MarketWatch  Jun 22  Comment 
Air Products & Chemicals Inc. said Friday it is raising the prices of its liquid and bulk industrial gas products effective July 1, as it combats low operating rates in the steel market and higher operational and delivery costs. Costs are being...
Biomass Magazine  May 10  Comment 
Air Products has acquired gasification technology from Shell. The acquisition includes Shell’s associated patent portfolios for solids (coal and biomass) gasification and sharing of patent rights for residue and biomass gasification.
Benzinga  Apr 25  Comment 
Air Products & Chemicals (NYSE: APD) releases its next round of earnings Thursday. Get the latest predictions in Benzinga's essential guide to the company's Q2 earnings report. Earnings and Revenue Sell-side analysts expect Air Products &...
Flightglobal  Apr 23  Comment 
Edinburgh airport chief executive Gordon Dewar has described the Scottish government s decision not to reduce air passenger duty (APD) as a "short sighted" move, which contributed to Norwegian s decision to cut two routes from the gateway this...
Flightglobal  Apr 22  Comment 
A consultation on the scrapping of air passenger duty for short-haul flights in Northern Ireland could see the region lead the way in the wider UK.
Benzinga  Mar 28  Comment 
The industrial gas industry as a whole is well positioned to deliver solid performance and investors looking for exposure to the sector may want to consider Air Products & Chemicals, Inc. (NYSE: APD), at least according to BMO. The...


Air Products and Chemicals sells gases such as hydrogen, helium, nitrogen, and oxygen to industrial manufacturers and commercial end-users of industrial and lab-purity gas.

Gases are vital inputs to many manufacturing processes, and APD is one of the largest global bulk gas sellers. For large customers, APD will put one of its own plants next to the customers' factory and supply gas directly via pipeline.

Business Overview

Business & Financial Metrics[1]

In 2009, APD generated $631.3 million in net income on $8.26 billion in total revenues. This represents a 30.6% decrease in net income on a 20.7% decrease in total revenues from 2008, when the company earned $909.7 million on revenues of $10.41 billion.

Business Segments

Merchant Gases ($3.61 billion, or 44% of total revenues)[2]

This segment industrial and lab purity species of gases such as oxygen, nitro, and hydrogen. This segment chiefly supplies the metals, glass, chemical processing, manufacturing, and energy industries. The distinction between this segment and the Tonnage Gases segment is chiefly one of how the product is delivered. Volume in Merchant gases is lower, and often delivered by tanker or tube trailer, or smaller containers.[3]

APD's old "Healthcare" segment, which sells home-based medical treatment, including chemical therapy, beds, and wheelchairs, is now a part of the "Merchant Gases" segment.

Tonnage Gases ($2.57 billion, or 31% of total revenues)[4]

In this segment, gases are supplied in very large quantities, and Air Products often places its plants adjacent to its customers, delivering gas via pipeline, and thus saving on transportation costs. This arrangement leads to reliable supply of gas as well as significant discounting of costs for the client, and often plants are designed with contractual arrangements in mind ensuring a steady relationship between APD and its client.[5]

Electronics and Performance Materials ($1.58 billion, or 19% of total revenues)[6]

This segment specializes in delivery of products relevant to the electronics industry, for the manufacture of silicon, semiconductors, displays, and photovoltaic devices. APD also has a chemical materials business that also sells related products to clients in this segment. [7]

Equipment and Energy ($489.8 million, or 6% of total revenues)[8]

This segment designs and sells equipment for energy production, and also partially owns and operates several small energy plants around the world.

Key Trends & Forces

Significant Manufacturing Exposure to Electronics and Energy

APD's gases are inputs to many chemical and energy processes necessary for the production of energy and the manufacture of electronic devices. In addition, APD is the largest mover of hydrogen gas worldwide[9], which offers tremendous upside in any potential future hydrogen-based energy economy - such as one in which cars are powered by hydrogen fuel cells instead of gasoline.[10]

On the other hand, this exposure can be a double-edged sword. Significant economic contraction would impact consumer consumption, which will reduce consumer demand for goods and energy. Consumer demand is the lifeblood of manufacturing, and even more so for high-risk industries like electronics, where goods are typically consumer wants, rather than consumer needs.

APD's business is subject to legislation and regulation

Although the majority of APD's gases are environmentally innocuous, many of its customers use industrial gases in ways that are facing scrutiny. In addition, regulation adds to administrative costs to APD. For example, the European Union now requires volume producers of chemicals to register their chemicals and all their uses with the European Chemicals Agency.[11] This has both positive and negative effects for APD, as industrial gases can be used to improve energy efficiency as well as environmental performance, but demand for gases will decrease if regulation makes client businesses less profitable.[12]

Increasing energy costs pose a risk to APD's business, as energy is a significant input to its operations

Cost of electricity is the most significant component in cost of goods sold in the gases segments, and significant amounts of energy are required in any of APD's plants.[13] If prices were to substantially rise, APD will either be forced to pass-through costs to clients, or if it is not able to do so, take a hit to its margins.

Historically, this complicated relationship with energy was evidenced during the 1970s energy crisis. Increasing petrochemical fuel costs lowered revenues in that segment, but increased popularity of oxygen as a fuel. In addition, the higher input costs were offset by higher demand for other gases to create cheaper energy sources, such as liquified natural gas.[14]


Global competitors

These 3 global suppliers operate on similar platforms to Air Products and Chemicals. Firms compete on a variety of factors, including price, performance or specifications, continuity of supply, and customer service.

Regional (domestic)

Since another large component of cost of goods sold is transportation, regional players can compete effectively against APD when they have on-site or cheaper delivery options.


  1. APD 2009 10-K pg. 43  
  2. APD 2009 10-K pg. 24  
  3. Air Products and Chemicals. "2007 Financial Review". pg.14
  4. APD 2009 10-K pg. 25  
  5. Morningstar: "APD, Air Products and Chemicals" July 31, 2007
  6. APD 2009 10-K pg. 26  
  7. Air Products and Chemicals. "2007 Financial Review". pg.14
  8. APD 2009 10-K pg. 7  
  9. Air Products and Chemicals, 2007 Financial Review "Tonnage Gases."
  10. Seeking Alpha. "Air Products, Fuel Cell Energy building High Efficiency Hydrogen Power Plant". March 23, 2007
  11. Air Products and Chemicals "REACH"
  12. APD FY 2008 Q1 Call transcript, Seeking Alpha.
  13. Chemical Market Reporter "Energy costs drive Air Products" October 3-9, 2005
  14. Answers.com "Air Products & Chemicals"
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