Q3 2024 Air Products and Chemicals Inc Earnings Call
Speaker Change: www.larryweaver.com
Unknown Executive: Good morning and welcome to Air Products' third 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.
Speaker Change: Good morning and welcome to Air Products third quarter earnings release conference call. Today's call is being recorded at the request of Air Products.
Speaker Change: 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.
Siddharth Manjeshwar: Beginning today's call is Mr. Siddharth Manjeshwar. Thank you to Air Products' third quarter 2024 earnings results teleconference.
Speaker Change: Beginning today's call is Mr. Sidd Manjeshwar.
Sidd Manjeshwar: Thank you, Samira. Good morning, everyone. Welcome to Air Products' third quarter 2024 earnings results teleconference.
Siddharth Manjeshwar: This is Siddh Manjeshwar, Vice President of Investor Relations. I am pleased to be joined today by Seifi Ghasemi, Achaemen, President and CEO, Melissa Schaeffer, Chief Financial Officer, Sean Major, our Executive Vice President, General Counsel and Secretary, and Eric Guter, our incoming head of Investor Relations. After our comments, we will be pleased to take your questions.
Sidd Manjeshwar: This is Sidd Manjeshwar, Vice President of Investor Relations.
Speaker Change: I am pleased to be joined today by Seifollah Ghasemi, our Chairman, President and CEO , Melissa Schaeffer, our Chief Financial Officer,
Speaker Change: Sean Major, our Executive Vice President, General Counsel and Secretary, and Eric Guter, our incoming Head of Investor Relations.
Unknown Executive: 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 airproducts.com. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures, to join our call today.
Speaker Change: 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 www.airproducts.com.
Siddharth Manjeshwar: Our earnings release and the slides for this call are available on our website at airproducts.com. 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, EBITDA, EBITDA margin, the effective tax rate, and ROCE, both 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.
Speaker Change: Today's discussion contains forward-looking statements, including those about earnings and capital expenditure guidance, business outlook, and investment opportunities.
Speaker Change: Please refer to the Cautionary Note regarding forward-looking statements that is provided in our earnings release and on slide number 2.
Speaker Change: Additionally, throughout today's discussion we will refer to various financial measures including earnings per share,
Speaker Change: Operating Income, Operating Margin, EBITDA
Speaker Change: EBITDA margin, the effective tax rate, and ROCE, both on a total company and segment basis.
Speaker Change: Unless we specifically state otherwise, statements regarding these measures are referring to our adjusted, non-GAAP financial measures.
Siddharth Manjeshwar: Reconciliation of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section.
Saifi: Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section. Now with that, I'm pleased to turn the call over to Seifei.
Seifi Ghasemi: Now, with that, I'm pleased to turn the call over to Safey. Thank you, Sid, and good day to everyone. Thank you for taking time from your busy schedules to join our call today.
Saifi: Thank you Sid and good day to everyone.
Saifi: Thank you for taking time from your busy schedules to join our call today.
Seifi Ghasemi: Before I discuss our results, I would like to introduce Eric Guter, who is with us today. Eric has been with the company for nearly 30 years, most recently serving as our Vice President of Hydrogen for Mobility. He will bring a belt of knowledge and experience to investor relations. I'm happy that he has agreed to take on this new challenge.
Saifi: Before I discuss our results,
Speaker Change: I would like to introduce Eric Guter, who is with us today.
Eric Guter: most recently serving as
Eric Guter: I'm happy that he has agreed to take on this new challenge.
Eric Guter: Eric, would you like to say a few words? Thank you, Safey. I appreciate your kind words, and I'm humbled and honored to be part of this tremendous team, and to be taking on this new role with the near product.
Eric Guter: Thank you, Zafi. I appreciate your kind words, and I'm humbled and honored to be part of this tremendous team and to be taking on this new role with In-Ear Products.
Seifi Ghasemi: Looking forward to meeting with our analysts and investors and continuing the great work Sidd and the team have done as we continue to execute our role strategy. Thank you, Eric, and as we have announced, Sidd will be leaving the company to pursue other career opportunities. Sidd is an analyst, and for his work over the past few years at the company. Sidd and Eric are already working closely together to ensure a smooth transition.
Eric Guter: Looking forward to meeting with our analysts and investors and continuing the great work Sid and the team have done as we continue to execute our growth strategy.
Speaker Change: Thank you, Eric. And as we have announced, Sid will be leaving the company to pursue other career opportunities.
Seifi Ghasemi: Now please turn to slide number three. As always, I would like to begin with our record on safety, which is our top priority at their products. We have made significant progress on both our employee loss time, injury rate, and recordable injury rate since 2014. We are proud of this improvement, and we are very proud to have the best safety record in the industry. But we always strive to achieve zero incidents and zero accidents. That is our ultimate goal.
Speaker Change: Now please turn to a slide number three.
Speaker Change: which is our top priority at Air Products.
Speaker Change: We are proud of this improvement and we are very proud to have the best safety record in the industry.
Speaker Change: to achieve zero incidents and zero accidents. That is our ultimate goal.
Unknown Executive: Slide number four summarizes our management philosophy. During our fiscal third quarter, which has already begun, Cash Needs of Our Growth Strategy, leading the industry by far and demonstrating our commitment to provide a summary of the third quarter financial and business segment results, as well as contributions from new assets. EBITDA of $1.3 billion increased 5%, primarily driven by positive contribution margin and favorable business; ROCE of 11% was down 70 basis points and relatively flat sequentially, mainly due to better operating; Currency was negative 4 cents, mainly due to weaker currencies in Asia and South America.
Seifi Ghasemi: A slide number four summarizes our management philosophy. We have shared this with you many times before. We are, as we have been for the past ten years, committed to these principles and practiced them every single day.
Speaker Change: We are, as we have been for the past 10 years.
Speaker Change: committed to these principles and practice them every single day.
Seifi Ghasemi: Now please turn to slide number five. Our third quarter adjusted earnings per share of $3.20 exceeded the upper end of our prior goal. The guidance range of $3.305 and improved 7% over last year. Our results reflect strong underlying performance in the Americas and Europe. Additionally, we saw improvements across our organization driven by our price and productivity actions. We continue to execute our two-pillar growth strategy, which includes driving operational excellence and growth in our industrial gas business. While executing our energy transition projects focused on clean hydrogen.
Speaker Change: Now please turn to a slide number five.
Speaker Change: Our third quarter adjusted earnings per share of $3.20
Speaker Change: exceeded the upper end of our prior guidance range of 3 to 305.
Speaker Change: improved 7% over last year.
Speaker Change: Our results reflect strong underlying performance in the Americas and Europe .
Speaker Change: and growth in our
Speaker Change: while executing our energy transition projects focused on clean hydrogen.
Seifi Ghasemi: Now please turn to slide number six. We are maintaining our full-year adjusted earnings per share guidance of $12.20 to $12.50.
Speaker Change: Now please turn to a slide number six.
Speaker Change: We are maintaining our full year adjusted earning per share guidance of 1220 to 1250.
Seifi Ghasemi: Committee. And we still expect our capitals to be in the range of five to five and a half billion in fiscal year 2024.
Speaker Change: And we still expect our capex to be in the range of $5 to $5.5 billion in fiscal year 2024.
Seifi Ghasemi: Now please turn to slide number seven. During our fiscal third quarter, in addition to achieving seven percent earnings per share growth, we have also reached overall significant milestones. In June, we announced a very large scale long-term green hydrogen supply agreement with Total Energies. Beginning in 2030, Air Products will supply Total Energies with 70,000 tons per year of green hydrogen for 15 years. This pioneering agreement, which has already generated significant interest from other customers, validates a long-term strategy and demonstrates a strong demand for green hydrogen. We are seeing the development of significant demand for green hydrogen in Europe.
Speaker Change: Beginning in 2030.
Speaker Change: for 15 years.
Speaker Change: This pioneering agreement, which has already generated significant interest from other customers
Seifi Ghasemi: And as a result, we are even more excited and committed to our strategy to be a pioneer in the production of green hydrogen.
Seifi Ghasemi: In July, we announced the planned sale of our LNG process technology and equipment business to Honeyville for an all-cash price of roughly 1.8 billion. The divestment of this business with allow us to focus on our core business while both stringing our balance sheet and our liquidity position.
Speaker Change: In July .
Speaker Change: We announce the planned sale of our LNG process technology and equipment business
Speaker Change: for an all-cash price of roughly $1.8 billion.
Speaker Change: The divestment of this business will allow us to
Speaker Change: to focus on our core business while bolstering our balance sheet and our liquidity position.
Seifi Ghasemi: Also in July, we were pleased to announce our collaboration with Mercedes-Benz to help decolonize the heavy transport sector. Air Products was among five other companies that took delivery of Mercedes-Benz hydrogen fuel cell trucks. This is a significant milestone toward the eventual mass production of hydrogen fuel cell heavy-duty trucks. In a related development, we have also announced plans to build a network of permanent commercial hydrogen fueling stations along the Trans-European transport network.
Speaker Change: to help
Speaker Change: Air Products was among five other companies that took delivery of Mercedes-Benz hydrogen fuel cell trucks.
Speaker Change: This is a significant milestone.
