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Air Products and Chemicals, Inc. Message Board

  • imho_dyodd imho_dyodd Jan 23, 2014 5:58 AM Flag

    My speculation on APD value unlocking ideas

    Reduced Capex needs in future ..lot of capex was spent in the last 3-5 years

    Pricing power in most their business lines.

    Could Contract renewal throw some cash?
    For the captive business, where contract is expiring could they get capital from their clients by negotiating favorable new contracts. Remember Ackman mentions customer switching costs are it maybe cheaper for clients to throw a few $100m to APD and renew their contracts versus
    switching to a new supplier. Could this cash be used to buy back stock ?

    Margin lower than competitors like PX. So operating margins can be improved

    Helium Shortage
    Global helium supplies are forecast to be lower in 2014 & 2015 relative to 2013.
    Helium is ~ 4-5 % of APD revenues.

    Could pursue Airgas (sell non-core assets) again and Synergy savings
    (In 2010 APD attempted to buy ARG and back then they estimated
    $250m in synergy savings...this likely maybe more now since both businesses have grown since)

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    • Interesting, relatively poor performing as they have been compared to PX over the last decade+, it's still not and easy ship to turn. Clearly support functions and non-essential functions can be pared back, there is some money to be had in the cost structure, we're talking corporate, finance and HR and R&D. Businesses could be sold and maybe they should be, but there's not much left outside the skeleton there. The elephant is the $4 billion of capital coming on line. These were either great investments in which case the departing management team just couldn't hang on long enough, or they will become an additional weight round the neck of the new CEO. A second fundamental issue is that the company is not the largest or the smallest or the most specialized in its industry, and how much does that matter? Would it as a whole, or parts of it have more value combined with someone else's portfolio or is size not that important and could a pared back cost structure sew blood and a reinvigorated culture be the kernel for new growth that can surpass it's former prospects?

      • 1 Reply to rational_investor69
      • rational, I believe your comment on "not the largest or the smallest" gets to the heart of their problem. Since Len Poole, all the ceo's have wanted to have a "sexier" product to tout. This has lead to an inefficient dispersal and dilution of talent and money. All the entry into and exit from the plastics, oil and other non-core businesses have sapped strength from what "could have been". The refining and marketing of gases is as "non sexy" as it gets, much like an electric utility. But if you can sell this product at the lowest cost, you WILL beat out the competition. Maybe not exciting, but steady and certain stock price and divs. Yes, I know that there has been many years of increasing divs, but think of what "could have been" ?

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