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Air Products Well Placed on Projects, Productivity Actions

Zacks Equity Research

Air Products and Chemicals, Inc APD is poised for growth on the back of its project investments, productivity and cost improvement measures, new business deals and acquisitions.

Air Products’ strategic investments in high-return projects, productivity actions and contributions of acquisitions should drive its fiscal 2019 results. The company, in July, said that it now expects adjusted earnings for fiscal 2019 in the range of $8.20-$8.25 per share. This suggests more than 10% rise year over year at the midpoint.

Air Products, which is among the prominent players in the chemical space along with Eastman Chemical Company EMN, Celanese Corporation CE and PPG Industries, Inc. PPG, remains committed to boost productivity to improve its cost structure. It is seeing positive impact of its productivity actions and expects to benefit from additional productivity and cost improvement programs in fiscal 2019. Productivity actions should lend support to its margins.

Moreover, new projects, especially the Lu'An syngas project in China, are contributing to volume growth in the company’s Industrial Gases – Asia segment. The company expects the Lu'An project to contribute more than 25 cents per share to its earnings in fiscal 2019. The company also expects to close the Jazan gasifier and power project in Saudi Arabia by the end of 2019. It is working on a number of gasification projects globally.

Air Products remains focused on deploying capital in high-return industrial gas projects. It has a total available capacity to deploy (over fiscal 2018-2022) nearly $17 billion in high-return investments, aimed at creating significant shareholder value. Air Products has already spent or committed more than half of this capacity.

The company also remains committed to maximize returns to shareholders leveraging strong cash flows. It generated more than $2.5 billion of distributable cash flow during the twelve months ending third-quarter fiscal 2019. This distributable cash flow enabled it to pay roughly $1 billion or around 40% as dividends to shareholders.

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