Q1 2024 Air Products and Chemicals Inc Earnings Call
Operator: www.air-q.com Good morning, and welcome to the Air Products First Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products, and all rights are reserved. Beginning today's call is Mr. Sid Manjeshwar. Please go ahead.
Good morning, and welcome to the Air products first quarter earnings release Conference call. Today's call is being recorded at the request of Air products. Please note that this presentation and the comments made on behalf of air products are subject to copyright by air products and all rights are reserved beginning today's call is Mr. Sigman Just war. Please go ahead.
Operator: Hi, thank you, Jennifer. Good morning, everyone. Welcome to Air Products' First Quarter 2024 Earnings Results Selection. This is Sid Manjeish.
Sigman Just: Alright, Thank you Jonathan good morning, everyone.
Speaker Change: Welcome to air Products' fourth quarter, but he's ready for earnings results teleconference.
Speaker Change: It shrunk widespread it is.
Sid Manjeshwar: Vice President of Investor Relations and Corporate Trash. I am pleased to be joined today by Stacey Ghasemi. Chairman, President, and CEO. Dr. Samir Sarhan, operating on. Melissa Schaefer, our Chief Financial Officer. Sean Major.
Sigman Just: That's our relations and corporate treasurer.
Sigman Just: Pleased to be joined today by David.
Our chairman President and CEO.
Sigman Just: Amir our horn, our chief operating officer.
Sigman Just: But let's say Schafer, our chief financial Officer and.
Sigman Just: Sean Major executive Vice President General Counsel and Secretary.
Sid Manjeshwar: General Townsend. 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, www.airproducts.com. Today's discussion contains forward-looking statements, including those about earnings. Capital Expenditure Guide, Business Outlook, and Investment Office. Please refer to the cautionary notes regarding forward-looking statements that are provided in our own. Lightening. Lightening.
After our comments, we will be pleased to take your questions.
Sigman Just: Our earnings release and the slides for this call are.
Sigman Just: Our available on our website.
Sigman Just: Air products Dot com.
Sigman Just: Today's discussion contains forward looking statements.
Sigman Just: Any thoughts about funding and capital expenditure guidance.
Sigman Just: This outlook and investment opportunities.
Sigman Just: Please refer to the cautionary note regarding forward looking statement.
Sigman Just: As provided in our earnings release.
Sigman Just: On slide number.
Sid Manjeshwar: Additionally, throughout today's discussion, we will refer to various financial figures... including Earnings Per Share.
Additionally.
Sigman Just: Throughout today's discussion, we will refer to various financial measures including earnings per share.
Sid Manjeshwar: Operating Income and Operating Margin. Good job at Dumbarton.
Sigman Just: Operating income operating margin.
Sigman Just: EBITDA.
Sigman Just: EBITDA margin.
Sid Manjeshwar: Effective Tax Rates and ROC, both on our total company, segment based, unless we specifically state otherwise, statements regarding these are referring to our, and On Gap. Consumers, to our most directly comparable, can be found on our website. The Relevance, Earnings. How was that?
Sigman Just: The effective tax rate and our oce.
On a total company.
Segment base.
Sigman Just: Unless we specifically state otherwise statements regarding these measures.
Sigman Just: According to our adjusted non-GAAP financial measures.
Sigman Just: Reconciliation of these measures to our most directly comparable GAAP financial measure can be found on our website in the relevant earnings release section.
With that I'm pleased to turn the call over to safety.
Seifollah Ghasemi: on the call over. Thank you, Sid, and good day to everyone. Thank you for taking time from your very busy schedule to be on our call today. As always, I would like to begin with slide number three, our safety performance, which is our number one priority at Air Products. I'm very pleased to share that our employee recordable injury rate in the first quarter was 78% lower than in 2014, and our employee last time injury rate was at a record low, the best in the industry. Our Ultimate Goal. There will always be zero accidents and zero incidents.
Safety: Thank you Shay and good day to everyone.
Safety: Thank you for taking time from your very busy schedule to be on our call today.
Safety: As always I would like to begin with slide number three our safety performance.
Safety: Which is our number one priority at air products.
Safety: I'm very pleased to share that our employee recordable injury rate in first quarter was 78% down in 2014.
Safety: And our employee lost time injury rate was at a record drove the best in the industry.
Safety: Our ultimate goal.
Safety: We'd always be zero accidents and zero incidents.
Seifollah Ghasemi: Now, please turn to slide number four, which summarizes our management philosophy. These principles remain fundamental to how we manage and grow our company. Now, please turn to slide number five.
Safety: Now please turn to slide number four.
Safety: Summarizes our management philosophy.
Safety: These principles remain the <unk>.
Safety: It's fundamental to how we manage and grow our company now.
Safety: Now please turn to slide number five I.
Seifollah Ghasemi: I would like to take a few minutes to discuss the results for this quarter. Our first quarter adjusted earnings per share of $2.82 was 7% higher than last year. Our business performed well, and we are moving forward. There were several positive contributions to this result, which included a strong conversion margin. Robust on-site activities in Americas and Europe and higher quality affiliate income globally, despite the year-to-year improvement that I just mentioned. Our results diverge from the guidance.
Speaker Change: I would like to take a few minutes.
Speaker Change: Discuss the results for this quarter.
Speaker Change: Our first quarter adjusted earnings per share of $2.82.
Speaker Change: 7% higher than last year.
Speaker Change: Business performed better and we are moving forward.
Speaker Change: There are several positive contributions to this result that included strong conversion margins.
Speaker Change: Robust onsite activities in the Americas and Europe.
Speaker Change: And higher quality affiliate income globally.
Speaker Change: Despite the year to year improvement than that I just mentioned.
Speaker Change: Our results diverged from the guidance range that.
Speaker Change: We are giving you two separate items.
Seifollah Ghasemi: We have given you due to several items that they're not factored in our first quarter 2024 out. We have given you a forecast, and we are delivering less than the forecast. But again, I'd like to express that we are seven percent higher than last. These factors that have affected our guidance are... Number one, larger than anticipated volume head, from Weak Economic Growth in China. We were too optimistic about performance in China. The second one is lower helium demand in electronics, especially across.
Speaker Change: They're not factored in our first quarter 'twenty 'twenty four.
Speaker Change: We had given you a forecast and we are delivering less than the forecast, but again I like to stress that we are 7% higher than last year.
Speaker Change: These factors.
Speaker Change: That affected our guidance.
Speaker Change: Sure.
Speaker Change: One larger than anticipated volume headwinds from weak economic growth in China.
Speaker Change: We were too optimistic about that performance.
Speaker Change: Performance in China.
Speaker Change: Second bone is lower helium demand.
Speaker Change: Electronics, especially across the board.
Seifollah Ghasemi: But I would like to mention that our pricing in helium, phase Betty Estevo, and very robust, but we have the volume was lower than we expected.
Speaker Change: I would like to mention that our pricing in helium.
Speaker Change: As very.
Speaker Change: Very stable.
Speaker Change: And that is robust, but we had the volume was lower than we expected.
Seifollah Ghasemi: There is a high, we have experienced higher costs for the state of equipment project and the impact of Argentina's currency devaluation. With this, let me talk about our revised four-year guidance. Please turn to slide number.
Speaker Change: There is a heightened the AD experience higher cost for the sale of equipment project.
And the impact of Argentina currency devaluation.
Speaker Change: With this let me talk about our revised full year guidance range.
Speaker Change: Please turn to slide number six.
Speaker Change: We now expect full year adjusted earnings per share to be in the range of $12 22, which was 50.
Seifollah Ghasemi: We now expect full-year adjusted earnings per share to be in the range of $12.20 to $12.50, which reflects the first quarter events I just discussed. It also reflects evolving geopolitical developments and uncertainty and continued weakness in Asia and Heliobolus.
Speaker Change: This reflects the first quarter events I just discussed.
Speaker Change: It also reflects evolving geopolitical developments and uncertainties.
Speaker Change: <unk> continues.
Speaker Change: Weakness in Asia and helium volumes.
Seifollah Ghasemi: This new range is supported by expected positive volume contributions from several new on-site plants and improvement in our LNG sale of equipment business, as well as continuing cost productivity that we always achieve. For the second quarter of fiscal year 2024, our adjusted earning per share guidance is $2.60 to $2.75. We continue to expect our CAPEX to be between five dollars, five million, five billion, and five and a half billion in fiscal year 2020. Now, please turn to slide number seven.
This new range is supported by expected positive volume contributions from several new onsite plants and improvement in our LNG sale of equipment business as it is continuing cost productivity that we always pursue.
Speaker Change: For the second quarter of fiscal year 2024, our adjusted earnings per share guidance is $2 $62 75.
Speaker Change: We continue to expect our capex to be between $5 <unk>.
$5 million.
Speaker Change: Hi, 5 billion and $5 5 billion in fiscal year 2024.
Speaker Change: Now please turn to slide number seven.
Seifollah Ghasemi: We are proud of our adjusted earnings per share, an improvement since 2014. And we have delivered, on a consecutive basis, for the last 10 years, more than 10% annual growth in our area. I would like to take the time to thank each and every one of our employees around the world for their hard work, and dedication, and commitment, which has made it possible for us to deliver these excellent results. Now please turn to slide number eight. In addition to investing in high-return projects, we believe creating shareholder value includes returning cash to our investors by paying a healthy dividend directly to them. In January, we again raised our quarterly dividend to $1.77 per share per quarter, extending our record of 42 consecutive years of dividends.
Speaker Change: We are proud of our adjusted earnings per share.
Speaker Change: Improvement since 2014.
Speaker Change: And we have delivered on a consecutive basis for the last 10 years more than 10% annual growth in our earnings.
Speaker Change: I would like to take the time to a tank each and every one of our employees around the world.
Speaker Change: Or.
Speaker Change: Their hard work.
Speaker Change: And dedication and commitment which has made it possible for us.
Speaker Change: These excellent results.
Speaker Change: Now please turn to slide number eight.
Speaker Change: In addition to investing in high return projects, we believe creating shareholder value includes tightening returning cash to our investors by paying a healthy dividend directly due debt.
Speaker Change: In January we again raised our quarterly dividend to $1 77 per share per quarter.
Speaker Change: Sending a record of 42 consecutive years of dividend increase.
Seifollah Ghasemi: We expect to return approximately $1.6 billion to our shareholders in 2024 while continuing to execute hard return industrial gas and clean hydrogen projects that support our customers in their sustainability journey and Drive the Energy Trend. This balanced approach to capital allocation allows us to meet our capital needs while maintaining our A82 credit rating. Now please turn to slide number nine, which shows our EBITDA margin trend since 2010. Our margins have returned to roughly 40 percent since the second half of fiscal year 2023.
Speaker Change: We expect to regain approximately one $6 billion to our shareholders in 2024, while continuing to execute high return industrial gas and clean hydrogen projects that support our customers in their sustainability journey.
Speaker Change: And drive the energy transition.
Speaker Change: This balanced approach to capital Allo.
Speaker Change: Allocation it allow us to meet our capital needs.
Speaker Change: Maintaining our AA credit.
Speaker Change: <unk>.
Now please turn to slide number nine it shows our EBITDA margin trend since 2014.
Speaker Change: Our margins have returned to roughly 40%.
Speaker Change: Finish the second half of fiscal year 2023.
Seifollah Ghasemi: Going 1,500 basis point improvement versus 20. Thank you. And our margins are leading industry margins, and they reflect the continued strength of our business model.
Speaker Change: Following your 1500 basis point improvement versus 2020.
Speaker Change: 2014.
Speaker Change: And our margins are leading to a leading industry margins and they reflect the continued strength of our business model.
Speaker Change: Now.
Melissa Schaefer: It's my pleasure to turn the call over to Melissa Schaefer, our Chief Financial Officer, to give you a summary of our first quarter 2020 results. Thank you, Stacey. Now please turn to slide 10 for a review of our first quarter results. As Davey stated, our business fundamentals are strong. In comparison to last year, we continue to show underlying sales growth with both positive volume and price. Overall, the price for the quarter was up despite lower energy costs across most.
