Air Products & Chemicals Inc., FCFF calculation

US$ in thousands

12 months ended:	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015
Net income attributable to Air Products	1,886,700)	1,760,000)	1,497,800)	3,000,400)	631,100)	1,277,900)
Net income attributable to noncontrolling interests	44,400)	49,400)	35,100)	20,800)	30,400)	39,700)
Net noncash charges	1,373,700)	1,185,800)	1,287,200)	(535,100)	2,066,000)	901,400)
Working capital changes that provided (used) cash, excluding effects of acquisitions	(40,100)	(25,300)	(265,400)	48,000)	(20,100)	218,800)
Cash provided by operating activities	3,264,700)	2,969,900)	2,554,700)	2,534,100)	2,707,400)	2,437,800)
Cash paid for interest, net of amounts capitalized, net of tax¹	53,962)	126,123)	101,434)	102,734)	87,798)	74,100)
Capitalized interest, net of tax²	12,768)	10,922)	16,068)	15,504)	23,853)	37,316)
Additions to plant and equipment, including long-term deposits	(2,509,000)	(1,989,700)	(1,568,400)	(1,039,700)	(1,055,800)	(1,614,800)
Free cash flow to the firm (FCFF)	822,429)	1,117,245)	1,103,802)	1,612,638)	1,763,250)	934,416)

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, 2} See details »

Cash provided by operating activities: The cash generated from operating activities showed an overall upward trend during the period analyzed. Starting at approximately 2.44 billion USD in 2015, it increased steadily each year except for a slight dip in 2017. By 2020, the figure reached approximately 3.26 billion USD, representing a significant rise over the six-year span. This consistent increase suggests improving operational efficiency or higher revenue generation capacity over the years.
Free cash flow to the firm (FCFF): The free cash flow to the firm demonstrated noticeable fluctuations throughout the period. In 2015, FCFF was approximately 934 million USD, which then surged sharply to about 1.76 billion USD in 2016. Following this peak, the FCFF declined moderately in 2017 and continued a downward trend through 2018 and 2019, stabilizing slightly around 1.12 billion USD. By 2020, FCFF decreased further to approximately 822 million USD, marking its lowest point in the period under review. This volatility may indicate variations in capital expenditures, changes in working capital components, or shifts in investment activities impacting the free cash flow available to the firm.

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Air Products & Chemicals Inc., interest paid, net of tax calculation

US$ in thousands

12 months ended:	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015
Effective Income Tax Rate (EITR)
EITR¹	19.70%	19.10%	17.60%	18.40%	27.50%	24.00%
Interest Paid, Net of Tax
Cash paid for interest, net of amounts capitalized, before tax	67,200)	155,900)	123,100)	125,900)	121,100)	97,500)
Less: Cash paid for interest, net of amounts capitalized, tax²	13,238)	29,777)	21,666)	23,166)	33,303)	23,400)
Cash paid for interest, net of amounts capitalized, net of tax	53,962)	126,123)	101,434)	102,734)	87,798)	74,100)
Interest Costs Capitalized, Net of Tax
Capitalized interest, before tax	15,900)	13,500)	19,500)	19,000)	32,900)	49,100)
Less: Capitalized interest, tax³	3,132)	2,579)	3,432)	3,496)	9,048)	11,784)
Capitalized interest, net of tax	12,768)	10,922)	16,068)	15,504)	23,853)	37,316)

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 See details »

² 2020 Calculation
Cash paid for interest, net of amounts capitalized, tax = Cash paid for interest, net of amounts capitalized × EITR
= 67,200 × 19.70% = 13,238

³ 2020 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 15,900 × 19.70% = 3,132

