Zacks_Analysts' Blog : APD Acquires Poly-Flow Engineering - Analyst Blog

The industrial gas company Air Products & Chemicals Inc. (APD) announced that it has acquired Poly-Flow Engineering (PFE), an Albuquerque, N.M., company that makes equipment for the semiconductor industry for an undisclosed amount.

Poly-Flow makes chemical delivery and precision cleaning equipment for the semiconductor industry and employs about 100 people at a large manufacturing facility. It also sells equipment to the medical, optical fiber and solar industries.

Air Products expects the deal to immediately add to its bottom line.



Air Products specializes in delivering gases and chemicals to industrial, energy, technology and health care markets worldwide. Air Products' electronics and performance materials segment EES provides best of chemicals and gases to the markets in a very cost effective manner. EES operates from four major hubs including engineering and R&D at Air Products' headquarters in Allentown, Pa. and Carlsbad, Calif., and equipment manufacturing sites in Allentown and Ansan, Korea.

The combination of PFE’s experienced personnel along with Air Products’ global presence and its services will bring long-term benefits to the customers.

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. Air Products’ aggressive cost cutting and productivity initiatives, combined with its portfolio realignment efforts, have helped mitigate fixed cost headwinds, which is very encouraging.

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 use.

A week back the company at an Investor Conference announced new financial targets for 2015 to take the company to a new level of performance.

The company announced that profit margins will expand 3 percentage points through 2015 and sales will rise about 12% annually, led by growth in energy and electronics markets.

Air Products expects revenues to surpass $15 billion in 2015, up from $9 billion last year. The company forecasts operating margins to increase to 20% by 2015 from 17% which will be an improvement of 300 basis points. The return on capital is expected to increase 150 basis points to 15% from 2011 to 2015.

With these results the company expects to deliver enhanced revenue growth and sustained margin and return improvement. The company has a record of setting and meeting its long-term goals and has a strong presence in the energy, environmental and emerging markets worldwide. Thus by implementing these strategic actions, the company expects to continue to lower its costs, improve returns and gain a greater competitive advantage over its peers.

Air Products faces stiff competition from Praxair Inc. (PX).

Currently, Air Products has a short-term (1 to 3 months) Zacks #2 Rank (Buy) but a long- term Neutral recommendation.