& Chemicals Inc.
) has signed a long-term contract for supplying bulk gases to
Xiamen Tianma Microelectronics, which is an affiliate of Tianma
Microelectronics Co., a leading small and medium-sized TFT-LCD
manufacturer in China.
Under the agreement, Air Products will supply Xiamen Tianma with
ultra high-purity nitrogen and oxygen, hydrogen, argon, and helium
for its new facility at Xiamen Xiang'an Industrial Park in the
The facility is China's first 5.5 Generation low-temperature
polysilicon (LTPS) thin-film transistor liquid crystal display
(TFT-LCD) and color filter production line. Air Products' deal with
Tianma does not come as a surprise considering that the company was
already supplying bulk gases to Tianma's facility in Shanghai and
electronics materials to its Chengdu plant.
Moreover, the new contract strengthens Air Products' presence in
China as well as its position in the lucrative and rapidly growing
TFT-LCD market. The company has been plying its trade in the global
electronics industry for more than four decades, establishing a
lead over its peers in TFT-LCD markets and the semiconductor
industry in emerging economies such as China.
The deal should provide some relief to Air Products' investors
who have seen the stock lose almost 5% of its value so far this
year. In comparison, arch-rival
) has gained almost 13%, eclipsing the S&P 500's gains by more
Air Products witnessed a decline in profits and revenues in the
recently reported second quarter of 2012. The company's adjusted
earnings from continued operations came in at $1.31 a share,
missing the Zacks Consensus Estimate of $1.33. In absolute terms,
profits fell 2.7% to $296 million in the quarter from $304.3
million in the year-ago period.
A challenging environment in Europe coupled with lower sales
volumes affected Air Products' top line in the second quarter. The
company's revenues went down 2% to $2,344 million in the quarter,
missing the Zacks Consensus Estimate of $2,460 million.
However, Air Products anticipates its earnings and revenues to
improve going forward as it expects to sign new deals in 2012 to
support its top-line growth. It anticipates adjusted earnings from
continuing operations in the third quarter to be in the range of
$1.40-$1.45 per share. For fiscal 2012, the company expects to earn
between $5.47 and $5.60 per share on an adjusted basis from
Based in Pennsylvania, Air Products benefits from a long-term
take-or-pay contract, consolidated industry structure, diverse
customer base and sustained pricing power. However, soaring energy
and raw material costs pose a threat to margin expansion. In
order to compensate for the escalating raw material costs, the
company has been increasing the price for a range of chemicals it
manufactures for industrial use.
Air Products faces stiff competition from
) and The Linde Group. The company currently retains a Zacks #5
Rank, reflecting a short-term (1 to 3 months) Strong Sell rating.
Currently, we have a long-term (more than 6 months) Neutral
recommendation on the stock.
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