Speaker Change: It's my pleasure to turn the call it other.
Speaker Change: Shafer.
Shafer: <unk> financial officer.
Shafer: To give you a summary of our first quarter 'twenty 'twenty or results in their shop.
Shafer: Thank you Stacey now please turn to slide 10 for a review of our first quarter results.
As he stated our business fundamentals are strong in comparison to last year, we continue to show underlying sales growth with the positive volume and price.
Overall price for the quarter was up despite lower energy cost across most regions.
Melissa Schaefer: Volume improved 3% driven by strong onsite volume, including higher demand for hydrogen, and Contributions from NUAC, but partially offset by weaker demand for helium, particularly in aid. Declining natural gas prices in Europe and North America resulted in a 11% lower energy cost pass through for the company overall. This had no impact on profit but contributed to higher margins. EBITDA improved 8% as favorable volume, price net of power costs, and equity affiliate income more than offset higher costs driven by higher planned maintenance activities and inflation. Even a margin of 39.2% jumped more than 500, with lower energy cost pass-through contributing to about three-fourths of this improvement. ROCE remained steady at about 12%.
Shafer: <unk> improved 3% driven by strong volume, including higher demand for hydrogen and contributions from new assets.
Shafer: But partially offset by weaker demand for helium, particularly in Asia.
Shafer: Declining natural gas prices in Europe, and North America resulted in 11% lower energy cost pass through for the company overall.
Shafer: No impact on profit, but contributed to higher margins.
Shafer: EBITDA improved 8% favorable volume price net of power costs and equity affiliate income more than offset higher costs, driven by higher planned maintenance activities and inflation.
Shafer: EBITDA margin of 39, 2% jumped more than 500 basis points with lower energy cost pass through contributing to about three fourths of this improvement.
Shafer: R O C E remained steady at about 12% adjusting for cash R. R. O C. He would have been about 13%.
Melissa Schaefer: Adjusting for cash, our ROCE would have been about 13%. Sequentially, results were unfavorable primarily due to seasonality in the Americas and sale of equipment headwinds in our corporate sector. Now please turn to slide 11 for a discussion of our earnings per share. Our first quarter adjusted earnings was $2.82 per share, up 18 cents or 7% compared to last year, due to favorable volume, pricing, and higher equity affiliate income, partially offset by unfavorable costs. Volume was $0.11 due to improvements in America and Europe, which more than offset shortfalls in Asia and the corporate, Hi. Net Available Costs contributed $0.15 this quarter, driven by both pricing actions and lower power costs, but they had an unfavorable impact of $0.21 driven by higher planned maintenance costs, inflation, and our efforts to support our growth strategy. Equity Affiliate Income was $0.18 higher due to the contribution of the second phase of the ZAN project and positive results from our unconsolidated joint ventures across most. The remaining items, including a lower tax rate, higher interest expense, and Together, they had a modest negative 5 cents.
Shafer: Sequentially.
Shafer: Results were unfavorable primarily due to seasonality in the Americas and to have equipment headwind in our corporate segment.
Shafer: Now please turn to slide 11 for a discussion of our earnings per share.
Shafer: Our first quarter adjusted earnings was $2 eight two cents per share at 18, or 7% compared to last year due to favorable volume pricing and higher equity affiliate income partially offset by unfavorable cost.
Volume, what 11 cents due to improvements in Americas, and Europe, which more than offset shortfalls in Asia and our corporate segment.
Net of variable costs contributed 15% this quarter driven by both pricing actions and lower power costs.
Shafer: Cost and an unfavorable impact of 21.
Shafer: And by higher planned maintenance costs inflation, and our efforts to support our growth strategy.
Shafer: I agree to affiliate income with 18% higher due to the contribution of the second phase of Suzanne project and positive results from our unconsolidated joint ventures across most regions.
Shafer: The remaining items, including lower tax rate higher interest expense and other non operating expense together had a modest negative 5% impact.
Melissa Schaefer: Before I turn the call to Dr. Sherhan, I would also like to thank the people of Air Products for their commitment to the company. I am proud to be working alongside them as we continue to execute our strategy. Now, to begin to review our business segment results, I'll turn the call to Dr. Please return to slide 12 for a review of our... Price and volume together were up $5,000. Merchant Enterprise.
Speaker Change: Before I turn the call to Dr. Han I would also like to thank the people of air products for their commitment to the company.
Dr. Han: I am proud to be working alongside them as we continue to execute our strategy.
Dr. Han: Now to begin to review our business segment results I'll turn the call to Dr. Sorry.
Dr. Sorry: Thank you Melissa.
Dr. Han: Please turn to slide 12 for a review of our Americas segment results.
Dr. Sorry: Compared to last year, right and volume together were up 5%.
Dr. Sorry: Barge birth merchant price increase of 6%.
Dr. Sorry: Represents a 2% price improvement for the region overall.
Seifollah Ghasemi: Thank you. Thank you. Thank you. Project Volume grew 3% from Demand for Hydropower. The American RealtorĀ® was up 9% driven by strong price as well as favorable value, while partially offset by higher.
Dr. Sorry: This drove contribution margin improvement.
Dr. Sorry: Volume grew 3% due to strong demand for hydrogen.
Dr. Sorry: EBITDA was up 9% driven by strong price as well as favorable volume and equity affiliate income.
Dr. Sorry: While partially offset by higher planned maintenance costs.
Seifollah Ghasemi: The margin was up by almost..., driven mostly by lower energy costs. Eventually, if it had decreased 7%..., mainly due to The End. Thank you. Now please turn to slide 13 for a review of our aged segment. Challenging Economic Conditions in China, Markets to put pressure on our volumes were a flat, hire on site. Upstairs, Lower- by a job one percent, focus on price over.
Dr. Sorry: EBITDA margin was up by almost 800 basis points.
Dr. Sorry: Driven mostly by lower energy costs.
Dr. Sorry: When Chile EBITDA decreased 7%.
Dr. Sorry: Mainly due to seasonality as demand moderated and maintenance activities picked up during the winter.
Dr. Sorry: Now please turn to slide 13 for a review of our Asia segment results.
Dr. Sorry: The challenging economy conditions in China, and the <unk>.
Dr. Sorry: Weak electronics market continued to put pressure on that either.
Dr. Sorry: Relative to last year.
Dr. Sorry: Our volumes were flat for the region is higher on site activity.
Dr. Sorry: Lower helium demand.
Dr. Sorry: Hey, just 1% as we continued to focus on price over volume.
Dr. Sorry: EBITDA and EBITDA margin was down primarily due to the unfavorable helium volume and higher costs.
Seifollah Ghasemi: Sequentially, results improved relative to the unfavorable business mix in the previous quarter. Please turn to slide 14 for a review of our Europe segment; volumes were up 9% benefiting from better on-site activities, including the new project. Compared to last year, merchant pricing remained stable relative to the decline in energy costs.
Dr. Sorry: Sequentially results improve.
Dr. Sorry: Improved relative to the unfavorable business mix in the previous quarter.
Dr. Sorry: Please turn to slide 14 for a review of our Europe segment results.
Dr. Sorry: Volumes were up 9% benefiting from better onsite activities, including the new project and use the Pakistan.
Dr. Sorry: Compared to last year merchant pricing remains stable relative to the decline in energy costs.
Seifollah Ghasemi: Contributing to Marginalized, The beta was up 28%. Driven by Feverable Volumes. Lower Power Costs and Stronger Currencies Against the U.S. more than compensated for increased costs due to inflation and planned maintenance. EBITDA margin was over 1,000 basis points higher, about half of which was due to the impact of lower energy costs.
Dr. Sorry: So built into margin improvement.
Dr. Sorry: EBITDA was up 28% driven by favorable volume.
Dr. Sorry: Lower power costs.
Dr. Sorry: Stronger currencies against the U S dollar.
Dr. Sorry: Which more than compensated for the increased costs due to inflation in it.
Dr. Sorry: Maintenance activities.
Dr. Sorry: EBITDA margin was all about 1000 basis points higher about half of which was due to the impact of lower energy costs basketball.
Dr. Sorry: Sequentially.
Seifollah Ghasemi: sequentially. Results improved, driven by favorable price, volume, and cost. Now please turn to slide 15 for a review of our Middle East and India segment, from birth to last year. Sales decreased due to lower volumes.
Dr. Sorry: But it's also improved driven by favorable price volume and cost.
Dr. Sorry: Now please turn to slide 15 for a review of our Middle East and India segment results.
Dr. Sorry: Compared to last year.
Dr. Sorry: Sales decreased due to lower volume.
Seifollah Ghasemi: EBITDA improved due to the completion of the second phase of the Gizani project in mid-January of last year. Please now turn to slide 16 for our corporate and other segments. This segment includes our sale of equipment businesses, as well as our centrally managed functions and corporate costs. However, despite higher sales from LNG activities, EBITDA declined due to higher costs in our non-LNG sale of equipment business, as Seify mentioned before.
Dr. Sorry: EBITDA improved due to the completion of the second phase of the design the project in mid January of last year.
Dr. Sorry: Please now turn to slide 16 for our corporate and other segment results.
Dr. Sorry: This segment includes our sale of equipment businesses as well.
Dr. Sorry: Our centrally managed functions on corporate costs.
Dr. Sorry: Despite higher sales from LNG activity EBIT declined due to the Ohio cost in our none LNG sale of equipment business.
Safety you mentioned before.
Dr. Sorry: Our activities related to the LNG equipment and technology business.
Seifollah Ghasemi: Our activities are related to LNG equipment and technology. A R O B O T, We continue to have constructive conversations with customers who are interested in our office. And we expect our LNG-related projects to improve the corporate segment moving forward. At this moment, I also would like to thank our teams around the world for their effort and demonstrating their determination to overcome the challenges we are facing. Now, I would like to turn the call back to Seif for his closing remarks. Thank you, Dr. Sheehan. Now please turn to slide number 17. As I always say, a real competitive advantage is commitment, dedication, and motivation. Award.
Dr. Sorry: Our robust we continue to have constructive conversations with customers who are interested in our offering.
Dr. Sorry: And we expect our LNG related projects to improve the corporate segment moving forward.
Speaker Change: At this moment I also would like to thank our teams around the world for their effort.
Speaker Change: Kurt.
Speaker Change: Demonstrating the determination to overcome the challenges we are facing.
Now I would like to turn the call back to safety to provide his closing remarks.
Safety: Thank you Dr. Sharon now please turn to slide number 17.
Safety: As I always say a real competitive advantage.
Safety: Is the commitment dedication and motivation.
Safety: All of our people.
Safety: I am proud to see that commitment and motivation.
Seifollah Ghasemi: I am proud to see that commitment and motivation in action every day. I'm very proud of our The Fundamentals of Our Existing Business. Strong, and we are moving forward. Short-term issues we have discussed do not change the compelling long-term prospects of air products. Air Products is pursuing a first-mover growth strategy, with our core industrial gases business as the first pillar, and our Blue and Green Hydrogen Project, as the second, executing our strategy in the. These two pillars, with Sustainability, and they're pinning both of them, enable us to fulfill our higher purpose as a company, which is to help solve significant energy and environmental challenges in our world. That is our hope. First, our industrial gases business and technology solutions help customers across dozens of industries and businesses improve yield, increase production, reduce energy, and consumption, and lower emissions. In other words, to make more with less while reducing the impact on the environment.
Safety: In action every day in our company and I'm very proud of our people.
Safety: The fundamentals of our existing business are strong and we are moving forward.
Safety: The short term issues, we have discussed.
Safety: Not change the compelling long term prospects of air products.
Safety: Air products is pursuing it.
Safety: Mobile growth strategy.
Safety: With our core industrial gases business as the first theater.
Safety: Our blue and green hydrogen projects.
Safety: The.
The second pillar <unk>.
Safety: Executing on our strategy in.
