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Air Products Wins UMC Contract

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Air Products San Fu Co. Ltd, the Taiwanese arm of specialty chemical bellwether Air Products and Chemicals Inc. (APD - Free Report) , announced the winning of a long-term contract from United Microelectronics Corporation (“UMC”), which is the world's second largest foundry company and a leading 300mm wafer manufacturer.

As per the contract, Air Products will supply nitrogen and other bulk gases to four new phases of UMC's Fab 12A complex in the Tainan Science Industrial Park (TSIP) in Taiwan.

Air Products San Fu will build an air separation unit (ASU), pipeline and a bulk gas system to supply ultra-high purity (UHP) nitrogen and other bulk gases including oxygen, argon, helium and hydrogen to UMC's Phase Five to Phase Eight of their new 300mm wafer fab in one of Taiwan's largest science parks. The ASU is expected to come online by the second half of 2013.

With this contract, Air Products’ position in the TSIP market will be strengthened as Air Products San Fu serves its customers through UHP bulk gas facilities and also supplies bulk gases to UMC's first four phases of Fab 12A via pipelines in the park. On the other hand, UMC will be able to have a strong foothold in the park. The association with Air Products will help UMC better serve its customers and provide them with enhanced reliability and flexibility in a cost effective manner.

Air Products is the world’s leading supplier of hydrogen for processing cleaner burning transportation fuels and hydrogen infrastructure and fueling technology. The company also holds a leadership position in liquefied natural gas technology and equipments.
In July, the company released its results for the third quarter of 2012, ended on June 30. The company reported adjusted (excluding one-time items) earnings from continued operations of $1.41 a share for the quarter, in line with the Zacks Consensus Estimate.

Consolidated net income 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 profits 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 $2,455.0 million. Challenging conditions in Europe and Asia as well as unfavorable currency (due to a stronger dollar) weighed on the company’s 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 are likely to hamper margins.

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

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