Through internal development and by acquisitions, Air Products and Chemicals,
Inc. has established an internationally recognized industrial gas and related
industrial process equipment business and developed strong positions as a producer
of certain chemicals.
The gases business segment recovers and distributes industrial gases such as
oxygen, nitrogen, helium, argon, and hydrogen, and a variety of medical and
specialty gases, and also includes the Company's healthcare business. The chemicals
business segment produces and markets performance materials and chemical intermediates.
The equipment business segment supplies cryogenic and other process equipment
and related engineering services.
Air Products, through subsidiaries and affiliates, conducts business in numerous
countries outside the United States. The structure of the Air Products gas business
in Europe is comparable to the Company's United States operation, except that
in Europe the Company is also engaged in a broader packaged gas business. Air
Products' international business is subject to risks customarily encountered
in foreign operations, including fluctuations in foreign currency exchange rates
and controls, import and export controls, and other economic, political, and
regulatory policies of local governments.
The Company's industrial gas segment, through investments ranging from wholly
owned subsidiaries to minority ownership interests, does business in approximately
35 countries outside the United States. Majority and wholly owned industrial
gas subsidiaries operate in Argentina, Brazil, Canada, and Mexico, and throughout
Europe and Asia in 16 and ten countries, respectively. There are 50'percent
industrial gas joint ventures in Canada and Trinidad and Tobago, seven countries
in Europe, four in Asia, and two in Africa, and less than controlling interests
in Africa, Canada, and Mexico, four countries in Europe, and five in Asia. The
Company has a 50'percent joint venture in the U.K. that is developing products
relating to silicon wafer polishing, chemical mechanical planarization processes,
and hard disk polishing. The Company also has a 50 percent interest in a power
generation facility in the Netherlands and a 48.8 percent interest in one in
Thailand.
The principal geographic markets for the Company's chemical products are in
12 countries, with operations in North America, Europe, Asia, Brazil, and Mexico.
Majority and wholly owned subsidiaries operate in Germany, Italy, the Netherlands,
the United Kingdom, Australia, Japan, Korea, China, Taiwan, and Mexico. The
polymer emulsions and pressure-sensitive adhesives joint venture with Wacker-Chemie
GmbH has headquarters in the United States and production facilities in the
United States, Germany, Mexico, and Korea, along with a technical service center
in Shanghai, China.
Raw Materials and Energy
The Company manufactures hydrogen, carbon monoxide, synthesis gas, and carbon
dioxide principally from natural gas. The Company's principal raw material purchases
are chemical intermediates produced by others from basic petrochemical feedstocks
such as olefins and aromatic hydrocarbons. These feedstocks are generally derived
from various crude oil fractions or from liquids extracted from natural gas.
The Company purchases its chemical intermediates from many sources and generally
is not dependent on one supplier. However, with respect to vinyl acetate monomer
that supports the performance polymer business, the Company is heavily dependent
on a single supplier under a long-term contract that produces vinyl acetate
monomer from several facilities. The Company characterizes the availability
of these chemical intermediates as generally being readily available. The Company
uses such raw materials in the production of emulsions, amines, polyurethane
intermediates, specialty additives, polyurethane additives, and epoxy additives.'
Natural gas is an energy source at a number of the Company's facilities. The
Company also purchases ammonia under long-term contracts as a feedstock for
several of its chemicals facilities.
Competition
The Company's businesses face strong competition from others, some of which
are larger and have greater resources than Air Products.
Air Products' industrial gas business competes in the United States with three
major sellers and with several regional sellers. Competition in industrial gas
markets is based primarily on price, reliability of supply, and furnishing or
developing applications for use of such gases by customers, and in some cases
the provisions of other services or products such as power and steam generation.
Similar competitive situations exist in European and Asian industrial gas markets
in which the Company competes against one or more larger entrenched competitors
in most countries.
The division of the Company's gas business that serves the electronics industry
offers electronic specialty gases, chemicals, services, and equipment. These
products face competition from competitors who vary from product to product,
ranging from niche suppliers having only a single product, to larger and more
vertically integrated chemical companies with greater financial resources than
the Company. Competition in these products is principally on the basis of price,
quality, product performance, and reliability of product supply.
Competition in the institutional market of the global healthcare business is
principally from other large, established industrial gas companies using business
models (long-term product supply agreements) that are similar to those the companies
utilize for other industrial gas supply relationships. Competition in this market
is principally based on price, quality, service, and reliability of supply.
Homecare is served by national and local providers, and in the U.S. there are
over 2,000 regional and local providers. The homecare market is highly competitive.
In the United States reimbursement levels are established by fee schedules regulated
by Medicare and Medicaid, or by the levels negotiated with insurance companies.
Accordingly, in the United States, homecare companies compete primarily on the
basis of service. Maintaining competitiveness requires efficient logistics,
reimbursement, and accounts receivable systems. The Company intends to attempt
to acquire additional homecare companies, provided that such companies can be
acquired on terms deemed reasonable by management.
The number of the Company's principal competitors in the chemicals business
varies from product to product, and it is not practical to identify such competitors
because of the broad range of the Company's chemical products and the markets
served, although the Company believes it has a leading or strong market position
in most of its chemical products. For amines the competition is principally
from other large chemical companies that also have the ability to provide competitive
pricing, reliability of supply, technical service assistance, and quality products
and services. The possibility of back integration by large customers is the
major competitive factor for the sale of polyurethane additives. In its other
chemical products, the Company competes with a large number of chemical companies,
some of which are larger, possess greater financial resources, and are more
vertically integrated than the Company. Competition in these products is principally
on the basis of price, quality, product performance, reliability of product
supply, and technical service assistance.
The Company's equipment business competes in all aspects with a great number
of firms, some of which have greater financial resources than Air Products.
Competition is based primarily on technological performance, service, technical
know-how, price, and performance guarantees.
