Air Products & Chemicals Inc. (APD), a company serving customers in technology, energy, healthcare and industrial markets worldwide, has planned to increase the production capacity of nitrogen trifluoride (NF3) by expanding its Ulsan, Korea facility. The new capacity is anticipated to start operations in the latter half of 2012.
For over 30 years, the company has been producing and distributing NF3, as it has realized the potential of the product. There is an increasing demand for NF3 in the market and several OEMs plan to use NF3 for their next-generation processes. Hence, Air Products has decided that this is the right time to expand its existing facility, with the market for NF3 expected to grow.
In addition to the Ulsan facility, there are three NF3 plants operated by the company at its Electronic Specialty Materials manufacturing facility located in Hometown, Pennsylvania.
NF3 remains the chamber cleaning gas of choice for semiconductor, thin-film transistor liquid crystal display (TFT-LCD), and thin-film photovoltaic manufacturers. TFT-LCD, PV and semiconductor manufacturers now have a greater choice of chamber cleaning solutions based on Air Products’ product portfolio, record of fluorine production and handling and its expertise in the chamber cleaning process.
In July 2011, the company reported third quarter fiscal 2011 EPS of $1.46, versus $1.17 in the year-earlier quarter and matched the Zacks Consensus Estimate of $1.46. The results exclude a 4-cent gain in discontinued operations recognizing a tax benefit from the sale of the company’s U.S. healthcare operations in 2009.
Net sales amounted to $2.6 billion, versus $2.3 billion in the prior-year quarter, moving ahead of the Zacks Consensus Estimate of $2.5 billion. The improved results were mainly driven by higher volumes in the Electronics and Performance Materials and Tonnage Gases segments.
The company witnessed strong volume growth across a number of businesses mainly in the Asia Merchant business and the energy and electronics markets. However, U.S. and Europe Merchant businesses saw slower growth.
For the quarter ahead, the company forecasts strong revenue growth in the Tonnage, and Electronics and Performance Materials segments. The company also expects to improve margins in the next quarter based on its actions to improve Merchant segment performance.
Management expects fourth quarter EPS between $1.48 and $1.53. The company raised the full fiscal year EPS guidance between $5.70 and $5.75 per share from $5.65 and $5.75 previously.
Last month, the company also announced new financial targets for the 2015 timeframe. The company expects to deliver top line growth of 11% to 13% per year over the next four years, which would take its total revenues to over $15 billion in 2015. Air Products also expects to improve its operating margin to 20% and its return on capital to 15% by 2015.
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. 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 users. Air Products faces stiff competition from Praxair Inc. (PX) and The Linde Group.
We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
