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    APD
    Earnings call· Dec 2025(Q1 FY26)

    Air Products & Chemicals Q1 FY26 earnings call APD

    Jan 30, 2026 Source

    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

    5

    • 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

    4

    • 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

    8
    CategoryTargetConfidence
    Full-year EPS
    $12.85 to $13.15
    high materiality
    High
    Q2 FY26 EPS
    $2.95 to $3.10
    medium materiality
    High
    Fiscal Full Year Capital Expenditures
    approximately $4 billion
    high materiality
    High
    Capital Expenditures Reduction
    approximately $1 billion
    high materiality
    High
    Yara Agreement Finalization (Saudi Arabia)
    finalized in the first half of 2026
    medium materiality
    Medium
    Louisiana Project Cost Clarity
    in the next few months
    high materiality
    Medium
    NEOM Project Deconsolidation
    mid-2027
    high materiality
    High
    Alberta Project Startup
    first part of 2028
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    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

    Operational metrics

    18
    Adjusted Operating Income Improvement
    12%YoY
    Q1 FY26

    Broad-based improvement across all reporting segments.

    Adjusted EPS
    $3.16up 10%
    Q1 FY26

    Up $0.30 or 10% relative to the prior year, exceeding the top end of guidance.

    Operating Margin
    24.4%up 140 bps
    Q1 FY26

    Up 140 basis points on business mix and non-helium price, offsetting tough year-on-year comparison.

    Return on Capital
    11%slightly lower YoY, stable sequentially
    Q1 FY26

    Slightly lower than last year but remained stable sequentially as the company continues to execute on its project backlog.

    Helium Headwind (Q1 FY26 EPS)
    approximately $0.10
    Q1 FY26

    Due to prior year nonrecurring helium sale in the Americas, providing for tough comparisons.

    Helium Headwind (FY26 EPS effect)
    around 4%
    FY26

    Best forecast for the full fiscal year.

    Sales Volume
    flat
    Q1 FY26

    Favorable on-site volume was offset by lower helium, which included a sizable nonrecurring helium sale in the prior year.

    Operating Margin Headwind from Energy Pass-through
    50 bps
    Q1 FY26

    Operating margin also improved despite a 50 basis point headwind from higher energy cost pass-through driven by the Americas.

    Net Debt-to-EBITDA
    2.2x
    Q1 FY26

    Adjusted leverage ratio to better represent Air Products' investment, considering NEOM consolidation during construction.

    Cash Returned to Shareholders
    nearly $400 million
    Q1 FY26

    Returned through dividends and buybacks.

    Gasification Assets Held for Sale Benefit
    about 1%
    Q1 FY26

    Benefit from the overall results for the quarter from reduced depreciation of gasification assets in Asia held for sale.

    Sale of Equipment Cost Overrun Impact
    $32 millioncomparable to prior year
    Q1 FY26

    Impact to results in Q1 FY26, comparable to the prior year. This is a percent of completion accounting and represents the best estimate of future cost.

    Hydrogen Production Capacity (Gulf Coast Ammonia reformer)
    around 175 million
    Current

    This reformer provides approximately 70% of the total volume required by the ammonia loop when running at 100%.

    Space Market Share (US)
    40% to 50%
    Current

    Estimate based on customers served in the US Space market.

    Space Market Growth Trajectory
    6% to 7%
    Per year

    Expected growth for projected sales in the Space market.

    Power Cost for Green Ammonia (Saudi Arabia)
    below $0.02 per kilowatt / $20 per megawatt
    Current

    Internal power cost for the NEOM project, based on active renewable power market agreements in Saudi Arabia.

    Hypothetical Power Cost for Green Ammonia (India context)
    $60-$70
    Current

    Hypothetical export power price from India, used to illustrate the difficulty of achieving low green ammonia prices in certain jurisdictions (in context of $600-$700 ammonia prices).

    Power Required for Ammonia Production (Electrolysis)
    about 10 megawatts
    Per metric ton

    For every metric ton of ammonia made starting from electrolysis.

    Industry KPIs

    5
    MetricValueDetails
    Volume vs price splitVolume flat, Price improved
    Signed project backlogNEOM Green Hydrogen Project
    Energy cost pass through50 bpsheadwind
    Helium supply demand pricing~$0.10EPS impact
    Productivity cost savings programSignificant productivity

    Deals & partnerships

    3
    Yara Internationalmarketing 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 Internationalasset acquisition and supply agreement25-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.

    NASAsupply contract

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

    Capital programs

    3
    NEOM Green Hydrogen Projectunderway

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

    Alberta Clean Energy Projectunderway$3.3 billion

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

    Louisiana Low-Emission Ammonia Projectadvanced 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

    5
    Helium HeadwindsFY26

    ~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 EnvironmentFY26

    Limits volume growth for FY26

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

    Sale of Equipment Cost OverrunQ1 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 IncreasesOngoing

    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

    8

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.