Paul Huck, VP & CFO
Lehman Brothers
February 8, 2007
Forward-Looking Statements
    NOTE: This presentation contains “forward-looking statements” within the safe harbor provis...
Air Products
    At a glance
        $9B in sales
        Diverse markets and geographies
        Positioned for continued...
Value Proposition
    Profitable Growth
     Stability
      – Long term contracts
      – Consistent and predictable
    ...
Gases Supply Modes
    Focusing on Stability

                                                                            ...
A Healthy Report Card
    Three consecutive years
                                                                FY04    ...
Increase Return on Capital
    Our Highest Priority


                     12.5% ORONA
                                   ...
Significant changes in 2006
    Positioning for the future
      Announced Chemicals restructuring March ’06
      Sold Ge...
Merchant Gases:
    Leveraging Strong Demand
    Industrial gases,          FY’06 Performance
    certain medical /
      ...
Tonnage Gases
     Investments Drive Growth
     Industrial gases via
                                  FY’06 Performance
...
Equipment & Energy
     LNG Drives Growth
     Air sep, hydrocarbon          FY’06 Performance
     recovery/purification,...
Electronics & Performance Materials:
     A Winning Combination
     Specialty / bulk gases /      FY’06 Performance
     ...
Healthcare:
     Focused on Improvement
     Respiratory therapies,       FY’06 Performance
     home medical
            ...
Consolidated Q1 Financials:
     FY07 Off To A Good Start
                                                                ...
2007
     Delivering 12.5% ORONA
     12.5%

                             ORONA Improvement

     11.5%



     10.5%


  ...
Our FY’07 Commitments
      Achieve 12.5% ORONA this year
                                       Add Photo
      Capture p...
Return On Capital Measures
     Transitioning to ROCE
      ORONA = Operating Return on Net Assets
                       ...
Return On Capital Measures
     Similar Trends

     12.5%



     11.5%
                                    ROCE

     10...
Beyond 2007
     Growth Levers
      Large ($25MM+) projects on stream….9 in 2008
       – 6 in Tonnage
       – 3 in Elec...
Beyond 2007
     Sustainable Double-Digit Growth
     At Superior Returns
      Targeting EPS growth between 10-15%
      ...
Thank you




tell me more
www.airproducts.com
Appendix:
     Non GAAP Reconciliation
      ($ Millions, except per share data)
                                         ...
Appendix:
     Non-GAAP Reconciliation

                                                                                  ...
Appendix:
      ORONA Calculation

     $ Millions
     Quarter Ended                                   Sep-03    Dec-03  ...
Appendix:
     ROCE Calculation




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air products & chemicals LehmanBrothersIndustrialSelectConference_08Feb2007

