Air Products and Chemicals Inc (APD)

Air Products and Chemicals Inc: A Comprehensive Overview

Company Profile:

A. Detailed History and Background

• Established in 1940 through the merger of Air Reduction Company and National Carbide Corp.
• Pioneered the development of cryogenic (ultra-low temperature) products, including liquefied hydrogen, helium, and nitrogen.
• Global leader in the production and distribution of industrial gases, including oxygen, nitrogen, hydrogen, argon, and rare gases.
• Has significant experience in engineering, technology, and cryogenics.
• Provides various industrial gases, equipment, and related technologies through its two major segments:

  • Industrial Gases
  • Semiconductor Materials

B. Business Areas

1. Industrial Gases: Produces and supplies atmospheric, process, and specialty gases and related equipment and services used in various industries:

   • Chemicals & Energy: Refining chemicals, production of polyethylene.
   • Refining & Chemicals: Production of synthetic crude.
   • Metals Manufacturing: Refining aluminum and producing seamless stainless steel tubes.
   • Electronics: Manufacturing semiconductors
   • Food Industry: Preservation, freezing of food products.

2. Materials Technology: Develops, engineers, and sells specialty materials to various markets:

   • Semiconductor fabrication (Electronic Gases & Chemicals): Manufacturing photomask blanks used for chip and circuit printing on silicon chips.
   • Automotive Electronics Industry (Specialty Additives): Manufacturing catalytic converters that reduce vehicle emissions.

C. Leadership and Corporate Structure

• CEO & Chairman: Seifi Ghasemi (leading since August 2020). He joined company in 1986. Previously he held the positions of president from 2014 to August 2020 and chief operating officer from 2008 to 2014.
• Other Key Executives: William F. Baugh (Vice Chairman & CFO), Michael E. Fiacco(Chief Operating Officer and President,Industrial gases).
• Board of directors comprises eleven directors with diverse skillsets and experiences in various business sectors.
• Headquarters in Lehigh Valley, Pennsylvania, and a global presence in over 55 countries with over 21,000 employees.

Top Products and Market Share:

Top Air Products: The top products include the following:

- Industrial gas sales & marketing by market (in millions US Dollars) :	Americas : US$6,783	Europe and Middle East and North Africa (MENA): US$4,288	Asia (excluding China ): US$1422	China :	Americas	64% (2020): 58% (2023)	EMEA : 41% (2020): 38% (2023)	Asia and China	24%(2020) :33% (2023 )

These are the primary revenue generating segments for the Company in their industrial division.

In their Semiconductor materials division, some of the biggest selling products are:


• Silane and silane derivatives: 
• Dopants (phosphine, etc.):	• Specialty gas blends	:• Rare Gases (krypton, xenon, and helium )	

• In 2022, the global industrial gas market size was valued at $74.45 billion.

  • Air Products is a prominent global industrial gases player, but market share data for individual companies varies by region and gas type:

    • US market share unknown.

      • Global share in nitrogen (2021) - 24.6% market penetration.

  • Hydrogen production in 2022 - **7% market penetration (estimated by S&P Global). **

• In comparison, competitors like Linde and Air Liquide have an estimated total global share for the industrial gases sector around 54.3% (as of 2021).

Total Addressable Market

• Global industrial gas and equipment market size in 2022 - US 81.89 billion (estimated to reach US $155.13 billion by 2028.)

  • Market growth fueled mainly by:

• Increasing demand from manufacturing and chemical industries in developed and developing nations.
• Growing healthcare sector demand (oxygen).

• Growing cleantech sector demand (hydrogen & other applications).

  • High investment in research & development (for innovation in various application industries and product development).

**Financial Performance (2022): **

Revenue: $12.723b (9.74% YoY growth from 21,332)

Net Income: 3.551 billion (78% YoY from 2,003)

Profit Margin: 28%. (20%)

Earnings per Share (EPS): 15.16 (78% YoY from 887.)

Dividends and Shareholder Returns

• Dividend History:**

• Company started dividend paying in 1964. It is a Dividend Champion, increasing annual dividends for 41 consecutive years.
• Current annual Dividend yield (FY 2023E): around 2.1%.
• FY-2023E Dividend payout ratio : Around 41%.
• Strong dividend track record, with steady payout growth over time.

Shareholder Returns**

• Total shareholder returns for Air Products and Chemicals Inc. over different periods:

  | **Time Period**        | **Total Return (% )* |
  ------- | ------ |
  | Year-to-Date | 0.8  *            |
  |Past Three Months      | 8     *            |
  
  | Past Twelve Months | 40.3  *           |
  | Past Three years      | 133.1   *          |
  | Past Five Years       | 139.8 *           |
  

• Based on data for 11/20/2023.

Growth Trajectory

Growth Drivers & Performance:

• Industrial Gases Segment : The segment primarily relies on long-term contract sales. The company's focuson expanding global footprint, diversification of offerings and applications of industrial gases in emerging industries will drive growth. Additionally in 2022, the US government awarded the company $7.7b contracts to build green and blue fuel production facilities, which would be operational by late 2027

** * Materials & Semiconductor Segment:* High R&D spending for product development and penetration within the semiconductor market and its focus on high tech and speciality chemicals will propel the segment towards sustainable growth.

**Recent Acquisition**

Air Products acquired:

• Sunoco Logistic Partners LP: in February 2020. This $700 Mn investment was a joint investment with EIG (Global Energy Partners Infrastructure Fund and EIG Global Partners LP). This acquisition provides transportation infrastructure with direct connection to the Mariner East Pipeline for liquid hydrocarbons (ethane/propane and butane) that is used by APD ( Air Products & Chemicals, Inc ) to produce various products such as blue hydrogen from the existing natural gas supply.

AI-Based Stock Fundamentals Rating (based on data as of November 28, 2023): 7.4 out of 10

Rating Factors and Analysis

• Strong financials with healthy revenue growth, profit margins, and positive free cash flow.

• Market share leader: in some crucial product lines and is well-positioned for future growth

  >> * **Attractive dividend payouts and shareholder return potential.**



      >* **Challenges: ** Competitive landscape, dependence on economic factors and energy prices in industrial sector, and risk related to capital investment projects



                     >>* **Opportunities for growth:** Continued focus on emerging markets such as hydrogen-powered vehicles, electronics (especially semiconductor materials ), and the expansion  into environmental markets like biogas

Sources and Disclaimers:

• Information sourced from Air Products and Chemicals Inc. company filings, investor presentations

  • Morningstar and YCharts
  • Market share, financial data, growth estimates based on 2022 annual results and company guidance
  • Shareholder return information calculated on the basis of available data as on October 26 ,2023.
  • AI Rating and other analysis are generated based on historical performance and projected trends. Disclaimer: I am an AI assistant; this information is meant for educational purposes and shouldn't be considered professional financial advice. Investment decisions require professional consultation and independent assessment of risk-reward.

Additional Points:

• Air Products and Chemicals Inc. remains a major competitor, with a robust market presence and strong growth opportunities in the long run due to its innovative offerings, global operations, and commitment to sustainable development.

This detailed analysis provides a valuable insight into the past and current performance of this industrial gas giant as well as the potential opportunities that the future has to offer.