Safety: In these two pillars.
Safety: Sustainability.
Safety: Underpinning both of them enables us to fulfill our higher purpose as a company.
Safety: Yes.
Safety: Help solve significant energy and environmental challenges in our board that is our highest.
Safety: First our industrial gases business and technology.
Safety: Solutions.
Safety: Customers across dozens of industries improved yield increase production reduce energy.
Safety: Consumption and lower emissions.
Safety: Other boards to make.
Safety: More with less while reducing the impact on the environment.
Seifollah Ghasemi: Second, the world needs more energy and wants that energy delivered with a lower carbon footprint. At Air Products, we are demonstrating our leadership, position, leveraging our decade-long experience in competencies, core technologies, and our ability to execute world-scale hydrogen projects by producing and delivering low and zero carbon hydrogen at the scale for heavy duty transportation and industry, so they can meaningfully contribute to the goal of decarbonizing the world. We believe that the first mover advantage will be substantial and deliver enduring long-term shareholder value, both in terms of return on air products and in generating a cleaner, cleaner future for everybody. With that, we are now more than happy to take your questions. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment.
Safety: Second the world needs more energy advanced energy delivered at a lower carbon footprint.
Safety: At Air products, we are demonstrating our leadership.
Safety: Position, leveraging our decades long experience.
Safety: Core competencies core technologies, and our ability to execute world scale hydrogen projects.
Safety: But producing and deliberate Inc.
Safety: Low and zero carbon hydrogen at scale for heavy duty transportation and industry.
Safety: It can meaningfully contribute to the goal of Decarbonising divorced.
Safety: We believe that the first mover advantage.
Safety: Be substantial and deliver enduring long term shareholder value both in terms of return to air products.
Safety: And in generating Accoona cleaner future for everybody.
Speaker Change: With that we are now more than happy to take your questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: And we'll go first to Jeff Zekauskas from J P. Morgan.
Jeff Zekauskas: And we'll go first to Jeff Zekauskas from J.P. Morgan. Thanks very much. When did the Gulf Coast Pneumonia Project come on? And is that a meaningful income stream? Golf Course Pneumonia consists of two different parts.
Jeff Zekauskas: Thanks very much.
Jeff Zekauskas: When did the Gulf Coast ammonia project.
Jeff Zekauskas: Hum on and is that a meaningful income stream for you.
Jeff Zekauskas: Yeah.
Seifollah Ghasemi: One is the hydrogen plant and the other one is the actual ammonia. I can comment on the hydrogen plant because we own that and that is a sale of gas that is on stream, and it's producing revenue. And on the other part, I don't want to comment because we don't own that facility, and a lot of the owners' statements on that. In the quarter, there was, Yes, thank you for that. In the quarter, the expense was materially higher year over year than your expectations for 2024. You have a large cost cutting program. Maybe losses on the sale of equipment would be smaller. There was significant room for improvement in this particular line. Is that the case or things?
Jeff Zekauskas: Gulf Coast ammonia is consists of two different parts one is the hydrogen plant and the other one is the.
Jeff Zekauskas: Actual ammonia plant.
Jeff Zekauskas: Yeah, I can't comment on the hydrogen plant because we own that and that is a shade of gas that is on a stream and it's producing revenue and on the other part I don't want to comment because we don't own that facility and a lot of owners to make a statement on that.
Jeff Zekauskas: It's necessary.
Yeah, Okay, Jeff quarter, there was.
Jeff Zekauskas: Yes, thank you for that.
Speaker Change: In the quarter the <unk>.
Speaker Change: Spence.
Speaker Change: Yes.
Speaker Change: Materially higher year over year.
Speaker Change: That your expectations for 2024.
Seifollah Ghasemi: Jeff, you are absolutely right. That is the case. In the first quarter, our costs were higher because of the sale of equipment issue that you mentioned, and we expect that as we go forward, that will not be repeated, and therefore, our year-to-year costs will be lower, as I had mentioned. Thank you. Thank you. We'll go next to Mike Harrison from Seaport Research Partners. Hi, good morning.
Speaker Change: You have a large cost cutting program.
Speaker Change: Maybe losses on sale of equipment would be smaller.
Speaker Change: There was significant room for improvement.
Speaker Change: <unk>.
Speaker Change: If that's the case or if things changed.
Speaker Change: Yes, you're absolutely right that is the case in the first quarter, our costs were higher because of the sale of equipment issue that you mention and we expect that in there as we go forward.
Michael J. Harrison: Morning. I was hoping that you could give a little bit more detail on what's going on within the helium business. Is it a situation where demand is lower, or a situation where you guys are struggling to get the volumes of helium that you need? And also, which regions have the biggest exposure to helium?
Speaker Change: That would not be repeated and therefore our.
Speaker Change: I used to use cost will be lower as I had mentioned to you before.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Seifollah Ghasemi: It seems like this is mostly an Asian issue, at least in the first quarter. Thank you for the question, and that's an excellent question. Number one, we do not have any issues with having helium molecules for sale. We are actually the best.
Speaker Change: Thank you we'll go next to Mike Harrison from Seaport Research partners.
Michael J. Harrison: Hi, good morning.
Michael J. Harrison: Good morning was hoping was hoping that you could give a little bit more detail on what's going on within the helium business is that a situation where.
Michael J. Harrison: Demand is lower or a situation where you guys are.
Seifollah Ghasemi: We have always been the supplier that has delivered helium to people when they need it. We have a tavern. We have significant production facilities around the world. So we are a very reliable supplier, and we have always been. The issue with helium is that, first of all, demand is lower, especially in electronics, across the board, and particularly in China and in Asia.
Michael J. Harrison: <unk> to get the volumes of helium that you need.
Michael J. Harrison: Also which regions have the biggest exposure to helium. It seems like this is mostly in Asia issue at least in the first quarter.
Speaker Change: Thank you for the question at and that's an excellent question number one we do not have any issues.
Seifollah Ghasemi: And the other thing is that, as I said, we operate on the basis that we want value for the product that we are selling. So we have held on to the pricing, and whether we might have lost some market share, that is possible, but they have no issues delivering the product. But we definitely see, as I said, a weakness in demand across the world. And in terms of air products, in terms of helium volumes, obviously, Asia is a significant part of that. The other regions use a lot of helium too, but Asia is... All right, that's very helpful.
Speaker Change: Having helium molecules for sure.
Speaker Change: They are actually the best you have always been there.
Speaker Change: Supplier that has delivered helium to people when they need it we have a tavern behalf significant production facilities around the world. So we are a very reliable supplier and we have always been.
Speaker Change: The issue with helium is that number one demand is lower especially in our electronics across the board.
Seifollah Ghasemi: And then my second question is related to your guidance. It looks like the implied guidance for the first half of the year is around $5.50 in EPS, and you're expecting maybe something closer to $7 in the second half. Can you talk about the visibility that you have that gives you confidence in a much better second half and maybe help us bridge the improvement that you're expecting in the second half versus the first half, that $1.50 or so? Well, that's an excellent question. Obviously, the guidance is what is our best estimate at this point, right? We can't foresee world events.
Speaker Change: And particularly in China and in Asia.
Speaker Change: And the other thing is that as I said.
Speaker Change: We operate on the basis that the bonds value for the products that we're selling so we have held on the pricing and whether we might have lost some market share that is possible.
Speaker Change: But the abnormal issues delivering the product.
Speaker Change: But we definitely see a as I say the weakness in demand.
Speaker Change: Across the board and in terms of air products in terms of helium volumes.
Speaker Change: Yossi Asia is a significant part of that is not.
Speaker Change: The other regions use a lot of helium to but Asia is the biggest.
Speaker Change: Alright, that's very helpful. And then my second question is related to your guidance it looks like the implied guidance for the first half of the year is around $5 50 in EPS and Youre expecting maybe something closer to $7 in the.
Seifollah Ghasemi: But fundamentally, when you look at their products, over the years, we consistently delivered about 46-47% of the year's results in the first half, and we delivered around 53-54% in the second half. So the second half is usually our strongest quarter because of seasonality. So you should take that into account.
Speaker Change: Second half.
Speaker Change: Can you talk about the visibility that you have that gives you confidence on a much better second half and maybe help US bridge the improvement that you're expecting in the second half versus the first half of that $1 50 or so.
Seifollah Ghasemi: And then the other thing that we are giving you guidance on is that we are expecting that in the second half of the year, some of the onsite projects that we have will be running very strong. And therefore, we will have a higher income from those. That is our estimate as of today. But how the world will turn, we'll see.
Speaker Change: Well that's an excellent question obviously the guidance is that what is our best estimate at this point right, we can't foresee the world events, but.
Speaker Change: Fundamentally when you look at air products.
Speaker Change: They use the consistent.
Seifollah Ghasemi: But that is how we bridge the gap of why we will be able to deliver the 7 versus the 550 in the first half of the year. Thank you very much. Thank you. Thank you.
Speaker Change: Consistent.
Speaker Change: They live at about 46, 47% of the year's results in the first half and then delivered at under 50, 354% in the second half the second half is usually our strongest quarter because of seasonality.
John Roberts: Thank you. Sefi, is the weakness in China also related to onsite operations, and maybe you could separate the gasifier business from other onsite? John, first of all, thank you for your question and I hope all is well with you. There is no weakness in onsite operations in China.
Speaker Change: So you should take that into account and then the other thing that we are right now by giving you. The guidance is that we are expecting that in the second half of the year. Some of the onsite projects that we have will be running very strong and therefore, we will have a higher income from dose that is our estimate.
Seifollah Ghasemi: You know, our onsite business is take or pay across the world, so we don't see any issues there. The fundamental issue is on the merchant side and helium. And that is related to the economic activity. I'd just like to caution everybody on the call that the economic situation in China is not as robust as people might think.
Speaker Change: As of today, but how the world will tend will see but that is how we bridge. The gap of five we will be able to deliver the seven versus the $5 50 in the first half.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you we'll go next to John Roberts from Mizuho.
John Roberts: Thank you Sophie is the weakness in China also related to on site operations and maybe you could separate the gasifier business from other on site.
Seifollah Ghasemi: We, as you know, make products that are used instantaneously. We are a great leading indicator, and things are not really that exciting in that part of the world. Thank you. Thank you. We'll go next to Steve Byrne from Bank of America. Yes, thank you. I was just looking at the location of Jizan and it seems to be within a hundred miles of quite a few of these recent strikes in Yemen and just wanted to ask is everything okay at the plant, or do you see any access to labor or risks of this issue going on right now? But first of all, up to now, we have not seen any incidents. None of these missiles and so on have been directed at the facility. So, I mean, I can't predict the future, but up to now, there have not been any issues. The refinery is fully operational.
John Roberts: Yeah.
Sophie: John first of all thank you for your question and I Hope all is well with you.
Speaker Change: There is no weakness in on sites in China.
Sophie: Our answer onsite business is take or pay across the awards. Therefore, we don't see any issues that the fundamental issue is on the merchant side on helium.
Sophie: And that is related to the economic activity.
Sophie: Just like to caution.
Sophie: Everybody on the call.
Sophie: That.
Sophie: The economic situation in China is not as robust as people might think.
Sophie: As you know we make products that are used instantaneously.
Sophie: They are a great leading indicators.
Sophie: And things are not really that exciting that part of the world.
Speaker Change: Thank you.
Thank you.
Speaker Change: Thank you we'll go next to Steve Bryan from Bank of America.
Steve Byrne: Yes. Thank you I was just.
Seifollah Ghasemi: Our investment, I mean, our performance there is great. I'm very proud of our people. We are operating 16 gasifiers, which are the largest in the world for gasifying the bottom of the refinery. And despite predictions for the worst, those things are actually working. And we are producing syngas, we are supplying hydrogen to the refinery, and we are making close to 4,000 megawatts of power that is delivered to the South. So, up to now, everything is fine. Thank you. Very good, thank you. And can you provide any more detail on the CapEx target for the year, the five to five and a half billion? Can you just highlight what are the largest projects within that list? I was just curious whether you're moving forward with the project in North Texas this year? Mmm...
