Air Products Ties Up with Cangzhou - Analyst Blog

Air Products & Chemicals Inc. ( APD ) announced the signing of a long-term agreement with Cangzhou Zhengyuan Fertilizer Co., Ltd, wherein it will build, own and operate an air separation unit (ASU) and integrated gas liquefier in Hebei Province, China. The ASU and liquefier are expected to come online by 2014.

Air Products' ASU is expected to produce 2000 tons per day (TPD) of gaseous oxygen as well as liquid products to serve the Chinese merchant gases market. The company believes that the facility will support sustainable tonnage gases and merchant operations in China. Also, the liquefier will provide integrated gas models that will help Air Products establish itself in the Chinese market.

On the other hand, Cangzhou Zhengyuan will have the access to Air Products' coal-gasification technology and also enjoy the benefit of its operational and management expertise. The agreement will help Cangzhou Zhengyuan to cement its leadership position in coal-gasification, synthetic ammonia and urea industries. The ASU will also be instrumental in reducing costs through energy efficiency methods. Air Products also plans to open a liquid bulk terminal facility to support the liquefier at the site to serve merchant gas customers in the Hebei region, China

Cangzhou Zhengyuan is a wholly-owned subsidiary of Hebei Yangmei Zhengyuan Chemical Group, which manufactures urea and ammonia using coal as process material. Air Products is a leading gas company and provides atmospheric, process and specialty gases; performance materials; equipment and technology.

In July 2012, Air Products released its fiscal third quarter 2012 results for the period ended June 30, 2012. The company reported adjusted (excluding one-time items) earnings from continued operations of $1.41 a share for the quarter, which is in line with the Zacks Consensus Estimate.

Consolidated net income, as reported, surged 48% year over year to $484.5 million or $2.26 a share compared with $326.5 million or $1.50 a year ago. The increase in profit was attributable to lower costs and one-time gains, which more than offset the impact of lower sales.

Revenues dipped 5% year over year to $2,340.1 million, missing the Zacks Consensus Estimate of $2,455 million. Challenging conditions in Europe and Asia and unfavorable currency exchange impact (stemming from a stronger dollar) weighed on the top line in the quarter.

Air Products' healthy project backlog and solid bidding activity strongly positions it to achieve its long-term growth target. Given its leading position in the gases business, the company is well positioned to capitalize on the cyclical recovery in its core industrial end markets. Further, new business deals are expected to boost profits in 2012. However, soaring energy and raw material costs pose a threat to margin expansion.

Air Products, which competes with Praxair Inc. ( PX ), has a short-term Zacks #3 Rank (Hold). We currently have a long-term Neutral recommendation on its shares.

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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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