Q1 2022 Air Products and Chemicals Inc Earnings Call

Please standby we're about to begin.

Good morning, and welcome to the Air products first quarter earnings release Conference call. Today's call is being recorded at the request of Air products. Please note that this presentation and the comments made on behalf of air products are subject to copyright by air products and all rights are reserved but again.

Today's call is Simon Moore. Please go ahead.

Thank you Allie and good morning, everyone. Welcome to Air Products' first quarter 2022 earnings results teleconference. This is Simon Moore, Vice President of Investor Relations corporate relations and sustainability.

I'm pleased to be joined today by <unk>, our chairman President and CEO , Dr. Samir <unk>, our chief operating officer.

Elisa Shaffer, our senior Vice President and Chief Financial Officer, and Sean Major our executive Vice President General Counsel and Secretary.

After our comments, we will be pleased to take your questions.

Our earnings release and the slides for this call are available on our website at air products Dot com.

This discussion contains forward looking statements. Please refer to the forward looking statement disclosure that can be found in our earnings release and on slide number two.

In addition throughout today's discussion we will refer to various financial measures unless we specifically state otherwise when we refer to earnings per share EBITDA EBIT margin the effective tax rate in <unk>, both on a company wide and segment basis, we are referring to our adjusted non-GAAP financial measures adjust.

Earnings per share adjusted EBITDA, adjusted EBITDA margin adjusted effective tax rate and adjusted return on capital employed.

Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section.

Also as we shared with you on our last call. This is the first quarter, we reported our results with our new Middle East in India, and our new corporate segments now I am pleased to turn the call over to safety.

Thank you Simon and good day to everyone.

Thank you for taking time from your very busy schedule to be on our call today.

I am proud to say.

That despite significant challenges.

Including unprecedented and as your cost increases.

And I mean unprecedented.

Especially in Europe supply chain disruptions.

And the continued adverse effects caused by the pandemic.

They are talented committed and motivated people of air products continue to deliver excellent results.

Including earning per share this quarter in the top half of our guidance range.

This quarter, we closed on phase one of the <unk> project.

Appreciated the single largest project in our <unk>.

<unk> history and create significant value for many years to come.

As always.

Wanted to tank or more than 20000 employees around the growth.

Or standing together working hard.

Being agile and delivering.

Our customers and shareholders.

Let me start this presentation with our highest.

Alrighty.

He is obviously safety.

Please take a look at the slide number three.

Although we have made significant progress in this area since fiscal year 2014.

Our first quarter safety performance.

Slightly behind last year.

That is not acceptable.

Our goal remains zero accidents and zero incidents.

We are committed to dry.

Toward that goal across the organization.

Knowing that the right attitude and constant attention to safety.

Absolutely necessary.

And requires.

The slides number four five and six.

They include our bowl.

Our management philosophy, and our five point plan.

We have shared these slides with you before.

Im not going to go through the details, but these are the principles that we follow every day.

And they will guide us in the future.

Now please turn to slide number seven.

We are focused on making air products.

The leader in providing solutions to today significant energy and environmental challenges.

True.

Asia CASM capture clean hydrogen.

I am proud to say that we have continued to create and win projects.

Help customers and countries meet there.

Boeing needs for clean energy and environmental solutions.

Last year, we announced two landmark blue hydrogen projects.

One in Alberta, Canada, and the other in Louisiana in United States of America.

Adding to our.

Slate of board scale megawatt projects.

For the energy transition.

At the beginning of our fiscal year.

This fiscal year.

We successfully closed on phase one of the $12 billion, Jasmine, Zhang gasification and power project.

For fitting one of our major commitments.

We continue.

To expect phase one of this project to contribute 80 to 85 cents per share on a full year basis.

Consistent with what we have committed to you before.

We also continued to make great progress on our.

Our significant project backlog.

Now please turn to slide number eight.

Creating a clean energy future.

Likewise experience.

Investment.

Elevation on award the scale.

At Air products.

Have the technology.

That track record.

Capital.

And the ambition to X.

Our board strategy.

And bringing people around the world together.

To collaborate in an inclusive environment.

And helps.

Dogs sustainability challenges.

We are living our highest purpose.

As a company that is our highest surface.

Now please turn to slide number nine.

It is clear that air products.

The ability is our growth strategy.

Sustainability creates are broad opportunities and our growth opportunities support our sustainability goals I'm focused.

We are very proud.

To help drive the energy transition.

In particular through our broader scale hydrogen makes a lot of projects.

Our new home project in Saudi Arabia.

Our <unk> project in Canada.

And Louisiana project in the United States of America.

Present, almost $10 billion.

Exactly.

<unk> capital creep.

Create a zero and low carbon hydrogen.

We need that to drive the carbonization and accelerate the energy transition.

These projects will significantly reduce <unk> emissions.

For our customers.

But air products yourself and four doors.

As a first move it taking real action.

Through these real projects, we can bring a portfolio of experiences and technologies together.

To provide lower carbon forms of energy.

Prove our customers' sustainability and help solve significant energy and environmental challenges.

As I said this is our Hyatt place as a company.

In addition, it is important that our commencements are aligned.

Strategy.

We introduced our third by 30 carbon intensity reduction goal.

More than a year ago.

And I'm very proud to say.

That the major projects that you have and lounge.

And along with our day to day focus on operational efficiency.

Puts us in a great position to meet or exceed this goal by 2030.

But as a company we are never satisfied with our performance.

Therefore.

Taking another look.

At our opportunities to make even more meaningful.

Yes.

Hi, Ed environment or both.

And then the purview of our sustainability leadership Council.

Reviewing additional areas of opportunity.

Which could include scope three emissions goal.

Benefits of avoided emissions and or other potential scenarios.

I expect to share more with you on this exciting topics by midyear.

Now please turn to slide number 10.

It shows our EPS growth.

Why the focus on our strong wrong term prospects.

We remain vigilant and motivated to deliver excellent near term results.

Consistent with our strategy.

And do you have already promised to investors.

As you can see.

We have delivered on the promise during 2014 and achieved an 11% annual cumulative EPS growth on average since 2014.

Building, a strong foundation for future growth.

The excellent results and key projects, we have executed.

Represent the initial stages of our strategy.

Vance aboard toward the cleaner energy future.

I am very optimistic about our company's prospects.

To capitalize on these growing opportunities by being a meaningful.

Meaningful player in the energy transition.

Now please turn to slide number 11.

As a reminder.

We do share our earnings growth directly.

Customers through our dividend.

While we continue to invest in growth opportunities.

The whole team at air products is very proud that we just announced our 48 consecutive year of dividend increase.

This tremendous long term record.

Is a testament to our people and our strength and consistency.

Of our business model.

Most recent increase is 8%.

Which increases our dividend to $1.62.

Sure.

Got it.

Which we expect to transfer.

Translate directly returning.

More than one $4 billion to our shareholders in 2022.

And asthma.

Uh huh.

Our senior Vice President and Chief Financial Officer.

As shared with you in a moment really have significant remaining cash flow to support our many projects opportunities.

And finally.

Please turn to slide number 12.

It's still my favorite slide.

Since it captures in one shot.

The progression of our business since 2014.

We continued to deliver strong underlying results.

But our margin declined in recent quarters, primarily driven by higher energy pass through.

It increases our sales, but it doesn't impact profit.

Who is chair of the margin decline from a peak.

Due to the impact of this higher energy pass through.

As I indicated last quarter, we are continuing to take action to improve our margins through controlling costs and increasing prices to cover cost increases.

Now I'm happy to turn the call over to Melissa to discuss our results in more detail.

Uh huh.

Thank you Stacey now please turn to slide 13.

Before we discuss the details of our first quarter results I would like to highlight a few notable items in our reported financials this quarter.

As we previously announced.

Reorganized our reporting segments, starting next quarter.

To provide more visibility to our regions, we separated the previous EMEA segment into Europe , and Middle East and India segment.

The new segment is made up of our business in the Middle East, which includes a new <unk> joint venture in India. Additionally, we combined global gases with the corporate and other segment.

Historical segment financial information is available in a form 8-K, which we published in December .

We are proud to have completed phase one at the 12 billion dollar Japan joint venture and late October . This milestone has led to two separate but related events.

Which impact our results favorably favorably this quarter first was it started a new joint venture known as J I G. P. <unk>.

Ongoing financial contribution.

With the contract between the joint venture in Saudi Aramco.

On an ongoing basis, our portion of the Japan Joint Ventures net profit is it included in equity affiliate income since we don't consolidate this joint venture.

Also recognize interest income on the shareholder loan associated with our $1 $5 billion investment, which is included in our non operating income line of our income statement to be clear. These are loans from air products to the joint venture and our mechanism for us to efficiently fund our contribution.

They're these two income streams guidance 80 to 85 cents and annual EPS annual phase one EPS.

But we expected and committed to our shareholders and consistent with what we recognized for two months in Q1.

We remain on track to start closing on phase two in 2023.

Second a non reoccurring event of approximately 20.

And Bob the transfer of the Air separation unit supporting the Gasifier at just Dan from a previous.

S U joint venture to the Japan joint venture.

This transfer required the final settlement of our ASU joint venture, which previously owned and operated these air separation units and enabled us to recognize a portion of the profit that was deferred when air products sold the ASU to the joint venture.

This profit was recognized at equity affiliate income.

Partially offsetting this and also in equity affiliate income recorded a loss associated with the ASC joint venture settlement.

Our joint venture partners share of this settlement loss is reflected as a favorable non controlling interest item.

Now please turn to slide 14 for our first quarter results.

Compared to last year sales increased 26% to nearly $3 billion.

And price were strong and together account for 13% of the increase while the remaining half was driven by higher energy pass through.

Rapidly escalating energy costs continued to negatively impact our business across our regions this quarter.

Situation was especially challenging in Europe , and Americas, as natural gas and electricity cost surge even higher from the already elevated levels, we saw last quarter.

Simon will share more details, but in Europe natural gas costs were almost six times higher and power costs were almost four times higher than the beginning of the year.

Our onsite business about half of our total company sales has contractual protection from the energy cost increases.

The costs are passed onto the customer.

Energy cost pass through nature of sales, 14% higher but did not impact our profit.

And our merchant business our teams around the world have quickly executed price actions to help offset the escalating energy costs.

For this quarter prices improved compared to last year and last quarter and all three largest segments Asia Europe and America.

We're able to recognize a 10% price increase across the merchant business, which translated to a 5% increase in price for the total company.

This is our best pricing results in many years.

I would like to thank our team for the excellent work. They have done in response to such a significant challenge. However, we still have more work to do we are actively executing against price actions across the region to recover the unprecedented cost impact.

Volume improved 8% up in all segments, driven by new assets hydrogen merchant recovery and stronger scale of equipment activity EBIT.

EBITDA increased 8% again exceeding the $1 billion mark for a quarter as favorable volume prices and equity affiliate income more than offset higher costs.

EBITDA margin declined 570 basis points, mostly due to the higher energy pass through which negatively impacted our margins about 450 basis points by higher costs net of price increases.

Tribute to the remaining shortfall.

Sequentially volumes were down 3%, primarily due to the strong sale of equipment and prior quarter.

2% price increase was the direct result of our ongoing price action.

EBITDA was 4% lower sequentially as better price and equity affiliate income were more than offset by higher costs and lower sale of equipment profit recognition.

Our LTE with 10, 3%.

Currently have significant cash on our balance sheet, which will support the major projects, we have announced.

Adjusting for this cash are oce would have been 13, 9%, we expect <unk> to improve as we deploy the cash and bring projects on stream.

Now please turn to slide 15.

Our first quarter adjusted EPS was $2.52, which is 44, 19% above last year.

Volume was favorable 19.

And price net of variable cost with modestly unfavorable for.

As our price actions were able to offset most of the unprecedented energy cost increases.

For the quarter, our price actions alone before netting against variable costs contributed about 40.

Costs were up this quarter similar to prior quarters, our growth strategy has us continuing to invest in additional resources.

