Q2 2022 Air Products and Chemicals Inc Earnings Call

Please standby we're about to begin good morning, and welcome to the Air products second 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 Mr. Simon Moore. Please go ahead Sir.

Thank you Jess good morning, everyone welcome to Air Products' second quarter 2022 earnings results teleconference. This is <unk>.

Simon Moore, Vice President of Investor Relations corporate relations and sustainability.

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

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

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

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

The 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 and our oce, both on a company wide and segment basis.

You 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 most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section.

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 want to begin by saying a few awards regarding air products response to that.

Current situation.

And in Europe .

We are deeply concerned.

Human tragedy in Ukraine.

And the impact that this company has on the award.

We condemn this regression.

I encourage all efforts towards peace.

Our Hearts go out to those affected and we are continuing to support our employees in this region.

As a company.

Providing humanitarian support.

Including assistant to the International Committee of the Red Cross from David Paz from Foundation.

Our employees have also responded with chat and generosity.

Reaching out to that affected colleagues and making contributions to various organizations supporting relief efforts.

Our questions in Ukraine is minimum.

<unk> $5 million in saves last fiscal year.

And we suspect that the development of a small air separation unit in the country.

Our business in Russia is also very small.

With less than $25 million in saves last fiscal year.

We are in the process of it.

Existing Russia and stopped doing business in that country.

Now before we get into the details.

I want to tank.

Each and every one of about 20000 employees around the world.

For their hard work.

Men and dedication.

Operational excellence and serving our customers.

Last quarter.

Despite the very difficult.

<unk>.

Pause by war.

Significant inflation in energy costs.

Supply chain disruptions.

And lingering effects of the COVID-19 buyers are.

<unk> delivered strong results with that.

Earnings per share of $2.38.

Is 14% higher than the previous year.

As always.

Our people's commitment and dedication.

He is our competitive advantage as we move forward.

Now please look at slide number three.

Focusing on safety, which is our highest priority.

Our second quarter.

Safety performance was similar to last quarter.

But but still behind last year.

Although we are proud of the fact that we have made significant progress in this area.

Over the past few years.

This result is not acceptable.

Our goal remains zero accidents, and zero incidents and we are committed to achieving that goal across the organization.

Slide number four.

Number seven.

Include our goal.

While our management philosophy.

<unk>.

Right.

<unk>.

Plan for moving forward.

And we have also included a higher purpose sides.

To explain.

What.

We are trying to do every day when we come to work.

The App shows you the slides with investors many times before.

But you always have them as part of our package.

Besides the point that these are the principles that we follow every day and they will continue to guide us as we move forward.

As we have explained to our investors in the past.

Our strategy for moving forward is based on two pillars.

The first is absolute excellence and running our existing industrial gases business.

That is.

Two upgrades with the greatest efficiency and productivity.

Best and maintained our market share and improved pricing to compensate for inflation.

Our results that we have just announced confirm that we are successfully.

Implementing this strategy.

Since we are delivering strong results and they are very difficult and challenging circumstances.

The second pillar of our strategy for the future.

Is to take advantage of our unique technologies and expertise.

To be a meaningful player.

In the significant worldwide effort.

The transition to clean energy.

Specifically in this area.

Our focus on developing and executing mega projects to produce blue and green hydrogen.

And other sustainable fuels for the board.

In summary.

This explains.

Okay.

Intent of the almost $20 billion of projects that we have.

Our backlog.

And there are more of these projects to come.

In the second quarter of fiscal year 'twenty two.

The announced projects that confer.

In a significant day.

Our commitment to days two strategic pillars.

First in our base.

Business as you can see on slide number eight.

<unk>, one $3 billion of investment in.

In two major products projects or the electronics industry.

These are real megawatt projects with long term take or pay contracts with some of the largest semiconductor manufacturers in the world.

We are proud to be executing these projects that's confirmed.

Significant position in the semi conductor industry.

As related to the second pillar of our strategy.

As you can see on the slide number nine.

Instead, we are building a $2 billion facility in southern California to convict conventional refinery to one that produces sustainable.

Asian fueled called SAP.

This facility will be.

Yours is raw material.

The OIBDA organic materials.

Such as base cooking oil animal fats et cetera.

And us substantial amounts of hydrogen.

Convert these raw materials to few four airplanes.

The total capacity up this plan.

Will be approximately 340 million gallons per year.

Although this sounds like a big number.

2019 ward jet fuel consumption was more than <unk> billion gallons.

What airlines are looking to Decarbonize.

Major corporations and the board are focused on reducing the carbon emissions generated by the airline.

In this travel.

And there are already significant incentives in place.

To encourage the move toward sustainable aviation fuel.

This is the fundamental reason.

<unk> built out a strategy to pursue this opportunity.

We started developing this project two years ago.

<unk> should be bold energy.

A private company that is currently the leading producer of sustainable airline cube.

Our agreement is that air products will engineer build and all of the facility.

And board Energy Bill provides the raw material.

World Energy, we also sell the project the product.

And has a contractual commitment.

To pay AD products fixed fee.

Shoes and acceptable return on any products investment.

We are very excited about this project since it also uses a significant amount of hydrogen.

That we can supply.

Our established and extensive hydrogen pipeline in southern California.

Our partner in this project what energy is a private company.

So I know I fully appreciate that there is little information available about them in the public domain.

We have permission from the principles of the company to disclose the following information which can be found.

On slide number 10.

This information is self explanatory.

And we are delighted to work with bold energy on this great project.

I just like to point out that on the bottom up slide number 10.

<unk>.

We have included sales and profitability.

Numbers 400 million of sales of $54 million of profit that is just for the product that board and as your cells out of the Paramount refinery that we are converting to that.

In addition to that.

And as he has the capacity in the other plants in America in Canada to produce 150 million gallons a year.

Oh diesel.

The sales don't bet on profitability of those numbers are not disclosed.

I also want to report to you at this time that we continue to make good progress in building and bringing on the screen key they've got projects that we have already announced.

Slide number 11 highlights the major projects that we expect to bring on stream in 2023.

Now I would like to take a moment to reflect on our performance over the past eight years.

In July 2014.

During my first conference call with investors as chairman, President and CEO of Air products.

I promise to shareholders.

That our goal was to deliver over the long term.

At 10% per year.

Average cumulative growth in air products earnings per share.

On slide 12.

You can see.

That's where the past eight years, we have delivered.

More than what we promised it years ago.

And our goal for the future is to continue to deliver similar results as we move forward.

On Slide 13, you can see that we have shared the positive growth with our investors and increased our dividend on average 10% per year over the last eight years.

And finally, please turn to slide number 14.

That's still my favorite slide.

It shows our EBITDA margin since 2014.

Despite all of the turmoil in the board.

Significant energy.

Cost inflation.

<unk> changed your assumptions are.

Our EBITDA margin last quarter.

Almost 1000 basis points higher than in 2014.

Now, it's my pleasure to turn the call over to Mel.

Lisa to discuss our results in more details Vanessa.

Thank you.

As you mentioned.

Our growth strategy and supporting our base.

At the same time, we expect a large project can drive our long.

Long term growth.

<unk> continues delivering near term results.

Those large projects and these businesses contribute to our fiscal second quarter results.

Interest and joint venture.

During Q1 provided a corner.

Consistent with our commitment of 80 to 85 per share on a fallen campaign.

Our pricing actions also contributed.

<unk> exceeding <unk> cost increases.

The outperformance was particularly noteworthy.

We experienced the most significant energy cost pressure.

I want to express my thanks to the team.

Our speed of execution and job well done.

Now please turn to slide 16.

Core earnings.

Energy costs remain elevated this quarter.

Our teams continue to implement significant price action in response to the unprecedented change.

6% total company type company.

Translate in 13% increase in <unk>.

By that time.

This is our second consecutive quarter.

All right.

And across our merchant.

Volume was also strong.

<unk>, 8% overall.

And all segment driven by new asset.

Hydrogen recovery strong merchant demand and increased capital equipment activity.

Thank you volume combined were up 14% accounting for most of the 18% sales increase in cash of last year.

EBITDA increased 9% Eric.

Third consecutive quarter exceeding the $1 billion a month.

Favorable volume price debt and equity.

And one.

Offset Hyatt com.

EBITDA margin declined 270.

Thank you.

From the pioneer and the negative impact.

Hi, Andrew.

Energy task.

More than offset higher.

Higher energy pass through.

Margin right now.

Uh huh.

Sequentially volumes are down 3%, primarily due to lower volume.

I think customer operational action and a leaner.

Operating income.

7% driven by zero.

Yes.

However, EBITDA was up 2% and net income was down 5%.

<unk> nine.

The finalization of our Japan ASU joint venture.

The benefit that.

Our LTE Samsung 6%.

Currently have significant cash and announce.

This will support the major check you never know.

Adjusting for the cash.

Okay.

Okay second question.

We expect <unk>.

Yes.

Onstream.

Now please turn to slide 16.

Our second quarter.

Yes.

30.

14.

Yes.

Second it quite yet.

And a testament to that.

Okay.

Growth of our business.

The argument theme about 18.

Price net of a coffee and sample Fortunately.

And our price actions more than offset.

The energy cost.

For the quarter.

<unk> alone.

Netting against that.

It should be at around 50%.

Our other costs are higher due to the combination of investment strategic credit.

Maintenance and external factors. One example.

That's it.

Gilliam storage cabin.

Goodbye reliable supply to our customers globally.

This investment increased across now, but Betsy generally.

Value unless investment in inkjet.

Also see higher cost as we increase resources private brand named project Onstream. For example, you have hired approximately.

He will be responsible for operating the <unk> gasifier come back once it comes Onstream next year.

The purposeful strategic action taken to ensure the long term success of our company.

Thoughts about roughly half the total increase.

At this point.

The remaining half is primarily external factors attributable to inflation and supply chain challenges across the region.

We remain focused on driving productivity and cost effectiveness.

Japan joint venture and contribute.

Its first full quarter ever stop and continues to deliver as expected.

Our shadow results from the project are reflected entirely in an equity affiliate income this quarter and will be going forward I realize this is an updated accounting interpretation and it's slightly different than we discussed last quarter, but we believe this approach will be clear for investors moving forward.

There is no difference to the bottom line EPS. The project continues to deliver as we expected.

Overall for the quarter equity affiliate income was 18% higher driven by our share of joint venture profit.

Our second quarter effective tax rate of 18, 6% with 160 basis points lower than last year, including the favorable impact of Japan.

We expect our tax rate to be between 19 and 20% for the remainder of this fiscal year.

Non operating income.

<unk>.

Driven by higher pension expense.

Now please turn to slide seven.

The stability of our business continued to allow us to generate strong cash flow despite the challenging geopolitical.

