How Does Air Products & Chemicals Company Work?

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How does Air Products & Chemicals Company operate?

Air Products & Chemicals Inc. (NYSE: APD) is a global leader in industrial gases. In fiscal Q2 2025, the company reported a GAAP net loss of $1.7 billion, largely due to a $2.3 billion after-tax charge for exiting clean energy projects, signaling a strategic return to its core industrial gas business.

With a market cap of approximately $64.40 billion as of August 2025, the company has over 80 years of experience supplying essential gases and equipment to industries like refining, electronics, and healthcare.

The company's operations are centered around the production and distribution of atmospheric gases such as oxygen and nitrogen, as well as process gases like hydrogen. These gases are critical for a vast range of industrial applications, from enhancing manufacturing processes to supporting medical treatments. For a deeper understanding of the external factors influencing its business, consider the Air Products & Chemicals PESTEL Analysis.

Air Products creates and delivers value by supplying essential industrial gases, related equipment, and specialized application expertise to a diverse global customer base. The company's core offerings include atmospheric gases like oxygen, nitrogen, and argon, as well as process gases such as hydrogen, helium, and carbon dioxide.

Core Products and Services

The company's primary products are atmospheric gases (oxygen, nitrogen, argon) and process gases (hydrogen, helium, carbon dioxide, carbon monoxide, syngas). Beyond gases, Air Products also provides turbomachinery, membrane systems, and cryogenic containers globally.

Industries Served

These products and services cater to a wide range of industries including refining, chemicals, metals, electronics, manufacturing, medical, and food. This broad market reach is a key aspect of the Air Products business model.

Supply Modes: On-Site vs. Merchant

Air Products operates through two main supply modes: on-site and merchant. On-site involves dedicated plants for large customers, while merchant supply uses tankers and cylinders for bulk or smaller deliveries.

Global Presence and Expertise

Operating in approximately 50 countries, the company leverages over eight decades of expertise, particularly in hydrogen supply. This global footprint and deep technical knowledge are central to Air Products operations.

Value Proposition and Innovation

Air Products differentiates itself through deep expertise, especially in hydrogen, and its commitment to sustainability. The company develops and operates world-scale clean hydrogen projects, contributing to customer operational efficiency and reduced emissions.

• Leadership in hydrogen supply and clean energy solutions.
• Development of large-scale clean hydrogen projects, such as the NEOM Green Hydrogen Company, which reached 80% construction completion by July 2025.
• Enabling customers to increase operational efficiency and reduce resource consumption.
• Commitment to lowering greenhouse gas emissions through innovative applications.

The company's operational processes are primarily structured around two main supply modes: on-site and merchant. The on-site business involves constructing or acquiring plants on or near large-volume customer facilities, or delivering product through its extensive pipeline networks, serving clients with relatively constant demand. The merchant business focuses on delivering liquid or gaseous bulk supply via tanker or tube trailer, and for smaller customers, packaged gases in cylinders or dewars. Air Products operates across approximately 50 countries, with key regional segments in the Americas, Asia, Europe, and the Middle East and India. This extensive global presence and diversified operational structure are key to the Growth Strategy of Air Products & Chemicals.

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The company's primary revenue streams stem from the sale of industrial gases, related equipment, and comprehensive services. For the fiscal second quarter of 2025, total revenue reached $2.92 billion, reflecting a slight decrease from the prior year. The on-site segment remains the largest contributor, with $1.55 billion in sales, followed by the merchant segment at $1.27 billion.

On-Site Segment Dominance

The on-site business is the company's largest revenue generator, bringing in $1.55 billion in Q2 FY2025. This segment typically involves large-scale gas production facilities built at customer locations.

Merchant Segment Strength

The merchant segment contributed $1.27 billion to revenue in Q2 FY2025. This involves supplying gases in cylinders, bulk, or cryogenic tankers to a broader customer base.

Equipment Sales

Sales of associated equipment added $94.70 million to the revenue in the same quarter. This includes the sale of gas processing and handling equipment.

Long-Term Contractual Stability

Monetization strategies heavily rely on long-term, take-or-pay contracts, especially for major on-site projects. This ensures predictable and stable revenue streams.

Bundled Services and Technology

The company also offers bundled services and advanced technology solutions. These include process control systems and gas separation membranes to enhance customer operations.

Regional Revenue Performance

In Q2 FY2025, the Americas segment saw a 3% sales increase to $1,287 million, while Europe experienced 9% growth to $727 million. Asia's sales saw a 1% decrease to $774 million.

The company's strategic focus has also influenced its revenue composition. A notable change was the divestiture of its Liquefied Natural Gas (LNG) process technology and equipment business on September 30, 2024. This business previously contributed to the Corporate and other segment's sales, and its removal signifies a strategic refocusing on core industrial gases operations. This move is part of a broader strategy to align with the Mission, Vision & Core Values of Air Products & Chemicals, emphasizing core competencies.