The very high end dynamic energy prices and our last in our largest three segments also impacted our supply chain as we incurred higher operating and distribution costs to keep our customers supplied.

We had additional discretionary compensation this quarter and a positive settlement of a supply contract last year, neither of which will continue in the future.

The ongoing EPS contribution of <unk>, Dan <unk> and joint venture this quarter represent two months and is consistent with our commitment adding to both equity affiliate income and non operating income.

Equity affiliate income increased 29 <unk>.

Including the ongoing <unk> results, the deferred profit recognition and the unfavorable ASU joint venture settlement, which I mentioned earlier.

Noncontrolling interest was seven favorable versus prior year, representing our partners' portion of the asphalt joint venture settlement.

<unk> operating income was flat as the interest income from the shareholder loans associated with the Japan joint venture was offset by higher pension expense.

Our first quarter effective tax rate of 17, 1% was 220 basis points lower than last year.

<unk> the favorable impacts of Japan.

Seasonally lower primarily due to the additional share based compensation and we still expect our tax rate to be 19% to 20% this year.

Now please turn to slide 16.

The stability of our business continues to allow us to generate strong cash flow. Despite the challenging energy environment over the last 12 months, we generated about $2 8 billion of distributable cash flow or about $12 50 per share.

From a EBITDA of almost $4 billion, we pay interest tax and maintenance capital.

That our maintenance capital is a little higher than usual driven in part by the spending on a novel New Global headquarters, which is now essentially complete complete.

From the distributable cash flow, we paid over 45% or $1 $3 billion as dividends to our shareholders and still have about $1 $5 billion available for high return projects.

This strong cash flow even in uncertain times enables us to continue to create shareholder value through increasing dividends and capital deployment.

Slide number 17 provides an update on our capital deployment we.

We continue to make great progress in developing and executing our major growth projects. In fact, we see potential opportunities significantly greater than the investment capacity we show here.

With the closing of <unk> phase one we see a reduction in cash on hand, and an increase in capital or expense.

As you can see our deployment.

Potential is over $33 billion through fiscal 2027.

The $33 billion includes over $8 billion of cash and additional debt capacity available today.

Over $16 billion, we expect to be available by 2027 and over $9 billion already spent.

We still believe that capacity is conservative given the potential for additional EBITDA growth.

To generate additional cash flow and additional borrowing capacity.

We will continue to focus on managing our debt balance to maintain our current targeted <unk> rating.

So you can see we've already spent 27% and have already committed 70% of the updated capacity we show here.

We have made great progress and still have substantial investment capacity remaining to invest in high return projects.

Now to begin the review of our business segment results I'll turn the call back over to safety safety.

Thank you Melisa now.

Now please turn to slide number 18 for our Asia results.

Sales were up 9% compared to last year.

Volumes grew 4% due to a strong onsite volume is there.

A variety of small to medium sized new plans shame on us on.

On the screen across the region.

Hey, Luann facility continues to operate at full capacity under the interim supply agreement.

We continue to recognize the reduced fee in quarter, one consistency is in.

Term supply agreement.

We expect this to continue to prescribe the year 2022 before returning to the peak in 2023.

We saw the best price performance for Asia in nearly two years.

3% overall price increase improvement for the region.

Close to about 8% price increase for our Mexican business.

Our team has implemented price action.

Loans to higher power costs.

General inflation.

China Government has also relax as power.

30 program alone.

<unk> low cost power cost to fluctuate.

This market oriented approach May result in more variability in our power cost going forward.

We are monitoring this.

Situation very closely.

In addition, China's effort to reduce energy usage.

Intensity to its dual control policy continued.

Continue to impact customer demand.

Cause isolated disruptions of our clients.

This has a very modest negative impact on our plant efficiency and supply chain costs.

This impact was more prominent earlier in the quarter.

Seem to ease in December .

Costs were also unfavorable view to resources that we needed to add to support our new.

Project start ups in the region.

And the higher without the Covid related government incentives.

Last year.

EBITDA was up 2%.

Bigger volumes price.

And currencies rather.

More than offset higher costs.

Sequentially sales and profits are up.

Strong price more than offset higher costs.

Now I would like to turn the call over to Simon to talk about.

European results Simon.

Thank you Safi now please turn to slide 19.

Before I get into our Europe results and to build on Melissa comments earlier I wanted to share some details related to the unprecedented energy cost increases this quarter.

Energy costs climbed throughout the quarter from already elevated levels natural gas costs were almost six times higher and power costs were almost four times higher than the beginning of the calendar year.

While the energy costs have been elevated all year this quarter saw energy costs more than doubled from the previous quarter.

As Melissa mentioned, our onsite business has contractual pass through of the higher costs.

For the merchant business. Our team has delivered significant price actions to partially recover the recent cost increases.

I also would like to thank our European team for their extraordinary efforts.

Although we are very proud of the work done by our team our price actions have not fully recovered the cost increase and as Melissa said, we have more work to do.

We do believe we will be able to recover the shortfall by the end of the year.

Now please turn to slide 20 for a review of our Europe results.

Sales increased 37% versus last year volume and price were strong and together grew 14%.

However, our profit and margin were unfavorable this quarter due to the dramatic energy cost increases.

The energy cost pass through increased sales, 27%, but did not increase profit.

For the quarter, our price actions resulted in a 9% price gained for the region, which corresponds to a 14% improvement for the merchant business.

Prices were higher across all major product lines and subregions.

Volume increased 5%, primarily driven by improved hydrogen and merchant demand.

Currencies were unfavorable 4%, primarily due to the weaker euro against the U S dollar.

For this quarter other costs also increased the very significant energy cost increases also disrupted our supply chain negatively impacting both plant operating and distribution efficiencies.

We also saw inflation higher maintenance discretionary incentive compensation and COVID-19 related costs, while we continue to invest in additional resources needed to support our growth strategy.

EBITDA was down 19% as higher costs were partially offset by price increases volte.

Volume was positive in sales, but did not contribute significantly to profit due to unfavorable mix.

EBITDA margin was 500 basis points lower about 700 basis points of the decline was due to the significant energy cost pass through increase while the remainder was mostly due to higher costs, partially offset by price in the merchant business.

Compared to prior quarter, EBITDA was 19% lower due to unfavorable business mix higher costs and lower equity affiliate income.

Higher energy pass through also negatively impacted margin by about 350 basis points sequentially.

Now I would like to turn the call over to Dr. <unk> for a brief discussion of our other segments.

Thank you Simon now please turn to slide 21 for a review of our Americas results.

Sales increased more than 30% versus last year.

Volume and price to got that it went up 11%.

While energy pass thru accounted for the remaining increase.

Volume grew 8% primarily due to hydrogen the company on a strong merchant demand.

And so our hydrogen business has improved it has not yet.

So it's a brief corporate level.

Similar to other regions.

<unk> has also experienced significant energy cost increases versus loss.

Steve.

Our team has done an excellent job raising prices to cover today knows your cost increase in this quarter.

The 3% gain for the region is equivalent to 9%, 9% on our merchant business.

Costs were favorable despite inflation and supply chain related challenges.

And partly due to lower maintenance costs this quarter.

We expect planned maintenance activities to pick up next quarter.

EBITDA posted another double digit gain.

18%.

Last year.

But our volume.

Right.

Yeah affiliate income more than offset the higher energy costs.

EBITDA margin was 560 basis points lower than last year.

Higher energy cost pass through negatively impacted EBITDA margin by about 700 basis points.

In other words EBITDA margin would have been up excluding the energy cost pass through.

Sequentially.

EBITDA was lower due to higher maintenance costs.

High energy cost basket food negatively impacted EBITDA margin by about 300 basis points.

Now please turn to slide 22, our newly created middle East and even gift segment.

Again as I stated before this segment is composed of our business is in the middle east, including the Japan joint venture.

I know a lot of business.

Yes.

Dan.

Income in the segment are modest since our middle East and India wholly owned operations are smaller in size.

However, the segment's EBITDA is significant since it includes the equity affiliates Inc.

Related to the <unk> joint venture.

Our India joint venture.

Roughly $70 million increase in equity affiliate income included our share of that.

<unk> joint venture of midst bucket for two months.

And the net impact to Q2, the Finalization of day assumed joint venture that minutes previously discussed.

Sales and operating income are up compared to last year due to a new facility on stream in India.

But down sequentially to a favorable due to a favorable contract settlement.

The previous quarter.

Now please turn to slide 23.

<unk>, which is our new corporate segment, which now includes our previous global gases segment.

Yeah.

This segment includes our sale of equipment businesses.

Well.

Our centrally managed functions and corporate costs.

Over the past few years, our LNG sale of equipment businesses.

Has it grown considerably now contributing most of the sales in this segment.

However, the margins of these businesses are typically below our company average.

Sales were higher in this quarter driven by increased project activity.

But the buckets were lower due to higher corporate costs.

And without last year's settlement of our supply comes on.

At this point I would like to turn the call back over to safely to provide his closing comments.

Thank you very much Doctor say huh.

During my nearly five decades in business.

I have learned that the board changes all the time.

Sometimes in very unpredictable ways as we have seen in the past several years.

Therefore.

We're an organization.

The ability to anticipate plan and react to change.

Speed and resiliency.

Key to success.

I have also learned that all challenges can be addressed by staying focused.

And United and call.

And by working towards a common goal.

That is why I'm proud.

Despite the continuing adverse effects of the pandemic.

Rising costs.

Inflation supply chain disruptions.

And all of the challenges facing us.

People at Air products have done just what we expected them to do.

That is they have adopted to the change in our.

Acting accordingly.

This is by the delivered strong results. Despite all of these challenges.

Our volume.

This profits all grew this quarter versus last year.

Even as the stay the course and added resources.

Support our opportunities and board scale projects for the cleaner energy future.

I truly believe that our company has become EBIT stronger in the past two years and fully expect to deliver significant earnings growth as the economies around the award normalize and our new projects come on stream.

Now please turn to slide number 24.

As I said I remain highly confident.

<unk> resilient business model.

Our strategy and our execution.

However, I do have some concerns on the economic backdrop.

Driven by continued Covid challenge.

The impact of supply chain constraints.

Inflation.

And then as your Cogs and geopolitical tensions.

Therefore.

For quarter two of fiscal year 2022.

Earnings per share guidance.

Is $2 30 to $2 40.

Up 11 to 15 over last year.

For fiscal year 2022.

Earnings per share guidance remains unchanged.

At $10 20 to $10 40.

Which is 13% to 15% better than last year.

We continue to see our capital expenditure in 2022.

To be around four $5 billion to $5 billion.

Including the approximately $1 5 billion for phase one of the <unk> project.

Now please turn to slide number 25.

The opportunities created by the energy transition have already mens.

That is one two.

Our megawatt projects in gasification carbon capture and hydrogen.

We are acting as a first mover.

We are taking real action through real board the scale investments and projects that address significant energy and environmental challenges.

So you have the portfolio of expanding is in technologies that we can bring together.

Optimal configuration for a project.

Working with customers in countries around the world.

We'll deliver low carbon forms of energy and improve their sustainability.

In addition to investment in technology.

We know that there's always the Ria enablers of this transition.

The people, who work alongside our customers and bringing our opportunities and projects to life.

At Air products.

<unk> consciously increased our talent and.

And resources to take on these urgent challenges.

Adding.

Over 3000 people over the past two years.

As we drive toward the clean.

Energy Board.

A talented people.

Help us accelerate progress.

We are continuing to build.

Diverse and inclusive culture.

There are people feel they belong and know that data contribution matters.

As I always say.

Our long term competitive advantage.

Is the commitment.

Motivation about people.

I know that through their hard work and contribution.

We continue to succeed.

Now.

We are pleased to answer your questions.

Operator.

Thank you and if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. Please pickup your handset to make sure. Your mute function is turned off so that you signal.

Our equipment.

Again, it is star one if you would like to ask a question.

And we'll go ahead and take our first question from.

P J <unk> with Citi. Please go ahead.

Yes.

Yes, good morning Savi.