  1. 1. Paul Huck, VP & CFO Lehman Brothers February 8, 2007
  2. 2. Forward-Looking Statements NOTE: This presentation contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s reasonable expectations and assumptions as of the date of this presentation regarding important risk factors. Actual performance and financial results may differ materially from those expressed in the forward- looking statements because of many factors, including those specifically referenced as future events or outcomes that the company anticipates as well as, among other things, overall economic and business conditions different than those currently anticipated and demand for Air Products’ goods and services during that time; competitive factors in the industries in which it competes; interruption in ordinary sources of supply; the ability to recover unanticipated increased energy and raw material costs from customers; uninsured litigation judgments or settlements; changes in government regulations; consequences of acts of war or terrorism impacting the United States’ and other markets; the effects of a pandemic or epidemic or a natural disaster; charges related to portfolio management and cost reduction actions; the success of implementing cost reduction programs and achieving anticipated acquisition synergies; the timing, impact and other uncertainties of future acquisitions or divestitures or unanticipated contract terminations; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the impact of tax and other legislation and regulations in jurisdictions in which Air Products and its affiliates operate; the impact of new financial accounting standards; and the timing and rate at which tax credits can be utilized. The company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this presentation to reflect any change in the company’s assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based. 2
  3. 3. Air Products At a glance $9B in sales Diverse markets and geographies Positioned for continued long-term value creation FY06 Geographic Sales FY06 Segment Sales ROW Canada/Latin Tonnage (2%) Merchant America (4%) Gases Gases (25%) (31%) Asia United States (16%) (49%) Equipment & Energy Healthcare (6%) (6%) Europe (29%) Electronics & Chemicals Performance (10%) Materials (22%) 3
  4. 4. Value Proposition Profitable Growth Stability – Long term contracts – Consistent and predictable cash flows – Strong balance sheet Earnings growth – Volume loading – Pricing/margins – Productivity Improving returns 4
  5. 5. Gases Supply Modes Focusing on Stability FY’05 FY’95 Onsite/Pipeline Industrial Onsite/Pipeline 27% Cylinders Industrial 39% 21% Cylinders 13% Specialty Gas 11% Specialty Gas Liquid Bulk 16% 32% Liquid Bulk 41% Revenue basis includes equity affiliates, excludes sale of equipment and cutting & welding supplies. 5
  6. 6. A Healthy Report Card Three consecutive years FY04 FY05 FY06 $7.8 $7.0 $8.9 Sales ($B)…………… $3.50 $2.53 $2.93 EPS* ($/share)……....... 9.3% 10.0% ORONA* (%) ………….. 11.3% SG&A as % of Sales*.... 12.2% 14.2% 13.5% Balance Sheet…………. “A” rating Dividend increase & Shareholder Value……. share repurchase 6 * Comparisons are non-GAAP. See appendix slide for GAAP reconciliation.
  7. 7. Increase Return on Capital Our Highest Priority 12.5% ORONA Electronics & in FY’07 Perf Mat’ls Merchant Plant loading Tonnage Gases Healthcare & Equipment Productivity and Energy Other Capital discipline 7
  8. 8. Significant changes in 2006 Positioning for the future Announced Chemicals restructuring March ’06 Sold Geismar PUI facility & Amines businesses First $500MM of $1.5B share repurchase completed Reorganized to focus on growth More Focused, Less Cyclical, Higher Growth, Higher Returns 8
  9. 9. Merchant Gases: Leveraging Strong Demand Industrial gases, FY’06 Performance certain medical / vs. Prior Year: specialty gases supplied to a variety Sales $2.7 billion of markets up 10% Liquid bulk, Op. Inc. $470 million packaged gases, up 18%* small on-sites Strong volume performance in all regions of the world, supported by new customer signings and price increases despite hurricane impacts 9 * Comparisons are non-GAAP
  10. 10. Tonnage Gases Investments Drive Growth Industrial gases via FY’06 Performance large on-sites or vs. Prior Year: pipelines to refining, chemical, metallurgical Sales $2.2 billion industries up 28% Growing hydrogen Op. Inc. $341 million franchise position; up 39%* gasification and new oxygen technologies Strong volumes from six new refinery hydrogen plants (35% capacity increase) and base business growth 10 * Comparisons are non-GAAP
  11. 11. Equipment & Energy LNG Drives Growth Air sep, hydrocarbon FY’06 Performance recovery/purification, vs. Prior Year: natural gas liquefaction, helium distribution Sales $537 million equipment; future up 45% energy technologies Op. Inc. $69 million Oil and gas, utilities, up significantly* chemical, metals markets Driven by orders for liquefied natural gas (LNG) heat exchangers and air separation units 11 * Comparisons are non-GAAP
  12. 12. Electronics & Performance Materials: A Winning Combination Specialty / bulk gases / FY’06 Performance chemicals, services and vs. Prior Year: equipment for electronics; performance chemical Sales $1.9 billion solutions for various end up 12% markets Op. Inc. $195 million Surface science expertise up 48%* delivers performance Strong volumes driven by semiconductor and flat-panel display market demand and Tomah3 Products acquisition 12 * Comparisons are non-GAAP
