Air Products Investor Presentation
Jeffry L. Byrne VP/GM, Tonnage Gases Oppenheimer 3rd Annual Industrials Conference October 2, 2008
Forward-Looking Statements Note: This document contains “forward-looking statements” including, without limitation, statements about the company’s expected fiscal fourth quarter results. These forward-looking statements are based on management’s reasonable expectations and assumptions as of the date of this document. Market conditions will continue to evolve, and additional investigation of damage from the fire and hurricanes and September results could impact the estimates provided today. The company does not intend to update this information until it announces fiscal fourth quarter results. Events or results described in forward looking statements may be influenced by many factors not anticipated by management, including, without limitation, overall economic and business conditions different than those currently anticipated; future financial and operating performance of major customers and industries served by the Company; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; consequences of acts of war or terrorism impacting the United States’ and other markets; the effects of a pandemic or a natural disaster; the ability to attract, hire and retain qualified personnel in all regions of the world where the company operates; unanticipated contract terminations or customer cancellation or postponement of projects or sales; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the continued availability of capital funding sources in all of the company’s foreign operations; the impact of new or changed environmental, healthcare, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate;. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Company’s assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based. 2
Air Products At a glance
$10B in revenues Diverse markets and geographies Positioned for continued long-term value creation FY07 Segment Sales Merchant Gases (34%)
Healthcare (7%) Equipment & Energy (6%) 3
Tonnage Gases (31%)
Electronics & Performance Materials (22%)
FY07 Geographic Sales Asia (17%)
ROW (2%)
United States (44%) Europe (32%) Canada/Latin America (5%)
APD Transformation
Creating Shareholder Value FY00 Sales $5.7B
FY07 Sales $9.4B Merchant
Merchant
Tonnage
Tonnage
Electronics & Perf Mat’ls Healthcare Chemicals
Equipment & Energy
Healthcare Equipment & Energy
4
Electronics & Performance Materials
Air Products Value Proposition Profitable Growth
Stability – Long term contracts – Consistent and predictable cash flows – Strong balance sheet Growth – Solid project backlog – High bidding activity – Energy opportunities Improving returns – Margin improvement – Productivity – Increasing dividends – Share buyback 5
Supply Modes
Durable Business Models 10, 15 and 20-year contracts Take-or-pay minimum volumes Contractual energy pass-through Formula escalation
3-5 year contracts Regional business Cost pass-through/surcharges
6
Onsite/Pipeline 36%
Liquid/Bulk 21%
Equipment & Services 18%
Package Gases & Specialty Materials 25%
A Healthy Report Card Four consecutive years FY04
FY06
FY07
Sales ($B)………………
$6.4
$7.1
$8.2
$9.4
EPS ($/share)…….......
$2.45
$2.80
$3.35
$4.20
ORONA (%) …………..
11.3%
12.4%
ROCE (%)……………..
11.2%
12.3%
12.8%
12.2%
SG&A / Sales (%)……
7
FY05
14.7% 14.2%
Balance Sheet………….
“A” rating
Shareholder Value…….
Dividend increase & share repurchase
* Comparisons are non-GAAP.
Merchant Gases
Strong Growth & Performance $MM
$MM
12% CAGR
Revenue by Region ($, FY07) Europe LB
• Continue delivering double-digit growth Europe PG
Solid growth in Asia Expanding in Eastern/Central Europe
North America
New offerings success Asia Equipment
8
ROW
• Achieve 20% operating margins
Electronics & Performance Materials
Performance Improvement $MM
$MM
11% CAGR
Revenue by Region ($, FY07) Asia (40%) North America (40%)
Europe (18%)
9
• Profit and return improvement driven largely by Electronics turn-around • Continue delivering double-digit growth • Growth in Photovoltaics
Latin America (2%)
• Achieve 15% operating margins
Tonnage Gases
High Growth Segment $MM
$MM
16% CAGR
Investment by Region North America
Europe & Middle East Asia
10
• Significant profit growth and improvement in returns on capital while bringing on new investments • Significant large plant bidding opportunities (both H2 & O2) continue • Anticipate continued 10%-15% H2 growth
Refining Hydrogen and Energy Driving Hydrogen Growth Transport fuels growth More heavy, sour crude Clean fuels legislation
15% 15%
45% 25%
Increased outsourcing trend Future opportunities – Gasification – GTL – Oil sands – Non-conventional fuels 11
Conversion Crude Clean Fuels Outsourcing
Major Hydrogen Pipeline Positions – US / Canada / Europe Baton Rouge
Sarnia Canada
Edmonton, Canada
Louisiana
Plaquemine
Shell Refinery 16
Convent New Orleans
Air Products Canada
40
16
Lake Pontchartrain
10
Cosmar
40
Suncor
Geismar Geismar
40
Nola
Petro-Canada
Imperial Oil
Sherwood Park
Taft 14
ST. CLAIR RIVER
Corunna
21
Chalmette 14
Rotterdam Europoort
Dominguez Channel
Pernis
Southern California
91 405
Zwijndrecht Botlek
190th St. 710
Van Ness Ave. Sepulveda Blvd
110
Carson H2
To Moerdijk Long Beach Arpt.