And the team running P. J how are you this morning.

Yes, a couple of questions first can you give us an update on the Neal project, especially on the downstream side.

We will be executing on your own.

Is there any update on contract signings and then this significant disruption that we're seeing in energy pricing in Europe .

Does that create uncertainty for customers to come into long term contracts on that side.

P. J. Thank you for the question Danielle project with respect to the downstream side. Obviously, we are working in developing the infrastructure needed to bring in the green ammonia.

Crack it and then sell it to our customers. So those projects are underway.

In terms of any contract signing and all of that we have said from the beginning two years ago that we are going to be very.

The cautious about saying anything about that.

Because that is in Israel competitive advantage and be certainly they don't want to give all of our secrets away.

With respect to the question that you asked about energy costs.

Obviously, the significant fluctuation in energy costs, and especially them going up.

Is going to make it more competitive for that.

Green and clean products, so from that point of view the level of interest.

In Green.

Hi, vision and blue hydrogen.

Has significant increase around the world.

Okay. That's fair enough one other quick question for Melissa.

On Slide 13, you mentioned interest income from loans to Japan can you just give us more details on that loan. Thank you.

Yes.

Yeah.

And unless you have addressed that but.

That's a very very complicated transaction and debt.

I'm not sure if you can and should be able to answer all of your details of your question on the call. We can always have another call video on decided to give you the details, but I'll turn it over to Melissa to say, but she can on this call go ahead, Melissa yes. Thank you very much Jessie. Thank you P. J for the question so as Stacey.

Mentioned is complex but.

Just a quick highlight so as we mentioned during our statements about one third of the contribution from the <unk> joint venture in Nonoperating income. This is the interest income on our investment as a shareholder loan so.

This is just our efficient way of funding the joint venture.

Thank you Okay P J.

Yes, Thank you Stephanie.

Sure.

We'll go ahead and move on to our next question from Steve Byrne with Bank of America. Please go ahead.

Yes. Thank you Simon and you made a comment about in the European segment do you expect to recover costs with price actions by year end.

Just wanted to drill into that a little more can you comment on.

What fraction of your merchant business has a pass through and perhaps its small but do you have it in place and soon but in order for you to recover by year end or are you do you have more price actions that you have yet to announce or is there a lag effect.

Or do you expect cost to come down and just would like to better understand that.

Sure it's actually PD.

Straightforward what happens is that we anticipate energy cost increases N V announced price increases.

But energy prices have been going up significantly higher than our anticipation.

Therefore, we need to take a delayed action to increase prices to recover what has happened in the past that is why there will be a delay in recovering the costs.

We'll take the action but.

Obviously from the time to take action and invoice the customer until we get there.

And of that there is a delayed action, but fundamentally they tend to increase prices every day, they do that every quarter.

Yeah.

We anticipate that for the first quarter of this year, but significantly lower but.

I actually have so now we have increased prices starting January <unk>.

We will increase prices starting April 1st and as we build with different customers and that is why there is a lag.

And any of them.

Pass through in the contract.

But the merchant business a lot of it is not the contract.

Pass through which as per the contract is for our onsite business that is pass through that hasn't affected our results and all of those pass throughs have happened that is why our results on our onsite so visa on.

On the merchant side.

In Europe is approximately 60% of our business that is where the executed price increases.

And I hope it is most of the contracts do not have kind of officially pass throughs as our merchant business.

Yes.

Okay, one more for you safety it seems like you are.

Hugh.

Youre focused in gold zone.

On the energy kind of expanded to beyond hydrogen to include carbon capture narrow my question for you is do you see this as a business.

Relevant for a product that could be completely independent so hydrogen I E.

Working with customers to perhaps capture carbon from combustion sources.

Completely different approach and perhaps that could drive increased sales of oxygen just just where would you like to see that particular business goal for air products.

This is an excellent question at this point in time, we are doing carbon capture in order to produce clean blue hydrogen specifically.

So I don't see us ranging into that but if that becomes a very attractive sector and we have the technology to take a look at it but right now we are doing carbon capture.

Those projects in.

In conjunction with their producing blue hydrogen.

Okay. Thank you.

Thank you Sir.

And we will move on to our next question from Jeff Zekauskas with Jpmorgan. Please go ahead.

Alright, thanks very much.

You weren't $2 52 in the quarter and so if you annualize that that's 10%.

And your guidance is $10 20 to $10 40.

In the December quarter is probably a seasonally weak quarter.

So.

It doesn't seem like you expect a very much progress or maybe you are really at the top of your range or a little bit beyond that.

Why are your earnings higher this year energy costs are coming down in Europe , you're passing through prices.

Shouldnt you have higher returns this year.

Just the thing is that you know.

Uh huh.

Everything obviously it depends on your view of the world and in terms of what's been happening.

Look at this quarter, we had high expectations for this quarter, but then Colby came in in Europe got shut down.

And energy price has been up significantly higher.

And I am not trying to say that I am very concerned about.

Some of the geopolitical tensions what would be the implications of that for energy prices.

Vince forbid if anything happens with Ukraine, and so on but that's due to Europe and energy So I said resolved.

We are trying to be balanced.

Balance.

And Oh.

Give people projections that be realistically believe.

We can meet.

No you can save you a conservative, but you might not be but.

We didn't see any reason at this point in time, considering what has happened in the first quarter to change our guidance.

Next quarter as things change.

It obviously shed any thoughts that you have this year.

Great and then.

Secondly, I'm always puzzled about your corporate EBITDA line.

Can you give us any insight into what that number might be.

Over the next three quarters does it change much is there a certain level.

And then for Melissa.

The undistributed earnings of equity method investments in the quarter were negative $1 17.

What should that number be for the year order of magnitude.

Okay, Jeff I'll answer your first question and initiative and answering your second question.

Yeah.

So I think is that that corporate sector, obviously from my point of view I'd like to see there.

The number to be basically on EBITDA thing to be balanced that means that you can make enough money on the other parts of the business in order to balance our corporate overhead.

Yes, that's our goal, but obviously because it is somewhat be a sale of equipment, it goes up and down quarter by quarter, but overall.

I would like to see that number to be.

Just flat.

Basically they don't make money if you don't lose money.

So with respect to your second question Melissa would you like to address that please.

Thank you Stacey.

I think youre, referring to the undistributed earnings of equity affiliates in the cash flow statement. So yes exactly right. Yes. Thank you. So this is cash on the operating activity from the joint venture. So as the dividends are distributed later this year, which we fully expect they'll go through the investment section.

Great. Thanks, so much.

Do you change that.

Well move onto our next question from John .

<unk> <unk> with BMO capital.

Markets. Please go ahead.

Yes. Good morning, Thanks for thanks for taking my question and safety.

Just a question on the European energy issues. So it sounds like if I'm understanding and I guess, that's what I want to clear up what youre, putting through its not a surcharge or anything like that it's more of a direct pricing. So if we start to see energy prices subside as we get past kind of the winter months et cetera, it sounds like that would be <unk>.

Reasonable windfall for you as the pricings going through as the energy is coming down am I thinking about that right or is there some other nuance to consider.

So first of all good morning, John Hope all these video and talk to you for one.

With respect to the question that Youre asking.

You always get it right that is exactly what we are trying to do that means that we are increasing the prices.

And then hopefully as energy cost goes down do you expect to keep some of those prices.

Because to make up for the fact that we didn't get enough of it in the previous quarters.

So youre right if energy prices go down.

They go down then we will have an up some.

But that's a big if John but that is exactly that you'll have it you are thinking about it exactly the way they were trying to execute.

Got it Okay and then.

Just a question on the third by 30 carbon intensity goal that you have I guess.

When you think about the three big hydrogen projects with two big Blue ones in the Green one does that actually get you to that target already or is there more to do there and I guess tied to that.

Are there projects going forward that air products might not do just because of the carbon intensity around them that in the past they might have so say whatever its a big coal gasification project, where there's no carbon capture or something like that does that does a target like this preclude you from actually go.

Going after that type of business I guess, how should we be thinking about that.

John that is an excellent question and first of all in my comments your Vegas much read through it.

We're saying that it looks like the projects that we are doing.

We think we can meet that target and exceed it and therefore, we are going to give you an update by midyear.

So youre right I mean, we are doing a lot of good projects and that would help us.

Just back to your second question it depends on how the contracts are structured.

Because countries.

We will come to us have come to us and said I want you to do this project is coal gasification.

Yes.

You are not responsible for this year or two I gave you the raw material and you gave me the projects Youre adjusted taller and they see what we're doing as much responsibility.

If people are willing to do it like that as they have been.

Then we do the projects and of course, then we are not adding any she would do through the or somebody else is going down.

Sure Bonnie.

But if it turns out that we have doing a project that <unk> two is our responsibility.

But then we would think twice about organic.

Sure.

It's about reducing shoot you an award not attitude.

But there are circumstances with their customers.

Country comes to Us and said.

Look I don't want to take the call and make mentioned on all of it.

And I'll take the responsibility for the short term.

Okay. John Thanks got it very helpful. Thanks very much.

Thank you.

We'll go ahead and move on to our next question from Chris Parkinson with Mizuho Securities. Please go ahead.

Chris Your line is open.

Oh, sorry about that mute.

Can you just give us a bit of a broader view of the situation of China Luann as well as some just very quick updates on your tie into Bang just how should investors be thinking about the cadence of these projects. Thank you very much.

Good morning, Chris, but the thing is that I gave you an update on the wind at the project is.

The plant is operating at full scale in all of that and we have consciously given a break with the close to the customer for two years for other good reasons.

We expect that to be going back to normal.

October of 2022.

And the other projects are being executed.

On plan B.

We don't expect any major issues with dose.

So up to now.

Yeah, you know, we don't have any significant.

Disruption that would be.

Need to talk about.

Got it thank you Andrea.

Yes, no that's very helpful and just as a very quick follow up prior to Covid. There was a lot of talk and obviously there were some project signs across central and Southeast Asia.

It seems like you still have a very large opportunity in Indonesia, and there are still several projects be decided on in India could you just give us a very quick update on your overall thought process and how those would potentially fit in.

Abd's backlog thank you.

Well they have decided not to talk about those projects.

There are a lot of them as you alluded to until we sign the final contracts. So we don't want to announce animal use or if you don't want to announce every time that there.

I have a videoconference with the minister or anything like that.

So.

Those are the opportunities are there and when those contracts get to this stage that they are definitive contracts and then we will obviously announce them, but those projects are there we haven't seen any slowdown.

Thank you David.

Late because of Covid in terms of getting to the final stage of the contract.

But I expect that baby.

Understandable. Thank you so much.

Thank you Chris.

We'll take our next question with David Begleiter with Deutsche Bank. Please go ahead.

Thank you and good morning.

In Europe , how are you I'm.

I'm doing well how about yourself.

But bigger.

This is in Europe , you mentioned, you mentioned the delays in implementing or capturing of pricing. This time around why is that the case is that because of the sharp rise in energy prices and how are you seeing similar cadences by competitors in and delaying or extending captures until the end of the year.

Yeah, David I'm very glad that you asked the question.

When we say that D day. Please it is not as if we are delayed in crude price increases.

Falling.

Sure.

Let's say here is the month of that.

Yeah.

End of April right.

And our team gets together and say, we anticipate that prices.

In June July and August the price of energy.

Please go up 10%.

Therefore, we announced a 10% increase.

On prices on June 1st right.

Alright.

If the price during that quarter of June July and August goes up 20%.

Then we have fallen behind.

Then in the month the next quarters now the need to raise the prices.

3% to catch up with that.

But then the energy prices.

Our issue in Europe has been that every time, we anticipate price increases the actual price increases.

Beyond that there was no big deal would have predicted no bank debt and natural gas prices in Europe will go up six times. There was no way that people would have predicted that.

And as electricity costs in Europe , we will get to <unk>.

Towards the sensor kilowatts.

So that is the debate.

Delays in action.

Is the fact that our anticipation of price increases that lower because <unk> talked it was pretty robust, but the real work ahead of us.