Speaker Change: toward the eventual mass production of hydrogen-fueled cell heavy-duty trucks.
Speaker Change: In a related development, we have also announced
Speaker Change: Plans to Build a Network of Permanent
Speaker Change: Transport Networks
Seifi Ghasemi: Now please turn to slide number 8, which illustrates our greater than 10 percent average growth rate for our adjusted earnings per share in the past 10 years. Our goal is to extend this strain for another 10 years while remaining the safest, most diverse, and most profitable industrial gas company in the world. We have done this before, and I'm confident we will do it again.
Speaker Change: Now please turn to slide number 8 which illustrates our greater than 10% average growth rate for our adjusted earning per share in the past 10 years.
Speaker Change: Our goal
Speaker Change: is to extend this train for another 10 years.
Speaker Change: while remaining the safest.
Speaker Change: We have done this before, and I'm confident we will do it again.
Seifi Ghasemi: Now please turn to slide number 9. We take a balanced approach to determining our dividends. We are confident that our cash flows from operations and our ability to raise capital through financing and other strategic initiatives will allow us to continue rewarding our shareholders through increased dividends while meeting the cash needs of our growth strategy.
Speaker Change: Now please turn to a slide number nine.
Speaker Change: We are confident there are cash flows from operations and our ability to raise capital.
Speaker Change: through financing and other strategic initiatives.
Seifi Ghasemi: Now turn to slide number 10, which, as I always say, is my favorite slide. It shows that our EBITOM margins have significantly grown and now it stands at 42%. Leading the industry by far and demonstrating our persistent focus on effectively running our base business. We are very much focused on profitability, and this slide is a living proof of that.
Seifi Ghasemi: I want to thank all of our employees for delivering these outstanding results in very challenging economic conditions.
Melissa Schaeffer: At this point, I would like to turn over to Melissa Schafer or Chief Financial Officer to provide the summary of the third quarter financial and business segment results. Melissa? Thank you, Safy. Now please turn to slide 11. Compared to last year, underlying sales, volume, and price together were up 1% and positive across most reporting segments. The 2% reduction on the company's top line was primarily due to unfavorable currencies. On-site volume was again positive this quarter, driven by strong demand for hydrogen as well as contributions from new assets. However, overall volume was flat due to lower demand for emerging products.
Melissa Schaeffer: Overall price improved modestly at 1% with continued strong performance in the Americas, coupled with lower power costs, which improved contribution margin. The conning natural gas prices in Europe and North America resulted in 1% lower energy cost pass through, which has no impact on profit. EBITDA of 1.3 billion increased 5% primarily driven by positive contribution margin and favorable business mix. Although cost is modestly unfavorable with heavy plan maintenance this quarter, we are starting to see positive momentum on our productivity actions across the organism. Association. ROCE of 11% was down 70 basis points and relatively flat sequentially.
Speaker Change: Cost pass through which has no impact on profit.
Speaker Change: EBITDA of 1.3 billion increased 5%, primarily driven by positive contribution margin and favorable business mix.
Speaker Change: Although costs was modestly unfavorable this with heavy planned maintenance. This quarter, we are starting to see positive momentum on our productivity actions across the organization.
Speaker Change: R O C E of 11% was down 70 basis points and relatively flat sequentially.
Melissa Schaeffer: Adjusted for cash, our ROCE is about 12%. So, sequentially volume improved across the reporting segments.
Speaker Change: Adjusted for cash R. R. O C E is about 12%.
Speaker Change: Sequentially volume improved across our reporting segments.
Melissa Schaeffer: Now please turn to slide 12 for a discussion of our earnings per share. Our third quarter adjusted earnings per share was $3.20, up 22 cents or 7% compared to last year, mainly due to better operating results. Overall, volume was up 5 cents on higher onsites, including new assets, partially offset by lower merchant demand. Price, net a variable cost, contributed 16 cents this quarter, driven by both pricing gains and lower power cost. Costs were 4 cents unfavorable, as products of the actions offset much of the costs related to planned maintenance and inflation. Again, we are making good progress implementing the productivity actions and exercising significant cost control throughout the organization.
Speaker Change: Now please turn to slide 12 for a discussion of our earnings per share.
Melissa Schaeffer: Currency was negative 4 cents, mainly due to weaker currencies in Asia and South America. Additional debt contributed to higher interest expense of 3 cents, and one-time items help lower the effective tax rate this quarter. Our full year effective tax rate is expected to be about 18%.
Melissa Schaeffer: Now please turn to slide 13 for our discussion of our business segment results. Instead of viewing each business segment in detail, I would like to provide a focused discussion summarizing our segment results and highlighting key items for the quarter. You will find individual slides covering each of the business segments in the appendix. Looking at each business segment, America's underlying sales are positive, with price and volume together up 2%. Merchant pricing was 7% higher, which resulted in a 3% overall price gain for the region. Volume was relatively stable as weaker merchant demand was offset by strong demand for hydrogen.
Unknown Executive: America's underlying sales are positive, with price and volume together up 2%. EBITDA increased 6%, and EBITDA margin increased about 400 basis points, primarily driven by strong price. EBITDA and EBITDA margin were unfavorable, primarily driven by the plan maintenance outage.
Melissa Schaeffer: EBITDA increased 6% and EBITDA margin increased about 400 basis points, primarily driven by strong price, despite increased costs due to higher planned maintenance. Looking at Asia results, the region's underlying sales were relatively stable. Volume was down 1% as lower demand for merchant products and planned maintenance outages were offset by new assets. EBITDA and EBITDA margin were unfavorable, primarily driven by the planned maintenance outages. Switching to our Europe segment, merchant pricing was held firm, and combined with our declining power costs in the region drove improved contribution margin. Volume was up 1% largely due to our new assets and use Pakistan.
Melissa Schaeffer: EBITDA improved 12% and EBITDA margin increased nearly 500 basis points, mainly due to improved volume and contribution margin. Association. Moving to our Middle East and India segment, sales and operating incomes decline due to unfavorable merchant price and volume. Equity affiliates income was 7% lower due to higher cost. For our corporate and other segment, sales and profit were up this quarter, primarily due to higher sale of equipment, including LNG. We're making good progress on our productivity actions across all segments of the company.
Melissa Schaeffer: Before I turn the call back to Safey, let me take a moment to thank our teams around the world for delivering these outstanding results.
Seifi Ghasemi: Now I would like to turn the call back to Safey to provide closing remarks. Thank you, Melissa. Now please turn to slide number 14. Our industrial gases business is a great business, and we are committed to invest and grow it. Our recent announcements to expand our membrane production facility in St. Louis and to build two new air separation units in Georgia and North Carolina are just the latest examples. We are also leading the way to deliver low carbon hydrogen at scale to help decarbonize the industrial and heavy-duty transportation sectors of the economy. Our two-pillar growth strategy drives our company towards these two goals in peril.
Unknown Executive: Our industrial gases business is a great business, and we are committed. Production facility in St. Louis. Now, before I open it up for industrial questions, The formation of the Management Board was a strategic step.
Seifi Ghasemi: The outstanding results and the significant project milestones that we were able to achieve this quarter demonstrates that we have derived strategy and, as I always say, we have the commitment and motivation our employees to make it happen.
Speaker Change: And motivation of our employees to make it happen.
Seifi Ghasemi: Now, before I open it up for industrial questions, I want to make some comments about our management board and succession planning. The formation of the management board was a strategic step to delegate more responsibility to our senior executives who are close to the business. You have seen our public announcements and our AK filing on these organizational changes, and I don't really have any additional comments to make on them. On a personal basis, you all know that I am firmly committed to our two-pillar growth strategy, and I have, as I have articulated that many times, I fully intend to continue leading Air Products, ensuring that our growth strategy is fully implemented.
Speaker Change: Now before I open it up for industrial for questions.
Speaker Change: I want to make some.
Speaker Change: Comments about our management board.
Speaker Change: And succession planning.
Speaker Change: The formation of the management Board.
Speaker Change: It was a strategic step.
Speaker Change: To delegate more responsibility to our senior executives.
Speaker Change: Who are close to their business.
Speaker Change: You will have seen our public announcements.
Speaker Change: And our 8-K filing on these organizational changes and I don't really have any additional comments to make on them.
Unknown Executive: And I don't really have any additional comments to make, on a personal basis. Ensuring that our growth strategy is fully implemented, and we are serving our customers with low carbon and zero carbon hydrogen. However, to have a fully qualified individual, he or she should be well known to investors, preferably a current or former CEO of a public company with significant international experience and relations.
Speaker Change: On a personal basis.
Speaker Change: You all know.
Speaker Change: I am firmly committed.
Seifi Ghasemi: are mega projects, projects are built, and we are serving our customers with low carbon and zero carbon hydrogen.
Seifi Ghasemi: However, with our continued commitment to good governance and succession planning, it is prudent and good practice to have a fully qualified individual who can be my successor if something unexpected were to happen to me. I currently serve in three roles at Air Products: Chairman of the Board, Chief Executive Officer, and President. With good governance in mind, I have decided to bring into the company a fully qualified, potential successor as President and a member of our Board of Directors. This person should be well known to investors with a clear record of success, preferably a current or former CEO of a public company with significant international experience and relationships.
Speaker Change: With a clear record of success.
