Air Products finds momentum after a costly clean-energy reset

Air Products and Chemicals, Inc. (NYSE:APD) has put a stronger operating year behind it, but the clean-up bill remains enormous. The industrial gases company reported fiscal 2026 adjusted EPS of US$13.45, up 12%, and adjusted operating income of US$3.2 billion, up 11%, while recording roughly US$3.2 billion in pre-tax business and asset action charges tied primarily to clean-energy project exits and Chinese coal gasification assets.

Adjusted earnings improved as capital spending fell

Sales rose 8% to US$13.0 billion on 4% higher volumes, 2% energy cost pass-through and 2% favourable currency movements. The adjusted operating margin widened 70 basis points to 24.4%, with higher on-site volumes, pricing and currency benefits partly offset by fixed-cost inflation and higher incentive compensation.

Cash used for investing activities fell to US$4.1 billion from US$7.2 billion, while Air Products’ non-GAAP capital expenditure measure dropped to US$3.3 billion from US$5.1 billion. Management’s fiscal 2027 capital expenditure range of US$3.0 billion to US$3.5 billion points to another year of materially lower spending than the recent peak, although the company’s own measure excludes certain project expenditure funded by sources other than Air Products’ equity.

Project exits continue to dominate GAAP results

On a GAAP basis, fiscal 2026 operating income was just US$23 million, compared with an operating loss of US$877 million a year earlier. GAAP EPS was US$2.39, versus a loss per share of US$1.74 in fiscal 2025. The adjusted figures exclude the charges, which included exits from a clean-energy complex under construction in Louisiana, a green hydrogen facility in Casa Grande, Arizona, and other clean-energy projects.

The fourth quarter added another complication. Air Products recorded about US$224.5 million in pre-tax charges primarily to update the carrying values of two Chinese coal gasification plants held for sale. One was fully impaired after limited buyer interest, while the other was adjusted to reflect a sales agreement and was subsequently sold in October. That disposal reduces one piece of the portfolio uncertainty, but the size of the charges shows how far the company’s reported earnings can still diverge from its adjusted measure.

Industrial gases backlog gains a new electronics foothold

The core business showed more encouraging momentum in the fourth quarter. Adjusted operating income rose 5% to US$856 million, with higher volumes and pricing actions offset by higher costs. Americas sales climbed 27% on a 26% volume increase, while Asia sales rose 4% and Europe sales increased 8%, although European margin was pressured by energy cost pass-through and fixed-cost inflation.

Air Products also said it had expanded its project backlog with more than US$2.0 billion of new electronics wins. The release does not provide a timetable for converting those wins into revenue or cash flow, making execution rather than headline backlog value the next important test.

Fiscal 2027 guidance points to measured growth

Management guided to fiscal 2027 adjusted EPS of US$14.15 to US$14.50, implying growth of 5% to 8% from fiscal 2026, and set first-quarter adjusted EPS guidance at US$3.35 to US$3.45. The company’s guidance is non-GAAP and cannot be reconciled to a comparable GAAP range because the timing and scale of future project charges and other excluded items cannot be predicted without unreasonable effort.