Air Products & Chemicals Inc.'s (APD) fiscal second-quarter earnings fell 2.7% as the industrial gas company saw lower-than-expected volumes in its core businesses, despite improved pricing.
Chief Executive John McGlade said business activity didn't pick up as much as expected.
"With Europe in recession, we have taken actions to improve our business portfolio and cost positions," he added. The company said it cut 800 jobs, contributing to a cost reduction charge of $86.8 million for the quarter.
For the year, the company lowered its guidance, seeing $5.47 to $5.60 a share, down from its January outlook of $5.90 to $6.30 a share. McGlade said business activity was slower than expected going into the second half of the year, reducing both sales and earnings growth. Business is still expected to pick up during the second half, and into 2013, he said, with capital spending higher than expected.
For the current quarter, the company expects earnings between $1.40 and $1.45 a share, lower than estimates of analysts polled by Thomson Reuters, who recently predicted $1.51.
The specialty-gas and chemical maker had warned that global economic conditions would pressure second-quarter volumes and earnings, before growth in Asia and North America begins to pick up in the second half of the year.
The company in January agreed to sell its continental home-care business to Linde AG (LNEGY, LIN.XE) for EUR590 million as it looks to focus on its core gases business. The deal was recently approved by European regulators and is expected to close by the end of this month.
For the period ended March 31, Air Products reported a profit of $296 million, or $1.38 a share, down from $304.3 million, or $1.39 a share, a year earlier. Adjusted earnings were $1.39, down from $1.41. The company in January saw earnings between $1.37 to $1.43.
Revenue decreased 2.4% to $2.34 billion, below the expectations of analysts polled by Thomson Reuters, who saw $2.43 billion.
Gross margin narrowed to 26.8% from 27.2%.
Sales in the company's merchant gases segment fell roughly 3% to $884 million, with positive pricing offset by weaker volume across all regions. Air Products' tonnage gases segment, which provides gases to refineries and steelmaking industries, reported around 2% lower revenue. Sales in electronics and performance materials fell 2% on lower electronics volume, while equipment and energy sales fell 3%, due to lower project activity.
Shares of the company closed Monday at $88.73 and were inactive premarket. The stock is up 4.2% so far this year.
-By Kristin Jones; Dow Jones Newswires; 212-416-2208; [email protected]