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Honeywell Chosen by ZPC for Petrochemicals Project in China

Zacks Equity Research

Honeywell International Inc. HON recently announced that its business unit, Honeywell UOP, has been selected by Zhejiang Petrochemical Co. Ltd. (“ZPC”) to provide a range of process technology in China. Notably, ZPC will be using the state-of-the-art UOP technologies for the second phase of its integrated refining and petrochemical complex located in Zhoushan, Zhejiang Province.

Honeywell UOP is a division of Honeywell's Performance Materials and Technologies strategic business group, which also comprises Honeywell Process Solutions.

Honeywell UOP already has a business relationship with ZPC. Notably, in 2017, for the first phase of the project, Honeywell UOP technologies were selected by ZPC for hydroprocessing and heavy oil upgrading, apart from producing aromatics. Selection of Honeywell’s UOP technologies for the second phase of the project further strengthens this relationship.

Per the deal, Honeywell UOP will be responsible for providing various technology licenses, key equipment, engineering design, as well as state-of-the-art catalysts and adsorbents. This will enable ZPC to enhance the complex’s production capacity of aromatics. Also, in sync with the deal, Honeywell Experion Process Knowledge System will offer process controls as well as automation systems for the complex.

Notably, the second phase of the project will comprise a refining section including three Honeywell UOP Unicracking process units, a two-train LD Parex aromatics complex that includes the UOP Sulfolane, Isomar as well as Tatoray processes. Also, it will include two Continuous Catalyst Regeneration Platforming units and Honeywell Experion Distributed Control Systems.

On completion of the second phase, the complex will possess the potential of processing 20 million tons per year of crude oil apart from producing additional six million tons per year of aromatics. As a matter of fact, the complex will have more than 50% of crude to petrochemicals conversion capability, making it the largest crude-to-chemicals complex globally.

Existing Business Scenario

Strong demand for state-of-the-art technology solutions like Falcon Connect and increased technology spending of the global commercial aviation industry will likely continue to bolster Honeywell's revenues in the quarters ahead. The company currently anticipates generating organic sales growth of 6% in 2018.

In the past month, this Zacks Rank #3 (Hold) company's shares have yielded 4.9% return compared with the industry's growth of 4%. Also, Honeywell has been successful in improving its liquidity on the back of its unique HOS Gold working capital tool and increased operational efficacy.


However, the company is presently facing inflationary headwinds across its entire supply-chain process. Rising cost, if not checked, will weigh on its profitability, going forward.

Key Picks

Some better-ranked stocks in the same industry are Hitachi Ltd. HTHIY, Carlisle Companies Incorporated CSL and HC2 Holdings, Inc. HCHC. While Hitachi and Carlisle sport a Zacks Rank #1 (Strong Buy), HC2 Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hitachi delivered average earnings surprise of 55.51% in the trailing four quarters.

Carlisle pulled off average positive earnings surprise of 11.90% in the trailing four quarters.

HC2 Holdings’ earnings surprise in the last reported quarter was 111.90%.

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