That is why.

Our lagging behind.

I think that you can see a significant improvement in the performance of our business in Europe index and the <unk>.

What they are doing it.

I fully expect that but.

Who knows what happens with the energy products that that is.

Our ability.

Israel, we are falling short.

In terms of ability to predict energy prices, but nobody.

I could do that because they have been so unprecedented.

Yes.

If at the beginning of last year, you would have told somebody that.

Electricity cost for air products go from.

Yeah.

A few weeks.

<unk> hundred 20.

Yeah.

People.

We would have thought that was reasonable.

But that's the way it has worked out.

I hope I made myself clear.

David rather than doing a lot of talking.

No very clear and just from Melissa Suzanne Melissa what was the net impact of the transfer of the.

A few assets this quarter the net net impact.

Okay.

In fact, it's about 2000.

Thank you.

And we'll take our next question from Kevin Mccarthy with vertical Research partners. Please go ahead.

Good morning on Slide 15, you provided a helpful disaggregation of the EPS growth.

And as I read it it looks as though you're recovering the vast majority of the energy cost increases in terms of the <unk> drag from price net of variable than below that there is a 21% headwind from other costs can you speak to what costs are resident in the 20th.

<unk> number and how you would expect that to.

The trends over time.

Hi, Kevin.

Very good question the thing is that it.

There is a list of about 30 items in there that we can go through that with you offline in terms of some of that some of that has got to do with the fact that we had some one off benefits last year. So when you compare this year to last year.

Those numbers look.

Look as if the costs have gone up significantly, but there is no question that the R.

And the volume costs.

Our higher because of all of the money that you're spending and the development of the projects that the mega projects.

Each one of these projects takes $5 million to $10 million develop.

As I've said before we have added 3000 people to our organization in order to deal with that.

Now as some of these projects become.

Investment projects and approved by our board.

Some of these costs go into capital rather than just being charged to the bottom line.

While life has grown and gone they are charged to Gabon them or they are ongoing cost. So I don't expect the number to be as big as it is this quarter.

And then line, we probably have $20 million to $30 million a year of additional costs because of what we are doing the diminished a bit the megawatt projects.

I see Thats very helpful. And then secondly, you raised your dividend by 8% yesterday.

At the EPS guidance that would suggest potential for growth of <unk>.

14% at the midpoint can you just speak to the Delta between those numbers what is what is the thinking behind adopting a more measured pace for the dividend relative to what you contemplate for earnings.

Yeah.

Well again, thank you for the question, Kevin and VITAS, 8% is pretty robust, you're saying that your dividend is not growing as much as yours.

EPS.

We obviously want to have some cash for growth, but there is another measure that we have talked about this is not how the.

Decide on dividends do you have a lot of factors into that but overall.

We have always said that we want the dividend.

To be something between two to join a half percent of stock price in terms of our dividend yield.

So if you take a dollar of 62 times four.

And divided by the stock price at around about 284%.

So that's another measure, but as I said, that's not the only day that decide on EPS is a lot of factors in terms of cash flow and all of that.

But that's a.

And besides that Dr Weil.

Ahead of everybody else.

Our sector in terms of dividend.

So if you didn't want to overdo it.

Yes. Thank you for that reminder.

Thank you Sir.

And our next question comes from John Roberts with UBS. Please go ahead.

Thank you Sophie.

Hi, John .

Good morning, you mentioned your power costs in China might fluctuate more or the merchant contracts in China any different than your merchant contracts in Europe and elsewhere that you might have a hard time dealing with those fluctuations.

I don't think so John .

At the end of the day. This is all a function of the competitive environment and the utilization of your facilities.

In China right now.

Utilization of our merchant facilities in mid eighties.

Mid eighty's.

Our costs go up I think you could have the ability to pass that through.

And I think it was mentioned that pension costs actually went up it was a bit of a contributor to the headwind.

Down for a lot of other companies because of interest rates going up and good plan performance last year why would your pension be going up.

Well.

You know there is a lot of reason because we have a lot more people.

We have 3000 more people that they need to.

People say that okay, you need to provide for these people and so on but if you don't have too many defined pension plans, but.

I'd like to see it Melissa has anything else to add to that this is a.

Function of the act.

Actually he's doing all the numbers how long people are going to live and all of that you know all of that.

Melissa do you have anything else to that yet.

Yes, Thank you David.

Where we are in our funding we are going through a de risking our glide path and that that is a portion of the reason that you're seeing that change.

Thank you.

Okay.

And we'll take our next question from Mike Sison with Wells Fargo. Please go ahead.

Okay.

Hey, good morning nice quarter.

I think your question is given.

Given.

Given the high energy costs electricity costs in industrial gases 10 to be used as sort of an efficiency aid for a lot of facilities is this environment. Good.

The fundamental demand for industrial gases over the next couple of years.

I mean will it sort of sparked more.

Many projects or just general demand for oxygen nitrogen et cetera.

Well on for that to materialize they need to get Colby to go away. So that the economic activity goes up.

And then usually inflationary environment is a good thing for industrial gases usual.

Not always.

We think that if the inflationary environment continues and we are able to increase prices and then if the cycle turns.

We keep some of those price increases that might be a pause it.

It's very difficult to quantify that right now.

Got it and then a quick follow up on Europe , EBITDA was down about $40 million is that the delta that you need to just offset with pricing.

For the next couple of quarters.

Yes, that's most of it yes.

Great. Thank you.

Thank you.

And our next question comes from Mike Harrison with Seaport Research Partners. Please go ahead.

Hi, good morning.

Good morning, Mike.

Safety I was wondering if you can give a little bit more color on the impact of dual control in China on your Asia volumes.

As well as the margin impact you mentioned some plant efficiency and supply chain was also impacted and then it sounds like maybe the dual control policy is evolving.

You were watching it closely so do you expect a similar impact in Q2 or maybe not as bad.

Mike I in my comments I tried to shed some light into that by saying that first of all the impact there was an impact but it was not material in the first quarter.

The impact bus.

A lot.

A lot more in the month of October than it turned out to be in the month of November and December .

And.

It seems that that the harshness rich.

The government trying to implement that being back in September October .

Has subsided a little bit and as a result, we don't expect any material effects of that on all of that.

The results in the next quarter.

Alright, and then in terms of the inflationary environment.

As you look at some of your committed projects and the capital associated with them are you seeing higher costs for labor and equipment steel other materials.

Kris the capital costs associated with those projects and do those higher costs, then get passed onto the customer.

So there is some change in the base facility charge, where do they end up eating into returns if your capital costs are higher.

So first of all then be.

Did some of these projects, we obviously have made provisions for possible inflation on all of that but at the end of the day. It is a fact that some of the costs are going up in terms of how much of it they can pass on to the onsite customers. So on is very much dependent on the details of the contract that we have negotiated with this.

Recipient customers, so I cannot make a general statement.

But the overall.

There is pressure on us to be very diligent to.

To make sure that the stay on top of the cost for our projects and all of that.

Make sure that they.

They don't eat into our returns as you alluded to.

Alright, Thank you very much.

Thank you.

Our next question comes from Duffy Fischer with Barclays. Please go ahead.

Yes, good morning.

Good morning Duffy.

<unk> around your new segment, the middle Eastern India. If you look at the $103 million of EBITDA and you normalize for having <unk> for the full quarter and not changing the JV structure would like a normalized EBITDA run rate be for that segment.

Wow.

Hi.

Yeah.

To some extent you can calculate it in the sense that.

For the.

First quarter two months of just that.

So for the next quarter.

You'll have three months of just that.

And most of that is just so you can kind of triangulate to them.

Approximately.

It will come up with that number youre looking for.

Okay.

And going forward, how variable will that EBITDA number would be is there a seasonality in it or are there going to be lumpy quarters, where you've got turnarounds and stuff like that or will it be in a very tight range. When you kind of just print the same number quarter over quarter until you move on from phase one.

I expect that number to be stable.

Uh huh.

Because it's basically a facility fee.

No I don't expect that to change significantly in our maintenance cost change that significantly.

Terrific. Thanks, guys.

Thank you.

Well go ahead and move onto our next question from Vincent Andrews with Morgan Stanley . Please go ahead.

Thank you good morning, everyone.

Hey, good morning.

Thank you Stacy I'm reading about there's about $9 million.

Infrastructure grants in the U S that are going to come out.

Is it fair to assume that youll be positioning the company to get some part of that for our hydrogen projects.

We will try for sure.

And what order of magnitude do you think that could be.

I have.

I have no idea because.

It depends on what gets allocated how much of that will be for hydrogen there their locations will be what would be the criteria.

I mean they are.

These projects as you know there is sometimes a lot of strings attached.

Some of it might not be acceptable to us and all of that so it is a very very difficult to project at this stage.

Ah Okay because they.

They have just started they have just started the obviously already engaged with the department of energy.

They have some real.

Projects its not theoretical but.

I have that.

Yeah, they no visibility into what that number could be or should be.

Okay, and just as a follow up there was a comment in the prepared remarks about.

America's hydrogen still being below pre COVID-19 levels do you give a rough approximation of how below pre COVID-19 levels you are.

Something in the order of magnitude of about.

5% something like that.

That's S. There arent you want to.

Do that.

Yes, I did say three 5% to 10% from two years ago.

Thank you. Thank you. Thank you very much.

Okay.

And we will move on to Bob <unk> with Goldman Sachs. Please go ahead.

Your line is open.

Yeah.

And Bob are you on mute.

Okay.

Okay due to no response, we will move on to our next question from Marc Bianchi with Cowen. Please go ahead.

Hey, Thank you good morning.

I had a question came up earlier save me. The question came up earlier about Annualizing, the EPS and getting.

$10, but if I try to take out all the onetime Japan and in the.

Recurring contribution of Japan.

Looks like to me that the the second half EPS implied in the guidance is up about 15% to 20% from the first half just in the underlying business.

Which seems like a big ramp I know, there's some favorable seasonality in there and you've got some pricing initiatives to recover some of the energy cost, but could you talk to.

Maybe the components of that improvement how much is seasonality what's anticipated in terms of energy recovery.

Sorts of things I'm curious for some more color.

Sure I mean, there's two guidelines obviously if you go through all of this thing before I could give you a guidance and because.

Because of what you said, that's why we didn't change our guidance for the year, but.

Number one you know the results for the first quarter.

We have given you a guidance for the second quarter. So you can add it up and you get two but expect to make in the first half.

Usually from a seasonality point of view.

Approximately.

Do you take all of the years.

Make about 47%, 48% of our profit during the first half.

And 52% to 53% of it during the second half.

So that is the seasonality you're kind of assuming that you can take a look at.

And then the other thing is that we do expect.

That we did get ahead of these energy costs in Europe .

Yeah.

And therefore.

Let me cover some of that and therefore, our the performance of our European sector will be bet.

When you look at this this quarter is actually the pitiful Miss of our business in Asia and in the United States with very good it's just that Europe that hurt our results.

So if you put the combination of the seasonality and the recovery in Europe , then do you have a reasonable chance of doing that.

Guidance that you have given.

Okay. Okay.

That's all I had thank you so much.

Well, thank you very much.

We will go ahead and take our next question from Laurence Alexander with Jefferies. Please go ahead.

Good morning in your European business are you receiving any kind of performance bonuses for running at higher operating rates and helping customers be more energy efficient.

Given the high electricity prices, but they are replacing.

Nothing that substantial because over there.

Those customers on our onsite business are obviously paying for the higher energy costs.

Oh, yes, they are not receiving any special.

Compensation or anything like that they are just paying for the additional energy cost and to get our feet there are contract.

Thank you.

Thank you.

Yeah.

And we have no further questions with that that does conclude our question and answer session I would now like to turn back over to our presenters for any additional or closing remarks.

Well.

Thank you very much everybody for participating in our call B I appreciate your.

Our attention and good questions.

And the issue.

Good health.

Success for the balance of the quarter and look forward to talking to you next quarter.

Thank you again.

Yeah.

