Air Products today reported net income of $315 million and diluted earnings per share (EPS) of $1.47 on a non-GAAP, continuing operations basis, for its fiscal fourth quarter ended September 30, 2013. 

These results exclude after-tax expenses of $164 million, or $0.77 per share, primarily for cost reduction, and asset and product rationalization actions, mainly in the Company's Electronics and Merchant Gases businesses, and for streamlining corporate functions. 

On a GAAP basis, net income and diluted EPS from continuing operations were $150 million and $0.70, respectively, for the quarter. 

Fourth quarter revenues of $2,587 million decreased one percent versus prior year on two percent lower base volumes, and a negative two percent impact due to the previously announced decision to exit the Polyurethane Intermediates (PUI) business. Higher energy pass-through and positive currency impacts partially offset the lower volumes. Sequentially, overall sales increased two percent, with underlying sales up three percent on higher volumes across all business segments. 

Operating income of $421 million for the quarter increased three percent versus prior year. Operating margin of 16.3 percent was up 60 basis points versus prior year despite higher pension costs. Sequentially, operating income increased 10 percent and operating margin improved 130 basis points, mostly due to higher volumes and lower costs. 

For fiscal 2013, sales of $10,180 million increased six percent versus prior year, with acquisitions contributing five percent and higher energy pass-through contributing two percent, partially offset by one percent lower volumes driven by the PUI business exit. Underlying sales, excluding PUI, increased one percent on higher North America and Asia Tonnage Gases volumes, higher Performance Materials volumes, and LNG equipment activity. Operating income of $1,566 million improved two percent on the prior year. Operating margin was down 60 basis points, primarily due to higher pension costs. 

Commenting on the fiscal year, John McGlade, chairman, president and chief executive officer, said, "We delivered on our key priorities and produced strong returns for shareholders, reflecting our continued focus on cost reduction, productivity improvements and disciplined project execution. Despite a weak economy, our volumes improved and our productivity initiatives more than offset inflation."

Fourth Quarter Results by Business Segment

Merchant Gasessales of $1,054 million increased four percent versus prior year on higher volumes and improved pricing. Operating income of $177 million increased ten percent versus prior year, largely due to higher volumes and improved pricing, and the completion of prior year cost reductions in Europe. Sequential sales increased two percent due to stronger volumes in the U.S/Canada and Asia. Operating income increased seven percent sequentially on higher volumes and lower costs.

Tonnage Gasessales of $835 million decreased one percent versus the prior year mostly due to lower PUI volumes offsetting higher energy pass-through and positive currency impact. Excluding PUI, volumes were down one percent, with strong U.S. hydrogen volumes offset by a contract termination in Latin America. Operating income of $135 million was down four percent versus prior year due to higher maintenance costs, higher pension costs and the impact of the contract termination. Sequential sales decreased one percent as higher volumes were more than offset by lower energy pass-through. Sequential operating income increased nine percent, excluding PUI, largely due to higher volumes.

Electronics and Performance Materialssales of $580 million were down six percent versus prior year, primarily driven by lower Electronics equipment sales. Operating income of $96 million increased 12 percent, primarily due to higher inventory costs in the prior year. Operating margin improved 270 basis points on the higher income and product mix. Sequential sales were up three percent on higher volumes. Sequential operating income improved 10 percent and operating margin was up 120 basis points, primarily due to higher volumes.

Equipment and Energysales of $118 million were down seven percent versus prior year due to lower ASU sales, partially offset by higher LNG project activity. Operating income of $21 million increased 16 percent versus prior year due to higher LNG project activity. Sequentially, sales increased 14 percent and operating income improved 28 percent on the higher LNG project activity. The sales backlog increased 23 percent versus prior quarter on continued LNG project orders.

Outlook

Air Products expects first quarter EPS from continuing operations to be between $1.30 and $1.35 per share. The Company's guidance for continuing operations for fiscal 2014 is a range of $5.70 to $5.90 per share. 

Looking ahead, McGlade said, "We are taking decisive actions to build momentum and accelerate earnings growth. Our priorities for 2014 remain consistent, executing against our backlog, winning profitable new projects, loading existing assets, and implementing further productivity and cost initiatives. The investments we have made over the past several years are key drivers for Air Products' future and we believe shareholders will realize stronger returns because of these actions."