Air Products and Chemicals
Air Products and Chemicals is a global industrial gases company. Founded in 1940, with its headquarters in Allentown, Pennsylvania, Air Products sits in the materials and industrial gas world. Though they operate like a utility that's embedded inside of refineries, fabs, steel mills, hospitals, and chemical plants. APD (the company’s ticker) management team emphasizes its longevity and positions itself as a multidecade operator built around engineering, safety, and reliability. APD’s real risks aren’t where their customers are located but the rules of the game, permitting, and energy policies that can change the economics of their business on a coin flip.
At ADP’s core is industrial gases (no shit) delivered through three models that include on-site supply, bulk distribution, and packaged gases in cylinders. Their products include atmospheric gases, process gases, and specialty gases. About 90% of APD's sales come from regional industrial gases, with about 50% of those coming from atmospheric gases like oxygen, nitrogen, and argon. Recently, APD sold its LNG processing technology and equipment to Honeywell. This indicates that APD’s management team is willing to cut non-core businesses to focus on their core structure rather than trying to be a broader one-stop shop for processing technology.
The lads at APD operate in about 50 countries, while this sounds pretty rad, the reality is a major headache due to ever-changing local regulations. APD tracks and reports its business performance across the Americas, Asia, and Europe while separately tracking its Middle East and India business through equity affiliates. The China segment is notable because, in 2025 included impairments and several bits that were ‘held for sale’ that were still tied to two coal gasification projects. This is a heavy reminder that APD’s geographic exposure isn’t just sales mix but its political, regulatory, and execution exposed embedded in hard assets.
2025 was a pretty good year for the lads over at Air Products and Chemicals; they reported $12 billion in sales, $12.03 adjusted EPS, and $3.3 billi in operating cash flow. The company also reported about $3.7b pre tax business and asset action changes, with $3.6b of that being related to project exits. Primarily related to clean energy generation, plus impairments held for sale moves in China. This was not a one time accountant trick but an admission that parts of their growth plan did not go to plan or meet their risk standards. Management is now focusing on a multi-year plan built around capex reduction, productivity gains, and a target to reach mid-teens ROC by 2030.
The industrial gases industry is not glamorous, but it's critical for refineries, semiconductor fabs, steel mills, food/freezing, hospitals, and chemical plants. These segments can’t operate without a large supply of oxygen, nitrogen, argon, hydrogen, CO2, helium, and other specialty gases. Some management teams may consider demand non-discretionary and may reduce output in recessions, but they cannot opt out of these molecules. This business is highly oligopolistic in some regions due to physics and capex. Building air separation units, hydrogen plants, purification systems, distribution networks, and pipelines requires scale and engineering know-how that takes decades to earn. Once a plant is embedded within a company's supply chain, you get strong stickiness because switching suppliers isn’t like changing software; it's a major operational risk.
The industry is split between three major layers: the global majors with full portfolios and massive balance sheets, regional players that are focused on merchant/bulk packaged gases, and niche specialists that are focused on electronic materials, rare gases, medical/homecar, and small modular systems. The majors win on large site projects, often locking down 15-20 year contracts. While the smaller players often win projects around local density, service responsiveness, and price.
On-site supply is a crown jewel segment due to plants often being built right next to a customer. While this is capital intensive its where the industry earns its utility like reputation. Merchant and bulk liquids are often delivered by truck to customers who need high volumes of gear but don’t need enough to justify the on-site plant. This segment is exposed to spot pricing, distribution efficiency, and local density advantages. Packaged gases are considered the retail layer by some due to smaller volumes, higher service intensity, broader customer base, and higher margins per unit. This segment is more about distribution footprint, customer service, and safety compliance than serving megaprojects.
Then there are specialty and electronic gases; this segment is often sold at a premium due to extreme purity specs, with extremely high failure costs. This segment is closely tied to chip demand and advanced manufacturing and can be linked to more qualification-heavy and technology-demanding products. Then there is the hydro and synthesis gas supply that sits across segments like refineries, chemical plants, or can be delivered via pipelines, depending on location.
Reindustrialization and supply chain localization are major tailwinds. Governments and corporations are now beginning to push for the domestic production of their major raw materials. Semiconductors and advanced manufacturers are driving serious demand as nodes shrink, manufacturing complexity increases, and purity requirements become stricter. This is one of the few segments where technology processes are correlated to an increase in molecule demand. The healthcare segment also creates a continuous tailwind via medical oxygen and other related applications. While this isn’t their largest segment by volume, it compounds and tends to be less correlated with other industrial cycles.
