Air Products and Chemicals, Inc. (APD) FY2025 10-K and Q3 FY2026 10-Q Summary

Business

From the fiscal 2025 Form 10-K, accession 0000002969-25-000055.

Air Products is one of the world's largest industrial gases companies. It produces and sells atmospheric gases (oxygen, nitrogen, argon), process gases (hydrogen, helium, carbon dioxide, carbon monoxide and syngas) and specialty gases to customers in refining, chemicals, metals, electronics, manufacturing, medical and food. Regional industrial gases account for over 90% of consolidated sales, roughly half of it from atmospheric gases. The company calls itself the world's leading supplier of hydrogen, which refiners use mainly to make ultra-low-sulfur fuels. A smaller equipment business, under 10% of sales, makes air-separation and gas-processing equipment, turboexpanders (Rotoflow) and helium and hydrogen transport containers (Gardner Cryogenics). In fiscal 2025, about 60% of sales came from customers outside the United States. The company operates in about 50 countries and had about 21,300 employees at 30 September 2025.

How it makes money: two supply modes.

• On-site gases (about half of total sales). Large plants are built on or near a customer's site, or gas is piped from central plants, mainly for refining, chemicals, metals and electronics customers. Contracts usually run 15 to 20 years and commonly include fixed monthly charges or minimum purchase requirements, with price escalation tied to external indices. Energy costs are passed through to the customer. This makes on-site revenue long-dated and resilient, but pass-through also inflates sales and dilutes reported margins when natural gas and power prices rise.
• Merchant gases. Liquid bulk gases delivered by tanker or tube trailer, plus packaged gases in cylinders and dewars (in Europe, Asia and Latin America). Contracts generally run five years or less and have no minimum purchase requirements, so merchant volumes and pricing, especially for helium, are more cyclical.

Segments. The company reports five segments. Here is how each performed in fiscal 2025:

• Americas: sales of $5.1 billion; operating income of $1.5 billion (29.6% margin). It includes pipeline systems on the U.S. Gulf Coast, in California and Arizona, and in Alberta and Ontario.
• Asia: sales of $3.3 billion; operating income of $851.1 million (26.0% margin). Main markets are China, South Korea and Taiwan.
• Europe: sales of $3.0 billion; operating income of $844.7 million (28.3% margin).
• Middle East and India: sales of $135.9 million, but $340.9 million of equity affiliates' income. The segment holds the 55% equity-method investment in the Jazan Integrated Gasification and Power Company (JIGPC), which supplies Aramco's Jazan refinery under a 25-year agreement and had a carrying value of about $3.1 billion. It also consolidates the NEOM Green Hydrogen Company joint venture (NGHC).
• Corporate and other: sales of $520.0 million and an operating loss of $367.3 million. This covers the sale-of-equipment businesses and corporate costs. The LNG process technology and equipment business was sold to Honeywell International on 30 September 2024.

Competition and assets. Air Products competes with three global industrial gas companies (Air Liquide, Linde and Messer) and with regional players. Competition turns mainly on price, reliability of supply and applications development, and pipeline networks give an advantage where they exist. Equity affiliates are significant to earnings: $647.7 million in fiscal 2025. All equity-method investments are in foreign industrial gas producers, the largest of them in Algeria, China, India, Italy, Mexico and Saudi Arabia. Helium is held in ISO containers and in underground storage in Amarillo and Beaumont, Texas.

Clean energy projects. The company has also invested heavily in large clean-hydrogen projects. The largest still active is the NEOM Green Hydrogen Project in Saudi Arabia, a green-ammonia facility powered by renewable energy. Air Products owns one-third alongside ACWA Power and NEOM Company, consolidates it, and is the exclusive offtaker under a long-term take-if-tendered agreement. The engineering, procurement and construction agreement is $6.7 billion, and Air Products is the main contractor. NGHC has about $6.1 billion of project financing that is non-recourse to Air Products. In the 10-K, the company said it expected the project to come onstream and deliver green ammonia in 2027.

Strategic reset. Fiscal 2025 was what the company called a "transitional year." Eduardo Menezes, formerly an executive at Linde and Praxair, became CEO in February 2025 after a proxy contest with Mantle Ridge. The Board and the new CEO then reviewed the project portfolio and exited a series of clean-energy projects. Under new leadership the company has refocused on its core industrial gas business, with stricter return thresholds, more risk-sharing with customers, and lower capital spending and debt over time.