Speaker Change: Okay, preferably a current or former CEO of a public company with significant international experience and relationships.
Seifi Ghasemi: I have started this process, and we will take our time to find the right person for the job.
Speaker Change: I have started this process.
Speaker Change: And we will take our time to find the right person for the job.
Unknown Executive: At this point, I will be delighted. We all will be delighted to answer your questions. Please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question.
Speaker Change: At this point I will be delighted we all we'd be delighted to answer your questions.
Speaker Change: Thank you and if you would 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: Press Star one to ask a question.
John Mcnulty: And we will take our first question from John McNulty with BMO Capital Markets. Please go ahead. Good morning, Safety. And thanks for all the color and the commentary around the Management Committee. It is definitely helpful in terms of how to think about things going forward.
Unknown Executive: And we'll take our first question from John McNulty with BMO Capital Markets. Please go ahead. announced early that he is committed to green hydrogen and he is committed to converting at least his northern refineries to hydrogen, or have found a better customer or a better application for a significant amount of hydrogen. We feel very confident about the capital that we have announced, very good about it, and if we ever sign anything definitive, we will obviously be in a position to announce it. Great, thanks very much for the call. Thanks very much.
Speaker Change: And we will take our first question from John Mcnulty with BMO capital markets. Please.
Speaker Change: Please go ahead.
Seifi Ghasemi: So I guess one of the things I wanted to dig into, one of the newer events that came up during the quarter was on the green hydrogen announcement with Total. Now it came earlier than what we were thinking in terms of offtake arrangements. So I guess can you speak to one, maybe what brought that forward or kind of brought the timing of it maybe a little bit earlier than expected. And then two, you spoke to kind of how that heightened incremental demand for green hydrogen. Can you speak to that and maybe the potential for further offtake arrangements as we look out over the next 12 months or so.
Seifi Ghasemi: Good morning, John.
Seifi Ghasemi: And thanks for the very good question. John, we have been talking to potential customers for hydrogen. Since even before we announced our project in Newham, so for the past five years.
Seifi Ghasemi: and with these things they have a life of their own. The customers need to decide when they want to make a public announcement about having made a commitment; it depends on their needs, it depends on the regulatory conditions, it depends on the conditions of the industry and all of that. And I'm very happy to see that a visionary reader, like Mr. Patrick Perrella of Total, decided to be the first mover and announced early that he is committed to green hydrogen and he is committed to convert at least his northern refineries to hydrogen. Since we had been talking to him for a long time, it was not too difficult to kind of get our act together and put a contract together and make a commitment on both sides.
John Mcnulty: Tried it to be the first mover.
John Mcnulty: And.
Speaker Change: Announced earlier that he is committed to green hydrogen and he's committed to convert at theses northern refineries to hydrogen.
Speaker Change: Since we had been talking to him for a long time it was there.
Speaker Change: Not too difficult to kind of.
Speaker Change: Get our act together and put the contract together in May and make a commitment on both sides. We are obviously delighted.
Seifi Ghasemi: We are obviously delighted; we could not have found a better customer or a better application for a significant amount of hydrogen.
Speaker Change: We could not.
Speaker Change: I found a better customer or a better application for significant amount of hydrogen.
Seifi Ghasemi: In terms of additional volumes for them, I want to leave it to Total Energies to make those statements; I do not want to preempt anything. But what has happened since we have made the announcement, it has proven that people go through an auction process and then they find out that the best possible alternative is Air Products. So a lot of other customers are taking the queue from Total Energy; obviously, if they are going to convert their refineries to green, what are the other refineries going to do? They have to follow. So we are being contacted by other refineries. We are being contacted by filmmakers who, and now it has become a little bit of a dynamic of, well, maybe we should get to air products before they run out of products, which is obviously puts us in a very good position.
Speaker Change: In terms of additional volumes for them I want to leave it too.
Speaker Change: Total energies to make those statements or do not want to preempt anything.
Seifi Ghasemi: In terms of future contracts and so on, I have always been acting very responsibly not to lead anything or give a hint until we actually do something, and I like to keep it that way. We are obviously working with other people; our intention is obviously to sell everything that we make. But if anything comes up at the appropriate time, we will make an announcement.
Seifi Ghasemi: But there is no question that agreement with total is a significant new beginning for us.
Seifi Ghasemi: God, thanks so much for the color; maybe just as a follow-up. So can you give us an update on the progress that you are making with the Louisiana Project, and I guess somewhat tied to the total arrangement, you know, it seems like if the market is opening up for green, I would imagine it is opening up even more quickly for what should be a more cost-effective solution, which would be blue. So can you speak to maybe that dynamic as well?
Speaker Change: Two maybe that dynamic as well.
Seifi Ghasemi: Sure, again, another good question. Number one, our project in Louisiana, we call it the Darrow Project, is moving very well. We feel very confident about the capital that we have announced. And I feel very good that we have done our homework; we have done the testing and all of that. And we filed last week our class six permit to the state of Louisiana. That is a major, minor milestone. And the clock starts running in terms of getting approval for that, which is the most critical item for that project to be viable. We feel very good about the poor space that we have.
Speaker Change: Sure again another good question number one our project in Louisiana They call. It the <unk> project is moving very well.
Speaker Change: We feel very confident about the cafe told that we have announced.
Speaker Change: And I feel very good that we have done our homework, we have done the testing and all of that and we filed last week.
Speaker Change: Our class six permit.
Speaker Change: The state of Louisiana that is a major miners milestone.
Seifi Ghasemi: We have proven that we have the poor space, which I think is a challenge for a lot of other people.
Seifi Ghasemi: And we are very confident that we should be able to bring that plant on a stream sometime in 2028. In terms of the demand for the product, you are right. There is a lot of discussions about the demand. And we have had discussions; the target for that product is true. Number one, the blue hydrogen; we are going to put it in our pipeline and serve our existing customers with blue hydrogen. And then a significant part of the hydrogen will be converted to ammonia for shipment to places like Japan and Korea to decarbonize their power plants.
Seifi Ghasemi: So we feel very good about that.
Seifi Ghasemi: And if we have, if we ever sign anything definitive, we will obviously be in a position to announce.
Seifi Ghasemi: Great. Thanks very much for the call, Stacey.
Jeff Zagokas: And we'll take our next question from Jeff Zagokas with JP Morgan. Please go ahead. Thanks very much. Is the Neon project still to come on stream at the end of calendar 2026? And what's the state of your hydrogen dissociation technology?
Unknown Executive: Is the NEOM project still to come on stream at the end of calendar 2026? and hopefully commissioned by, as you said, December of 2026. And they should have the product for sale in early 2027. We have proven that technology, and we obviously will deploy it like in Total and in other places. When you when I look at Air Products' results, which I think are not dissimilar from what's happening with Air Liquide or Linden, And there's also been a slowdown in price, which in the end doesn't really matter much and the overall volume slowdown in the industry, and... In Europe, it's steady, but it is weak in China.
Speaker Change: Is the neon projects still to come on stream at the end of calendar 2026.
Speaker Change: And what's the state of your hydrogen dissociation technology.
Speaker Change: Yeah.
Seifi Ghasemi: Jeff, good morning. Number one, our plant in Neon is on a schedule. We expect that plant to be mechanically complete and hopefully commissioned by, as you said, December of 2026. And we should have product for sale in early 2027 in terms of the cracking technology, which I think is what you are referring to with the ammonia dissociator. We have proven that technology, and we obviously will deploy it like in total and in other places.
Speaker Change: Jeff Good morning number one.
Speaker Change:
Speaker Change: Plant in Neil is on schedule.
Speaker Change: Expect that plant to be mechanically complete.
Speaker Change: And hopefully commissioned by as you said December of 'twenty, two 'twenty shakes and we should have product for sale in early 2027.
Speaker Change: In terms of the day.
Jeff Zagokas: Okay, great. When I look at Air Products results, which I think are not dissimilar from what's happening with Air Leaky or Linda, there's been a slowdown in volume over time and there's also been a slowdown in price, price change. Now, it's hard to know whether raw materials have moved down, and so probably on-site prices have moved down, which in the end doesn't really matter very much.
Seifi Ghasemi: But can you talk about the sequential change in merchant prices and the overall volume slowdown in the industrial gas industry? Jeff, I would say that we have an overall reduction in industrial gases. Our merchant volumes in the US is okay, and the pace that then you look at overall at the air products where we are seeing a slowdown is obviously in China, and that affects our numbers.
Seifi Ghasemi: In terms of pricing, I can only comment on the past; I will not comment on the future. But obviously, when you increase prices, there comes a time, well, year to year, you don't show a huge amount of improvement because there is a limit to what you can increase the price to, because people find alternatives, and there is a certain price at which you start being demand destructive. I feel very good about what our people have done with pricing, and our overall volumes in the US is good. In Europe, it's a study, but it is weak in China.
Speaker Change: Year to year, you don't sure sure.
Speaker Change: Huge amount of improvement because there is a limit to what you can increase the price too because that.
Speaker Change: People find alternatives and.
Speaker Change: You know that there is a certain price at which you start being demand destructive.
Speaker Change: So I feel very good about what our people have done with pricing.
Speaker Change: And our overall volumes in the U S is good.