Regulation and decarbonization policies are a double-edged sword. On one side, carbon policy and clean fuel mandates can expand the demand for oxygen, hydrogen, and other clean infrastructure. The other side is that bad policy can hurt the capex of companies that are focused to build ahead of real offtake economics. The industry has also shown that the energy transition can create value due to subsidies. Although when the narrative outruns contract quality, the broader industry could be forced to re-emphasize contract volumes and risk-adjusted returns because megaproject errors are expensive. Long-term policy looms over hydrogen and ammonia as governments can accelerate demand through decreased standards and incentives.
Product technology improves in air separation, and hydrogen generation will create meaningful margin expansion. Modern cryogenic air separation units could achieve energy consumptions of 220 kilowatt-hours per ton of oxygen, which is down from 270 KwH from a decade ago. That reduction flows right into the producer's bottom line. Membrane separation technology offers alternatives for lower-quality applications, like using polymeric membranes to separate nitrogen from the air, with significantly less capex than cryogenic units. While these aren’t game-changing breakthroughs, they will compound improvements over time. The carbon capture and sequestration technology remains a critical enabler for blue hydrogen economics, and execution risks in this area explain the recent project cancellations across the industry. Blue hydrogen offers a lower-cost pathway to clean hydrogen, with production costs significantly less than green hydrogen.
Digital technologies and analytics have also created operational improvements for customers and suppliers. Predictive algorithm uses data from thousands of cryogenic pumps, compressors, and distillation columns that can reduce downtime by 20%. This is a major advantage when customer contracts include large penalties for supply interruptions. Supply chain optimization platforms balance production across large networks to minimize consumption and costs. Industrial gas companies that can successfully deploy these technologies can build strong competitive moats due to their domain expertise, proprietary data sets, and integration with real assets. The economics still favor centralized production and distribution for the vast majority of use cases.
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Air Products operates in an oligopolistic industrial gas market, with strong structural advantages despite facing intense competition from its peers. APD trades at a strong premium, due to the company's competitive position in legacy gases versus the emerging hydrogen economy. APD is a top-tier industrial gases player with sticky customer relationships and extremely high switching costs. APD is a part of the NEOM project in Saudi Arabia. This is a massive $15b project in which Air Products and Chemicals is a key partner in building the world's largest hydrogen facility in Saudi Arabia. This positions APD as a hydrogen leader by scale, but without differentiated economics or locked-in demand, it just means you’ve deployed more capital than you can shake a stick at.
Air Products and Chemicals has 17% market share globally, while Linde has around 35% and Air Liquide 25%. These three players hold about 70% of the global market share, while the remaining 30% is fragmented amongst regional players and smaller local players. APD has a stronger presence in North America, where it captures about 30% in key segments. However, they lack geographic depth like Linde or Air Liquide. The competitive landscape is shifting in the hydrogen infrastructure market with new entrants like Plug Power and major energy players like BP and Shell aggressively investing to enter the market. While APD’s partnership with NEOM is the largest hydrogen facility, size alone doesn’t guarantee competitive advantages because the project depends on off take agreements, subsidies, and execution at an unprecedented scale.
Due to the oligopolistic nature of this industry, APD shares several strategic advantages with its peers. Switching costs are a major factor, as once an on-site air separation unit is built next to a plant, that customer relationship becomes extremely sticky. With most partners signing 15-20 year contracts, creating predictable cash flows and high renewal rates. This is due to the extremely high capex costs with large air separation units costing upwards of $300 million. This creates natural high barriers to entry, as companies will need both the capital and customer commitments before construction starts. Network effects are minimal in this sector, as each customer relationship is mostly standalone rather than reinforcing.
Barriers to entry remain strong due to extreme capex requirements, technical expertise, and customer relationships that could take years to develop. You also can’t easily repurpose an on-site air separation unit, which creates projects that are difficult to redeploy if relationships go sour. Switching costs are also a major problem, as on-site projects and switching suppliers mean triggering contractual termination penalties. These frictions are large enough that customers will rarely switch unless the supplying partner is gauging prices, reliability failures, or deterioration in service. Even in the merchant gases segment, switching costs may be lower but still noticeable as customers need to qualify suppliers, modify supply chains, and worry about inventory management before they can accept new suppliers.
