Q1 2025 Linde PLC Earnings Call

Thank you for standing by.

Operator: Welcome to the Linde first quarter 2025 earnings call and webcast. At this time, all participants are in a listen-only mode. please be advised that today's conference is being recorded.

Welcome to the Lindy first quarter 2025 earnings call and webcast at.

At this time all participants are in a listen only mode.

Please be advised that today's conference is being recorded.

Operator: After the speaker's presentation, there will be a question and answer session.

After the speaker's presentation, there will be a question and answer session.

Juan Pelaez: I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir. Abby, thank you.

Speaker Change: I would now like to hand, the conference over to Mr. Juan Pliers head of Investor Relations. Please go ahead Sir.

Speaker Change: Thank you.

Juan Pelaez: Good morning, everyone. And thanks for attending our 2025 First Quarter Earnings Call-In Webcast.

Juan Pliers: Morning, everyone and thanks for attending our 2025 first quarter earnings call and webcast.

Juan Pelaez: I'm Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Sanjiv Lamba, Chief Executive Officer, and Matt White, Chief Financial Officer.

Speaker Change: And mobilize head of Investor Relations and I'm joined this morning by Sandeep, <unk>, Chief Executive Officer, and Matt White, Chief Financial Officer.

Juan Pelaez: Today's presentation materials are on our website at linde.com in the Inventor section. Please read the forward-looking statement disclosures on page two of the slides and note that it applies to all statements made during this teleconference. The reconciliation of the adjusted numbers are in the appendix to this presentation.

Speaker Change: Today's presentation materials on our website at the linear dot com in the investors section.

Speaker Change: Please read the forward looking statement disclosure on page two of the slides and note that it applies to all statements made during the teleconference.

Speaker Change: A reconciliation of the adjusted numbers are in the appendix to this presentation.

Juan Pelaez: Sanjiv will provide some opening remarks, and then Matt will give an update on Linde's first quarter financial performance and outlook, after which we will wrap up with Q&A.

Speaker Change: So how do you will provide some opening remarks, and then Matt will give an update on the knees first quarter financial performance and outlook after which we will wrap up with Q&A.

Sanjiv Lamba: Let me now turn the call over to Sanjiv. Thanks, Juan, and very good morning, everyone. Last quarter, we took a fairly cautious view on the economy, and unfortunately, things mostly played out as... Yet despite those headwinds, Linde employees once again delivered resilient results by growing APS XFX by 8%. expanding operating margins 120 basis points to 30.1% and maintaining industry-leading ROC at 25.7%. It's during volatile and uncertain times like today when the Linde operating model truly stands out. To demonstrate that, slide 3 provides an overview of the defensive nature of our pistol. Some of you may recall this slide.

Sean: Now I'll turn the call over to Sean.

Sean: Thanks, a lot and very good morning, everyone.

Sean: Last quarter, we took a fairly cautious view on the economy and unfortunately things mostly played out.

Sean: Peter.

Peter: Yeah. Despite those headwinds Lindy employees once again delivered resilient results by growing EPS ex FX by 8%.

Speaker Change: <unk> operating margins of 120 basis points.

Speaker Change: <unk>, 1% and maintaining industry, leading R O C at 25, 7%.

Speaker Change: Yes, Julian volatile and uncertain times like today, when the Lindy operating model truly stands out.

Speaker Change: To demonstrate that slide three provides an overview of the defensive nature of our business.

Speaker Change: Some of you may recall, the slide that is because we presented a version of it in April 2020.

Sanjiv Lamba: That is because we presented a version of it in April 2020. Another period when financial markets were gripped with fear and uncertainty. Linde managed through a challenging 2020 and demonstrated its resiliency by growing EPS 12% that year. and I fully expect this defensiveness to be on display for 2025 and beyond.

Speaker Change: Another theory, but financial markets gripped with fear and uncertainty.

Speaker Change: And then he managed through a challenging 2020 and demonstrated its resiliency bright growing EPS, 12% that yet.

Speaker Change: And I fully expect this defensiveness to be on display, but 2025 and beyond.

Sanjiv Lamba: Now we define defensive sales as businesses which contain at least one of the three categories. The first category represents resilient end markets that tend to be independent of economic trends such as healthcare, electronics, or food and beverage. Over the last few decades, we have found these end markets to remain quite stable, even during the most challenging periods, while also offering nice opportunities for growth throughout various economic cycles. The second category represents on-site customers from any environment. will pay fixed facility fees that are independent of volume. These fees are contractually required to recover a capital investment and are part of virtually every on-site agreement.

Speaker Change: Now, we define defensive sales as businesses, which contain at least one of the three categories.

Speaker Change: The first category represents resilient end markets that tend to be independent of economic trends, such as health care electronics, all food and beverage.

Speaker Change: Over the last few decades, we have found these end markets remained quite stable even during the most challenging periods, while also offering nice opportunities for growth throughout various economic cycles.

Speaker Change: The second category represents onsite customers from any end market.

Speaker Change: Well fixed facility fees that are independent of volumes. These fees are contractually required to recover our capital investment.

Speaker Change: A bottle of virtually every onsite agreement.

Sanjiv Lamba: This structure gives us significant earnings stability, which has been proven during the most difficult time. And the final category relates to rental payments on our owned assets, such as tanks, cylinders, and equipment. Although the asset network requires upfront capital outlay, the contractual rental fees help recover the initial investment regardless of gas consumption. Individually, these categories have proven to provide resilient revenues and cash flow, underpinned by a dense supply network around the world, especially during times of economic stress. So the dark blue shading on the slide represents these three defensive categories. which together account for almost two-thirds of global gas emissions.