  13. 13. Healthcare: Focused on Improvement Respiratory therapies, FY’06 Performance home medical vs. Prior Year: equipment, infusion services for patients in Sales $571 million their homes up 5% Anticipate future Op. Inc. $8 million improvement from higher down significantly* U.S. volumes and lower operating costs Operational issues in the U.S. and higher start-up costs from a new U.K. home oxygen contract 13 * Comparisons are non-GAAP
  14. 14. Consolidated Q1 Financials: FY07 Off To A Good Start Fav/(Unfav) vs. Q1 FY07 Q1 FY06 Q4 FY06* ($Millions) ● Sales $2,433 21% 3% ● Diluted EPS $1.03 29% 10% ● ORONA 11.8% 170bp 50bp ● SG&A as a % of Sales 11.7% 70bp 10bp 14 * Comparisons v. PQ are non-GAAP, see appendix for reconciliation
  15. 15. 2007 Delivering 12.5% ORONA 12.5% ORONA Improvement 11.5% 10.5% 4 Qtr Rolling Avg 9.5% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 15 * see appendix for ORONA calculation
  16. 16. Our FY’07 Commitments Achieve 12.5% ORONA this year Add Photo Capture profitable growth Improve Healthcare performance Simplify Electronics Restructure Chemicals Drive productivity to the bottom line More Focused, Less Cyclical, Higher Growth, Higher Returns 16
  17. 17. Return On Capital Measures Transitioning to ROCE ORONA = Operating Return on Net Assets Operating Income Average (Net Assets – Equity Affiliate Investment) ROCE = Return on Capital Employed (Oper Inc BT + Equity Affiliate Inc BT)x(1- ETR) Average (Debt + Equity + Minority Interest) ROCE … more inclusive – Equity Affiliate Income – After Tax 17
  18. 18. Return On Capital Measures Similar Trends 12.5% 11.5% ROCE 10.5% ORONA 9.5% 8.5% FY04 FY05 FY06 18 * see appendix for ROCE calculation
  19. 19. Beyond 2007 Growth Levers Large ($25MM+) projects on stream….9 in 2008 – 6 in Tonnage – 3 in Electronics New geographies – Poland/Central and Eastern Europe – Asia New applications/products/markets – Energy – Performance Materials Productivity – Expand gross margins – Electronics/Healthcare/Europe business improvement – Leverage SAP 19
  20. 20. Beyond 2007 Sustainable Double-Digit Growth At Superior Returns Targeting EPS growth between 10-15% 6-7% Market growth 2-4% New geographies/applications/products 2-4% Productivity/margin expansion 10-15% Total ROCE well above our cost of capital +3-5% 20
  21. 21. Thank you tell me more www.airproducts.com
  22. 22. Appendix: Non GAAP Reconciliation ($ Millions, except per share data) GAAP Measure Proforma adjusts Non GAAP Measure Stock Option Expense FY04 FY05 FY06 FY04 FY05 FY06(1) FY04 FY05 FY06 Sales 7,031.9 7,768.3 8,850.4 7,031.9 7,768.3 8,850.4 SG&A 956.2 1,013.6 1,080.7 39.4 38.5 995.6 1,052.1 1,080.7 SG&A% of Sales 13.6% 13.0% 12.2% 14.2% 13.5% 12.2% Diluted EPS - Continuing Ops $2.66 $3.06 $3.29 (0.13) (0.13) 0.21 $2.53 $2.93 $3.50 (1) Global cost reduction plan charge 22
  23. 23. Appendix: Non-GAAP Reconciliation % Change % FY06 Q4 Pro forma FY06 Non-GAAP FY07 guidance - EPS Growth FY'07 FY'06 Change Adjustment(1) Pro forma Measure Diluted EPS - Continuing Ops $3.98-$4.10 $3.29 21%-25% $0.21 $3.50 14%-17% % Change % FY06 Q4 Pro forma Non-GAAP Q107 vs. Q406 - Total Company Q406 Q107 Change Adjustment(1) Q406 Q107 Measure Operating Income 232.9 332.3 43% 72.1 305.0 332.3 9% Net Income From Continuing Ops 163.5 230.3 41% 46.8 210.3 230.3 10% Diluted EPS - Continuing Operations $0.73 $1.03 41% $0.21 $0.94 $1.03 10% (1) Global Cost Reduction Plan 23
  24. 24. Appendix: ORONA Calculation $ Millions Quarter Ended Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep 05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Operating Income 332.3 Operating Income 200.5 206.6 232.6 246.7 237.7 242.2 257.6 258.0 253.5 282.6 291.9 232.9 Proforma Option Expense (12.0) (12.1) (12.7) (12.2) (11.0) (10.9) (11.1) (14.9) - Global Cost Reduction Plan - - - - - - - - - - - 72.1 332.3 Op Inc ex Global Cost Red/incl Option Expense 188.5 194.5 219.9 234.5 226.7 231.3 246.5 243.1 253.5 282.6 291.9 305.0 Assets Total Assets 9,473.5 9,786.6 9,962.5 9,930.0 10,040.4 10,653.4 10,707.3 10,309.8 10,408.8 10,624.9 11,032.5 11,290.8 11,180.7 11,500.0 765.6 Less Investment in Equity Affiliate 553.5 585.0 601.8 608.2 629.8 672.1 672.8 661.3 663.7 679.4 718.2 736.4 728.3 Less Current Assets Disc Ops 103.3 119.9 137.4 113.9 126.8 110.4 105.9 103.0 100.7 100.5 102.5 83.3 - - - Less Non-Current Assets Disc Ops 150.0 145.6 145.1 146.7 149.6 146.7 145.2 142.1 133.5 130.7 128.5 126.4 - Net Assets from Cont Ops 8,666.7 8,936.1 9,078.2 9,061.2 9,134.2 9,724.2 9,783.4 9,403.4 9,510.9 9,714.3 10,083.3 10,344.7 10,452.4 10,734.4 ORONA ex Global Cost Reduction Plan with Option Expense in all periods 4 Qtr Trailing Op Income 837.4 875.6 912.4 939.0 947.6 974.4 1,025.7 1,071.1 1,133.0 1,211.8 5 Qtr Avg Net Assets from Cont Ops 8,975.3 9,186.8 9,356.2 9,421.3 9,511.2 9,627.2 9,699.1 9,811.3 10,021.1 10,265.8 ORONA ex Global Cost Reduction Plan with Option Expense 9.3% 9.5% 9.8% 10.0% 10.0% 10.1% 10.6% 10.9% 11.3% 11.8% 24
  25. 25. Appendix: ROCE Calculation 25

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