Analysis of Geographic Areas
Air Products & Chemicals Inc. operates in 3 regions: United States; China; and Other foreign operations.
Area Asset Turnover
Air Products & Chemicals Inc., asset turnover by geographic area
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| United States | 0.73 | 0.90 | 0.90 | 0.85 | 1.00 | 1.13 |
| China | 0.46 | 0.52 | 0.52 | 0.66 | 0.68 | 0.65 |
| Other foreign operations | 1.05 | 1.16 | 1.25 | 1.26 | 1.36 | 1.09 |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
Between 2015 and 2020, a general decline in asset turnover ratios is observed across all reported geographic segments. This trend indicates a systemic reduction in the efficiency with which assets are utilized to generate revenue across the company's global operations, culminating in a notable decrease for all regions in the 2020 fiscal year.
- United States
- The asset turnover ratio in the United States experienced a steady downward trajectory, starting at 1.13 in 2015 and ending at 0.73 in 2020. While a brief period of stability occurred between 2018 and 2019 at 0.90, the ratio declined significantly by 2020, representing the most substantial decrease in efficiency among the domestic operations over the analyzed period.
- China
- China consistently exhibited the lowest asset turnover ratios of all geographic areas. The ratio remained relatively stable between 0.65 and 0.68 from 2015 to 2017, followed by a sharp decline to 0.52 in 2018. This lower level of efficiency persisted through 2019 before further deteriorating to 0.46 in 2020, suggesting a challenging environment for asset productivity in this region.
- Other foreign operations
- Other foreign operations maintained the highest asset turnover ratios for the majority of the period. After an initial increase from 1.09 in 2015 to a peak of 1.36 in 2016, a gradual decline ensued. By 2020, the ratio had fallen to 1.05, mirroring the broader global trend of diminishing asset productivity, although it remained the most efficient segment relative to the United States and China.
The convergence of these trends in 2020 suggests an external or systemic factor affecting all geographic regions simultaneously, as every segment recorded its lowest or near-lowest turnover ratio of the six-year period.
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Area Asset Turnover: United States
Air Products & Chemicals Inc.; United States; area asset turnover calculation
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Sales to external customers | 3,359,600) | 3,351,800) | 3,149,600) | 2,886,800) | 3,792,300) | 4,280,100) |
| Long-lived assets | 4,633,900) | 3,721,300) | 3,512,700) | 3,407,400) | 3,780,200) | 3,776,700) |
| Area Activity Ratio | ||||||
| Area asset turnover1 | 0.73 | 0.90 | 0.90 | 0.85 | 1.00 | 1.13 |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Area asset turnover = Sales to external customers ÷ Long-lived assets
= 3,359,600 ÷ 4,633,900 = 0.73
The asset utilization efficiency within the United States geographic area experienced a notable decline between 2015 and 2020. While the period began with a turnover ratio above 1.0, it concluded at its lowest point in the analyzed timeframe, indicating a diminishing return on long-lived asset investments relative to sales generation.
- Revenue Trajectory
- Sales to external customers exhibited significant volatility, starting at $4.28 billion in 2015 and falling to a trough of $2.89 billion in 2017. Although a recovery phase occurred between 2018 and 2020, with sales stabilizing at approximately $3.36 billion, revenue levels remained substantially lower than the 2015 peak.
- Long-Lived Asset Evolution
- The asset base remained relatively stable between 2015 and 2019, fluctuating within a range of $3.41 billion to $3.78 billion. However, a substantial increase in long-lived assets was recorded in 2020, rising to $4.63 billion, which represents a significant expansion of the capital base in the United States.
- Area Asset Turnover Analysis
- The turnover ratio declined from 1.13 in 2015 to 0.73 by 2020. This downward trend was driven by two distinct phases: an initial decline from 2015 to 2017 caused by a rapid contraction in sales, and a secondary sharp decline in 2020. The most recent decrease is specifically attributed to the misalignment between a sharp increase in long-lived assets and nearly flat sales growth, suggesting that recent capital expenditures have not yet yielded proportional increases in external revenue.