And with that that does conclude today's call. Thank you for your participation you may now disconnect.

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Good morning, and welcome to Air Products' first quarter earnings release Conference call. Today's call is being recorded at the request of Air products. Please note that this presentation and the comments made on behalf of air products are subject to copyright by air products and all rights are reserved.

Beginning today's call is Simon Moore. Please go ahead.

Thank you Allie and good morning, everyone. Welcome to Air Products' first quarter 2022 earnings results teleconference. This is Simon Moore, Vice President of Investor Relations corporate relations and sustainability I'm.

I am pleased to be joined today by safety SME, Our chairman President and CEO , Dr. Samir, Sir Hahn, our Chief operating officer.

Elisa Shaffer, our senior Vice President and Chief Financial Officer, and Sean Major our executive Vice President General Counsel and Secretary.

After our comments, we will be pleased to take your questions.

Our earnings release and the slides for this call are available on our website at air products Dot com.

This discussion contains forward looking statements. Please refer to the forward looking statement disclosure that can be found in our earnings release and on slide number two.

In addition throughout today's discussion we will refer to various financial measures unless we specifically state otherwise when we refer to earnings per share EBITDA EBITDA margin the effective tax rate in <unk>, both on a company wide and segment basis, we are referring to our adjusted non-GAAP financial measures adjusted.

Earnings per share adjusted EBITDA, adjusted EBITDA margin adjusted effective tax rate and adjusted return on capital employed.

Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section.

Also as we shared with you on our last call. This is the first quarter, we reported our results with our new Middle East in India, and our new corporate segments now I am pleased to turn the call over to safety.

Thank you Shannon and good day to everyone.

Thank you for taking time from your very busy schedule to be on our call today.

I am proud to say.

That despite significant challenges.

Including unprecedented and as your cost increases.

And I mean unprecedented.

Especially in Europe supply chain disruptions.

And the continued adverse effects caused by the pandemic.

The talented committed and motivated people of air products continue to deliver excellent results.

Including earnings per share this quarter in the top half of our guidance range.

This quarter, we closed on phase one of the <unk> project.

This is the single largest project in our <unk>.

<unk> history, and will create significant value for many years to come.

As always.

Want to tank or more than 20000 employees around the growth.

Or standing together working hard stay.

Staying agile and delivering for our customers and shareholders.

Let me start this presentation with our highest.

Priority, which is obviously safety.

Please take a look at the slide number three.

Although we have made significant progress in this area since fiscal year 2014.

Our first quarter safety performance.

Slightly behind last year.

That is not acceptable.

Goal remains zero accidents and zero incidents.

And we are committed to drive.

Toward that goal across the organization.

Knowing that the right attitude and constant attention to safety.

Is absolutely necessary.

And requires.

The slides number four five and six.

We include our bowl.

Our management philosophy, and our five point plan.

We have shared these slides before.

So I'm not going to go through the details, but these are the principles that we follow every day.

And they will guide us in the future.

Now please turn to slide number seven.

We are focused on making air products.

Lead it and providing solution to today significant energy and environmental challenges.

True gasification carbon capture and clean hydrogen.

I am proud to say that we have continued to.

To create and win projects.

Customers and countries meet.

There are growing needs for clean energy and environmental solutions.

Last year, we announced two landmark blue hydrogen projects, one in Alberta, Canada and the other in Louisiana in United States of America.

Adding to our <unk>.

Late award.

Mega projects.

<unk> energy transition.

At the beginning of our fiscal year.

This fiscal year.

We successfully closed on phase one of the $12 billion, Jasmine, Zhang gasification and power project.

For fitting one of our major commitments.

We continue.

To expect phase one of this project to contribute 80 to 85 per share on a full year basis.

Consistent with what we have committed to you before.

We also continued to make great progress on our.

Our significant project backlog.

Now please turn to slide number eight.

Creating a cleaner future.

Likewise experience.

Investment and.

Innovation on award the scale.

At Air products.

Have the technology.

The track record.

Capital.

And the ambition to X.

<unk> our board strategy.

And bringing people around the world together.

To collaborate in an inclusive environment.

And helps.

Dogs sustainability challenges.

We are living our highest purpose.

As a company that is our highest surface.

Now please turn to slide number nine.

It is clear that air products.

The ability is our growth strategy.

Sustainability creates are broad opportunities and our growth opportunities supports our sustainability goals I'm focused.

We are very proud.

To help drive the energy transition.

In particular through our broader scale hydrogen megawatt projects.

Our new home project in Saudi Arabia.

Our <unk> project in Canada.

And Louisiana project in the United States of America.

Present, almost $10 billion.

Is that air products capital.

To create a zero and low carbon hydrogen needed to drive the carbonization and accelerate the energy transition.

These projects will significantly reduce <unk> emissions.

Customers.

For air products yourself and four doors.

As a first mover taking real action.

Through these real projects.

Bringing a portfolio of experiences and technologies together.

<unk> lower carbon forms of energy.

Improve our customers' sustainability and.

So significant energy and environmental challenges.

As I said this is our highest purpose as a company.

In addition, it is important that our commencements are aligned.

Our strategy.

We introduced our third by 30 carbon intensity reduction goal.

More than a year ago.

And I'm very proud to say.

That the major projects that you have announced.

And along with our day to day focus on operational efficiency.

Puts us in a great position to meet or exceed this goal by 2030.

But as a company we are never satisfied with our current performance.

Therefore.

Taking another look.

At our opportunities to make even more meaningful.

Yes.

Hi, Ed environmental goals.

And there's a few of our sustainability leadership Council.

Reviewing additional areas of opportunity.

Which could include scope three emissions goal.

Benefits of avoided emissions and or other potential scenarios.

I expect to share more with you on this exciting topics by midyear.

Now please turn to slide number 10.

It shows our EPS growth.

But the focus on our strong long term prospects.

We remain vigilant and motivated to deliver excellent near term results.

Consistent with our strategy.

And must be have already promised to investors.

As you can see.

We have delivered on the promise during 2014 and achieved an 11% annual cumulative EPS growth on average since 2014.

Building, a strong foundation for our future growth.

The excellent results and key projects, we have executed.

Represent the initial stages of our strategy.

Vance award towards a cleaner energy future.

I am very optimistic about our company's prospects.

To capitalize on these growing opportunities by being a meaningful.

Meaningful player in the energy transition.

Now please turn to slide number 11.

As a reminder.

We do share our earnings growth directly.

Customers through our dividend.

While we continue to invest in growth opportunities.

The whole team at air products is very proud that we just announced our 48 consecutive year of dividend increase.

This tremendous long term record.

As a testament to our people and our strength and consistency.

Of our business model.

The most recent increase is 8%.

We've increased our dividend to $1.62 per share per quarter.

Which we expect to transfer.

On slide two.

Directly returning more than one $4 billion to our shareholders in 2022.

And asthma shafer.

Senior Vice President and Chief Financial Officer.

Shared with you in a moment really have significant remaining cash flow to support our many projects opportunities.

And finally <unk>.

Turn to slide number 12.

It's still my favorite slide.

It captures in one shot.

Progression of our business since 2014.

We continued to deliver strong underlying results.

But our margin declined in recent quarters, primarily driven by higher energy pass through.

Which increases our sales.

Doesn't impact profit.

Who is chair of the margin decline from a peak is due to the impact of this higher energy pass through.

But as I indicated last quarter, we are continuing to take action to improve our margins through controlling costs and increasing prices to cover cost increases.

Now Im happy to turn the call over to Melissa to discuss our results in more detail.

Uh huh.

Thank you Stacey now please turn to slide 13, before we discuss the details of our first quarter results I would like to highlight a few notable items in our reported financials this quarter.

As we previously announced we reorganized our reporting segments, starting next quarter to provide more visibility to our regions. We separated the previous EMEA segment into Europe , and Middle East and India segment.

The new segment is made up of our business in the Middle East, which includes the <unk> joint venture in India. Additionally, the combined global gases with the corporate and other segment.

Historical segment financial information is available in a form 8-K, which we published in December .

We are proud to have completed phase one at the 12 billion dollar Japan joint venture and late October . This milestone has led to two separate but related events.

Which impact our results favorably favorably this quarter first was it started a new joint venture known as J I G. P CS ongoing financial contribution.

With the contract between the joint venture in Saudi Aramco.

On an ongoing basis.

A portion of the Japan Joint Ventures net profit is it included in equity affiliate income since we don't consolidate this joint venture.

<unk> also recognized interest income on the shareholder loans associated with our $1 5 billion dollar of investment which is included in our non operating income line of our income statement to be clear. These are.

<unk> air products to the joint venture and our mechanism for us to efficiently fund our contribution to.

Gather these two income streams guidance, 80% to 85% of annual EPS annual phase one EPS.

Exactly what we expected and committed to our shareholders and consistent with what we recognized for two months in Q1.

We remain on track for closing our phase two in 2023.

Second a non reoccurring event of approximately 20.

And Bob the transfer of the air separation units supporting the Gasifier I, just Dan from a previous ASU joint venture to the Japan joint venture.

This transfer required the final settlement of our ASC joint venture, which previously owned and operated these air separation units and enabled us to recognize a portion of the profit that was deferred when air products sold the ASU to the joint venture.

This profit was recognized at equity affiliate income.

Offsetting that and also in equity affiliate income recorded a loss associated with the ASC joint venture settlement.

Our joint venture partners share of this settlement loss.

It reflected as a favorable non controlling interest item.

Now please turn to slide 14 for our first quarter results.

Compared to last year sales increased 26% to nearly $3 billion.

And price were strong and together account for 13% of the increase while the remaining half was driven by higher energy pass through.

Rapidly escalating energy costs continued to negatively impact our business across the region this quarter.

The Fisher situation was especially challenging in Europe , and America as natural gas and electricity costs service, even higher from the already elevated levels, we saw last quarter.

Simon will share more details, but in Europe natural gas costs were almost six times higher and power costs were almost four times higher than the beginning of the year.

Our onsite business about half of our total company sales has contractual protection from the energy cost increase at.

Our costs are passed onto the customer.

Energy cost pass through nature of sales, 14% higher but did not impact our profit.

And our merchant business our teams around the world have quickly executed price actions to help offset the escalating energy costs.

But this quarter prices improved compared to last year and last quarter and all three largest segment Asia Europe and America.

We're able to recognize a 10% price increase across the merchant business, which translated to a 5% increase in <unk>.

For the total company.

This is our best pricing results in many years I.

I would like to thank our team for the excellent work. They have done in response to such a significant challenge. However, we still have more work to do we're actively executing against price action across the region to recover the unprecedented cost impact.

Volume improved 8% up in all segments, driven by new assets hydrogen merchant recovery and stronger sale of equipment activity EBIT.

EBITDA increased 8% again exceeding the $1 billion mark for a quarter as favorable volume prices and equity affiliate income.

Offset higher costs.

EBITDA margin declined 570 basis points, mostly due to the higher energy pass through which negatively impacted our margins about 450 basis points by higher costs.

Price increases.

Tribute to the remaining shortfall.

Sequentially volumes were down 3%, primarily due to the strong sale of equipment and prior quarter.

2% price increase was the direct result of our ongoing price action.

EBITDA was 4% lower sequentially is better.

Better price and equity affiliate income were more than offset by higher costs and lower sale of equipment profit recognition.

Our LTE was 10, 3% weaker.

We currently have significant cash on our balance sheet, which will support the major projects we have it now.

Adjusting for this cash are our oce would have been 13, 9%, we expect <unk> to improve as we deploy the cash and bring projects on stream.

Now please turn to slide 15.

Our first quarter adjusted EPS was $2.52, which is 40 or 19% above last year.

Volume with favorite about 19 cents and price net of variable cost with modestly unfavorable four cents.

Is that price action, we're able to offset most of the unprecedented energy cost increase it.

For the quarter, our price actions alone before netting against the variable costs contributed about 45.

Costs were up this quarter similar to prior quarters, our growth strategy has us continuing to invest in additional resources.