BP Carson
Texas
Lake Charles
Beaumont
405
1
Conoco Phillips Carson Anaheim Street
Conoco Phillips Wilmington
Shell Wilmington
Mont Belvieu City of Houston
Battleground Baytown 2
610 110
Wilmington H2 225
Pasadena Bayport
45
Clear Lake Texas City
12
69
73 10
Valero Wilmington
10
LaPorte
Port Arthur
APD HyCO facilities H2 pipeline CO pipeline Syngas pipeline
Hydrogen Plant Integration
Adds Significant Value Steam to Others
Power to Grid
H2 to Pipeline
Hydrogen Steam Power
Air Products H2 / cogen plant
HC Feeds H2 Offgas Fuel
REFINERY
Tonnage Gases
Leading the Way on Gasification APD is one of the largest suppliers of oxygen to gasification facilities around the world (>10 large units) Designed, built, own and operate units in Texas for syngas, H2 and CO for pipeline systems: – NG based POX units (LaPorte) – Syngas cleanup / separation facilities from heavy oil POX unit (Baytown) Recently announced Tonnage relationship on O2 and H2: – Eastman Gasifier -Texas – Wison II, Weihe in China – BP Clean Power in California 14
Air Products Outlook Future demand drivers are strong – High energy costs efficiencies – High capital costs debottlenecking – Environmental pressures new applications
Globally well positioned with market leadership – Hydrogen for clean fuels – Oxygen for gasification – Electronics 15
Margin Improvement Goal 17% 14%
2010
2007
300 BP Operating Margin Improvement from …
16
Plant Efficiency
Cost Reduction
Improved Mix
50BP
200BP
50BP
Capital Spending Outlook FY2008 PP&E CapEx $1.2B Capital leases 0.2 Total $1.4B
FY2009 Forecast Total
$1.7-$2.0B
On-site includes long-term contracts reported in our Tonnage, Electronics and Merchant Gas business segments. Merchant includes liquid & bulk gas, packaged gas, specialty and performance materials and equipment & services capital.
17
Support includes maintenance capital and other non-revenue generating capital spending.
2009 and Beyond
Sustainable Double-Digit Growth at Superior Returns Targeting sustainable double-digit EPS growth
● Targeting a total of 300BP margin improvement in FY’07 – FY’10 – Cost reduction and SG&A improvement – Improved business mix – Plant efficiency / incremental expansions
Targeting a ROCE 3% – 5% above our cost of capital
More Focused, Less Cyclical, Higher Growth, Higher Returns 18
Thank you
tell me more www.airproducts.com
Forward-Looking Statements Note: This document contains “forward-looking statements” including, without limitation, statements about the company’s expected fiscal fourth quarter results. These forward-looking statements are based on management’s reasonable expectations and assumptions as of the date of this document. Market conditions will continue to evolve, and additional investigation of damage from the fire and hurricanes and September results could impact the estimates provided today. The company does not intend to update this information until it announces fiscal fourth quarter results. Events or results described in forward looking statements may be influenced by many factors not anticipated by management, including, without limitation, overall economic and business conditions different than those currently anticipated; future financial and operating performance of major customers and industries served by the Company; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; consequences of acts of war or terrorism impacting the United States’ and other markets; the effects of a pandemic or a natural disaster; the ability to attract, hire and retain qualified personnel in all regions of the world where the company operates; unanticipated contract terminations or customer cancellation or postponement of projects or sales; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the continued availability of capital funding sources in all of the company’s foreign operations; the impact of new or changed environmental, healthcare, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate;. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Company’s assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based. 2
Air Products At a glance
$10B in revenues Diverse markets and geographies Positioned for continued long-term value creation FY07 Segment Sales Merchant Gases (34%)
Healthcare (7%) Equipment & Energy (6%) 3
Tonnage Gases (31%)
Electronics & Performance Materials (22%)
FY07 Geographic Sales Asia (17%)
ROW (2%)
United States (44%) Europe (32%) Canada/Latin America (5%)
APD Transformation
Creating Shareholder Value FY00 Sales $5.7B
FY07 Sales $9.4B Merchant
Merchant
Tonnage
Tonnage
Electronics & Perf Mat’ls Healthcare Chemicals
Equipment & Energy
Healthcare Equipment & Energy
4
Electronics & Performance Materials
Air Products Value Proposition Profitable Growth
Stability – Long term contracts – Consistent and predictable cash flows – Strong balance sheet Growth – Solid project backlog – High bidding activity – Energy opportunities Improving returns – Margin improvement – Productivity – Increasing dividends – Share buyback 5
Supply Modes
Durable Business Models 10, 15 and 20-year contracts Take-or-pay minimum volumes Contractual energy pass-through Formula escalation
3-5 year contracts Regional business Cost pass-through/surcharges
6
Onsite/Pipeline 36%
Liquid/Bulk 21%
Equipment & Services 18%
Package Gases & Specialty Materials 25%
A Healthy Report Card Four consecutive years FY04
FY06
FY07
Sales ($B)………………
$6.4
$7.1
$8.2
$9.4
EPS ($/share)…….......