Speaker Change: This structure gives us significant earnings stability, which has been proven during the most difficult times.

Speaker Change: The final category relates to rental payments on our owned assets.

Speaker Change: Stacks cylinders and equipment.

Speaker Change: Although the asset network requires upfront capital outlay.

Speaker Change: Contractual rental fees help break out what the initial investment regardless of gas consumption.

Speaker Change: Individually these categories have proven to provide resilient revenues and cash flow underpinned by a dense supply networks around the world, especially during times of economic stress.

Speaker Change: So the dark blue shading on the slide represents these three defensive categories, which together account for almost two pilots.

Speaker Change: Gas sales.

Sanjiv Lamba: Additionally, this split is almost identical in every segment. further reinforcing the consistency of our business model in every job. And this is ultimately validated by the chart on the right. showing a 12% EPS compound annual growth rate over the last three decades. Overall, the model has proven itself and stood the test of time. and I don't see that changing any time soon.

Speaker Change: Additionally, the split is almost identical in every segment.

Speaker Change: Reinforcing the consistency of our business model in every geography.

Speaker Change: This is ultimately validated by the chart on the right.

Speaker Change: Showing a 12% EPS compound annual growth rate over the last three decades.

Speaker Change: Overall, the model has proven itself and stood at the depths of that.

And I don't see that changing anytime soon.

Sanjiv Lamba: But looking at the current environment, we're seeing more negative than positive development. So it may be helpful if I can provide some color on the first quarter trends by segment. starting in April. China's trends have remained consistent when adjusting for seasonally weaker Q1. We're still seeing strength in battery and electronics, although rare gases and helium prices remain lower than prior years. Regarding the industrial end markets, we continue seeing softness across most, although our customers are primarily tier one producers and thus have been much more stable. Courier is mostly tied to the electronic sector. and our largest customer there recently announced further expansion resulting in a new Project WIN for Linden.

Speaker Change: But looking at the current environment, we're seeing more negative than positive developments.

Speaker Change: So it may be helpful. If I can provide some color on the first quarter trends by segment.

Speaker Change: Starting in the back.

Speaker Change: China trends remained consistent when adjusting for seasonally weaker Q1.

Speaker Change: We are still seeing strength in battery and electronics, although red gasoline helium prices remained lower than prior year.

Speaker Change: Regarding the industrial end markets, we continue seeing softness across most although our customers are primarily tier one producers and thus have been much more stable.

Speaker Change: Okay.

Speaker Change: Maria is mostly tied to the electronics sector.

Speaker Change: And our largest customer that recently announced further expansion, resulting in a new project wins for led.

Sanjiv Lamba: Australia has seen weaker manufacturing trends, directly impacting packaged gas volume. while India, on the other hand, remains one of the better growth regions globally.

Speaker Change: Australia has seen weaker manufacturing trends directly impacting packaged gas volumes.

Speaker Change: India on the other.

Speaker Change: <unk> remains one of the better growth regions globally.

Speaker Change: Okay.

Sanjiv Lamba: Moving to mail. We have not seen any meaningful improvement in industrial despite some of the recent positive news regarding increased government spending. However, I'm encouraged by the more pragmatic discussions around decarbonization. which could help accelerate potential growth. Furthermore, we are very well positioned for any economic recovery or increased infrastructure spending.

Speaker Change: Moving to EMEA out.

Speaker Change: We have not seen any meaningful improvement in industrial activity.

Speaker Change: Despite some of the recent positive news regarding increased government spending.

Speaker Change: However, I'm encouraged by the more pragmatic discussions around decarbonization, which could help accelerate potential growth opportunities.

Speaker Change: Furthermore, there are very well positioned for any economic recovery or increased infrastructure spending.

Sanjiv Lamba: The America segment has been more of a mixed bag. On one hand, Canada and U.S. packaged gases are seeing some weakness from manufacturing uncertainty. On the other hand, U.S. bulk, not Latin America volumes, continue to grow low to mid-single-digit percent. America has the highest segment price increase at 3%, reflecting the inflationary pressure we see in the segment. I fully expect us to stay ahead of any inflationary pressure through a combination of contractual pricing clauses as well as our productivity program. The quarter ended with a strong backlog of $10 billion, of which more than $7 billion is sale of gas projects.

Speaker Change: The medical segment has been more of a mixed bag.

Speaker Change: On one hand, Canada U S packaged gases are seeing some weakness from out of factoring uncertainty.

Speaker Change: The other had U S bulk north Latin America volumes continue to grow low to mid single digit percent.

Speaker Change: Americas has the highest segment price increased 3%, reflecting the inflationary pressure we see in the segment.

Speaker Change: What do you expect us to stay ahead of any inflationary pressure through a combination of contractual pricing clauses as well as our productivity programs.

Speaker Change: The quarter ended with a strong backlog of $10 billion.

Speaker Change: More than $7 billion sale of gas projects, all underpinned by long term contracts with secured returns driving future growth.

Sanjiv Lamba: all underpinned by long-term contracts with secured returns, driving future growth. You may recall from our prior earnings call that project contribution is part of our EPS growth algorithm. And despite the uncertainty, I expect we will continue to announce new wins in the quarters ahead.

Speaker Change: You may recall from our prior earnings call that project contribution as part of our EPS growth algorithm. Despite the uncertainty I expect we will continue to announce new wins in the quarters ahead.