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Area Asset Turnover: China
Air Products & Chemicals Inc.; China; area asset turnover calculation
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Sales to external customers | 1,719,700) | 1,730,200) | 1,585,700) | 1,143,400) | 1,176,200) | 1,129,100) |
| Long-lived assets | 3,719,400) | 3,302,600) | 3,066,600) | 1,737,900) | 1,721,900) | 1,732,700) |
| Area Activity Ratio | ||||||
| Area asset turnover1 | 0.46 | 0.52 | 0.52 | 0.66 | 0.68 | 0.65 |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Area asset turnover = Sales to external customers ÷ Long-lived assets
= 1,719,700 ÷ 3,719,400 = 0.46
Between 2015 and 2020, the operational performance in China was characterized by substantial capital investment and a corresponding increase in revenue, although the efficiency of asset utilization experienced a notable decline.
- Revenue Growth Trends
- Sales to external customers remained relatively stable between 2015 and 2017, fluctuating between 1.13 billion and 1.18 billion US dollars. A significant acceleration occurred in 2018, with sales rising to 1.59 billion US dollars, and peaking in 2019 at 1.73 billion US dollars before slightly moderating to 1.72 billion US dollars in 2020.
- Long-Lived Asset Expansion
- Asset accumulation followed a two-phase pattern. From 2015 to 2017, long-lived assets were held steady at approximately 1.73 billion US dollars. Starting in 2018, there was a sharp increase in capital allocation, with assets rising to 3.07 billion US dollars, and continuing upward to 3.72 billion US dollars by 2020. This represents a more than twofold increase in the asset base over the six-year period.
- Area Asset Turnover Performance
- The asset turnover ratio exhibited a downward trend, particularly after 2017. The ratio peaked at 0.68 in 2016 and remained stable through 2017 at 0.66. However, the aggressive expansion of the asset base in 2018 outpaced revenue growth, causing the ratio to drop to 0.52. This decline continued through 2020, reaching a low of 0.46.
- Operational Efficiency Analysis
- The divergence between the growth rates of sales and long-lived assets indicates a period of heavy investment. While the total revenue increased by approximately 52% from 2015 to 2020, long-lived assets grew by approximately 115% in the same timeframe. The resulting decrease in the asset turnover ratio suggests that the new capital investments have not yet reached their full revenue-generating potential.
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Area Asset Turnover: Other foreign operations
Air Products & Chemicals Inc.; Other foreign operations; area asset turnover calculation
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Sales to external customers | 3,777,000) | 3,836,900) | 4,194,900) | 4,157,400) | 4,555,900) | 4,485,700) |
| Long-lived assets | 3,611,400) | 3,313,700) | 3,344,400) | 3,294,900) | 3,350,600) | 4,127,500) |
| Area Activity Ratio | ||||||
| Area asset turnover1 | 1.05 | 1.16 | 1.25 | 1.26 | 1.36 | 1.09 |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Area asset turnover = Sales to external customers ÷ Long-lived assets
= 3,777,000 ÷ 3,611,400 = 1.05
The asset utilization efficiency for other foreign operations exhibited a non-linear trend between 2015 and 2020, characterized by a significant peak in 2016 followed by a consistent multi-year decline in turnover performance.
- Sales Performance
- External customer sales experienced an initial slight increase in 2016, reaching a peak of US$ 4,555,900 thousand. However, a general downward trajectory followed, with revenue decreasing to US$ 3,777,000 thousand by September 30, 2020. This represents a total reduction in annual sales of approximately 15.8% from the 2016 peak.
- Long-lived Asset Trends
- The asset base saw a sharp reduction between 2015 and 2016, falling from US$ 4,127,500 thousand to US$ 3,350,600 thousand. Asset levels remained relatively stable between 2016 and 2019, fluctuating within a narrow range. A reversal occurred in 2020, where long-lived assets increased to US$ 3,611,400 thousand.
- Area Asset Turnover Analysis
- The asset turnover ratio peaked at 1.36 in 2016, primarily driven by the substantial reduction in long-lived assets during that period rather than a significant increase in sales. Following this peak, the ratio declined steadily each year, ending at 1.05 in 2020. The deterioration of this ratio from 2017 onward is attributed to the simultaneous contraction of sales and the eventual expansion of the asset base in the final year of the period.
The convergence of declining revenues and increasing asset investment in 2020 resulted in the lowest asset turnover ratio of the observed period, indicating a reduction in the operational efficiency of assets within these foreign operations.