Over the last 12 months we.

We generated around $2 8 billion of distributable cash flow.

Our nearly 12 70 cents per share.

<unk> EBITDA.

Yes.

Okay.

Taxes and maintenance capital expenditures.

Note that our maintenance capital.

It's higher than usual.

In fact, they are spending on our new.

Okay.

Okay.

Yes.

From a distributable cash flow.

Of our 45% over $1 billion.

To our shareholders and still have about $1 5 million.

Sales of our high return.

This strong cash flow even in uncertain times.

Loss to continue to create shareholder value.

<unk>.

And capital deployment.

Slide 18 provides an update on our capital.

We continue to make great strides.

Announcing.

Thank you.

In fact, we see potential opportunities significantly right.

Amy shelf yet.

As you can see.

Hello.

34.

So 2027.

34 billion.

Please about $8 billion of cash and additional debt capacity available today.

16 billion.

We expect to be available by 'twenty.

And almost 10 billion already.

I believe this capacity.

And so for additional EBITDA.

Which would generate additional cash flow.

Okay.

We will continue to focus on managing our debt.

To maintain our current targeted <unk>.

Excuse me.

So you can see.

29%.

I've already committed 74%.

It would be shown here.

Great project.

Substantial investment capacity.

Higher charter contract.

We continually evaluate.

Yes.

Chairman the best way to use available cash entrusted to us by.

By our shareholders.

We believe that investing in these high return projects.

The best way to create shareholder value.

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

Sandy.

Thank you Melissa.

Now please turn to slide number 19 for our ACO results.

She is up 8% compared to last year.

Primarily on 6% higher volume.

Is it a variety of new traditional industrial gas plants.

Okay.

Dream across this region.

Price was again positive.

The 1% over the price overall price improvement for the region equals to about a 2% increase for the midstream business.

China dual control policy has ease.

But COVID-19 restrictions in part of China has modestly impacted customer demand.

They also impacted our plant efficiency and increase our supply chain costs.

Cost of.

Favorable.

Mainly due to inflation.

And resources needed to support New project startups Hasnt been as I mentioned.

EBITDA was up 2%.

Volume and price more than offset higher costs.

Compared to last quarter.

Volumes declined 2%.

Primarily due to the lunar new year holiday.

Price was 2% lower sequentially.

As mentioned during our last earnings call.

China's government has relaxed its power tariff program.

Allow low power power cost to fluctuate.

This market oriented approach has resulted in higher other costs compared to last quarter.

However, our overall cost the lowest due to better operating and supply chain inefficiencies.

Our EBITDA was down 9% sequentially and EBITDA margin decreased 60 basis points as the MTA volume unfavorable volume and price more than offset lower costs.

For the second half of the fiscal year.

We are very concerned about the potential impact.

Of the Covid related restrictions in China.

And we do expect higher planned maintenance activities.

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

Thank you Stacey now please turn to slide 20.

Energy costs in Europe began the quarter moderating, but then moved up significantly and were the highest yet in March.

Natural gas costs peaked in January more than seven times higher than a year ago, while power cost stayed almost four times higher.

Nevertheless, I mentioned, our onsite business has contractual pass through of the higher cost. So we are not directly impacted by higher natural gas prices.

Higher power costs are also pass through in our ASU onsite business.

In our merchant business, our team implemented significant price actions, which more than covered the higher power costs this quarter.

Fact, we recovered this quarter's higher power cost and about half of the unrecovered costs from Q1.

Again, a great job by the team.

However, we remain vigilant and are working to drive further improvement.

Now please turn to slide 21 for a review of our Europe results.

Compared to the prior year sales were up 32% energy cost pass through which increases sales, but not profit accounted for more than two thirds of the sales increase.

Price increased 14% for the region, which translates to 22% for the merchant business.

Prices were higher across all major product lines and subregions.

Volume was up 2% on higher merchant volume.

EBITDA was down 3% as favorable price net of variable cost and better equity affiliate income were more than offset by negative currency unfavorable volume mix and higher other costs.

For the quarter the supply chain disruptions caused by the significant energy cost increase has persisted negatively impacting both plants operating and distribution efficiencies.

We also saw higher costs due to inflation, while we continue to prepare for new projects coming on stream.

EBITDA margin was 950 basis points lower most of the decline about 700 basis points was due to the significant energy pass through increase.

The remainder was mostly driven by higher cost and negative volume mix, partially offset by strong merchant pricing and higher equity affiliate income.

Compared to the prior quarter price was up 5% further improved from the already strong performance last quarter, which allowed us to more than offset the higher energy costs.

This equates to an 8% increase on the merchant business.

Volume was 7% lower due to reduced hydrogen demand on customer specific operating actions.

EBIT jumped 17% sequentially and EBITDA margin improved 380 basis points as strong price higher equity affiliate income and lower non energy related costs more than compensated for the lower volume.

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 22 for a review of our Americas results.

Sales increased 12% versus last year.

Volume and price together went up 11%.

Our team in the Americas also did an excellent job raising prices to cover the higher energy costs this quarter.

Prices improved in all key product lines over the last year.

And were also up sequentially.

The 5% price schemes for the region compared to last year is equivalent to a 12% increase in our merchant business.

But I submit to variable cost was also positive for the region.

Volume increased 6%, primarily due to hydrogen recovery.

Got out of mesh and demand.

In general.

We see a hydrogen demand actually are some brief COVID-19 levels.

Although HIFU volumes this quarter were impacted by the planned outages.

We expect the third quarter to continue at the high level of planned outages didn't expect volume to fully recover as we move into 2023.

Meanwhile, our merchant volume was weak in South America due to lower demand for medical oxygen.

Covid cases declined.

The decrease demand for medical gases also reduce Americas equity affiliate equity affiliate income.

As we expected the planned maintenance increased costs this quarter.

Costs were also unfavorable primarily due to inflation and supply chain related challenges, including a driver shortages auto broadly impacting the industry.

Yeah.

Operating income improved as well.

The price and volume Portland, unfavorable mix and higher costs.

Yeah.

EBITDA was flat as it was impacted by lower equity affiliate income.

EBITDA margin was 460 basis points lower than the previous year due to higher cost negative volume mix and reduced equity affiliate income, which were partially offset by better price.

Sequentially volume this quarter was lower due to planned maintenance outages.

Operating income was up primarily due to strong price, but was partially offset by higher maintenance cost.

EBITDA was down Additionally impacted by lower equity affiliate income.

Now please turn to slide 23, our middle East and India segment, which includes our businesses in the Middle East <unk>.

Including <unk> joint venture in India.

Sales on operating income in this segment are modest since our immediate eastern India wholly owned operations out of smaller in size.

However, this segment's EBITDA is significant.

<unk> stake with the affiliate income related to the <unk> joint venture and our India joint venture <unk> AP.

The 55 million dollar increase in equity affiliate income included our share of the <unk> joint venture of mid <unk> for the fourth quarter that Melissa previously discussed.

I'm pleased that our board the team successfully started up a number we've got supplier on the steam turbine units.

There is still a phase one startup is continuing as planned.

Sequentially tick with the affiliate income was lower due to the positive nonrecurring items in quarter, one related to the Finalization.

Our previous design ASU joint venture.

Now please turn to slide 24, which addresses our corporate segment.

This segment includes our sale of equipment businesses as well as our centrally managed functions and corporate costs.

Over the past few years, our non LNG sale of equipment businesses have grown considerably.

No.

Now what is the company responsible for most of the sales and profit increases this quarter.

Our LNG project activities remain robust and also contributed to these increases.

As expected.

Inquiries for potential LNG projects have increased significantly.

Since our customers measure the projects take time to develop.

It will be some time until this interest is translates into new projects.

Yeah.

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

Thank you Sir.

Although the consequences of the constantly cranes.

Are far from clear.

The evolving situation has once again brought.

Brought this critical issue.

And then as your independents and national security to the forefront.

Emphasizing the critical nature of the energy transition.

That air products has highly value your technology skills and experience that.

That will benefit our customers and countries around the world.

Gadget vacation allows countries to utilize their own resources.

In an environmentally friendly debate.

Using their imports.

Fuels and chemicals.

Move on renewable energy, including Green hydrogen and fuse drive from sustainable organic resources, including renewables visa that sustainable aviation fuel.

We'll allow countries to reduce the reliance on fossil fuels.

Furthermore.

The desire for diversified energy supply.

Also encourage additional LNG projects.

In the future a positive development for air products as we are the leading technology.

And equipment provider for these large LNG projects.

Air products strategy and competencies.

And allowing us to be a leader.

And then in the energy transition.

Our industry, leading gasification technologies are suitable for various types of feedstocks, which can create net zero hydrogen.

The neon Green hydrogen project is the largest project of its kind in the world.

Our LNG heat exchangers, which convert natural gas liquid.

Got it got it.

Take are all part of it.

Jeep.

Project.

This sustained at aviation fuels to be produced in our new facility in California is a direct drive to drop in replacement for conventional jet fuel.

It can significantly reduce carbon footprint of the aviation industry without any equipment modification.

The focus on energy security and energy transition.

Creating significant new project opportunities now and in the future.

Therefore.

We firmly believe.

That investing in high return projects.

Rather than share buyback.

Is the right way forward.

To support the energy transition.

In short.

Continuous profitable growth for their products.

And.

An appropriate return for our investors.

Now please turn to slide number 25.

I remain highly confident of.

Air products resilient business model.

<unk> and our execution.

However, I do have some concerns about the economic backdrop, driven by continued Colby challenges.

The impact of supply chain constraints.

<unk> and energy costs.

Even with these challenges.

For quarter three fiscal year 2022.

Our ethylene per share guidance is $2 55 to $2 65.

Up 10% to 15% over last year, and almost <unk> higher than last quarter.

For fiscal year 2022.

I think I share guidance remains unchanged at 10 20 to $10 40.

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

We continue to see our capex in 'twenty two to be around four and a half to $5 billion, including the approximately one and a half billion previously invested for phase one of the <unk> project.

At this point.

Like you to turn to a slide number 26.

The drive for energy security and transition to a more sustainable future.

Not mutually exclusive.

The board needs cleaner lower carbon forms of energy and.

And more diverse sources of energy.

We believe our strategy directly.

Addresses these needs.

As we drive toward a clean Energy award.

The talent and dedication of our people.

Are the key to.

To making distributions in reality.

The knee.

Unfortunately have talented and dedicated people.

To help us accelerate the progress.

As I always say.

Our long term competitive advantage is the commitment and motivation of our people.

Their hard work and contribution will ensure our success.

So at this point.

I would like to end my comments, and we will be delighted to answer questions.

Operator, we are ready for questions. Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad again that is star one. Please make sure. Your mute function is turned off to like your signal to reach our equipment.