Steve Byrne: Looking at the location of <unk> and it seems to be within 100 miles.
Steve Byrne: Quite a few of these recent strikes.
Steve Byrne: Just wanted to ask is everything there okay at the plant to your or do you see any.
Steve Byrne: Access to labor or risks.
Steve Byrne: This issue going on right now.
Speaker Change: But first of all up to now we have not seen any incidents none of these missiles and so on have been directed at the facility. So yeah, I mean, I can't predict the future, but up to now there has not been any issues they refer.
It is running fully or artifact.
Speaker Change: <unk> investment performance.
Speaker Change: Performance that is great I'm very proud of our people. We are operating 16, Gasifier, which are the largest in the world for gadget, calling the bottom of the refinery and despite predictions for divorce those things are actually working and we are producing syngas you are supplying.
Seifollah Ghasemi: Right now, in that five and five and a half billion, there is not a significant amount of money for the project in Texas because we are in the process of getting the permit and doing the preliminary engineering. But we did spend a few hundred million, but it is not a significant part of the five and a half billion. The five to five and a half billion is mainly going to be spent on continuing operations at Neom in Saudi Arabia for our green hydrogen facility. A substantial amount of it will go to our blue hydrogen facility, and other substantial amounts will go to our blue hydrogen facility in Canada. And then obviously our expenditure on the sustainable airline in Los Angeles, and then obviously we have our maintenance CAPEX and about a billion dollars a year that we spend on our day-to-day investments, like any other industrial gas business that we don't usually talk about. We don't put out press releases about how many small projects we win because we do win small projects like...
Speaker Change: Hydrogen to the refinery and they are making close to 4000 megawatts of power that is delivered to the Saudi grid.
Speaker Change: So obviously not everything is fine.
Speaker Change: Thank you.
Speaker Change: Very good thank you and can you provide any more.
Detail on the on the Capex target for the year, the five to $5 5 billion.
Speaker Change: Can you just highlight what are the largest projects within that list.
Speaker Change: Just curious whether you are you are moving forward with the project in North Texas This year.
Speaker Change: Yeah.
Speaker Change: Right now in that 555 billion that is not a significant amount of money for the project in Texas, because we are in the process of getting the permit then during the preliminary engineering, but we did spend a few hundred million dollars, but it is not a significant part of the $5 5 billion to five to $5 5 billion.
Speaker Change: Is mainly going to be spent on <unk>.
Speaker Change: Our continuing operations and.
Speaker Change: Neil in Saudi Arabia for a greenhouse facility a substantial amount of it will go to our blue hydrogen facility.
Seifollah Ghasemi: But that is about a billion dollars too, and our maintenance capex is around $500,000. So one and a half billion is for those, and then the rest of it is for the big projects. Thank you. Thank you. We'll go next to John McNulty from BMO Capital Markets. Yeah, good morning.
Speaker Change: Another substantial amounts will be our blue hydrogen facility in Canada, and then obviously our expenditure on the sustainable Airlines a few facility in.
Speaker Change: Los Angeles, and then obviously, we have our maintenance capex and about $1 billion a year that we spend on our day to day investments like any other industrial gas business that you don't usually talk about it then.
John P. McNulty: Thanks for taking my question, Stevie. So we had a question on the dividend hike that you guys announced earlier. It strikes us as kind of smaller than, I guess, what we've seen in the past from Air Products. And I guess the question is, why is that? And is there any concern from, say, the rating agencies around the comfort with your capital spending?
Speaker Change: We don't put out press releases about how many are smaller projects one because we do have been smaller projects like everybody else, but that is about $1 billion to our maintenance Capex is around five six ended so a $1 5 billion as those and then the rest of it is for the Big project.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you go next to John Mcnulty from BMO capital markets.
John P. McNulty: Yes. Good morning, Thanks for taking my questions.
Seifollah Ghasemi: Or is there some change why that why that hike would be as kind of modest as it's been? I guess, how should we think about that? Well, for the past six or seven years, I have always been telling people that I personally believe that dividends should be a percentage of the stock price, and we have given people guidance that the target that we pay about two and a half percent of our stock price as dividends. And we were doing that, but now with the stock price where it is, and you're talking about more than $7, any higher than that, so I don't see why we should significantly increase the dividend when the stock price is what it is, because the shareholders are getting more than 2.5% from the stock, and then 10% growth, then it becomes at least almost a guaranteed 12.5% return if they buy the stock.
John P. McNulty: So we had a question on the dividend hike that you guys announced earlier.
John P. McNulty: It strikes us as kind of smaller than I guess, what what we've seen in the past from air products and I guess the question is why is that and is it is there any concern from say the rating agencies around the comfort with your capital spending or is there. Some change why that why that hike would be is as modest as it has been.
John P. McNulty: I guess, how should we think about that.
John P. McNulty: Well for the past six or seven years I have always been telling people that I personally believe that dividends should be a percentage of the stock.
John P. McNulty: Our stock price and we had given people a guidance that the target that we pay about two 5% of our stock price as dividend.
John P. McNulty: And we were doing that but now with the stock price where it is.
John P. McNulty: And you are talking about now more than $7 is significantly higher than that so I.
John P. McNulty: I don't see volume you should significantly increase the dividend and the stock prices, where it is because the shareholders are getting more than two 5% from the stock and then 10% growth then it becomes at least almost a guarantee 12, 5% return if they buy the stock.
Seifollah Ghasemi: There is no issue with respect to our cash or our cash flow and so on, but... We also have investors who believe we shouldn't pay any dividend, but obviously, that will never happen, and we are never going to reduce the dividend, but the rate of increase is very directly related to the stock price. Got it. Okay. So it's more about the yield, not necessarily the earnings growth or anything like that.
John P. McNulty: There is no issue with that respect our cash or our cash flow and so on but that.
John P. McNulty: You also have investors, who believe me she didn't pay any dividend, but obviously that will never happen.
John P. McNulty: To reduce the dividend.
The rate of increase is very directly related to the stock price my friend.
Speaker Change: Got it okay. So it's more about the yield not necessarily that the earnings growth or anything like that.
Seifollah Ghasemi: Okay. And then just as a follow-up question, it would just be on the, I know you mentioned earlier, kind of first half versus second half. There's a bunch of, you know, projects that should be running a little harder, running up more, or coming on. I guess, can you remind us which projects aren't necessarily fully running in your first half of the year but will be in the second half of the year, just so we can kind of model that out or map that out a little bit better? Well, that one, I'm not going to get into. I am not disclosing the operational details of our customers. I don't have the privilege of doing that because of the confidentiality.
Speaker Change: Okay, and then just as a follow up question would just be on the I know you mentioned earlier in kind of first half versus second half.
Speaker Change: There's a bunch of projects that should be running a little harder running up more ore coming on I guess can you remind us what projects.
Speaker Change: Aren't necessarily fully running in your first half of the year, but we will be in the second half of the year. Just so we can kind of model that out our map that out a little bit better.
Speaker Change: Well, that's one and then I'm going to get into.
Speaker Change: Disclosing their operation on the details of our customers and I'm not.
Speaker Change: I don't have the privilege of doing that because of the confidentiality agreements. We have so if you give me a break I cannot.
Seifollah Ghasemi: So if you give me a break, I cannot answer that question in detail. Sorry about that. No, no problem. No problem at all. We'll definitely give you a break on that. Thanks for the time. Thank you.
Speaker Change: Answered that question in detail sorry about that.
Speaker Change: No no problem in Oklahoma at all we'll definitely give you a breakout that thanks for the time. Thank you Sir.
Speaker Change: You should.
Seifollah Ghasemi: Thank you. We'll go next to Vincent Andrews from Morgan Stanley. Thank you and good morning, everyone. If I could just ask about helium, what was sort of the surprise in the quarter on the electronic side of the equation?
Speaker Change: Thank you we'll go next to Vincent Andrews from Morgan Stanley.
Vincent Stephen Andrews: Thank you and good morning, everyone.
Vincent Stephen Andrews: If I could just ask on the helium.
Vincent Stephen Andrews: What was sort of the surprise in the quarter on the electronics side of the equation right. So what's really changing with those customers is it something in particular or is it just the economy. There is decelerating and are we at the point with it and the electronics piece that youre comfortable that you know.
Vincent Stephen Andrews: Like, what's really changing with those customers? Is it something in particular, or is it just that the economy there is decelerating? And are we at the point with it in the electronics piece where you're comfortable that, you know, that that aspect is flattened out at a level that you're comfortable with? Maybe we could start there. First of all, good morning, Vincent.
Vincent Stephen Andrews: Does that does that aspect, it's flattened out at.
Vincent Stephen Andrews: At a level that youre comfortable with maybe we could start there.
Speaker Change: First of all good morning, Vincent Thanks for the good question.
Seifollah Ghasemi: Thanks for the good question. Usually, what happens with the electronics industry, and you know this better than I do, is that they run very strongly during the third quarter of the calendar year to make all of the chips and so on which are used for all the toys and everything that people are going to buy for Christmas.
Speaker Change: <unk>.
Speaker Change: You know.
Speaker Change: Usually what happens with the electronic industry than you know this better than I do is that they run very strongly.
Speaker Change: During the third quarter of the calendar year.
Speaker Change: Who make all of the chips and so on which are used for all the toys and everything that people are going to buy or Christmas.
Seifollah Ghasemi: And then when that period is over, usually the fourth quarter of the year for chipmakers is slower. That is the general. And then, in addition to that, you do have economic conditions and all of that. I am not an expert in terms of the dynamics of the electronics industry, but I would like to tell you that that is what we are seeing, that a lot of these people are slowing down. And then the other thing that might be in play is that the helium prices being high significantly affects the operational people at the chip manufacturing facilities to try to conserve as much helium as they can or other uses. So there might be a little bit of demand destruction. And then as a follow-up, in the fiscal second quarter, you know, we obviously just had another winter storm or winter freeze in the Gulf Coast area.
Speaker Change: And then when that period is over usually the fourth quarter of the year or the chipmakers slower that is the general thing.
Speaker Change: And then in addition to that you do have economic conditions and all of that.
Speaker Change: I'm not an expert in terms of the dynamics of the electronic industry, but.
Speaker Change: I would like to tell you that that is what we are seeing that that a lot of these people that are right.
Speaker Change: Slowing down and then the other I think that.
Speaker Change: Might be in play is that the helium prices being high it's significantly effects the operational people add there.
Chip the chip manufacturing facilities to try to conserve as much helium as they can or other users. So there might be a little bit of a demand destruction too.
Speaker Change: Okay, and then as a follow up in the fiscal second quarter.
Speaker Change: Obviously, just had another winter storm or winter freeze in the Gulf Coast area are you anticipating that you're going to have some downtime associated with that our customers are going to have downtime.
Seifollah Ghasemi: Are you anticipating that, you know, you're going to have some downtime associated with that, or are customers going to have downtime from, you know, some plants being turned off, you know, in preparation for that weather event? That's a very difficult question to answer. That might be the case, but I don't want to predict that, Vincent. I don't know. I just meant what had already happened, the storm that happened in January. Is that already baked in? Yeah. Dr.
Speaker Change: From.
Speaker Change: Some plants being turned off.
Speaker Change: And in preparation for that weather event.
Speaker Change: That's.
Speaker Change: That's a very difficult question to answer quite honestly.
Speaker Change: Might be the case, but I don't want to.
Speaker Change: That being said I don't know.
Speaker Change: And then what it already happened with storm that happened in January.
Speaker Change: Is that already baked in.
Speaker Change: Yeah.
Speaker Change: That's S. Alan do you have anything to add to that a minor issue is really that happened, we still see very strong hydrogen demand even during that freeze.
