Air Products and Chemicals Q2 Earnings Call Highlights

Key Points

• Air Products reported Q2 EPS of $3.20 (up 19%) with operating margin of 23.7%, and raised full‑year EPS guidance to $13.00–$13.25 (roughly 8–10% growth).
• Management flagged helium supply disruption from Qatar curtailments but has activated contingency plans—drawing from a Texas storage cavern and deploying its isocontainer fleet—and expects helium pricing to “bottom” by year‑end while favoring longer‑term contracts over spot pricing.
• Air Products emphasized capital discipline: keeping capex guidance at about $4 billion while cutting ~$1 billion versus prior year, advancing NEOM (renewable power ready) and reviewing the Louisiana (Darrow) project with a mid‑year go/no‑go decision, supported by a $9 billion backlog and growing electronics pipeline.

Air Products and Chemicals NYSE: APD reported fiscal second-quarter 2026 results that executives said reflected broad-based operating income improvement across reporting segments, continued cost productivity, and stronger-than-expected helium volumes tied to aerospace activity. Management also raised full-year earnings guidance while emphasizing capital discipline and ongoing work to optimize the company’s large project portfolio amid continued uncertainty tied to the Middle East conflict.

Second-quarter results and drivers

CEO Eduardo Menezes said the company delivered earnings per share of $3.20, up 19% from the prior-year quarter, driven by “improved volumes, productivity, and currency.” He also noted reduced headwinds from helium, with volumes “better than expected due to aerospace.”

Menezes said operating margin was 23.7%, up year over year, reflecting strong underlying volumes—particularly in the on-site business—and ongoing cost productivity. Return on capital was 11.4%, “in line with prior year and improved sequentially,” according to Menezes.

CFO Melissa Schaeffer said sales rose 9% while operating income increased 19%, supported by volume, currency, and lower costs, “partially offset by price headwinds.” On volume, Schaeffer pointed to on-site growth tied to increased production from a U.S. refinery asset and new assets coming online in Asia, along with an easier comparison in Europe after a major turnaround in the prior year. Merchant volumes were stable, including “a modest improvement in helium.”

Schaeffer said the company’s base business expanded operating margin by more than 200 basis points to 23.7% “despite a 50 basis point headwind from higher energy pass-through.” She added that Air Products has recognized about $50 million in savings year-to-date from headcount reductions and remains “on track” with its plan for the year.

Segment performance: Asia led operating income growth

In a segment review, Schaeffer said:

• Americas: Operating income increased 2%, primarily driven by on-site volume, with merchant volume also up “including helium supplied for the space launches,” and contributions from non-helium merchant price. Offsets included prior-year income from “a one-time customer contract addendum,” lower helium price, higher power costs, and maintenance turnarounds.
• Asia: Operating income rose 25% on productivity improvements and favorable on-site and helium volumes, with a “modest contribution” from new assets as they ramp. Reduced depreciation from certain gasification assets classified as held for sale also benefited results, partly offset by helium pricing headwinds.
• Europe: Operating income increased 8% due to favorable on-site volume (including a prior-year turnaround), favorable currency, and non-helium pricing. Higher costs, including depreciation and fixed-cost inflation, along with helium volume and pricing headwinds, weighed on results.
• Middle East and India: Operating income improved on lower costs, with equity affiliate income “slightly positive.”
• Corporate and other: Results improved due to lower “sale of equipment” cost headwinds and continued productivity.

Asked about non-helium pricing, Schaeffer said non-helium merchant pricing was up about 2% overall, with roughly half of that improvement in the Americas and half in Europe, while Asia was “largely flat” on a non-helium basis.

Helium disruption and contingency measures

Management spent part of the call addressing helium supply dynamics following curtailments in Qatar due to the Middle East conflict. Menezes said helium is a key product line for the company, with major end markets including electronics, aerospace, and medical. He described Air Products’ helium supply chain as resilient due to multiple sources in the U.S., long-term partnerships in Algeria with Sonatrach and in Qatar with QatarEnergy, and a dedicated helium storage cavern in Texas that has been operating for nearly five years.

Menezes also highlighted the company’s “large helium isocontainer fleet” produced by its Gardner Cryogenics subsidiary, which he said provides flexibility to manage supply flows. He said the company has activated contingency plans by drawing product from the cavern and positioning the container fleet to bypass conflict-affected areas.

