On this page of StockholderLetter.com we present the 12/8/2023 shareholder letter from Air Products & Chemicals, Inc. — ticker symbol APD. Reading current and past APD letters to shareholders can bring important insights into the investment thesis.

 •  12/8/2023 Letter Continued (Full PDF)
 •  12/3/2024 APD Stockholder Letter
 •  12/11/2025 APD Stockholder Letter
 •  More "Specialty Chemicals" Category Stockholder Letters
 •  APD Benford's Law Stock Score = 90

APD 12/8/2023 Shareholder/Stockholder Letter Transcript:

GENERATING
A CLEANER FUTURE
AN
NNU
UAL REP
E ORT

"011
1;
1";
eivituak
a   latona
AIR PRODUCTS   
PRODUCTS' GLOBAL HEADQUARTERS
ALLENTOWN, PENNSYLVANIA USA
ANNUAL REPORT

OUR
BUSINESSES



(NYSE:AP a world-leading industrial gases
Air Products (NYSE:APD),
company in operation for over 80 years, provides essential
industrial gases, related
relat equipment, and applications expertise
t world.
to customers around the
Focused on serving
ser
rving
servii
ng energy,
environmental,l, aand
environmental
emergin
ng
nd emerging
markets, the Con
Co
ompany
Company
pany offerss a
portfolio of prods
products
pro
oducts
serv
rvicces that
cts and services
enables custom
customers
merss to improve
v their
the
eir
customer
performance,
environmentall p
e, product
prod
duct
erformance,
productivity.
quality, and prod
Prod
ducts
uctivity. Airr Products
sustainability-driven
has a sustainabil
sustainab
bility-driven
tw
wo-piillar
ty-driven two-pillar
growth strategy
strateg
gy consisting
of the
the
onsisting of
expansion and
d efficient
operrat
ation
n
eificient operation
of its core industrial
indu
ustrial
bus
u inesss
industi
ial gases business
n of projectss that
execution
execut
tion
th
hatt
and the executio
world-scale
provide world-sc
world-scale
hy
ydr
droge
en.
ale clean hydrogen.
co
ore industrial gases
ga s
Air Products   
Products' core
cor
business serves ccustomers
n dozens
doze
ens
ustomers in
including
of industries, inc
in
ncluding
refin
nin
ing,
uding refining,
chemicals, metals,
met
tals,
electronics
cs,
metal
s, electronics,
manufacturing,
manufacturing
g, medical,
d food.
fo
ood
d. The
and
develops,
Company also de
eng
gin
neers,
velops, engineers,
and
builds, owns, anc
and operates some
som
ome of
of the
clean
world's largest d
en projects
pro
ojects
worlds
an hydrogen
suppo
ort the transition
transitiion to
o lowthat will support
nergy in the
zero-carbo
on energy
th
he heavyhea
avyand zero-carbon
transportation
duty transportat:
indu
usttria
al
on and industrial
Proch
sectors. Air Products
Pro
oducts
th
he world
wo
orld
cts is also the
su
upply
liqueffied natural
natural
ply of liquefied
leader in the supply
sup:
technology
gas process techr
tec
chnology
equ
uipment
ology and equipment
turbomachinery,
tu
urbomachiner
ry,
bomachinery,
and provides tur
membrane syste
systems,
cryo
ogeniic
ms, and cryogenic
globally.
containers global
glob
bally.
ly.
   scal year 2023
Air Products reported fiscal
   ve segments:
results under five



Americas;
Asia;
Europe;
Middle East and India; and
Corporate and other.
The regional industrial gases segments
produce and sell atmospheric gases,
such as oxygen, nitrogen and argon;
process gases, such as hydrogen,
helium, carbon dioxide, carbon
monoxide, and syngas (a mixture of
hydrogen and carbon monoxide); and
specialty gases. The regional segments
distribute gases to customers through
different supply modes according to
customers    volume requirements and
customers'
locations. The merchant gas supply
mode delivers liquid or gaseous bulk
supply by tanker or tube trailer and,
for smaller customers, packaged gases
in cylinders and dewars. The on-site
supply mode serves large-volume
customers with relatively constant
demand through either an on-site plant
on or near the customer   s
customer's facility or one
Company   s pipelines.
of the Company's
The Corporate and other segment
includes the Company's
Company   s sale of
equipment businesses. This segment
sells cryogenic and gas processing
equipment for air separation that is
sold worldwide to customers in many
industries, including chemical and
petrochemical manufacturing, oil and
gas recovery and processing, and steel
and primary metals processing, as
lique   ed natural gas process
well as liquefied
technology and equipment, turbo
machinery equipment and services,
and distribution equipment, including
membrane systems and cryogenic
containers. The Corporate and other
segment also includes costs to
provide corporate support functions
and global management activities
bene   t all segments, including
that benefit
product development, research and
development, and administrative
support.
Each of the Company's
Company   s reporting
segments includes its share of the
results of joint ventures accounted
for under the equity method, such as
Gasi   cation and
the Jazan Integrated Gasification
Power Company joint venture in Saudi
Arabia.
I