Sanjiv Lamba: In summary, the rapid changes in global trade policy are having a dampening effect on overall industrial economy. So I'd anticipate more volatility in end market trends until there is greater clarity and stability. And while no one can predict what will happen next week, let alone next quarter, I'm confident Linde will navigate the uncertainty by not only leveraging our operating rhythm to quickly adapt, but also continuing to deliver high quality growth.

Speaker Change: In summary, the rapid changes in global trade policy are having a dampening effect on overall industrial activity.

Speaker Change: So I would anticipate more volatility and end market trends until there is greater clarity and stability.

Speaker Change: And while no one can predict what will happen next week, let alone next quarter.

Speaker Change: Linda Nicholls will navigate the uncertainty by not only leveraging our operating rhythm to quickly adapt but also continuing to deliver high quality growth.

Matt White: I'll now turn the call over to Matt to walk through our financial results. Thanks, Sean. First quarter results can be found on the slide. Sales of $8.1 billion were flat to prior year. and down 2% sequentially. versus prior year, the foreign currency headwind was volatile, starting at 4%, but ending with 2%. for an overall first quarter average of three. costs passed through increased 1% from higher natural gas prices. but had minimal effect on profit. Net acquisitions contributed 1%, primarily from packaged gas tuck-ins in North America, as we continue to see attractive roll-up opportunities justified by cost centers.

Speaker Change: I'll now turn the call over to Matt to walk through our financial results.

Speaker Change: Thanks Sanjay.

Speaker Change: First quarter results can be found on slide four.

Speaker Change: Sales of $8 $1 billion were flat to prior year.

Speaker Change: And down 2% sequentially.

Speaker Change: Versus prior year.

Speaker Change: Foreign currency headwind was volatile starting at 4%, but ending with 2%.

Speaker Change: Overall first quarter average of 3%.

Speaker Change: Cost pass through increased 1% from higher natural gas pricing, but had minimal effect on profit.

Speaker Change: Net acquisitions contributed 1% primarily from packaged gas tuck ins in North America, as we continue to see attractive roll up opportunities justified by cost synergies.

Matt White: Excluding these items, underlying sales increased 1% from last year, as higher pricing was partially offset by lower volume. Pricing tracked with globally-weighted inflation everywhere except for APEC, which was impacted by lower prices in helium and rare gas. volumes declined 1% as 2% lower base volumes were partially offset by contribution from the project backlog. As Sanjiv mentioned, industrial activity remains sluggish in most geographies and therefore has dragged down base volume. Sequentially, underlying sales are down 1% as higher pricing is more than offset by lower volume. The lower volume is primarily driven by seasonal factors, especially in APAC.

Speaker Change: Yes.

Speaker Change: Excluding these items underlying sales increased 1% from last year.

Speaker Change: As higher pricing was partially offset by lower volumes.

Speaker Change: Pricing tracked with globally weighted inflation everywhere, except for APAC, which was impacted by lower prices and helium and rare gases.

Speaker Change: Volumes declined 1% as 2% lower base volumes were partially offset by contribution from the project backlog.

Speaker Change: As Sanjay mentioned industrial activity remains sluggish in most geographies and therefore has dragged down volumes.

Speaker Change: Sequentially underlying sales are down 1% as higher pricing is more than offset by lower volumes.

Speaker Change: The lower volume is primarily driven by seasonal factors, especially in APAC.

Matt White: although we did experience weaker trends in certain packaged gas markets. Operating profit of $2.4 billion increased 4% and resulted in a margin of 30.1% or 120 basis points higher than prior year. all segments expanded operating margin as management actions in pricing and cost productivity more than compensated weaker base volume. Despite the economic challenges, we expect management actions to continue to support profit growth and margin expansion. EPS of $3.95 was 5% over prior year or 8% when excluding the effects of currency translation. We finished the quarter at the top end of the guidance range, due to slightly better FX, as benefits from cost and pricing actions were mostly offset by weaker volume.

Although we did experience weaker trends in certain packaged gas markets.

Speaker Change: Operating profit of $2 4 billion increased 4% and resulted in a margin of 31% or 120 basis points higher than prior year.

Speaker Change: All segments expanded operating margin as management actions and pricing and cost productivity more than compensated weaker base volumes.

Speaker Change: Despite the economic challenges, we expect management actions to continue to support profit growth and margin expansion.

Speaker Change: EPS of $3 95.

Speaker Change: Is 5% over prior year or 8% when excluding the effects of currency translation.

Speaker Change: We finished the quarter at the top end of the guidance range due to slightly better FX as benefits from cost and pricing actions were mostly offset by weaker volumes.

Matt White: CapEx of $1.3 billion was equally split between Base CapEx and Project Backward. As a reminder, Linde has the most stringent project backlog definition in the industry. which requires incremental growth underpinned by fixed fees and contract clauses to protect the overall return. Base Cap X includes all other growth investments not meeting our backlog definition. as well as maintenance and replacement specs. The 58% increase in Project CapEx supports the record $7 billion sale of gas backlog. We're actively constructing the two largest projects in our history. So I anticipate elevated levels for a few more quarters. Conversely, base capex has declined from lower volumes and productivity acts.

Speaker Change: Capex of $1 $3 billion was equally split between base Capex and project backlog.

Speaker Change: As a reminder, Linda has the most stringent project backlog definition in the industry.

Speaker Change: Which requires incremental growth underpinned by fixed fees and contract clauses to protect the overall return.

Speaker Change: Base Capex includes all other growth investments not meeting our backlog definition.

Speaker Change: As well as maintenance and replacement spend.

Speaker Change: The 58% increase in project Capex supports the record $7 billion sale of gas backlog.