Full Fiscal Year 2024 Financials

For the entirety of fiscal year 2024, the company reported total sales amounting to $12.1 billion. This figure provides a broader perspective on the company's overall financial performance and market reach.

• Total Revenue FY2024: $12.1 billion
• Q2 FY2025 Revenue: $2.92 billion
• Q2 FY2025 On-Site Revenue: $1.55 billion
• Q2 FY2025 Merchant Revenue: $1.27 billion
• Q2 FY2025 Equipment Sales: $94.70 million

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Air Products has recently undergone significant strategic shifts, including a return to its core industrial gas business and the cancellation of several large clean energy projects. These moves, alongside leadership changes and portfolio adjustments, are reshaping the company's operations and financial outlook.

Strategic Realignment and Project Exits

In Q2 FY2025, Air Products decided to focus on its core industrial gas operations. This led to the cancellation of three major U.S. clean energy projects, including sustainable aviation fuel, green liquid hydrogen, and carbon monoxide initiatives. These exits resulted in a substantial pre-tax charge of up to $3.1 billion for asset write-downs and contract terminations.

Leadership Transition and Shareholder Returns

Eduardo F. Menezes assumed the role of CEO in early 2025, aligning with the company's strategic realignment. Despite a reported GAAP net loss of $1.7 billion in Q2 FY2025, the company demonstrated its commitment to shareholders by increasing its quarterly dividend to $1.79 per share, marking its 43rd consecutive annual increase.

Portfolio Streamlining and Hydrogen Investments

The sale of its LNG business in Q4 FY2024 further streamlined Air Products' portfolio. Simultaneously, the company continues to advance significant clean hydrogen projects, such as the NEOM Green Hydrogen Company in Saudi Arabia, which reached 80% construction completion by July 2025, and a 15-year agreement to supply green hydrogen to TotalEnergies starting in 2030.

Operational Challenges and Cost Management

The company experienced operational headwinds in Q2 FY2025, including lower volumes and increased costs, which led to a 6% year-over-year decrease in adjusted EPS. In response, Air Products is implementing cost-cutting measures and efficiency improvements, including a planned 8% workforce reduction by 2025/2026.

Competitive Edge and Market Position

Air Products leverages over 80 years of operational experience, technological leadership in gas separation and cryogenics, and a vast global network across approximately 50 countries. Its established brand and leadership in hydrogen supply are key differentiators, allowing it to adapt by prioritizing its core industrial gas business while strategically investing in clean hydrogen opportunities.

• Over 80 years of operational experience
• Technology leadership in gas separation and cryogenics
• Extensive global network spanning approximately 50 countries
• Leading position in hydrogen supply

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The company holds a leading position in the industrial gases sector, competing globally with other major entities. Its extensive operations span approximately 50 countries, serving a wide array of critical industries and fostering strong customer loyalty through its broad market reach.

Industry Position

As a global leader in industrial gases, the company commands a significant market share. Its operations are vital to numerous sectors, underscoring its importance as an industrial gas supplier.

Global Presence and Customer Base

Operating in around 50 countries, the company serves a diverse customer base across essential industries. This extensive global presence is a key aspect of its business model.

Key Risks and Challenges

The company faces risks from macroeconomic factors, geopolitical events, and supply chain disruptions. A substantial debt load of $14.15 billion as of Q2 2025 also necessitates careful financial management.

Strategic Financial Outlook

The company projects high single-digit annual adjusted EPS growth from 2026-2029, targeting operating margins in the high 20% range. Future growth beyond 2030 is anticipated to reach double-digit adjusted EPS growth with margins around 30%.

Future Growth and Sustainability Initiatives

The company is focusing on core business improvements and strategic capital allocation, including approximately $5.0 billion in capital expenditures for fiscal year 2025. Its commitment to clean hydrogen megaprojects, with initial contributions expected in 2027-2028, is a significant part of its future strategy.

• Targeting high single-digit annual adjusted EPS growth from 2026 to 2029.
• Aiming for operating margins in the high 20% range for the same period.
• Projecting double-digit annual adjusted EPS growth and 30% operating margins beyond 2030.
• Investing approximately $5.0 billion in capital expenditures for fiscal year 2025.
• Committed to reducing carbon intensity by 33% by 2030 and quadrupling renewable energy use by 2030.
• Advancing clean hydrogen megaprojects with careful capital discipline.
• Securing firm offtake agreements for future clean energy investments.

The company's strategic pivot away from certain capital-intensive clean energy projects highlights the complexities of commercial viability and regulatory landscapes in the energy transition. Understanding the Marketing Strategy of Air Products & Chemicals is crucial to grasping how they navigate these challenges and pursue their growth objectives in the evolving energy sector.

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