Speaker Change: In Europe, it's steady, but it is weak in China. No question about that we have talked about that that was one of the principal reasons that the missed our estimate in the first quarter.
Seifi Ghasemi: No question about that.
Seifi Ghasemi: We have one of the principal reasons that we missed our estimate in the first quarter, but it has stabilized, but we are not seeing much growth in that part of the world. Thank you so much.
Speaker Change: But it has stabilized, but we are not seeing much growth in that part of the world.
Speaker Change: Great. Thank you so much.
Vincent Andrews: Thank you very much. Our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thank you. Good morning, Stacy.
Speaker Change: Thank you very much.
Unknown Executive: No question about that. We have talked about that before. That was one of the principal reasons that we missed our estimate in the first quarter, but it has stabilized, but we are not seeing much growth in that part of the business. Thank you so much. And our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thank you, and good morning, Stacey. I'm wondering if you can give us an update on the sustainable aviation fuel project out in Los Angeles, both in terms of, you know, how the relationship with World Energy is going and the JV itself, as well as the permitting process and what your expectations are, if there's any update in terms of timeline or customers or just anything we should know incrementally there. Good morning, Vincent.
Seifi Ghasemi: I'm wondering if you can give us an update on the Sustainable Aviation Fuel Project out in Los Angeles, both in terms of how the relationship with World Energy is going and the JV itself, as well as the permitting process and what your expectations are if there's any update in terms of timeline or customers or just anything we should know incrementally there. Good morning, Vincent. In terms of our relationship with world energy, we have a very good relationship with them. Obviously, we have been working with them for a few years.
Unknown Executive: In terms of our relationship with World Energy, we have a very good relationship with them. Obviously, we have been working with them for a few years. In terms of the status of the project, we have put that project on hold until we get our permits. We always said that that process would probably take a year, and we still expect it to take that long. In terms of the demand for the product and all of that, you know, SAF seems to be very much in demand, and as you have seen, Vincent, I mean, you're very well informed, a lot of people are trying to make SAF all over the world.
Seifi Ghasemi: In terms of the standards of the project, we have put that project on hold until we get our permits. We always said that that process will probably take a year, and we still expect that. In terms of their demand for the product and all of that, you know, SAF seems to be very much in demand. And as you have seen, Vincent, I mean, you're very, very informed. A lot of people are trying to make SAF all over the world. So we just got a contract to supply hundreds and to a unit in Europe. So we feel pretty good about that project, but it is on hold until we get our permits. Considering that we are operating in the state of California, we just have to wait and see how that works out.
Unknown Executive: So we just got a contract to supply hydrogen to a unit in Europe. So we feel pretty good about that project, but it is on hold until we get our permits. I have to wait and see how that works. Okay, and as a follow-up, the tax rate in the quarter came in a little bit lower than we had expected. Should we assume that same tax rate in the fourth quarter? I would like to turn that question to Melissa to give you some color on that. Thank you very much.
Melissa Schaeffer: Okay, and as a follow-up, the tax rate in the quarter came in a little bit lower than we expected. Should we assume that same tax rate in the fourth quarter?
Melissa Schaeffer: I would like to turn that question to Melissa to give you a color on that. Thank you. I appreciate that. Thank you. I appreciate that.
Melissa Schaeffer: So for, as we mentioned in the comments, we did see a lower tax rate this quarter, but for the full year, we do expect it to be at 18%. We had a number of one-time items that occurred this quarter. For example, there was a significant stock option exercise and some foreign restructuring, which did support the lower tax rate. But again, 18% is what you should forecast for the year.
David Beckleiter: Thank you. And we'll take our next question from David Beckleiter with the Deutsche Bank. Please go ahead. Thank you. Good morning. I'm safe. Good morning, David. Good morning.
Unknown Executive: Thank you. And we'll take our next question from David Begleiter with Deutsche Bank, please go ahead. Our Alberto project will come on stream sometime in 2025. Okay. And just in the queue for guidance, it is a bit wide. Why is it so wide?
Speaker Change: With Deutsche Bank. Please go ahead.
Speaker Change: Thank you good morning.
Speaker Change: I'm, saying good morning, David.
Seifi Ghasemi: Do you have an update on the Alberta project as to when it will start up? And we'll contribute to 25 earnings? Our Alberta project will come on stream sometimes in 25. And whether it will contribute to our fiscal year results, we have to wait and see exactly when that project comes on the stream. We are building a plant in the middle of Alberta. You know what the winters are like. So it's anybody's guess how much construction and how fast construction we can do during this winter.
Speaker Change: Good morning, do you have an update on the Alberta project as to when it will start up.
Speaker Change: And will contribute to <unk> 25 earnings.
Speaker Change: Our Alberta project will come on stream, sometimes in 'twenty five.
Speaker Change: And when it will contribute to our fiscal year.
Speaker Change: Yeah.
Speaker Change: Results.
Speaker Change: We have to wait and see exactly when that project comes on stream. We are building a plant in the middle of the.
Speaker Change: Oh Delta you know what the vintages are like so it's.
Seifi Ghasemi: So I don't want to commit to any specific date. We are going to give you when we issue our guidance for the year, we are going to be conservative and assume no contribution from that project in 25. Understood.
Unknown Executive: And what would cause you to come in at the higher end or lower end of the guidance range? Thank you. The Federal Reserve hasn't made up its mind about exactly what they want to do. There are a lot of unknowns. You should focus, and I would appreciate it if you focused on the year guidance rather than just the quarterly guidance. Thank you.
Seifi Ghasemi: And just like you for guidance, it is a bit wide. Why so wide and is what would cause you to come in at the higher end or lower end of the guidance range. Thank you. David, you make a very good point. Number one, we didn't want to change the guidance for the year, quite honestly. So, by default, you end up with the numbers that you have. Because I thought if you start changing the guidance for the year, it might get misinterpreted because we either had to move the bottom up or the top down. But there is good reason for the wide range, David.
Seifi Ghasemi: You see the news; the geopolitical situation in the world is very unstable. We are going through an election cycle. The Federal Reserve hasn't made up their mind about exactly what they want to do. There is a lot of unknowns. And therefore to try to kind of try the needle and come up with a five cent range and so on. We did that last quarter because it was I was not as worried about the overall geopolitical situation as I am now.
Seifi Ghasemi: But overall, I think you should focus. I would appreciate it if you focus on the year guidance rather than just the quarter guidance. Yeah, we are going to be somewhere between 12-20 and 12-50, right? Understood. Thank you.
Speaker Change: <unk> guidance, rather than just the quarter guidance, yes, you are going to be somewhere between 12 20 onto a 50 right.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you.
Christopher Parkinson: We'll take our next question from Chris Parkinson with Wolf Research.
Unknown Executive: And we'll take our next question from Chris Parkinson with Wolf Research. Please go ahead. What else do we expect? Our onsite volumes, especially hydrogen, are very strong in the U.S. Unless something significantly unexpected happens with the interest rates and with the election, we all know what to expect. It's either one or the other, so I don't think that will change things that much. Then, with respect to Europe, Europe is holding up relatively well.
Speaker Change: We will take our next question from Chris Parkinson with Wolfe Research. Please go ahead.
Seifi Ghasemi: Please go ahead. If you put together a couple of decent quarters, I should say good, between the US and Europe, and yet the macro, I think, across all geographies has been fairly choppy, and you've been navigating a lot of difficulties across the board, and yet you're moving in the right direction now. Can you just give us a quick update on some of the key things that you're seeing on a regional basis, specifically what's the latest in manufacturing and electronics, perhaps a little update on helium and Asia, just putting everything together now that we are in a more favorable trajectory.
Speaker Change: Great.
Chris Parkinson: Safety, you've put together a couple of decent quarters.
Speaker Change: I should say good between the U S and Europe and yet you know the macro I think across all geographies has been fairly choppy and you've been navigating a lot of.
Speaker Change: A lot of difficulties across the board and yet you're kind of moving in the right direction. Now. So can you just kind of give us a quick update on some of the key things that you're seeing on a regional basis, specifically you know what what's the latest in manufacturing and electronics, perhaps a little update on helium in Asia just.
Speaker Change: Putting everything together now that we are more capable trajectory I'd love to just hear your thoughts on entering 2025. Thank you so much.
Seifi Ghasemi: I'd love to hear your thoughts on entering 2025. Thank you so much.
Seifi Ghasemi: Thank you, Chris. That's an excellent question. Chris, on a macro basis, I'm always an optimist and I'm generally optimistic. I think the US economy has proven everybody wrong. It is moving stronger than what we expected. Our unsight volumes, especially hydrogen, is very strong in the US and the merchant business is doing fine. For the US, I feel very comfortable going into 2025, and less something significantly unexpected happens with the interest rates and with the election. We all know what to expect. It's either one or the other. I don't think that will change things that much.
Seifi Ghasemi: Then, with respect to Europe, Europe is holding up relatively well. We have been successful in holding on to the price increases that is making sure that we have a good margins there. My only concern going into 2025 is how would Asia develop? But considering where China is right now, I don't expect it to get any worse. Some people are predicting that the things will improve, especially in the electronic sector, as you mentioned, but we will wait and see. Overall, going into 2025, I'm very optimistic for sure about their products and in terms of our ability to deliver the growth that we, in general, want, which is 10% growth every year on our EPS.