Air Products reported $12 billion in revenue in 2025, down 1% YoY due to 4% lower volumes. This is primarily due to APD offloading its LNG business, decreased helium demand, and rising energy project costs. Although pricing was up 1% in non-helium merchant gases. APD also exited three U.S. energy transition projects during 2025, which hurt their contract volumes. Although on-site volume was up as new plants came online and existing facilities continued to cook, non-helium merchants grew modestly. Adjusted EBITDA was also up slightly, $5.08 billion from $5.04 in 2024. EBITDA margins were around 42%, which is pretty decent for an industrial business. The net income side of things is where things get fugly with the company reporting a net loss of $386 million (the company reported a net income of $3.84 billion in 2024). This is because of a one-off $3.7 billion tax charge for business and asset auctions. Adjusted income without those charges was $2.68 bullion, down 3% YoY.
Air Products and Chemicals' balance sheet has been shifty during 2025 as the company juiced up its loan balance to fund hydrogen projects and operations. Total debt sits around $17.5 billion, this up from aboot $14.1 billion from 2024. Cash declined from $3.0 billion to $1.9 billion as well. APD has been able to maintain investment grade ratings, Baa1 from the Moody’s idiots and BBB+ from the dogs over at S&P. Rating agencies are not fond of hydrogen projects, and if leverage increases, borrowing costs will increase. If something goes wrong, like a major delay, a demand shock, or a macroeconomic downturn, APD’s balance sheet will be unable to absorb the losses without either cutting its dividend or issuing more debt. On the asset side of things, total assets grew from $39.6b to $41.1 billion. The primary reason for this is the PP&E construction progress.
Operating cash flow is also down to $3.26 billion from $3.56 billi in 2024. This game came from lower profitability and working capital commitments. Operating cash flow has been basically flat over the past few years, hovering in the $3.3-3.8 billion range, reflecting the slow-growth nature of the industrial gas business. Capex was around $5.06 billion; this doesn’t include NEOM spending, which is funded by partner equity. About $1.5 to $2 billion is maintenance capex to sustain current operations, and the remaining capex is split between traditional has projects and energy transition projects, including Louisiana Blue and others. APD paid out $1.58 billion in dividends in 2025, which were funded entirely by debt issuance and cash drawdowns. With essentially no free cash flow and a market cap of around $70 billion, there is no cash to be distributed to equity holders beyond the dividend. This is not good, as investors are paying a premium for a business that is constantly burning cash rather than generating it.
Return on invested capital is also down 10% YoY flecting two dynamics: margins have expanded despite capital deployment, and invested capital keeps growing while new assets aren’t creating visible gains yet. APD reported a ROE of 15%, which is down from 18-20% from years prior. This is because the company is leveraged to the tits and deployed capital has yet to generate strong returns. APD invests in long-term payback projects. If hydrogen projects start to deliver targeted returns, APD will be a group of happy campers. Despite declining numbies, Air Products is still trading at a premium. This reflects investor confidence in APD’s hydrogen projects and managements ability to execute.
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Air Products and Chemicals' organic growth has been slowed down recently due to the competitive nature of the industry. APD reported 1% pricing improvements in 2025; this was mostly in their non-helium-related merchant gases. Both America and Europe delivered the 1% pricing gains, while Asia saw a modest pricing improvement that was offset by helium weakness. Total volume was down 4% in 2025 due to stripping out their LNG business, helium, and other projects that the company exited. They did see an increase in on-site volume as new facilities came online and existing plants continued to run at a strong pace. Management expects low growth due to macroeconomic headwinds in 2026, suggesting they’re not counting on strong volumes from industrial production. Geographic growth is limited as the boys already operate in 50 countries, though about 50% of its revenue comes from North America. Growth in these regions is closely tied to industrial production growth, which is estimated to growth 4% in developed markets and 6% in emerging markets. However, APD faces rough competition in these markets with Linde and Air Products having strong market share positions in the non-American markets.
Hydrogen is one of the largest organic growth opportunities due to the use cases in industrial and mobility applications. One major growth play is in replacing gray hydrogen with blue or green hydrogen as customers face pressure to decarbonize their supply chains. Also, customers are expanding into the hydrogen markets like heavy-duty transportation, steelmakers, and ammonia producers. The TAM for this market is enormous with studies suggesting clean hydrogen demand reaching over 500 million tons annually by 2050 versus the 90 tons today. However, actually monetizing on this requires investing billions in capex, educating customers, developing supply chains, and competing with customers over contracts. APD’s growth in the hydrogen segment has been modest despite their NEOM project and pipeline networks in the U.S. Gulf Coast has large on-site hydrogen plants that serve refineries. If APD wants to see real growth, it will need to capture more than 2% of the industrial demand to drive meaningful margin expansion. Additionally, they will need to secure large contracts with semiconductor fabs, steel mills, and chemical plants, as these are typically 15-20 year deals with significant upside.
