Shares of Air Products and Chemicals Inc. (APD) advanced 3.26% or $2.44 and closed at $77.19 on September 2, 2010 after the announcement that the company has won a 15-year contract. Under the contract, Air Products will supply an onsite air separation unit to Voronezhsintezkauchuk, an affiliate of SIBUR, which is a leading petrochemical company in Russia and Eastern Europe. The air separation unit is scheduled to come on stream in 2012 with a capacity up to 3,000 cubic meters per hour of gaseous nitrogen and up to 16,000 cubic meters per hour of dry compressed air. Additionally, Air Products will supply liquid products to the Russian market. Financial terms of the contract were not disclosed.
Voronezhsintezkauchuk states that the outsourcing of the air separation unit and the required industrial gases will help the company invest in renovation of the existing air separation units that were set up in 1970 and require major reconstruction. Currently, Voronezhsintezkauchuk has four air separation plants that engage in the production of nitrogen, oxygen and compressed air for the production of synthetic rubber and latex.
Last week, Air Products won a similar contract from the world’s largest steel maker ArcelorMittal (MT), to supply gases including oxygen, nitrogen and argon to the company’s Gent, Belgium steel facility. The Gent steel mill is operated under ArcelorMittal’s Belgium Affiliate. Under the current agreement, Air Products will construct a third on-site air separation unit at the Gent site to help ArcelorMittal in meeting its industrial gases requirement. The air separation unit, which is expected to come on stream by 2012, will have a total production capacity of 2,000 tons per day.
Air Products has been supplying industrial gases to ArcelorMittal’s Gent facility for last 40 years. Air Products became the leading industrial gas supplier in Central Europe’s fastest growing economy with the acquisition of BOC Gazy in Poland from the Linde Group in 2007. The acquisition added on-site facilities serving chemicals and steel firms as well as liquid bulk and packaged gas plants to Air Products’ profile, which helped the U.S. industrial gas producers benefit from the growing central European market.
We are encouraged by the new contract wins across the industrial gas space in recent months, reflecting a robust growth momentum across the emerging economies of Asia, where the company has a strong presence. Air Products operates in 15 countries throughout Europe, including the central and eastern European countries of the Slovak Republic, the Czech Republic, Russia and Poland. Recent moves by the company clearly reflect its strategy to strengthen its position in leading growth markets.
Currently, Air Products has a Zacks #3 Rank (short-term Hold rating) and a long-term (6+ months) Neutral recommendation.
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