Air Products and Chemicals, Inc. APD plans to construct two more nitrogen plants as part of the multi-phase expansion serving Samsung Electronics Co. Ltd.’s SSNLF giga fab in Pyeongtaek City, Gyeonggi Province, South Korea.
In 2015, Air Products was awarded a major contract by Samsung Electronics to build multiple production facilities across multiple phases. Per the deal, the company had built an ultra-high purity nitrogen plant; hydrogen generators, a liquefier, and a bulk specialty supply system in phase one. Further, its second ultra-high purity nitrogen plant came on-stream, marking the completion of its phase two expansion to supply additional nitrogen to the fab.
Shares of Air Products have rallied 8.5% in the past three months, outperforming the industry’s 4.6% growth.
Air Products has built a strong project backlog. These projects are anticipated to be accretive to earnings and cash flow over the next few years. Moreover, strategic investments in high-return projects, new business deals and acquisitions are anticipated to drive results in fiscal 2018.
The company is expanding footprint in China. The company has landed a second long-term oxygen and nitrogen supply contract with a leading global materials supplier in Guangdong in South China. The move will help to strengthen its position in the strategic industrial base as well as relationship with this global customer. Air Products and Yankuang Group also entered into an agreement for a $3.5 billion coal-to-syngas production facility to be constructed in Yulin City, Shaanxi Province, China.
Moreover, the company inked a long-term gas supply agreement with Huntsman Corporation HUN in July 2017. Per the deal, Air Products will build, own and operate a new steam methane reformer and cold box in Geismar, LA. Air Products facilities which will supply hydrogen, carbon monoxide and steam to Huntsman's Geismar operations are anticipated to be onstream in January 2020. The new state-of-the-art facility will provide high reliability and sustainability with enhanced energy efficiency and will aid lower emissions.
The company also remains on track in delivering on cost-reduction programs, which is likely to support margins. The company is making a good progress with its $600 million cost-cutting program and has already delivered more than $475 million of cost savings. Additionally, it plans to deliver the balance in next two-three years.
Moreover, Air Products has significant amount of cash to invest in core industrial gases business. The company expects to have at least $8 billion to deploy in strategic, high-return opportunities (including acquisitions and large industrial gases projects) to create shareholder value over the next three years.
Air Products and Chemicals, Inc. Price and Consensus
Zacks Rank & Other Stocks to Consider
Air Products carries a Zacks Rank #2 (Buy).
Another stock worth considering in the basic materials space is Kronos Worldwide Inc. KRO.It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kronos Worldwide has expected long-term earnings growth of 5%. Its shares have skyrocketed 110.9% over the past year.
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