The very high end dynamic energy prices and a lack in our largest three segments also impacted our supply chain as we incurred higher operating and distribution costs to keep our customers supplied we.

We had additional discretionary compensation this quarter and a positive settlement of a supply contract last year, neither of which will continue in the future.

The ongoing EPS contribution of <unk>, Dan <unk> and joint venture this quarter represent two months and is consistent with our commitment I think keeps us equity affiliate income and non operating income.

Equity affiliate income increased 29.

Including the ongoing Suzanne results.

First profit recognition.

The unfavorable ASU joint venture settlement, which I mentioned earlier.

Non controlling interests was 7% favorable versus prior year, representing our partners' portion of the asphalt joint venture settlement.

Non operating income was flat.

Interest income from the shareholder loan associated with the <unk> joint venture was offset by higher pension expense.

Our first quarter effective tax rate of 17, 1% was 220 basis points lower than last year, including the favorable impact of interest in.

Seasonally lower primarily due to the additional share based compensation and we still expect our tax rate to be 19% to 20% this year.

Now please turn to slide 16.

The stability of our business continues to allow us to generate strong cash flow.

The challenging energy environment.

Over the last 12 months, we generated about $2 8 billion of distributable cash flow or about $12 50 per.

Sure.

EBITDA of almost $4 billion, we pay interest tax and maintenance capital.

Note that our maintenance capital is a little higher than usual driven in part by the spending on a novel New Global headquarters, which is now essentially complete.

From the distributable cash flow, we paid over 45% or $1 $3 billion as dividends to our shareholders and still have about $1 $5 billion available for high return projects.

This strong cash flow even in uncertain time enables us to continue to create shareholder value through increasing dividends and capital deployment.

Slide number 17 provides an update on our capital deployment.

They continue to make great progress in developing and executing our major growth projects. In fact, we see potential opportunities significantly greater than the investment capacity we show here.

With the closing of <unk> phase one.

You see a reduction in cash on hand, and an increase in capital spend.

As you can see our deployment.

Potential is over $33 billion through fiscal 2027.

The $33 billion includes over $8 billion of cash and additional debt capacity available today.

Over $16 billion, we expect to be available by 2027 and over $9 billion already spent.

We still believe this capacity is conservative given the potential for additional EBITDA growth.

To generate additional cash flow and additional borrowing capacity.

We will continue to focus on managing our debt balance to maintain our current targeted <unk> rating.

See if already spent 27% and have already committed 70%.

Dated capacity, we show here.

We have made great progress and still have substantial investment capacity remaining to invest in high return projects.

Now to begin the review of our business segment results I'll turn the call back over to Stacey Stacey.

Thank you Melisa now.

Now please turn to slide number 18 for our.

Our Asia results.

Sales were up 9% compared to last year.

Walliams grew 4% due to a strong onsite volume.

There are variety of small to medium sized new plants came on risks on the screen across the region.

Hey, Luann facility continues to operate at full capacity under the interim supply agreement.

We continue to recognize the reduced fee in quarter one consistent.

This interim supply agreement.

We expect this to continue through fiscal year 2022, before returning to the full peak in 2023.

We saw the best price performance for Asia in nearly two years.

3% overall price increase improvement for the region.

Close to about 8% price increase for our merchant business.

Our team has implemented price actions in response to higher power costs and.

General inflation.

China Government has also relax as power.

30 program.

To allow low cost power cost to fluctuate.

This market oriented approach May result in more variability in our power cost going forward.

We are monitoring this situation very closely.

In addition, China's effort to reduce energy usage.

And intensity through its dual control policy.

Continue to impact customer demand and caused isolated disruptions of our clients.

This had a very modest negative impact on our plant efficiency and supply chain costs.

This impact was more prominent earlier in the quarter.

Seem to ease in December .

Costs were also unfavorable due to the resources that we needed to add to support our new.

Project start ups in the region.

And they're higher without the Covid related government incentives.

Last year.

EBITDA was up 2%.

Visitor volumes price.

And currencies.

More than offset higher costs.

Sequentially sales and profits are up.

Strong price more than offset higher costs.

Now I would like to turn the call over to Simon to talk about.

European results Simon.

Thank you Safi now please turn to slide 19.

Before I get into our Europe results and to build on Melissa comments earlier I wanted to share some details related to the unprecedented energy cost increases this quarter.

Energy cost climbed throughout the quarter from already elevated levels natural gas costs were almost six times higher and power costs were almost four times higher than the beginning of the calendar year.

While the energy costs have been elevated all year this quarter saw energy costs more than doubled from the previous quarter.

As Melissa mentioned, our onsite business has contractual pass through of the higher costs.

For the merchant business. Our team has delivered significant price actions to partially recover the recent cost increases.

I also would like to thank our European team for their extraordinary efforts.

Although we are very proud of the work done by our team our price actions have not fully recovered the cost increase and as Melissa said, we have more work to do.

We do believe we will be able to recover the shortfall by the end of the year.

Now please turn to slide 20 for a review of our Europe results.

Sales increased 37% versus last year volume and price were strong and together grew 14%.

However, our profit and margin were unfavorable this quarter due to the dramatic energy cost increases.

The energy cost pass through increased sales, 27%, but did not increase profit.

For the quarter, our price actions resulted in a 9% price gain for the region, which corresponds to a 14% improvement for the merchant business.

Prices were higher across all major product lines and subregions.

Volume increased 5%, primarily driven by improved hydrogen and merchant demand.

Currencies were unfavorable 4%, primarily due to the weaker euro against the U S dollar.

For this quarter other costs also increased the very significant energy cost increases also disrupted our supply chain negatively impacting both plant operating and distribution efficiencies.

We also saw inflation higher maintenance discretionary incentive compensation and COVID-19 related costs, while we continue to invest in additional resources needed to support our growth strategy.

EBITDA was down 19% as higher costs were partially offset by price increases volte.

Volume was positive in sales, but did not contribute significantly to profit due to unfavorable mix.

EBITDA margin was 500 basis points lower about 700 basis points of the decline was due to the significant energy cost pass through increase while the remainder was mostly due to higher costs, partially offset by price in the merchant business.

Compared to prior quarter, EBITDA was 19% lower due to unfavorable business mix higher costs and lower equity affiliate income.

Higher energy pass through also negatively impacted margin by about 350 basis points sequentially.

Now I would like to turn the call over to Dr. <unk> for a brief discussion of our other segments.

Thank you Simon now please turn to slide 21 for a review of our Americas results.

Sales increased more than 30% versus last year.

Volume and price to get that it went up 11%.

While energy pass thru accounted for the remaining increase.

Volume grew 8% primarily due to hydrogen the company on a strong merchant demand.

And so our hydrogen business has improved it has not yet.

So it's a brief COVID-19 levels.

Similar to other regions.

We also experienced significant energy cost increases.

Steve.

Our team has done an excellent job raising prices to cover that cost increase in this quarter.

The 3% gain for the region is equivalent to 9%, 9% on our merchant business.

Cost one favorable despite inflation and supply chain related challenges.

And Bob did you have to lower maintenance costs this quarter.

We expect planned maintenance activities to pick up next quarter.

EBITDA posted another double digit gain.

14% ahead of last year.

But our volume.

And equity affiliate income more than offset the higher energy costs.

EBITDA margin was 560 basis points lower than last year.

Higher energy cost pass through negatively impacted EBITDA margin by about 700 basis points.

In other words.

The margin would have been up excluding Dana to your cost basket.

Sequentially.

EBITDA was lower due to higher maintenance costs.

Higher energy cost pass through negatively impacted EBITDA margin by about 300 basis points.

Now please turn to slide 22, our newly created middle East and even gift segment.

Again as I stated before this segment is composed of our business is in the middle east, including the Japan joint venture.

I'll now.

Yes.

Dan and operating income in the segment are modest since our middle East and India wholly owned operations or small on site.

However, the segment's EBITDA is significant since it includes the equity affiliates Inc.

Related to the joint venture and our India joint venture.

Roughly $70 million increase in equity affiliate income included our share of that.

<unk> joint venture of MIT bucket for two months.

And the net impact due to the Finalization of day assumed joint venture that Melissa previously discussed.

Sales and operating income are up conduct on last year due to a new facility on stream in India.

But down sequentially to a favorable due to a favorable contract settlement.

Our previous quarter.

Yeah.

Now please turn to slide 23.

Our new corporate segment, which now includes our previous the global gases segment.

Okay.

This segment includes our sale of equipment businesses.

Well.

Our centrally managed functions and corporate costs.

Over the past few years, our LNG sale of equipment businesses.

Has it grown considerably now contributing most of the sales in this segment.

However, the margins of these businesses are typically below our company average.

Sales were higher in this quarter driven by increased project activity.

But the buckets were lower due to higher corporate costs.

Without last year's settlement of our supply comes off.

At this point I would like to turn the call back over to safely to provide his closing comments.

Thank you very much out there say huh.

During my nearly five decades in business.

I have learned that the board changes all the time.

Sometimes in very unpredictable ways as we have seen in the past several years.

Therefore.

An organization.

The ability to anticipate plan and react to change.

Speed and resiliency.

Key to success.

I have also learned that all challenges can be addressed by staying focused.

And United and call.

And by working toward a common goal.

That is on <unk>.

<unk>.

Despite the continuing adverse effects.

Dennis.

The rising cost.

Inflation supply chain disruptions.

And all of the challenges facing us.

People at Air products have done just what we expected them to do.

That is they have adopted to the change in our.

Acting accordingly.

This is by the delivered strong results. Despite all of these challenges.

Our volume.

This profits all grew this quarter versus last year.

Even as the stay the course and added resources.

Support our opportunities and board scale projects for the cleaner energy future.

I truly believe that our company has become EBIT stronger in the past two years and fully expect to deliver significant earnings growth as the economies around the award normalize and our new projects come on stream.

Now please turn to slide number 24.

As I said I remain highly confident.

<unk> resilient business model.

Our strategy and our execution.

However.

I do have some concerns on the economic backdrop.

Van.

<unk> continued Covid challenge.

The impact of supply chain constraints.

Inflation.

And then as you had Cogs.

Geopolitical tensions.

Therefore.

For quarter two of fiscal year 2022.

Earnings per share guidance is $2 30 to $2 40.

Up 11 to 15 cents over last year.

For fiscal year 2022.

Earnings per share guidance remains at and change.

At $10 20 to $10 40.

This is 13% to 15% better than last year.

We continue to see our capital expenditure in 2022.

It would be around four $5 billion to $5 billion.

Including the approximately one and a half billion for phase one of the <unk> project.

Now please turn to slide number 25.

The opportunities created by the energy transition have already mens.

That is why through our megawatt projects in gasification carbon capture and hydrogen.

We are acting as a first mover.

We are taking real action through real board the scale investments and projects that address significant energy and environmental challenges.

So you have the portfolio of expanding is in technologies that we can bring together.

Optimal configuration for a project.

Working with customers in countries around the world.

We'll deliver low carbon forms of energy and improve their sustainability.

In addition.

<unk> to investment in technology.

We know that as always.

The Ria enablers of this transition.

Are the people, who work alongside our customers and bringing our opportunities and projects to life.

At Air products.

We have consciously increased our talent.

And resources to take on these challenges.

Adding.

Over 3000 people over the past two years.

As we drive toward a clean.

Energy Board, we need talented people to help us accelerate progress.

We are continuing to build a diverse and inclusive culture.

There are people feel they belong and know that data contribution matters.

As I always say.

Our long term competitive advantage.

He is the commitment.

Motivation about people.

I know that through their hard work and contribution.

We continue to succeed.

Now.

We are pleased to answer your questions.

Operator.

Thank you and if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. Please pickup your handset to make sure. Your mute function is turned off so that you signal, which is our equipment.

Again, it is star one if you would like to ask a question.

And we'll go ahead and take our first question from.

P J <unk> with Citi. Please go ahead.

Yes, good morning Savi.

And the team running P. J how are you this morning.

