Air Products & Chemicals Inc. (NYSE:APD)

The inventory data reveals notable fluctuations across the six-year span. Total inventories exhibit a declining trend from 2015 through 2017, dropping significantly from 657.8 million to 335.4 million US dollars. However, starting in 2018, inventories begin to recover, gradually increasing to 404.8 million by 2020.

Finished goods show a steep decrease between 2016 and 2017, falling from 456.7 million to 120 million, an approximate 74% decrease, which greatly contributes to the overall reduction in inventories during this period. From 2017 onward, finished goods stabilize and slowly increase, reaching 134.5 million by 2020.

Work in process inventories experienced a decline in 2017, reaching 15.7 million, down from 38.2 million the previous year. This was followed by an increase to 27.5 million in 2019, before a slight drop to 21.3 million in 2020. These fluctuations are more moderate compared to finished goods but indicate variable production activity or valuation changes in progress inventories.

Raw materials, supplies, and other inventories display a more stable yet somewhat cyclical pattern. Values decreased from 229.3 million in 2015 to 204 million in 2016 but rebounded in the subsequent years, peaking at 249.5 million in 2018, then declining again in 2019, before returning to 249 million in 2020. This suggests adjustments in procurement or inventory management policies responding to operational needs.

The FIFO cost follows a similar trajectory to total inventories, decreasing sharply from 758.6 million in 2015 to 358.7 million in 2017, then experiencing a recovery trend to 404.8 million by 2020. The magnitude of the drop in FIFO cost parallels the reduction in finished goods and total inventory, indicating cost adjustments in line with quantity decreases or revaluations.

The excess of FIFO cost over LIFO cost, reported only from 2015 to 2017, shows a decreasing negative balance, moving from -100.8 million to -23.3 million. This suggests that the difference between these inventory valuation methods narrowed, potentially reflecting changing cost structures or price trends for the inputs. The absence of data from 2018 onwards restricts further analysis of this aspect.

In summary, the data indicates that inventory levels and associated costs underwent a pronounced contraction from 2015 through 2017, driven mainly by a steep decline in finished goods, followed by a period of recovery and stabilization through 2020. The variability in work in process and raw materials inventories points to adaptive inventory management and possible responses to changing market conditions or production demands. The diminishing excess of FIFO over LIFO cost in early years suggests moderated cost inflation or improved efficiency during that time frame.

The data reveals several notable trends in the financial position and performance over the six-year period.

Inventories

Reported inventories declined significantly from 657.8 million USD in 2015 to 335.4 million USD in 2017, before stabilizing around the 388 to 405 million USD range through 2020. The adjusted inventories, accounting for the LIFO reserve, follow a similar pattern but are consistently higher than reported inventories, indicating the presence of LIFO accounting effects. The narrowing difference by 2018 and onward suggests stabilization in inventory valuation adjustments.

Current Assets

Reported current assets increased substantially from approximately 2.91 billion USD in 2015 to 8.68 billion USD in 2020. Adjusted current assets, which include inventory adjustments, also exhibited a similar upward trend, remaining slightly above the reported figures. The pronounced increase, especially from 2019 to 2020, signals a significant growth in liquid and short-term assets during the final year in the dataset.

Total Assets

Total assets, both reported and adjusted, exhibited moderate growth from around 17.44 billion USD in 2015 to approximately 25.17 billion USD by 2020. The adjusted totals are marginally higher than reported figures, reflecting the cumulative impact of inventory adjustments. The consistent upward movement in total assets reflects ongoing asset growth and expansion.

Shareholders’ Equity

Total shareholders’ equity attributable to the company increased from approximately 7.25 billion USD in 2015 to 12.08 billion USD in 2020. Adjusted equity values are slightly higher throughout, paralleling the pattern seen in total assets. Equity growth was relatively steady, with a notable increase between 2016 and 2017, after which it maintained a positive but more gradual trajectory.

Net Income Attributable to Air Products

Net income showed marked volatility, starting at around 1.28 billion USD in 2015, dropping by more than half in 2016 to approximately 609 million to 631 million USD (adjusted and reported respectively), then spiking dramatically to about 3 billion USD in 2017. After this peak, net income declined to roughly 1.48 to 1.50 billion USD in 2018 and then increased steadily to nearly 1.89 billion USD by 2020. The adjusted net income closely tracks the reported figures, with minor variances in some years.

Overall, the financial data reflects a company experiencing asset growth and equity strengthening while navigating fluctuations in profitability. The adjustments for the LIFO reserve indicate moderate inventory-related valuation effects, which slightly elevate reported asset and equity balances. The sharp fluctuations in net income, particularly the spike in 2017, suggest episodic factors affecting profitability during the period under review.