On the inorganic growth side, APD has been on the sell side recently. The company recently offloaded its LNG process technology and equipment business to Honeywell for $1.8 billion. Management used that capital to pay down some of their debt and fund new projects. The company also sold off its performance materials division to focus on industrial gases and hydrogen. APD has not made an acquisition in many years, with its latest attempt failing. This happened in 2011 when they placed a hostile bid for AirGas, though AirGas was able to defend itself from it. M&A in the industrial gas space is difficult due to the few available targets, high valuations, and the fact that integrating Company A’s supply chain with Company B’s supply chain is extremely difficult.
Joint Ventures paint a different picture, with the company’s largest JV being NEOM, where APD holds a ⅓ stake alongside Saudi Arabia and ACWA Power. This project is being funded with $10 billion in non-recourse project financing plus $1.7 billion in equity from each partner. APD will also operate the facility and has a 30-year off-take agreement for the green ammonia produced. Another major JV includes Jazan Integrated Gasification and Power Company. Air Products owns 25%, and Saudi Aramco owns the other 75%. This JV produced $341 million in 2025. Air Products has several smaller partnerships across Asia for industrial gas production. These are mostly local industrial companies' partnerships to build on-site facilities for specific customers.
Despite Air Products' current financial position, there is whitespace for inorganic growth. These include acquiring or partnering with hydrogen infrastructure companies, technology plays in electrolysis or carbon capture, and regional industrial gas players in growth markets. Management has made it clear that they are focused on a disciplined capital allocation strategy and strengthening their balance sheets. Smaller acquisitions could be on the table if they are likely to return capital or can provide critical capabilities. A more likely path for APD is asset divestitures to generate cash and optimize its portfolio.
Governments globally have committed to net-zero emission targets because they’re morons, and hydrogen is viewed as essential for the decarbonization process. While moronic, the scale for this opportunity is massive; if APD can capture even just 10% of the hydrogen market, that could add up to $80 billion in potential annual revenue. Although hydrogen adoption has been slower than forecasts due to a lack of infrastructure, costs, and competition from other decarbonization plays like electrification, biofuel, and carbon capture on existing processes. APD is placing a major bet that things will fall in favor of hydrogen in the next 5 to 10 years as renewable energy costs decline, carbon prices rise, and technology and infrastructure improve. If Hydrogen adoption stalls, Air Products may be left holding a 20 billion dollar bag filled with assets that take decades to earn real returns.
Regulation is a major growth catalyst/risk for APD's hydrogen strategy. This is due to the U.S. “Inflation Reduction” Act, although to qualify for the tax credits, projects must meet strict carbon thresholds and wage requirements. Air Products Louisiana Blue Project’s economics fully depend on capturing the full credit, and if the credits are reduced or eliminated the project returns will become cooked. In Europe, the Renewable Energy Directive established requirements for renewable fuels, this includes green hydrogen. About 1% of the European transport fuel demand translates to 10 million tons of green hydrogen annually, which is about seven times the total planned production of the NEOM project.
Air Products and Chemicals' expansion is purely focused on hydrogen products and infrastructure rather than traditional industrial gas assets. APD brought online several new on-site projects in 2025, serving customers in the chemical, steel, and electronic segments. These projects are 15 to 25 year deals, which create predictable returns and low execution risks. NEOM represents about 237,000 tons annually of green hydrogen, which will be converted to 1.2 million tons of green ammonia for export. This project is almost complete, with solar and power generation expected to reach completion by mid 2026. The Louisiana Blue project would add similar numbers and would serve industrial customers in the Gulf Coast region. Beyond those two mega projects, management has made it clear that they’re applying stricter criteria to new projects. New projects must meet risk-adjusted returns, have high volume contracted with trustworthy clients, and require strong integration benefits rather than being subscale or stranded assets.
Expanding APD’s pipeline networks and building new ones would strengthen its competitive position but would require significant capex investments. Hydrogen pipelines cost $1 to $3 million per mile, so a 500-mile network could cost upwards of $2 billion. The company is also investing heavily in additional liquefaction capacity to serve potential fuel cell demand. Air Products doesn’t clearly disclose total hydrogen R&D spend, but in 2025 they spent $96 million on R&D. This suggests that the company is more focused on engineering and scaling proven technology rather than investing in potential research breakthroughs.
