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Air Products Gets Supply Contract for POSCO's Sejong Site

Zacks Equity Research

Air Products and Chemicals, Inc. APD recently announced that POSCO Chemical has awarded it a contract for supplying on-site nitrogen to a new anode material manufacturing facility, which is being built in Sejong, South Korea.

The move reflects POSCO Chemical’s continued confidence in Air Products’ reliability, safety and operational excellence as the former continues to ramp production capacity in order to capitalize on the rapidly growing secondary battery market.

The outlook of South Korea's secondary battery industry is promising, which can be attributed to environmental and energy trends, per Air Products. Applications in both electric vehicles and energy storage systems are on the rise.

Air Products supplies pipeline oxygen to POSCO Chemical's cathode material manufacturing facility in Gumi. It will supply onsite nitrogen and oxygen to its new cathode material production line in Gwangyang.

Notably, anode materials are paired with cathode materials in secondary batteries. They are critical for battery performance. These materials are generally used in mobile phones, energy storage systems, consumer devices, electric bicycles, golf carts and electric vehicles.

The global steelmaker, POSCO Group, is expanding business into the secondary battery industry. In April 2019, POSCO Chemical was formed following the merger of POSCO ESM and POSCO Chemtech, which are two affiliates of the group engaged in the production of key battery materials.

Air Products’ shares have rallied 39.8% in the past year against the industry’s decline of 39.9%.



The company’s adjusted earnings per share (EPS) in third-quarter fiscal 2019 (ended Jun 30, 2019) quarter were $2.17, up 11% from the year-ago quarter’s earnings of $1.95. The figure surpassed the Zacks Consensus Estimate of $2.14.

Air Products revised adjusted EPS guidance for fiscal 2019 to 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 improvement of 13-16%.

Also, Air Products continues to expect capital expenditure for fiscal 2019 in the range of $2.4-$2.5 billion for fiscal 2019.

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 140% for 2019. The company’s shares have surged 69.9% in the past year.

Alamos Gold has projected earnings growth rate of 280% for the current year. The company’s shares have rallied 57% in a year’s time.

Arconic has an estimated earnings growth rate of 42.7% for the current year. Its shares have moved up 24.9% in the past year.

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