Risk factors

Condensed from Item 1A of the fiscal 2025 Form 10-K, accession 0000002969-25-000055. The quarterly report for the period ended 30 June 2026 contains no risk-factor section of its own.

These are the substantive risks the company identifies, grouped as in the filing.

Economic and market

• Demand and impairment risk. Weak economies or troubled customer industries can cut demand, cause customer defaults or contract terminations, and leave plants underused. That can force impairments of facilities, customer relationships or goodwill. Demand for the green and blue hydrogen projects depends in part on continued public and private focus on decarbonization.
• International exposure. About 60% of fiscal 2025 sales came from outside the U.S. Large, complex projects sit in China, India, the Middle East and Uzbekistan, where the company faces political instability, possible seizure of property or cancellation of contracts without full compensation, tariffs and sanctions. Most revenue is earned outside the U.S., and the company chooses not to hedge the translation of foreign earnings. It estimates that a 10% fall in the Chinese renminbi or the euro against the dollar would cut annual operating income by about $50 million or $34 million, respectively.
• Financing. Disruption in credit markets or a downgrade could raise borrowing costs or limit access to financing.

Business and execution

• Large-project risk. This is the risk most clearly tied to the company's recent losses. Clean hydrogen, carbon capture and gasification projects take years, cost billions, and depend on permits, government approvals and financing. The company says delays, litigation and execution problems have already forced it to delay or abandon projects. Its large clean-hydrogen projects are being built before offtake agreements are finalized for much of their expected production. Failing to sign favorable offtake contracts could hurt returns, the share price and credit ratings. Project financings carry performance requirements, and missing them could trigger default or restructuring costs.
• Operational hazards. Pipeline leaks and ruptures, fires, explosions, toxic releases and cyber incidents could cause loss of life, environmental damage or lost production. Results also depend on maintaining and replacing aging assets.
• Energy, raw materials and helium. Energy is the largest cost component. Pass-through contracts protect profit but compress margins, prices may lag costs, and supply disruptions could prevent the company from meeting contracts. Crude helium supply depends on natural gas production by third parties, so changes in helium supply move helium pricing.
• New technology. Some technologies are being deployed at scales or in combinations the company has not operated before. Green hydrogen products may also be hard to market.
• Acquisitions, joint ventures and divestitures. Several of the largest projects are joint ventures in which partners may have different goals or fail to meet obligations, and the company may have limited control. Divestitures can dilute earnings and leave indemnification liabilities.
• Cybersecurity. Attacks on IT and operational technology could disrupt plants, pipelines and delivery systems. The company reports no material cybersecurity incidents in the past three years.
• Pension obligations. Discount-rate, asset-return and regulatory changes could raise expense and required contributions.

Legal and regulatory

• Climate policy. Producing gray hydrogen by steam methane reforming emits CO2, and greenhouse-gas limits, taxes or reporting rules could raise costs or reduce demand. In the other direction, some projects depend on supportive incentives such as Inflation Reduction Act credits for carbon sequestration and clean hydrogen, and reversing them threatens project returns. In fiscal 2025 the company cancelled a U.S. green liquid hydrogen project and took a significant impairment, in part because a regulatory change made existing hydroelectric supply ineligible for the 45V clean hydrogen production tax credit.
• Safety, compliance and corruption. The company names safety incidents, environmental remediation costs, and violations of anti-bribery, export-control and sanctions laws (including the FCPA, the UK Bribery Act and China's Anti-Unfair Competition Law) as sources of fines and reputational harm.
• Workforce. Headcount grew from about 16,300 at the end of fiscal 2018 to as many as about 23,000 in fiscal 2024. The company is cutting the workforce and expects it to stabilize at about 20,000 by the end of fiscal 2026. Turnover and lost experience could affect productivity and culture.
• Tax. Changes in tax law, including OECD global minimum taxes, could raise the effective rate.
• Litigation and environmental exposure. At the 10-K date the company was a potentially responsible party at 26 remediation sites, and the 10-Q lists 25. At 30 June 2026 environmental accruals were $83.1 million, against a reasonably possible upper exposure of $96 million. The largest site is Pace, Florida ($52.8 million). In Brazil, the antitrust authority CADE had fined Air Products Brasil R$179.2 million in 2010. In October 2025 the Supreme Court of Brazil confirmed the annulment of the proceeding and the fine, and that judgment is final.

General

• Catastrophes and competition. Severe weather, pandemics, war and terrorism could disrupt operations, suppliers or customers. Competitors' new technology, capacity or pricing could weaken demand or margins.