Speaker Change: We're actively constructing the two largest projects in our history.

Speaker Change: So I anticipate elevated levels for a few more quarters.

Speaker Change: Conversely base Capex has declined.

Speaker Change: Lower volumes and productivity actions.

Matt White: Slide 5 provides further details on quarterly capital management. The operating cash flow trend can be seen to the left. with the most recent quarter of $2.2 billion, increasing 11% above last year.

Speaker Change: Slide five provides further details on quarterly capital management.

Speaker Change: The operating cash flow trends can be seen to the left.

Speaker Change: With the most recent quarter of $2 2 billion, increasing 11% above last year.

Matt White: Note, the first half is weaker due to seasonality of cash payment timing for interest, taxes, and incentives. for 2025, I anticipate a similar trend as last year.

Speaker Change: Note. The first half is weaker due to seasonality of cash payment timing for interest taxes and incentives.

Speaker Change: For 2025, I anticipate a similar trend as last year.

Matt White: Disciplined capital allocation is a hallmark of Linde culture, and the pie chart to the right demonstrates the balance across investing into the business and returning capital to shareholders. During the quarter, we raised the annual dividend by 8%. representing 32 straight years of dividend growth with an average rate of 13%. We also repurchased $1.1 billion of stock while reinvesting almost $1.3 billion back in 2020.

Speaker Change: Disciplined capital allocation is a hallmark of Lindy culture, and the Pie chart to the right demonstrates the balance across investing into the business and returning capital to shareholders.

Speaker Change: During the quarter, we raised the annual dividend by 8%, representing 32 straight years of dividend growth with an average rate of 13%.

Speaker Change: We also repurchased $1 $1 billion of stock, while reinvesting almost $1.3 billion back into the business.

Matt White: The steady capital allocation model is underpinned by quality credit metrics and access to low-cost funding, as evidenced by our most recent 3% average bond coupon. In uncertain and volatile times like today, having a fortress balance sheet is critical for not only maintaining stability, but also capitalizing on growth and share repurchase opportunities as they arise.

Speaker Change: The steady capital allocation model is underpinned by quality credit metrics and access to low cost funding.

Speaker Change: As evidenced by our most recent 3% average on coupons.

Speaker Change: An uncertain and volatile times like today.

Speaker Change: Having a fortress balance sheet is critical for not only maintaining stability.

Speaker Change: But also capitalizing on growth and share repurchase opportunities as they arise.

Matt White: I'll wrap up with a guidance update on slide. For second quarter, the EPS guidance range is $3.95 to $4.05. This represents 3% to 5% growth or 5% to 7% when excluding a 2% currency head. This range assumes recessionary conditions at the midpoint, translating to roughly 2% EPS headwind from lower volume. Therefore, while the assumed FX headwind improved by 2%, we offset that benefit with an equivalent volume contraction at the mid. Consistent with our normal approach, this is merely an economic placeholder based on current. If things are better, we'll perform better, and if worse, we'll take actions to mitigate.

Speaker Change: I'll wrap up with a guidance update on slide six.

Speaker Change: For second quarter, the EPS guidance range is $3 95.

Speaker Change: So $4.05.

Speaker Change: This represents 3% to 5% growth or 5% to 7% when excluding a 2% currency headwind.

Speaker Change: This range assumes recessionary conditions at the midpoint translating to roughly 2% EPS headwind from lower volumes.

Speaker Change: Therefore, while the assumed FX headwind improved by 2%, we offset that benefit with an equivalent volume contraction at the midpoint.

Speaker Change: Consistent with our normal approach. This is merely an economic placeholder based on current trends if things are better will perform better and if worse, we'll take actions to mitigate.

Matt White: However, it's important to note this range still follows our long-term EPS growth algorithm. with double-digit percent growth from capital allocation and management actions. partially offset by the current unfavorable economic impact, including currency trends.

Speaker Change: However, it's important to note. This range still follows our long term EPS growth algorithm.

Speaker Change: With double digit percent growth from capital allocation and management actions.

Speaker Change: Partially offset by the current unfavorable economic impact including currency translation.

Matt White: The full year guide follows the same approach as Q2. resulting in an updated range of $16.20 to $16.50. FX improved by 2% but was offset by an equally negative volume assumption at the mid-point. All in, we're holding the original guidance midpoint but are narrowing the range by a nickel on each end due to less remaining court. Overall, we believe it's prudent to remain guarded in this environment. but do not mistake our prudence for complacency. We continue to manage the things within our control by taking proactive actions and adhering to our long-term proven capital allocation strategy.

Speaker Change: The full year guide follows the same approach as Q2 <unk>.

Speaker Change: Resulting in an updated range of $16 22.

Speaker Change: $16 50 sites.

Speaker Change: FX improved by 2%, but was offset by an equally negative volume assumption at the midpoint.

Speaker Change: All in we're holding the original guidance midpoint, but are narrowing the range by a nickel on each end due to less remaining quarters.

Speaker Change: Overall, we believe it's prudent to remain guarded in this environment.

Speaker Change: But do not mistake, our prudence for complacency.

Speaker Change: We continue to manage the things within our control by taking proactive actions and adhering to our long term.

Speaker Change: <unk> capital allocation strategy.

Matt White: Additionally, we're leveraging our secure balance sheet, engineering capabilities, and unrivaled supply network to capture opportunities that will position us for the future. And eventually, the economy will recover, at which point Linde will be well positioned to benefit. with 2021 being the most recent example.

Speaker Change: Additionally.