During Q&A, Menezes told analysts that the helium market was “structurally long” prior to the war but is now short given Qatar’s share of global supply. However, he said Air Products is focused on signing longer-term supply agreements and cautioned against embedding potential spot-market gains in forecasts given uncertainty over the duration of disruptions.

Later in the call, Menezes said the company had been expecting helium pricing to “bottom” by the end of the year and continues to expect that. He also emphasized that reliability has become more important to customers and said recent agreements are typically three to five years, with some longer-term contracts being signed.

Project portfolio updates: NEOM progressing; Louisiana decision pending

Menezes reiterated three 2026 priorities: “unlocking earnings growth,” optimizing the large project portfolio, and maintaining capital discipline. On NEOM, he said negotiations on a marketing and distribution agreement with Yara are “progressing in line with expectations.” He added that the project “continues to make progress and is ready to produce renewable power” to be used in commissioning hydrogen and ammonia plants, and said activities at NEOM have not been impacted by recent Middle East events.

In response to questions, Menezes said the NEOM project is on the west coast of Saudi Arabia and “has not been affected by the conflict.” He said the renewable power side is “basically done,” the substation has been energized using grid power, and the next step is connecting the solar park and starting commissioning using renewable power.

On the Louisiana project (referred to by analysts as Darrow), Menezes said the company has “set a high bar” and requires a reliable capital cost estimate and construction agreements that meet risk-adjusted return requirements. He said Air Products is reviewing bids from EPC firms and remains committed to reaching a go/no-go decision with partners by the middle of the calendar year.

Schaeffer added that “our base case” is that the project would not move forward, pending review of economics as construction bids come in. If the project does not proceed, she cited the company’s recently announced Samsung electronics project as an example of capital that could “quickly replace” expected Darrow spending, adding that the company is “very bullish” on electronics opportunities.

When asked whether Darrow could be downsized, Menezes said the configuration makes it difficult to execute only part of the project and suggested partial execution could raise costs and worsen economics.

Guidance raised; capex reduction and balance sheet priorities

Schaeffer said Air Products raised fiscal 2026 full-year EPS guidance to $13.00 to $13.25, representing 8% to 10% growth from the prior year. For the third quarter, the company expects EPS of $3.25 to $3.35, or 5% to 8% growth year over year. She said the company remains cautious due to macro uncertainty, “especially in Europe and Asia,” but expects continued benefits from non-helium pricing actions, productivity initiatives, and new asset ramp-ups in the second half.

On capital spending, Schaeffer said the company is maintaining capex guidance at approximately $4 billion for the year and remains on track to reduce capital spending by more than $1 billion versus the prior year. Menezes also said the company expects to reduce capex by about $1 billion in fiscal 2026 and is focusing investment on traditional industrial gas projects while strengthening its pipeline in electronics and aerospace.

Management said that in the first half of fiscal 2026, Air Products returned $800 million to shareholders through dividends. Schaeffer said net debt to EBITDA was 2.2x and that the company is committed to returning to an Aa2 rating over the long term.

Discussing the electronics backlog and pipeline, Menezes said Air Products is executing about $1 billion in ASU and hydrogen projects in Asia for multi-phase semiconductor and memory customers and expects to add another $1.5 billion to $2 billion to backlog in the next six months, including a newly announced Samsung agreement in South Korea. Schaeffer later said total backlog is $9 billion, while traditional industrial gas backlog is “a little over $2.5” billion, with a significant portion in electronics.

About Air Products and Chemicals NYSE: APD

Air Products and Chemicals, Inc is a global supplier of industrial gases and related equipment and services, headquartered in Allentown, Pennsylvania. The company produces and delivers atmospheric gases such as oxygen, nitrogen and argon, as well as specialty and process gases used across a wide range of industrial applications. Air Products designs, builds and operates gas production facilities, merchant distribution networks and on-site gas systems for customers that require reliable, high-purity gases and integrated supply solutions.

The company's product and service portfolio includes packaged and bulk gas supply, pipeline distribution, on-site generation, gas handling and storage equipment, and engineered systems for gas liquefaction and purification.

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