Q4 2024 Air Products and Chemicals Inc Earnings Call
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Please stand by, we're about to begin.
Good morning and welcome to Air Products fourth 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: Beginning today's call is Mr. Eric Guder. Please go ahead, sir.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Thank you, Jessica. Good morning, everyone. Welcome to Air Products' fourth quarter 2024 Earnings Results Teleconference.
This is Eric Gooder, Vice President of Investor Relations.
Speaker Change: I am pleased today to be joined by Seifollah Ghasemi, our Chairman, President, and CEO, Melissa Schaeffer, our Chief Financial Officer, and Sean Major, our Executive Vice President, General Counsel, and Secretary.
Speaker Change: After our comments, we will be pleased to take your questions.
Speaker Change: Our earnings release and the slides for this call are available on our website at www.airproducts.com. 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 two.
Speaker Change: 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, either on a total company or segment basis.
Speaker Change: Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures.
Speaker Change: Reconciliations of these measures to our most directly comparable GAP financial measures can be found on our website in the relevant earnings release section.
Now, I'm pleased to turn the call over to Safi.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Thank you, Eric.
and good day to everyone.
Thank you for taking time from your busy schedules.
who joined our call today.
Speaker Change: Please turn to slide number 4 of the material we have posted on our website for this call.
Speaker Change: Ten years ago, we set a goal for Air Products to be the safest, most diverse, and most profitable industrial gas company in the world, delivering excellent service to our customers.
Speaker Change: I am very proud to say that thanks to the outstanding efforts of all of our talented, dedicated and committed people at Air Products.
Speaker Change: We are today the safest and most profitable industrial gas company in the world.
Speaker Change: We have achieved what we set out to do, and now we are ready to move forward.
Speaker Change: On slide number five, I'd like to point to our safety track record.
which is our number one priority.
Speaker Change: We have made significant progress on both our employee loss time injury rate and recordable injury rate since 2014.
We are very proud of this improvement.
Speaker Change: We will continue to strive to achieve zero accidents and zero incidents as the ultimate goal.
We believe that all incidents and accidents are preventable.
Now please turn to a slide number six.
for a look at our fourth quarter results.
Speaker Change: Our fourth quarter adjusted earning per share of $3.56 was at the upper end of our guidance range of $3.33 to $3.63.
Speaker Change: up 13% over last year, driven by our three largest reporting segments.
Speaker Change: We successfully completed the 1.8 billion sale of our LNG process technology and equipment business to Honeywell at the end of September.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: The LNG business was part of our full fiscal year 2024 results.
Speaker Change: But with the sale, we no longer, it will no longer contribute to our earnings going forward.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Our Adjusted Ibido Margin.
Speaker Change: and our adjusted operating margin increased 350 basis points versus prior year.
Speaker Change: Please turn to a slide number seven for our fiscal year 2025 outlook.
Speaker Change: which is two and a half percent higher than last year.
We expect.
Our ongoing business
Speaker Change: which excludes the LNG business to deliver adjusted earnings per share of $1,270 to $1,330, demonstrating an improvement of 6% to 9% over last year.
Speaker Change: We expect our first quarter adjusted earning per share to be in the range of 275 to 285, which is flat to up to 4% when considering the LNG divestiture.
Speaker Change: As you know, our first quarter is typically our weakest quarter.
impacted by seasonality.
In addition,
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: We are not forecasting any significant growth for this quarter due to our concerns about the economic activity in China.
Speaker Change: It is possible that economic activity in China might improve with actions that the Chinese government might take in the future, but we have not included that in our forecast.
Speaker Change: We are proud of our results this quarter, and I would like to thank the talented and dedicated people at Air Products for helping us to deliver these strong results.
Speaker Change: Working together, I am confident that we can achieve what we have put forth in our guidance for fiscal year 2025.
Now please turn to slide number 8.
Speaker Change: where you can see our strong, sustained performance over the long term.
We have achieved a 10% annual growth rate.
in our adjusted earning per share since 2014.
Speaker Change: We have delivered consistent results throughout significant ups and downs in the world economy.
Speaker Change: As I just mentioned, we expect to continue that trajectory in FY 2025 with adjusted EPS growth ranging from 6% to 9% on a like-for-like basis.
Now, please turn to slide number 9.
Speaker Change: Another top priority for us is to consistently return cash to our shareholders.
Speaker Change: Our sustained growth has enabled us to achieve a 9% annual growth rate in our dividend since 2014.
Speaker Change: and we plan to return about 1.6 billion dollars of cash to our shareholders.
in Dividend Payments this year alone.
We take a balanced approach to determine our dividends.
Speaker Change: and we are confident that our sustained performance will enable us to continue rewarding shareholders.
Speaker Change: through increased dividend while also meeting the cash needs of our growth strategy.
Now please turn to slide number 10.
which is
My favorite slide.
again demonstrating on long-term performance.
are adjusted EBITDA margin.
has expanded by almost 2,000 basis points.
over the last 10 years.
We are now at a 44% adjusted EBITDA margin.
Speaker Change: We lead the industry when it comes to adjusted EBITDA margin.
and this track
Speaker Change: This record demonstrates our focus on effectively running our base industrial gases business.
Speaker Change: Now, I would like to turn the call over to Melissa Schaeffer, our Chief Financial Officer, to discuss our Quarter 4 results.
Melissa?
Melissa Schaeffer: Thank you, Safi. Please turn to slide number 11 for a detailed review of our fourth quarter results.
compared to last year.
Volume and price, each improved 1%.
with positive underlying sales in our three largest regional segments.
Melissa Schaeffer: Fire on-site volume, including new assets, more than offset lower demand for merchant products.
Melissa Schaeffer: Overall, price improved modestly, driven by positive pricing results in the Americas and Europe.
Melissa Schaeffer: Declining natural gas prices, primarily in North America, resulted in 2% lower energy cost pass-through.
which has no impact on profit.
Melissa Schaeffer: Adjusted EBITDA increased 12% on favorable volume and price, which contributed to over 450 basis point improvement to adjusted EBITDA margin.
Speaker Change: Now please turn to slide 12 for our discussion of our adjusted earnings per share.
Speaker Change: Our fourth quarter adjusted earnings per share of $3.56 was up 41 cents or 13% versus last year, driven by strong operating results.
Speaker Change: Overall, volume was up 15 cents on higher onsite, partially offset by lower merchant demand.
Price, net of variable cost, contributed $0.23.
by both pricing gains and lower power costs.
Speaker Change: Cost was favorable $0.05 as our productivity actions more than offset the impact of inflation.
Speaker Change: Now please turn to slide number 13 for a brief discussion of our business segment results.
Speaker Change: You can find individual slides covering each of the business segments in the appendix.
Looking at each business segment.
Speaker Change: America's overall pricing was 3% higher while volume was flat. This translated to a 6% merchant pricing gain for the region with improvement across the product line.
Speaker Change: Adjusted EBITDA increased 11% and adjusted EBITDA margin improved over 650 basis points. In each case, primarily due to strong pricing.
Speaker Change: and Favorable Mix driven by one-time asset sale associated with an early contract termination at the request of the customer and higher hydrogen demand.
Speaker Change: Additionally, lower energy cost pass-through improved margin by approximately 200 basis points.
Moving to our Asia segment.
The 7% volume improvement was driven by our onsite business.
Including contributions from new assets.
Speaker Change: Adjusted EBITDA increased 21% and adjusted EBITDA margin and improved almost 500 basis points.
Speaker Change: Looking at Europe's results, price was 2% up with broad base improvement across the region.
Speaker Change: Volume was flat as a new asset in Uzbekistan offset weaker merchant demand.
Speaker Change: Adjusted EBITDA improved 17% and adjusted EBITDA margin increased nearly 500 basis points, in each case mainly due to improved price.
Switching to our Middle East and India segment.
Lower merchant volume negatively impacted sales and adjusted EBITDA.
for our corporate and other segments.
Speaker Change: Sales and profit were lower this quarter primarily due to lower sales and higher cost estimates related to our sale of equipment activities.
Speaker Change: Finally, I'd like to close out the review of our performance and quarterly results on slide number 14.
Our core industrial gas business remains as strong as ever.
Delivering significant EPS growth over the past decade.
and Achieving Industry-Leading Profitability in Adjusted EBITDA Margins.
Speaker Change: Air Products pioneered the onsite business model more than 80 years ago.
Speaker Change: And about half of our business today is onsite, proportionally higher than our peers.
Our on-site business has contractual passers.
Speaker Change: This, combined with our take or pay provisions in our customer contracts, enable the stability of our business.
Speaker Change: We generate strong and steady cash flow that supports reinvestment aligned with our disciplined capital allocation strategy.
Speaker Change: As we continue to show, this also fuels our ability to consistently return capital to shareholders with continued increases to our dividends.
through our core industrial gas business.
Speaker Change: We supply customers in dozens of industries with critical products and services with the goal of being the safest, most diverse, and most profitable industrial gas company in the world.
Now I'll turn the call back over to Safi.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Thank you, Melissa.
Speaker Change: Now, I would like to take this opportunity to discuss our growth strategy.
Please turn to slide number 16.
Our growth strategy consists of two pillars.
Our excellent core industrial gases business.
and are developing clean energy business.
Speaker Change: Our core industrial gas business is an industry leader, it is a stable business, and grows at GDP or industrial production levels around the world.
We continue to optimize for maximum efficiency and invest strategically.
to maintain our market share.
in 23 and 24.
Speaker Change: Almost half of our capital investment was related to our core industrial gases business.
Second, we see tremendous opportunity in clean hydrogen.
driven by strong demand for decarbonization solutions.
that we are already seeing play out today.
We are particularly optimistic.
Speaker Change: about the use of blue hydrogen in the form of clean ammonia to minimize the use of coal in Asia's power plants.
Speaker Change: Another promising demand is the use of blue ammonia directly to power ships.
Speaker Change: Dozens of such ships are already on order or under constructions.
We are equally excited about the application of green hydrogen.
Speaker Change: to meet Europe's emission reduction mandate across the heavy, industrial and transport sectors.
Clean hydrogen has real demand today.
Speaker Change: and we expect to drive outside growth relative to our core industrial gas business over the long term.
Speaker Change: The two pillars of our growth strategy are complementary and interrelated.
Speaker Change: underpinned by our core competencies, technology and of course more than 65 years of hydrogen experience.
Speaker Change: We are committed to efficiently running and growing our core industrial gas business.
Speaker Change: while pursuing strategic high growth and high return opportunities in clean hydrogen.
Now please turn to a slide 17.
Speaker Change: I want to expand on my comments about how we developed our clean hydrogen platform.
Clean hydrogen is not a new business for air products.
It's merely an extension of our existing core business.
Speaker Change: As I said, Air Products has been supplying hydrogen for more than 65 years.
Speaker Change: over which time we have developed key customer relationships that span both the private and public sectors.
about 30 years ago.
Speaker Change: Air Products pioneered the on-site hydrogen business model to take or pay provisions and contractual pass-through.
Supplying hydrogen over the fence to refineries in California.
Speaker Change: We then gradually expanded to the U.S. Gulf Coast, Canada, and Europe.
Speaker Change: We capitalized on global desulfurization regulations to ultimately become the world's largest hydrogen supplier with the most extensive hydrogen pipeline system.
Now, we are well positioned.
Speaker Change: to capitalize on the next phase of hydrogen development which is clean hydrogen.
supported by the need to decarbonize hard-to-abate sectors.
Speaker Change: We moved first with focus and conviction to capture the important first-mover advantages, which I will talk more about in a moment.
consistent with our traditional hydrogen business.
Clean Hydrogen Offtake
Speaker Change: also follow the unsigned business model and we anticipate these projects will provide attractive returns.
Speaker Change: Our strategic first mover actions are now creating the opportunity for us to become the world's largest clean hydrogen supplier.
Please turn to slide number 18.
There are clear advantages in moving first.
Speaker Change: They have been able to secure optimum locations for renewable resources, including for areas with strong sun and wind generation at the same time, to produce low-cost green hydrogen.
Speaker Change: and for Blue Hydrogen, we have been able to gain access
to the right geologies.
…media…
for Carbon Sequestration, which is the key enabler.
for making Blue Hydrogen.
Speaker Change: As mentioned, we also have been able to apply more than 65 years of hydrogen and technology expertise which sets us apart.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: On slide number 19, you can see an overview of the various regulatory drivers for clean hydrogen in Europe and Asia.
Speaker Change: focusing on heavy industry and transport sectors where battery electric methods are not effective.
Speaker Change: A wide range of industries need to decarbonize using clean hydrogen.
and we continue to extend our reach into these sectors.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Now turning to slide number 20.
Let me underscore the significant demand for clean hydrogen today.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Various leading companies.
including Total Energies.
Speaker Change: as one key example, have issued requests for quotation, requesting capacity equal to requirements that far exceed the capacity of our green hydrogen project under construction in NEO.
Taking a step back, total energies are few.
Speaker Change: accounts for only 10% of gray hydrogen now used by European refineries.
Speaker Change: and the output of our NEOM project is less than 5% of the gray hydrogen used by European refineries.
Speaker Change: And beyond refineries, there is demand for several other hard-to-abate sectors, including shipping and steelmaking.
Speaker Change: This strong demand in the market today gives us great confidence in our ability to load the green hydrogen facility under construction in NEOM.
Turning to slide 21.
Speaker Change: This demonstrates the sheer scale of the clean hydrogen industry in the coming years.
Speaker Change: There is significant demand now, and that demand is expected to grow significantly over the long term.
Air Products.
Speaker Change: Capturing even a very small portion of that demand means that we will be well positioned to deliver significant growth.
to demonstrate how large this market opportunity is.
Air Products Currently Approved Clean Hydrogen Projects
account for less than 1% of future market expectations.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Before we discuss our key projects, please turn to slide number 22 with important takeaways about our strategy and disciplined approach to creating shareholder value.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Our Core Industrial Gases Business
Speaker Change: remains fundamentally strong with industry-leading adjusted EBITDA margin and solid GDP and industrial production growth.
Speaker Change: We are adding to this strong foundation by pursuing attractive growth opportunities in clean hydrogen.
driven by decarbonization.
Future clean hydrogen demand is expected to be significant.
We ultimately need to capture
Speaker Change: As I said before, only a small portion of this anticipated high growth market for our initial projects to be successful.
Speaker Change: We believe favorable supply-demand dynamics will enable us an attractive return on green hydrogen.
We are pursuing this strategy prudently.
and only approve new projects.
Speaker Change: And I'd like to stress, only approve new projects after securing anchor customers.
Speaker Change: As we have said before, we will not take any final investment decision on new projects until our current facilities are loaded at least 75% or more.
We have focused teams within Air Products
to Taylor. Thank you. Thank you.
This is strategy.
Speaker Change: Our employees are dedicated to the ongoing success of both our core industrial gases business and our clean hydrogen business.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Now I would like to take a moment to provide an update on our key project sliding on slide number 24.
There you can see an actual
Speaker Change: recent aerial photo of the NEOM project and their construction. I'd like to stress this is a real project, it's not a computer-generated slide.
Speaker Change: It covers the ammonia production site, the electrolyzer facility, and the jetting.
Although this view covers a vast area,
Speaker Change: It does not capture the wind farms located 50 miles to the north near the Gulf of Aqaba and the solar farms situated 40 miles to the west on the other side of the mountain range.
We are full speed ahead on this project.
Please turn to slide number 25.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We have made immense progress on this green hydrogen project.
Construction is about 60% complete.
Speaker Change: and we are on track to bring this facility on a stream at the end of 2026.
Speaker Change: There are 18,000 workers on the site building this facility today.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Importantly, roughly 35% of the total amount of the production has been contracted on a take-or-pay basis.
Speaker Change: Negotiations are underway for additional offtake which would exceed the production of the facility.
Speaker Change: Neom has been financed by 23 banks, providing more than 70% of the total capital needed. Air Products is investing about $800 million, or less than 10% of the total project cost.
Speaker Change: This is significantly less than the $1.7 billion that we originally projected for this project and illustrates our ability to execute highly successful project financing.
Now please turn to slide number 26.
Speaker Change: In June of this year, we were delighted to announce a 15-year agreement to supply 70,000 tons of green hydrogen annually to Total Energies, beginning in 2030.
Speaker Change: This was a milestone for us and the Tate-Corpay nature of this agreement will drive stability in growing our clean hydrogen business.
Speaker Change: This pioneering agreement validates our clean hydrogen strategy and demonstrates significant demand for green hydrogen.
in one of the largest energy companies in the world.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Moving to slide 27.
Speaker Change: Let me share the status of two other major clean hydrogen projects.
First, our Canada Net Zero Hydrogen.
Energy Project
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
They are, they have committed.
Speaker Change: 60% of the capacity on a long-term take or pay contract and we are in active discussion for the reminder of the capacity.
As for our Louisiana project.
The Blue Hydrogen Project.
Speaker Change: be issued in 25 and 26 and we have received major pieces of equipment already in the site in readiness for construction work.
We are in active discussion.
for offtake from this facility.
Also, in discussions with possible equity partners,
Speaker Change: Also assessing project financing for this project and we will keep you updated as we move forward.
Moving to slide number 28.
As we have said before,
Speaker Change: We have put the Sustainable Aviation Fuel Project in Paramount, California, on hold until we get our full permits.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: With regard to the proposed four and a half billion dollar joint venture to produce green hydrogen in North Texas.
This project never reached final investment decision.
Speaker Change: It does not meet our established guidelines for new low-carbon project investments and therefore we have stopped
Speaker Change: are involved in this project and we have sold our development rights to our partners.
Finally, on a slide number 29,
Speaker Change: You can see that we continue to focus on our core industrial gas business, which accounts for more than 50% of our total fiscal 23 to fiscal 25 CAPEX.
Much of that capex is focused on growth.
Projects for Core Industrial Gas Business and Clean Hydrogen.
Both need to meet or exceed our internal return targets.
Speaker Change: We regularly evaluate alternative funding opportunities to optimize our cash allocation.
Beginning in 2027.
Speaker Change: We anticipate meaningful decline in net debt-to-EBITDA ratio as well as possible net cash flow.
Now.
for an update on succession planning.
Please turn to slide number 33.
Speaker Change: As discussed in our last earning call, we have decided to bring into the company a fully qualified potential successor, Has Predism.
and a member of our Board of Directors.
This person should be well known to investors.
with a clear record of success.
Speaker Change: preferably a current or former CEO of a public company with significant international experience and relationships.
Speaker Change: This board-driven process is being led by our independent director, Mr. Ed Manzer, with the support of the full board and the executive search firm Egon Zender.
Speaker Change: I am happy to say that qualified candidates have already been identified and we are anticipating announcing the President's name in the first half of fiscal year 2025.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Now please turn to slide number 33.
At Air Products, our two-pillar growth strategy includes
running our core industrial gas business.
efficiently and continuing to invest and grow it.
Speaker Change: At the same time, leveraging our 65 years of hydrogen experience,
to serve the large, high-growth, clean hydrogen market.
Speaker Change: We expect our clean hydrogen projects to achieve higher returns than our core industrial gas business.
Speaker Change: And I think all of this is our relentless focus on thoughtful, strategic capital allocation.
Speaker Change: Being a prudent steward of Air Prada's capital has been and will continue to be our top priority.
Now please turn to slide number 34.
Speaker Change: The people of Air Products are working hard every day to deliver for our customers. Do so safely and deliver best-in-result profitability.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Our operating discipline combined with our focus on delivering shareholder value.
Speaker Change: gives us confidence as we enter into the next chapter of our growth at Air Products.
And now, we will be delighted to answer your questions.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Operator, if you would like, yes, if you would like to ask a question, please signal by pressing star one on your telephone keypad. Using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Again, star 1 to ask a question.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move first to John McNulty with BMO Capital Markets.
Speaker Change: Yeah, good morning, Shafi. Maybe I can start with something on the more immediate term. You've got
Speaker Change: You know, you've got some growth despite a difficult environment looking out to 2025 versus 2024. I guess, can you help us to kind of basket that a bit? How much comes from price? How much comes from some of the new projects that you've been gradually ramping through 2024? And how much comes from core growth?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Good morning, John. Thank you for your question. John, for Fiscar 2025, we obviously, one of our major concerns and unknowns is how does the
The man developed in Asia.
Speaker Change: We have a pretty decent handle on our opportunities in Middle East, in Europe, and in America.
Speaker Change: The big unknown is China. That is why we have taken a conservative approach there.
Speaker Change: Things might change depending on what the Chinese government does, but we are going to be cautious. In terms of right now, our expectation for price
Speaker Change: overall is similar to last year about 1% to 2% price increase.
Our volume growths are very much
Speaker Change: adjusted to the expected GDP and industrial production growth forecasted for the different regions in the world, which is not that much. It's about two, sometimes 2%, 3%, depending on which area you are.
Speaker Change: And then, we do not have too many significant large projects coming on the screen.
Speaker Change: But we do have a lot of smaller projects coming on stream, which are going to contribute to our growth. We feel pretty good about our fiscal year guidance. I have to...
Speaker Change: Admit that we are very conservative on the first quarter because of the immediate weakness that we see in China.
Speaker Change: Got it. Okay. No, that's a that's helpful color. And then maybe I can just ask a question.
Speaker Change: on Louisiana. So, you kind of mentioned a bunch of things going on there. You're looking for offtake partners. You're also looking for equity partners and maybe even project financing. I guess, can you speak to what you see as the ideal equity partnership arrangement that you're kind of pursuing at this point and how we should be thinking about that?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Well, the ideal thing would be to have equity partnership with somebody who is going to take the office.
So, that's kind of.
Speaker Change: The obvious solution, but there are a lot of people who have raised significant funds, so-called clean funds.
Speaker Change: and want to participate in equity with us, but our preference obviously would be with somebody who is going to take the office.
Speaker Change: So, so it's less about coming up with a partner to take on some of the manufacturing or other certain parts of the, of the project. It's more about coming up with a, with a partner for the offtake. Is that, am I thinking about that right?
Speaker Change: No, I think we would be interested in partnering with people on the manufacturing part too, equity participation in the entire project.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Got it. Okay. Thanks very much for the caller.
Thank you.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to Jeff Sakakis with J.P. Morgan.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Thanks very much. I think that there are two prominent activists that seem to be involved in your products.
Speaker Change: One of them published a large slide deck, you know, maybe generally speaking all about the de-risking of various projects.
When you listen or look at the
Speaker Change: Activist approach to air products. How do you reflect on it? Is it something that leads you to change your behavior in any way or not change your behavior? How do you assess the different
Speaker Change: new owners and their products and their ideas about the company.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We have many, many investors.
Speaker Change: and we have respect for all of our investors. As you know very well, we meet very often with our investors.
Speaker Change: and we believe the view of all of the investors is as important as the view of one investor.
Speaker Change: I don't want to single out the fact that we listen to a particular investor, we listen to all of our investors.
Speaker Change: and the suggestions that have been made by all of our different investors is pretty consistent.
Speaker Change: They want us to focus on our base industrial gases business, which we are.
Speaker Change: and they also want to make sure that we are investing in the developing clean hydrogen business in a responsible way.
and you're obviously doing that.
Speaker Change: and all of our investors throughout the years always ask about succession planning and we have always been very diligent about succession planning and we have now laid out very specifically what we want to do.
As I said, we listen to all of our shareholders.
Speaker Change: and we take their views very seriously and consider them and then act on them if necessary.
Speaker Change: And then for my follow-up, I think on slide 20 you said you expect to fully load NEOM before the on-stream date.
The commitment with Total, I think, is for 2030.
Speaker Change: So does this fully loading NEOM mean that it would be fully loaded for 2027?
Speaker Change: Should one expect a full loading for 2027, if you're mechanically complete, you know, at the end of 2026?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
to fully load NEOM.
and we are working toward that.
Speaker Change: in 2027. Yes, that is our expectation. That is what we are working on.
Speaker Change: because there are other customers beyond Total. Total, we got their permission to announce it publicly. With the other people, we don't have such permission and when the time comes, we will announce that.
Thank you so much.
Thank you, sir.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to Patrick Cunningham with Citi.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Hi, good morning. I wanted to, you know, with the LNG out of the business, you know, what should we expect in terms of the corporate line for 2025? I know you've taken significant productivity actions. So what might be the offsets from cost reduction on the corporate line?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Melissa Schaeffer: Well that's a very good question and I'd like to give Melissa a chance to respond to that. Melissa? Yes, hi. Thank you, Seifi.
Melissa Schaeffer: So L&G is about a 4% contributor or about $0.49 to the organization, obviously evenly distributed throughout the quarters with some timing based on delivery of the product. So we're seeing about a 4% headwind going into FY 2025 or again about $0.49 for the full year.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: So, if I may add to that, that means that during 2025.
We obviously.
Speaker Change: have taken and will continue to take actions in terms of productivity. And we obviously have a growth from the, as I said, smaller projects.
and we hope that
Speaker Change: A strong economic activity that we saw in the U.S. will continue in 2025, which we think it will.
Speaker Change: And in Europe, we have opportunities for some of our onsites to do a little bit better than they did last year.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Understood. Very helpful. And could you provide a more general update on the World Energy Project? What is holding up the permitting process? Is there anything about the relationship or project budget, you know, that we should know there?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: What is holding up the permit was the fact that the permit that was issued was challenged by some
Speaker Change: People who call themselves environmentalists, but we are doing an environmental friendly project, but they go and object to our permit.
Speaker Change: But, so that is what is holding it up and we have decided that we do not want to take the risk of building the project.
and continuing with the project.
Speaker Change: and then get challenged again. So we want to make sure we have all of the permits before we go forward. That's the reason we have put that project on hold.
Speaker Change: In terms of our relationship with our partners there, the relationship between Air Products and Board Energy is excellent and we are working in concert, hand in hand, to make that project a successful investment.
Speaker Change: At the same time, as I say on the slides, Air Products is looking at other alternatives for that project because some people have...
Speaker Change: expressed interest in kind of buying us out of that project, and we obviously listened to all alternatives.
Understood. Thank you so much.
Thank you.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to Steve Byrne with Bank of America.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Yes, thank you. I wanted to just drill into NEOM a bit more. Safi, four years ago, I believe, you were talking about a downstream CapEx budget for NEOM of $2 billion.
Speaker Change: What is the status of that now, given, I think back then your focus was Asia, it's now Europe?
Speaker Change: Do you have a strategy of what do you need to invest in Europe to distribute the green ammonia and then crack the hydrogen?
Perhaps comment also on
Speaker Change: And just lastly on that, the 35% seems more than total. Does that mean you've picked up other long-term take-or-pay contracts?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Thank you for your question. The amount of investment in the downstream obviously depends on who the final end customers are, but $2 billion order of magnitude for that is in the ballpark, but it might be a lot less than that, depending on who the actual customers are going to be.
In terms of, as I said, you know,
Speaker Change: There are a lot of ways to sell the product out of that plant. One is to...
Take it, crack it, and yeah.
Speaker Change: Put it in a refinery. Another one is that some people might be interested in just buying the ammonia, FOB, neon.
Speaker Change: and using it for applications where you don't need cracking. So, there is a lot of different possibilities there. And as we finalize the contracts, we will give you more visibility on that.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: and maybe just one more on this. Europe prefers the pathway forward being green, not blue.
Speaker Change: If that were to change for economic reasons, what would be your end market outlook for NEOM under that kind of a scenario?
Speaker Change: Well, first of all, can I just make a comment? We are...
committed to low-carbon hydrogen.
Green and Blue
Speaker Change: That is why we are doing the project in Neom for green and the project in Louisiana for blue because we think the lowest cost place to produce green is in North and Saudi Arabia and the lowest cost place to produce blue is in...
U.S. Golf Course. U.S. Golf Course.
Speaker Change: that no place in the world can compete with the U.S. Gulf Coast because of their low natural gas. But more importantly, when people talk about blue, they need to keep in mind, you can only make blue if you have a place to sequester the CO2.
Speaker Change: and it is not that easy to find those places. So, we are committed to both of them and we look at those opportunities in an equal way. We don't have any preference for one or another.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Thank you.
Thank you.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to David Vangelander with Deutsche Bank.
Speaker Change: Hi, this is David Huang here for Dave. I guess one of the concerns investors have is on your, you know, large headcount increase since you started the journey in green hydrogen.
Speaker Change: How much of the headcount increase through the years is related to the clean hydrogen projects?
Speaker Change: If you can talk about how, you know, the staff is being deployed to support these projects.
Speaker Change: Additionally, I guess given the SAF project that's on hold and you're no longer pursuing the Texas project, are there any opportunities to reduce some costs here in the near term? And how should we think about the scale if you have any of those plans?
Speaker Change: Well, the thing is that I think we need to explain that because
Speaker Change: The big headcount increase was in order to engineer NEOM and
Speaker Change: Our Blue Hydrogen Project and several other projects that we had.
So those headcounts are going to come down.
Speaker Change: But they are not going to affect our bottom line because those costs were capitalized as part of the capital.
Speaker Change: So our earning per share and so on was not being affected by those increases. We did have increased costs, significant increased costs, in terms of development costs while we were developing those projects.
Speaker Change: Those costs are going to come down, and I'm sure that you have taken a look at our SG&A line, and you see that our SG&A for the quarter is less than last year's quarter, and for the year, it's less than last year.
Speaker Change: So, the headcount thing, which went up, is going to come down. But in terms of our bottom line, we are going to continue to march toward the 8, 9, 10 percent growth on EPS as we have done in the past 10 years.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
And at this point in time...
I'm sorry, please go ahead. Oh, go ahead.
No, I was just going to say at this time...
Other than
Neom where most of the engineering is basically done.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We are working on engineering on our project in Louisiana.
Speaker Change: and one or two other projects in Texas and our Edmonton project.
Speaker Change: Other than that, we are not working on any other major project and as you just saw, we just cancelled any commitment or any engineering effort that we were spending on the North
takes us Green Hydrogen Project.
Speaker Change: because it did not meet our criteria which was that we do not make final investment decision until we have an anchor customer and until we have loaded 75% of our existing facilities.
Speaker Change: So, as a result, there are not too many other projects in the pipeline. We always think about these things and so on, but we will only move on those once those criteria are met.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Okay. Yep. And then just another question on Alberta. Just to clarify, this is not included in your FY25 guidance and if not, when do you expect the plan to start up?
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: No significant income is included in our fiscal year 2025 income for that project. Yes.
Okay, thanks.
Thank you.
Transcription by Trans-Expert at Fiverr.com
We'll move next to John Roberts with Mizuho.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Thanks, Steffi. I'm guessing the board has already been maintaining some level of contact with potential president candidates that could be available on short notice, especially since the departure of Dr. Serhan. Do you think the search for a president could be over before the proxy is filed for the shareholder meeting? Slide 31 suggests it could go beyond the shareholder meeting.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: At this point in time, I do not expect for us to name a president until March, April.
May. We have identified very highly qualified people.
They are being interviewed by our board.
Speaker Change: and going through the process. I mean, choosing a president for Air Products, you have to go through the process. Our board needs to feel very comfortable. And they need to meet the criteria that I set out, that we want people who have been CEOs of public companies. People who have not been CEOs of public companies do not qualify.
Speaker Change: So, the process is underway, I just wanted to give you an update, but we have no expectation of announcing a president before, as I said.
Speaker Change: Before March, April, May, depending on the availability of the people, because if these people are CEOs of current companies.
Speaker Change: They have obligations to unwind their present position, so it's not going to be, you can't snap your finger and have them start.
Speaker Change: Okay, John. Thank you. Yep, that's all I have. Thank you. Thank you. Thank you very much, John.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to Chris Parkinson with Wolf Research.
Speaker Change: Great, thank you so much. Safey, regarding the Louisiana project, obviously it's, you know, fairly sizable and there's a lot of focus on both manufacturing as well as, you know, the offtake agreements in terms of, you know, redistributing potentially some of that project risk. However, you know, one of the things that's been on my mind and I think a lot of investors has been just the
Speaker Change: You know, given the size of the facility, just the construction outlay and how to think about the various units going into that, just relative to the size of everything else that's been done in the United States over the last decade or decade and a half. So
Speaker Change: Can you perhaps just give us a little bit more detail on the various stages on how we should be thinking about that development or evolution of that project and whether or not it has to be all at once or you're thinking about in various stages, perhaps one through three, just any color there would be particularly helpful. Thank you.
Luis Llano
The most important part of that project.
was finding a place
that is credible and proven.
that you can sequester CO2.
We have achieved that.
We have identified sites.
Do you have the rights to that?
We have done extensive work, spent about $75 million.
that it is possible.
to sequester the CO2 in there.
We have submitted all of that.
to the Louisiana Department of Environmental Resources.
for an application for a class six well.
We have gotten feedback that our application is complete.
Speaker Change: That means that they accept that they have done all of the work and now we need to wait until they make their assessment and issue the final permit for us to construct that. That was the major risk for that project. The rest of the project, what is it? It is making the hydrogen.
Speaker Change: That, we know how to do. It is PAX units. It's our own technology.
Speaker Change: We have similar units in operation around the world, and therefore there is no technology risk there. And then the ammonia plant is the ammonia plant, everybody is very familiar with ammonia plants.
Speaker Change: So we are not taking any technology risk, the CO2 sequestration is secure.
Speaker Change: I've said previously that this project we expect to come on the stream sometime in 2028 depending on the
Speaker Change: We don't want to spend $7 billion of air products capital into the project. So the issue is, how do we finance this thing?
Speaker Change: Do we finance it the way we finance NEOM? Do we bring in an equity partner?
Speaker Change: Those are the things that we are evaluating and in the meantime we have we are not in a hurry we have time we have done most of the engineering
Speaker Change: We are going to start bringing contractors where the engineering is done so that we can get lump sum prices from the contractors. So
Speaker Change: We are executing this project in a very prudent way and trying to find the optimum way for us to finance the project. In terms of the demand for the product, we feel very good about that because
Speaker Change: The demand is not only decarbonizing and reducing the use of coal in Asia, but another significant demand which is developing, as I mentioned in my prepared remarks, is ammonia as a direct fuel for ships.
Speaker Change: Low carbon ammonia using as a direct fuel for ships significantly reduces the emissions, it makes ships comply, and it is very attractive.
to the people who ship their product.
Speaker Change: across the world because that helps them to decarbonize their scope 3 emissions. So we feel very good about that project and as I said as we move forward we'll update you about the progress on all of those fronts.
Transcription by Trans-Expert at Fiverr.com
Speaker Change: purely roughly of kind of that implied number of what the legacy thought process
Speaker Change: and, you know, what you could be looking at today, I mean, is that like a 10% difference of...
Speaker Change: to refineries in Europe, or is that something that could be more significant, like a 30% or 40% difference in terms of how we're thinking about the off-take CapEx of the project? Thank you so much.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Well, thank you very much. I'm just trying to fully digest your question, Chris, in terms of that. You're asking a very good question, but fundamentally, originally, when we announced
Speaker Change: Oh, sorry, [laughter] questions credits at in terms of that and you are asking a very good question, but fundamentally.
Speaker Change: Originally when we announced the project.
Speaker Change: We said that we will need $3 $7 billion of cash.
Speaker Change: And we broke it down to $1 7 billion invested in the project and 2 billion for so-called chairman ask to sell it.
Speaker Change: and we broke it down to 1.7 billion invested in the project and 2 billion for so-called terminals to sell it.
Speaker Change: But we are saying is that it.
Speaker Change: One seven in investment in the production is now $800 million.
Speaker Change: What we are saying is that the 1.7 investment in the production is now $800 million.
Speaker Change: Because we were able to successfully project finance this.
because we've been able to successfully project finance this.