Seifollah Ghasemi: Salon, do you have anything to add to that? Minor issues, really, that happened. Like, Comment, and subscribe. Thank you very much. Okay, Vincent. Thank you. Yes, thank you. We'll go next to David Begleiter from Deutsche Bank. Stay on!
Okay. Thank you very much okay. Thank you. Thank you very much.
Speaker Change: Excellent well go next to David Begleiter from Deutsche Bank.
David I. Begleiter: Thank you good morning.
David I. Begleiter: Good morning. Just staying on helium, can you quantify the impact of the year-over-year helium profit decline in Q1 and your expectations for the full year in terms of helium profit decline? David, you're asking a question that we have never answered, that is, we have never really disclosed the details of the performance of our helium business for competitive reasons, and I'm sure you understand that. So I do not want to quantify that exactly. But, uh...
David I. Begleiter: Hey, Jeremy.
David I. Begleiter: Good morning, just staying on helium can you quantify the impact of the year over year helium a profit decline in Q1 and your expectations for the full year in terms of the helium op profit decline.
David I. Begleiter: At.
David I. Begleiter: David.
David I. Begleiter: You're asking a question that that.
David I. Begleiter: We have never answered that is we have never really disclosed.
David I. Begleiter: The details of the performance of our helium business for competitive reasons.
David I. Begleiter: And I'm sure you understand that so I do not want to quantify.
David I. Begleiter: Quantify that exactly.
David I. Begleiter: Got that.
Seifollah Ghasemi: If you look at the, You know, when you compare it to last year, and we compare it to last year, we are still ahead. What we are trying to explain is the difference between what we delivered versus guidance. Compared to last year, we are still ahead. But the expected. We did not expect the weakness in helium the way it has materialized. Would it continue in the second quarter and the third quarter?
David I. Begleiter: If you look at that.
David I. Begleiter: Okay.
David I. Begleiter: You know when you compared to last year.
David I. Begleiter: Compared to last year, we are still ahead.
David I. Begleiter: But we are trying to explain is the difference between what we delivered versus guidance.
David I. Begleiter: Not versus last year, we are still ahead.
David I. Begleiter: But we expect it.
David I. Begleiter: We did not expect the weakness in helium.
David I. Begleiter: It hasn't materialized.
David I. Begleiter: Did continue in the second quarter in the third I mean in the second third and fourth quarter of our fiscal year remains to be seen and that is one of the reasons, we lowered our guidance because we are allowing for the fact that it might continue.
Seifollah Ghasemi: I mean, the second, third, and fourth quarter of our fiscal year remains to be seen. And that is one of the reasons we lowered our guidance, because we are allowing for the fact that it might continue. But we don't know for sure.
David I. Begleiter: But we don't know for sure.
Speaker Change: Understood. Thank you and just on the Alberta project now that within 12 months of all hopefully a startup do you have timing of that project ramping up early next year and how should we thinking about the earnings contribution.
Seifollah Ghasemi: And just on the Alberta project, now that we're within 12 months, hopefully of start-up, do you have timing for that project ramping up early next year, and how should we think about the earnings contribution throughout the calendar year 25 for Alberta?
Speaker Change: Throughout the calendar year 'twenty five for Alberta.
Speaker Change: Yeah, David we will broke up I didn't understand which projects you are referring to.
Seifollah Ghasemi: David, you were broke up; I didn't understand which project you were referring to. The Alberta project. When will it come on stream, and how are you thinking about the earnings cadence? post-startup early next year. Excellent. I'll have Dr. Sheeran answer that.
Speaker Change: The Alberta project.
Speaker Change: One of them will come on stream.
Speaker Change: And how we should be thinking about the earnings cadence posts posted stellar <unk>.
David I. Begleiter: Excellent I'll have that after I said on the answer that I mean.
Seifollah Ghasemi: Thank you for the question. We remain incredibly excited about our first blue net zero hydrogen project that's in the construction phase right now. We look to bring it on stream in fiscal year 25 in line with our customer plan. There are no updates in regard to the deployed capital and also the government incentive.
Speaker Change: Thank you for the question.
Speaker Change: We remain incredibly excited about our first blue net zero hydrogen to project that.
Speaker Change: And the construction phase right now.
Speaker Change: We look to bring it on stream in fiscal year 'twenty five in line with our customer plans.
Speaker Change: There are no updates in regards to the deployed capital and also the government incentive will provided that already.
Seifollah Ghasemi: We provided that already. So again, we're really fully committed to this asset, and things are going well, and we're aligned with our customer, ION. We'll be online the first half of fiscal year. Sorry. It's in fiscal year 25, in the second. Second half, thank you.
Speaker Change:
Speaker Change: So again were really for their committed to assess it and things are going well and we're all aligned with our customer to Iowa.
Speaker Change: Will it be online the first asking for your fiscal year.
Speaker Change: Sorry.
Speaker Change: It's in fiscal year 'twenty five I mean in.
Speaker Change: In the second half.
Speaker Change: Second half thank you.
Seifollah Ghasemi: This is really in alignment with the plans for renewable refineries. So basically, everything is going well for that up to now. Thank you. Thank you. We'll go next to Josh Spector from UBS.
Speaker Change: This is really in alignment with our with the plans that renewable loud refinery.
Speaker Change: Thank you.
Speaker Change: So basically everything is going well for that uptick.
Speaker Change: Thank you very much.
Speaker Change: Georgia. Thank you well go next to Josh Spector from UBS.
Josh Spector: Hi, good morning. So I wanted to follow up just on the guidance and maybe ask specifically, you know, when you talk about the challenges and uncertainty, China and helium demand, etc. I guess to hit your second half, do markets need to improve, or are you assuming there will be some improvement there? Or is the status quo plus what you see coming online enough to get to what your expectations are today for the second half? Now, we don't expect any improvement.
Josh Spector: Hi, good morning.
Josh Spector: So I wanted to follow up just on the guidance and maybe ask specifically when you talk about the challenges and uncertainty China in helium demand et cetera, I guess to hit your second half do market need to improve or are you assuming any improvement there or is status quo plus what you see coming online enough to get to what your.
Josh Spector: Patients are today for the second half.
Josh Spector: No. We don't expect any improvement you expect things to be the way. They are I, just hope that things don't get divorced because of the geopolitical developments.
Seifollah Ghasemi: We expect things to be the way they are. I just hope that things don't get worse because of the geopolitical developments. But we are not factoring in any significant improvement in the world economy. That's correct. Okay, thanks. That's helpful.
We are not factoring in any significant improvement in the broader economy.
Speaker Change: It's correct.
Speaker Change: Okay. Thanks, that's helpful and just on the sale of equipment. So when you talk about the increasing costs. There is that cost to execute is that material issue specific contract just thinking about how unique or one off that is and when you talk about your LNG wins and you've been talking about more projects coming online.
Josh Spector: And just on the sale of equipment. So when you talk about the increase in cost there, is that cost to execute? Is that a material issue, a specific contract? Just thinking about how unique or went off that is.
Seifollah Ghasemi: And when you talk about your LNG wins, and you've been talking about more projects coming online or sales in the next couple of years, is that a risk we need to think about with some of those contracts underwater or some other costs? If I may answer the second part, the LNG thing, we expect that the projects that you're talking about are projects that are already under execution, and we have won, so the risk on that is low. With respect to the sale of equipment, what we are talking about is inflation and delays in execution, and all of that that is costing us. Okay. Okay. Yep. Thank you. Thanks. Thank you very much. Thank you. We will go to Mark Bianchi from TD Calendars.
Speaker Change: Sales in the next couple of years is that a risk we need to think about with some of those contracts under water or some other cost issue.
Speaker Change: And if I may answer the second part the LNG tank, we expect that the projects that you were talking about are the projects, which are already under execution M. B have born so.
Speaker Change: It's gone that is low with respect to the sale of equipment, Inc. And what we are talking about is installation.
Speaker Change: And delays in execution and all of that that is costing guzman.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thank you, we'll go to Marc Bianchi from T D Cowen.
Mark Bianchi: Hi, thank you. A question was asked earlier about the large components of CAPEX, and you mentioned NEOM, the two blue hydrogen projects, and SAF. You provided an update on Alberta just now. I'm curious if you could update us on the status of the other three. Well, on the other three, we don't have anything substantial to report other than what we have told you before. So. Eh. Things are going OK with them as of right now, so we do not have anything material that has happened to report.
Marc Bianchi: Hi, Thank you.
Marc Bianchi: The question was asked earlier about the.
Marc Bianchi: Large components of Capex and you had mentioned the two blue hydrogen projects and Saf you.
Marc Bianchi: <unk> an update on on Alberta, just now I'm curious if you could update us on the status of the other three.
Marc Bianchi: But on the other three we don't have anything substantial to report other than Bud told you before.
Marc Bianchi: So.
Marc Bianchi: Yeah.
Speaker Change: Things are okay.
Speaker Change: Okay. The dam is as of right now so we do not have any if you can remind me.
Speaker Change: Nothing to report to you.
Okay. Thank you say if he could you just remind us the startup expectation for neon, Louisiana N S. A F.
Seifollah Ghasemi: Thank you, Seifi. Could you just remind us the startup expectation for NEOM, Louisiana, and SAF? NEOM, we are expecting. January, I mean December. 31st, 2026. Pete Louisiana.
Speaker Change: Neal we are expecting.
Eh Jen I mean December.
Speaker Change: 31st 2026.
Speaker Change: With Louisiana.
Seifollah Ghasemi: What we have said up to now has been fiscal year 2028. And with SAF, it is somewhere around fiscal year 2027, depending on us getting all of the permits. So I'm sorry, I'd like to correct that to 2027. I said, I think I said 28, but in 27.
Speaker Change: But we have set up to now has been.
Speaker Change: Fiscal year 'twenty 'twenty eight.
Speaker Change: And the way.
Speaker Change: So yeah, it is somewhere around our fiscal year 2027.
Speaker Change: Depending on us getting all of the permits that we need.
Speaker Change: So and with that I'm.
Speaker Change: I'm, sorry that would be dead, Oh, I'd like to correct that through 2027, and I said I think I said 'twenty eight 'twenty.
Speaker Change: 2007.
Seifollah Ghasemi: That's approximately the timeline for those projects. Okay, thank you for that. The other question I had was there have been some reports in news stories lately about natural hydrogen, so naturally occurring hydrogen deposits that could be quite meaningful.
Speaker Change: That's approximately the time line.
Speaker Change: <unk> for those projects.
Speaker Change: Okay. Thank you for that the other question I had was there have been.
Speaker Change: Some reports in.
Speaker Change: New stories lately about natural hydrogen so.
Speaker Change: Actually occurring hydrogen deposits that could be quite meaningful I'm curious what.
Seifollah Ghasemi: I'm curious what your view of that is and if you have any involvement. We do not have any involvement in that, and I don't want to give you a scientific answer, but that's a little bit of a pie in the sky idea. There's hydrogen sitting there that you need to deridiville, and it will come out at zero cost. We are not involved in any projects like that, and we are not going to get involved in that because ... because the... Do not think that that is reality.
Your view of that is and if you have any involvement.
Speaker Change: You do not have any involvement in that.
And.
Speaker Change: I don't want to give you a scientific answer.
Speaker Change: That's a little bit of a pie in the Sky bet.
Speaker Change: As hydrogen sitting there that you need to do the villa and if you'll come out of that there is zero cost, but that we are not involved in any projects like that and we are not going to get involved in that because.
Speaker Change: He just there.
Speaker Change: Do not think that that is a reality.
Seifollah Ghasemi: Thank you very much. Thank you. Thank you. We'll go next to Mike Leithead from Barclays. Great, thank you. Good morning. Good morning.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you we'll go next to Mike <unk>.
Michael J. Harrison: Mike <unk> from Barclays.
Michael J. Harrison: Great. Thank you good morning.
Michael J. Harrison: Save money could you make good morning could you maybe update us on the state of your ongoing discussions for green and Blue ammonia potential offtake should should we expect some offtake announcements later this year or do you still believe it's better to wait until closer to the project startup to formalize some of those.