Speaker Change: We're leveraging our secure balance sheet engineering capabilities, and unrivaled supply network to capture opportunities that will position us for the future.

Speaker Change: And eventually the economy will recover at which point Lindy, we'll be well positioned to benefit.

Speaker Change: With 2021 being the most recent example.

Matt White: Until that time, investors can rest assured knowing that our employees will continue to exemplify the no-excuses execution culture, which has been the bedrock of our long-term compound value creation.

Speaker Change: Until that time.

Speaker Change: <unk> can rest assured knowing that our employees will continue to exemplify the no excuses execution culture, which has been the bedrock of our long term compound value creation.

Operator: I'll now turn the call over to Q&A. Thank you.

Speaker Change: I'll now turn the call over to Q&A.

Speaker Change: Thank you.

Operator: And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and... like to withdraw your question press star 1 a second. are called upon to ask your question and are listening via speakerphone on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many of your questions as possible, we ask that you please limit yourself to one question. Again, it is star 1 if you would like to join the queue.

Speaker Change: And we will now begin the question and answer session.

Speaker Change: Dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: If you would like to withdraw your question Press Star one a second time.

Speaker Change: If you are called upon to ask your question in or listening via speakerphone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: To be able to take as many of your questions as possible. We ask that you. Please limit yourself to one question.

Speaker Change: Again, it is star one if you would like to join the queue.

Michael Leithead: And your first question comes from the line of Michael Leithead with Barclays. Your line is open. Great. Thank you.

Speaker Change: And your first question comes from the line of Michael Whitehead with Barclays. Your line is open.

Michael Whitehead: Great. Thank you. Good morning team question as it relates to your backlog Dow recently announced the delay of its Alberta project Lindsay as a partner on that.

Sanjiv Lamba: Good morning, team. Question as it relates to your backlog. Dow recently announced the delay of its Alberta project. Linde is a partner on that. Can you speak to what impact you expect that to have on your associated project timing and startup, or what contingencies Linde has to protect?

Michael Whitehead: Can you speak to what impact do you expect that to have on your associated project timing and startup or what contingencies Lindsay has to protect itself there.

Sanjiv Lamba: Thanks, Mike. As you'd expect, most on-site contracts that we've had and continue to have build in contractual protection for events such as delays driven by customers. So, this is not new. It typically happens.

Michael Whitehead: Thanks, Mike.

Michael Whitehead:

Speaker Change: As you would expect most onsite contracts that we've had and continue to.

Speaker Change: Build and contractual protection for events, such as delays driven by customers. So this is not new it typically happens there is a typical great spirit beyond which we have our invoicing that starts in the customers out space. So this is going to be no different in terms of the contractual protection that we have on the contract I'm going to say, having said that we will be well.

Sanjiv Lamba: There is a typical grace period beyond which we have our invoicing that starts and the customer starts paying. So, this is going to be no different in terms of the contractual protection that we have on the contract. Obviously, having said that, we'll be working with Dow to look at while maintaining Linde's interest in the project.

Speaker Change: With Dow to look at alternatives and opportunities to see how we can help them meet their goals, while maintaining lindsay as interest in the project.

Great. Thank you.

Vincent Andrews: And your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open. Hey, good morning.

Speaker Change: And your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.

Steve Haynes: Hey, Good morning. This is Steve Haynes on for Vincent Thank.

Steven Haynes: This is Steve Haynes. I'm from Dentson. Thank you for taking my question. The EMEA margin performance was super robust in the quarter. I think this is this is kind of coming collectively. Even with your volumes down, you know, high single digits over the last few years.

Speaker Change: Thank you for taking my question.

Speaker Change: The EMEA margin performances with Super robust in the quarter.

Speaker Change: Think this is this is kind of coming collectively.

Speaker Change: Even with your volumes down you know.

Speaker Change: High single digits over the last few years can you kind of help us think a little bit about what the margin profile could look like once.

Sanjiv Lamba: Can you kind of help us think a little bit about like what the margin profile could look like? volumes start to return eventually at some point. Thank you. So the email margins have been, you know, as a result of some very hard work done over that, by that team over a period of time. And I think making sure. The things that we control, pricing, productivity, get the attention that they deserve and are translated into results that reflect that margin number today. Obviously, that's in the face of the volume kind of downside that you talked about.

Speaker Change: Volumes start to return them potentially at some point. Thank you.

Speaker Change: So they may margins have been the result of some very hard work done over that.

Speaker Change: That team over a period of time, and I think making sure.

Speaker Change: The things that we control pricing productivity get the attention that the meso and all translated into results that reflect that margin number today.

Speaker Change: Obviously, that's in the face of.

Speaker Change: The volume kind of downside that he talked about our expectation is as volumes improve those margins will continue to grow which has been proven over time.

Sanjiv Lamba: Our expectation is as volumes improve, those margins will continue to grow, which has been proven over time.

Speaker Change: Thank you.

Duffy Fisher: And your next question comes from the line of Duffy Fisher with Goldman Sachs. Your line is open. Yeah, good morning, guys. It was two years ago, you guys rolled out the slide where you talked about $50 billion of opportunity around clean energy. You know, a lot of changes in the world as we're looking at that now. When you look at that market today, you know, how would you, would you size it differently? Would you size the timing of it differently? You know, what are customers coming back to you saying, you know, how much trust do they have in pieces of the IRA, you know, some of the stuff that was driving that forward, you know, because it was, you know, going to be a decent part of the algorithm for you guys to grow.

Duffy Fischer: And your next question comes from the line of Duffy Fischer with Goldman Sachs. Your line is open.

