Q2 2024 Air Products and Chemicals Inc Earnings Call
Good morning, and welcome to Air Products' second quarter earnings release Conference call. Today's call is being recorded at the request of Air products. Please note that this presentation and the comments made on behalf of air products are subject to copyright by air products and all rights are reserved.
Today's call is Mr. Sid and then just wire. Please go ahead.
Thank you Katie good morning, everyone. Welcome to air products is second quarter 'twenty 'twenty four earnings results teleconference.
This is Sid and manage your issuer Vice president of Investor Relations.
I am pleased to be joined today by C. If he gets Sami our chairman President and CEO, Dr. Samir, sorry, Hahn, our chief operating officer.
Melissa Schafer, our Chief Financial Officer.
And Sean major our executive Vice President General Counsel and Secretary.
After our comments, we will be pleased to take your questions.
Our earnings release and the slides for this call are available on our website at air products Dotcom.
Today's discussion contains forward looking statements, including those about earnings and capital expenditure guidance.
Business outlook and investment opportunities.
Please refer to the cautionary note regarding forward looking statements that is provided in our earnings release and on slide number two.
Additionally throughout today's discussion, we will refer to various financial measures including earnings per share.
Operating income.
Operating margin.
EBITDAR.
EBITDA margin the effective tax rate and our oce bolt on a total company and segment basis.
Unless we specifically state otherwise statements regarding these measures are referring to our adjusted non-GAAP financial measures.
Reconciliations of these measures the most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section.
Now with that I'm pleased to turn the call over to safety.
Thank you Richard and good day to everyone.
Thank you for taking time from your busy schedule to be on our call today.
As you know I always start with safety.
She is our top priority at air products.
Slide number three.
Includes our employee lost time injury rate.
And record the bedroom during the day.
The first half of fiscal year 'twenty 'twenty four.
Both of these rates that are at the lowest level since 2014.
And the best in the industry.
This is great progress.
Our ultimate goal will always be zero accidents and zero incidents.
Slide number four our management philosophy.
We believe strongly in these principles and they will continue to guide us as we move air products forward like do you have done in the past 10 years now.
Now please turn to slide number five.
Our second quarter adjusted earnings per share of 285 exceeded the upper end of our previous guidance.
And.
Improved 4%.
Third to last year on a strong results in Americas and Europe.
We continue to effectively manage.
Our current business.
While simultaneously executing our growth projects.
We are focused on reducing costs.
And improving pricing in this inflationary environment.
Our industrial gases business and board the scan low carbon hydrogen projects are.
Our driving sustainability.
Enabling customers to decarbonize and generating clean that future for our board.
Now please turn to slide number six.
Review of our third quarter and full year guidance.
For the third quarter of fiscal year 2024.
Our adjusted earnings per share guidance is $3 to $3.05.
Our earnings are generally higher in the second half.
Our fiscal year.
We are maintaining our full year guidance of 12 to 20.
12 50 per share.
As we continue tomorrow.
To monitor economic.
And certainly including China's economy.
And activities in the electronic industry.
Throughout Asia.
We continue to expect our capex, you'll be in the range of five to <unk>.
In fiscal year 2024.
Now please turn to slide number seven.
Our adjusted earnings per share.
As the improved an average of more than 10% annually since 2014.
A trend we are committed to continue.
Now please turn to slide number eight.
They take a balanced approach to determine our dividend.
Various factors, including yield payout.
And peer benchmarks.
While investing for growth and maintaining.
Oh, a eight to credit rating.
In January.
Again increase our dividend to $1 77.
Per share per quarter.
Extending.
A record.
A 42.
Years of dividend increase.
We expect.
We returned approximately $1 $6 billion to our shareholders.
He was evidenced in 2024.
Slide number nine shows our EBITDA margin trends.
Always my favorite at the site.
Our margins have again cried about 40%.
Leading the industry.
Reflecting our commitment to creating shareholder value.
At this point I would like to remind our shareholders.
That's almost 10 years ago.
On my first call as chairman and CEO of Air products.
I promise you that deal would make air products.
The safest and most profitable industrial gas company and the board.
And we have delivered on that.
On the same call 10 years ago.
I'll show promise people would increase our earnings per share.
The average like 10% every year.
And as you can see on the slide seven.
We have delivered on that too for the last 10 years.
So today I want to set the goal for the next 10 years.
Air products is.
Continue to be the safest most.
Diverse and most profitable industrial gas company in the world.
And as we have done before.
Delivered earnings per share.
Growth of at least 10% per year on average.
For the next 10 years.
We have done it before.
And we will do it again.
I have total confidence.
And I want to stress this I have total confidence in the ability of the.
Talent.
Dedicated.
Motivated and committed people.
Air products.
Execute our bulk and forward looking strategy.
And deliver significant value to our shareholders.
Speaker Change: I want to tank every one of them.
Speaker Change: For the hard work.
Commitment and dedication.
I'm very proud to be part of this team.
Now I would like to turn the call over to Melissa.
Alright.
Chief Financial Officer.
My remarks.
Remarks about the second quarter Elisa.
Thank you Stacey now please turn to slide 10 for a review of our second quarter results.
Paired to last year onsite activities worry about that.
And by higher demand for hydrogen and contributions from new assets. The volume was down 2%, primarily due to lower demand for merchant products.
Speaker Change: Price contributed 1%.
The combined impact of pricing and lower power costs across most regions, resulting in strong contribution margin.
Speaker Change: The declining natural gas prices in Europe, and North America.
All good and lower energy cost pass through.
Has no impact on profit that contributed to higher margin <unk>.
EBITDA improved 4% as higher contribution margin and lower costs more than offset lower.
Elliot income.
EBITDA margin exceeded 40%.
Lower energy cost Pascal contributing about half of the nearly 500 basis point improvement.
Our S E of 11% was relatively flat.
<unk> forecast our R. O C. He would have been about 13%.
Sequentially results improved driven primarily by favorable pricing and lower costs.
Despite the seasonal slowdown due to the lunar new year in Asia and planned maintenance outages.
Now please turn to slide 11 for a discussion of our earnings per share.
Our second quarter GAAP earnings per share was $2 57.
This included a 20 cent charge our productivity actions.
Alright, just at earnings per share was $2 85 up 11% or 4% compared to last year.
Primarily due to favorable pricing and cost.
Partially offset by unfavorable volume and equity affiliate income.
Overall volume was down seven cents on lower merchant demand and planned maintenance outages.
Alright.
The variable costs contributed 16 cents this quarter driven by both pricing actions and lower power costs.
Other costs were 12 cents favorable.
