2024-03-13 12:51:13 ET
Air Products and Chemicals, Inc. (APD)
J.P. Morgan 2024 Industrials Conference
March 13, 2024 8:45 AM ET
Company Participants
Seifi Ghasemi - Chairman, President and Chief Executive Officer
Conference Call Participants
Jeff Zekauskas - JP Morgan
Presentation
Seifi Ghasemi
Hi, good morning. My name is Jeff Zekauskas. I cover chemicals for JP Morgan in North America, and it's my pleasure this morning to introduce the management of Air Products. Representing Air Products is Seifi Ghasemi, to my right, who's the CEO. You may know Seifi from his years when he ran Rockwood. He joined Air Products in 2014, restructured the operations of the company, expanded its Asian operations over a longer period of time, and then is now engaged in two large unconventional projects to produce hydrogen in the United States and Saudi Arabia.
Accompanying Seifi is Melissa Schaeffer, who's the CFO, who's sitting in the third row, and Sidd Manjeshwar who is to my right. The format of our presentation this morning is fireside chat. So maybe where we can begin is Air Products has two very large projects that will take years to complete, whether it's 2026 or 2027, and the financial demands of the projects are significant in that your CapEx is $5 billion a year, roughly, maybe it's $5.5 billion. Cash flow is about $4 billion. You pay a $1.5 billion in dividends, and so you're going to be burning $2.5 billion, $2.8 billion of cash for at least the next two years. Your leverage level right now is 1.5, so as a base case that'll take it up to 2.5. Is that too much? Have you bitten off more than you can chew? Is that the right amount of opportunity and stress for your balance sheet?
Question-and-Answer Session
Operator
[Operator Instructions]
Seifi Ghasemi
Well, first of all, Jeff, it's a pleasure to be here with you, and good morning to everybody who is in the room, and all the people who are listening on the webcast. With respect to what you are mentioning, we do have the capacity, financial capacity, to absorb that because, as you said, our leverage right now is around 1.5. We do want to keep our A rating and we definitely still have a lot of room to lever the balance sheet before we get to the point that our A rating will become an issue, and in addition to levering the company there are significant amount of other levers that Air Products has with respect to cash. I think your calculation is right if you assume that all of the projects that we are doing would be 100% equity, there is possibility of financing some of those projects as we have done with the big projects that we have done like Jazan or like the Green Hydrogen Plan and therefore we feel very comfortable that we have the financial capacity to not only support our existing business and maintain our market share and gain new projects as we have been, but in addition to that do these two very big projects and maybe even more as we go forward. So we obviously do these calculations all the time. We are very engaged with the rating agencies who have a great deal of interest in terms of our leverage and all of that. And we feel very comfortable that we should be able to meet the requirements and continue with executing what we have told people that we are executing and more than that, if necessary....
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Air Products and Chemicals, Inc. (APD) CEO Seifi Ghasemi presents at J.P. Morgan 2024 Industrials Conference (Transcript)