Yes, a couple of questions first can you give us an update on the Neal project, especially on the downstream side.

You'll be executing on your own.

Is there any update on contract signings and then this significant disruption that we're seeing in energy pricing in Europe .

Does that create uncertainty for customers to come into long term contracts on that side.

P. J. Thank you for the question Danielle project.

Back to the downstream side, obviously, we are working in developing the infrastructure needed to bring in the green ammonia a crack at that and then sell it to our customers. So those projects are underway.

In terms of any contract signing and all of that we have said from the beginning two years ago that they are going to be very.

The cautious about saying anything about that.

Because that is in Israel competitive advantage and be certainly they don't want to give all our secrets away.

With respect to the question that you asked about energy cost.

Obviously, the significant fluctuation in energy costs, and especially them going up.

It is going to make it more competitive for that.

Green and clean products, so from that point of view the level of interest.

In Green.

Hi, vision and blue hydrogen.

Has significant increase around the world.

Okay. That's fair and then one other quick question for Melissa.

On Slide 13, you mentioned interest income from loans to Japan can you just give us more details on that loan. Thank you.

Yes.

Yeah.

And that's.

That's that but.

That's a very very complicated transaction and debt I'm not sure she can and should be able to answer all of your details of your question on the call. We can always have another call video on decided to give you the details but.

Ill turn it over to Melissa to say, but she can add on this call go ahead, Melissa yes. Thank you very much Jessie. Thank you P. J for the question. So as Stacy mentioned is complex, but just a quick highlight so as we mentioned during our statements about one third of the contribution from the J P C.

<unk> joint venture in Nonoperating income. This is the interest income on our investment at the shareholder alone.

So this is Jeff.

Efficient way of funding the joint venture.

Thank you Okay P J.

Yes, Thank you Stephanie.

Sure.

Well go ahead and move on to our next question from Steve Byrne with Bank of America. Please go ahead.

Yeah. Thank you Simon and you made a comment about in.

European segment do you expect to recover costs with price actions by year end.

Just wanted to drill into that a little more can you comment on.

What fraction of your merchant business How's this pass through and perhaps its small but do you have it in place and soon but in order for you to recover by year end or are you do you have more price actions that you have yet to announce or is there a lag effect.

Or do you expect cost to come down just would like to better understand that.

Sure it's actually PD.

Straightforward what happens is that we anticipate energy cost increases N V announced price increases.

But energy prices have been going up significantly higher than our anticipation.

Therefore, we need to take a delayed action to increase prices to recover what has happened in the past that is why there will be a delay in recovering the cost.

We will take the action but.

Obviously from the time, they take action in English the customer until we get there.

And of that there is a delayed action, but fundamentally we can increase prices every day, they do that every quarter.

Yeah.

We anticipate that for the first quarter of this year, but significantly lower yes, but actually have so now we have increased prices starting January <unk>.

With increased prices, starting April 1st and as we build with different customers and that is why there is design.

And any of them.

Pass through in the contract.

But the merchant business a lot of it is not the contract.

Pass through which as per the contract is for our onsite business that is pass through that hasn't affected our results and all of those pass throughs have happened that is why our results on our onsite so on the merchant side.

And Europe is approximately 60% of our business.

That is where the executed price increases.

And I hope it is.

Of the contracts do not have kind of officially passed its emission business yes.

Yes.

Okay, one more for you safety it seems like yeah.

Yeah.

Youre focused in gold zone.

Energy has kind of expanded to be on hydrogen to include carbon capture now my question for you is do you see this as a business.

Development for products that could be completely independent so hydrogen I E.

Working with customers to perhaps capture carbon from combustion sources.

Completely different approach and perhaps that could drive increased sales of oxygen.

Just where would you like to see that particular business goal for air products.

This is an excellent question at this point in time.

We are doing carbon capture in order to produce clean.

Hydrogen specifically.

I don't see us range from getting to that but if that becomes a very attractive sector and I'd be happy to technology, we take a look at it but right now we are doing carbon capture.

Those projects are in.

In conjunction with the producing blue hydrogen.

Okay. Thank you.

Thank you Sir.

And we will move on to our next question from Jeff Zekauskas with Jpmorgan. Please go ahead.

Alright, thanks very much.

You weren't $2 52 in the quarter and so if you annualize that that's 10 10.

And your guidance is $10 20 to $10 40.

In the December quarter is probably a seasonally weak quarter.

So.

It doesn't seem like you expect to very much progress or maybe you're really at the top of your range or a little bit beyond that.

Why are your earnings higher this year energy costs are coming down in Europe , you're passing through prices.

Shouldn't you have higher returns this year.

Just the thing is that you know.

Everything obviously it depends on your view of the world and in terms of what's been happening.

Look at this quarter, we had high expectations for this quarter, but then Colby came in in Europe got shut down.

And energy price has been up significantly higher.

I am not trying to say that I am very concerned about.

Some of the geopolitical tensions what would be the implications of that for energy prices evidenced.

Heavens forbid if anything happens with Ukraine, and so on but that due to Europe and energy. So I said resolved.

We are trying to be balanced.

Balance.

And Oh.

Give people projections that be realistically believe.

We can meet.

No you can save you a conservative, but you might not be but.

We didn't see any reason at this point in time, considering what has happened in the first quarter to change our guidance.

Next quarter as things change.

It obviously shed any thoughts that you have this year.

Great and then.

Secondly, I'm always puzzled about your corporate EBITDA line can.

Can you give us any insight into what that number might be.

Over the next three quarters does it change much is there a certain level.

And then for Melissa.

The undistributed earnings of equity method investments in the quarter were negative $1 17.

What should that number be for the year order of magnitude.

Okay, Jeff I'll answer your first question and initiative and answering your second question.

Yeah.

Is that that corporate sector, obviously from my point of view I'd like to see there.

Remember to be basically EBITDA thing to be balanced that means that you can make enough money on the other parts of the business in order to balance our corporate overhead.

That's our goal, but obviously because it is somewhat be a sale of equipment, it goes up and down quarter by quarter, but overall.

We would like to see that number to be.

Just flat.

Zero basically.

Don't make money if you don't lose money.

So with respect to your second question, Melissa would you like to address that Chris Yes.

Thank you Stacey.

I think youre, referring to the undistributed earnings of equity affiliates in the cash flow statement. So this yes exactly right. Yes. Thank you. This is cash on the operating activity from that joint venture. So as the dividends are distributed later this year, which we fully expect they'll go through the investment section.

Great. Thanks, so much.

You don't change it.

We'll move on to our next question from John .

<unk> <unk> with BMO capital.

Markets. Please go ahead.

Yes. Good morning, Thanks for thanks for taking my question safety.

A question on the European energy issues. So it sounds like if I'm understanding and I guess, that's what I want to clear up what youre, putting through its not a surcharge or anything like that it's more of a direct pricing. So if we start to see energy prices subside as we get past kind of the winter months et cetera, it sounds like that would be a reasonable.

Windfall for you as the pricing is going through as the energy is coming down am I thinking about that right or is there some other nuance to consider.

Well first of all good morning, John Hope all is overdue and talk to you for a long.

With respect to the question that Youre asking.

Ah you always get it right that is exactly what we're trying to do that means that we are increasing the prices.

And then hopefully as energy cost goes down do you expect to keep some of those prices.

Because to make up for the fact that we didn't get enough of it in the previous quarters.

So youre right if energy prices go down.

They go down then we will have an up sell.

That's a big if John but that is exactly that you'll have it you are thinking about it exactly the way we are trying to execute.

Got it Okay and then just a question on on the third by 30 carbon intensity goal that you have I guess.

When you think about the three big hydrogen projects with two big Blue ones in the Green one does that actually get you to that target already or is there more to do there and I guess tied to that.

Are there projects going forward that air products might not do just because of the carbon intensity around them that in the past they might have so say whatever its a big coal gasification project, where there's no carbon capture or something like that does that does a target like this preclude you from actually going.

After that type of business I guess, how should we be thinking about that.

John that is an excellent question and first of all in my comments your biggest mark to read through it I was saying that it looks like the projects that we are doing.

He thinks we can meet that target and exceed it and therefore, we are going to give you an update by midyear. So youre right. I mean, we are doing a lot of good projects and that would help us.

Back to your second question it depends on how the contracts are structured.

Because countries.

We will come to us have come to us and said I want you to do this project is coal gasification.

<unk>.

You are not responsible for this year or two.

To give you the raw material rather than you give me the product that you adjust the taller and they see what we're doing as much responsibility.

If people are willing to do it like that as they have been.

And then we do the project.

We are not adding any issue due to the or somebody else is going down.

Sure Bonnie.

But if it turns out that we have doing a project that <unk> two is our responsibility.

And then we would think twice about doing it.

Sure because we are about to reducing sure Julien, we're not adding to it.

But there are circumstances.

<unk>.

<unk> comes to Us and said look.

Look I'm going to take the call and make mentioned on all of it.

And I'll take the responsibility for the short term.

Okay. John Thanks got it very helpful. Thanks very much.

Thank you.

We'll go ahead and move on to our next question from Chris Parkinson with Mizuho Securities. Please go ahead.

Chris Your line is open.

Oh, sorry about that doesn't mute.

Can you just give us a bit of a broader view of the situation of China Luann as well as some just very quick updates on your tie into Bang just how should investors be thinking about the cadence of these projects. Thank you very much.

Good morning, Chris, but the thing is that I gave you an update on the wind at that project is.

The plant is operating at scale in all of that and we have consciously given a break for the close to the customer for two years for other good reasons.

We expect that to be going back to normal.

October of 2022.

And the other projects are being executed.

On plan B.

Don't expect any major issue is the dose.

So up to now be or.

Okay.

Don't have any.

Significant disruption that would be.

Need to talk about.

Got it thank you Andrea.

Yes, no that's very helpful and just as a very quick follow up prior to Covid. There was a lot of talk and obviously there were some project signs across central and Southeast Asia.

It seems like you still have a very large opportunity in Indonesia, and there is still several projects be decided on in India can you just give us a very quick update on your overall thought process and how those would potentially fit in.

The <unk> backlog. Thank you.

Well they have decided not to talk about those projects.

There are a lot of them as you alluded to until we sign the final contract. So we don't want to announce animal use or we don't want to announce every time debt.

I have a videoconference with the minister or anything like that.

So those are the opportunities are there and then those contracts get to this stage that they are definitive contracts and then we will obviously announce them, but those projects are there we haven't seen any slowdown.

Thank you David.

Late because of Covid in terms of getting to the final stage of the contract.

I expect that baby.

Understandable. Thank you so much.

Thank you Chris.

We'll take our next question with David Begleiter with Deutsche Bank. Please go ahead.

Thank you and good morning.

In Europe , how are you I'm.

I'm doing well how about yourself.

But bigger.

This is in Europe , you mentioned, you mentioned the delays in implementing or capturing of pricing. This time around why is that the case is that because of the sharp rise in energy prices and how are you seeing similar cadences by competitors in and delaying or extending captures until the end of the year.

Yeah, David I'm very glad that you asked the question.

When we say that D day. Please it is not as if we are delayed in crude price increases.

Finally.

Let's say here is the month of that.

Yeah.

End of April right.

And our team gets together and say, we anticipate that prices.

In June July and August the price of energy.

Please go up 10%.

Therefore, we announced a 10% increase.

On prices on June <unk>.

Right.

If the price during that quarter of June July and August goes up 20%.

Then we have fallen behind.

And in the month.

In the next quarter or not we need to raise the prices, 30% to catch up with that.

But then the energy prices.

Our issue in Europe has been that every time, we anticipate price increases the actual price increases.

Beyond that there was no big deal would have predicted no bank debt and natural gas prices in Europe will go up six times.

There's no way that people would have predicted that.

And electricity costs in Europe , we will get to <unk>.

Towards the sensor kilowatt.

So that is the delay it is not as if we are delayed in action.

Is the fact that our anticipation of price increases.

Lower because <unk> talked it was pretty robust, but the real work ahead of us.

That is why.

Our lagging behind.