Unknown Executive: We have been successful in holding on to the price increases that are making sure that we have good margins there. And then my only concern going into 2025 is how will Asia develop? But considering where China is right now...
Unknown Executive: I'm very optimistic for sure about Air Products, that we kind of own their whole supply chain; we produce the green hydrogen. Then we build the station. We will own the station. We might own the station jointly with some other people and sell it to the end customer, to the truck company, or the train company or anybody else.
Speaker Change: In general are ones, which is 10% growth every year on our EPS.
Seifi Ghasemi: Thank you for the color.
Speaker Change: Thank you for the color.
Seifi Ghasemi: Thank you.
Speaker Change: Thank you.
Duffy Fisher: We'll take our next question from Duffy Fisher with Goldman Sachs. Please go ahead. Yes, good morning, guys. Good morning, Duffy. How are you? Good, thanks.
Speaker Change: And we will take our next question from Duffy Fischer with Goldman Sachs. Please go ahead.
Duffy Fischer: Yes, good morning, guys.
Speaker Change: Good morning, dummy Duffy how are you.
Duffy: Good thanks.
Seifi Ghasemi: If you could maybe talk us through what the economics look like for the two hydrogen stations that you called out, the one that you were going to do in Europe and then the one in California. Roughly how much capital is that? And then what's the business model there? Will you own the stations and then push your hydrogen through it? Or will other people own it and just source from you? Can you give us some rough scope of what that project looks like?
Speaker Change: You could.
Speaker Change: Talk us through what the economics look like for the two hydrogen stations that you called out the one that you were going to do in Europe, and then the one in California, roughly how much capital is at and then what's the business model. There will you own the stations and then push your hydrogen through it or will other people own it and just sort.
Speaker Change: From you.
Speaker Change: Can you give us some rough scope of what that project looks like.
Seifi Ghasemi: Sure. Duffy, our intention is that we kind of go on their whole supply chain. We produce the green hydrogen; we move it, whether it's in form of liquid or in form of ammonia that we then crack. Then we build the station. Then we will own the station; we might own the station jointly with some other people, but we will have control over the station, and we will sell it to the end customer: to the truck company or the train company or anybody else. So we want to own the whole supply chain, and that is why, in terms of economics, obviously, it depends; the capital deployed, it depends on the number of stations you are going to build. That will be a gradual development depending on how much products we have and all of that.
Doug: Sure Doug.
Speaker Change: Our intention.
Speaker Change: Is.
Speaker Change: That.
Speaker Change: That the kind of go on the whole.
Unknown Executive: So we want to own the whole supply chain. All four, application of decarbonizing refineries, then obviously, we will build a new one too, and therefore, building the stations will be a little bit delayed. And same thing in California.
Seifi Ghasemi: I mean, right now we fully intend to build these stations in Europe and in California, but in Europe, if we sell out new all for application of decarbonizing refineries, then obviously we will build a new home to, and therefore building the stations will be a little bit delayed, and same thing in California. So it very much depends on how the market develops, but the idea is exactly what you said: that we will either own the station 100% or we share the ownership with Air Products and control so that we make sure that our molecules are the molecules that are going through it.
Unknown Executive: So it very much depends on how the market develops, but the idea is exactly what you said. We might or might not sell them the molecules. It depends.
Seifi Ghasemi: And if other people build stations, we might or might not sell them the molecules; it depends.
Seifi Ghasemi: Great.
Unknown Executive: And then for the second one, if I could, when we look at the sequential walk from Q3 to Q4, at the midpoint of the guide, it's up 28 cents. But Melissa just talked about having a tax headwind sequentially that might be a nickel or a dime. Can you bridge us to getting, you know, let's say 30 cents better in EPS going from Q3 to Q4? What drives that?
Seifi Ghasemi: And then for the second one, if I could, when we look at the sequential walk from Q3 to Q4, at the midpoint of the guide, it's up 28 cents, but Melissa just talked about having attacks headwind sequentially that might be a nickel or a dime. Can you bridge us to getting, you know, let's say that 30 cents better in EPS going from Q3 and Q4? What drives that? What drives that is, that's obviously a very good question. What drives that is that number one is, when you look at our results in the last 10 years or 15 years or 20 years, fourth quarter of our fiscal year is one of our strongest quarters.
Unknown Executive: When you look at our results in the last 10 years or 15 years or 20 years, the fourth quarter of our fiscal year is one of our strongest quarters. It is not just one of us; it is our strongest quarter, so we expect that we would have better results than the 320 just because of the cyclicality. The second reason is that we have taken serious productivity actions. You are seeing some of the results in this quarter, but you'll see a lot more of that in the next quarter.
Seifi Ghasemi: It is not only one of, it is our strongest quarter. So we expect that we would have better results than the 320 just because of the cyclicality. The second reason is that we have taken serious productivity actions. You are seeing some of the results in this quarter, but you'll see a lot more of that in the next quarter. And then the third thing is that we do have some new smaller projects coming on a stream that will contribute. So we feel pretty confident that we should be able to, as you said, bridge that 30 cents and deliver the midpoint of what we have delivered, you know, the 3.48 that we need to get to the midpoint of our guide.
Unknown Executive: And then the third thing is that we do have some new smaller projects coming on stream that will contribute. So we feel pretty confident that we should be able to, as you said, bridge that 30 cents and deliver the midpoint of what we have delivered, you know, the 3.48 that we need to get to the midpoint of our guidance. Terrific. Thank you, guys. Please go ahead. Thank you very much. This is Alvaro Tijano filling in for Steve.
Seifi Ghasemi: Terrific.
Seifi Ghasemi: Thank you, guys.
Steve Bern: Thank you. We'll take our next question from Steve Bern with Bank of America. Please go ahead.
Seifi Ghasemi: Thank you very much. This is how I look at the annual feeling for Steve. So, firstly, I want to go back a little bit to the Louisiana Project where you mentioned you're still on track for a 2028 startup. And you made the comment that blue ammonia would be sold to the export market for energy. However, it seems like companies such as some of the major Japanese utilities will probably not need that much ammonia, if any at all, at that time; perhaps you have to wait two or three years.
Unknown Executive: So firstly, I want to go back a little bit to the Louisiana project where you mentioned you're still on track for a 2028 startup, and you made the comment that blue ammonia would be sold to the export market for energy. However, it seems that companies such as some of the major Japanese utilities will probably not need that much ammonia, if any, at all, at that time. Perhaps you will have to wait two or three years. So is it safe to assume that you will not focus on ammonia till perhaps 2030? Or are there any other outlets for that when you start up?
Seifi Ghasemi: So, if it takes to assume that you will not focus on ammonia, you'll perhaps 2030, or are there any other outlets from that when you start up? Thank you for your question. Obviously, we are hearing a different story from them. I don't know what they tell you, but they tell us there is a lot of demand. But there is also another sector that is developing pretty rapidly, and that is ammonia for as a marine fuel for shipping. So, we feel pretty confident that by 2028, we will be able to start loading that facility. We also have the capacity and capability of balancing between hydrogen and ammonia.
Speaker Change: Is it safe to assume that.
Speaker Change: You will note folks from ammonia, perhaps 2030 or are there any other outlets for that when you start up.
Speaker Change: Okay.
Unknown Executive: Well, thank you for your question. Obviously. We are hearing a different story from them. I don't know if we will be able to start loading that facility. We also have the capacity and capability of balancing between hydrogen and ammonia, and we do have the pipeline. And I think by 2028, a lot of our existing customers might want blue hydrogen instead of Greyhound. Well, we hope that we get our permit and we hope to finish the plan, but we have to wait for the permits because we don't want to commit and then find out there is an issue with the permit, or we have to wait some more.
Speaker Change: Thank you for your question obviously.
Speaker Change: We are hearing a different story from them I don't know.
Speaker Change: What they tell you, but they tell US there is a lot of demand, but there is also another sector that is developing pretty rapidly.
Speaker Change: And that is ammonia for.
Speaker Change: As a marine fuel.
Speaker Change: Our shipping.
Speaker Change: So we feel pretty confident that by.
Speaker Change: 2028.
Speaker Change: We will be able to start loading that facility.
Speaker Change: We also have the capacity and capability of <unk>.
Speaker Change: Balancing between hydrogen in ammonia and we do have the pipeline in 19 by 2028.
Seifi Ghasemi: And we do have the pipeline, and I think by 2028, a lot of our existing customers might want blue hydrogen instead of gray hydrogen.
Speaker Change: Out of our existing customers might one blue hydrogen instead of.
Speaker Change: Great hydrogen.
Seifi Ghasemi: Perfect.
Speaker Change: Perfect and I wanted to go back to work.
Seifi Ghasemi: And I wanted to go back a little bit to the World Energy Project. You mentioned that it's roughly a one-year project, one-year timeline to get the permit. I think the project itself was announced over two years ago. So, if it takes to assume you didn't actually apply for permits in over a year after that, then when is kind of the one year deadline that you kind of alluded to? And that is mean at that point, you're going to proceed with the final FID, and we're going to know if it's a go or no go. Well, we hope that we get our permit, and we hope to finish the plan, but we have to wait for the permits because we don't want to commit and then find out there is an issue with the permit, or we have to wait some more.
