How much is the continuing helium business down, expected headwind for the rest of the year, and the benefit/timing/proceeds from selling gasification assets in China.

Helium is expected to be a ~4% EPS headwind for the full year. The gasification asset sale provided about a 1% benefit to Q1 results, with negotiations ongoing and expected to close this fiscal year. “I would say, overall, the information that we gave you in the beginning of the year that we would be down for the year around 4% EPS effect is still our best forecast at this point.”

Status of income from Gulf Coast Ammonia, investment amount, and assets owned by Air Products.

The plant is starting up, running at 80-90% capacity, with a turnaround this week to finalize components and reach 100% in a few weeks. Air Products owns the SMR (hydrogen production) and air separation plant, which includes a reformer of ~175 million cubic feet/day. “The plant is making product, it was running at up to 80%, 90% capacity for the last few months. In fact this week, we are taking a turnaround that we were expecting to do that to finalize the last components, and we hope to be up and running at 100% and finalize all the commitments for that site in the next few weeks.”

Unpack the 150 basis points margin improvement in Americas, given a 4% volume drop.

Strong on-site volumes (HEICO and non-helium merchants) and strong non-helium pricing drove the improvement, partially offset by higher costs. The volume drop was due to the one-time helium impact. “So we did see strong on-site volumes in the Americas. This is specific to our HEICO and non-helium merchants. So positive in the volumes. Price was also strong in the Americas this quarter across products outside of Helium.”

APD

Air Products (APD) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q1 FY26)· Materials· Jan 30, 2026

Source: earnings call transcript

Executive summary

Air Products Q1 FY26 — Strong Operating Income Growth Despite Helium Headwinds

Air Products delivered a solid start to the fiscal year with broad-based operating income improvement and strong EPS growth, driven by pricing actions and productivity. The company is affirming its full-year earnings guidance, focusing on optimizing its large project portfolio and maintaining capital discipline amidst continued helium headwinds and a challenging macroeconomic environment. Strategic negotiations for the Louisiana project are ongoing, aiming for traditional industrial gas project scope and returns.

Highlights

Adjusted operating income improved 12% across all reporting segments in Q1 FY26.
EPS grew 10% to $3.16 in Q1 FY26, exceeding the top end of guidance.
Operating margin increased 140 basis points to 24.4% in Q1 FY26.
Board authorized a dividend increase, marking the 44th consecutive year of increases.
Strong on-site volumes and non-helium pricing actions drove results, particularly in Americas and Europe.

Concerns

Helium headwinds, including a prior year nonrecurring sale, negatively impacted EPS by approximately $0.10 in Q1 FY26.
Net debt-to-EBITDA ratio of 2.2x, with NEOM consolidation impacting leverage.
Sale of equipment cost overrun impacted results by $32 million in Q1 FY26.
Sluggish macroeconomic environment is expected to limit volume growth for FY26.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year EPS	$12.85 to $13.15 high materiality	FY26	High
Q2 FY26 EPS	$2.95 to $3.10 medium materiality	Q2 · FY26	High
Fiscal Full Year Capital Expenditures	approximately $4 billion high materiality	FY26	High
Capital Expenditures Reduction	approximately $1 billion high materiality	FY26	High
Yara Agreement Finalization (Saudi Arabia)	finalized in the first half of 2026 medium materiality	H1 2026	Medium
Louisiana Project Cost Clarity	in the next few months high materiality	Short-term	Medium
NEOM Project Deconsolidation	mid-2027 high materiality	Mid-2027	High
Alberta Project Startup	first part of 2028 high materiality	H1 2028	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Americas Sales were up 4%, driven by higher energy pass-through. Operating income improved on price, on-site volume, and lower maintenance, partially offset by prior year nonrecurring items and fixed cost inflation. On-site volume: favorableNon-helium merchant products price: improvedOperating income drivers: price, on-site volume, lower maintenanceOperating income offsets: prior year nonrecurring items, fixed cost inflation	—	4%	—	improved
Asia Sales were up 2%, while operating income was up 7%. This improvement was driven by productivity and reduced depreciation from certain gasification assets held for sale, partially offset by lower helium. New assets contributed modestly and are expected to ramp up in the second half of the fiscal year. Productivity: improvedReduced depreciation: from certain gasification assets held for saleHelium: lowerNew assets contribution: modest, expected to increase in H2 FY26	—	2%	—	up 7%
Europe Sales and operating income both increased due to volume and price, as well as favorable currency. Higher volumes were driven by on-site, including a prior year turnaround, and non-helium merchant. Operating income was also impacted by higher costs associated with depreciation and fixed cost inflation despite productivity improvements. Volume: up 5% YoY (driven by on-site, including prior year turnaround, and non-helium merchant)Price: increasedCurrency: favorableOperating income impact: higher costs associated with depreciation and fixed cost inflation despite productivity improvements	—	—	—	increased
Middle East and India Operating income improved on lower cost, while equity affiliate income remained flat. Operating income drivers: lower costEquity affiliate income: flat	—	—	—	improved
Corporate and Other Segment results improved from lower costs, including productivity actions. Cost drivers: lower costs, including productivity actions	—	—	—	improved

Deals & partnerships

Yara International marketing and distribution agreement

Advanced negotiations for marketing and distribution agreement where Yara would distribute and commercialize all the renewable ammonia from the Saudi Arabia project that is not used by Air Products to produce green hydrogen in Europe.