Duffy Fischer: Hey, good morning, guys.

Duffy Fischer: It was two years ago, you guys rolled out this slide where you talked about $50 billion of opportunity around clean energy.

Speaker Change: You know a lot of changes in the World is we're looking at that now when you look at that market today, how would you size. It differently would you size the timing of it differently.

Speaker Change: What are customers coming back to you, saying you know how much trust do they have in pieces of the eye or a some of the stuff that was driving that forward because it was going to be a decent part of the the algorithm for you guys to grow I'm. Just you know get your view on kind of where that is today.

Sanjiv Lamba: Just, you know, get your view on kind of where that is today. So Duffy, you're right. We kind of laid that out a couple of years ago when we laid out the strategy which said, look, we'll decarbonize our own operations, we'll support our customer decarbonization process, and of course, our new energy markets that, you know, will come through. We did offer that $50 billion over a period of 10 plus years. So there's a long time to go as we reflect on that number. I think, you know, we see the opportunity set that we have around clean energy projects still looking fairly attractive.

Speaker Change: So Duffy Arabia, we kind of laid that out a couple of years ago. When we laid out the strategy. We said look real decarbonize, our own operations will support our customer decarbonization process and of course, the neo energy market.

Speaker Change: What will come through.

Speaker Change: We did offer that 15 billion over a period of 10 plus years. So theres a long time to go as we reflect on that number I think we see the opportunity set that we have around clean energy projects still looking fairly attractive the feed up all into that 50 billion looks look still reasonable I think what's more important.

Sanjiv Lamba: The feeder pool into that $50 billion looks still reasonable. I think what's more important is to focus on the slightly more shorter term. And we said that, look, we expect $8 to $10 billion over the next few years. And I think the point to make over here, Duffy, is that we are about halfway through there with the two projects that we're currently executing. And our expectation remains that some of those projects are likely to see additional trains in due course. And of course, other projects developing elsewhere in the Middle East and Europe could add to that tally.

Speaker Change: Austin is a focus on the slightly more shorter term and we've said that look we expect eight to 10 billion over the next few years and I think the point to make all the here.

Speaker Change: Duffy is as we're about halfway through there with the two projects that we're currently executing.

Speaker Change: Our expectation remains that some of those projects are likely to see additional cranes and deal costs and of course other projects developing elsewhere in the middle Eastern Europe could add to that Sally I'd say to you standing here I still feel reasonably confident that eight to 10 billion over the next few years is something that we still feel that we are set to get.

Sanjiv Lamba: I'd say to you standing here, I still feel reasonably confident that $8 to $10 billion over the next few years is something that we still feel that we are set to get to. So that's kind of what the numbers look like.

Speaker Change: So that's kind of what the numbers look like just in terms of feedback and I think it's important to note over here and you've heard me say this before so at all.

Sanjiv Lamba: Just in terms of feedback. And I think it's important to note over here, and you've heard me say this before. So you know, at the point of, you know, I'm kind of belaboring the point over here a little bit, but we've always differentiated between two different types of projects. the Low Carbon Hydrogen Project, which is what is also known as Blue Hydrogen Development, as well as Renewable Hydrogen, or Green Hydrogen Development. And you've heard me say in the past that Green Hydrogen Development, from my point of view, isn't at scale today, doesn't have the competitive cost base that is necessary, or indeed, requires to have significant reduction in capital intensity to get to that point of inflection.

Speaker Change: The point I've got a belaboring the point over here a little bit but.

Speaker Change: It's differentiated between two different types of projects.

Speaker Change: The low carbon hydrogen project, which is what is also known as blue hydrogen development as well as renewable hydrogen green hydrogen development and you've heard me say in the past the green hydrogen development from my point of view isn't at scale today doesn't have the competitive gap.

Speaker Change: Cost base that is necessary or indeed requires us to have significant reduction in capital intensity to get to that point of inflection.

Sanjiv Lamba: We've said in the past and I maintain that that's probably five to seven years out. you'll be pleased to know that in our portfolio project that we're pursuing, that is a very small percentage related to renewable hydrogen. And we only do that opportunistically when there is potentially a very low cost renewable energy access and so on and so forth. The primary. development in our project pipeline is related to low carbon hydrogen or blue hydrogen. And again, you know, a lot of people reference IRA. I always want to remind folks that the clause that we should be talking about and thinking about is 45Q, which predates the IRA, and that clause is supporting Producing hydrogen using natural gas.

Speaker Change: We've said in the past I mean, David that's probably five to seven years out.

Speaker Change: You'll be pleased to know that in our portfolio of projects that we're pursuing that as a very small percentage related to renewable hydrogen and we only do that opportunistically. When there is essentially a very low cost renewable energy access and so on and so forth.

Speaker Change: The primary.

Speaker Change: Development in our in our project pipeline is related to low carbon hydrogen op blue hydrogen.

Speaker Change: And again, a lot of people referenced irate I always want to remind folks that the.

Speaker Change: Flaws that we should be talking about and thinking about is 45, Q, which predates the irate.

Speaker Change: And that clause is supporting.

Speaker Change: Producing hydrogen using natural gas.

Sanjiv Lamba: converting that using an autothermal reformer or a steam methane reformer and taking the carbon dioxide that is produced, capturing it, and sequestering it. And hence that 45Q credit of $85 per ton, which we feel reasonably confident at this point in time. I think, you know, I'm being brave in this world, but I feel confident that that has the support necessary as we move forward. And that's really what's underpinning the project development cycle that we're looking at, and that's where we feel the larger project development world that Linde is doing is concentrated on. And that looks pretty resilient as things stand.

