Air Products Gains on Project Investments and Productivity Actions

Air Products and Chemicals, Inc. APD benefits from its project investments, productivity actions and new business deals amid headwinds from the sluggishness in China and weaker helium demand. Cancellation of several large projects and the divestment of the liquefied natural gas (“LNG”) business are also expected to impact performance. 

Air Products, which is among the prominent players in the chemical space along with Dow Inc. DOW, Eastman Chemical Company EMN and Celanese Corporation CE, is well-placed to gain from its investments in high-return industrial gas projects and productivity measures. It remains focused on its gasification strategy and is executing its growth projects. These projects are expected to be accretive to earnings and cash flows. 

APD is realizing the benefits of the completion of the second phase of the Jazan project in Saudi Arabia. APD has two major projects undergoing execution — the NEOM green hydrogen project in Saudi Arabia and the Louisiana Clean Energy Complex. While the NEOM project is expected to commence production in 2027, the Louisiana Clean Energy Complex is anticipated to do so in 2028 or 2029.  

Air Products is building a world-class clean energy complex in Louisiana. The project, the company’s largest-ever investment, is expected to produce more than 750 million standard cubic feet per day of blue hydrogen for local and global markets. Also, Air Products’ $8.4 billion carbon-free green hydrogen joint venture (JV) project in Saudi Arabia with NEOM and ACWA is building the world’s largest green hydrogen facility to produce green ammonia at scale.

Air Products is also driving productivity to improve its cost structure. It is seeing the positive impacts of its productivity actions. Benefits from additional productivity and cost improvement programs are likely to support its margins moving ahead. Air Products expects productivity benefits of at least $75 million in fiscal 2025. Its global cost-reduction plans are also expected to deliver significant synergies. The company expects to realize annual savings of $185-$195 million once all actions under the plan are fully executed. The company also remains focused on improving pricing amid an inflationary environment. 

APD also remains committed to maximizing returns to shareholders, leveraging a strong balance sheet and cash flows. Air Products’ board, in January 2025, increased its quarterly dividend to $1.79 per share from $1.77. This marked the 43rd straight year of dividend increase. It generated an operating cash flow of around $2 billion in the nine months ended June 30, 2025. 

A slower economic recovery in China and lower helium demand are concerns. The company faces headwinds from a slowdown in manufacturing in China. The China slowdown and weaker global helium demand are affecting its performance. No material improvement has been seen in China and the market is expected to remain challenging over the near term.

The company faces headwinds from cancellations of several large projects and the divestment of its LNG business. It has cancelled several significant projects, factoring in a volatile macroeconomic environment. The company expects the project cancellation to be a 3% year-over-year headwind in full-year fiscal 2025, resulting from lower operating income and reduced capitalized interest. The divestiture of the LNG business is also expected to result in a 4% headwind.

Air Products updated its full-year adjusted earnings per share guidance for fiscal 2025 to a range of $11.90 to $12.10. For the fourth quarter of fiscal 2025, APD expects adjusted EPS to be between $3.27 and $3.47. 

Another prominent chemical maker, Dow expects its strategic initiatives to help it navigate the evolving challenges within the industry. DOW’s near-term growth projects, along with its long-term strategic investments, are expected to enhance its presence in high-value applications and attractive markets that are less affected by such anti-competitive pressures.

Eastman Chemical, on its second-quarter call, noted that it is seeing a challenging global macroeconomic environment entering the second half. The company expects to gain from the ramp-up of cost-reduction initiatives and higher revenues from its Kingsport methanolysis facility. EMN sees third-quarter adjusted earnings to be roughly $1.25 per share. 

Celanese projects a softer demand environment across most key end-markets for the second half of the year. The company expects that slowing demand will partly offset the benefits of its cost reduction initiatives, which are anticipated to be realized in the third quarter. For the third quarter, Celanese forecasts adjusted earnings per share in the range of $1.10 to $1.40.

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