Our first question will come from Vincent Andrews with Morgan Stanley . Your line is open. Please go ahead.

Thank you and good morning safety how are you.

Very good great.

Great to hear from you.

Okay. Thank you.

I'm wondering if you could just talk a little bit more to start off with about the volume decline in Europe , and how much of that was related to sort of customer financial conditions versus maintenance or anything else and sort of how youre seeing the European operating environment in general just given obviously the inflation.

For the consumer and for corporates and some of the other macro challenges.

Sure our volume decline in Europe .

The core business or specific views related to one specific customer.

Who decided to.

So kind of.

Change the fetus.

For the the Gasifier is because of the high natural gas prices.

But overall.

And we do see a small decline I think you said that our volumes in Europe sequentially were down about 2%.

That is obviously the effect of the very high energy prices.

And there was always high energy prices.

Thanks.

And how it is affecting demand, but it is not dramatic and it is not.

A significant cause of concern, but it is of course.

But it is a reality that you did.

Okay. Thank you and as a follow up the other costs that you called out.

From the investments, obviously easy to understand what youre doing there, but could you help us understand whether those costs have now sort of plateaued on a sort of year over year basis, such that we'll begin to lap them and they won't be coming incremental issue or do you think there's going to be more investment coming in future quarters.

Well I mean, obviously D var to our cost of cigarettes.

Every penny but.

Yeah.

Cost increases for example in Europe .

Related to the fact that we are building the infrastructure.

That you need to build in order to bring our green ammonia.

Europe crack it and supply Green energy to Europe .

So it is early days, but we have started that process and that requires people and the expenditure and buying properties and renting equipment and trying to do engineering and all of that.

Because that is.

If you get ready because by 2020.

<unk> six <unk> seven do you need to bring in.

The green ammonia and sell it to our customers and the customers expect us to start building the infrastructure.

And then around the world.

<unk> got new plants and all of that so those costs are legit.

Very focused on.

Necessary for us to.

<unk> maintained the growth we did suffer a little bit as you see it right now.

Cause a little bit higher than they should be but.

In the overall scheme of things they would be more than justified as we move forward.

But I don't expect to see a significant uptick on those costs, if that is where you're going.

That's exactly what I wanted to know thank you very much Stacy I'll pass it along thank you.

Our next question comes from Kevin Mccarthy Vertical research partners. Your line is open. Please go ahead.

Good morning, this is corey on for Kevin.

In the context of Asia.

Why has the pricing in Asia lagged and can you help us understand maybe the pricing in the region.

Then for the volume declined modestly on a sequential basis, how much of that was related to lunar new year versus COVID-19 and have you seen any impact thus far in the current quarter as it relates to COVID-19 impacts on volume.

Finally, with respect to pricing there.

Isn't that the prices hasn't gone up so much in Asia is because.

There is no significant energy inflation.

In the.

Asia.

Yeah.

Justifies us going to the customers and increasing prices.

So that that is the fundamental dynamics.

The decrease in volumes are mainly due to lunar new year.

Starting in March.

Frictions that the Chinese government has put in current clients showing up beginning to have some effect.

And as they are in this current quarter.

You do see.

More impact because of the Covid destructions the restrictions.

It is.

It's almost impossible to predict what would be the effect because it depends on how.

At March Stacy that's the.

Restrictions or actually increase it depending on the progress of Kobe.

So we are watching that situation very carefully.

Cause it can swing back and forth significantly.

Understood Okay.

Yes, that's great and as a quick follow up.

In the context of rising interest rates I'm curious, how you think about capital deployment going forward and the need for potentially higher rois on future projects.

Thank you.

Rising interest rates.

It's easy to raise new capital, obviously, you would have to pay.

More interest on that but right. Now currently do you have a lot of cash and we are not in the market to do that.

But what does that do you have a point or did I Miss that.

I guess I meant more broadly sort of structurally as you think about the 10% returns that you generally target would you raise that target and how would you think about oh, okay. The project could take on yeah. Thank you.

No that's not that I understand your question completely of course with you.

If we are going to bid on a new project to consider a new project, we will consider it in the video view ore bodies at cost of capital obviously, the cost of capital has gone up as interest goes up.

Sure.

Okay. Thank you.

Thank you.

Okay.

Our next question comes from David Begleiter of Deutsche Bank. Your line is open. Please go ahead.

Good morning. This is Anthony <unk> on for David Begleiter.

Would you expect earnings in Europe to be up year over year in the second half and then.

In regards to Asia do you think merchant pricing is slowing there. It was up just so at least 3%.

Year over year.

Well I think first of all if I may ask the second question first.

Merchant pricing in the second half in Asia depends very much on board. The energy costs are and all of that is TC energy costs going up that our costs are going up we certainly did increase the prices to recover that.

I hope that our performance in the last two quarters demonstrates that we do have the ability.

Sure.

<unk> prices of energy cost score as Melissa mentioned, we have increased prices in Europe , 22% versus last year's significant pricing power in many of these justified certainly will do that as far as that.

Our earnings in the second quarter second half of the year for Europe will be higher than before I don't want to make a forward predictions like that but from the guidance that we have given you for the quarter.

And for the year.

Can conclude that we are not expecting any decline.

Yeah, I expect that we will do fine.

Just last year, that's why that's the only way they can meet our forecast.

Okay. Thank you.

Yes, and just maybe just one more follow up here.

Is the entire increase in the middle East.

Equity income of I think it was $55 million is it all from Japan.

Most of it is from Japan.

Venture operations in India in the <unk>.

He's doing very well too, but most of that is from.

It does.

Dr. <unk> Han do you want to make any comment on that.

Yes definitely design is the main driver for the results in the second quarter, but again.

When it comes to our joint venture with <unk> in India.

Also doing very well.

Currently basically executing around the 20, new plans for India.

Basically the number one industrial gas company in India.

The significant growth, we anticipate in the future that we're going to get more contribution.

Great. Thank you.

Sure.

Our next question comes from Michael <unk> with Barclays. Your line is open. Please go ahead.

Great. Thanks, good morning.

First of all I wanted.

I wanted to ask on your slide 11 on the 2023 projects I. Appreciate we're still a bit early in 'twenty, two but I think <unk> got over $2 billion of projects starting up there. So could you maybe just help level set roughly how we should think about the EPS contribution in 'twenty three I know, Japan should be immediately accretive upon close other projects.

I need to ramp just roughly how we shouldn't let that altogether here.

Well I think we have laid out for you because.

We say that every dollar that VX spend.

Should get us.

10 cents and the operating income and then you know our tax rate and all of that.

So the projects that you have you have given you the capital.

Not all of them are not going to come on stream at the beginning of 'twenty three.

But you know you can make it a good guess about how much contribution dose.

Projects will make.

To our bottom line and it is not small.

Okay, Great and then maybe just secondly on the Saf project I think there has obviously been tremendous customer interest or sustainable aviation fuel.

You're right, we talk about but my understanding is there is still some questions in the industry about constraints on feedstock and what that ultimately means for Saf pricing and the economics behind it. So obviously you're investing in backing a company growing very tremendously from say 4 million SaaS to $250 million. So.

So I guess, just how do you get comfortable with the questions of feedstock supply and the economics behind that.

But because we have confidence in both energy people, who have been they are responsible for coming up with serious thought they had been in the business of buying and providing feedstock for their facilities for the past 20 years. The company has been around since 1999.

Any competent people and they have done our due diligence and they feel very confident that they can get the feedstock.

Everybody in the World is trying to do with this thing as you know that's why a company like Chevron win them bought to RTG and all of that everybody is trying to convert the refineries the sustaining of Iran. Fjord, because that is the fuel of the future.

Right think about sustainable aviation fuel is the fact that you said direct dropping you don't need to change the engine of the plane or anything like that.

Obviously, we believe that 50 years from now most of these claims, especially in the short haul volumes will be fueled by hydrogen but I.

I think that in the meantime, right now so stay tuned on fuel.

Is the SaaS is the solution and everybody wants it not only that.

Airlines, but also companies some of the biggest companies in the world that they want to take credit for Decarbonising their business travel.

So the demand is very high on that we are very excited about that project.

Great. Thank you.

Thank you.

We'll go next to Mike Harrison at Seaport Research Partners. Your line is open. Please go ahead.

Hi, good morning.

Oh are you.

Doing well thanks, a fee you noted the increases that you've seen in the LNG inquiries, obviously, given the natural gas situation in Europe can you give us a sense of how many of these inquiries could turn into equipment sales and I guess, maybe how should we think about the contribution.

LNG heat exchangers as we think about the next couple of years.

Well I'm going to turn this question to Dr. Han to answer because he runs the business on a day to day basis, but.

Obviously, they are not going to disclose the contribution of the these projects but.

As I said Han mentioned that they are seeing significant additional inquiries, but I'll, let him make the comment that you said you'd like to.

Yep. Thanks, Jamie Yeah. We're currently executing seven large what the scale of projects right now that are under execution everything is going well.

And we're getting lots of pressure from our customers to supply this exchange of the earlier because of the demand for LNG.

And I continue our pipeline right now over projects is more than 15% of projects that basically we are developing with our customers and we see this is going to be coming.

In the future. So we do expect very steady flow and income out of our LNG business.

It's really in a very good position.

Okay Alright.

That's great and then wanted to ask a question about the helium business talk a little bit about what youre seeing in that market and how much contribution that's having.

Both earnings and pricing.

And maybe talk a little bit about what we should expect from the helium business in the second half compared to what you're seeing now thank you.

My Cat.

You know.

The helium business it's that.

The business that you don't usually talk about it about the details of that but.

In terms of how much contribution on all of that it's a great business. We are the world leader on that.

The fact of the matter is that the board expects it.

That's a very large project that will produce helium called the AMOLED projects in Russia.

Would it be on stream in 2021.

And that would put a lot of helium in the market.

And therefore, it would have a negative price negative effect on price that was the expectation.

And as Scott <unk> got those plans.

In Russia.

<unk> had one explosion in one train and then six months later they had an explosion in the second train.

So nothing no helium came out of Russia in 2021.

And nothing has come out of it in 2022.

Yes.

But now on top of the fact that they have to repair those.

Yeah.

Units because of the damage that was done.

You have the issue of the sanctions on Russia.

So I am not sure that even when they are ready to bring that material through the market.

Much of the 10 day brings on the market considering the sanctions.

So as a result of all of that.

You would expect.

That the markets for.

Video would be a little bit tight.

And that is what we see.

Okay.

Excellent thanks very much.

Thank you Mike.

We'll move next to Josh Spector with UBS.

Yeah, Hi, good morning, Thanks for taking my question.

