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Air Products profit falls for fiscal first quarter

Air Products and Chemicals, producer and supplier of industrial gases used in industrial applications, based in US, reported recently that net income fell 16% for the fiscal first quarter, largely bec…

Air Products and Chemicals, producer and supplier of industrial gases used in industrial applications, based in US, reported recently that net income fell 16% for the fiscal first quarter, largely because of continued lower demand in the global electronics industry. Leo Daley, controller and vice president of finance, said he anticipated an upswing to begin in the fiscal third quarter. Net income dropped to US$ 113.7 million, or 52 cents a share, from US$ 135.6 million, or 62 cents, a year earlier. Profit increased by two cents a share under a new accounting rule for good will. Earnings fell below analysts“ expectations. A profit of 54 cents a share was expected by Thomson Financial/First Call. Sales for the quarter ending 31 December slid 11% to US$ 1.32 billion, from US$ 1.48 billion. Revenue was hurt by a decline in demand for specialty chemicals, gases and equipment used to make electronics. Air Products has 18,000 employees globally, including 4,300 in the Lehigh Valley. It is the world“s only combined industrial gases and chemicals company. About two-thirds of the company“s revenue comes from industrial gases and one-third from the chemicals. Sales of industrial gases slid 12% to US$ 904 million, and operating income for the segment fell 21%. Weak demand in the electronics industry was the main culprit. The financial results for gases sold to the chemicals and processing industries dropped, too, because of planned plant closings by customers and related plant maintenance costs. However, Asian and European markets continued to perform well. Chemical sales declined 11% to US$ 349 million, while operating profit climbed about 9%. Sales were slow mainly because of the sluggish economy. Raw material, energy and overhead costs were lower. The company recently announced the sale of most of its US packaged gas business for US$ 270 million, primarily to Airgas of Radnor, Delaware County, and a portion to a private welding company. Analysts estimated the profit margin for the business at less than 10%. The planned sale is part of the company“s strategy to shed less profitable business for higher-growth areas. Chemicals analyst Dave Begleiter of ABN Amro in New York City expects Air Products to do more pruning in the chemicals side of the business. However, Daley of Air Products said it will not be limited to the chemicals area. Money from the sales could be used to buy businesses in the electronics and medical markets. Daley did not say which companies Air Products is interested in. The company expects operating earnings for fiscal 2002 to be at the lower end of its previous target of US$ 2.35 to US$ 2.45 per share, and the second quarter to be little changed compared with the first quarter this year.

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