Air Products posts profit, cuts 500 jobs

Air Products, the Lehigh Valley’s third largest employer, saw positive earnings growth in its fiscal first quarter while cutting 500 jobs worldwide as part of an ongoing restructuring.

The layoff total was released Thursday for the first time — in one paragraph near the bottom of an 11-page earnings news release — and CEO Seifi Ghasemi offered little in the way of explanation during a conference call with investment analysts other than to say the layoffs are expected to save $50 million to $60 million annually.

Art George, spokesman for the Trexlertown-based seller of industrial gases, declined after the call to say how many of the jobs were cut in the Lehigh Valley. The reduction thus far represents about 2.5 percent of Air Products’ global workforce of 20,000.

Air Products said it has incurred approximately $45 million in severance and other restructuring charges during the last two fiscal quarters, or about 15 cents per share. The company also said it cut 50 positions during its fiscal fourth quarter, ended Sept. 30 and 450 jobs in the most recent three-month period ended Dec. 31.

And the company is not finished cutting. Ghasemi, in answer to an analyst’s question, said he expected the overall financial benefit from restructuring to “materialize more in 2016” than this year. He previously told The Morning Call it will take several years to complete the restructuring.

As for earnings, Air Products posted its second straight quarterly gain, with a 13 percent jump in profit. Net income stood at $324.6 million, or $1.50 per diluted earnings per share, compared with $287.1 million or $1.34 per share for the same quarter in 2014. Earnings per share rose about 12 percent.

Ghasemi attributed the strong earnings to the organizational changes, as well as improvements in safety and growing its cash flow.

“We are on the way to becoming the safest and most profitable gas company in the world,” Ghasemi said. “The fact is we have started on our journey to get there.”

Ghasemi took over as CEO in June for John McGlade after activist investor William Ackman’s Pershing Square hedge fund began pumping enough money into the company to acquire a 10 percent stake.

In September, Ghasemi — who most recently headed New Jersey-based specialty chemicals company Rockwood Minerals — announced a major restructuring of Air Products. He promised to decentralize the company by eliminating layers of management.

Some analysts predicted he would unload Air Products’ Materials Technologies division, but instead he promised to retain the division so long as it improved its profitability.

Air Products posted revenue of $2.56 billion during its fiscal first quarter. Looking ahead, the company projects earnings per share in the $1.50 to $1.55 range during its second quarter, and between $6.35 and $6.55 per share for the fiscal year, up 9 to 13 percent from 2014.

Dean McDermott, owner of McDermott Investment Services LLC in Bethlehem, said Air Products’ emphasis on safety in the conference call was intriguing.

“Is there something that is going to be coming out about safety problems?” said McDermott, who said he holds no Air Products stock but advises clients who are company shareholders.

Air Products, the world’s largest hydrogen producer, is one of the Lehigh Valley’s two Fortune 500 companies and employs 3,400 locally.

The company’s stock closed up Thursday about 6 percent, or $8.16, to $146.99 per share.

asalamone@mcall.com

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FINANCIAL SNAPSHOT

* Net income: $324.6 million, first quarter 2015

$287.1 million, first quarter 2014

* Earnings per share: $1.50, first quarter 2015

$1.34, first quarter 2014

* Sales: $2.56 billion, first quarter 2015

$2.54 billion, first quarter 2014

Note Air Products’ fiscal year runs October to October.