Industrial gas giant
Air Products and Chemicals Inc.
) recently said that it will raise the prices for North American
liquid and bulk helium gases. The move, which will be effective
January 1, 2013, or as contracts permit, will help the company to
recover significant costs that it has incurred to maintain supply
and secure new sources of helium for its customers.
Air Products is seeing a sharp increase in the cost of inputs
and its operations given the ongoing global helium shortage. The
pricing actions will help it to counter rising input
Helium is used in a plethora of applications including
magnetic resonance imaging ("MRI"), fiber optics and
semi-conductor manufacturing, analytical chemistry, metallurgy
and pressurizing and purging pipes. Air Products is one of the
world's largest suppliers of helium and holds the largest helium
production and distribution system on the planet.
Air Products benefits from a long-term take-or-pay contract, a
consolidated industry structure, diverse customer base and
sustained pricing power. The company's healthy project backlog
strongly positions it to achieve its long-term growth target.
New business wins in the Merchant Gases segment should support
results in fiscal 2013. Moreover, Air Products continues with its
global cost reduction plan. The company is also offering healthy
returns to its shareholders in the form of incremental
However, sluggish economic conditions across the U.S. and
Europe may continue to impact the demand for the company's
products. Volume in the Merchant Gases division is expected to
remain under pressure, partly due to the recessionary conditions
Moreover, the Electronics and Performance Materials segment is
expected to witness lower seasonal demand in first-quarter fiscal
2013 while profits are expected to fall in the Tonnage Gases
division due to lower volume and higher maintenance
Air Products, which competes with
) among others, currently retains a short-term Zacks #3 Rank
(Hold). We currently have a long-term Underperform recommendation
on the stock.
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