Effective Income Tax Rate (EITR): The effective income tax rate demonstrated a declining trend from 2015 to 2018, decreasing from 24% in 2015 to a low of 17.6% in 2018. Following this period, the rate experienced a slight increase, stabilizing around 19% in 2019 and 2020. This pattern suggests an overall improvement in tax efficiency during the earlier years, with a moderate rise in the later years.
Cash Paid for Interest, Net of Amounts Capitalized, Net of Tax: The cash paid for interest showed a general upward trend from 2015 to 2019, increasing from 74,100 thousand USD in 2015 to a peak of 126,123 thousand USD in 2019. However, there was a significant decline in 2020, with cash interest paid dropping to 53,962 thousand USD. This abrupt decrease in 2020 may indicate changes in debt levels, interest rates, or refinancing activities during that year.
Capitalized Interest, Net of Tax: Capitalized interest decreased steadily from 37,316 thousand USD in 2015 to 10,922 thousand USD in 2019, indicating a reduction in the interest costs being capitalized rather than expensed. In 2020, there was a slight increase to 12,768 thousand USD. The downward trend suggests a potential shift in capital investment strategies or financing activities over the period, with a modest reversal in the most recent year.

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Air Products & Chemicals Inc., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in thousands)
Enterprise value (EV)	62,954,505)
Free cash flow to the firm (FCFF)	822,429)
Valuation Ratio
EV/FCFF	76.55
Benchmarks
EV/FCFF, Competitors¹
Linde plc	45.00
Sherwin-Williams Co.	39.48
EV/FCFF, Sector
Chemicals	43.05
EV/FCFF, Industry
Materials	45.12

Based on: 10-K (reporting date: 2020-09-30).

¹ Click competitor name to see calculations.

If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Air Products & Chemicals Inc., historical EV/FCFF calculation, comparison to benchmarks

	Sep 30, 2020	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015
Selected Financial Data (US$ in thousands)
Enterprise value (EV)¹	61,669,949)	52,915,712)	35,745,103)	35,621,405)	35,233,696)	35,850,244)
Free cash flow to the firm (FCFF)²	822,429)	1,117,245)	1,103,802)	1,612,638)	1,763,250)	934,416)
Valuation Ratio
EV/FCFF³	74.99	47.36	32.38	22.09	19.98	38.37
Benchmarks
EV/FCFF, Competitors⁴
Linde plc	34.03	—	—	—	—	—
Sherwin-Williams Co.	21.39	—	—	—	—	—
EV/FCFF, Sector
Chemicals	28.47	—	—	—	—	—
EV/FCFF, Industry
Materials	30.81	—	—	—	—	—

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 See details »

² See details »

³ 2020 Calculation
EV/FCFF = EV ÷ FCFF
= 61,669,949 ÷ 822,429 = 74.99

⁴ Click competitor name to see calculations.

The analysis of the provided financial data reveals several significant trends over the six-year period ending in 2020.

Enterprise Value (EV): The enterprise value exhibited a relatively stable pattern from 2015 through 2018, fluctuating modestly between approximately 35.2 billion and 35.8 billion US dollars. However, starting in 2019, there was a pronounced increase, with EV rising sharply to over 52.9 billion and continuing to grow to approximately 61.7 billion in 2020. This substantial escalation suggests increased market valuation or adjustments in capital structure during the latter years.
Free Cash Flow to the Firm (FCFF): The free cash flow to the firm showed an initial upward trend, nearly doubling from about 934 million in 2015 to over 1.76 billion in 2016. After 2016, FCFF remained relatively stable but displayed some volatility, with a notable decline beginning in 2018. By 2020, FCFF had decreased to approximately 822 million, representing its lowest value in the period analyzed. This decline in cash flow may indicate operational challenges or increased capital expenditures impacting liquidity.
EV to FCFF Ratio: The ratio of enterprise value to free cash flow to the firm reveals an inverse relationship driven by the trends in the numerator and denominator. The ratio decreased significantly from 38.37 in 2015 to 19.98 in 2016, reflecting the surge in FCFF against relatively stable EV. Subsequently, the ratio increased progressively, reaching 74.99 in 2020, the highest ratio in the dataset. This rise is primarily attributable to the combination of rising enterprise value and falling free cash flow, which may signal potential overvaluation or decreased cash generation efficiency relative to market capitalization.

Overall, the data indicate a company experiencing significant growth in enterprise valuation alongside a declining capacity to generate free cash flow, leading to an elevated valuation multiple. This divergence could warrant closer scrutiny to understand the underlying factors influencing the financial dynamics and to assess sustainability.

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Air Products & Chemicals Inc. (NYSE:APD)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical