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Air Products & Debang Group Form Syngas Project JV in China

Zacks Equity Research

Air Products and Chemicals, Inc. APD recently announced that it has entered into a new joint venture (JV) with Debang Group’s subsidiary — Debang Xinghua Technology Co., Ltd. The JV will build, own and operate a coal-to-syngas processing plant in Xuwei National Petrochemical Park, Lianyungang City, Jiangsu Province, China.

Air Products will own 80% of the JV and Debang Group will own the remaining 20%. The JV will own and operate the air separation unit, purification and gasification assets through a 20-year contract for a fixed monthly fee. It will supply syngas to support Debang Group's 350,000 tons per annum chemicals facilities. The project is slated to come onstream in 2023.

Additionally, Air Products will be the exclusive buyer of merchant liquid products from the JV facility. This will enable the company to establish a strong supply position to serve the high-growth chemical, general manufacturing and opto-electronics industries in the Lianyungang area along with south of Shandong in East China and key surrounding cities north of Jiangsu.

The JV is expected to invest nearly $250 million in the project. Per Air Products, the new project furthers its gasification growth strategy in the Xuwei National Petroleum Park. It will also create new merchant supply capability for the company and enable it to serve a high-density manufacturing base in the region.

Air Products’ shares have rallied 28.6% in the past year against the industry’s decline of 39.3%.

In third-quarter fiscal 2019, the company revised adjusted earnings per share (EPS) guidance for fiscal 2019 in the range of $8.20-$8.25 from the previous expectation of $8.15-$8.30. This suggests more than 10% rise year over year at the midpoint.

It expects adjusted EPS for fourth-quarter fiscal 2019 in the band of $2.26-$2.31, which indicates year-over-year rise of 13-16%.

Zacks Rank & Key Picks

Air Products currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Alamos Gold Inc. AGI and Arconic Inc. ARNC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 160% for 2019. The company’s shares have surged 70.2% in the past year.

Alamos Gold has projected earnings growth rate of 320% for the current year. The company’s shares have rallied 42.5% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the current year. Its shares have moved up 17.7% in the past year.

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