Michael Leithead: Could you maybe update us on the state of your ongoing discussions for green and blue ammonia potential offtake? Should we expect some offtake announcements later this year? Or do you still believe it's better to wait until closer to project startup to formalize some of those? Well, on that, you're raising an excellent point.
Speaker Change: Well on that that's when you originally.
Speaker Change: Excellent point, so you have basically.
Seifollah Ghasemi: We have basically told people that they should not expect any announcement about any offtake until about a year or a year and a half before the plants come on stream. And the main reason for that is that we believe that as we get closer to the deadline, companies will have to comply with the new environmental regulations. They will certainly realize that there are not that many real commercial facilities coming on stream that have the product. Therefore, the value of our product will be higher than what people think it is today. So we are not in a hurry to sign any agreements.
Speaker Change: <unk> told people that.
Speaker Change: We do not expect any announcement about any offtake until about a year or year and a half before the plants come on stream.
And the main reason for that is that we believe that as we get closer to the deadlines that companies have to comply with the new environmental rules.
Speaker Change: Certainly realized that there are not that many real commercial facilities coming on stream that has the product. Therefore, the value of our products will be higher than what people think it is today. So we are not in a hurry to sign any agreements. We think the demand is there. So if you are going to take our time.
Seifollah Ghasemi: We think the demand is there, so we are going to take our time. But in the meantime, if somebody wants to act sooner and gives us a contract, a long-term contract at the prices that we expect, we might announce that sooner. But I wouldn't want the investors to expect any announcements soon. That makes sense.
Speaker Change: But in the meantime, if somebody.
Speaker Change: <unk> two.
Speaker Change: As sooner and gives us a contract a long term contract at the prices that we expect you might announce that sooner, but I wouldn't want our investors to expect.
Speaker Change: [noise] announcements are.
Speaker Change: Soon.
Speaker Change: So.
Seifollah Ghasemi: That's great. And then, maybe on a similar note, I believe the Treasury Department recently came out with guidance around the green hydrogen tax credit. I think most people viewed it as fairly strict, although I also believe Air Products' plans are pretty well aligned with this guidance. Bigger picture, do you have any concerns about the strict interpretation limiting the U.S. industry's ability to take off, or do you actually see it as advantageous for Air Products? No, we absolutely disagree with that point of view, that this is limiting. I mean, how is it limiting?
Speaker Change: Great that makes sense.
Speaker Change: Maybe on a similar note I believe.
Speaker Change: Measuring department recently came out with guidance around the green hydrogen tax credit.
Speaker Change: Most people you need us fairly strict although I also believe air products as plans are pretty well aligned with this guidance bigger picture do you have any concerns about the strict interpretation.
Speaker Change: Limiting the U S industry's ability that they take off or do you actually see it as advantageous for air products.
Speaker Change: No we absolutely disagree with that point of view that this is limiting and I mean, how is it limiting we are complying with every single part of the Treasury Department has put out three pillars and we are committing billions of dollars to build these facilities. Other people can do the same thing some people.
Seifollah Ghasemi: We are complying with every single part of what the Treasury Department has put out, the three pillars, and we are committing billions of dollars to build these facilities. Other people can do the same thing. Some people are trying to get money from the government by continuing to pollute the atmosphere, and we don't believe that. We believe very strongly in the three pillars.
Speaker Change: A lot of that trying to get money from the government.
Speaker Change: By continuing to pollute the atmosphere and we don't believe that we believe very strongly in the three pillars that means that any electricity used for production of green hydrogen needs to be additional.
Seifollah Ghasemi: That means that any electricity used for the production of green hydrogen needs to be additional. Otherwise, you're just going to use coal to replace that power that you use. So it has to be additional. The second thing is that it has to be hourly, because otherwise, in the middle of the night, when there is no sun, if somebody makes green hydrogen, then they're drawing power from the grid.
Speaker Change: Otherwise, you're just going to use call to replace that.
Yeah.
Speaker Change: Howard that you use so it has to be additional the second thing it has to be oddly because other advisers in the middle of the night when there is no sound if somebody makes.
Green hydrogen than Youre, drawing power from the grid and that has to be replace again from coal fired plants and all of that.
Seifollah Ghasemi: And that has to be replaced, again, from coal-fired plants and all of that. And so additionality, hourly. And then the other thing is that it has to be on the same network.
Speaker Change: So additionality Ali and then the other thing is that it has to be on the same network.
Speaker Change: Fully supportive fully supportive of what the.
Seifollah Ghasemi: We are fully supportive, fully supportive of what the Treasury Department has put out. I'd like to applaud them for sticking to their principles that the IRA was designed not to make companies rich, but it was designed to save the environment, and we should not allow people to get some subsidies if they are not doing something to reduce the pollution into the atmosphere. The IRA is not a handout.
Treasury Department has with that I'd like to applaud them for sticking to the principles that the I R. A buzz designed not to make companies rich, but I, our Airbus design to save the environment and this should not allow people to get some subsidies if they are not doing something to reduce.
Speaker Change: Who's the evolution into the atmosphere.
Speaker Change: The Iras and other handout. The IR E is designed that is while Congress approved it to improve the environment.
Seifollah Ghasemi: The IRA is designed, that is why Congress approved it, to improve the environment, and we should all abide by that. Therefore, we are fully in line with those rules that Treasury has put out, and I really hope that they keep their nerve and execute those principles, because those are the right principles, and we are fully supportive of that. Again, I'd like to stress that we are spending billions of dollars and executing projects right now, even before those rules come out, complying with those rules, because we think they are the right ones. OK. Great. Thank you so much.
Speaker Change: And we should all abide by that therefore, we are fully in line with those.
Speaker Change: Those rules that treasury.
To that and I really hope that they keep their nerve and execute those there.
Speaker Change: Principles because that those are the right principles and we are fully supportive of that and <unk>.
Speaker Change: Again, I'd like to stress that we are spending billions of dollars.
Speaker Change: And executing projects right now.
Speaker Change: Even before those rules come out complying with those rules because they think they are the right rules.
Speaker Change: Okay great.
Speaker Change: Great. Thank you so much.
Duffy Fischer: Thank you. Thank you. We'll go next to Duffy Fischer from Goldman Sachs. Yeah, good morning, guys. Good morning, Duffy, how are you?
Speaker Change: Thank you.
Speaker Change: Thank you we'll go next to Duffy Fischer from Goldman Sachs.
Duffy Fischer: Yeah, Good morning, guys.
Duffy Fischer: Good morning Duffy.
Seifollah Ghasemi: Good, thank you. Question on cash flow, if I could. At least in the first quarter, cash flow was down, or operating cash flow was down double digits, even though earnings were up. Will that reverse itself throughout the year?
Duffy Fischer: Sure. Thank you.
Duffy Fischer: On cash flow if I could.
Duffy Fischer: At least in the first quarter cash flow was down or operating cash flow was down double digits, even though earnings was up.
Duffy Fischer: Well that invert throughout the year would you expect operating cash flow to grow roughly at the same level of EPS. This year.
Duffy Fischer: Would you expect operating cash flow to grow roughly at the same level of EPS this year? Duffy, I'm glad you asked this question, but I'll have Melissa go through the details. But, my friend, our EBITDA is going up. If our EBITDA is going up, the cash coming to the company is going up. But what we are reporting is accounting and the timing of the cash. We report the number because we book it. But when we get the actual cash, it's different because of our equity affiliates. But I think the best person to qualify to answer this question is me, because I don't want to get into accounting either.
Speaker Change: Definitely I am glad you asked this question, but I'll have Melissa go through the details.
Melissa: But my friend, our EBITDA is going up if our EBITDA is going up the cash coming through the company is going up.
But we are reporting is accounting and is the timing of the cash the reported number.
Melissa: Because we book it but when do you get the actual cash it's different because of our equity affiliates, but I think the best person to qualify to answer this because I don't want to get into accounting needed. Melissa could you. Please explain that yeah, absolutely. Thank you.
Melissa Schaefer: Melissa, would you please explain that? Hi, Duffy, how are you? So first of all, Duffy, yes, thank you. So our EBITDA cash aversion and our Distributable and Invested Cash Flow are both.
Melissa: Hi, Debbie how are you.
First of all.
Melissa: Yeah, our EBITDA cash conversion is stable and our distributed distributable and investment cash flow.
Melissa Schaefer: So that's in line with our year of... Additionally, we have The E.S.O. So all very well... We did see an incremental reduction. There are a few items that attribute to this, namely, it's really a timing component related to our large.
Melissa: So that's in line with our year every year.
Melissa: Additionally, we are industry leading.
Melissa: All very strong.
Melissa: Incremental reduction in our operating cash flow to EBITDA. This quarter. There are a few items that contribute to that name.
Melissa: Namely, it's really timing component related to our distributions that Ernie for our large equity affiliates again not with profit.
Melissa Schaefer: Again, not an issue with profit, just timing. And the second one is, and we look to de-risk our helium supply. And then, so we are building some of our helium, which obviously has an offset to operating cash, but obviously will contribute. Okay, Duffy.
Melissa: Profit just timing.
Melissa: The second one is as we do manage and look to Derisk, our helium supply chain.
And then we are building and those are healing in inventory, which obviously has an offset operating cash.
Melissa: But obviously, we will attribute to profit.
Speaker Change: Okay definitely give.
Duffy Fischer: Thank you. You bet. Thank you on that one. And then just on the announcement that the EPA was giving the state of Louisiana the authority to deal with the CO2 sequestration there, roughly, can you kind of explain how your relationship is with the state and how quickly you think that will speed up the process there and when we might get permits for Louisiana? Duffy, I'm glad you asked that question.
Speaker Change: You bet. Thank you on that one and then just.
Speaker Change: On the announcement that the EPA was giving to the state of Louisiana.
Speaker Change: <unk> alright.
Speaker Change: Deal with the C O two sequestration there roughly.
Speaker Change: Can you kind of explain how your relationship is with the state and how quickly you think that will speed up the process, there and when we might get permits for Louisiana.
Speaker Change: Duffy I'm glad you asked that question, we are very excited about that.
Seifollah Ghasemi: We are very excited about that. I think it was the right decision and that will cut about, we think, about a year off the timeline of us getting the permit for the class six well. And we do have an excellent relationship with the state of Louisiana. But that's not the whole story.
Duffy Fischer: I think it was the right decision and that will cut about we think about the year on the timeline of us getting the permit for the classic smell.
Duffy Fischer: And we do have an excellent relationship with the state.
Duffy Fischer: As you know, but it's not that relationship we're going to do the right thing by having their stayed up Louisiana review that the game time, because they say that Louisiana will have less last six wells to deal with than EPA. So it's just a matter of the workload and they did the right thing by distributing the vote.
Seifollah Ghasemi: We are going to do the right thing by having the state of Louisiana review that. We gain time because the state of Louisiana will have fewer plastics bills to deal with than EPA. So it's just a matter of the workload. And they did the right thing by distributing the workload. Therefore, now the state of Louisiana will have fewer applications.
Duffy Fischer: Therefore, now the state of Louisiana will have fewer applications and therefore, they can approve our project.
Seifollah Ghasemi: And therefore, they can approve our project by about a year faster than the federal government would have done so. So that is why it is very helpful and very impactful and gives us a lot more confidence in terms of our ability to get the class experiment if we need it. Great. Thank you. Thank you very much. Thank you. We'll go to Kevin McCarthy from Vertical Research Partners. Thank you and good morning.
Duffy Fischer: By about the years past there than the fed.
Duffy Fischer: Our government would have done that so that is why it is very helpful and very impactful and it gives us a lot more confidence in terms of our ability to get the classic experiment.
If we need it.
Speaker Change: Great. Thank you.
Thank you very much.
Kevin W. McCarthy: We'll go to Kevin Mccarthy from vertical research partners.
Kevin W. McCarthy: Yes, Thank you and good morning, So if you wanted to come back to the helium market dynamics.
