Air Products (APD) Starts Up Air Separation Plant in China

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Air ProductsAPD declared that it has started up another state-of-the-art cryogenic air separation plant in Guangdong, South China. The new plant will strengthen supply position, improve production capacity and help the company to become a leading manufacturer of high-tech displays under multi-year contract.

The new plant is capable of producing major gases like nitrogen and oxygen. The innovative modular design requires much less space, making the installation process seamless. The additional production will help to meet quality, efficiency, sustainability and productivity goals of their customers.

China is an important market for Air Products where it has around 2,500 employees supporting a number of regional capabilities including strategic sourcing, cryogenic equipment manufacturing unit, engineering capabilities and IT application center.

With more than 130 production facilities in China and strong supply chain network in Guangdong, the company addresses the demand from over 30 industries. The latest investment will likely strengthen its market position further in China. The initiative is also in line with the company's on-going commitment to support the Guangdong government in implementing Intelligent Manufacturing Development Plan (2015 - 2025).

The Chinese government expects the demand for industrial gases to increase from various industries like automobiles, electronics, pharmaceuticals, glass, papermaking, information and communications, food and beverage, advanced fabrication, materials and biotechnology.

Given its leading position in the gases business, Air Products is well positioned to capitalize on the cyclical recovery in these core industrial end-markets. It has sufficient resources to meet the expected upturn in demand.

Air Products' shares lost around 7.6% over the past three months, underperforming the Zacks categorized Chemicals-Diversified industry's 7.1% gain owning to multiple headwinds.

Air Products missed earnings expectations in the first quarter fiscal 2017 (ended Dec 31, 2016). The company logged first-quarter adjusted earnings of $1.47 per share, up 9% from the year-ago quarter. However, earnings marginally missed the Zacks Consensus Estimate of $1.48.

Air Products and Chemicals, Inc. Price and Consensus

Air Products and Chemicals, Inc. Price and Consensus | Air Products and Chemicals, Inc. Quote

Air Products has a strong project backlog and benefits from cost-reduction measures and a diverse customer base. Moreover, acquisitions and new business deals are expected to support its results.

However, Air Product's industrial gases business in the EMEA region is witnessing pressure from a weak operating environment. The company is also seeing lower volumes in Latin America due to weak demand. Moreover, volumes in packaged gases continue to be weak while LNG (liquefied natural gas) sales remain under pressure due to low project activity.

Air Products currently carries a Zacks Rank #3 (Hold).

Key Picks

Better-ranked companies in the chemical space include Univar Inc. UNVR , Kronos Worldwide Inc KRO , and Arkema S.A. ARKAY . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Univar has an expected long-term earnings growth of 9.4%.

Kronos has an expected long-term earnings growth of 5%.

Arkema has an expected long-term earnings growth of 12.36%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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