PX Signs CO2 Contract with Osage – Analyst Blog

Praxair Inc. (PX) has signed a contract to purchase carbon dioxide (CO2) from Osage Bio Products, an affiliate of Osage Bio Energy for 15 years. The carbon dioxide will be produced by fermenting barley to convert it to ethanol at Osage’s Appomattox Bio Energy plant at Hopewell, Virginia. The plant is expected to start production in August 2010.

 

The carbon dioxide will be purified and liquefied at Praxair’s new plant, expected to be operational by the fourth quarter of 2011, and will produce up to 450 tons per day. The gas will be used primarily for food freezing and processing and beverage applications.

 

Praxair is a premier industrial gas supplier in the Americas and internationally. The company’s intense focus on expanding its reach within its operating regions and adding new customers has accelerated its profit growth, which should continue in the future. Furthermore, Praxair stands well positioned to benefit from the favorable economic environment, given its broad end-market exposure to food and beverage, steel, glass and chemicals.

 

However, Praxair’s large international presence increases risks related to fluctuations in foreign currencies and geopolitical uncertainties. Also, volatility in energy prices increases the risk of energy supply in adverse economic conditions.

 

Praxair expects diluted earnings per share to be in the range of $1.10 to $1.15 for the second quarter of 2010 and within $4.42–$4.57 for full-year 2010. Total revenue for full-year 2010 is expected to be approximately $10.0 billion.

 

Praxair faces stiff competition from Air Products and Chemicals Inc. (APD); Airgas Inc. (ARG); Linde AG (LNAGF.PK); Chromalloy Gas Turbine Corporation and Bodycote (BOY.L). We are currently maintaining a Neutral recommendation on Praxair, which is supported by Zacks # 3(Hold) Rank.