Speaker Change: Barring that using an auto tomo reform, Laura or a steam methane reformer and taking the carbon dioxide that has produced capturing and sequestering it them and hence that 45 credit of $85, but.

Speaker Change: Which may feel reasonably confident at this point in time, I think I'm being brave in this world, but I feel confident that that has the support necessary as we move forward and that's really what's underpinning.

Speaker Change: The project development cycle that we're looking at and that's why we feel the larger project development laws that Lindsay is doing is concentrated at all and that looks pretty resilient dusting stop.

Matt White: And maybe definitely just one thing I'll add to Sanjiv's as well is, you know, when you're referencing on the algorithm, you know, we've always said the capital allocation algorithm, we expect 4 to 6%. That's been our stable contribution going back a couple decades. And it absolutely includes projects like Sanjiv mentioned, and we feel good about that. But it also includes buybacks, it includes acquisitions, and it includes capital structure. These are all uses of capital. And you saw this quarter, acquisitions now rounding up to 1%. We're seeing opportunities to do that. We continue to see buyback opportunities in the way the markets are reacting.

And maybe just one thing I'll add is as well as you know when you when you're referencing on the algorithm you know we've always said the capital allocation algorithm, we expect 4% to 6% that's been our stable contribution going back a couple of decades and it absolutely includes projects like Sanjiv mentioned and we feel good about that but it also includes buybacks.

Speaker Change: It includes acquisitions and it includes capital structures. These are all uses of capital and you saw this quarter acquisitions now rounding up to 1%, we're seeing opportunities to do that we continue to see buyback opportunities and the way the markets are reacting. So we have mechanisms and means to continue to contribute on that algorithm even as some of these projects.

Matt White: So we have mechanisms and means to continue to contribute on that algorithm, even as some of these projects might be a little bit delayed, or until they contribute. So we still feel good about our ability to deliver on that.

<unk> might be a little bit delayed or until they contribute so we still feel good about our ability to deliver on that.

Operator: Awesome, thank you guys.

Speaker Change: Awesome. Thank you guys.

David Begleiter: And your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open. Thank you, good morning. On your guidance, you load it by roughly $0.30 FX. vast majority in the American...

Speaker Change: And your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open.

David Begleiter: Thank you good morning.

Speaker Change: On your guidance you lowered it by roughly 30 cents F X was it what was the vast majority in the Americas due to weak manufacturing.

David Begleiter: If it was which manufacturing end markets, where you're seeing the greatest flow.

Speaker Change: Slowing or demand weakness thank you.

Matt White: So, I'll let Matt talk about the guidance and I'll give you a flavor of what we're seeing in the U.S. manufacturing, Matt. Yeah, sure. So, I think, David, on the guidance, if you start with the FX change, as I mentioned, you know, it was 4% in the beginning of the quarter, went to 2% by the end, averaged at 3%. Just as a reminder, when we put a guidance estimate, and it's merely an estimate, into our range here, we take the forward rates at the beginning of each month. So, what I'm telling you right now was the forward rate as of April 1st.

David Begleiter: So I'll, let I'll let.

David Begleiter: But talk about the guidance and I will give you a flavor of what we're seeing in the U S manufacturing.

David Begleiter: Yeah sure. So I think David on the guidance if you start with the FX change as I mentioned it was 4% in the beginning of the quarter went to two by the end averaged at three <unk>.

David Begleiter: Just as a reminder, when we put our guidance estimate and it's merely an estimate into our range here, we take the forward rates at the beginning of each month, so what I'm, telling you right now what's the forward rate as of April 1st we haven't updated that for today's forward rate, which will do and then of course, we book the average rate as it.

Matt White: We haven't updated that for today's forward rate, which we'll do. And then, of course, we book the average rate as it occurs. Clearly, the rates have moved a little bit, I would say, to a further weakening dollar. And when you think about what's moved the most, the Euro has helped the most, given that seems to be more of a flight-to-quality currency today. The Sterling's helped a bit. And then, on LATAM currencies, it's been a mixed bag, I'd say, between the peso and the REI. So, that's how we thought about that. And then, clearly, what you're seeing in this environment, normally, when we'd see risk off, you'd see a strengthening dollar, which, with a weakening environment, it's a bit inverted now.

David Begleiter: Occurs clearly the rates have moved a little bit I would say to a further weakening dollar and when you think about what's moved the most the euro has helped the most given that seems to be more of a flight to quality currency today. The Sterling has helped a bit and then our Latam currencies. It's been a mixed bag I would say between the peso and the Reais.

David Begleiter: So that's how we thought about that and then clearly what youre seeing in this environment normally when we'd see risk off you'd see a strengthening dollar which with the weakening environment. It's a bit inverted now you are saying.

Matt White: You're seeing a... basically a weakening dollar with a weakening environment. So we are getting some offset in that, and that's how we've laid it out. Time will tell, but like we said, if things are better, we'll do better.

David Begleiter: Basically a weakening dollar with a weakening environment. So we are getting some offsetting that and that's how we've laid it out time will tell but like we said if things are better we'll do better, but I'll hand up sanjiv to give more update on Americas trends.

Sanjiv Lamba: But I'll hand off to Sanjiv to give a more update on America's trend.

Sanjiv Lamba: So I'm going to focus on manufacturing, which I think was your question, David. So manufacturing in Q1 for the US was softer than prior year. And that is a combination of factors, including the fact that we had a couple of weather events in both January and February, particularly in the south and southeast of the US, which obviously impacted that. We didn't end the quarter strong with a strong march. Probably for the first time in many quarters, we saw some core manufacturing growth, both in gases and hard goods. In April, that trend appears to continue to be there.