Management's discussion, fiscal 2025

From Item 7 of the fiscal 2025 Form 10-K, accession 0000002969-25-000055.

In fiscal 2025, large write-offs of energy-transition projects hit the GAAP results, while the underlying gas business was roughly stable.

Results versus fiscal 2024

• Sales and volumes. Sales of $12.0 billion fell 1%. Volumes were down 4% because of the September 2024 LNG sale, weaker global helium demand and exited projects. Higher energy cost pass-through (+2%) and pricing (+1%, driven by non-helium merchant products) partly offset the decline.
• GAAP operating result. There was an operating loss of $877.0 million, compared with operating income of $4.5 billion in fiscal 2024. Fiscal 2025 included about $3.7 billion of pre-tax charges for business and asset actions ($3.0 billion after tax, or $13.68 per share). Fiscal 2024 had included a $1.6 billion pre-tax gain on the LNG sale.
• Adjusted operating income. Adjusted operating income of $2.9 billion fell 3%. Lower volumes, fixed-cost inflation and higher depreciation outweighed non-helium pricing gains and productivity. The adjusted operating margin was 23.7%, down 70 basis points, with about 50 basis points of that decline caused by higher energy cost pass-through.
• EPS and net result. There was a GAAP diluted loss per share of $1.77, compared with EPS of $17.18 in fiscal 2024; from continuing operations, the figures were a loss of $1.74 and EPS of $17.24. There was a net loss of $354.4 million. Adjusted EPS was $12.03, against $12.43. Adjusted EBITDA of $5.1 billion rose 1%.
• Segments. Americas operating income fell 3% on higher depreciation, maintenance and inflation. Asia was down 1% on lower helium pricing. Europe rose 4% on non-helium pricing and currency. Corporate and other's operating loss widened by $74.6 million, mainly because the LNG business was gone.

Project exits. In the second quarter of fiscal 2025 the Board and the new CEO launched a project review that produced about $3.6 billion of project-exit costs, mostly non-cash write-downs:

• about $2.4 billion for three U.S. projects in the Americas segment;
• about $755 million for several smaller energy-transition projects;
• about $425 million to write down two coal gasification plants in China that were put up for sale. The company expected to sell them during fiscal 2026.

The exits included withdrawing from the sustainable aviation fuel expansion project with World Energy in Paramount, California, with cumulative charges of about $1.9 billion. A separate global cost-reduction plan added $123.7 million of severance in fiscal 2025. Since June 2023 that plan has cost $207.7 million and covered about 3,600 employees, and it targets annual pre-tax savings of about $240 million to $260 million.

Other items in fiscal 2025. The company recorded:

• $86.3 million of shareholder-activism costs tied to the proxy contest that ended in January 2025, including a $24.7 million reimbursement to Mantle Ridge;
• a $67.3 million gain on selling a Singapore subsidiary for $104.3 million;
• a $31.3 million gain on selling its Hersham, England office for $37.7 million;
• the acquisition of Ijsfabriek Strombeek, a Belgian merchant gases producer, on 30 April 2025 for $74.2 million net of cash acquired;
• the deconsolidation of the Blue Hydrogen Industrial Gases Company (BHIG) joint venture in Jubail, Saudi Arabia, which removed about $655 million of debt from the balance sheet.

Cash flow and balance sheet.

• Cash flow. Operating cash flow was $3.3 billion, reduced by about $395 million of tax payments on the LNG gain. Capital expenditures (a non-GAAP measure) were $5.1 billion. Additions to plant and equipment were $7.0 billion, about $3 billion of it for NEOM.
• Debt. Total debt rose to $17.7 billion from $14.2 billion. The increase came from euro- and dollar-denominated senior notes issued in February and June 2025 (€1.5 billion and $1.1 billion of principal) and about $1.6 billion of additional non-recourse NEOM project borrowings.
• Dividends. The company paid about $1.6 billion in dividends and marked its 43rd consecutive annual dividend increase.

Fiscal 2026 outlook at the time of the 10-K.

• Earnings growth was expected from new plant onstreams, pricing discipline and productivity, with helium described as an ongoing headwind.
• Capital expenditures were expected at about $4 billion, about $1 billion of it for traditional industrial gas projects.
• The project review was described as ongoing, with possible further charges.

Current quarter, fiscal 2026 third quarter (three months ended 30 June 2026)

From the Form 10-Q, accession 0000002969-26-000036, and the earnings release furnished 30 July 2026, accession 0000002969-26-000034. The project-exit announcement comes from the Form 8-K of 30 June 2026, accession 0001193125-26-289427.

