Air Products Expands in China


Air Products and Chemicals Inc. (APD) announced the acquisition of an Air Separation Unit (:ASU) and integrated gases liquefier in Guiyang, China, from Guizhou Kaiyang Chemical Co. Ltd. Guizhou Kaiyang Chemical is a subsidiary of the Yankuang Group, a state owned coal-mining company in China.

The ASU is expected to produce about 2,000 tons per day (:TPD) of gaseous oxygen and nitrogen, which will be supplied to Guizhou Kaiyang Chemical's coal to ammonia conversion plant. Meanwhile, the liquid gas will be supplied to industries in Guiyang, with some portion being sold to Guizhou Kaiyang Chemical. Both the ASU and the liquefier are expected to come online next month.

This is the second contract that Air Products has signed with a Yankuang Group member. Air Products already has a contract with another Yankuang Group member, Shaanxi Future Energy Chemical Co., Ltd., in Yulin, Shaanxi Province. The company plans to operate the largest on-site ASU under the contract. Shaanxi's coal chemical plant will become operational from 2014 and expects to produce 12,000 TPD of oxygen and significant volumes of nitrogen and compressed dry air.

Recently, Air Products also struck a deal with Jinxin Glass in Jiyuan, located in Henan Province in China, to supply its integrated oxy-fuel solution. The supply will help in reducing emissions in the glass melting process as it will replace the conventional air-fuel combustion.

In July 2012, Air Products released its third-quarter results for fiscal 2012 ended June 30, 2012. The company reported adjusted (excluding one-time items) earnings from continued operations of $1.41 a share for the quarter, in line with the Zacks Consensus Estimate.

Consolidated net income, as reported, surged 48% year over year to $484.5 million or $2.26 a share compared with $326.5 million or $1.50 a year ago. The increase in profit was attributable to lower costs and one-time gains, which more than offset the impact of lower sales.

Revenues dipped 5% year over year to $2,340.1 million, missing the Zacks Consensus Estimate of $2,455 million. Challenging conditions in Europe and Asia as well as unfavorable currency due to a stronger dollar weighed on the company’s top line in the quarter.

Air Products’ healthy project backlog and solid bidding activity strongly positions it to achieve long-term growth target. Given its leading position in the gases business, the company is well positioned to capitalize on the cyclical recovery in its core industrial end markets. Further, new business deals are expected to boost its profits in 2012. However, soaring energy and raw material costs pose a threat to margin expansion.

Air Products, which competes with Praxair Inc. (PX), has a short-term Zacks #3 Rank (Hold) currently and we have a long-term Neutral recommendation on its shares.

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