Speaker Change: The NRG project, you mentioned that you took.
Speaker Change: Roughly a one year.
Seifi Ghasemi: So, I'm not sure if there is anything more for me to add. We are just waiting for the permit. We don't want to hurry up like we did last time and start getting ahead of ourselves and then finding that the permit gets challenged, and all of that. We want to make sure that it is put it through before we have final FID decision. Thank you.
Unknown Executive: We are just waiting for the permit. We don't want to hurry up like we did last time and start getting ahead of ourselves and then finding that the permit gets challenged and all of that. We want to make sure that it is bulletproof before we have the final FID decision.
Michael Leithead: I'm going to take our next question from Mike Leithead with Barclays. Please go ahead. Great. Thank you. Good morning, guys.
Unknown Executive: Okay, thank you. We'll take our next question from Mike Leithead with Barker. Please go ahead, risk by being a first mover.
Seifi Ghasemi: I wanted to ask them a total green hydrogen agreement. I appreciate you likely won't talk about pricing. If you want to give us the agreed-upon price, I'd happily take it. But can you speak to the return hurdle of this agreement? You've obviously taken a lot of risk by being a first mover. So, in this validation, are you getting a return profile that is materially above your traditional project hurdle? Well, you know, you're asking a very good question. Obviously, the answer to that is yes. But I hope you have some sympathy with me that we are negotiating with people to sell them something, and you don't expect me to be sitting here on a public call saying, "Hey, we're going to make a lot of money."
Speaker Change: Basically I wanted to ask him a total green hydrogen agreement I. Appreciate you likely won't talk about pricing. If you want to give us the agreed upon price I'd happily take it but can you speak to the return hurdle of disagreement and you've obviously taken a lot of risk by being a first mover. So so in this.
Unknown Executive: So in this validation, are you getting a return profile that is materially above your traditional project hurdle? Well, you're asking a very good question. Obviously, the answer to that is yes.
Speaker Change: Validation are you getting a return profile that has a materially above your traditional project hurdle.
Speaker Change: Well you know you are asking a very good question, obviously the answer to that is yes.
Unknown Executive: But I hope you have some sympathy with me that we are negotiating with people to sell them something, and you don't expect me to be sitting here on a public call saying, hey, we are going to make a lot of money, right? So we have to be cautious in terms of our comments, but you can be sure that, as I have always said. We have taken the risk, and therefore the reward should be higher than what we do when we do things that are no risk, not risky.
Speaker Change: But I hope you'll have some sympathy with me that we are negotiating with people to sell them something and you don't expect me to be sitting here on a public call, saying, Hey, we're going to make another money right. So.
Seifi Ghasemi: Right. So we are; we have to be cautious in terms of our comments. But you can be sure that, as I have always said, we have taken the risk, and therefore the reward should be higher than what we do when we do things that are not risky. Not risky. Makes a lot of sense.
Speaker Change: Sure.
Speaker Change: They have to be cautious in terms of our comments, but you can be sure that as I have always said.
Speaker Change: We have taken the risk and therefore, the reverse should be higher than what we do when the two things that are noticed not risk.
Speaker Change: Makes a lot of sense and then I think you've talked before about being excited about building like you just said two or other large clean energy projects, but at the same time, you didn't want to commit.
Seifi Ghasemi: And then I think you've talked before about being excited about building, like you just said, Neon Two or other large clean energy projects, but at the same time you didn't want to commit to announcing much until you've signed tangible off-take agreements for what you already have out there. So now that we have the total contract, that sounds like you're far along with some other negotiations. Should we expect further clean energy project announcements and say the next 12 months or so? I will only commit to that if we have announced enough projects so that the investors see that we are sold out.
Seifi Ghasemi: You know, I don't want to say that, okay, we have sold 35% of neon. Therefore, we should rush and go and build Neon number two. I'd like to wait until we have sold 80% of neon and then commit to that. So we are going to be conservative and cautious and not to get ahead of ourselves, but the fact that we have demonstrated that there is significant volume demand is the good sign because, until a few months ago, you have seen the slides from some of our competitors. Where they put it in writing that there is no demand for green hydrogen.
Unknown Executive: The fact that we have demonstrated that there is significant volume demand is a good sign because until a few months ago, you saw the slides from some of our competitors where they put it in writing that there is no demand for green hydrogen. New Neon Project, but it will depend on how fast we progress with signing contracts for the current production. Wells Fargo.
Seifi Ghasemi: So I think, and now it's obviously a little bit of a different story. There is demand for green hydrogen. But I would like to give some confidence to the investors that we are truly have signed enough things that it is sold out before we commit to additional projects. Depending on how fast those things come, you are right; it might be that in a year we will announce a new project, but it will depend on how fast we progress with signing contracts for the current production. Thank you.
Michael Sison: Thank you so much. Thank you.
Seifi Ghasemi: We'll take our next question from Mike Sison with Wells Fargo. Please go ahead. Hey, good morning. Nice quarter and an outlook.
Unknown Executive: Please go ahead. Hey, good morning, nice quarter and outlook. So when you think about 25, and I know it's a little bit early to give any specific outlooks, how much earnings growth do you think will be anchored by your projects next year? And maybe any, any sort of color you can have in terms of, you know, how much that could help or kind of sort of support some earnings growth next year? Well, good morning, and thanks for your comment. You know...
Seifi Ghasemi: The city, so when you think about 25, I know it's a little bit early to give any specific outlooks. How much earnings growth do you think will be anchored by your projects next year? And maybe any sort of color you can have in terms of how much that could help or kind of support some earnings growth next year. Thank you.
Unknown Executive: It would be very difficult right now to give you details. We are going to give you all those details when we announce our fourth quarter results. But in general, I would like to say that Air Products and today we are committing that for the next 10 years, we will do the same. So our target, our goal, our challenge is to deliver at least 10% growth next year. But we will obviously, we are going through the budgeting process. We'll have all of the details, and then we'll give you a number when we announce our results in late October or early November.
Seifi Ghasemi: Good morning, and thanks for your comment. You know, it would be very difficult right now to give you details. We are going to give you all those details when we announce our fourth quarter results. But in general, I would like to say that Air Products 10 years ago, we committed to delivering an average of 10% growth in earnings. And today we are committing that for the next 10 years, we will do the same. So our target, our goal or challenge, is to deliver at least a 10% growth for next year. But we will obviously are going through the budgeting process.
Seifi Ghasemi: We will have all of the details, and then we will give you a number when we announce our results in late October or early November. Great. Thank you.
John Roberts: And we will take our next question from John Roberts with Mizzouho. Please go ahead. Thank you and best wishes to welcome Eric and Mon. Thanks for being the rock. Stephanie, in your price discussions on clean hydrogen between Alberta, Louisiana, Neil, I know you don't want to give any details, but is there a really wide range that you're seeing in terms of discussions with customers, and have they all been assumed above gray hydrogen plus a carbon credit?
Unknown Executive: Great, thank you. Thank you. Thank you. And we'll take our next question from John Roberts with Miss Steffi, please go ahead. Steffi, in your price discussions on clean hydrogen between Alberta, Louisiana, and Neom, I know you don't want to give any details, but is there a really wide range that you're seeing in terms of discussions with customers? And have they all been, I assume, above gray hydrogen plus a carbon credit
Speaker Change: Neil.
Neil: I know you don't want to give any details but is there a really wide range.
Neil: That youre seeing in terms of discussions with customers and have they all been I assume above gray hydrogen plus of carbon credits.
Neil: Uh huh.
Seifi Ghasemi: Let's have a good morning, John. You know, the guidance that the overall guidance that they have been telling people is if the gray price is something, the blue price is at least twice that and the green price is twice that. So it's double for blue and then double blue for green, and that is the kind of overall guidance for pricing. So I think you all have a pretty good idea of the kind of pricing that we are looking for, and we are getting that. And I think that the pricing can really improve as we go forward, then the demand exceeds the supply.
Neil: First of all good morning, John.
Unknown Executive: [inaudible] It, you know. The guidance that the overall guidance that we have been telling people is: If the gray price is something, the blue price is at least twice that, and the green price is twice that. So, it's double for blue, and then double blue for green.
Speaker Change: You know the.
Speaker Change: <unk> that the overall guidance that we have been telling people is.
Speaker Change: If the grain price is something they blew prices at least twice that and the green prices twice that so it's natural for.
Speaker Change: Blue and then debut for Green.
Speaker Change: And that is the kind of.
Unknown Executive: And that is the kind of Overall Guidance for Pricing. And I think that the pricing thing will improve as we go forward when demand exceeds supply. And that's the price at the customer receipt level, and your net back pricing will be significantly different across the various customers because, obviously, some in Alberta are right next door. And, Well, the thing is that, you know, there is some element of that, but we do take that into consideration when we give the pricing. I mean, if it is very difficult to serve a customer, then obviously the price will be significantly higher than if, as you said, somebody is next to you.
Speaker Change: Overall guidance for pricing so.
Speaker Change: Ah.
Speaker Change: I think cat.
Speaker Change: And you all have a pretty good idea of the kind of pricing that we are looking for and we are getting that.