Just first on the guidance I guess looking at your guide for next quarter and the full year, you're implying about 10% ish step up sequentially. Each of the next two quarters I'm wondering if you could break down the drivers there between price cost recovery.

<unk> or anything else, particularly in light of perhaps more challenging volume outlook than you guys expected previously.

Well I'm very happy that you're you laid it out like that because.

It does show that it is a pretty robust.

Okay.

Consequently, each quarter going up.

The reason that we feel confident about that is that number one historically.

If you look at our results.

We delivered about 47%.

48% of our EPS in the first half.

And 52 or 52% of our result in the second half.

Seasonally seasonally the second half is stronger.

So that is one of these.

Second reason is that the.

Our very confident about the fact that we can deal with inflation in energy cost increases by increasing prices.

So as a result, and I hope the investors get some comfort about that looking at our results.

Have that capability.

That is one of the most important things.

That I hope people notice about the results that we have the capacity.

Happy to do that and the only reason we can do that just because our products are.

Our products that our customers need and.

Our products are not a significant part of our customers' cost so there'll be increased prices not increasing the final price the price of the product that the customer service.

To the market that much.

Do you have the ability to recover.

That so.

And then with the volumes.

D R.

Optimistic that at least that I don't know, what's going to happen in Asia, but we are optimistic that are faced in the U S.

We will see some pent up demand.

Cause.

Now that the Covid is eating out.

Therefore, we would see that their volumes.

Yeah.

Okay. Thanks, that's very helpful and I guess just a second.

Second question just on on hydrogen logistics, I guess with the Neon project you guys announced there's $2 billion of infrastructure to be spent along with that with SaaS you talked about some infrastructure there the Arizona plant I think you had some language that it could be a hydrogen hub.

To an extent and you announced the <unk>.

The Rotterdam.

The commercial truck hydrogen hub as well is that part of that $2 billion being spent in some of those projects or is that contemplated for different applications.

The 2 billion is just related to Neil.

The other things that you're talking about an additional cost.

With that to bill.

Okay. Thank you.

Sure.

We'll go next to Laurence Alexander with Jefferies. Your line is open. Please go ahead.

Good morning. This is Dan Rizzo on for Laurence. Thank you for taking my question.

Just want to think over time, what do you think it's a good mix in terms of profit contribution from <unk>.

The vertically integrated in <unk> relative to onsite merchant and packaged how should we think about it over the long term.

Uh huh.

Just focus on your question to make sure that I understood it correctly.

I'm just wondering how we should think about mix over the long term from GBS from onsite for merchant and package how would you break breakout.

Well, our Jv's right now if you add up the sales of our J D. I think we disclosed that publicly.

Simon I'd be doing they disclose it publicly so I can mention that right.

Correct, Yeah, our sales from Jbs is getting close to more than two and a half dozen adults.

So V C.

Very good growth in all of the changes are major Jv's are an excellent company that we had in Italy called sat deal you have to see.

Sending company in India, and as Dr. Han mentioned, they are growing very fast with 20, new plants under construction.

And then do you have a great JV in China.

And a significant joint venture in Mexico.

<unk> court and all.

And obviously, if you have a JV in.

Taiwan that'd be fully consolidated.

These JV is there are very good companies long established companies.

They are doing very well because some of those economies are doing stuff. So.

We expect those to continue to grow.

Then our Mexican business.

Now I think our onsite business is about 20 about 50.

253%, 55% of our portfolio.

We expect that all of the big projects that Youre doing.

That people would end up our onsite business. If you look at the 10 years from now it might grow to be about.

Except I mean, 70% of our business, but that doesn't mean that our merchant business is shrinking.

Make sure business has continued to grow but the percentage will come down because the whole company to become a much bigger company.

That's very helpful.

I really appreciate that.

And then just just one follow up with the equity income does it have the same seasonality as the rest of the rest of the company I think you mentioned, 52%, 48% for EPS I was just wondering if.

Yeah.

Income from affiliates is relatively the same.

I.

I wouldn't characterize it that way because those are different countries different dynamics and all of that.

But usually the second half of the year is a stronger for most people unusual.

Alright, Thank you very much.

Yeah.

Okay.

John Kim with BMO capital markets. Your line is open. Please go ahead.

Yes, hi, thanks for taking my question.

So I guess, we understand that the lockdowns in China are a little bit difficult to predict going forward, but I guess is there a way to think about how much April was down relative to say the first or excuse me. The your fiscal <unk> levels. Just so we can kind of.

Kind of set a baseline and then think about how it how it kind of changes throughout the quarter.

Well first of all good morning, John .

Got it.

If I start disclosing that since I know the results for the month of April is kind of talking about the quarter of IV or in the middle of it.

But let me just in general I'll say that.

April .

That was.

A little bit worse than the month of March.

I would put it that way.

Okay.

Compared to March hasn't improved.

I hope it does improve but it's totally unpredictable.

I don't think given the Chinese authorities know that in terms of it just depends on their spread in a number of cases of Covid right.

Got it Okay, and then just a housekeeping kind of question so in.

In the in the slide 16, where there was kind of a breakdown of the earnings contributions.

You had about <unk> 18 cents from equity affiliate income and I'm, assuming the bulk of that is Japan, but when I annualize that it doesn't quite get to that kind of 80 to 85 cent contribution that Japan is supposed to be giving so am.

Am I am I missing something on this or just Japan have kind of another kind of step up when we think about moving from fiscal <unk> to fiscal <unk> that we should be thinking about whether there's a startup issue or what have you like I guess, how would how would you characterize that.

I guess, Melissa do you think about this thing before I turn it over to you have to answer that specific question, but with respect to just that there is no step up I mean, what you saw in the second quarter.

Is it pretty good.

The presentation of what that will do it every quarter until the phase II comes on stream.

So now if you are taking the contribution that we have had and annualizing it doesn't say that.

That is the 88 cents I think you should get to that I think Melissa mentioned that it could get to that but Melissa would you like to make any comments on this.

Yes. Thank.

Thank you Stacey and just just to be clear that 18 sense it that youre seeing there versus prior year right. So.

So you have to take the bad is there a portion of the pie, yes, but to be clear if you're analyzing the IGT.

It's around 22 central this quarter, but we did have some headwinds and other joint ventures, specifically, our Mexico Mexican joint venture had some headwinds because every day.

Sales from Covid.

Medical oxygen.

Got it okay now that makes that makes sense. Thanks for the thanks for the color appreciate it.

Absolutely.

We'll go next to Chris Parkinson with Mizuho. Your line is open. Please go ahead.

Hi, Good morning, this kieran on for Chris.

Hi, I was just wondering if you can speak a little bit about your current let's say traditional onsite project backlog you seem to be getting some benefits in Asia throughout this quarter, but how should we think about contributions from that business in the balance of the year and maybe into 'twenty, three and maybe more of a long term picture or are you seeing an uptick.

Opportunities I guess, particularly in terms of energy or chemical or electronics end markets. Thank you.

Sure we are doing very well that's because they are gay.

We are getting projects.

Our more than our.

So call it traditional share of the market. They are very successful in the electronic industry as that you saw on the projects that you have in house and there are some projects that you haven't announced and in the other things like oxygen plants in nitrogen generators and so on resetting the odd.

Winning our share of democracy.

So if you look at the industrial gases business worldwide.

And look at our market shares which is about I think.

14, 15 17.

Depending how you look at it we certainly are there any more than that in terms of the so called traditional nitrogen generated oxygen generators.

Yeah.

Electronic.

High purity nitrogen generators.

We're doing fine there and I'm very pleased with that.

Great and then maybe just a really quick follow up in terms of the Americas logistics challenges I think you mentioned trucking being a bit of a drag in terms of the quarter.

Any thoughts in terms of that improving whether it's just preliminary thoughts into what you've seen throughout April and may or just your thoughts into the back half of the year would be helpful. Thank you.

Sure I mean, our challenge in the United States is that you know that we are obviously very big trucking company because they have all of these trucks developing.

<unk> products to our customers.

I don't mind, telling you that right now.

Have had in the last quarter about 150 positions opened for truck drivers.

We cannot yet.

So despite that we are delivering products to our customers and so on but you know what that means that means that our costs.

<unk> number one behalf to offer a lot more to high drivers.

The two people who have to work significant amount so overtime in order to compensate for the shortage of the drivers that would be so that is creating an issue for us but that has been beat us in the last two quarters and the effect of that on our bottom line is.

<unk> in the second quarter. So over the next few quarters I don't think the situation would get bush, but I think the order to your what you describe what the challenges are.

Okay. Thank you very much.

Sure.

Well go next question Erin.

Of America. Your line is open. Please go ahead.

Hi, This is Rob Hoffman for Steve Byrne.

My first question is regarding yes, Hello, Rick.

Guarding the first SaaS projects does world energy have any long term contracts or I'll say up and if so will pricing be competitive with conventional aviation fuel and then.

Well, the hydrogen plant and V. A P O X or ACR technology, rather than an SME so as to enable.

Some capture if required in the future.

Okay number one.

So your second part of the question.

Hydrogen plants that do you have supply any of this thing now then it comes into the stream will be the regular S. M ours.

But.

And in the future you can see what you've captured on doors, but capturing C. O. Two in southern California had the challenge of what do you do with it.

Our plan in the long term.

And the long term.

Is to try to supply that facility did green hydrogen.

Richa, we can bring to Los Angeles from our different plants, making green hydrogen.

And use our pipeline to deliver that so that is how people would show up at the club rise.

In terms of the price.

Competitive pricing as you know when you sell sustained other airlines view to an airline.

You charge them a certain amount, but then there is the incentives the low.

Those.

And CFS.

Low carbon fuel cell.

Subsidies that people get.

So theoretically you can send me a gallon of that.

Sustainable aviation fuel.

For a $5 $6, which is the price that you pay for the conventional thing, but then one can get about three to $4 or sometimes more than that depending on the carbon intensity as a subsidy there because it's a trade of a commodity right now.

So as a result, the end result would be as if you are selling it for.

$910 a gallon.

These days.

That is hard at Lindbergh, therefore, it is very competitive.

Okay got it thank you.

Quick follow up.

Just what was the source of hydrogen recovery in <unk> and is there more opportunity for us.

The source of hydrogen recovery is basically the fact that the refineries are running harder because the demand for gasoline has gone up.

Got it okay. Thank you Sir thank you yeah.

And with no other questions holding I'll turn the conference back for any additional or closing comments.

Well. Thank you very much I would like to take a moment and tank.

Everybody for that.

Participation in our call.

We appreciate your good questions and.

We look forward to talking to you in about three months about our third quarter results in the meantime, stay safe and have a wonderful day. Thank you very much.

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time.