Air Products has spent over 85 years building up its supply chain. Critical inputs include electricity and natural gas to power air separation units and hydrogen facilities, equipment and components for building plants, and transportation assets for delivering liquid and compressed gases. APD has also built deep relationships with equipment suppliers, energy providers, and logistics partners. Although this is something that can be found across the industry. The strongest supply chain element is on-site production, where the company operates next door to customer facilities. These on-site partnerships are often 15 to 25 year contracts, which maximizes customer stickiness. APD has around 800 on-site facilities globally, serving customers in major segments like chemicals, metals, and refining.
For products that are delivered by truck or railcars, the supply chain is more commodity-like with limited competitive advantages. APD operates about 100 ASU (air separation units) plants that produce oxygen, nitrogen, and argon. The merchant gas has lower margins, so the plants are often located near customers to minimize delivery costs. APD’s merchant network is in the same league as Linde and Air Liquide, although they don’t have strong advantages in this segment except in specific local markets where they have scale. Air Products' supply chain advantages come from its vertical integration in equipment manufacturing, the NEOM project, and the U.S. Gulf Coast hydrogen pipeline network. Their primary supply chain vulnerabilities stem from dependence on external partners for critical elements, exposure to commodity prices, and limited electrolysis technology.
Air Products' largest operational risk is the NEOM project, which is one of the company's largest projects in a challenging environment. This project will be the largest green hydrogen facility and is being built in a remote desert in Saudi Arabia with limited existing infrastructure. Air Products has never built a facility at this scale, with its closest comparable facility being a large LNG facility. Although LNG facilities are less complex. Specific risks involved in the NEOM project include underproduction, electrolyzer reliability, and ammonia synthesis integration. Although this project is 80%, the final 20% is where problems start to emerge. The helium business also could face headwinds in the near term, with prices down significantly in 2025. The helium market has historically been volatile, with supply coming from several sources, and demand driven by semiconductor manufacturing, MRI machines, and scientific research.
Management execution is another concern as the company recently appointed Eduardo Menezes (former COO) after a battle with activist investors. This also resulted in changes in the board. APD has also seen high turnover within its management team, and the broader company size has shrunk from around 24,000 to 20,000. APD’s management team has historically invested $500 million max for new projects, while this NEOM project is upward of a $1.7 billion investment for the company. The company does not have much experience in managing several multibillion-dollar projects, which could lead to increased costs from overruns, schedule delays, and technical failures.
Third-party supply chain dependencies create another layer of risk, which is fully out of Air Products' control. The NEOM project relies on ACWA Power to deliver renewable energy on budget and on time. APD has no control over these lads and could face cost overruns if ACWA encounters any delays in this project. APD is also dependent on electrolyzer vendors like Thyssenkrupp, Nel, and ITM for technology that is rapidly evolving. This is important because of next gen electrolyzer’s are cheaper or more efficient, current builds could be disadvantaged before they even come online. Cybersecurity and technology risks are also juiced for massive projects. Any cyber bump, system failure, or human error could cause production outages, safety incidents, or other damages.
A major risk for APD is the NEOM project; any failure, delay, or material underperformance would significantly hurt the company’s balance sheet. If it fails, Air Products $5 billion in equity could be written down to zero and destroy their reputation within the hydrogen segment. Management expects 12% returns on their hydrogen projects, and if actual returns come in lower, shareholders will be unhappy. APD’s Louisiana Blue project remains a sunk cost with the company already investing $2 billion in engineering, site work, and equipment before management paused the project.
Industrial demand risk is also a concern for the management team. APD’s business serves chemicals, refining, metals, and electronics, all of which are closely tied to global manufacturing and GPT growth. Production contracts take a hit due to recession indicators, trade tensions, and other factors that could impact volumes. APD is also exposed in the Chinese markets, as the company has two coal gasification projects that are currently for sale. While China represents 10% of Air Chemicals' revenue, the profitability from said revenue has been disappointing.
The hydrogen market is becoming extremely competitive, much faster than Air Products’ management team expected. APD’s competitors and Energy Majors are also investing in hydrogen production, distribution, and capabilities that will be able to leverage existing infrastructure. If hydrogen becomes a commodity business with easy-to-track metrics, Air products first mover advantage would be erased, and returns from projects could take a hit. With technology startups like Plug Power or Bloom Energy investing heavily to drive down costs faster than the big dawgs expected.