Kevin W. McCarthy: Safia, I want to come back to the helium market dynamics. I heard your comments on the demand side, but my question is, have you witnessed any material changes on the supply side of the global market, such as the operating status of Gazprom's Amur project in Russia, or is it strictly a function of demand in terms of the volume shortfall that you cited in the quarter? Well, that is a very good question. Theoretically, and whatever Amour produces in Russia.
Kevin W. McCarthy: I heard your comments on the demand side, but my question is have you witnessed any material changes on the supply side of the global market.
Kevin W. McCarthy: Such is the operating status of Gazproms are more project in Russia or is it strictly a function of demand in terms of.
Kevin W. McCarthy: The volume shortfall that you cited in the quarter.
Speaker Change: Well that is a very good question theoretically.
Speaker Change: [laughter] whatever are more producers in Russia.
Seifollah Ghasemi: Theoretically, there are global sanctions on that, that that is not supposed to be getting into the market. Is it getting into the market illegally and therefore increasing the supply of helium and therefore that is why people are buying from other people? It could be the case.
Speaker Change: Fewer ethically.
Speaker Change: As global sanctions on that.
Speaker Change: That is not supposed to be getting into the market.
Speaker Change: Is it getting into the market illegally and therefore, increasing the supply of <unk>.
Speaker Change: And therefore that is why people are buying from other people it could be the case I am not sure.
Seifollah Ghasemi: I am not, True, but the detailed dynamics of that are, and I don't want to be interpreting sanctions laws and all of that, but what you are suggesting is a possibility. We are looking into that. We haven't seen any significant factor from that yet, at least we haven't seen it yet, but it might be the case.
Speaker Change: True, but the detailed dynamics on data and I don't want to be interpreting sanctions laws and all of that but what you are suggesting is a possibility we are looking into that.
Speaker Change: Haven't seen any significant <unk>.
Speaker Change: Actor from that yet at least we don't see it yet, but it might be the case.
Kevin W. McCarthy: Okay, that's helpful. And secondly, I had a few sort of housekeeping questions, you know, possibly for Melissa. I think you mentioned the valuation of the Argentine peso. And we talked about the cost overrun from the sale of equipment project. Can you quantify the impact of some of those issues on the quarter? I don't think we want to quantify the details of every one of them, but the Argentine currency is easy, I'll answer that to make life easy for Melissa. That effect was about $10 million on our bottom line for the Argentine currency.
Speaker Change #100: Okay. That's helpful. And then secondly, I had a few.
Speaker Change #100: Housekeeping questions.
Speaker Change #100: Possibly for Melissa I think you mentioned.
Speaker Change #100: Devaluation of the Argentine peso and we talked about the cost overrun from the sale of equipment project can you quantify the impact of of some of those.
Speaker Change #100: Issues in the quarter.
Speaker Change #100: I I don't think we want to quantify the details of every one of them, but they are there Argentine currencies easy I'll answer that make life easy for Melissa is that that effect. It was about $10 million on our bottom line.
For the Argentinian curious about <unk>.
Seifollah Ghasemi: OK. And the SOE, no comment on that one. Now the rest of it, we don't want to break down how much helium was, how much the sale of equipment, and how much the slowdown in China was because then we would be giving away too much competitive information, if you don't mind. I see. Okay. Thank you very much.
Speaker Change #100: Okay.
Speaker Change #100: And the.
Speaker Change #101: So we have no comment on that one.
Speaker Change #101: No the rest of it we don't want to break down how much of a CD on how much was the sale.
Speaker Change #101: Sale of equipment and how much was the slowdown in China, because then we'd be giving away too much competitive information if you don't mind.
Speaker Change #102: Okay. Thank you very much.
Patrick Fischer: Thank you. Thank you. We'll go next to Patrick Cunningham from Citi. Hi, good morning.
Speaker Change #103: Thank you.
Speaker Change #103: Thank you we'll go next to Patrick Cunningham from Citi.
Patrick Fischer: Hi, good morning.
Seifollah Ghasemi: Could you maybe comment on the direction of prices in Europe and how sustainable these margins are going forward? Well, quite frankly, we did that is one of the areas where we did better than we expected. Our results in Europe are excellent.
Could you maybe comment on the.
Patrick Fischer: Direction of price in Europe, how sustainable these margins are going forward.
Patrick Fischer: But quite frankly, we did a that is one of the areas, where we did better than we expected our results in Europe or.
Patrick Fischer: Excellent.
Seifollah Ghasemi: The margins are up 1000 basis points, and that is because people have done a good job hanging on to the price while energy prices are going down. How this will develop in the future obviously depends on what happens to energy prices and so on. But I'm very proud of our people in terms of their performance.
Patrick Fischer: Margins are up 1000 basis points and that is because people have done a good job hanging onto the price a lot of energy prices are going down.
Patrick Fischer: How this will develop in the future obviously depends on what happens to energy prices, that's wrong, but I'm very proud of our people in terms of their performance and in terms of that.
Seifollah Ghasemi: And in terms of making sure that they maintain the pricing, we have been successful. And quite honestly, and as Dr. Serhan was saying, our European business did very well during the quarter. Great, and then maybe just a related follow-up on the Uzbekistan project, you know, how much volume was up for Uzbekistan? And what sort of contribution should we have throughout the year? I know you talked previously about about 35 cents per share. How is Uzbekistan performing relative to your expectations?
Patrick Fischer: Making sure that they maintain they maintained their pricing and we have been successful and quite honestly and as Victor said, Ron was saying our European.
Patrick Fischer: The business did very well.
Patrick Fischer: During the quarter.
Patrick Fischer: Yeah.
Speaker Change #105: Great and then maybe just a related follow up on Uzbekistan project, you know how much volume was up on Uzbekistan, and what sort of contribution should be have throughout the year. I know previously you talked about about 35 cents per share how is <unk> performing relative to your expectations.
Seifollah Ghasemi: Dr. Serhan, would you like to answer that? Uh, I just want to start by saying this project really has been a great fit for both Air Products and Use Pakistan. It leverages our core competencies and addresses the country's desire for energy independence. Socio-Economic Development. This project includes the world's largest ATRs, autothermal reformers, and just to remind everybody, to produce blue hydrogen, you need to use autothermal reformers, and those are the largest in the world, or you need to use PAX units, which are partial oxidation, which is the technology we bought from GE.
Speaker Change #106: So how would you like to answer that yes.
Speaker Change #107: Just want to start by saying this project really has been a great fit for both the Arab products unused Pakistan.
Speaker Change #107: Leverages, our core competencies and address the country desire for energy independence.
Speaker Change #107: And social economic development.
Speaker Change #107: This project includes the world's largest atr's or to sell them, a reformer and just to remind everybody to produce at blue hydrogen you need to use or to sell them or at least 12 months.
Most of the largest in the world or you would need to use box units, which are the partial oxidation, which is the technology, we bought from GE gasification.
Seifollah Ghasemi: We are excited about the operational and technological synergies of operating these large ATRs. The asset was brought on stream on October 23. We expect the asset to contribute around $0.35 for... OK. Great. Thank you. Thank you. Thank you. I'll go next to Mike.
Speaker Change #107: We are excited about the operational and technological shortages by operating these large 80 hours a day I sit was brought on stream in October 23.
Speaker Change #107: We expect that to contribute around 35% for the full year.
Okay.
Speaker Change #108: Thank you.
Speaker Change #109: Thank you.
Speaker Change #109: Thank you.
Michael Sison: This would be the last question. OK? OK. We'll go to Mike Sison from Wells Fargo. Oh, sorry, give me a minute.
Speaker Change #110: It would be the last question okay.
Speaker Change #110: Okay.
Speaker Change #110: Well go to Mike Sison from Wells Fargo.
Michael Sison: Oh, sorry.
Michael Sison: I made a mistake about the timing we can answer some more questions if necessary if people have questions go ahead.
Operator: I made a mistake about the timing. We can answer some more questions. If people have questions, go ahead. Hey, good morning, everybody.
Michael Sison: Hey, good morning, everybody.
Michael Sison: I guess my first question on fiscal 24 EPS growth is, the projects that have recently come on stream, the four that you've noted in the slide, are those contributing what you thought they would contribute in 2024? And I guess, you know, sort of the follow-up is that the delta between the 13% growth and the six to nine percent growth now has nothing to do with the projects, more of the other stuff that you talked about in terms of headwinds. Well, the thing is that I'd like to give you a general answer in the sense that if you're up year on year, and in the meantime, China is going down. Helium volumes are lower,
Michael Sison: I guess my first question on fiscal 'twenty for EPS growth.
Michael Sison: Yes.
Michael Sison: Projects that recently come on stream the four that you've noted in the slide are those contributing what you thought they would contribute in 2024 and I guess as far as the follow up is that the.
Michael Sison: The delta between the 13% growth.
Michael Sison: Two the six 9% growth now it has nothing to do with the projects more of the other stuff that you.
Michael Sison: <unk> talked about in terms of headwinds.
Speaker Change #112: Well the thing is that yeah, I just like to give you a general answer in the sense that if you are up year on year.
Speaker Change #112: And in the meantime.
Speaker Change #112: China is going down.
Speaker Change #112: Helium volumes are lower.
Seifollah Ghasemi: And we have had these headwinds. Then the only reason that it's going up is because some of the other projects are contributing, of course, so that today I would like to leave it. Okay, got it, and I get it, and it's going up. Therefore, the other products are contributing. Yes.
Speaker Change #112: We have had these headwinds.
Speaker Change #112: Then the only reason that it is going up is because some of the other projects are contribute of course, so that that's the way I would like to leave it with you.
Speaker Change #114: Okay got it.
Speaker Change #113: I see.
Speaker Change #113: It's going up therefore, the other properties are contributing yes.
Michael Sison: Yeah, that's great. And then, you know, beyond 2024, when you think about 25, 26, 27, more of a longer-term sort of view, how do you think the growth algorithm changes, or maybe doesn't change, as we look out of those years, in terms of EPS growth? I think Air Products will deliver on average an EPS growth of the 10% that we have delivered before. That's our goal.
Speaker Change #115: Yeah, that's great and then.
Speaker Change #115: Beyond <unk>.
Speaker Change #115: 2024, when you think about 'twenty five 'twenty six 'twenty seven.
Speaker Change #115: More of a longer term sort of view.
Speaker Change #115: How do you think the growth algorithm change.
Speaker Change #115: Changes or maybe it doesn't change as you look out over those years.
Speaker Change #115: The EPS growth.
Speaker Change #115: I think of air products will deliver on the average and EPS growth of 10% that we have delivered before.
Speaker Change #116: That's our goal.
Speaker Change #116: And that one year to be might be 9%, one year, you're going to be 11%, but overall, we are going to continue on that trend and the problem is that 10 years ago, we have delivered and I fully expect that we will continue to deliver that.
Seifollah Ghasemi: And you know, one year we might be 9%, one year we might be 11%, but overall, we are going to continue on that trend. And we promised that 10 years ago, and we have delivered. And I fully expect that we will continue to deliver. Right, thank you. Thank you, sir. Thank you. We'll go to Lawrence Alexander from Jeffreys.
Speaker Change #117: Great. Thank you.
Speaker Change #118: Thank you Sir.
Speaker Change #118: Thank you, we'll go to Laurence Alexander from Jefferies.
Don Carson: Hi, this is Dan Rizzo on for Lawrence. Thank you for getting me in. I just want to make sure that of the projects under execution, that's listed on page 19. The next one that's going to come online is the one in Alberta, Canada, correct? Yes, Alberta, Canada, is the next one which is going to come online.
Speaker Change #119: Hi, This is Dan Rizzo on for Laurence. Thank you for getting me in I, just want to make sure that all the projects under execution.
On page 19, the next one that's going to come online as the one in Alberta, Canada correct.
Speaker Change #120: Yes, our best that Canada is the next one which is going to come on stream and as Dr. <unk> said, we expect that to be in fiscal year 2025.
