Air Products and Chemicals Inc Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Air Products and Chemicals Inc's Q4 2025 earnings call highlighted consistent progress, delivery of EPS above guidance, focus on core industrial gas business, and key priorities for 2026 including EPS growth, project portfolio optimization, and balanced capital allocation. The call also addressed helium headwinds, macroeconomic environment, and specific project updates for NEOM and Louisiana.
Key Financial Results
Q4 2025 EPS was reported at $12.03, above the midpoint of fiscal year guidance.
Operating income margin was 23.7%.
Return on capital was 10.1%.
The company marked the 43rd consecutive year of increasing the dividend.
A total of $1.6 billion was returned to shareholders in fiscal 2025.
Fiscal year EPS of $12.03 decreased $0.40 or 3% from the prior year, driven by a 4% headwind from LNG divestitures and a 2% headwind from project exits.
Without these discrete items, EPS would be up 3%.
Business Segment Results
Americas results were down 3%.
Asia fiscal year results were relatively flat as lower helium was offset by favorable on-site non-helium price and productivity.
Europe's FY 2025 results improved 4% as non-helium, merchant pricing, productivity, and favorable on-site contribution was partially offset by lower helium and higher costs associated to depreciation and fixed cost inflation.
The full year Middle East and India equity affiliates' income decreased 2% from prior year, primarily due to lower contributions from our Jazan joint venture.
The full-year results for the corporate and other segment were primarily impacted by the headwind from the prior-year sale of LNG, partially offset by lower changes to the sale of equipment project estimate and lower costs with our continued focus on productivity improvements.
Capital Allocation
Capital expenditures are expected to reduce to roughly $2.5 billion per year following the completion of several large projects.
In 2026, capital expenditures are expected to be about $4 billion.
Traditional core growth investments are expected to be approximately $1.5 billion per year going forward.
The company returned $1.6 billion in cash to shareholders.
Industry Trends and Dynamics
The scale of the energy transition requires volumes to meet mandates such as the RED III EU mandate.
The RED III EU mandate to convert 1% of fuel sold to RFNBO fuels with greater green hydrogen demand equals approximately 7 times the total production of the company's NEOM project by 2030.
The market for green ammonia is being developed.
Competitive Landscape
The company is evaluating proposals to divest the carbon sequestration and ammonia production assets for the Blue Hydrogen project in Louisiana.
Macroeconomic Environment
The 2026 guidance anticipates additional helium headwinds in a sluggish macroeconomic environment.
The company is not forecasting significant market growth at this time, given the macroeconomic headwinds.
Growth Opportunities and Strategies
The company expects to unlock earnings growth through productivity, pricing, operational excellence and disciplined capital allocation.
Three key priorities for 2026: deliver high single digit annual EPS growth, optimize large projects portfolio, and balance capital allocation to improve balance sheet.
The company has identified a total of 3,600 head count reductions, which translate to 16% of peak workforce.
These reductions are expected to contribute approximately $250 million in annual cost savings, or $0.90 per share in earnings, once the reductions are complete.
The company is moving forward with several underperforming projects given commercial obligations and project status.
The NEOM project is progressing well and is about 90% complete.
Solar and wind power generation for NEOM will be completed by early 2026, and commissioning of the electrolyzers and ammonia production will start.
Ammonia production onstream with full product availability in 2027 is expected for NEOM.
The company will only go forward with the Blue Hydrogen project in Louisiana if firm offtake agreements for hydrogen and nitrogen are signed.
Financial Guidance and Outlook
The company expects to deliver earnings per share in the range of $12.85 to $13.15 for the full year 2026, an improvement of 7% to 9% from the prior year.
For the first quarter of 2026, the company expects to deliver earnings per share in the range of $2.95 to $3.10, representing a 3% to 8% improvement from the prior year.
Capital expenditure of approximately $4 billion is expected as the company executes on its project backlog.
The company expects to be modestly cash flow positive in fiscal year 2026, and are committed to staying cash flow neutral through 2028 as they close out on several projects.