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Good morning, and welcome to the Air products second 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 Mr. Simon Moore. Please go ahead Sir.

Thank you Jess good morning, everyone welcome to Air Products' second 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 safety semi our chairman President and CEO , Dr. Samir <unk>, our Chief operating Officer, Melissa Schaefer, 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.

A 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 our oce, both on a company wide and segment basis.

You 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.

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 want to begin by saying a few awards regarding air products response.

Through the current situation in eastern Europe .

We are deeply concerned by the human tragedy in Ukraine.

The impact that this conflict.

It has on the world.

We condemn this aggression and encourage all efforts towards peace.

Our Hearts go out to those affected and we are continuing to support our employees in this region.

As a company we are.

Providing humanitarian support.

Including assistant to the International Committee of the Red Cross.

The Airbus Foundation.

Our employees have also responded with Chad and generosity.

Reaching out to that affected colleagues and making contributions to various organizations supporting relief efforts.

Our presence in the Crane is minimal.

That $5 million in saves last fiscal year.

And we have suspended the development of a small air separation unit in the country.

Our business is Russia is also very small.

With less than $25 million in saves last fiscal year.

We are in the process of exiting Russia.

And then stopped doing business in that country.

Now before we get into the details.

I've gone to tank.

Each and every one of about 20000 employees around the world.

For their hard work commitment and dedication to operational excellence and to serving our customers.

Last quarter.

Despite the very difficult conditions.

Cause by war.

Significant inflation in energy costs.

<unk> changed your assumptions.

And lingering effects of the COVID-19 buyers are.

Our people delivered strong results.

Earnings per share of $2.38.

Is 14% higher than the previous year.

As always.

Our people's commitment and dedication.

He is our competitive.

Advantage.

As we move forward.

Now please look at slide number three.

Focusing on safety.

Which is our highest priority.

Our second quarter.

Safety performance was similar to last quarter.

But it's still behind last year.

Although we are proud of the fact that we have made significant progress in this area.

Over the past few years.

This result is not acceptable.

Our goal remains zero accidents, and zero incidents and we are committed to achieving that goal across the organization.

Slide number four.

Through number seven.

Include our goal.

While our management philosophy.

Our five.

<unk>.

Plan for moving forward.

And we have also included a higher purpose side too.

To explain why.

<unk>.

We are trying to do every day when we come to work.

The App shows you the slides with investors many times before.

But you always have them as part of our package to emphasize the point that these are the principles that we follow every day and they will continue to guide us as we move forward.

As we have explained to our investors in the past.

Our strategy for moving forward is based on two pillars.

The first is absolute excellence and running our existing industrial gases business.

That is.

To operate with the greatest efficiency and productivity.

Invest and maintain our market share.

Improved pricing to compensate for inflation.

Our results that we have just announced confirm that we are successfully.

Implementing this strategy.

Since we are delivering strong results and they are very difficult and challenging circumstances.

The second pillar of our strategy for the future.

Is to take advantage of our unique technologies and expertise.

To be a meaningful player.

The significant worldwide effort with <unk>.

Transition to clean energy.

Specifically in this area.

We are focused on developing and executing mega projects.

Produce blue and green hydrogen.

In other sustainable fuels for the board.

In summary.

This explains it.

The content of the almost $20 billion of projects that we have.

In our backlog.

There are more of these projects to come.

In the second quarter of fiscal year 'twenty two.

The announced projects that's confirmed.

In a significant day.

Our commitment to these two strategic pillars.

First in our base business as you can see on slide number eight.

Announced one $3 billion of investment.

Two major products projects or the electronics industry.

These are real megawatt projects with long term take or pay contracts with some of the largest semiconductor manufacturers in the board.

We are proud to be executing these projects that's confirmed.

Significant position in the semi conductor industry.

As related to the second pillar of our strategy.

As you can see on the slide number nine.

We announced that we are building a $2 billion facility.

Southern California.

VIX it conventional refinery to one that produces sustainable aviation fuel called SAP.

This facility.

With us as its raw material.

The new or the organic material such as base cooking oil animal fats et cetera.

In euros substantial amounts of hydrogen.

To combat these raw materials to fuel for airplanes.

The total capacity of this plant.

Will be approximately 340 million gallons a year.

Although this sounds like a big number two.

2019.

Our jet fuel consumption was more than <unk> billion gallons.

The board add ons.

Looking to Decarbonize.

Major corporations and the board are focused on reducing the carbon emissions generated but their airline business travel.

And there are already significant incentives in place.

Encourage the move toward sustainable aviation fuel.

This is the fundamental reason is aligned with our strategy to pursue this opportunity.

We started developing this project two years ago.

In partnership with bold energy.

Private company that is currently the leading producer of sustainable Airlines.

Our agreement is that air products will engineer.

And all of the facility.

Board energy provides the raw material.

Wood energy they also sell the project.

Yes.

It has a contractual commitment.

To pay air products fixed fee.

Shoes, and acceptable return on and it products investment.

We are very excited about these projects since it also uses a significant amount of hydrogen.

That we can supply.

Our established and extensive hydrogen pipeline in southern California.

Our partner in this project what energy is a private company.

So I know I fully appreciate that there is little information available about them in the public domain.

We have permission from the principles of the company to disclose the following information, which can be found here.

On slide number 10.

This information is self explanatory.

We are delighted to work with bold energy on this great project.

I just like to point out on the bottom of slide number 10.

<unk>.

Included sales and profitability.

[noise] numbers 400 million of sales of $54 million of profit that is just for the products that board and as you sell out of the pay that month's refinery that we are converting to that.

In addition to that what energy has the capacity in the other plants in America in Canada to produce 150 million gallons a year.

Biodiesel.

The sales don't bet on profitability of those numbers are not disclosed.

Yeah.

I also want to report to you at this time that we continue to make good progress in <unk>.

Building and bringing on the screen key they've got projects that we have already announced.

Slide number 11 highlights the major projects that we expect to bring on stream in 2023.

Now I would like to take a moment to reflect on our performance over the past eight years.

In July 2014.

During my first conference call with investors as chairman, President and CEO of Air products.

I promise to shareholders.

That our goal was to deliver over the long term.

At 10% per year.

Average cumulative growth in air products earnings per share.

On slide 12.

You can see.

That's where the past eight years.

Deliberate.

More than what we promised it years ago.

And our goal for the future is to continue to deliver similar results as we move forward.

On Slide 13, you can see that we have shared the positive growth with our investors.

We increased our dividend on average 10% per year over the last eight years.

And finally, please turn to slide number 14.

It's still my favorite slide.

Our EBITDA margin since 2014.

Despite all of the turmoil in the board.

Significant energy.

Cost inflation.

<unk> changed your assumptions are.

Our EBITDA margin last quarter.

Almost a thousand basis points higher than in 2014.

Now, it's my pleasure to turn the call over to me.

Lisa to discuss our results in more details Vanessa.

Thank you.

As he mentioned, we are executing our growth strategy and supporting our base.

At the same time, we expect a large projects to drive long term growth.

<unk> continues delivering near term myself.

Those large projects and these businesses contribute to our fiscal second quarter results.

This is Dan joint venture.

During Q1 provided a full quarter of benefit.

Consistent with our commitment of 80 to 85 cents per share on a fallen here.

Our pricing action office in Shanghai.

Excluding variable cost increase this quarter.

Performance was particularly noteworthy in your.

We experienced the most significant energy cost pressure.

I want to express my thanks to the team.

For the speed of execution and job well done.

Now please turn to slide 16.

Core <unk> results.

Energy costs remain elevated this quarter <unk> continued to implement significant price action in response to the unprecedented change.

6% total company tight synchrony translate in 13% increase in price.

By that merchant.

This is our second consecutive quarter.

Agent gain across a merchant.

Volume was also strong increasing 8% overall.

In all segments.

And buy new assets.

Im sure recovery strong merchant demand and increased capital equipment activity.

Pricing volume combined were up 14%.

Accounting for most of the 18% sales increase attach of last year.

EBITDA increased 9%.

A third consecutive quarter exceeding the $1 billion Mark.

Favorable volume price debt and equity.

And one.

Offset Hyatt com.

EBITDA margin declined 270.

Yeah.

From the pioneer and the negative.

I had thought.

He has.

More than offset higher.

Higher energy capital.

Alright.

If I can.

Sequentially volumes are down 3%, primarily due to lower volume.

I think customer operational action and a leaner.

Yeah.

Operating income.

Driven by favorable price and cost.

However, even though it was up 2% and net income was down 5%.

<unk> nine.

We maintain a finalization.

Yes, Dan ASU joint venture.

The benefit that.

Our S E T.

6%.

Currently have significant cash.

This will support the major check you never know.

Adjusting for the cash.

E.

Okay excellent.

We expect RFC you can't see.

Okay.

On stream.

Now please turn to slide 16.

Our second quarter.

Yes.

30 day plus 14.

Yes.

Second it quite yet.

Yes.

Yeah.

And a testament to both.

Thanks.

The argument theme about 18.

Price net of grab a coffee and sample Fortunately.

And our price actions more than offset the president.

And energy costs.

For the quarter.

I can't above four netting against that on top of it.

We didn't know about it.

Our other costs were higher due to the combination of investment strategic credit planned maintenance and external factors. One example.

We invested in helium storage cabin.

Reliable helium supply to our customers globally.

Investment increased a cost now but.

We generate significant value and less investment in the future.

Also see higher cost as we increase resources private bringing project onstream.

For example, if hired approximately.

He will be responsible for operating the <unk> Gasifier complex once it comes Onstream next year.

Purposeful strategic action taken to ensure the long term success of our company.

Our sponsor ballpark roughly half the total increase.

At this point.

The remaining half is primarily external factors attributable to inflation and supply chain challenges across the region.

We remain focused on driving productivity across that business.

And just and joint venture contributed its first full quarter ever stop.

Can you use to deliver as expected.

Our shattered.

From the project are reflected entirely in an equity affiliate income this partner and will be going forward.

We like the updated accounting interpretation.

It's slightly different and we can discuss that.

But we believe this approach will be clear for investors moving forward.

There is no difference to the bottom line EPS.

<unk> continues to deliver as we expected.

Overall for the quarter and we didn't carry income was 18%.

Higher driven by our share of the joint venture profit.

Our second quarter effective tax rate of 18, 6% was 160 basis points lower than last year, including the favorable impact of Japan.

We expect our tax rate to be between 19 and 20%.

This fiscal year.

Non operating income.

<unk> driven by higher pension expense.

Now please turn to slide seven.

The stability of our business.

We continue to allow us to generate strong cash flow despite the.

The challenging geopolitical.

Over the last 12 months.

Generated around $2 8 billion of distributable cash flow.

Our nearly $12.70 per share.

