APD Air Products and Chemicals Inc

Praxair Inc. (PX) is in constant effort to expand its operations in the existing operating areas and new regions by adding new customers. The company’s Brazilian arm, White Martin, recently signed a gas supply contract with Braskem, the largest petrochemical company in the Americas and the world’s largest biopolymers producer.

The 15-year agreement requires White Martin to supply nitrogen and oxygen to Braskem’s expanded polyvinyl chloride (PVC) unit in the state of Alagoas, in Brazil’s northeast region. The company will construct a new cryogenic on-site air separation plant with a daily capacity of 200 tons.

The project with an estimated value of R$1 billion (US$635 million) is Braskem’s single largest investment in Brazil. Operations at the new industrial unit are likely to start by the first half of 2012.

Earlier in July 2011, Praxair’s Chinese unit signed a contract with the Shandong Guangfu Group Co., leading a steel and iron enterprise in Shandong province, North China. The company will provide its proprietary oxy-fuel technology and will install its gas injection system at the 100-ton electric arc furnace of the steel mill of Shandong Guangfu Group.

We believe Praxair’s expansionary efforts will be profitable for the company in the long term and enable it to achieve its long-term goals. Annual organic sales growth target is set at 8%-12%, with emerging markets, including South America, Asia, and Mexico, with an estimated target of 45% of total sales by 2015.

The company is slated to release its second quarter financial results on July 27, 2011. Zacks Consensus Estimate for the second quarter is $1.37, representing a year- over-year increase of 15.44%. Estimate for the fiscal year 2011 and 2012 is $5.47 and $6.26, respectively.

Praxair faces stiff competition from Air Products and Chemicals Inc.(APD) and Airgas Inc. (ARG). We currently maintain a Neutral recommendation on Praxair.

 
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