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Air Products to Sell European Unit - Analyst Blog
1/10/2012 8:45:00 AM
Air Products & Chemicals Inc. ( APD ), the US supplier of specialty gas products, announced its plan to sell its Continental Europe Homecare business to The Linde Groupe of Germany for 590 million euros (approximately $750 million).
The Continental Europe Homecare business provides oxygen therapy, sleep therapy, and infusions, and operates in Germany, France, Spain, Portugal and Belgium. The operations have a base of about 260,000 patients.
Air Products intends to sell off its Europe Homecare business as it does not fit with its core gases business. On the contrary, this acquisition will boost Linde's position in the structural growth market while making it one of the market leaders in the European respiratory homecare business.
Air Products is also evaluating its options for its home care business in the U.K., Ireland, Argentina, and Brazil. The company will continue to operate these businesses as part of its portfolio. In addition, Air Products will compete to win new businesses while providing quality patient care.
Linde achieved sales of 1.1 billion euros in the healthcare segment as a whole, in the 2010 financial year. The company is the second largest supplier of medical gases and related services in the world.
In late October 2011, Air Products reported an increase in profit for the fourth quarter, primarily reflecting revenue growth amid double-digit increases at three of its four operational segments.
Air Products reported fourth-quarter 2011 EPS of $1.51 versus $1.35 in the year-earlier quarter, in line with the Zacks Consensus Estimate of $1.51. For full-year 2011, the company reported an EPS of $5.73, up 14% year over year, matching the Zacks Consensus Estimate of $5.73.
Net sales amounted to $2.6 billion versus $2.4 billion in the prior-year quarter, in line with the Zacks Consensus Estimate of $2.6 billion. The improved results were mainly driven by growth in the emerging markets and strong performance in its Tonnage Gases business. Despite a slowing global economy in the second half of 2011, the company won several projects and also witnessed double-digit sales and earnings growth.
For fiscal 2011, sales increased 12% year over year to $10,082 million driven by a 9% volume increase, which was in line with the Zacks Consensus Estimate.
Though the near-term economic outlook looks bleak and has a lot of global economic and policy uncertainties, Air Products remains confident of its large backlog of projects backed by signed customer contracts while remaining committed to achieve its 2015 goals for growth, margin, and return on capital.
The company expects fiscal year 2012 EPS to be in the range of $5.90 to $6.30 per share, representing year-over-year earnings growth of 3% to 10%. For the first quarter of fiscal 2012, the company expects to earn $1.31 to $1.39 per share.
The company also forecasts capital spending in fiscal 2012 to be between $1.9 and $2.2 billion.
Based in Pennsylvania, Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, a diverse customer base and sustained pricing power. However, soaring energy and raw material costs pose a threat to margin expansion.
Air Products, which faces stiff competition from Praxair Inc. ( PX ), has a Zacks #2 Rank (Buy) on its stock for the short term. We currently provide a long-term Neutral recommendation on the stock .
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