Leading industrial-gas company Air Products and Chemicals Inc. (APD - Analyst Report) recently penned a supply deal with leading Chinese glass maker Kunshan Yongxin Glassware ("Yongxin"). Yongxin is a leading heat-resistant glass maker for microwave ovens and other home appliances in China.
Under the pact, Air Products will supply its integrated oxy-fuel solution to Yongxin, which will help the Chinese manufacturer meet the increasingly stringent environmental regulations while enhancing productivity and quality.
The supply of integrated oxy-fuel solution by Air Products includes the Cleanfire HRi oxy-fuel burners, an automatic control skid for burners and the PRISM vacuum swing absorption oxygen generator. Air Products has also consulted on the design of furnace and optimization of process and technique.
The integrated oxy-fuel solution provides glass makers with an array of benefits including roughly 80% reduction of nitrogen oxide emissions, more than 25% improvement in productivity, lesser capital expenses, 25%-60% savings in energy and improvements in glass quality.
Air Products provides industrial gases as well as a variety of polymer and performance chemicals and serves technology, energy, industrial and health care customers globally. The company competes with Praxair Inc. (PX - Analyst Report) among others.
Air Products offers oxy-fuel burners and technology, customized control systems, commissioning service, safety and site training, design and technical know-how, maintenance contracts and project management. It has already installed over 1,500 Cleanfire burners globally.
Prior to the Yongxin deal, Air Products agreed to supply its oxy-fuel integrated solution to a fiberglass maker in China and a Korean container and tableware glass manufacturer.
Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, diverse customer base and sustained pricing power. However, soaring energy and raw material costs pose a threat to margin expansion. To compensate for escalating raw material costs, Air Products has been increasing the price for a range of chemicals it makes for industrial use.
We currently have a Neutral recommendation on Air Products. The stock currently holds a short-term Zacks #4 Rank (Sell).