New Air Separation Unit for Airgas - Analyst Blog

Airgas, Inc. (ARG) has announced an initiative for the expansion of its atmospheric gas production capacity in New England. Under the extension program, the company is planning to build the second air separation unit (ASU) in Bozrah, Conn.

The market for atmospheric gases is expected to grow in New England. Airgas’ new ASU will help to meet the increased demand for merchant gases, particularly in the medical, laboratory, high-tech firms and food industries.

Airgas plans to operate the new plant alongside the existing one in Bozrah. The proposed plant will produce more than 600 tons of oxygen, nitrogen, and argon per day, adding to its current production capacity of 1,000 tons daily. The ASU is expected to begin production in the fall of 2015.

Dual production facilities will increase the security of Airgas’ supply of atmospheric gases. The company also purchases atmospheric gases under long-term supply contracts with other producers.

Airgas has 16 air separation plants globally and it is the fifth largest producer of atmospheric gases in North America. Last year, the company has commissioned the Tennessee plant which began production in May 2012. In addition, Airgas is also building a new ASU in Illinois, which is set to be on line in the summer of 2015.

Airgas posted adjusted earnings of $1.25 a share in second-quarter fiscal 2014 (ended Sep 30, 2013), up 19% year over year. The results marginally surpassed the Zacks Consensus Estimate of $1.23. Revenues also grew 4% year over year to $1.28 billion, beating the Zacks Consensus Estimate of $1.27 billion.

For fiscal 2014, Airgas lowered its earnings outlook to $4.85–$5.00 from its previous expectations of $5.00 to $5.15, reflecting 11% to 15% annual growth. The guidance is based on a reduction in year-over-year organic sales growth rate assumptions.

However, strong cash flow continues to be a benchmark for Airgas’ business model. Moreover, its focus on effective management of expenses and balancing short-term cost containment with investment will drive long-term growth.

Airgas is also optimistic about future prospects in the U.S. manufacturing and energy industries, as well as non-residential construction, unique value proposition and a less challenging platform. However, it will continue to face challenges from helium supply constraints and a larger-than-expected R-22 impact.

Radnor, Pa.-based Airgas, through its subsidiaries, distributes industrial, medical and specialty gases as a well as hardgoods in the U.S. The company also markets its products and services through e-business, catalogues and telesales channels.

Airgas currently carries a Zacks Rank #3 (Hold).

Better-ranked chemical stocks include Asahi Kasei Corporation (AHKSY), Johnson Matthey plc (JMPLY) and BASF SE (BASFY). While Asahi Kasei and Johnson Matthey have a Zacks Rank #1 (Strong Buy), BASF holds a Zacks Rank #2 (Buy).
 

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AIRGAS INC (ARG): Free Stock Analysis Report

BASF SE (BASFY): Get Free Report

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