Seifollah Ghasemi: And as Dr. Serhan said, we expect that to be in fiscal year 2022. But should the other projects come on right behind that, or will there be, I don't know, year-like delays or, I'm trying to think of the cadence as these are coming online? Well, after that, we will have in 26, by the end of fiscal year 26, we will have, by the end of calendar 26, we will have our green hydrogen project in Saudi Arabia. The year after that, we will have our blue hydrogen project in Louisiana. And the year after that, we will hopefully have other projects that we will announce. Okay, thank you very much. Thank you. We'll go next, Steve Byrne. Favre from BNP said yes, good morning, and thanks for squeezing me in.
Speaker Change #121: Are there and this will be my second question is should the other projects come on right behind that or will there be I don't know year like delays or I'm, just trying to think of the cadence of.
Speaker Change #121: These are coming online.
Speaker Change #121: But after that.
Speaker Change #121: We'll have a.
Speaker Change #121: In 2006 by the end of fiscal year 2006, we would have that.
Speaker Change #121: By the end of calendar 'twenty six we will have our green hydrogen project in Saudi Arabia. The year. After that we will have our blue hydrogen project in Louisiana and the year. After that we will have hopefully other projects that visit an ounce.
Speaker Change #121: Okay.
Speaker Change #122: Thank you very much thank you.
Speaker Change #122: Yeah.
Speaker Change #123: We will go on any other questions.
Gray: Gray from BMT.
Oh, yes, good morning, and thanks for squeezing me in I'd like to.
Don Carson: I'd like to go back to the SAF project, actually. I think you just mentioned that the startup would be in 2027. In May last year, you had it in, I guess, for a startup at 25, and in August, it was still part of the group of projects that should be up and running by 2026. So I was wondering if you could talk about what the specific reasons were for this more than one year delay. Is it on the customer side, or is it execution on your side? Thank you. Well, it is related to the fact that we are building this plant in California, and you know, in California, it usually takes a long time to get permits. So it depends, it is dependent on the timing of the permits for construction of that facility. Once we have a final, final ruling on the permit, then we will be able to give you a definite date about when that plant is going to come on. And could you cite for us the potential cost of a run on top of the $2.5 billion that was initially slated? Are we talking about a material difference?
Gray: If you go back to D. C project actually I think you just mentioned that this concept would be in 'twenty 'twenty seven.
Gray: Last year, you had you can I.
Gray: I guess I always concept in 'twenty five and you know just it was steel parts of the group of projects that should be up and running by 2026. So I was wondering if you could talk about I guess one other specific reasons for this are more than one year delay.
Gray: The customer side that we should take vacation or neuroscience. Thank you.
Speaker Change #125: Well it is related to the fact that we are building this plant in California, and you know in California.
Speaker Change #125: Usually it takes a long time to get permits.
Speaker Change #126: It depends it is dependent on the timing of the payments for construction for that facility.
Speaker Change #126: Once we have the final final ruling on the pyramid.
Speaker Change #126: To be able to give you a definite dates about when that plant is going to come on stream.
Speaker Change #126: And could you size for us the potential cost of the RIN on top of the $2 5 billion that was initially estimated and are we talking a balance in the channel difference.
Seifollah Ghasemi: I'm, I'm not sure I understood the question. No, I think Lawrence on that one, the capital. We own the return on the capital. Let's go on. I haven't just played anything.
Speaker Change #126: Yeah.
Speaker Change #127: I'm not sure I understood the question.
Speaker Change #128: No I think Laurence on that one the capital we earned a return on the capital of the project.
Speaker Change #129: I know you don't anticipate any capital updates there.
Speaker Change #130: Return on the project is fixed they are going to get there.
Seifollah Ghasemi: The return on the project is fixed. We are going to get a return on the capital that we spend, no matter what the capital. Okay, thank you. Thank you. And we'll take our last questions from Sebastian Bray from Berenberg.
Speaker Change #130: 10.
Speaker Change #130: On the capital that would be a spend no matter what the capital is.
Speaker Change #131: Okay. Thank you.
Speaker Change #132: Thank you. Thank you.
Speaker Change #132: And we'll take our last question from Sebastian Bray from Bamberg.
Sebastian Bray: Hello, good morning everybody, and thank you for taking my questions. My first one is on merchant pricing as it stands today. Is this stable in Europe or in the US? Has it started to decline, or has it started to go up? The answer seems to be stable, but I wanted to double-check. My second question is on guidance.
Hello, Good morning, everybody and thank you for taking my questions. My first one is unmatched in pricing as it stands today.
Sebastian Bray: This stable in Europe, and the U S has it started to decline or has it started to go off the answer seems to be stable, but I wanted to just double check my second one is on guidance.
Seifollah Ghasemi: Are we just assuming when setting the EPS growth rate guided for 24 that the dollar rates as they stand today hold for the rest of the year? My third one is a more philosophical question on pricing. Is the desire to wait longer for the Clean Ammonia and Clean Hydrogen Project off-take agreements a reaction to try and hedge out the risk that IRA subsidies may be changed from 25, i.e., if that industry shakes out and it turns out the projects need higher clean hydrogen pricing to be economical with fewer subsidies available, is the APD approach to say, well, we'll wait for the industry to shake out and see what happens?
Sebastian Bray: Just assuming when setting the EPS growth rate guidance for 'twenty for one dollar rates as they stand today hold for the rest of the year.
Sebastian Bray: My first one is a more philosophical question on pricing.
Sebastian Bray: His fee desire to wait longer for.
Sebastian Bray: Clean ammonia and clean hydrogen project offtake agreements.
Sebastian Bray: Our reaction to try and hedge out the risk with IRI subsidies maybe changed from 25.
Sebastian Bray: E.
Sebastian Bray: If our industry shakes house and it turns out the projects need clean how high a clean hydrogen pricing to be economics with fewer subsidies available.
Speaker Change #134: <unk> approach to say well wait for the industry to shake out and see what comes thank you.
Seifollah Ghasemi: Thank you. Well, you're asking a very, very good question. And I would like to tell you that Beep is the first mover in this project. We are investing a significant amount of money in making the first move. Obviously, my job is to try to maximize return for the investor, and if we were the first mover, And we took the risk of, as they say, building these facilities before we had contracts. We should get rewarded for that and not just have projects which have the standard returns but be rewarded with a higher return. That's one thing.
Speaker Change #135: Well, you're asking a very very good question and I would like to tell you that.
Speaker Change #134: B.
Speaker Change #136: The first mover in these projects.
Speaker Change #136: They are investing significant amount of money being the first mover.
Speaker Change #137: We obviously my job is try to maximize return for the investors.
Speaker Change #137: And if we were the first mover.
Speaker Change #137: And we took the risk as they say building these facilities before we had contracts.
Speaker Change #137: Should get rewarded by that and not just have projects, which have their standard deterrent, but be rewarded with a higher return. That's one thing and then the second thing is that we genuinely believe that where we are in these projects, we will have a product which will be insignificant.
Seifollah Ghasemi: And then the second thing is that we genuinely believe that where we are in these projects, we will have a product that will be in significant demand, as we get closer to people trying to comply with the rules that are already in place, in Europe, especially. By 2028, a lot of industries will have to use the products that we make, and we don't see that many people making the product. So, in that case, we are not in a hurry to give it away.
Speaker Change #137: Demand.
Speaker Change #137: As we get closer to people trying to comply with the rules that are already in place.
Speaker Change #137: In Europe, especially.
Speaker Change #137: By 2020, a lot of the industries have to use the products that we make.
Speaker Change #137: And we don't see that many people, making the product.
Speaker Change #137: So in that case, we are not in a hurry to give it away.
Seifollah Ghasemi: Obviously, our job is to maximize profit for the company, and get the best that we can. And that is the philosophy that we are following. It is not because of concerns about the other things that you mentioned. No, I think that the subsidies and so on are going to be enacted.
Speaker Change #137: Obviously, our job is to maximize profit for there.
For the company get the best that we can and that is the philosophy that we are following it is not because of concerns about the other things that you mentioned.
Speaker Change #137: I think that there are subsidies and Sean are going to get enacted everyday that goes by you'll see the government's taking action recently it was Japan before it has been Europe is well established U S with the IRI. So.
Seifollah Ghasemi: Every day that goes by, you see governments taking action. Recently, it was Japan. Before that, it was Europe. It's well-established. U.S. with the IRA. So, Events, as you go forward every day, point in the direction that, hopefully, our strategy is the right strategy, and we want to take maximum advantage. Shuli Seifi, there has been a report from the International Energy Agency that indicates that out of all of the projects announced for green hydrogen by 2030 to come on stream, only 7% will eventually come on stream.
Speaker Change #137: Events as you go forward everyday points in the direction.
Hopefully our strategy is the right strategy and we want to take maximum advantage of that.
Speaker Change #137: That's truly safety, there's been another board from the International Energy Agency.
Speaker Change #137: <unk> indicated that out of all of the projects announced for green hydrogen by 2030 to come on stream only 7%. We left you eventually come on stream by 27.
Seifollah Ghasemi: Okay, sorry we gave you a long answer, but I hope we addressed your issue. No, it's appreciated, Sethi. Thank you. And the merchant pricing and the question on FX assumptions for the rest of the year on a more tactical short-term basis? Yeah, well, that's, again, a very good question. We make our estimate. Melissa, why don't you answer that? Yeah, so let me give you an answer about the merchants. So merchants... had a stronger presence, which was partially offset by some small.
Speaker Change #138: Okay, sorry, if we gave you a long answer but I hope we addressed your issue.
Speaker Change #138: No.
Speaker Change #139: Perfect. Thank you and the merchant pricing and the question on FX assumption for the rest of the year.
Speaker Change #139: Tactical short term basis.
Speaker Change #139: Yeah, well that's again a very good question, we make our estimate of.
Speaker Change #139: Of other insurance.
Speaker Change #140: Let me give you an answer on the merchant so Bruce.
Speaker Change #140: Slightly we had stronger merchant merchant pricing in the Americas, which was partially offset by some small decreases.
Melissa Schaefer: However, I do want to mention that in Europe, our conversion, Transcription by Transcribe. Microsoft Office Word Transcription Title Microsoft Office Word Document MSWordDoc at a fast rate. And with respect to FX, when we give you an estimate, we give you an estimate based on the exchange rates as of today. So that is where we are not assuming any significant change in the exchange rate.
Speaker Change #140: However, I do want to mention that in euro our conversion margin.
Speaker Change #140: Sean.
Speaker Change #140: <unk> power costs.
Speaker Change #140: Decreased at a faster rate.
Speaker Change #140: Yeah.
Sean Major: Alright, and margin strong and healthy.
Sean Major: And with respect to FX when we give you an estimate we gave you an estimate based on the exchange rates as of today.
Sean Major: So that is where we are not assuming any significant change in the exchange rate.
Melissa Schaefer: That's very helpful. Thank you, Stephanie and Elizabeth, for your time and questions. Thank you very much. I really appreciate that operator. Since there are no other questions, I would like to thank everybody for joining our call today. We again appreciate your interest in Air Products, and we look forward to discussing our results with you in three months. All the very best and thank you for listening. And that concludes today's conference. Thank you for your participation, and you may now disconnect, www.microsoft.com.au, or use the contact information below to contact us about any other issues you may have.
Sean Major: Okay.
Speaker Change #142: That's very helpful. Thank you for the time.
Speaker Change #143: Any questions.
Speaker Change #144: Thank you very much I really appreciate that operate there.
Since there are no other questions.
Speaker Change #145: I would like to tank everybody for joining our call today.
Speaker Change #146: Again I appreciate your interest in air products.
Speaker Change #147: And we look forward to discussing our results with you in three months.
Speaker Change #148: All the very best and thank you for listening.
And that does conclude today's conference. Thank you for your participation and you may now disconnect.
Speaker Change #148:
Speaker Change #148: Okay.
Speaker Change #148: Yes.
Speaker Change #148: [music].