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Sales to external customers
Air Products & Chemicals Inc., sales to external customers by geographic area
US$ in thousands
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| United States | 3,359,600) | 3,351,800) | 3,149,600) | 2,886,800) | 3,792,300) | 4,280,100) |
| China | 1,719,700) | 1,730,200) | 1,585,700) | 1,143,400) | 1,176,200) | 1,129,100) |
| Other foreign operations | 3,777,000) | 3,836,900) | 4,194,900) | 4,157,400) | 4,555,900) | 4,485,700) |
| Total | 8,856,300) | 8,918,900) | 8,930,200) | 8,187,600) | 9,524,400) | 9,894,900) |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
Total external sales exhibited a general downward trajectory between 2015 and 2017, followed by a period of relative stability from 2018 through 2020. Overall revenue declined from $9.89 billion in 2015 to $8.86 billion in 2020, representing a total decrease of approximately 10.4% over the six-year period.
- United States Market Performance
- Sales within the United States experienced a significant contraction, falling from $4.28 billion in 2015 to a low of $2.89 billion in 2017. Following this trough, a gradual recovery was observed, with revenue increasing steadily to reach $3.36 billion by September 30, 2020. Despite this recovery, US sales remained approximately 21.5% lower at the end of the period compared to the 2015 baseline.
- China Market Expansion
- China demonstrated the most consistent growth among the analyzed regions. After maintaining stable levels between 2015 and 2017, sales surged from $1.14 billion in 2017 to $1.73 billion in 2019. This represents a substantial increase in the regional contribution to total revenue, with 2020 figures remaining strong at $1.72 billion.
- Other Foreign Operations
- Revenue from other foreign operations remained the largest single geographic segment for much of the period, though it trended downward overall. After peaking at $4.56 billion in 2016, sales declined to $3.78 billion by 2020. This segment's decline contributed significantly to the overall reduction in total external sales.
- Geographic Revenue Distribution
- The composition of external sales shifted over the period. The reliance on the United States and other foreign operations decreased, while the proportional importance of the Chinese market increased. By 2020, China accounted for approximately 19.5% of total external sales, compared to 11.4% in 2015.
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Long-lived assets
Air Products & Chemicals Inc., long-lived assets by geographic area
US$ in thousands
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | |
|---|---|---|---|---|---|---|
| United States | 4,633,900) | 3,721,300) | 3,512,700) | 3,407,400) | 3,780,200) | 3,776,700) |
| China | 3,719,400) | 3,302,600) | 3,066,600) | 1,737,900) | 1,721,900) | 1,732,700) |
| Other foreign operations | 3,611,400) | 3,313,700) | 3,344,400) | 3,294,900) | 3,350,600) | 4,127,500) |
| Total | 11,964,700) | 10,337,600) | 9,923,700) | 8,440,200) | 8,852,700) | 9,636,900) |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
Total long-lived assets experienced a period of contraction between 2015 and 2017, followed by a trajectory of sustained expansion through 2020. Total assets decreased from approximately $9.64 billion in 2015 to a minimum of $8.44 billion in 2017, before rebounding strongly to reach $11.96 billion by September 30, 2020.
- United States Asset Trends
- Long-lived assets within the United States remained relatively stable through 2016, followed by a decline to $3.41 billion in 2017. A consistent recovery trend was observed from 2018 onward, culminating in a significant increase to $4.63 billion in 2020, reflecting a substantial intensification of domestic capital investment in the final year of the period.
- Strategic Expansion in China
- The most aggressive growth pattern is evident in China. Assets remained stagnant at approximately $1.7 billion between 2015 and 2017, followed by a sharp increase to $3.07 billion in 2018. This growth continued steadily, reaching $3.72 billion by 2020, which represents more than a doubling of the asset base in this region over the five-year period.
- Other Foreign Operations
- Assets in other foreign operations underwent a notable reduction, falling from $4.13 billion in 2015 to $3.35 billion in 2016. Following this decline, asset levels remained largely flat through 2019, with a moderate increase to $3.61 billion recorded in 2020.
The overall geographic distribution of long-lived assets reveals a strategic pivot. While the company initially saw a reduction in assets across other foreign operations and a temporary dip in the United States, these were offset by a massive expansion in China starting in 2018 and a strong domestic surge in 2020. By the end of the analyzed period, the combined growth in the United States and China drove the overall increase in the company's long-lived asset base.
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