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Praxair’s Non-Industrial Gases Segment: Surface Technologies

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Praxair’s surface technologies segment

Praxair’s surface technologies segment manufactures coating equipment and thermal spray powders, and also provides coating services. Praxair’s coating products are used by several industries to provide corrosion protection, wear resistance, and thermal insulation to prolong the life of components. The company also produces a line of electric arc, plasma, and high-velocity oxyfuel equipment. The company has 45 manufacturing plants, primarily located in the United States and Europe, and smaller operations in Asia and South America. The surface technologies segment contributed 6% to the company’s sales in 2014. Major end markets for this segment are aerospace, energy, and manufacturing. Aerospace contributed the highest percentage, 34%, to the surface technologies segment’s total revenue in 2014, followed by energy with 28%, manufacturing with 11%, and the rest from metals, chemicals, electronics, healthcare, food and beverage, and others.

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Financial performance

Surface technologies’ revenue has increased at a CAGR (compound annual growth rate) of 2%, from $648 million in 2011 to $679 million in 2014. The revenue growth was primarily driven by higher volumes and business transfers. Surface technologies’ revenue decreased by 1% in 2013 due to flat volume and lower cost pass-through in the metals industry for thermal spray powder. However, the segment’s operating margins improved from 16.2% in 2012 to 18.1% in 2014. The higher margins were due to higher volumes, lower costs, higher pricing and business transfers.

The iShares US Basic Materials ETF (IYM) primarily focuses on chemical industry stocks. DuPont (DD), The Dow Chemical Company (DOW) and Monsanto (MON) are IYM’s top three holdings. DuPont makes up the highest percentage of IYM’s total holdings, with around 11%. In the next article, we’ll look at Praxair’s key end-user industries.

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