Air Products and Chemicals, Inc. (NYSE:APD) Q1 2020 Earnings Conference Call - Final Transcript

Jan 24, 2020 • 10:00 am ET

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Air Products and Chemicals, Inc. (NYSE:APD) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] And we'll take our first question from Jeff Zekauskas with JPMorgan.

Analyst
Jeff Zekauskas

Thanks very much. Can you describe your volume growth in oxygen and nitrogen in the United States in the merchant area?

Executive
Seifi Ghasemi

Hi, Jeff. Good morning.

Analyst
Jeff Zekauskas

Good morning.

Executive
Seifi Ghasemi

We would prefer not to get into that detail, Jeff, because that is obviously a very significant competitive information and we usually do not disclose that. I'm sorry about that, but you bear with us that we want to restrict to that policy.

Analyst
Jeff Zekauskas

Okay. You're going to spend $4 billion to $4.5 billion in capex this year. Does that amount of spending lead to some costs coming into the income statement in advance of the capital projects coming on stream? In other words, are your current returns being penalized at all by the large capital expenditure budget that you have for this year?

Executive
Seifi Ghasemi

Jeff, you make a very good point. As you noticed from our results, our costs, I mean, if you focus on the cost, you see increasing cost. That's not because we have become less efficient. That is because we are building the organization in anticipation of executing these projects. So you are very correct that we will see as you are seeing some increase in costs. It is not that significant, but it is there and you're very -- it's very appropriate for you to point that out.

Analyst
Jeff Zekauskas

Okay. Thank you so much.

Executive
Seifi Ghasemi

Thank you, sir.

Operator
Operator

And we'll take our next question from Vincent Andrews with Morgan Stanley.

Analyst
Vincent Andrews

Thank you, and good morning, everyone. I have a follow-up on the $0.12 of costs increase in the quarter. The investments you're making to grow the business, Jeff, obviously just talked about the existing plants. How much of the spend is going towards future opportunities like hydrogen mobility or other things? Because I'm Just curious on the R&D side of the equation, what it is that you're driving at?

Executive
Seifi Ghasemi

Well, the expenditures are in two aspects. One is obviously R&D expenditure, which is -- you kind of know how much we are spending. It is not that huge. But the other thing is actually hiring very high quality experienced people to oversee the execution of these projects that we expect to get. We don't want to get the projects and then look for talent. We are putting the talent in place in anticipation of those projects, which we are should will happen. So a significant part of the cost is the hiring and on-boarding of all of these people. And there is a substantial number of people that we have brought in, especially to strengthen our technology section and our project execution capability.

Analyst
Vincent Andrews

Okay. That makes sense. If I could just ask a follow-up on the dividend. Obviously, a very large increase, your record increase. Last year, when we talked about it, you mentioned that you've historically spoken to your investors about a 2.5% to 3% yield. Obviously, this takes to about 2.25%. My assumption is that with