Air Products and Chemicals has reported a 12% increase in adjusted earnings per share for fiscal 2026, alongside a sharp reduction in capital spending and an expanded industrial gas project backlog, signalling improved performance in its core business.

 

The industrial gases major posted adjusted earnings per share (EPS) of $13.45, up from the previous year, while adjusted operating income climbed 11% to $3.2 billion. Full-year sales rose 8% to $13 billion, supported by higher volumes, energy cost pass-through and favourable currency movements.

 

The company also significantly tightened its capital spending, reducing capital expenditures by $1.8 billion to $3.3 billion. Cash used for investing activities fell by $3 billion to $4.1 billion.

 

A key growth driver was the expansion of its project pipeline, including more than $2 billion in new electronics business wins, strengthening its position in the industrial gases market.

 

However, reported GAAP earnings continued to reflect substantial charges linked to business and asset actions, particularly previously announced project exits. Air Products reported full-year GAAP EPS of $2.39 and operating income of just $23 million, compared with a loss per share of $1.74 and an operating loss of $877 million in fiscal 2025.

 

The company said both years were affected by significant charges associated primarily with project exit decisions.

 

On an adjusted basis, operating margin improved 70 basis points to 24.4%. Earnings growth was driven mainly by stronger on-site volumes, favourable currency movements and higher pricing, although inflation, increased incentive compensation and other costs partly offset these gains.

 

Air Products also reported a stronger fourth quarter, with adjusted EPS rising 6% year-on-year to $3.61, exceeding the midpoint of its guidance.

 

Adjusted operating income increased 5% to $856 million, while quarterly sales climbed 12% to $3.6 billion, driven largely by a 9% increase in volumes.

 

GAAP operating income surged to $633 million from $17 million in the year-ago quarter, while GAAP EPS rose to $2.62 from $0.02.

 

The reported figures, however, were influenced by significant business and asset charges in both periods. Current-year charges primarily reflected revised estimates linked to the sale process for two coal gasification plants in China, including one that was sold in October 2026.

 

Adjusted operating margin stood at 24.1%, down 150 basis points, as higher operating costs weighed on profitability.

 

Chief Executive Officer Eduardo Menezes said, "Our fiscal 2026 results demonstrate the progress we are making to improve our core industrial gas business, strengthen execution, and allocate capital with discipline. We delivered 12 percent adjusted EPS growth, reduced capital expenditures by $1.8 billion, and expanded our industrial gas project backlog through new business wins. 

 

"These results reflect the dedication of our employees, whose commitment to safety and focus on serving our customers with excellence continue to drive our performance. As we move through fiscal 2027, we will maintain a disciplined approach to capital allocation while focusing on expanding our industrial gas project backlog and delivering continued operating income growth."

 

The Americas emerged as a major contributor to quarterly performance, with sales surging 27% to $1.6 billion. Operating income increased 20% to $469 million, supported by higher on-site volumes, a significant asset sale linked to an early contract termination and contributions from new assets.

 

Asia recorded a 4% increase in sales to $909 million, while operating income rose 10% to $250 million. Growth was driven by on-site operations, new assets and helium volumes.

 

In Europe, sales increased 8% to $856 million, but operating income grew just 2% to $241 million. Higher energy costs and fixed-cost inflation continued to pressure margins.

 

Income from equity affiliates in the Middle East and India rose 6% to $97 million, primarily on stronger contributions from an affiliate in Saudi Arabia.

 

Corporate and other sales declined 34% to $122 million, while the operating loss widened to $108 million from $49 million a year earlier, reflecting weaker equipment sales activity and higher costs.

 

Air Products has set its fiscal 2027 adjusted EPS target at $14.15-$14.50, signalling expectations of continued earnings growth.

 

For the first quarter of fiscal 2027, the company expects adjusted EPS of $3.35-$3.45.

 

Capital expenditure is projected to range between $3 billion and $3.5 billion for the full year, indicating continued investment alongside a focus on financial discipline.

 

With stronger adjusted earnings, lower capital spending and an expanding project backlog, Air Products is looking to build on its improved core business performance. The challenge will be to sustain operating growth while managing project execution risks, inflationary pressures and the financial impact of its ongoing portfolio adjustments.