But not EBITDA.

Yes.

Hey.

Taxes and maintenance capital expenditures.

Note that our maintenance capital.

Higher than usual.

Spending on R&D.

Okay.

Okay.

Yes.

From a distributable cash flow.

45% over $1 billion.

To our shareholders and still have about one 5 million.

Sales of our high return.

This strong cash flow even in uncertain times.

Loss to continue to create shareholder value.

<unk> given you.

And capital deployment.

Slide 18 provides an update on our capital.

We continue to make great strides.

Announcing.

In fact, you see percent.

Opportunities significantly.

Amy shelf yet.

As you can see.

Thanks.

30, <unk> one thing.

So 2007.

34 billion.

About $8 billion of cash and additional debt capacity available today.

16 billion.

Payable by <unk>.

And almost $10 billion already.

I believe that capacity.

And just for additional EBITDA.

Which will generate additional cash flow.

Yeah.

We will continue to focus on managing our debt balance to.

You maintained.

Got it.

So you can see it.

He said 29%.

R&D.

74%.

It is shown here.

Great project.

Substantial indefinite capacity.

Yes.

Iron content.

We continually evaluate.

Yeah.

Chairman the best way to use this ample cash entrusted to us.

By our shareholders.

I'll leave it investing in these high return projects.

The best way to create shareholder value.

Yes.

To begin the review of our segment results I'll turn the call back over to Sandy.

Sandy.

Thank you Melissa.

Now please turn to slide number 19 for our ACO results.

She is up 8% compared to last year.

Primarily on 6% higher volume.

Is there a variety of new traditional industrial gas plants.

Same store.

Stream across this region.

<unk> was again positive.

The 1% over price overall price improvement for the region equals to about a 2% increase for the midstream business.

China do well control policy has ease.

Covid restrictions in parts of China.

Modestly impacted customer demand.

They also impacted our plant efficiency and increase our supply chain costs.

Cost of.

The risks and favorable.

Meredith due to inflation.

And resources needed to support New project startups Hasnt been as I mentioned.

EBITDA was up 2% and.

Volume and price more than offset higher costs.

Compared to last quarter.

Volumes declined 2%.

I'm merely due to the lunar new year holiday.

Price was 2% lower sequentially.

As mentioned during our last earnings call.

China's government has relaxed its power tariff program.

To allow low power power cost to fluctuate.

This market oriented approach has resulted in higher other costs compared to last quarter.

However, our overall cost the lowest due to better operating and supply chain efficiencies.

Our EBITDA was down 9% sequentially.

EBITDA margin decreased 60 basis points as the MTA bid volume unfavorable volume and price more than offset lower costs.

For the second half.

The fiscal year.

We are very concerned about the potential impact.

Of the Covid related restrictions in China.

And we do expect higher planned maintenance activities.

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

Thank you JP now please turn to slide 20.

Energy costs in Europe began the quarter moderating, but then moved up significantly and were the highest yet in March.

Natural gas costs peaked in January more than seven times higher than a year ago, while power cost stayed almost four times higher.

Nonetheless, as I mentioned, our onsite business has contractual pass through of the higher cost. So we are not directly impacted by higher natural gas prices.

Power costs are also pass through in our ASU onsite business.

In our merchant business, our team implemented significant price actions, which more than covered the higher power costs. This quarter. In fact, we recovered this quarter's higher power cost and about half of the unrecovered costs from Q1.

A great job by the team.

However, we remain vigilant and are working to drive further improvement.

Now please turn to slide 21 for a review of our Europe results.

Compared to the prior year sales were up 32% energy cost pass through which increases sales, but not profit accounted for more than two thirds of the sales increase.

Price increased 14% for the region, which translates to 22% for the merchant business.

Prices were higher across all major product lines and sub regions.

Volume was up 2% on higher merchant volume.

EBITDA was down 3% as favorable price net of variable cost and better equity affiliate income were more than offset by negative currency unfavorable volume mix and higher other costs.

For the quarter the supply chain disruptions caused by the significant energy cost increases persistent negatively impacting both plant operating and distribution efficiencies.

We also saw higher costs due to inflation, while we continue to prepare for new projects coming on stream.

EBITDA margin was 950 basis points lower most of the decline about 700 basis points was due to the significant energy pass through increase the.

The remainder was mostly driven by higher cost and negative volume mix, partially offset by strong merchant pricing and higher equity affiliate income.

Compared to the prior quarter price was up 5% further improved from the already strong performance last quarter, which allowed us to more than offset the higher energy costs.

This equates to an 8% increase on the merchant business.

Volume was 7% lower due to reduced hydrogen demand on customer specific operating actions.

EBIT jumped 17% sequentially and EBITDA margin improved 380 basis points as strong price higher equity affiliate income and lower non energy related costs more than compensated for the lower volume.

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 22 for a review of our Americas results.

Sales increased 12% versus last year.

Volume and price together went up 11%.

Our team in the Americas also did an excellent job raising prices to cover the higher energy costs this quarter.

<unk> improves in all key product lines over the last year.

And were also up sequentially.

The 5% price gains towards the region compared to last year is equivalent to a 12% increase in our merchant business.

Life's knit to variable cost was also positive for the region.

Volume increased 6%, primarily due to hydrogen recovery.

<unk> demand.

In general.

We see a hydrogen demand actually has a brief COVID-19 levels.

Although HIFU volumes this quarter were impacted by the planned outages.

We expect the third quarter to continue at the high level of planned outages didn't.

<unk> volume to fully recover as we move into 'twenty 'twenty three.

Meanwhile, our merchant volume was weak in South America due to lower demand for medical oxygen.

Covid cases declined.

The decrease demand for medical gases also reduce Americas equity affiliate equity affiliate income.

As we expected planned maintenance increased costs this quarter.

Costs were also unfavorable primarily due to inflation and <unk>.

Supply chain related challenges, including a driver shortages that auto broadly impacting the industry.

Yeah.

Operating income improved as positive price and volume more than couple of unfavorable mix and higher costs.

EBITDA was flat as it was impacted by lower equity affiliate income.

EBITDA margin was 460 basis points lower than the previous year due to higher cost negative volume mix and reduced equity affiliate income, which were partially offset by better price.

Sequentially volume disclosure was lower due to planned maintenance outages.

Operating income was up primarily due to strong price, but was partially offset by higher maintenance costs.

EBITDA was down Additionally impacted by lower equity affiliate income.

Now please turn to slide 23, our middle East and India segment, which includes our businesses in the Middle East <unk>.

Including the <unk> joint venture in India.

Sales on operating income in this segment are modest since our middle East and India wholly owned operations out of smaller or insights.

However, the segment EBITA is significant good stake with the affiliate income related to the <unk> joint venture.

Our India joint venture.

Yes.

The 55 million below the increase in equity affiliate income.

Included our share of the <unk> joint venture of mid <unk> for the fourth quarter that Melissa previously discussed.

I'm pleased to report that the team successfully started up a number we've got supplier and a steam turbine units.

And the rest of the phase one startup is continuing as planned.

Sequentially tick with the affiliate income was lower due to the positive nonrecurring items in quarter, one related to the Finalization.

Our previous design ASU joint venture.

Now please turn to slide 24, which addresses our corporate segment.

This segment includes our sale of equipment businesses.

Well as our centrally managed functions and corporate costs.

Over the past few years, our non LNG sale of equipment businesses have grown considerably.

Now what is the company responsible for most of the <unk> increases this quarter.

Yeah.

Our LNG project activities remain robust and also contributed to these increases.

As expected.

Inquiries for potential LNG projects have increased significantly.

Since our customers measure the projects take time to develop.

It will be sometime.

This translates into new projects.

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

Thank you Dr. Han.

Although the consequences of the constantly you know crane.

Our far from clear.

The evolving situation has once again.

Brought the critical issue.

And then as your independents and national security to the forefront.

Emphasizing the critical nature of the energy transition.

That air products has highly value our technologies, our skills and experience.

That will benefit our customers and countries around the world.

Gasification allows countries to utilize their own resources.

In an environmentally friendly ebay.

Using their imports.

Fuels and chemicals.

Meaningful renewable energy, including Green hydrogen.

Fused drive from sustainable organic resources, including renewables visa that sustainable aviation fuel.

We'll allow countries to reduce the reliance on fossil fuels.

Furthermore.

The desire for diversified energy supply.

Also encourage additional LNG projects.

In the future a positive development for air products as we are the leading technology.

And equipment provider for these large LNG projects.

Air products strategy and competencies.

And allowing us to be a leader.

And then in the energy transition.

Our industry, leading gasification technologies are suitable for various types of feedstocks.

Create net zero hydrogen.

The neon Green hydrogen project is the largest project of its kind in the world.

Our LNG heat exchangers, which convert natural gas liquid.

Got it got it.

Take real part too.

Jeep.

Projects.

This sustainable aviation fuel to be produced in our new facility in California.

Is it direct drive to drop in replacement for conventional jet fuel.

It can significantly reduce carbon footprint of the aviation industry without any equipment modification.

The focus on energy security and energy transition.

It's creating significant new project opportunities now and in the future.

Therefore.

We firmly believe.

That investing in high return projects.

Rather than share buyback.

The right way forward.

To support the energy transition.

In short Jim continued profitable growth for their products.

<unk>.

An appropriate return for our investors.

Now please turn to slide number 25.

I remain highly confident of air products resilient business model.

<unk> and our execution.

However, I do have some concerns about the economic backdrop driven.

Driven by continued Kobe challenges.

The impact of supply chain cause things inflation in energy costs.

Even with these challenges.

Quarter three fiscal year 2022.

Our ethylene per share guidance is $2 55 to $2 65.

Up 10% to 16% over last year, and almost 20 cents higher than last quarter.

For fiscal year 2022.

I think I share guidance remains unchanged at 10 20 to $10.40.

Which is 15% to 15%.

Last year.

We continue to see our capex in 'twenty two to be around four and a half to $5 billion.

Clothing get approximately one and a half billion previously invested for phase one of the <unk> project.

At this point.

Like you to turn to a slide number 26.

The drive for energy security and transition to a more sustainable future.

Not mutually exclusive.

The board needs cleaner lower carbon forms of energy and more diverse sources of energy.

We believe our strategy directly.

As these needs.

As we drive toward a clean Energy award.

The talent and dedication of our people.

The key.

Making distributions in reality.

The knee.

Unfortunately have talented and dedicated people who help us accelerate.

Progress.

As I always say.

Our long term competitive advantage is the commitment and motivation of our people.

Their hard work and contribution will ensure our success.

So at this point.

I would like to end my comments, and we will be delighted to answer questions.

Operator, we are ready for questions. Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad again that is star one. Please make sure. Your mute function is turned off to like your signal to reach our equipment.

