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Air Products Winnows Gases: It Will Drop Some Lines It Buys and Resells That Are Less Profitable.

Posted on: Wednesday, 24 May 2006, 18:00 CDT

By Kurt Blumenau, The Morning Call, Allentown, Pa.

May 24--Air Products and Chemicals plans to phase out some of the less profitable gases and chemicals it supplies to electronics makers, the company's top official said Tuesday.

Chief Executive Officer John Jones, speaking at an investors' conference in New York City, said the Trexlertown company plans to stop selling some products it has historically supplied to electronics companies. Air Products sells more than 200 types of gases and chemicals to that industry, he said.

Jones said the materials to be phased out are not made by Air Products. Instead, the company buys them from others and resells them. Air Products' own gases and chemicals offer higher profit potential, he said.

"We're going to be streamlining our product offerings," he said.

Jones did not specify which products will no longer be sold, when they will disappear, or what their departure will mean to Air Products' bottom line. Electronics accounted for $1.3 billion in sales for the company last year, about 14 percent of Air Products' total year-end revenue.

Later in the day, company spokesman Rob Brown described the changes as "not very significant" in terms of financial impact. Brown said it is too soon to tell when the products will be dropped.

The announcement does not represent a pullback from electronics. Jones said the company has "very strong growth rates" in some parts of that business, and remains a leading global supplier to the industry.

For instance, Asian makers of flat-panel television screens use large amounts of nitrogen trifluoride, a gas made at Air Products' plant in the Schuylkill County village of Hometown. Semiconductor companies are also historically heavy users of Air Products' materials.

The announcement continues a trend of Jones winnowing out less profitable product lines to focus on more lucrative or promising areas.

Most recently, the company said in March it plans to sell operations representing more than half its annual chemicals revenue. Jones said Air Products is "engaged with multiple parties," negotiating the sales of those lines. It has already sold a chemicals plant in Louisiana.

At the same time, Air Products bought a Wisconsin company that makes high-profit specialty chemicals called performance materials. Unlike the chemical lines being sold, performance materials is considered a promising, high-growth business.

Air Products employs about 4,200 people in Lehigh and Northampton counties, making it the region's third-largest employer. It employs 20,000 people worldwide, and is one of two Fortune 500 companies with headquarters in the Valley. The other is PPL Corp. of Allentown.

Also on Tuesday, Air Products said sales rose 5 percent year-over-year in April, with strong gases and electronics sales outweighing weak chemicals results.

The company said the Easter holiday resulted in fewer work days. That hurt performance in several business areas, including European gases and specialty chemicals.

Overall chemicals volumes fell 7 percent, not including the acquisition of the Wisconsin chemicals company and the sale of the Louisiana plant. Asia continues to be a strong growth market, with gases demand up 24 percent.

Air Products' monthly sales updates do not include specific dollar amounts.

Air Products' stock gained 54 cents per share on the New York Stock Exchange, closing at $64.13 per share in average trading volume.

kurt.blumenau@mcall.com

610-820-6664

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Copyright (c) 2006, The Morning Call, Allentown, Pa.

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NYSE:APD, NYSE:PPL,

Source: The Morning Call, Allentown, Pennsylvania

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