Speaker Change: The $2 billion for the downstream part.
The $2 billion for the downstream part
Speaker Change: I can make a commitment exactly but that would be that as half of a 10% lower on Sean until they finalize who the off takers are.
Speaker Change: I can't make a commitment exactly what that would be, whether it's half of it, 10% lower and so on, until we finalize who the offtakers are.
Speaker Change: So that's where we are Chris.
Speaker Change: Okay.
Speaker Change: So all of that in terms of our.
So that's where we are, Chris.
Speaker Change: Yeah, our total commitment from before the number has not really changed.
Speaker Change: So overall, in terms of our total commitment from before, the number has not really changed.
Speaker Change: Thank you very much.
Speaker Change: Thank you Sir Thank you very much Chris.
Speaker Change: Thank you very much as always. Thank you, sir. Thank you very much, Chris.
Speaker Change: We'll move next to Mike Sison with Wells Fargo.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
We'll move next to Mike Sison with Wells Fargo.
Speaker Change: Hey, Hey, good morning.
Speaker Change: Yes, Stacy traditional hydrogen projects historically.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: Hey, hey, good morning. You know, Seify, traditional hydrogen projects, historically, you tend to sell that out.
Speaker Change: Canada sell that out.
Speaker Change: With off take for this item was that the case, what do you sort of created the business, 60% to 65 years ago and do you think at some point for the clean hydrogen projects that you know that that demand will be big enough when you announced the project.
Speaker Change: with offtakes when you sign them. Was that the case when you sort of created the business 60 to 65 years ago? And do you think at some point for the clean hydrogen projects that, you know, that that demand will be big enough when you announce a project?
Speaker Change: You'll have off takes immediately.
Speaker Change: And that is that kind of what I was trying to allude to when I said that in the future. We will not take an F. R. E on any green hydrogen project and theory that we have an anchor customer.
You know, you'll have offtakes immediately.
Siddharth Manjeshwar, Seifollah Ghasemi, Siddharth Manjeshwar, Samir Serhan, Unknown Executive
Speaker Change: That is kind of what I was trying to allude to when I said that in the future we will not take an FID on any clean hydrogen project until we have an anchor customer.
Speaker Change: Just like our industrial gases business, when we go and sell oxygen to a steel plant we build the air separation unit, 50% of the offtake is guaranteed by the takeaway to they're still make it and then the other 50% is mentioned that what we do so we are.
Speaker Change: Just like our industrial gas business, when we go and sell oxygen to a steel plant, we build an air suppression unit, 50% of the offtake is guaranteed with a take-away to the steel maker, and then the other 50% is mentioned at what we do.
Speaker Change: Saying that in the future we wanted to be the first mover. We did what we did with Neil and narrow and it has turned out to be a good experience. We are trying we are seeing that we can load. These facilities now theyre, saying that in the future we are not going to announce a project.
So, we are
Speaker Change: Without having and telling you a clear view of who will take 50 or 60% of the product on a long term basis.
Speaker Change: That's okay.
Speaker Change: Yeah. That's that's great and then just a quick follow up when you think about the earnings growth for 'twenty, five 6% to 9% I understand its economic environment isn't great, but if you think about longer term and you execute well on you're pretty well publicized growth strategy 26, 27 28.
Speaker Change: What do you think that growth rates have kicked up to as your clean energy projects kick in now with the growth from your core industrial gas business.
Speaker Change: Well I think that if we put everything together and teams work hard the very V or you think it is we will be able to deliver about 910% 25 26.
Speaker Change: And then 27 28 can be significantly higher than that.
Speaker Change: Yeah.
Speaker Change: As these projects.
Speaker Change: Coming on stream.
Speaker Change: With the kind of volumes that they are talking to you about.
Speaker Change: We can we can have significant growth higher than 10%.
Speaker Change: That's why I feel confident that to say that for the next 10 years.
Speaker Change: Sydney bodies going gone I think air products will deliver at least 10% growth in EPS as we go forward at least.
Speaker Change: Great. Thank you.
Speaker Change: Thank you very much.
Speaker Change: We'll move next to Josh Spector with UBS.
Speaker Change: Okay.
Speaker Change: Yeah, Hi, good morning, I wanted to ask a question on the neon offtake Theres just been some chatter I guess more recently around some finer details around that contract. So you highlight its take or pay you mentioned you're comfortable with the returns I guess some of the questions have been if theres any qualifying events the regulatory or credits.
Speaker Change: That needs to be put in place before that contract goes into effect or whether you would say what you have today is more iron clad theres nothing that needs to happen, but at to hit your return targets.
Speaker Change: Okay.
Speaker Change: Well, that's a very detailed question about the details of the contract via.
Speaker Change: Are continuing to negotiate the details, but I have my chief legal officer.
Speaker Change: Mr. Sean major who was very instrumental in negotiating that contract. So I think it's better if I turn it over to him to try to amplify on that.
Speaker Change: Sean.
Sean Major: Yes, Thank you safety, where we are.
Speaker Change: We're generally comfortable with what that contract, it's consistent with similar offtake agreements and we're fully confident that.
Speaker Change: That will be fully operational consistent what the terms of the agreement.
Melissa Schaeffer: She did a great explanation if I may just add it is not uncommon then we have a long term agreement with a customer in the contact the customer has an option to come and terminate the contract payoffs a cancellation fee because they want to do something different with the asset. So this was a small refinery.
Speaker Change: In southern power.
Speaker Change: Part of takes us and that's what happened it's not <unk>.
Speaker Change: Anything unusual as part of our normal course of business.
Speaker Change: Sorry, you had another question.
Speaker Change: Yes, the safety I wanted to go back to World Energy.
Speaker Change: I think you said in a prior answer that your relationship there is excellent.
Speaker Change: But there was a lawsuit that became public about two weeks ago that shows air products went world energy a good amount of money that world energy assumes defaulted on so how do we square that.
Speaker Change: That is the normal course of business is to guarantee about shift in payment. It is insignificant, but it obviously does be count on public.
Speaker Change: We obviously always protect our rights and so on but that doesn't mean that there is an agile relationship between air products and World energy.