Our first question will come from Vincent Andrews with Morgan Stanley . Your line is open. Please go ahead.

Thank you and good morning safety how are you.

Very good great.

Great to hear from you.

Okay. Thank you.

I'm wondering if you could just talk a little bit more to start off with about the volume decline in Europe , and how much of that was related to sort of customer financial conditions versus maintenance or anything else and how youre seeing the European operating environment in general just given obviously the inflation.

For the consumer and for corporates and some of the other macro challenges.

Sure our volume declines in Europe , and a high school business.

Or specific needs related to one specific customer.

What we decided to.

So kind of.

Change the fetus.

For the the gadget players because of the high natural gas prices.

But overall.

And we do see.

The small decline I think you said that our volumes in Europe sequentially were down about 2%.

That is obviously the effect of the very high energy prices.

And there was those high energy prices did effect.

And how it is affecting demand, but it is not dramatic and it is not.

A significant cause of concern, but it is of course, but it is a reality that the S. You did.

Okay. Thank you and as a follow up the other costs that you called out.

From the investments, obviously easy I understand what youre doing there, but could you help us understand whether those costs have now sort of plateaued on a sort of year over year basis, such that we'll begin to lap them and they won't become an incremental issue or do you think theres going be more investment coming in future quarters.

Well I know of.

C D var trial cost cigarettes.

Every penny but the.

Cost increases for example in Europe .

Related to the fact that we are building the infrastructure.

That you need to build in order to bring our green ammonia.

Moving to Europe crack it and supply Green energy to Europe .

So it is early days, but do you have just started that process.

That requires people and the expenditure and buying properties and renting.

Mint and trying to do engineering and all of that because that is.

They need to get ready because by 2020.

687, they need to bring in.

Green ammonia and sell it to our customers and the customers expect us to start building the infrastructure.

Around the World you are starting up new plants and all of that so those costs are legit.

Very focused unnecessary for us too.

<unk> maintained the growth we did suffer related as you see it right now.

It's a little bit higher than they should be but in the other.

The overall scheme of things they would be more than justified as we move forward.

But I don't expect to see it.

Significant uptick on those costs, if that is where you're going.

That's exactly what I wanted to know thank you very much Stacy I'll pass it along yeah. Thank you.

Our next question comes from Kevin Mccarthy of vertical Research partners. Your line is open. Please go ahead.

Good morning, this is corey on for Kevin.

In the context of Asia.

Why has the pricing in Asia lagged and can you help us understand maybe the pricing in the region and then for the volume declined modestly on a sequential basis, how much of that was related to lunar new year versus COVID-19 and have you seen any impact thus far in the current quarter as it relates to COVID-19.

Impacts on volume.

But with respect to pricing.

The reason that the prices hasn't gone up so much in Asia is because.

There is no significant energy inflation.

In.

Asia.

Yeah.

Justifies us going to the customers and increasing prices.

So that that is the fundamental dynamics.

The decrease in volumes are mainly due to lunar new year.

Starting in March.

Frictions that the Chinese government has put in trunk clients showing up beginning to have some effect.

And as they are in this current quarter.

Do we see.

More impact because of the Covid destructions the restrictions.

It is.

It's almost impossible to predict what would be the effect because it depends on how.

Much stays relaxed.

Restrictions or actually increase it depending on the progress of Kobe. So we are watching that situation very carefully because it can swing back and forth significantly.

Understood Okay, yes.

Yes, that's great and as a quick follow up.

In the context of rising interest rates I'm curious, how you think about capital deployment going forward and the need for potentially higher ROIC on future projects.

Thank you.

Rising interest rates.

It's easy to raise new capital, obviously, you would have to pay.

More interest on that but right. Now currently do you have a lot of cash and we are not in the market to do that.

But what does that do you have a point or did I Miss that.

I guess I meant more broadly sort of structurally you know as you think about the 10% returns that you generally target would you raise that target and how would you think about oh, okay. The project could take on yeah. Thank you.

No not that I understand your question completely of course, we do.

So you are going to bid on a new project or considered a new project.

We'll consider it in the video view of what is the cost of capital obviously the cost of capital has gone up as interest goes up sure.

Okay. Thank you.

Thank you.

Yeah.

Our next question comes from David Begleiter of Deutsche Bank. Your line is open. Please go ahead.

Hey, Good morning. This is Anthony <unk> on for David Begleiter.

Would you expect earnings in in Europe to be up year over year in the second half and then in regards to Asia do you think merchant pricing is slowing there. It was up just so at least 3%.

Year over year.

Well I think first of all if I may add.

Ask your second question first.

Merchant pricing in the second half in Asia depends very much on board the energy costs are and all of that if you see energy costs growing above our cost of bringing Dolby certainly did increase the prices to recover that and I hope that the outperformance in the last two quarters demonstrates that we do have the ability.

Increased prices of energy cost score as Melissa mentioned, we have increased prices.

In Europe , 22% versus last year's significant pricing power in many of these justified so we will do that.

As far as the way they are.

Our earnings in the second quarter second half of the year for Europe will be higher than before I don't want to make a forward predictions like that but from the guidance that we have given you for the quarter.

And for the year.

To conclude that we are not expecting any decline.

Yeah, I expect that we will do fine.

Last year, that's why that's the only way they can meet our forecast.

Okay. Thank you.

And just maybe just one more follow up here.

Is the entire increase in the middle East and.

In India equity income of I think it was $55 million is it all from Suzanne.

Most of it is from just that our joint venture operations in India.

Yeah.

India is doing very well too, but most of that is from.

Uh huh.

Dr. Han do you want to make any comment on that.

Yeah definitely design is the main driver for the results in the second quarter, but again when it comes to our joint venture with <unk> in India.

Also doing very well.

Basically executing around the 20, new plans for India.

Basically the number one industrial gas company in India and that under significant abroad. So we anticipate in the future that we're going to get more contributions.

Yeah.

Great. Thank you.

Sure.

Our next question comes from Mike <unk> with Barclays. Your line is open. Please go ahead.

Great. Thanks, good morning.

First of all I wanted.

I wanted to ask on your slide 11 on the 2023 projects I. Appreciate we're still a bit early in 'twenty, two but I think <unk> got over $2 billion of projects starting up there. So could you maybe just help level set roughly how we should think about the EPS contribution in 'twenty three I know, Japan should be immediately accretive upon close other projects.

Don't need to ramp just roughly how we shouldn't have that altogether here.

Well I think we have laid it out for you because.

We say that every dollar that VX spend.

Should get us.

10 cents and the operating income and then you know our tax rate and all of that.

The projects that you have you have given your capital.

Not all of them are not going to come on stream at the beginning of 'twenty three.

But you know you can make it a good guess about how much contribution does.

Projects will make.

To our bottom line and it is not small.

Okay, Great and then maybe just secondly on the Saf project I think theres, obviously been tremendous customer interest or sustainable aviation fuel as you're right. We talk about but my understanding is there is still some questions in the industry about constraints on feedstock and what that ultimately means for ICF price.

And the economics behind it so obviously you're investing in backing a company growing very tremendously from say 4 million SaaS to $250 million.

So I guess, just how do you get comfortable with the questions of feedstock supply and the economics behind that.

But because we have confidence in both energy people, who have been they are responsible for coming up it serious thought they have been in the business.

The buying.

And providing feedstock for their facilities for the past 20 years. The company has been around since 1999 they are.

Very competent people and we have done our due diligence and they feel very confident that they can get the feedstock.

Everybody in the World is trying to do this thing as you know that's why a company like Chevron win them bought to RTG and all of that everybody is trying to convey the refineries the sustaining of 11 fewer because that is the fuel of the future. The great thing about sustainable aviation fuel does the fact that he said direct dropping.

No need to change the anchoring of the plane or anything like that.

Obviously, we believe that 50 years from now most of these claims, especially the shortfalls bonus will be fueled by hydrogen but.

I think that in the meantime, right now so stay tuned there are few.

It is.

SaaS is the solution and everybody wants it not only that.

Airlines, but also companies some of the biggest companies in the world that they want to take credit for Decarbonising their business travel.

So the demand is very high on that we are very excited about that project.

Great. Thank you.

Thank you.

We'll go next to Mike Harrison at Seaport Research Partners. Your line is open. Please go ahead.

Hi, good morning.

The learning how are you.

Doing well thanks, a fee you noted the increases that you've seen in LNG inquiries, obviously, given the natural gas situation in Europe can you give us a sense of how many of these inquiries could turn into equipment sales.

And I guess, maybe how should we think about the contribution.

LNG heat exchangers as we think about the next couple of years.

Well I'm going to turn this question to Dr. Han to answer because he runs the business on a day to day basis, but.

Obviously, they are not going to disclose the contribution of the these projects but.

As I said Han mentioned that they are seeing significant additional inquiries, but I'll, let him make the comment that you said you like to.

Yep. Thanks, Jamie Yeah. We're currently executing seven large what the scale of projects right now that are under execution everything is going well.

And we're getting lots of a brush up from our customers to supply. This exchange of the earlier because of the demand for LNG.

And I continue our pipeline right now of our projects is more than 50% of projects that basically we are developing with our customers and we see this is going to be coming.

In the future. So we do expect very steady flow and income out of our LNG business.

It's really in a very good position.

Okay Alright.

That's great and then wanted to ask a question about the helium business.

Talk a little bit about what you're seeing in that market and how much contribution that's having to both earnings and pricing.

And maybe talk a little bit about what we should expect from the helium business in the second half compared to what Youre seeing now thank you.

My cap you know.

Our helium business it's.

<unk>.

The business that you don't usually talk about it about the details of that.

But in terms of how much contribution on all of that it's a great business. We are the world leader on that.

The fact of the matter is that the board expected.

That's a very large project.

Bill could use helium called a mood project in Russia.

Would it be on stream in 2021.

And that would put a lot of helium in the market.

And therefore, it would have a negative price negative effects on price that was the expectation.

And as Scott <unk> got those plans.

In Russia.

They had one explosion in one train and then six months later they had an explosion in the second train.

So nothing no helium came out of Russia in 2021.

And nothing has come out of it in 2022.

Yes.

But now on top of the fact that they have to repair those.

Yeah.

Units because of the damage that was done now.

Now you have the issue of the sanctions on Russia.

So I am not sure that even when they are ready to bring that material through the market how much of the 10 day brings on the market considering the sanctions.

So as a result of all of that.

You would expect.

That the markets for.

Video would be a little bit tight.

And that is what we see.

Okay.

Excellent thanks very much.

Thank you Mike.

Well move next to Josh Spector with UBS.

Yeah, Hi, good morning, Thanks for taking my question.