Demonstrating the team's commitment to managing costs, while we continue to support our growth strategy.
Currency impact was negative three <unk>, mainly due to a weaker Chinese RMB.
Equity affiliate income was eight unfavorable driven by lower contributions from affiliates in Europe, and the middle East, partially offset by higher income in America.
We successfully issued $2 $5 billion of Green bonds in February to help fund our growth projects.
This additional debt contribute to higher interest expense of seven cents.
The remaining items, including favorable noncontrolling interests.
Right and not operating expense together had a positive impact.
To Echo safety statement I would like to express my appreciation to the entire air products team for their commitment to our company.
Now to begin the review of our business segment results I'll turn the call to Dr history.
Thank you Melissa.
Please turn to slide 12 for a review of our Americas segment results.
Compared to last year underlying sales were positive.
With price and volume to gather up 4%.
Merchant pricing was 6% higher which corresponded to a 3% overall price improvement for the region.
Volumes grew 1% I, just strong demand for hydrogen more than offset weaker merchant volume.
EBITDA was up 15% driven by higher price volume and equity affiliate income.
Of the 1000 basis point improvement to the EBITDA margin roughly half was attributable to lower energy cost pass through.
Sequentially.
EBITDA was 5% higher mainly due to higher price and equity affiliate income.
Now please turn to slide 13 for a review of our Asia segment results.
Compared to last year volumes were roughly flat.
Higher onsite volumes, including a new assets, what offset by lower demand for merchant products.
While the price to remain stable.
I checked we mentioned, we continue to see challenging economic conditions in China.
But we're beginning to see some potential improvement in dielectrics market.
Currencies went up.
We had a 4% unfavorable primarily attributable to the weak of a Chinese RMB.
Speaker Change: EBITDA and EBITDA margin were unfavorable but I'm, a little driven by business mix.
Sequentially.
Volume was 2% lower due to the lunar new year slowdown.
However, EBITDA was flat.
Lower cost and higher equity affiliate income.
Please turn to slide 14 for a review of our Europe segment results.
Sales declined 11% compared to last year.
With lower energy cost pass through and volume shortfall each contributing about half of the total.
We kind of mesh and demand and the planned maintenance outage that drove lower volume.
Partially offset by contribution from our you expect to start a project.
Motion to pricing was stable.
And combined with declining power cost drove improved contribution margin.
EBITA was up 5% is the improved contribution margin on lower costs.
Speaker Change: More than compensated for lower equity affiliate income.
EBITDA margin improved over 600 basis points.
Approximately half of this was due to the impact of lower energy cost pass through.
Sequentially.
That's also what is stable.
The variable contribution margin.
And costs offset the planned maintenance volume impact and lower equity affiliate income.
Now please turn to slide 15 for a review of our Middle East and India segments results.
Despite lower sales volume operating income improved compared to last year due to lower costs.
Equity affiliate income from the joint venture was lower due to higher interest and other operating costs.
Please now turn to slide 16 for our corporate and other segment results.
Yeah.
This segment includes our sale of equipment businesses as well as our centrally managed functions and corporate costs.
Sales were down primarily due to lower non LNG sale of equipment activities. However.
Lower cost and contribution from LNG resulted in a stable EBITDA.
Our activities related to the LNG equipment and technology business are robust and we expect our LNG related projects to improve the results of this segment moving forward.
Speaker Change: Before I turn the call back to safety I also would like to say thanks to our teams around the world.
We're continuing to improve our results.
Safety: Now I would like to turn the call back to safety to provide his closing remarks Jamie.
Thank you Dr. Kerr Chevron.
Now please turn to slide number 17.
Air products has a great business model and continues to operate from a position of financial strength.
While we execute our bold growth strategy.
In this challenging and continuously changing macro economic and geopolitical environment.
Our organization must remain flexible and agile.
Safety: On a daily basis, our employees are committed to taking actions that improve our safety performance.
Simplifies work.
And reduces cost.
So that together we.
It can deliver productivity to the bottom line and continue to earn the right to grow as we pursue our strategy.
We appreciate.
The dedicated service.
Of all the people.
Who are contributing to add product success.
And.
The people in our leadership, who continue a motivating and developing our people.
As I always say.
Our real competitive advantage.
Is the degree of motivation and commitment.
The people in the company.
I am honored every day.
Be working alongside this team as the focus on delivering near term results, while executing our long term growth strategy.
At this point.
We obviously will be delighted.
To answer your questions.
Thank you.
<unk>.
Thank you.
If you would like to ask a question you may signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again star one for questions well go first to John Mcnulty with BMO capital markets.
Yeah. Good morning, Stacy Thanks for thanks for taking my question.
So I think the first one is just on how you're thinking about the cadence of the earnings as it progresses through the year, obviously <unk> came in pretty solidly <unk>, maybe a little bit below what we and the street were looking for which kind of makes for a really steep ramp in the fourth quarter. I guess can you help us to think about.
What drives that ramp whether it's some of the some of the projects or the corporate line coming off I guess can you help us to think about the cadence for the year.
Hey, good morning, John excellent question.
I would like to answer it in the following first of all.
There is a question about the guidance for the quarter.
The guidance for the quarter is a little bit lower than what people expect.
That is because we have some major turnarounds.
That'd be have to do on our plants in Europe and in the United States that is driving our maintenance costs for the quarter and that is why do you have given the lower guidance than budget.
<unk>.
I'd like to do so that is there for the third quarter ASP.
As far as we are committed to that years because in the fourth quarter.
Though it looks like a hockey stick.
We expect to bring significant number of smaller plants on stream.
We brought in about 20 of them in the last in the first half and we expect to have a number of clients coming on the stream that did contribute secondly, yes.
It's taken us significantly productivity actions that should result in better.
The numbers for the fourth quarter.
In addition, as you know our business is seasonal and the fourth quarter is just about every year.
Safety: Strongest quarter.
And the porting is that they are seeing a very strong performance by our LNG business and there are a lot of that ramp up in the fourth quarter.
So those are there.
Fundamental reasons, John I hope that answers your question.
Yes, no. That's hugely helpful. Yes, definitely helps our bridge at a reasonable amount.
Yes, maybe to that as the follow up on my second question.
You had alluded to in some of the prepared remarks cost reduction actions and things that we're starting to help on the on the margin side and then actually just in your last answer you gave maybe into.
You intimated that there is there is some help there I guess can you help us to think about some of the actions that you're taking and if it's any specific division or how we should be thinking about that.
Safety: If we look at the company across the board.
But through the activity the mean that'd be trying to do things there.
In a more.
