Air Products & Chemicals, Inc.

Air Products and Chemicals, Inc., a Delaware corporation founded in 1940, is a world-leading industrial gases company that serves a broad range of industries including refining, chemicals, metals, electronics, manufacturing, medical, and food, providing essential industrial gases, related equipment, and applications expertise. The company also develops, engineers, builds, owns, and operates some of the world's largest clean hydrogen projects supporting the transition to low- and zero-carbon energy, particularly in industrial applications and the heavy-duty transportation sector. Additionally, its sale of equipment businesses provide specialized products such as turbomachinery, membrane systems, and cryogenic containers to customers worldwide. The company manages its operations under five reportable segments: Americas, Asia, Europe, Middle East and India, and Corporate and other.

Each of the regional industrial gases segments competes against three global industrial gas companies: Air Liquide S.A., Linde plc, and Messer Group GmbH, as well as regional competitors. Competition in industrial gases is based primarily on price, reliability of supply, and the development of industrial gas applications. The company derives a competitive advantage in locations where it has pipeline networks, which enable it to provide a reliable and economic supply of products to its larger customers. Overall regional industrial gases sales constituted over 90% of consolidated sales in fiscal years 2025, 2024, and 2023, approximately half of which were attributable to atmospheric gases.

The company generates revenue through two primary supply modes: on-site gases and merchant gases. On-site gases serve customers primarily in the energy production and refining, chemical, metals, and electronics industries worldwide, where large and relatively consistent volumes of industrial gases are required, and these arrangements are generally governed by long-term contracts ranging from 15- to 20-years. The on-site supply mode generates approximately half total company sales. Merchant gases include liquid bulk and packaged gas products, governed by contracts and/or purchase orders that reflect the customer's specific needs with stated terms that are generally five years or less. The company also generates revenue from the sale of equipment, which constituted less than 10% of consolidated sales in fiscal years 2025, 2024, and 2023.

The industrial gases business produces and sells atmospheric gases such as oxygen, nitrogen, and argon (primarily recovered by the cryogenic distillation of air); process gases such as hydrogen, helium, carbon dioxide, carbon monoxide, and syngas; and specialty gases. Hydrogen is a process gas that is typically produced by purifying byproduct sources obtained from chemical and petrochemical industries without carbon capture, commonly referred to as gray hydrogen, and the company primarily produces gray hydrogen. The company is advancing projects that produce low-carbon hydrogen from hydrocarbons with carbon capture (blue hydrogen) and carbon-free hydrogen from renewable energy (green hydrogen), such as the NEOM Green Hydrogen Project in Saudi Arabia. The Corporate and other segment includes activity related to the sale of cryogenic and gas processing equipment for air separation, the Rotoflow business which manufactures turboexpanders and other precision rotating equipment, and the Gardner Cryogenics business which fabricates helium and hydrogen transport and storage containers.

The refining industry uses hydrogen to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels. The chemicals industry uses hydrogen, oxygen, nitrogen, carbon monoxide, and syngas as feedstocks in the production of many basic chemicals. The energy production industry uses nitrogen injection for enhanced recovery of oil and natural gas and oxygen for gasification. Oxygen is used in combustion and industrial heating applications, including in the steel, certain nonferrous metals, glass, and cement industries. Nitrogen applications are used in food processing for freezing and preserving flavor, and nitrogen is used for inerting in various fields, including the metals, chemical, and semiconductor industries. Helium is used for its unique properties as an inert gas with an extremely low boiling point, widely used in semiconductor and fiber optics manufacturing, MRI magnet cooling, and for purging and pressurizing rocket fuel systems in aerospace launches.

In fiscal year 2025, the company exited certain clean energy projects as discussed in Note 5, Business and Asset Actions, to the consolidated financial statements. During the second quarter of fiscal year 2025, the Board of Directors and Chief Executive Officer initiated a project review to focus resources on projects believed to deliver the greatest value to shareholders, resulting in the decision to exit various projects, primarily related to clean energy generation and distribution, and recognized project exit costs totaling approximately $3.6 billion ¹, primarily consisting of noncash asset write-downs and estimated costs to terminate contractual commitments. The company also completed the sale of its 100% ownership interest in a consolidated subsidiary in Singapore for cash proceeds of $104.3 ², recognizing a gain of $67.3 ³ ($51.9 ⁴ after tax, or $0.23 ⁵ per share). Additionally, the company issued Euro- and U.S. Dollar-denominated senior fixed-rate notes in February and June 2025, which together had a combined carrying value of $2.9 billion ⁶ as of 30 September 2025. The company also refinanced its existing 364-day $500 ⁷ revolving credit agreement to extend its maturity date to 26 March 2026.

Sales of $12.0 billion ⁸ decreased 1%, or $63.3 ⁹, as 4% lower volumes were partially offset by 2% higher energy cost pass-through to customers and 1% higher pricing. Operating loss was $877.0 ¹⁰ compared to operating income of $4.5 billion ¹¹ in fiscal year 2024, primarily attributable to approximately $3.7 billion ¹² in pre-tax charges related to business and asset actions ($3.0 billion ¹³ after tax, or $13.68 ¹⁴ per share). Net loss was $354.4 ¹⁵ compared to net income of $3.9 billion ¹⁶ in fiscal year 2024. Adjusted EBITDA of $5.1 billion ¹⁷ increased 1%, or $30.1 ¹⁸. Loss per share of $1.74 ¹⁹ was driven by an after-tax charge attributable to Air Products of $3.0 billion ²⁰ for business and asset actions, while on a non-GAAP basis, adjusted earnings per share was $12.03 ²¹.

