APD Company Profile

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.