Action and more simplified way, which means that you don't have as many costs.
That that is the action that is.
Normal for productivity.
It means that you are trying to do more with less with the same number of people you have or with less people.
So those are the specific actions we have taken.
Got it thanks very much for the color.
Thank you.
Thank you well go next to Jeff Zucker Caius with J P. Morgan.
Thanks very much.
Hi.
In the Louisiana project he'll bring on $3 5 million tons of ammonia.
Some consultants think that.
Japanese market.
It's only 3 million tonnes of ammonia by 2030.
Safety:
Your competitors have begun to have memoranda of understanding and procuring volume.
When your plant comes on in 2027 is there are three and a half million tons of demand for.
Blue ammonia and where might it come from.
Hey, Jeff Good morning, very good question as usual.
Jeff first of all.
The number that you are saying three and a half million tons of ammonia.
That assumes that leave you take all of the hydrogen.
That deep produced at that plant all of the deep blue hydrogen that we produce will be turned into ammonia.
That is not necessarily the case as you know if you have a huge pipeline that tag.
Goes all the way across the Gulf coast of the United States.
That is significant demand.
All blue hydrogen, but Liam.
Blue hydrogen not faked blue eyes.
And therefore, we expect.
That significant amount of the hydrogen we produce will be use this hydrogen to our pipeline to serve the customers that you have because they would be in need of that show the breakdown of the ammonia and hydrogen is not finalized yet.
Safety: So that is the maximum amount of ammonia that we will be making.
Safety: But he might make less than that depending on.
Safety: What do you do with the outage.
Safety: So for the quarter.
Safety: That you have is okay, even at $2 8 million whatever you made where is it going to be Jewish I.
Speaker Change: I understand that people are understood.
Speaker Change: I understand announcing letters of intent and all of that but that is people who don't have the product selling.
Speaker Change: People, who don't have a use for it.
Speaker Change: That is we are making rehab.
Speaker Change: No.
Speaker Change: Pneumonia related blue ammonia and 95% sure you would take it.
Speaker Change: Have a place to see questionnaire that.
Speaker Change: Therefore, our project is.
Speaker Change: Not having an imaginary or fake projects yes.
Speaker Change: And therefore, we believe strongly that there will be demand for the product.
Speaker Change: That it is going to go we have always said that it is going to go mainly for decarbonization of the power plants in Japan.
Speaker Change: And in Korea.
Speaker Change: Another significant demand.
Speaker Change: That is being developed.
Speaker Change: And I think that our.
Speaker Change: Significant signs that that is yes.
Speaker Change: Is.
Speaker Change: Ammonia as the fuel for ships.
Speaker Change: I'm sure you'll have some India that is starting.
Speaker Change: January of 2025.
Speaker Change: In six months.
Speaker Change: Every ship that goes to Europe.
Speaker Change: No matter that it starts from.
Speaker Change: If it gets to a port in Europe.
Speaker Change: They have to pay attacks.
Speaker Change: On this carbon emissions.
Speaker Change: Hey.
Speaker Change: Yes. It is.
Speaker Change: Since they left their quota voyage.
Speaker Change: Right.
Speaker Change: We believe this will generate significant amount of interest.
Speaker Change: In ammonia.
Speaker Change: As a direct fuel for ships.
Speaker Change: And you can check that people have already.
Speaker Change: Older ships.
Speaker Change: We will use them.
Speaker Change: As of Q.
Speaker Change: And some of them will actually be on the water in 2026.
Speaker Change: And the other thing that I like to just stress.
Speaker Change: We have not said that our Louisiana plants.
Speaker Change: In terms of timing is going to be fully commissioned and onstream in 2028.
Speaker Change: Okay Jeff.
Jeff: Okay and then.
Jeff: Thank you for that and then for my follow up.
Jeff: The in the quarter what seems surprising.
Jeff: We.
Jeff: Weakness in equity affiliates income in Europe, and in the mid east and in the script. There was some talk of higher interest costs and the mid east.
Jeff: Difficult to know if that's a one time event or if thats a sustainable event.
Speaker Change: Could you comment on that.
Jeff: And I think European volume was down 6% in the quarter and maybe in the previous quarter. It was up nine.
Jeff: And maybe if you can touch on what caused that change.
Jeff: Okay.
Speaker Change: I would tell you.
Speaker Change: I have the minutes.
Speaker Change: Yeah.
Speaker Change: Hey, I got excited I lost my voice.
Jeff: But I like your Melissa to answer the first question.
Jeff: Sure.
Dr. Andrzej: Dr. Andrzej answered the second question.
Dr. Andrzej: Melissa Yep Yep. Thank you Stacey.
Dr. Andrzej: Jeff what Youre seeing in equity affiliate income, it's a little bit of timing, but we did see a bit of a decline in our joint venture.
Melissa: Is really a one time item from the previous year and some higher interest expense for this quarter.
Dr. Andrzej: So again, it's primarily timing not an underlying business issue and a prior year one time issue.
Dr. Andrzej: And just following up on design I mean again <unk>.
Dr. Andrzej: <unk> is delivering a 35 cents for earning per share and we expect really the project to continue to deliver this amount on an annual basis I mean, there will be some seasonality depending on the operating costs maintenance.
Dr. Andrzej: When it comes to the volume in Europe.
Dr. Andrzej: The volume is lower because of the planned maintenance outage, we had in the second quarter and a significant outage for our air separation units and some out in the Rotterdam area. So that really drove the volume down and also what we highlighted before the weaker merchant volumes in general, especially.
Dr. Andrzej: Specially the liquids are they you expect Uzbekistan. It project continue to ramp up and that definitely help in this area.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: We'll go next to Vincent Andrews with Morgan Stanley.
Speaker Change: I'm sorry, it will go back next to Steve Byrne with Bank of America.
Stephen V. Byrne: Yes. Thank you.
Stephen V. Byrne: I'm just curious about that.
Stephen V. Byrne: The business mix that was unfavorable in Asia was that primarily helium.
Stephen V. Byrne: Can you provide an update on on how that business is doing in Asia are you adjusting to the Russian sourced product coming in.
Stephen V. Byrne: In your outlook in the next couple of quarters.
Stephen V. Byrne: Yeah.
Speaker Change: Thank you for the question.
Stephen V. Byrne: Yeah.
Speaker Change: We are addressing I think that's a very good one.
Stephen V. Byrne: We are adjusting to the helio conditions business conditions in China and that situation has stabilized and we expect the staple situation on that for the balance of the year.
Stephen V. Byrne: And a question about the Alberta project.