$2.45
$2.80
$3.35
$4.20
ORONA (%) …………..
11.3%
12.4%
ROCE (%)……………..
11.2%
12.3%
12.8%
12.2%
SG&A / Sales (%)……
7
FY05
14.7% 14.2%
Balance Sheet………….
“A” rating
Shareholder Value…….
Dividend increase & share repurchase
* Comparisons are non-GAAP.
Merchant Gases
Strong Growth & Performance $MM
$MM
12% CAGR
Revenue by Region ($, FY07) Europe LB
• Continue delivering double-digit growth Europe PG
Solid growth in Asia Expanding in Eastern/Central Europe
North America
New offerings success Asia Equipment
8
ROW
• Achieve 20% operating margins
Electronics & Performance Materials
Performance Improvement $MM
$MM
11% CAGR
Revenue by Region ($, FY07) Asia (40%) North America (40%)
Europe (18%)
9
• Profit and return improvement driven largely by Electronics turn-around • Continue delivering double-digit growth • Growth in Photovoltaics
Latin America (2%)
• Achieve 15% operating margins
Tonnage Gases
High Growth Segment $MM
$MM
16% CAGR
Investment by Region North America
Europe & Middle East Asia
10
• Significant profit growth and improvement in returns on capital while bringing on new investments • Significant large plant bidding opportunities (both H2 & O2) continue • Anticipate continued 10%-15% H2 growth
Refining Hydrogen and Energy Driving Hydrogen Growth Transport fuels growth More heavy, sour crude Clean fuels legislation
15% 15%
45% 25%
Increased outsourcing trend Future opportunities – Gasification – GTL – Oil sands – Non-conventional fuels 11
Conversion Crude Clean Fuels Outsourcing
Major Hydrogen Pipeline Positions – US / Canada / Europe Baton Rouge
Sarnia Canada
Edmonton, Canada
Louisiana
Plaquemine
Shell Refinery 16
Convent New Orleans
Air Products Canada
40
16
Lake Pontchartrain
10
Cosmar
40
Suncor
Geismar Geismar
40
Nola
Petro-Canada
Imperial Oil
Sherwood Park
Taft 14
ST. CLAIR RIVER
Corunna
21
Chalmette 14
Rotterdam Europoort
Dominguez Channel
Pernis
Southern California
91 405
Zwijndrecht Botlek
190th St. 710
Van Ness Ave. Sepulveda Blvd
110
Carson H2
To Moerdijk Long Beach Arpt.
BP Carson
Texas
Lake Charles
Beaumont
405
1
Conoco Phillips Carson Anaheim Street
Conoco Phillips Wilmington
Shell Wilmington
Mont Belvieu City of Houston
Battleground Baytown 2
610 110
Wilmington H2 225
Pasadena Bayport
45
Clear Lake Texas City
12
69
73 10
Valero Wilmington
10
LaPorte
Port Arthur
APD HyCO facilities H2 pipeline CO pipeline Syngas pipeline
Hydrogen Plant Integration
Adds Significant Value Steam to Others
Power to Grid
H2 to Pipeline
Hydrogen Steam Power
Air Products H2 / cogen plant
HC Feeds H2 Offgas Fuel
REFINERY
Tonnage Gases
Leading the Way on Gasification APD is one of the largest suppliers of oxygen to gasification facilities around the world (>10 large units) Designed, built, own and operate units in Texas for syngas, H2 and CO for pipeline systems: – NG based POX units (LaPorte) – Syngas cleanup / separation facilities from heavy oil POX unit (Baytown) Recently announced Tonnage relationship on O2 and H2: – Eastman Gasifier -Texas – Wison II, Weihe in China – BP Clean Power in California 14
Air Products Outlook Future demand drivers are strong – High energy costs efficiencies – High capital costs debottlenecking – Environmental pressures new applications
Globally well positioned with market leadership – Hydrogen for clean fuels – Oxygen for gasification – Electronics 15
Margin Improvement Goal 17% 14%
2010
2007
300 BP Operating Margin Improvement from …
16
Plant Efficiency
Cost Reduction
Improved Mix
50BP
200BP
50BP
Capital Spending Outlook FY2008 PP&E CapEx $1.2B Capital leases 0.2 Total $1.4B
FY2009 Forecast Total
$1.7-$2.0B
On-site includes long-term contracts reported in our Tonnage, Electronics and Merchant Gas business segments. Merchant includes liquid & bulk gas, packaged gas, specialty and performance materials and equipment & services capital.
17
Support includes maintenance capital and other non-revenue generating capital spending.
2009 and Beyond
Sustainable Double-Digit Growth at Superior Returns Targeting sustainable double-digit EPS growth
● Targeting a total of 300BP margin improvement in FY’07 – FY’10 – Cost reduction and SG&A improvement – Improved business mix – Plant efficiency / incremental expansions
Targeting a ROCE 3% – 5% above our cost of capital
More Focused, Less Cyclical, Higher Growth, Higher Returns 18
Thank you
tell me more www.airproducts.com