The headline: a second round of project exits. On 26 June 2026 the company decided to exit three groups of projects, and it announced the decision on 30 June:

• Louisiana Clean Energy Complex. This complex was designed to produce low-carbon hydrogen and ammonia. The company had previously said it would not make a final investment decision without a de-risking plan: firm offtake agreements for hydrogen and nitrogen, construction costs in line with its return expectations, and sales of the ammonia production and carbon sequestration elements. After a detailed review, it concluded that the expected returns would not meet its return criteria.
• Casa Grande, Arizona. The company is exiting this green (zero-carbon liquid) hydrogen production facility.
• Smaller clean-energy distribution projects. These exits, like Casa Grande, were blamed on difficult commercial conditions, project-specific economics, and markets developing more slowly than expected, mainly hydrogen for mobility.

Size of the charge. The third quarter carries $2.9 billion of pre-tax project-exit charges ($2,907.4 million; $2.2 billion after tax, or $9.92 per share).

• About $2.2 billion is asset write-downs. The affected plant and equipment had a remaining carrying value of $201.2 million at 30 June 2026.
• $696.8 million is accrued for estimated contract-termination and other exit costs. In the 30 June 8-K the company estimated cash spending on these exits at no more than $925 million, and said it expected less once settlements are negotiated.
• Cumulative project-exit charges from the fiscal 2025 and fiscal 2026 decisions reach $6.57 billion through 30 June 2026.
• The project review remains ongoing.

Reported results versus the prior-year quarter

• Sales: $3.16 billion, up 5% ($138.3 million). Volumes added 3%, mainly from new on-site assets and HyCO facilities, while pricing and currency each added 1%.
• GAAP operating result: an operating loss of $2.1 billion (negative 66.3% margin), compared with operating income of $790.6 million (26.2%). The prior-year quarter also held about $99 million of gains on the Singapore subsidiary and Hersham office sales.
• Adjusted operating income: $810.3 million, up 9%. The adjusted margin was 25.6%, up 110 basis points from 24.5%. Volume contributed $60 million, currency $21 million and pricing net of power costs $16 million, partly offset by $28 million of higher costs from fixed-cost inflation and incentive compensation.
• Equity affiliates' income: $205.2 million, up 22%, led by Mexico (Americas) and Saudi Arabia (Middle East and India).
• Interest expense: $49.4 million, down 20%, because more interest was capitalized on projects under construction.
• Tax: an income tax benefit of $515.4 million (26.6% effective rate), including $695.4 million of tax benefits on the exit charges. The adjusted effective tax rate was 18.6%.
• Net result and EPS: a net loss attributable to Air Products of $1.44 billion. Diluted loss per share was $6.47, all from continuing operations. In the prior-year quarter, diluted EPS was $3.20, or $3.24 from continuing operations before a $0.04 loss from discontinued operations. Adjusted EPS of $3.47 rose 12% from $3.09 and beat the top of the company's guidance range of $3.25 to $3.35.

Segments in the quarter

• Americas: sales of $1.32 billion, up 5%. Volumes rose 7% on HyCO facilities and a new on-site asset, while lower natural gas pass-through subtracted 2%. Operating income of $395.4 million rose 6%, and the margin was 29.9%. Equity affiliates' income of $56.2 million rose 49%, driven by Mexico.
• Asia: sales of $886.0 million, up 9%. Volumes rose 6% on new on-site assets and better helium volumes, with currency adding 2%. Operating income of $256.4 million rose 18%, and the margin of 28.9% was up 210 basis points. Depreciation fell because the Chinese gasification assets are classified as held for sale.
• Europe: sales of $815.7 million, up 6%. Energy pass-through added 3%, currency 3% and pricing 2%, while lower on-site volumes subtracted 2%. Operating income of $230.7 million rose 2%. The margin of 28.3% fell 90 basis points, about 50 of them from pass-through.
• Middle East and India: sales of $34.8 million, with operating income flat at $8.0 million. Equity affiliates' income of $101.1 million rose 18% on the Saudi affiliates.
• Corporate and other: sales of $103.1 million, down 28% on lower equipment sales. The operating loss of $80.2 million improved 3%.

