Praxair Inc. (PX) recently announced plans to increase its production capacity in Argentina to meet the escalating demand for industrial gases in the region.
The company via its subsidiary, Praxair Argentina, will build a new plant to supply oxygen, nitrogen and argon. The plant will be constructed involving state-of-the-art technology and will have approximately 400 tons per day of production capacity. The plant is expected to commence production in 2013.
Praxair is one of the leading companies engaged in the production and distribution of industrial gases, primarily catering to demands in North America, South America, Europe, and Asia. In the fourth quarter 2010, South American revenue accounted for roughly 20% of the company’s total revenue. The company has operations in nine South American countries, including Argentina.
We assume that Praxair will be on a growth trajectory in the quarters ahead as is evident from the company’s promising EPS guidance of $5.25-$5.40, with the mid-point up 12.3% year over year, on revenues of $11 billion for the fiscal year 2011.
Praxair is slated to release its first quarter 2011 financial results on April 27, 2011.
The growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to rise manifold due to their wide application areas. Industrial gases are being widely used by the chemical processing and petroleum refining, metal production and fabricating, and electronics and health care industries. Demands for industrial gases are also on the rise in the emerging economies.
However, the highly-competitive environment as well as extreme dependence on energy costs can be causes of concern. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L’Air Liquide SA.
We currently maintain a Neutral recommendation on the stock.
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