Just first on the guidance I guess looking at your guide for next quarter and the full year, you're implying about a 10% ish step up sequentially. Each of the next two quarters I'm wondering if you could break down the drivers there between price cost recovery.

<unk> or anything else, particularly in light of the perhaps more challenging volume outlook than you guys expected previously.

Well I'm very happy that you're you laid it out like that because.

It does show that it is a pretty robust.

Forecast so at.

10% Consequently.

Each quarter going up.

The reason that we feel confident about that is that number one.

Historically.

If you look at all of the results.

We delivered about 47%.

48% of our EPS in the first half.

And 50% to 52% of our result in the second half.

Seasonally seasonally the second half is stronger so that is one of these.

Second reason is that the.

We are very confident about the fact that we can deal with inflation in energy cost increases by increasing prices.

So as a result, and I hope the investors get some comfort.

Looking at our results.

Do you have that capability and I think that is one of the most important things.

I hope people notice about the results that we have the capacity and the ability to do that and the only reason we cant do that just because our products.

Our products that our customers need.

Our products are not a significant part of our customers' cost so there'll be increased prices not increasing the final price the price of the product that the customer service.

To the market that much so do you have the ability to recover.

That so therefore, and then with the volumes.

We are opt.

Optimistic that at least that I don't know, what's going to happen in Asia, but we are optimistic that are faced in the U S.

We did see some pent up demand because.

Now that the Covid is easing up and therefore, you could see better volumes.

Yes.

Okay. Thanks, that's very helpful and I guess just.

Second question just on on hydrogen logistics, I guess with the Neon project you guys announced there's $2 billion of infrastructure to be spent along with that with SaaS you talked about some infrastructure there the Arizona plant I think you had some language that it could be a hydrogen hub.

To an extent and you announced the.

The Rotterdam.

Commercial truck hydrogen hub as well is that part of that $2 billion being spent in some of those projects or is that contemplated for different applications.

The 2 billion is just related to Neil.

The other things that you were talking about an additional cost to that to bill.

Okay. Thank you.

Sure.

We'll go next to Laurence Alexander with Jefferies. Your line is open. Please go ahead.

Good morning. This is Dan Rizzo on for Laurence. Thank you for taking my question.

Just want to think over time, what do you think it's a good mix in terms of profit contribution from.

The vertically integrated GBS relative to on site merchant and packaged how should we think about it over the long term.

Yeah.

Maybe I just focus on your question to make sure that I understood it correctly.

I'm just wondering how we should think about mix over the long term from Jv's from onsite for merchant and package how would you break breakout.

What our Jv's right now if you add up the sales of our J D. I think we disclosed that publicly.

Simon you're doing they disclose it publicly so I can mention that right.

Correct, Yeah, our sales from J D is getting close to more than two and a half dozen adults.

So D C. It's very.

Good growth in all of the changes are major jbs are an excellent company that we had in Italy called SAP deal you.

We have an outstanding company in India and as Dr. Han mentioned, they are growing very fast with 20, new plants under construction.

And then do you have a great JV in China, and our significant joint venture in Mexico.

The dose cohort and all and obviously if you have a JV in that.

Taiwan that'd be fully consolidated but.

These jbs, they're all very good companies long.

Fabless companies and they are doing very well because some of those economies are doing stuff. So we expect those to continue to grow.

And then our Mexican business.

Right now I think our onsite business is about 20 about 50.

253%, 55% of our portfolio.

We expect that all of the big projects that Youre doing.

That we would end up onsite business. If you look at the 10 years from now it might grow to be about.

I mean, 70% of our business, but that doesn't mean that our merchant business is shrinking.

Make sure business has continued to grow but the percentage will come down because the whole company to become a much bigger company.

That's very helpful.

I really appreciate that.

And then just one just one follow up with the equity income does it have the same seasonality as the rest of the rest of the company I think you mentioned, 52%, 48% for EPS I was just wondering if.

Income from affiliates is relatively the same.

I.

I wouldn't characterize it that way because those are different countries different dynamics and all of that.

But usually the second half of the year is a stronger for most people unusual.

Alright, Thank you very much.

Thank you.

Yeah.

Okay.

John Mcnulty with BMO capital markets. Your line is open. Please go ahead.

Yes, hi, thanks for taking my question.

So I guess, we understand that the lockdowns in China are a little bit difficult to predict going forward, but I guess is there a way to think about how much April was down relative to say the first or excuse me. The your fiscal <unk> levels. Just so we can kind of.

It kind of set a baseline and then think about how it how it kind of changes throughout the quarter.

Well first of all good morning, John Gunn.

Got it.

You start disclosing that since I know the results for the month of April is kind of talking about the quarter of IV or in the middle of it.

But let me just in general I'll say that.

April .

It was.

A little bit worse than the month of March.

I would put it that way.

Okay.

Compared to March hasn't improved.

I hope it does improve but it's totally unpredictable John I don't think given the Chinese authorities know that in terms of it just depends on their spread in a number of cases of Covid right.

Got it Okay, and then just a housekeeping kind of question so in the in the <unk>.

<unk> 16, where there was kind of a breakdown of the earnings contributions you had about <unk> 18 cents from equity affiliate income and I'm, assuming the bulk of that is <unk>, but when I annualize that it doesn't quite get to that kind of 80% to 85% contribution that Japan is supposed to be giving so.

I am I missing something on this or just Japan have kind of another kind of step up when we think about moving from fiscal <unk> to fiscal <unk> that we should be thinking about whether there's a startup issue or what have you like I guess, how would how would you characterize that.

I'll give that Melissa do you think about this thing before I turn it over to you have to answer the specific question, but with respect to <unk>. There is no step up I mean, what you saw in the second quarter.

Is it pretty good.

Is it a representation of what that will do it every quarter until the phase II comes on stream.

So no if youre, taking the contribution that we have had and annualizing it doesn't say that.

There is the 88 cents I think you should get to that I think Melissa mentioned that it could get to that but Melissa would you like to make any comments on this.

Yes. Thank.

Thank you.

Just to be clear the 18th.

You are seeing there in person as prior year right. So.

Yes. So you have to take me that'd be a portion of the pie, yes, but to be clear.

Using the <unk>.

Around 20 expansion this quarter.

We did have some headwinds and other joint ventures, specifically on Mexico Mexican joint venture.

Some headwind because every sale.

Sales from Covid.

Medical oxygen.

Got it okay now that makes that makes sense. Thanks for the thanks for the color appreciate it.

Absolutely.

We'll go next to Chris Parkinson with Mizuho. Your line is open. Please go ahead.

Hi, Good morning, this kieran on for Chris.

Hi, I was just wondering if you can speak a little bit about your current let's say traditional on site project backlog you seem to be getting some benefits in Asia throughout this quarter, but how should we think about contributions from that business in the balance of the year and maybe into 'twenty three and maybe more of a long term picture are you seeing an uptick.

Opportunities I guess, particularly in terms of energy or chemical or electronics end markets. Thank you.

Sure we are doing very well in that regard.

We are getting projects.

Our more than our share.

I'll call it traditional share of the market.

Very successful in the electronic industry as that you saw on the projects that you have in house and there are some projects that you haven't announced.

In the order of things like oxygen plants in nitrogen generators and so on they set and they are bidding.

Winning our share of the market.

So if you look at the industrial gases business worldwide.

And look at our market shares, which is about I think for <unk>.

14, 15, 17%, depending how you look at it we certainly are there any more than that in terms of the so called traditional nitrogen generator oxygen generators.

And.

Electronic <unk>.

High purity nitrogen generators.

We're doing fine there and I'm very pleased with that.

Great and then maybe just a really quick follow up in terms of the Americas logistics challenges I think you mentioned trucking being a bit of a drag in terms of the quarter.

Any any thoughts in terms of that improving whether it's just preliminary thoughts into what you've seen throughout April and may or just your thoughts into the back half of the year would be helpful. Thank you.

Sure I mean, our challenge in the United States is that you know that you are obviously very big trucking company, because we have all of these trucks developing and delivering products to our customers.

Yeah.

I don't mind, telling you that right now.

I've had in the last quarter about 150 positions opened for truck drivers that they cannot get.

So despite that we are delivering products to our customers and so on but you know what that means that means that all costs increase number one behalf to offer a lot more to a high drivers and number two people who have to work significant amount so overtime in order to compensate for the shortage of the drivers of that.

So that is creating an issue for us but that has been beat us in the last two quarters and the effect of that on our bottom line is.

Included in the second quarter.

So over the next few quarters I don't think the situation will get worse, but I think the order to your what you describe what the challenges are.

Thank you very much.

Sure.

Any other questions.

Erika Your line is open. Please go ahead.

Hi, This is Rob Hoffman for Steve Byrne.

My first question is regarding yes, Hello, Hi regarding the first SaaS project does world energy have any long term contracts for I'll say up and if so what pricing to be competitive with conventional aviation fuel and then.

The hydrogen plant and V. A P O X or ACR technology, rather than an SME so as to enable CLS.

<unk> can capture if required in the future.

Okay number one.

To answer your second part of the question.

The hydrogen plants that the app supplying this thing now when it comes on stream will be the regulatory S. M.

But.

And in the future it would be 10 foot C O to capture on those but.

Capturing C O two in southern California, you had the challenge of what do you do with it.

Our plan in the long term.

In the long term.

Is to try to supply that facility did green hydrogen.

Richa, we can bring to Los Angeles from our different plants, making green hydrogen.

And use our pipeline to deliver that so that is how people shop at the cloud Bryce.

In terms of the price set.

Competitive pricing as you know when you sell sustained at airlines fuel to an airline.

You charge them a certain amount, but then there is the incentives that low.

Those.

Yeah.

And CFS.

Low carbon fuels so.

Subsidies that people get.

So theoretically you can send me a gallon of that.

Sustainable aviation fuel.

For a $5 $6, which is the price that you pay for the conventional game, but then one can get about three to $4 or sometimes more than that depending on the carbon intensity as a subsidy there because it's it's a trade of a commodities right now.

So as a result, the end result would be as if youre selling it for $910 a gallon.

These days.

So that is how that did vote. Therefore, it is very competitive.

Okay got it thank you.

Quick follow up.

What was the source of hydrogen recovery in there and is there more opportunity for us.

The social hydrogen as a company is basically the fact that the refineries are running harder because the demand for gasoline has gone up.

Got it okay. Thank you Sir thank you yeah.

And with no other questions holding I'll turn the conference back for any additional or closing comments.

Well. Thank you very much I would like to take a moment and tank.

The body for the that.

Participation in our call.

I appreciate your good questions and we look forward to talking to you in about three months about Dr. Third quarter results in the meantime, stay safe and have a wonderful day. Thank you very much.

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time.