I think that we will see a significant improvement in the performance of our business in Europe index and the <unk>.

Got it.

I fully expect that but.

Who knows what happens with the energy paths that that is.

Our ability that is where we are falling short.

In terms of it sounds like you to predict energy prices, but nobody.

I could do that because they have been so unprecedented.

Yes.

If at the beginning of last year, you would have told somebody that.

Electricity cost for air products go from.

Yeah.

A few weeks.

100 to <unk>.

Yeah.

We wouldn't be we would have thought that was reasonable.

But that's the way it has worked out.

I hope I made myself clear David rather than go into a lot of talking.

No very clear and just from Melissa Suzanne Melissa what was the net impact of the transfer of the <unk>.

<unk> assets this quarter the net net impact.

Okay.

The impact was about 2000.

Thank you.

And we'll take our next question from Kevin Mccarthy with vertical Research partners. Please go ahead.

Good morning.

Slide 15, you provide a helpful disaggregation of the EPS growth.

And as I read it it looks as though you're recovering the vast majority of the energy cost increases.

Terms of the <unk> drag from price net of variable than below that there is a 'twenty one cent headwind from other costs can you speak to what costs are resident in that 'twenty, one cent number and how you would expect that to.

The trends over time.

Hi, Kevin.

Very good question the thing is that it.

There is a list of about 30 items in there that we can go through that with you offline in terms of some of that some of that has got to do with the fact that we had some one off benefits last year. So when you compare this year to last year.

These numbers look even look as if the costs have gone up significantly, but there is no question that the.

Our <unk> costs.

Our higher because of all of the money that you're spending and the development of the projects that the mega projects.

I mean.

Each one of these projects takes $5 million to $10 million to develop.

As I've said before we have added 3000 people to our organization in order to deal with that.

Now as some of these projects come in.

Investment projects and approved by our board.

Some of these costs go into capital rather than just being charged to the bottom line.

And life is grown and gone they are charged to the bottom of their ongoing cost. So I don't expect the number to be as big as it is this quarter.

But as the line, we probably have 20 $30 million additional cost because of what youre doing with the.

Mega projects.

I see Thats very helpful. And then secondly, you raised your dividend by 8% yesterday, if I look at the EPS guidance that would suggest potential for growth.

14% at the midpoint can you just speak to the Delta between those numbers what is what is the thinking behind adopting a more measured pace for the dividend relative to what you contemplate for earnings.

Well again, thank you for the question Kevin.

At 8% is pretty robust, you're saying that your dividend is not growing as much as your.

EPS, but we obviously want to have some cash flow grows.

But there is another measure that we have talked about this is not.

We decide on that.

Evidence do you have a lot of factors into that but overall.

We have always said that would be one the dividend.

To be something between two to join 5% of the stock price in terms of our dividend yield.

So if you take a dollar of 62 times four.

And divided by the stock price at around about two points two 4%.

Oh.

That's another measure, but as I said, that's not the only day that decide on EPS is a lot of factors in terms of cash flow and all of that.

That's.

And besides that we are there.

Head of everybody else.

Our sector in terms of dividend.

So if you didn't want to overdo it Ken.

Yes. Thank you for that reminder.

Thank you Sir.

And our next question comes from John Roberts with UBS. Please go ahead.

Thank you Sophie.

You bet John .

Good morning, you mentioned your power costs in China might fluctuate more or the merchant contracts in China any different than your merchant contracts in Europe and elsewhere that you might have a hard time dealing with those fluctuations.

I don't think so John .

At the end of the day. This is all a function of the competitive environment and the utilization of your facilities.

In China right now.

Utilization of our merchant facilities in mid eighties.

Mid eighty's.

Our costs go up I think you can have the ability to pass that through.

And I think it was mentioned that pension costs actually went up it was a bit of a contributor to the headwind.

Down for a lot of other companies because of interest rates going up and good planned performance last year why would your pension be going up.

Well.

You know there is a lot of reason because we have a lot more people.

<unk> 3000, more people that you need to.

People say that okay, you need to provide for these people and Sean but if you don't have too many defined pension plans, but.

I'd like to see it Melissa has anything else to add to that this is it.

Function of.

Actually he's doing all the numbers how long people are going to live and all of that you know all of that.

Right.

Melissa do you have anything else that yes.

Yes, Thank you David.

Where we are in our funding we are going through a de risking our glide path and that that is a portion of the reason that you are seeing that change.

Thank you.

Okay.

And we'll take our next question from Mike Sison with Wells Fargo. Please go ahead.

Hey, good morning nice quarter.

Got it.

Given.

Given the high energy costs electricity costs in industrial gases 10 to be used as sort of an efficiency aid for a lot of facilities as this environment good for.

The fundamental demand for industrial gases over the next couple of years.

I mean will it sort of sparked more bigger.

Many projects or just general demand for oxygen nitrogen et cetera.

Well for that to materialize they need to get Colby to go away so that the economic activity goes up.

And then usually inflationary environment is a good thing for industrial gases usual.

But not always.

We.

I think that if the inflationary environment continues.

And we are able to increase prices and then if the cycle turns.

Keep some of those price increases that might be a pause it.

It's very difficult to quantify that right now.

Got it and then a quick follow up on Europe , EBITDA was down about $40 million is that the delta that you need to just offset with pricing over the next couple of quarters.

Yes, that's most of it yes.

Great. Thank you.

Thank you.

And our next question comes from Mike Harrison with Seaport Research Partners. Please go ahead.

Hi, good morning.

Good morning, Mike.

Safety I was wondering if you can give a little bit more color on the impact of dual control in China on your Asia volumes.

As well as the margin impact you mentioned some plant efficiency and supply chain was also impacted and then it sounds like maybe the dual control policy is evolving you said you were watching it closely so do you expect a similar impact in Q2 or maybe not as bad.

Mike I in my comments I tried to shed some light into that by saying that first of all the impact there was an impact but it was not material in the first quarter.

The impact bus.

A lot more in the month of October than it turned out to be in the month of November and December .

Yeah.

It seems that that their harshness.

The government versus trying to implement that thing back in September October .

Has subsided, a little bit and as a result.

Not expect any material effect of that on all of that.

Our results in the next quarter.

Alright, and then in terms of the inflationary environment.

You look at some of your committed projects and the capital associated with them are you seeing higher costs for labor and equipment steel other materials increase the capital costs associated with those projects and do those higher costs, then get passed onto the customer.

So there is some change in the base facility charge, where do they end up eating into returns if your capital costs are higher.

Well first of all then be.

Did some of these projects, we obviously have made provisions for possible inflation on all of that but at the end of the day. It is a fact that some of the costs are going up in terms of how much of it you can't pass onto the onsite customers. So on is very much dependent on the details of the contract that you have negotiated with this.

Specific customers, so I cannot make a general statement.

But although overall.

There is pressure on us to be very diligent.

Make sure that the stay on top of the cost for our projects and all of that and make sure that the.

They don't eat into our returns as you alluded to.

Alright, Thank you very much.

Thank you.

Our next question comes from Duffy Fischer with Barclays. Please go ahead.

Yes, good morning.

Good morning Duffy.

<unk> around your new segment, the middle Eastern India. If you look at the $103 million of EBITDA and you normalize for having <unk> for the full quarter and not changing the JV structure would like a normalized EBITDA run rate be for that segment.

Wow.

Hi.

Yeah.

To some extent you can calculate it in the sense that.

For there.

First quarter two months of just that.

So for the next quarter.

You'll have three months of <unk>.

And most of that is <unk>. So you can kind of triangulate to that.

Approximately.

It will come up with a number youre looking for.

Okay.

And going forward, how variable will that EBITDA number would be is there a seasonality in it are there going to be lumpy quarters, where you've got turnarounds and stuff like that or will it be in a very tight range. When you kind of just print the same number quarter over quarter until you move on from phase one.

I expect that number to be stable.

Yeah.

Because it's basically as I said the GP.

I don't expect that to change significantly in our maintenance cost change that significantly.

Terrific. Thanks, guys.

Thank you.

We'll go ahead and move onto our next question from Vincent Andrews with Morgan Stanley . Please go ahead.

Thank you good morning, everyone.

Hey, good morning.

Thank you Stacy I'm reading about there's about $9 million.

Infrastructure grants in the U S that are going to come out.

Is it fair to assume that youll be positioning the company to get some part of that for our hydrogen projects.

We will try for sure.

And what order of magnitude do you think that could be.

I don't know.

I have.

Uh huh.

I have no idea because.

It depends on what gets allocated how much of that will be for hydration, they're there.

Location is will be what would be the criteria.

Yes.

Right.

These projects as you know there is sometimes a lot of strings attached that some of it might not be acceptable to us and all of that so it is a very very difficult to project at this stage.

Okay because.

They have just started they have just started the obviously already engaged with the department of energy.

They have some real hydrogen projects its not theoretical but I have that.

Yeah, they no visibility into what that number could be or should be.

Okay, and just as a follow up there was a comment in the prepared remarks about.

America's hydrogen still being below pre COVID-19 levels, you give a rough approximation of how below pre COVID-19 levels you are.

Something in the order of magnitude of about.

5% something like that.

That's S. There arent you want to.

Do that.

Yes, I did say three it's around 5% to 10% from two years ago.

Thank you. Thank you. Thank you very much.

Okay.

And we will move on to Bob <unk> with Goldman Sachs. Please go ahead.

Your line is open.

Yeah.

And Bob are you on mute.

Okay.

Okay due to no response, we will move on to our next question from Marc Bianchi with Cowen. Please go ahead.

Hey, Thank you good morning.

I had a question came up earlier save me. The question came up earlier about Annualizing, the EPS and getting.

$10, but if I try to take out all the onetime does and in the end.

Recurring contribution of Japan.

Looks like to me that the second half EPS implied in the guidance is up about 15% to 20% from the first half just in the underlying business.

Which seems like a big ramp I know, there's some favorable seasonality in there and you've got some pricing initiatives to recover some of the energy costs, but could you talk to.

Maybe the components of that improvement how much is seasonality what's anticipated in terms of energy recovery.

Sorts of things I'm curious for some more color.

Sure I mean, there is two guidelines obviously if you go through all of this thing before I could give you a guidance and because of what you said, that's why we didn't change our guidance for the year, but.

Number one you know the results for the first quarter.

We have given you a guidance for the second quarter. So you can add it up and you get two but do you expect to make in the first half.

Usually from a seasonality point of view.

Approximately.

If you take all of the years.

We make about 47% 48% of our profit during the first half and.

<unk>, 52% to 53% of it during the second half.

So that is the seasonality you're kind of assuming that you can take a look at.

And then the other thing is that we do expect.

That you could get ahead of these energy costs in Europe .

Yeah.

And therefore.

Let me cover some of that and therefore, our the performance of our European sector will be bet.

When you look at this this quarter is actually the performance of our business in Asia and in the United States with very good it's just that Europe . It hits those results.

So if you put the combination of the seasonality and the recovery in Europe , then do you have a reasonable chance of doing that.

Guidance that you have given.

Okay. Okay.

That's all I had thank you so much.

Well, thank you very much.

We will go ahead and take our next question from Laurence Alexander with Jefferies. Please go ahead.

Good morning in your European business are you receiving any kind of performance bonuses for running at higher operating rates and helping customers be more energy efficient.

Given the high electricity prices that they are facing.

Nothing that substantial because over there.

Those customers on our onsite business are obviously paying for the higher energy costs.

Oh, Yeah, we're not receiving any special.

Compensation or anything like that they are just paying for the additional energy costs and to get our pizza our contract.

Thank you.

Thank you.

Okay.

And we have no further questions with that that does conclude our question and answer session I would now like to turn back over to our presenters for any additional or closing remarks.

Well.

Thank you very much everybody for participating in our call B I appreciate your.

Our attention and good questions and the issue.

Good health.

And success for the balance of the quarter and look forward to talking to you next quarter. Thank you again.

And with that that does conclude today's call. Thank you for your participation you may now disconnect.