Regulatory risk is massive for APD and its competitors. The entire economic case for clean hydrogen hinges on policy, with the U.S. Inflation Reduction Act (IRA) providing subsidies for clean hydrogen. If the IRA is repealed or modified, project economics would take a major hit. APD’s Louisiana Blue needs those economics to hit managements 12% return target, and with no subsidies, returns could become be 3% to negative returns. The European support through RED III is similar. Europe's hydrogen strategy has also been complicated due to the tensions between Russia and Ukraine. Several countries are now considering LNG imports and nuclear power over renewable hydrogen.
Demand risk also looms over Air Products, with most of the market talking about how much they love green hydrogen versus actually investing in it. Current demand is around 2 million tons globally for niche use cases, but the bullish forecasts assume massive (200 million tons by 2030 and 500 million tons by 2050) adoption. Hydrogen adoption is being slowed by high costs, lack of infrastructure, competition from alternative energies, and lack of technological advances. The steel industry represents the largest demand source of clean hydrogen. Although if steel adoption disappoints, 50 million tons of annual hydrogen demand will go poof. Hydrogen was seen as a killer use case for hydrogen, but EVs came in with lower total costs than fuel cell alternatives.
Air Products' costs are heavily tied to commodity costs, which creates volatile margins. Though contracts include provisions, there is typically a 8 month lag between cost changes and price adjustments. If electricity prices rise by 20% or if fossil fuel prices increase, APD's margins could take a major hit. The helium market has faced oversupply issues with several new sources coming online in 2023 and 2024. Helium represents about 7% of the company’s annual revenue. Due to the oversupply of helium, it became a low-margin item. If oversupply continues, Air Products' helium revenue may hurt the company more than it helps it.
Air Products and Chemicals trades at a 24x PE, which is a significant premium compared to industrials and the company’s core competition. This premium implies that the market sees that APD's base business will accelerate beyond management’s expectations, hydrogen projects will drive meaningful earnings, free cash flow turns positive, and margins rebound to match or beat their competition. This leaves very little room for disappointment and little margin of safety. Also, if the market loses confidence in APD’s hydrogen thesis, the company could see a major hit in valuation and potential earnings. With failed hydrogen projects, the company could see a 30-50% drop in valuation. Management also made some aggressive estimations for their 2026 guidance. Any misses in pricing, volume growth, productivity improvements, and new asset contributions could trigger even more potential dahnside.
The company’s lack of free cash flow is another major valuation concern. With essentially no FCF forecast, investors should be cool with no cash return beyond a dividend. The dividend is also on the table, as many investors own the stock specifically for the dividend. If the divi is cut or put on layaway, dividend investors would run for the hills. This could cause the stock to drop significantly. While this is an unlikely scenario, the downside is significant.
The most significant catalyst in the near term for APD is announcing an update on its Louisiana Blue project. The project is currently in limbo with management stating that they are waiting for off-take agreements, commitments for carbon sequestration, and confirmation that costs and timelines will generate acceptable returns. If / When the company announces that they have secured strong off-take agreements and strong customers, this could be a strong signal that the hydrogen economics are in motion. However, if the Louisiana project is canceled or delayed, that would trigger a $2 billion write-off and raise serious questions about the viability of large-scale blue hydrogen. Positive NEOM milestones throughout 2026 would provide ongoing catalysts as the project is expected to be complete by mid 2026, with the facility targeting 2027 for its first ammonia production. Key milestones related to the NEOM project include renewable energy systems reaching full operation, Electrolyzer arrays being tested at scale, Ammonia units being integrated with hydrogen production, and off-take agreement announcements for green ammonia.
Asset sales and portfolio optimization could also improve capital efficiency. APD currently has two coal gasification projects that are for sale, and management has stated that they are focused on portfolio optimization in 2026. APD could generate up to $500 million from these asset sales, which could be used to pay down debt and deleverage itself. Regulatory improvements for hydrogen and carbon pricing around town could provide upside. While Air Products and other players within the industry have no control over these regulations but would benefit massively from these policies.
Air Products and Chemicals is a very high-risk, high-reward industrial play, they are a mature oligopolistic business. Its hydrogen infrastructure bet will either transform the business or severely hurt the financial health of the company. The company has had to issue debt to pay dividends and suspend buybacks to fund its NEOM and Louisiana Blue projects. This scares the bad boys over at Azar Capital Group. Best case scenario, both projects are successful, and the stock could see 10-12% annual returns with an improved EPS through 2030. Investors should have a high risk tolerance if they are looking to load up on this company. For everyone with low risk levels, you should continue your search for investments elsewhere.
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