Airgas, Inc. (NYSE: ARG) reported in July earnings per diluted share of $1.16 for its first quarter ended June 30, 2015, down 2% compared to the prior year earnings per diluted share of $1.18, in line with the company’s expectations and reflective of the challenging economic conditions.
First quarter sales increased 3% over the prior year to $1.3 billion. Organic sales were up 2% over the prior year, with gas and rent up 5% and hardgoods down 3%. In the Distribution segment, organic sales were flat compared to the prior year, with gas and rent up 2% and hardgoods down 3%. In the All Other Operations segment, organic sales were up 16%, primarily driven by increased sales in the refrigerants, CO2 and dry ice businesses. Acquisitions contributed sales growth of 1% in the quarter on both a consolidated basis and in the Distribution segment.
“As anticipated, sales to our customers engaged in the energy and chemical and the manufacturing and metal fabrication sectors remained challenged through the quarter,” said Airgas President and Chief Executive Officer Michael L. Molinini. “One bright spot is the continued strength we are seeing in non-residential construction. After a relatively slow calendar 2014, our March 2015 quarter saw year-over-year growth in non-residential construction of 5% and this quarter year-over-year growth reached 6%. We remain focused on things we can control including leveraging our industry leading platform and managing expenses.”
Operating margin was 11.3%, down 50 basis points compared to the prior year, primarily reflecting the impact of the increase in selling, distribution, and administrative expenses in the current low organic sales growth environment related to our Distribution segment.
“We share the Fed’s view of tempered optimism on the economic outlook in the near-term and the level of uncertainty in the marketplace makes it difficult for us to predict our near-term sales outlook,” said Airgas Executive Chairman Peter McCausland. “While we are encouraged by some bright spots, such as the increased activity of many of our construction customers, our strong cash flow and increased acquisition activity, the overall sluggishness in the industrial economy tempers our near-term optimism. Long-term, we believe the fundamental growth prospects for the U.S. economy are strong. Through past investments we’ve made to improve our platform, systems and product and service offering, we have positioned Airgas for growth when the economy improves. Consistent with our demonstrated track record, we remain committed to delivering sustainable long-term value to our customers and shareholders. The low end of our fiscal 2016 guidance assumes a very modest uptick in growth rates as the year progresses, with average organic sales growth in the low single digits for the full year. The high end assumes acceleration in growth rates over the course of the year, with average organic sales growth in the mid single digits for the full year.”