Melissa Schaeffer
Senior Vice President and Chief Financial Officer at Air Products and Chemicals
Thank you, Seifi. As mentioned earlier, the resilience of our business is once again demonstrated on results this quarter. Our on-site business, which generates approximately half of our total company sales is stable and has contractual protection to pass through higher energy costs.
Our merchant business also performed very well. Price stayed ahead of variable cost increases for the second consecutive quarter, and how has now more than offset the higher variable costs, for the year-to-date.
I'm also pleased to announce that, we received a cash distribution of approximately $100 million from the Jazan joint venture in June, another example of this project meeting our commitments. I also would like to echo Seifi's comments, and thank all of our people at Air Products for their outstanding effort to overcome the significant energy cost challenges, and achieve key project milestones.
Now please turn to Slide 14 for our third quarter results. Underlying sales were strong. Price and volume combined were up 12%. So energy costs have fallen slightly in recent weeks, they remain significantly higher than in prior quarters and our team stepped up our pricing efforts across the region in response to the escalating energy costs.
Our third quarter merchant price was 17% higher than last year, which resulted in a 7% gain for the total company. Merchant price has improved double digits for three consecutive quarters and increased sequentially each quarter.
Volumes were up 5% overall and better in most segments. New assets recovery and hydrogen in the Americas better merchant demand and increased sales of equipment activities more than offset the negative COVID impacts in Asia and lower hydrogen volumes in Europe.
Currency translation from a strengthening US dollar was a significant headwind this quarter, reducing sales and EBITDA by 5%. Despite this headwind, EBITDA increased 11% as favorable volume, prices and equity affiliate income more than offset higher costs. EBITDA margin of 33.9% decreased 360 basis points compared to the prior year, as positive contributions from price, equity affiliate income was more than offset by higher energy pass-through, which lowered EBITDA margin by 500 basis points.
Sequentially, volumes were up 4%, supported by Lunar New Year recovery in Asia and higher hydrogen volumes in the Americas by partially offset by lower merchant demand due to the COVID restrictions in China. EBIT was up 6% sequentially, absorbing 2% of currency headwinds, as favorable price and volume more than offset higher costs.
ROCE has climbed steadily the last four quarters to reach 10.8%. We anticipate ROCE to further improve as we bring new projects on stream and continue to put the abundant cash on our balance sheet to work. Adjusting for this cash, our ROCE would have been 13.5% this quarter.
Now please turn to Slide 15. Our third quarter adjusted EPS of $2.62 increased $0.31, or 13% from the prior year, representing our fifth consecutive quarter of double-digit year-over-year earnings growth. Price, volume and costs together contributed $0.27. Volume was favorable $0.11 and price net of variable cost was favorable $0.32.
Asia, Europe and Americas all showed positive price results. Our costs were higher primarily due to inflation supply chain-related issues, and higher planned maintenance. We also remain steadfast in our support for the long-term growth of our company, hiring the necessary people to bring projects on stream and investing in facilities including our new helium storage cavern, which will generate significant value in the future.
We keep a close eye on all of our costs and continue to focus on productivity actions across all of our businesses. Weaker foreign currency versus US dollar lowered our EPS $0.08. The euro, British pound, Korean won and RMB were the biggest contributors. This was about $0.05 worse than we expected for the quarter.
The Jazan joint venture continues to deliver as expected and drove the improved equity affiliate income versus prior year.
Noncontrolling interest was unfavorable as higher earnings from consolidated joint ventures is attributed to our partners. Nonoperating income was $0.04 lower, driven by higher pension expense. Our third quarter effective tax rate of 18.6% was slightly higher than last year as the favorable impact of Jazan in the current year was offset by prior year impact of favorable onetime items. We expect our tax rate to be approximately 19% next quarter.
Now please turn to Slide 16. The stability of our business allows us to generate strong cash flow, despite the challenging geopolitical energy environment. Over the last 12 months, we generated more than $2.9 billion of distributable cash flow over $13 per share. From our EBITDA of over $4 billion, we paid interest, taxes and maintenance capital.
From the distributable cash flow, we paid over 45% or roughly $1.4 billion as dividends to our shareholders and still have over $1.5 billion available for high-return projects. This strong cash flow, even in uncertain times enabling us to continue to create shareholder value through increasing dividends and capital deployment for our high-return projects.
Slide 17 provides an update to our capital deployment. As you can see our capital deployment potential is $35 billion through fiscal 2027. The $35 billion includes about $8 billion of cash and additional debt capacity available today almost $17 billion we expect to be available by 2027 and more than $10 billion already spent.
We still believe this capacity is conservative, given the potential for additional EBITDA growth which would generate additional cash flow and additional borrowing capacity. As always, we continue to focus on managing our debt balance to maintain our current and targeted AA2 rating.
So, you can see, we have already spent 30% and have already committed 73% of the updated capacity, we show here. We've made great progress and still have substantial investment capacity remaining to invest in high-return projects. As Seifi mentioned we have committed an additional $4 billion to the future energy transition projects or about half of the remaining $9.5 billion to be committed.
We are developing a significant number of exciting projects. As a result, I think we have a good chance to exceed this target. We continually evaluate our capital deployment options and determine the best way to use the available cash entrusted to us by our shareholders. We believe that investing in these high-return projects is the best way to create shareholder value for the long run.
Now to begin the review of our segment results I'll turn the call back over to Seifi.