Speaker Change: And I think that the pricing team will improve as we go forward when the demand exceeds the supply.
Seifi Ghasemi: In that price at the customer receipt level, and your net back pricing will be significantly different across the various customers because obviously some in Alberta, right next door, and for neon, it's going to be pretty far away. Well, the thing is that, you know, there is some element of that, but we do take that into consideration when we give the pricing. I mean, if it is very difficult to serve a customer, then obviously the price will be significantly higher than if, as you said, somebody is next to.
Speaker Change: And that's priced at the customer.
Speaker Change: Pete level in your netback pricing will be significantly different across the various customers because obviously some in Alberta, Alberta right next door in.
Speaker Change: And for Neil them, it's going to be pretty far away.
Speaker Change: Well the thing is that you know there is some element of that but.
Speaker Change: We do take that into consideration when we give the pricing I mean, if it is very difficult to serve a customer then obviously the price will be significantly higher than if as you said if somebody's next door.
Seifi Ghasemi: Okay, thank you.
Speaker Change: Okay. Thank you.
Joshua Spector: Thank you. We'll take our next question from Josh Spector with UBS. Please go ahead. Yeah, hi, good morning. So I wanted to follow up on the question earlier around your commitment to announce additional projects. I think during the quarter you've been more explicit that you won't FID. I believe any projects until you get more off-takes. And I wanted to see, you know, how precise we should be taking that language. So you talked about Neon earlier, but as we think about Louisiana, should we think about both of those need to reach 80% off-takes before you announce anything else, or is your expectation to be loose to them that?
Speaker Change: Thank you.
Speaker Change: We will take our next question from Josh Spector with UBS. Please go ahead.
Unknown Executive: Okay, thank you. Thank you. To take our next question from Josh Spector with UBS, please go ahead. Yeah, hi, good morning.
Unknown Executive: So I wanted to follow up on the question earlier around your commitment to announce additional projects. I think during the quarter, you've been more explicit that you won't FID, I believe, any projects until you get more offtakes. And I wanted to see, you know, how precise we should be taking that language. So you talked about NEOM earlier. But as we think about Louisiana, should we think about both of those needing to reach 80% offtakes before you announce anything else? Or is your expectation to be looser than that?
Seifi Ghasemi: I think you should expect that we would kind of see our way of loading those three facilities that you talked about.
Unknown Executive: I think you should expect that we would, kind of, see our way of loading those three facilities that you talked about. Neon, fully loaded before we make an FID for another project. There is one other project that we are working on, which is the project that we did announce, the Green Hydrogen Hydrogen Project in Northern Texas. But for that project, we have not taken FID. We do not plan to take any FID until we have total clarity on what the IRA rules are for interpretation of what green hydrogen is.
Seifi Ghasemi: Neon, Louisiana, and Edmonton fully loaded before we make an FID for another project. There is one other project that we are working on, which is the project that we did announce Green Hydrogen project in Northern Texas. But that project, we have not taken FID. We do not plan to take any FID until we have total clarity on what the IRA rules are for interpretation of what is green hydrogen. So, other than that, I don't expect us to make any announcements until we see our way very clearly. And this is quite frankly a fundamental issue of being respectful to the investors.
Unknown Executive: So other than that, I don't expect us to make any announcements until we see our way very clearly. And this is, quite frankly... A fundamental issue of being respectful to investors. I think we announced many, many projects, and the investors got very concerned. And that is why, I mean, our stock should be $400 now, and it is at, I don't know $285, $290, or $300.
Speaker Change: Okay.
Speaker Change: And this is at a quite frankly.
Speaker Change: Fundamental issue of being respectful to the investors I think we announced many many projects and the investors got very concern and that is volume in our stock should be $400 now and it is at.
Seifi Ghasemi: I think we announced many, many projects, and the investors got very concerned. And that is, well, I mean, our stock should be $400 now, and it is at, I don't know, $280, $5, $290, $300. But the reason for that is that I think we got the investors a little bit concerned that we are getting ahead of ourselves. We didn't think so, but certainly the impression was for the investors that we are building plans without having a clue about where to sell it. That was never the case, but that was the impression. So I don't want to get into that mood again.
Speaker Change: I don't know $2 85 to 9300, but.
Unknown Executive: But the reason for that is that I think we got the investors a little bit concerned that we are getting ahead of ourselves. Thanks; I appreciate that. Just a quick follow-up then on Texas, I guess, specifically, do you consider that a new project? So if we get IRA clarity, IRA clarity, in the next, I don't know, six, nine months, but Japan takes longer to say what their credits are going to be for blue hydrogen into utility coal energy production, is that something you would FID, that Texas project, without that Louisiana project sold out? Or is a Louisiana project or another project that sold out the limiting factor in your view?
Speaker Change: That's the reason for that is that I think we got the investors a little bit concerned that youre getting ahead of ourselves. We didn't think so but certainly the impression was for the investors that we are building plants without having a clue about where to sell it that was never the case, but that was the impression so I don't want to get it.
Speaker Change: Into that mood again, we want to fully demonstrate that there is demand before we make any F. I D C announced any major projects.
Seifi Ghasemi: We want to fully demonstrate that there is demand before we make any FID, announce any major projects. Thanks. So I appreciate that. Just a quick follow-up then on Texas, I guess specifically, do you consider that a new project? So if we get IRA clarity in the next, I don't know, six, nine months, but Japan takes longer to say what their credits are going to be for blue hydrogen into utility, coal, energy production. Is that something you would FID that Texas project without that Louisiana project sold out, or is Louisiana project or whatever project sold out the limiting factor in your view?
Speaker Change: Thanks, I appreciate that and just a quick follow up then on Texas I guess, specifically do you consider that a new project. So forget IR clarity IRA clarity in the next I don't know six nine months, but Japan takes longer to say what their credits are going to be for blue hydrogen into.
Speaker Change: Utility coal energy production is that something you would F E that Texas project without that Louisiana project sold out or is the Louisiana project or whatever projects sold out the limiting factor in your view.
Seifi Ghasemi: The project in Northern Texas, we can demonstrate to you that it is fully sold out in a few years because that project is directed at making liquid green hydrogen, liquid green hydrogen, and that is targeted for the market in California. We can easily transport that without any significant cost to California. And then you look at the demand in California for green hydrogen and the number of stations and so on, you can easily come up with the demand to fill that project up. The main reason that we are holding on that project is because we want to understand what is the definition of green, and we know that we qualify to get $3.
Unknown Executive: The project in Northern Texas in a few years because that project is directed at making liquid green hydrogen. Liquid Green Hydrogen. We know that we qualify to get the $3. We want to see if other people qualify to get the $3 or not.
Speaker Change: And the project in Northern Texas.
Speaker Change: And we can demonstrate to you that it is fully sold out.
Speaker Change: Ah.
Speaker Change: In a few years because that project is directed at making liquid.
Speaker Change: Green hydrogen.
Speaker Change: Liquid green hydrogen.
Speaker Change: And that is targeted for the market in California.
Speaker Change: We can easily transport that without any significant cost to California.
Speaker Change: And when you look at the demand in California for Green hydrogen and the number of stations and so on you can easily come up with the demand to fill that project up. The main reason that we are holding on that project is because we want to understand what is the definition of green and.
Speaker Change: We know that the qualified to get $3, we want to see if other people qualified to get the $2 or not but.
Seifi Ghasemi: We want to see if other people qualify to get the $3 or not. But I am very, very confident about very confident about the fact that we can sell that product for very good prices. Right now we are selling green hydrogen into that market at close to $30 a kilogram, $30 a kilogram. If you do the math, that makes everything; so the project in Northern Texas is very much, we are waiting for the definition of the IRA. And as you said, I don't think we will have clarity on that until probably the beginning of next year.
Unknown Executive: But I am very, very confident about the We are waiting for the definition of the IRA. And as you said, I don't think we will have clarity on that until probably the beginning of next year. So we are not going to do anything until then.
Speaker Change: I am very very confident.
Seifi Ghasemi: So we are not going to do anything until then. Okay. Understood.
Unknown Executive: Okay, I understand. Thank you. Yep.
Patrick Cunningham: Yep, thanks. I think. Operator, we have time for two other questions, please. Thank you. The next question comes from Patrick Gunningham with City. Please go ahead. Hi. Good morning, everyone. Maybe I just wanted to follow up. You mentioned the election multiple times. I just want to understand your latest and greatest thoughts on what either outcome might mean for the two pillars of your business. And then maybe more specifically what you think each outcome might mean for the interpretation of the IRA rules. I am not sure I am fully interested. Can you just hold on? I mean, it's a sit.
Unknown Executive: Thanks, Jeffy. Operator, we have time for two other questions, please. Thank you. The next question comes from Patrick Cunningham with Citi. Please go ahead. Hi, good morning, everyone.
Unknown Executive: I just wanted to follow up, you mentioned the election multiple times, I just want to understand your latest and greatest thoughts on what you think either outcome might mean for the two pillars of your business, and then maybe more specifically, you know, what you think each outcome might mean for the interpretation of the IRA rule. I'm sorry, I'm not sure I fully understood. Can you just hold on, let me sit, can you?
