Air Products Bags Contract

Air Products and Chemicals Inc. (APD - Snapshot Report) strengthened its industrial gases business by tying up with Korean engineering giant Samsung Engineering Co. Ltd. to supply an air separation unit to National Industrial Gases Co. (NIGC), a subsidiary of Saudi Basic Industries Corp. The air separation unit will produce 3,550 tons per day (TPD) of oxygen, 3,600 TPD of nitrogen and 150 TPD of argon at NIGC’s facility in Al Jubail, Saudi Arabia. The facility will be on-stream in 2011.

Air Products, which supplies oxygen and other gases to industrial and medical sectors, is also building two new air separation units for Shadeed Iron & Steel's production plant in the Sohar Industrial Port of Oman with Saudi firm Abdullah Hashim Group.

Eyes Emerging Market

India is an emerging photovoltaic (PV) market with strong support from the government. Earlier this month, Air Product’s joint venture in India, INOX Air Products Ltd., signed two new contracts with leading manufacturers for the company's SunSource Solutions gases and materials to support the growing Indian PV market.

INOX Air Products has signed a long-term gas supply deal to provide bulk and specialty gases to HHV Solar Technologies Pvt. Ltd and Jupiter Solar Power Ltd. Last year, it won more than 20 new contracts in Asia from both crystalline and thin-film PV markets. The company has also signed gas supply contracts with leading PV manufacturers including Best Solar and CHINT Solar in China, Green Energy Technology in Taiwan and Gadir Solar in Spain.

Separately, Air Products said that its consolidated sales in the current quarter-to-date fell 26% from the same period last year. The company blamed declining demand in most end markets, unfavorable currency and price weakness for the drop in July and August sales. Sales in the Tonnage Gases segment were down 43%, driven by pricing pressure while sales in the electronics and performance materials segment was down 28% due to lower industry utilization and capital spending. Merchant gases sales slipped 17% on weak volumes and unfavorable currency impact.

The company is scheduled to release its fourth quarter results before the market opens on Oct. 21. We maintain our Neutral recommendation on the stock.