be free cash flow positive as early as next year and net cash flow positive through 2028 .
  • Trading lens: near-term volatility tied to execution on derisking (Louisiana partners/scope), helium normalization, and evidence of margin uplift; medium-term thesis pivots to core IG growth, disciplined capital allocation, and step-ups from NEOM/Louisiana contributions post-2027 .