Unknown Executive: Yeah, I think the question was related to the IRA guidance and whether the incumbents or a new administration coming in. What does that mean? Well, the IRA is the part that is related to us. One dimension is the so-called 45Q, which is that you get $85 per ton of CO2 that you sequester, irrespective of the fact that I might be using electricity that is made by burning coal. That is the controversy.
Seifi Ghasemi: Yeah, I think the question was related to the IRA guidance and with the incumbents or a new administration coming in. What does that mean? Well, the IRA is the part that is related to us. It has two dimensions. One dimension is the so-called 45Q, which is that you get $85 per ton of CO2 that you sequester. I think there is not much controversy around that rule. No matter which administration you have, I think that will get support. And that is why we are building the project in Louisiana. We feel very confident about that. The challenge is on the other part, which is called 45V, which is the $3 subsidy for Greenhatch.
Speaker Change: Administration, coming and what does that mean, well the island I Eh.
Speaker Change: Is that as the part that is related to us.
Speaker Change: It has two dimensions.
Speaker Change: One dimension is the so-called 45 Q.
Speaker Change: Which is that you get $85 per ton of C. O two that youll see questar.
Speaker Change: I think there is no not much controversy around that rude no matter, which administration you have I think that will get support and that is why we are building the project in Louisiana, we feel very confident about that.
Speaker Change: The challenge is on the other part which is called 45 V, which is the $3 subsidy for green hydrogen.
Seifi Ghasemi: And the controversy is very simple. What is the definition of green hydrogen? Is it enough to say, oh, I connected to the great, I'm getting electricity, I'm breaking down water and therefore I'm making green hydrogen and therefore give me the $3, irrespective of the fact that I might be using the electricity that is made by burning coal. That is the controversy. Obviously, Air Products' position has been crystal clear from day one, that we believe that green hydrogen means that you are using green electricity. If you are not using green electricity, then it is not green hydrogen, and green electricity should also be available 24 hours a day.
Speaker Change: And the controversy is very simple.
Speaker Change: What is the definition of green hydrogen.
Speaker Change: Is it enough to say all are connected to the grid I'm getting electricity I'm, breaking down water and therefore, I'm, making green hydrogen and therefore give me the $3.
Speaker Change: Irrespective of the fact that I might be using the electricity that is made by burning coal.
Speaker Change: It is the controversy.
Air Products: Obviously air products has position has been crystal clear from day, one that we believe that green.
Unknown Executive: Hydrogen means that you are using green electricity. If you are not using green electricity, then it is not green hydrogen. Hydrogen should also be available 24 hours a day. That means you need to prove that every hour you have green electricity. You can't.
Air Products: Hydrogen means that you are using green electricity.
Air Products: If you are not using green electricity.
Speaker Change: Then it is not.
Speaker Change: Green hydrogen.
Speaker Change: And green electricity.
Speaker Change: Should also be available 24 hours a day that means you need to prove that every hour you have green electricity you can't.
Seifi Ghasemi: That means you need to prove that every hour you have green electricity. You can't make a lot of green electricity during the day that the sun shines, and then say, okay, now in the night I'm going to connect to the grid. So, we have been very clear with our three pillars, and that is what we think is the definition of green. The administration, the current administration, has agreed with us. That is the way they have issued the rules that are public right now. The issue is they have not finalized the rules, and from what I hear, they are saying they are not going to finalize the rules until after the election.
Speaker Change: A lot of green electricity during the day that the Sunshine and then say okay now in the nighttime going to connect to the grid. So they have been very clear with our three pillars.
Speaker Change: And that is what we think is the definition of green.
Unknown Executive: The administration, the current administration has agreed with us, that is the way they have issued the rules that are public right now. And we are not going to go and commit billions of dollars building a facility not knowing what the exact interpretation is. Press and the Treasury Department, which we can certainly count on, and then we will proceed. No, thank you so much, Stacey. We'll only get there.
Speaker Change: The administration. The current administration has agreed with us.
Speaker Change: That is the way they have issued the rules.
Speaker Change: That are public right now.
Speaker Change: The issue is they have not finalized the rules.
Speaker Change: And from what I hear they are saying they are not going to find neurology rules and till after the election.
Seifi Ghasemi: So, the issue is if we have a change of administration, would the new administration see those rules as good or bad, or do they want to modify?
Speaker Change: So the issue is if you have a change of administration.
Speaker Change: The new administration.
Speaker Change: She those rules as good or bad or do they want to modify.
Seifi Ghasemi: And we are not going to co- and commit billions of dollars building a facility, not knowing what the exact interpretation is. So, we are going to wait until we have rules that have been approved, approved, pressed, and the Treasury Department that we can certainly count on, and then we will proceed. Sorry for the long answer, but I just wanted to address the whole issue.
Speaker Change: And we are not going to call them commit billions.
Speaker Change: Billions of dollars building a facility not knowing what the exact interpretation is so we're going to wait until we have rules that have been approved.
Speaker Change: Les and the Treasury Department that we can certainly count on and then we will proceed.
Speaker Change: Sorry for the long answer, but I just wanted to address our issue.
Seifi Ghasemi: No, thank you so much. Thank you.
Speaker Change: No. Thank you somewhat circular I'll leave it there.
Unknown Executive: We'll all leave it there. Thank you.
Speaker Change: Thank you.
Unknown Executive: Okay, operator, last question, please. Thank you. We'll take the last question from Lawrence Alexander with the Jeffries. Please go ahead. Hi, this is Dan Resowant for Lawrence. Thank you for fitting me in, and I'm sorry if I missed this, but have you put an update on the status for the hydrogen project in upstate New York? I don't remember that big mention recently. Yes, we are building a green hydrogen project in upstate New York. We are using hydro power to hydro power is green power, and the capacity of that plant is not huge; it's a small plant, 35 ton a day.
Speaker Change: Okay. Operator last question please.
Speaker Change: Thank you we'll take the last question from Laurence Alexander with Jefferies. Please go ahead.
Unknown Executive: Hi, this is Dan Rizzo on for Lawrence. Thank you for fitting me in. And I'm sorry if I missed this. But have you got an update on the status of the green hydrogen project in upstate New York? I don't remember that being mentioned recently, but hydropower is green power. And the capacity of that plant is not huge. It's a small plant, 35 tons a day.
Dan Rizzo: Hi, This is Dan Rizzo on for Laurence. Thank you for fitting me in and I'm, sorry, if I missed this but have you provided an update on the status for Green hydrogen project in upstate New York I don't remember that being mentioned recently.
Speaker Change: Yes, we are.
Speaker Change: Building, a green hydrogen project in upstate New York, we are using hydropower.
Speaker Change: Two hydropower as green power.
Speaker Change: And the capacity of that plant is not huge it's a small plan 35 ton a day and the reason they have put it in that part of the world is because they obviously could get their power from Niagara Falls.
Unknown Executive: And the reason we have put it in that part of the world is because we obviously could get the power from Niagara Falls, where it is coming from, and we see significant demand for mobility. We are going to produce liquefied green hydrogen, and we see significant demand for that in that part of the world because, by being in Messina, we can serve all the way to Pennsylvania and New York and all of that.
Seifi Ghasemi: And the reason we have put it in that part of the world is because the obviously could get the power from Niagara Falls. This coming from, and we see significant demand for mobility. We are going to produce liquefied green hydrogen, and we see significant demand for that in that part of the world because, by being in Messina, we can serve all the way to Pennsylvania, New York, and all of that. And therefore we are very optimistic about that project. That project is moving forward, and it is on time. In terms of the timing, I think we have said sometime in 27 or 28.
Speaker Change: It is coming from and we see significant demand for mobility. They are going to produce liquefied green hydrogen and we see significant demand for that in that part of the world because by being in Massena. We can serve all the way to Pennsylvania, and New York and all of that and therefore.
Unknown Executive: And therefore, we are very optimistic about that project. That project is moving forward, and it is on time, for 28, thank you for 27. Thank you very much. Well, thank you very much, and thank you, operator. And I'd like to thank everybody for joining our call. We do appreciate your interest in Air Products. Please be safe, stay healthy, and we look forward to talking to you when we announce our fourth quarter results. Thanks again, everybody. [inaudible]
Speaker Change: We are very optimistic about that project that project is moving forward and it is on time.
Speaker Change: And I'm, sorry, just remind me when that came online.
Speaker Change: In terms of the timing I think you have said sometime in 'twenty seven.
Speaker Change: Our 28 27, thank you very much.
Seifi Ghasemi: Thank you for 27.
Unknown Executive: Well, thank you very much, and thank you, operator, and we thank you.
Speaker Change: Well, thank you very much and thank you operator.
Speaker Change: And we think here I'd like to thank everybody for joining our call. We do appreciate your interest in air products.
Unknown Executive: I'd like to thank everybody for joining our call. We do appreciate your interest in their product. And we do appreciate your very good and insightful questions. Please be safe, stay healthy, and we look forward to talking to you. Then we announce our fourth quarter results. Thanks again, everybody.
Speaker Change: And we.
Speaker Change: We do appreciate your very good and insightful questions. Please be safe stay healthy and we look forward to talking to you.
Speaker Change: When we announce our fourth quarter results. Thanks again everybody.
Unknown Executive: This concludes today's call. Thank you for your participation. You may now disconnect. Thank you.
Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].