Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Earnings per share of $3.47 increased 12% year-over-year, exceeding guidance due to improved volume and higher equity affiliate contributions.
- Operating income grew 9% year-over-year, driven by volume and price improvements, with operating margin expanding over 100 basis points to 25.6%.
- Strong volume growth in the on-site business, led by new assets on stream in Asia and the Americas and higher production from US refinery assets.
- Secured a marketing and distribution agreement with Yara for renewable ammonia from the NEOM project, eliminating volume risk and creating an integrated value chain.
- Raised full-year fiscal 2026 EPS guidance to $13.39-$13.49, implying 11%-12% growth, supported by new asset contributions, pricing actions, and productivity savings.
Negative Points
- Recorded a pre-tax charge of $2.9 billion from exiting the Louisiana project, Casa Grande project, and other clean energy distribution projects.
- Helium remains a headwind, with a 2% negative impact in the quarter due to lower prices and reduced space volume in the Americas, despite some improvement in Asia.
- Higher costs from fixed cost inflation, distribution, and dislocation costs partially offset volume and price gains, particularly in the Americas segment.
- Macroeconomic uncertainties persist, with cautious outlook for Europe and Asia, where industrial markets are not growing and overcapacity remains a challenge in China.
- The NEOM project's financial impact for fiscal 2027 is expected to be zero, but the company retains price risk on ammonia offtake, with no clear timeline for full production or deconsolidation.
Q & A Highlights
Here are the key highlights from Air Products and Chemicals Inc APD's Q3 Fiscal 2026 earnings call, presented as a summary of the most important Q&A pairs.Q: Regarding the NEOM green hydrogen project (NGHC), you mentioned no material financial impact for fiscal 2027. Does this mean you don't foresee any drag or benefit from the project next year? Can you also clarify your level of confidence in finding a buyer for the offtake volume?
A: Eduardo Menezes (CEO): We can confirm our expectation is to have no gain or loss in fiscal 2027. We cannot go into further detail due to confidentiality obligations. Before the beginning of each year, we will provide a clearer picture of expectations. For 2027, we are confirming no impact for Air Products.
Q: Can you elaborate on the source of the incremental improvement in the Helium business? Also, can you provide an update on the supply impact from the situation in Qatar and your efforts to procure helium from other sources?
A: Eduardo Menezes (CEO): The improvement comes from new long-term agreements signed, especially for new electronic projects in Asia and the US. Our strategy of diversifying sources (US, Qatar, Algeria) and having our own storage cavern in Texas has proven very reliable. While the situation in Qatar is difficult and volumes from the Middle East are low, we are in a position to draw from our cavern for many quarters, which gives us strength in negotiations with both customers and suppliers.
Q: You've had a nice bump in your backlog from electronics projects. Can you offer color on how long these projects were being assessed and whether you expect more to trickle in over the next 12-18 months?
A: Eduardo Menezes (CEO): Aside from one large project in Taiwan that started in 2022, most of these projects have come in the last 12 months. The market is going through a super cycle, and we are working hard to get our fair share. We have two very large projects announced (Korea, Taiwan) and others to announce this quarter. The opportunity list is long and skewed toward electronics, which now represents about two-thirds of our opportunities.
Q: On the Louisiana project cancellation, can you go into more detail on what happens to the equipment and land, and any discussions you've had?
A: Eduardo Menezes (CEO): The project was in an advanced stage, so we have a lot of world-class equipment (air separation plants, ammonia loop) already purchased and in warehouses. We see significant value for these assets in the current market. Our plan is to maximize value recovery by using some equipment in our own operations and commercializing the ammonia loop as a full unit, potentially generating new projects for Air Products.
Q: The penalty from Helium this year is lower than originally expected. How would you allocate that impact geographically?
A: Eduardo Menezes (CEO): We look at this on a global basis. The impact is mostly in price, resulting from over a year of negotiations during a very short market. Today, that impact is migrating more to Europe and North America, particularly in the healthcare and MRI sectors. We are very optimistic about the future in Helium, gaining new long-term commitments, especially in electronics in Asia.
Q: In the Middle East and India segment, equity affiliate income was up over $100 million. Are the joint ventures operating at a new level of profitability, or was this a transitory jump?
A: Melissa Schaeffer (CFO): The improvement in equity affiliate income was split amongst multiple joint ventures globally. We did have an especially strong quarter in our Middle East joint venture, but that was largely driven by a contractual, structural preferred dividend to our joint venture partners, which is a timing item. We will see the normal run rate reconfigure in Q4.
Q: You reduced your capital expenditure forecast for the target year by about $500 million. What is driving that, and what do you think the alternative use of that capital will be?
A: Melissa Schaeffer (CFO): The reduction is largely due to timing associated with the execution and payments of our backlog under execution. There is nothing material behind it. We continue to invest in our underlying industrial gas projects, particularly the electronics wins we are executing. Eduardo Menezes (CEO) added that any proceeds from asset sales will go through our capital allocation pool.
Q: On the Yara offtake agreement for NEOM, should investors think of this as fully hedging Air Products' offtake risk or partially hedging it? Are there scenarios where you would be obligated to offtake but unable to move the product?
A: Eduardo Menezes (CEO): You should see this as a way to eliminate the volume risk. We still retain the price risk. The deal with Yara, who owns their own distribution network and ships, eliminates the risk of having to shut down the plant due to a take-or-pay event. The price risk sits mostly with us, but Yara is incentivized through a commission scheme to commercialize the product as green as possible.
Q: Given the reduced spending on the Louisiana project, is there an opportunity to pull forward the share buyback program or pursue M&A?
A: Melissa Schaeffer (CFO): We are very disciplined on capital deployment, focusing on risk-adjusted returns for new projects. Share buybacks are in our capital allocation waterfall. As we continue to improve our cash position and take advantage of opportunistic M&A and new projects, we would look to deploy additional capital into a share buyback program. We have line of sight to start that program towards the end of '27 or early '28.
Q: Can you provide an update on the sale process for the gasification assets held for sale in Asia, including timing and magnitude of proceeds?
A: Melissa Schaeffer (CFO): We continue to collect against those assets. The contribution from the accounting (stopped depreciation) and past due collections is about 1% to 1.5% for the total company. We are working with international and local banks to market the assets and are having ongoing conversations with good strategic purchasers. We will provide an update on timing when available.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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