Nine months to 30 June 2026

• Income statement. Sales were $9.44 billion, up 6% (currency +3%, volumes +2%, energy pass-through +1%), with pricing flat because helium weakness offset non-helium gains. The operating loss was $609.9 million, compared with $893.8 million. Adjusted operating income was $2.3 billion, up 13%, and the adjusted margin rose to 24.6% from 23.1%. Diluted loss per share was $0.23, all from continuing operations, compared with $1.79 a year earlier, when the loss per share from continuing operations was $1.76. Adjusted EPS was $9.84, up 14% from $8.63.
• Cash and capital spending. Operating cash flow was $3.31 billion, compared with $2.0 billion a year earlier, when the LNG-related tax payments weighed on it. Non-GAAP capital expenditures fell to $2.6 billion from $4.0 billion. Spending on NEOM is falling as the project nears completion.
• Equipment contracts. Changes in cost estimates on sale-of-equipment contracts reduced operating results by $78 million over the nine months.

Balance sheet and financing at 30 June 2026

• Debt. Total debt was $17.7 billion, unchanged from 30 September 2025. During the nine months, NGHC drew $543 million of non-recourse project debt, bringing NEOM borrowings to $5.5 billion. Air Products repaid its $550 million of 1.50% senior notes at maturity in October 2025.
• NEOM financing. The $6.1 billion of project financing is now expected to fund about 69% of the project, down from about 73% stated in the 10-K. NGHC's consolidated plant and equipment was $7.49 billion.
• Cash and credit lines. Cash was $980.5 million, $803.0 million of it held outside the U.S. The $500 million 364-day revolving credit facility was extended in March 2026 to 25 March 2027. The $3.0 billion five-year facility runs to 31 March 2029. Both were undrawn.
• Assets held for sale. The two Chinese coal gasification plants remain classified as held for sale, and the company is still marketing them. The 10-Q gives the long-lived assets classified as held for sale a carrying value of $461.6 million; total assets held for sale on the balance sheet were $475.5 million.

Guidance and capital plan. Guidance has risen through the year:

For the fourth quarter of fiscal 2026, adjusted EPS guidance is $3.55 to $3.65. Management describes itself as cautious about the macroeconomic environment. It expects benefits from new assets, pricing actions and productivity. About $1 billion of the fiscal 2026 capital budget is for traditional industrial gas projects. In the 10-Q, the company expects to return about $1.6 billion to shareholders in 2026. The quarterly dividend was raised in January 2026 to $1.81 per share, the 44th consecutive annual increase.

Commercial developments during the year (as reported in the fiscal 2026 earnings releases)

• Electronics. The third-quarter results release of 30 July 2026 announced a long-term agreement for Air Products San Fu to build, own and operate four large air-separation units, bulk gas systems and new underground pipelines for a semiconductor manufacturer's expansion in Taiwan. In the second quarter, Samsung selected Air Products to supply a new advanced fab in South Korea.
• Aerospace and helium. The company won NASA liquid hydrogen supply contracts totaling more than $140 million (first quarter) and supplied liquid hydrogen and helium for NASA's Artemis II mission (second quarter). In the second quarter it also strengthened its helium supply chain: it drew on its U.S. storage cavern, increased U.S. liquefaction and repositioned its ISO container fleet.
• NEOM offtake. In its 30 July 2026 release, the company said it had finalized a marketing and distribution agreement with Yara International for renewable ammonia from the NEOM project. Yara will sell and deliver the output through its global supply chain. On 30 June the agreement had been described as still being finalized.

Subsequent events

From the Form 10-Q, accession 0000002969-26-000036, and the earnings release furnished 30 July 2026, accession 0000002969-26-000034.

The quarterly report for the period ended 30 June 2026 has no separate subsequent-events note. It discloses no acquisition, divestiture, borrowing or litigation outcome after the quarter ended. The post-quarter developments in the filings are:

• Dividend. On 22 July 2026 the Board declared a quarterly dividend of $1.81 per share, payable on 9 November 2026 to shareholders of record on 1 October 2026.
• Yara agreement finalized. By the 30 July 2026 results release, the NEOM renewable-ammonia marketing and distribution agreement with Yara International was described as finalized, after being "finalizing" on 30 June 2026. The filings give no exact signing date or financial terms.
• Guidance raised. On 30 July 2026 the company raised its fiscal 2026 adjusted EPS guidance to $13.39 to $13.49 and cut expected fiscal 2026 capital expenditures to about $3.5 billion (see the guidance table above).

For context on the prior annual period: after 30 September 2025, the 10-K disclosed that the company repaid its $550 million of 1.50% senior notes at maturity in October 2025. In the same month, Brazil's Supreme Court finally annulled the CADE antitrust fine against Air Products Brasil.