Air Products To Support Capacity Expansion Project Of SMIC

Air Products (NYSE:APD) has been awarded the industrial gases supply to support the capacity expansion of the Tianjin facility of Semiconductor Manufacturing International Corporation (“SMIC”). The contract to support the capacity expansion project of SMIC, one of the world's leading and most advanced semiconductor foundries in mainland China, will help strengthen Air Products’ position and commitment to the country's electronics manufacturing industries.

Air Products will build an on-site nitrogen plant to support the expansion. The company will leverage its existing air separation unit and liquid gases capacity to supply a broad range of high-purity bulk gases, including nitrogen, oxygen, argon, carbon dioxide, hydrogen and helium, as well as compressed dry air.

The current Tianjin facility at SMIC, located in the state-level Xiqing Economic and Technological Development Area (“XEDA”) has been using Air Products' high-purity nitrogen, oxygen, argon and helium since 2004 for producing 8-inch (200mm) wafers. The expansion project will include a new fab making it the world's largest integrated 8-inch IC production line with a capacity of 150,000 wafers per month.

SMIC’s capacity expansion in Tianjin and XEDA will strengthen its position and help it meet the increasing demands from the thriving electronics and other high-end manufacturing industries.

Air Products has outperformed the Zacks categorized Chemicals-Diversified industry over the past three months. The company’s shares have moved up around 5.2% over this period, compared with roughly 0.3% gain recorded by the industry.

Air Products is well placed to leverage the cyclical recovery in core industrial end-markets. The company has built a strong project backlog. These projects are expected to be accretive to earnings and cash flow over the next few years. Acquisitions and new business wins are expected to continue to drive results. The company is also progressing well with its $600 million cost-cutting program.

Air Products also has significant amount of cash to invest in its core industrial gases business. The company expects to have roughly $8 billion to deploy in strategic, high-return opportunities to create shareholders value over the next three years.

However, the company’s industrial gases business in the Europe, Middle East and Africa (EMEA) region is seeing pressure from a weak operating environment. The company is also seeing lower volumes in Latin America due to weak demand. Moreover, volumes in packaged gases continue to be weak while LNG sales remain under pressure due to low project activity. The company is also exposed to currency headwinds.

Air Products and Chemicals, Inc. Price and Consensus

Air Products currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked companies in the chemical space include Koninklijke DSM NV (OTC:RDSMY) , The Chemours Company (NYSE:CC) and BASF SE (OTC:BASFY) .

Koninklijke has expected long-term growth of 7.7% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has expected long-term growth of 15.5% and sports a Zacks Rank #1.

BASF has expected long-term growth of 8.9% and carries a Zacks Rank #2 (Buy).

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