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Air Products Expands in Taiwan

Zacks Equity Research

Specialty chemical company Air Products & Chemicals Inc. (APD) announced that its Taiwanese subsidiary Air Products San Fu Co. plans to increase production capacity of ultra high-purity (:UHP) nitrogen and expand its nitrogen pipeline for the electronics industry in Tainan Science-Based Industrial Park (:TSIP) in Tainan, Taiwan and Tree Valley Science and Industry Park (:TVSIP), located beside TSIP. The company also plans to construct addition two air separation units to serve the area.

With the expansion of the nitrogen facility, the company will be able to provide reliable and cost effective supply of UHP nitrogen to its customers and better serve the growing merchant needs in the area.

The local subsidiary, Air Products San Fu, has established a leading supply position in TSIP, and its nitrogen pipeline in the park has been serving semiconductor and TFT-LCD manufacturers in the area since 2002. Currently, the pipeline is fed by three of the world's largest UHP nitrogen facilities that also serve the local merchant liquid bulk market.

Air Products provides atmospheric, process and specialty gases; performance materials; equipment; and technology products. Last month, the company released its fourth quarter and fiscal 2012 results. It logged adjusted earnings from continued operations of $1.42 a share for the quarter ended September 30, 2012, missing the Zacks Consensus Estimate by a couple of cents.

Consolidated net income, as reported, plunged 57% year over year to $138.7 million or 65 cents a share, pummeled by hefty one-time charges. The company reported a profit of $324.8 million or $1.51 a share a year ago.

Revenues rose 4% to $2,606 million, beating the Zacks Consensus Estimate of $2,574 million. The revenue growth was attributable to higher volumes in the Tonnage Gases, Equipment and Energy, and Electronics and Performance Materials divisions as well as sales increases due to acquisitions, partly offset by the impact of unfavorable currency. The company witnessed sluggish manufacturing activity in the quarter.

For fiscal 2012, adjusted earnings of $5.40 a share missed the Zacks Consensus Estimate of $5.42 but exceeded the year-ago level of $5.36. Sales for the year edged down 1% year over year to $9,612 million, but beat the Zacks Consensus Estimate of $9,577 million.

For fiscal 2013, Air Products plans to take a number of steps including execution of its new Tonnage investments and sustained improvement in its Electronics and Performance Materials unit to attain better productivity.

The company expects that its recent strategic moves will act favorably for future growth and profitability despite the weak macroeconomic backdrop.
Air Products anticipates earnings per share between $5.65 and $5.85 for fiscal 2013 and $1.26 and $1.31 for the first quarter of fiscal 2013. The company also expects capital expenditures between $2 billion and $2.2 billion for the year.

Air Products, which competes with Praxair Inc. (PX), currently holds a short-term (1 to 3 months) Zacks #4 Rank (Sell) and we have a long-term (more than 6 months) Underperform recommendation on the stock.

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