Stephen V. Byrne: Are you still expecting that the blue hydrogen project, a third to start up in some sometime in late 2025.
Stephen V. Byrne: And just curious how much of the volume of that.
Stephen V. Byrne: Plant would you say has now been committed can you provide any update on that.
Speaker Change: But the answer to your first part of your question is yes, and the second part.
Speaker Change: Is that.
Speaker Change: Then you have contracts on that JV.
Stephen V. Byrne: We believe that we will be all sold out.
Speaker Change: Okay. So you know if you do have a video out there okay. Thank you.
Speaker Change: Thank you we'll go next to David Begleiter Big later with Deutsche Bank.
David L. Begleiter: Thank you good morning.
David L. Begleiter: Safety on Neil have you signed any offtake agreements for any portion of the production from that project.
David L. Begleiter: Hey, good morning, David No, we have not signed any contracts at D. R.
David L. Begleiter: In a position to announce for that project yet.
David L. Begleiter: Understood and then same question for Louisiana is any portion of that contract been contracted for.
Speaker Change: Not yet.
David L. Begleiter: We have been very specific about this thing.
David L. Begleiter: That is not by accident that is by design.
David L. Begleiter: We are not going to sign any contracts for either one of those these two projects.
David L. Begleiter: Until we get to this stage that we can get it.
David L. Begleiter: The price that we expect.
David L. Begleiter: We have taken the risk of being the first mover in this area of Green and Blue.
David L. Begleiter: And therefore, we deserve returns which are more than a plain vanilla going on building a air separation unit.
David L. Begleiter: There'll be are going to wait until we can extract the right price.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you.
David L. Begleiter: We'll go next to Duffy Fischer with Goldman Sachs.
Patrick Fischer: Yes, good morning, guys.
Patrick Fischer: First question just on Europe.
Patrick Fischer: Could you take out the Uzbek impact and just let us know what volumes did in Europe, excluding that and then what was the split of that number between your turnarounds and the weak merchant business.
Speaker Change: But definitely you'll know that that's a very detailed question.
Speaker Change: Sensitive competitively.
Dr. <unk>: But I'll turn it over to Dr. <unk> to see what he wants to disclose.
Dr. <unk>: Yes, I would emphasize what you mentioned safety, we would really not like to get into those details.
Dr. <unk>:
Speaker Change: Thank you that's the right answer absolutely sorry Duffy.
Dr. <unk>: Another bright not highlighted.
Speaker Change: But we have highlighted before that you expect to stand up project is expected to really produce around 35 cents per year of earnings.
Speaker Change: Okay.
Speaker Change: And then the difference between GAAP and non-GAAP Theres 20 sensitive charges that are called out as business and asset actions can you detail.
Speaker Change: What exactly those are and call out a few of the bigger items to that number.
Speaker Change: Managed how you want to answer that.
Speaker Change: Sure sure well.
Speaker Change: So thanks for the question. So as we mentioned we continue to focus on our cost productivity and have just taken discrete actions that are reflected in that business and asset action line item.
Speaker Change: For the vast majority of these that is severance cost that we're recognizing in that 'twenty.
Speaker Change: And just for your awareness as a full year run rate of that savings is about $75 million.
Speaker Change: Great. Thank you guys.
Speaker Change: Well go next to Mike <unk> with Barclays.
Mike: Great great.
Mike: Great. Thanks, Good morning, guys.
Mike: The first question for safety I think this morning with the European Commission announced the first winning bids further green hydrogen subsidy auction.
Mike: Most of the winning bids were under 50 per kilo of hydrogen I guess does that outcome surprise you at all would you have expected higher subsidy bids or just is that roughly consistent with the bidding activity you would have expected.
Speaker Change: I have no idea about youre talking about in terms of 50 cents.
Speaker Change: Yeah, It is impossible to have that.
Speaker Change: 50 cents hydrogen.
Speaker Change: To make hydrogen you may care.
Speaker Change: You must have the units to make hydrogen you need about at least 50 to 60 kilowatt hours of power.
Speaker Change: And even the cost of power at <unk> that's two.
Speaker Change: $2, a kilogram for hydrogen excluding your capital costs and excluding your running costs. So.
Speaker Change: I'm not familiar with that number I don't know what you're underwriting.
Speaker Change: Apologies I was referring to the European Union European hydrogen bank auction results. This morning.
Speaker Change: Referring to kind of the bid prices that were awarded to seven different projects under <unk> 50 per kilo Gram of what they were awarded in terms of subsidy.
Speaker Change: But again I'm, sorry, I'm sorry.
Speaker Change: I'm sorry, no I understood. Your question, yes, they are.
Speaker Change: They are those.
Speaker Change: Those are not that they are buying hydrogen that that's right sorry about that.
Speaker Change: They are giving subsidies for people to use hydrogen.
Speaker Change: Some countries are giving 56 kilogram some countries are giving as high as $8 a kilogram.
Speaker Change: It depends on the country and it depends on which tranche and all of that but then their subsidies. They gave its welcome because that encourages us.
Speaker Change: My apologies at the beginning I thought that they are buying hydrogen that 50 cents.
Speaker Change: No no Joe noted these in terms of yeah.
Speaker Change: No worries and then again it came out this morning. So so I know, it's a quick yes.
Speaker Change: And then second question related to just on maybe for Melissa can you just remind us again.
Speaker Change: You've talked about the EPS impact, but can you just remind us.
Speaker Change: On the cash.
Speaker Change: <unk> are you receiving cash commensurate with your earnings per share or how should we think about the cash from a joint venture relative to the EPS impact.
Speaker Change: Now, let's show you want to go ahead.
Speaker Change: Yep I shared with AP. So, yes, we do get regular dividends from the joint venture and commensurate with the earnings sometimes in our cash flow statements you will see a little bit of timing of when those distributions steel occur, but yes, absolutely we are getting the dividends as expected.
Speaker Change: Great. Thank you.
Speaker Change: Thank you we'll go next to Marc Bianchi with TD Cowen.
Marc Gregory Bianchi: Hi, Thank you.
Marc Gregory Bianchi: On the earlier discussion around Louisiana safety, you mentioned that there'll be a market for your blue hydrogen into the pipeline network.
Marc Gregory Bianchi: Investors have asked if that could cannibalize some of your existing Cray hydrogen volumes can you talk about how we should think about that dynamic.
Speaker Change: Well it depends it depends.
Speaker Change: It it will eventually cannibalize that because I think eventually everybody will be using.
Marc Gregory Bianchi: Blue hydrogen.
Marc Gregory Bianchi: I mean 10 years from now I don't think anybody would be using green hydrogen.