Yara International asset acquisition and supply agreement 25-year (supply agreement)

Negotiations for Yara to acquire the ammonia production and distribution assets from Air Products' Louisiana project and execute a 25-year hydrogen and nitrogen supply agreement for an industrial gas facility that Air Products would build, own, and operate.

NASA supply contract

Latest supply contracts to provide liquid hydrogen to multiple U.S. facilities.

Capital programs

NEOM Green Hydrogen Project underway

Currently consolidated on balance sheet during construction phase; will deconsolidate once operational and decisions are shared among 3 shareholders.

Alberta Clean Energy Project underway $3.3 billion

Construction time and cost remain as previously estimated. Negotiations with other potential offtakers continue.

Louisiana Low-Emission Ammonia Project advanced negotiations

Spent to date: $2 billion

In advanced negotiations with Yara International. Air Products aims for traditional industrial gas scope with 25-year hydrogen/nitrogen supply agreement. Requires partner for carbon capture and sequestration and reliable capital cost estimate for FID. $2 billion already invested.

Risks & headwinds

Helium Headwinds FY26

~4% EPS effect for FY26; ~$0.10 EPS impact in Q1 FY26

Mitigation:Working to increase volumes for new accounts and customers, especially in electronics.

Sluggish Macroeconomic Environment FY26

Limits volume growth for FY26

Mitigation:Focus on pricing actions, productivity, and new asset contributions.

Sale of Equipment Cost Overrun Q1 FY26

$32 million impact in Q1 FY26

Mitigation:Expected to stop being a headwind once projects are on stream.

CBAM Tariffs (Louisiana Project) Ongoing

Indirect effect on potential Louisiana project if EU fertilizer CBAM rules change

Mitigation:Yara bears the regulatory risk; Air Products monitoring closely and focusing on construction cost certainty.

Power Cost Increases Ongoing

Increases for new contracts due to data center demand and market distortions

Mitigation:Sophisticated power procurement process, pass-through mechanisms in contracts, and efforts to reduce power consumption.

Q&A highlights

Clarification on whether the double-digit return target for go-forward CapEx on the Darrow project includes 45Q credits and the return on the $2 billion already invested.

The 45Q credit is included in Air Products' return calculation for the Darrow project on a go-forward basis. The company is not disclosing specific returns on the already invested capital.

“Yes, the 45Q credit is going to be taken by Air Products, and it's included on the return. And it's an overall return for the project in the go-forward basis, and that's all we're going to disclose at this point.”

asked by Emily Fusco · answered by Eduardo Menezes

3 min read 6 chapters

Detailed narrative

Strategic Priorities and Progress

Air Products is focused on three key priorities for fiscal 2026: unlocking earnings growth, optimizing large projects, and maintaining capital discipline. The company has taken significant actions over the past year, including project cancellations, headcount optimization, and asset rationalization, which are now contributing to improved results.

These actions are aimed at refocusing on the core industrial gas business, leading to a 12% improvement in adjusted operating income in Q1 FY26.

Louisiana Project Optimization and Diligence

The company is in advanced negotiations with Yara International for the low-emission ammonia projects in Saudi Arabia and the U.S. For the Louisiana project, the goal is a traditional industrial gas scope and return for Air Products, with Yara potentially acquiring ammonia production assets and entering a 25-year hydrogen and nitrogen supply agreement.

A high bar is set for moving forward, requiring a partner for carbon capture and sequestration and highly reliable capital cost estimates, with full clarity expected in the next few months. Approximately $2 billion has been invested in the project to date.

Helium Market Dynamics and Headwinds

Despite strong performance in other areas, the company continues to face helium headwinds, which negatively impacted Q1 results and are expected to be a ~4% EPS effect for the full fiscal year. A nonrecurring helium sale in the prior year created tough comparisons, impacting Q1 EPS by approximately $0.10.

The company is actively working to increase volumes with new accounts and customers, particularly in the electronics sector, to mitigate these challenges.

Electronics Segment Growth and Investment

The electronics segment is highlighted as a 'star segment' with increasing project sizes and an acceleration of investment decisions by large chip manufacturers, driven by AI. Air Products sees opportunities for new projects in the $1 billion CapEx range to be decided in the next 12 months.

New assets are ramping up and are expected to contribute more significantly in the second half of the fiscal year, reflecting strong positions in Asia and ongoing efforts to sign new business.

NEOM Deconsolidation and Financial Impact

The NEOM Green Hydrogen Project is currently consolidated on Air Products' balance sheet during the construction phase due to its role as EPC. Upon becoming operational in mid-2027, the project will be deconsolidated, moving its debt off the balance sheet and into the equity affiliate line.

This will also shift operating costs, with Air Products seeing only 1/3 of the operating cost impact through the equity affiliate line post-deconsolidation, while the operating company adds resources leading up to onstream.

CBAM and Regulatory Risk Assessment

The company is monitoring recent reports related to fertilizer CBAM tariffs in Europe, noting that any changes would indirectly affect the potential Louisiana project. While the current CBAM rules primarily target gray ammonia imports, Yara International would bear the regulatory risk related to CBAM changes if the project proceeds.

Management assesses the probability of significant changes to the CBAM scheme as very low, emphasizing that construction cost certainty is the primary driver for the Louisiana project's Final Investment Decision.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.