Current Ratio

The current ratio shows a steady increase over the analyzed period, rising from 0.8 in 2015 to 3.59 in 2020. Both reported and adjusted figures closely align, indicating consistency after LIFO reserve adjustments. This growth suggests an improvement in short-term liquidity and the company's ability to cover current liabilities with current assets.

Net Profit Margin

The net profit margin exhibits substantial volatility. Reported margins decreased significantly from 12.91% in 2015 to 6.63% in 2016, followed by a sharp spike to 36.65% in 2017. Thereafter, margins moderated to around 16.5%-21.3% through 2018 to 2020. Adjusted values are nearly identical to reported ones, showing minimal impact from inventory adjustments. The fluctuations indicate variability in profitability, possibly linked to operational or market conditions.

Total Asset Turnover

Total asset turnover demonstrates a generally declining trend, starting at 0.57 in 2015 and falling to 0.35 by 2020. The ratio decreased sharply in 2017 and remained relatively stable around 0.47 before the final decline. Adjusted and reported values are similar, suggesting LIFO reserve adjustments do not materially affect asset utilization metrics. This decline may reflect lower asset efficiency or changes in asset base composition.

Financial Leverage

Financial leverage ratios remained relatively stable with minor fluctuations. Values started around 2.4 in 2015, rose slightly to a peak near 2.55 in 2016, dropped to approximately 1.71-1.83 during 2017 to 2019, and increased again to 2.08 in 2020. Both reported and adjusted data follow the same pattern. This indicates modest variation in the company’s use of debt relative to equity over the period.

Return on Equity (ROE)

ROE exhibits significant fluctuations correlating with changes in profit margins and leverage. It dropped sharply from 17.63% in 2015 to 8.91% in 2016, surged to 29.75% in 2017, and then declined to the 13.58%-15.92% range in subsequent years. Adjusted figures closely match reported values. This pattern highlights variable profitability impacting shareholder returns.

Return on Assets (ROA)

ROA mimics the trend seen in ROE, falling from 7.33% in 2015 to 3.5% in 2016, peaking at 16.25% in 2017, and tapering off to around 7.5% by 2020. The adjusted data is nearly identical to reported metrics. The movement reflects changing asset profitability and operational efficiency over time.

The analysis of the financial data reveals notable trends in both current assets and liquidity ratios over the six-year period.

Current Assets

The reported current assets exhibit a generally increasing trend from 2015 through 2017, rising from 2,910,800 thousand USD to 5,876,700 thousand USD. However, this upward movement is interrupted in 2018 and 2019 with declines to 5,082,200 thousand USD and 4,618,300 thousand USD respectively. A substantial increase is observed again in 2020, reaching 8,684,900 thousand USD, the highest value within the period.

The adjusted current assets show a similar pattern to the reported figure, with slightly higher values in the earlier years 2015 to 2017 due to the LIFO reserve adjustment. The adjustment effect diminishes or becomes neutral from 2018 onward, as indicated by identical values for reported and adjusted current assets in 2018, 2019, and 2020.

Current Ratio

The reported current ratio sees a significant improvement from 0.80 in 2015 to 2.36 in 2017, indicating enhanced short-term liquidity. After a slight decrease in 2018 to 2.17, the ratio rebounds to 2.54 in 2019 and reaches 3.59 in 2020, suggesting strong liquidity.

The adjusted current ratio follows a very similar trend, with marginally higher values in the earlier years due to inventory adjustments. From 2018 onwards, the reported and adjusted ratios converge, consistent with the observed current assets data.

Overall, the data reflect an improvement in liquidity over the analyzed years, with some fluctuations in asset levels in the middle periods. The LIFO reserve adjustment had a more pronounced impact on the earlier years' current assets and liquidity, while its effect became negligible in later periods. The marked increase in both current assets and the current ratio in 2020 suggests strengthened short-term financial stability at the end of the period.

Net Income Trends

The reported net income attributable to Air Products exhibited fluctuations over the analyzed periods. It initially decreased from approximately 1.28 billion US dollars in 2015 to around 631 million US dollars in 2016, representing a significant decline. This was followed by a notable increase in 2017, reaching about 3.0 billion US dollars. Subsequently, net income reduced again in 2018 to roughly 1.50 billion US dollars, then increased moderately in 2019 and 2020, reaching approximately 1.76 billion and 1.89 billion US dollars, respectively.

The adjusted net income followed a similar trajectory, decreasing from about 1.27 billion US dollars in 2015 to 609 million US dollars in 2016, before rising sharply to approximately 3.01 billion US dollars in 2017. Thereafter, it decreased to 1.47 billion US dollars in 2018 and increased gradually to 1.76 billion and 1.89 billion US dollars in 2019 and 2020, respectively.

Net Profit Margin Analysis

The reported net profit margin mirrored the income trend, starting at 12.91% in 2015 and falling sharply to 6.63% in 2016. A pronounced spike occurred in 2017, where the margin dramatically increased to 36.65%, followed by a decline in 2018 to 16.77%. The margin then improved steadily over the following two years, reaching 19.73% in 2019 and 21.30% in 2020.

The adjusted net profit margin exhibited a similar pattern, with minor deviations. It decreased from 12.87% in 2015 to 6.4% in 2016, surged to 36.79% in 2017, dropped to 16.51% in 2018, and then rose consistently to match the reported margin at 19.73% in 2019 and 21.30% in 2020.

Overall Observations

There is a clear cyclical pattern in both net income and net profit margins, with a pronounced peak in 2017. The close alignment between reported and adjusted figures suggests minimal impact from inventory LIFO reserve adjustments on these profitability measures. Post-2017, the company appeared to stabilize, with gradual improvements in profitability through 2019 and 2020 after a period of volatility.

An analysis of the financial data over the period from 2015 to 2020 reveals several notable trends and developments related to asset levels and asset utilization efficiency.

Total Assets

Reported total assets demonstrate a generally upward trajectory, increasing from approximately $17.4 billion in 2015 to about $25.2 billion by 2020. This reflects a significant increase, particularly pronounced in the final year where assets rose sharply compared to more moderate changes in prior years. The adjusted total assets follow a closely similar pattern, indicating that inventory LIFO reserve adjustments have a relatively minor impact on the asset base.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios reveal a declining trend during the period under review. Starting from around 0.57 in 2015, the turnover ratio decreases to approximately 0.35 by 2020. This indicates a reduction in the efficiency with which the company utilizes its assets to generate revenues. Notably, the turnover ratio exhibits a more pronounced drop after 2018, suggesting a period of less effective asset deployment or slower revenue generation relative to asset growth in recent years.

Impact of LIFO Reserve Adjustment

The closeness of reported versus adjusted figures throughout the dataset implies that the LIFO reserve adjustments have minimal influence on the overall financial metrics analyzed. Both total assets and asset turnover ratios are nearly identical when adjusted, reflecting stability in the reported figures despite accounting adjustments.

Overall Insights

The company experienced consistent asset growth over the six-year period, culminating in a substantial increase by 2020. However, this growth has not corresponded to proportional increases in revenue generation efficiency, as evidenced by declining asset turnover ratios. The decreased turnover could indicate challenges in converting asset investments into sales or a strategic accumulation of assets anticipating future growth. The minor impact of LIFO adjustments ensures confidence in the reliability of reported asset metrics for evaluation.

The analysis of the financial data over the six-year period reveals several noteworthy trends in the company's asset base, shareholder equity, and financial leverage. The comparison between reported and inventory LIFO reserve adjusted figures provides insights into the potential impact of inventory accounting methods on financial metrics.

Total Assets

Both reported and adjusted total assets show a steady increase from 2015 through 2018, rising from approximately $17.4 billion in 2015 to $19.18 billion in 2018. There is a slight decrease in 2019 to around $18.94 billion, followed by a substantial increase in 2020 to approximately $25.17 billion. The parity between reported and adjusted asset values from 2018 onward indicates either the elimination or immaterial nature of LIFO reserve adjustments in these years.

Shareholders’ Equity

Reported shareholders’ equity experienced a decline from $7.25 billion in 2015 to $7.08 billion in 2016. This was followed by a significant increase in 2017 to about $10.09 billion, continuing to grow to $10.86 billion in 2018, $11.05 billion in 2019, and reaching $12.08 billion in 2020. Adjusted equity values mirror this pattern, starting slightly higher in 2015 and 2016, with negligible differences thereafter, indicating consistent upward equity growth and minimal inventory accounting impact post-2016.

Financial Leverage

The reported financial leverage ratio declined markedly from 2.41 in 2015 to 1.71 in 2019, demonstrating a trend towards lower leverage over this period. This trend is reversed in 2020, with leverage increasing to 2.08. Adjusted financial leverage ratios closely follow the reported figures, confirming that LIFO adjustments have little effect on leverage calculations during these years.

Overall, the data exhibits growth in both total assets and shareholders’ equity, with a notable surge in asset size in 2020. The financial leverage trend suggests improving credit strength up to 2019, followed by increased leverage in 2020, which could be reflective of strategic financing decisions or changes in capital structure. The minimal differences between reported and adjusted figures imply that inventory accounting methods have limited impact on the analyzed financial metrics.

Net Income Trends

The reported net income attributable to the company exhibited significant fluctuations over the analyzed periods. It decreased sharply from 1,277,900 thousand USD in 2015 to 631,100 thousand USD in 2016, followed by a strong recovery peaking at 3,000,400 thousand USD in 2017. Subsequently, net income declined to 1,497,800 thousand USD in 2018 before showing gradual increases, reaching 1,886,700 thousand USD by 2020. The adjusted net income follows a similar pattern, with marginal differences in values, indicating that LIFO reserve adjustments have minimal impact on net income figures.

Shareholders' Equity Patterns

The reported total shareholders' equity demonstrated a consistent upward trend throughout the periods with minor fluctuations. Starting at 7,249,000 thousand USD in 2015, it slightly decreased to 7,079,600 thousand USD in 2016, then substantially increased, reaching 10,086,200 thousand USD by 2017. This growth momentum continued through 2020, culminating at 12,079,800 thousand USD. The adjusted shareholders' equity closely aligns with the reported figures, showing minimal variation through LIFO reserve adjustments, reflecting stability in equity value.

Return on Equity (ROE) Analysis

Both reported and adjusted ROE displayed parallel trends, indicating the consistency of profitability measures irrespective of LIFO reserve adjustments. The ROE plummeted from 17.63% in 2015 to 8.91% in 2016, coinciding with a similar drop in net income. A strong rebound occurred in 2017, with ROE reaching approximately 29.75%. However, this peak was followed by a decline to around 13.8% in 2018. From 2019 to 2020, ROE stabilized in the mid-fifteen percent range, suggesting a period of moderate profitability relative to equity.

Impact of LIFO Reserve Adjustments

Adjustment for the LIFO reserve had a negligible effect on reported net income, shareholders’ equity, and ROE, as seen in the closely matched values between reported and adjusted data. This indicates that inventory accounting under LIFO does not significantly distort the company’s profitability or equity positions during the examined timeframe.

Overall Financial Insights

The data reflect a company experiencing volatility in profitability, particularly noticeable in 2016 and 2017, possibly due to operational or market factors affecting net income. Despite these fluctuations, shareholders' equity growth remains robust and steady, supporting a stable capital base. The ROE volatility mirrors changes in net income but trends towards stabilization in recent years, suggesting improving or more consistent returns on equity invested.

Net Income Trends

Reported net income attributable to the company showed a significant decrease from 1,277,900 thousand USD in 2015 to 631,100 thousand USD in 2016, followed by a sharp increase to 3,000,400 thousand USD in 2017. Subsequently, it declined again to 1,497,800 thousand USD in 2018 but rose gradually in the following years, reaching 1,760,000 thousand USD in 2019 and 1,886,700 thousand USD in 2020. The adjusted net income follows a similar pattern, with closely aligned figures to the reported net income over the years, indicating minimal impact from inventory LIFO reserve adjustments on net income.

Total Assets Analysis

Reported total assets displayed a steady growth trend from 17,438,100 thousand USD in 2015 to 19,178,300 thousand USD in 2018. However, there was a slight decrease to 18,942,800 thousand USD in 2019 before a notable increase to 25,168,500 thousand USD in 2020. Adjusted total assets closely mirrored the reported total assets with minor variations, particularly in 2015 and 2016, suggesting that inventory LIFO reserve adjustments had limited effect on total asset values.

Return on Assets (ROA) Evaluation

Reported ROA saw a steep decline from 7.33% in 2015 to 3.5% in 2016, then surged significantly to 16.25% in 2017. This was followed by a drop to 7.81% in 2018 and then a gradual increase to 9.29% in 2019 before falling again to 7.5% in 2020. Adjusted ROA values are consistently slightly lower than reported ROA in all years except for 2017, where they are marginally higher. This indicates that adjusting for inventory LIFO reserve slightly reduces the efficiency measure in most periods but does not substantially change the overall trend.

General Insights

The financial performance exhibits volatility, particularly in net income and ROA, with a pronounced peak in 2017 followed by fluctuations in subsequent years. Total assets maintain a general upward trajectory with an exceptional increase in 2020. The adjustments for inventory LIFO reserve have a minimal impact on net income and total assets, as demonstrated by the close alignment between reported and adjusted values. Consequently, the company's profitability and efficiency measures reflect similar trends regardless of inventory accounting adjustments.