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Air Products Lands Deal With Yankuang for $3.5B China Plant


Air Products and Chemicals, Inc. APD and Yankuang Group have entered into an agreement for a $3.5 billion coal-to-syngas production facility to be constructed in Yulin City, Shaanxi Province, China. The deal was signed in presence of President Trump and President Xi during the U.S. Department of Commerce’s Trade Mission to China.

Per the deal, Air Products and Yankuang Group’s subsidiary, Shaanxi Future Energy Group Co., Ltd. (“SFEC”), plans to form a joint venture company which will build, own and operate a gasification, air separation and syngas clean-up system to supply to the SFEC site. The air separation units are anticipated to produce roughly 40,000 tons-per-day (TPD) of oxygen, which will support the production of nearly 2.5 million nm3/hour of syngas. SFEC will supply steam, coal and power and also receive syngas under an onsite long-term contract.

Air Products presently supplies around 12,000 TPD of oxygen to SFEC’s Phase 1 project in Yulin. Phase 2 will make the site one of the largest coal-to-fuel and chemicals facilities in China. SFEC Phase 2 will produce about four million tons-per-year of downstream chemicals and liquid fuels.

Both parties are committed to finalize the agreements at the earliest and the overall project is expected to be onstream in 2021.

Shares of Air Products have moved up 11% in last three months, underperforming the 14.9% growth recorded by its industry.

Air Products beat earnings expectations in fourth-quarter fiscal 2017 (ended Sep 30, 2017). The industrial gases giant logged fourth-quarter adjusted earnings of $1.76 per share, up 18% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of $1.69.

Revenues rose 13% year over year to $2.2 billion in the reported quarter, beating the Zacks Consensus Estimate of $2.09 billion.

Air Products expects adjusted earnings per share of $1.60-$1.70 for first-quarter fiscal 2018, up 9-16% from the year-ago quarter. For fiscal 2018, Air Products expects adjusted earnings per share of $6.85-$7.05, up 9-12% year over year.

Zacks Rank & Other Stocks to Consider

Air Products currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Sociedad Quimica y Minera S.A. SQM, FMC Corporation FMC and Westlake Chemical Corporation WLK. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

FMC has an expected long-term earnings growth rate of 11.3%.

Westlake Chemical has an expected long-term earnings growth rate of 8.4%.

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