Air Products (APD - Free Report) has formed a joint venture (JV) with Linde North America named East Coast Nitrogen (“ECN”). The companies will build a 1,100 ton per day world-scale air separation unit and industrial gas liquefier in Glenmont, NY.
The new facility, which will produce liquid nitrogen, liquid oxygen and liquid argon, will involve a capital investment of around $60 million. The new plant will be constructed and operated by Air Products with commercial production expected to begin in Dec 2018. The plant, featuring Air Products' latest technology, will provide a higher production capacity for all three products to be produced at the location.
This is Linde's second air separation unit JV with Air Products. This investment will provide an impetus to Linde’s growth and reliability plan in North America.
The industrial gas products from the new facility will be distributed by Air Products and Linde independently to the market. The products will be available in New York and New England regions and will be supplied across various market segments including chemicals, food, electronics, primary materials, fabricated metals, health and medical, utilities and glass. Additionally, the new plant will also significantly increase the amount of liquid argon available to Air Products.
Air Products has outperformed the Zacks categorized Chemicals-Diversified industry over the past three months. The company’s shares have moved up around 5% over this period, compared with roughly 1.2% gain recorded by the industry.
Air Products is well placed to leverage the cyclical recovery in core industrial end-markets. The company has built a strong project backlog. These projects are expected to be accretive to earnings and cash flow over the next few years. Acquisitions and new business wins are expected to continue to drive results. The company is also progressing well with its $600 million cost-cutting program.
Air Products also has significant amount of cash to invest in its core industrial gases business. The company expects to have roughly $8 billion to deploy in strategic, high-return opportunities to create shareholders value over the next three years.
However, the company’s industrial gases business in the Europe, Middle East and Africa (“EMEA”) region is seeing 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 sales remain under pressure due to low project activity. The company is also exposed to currency headwinds.
Air Products and Chemicals, Inc. Price and Consensus
Air Products currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked companies in the chemical space include BASF SE (BASFY - Free Report) , The Chemours Company (CC - Free Report) and Kronos Worldwide Inc (KRO - Free Report) . 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.
BASF has expected long-term growth of 8.9%.
Chemours has expected long-term growth of 15.5%.
Kronos has expected long-term growth of 5%.
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