APD Air Products and Chemicals Inc

Air Products and Chemicals Inc. (APD) announced its plan to acquire EI DuPont de Nemours & Co.’s (DD) entire stake in its 50-50 joint venture (JV) with DuPont Air Products NanoMaterials LLC (DA NanoMaterials). The JV is engaged in manufacturing components for the semiconductor industry. The terms of the agreement are yet to be disclosed.  

Based in Tempe, Ariz. with regional headquarters in Taiwan, DA NanoMaterials makes specialty chemicals, called slurries. Slurries primarily polishes semiconductors and wafers used in electronic devices. The acquisition will enhance Air Products' presence in the electronics market

Recently, Air Products reported first-quarter 2012 EPS of $1.36 versus $1.35 in the year-earlier quarter, which is in line with the Zacks Consensus Estimate of $1.36. Net sales amounted to $2.4 billion, up 1% year over year, but down 7% sequentially. The increase was due to higher prices in Merchant Gases and Performance Materials. However, sales were below the Zacks Consensus Estimate of $2.5 billion.

Looking ahead, management expects second-quarter 2012 to remain slow. Besides, Asia and North America growth is expected to accelerate in the second half of 2012, coupled with improved operating performance and new plant on-streams, leading to stronger sales and earnings growth in the later half of 2012. The company’s recent orders, strong project backlog and robust bidding activity position it well to achieve its 2015 targets for growth, margins and returns.

Air Products is maintaining its guidance of $5.90 to $6.30 per share for fiscal 2012. The company expects second-quarter EPS to be between $1.37 and $1.43.

Based in Pennsylvania, Air Products benefits from a long-term take-or-pay contract, consolidated industry structure, diverse customer base and sustained pricing power. 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 manufactures for industrial use. Air Products faces stiff competition from Praxair Inc. (PX) and The Linde Group.

Currently, the company retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) “Hold” rating and we have recommended the shares of the company as “Neutral” for the long-term (more than 6 months).

 
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