Marc Gregory Bianchi: So.
Marc Gregory Bianchi: But the thing is that <unk>.
Marc Gregory Bianchi: Expect volumes to grow.
Marc Gregory Bianchi: The volumes as you saw it even this quarter on our pipeline system is we are totally sold out.
Marc Gregory Bianchi: And if you had any more hydrogen today you could sell it.
Marc Gregory Bianchi: So we expect that there will be significant growth in.
Marc Gregory Bianchi: In addition to what is in the pipeline and in the long term, we are going to make on the blue hydrogen.
Marc Gregory Bianchi: 15 years from now we will not have any margin.
John Patrick McNulty: Okay. Thank you for that and Dr. John made the comment in your prepared remarks about the.
Marc Gregory Bianchi: The electronics market outlook.
John Patrick McNulty: Sounded like maybe looking a little bit better I was hoping you could expand on that and maybe help us understand.
Marc Gregory Bianchi: How much your earnings are being held back by that so once the electronics market recovers what sort of uplift in EPS should we expect.
Marc Gregory Bianchi: Dr. Hung do you want to comment on that.
Dr. Hung: Yes, we do see signs of the electronics business is picking up but really we're not counting on any of that upside in our outlook for the second half of the year, So we're being conservative and disregard, but but do we do especially in Asia with our major customers as their volumes out of <unk>.
Marc Gregory Bianchi: Across nitrogen argon.
Marc Gregory Bianchi: The helium.
Speaker Change: Thank you Jim.
Speaker Change: Okay. Thank you very much.
Marc Gregory Bianchi: We'll go next to Vincent Andrews with Morgan Stanley.
Vincent Stephen Andrews: Thank you I apologize I fell off the call before certain who's been asked please please move on.
Vincent Stephen Andrews: Steve I wanted to ask you you did better in the second quarter you were above the high end of your guidance.
Vincent Stephen Andrews: It seems to me that maybe that was a function of cost coming in.
Vincent Stephen Andrews: On the power and maybe Nat gas side, a little bit lower than maybe what you had thought.
Marc Gregory Bianchi: Three months ago. So one is that the case and then two just given those Clos have indeed come down whether it was more than you expected or not.
Marc Gregory Bianchi: How are you thinking about that on a go forward basis, just because we've seen price me nicely sticky display despite the deflationary environment.
Marc Gregory Bianchi: Obviously, many things can happen that could cause those costs go back up so if they do go back up you think youll be able to reprice for it or should we just assume that there could be.
Marc Gregory Bianchi: You know a little bit of a give back.
Marc Gregory Bianchi: Over the next let's say 12 months, if we do see some reflation.
Marc Gregory Bianchi:
Speaker Change: Good morning mentioned.
Speaker Change: Is that yeah.
Marc Gregory Bianchi: Your comment about.
Marc Gregory Bianchi: Our second quarter coming out better than we expected.
Marc Gregory Bianchi: Because obviously you have taken the D R.
Marc Gregory Bianchi: Yeah.
Marc Gregory Bianchi: Seeing better volumes in U S and Europe.
Marc Gregory Bianchi: U S and Europe, they are very strong for us in the quarter.
Marc Gregory Bianchi: Which was not about the expected.
Marc Gregory Bianchi: So that was the good news. The addition is that they are taking cost actions in.
Marc Gregory Bianchi: In terms of pricing.
Marc Gregory Bianchi: I think that there.
Marc Gregory Bianchi: I'd now be deemed inflation debate is.
Marc Gregory Bianchi: Sure everybody's paying attention that debt.
Marc Gregory Bianchi: Consumer price index is up 30%.
Marc Gregory Bianchi: 8% in the last four years.
Marc Gregory Bianchi: Toby are having serious inflation and that is giving us the ability to go to the customers and ask for higher prices and as you saw in the U S.
Marc Gregory Bianchi: Our Michigan pricing goes up <unk>.
Marc Gregory Bianchi: Percent.
Marc Gregory Bianchi: In the quarter versus quarter over last year.
Marc Gregory Bianchi: So the as I said in my prepared remarks are focused on two things.
Marc Gregory Bianchi: Cost.
Marc Gregory Bianchi: Pricing those are the things that affects our short term results and obviously executing on projects.
Marc Gregory Bianchi: But we have always in the last 10 years, and saying you know what I stated, though.
Marc Gregory Bianchi: We have always reacted to the environment.
Marc Gregory Bianchi: As I said in my prepared.
Marc Gregory Bianchi: Prepared remarks in these these are the times when the organization needs to be very agile.
Marc Gregory Bianchi: And.
Marc Gregory Bianchi: You know.
Speaker Change: That's it.
Marc Gregory Bianchi: Air products is about we can adopt.
Marc Gregory Bianchi: We are not very big but yeah, we can adopt.
Marc Gregory Bianchi: As they say.
Marc Gregory Bianchi: The dinosaurs die they very very big.
Marc Gregory Bianchi: They are not agile that they are extinct.
Marc Gregory Bianchi: So hopefully we are there.
Marc Gregory Bianchi: I draw the funds that we're going to survive.
Marc Gregory Bianchi: The long term no matter what.
Speaker Change: Okay. Thanks, very much I'll pass it along.
Speaker Change: Thank you.
Kevin William McCarthy: Well go next to Kevin Mccarthy with vertical research partners.
Kevin William McCarthy: Yes, Thank you Anne and good morning safety congratulations for the results that you outlined over the last decade, and it's nice to see the 10%.
Kevin William McCarthy: Earnings growth goal moving forward and.
Kevin William McCarthy: Unfortunately, one thing that has changed over the last 15 months or so is air products is trading multiples of EBITDA and so I'm wondering to the extent that the company's hydrogen projects in investor anxiety around that issue may be weighing on the multiple.
Kevin William McCarthy: <unk> air products be interested in establishing a market value for its hydrogen business through an IPO and or a spinoff. For example is that something you would consider if not today then perhaps in 2025 or 26, when we move closer to sustaining cash flows from.
Kevin William McCarthy: The various project startups.
Speaker Change: Hey, Kevin.
Speaker Change: Yeah.
Kevin William McCarthy: Air products is right now involved in.
Kevin William McCarthy: Not only trying to deliver short term results that meet the expectation of our investors.
Kevin William McCarthy: And our own goal of 10% per year increase and at the same time executing.
Kevin William McCarthy: $3 billion of projects.
Speaker Change: I don't think this is the time.
Kevin William McCarthy: We try to do any kind of a financial engineering and all of that.
Kevin William McCarthy: Because that would be significant be distracting.