FINANCIAL
HIGHLIGHTS
IP

APD Global Presence
FY23 Sales = $12.6 billion
Europe,
Middle East*,
East*
India, Africa
45%
26%
16%
China
China
10%
U.S./Canada
3%
Asia
Asia
Latin
America
America
excluding
excluding
China
China
*Results of the Jazan
Jazan Integrated Gasification and
and Power Company joint
joint venture
venture equity affiliate
affiliate are
are not reported in sales.
sales.
*Results
Millions of dollars, except for
for per share data
2023
2022
Change
Change
FOR THE FISCAL YEAR ENDED 30 SEPTEMBER (from continuing operations, unless otherwise indicated)
GAAP
Sales
$12,600
(A)
$12,699
(1%)
Net
margin(A)
Net income margin
18.6%
17.8%
17.8%
80
80 bp
bp
Operating margin
Operating
19.8%
19.8%
18.4%
18.4%
140 bp
8.3%
8.3%
(40) bp
(A)
Return on
on capital employed (   ROCE   )
("ROCE") (GAAP Basis)
Basis)(A)
Cash used
for investing
Cash
used for
investing activities
7.9%
$5,916
$3,857
$3,857
53%
NON-GAAP
(B)
Adjusted EBITDA margin
margin(B)
Adjusted
37.3%
33.4%
390 bp
margin(B)
Adjusted operating margin
Adjusted
21.7%
19.0%
19.0%
270 bp
(B)
ROCE (Non-GAAP
(Non-GAAP Basis)
Basis)(B)
12.0%
12.0%
11.1%
90
90 bp
bp
(B)
(B)
Capital expenditures
expenditures(B)
$5,224
$4,650
12%
PER SHARE
("EPS")
GAAP diluted earnings per share (   EPS   )
(B)
Adjusted diluted EPS
EPS(B)
Adjusted
Dividends declared per common share
$10.30
$10.08
2%
$11.51
$10.25
12%
$6.87
$6.36
8%
(A)
(A) Periods presented include impacts from discontinued operations.
(B) Amounts are non-GAAP financial measures. See pages III-VI for reconciliation to the comparable GAAP measures.
(B)
Air Products |I 2023 Annual Report
III I

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per share data)
Adjusted EBITDA
We define adjusted EBITDA as net income less income from discontinued operations, net of tax, and excluding non-GAAP adjustments,
which we do not believe to be indicative of underlying business trends, before interest expense, other non-operating income (expense),
net, income tax provision, and depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA margin provide useful
metrics for management to assess operating performance. Net income margin and adjusted EBITDA margin are calculated by dividing
net income and adjusted EBITDA, respectively, by consolidated sales for each period. Margins are calculated independently for each
period and may not sum to total margin due to rounding.
The tables below present consolidated sales and a reconciliation of net income on aa GAAP basis to adjusted EBITDA and net income
margin on aa GAAP basis to adjusted EBITDA margin:
2022
2023
Fiscal Year Ended 30 September
Sales
Net income and net income margin
Less: Income from
from discontinued operations, net of
of tax
tax


Margin
Margin
$12,698.6
$12,600.0
$2,338.6
18.6%
$2,266.5
$2,266.5
17.8%
17.8%
7.4
0.1%
12.6
0.1%
Add: Interest expense
177.5
1.4%
128.0
1.0%
Less: Other
Other non-operating income (expense), net
(39.0)
(0.3%)
62.4
0.5%
Add: Income tax provision
551.2
4.4%
500.8
3.9%
1,358.3
10.8%
1,338.2
10.5%
244.6
1.9%
73.7
0.6%
Add: Depreciation and amortization
Add: Business and asset actions
Add: Equity method investment impairment charge
Adjusted EBITDA and adjusted EBITDA margin

$4,701.8
Net income margin change


14.8
0.1%
37.3%
$4,247.0
33.4%
80 bp
Adjusted EBITDA margin change
390 bp
Adjusted Operating Margin
The table below reconciles operating margin on aa GAAP basis to adjusted operating margin. Operating margin and adjusted operating
margin are calculated by dividing operating income and adjusted operating income, respectively, by consolidated sales for each period.
The adjusted measures exclude the impact of certain items that we do not believe are indicative of underlying business performance.
Fiscal Year
Year Ended 30 September
Sales
Operating income
Operating margin
2023
2022
$12,600.0
$12,698.6
2,494.6
2,338.8
19.8%
18.4%
18.4%
Change
Change
140 bp
Reconciliation of GAAP to Non-GAAP:
Operating income
Business and asset actions
Adjusted operating income
Adjusted operating margin
$2,494.6
$2,338.8
$2,338.8
244.6
73.7
$2,739.2
$2,412.5
21.7%
19.0%
19.0%
270 bp
III
III



 12/8/2023 Letter Continued (Full PDF)