APD Acquires Poly-Flow Engineering - Analyst Blog
June 16 2011 - 9:15AM
Zacks
The
industrial gas company Air Products &
Chemicals Inc. (APD) announced that it has
acquired Poly-Flow Engineering (PFE), an Albuquerque, N.M., company
that makes equipment for the semiconductor industry for an
undisclosed amount.
Poly-Flow
makes chemical delivery and precision cleaning equipment for the
semiconductor industry and employs about 100 people at a large
manufacturing facility. It also sells equipment to the medical,
optical fiber and solar industries.
Air Products
expects the deal to immediately add to its bottom line.
Air Products
specializes in delivering gases and chemicals to industrial,
energy, technology and health care markets worldwide. Air Products'
electronics and performance materials segment EES provides best of
chemicals and gases to the markets in a very cost effective manner.
EES operates from four major hubs including engineering and R&D
at Air Products' headquarters in Allentown, Pa. and Carlsbad,
Calif., and equipment manufacturing sites in Allentown and Ansan,
Korea.
The
combination of PFE’s experienced personnel along with Air Products’
global presence and its services will bring long-term benefits to
the customers.
Based in
Pennsylvania, Air Products benefits from a long-term take-or-pay
contract, a consolidated industry structure, a diverse customer
base and sustained pricing power. Air Products’ aggressive cost
cutting and productivity initiatives, combined with its portfolio
realignment efforts, have helped mitigate fixed cost headwinds,
which is very encouraging.
However,
soaring energy and raw material costs pose a threat to margin
expansion. In order to compensate for escalating raw material costs
Air Products has been increasing the price for a range of chemicals
it makes for industrial use.
A week back
the company at an Investor Conference announced new financial
targets for 2015 to take the company to a new level of
performance.
The company
announced that profit margins will expand 3 percentage points
through 2015 and sales will rise about 12% annually, led by growth
in energy and electronics markets.
Air Products
expects revenues to surpass $15 billion in 2015, up from $9 billion
last year. The company forecasts operating margins to increase to
20% by 2015 from 17% which will be an improvement of 300 basis
points. The return on capital is expected to increase 150 basis
points to 15% from 2011 to 2015.
With these
results the company expects to deliver enhanced revenue growth and
sustained margin and return improvement. The company has a record
of setting and meeting its long-term goals and has a strong
presence in the energy, environmental and emerging markets
worldwide. Thus by implementing these strategic actions, the
company expects to continue to lower its costs, improve returns and
gain a greater competitive advantage over its peers.
Air Products
faces stiff competition from Praxair
Inc. (PX).
Currently,
Air Products has a short-term (1 to 3 months) Zacks #2 Rank (Buy)
but a long- term Neutral recommendation.
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