Kevin William McCarthy: To the management.
Kevin William McCarthy: And to our people.
Kevin William McCarthy: We should continue doing what we're doing.
Kevin William McCarthy: And then Dan are interested in anxiety.
Kevin William McCarthy: Disappear once we have signed 2030 year contracts for the two big projects that you have under way.
Kevin William McCarthy: And once our hydrogen business blue and green hydrogen business becomes reality and producers would be the only producers they changed and all of that that is at the time that Duncan.
Kevin William McCarthy: Talk to you about those kinds of things this is not the time.
Kevin William McCarthy: And right now trying to put any value on the hydrogen business. It all depends on buddies that assumption on the price of blue hydrogen in the price of green hydrogen.
Kevin William McCarthy: And you talked to people some people say green hydrogen is worth $5. Some people say it's $10.
Kevin William McCarthy: Blue hydrogen at the same thing and obviously you have other people our competitors running around saying well there is no demand for these things.
Speaker Change: How would you value a business like that.
Speaker Change: I would be very concerned about any efforts in that direction.
Speaker Change: Because of the distraction that it did cause.
Speaker Change: Yeah.
Speaker Change: Especially the management and it and the team.
Speaker Change: So as they say there is a time for everything.
Speaker Change: This is not the time forward.
Speaker Change: Joining that kind of financial engineering on air products.
Speaker Change: And by the day follow up I did obviously read your Torchwood are there.
Speaker Change: The NIM on dish I appreciate that.
Speaker Change: Oh, well, thank you for that safety and I appreciate the.
Speaker Change: The feedback regarding timing.
Speaker Change: Hence my reference to future years, but so perhaps to follow up on on the logic. If I may it sounds as though the game plan is to enter into multi decade long term contracts.
Speaker Change: And with greater clarity on Counterparties in terms.
Speaker Change: Perhaps.
Speaker Change: The pressure on the multiple will be alleviated as I understand what you're saying.
Speaker Change: And so again just as.
Speaker Change: As a follow up would be you know what is the.
Speaker Change: Timeline that you have in your mind too.
Speaker Change: Lift the veil N and put forth these sort of agreements to the street is it six months or 24 months or or some other period of time, how how would you think about starting that disclosure process.
Speaker Change: Well, Kevin this is a very fluid situation.
Speaker Change: It can be any time it depends on as I said our criteria.
Speaker Change: He is not to run and announce something.
Speaker Change: So that the stock would go up 50 Bucks.
Speaker Change: Criteria is how do we extract the real value that we deserve for.
Speaker Change: These projects for the next two years.
Speaker Change: It is our criteria.
Speaker Change: And now if somebody accepts cohort.
Speaker Change: Hey, Jay.
Speaker Change: I'm going to start paying taxes tomorrow in 2027, and 2028 because of the regulation.
Speaker Change: Yes, but you need to stop and a bunch of secured before somebody else does it and I want to sign a contract three months from now we will do that.
Speaker Change: If it is.
Speaker Change: Months.
Speaker Change: Months from now than 20 months from now these clients are not coming on the stream.
Speaker Change: 2027 2028.
Speaker Change: That part I can confidently tell the investors.
Speaker Change: Believe me there is demand.
Speaker Change: Do not buy into this business that there is no demand.
Speaker Change: There is demand.
Speaker Change: The issue is at what point and not only there is demand, but air products is the only company, who is going to app rehab product being made.
Speaker Change: We have a.
Speaker Change: Green hydrogen project in Saudi Arabia, being built I can't show you the picture of the Ben Sherman.
Speaker Change: Himself.
Speaker Change: Nobody else has that.
Speaker Change: Therefore, two years from now when people need this product there are they going to get it.
Speaker Change: Therefore, having taken the risk and losing a lot of the as you said our market value.
Speaker Change: We have taken the risk.
Speaker Change: <unk> is there.
Speaker Change: A better return on these projects than running get on and trying to panic about the fact that our multiple is instead of being at 30 times EPS. It is.
Speaker Change: 20 times EPS, but the value of the company Hasnt changed.
Speaker Change: Our base business.
Speaker Change: Our base business is the most profitable the highest margin business than anybody else.
Speaker Change: So if anybody's business is trading at 30 times, all it should be trading at that too.
Speaker Change: And now people are worried about these big projects that is demand. Please take a look at the regulations in Europe.
Speaker Change: Thank you degradation that California take care of regulations that are coming in Japan and.
Speaker Change: Korea.
Speaker Change: There is demand and show it.
Speaker Change: It is obviously a very it's a great deal of pressure.
Speaker Change: But I am.
Speaker Change: Absolutely willing to stick my neck out and take the heat.
Speaker Change: Because I think my job is to create long term value for shareholders.
Speaker Change: Not dry to panic on a short term basis.
Speaker Change: So how do you stay long answer to your question.
Speaker Change: Thank you we'll go next to Patrick Cunningham with Citi.
Patrick David Cunningham: Hi, Good morning. Thank you for taking my question and you cited major turnarounds in Europe and America is potentially driving them. Three Q can you give us a sense of the volume and margin impact and what are those turnaround there.
Dr. <unk>: Dr. <unk>, you want to take that.
Speaker Change: Can you. Please repeat the question again, if you don't mind.
Speaker Change: Good question.
Speaker Change: In APAC.
Dr. <unk>: Yes.
Speaker Change: And youre talking about the third quarter for them.
Dr. <unk>: Yes, I mean, we haven't.
Dr. <unk>: Yeah.
Dr. <unk>: We have three major turnaround basically in the Americas in the third quarter.
Dr. <unk>: And that's why it really our maintenance expense for the quarter is pretty significant and they're also finishing a major turnaround in Europe. That's also going to contribute to basically yeah.
Dr. <unk>: And the increase in our maintenance cost for the quarter for the third quarter.
Dr. <unk>: Okay.
Speaker Change: And this sounds great.
Dr. <unk>: Maybe more luck hydrogen plants.
Speaker Change: Got it and then do you have an update on permitting and preliminary engineering for the North Texas project and when do you anticipate that either.
Speaker Change: I'd like to take that.
Speaker Change: We have done a significant amount of engineering and got their North Texas project.
Speaker Change: We are not.
Speaker Change: I'm going to make a commitment on FY <unk> on that project until.
Speaker Change: The rules for the implementation of a.
Speaker Change: Five year lives.
Speaker Change: That there is a significant impact and as you know there is significant amount of controversy about how those rules should be interpreted.
Speaker Change: Currently the way the rules have been stated.
Speaker Change: They are finding us and if that was the fine nothing we would commit to it but.