In fiscal year 2026, the company expects to achieve earnings growth from new plant onstreams, continued pricing discipline, and productivity improvements. The company remains committed to cost control, a reduction in capital expenditures, and other measures aimed at unlocking value and generating cash, while continuing to reward shareholders through increased dividends, as it has done for the past 43 consecutive years.

The company continues to pursue opportunities in both traditional industrial gas and energy transition projects that meet its projected return requirements. Significant progress has been made on the construction of several energy transition projects, including the NEOM Green Hydrogen Project, which the company expects to come onstream and deliver green ammonia in 2027. The company also continues to anticipate future benefits from tax credits related to certain clean hydrogen production projects, where construction has begun or is expected to begin prior to the applicable phase-out dates under the One Big Beautiful Bill Act.

Cost discipline remains a top priority as the company seeks to mitigate the impact of ongoing inflationary pressures and continued helium headwinds. The company expects to realize annual pre-tax savings of approximately $240 to $260 ²² from its global cost reduction program initiated in June 2023, primarily through selling and administrative expense, once all actions under the plan are fully executed.

The company expects capital expenditures for fiscal year 2026 to be approximately $4 billion ²³, reflecting continued investment in its energy transition projects, traditional industrial gas projects, and maintenance within its core business. Approximately $1 billion ²⁴ is expected to be dedicated to traditional industrial gas projects. The company anticipates funding these expenditures through its existing cash balance and cash generated from continuing operations, and also has access to capital and money market financing as well as other sources of funding.

The company expects capital expenditures for fiscal year 2026 to be approximately $4 billion ²⁵, reflecting continued investment in its energy transition projects, traditional industrial gas projects, and maintenance within its core business. Approximately $1 billion ²⁶ is expected to be dedicated to traditional industrial gas projects. The company anticipates funding these expenditures through its existing cash balance and cash generated from continuing operations. The company returned approximately $1.6 billion ²⁷ to shareholders in fiscal year 2025 through dividend payments and remains committed to continuing its history of dividend growth as part of its long-term capital allocation strategy.

While clean energy markets have not developed as previously anticipated, the company remains confident in the long-term demand fundamentals for industrial gases and clean energy solutions. The company's project review remains ongoing and may result in additional costs in future periods. The company also faces continued helium headwinds and ongoing inflationary pressures that it seeks to mitigate through cost discipline.

The company's operations in foreign jurisdictions may be subject to risks including exchange control regulations, import and trade restrictions, tariffs, trade policy and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad. The company is actively investing large amounts of capital and other resources, in some cases through joint ventures, in developing markets which may be subject to greater risks than those faced by its operations in mature economies, including political and economic instability, project delay or abandonment due to unanticipated government actions, and unfamiliar regulatory environments.

A material risk is the company's exposure to large-scale clean hydrogen projects, which involve challenging engineering, permitting, procurement, and construction phases that may last several years and involve the investment of billions of dollars, and are being built before finalization of offtake agreements for a substantial percentage of expected production, creating uncertainty regarding future demand and pricing. In fiscal year 2025, the company cancelled a project to build a green liquid hydrogen project in the U.S., based in part on a regulatory development that rendered existing hydroelectric power supply ineligible for the Clean Hydrogen Production Tax Credit (45V) and incurred a significant impairment charge. Another key risk is the company's extensive international operations, with approximately 60% ²⁸ of sales derived from customers outside the United States in fiscal year 2025, exposing it to fluctuations in foreign currency exchange rates, political and economic instability, and potential project delay or abandonment due to unanticipated government actions. The company also faces risks related to the security of its information technology systems, as security breaches could disrupt operations, result in the theft of intellectual property, and lead to legal claims and increased costs for security and remediation. Additionally, the company is subject to extensive government regulation, including environmental laws and regulations concerning greenhouse gas emissions, which could increase costs related to consumption of electric power, hydrogen production, and application of gasification technology, and any legislation that limits or taxes GHG emissions could negatively impact growth and increase operating costs.

Management characterized fiscal year 2025 as a transitional year for Air Products, marked by a renewed focus on the core industrial gas business under the leadership of the new Chief Executive Officer, who joined the Company in February 2025. Key themes emphasized include decisive actions to reshape the portfolio, including the cancellation and descoping of several large energy transition projects, and enhancing operations through targeted productivity initiatives. Management also sharpened the approach to capital deployment, emphasizing strict return thresholds, appropriate risk-sharing, and alignment with long-term customer relationships. Looking ahead, management believes Air Products is well-positioned to deliver sustainable growth through a renewed focus on the core industrial gas business, and in fiscal year 2026 expects to achieve earnings growth from new plant onstreams, continued pricing discipline, and productivity improvements. The company remains committed to cost control, a reduction in capital expenditures, and other measures aimed at unlocking value and generating cash, while continuing to reward shareholders through increased dividends, as it has done for the past 43 consecutive years.