Speaker Change: Just the normal course routine action and I can have Sean and make a comment on that if you want Sean.
Speaker Change: Safety I think it's important that particular piece of litigation does not involve world energy and our relationship with World Energy continues to be very strong and robust.
Speaker Change: Okay.
Speaker Change: Fair enough. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Any other questions operator.
Speaker Change: We can go to Duffy Fischer with Goldman Sachs.
Speaker Change: Yeah.
Speaker Change: Yes, good morning, guys.
Speaker Change: First question is just around the Asia business.
Speaker Change: <unk> being down is that more an indication of just what's happening generally.
Speaker Change: Supply demand is a little bit out of whack or is that still the hangover from helium prices falling and hurting pricing overall in Asia.
Speaker Change: It is a combination of both of them.
Speaker Change: It is supply demand and there is some impact on helium because of the helium coming from Russia, yes.
Speaker Change: Okay. Thank you and then I.
Speaker Change: I just wanted to go back to the head count comment you made.
Speaker Change: Again head count for you guys is up about 4000 people in the last several years and I just wanted to so none of that head count is really running through the P&L in the EPS that you guys delivered last year all of that is basically being capitalized or is there some percentage split between what's being capitalized and what's running through the P&L.
Speaker Change: Well why don't I have Melissa just said Melissa yeah, no. Thank you Stacy. So there are a good portion because the vast majority of the growth was in our project delivery organization. So a large portion of that is capitalized, but obviously there are portions of that that are part of a project.
Speaker Change: <unk> organization as well as support organization to really support the growth strategy and so the vast majority is in fact capitalized but there is a portion obviously for support but I do also want to comment that we did take productivity actions of the last two years I'm, reducing our head count.
Speaker Change: I almost a thousand.
Speaker Change: So obviously, we are being diligent that when there are opportunities to reduce head count we are strategically doing so thank you.
Speaker Change: Great. Thank you guys.
Speaker Change: Thank you very much.
Speaker Change: We'll move next to Laurence Alexander with Jefferies.
Laurence Alexander: So good morning, one short term question on the price the merchant pricing that Youre seeing in North America.
Speaker Change: What do you see what are you using for next year's outlook as to how solid pricing will be.
Speaker Change: Can you just elaborate on the dynamics there and then secondly, you made a comment around how big the FERC as the first mover youre getting better contracts.
Speaker Change: And then you would expect to get in the future.
Speaker Change: Can you unpack kind of stomach or give some examples around that.
Speaker Change: Because I appreciate kind of the marketing angle of being able to show people, where you have the facilities first.
Speaker Change: Can you walk through kind of the contractual differences that the options that you've been able to capture that you would never get again.
Speaker Change: Well. Thank you for your question with respect to our pricing assumption for 2025 that is a little bit of a forward looking statement about pricing and we usually do not do that so if you.
Speaker Change: Forgive me I cannot really answer that question, because that's not appropriate for us to make comments about future pricing.
Speaker Change: With respect to the contracts.
Speaker Change: Well, if we are the only people who are going to have green hydrogen available.
Speaker Change: By the time that people need to comply with the regulation.
Speaker Change: Within your tank that we would be in a better shape to negotiate the contracts and somebody who might have something available in 2035.
Speaker Change: So I think being a first mover and having the product.
Speaker Change: Please don't forget.
Speaker Change: Nobody else in the war is going to have a green hydrogen at the quantities commercial scale to decarbonize the refinery by 2030.
Speaker Change: Any new projects requires permitting land.
Speaker Change: Those things take a long time.
Speaker Change: Believe me you started on the project in Saudi Arabia, and our Green hydrogen projects in 2017, our project is going to come Onstream in 2027.
Speaker Change: 10 years.
Speaker Change: It's a long process.
Speaker Change: That is what I was referring to about five you have an advantage.
Speaker Change: Okay perfect. Thank you okay.
Speaker Change: Thank you.
Speaker Change: Operator.
Speaker Change: Time for two other questions. Please.
Speaker Change: We actually have one more question holding and we will go to Sebastian Bray with Baron Berg.
Speaker Change: Okay.
Sebastian Bray: Hello, Hello, Good morning, and thank you for taking my questions I have two please the first is on the Middle East segment.
Sebastian Bray: Just on I think it was a bit shy or the whole middle East and India line was a little bit shy of consensus expectations and I think the second time this has happened.
Sebastian Bray: Thing happened, which is on that makes our business less profitable in 2024 than in previous years was anything shifted in the contract is there anything else within the EBIT tail online, so middle East and India that would explain that my second question is.
Speaker Change: More philosophical.
Speaker Change: The company has cost is up significantly with a lot of personnel to in house expertise across the hydrogen Shane carbon capture probably some time in order to transport as well if I take the target for net cash flow positive by twenty-three settling.
Speaker Change: To me that implies okay, we do Neal, Louisiana, but we don't necessarily to any other projects in the meantime in a big way.
Speaker Change: How is it going to be able to continue to use the expertise of all of these people or are they still focused on those two projects. Thank you.
Speaker Change: Well. Thank you very much I will answer the second question and then I will turn it over to Melissa to answer your first question about the middle East.
Speaker Change: Respect to your second question.
Speaker Change: I do not think that it is.
Speaker Change: A correct assumption that we are doing 100% of what we are doing right now about Neil antibody, Louisiana in house that is not a correct assumption.
Speaker Change: We are not experts in that.
Speaker Change: Carbon sequestration.
Speaker Change: We are going to get people, who are experts on that to engineer that that's what they are doing and to.
Speaker Change: To do that for us.
Speaker Change: I'm not going to be designing class six wells.
Speaker Change: You see that is the we have people who oversee the process, but we are going to go to people.
Speaker Change: Who are experts on these things and they will do that for us when it comes to some of the engineering or the details.
Speaker Change: Detailed engineering of some of these facilities, we are using some of the largest engineering firms in the world to do those but we are keeping and Bud V. I have put together is the key people for the key technologies I mean Neil.
Speaker Change: Building the ammonia plant is not the key technology building a solar plant is not the key technology.