Speaker Change: But they are not finalized yet.
Speaker Change: And that we expect those to be finalized by June July but it is baked.
Speaker Change: We are not going to make F idea on that project.
Speaker Change: Those rules.
Speaker Change: Bruce our bodies the definition of green hydrogen.
Speaker Change: Find out on the books and on which basis, one can't count on their tax credit.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: We'll go next to Chris Parkinson with Wolfe Research.
Christopher S. Parkinson: Great. Thank you. So much can you just quickly take us for a trip around the world in terms of that merchant operating rates and what youre seeing.
Christopher S. Parkinson: I think there was on the street or hearing a few varying kind of takes on whats happening with the global economy. So we'd love to hear your.
Speaker Change: Thank you so much.
Speaker Change: Thank you very much Chris.
Speaker Change: If I may address that.
Speaker Change: In general terms.
Speaker Change #100: China has been weak for us in the first half.
Speaker Change: Right now there is talk you haven't seen any evidence yet, but there is talk and some <unk>.
Speaker Change: Actions taken that might indicate that China's economy be it improve in the second half.
Speaker Change: We are waiting to see that.
Speaker Change: We have not included any improvement on that in our forecast.
Speaker Change: When it gets to Europe.
Speaker Change: Europe is at.
Speaker Change: No change in the ER as compared to the last few quarters actually at European economy is growing a little bit better than we expected as I said before.
Speaker Change: And the U S economy is doing better than we expected.
Speaker Change: And then Latin America is not material to our business.
Speaker Change #101: I hope that covers what you were looking for Chris.
Christopher S. Parkinson: Sure and just a quick follow ups just given all the puts and takes I mean, I'm sure you've seen but in various public appearances.
Christopher S. Parkinson: A lot of your competitors and peers.
Christopher S. Parkinson: Whether it's been Exxon shell or a ramp towards that tell us they've had lets just characterize it as very mixed commentary on a lot of the initiatives that you've been saying in terms of your potential off takers over the next 345 years do you think there.
Christopher S. Parkinson: Comments during present day affect your positioning in terms of being a potential partner of choice on many of these projects or how should we interpret that industry ready to rhetoric versus your own. Thank you.
Christopher S. Parkinson: But Chris there.
Christopher S. Parkinson: Products that we are going to make.
Christopher S. Parkinson: The potential users for.
Christopher S. Parkinson: For Green hydrogen.
Christopher S. Parkinson: Our.
Christopher S. Parkinson: Steelmaking.
Christopher S. Parkinson: The refineries.
Christopher S. Parkinson: Shipping.
Christopher S. Parkinson: And using green ammonia up or ship as fuel for ships to meet the very stringent requirements in Europe.
Christopher S. Parkinson: And hydrogen for mobility.
Christopher S. Parkinson: Those are the four areas that eventually.
Christopher S. Parkinson: The offtake.
Christopher S. Parkinson: Off takers for the product.
Christopher S. Parkinson: And we are obviously talking to people in all of those four sectors.
Speaker Change #105: We don't have anything to announce.
Christopher S. Parkinson: And if you are talking to anybody.
Christopher S. Parkinson: And their NBA, therefore, we cannot announce anything or give any details, but those are the sectors that we will be using green hydrogen.
Christopher S. Parkinson: On the blue hydrogen side.
Christopher S. Parkinson: Yeah.
Christopher S. Parkinson: Developments debate I see.
Christopher S. Parkinson: It is still.
Christopher S. Parkinson: Using blue hydrogen.
Christopher S. Parkinson: As I say a few too.
Christopher S. Parkinson: Okay.
Christopher S. Parkinson: Ooh hydrogen.
Christopher S. Parkinson: It can also be used as I mentioned before.
Christopher S. Parkinson: I think a significant use will be as fuel for ships.
Christopher S. Parkinson: And blue hydrogen will be used in our pipeline.
Christopher S. Parkinson: Decarbonising refineries.
Christopher S. Parkinson: Let me call operation along the Gulf Coast.
Christopher S. Parkinson: Those are those are there.
Christopher S. Parkinson: Sectors that youre talking to.
Speaker Change #106: Thank you.
Speaker Change #103: Of course.
Speaker Change #102: Thank you very much Chris.
Speaker Change #102: Thank you well go next to Josh Spector with UBS.
Joshua David Spector: Yeah, Hi, Thanks for taking my question just a couple of quick follow ups just to follow up on the turnaround and maintenance side of it.
Joshua David Spector: The size of the EPS impact that you think in <unk> since you called that out as a bridging item for second half and would you characterize this year as a heavier maintenance here versus normal I mean, obviously, there's turnarounds going on all the time, but we're really not talking about that typically as much as we are today.
Joshua David Spector: Doug just sat on you want to take that yes.
Doug: Sure Savi.
Doug: Definitely our hydrogen a.
Doug: Our portfolio of hydrogen in Atlanta is really getting more and more which basically again you need to maintain these units like every four years around four years, you have to do a major turnaround this year without really mentioning a specific number it is at a record high especially in the U S with our U S Gulf Coast assets.
Doug: California, our assets in Canada.
Doug: Basically we have a significant amount of expense when it comes to.
Joshua David Spector: Also coincided this year. We also we have a four year turnaround for our major facilities enrolled towards them in in Europe. So.
Speaker Change #114: Okay, Alright, thanks, and if I could just ask then on Asia with helium specifically you commented earlier that it's stabilized, but I think from the last call you were talking about lower end pricing of regaining margins are we gaining volume sorry.
Speaker Change #114: Has that played out has it stabilized lower or have you regained any volumes, whereas that.
Speaker Change #107: We have lowered prices in order to stabilize the situation.
Speaker Change #107: Okay.
Speaker Change #109: Okay. Thank you.
Speaker Change #109: Okay.
Speaker Change #109: Thank you we'll go next to Laurence Alexander with Jefferies.
Laurence Alexander: Just very two very quick ones. Good morning, just on the pricing merchant pricing in North America is there any.
Laurence Alexander: Quirkiness in the end market mix, where youre seeing pricing or is this 6% across the board.
Laurence Alexander: And then secondly, how much capital you have invested in gray hydrogen currently.
Speaker Change #118: I would like to abduct xenon answers. The first question and the second question I'm not sure we want to disclose that.
Speaker Change #112: In detail.
Speaker Change #112: I mean, when it comes to the merchant, it's really across the board.
Laurence Alexander: I mean, it's.
Laurence Alexander: Nitrogen oxygen.
Laurence Alexander: Argon helium, it's really across the board that we really have a pricing discipline there.
Laurence Alexander: In this inflationary environment so.
Speaker Change #111: Thank you.
Speaker Change #111: Just also want to highlight in the Americas I mean, we've mentioned it before in the prepared comments.
Speaker Change #111: Again onsite hydrogen onsite has been really doing very well and that's helping the volume.
Speaker Change #111: For the year.
Speaker Change #111: And we continue to see this going for some extended amount of time because of the refining activities.
Speaker Change #117: Thank you.
Speaker Change #117: We'll go next next to Mike Sison with Wells Fargo.
Michael Joseph Sison: Hey, good morning.
Michael Joseph Sison: Nice quarter.
Michael Joseph Sison: In terms of the fourth quarter, what what volume growth do you need to hit the.
Michael Joseph Sison: The range that you have I know you gave us a lot of.
Michael Joseph Sison: Three or four different reasons, why it's going to be a lot stronger than the than the prior quarters, but any thoughts on what type of volume growth you need.
Michael Joseph Sison:
Speaker Change #119: We have really not.
Speaker Change #119: Volume growth not on the base business, but.
Speaker Change #119: But.
Speaker Change #119: We will have volume growth based on new plants coming down the street.
Speaker Change #116: Got it and then.
Speaker Change #120: Yeah, Yes, Sir.
Speaker Change #124: Sorry, but yes just.
Speaker Change #115: The quick follow up on your part.
Speaker Change #121: Louisiana, what and I know you can't really wanted to tell us what price, but what is the return premium that youre looking for to sign the off takes is there a certain way for us to look at it at from that standpoint.
Speaker Change #121: As high as we can get.
Speaker Change #121: Because if you have a product that nobody else has that.
Speaker Change #121: Sandbox should be satisfied with your specific return are they obviously do not want to disclose that but are there.
Speaker Change #121: Any kind of a return.
Speaker Change #123: We are.
Speaker Change #123: B.
Speaker Change #123: Had the product.
Speaker Change #123: That is going to come on stream.
Speaker Change #123: That people are going to need.
Speaker Change #123: Nobody makes that product today, so what is the price for that.
Speaker Change #123: The price point that is not calculated on the basis that this is my capital. This is their return and therefore, we do that.
Speaker Change #115: Then you have somebody that people need.
Speaker Change #115: Extract the maximum price.
Speaker Change #115: We all go to the gas station and pay what you're paying for the Gadget station.
Speaker Change #115: Cost of taking oil out of the ground in the middle East.
Speaker Change #115: $5 a barrel.
Speaker Change #115: If you sit down I calculated based on the return we should be paying 25 cents a gallon for gas.
Speaker Change #115: But people are sitting there, saying I habit.
Speaker Change #115: Need it it's $80 today, it might be $200, another day or it might be another probably for another day.
Speaker Change #115: So we are not facing the pricing from our products based on return.
Speaker Change #115: You're basing it on but he can get out of the market because there is significant value there.
Speaker Change #115: He bring to the market.
Speaker Change #115: For the investors, but right now if you will.
Speaker Change #115: <unk>.
Speaker Change #115: You.
Speaker Change #115: Blue hydrogen.
Speaker Change #115: That you can give to somebody.
Speaker Change #115: Whether they can make renewable diesel to sell it in California, there is a significant premium for that.
Speaker Change #115: So that's that's how we look at it.
Speaker Change #115: Yeah.
Speaker Change #130: Thank you.
Speaker Change #122: Thank you and if you allow me safety that's been just wanted to highlight.
Speaker Change #122: They we already have three major.
Speaker Change #122: Onsite blue hydrogen contacts for 15 plus years.
Speaker Change #122: The premium for the Blue product.
Speaker Change #122: Right.
Speaker Change #122: Obviously, if you haven't disclosed some of that yet but.
Speaker Change #122: Yeah.
Speaker Change #122: What is going on in the market place and our goal is to get the maximum return.
Speaker Change #134: But our investors not to sit down and.
Speaker Change #134: If it was just a matter of saying this is my investment and this is a 10% return and this is the problem.
Speaker Change #122: Then you don't need to pay somebody $15 million to be CEO of air products.
Speaker Change #122: Then anybody can do that.
Speaker Change #122: Yeah.
Speaker Change #122: Thank you we'll go next to John Roberts with Mizuho.
John Roberts: Thank you Stephanie did you say 15 years from now air products will not have any <unk> running.
John Roberts: Did you mean, not running without carbon capture or talk about talk about the average useful life left on the <unk>.
John Roberts: I very much appreciate you, bringing up that point.
John Roberts: Sure.
John Roberts: <unk> that we will not have any S M ours running vidal its carbon capture.
Speaker Change #128: That is correct.
Speaker Change #131: Okay and then.
Speaker Change #128: I had a fight that.
Speaker Change #128: On the lower natural gas feedstock costs for hydrogen besides the pass through impact on margin I think you also get to keep the benefit of efficiency improvements and those efficiency improvements I guess are worth a lot less when gas is low is that a meaningful headwind or is that immaterial right now.
Speaker Change #129: Well I wouldn't want to say, it's a mean meaningful but it is a hit.
Speaker Change #132: And I'm really appreciate you picking up on that.
Speaker Change #129: That is exactly right when natural gas prices are $12.
Speaker Change #129: 1000 <unk>.
Speaker Change #129: <unk> feed.
Speaker Change #129: Those bonuses are significant now that natural gas is $3, two and a half dollars bonuses become allowed the smelters.
Speaker Change #126: Thank you.
Speaker Change #133: Thank you.
Speaker Change #135: At this time there are no additional questions in queue I'd like to turn the call back over to our speakers for any additional or closing remarks.
Speaker Change #127: Well. Thank you very much I would like to again, thank everyone for joining our call today.
Speaker Change #137: We appreciate your interest in air products, and we look forward to discussing our results with you again next quarter.
Speaker Change #136: Stay safe and healthy and all the best and thank you for your very good questions that everybody really appreciate that.
Speaker Change #138: Thank you that will conclude today's call. We appreciate your participation.
Speaker Change #136: Okay.
Speaker Change #127: Yeah.
Speaker Change #127: Yeah.
Speaker Change #127: Okay.
Speaker Change #127: Yeah.
Speaker Change #127: Yes.
Speaker Change #127: Okay.
Speaker Change #127: Okay.
Speaker Change #127: Okay.
Speaker Change #127: Okay.
Speaker Change #127: Yeah.
Speaker Change #127: [music].
Speaker Change #127: Yes.
Speaker Change #127: [music].
Speaker Change #127: Yeah.
Speaker Change #127: [music].