Sanjiv: So I'm going to focus on manufacturing, which I think.

Sanjiv: As your question, David So manufacturing in Q1 for the U S was softer than prior year and that is a combination of factors, including the fact that we had a couple of weather events in both January and February, particularly in the south and southeast of the U S, which obviously impacted that we didn't end the quarter strong with a strong March probably for the first time in many quarters we.

Sanjiv: Saw some more manufacturing growth Bolton gases and hard goods and.

Sanjiv: In April that trend appears to continue to be there, it's slightly moderated the pace of movement, but it's still intact.

Sanjiv Lamba: It's slightly moderate in the pace of movement forward, but it's still intact.

Sanjiv Lamba: As I think about the industries that impacted that, you know, when we look at it, we saw automotive, agricultural products, mining, etc., which were soft, not a surprise, offset in part by general fabrication, energy, chemicals, and of course construction. Now, in April also, I'd say to you that the sentiment for the larger customers has turned more negative, obviously, you know, given the uncertainty and lack of stability in the market and potential for high inflation. So you can see that reflected in the PMI numbers that you've seen. While sentiment has turned, we haven't seen that reflect in volumes just yet.

Sanjiv: Think about the industry and that impacted that when we look at it we saw automotive agricultural products mining et cetera, which were soft not a surprise.

Sanjiv: Offset in part by general fabrication energy chemicals and of course construction.

Sanjiv: Now in April also I would say to you that the sentiment for the larger customers has turned more negative obviously given.

Sanjiv: Given the uncertainty and lack of stability in the market and potential for high inflation.

You can see that reflected in the in the PMI numbers that you've seen so.

Sanjiv: While sentiment has stalled we haven't seen that reflect in volumes just yet and indeed, some customers are still buying on the hardwood side are actually making investments in larger capex items, such as automation, which is kind of essential for productivity, particularly if you have labor shortages. So.

Sanjiv Lamba: And indeed, some customers are still buying on the hardwood side or actually making investments in larger CapEx items such as automation, which is kind of essential for productivity, particularly if you have labor shortages. So, you know, I think overall, I'd just say that manufacturing has been more resilient than people had expected, obviously.

Sanjiv: I think overall I'd, just say that manufacturing has been more resilient than people had expected obviously.

Sanjiv Lamba: The expectation remains that if you get some policy certainty and if you get some stability, you know, which have been creating some headwinds, you will see potentially in the second half of the year a likely pickup in manufacturing once those conditions are met. Thank you.

Sanjiv: The expectation remains that if you get some policy certainty and if we can get some stability.

Sanjiv: Which had been creating some headwinds you will see potentially in the second half of the year and likely pick up in manufacturing once those conditions are met.

Sanjiv: Thank you.

Sanjiv: Okay.

Peter Clark: Your next question comes from the line of Peter Clark with Bernstein. Your line is open. Yes, good morning, everyone. It's on the electronics, I think, with the fourth quarter, Sanjiv, you were saying you're expected to sign new signatures very shortly. You signed something in Korea with your relationship with Samsung with an expansion.

Speaker Change: And your next question comes from the line of Peter Clark with Bernstein. Your line is open.

Speaker Change: Oh, yes, good morning, everyone. It's only the electronics, but I think with our fourth quarter and Dave you were saying you expect it to start a new signature is very shortly.

Speaker Change: You you sign something in Korea with your relationship with Samsung with an expansion I'm just wondering clearly other things bubbling because that that size of the backlog actually in terms of value to them with gossip diminished and therefore going into Q1, and then just a quick follow up EMEA I mean, I've always thought that it should be the highest margin business you're delivering coca.

Sanjiv Lamba: I'm just wondering, clearly, how the things are bubbling, because that side of the backlog, actually, in terms of value terms with startup diminished a little going into Q1. And then just a quick follow-up, EMEA, I mean, I always thought that should be the highest margin business, you're delivering over 35%. Now, is there anything exceptional helping that? Is it the volumes, perhaps, in the smaller on-site business being a bit softer, giving it a little bit of a profit boost? Or is it just nothing extraordinary, it's just delivering on the model?

Speaker Change: 35% now is there anything exceptional helping that is it the volumes perhaps in the smaller on site business being soft so give me a little bit of a appropriate boost or is it just nothing nothing extraordinary just delivering on the model.

Sanjiv Lamba: So why don't I begin with the mayor, Peter, and just say that it is fundamentally the model. I don't think there is anything particularly offsetting, there's nothing special in there. It's a fundamental business that has done from being a 19% margin business back in 2019 to being a 35 and plus percent business today, and I think it's taken a lot of hard work to get there. I think credit to the team having worked through the energy crisis, you know, the war in Ukraine and all of that to get us here. And I remain confident that that team really has the algorithm worked out and are executing it every day to make sure that they maintain that margin and move forward.

Speaker Change: So why does it begin with EMEA, Peter and just say that it is it is fundamentally the marvell I don't think there is anything, particularly offsetting theres nothing special in there is the fundamental business that is done from being a 19% margin business back in 2019 to being a 35 plus percent.

Speaker Change: This today and I think it's taken a lot of hard work to get there I think credit to the team having worked through the energy crisis The war in Ukraine and all of that.

Speaker Change: To get us here and I I I remain.

Confident that that team really has the algorithm worked out and are executing it everyday to make sure that they maintain that margin and move forward with it.

Sanjiv Lamba: Let me go back to backlog then, and I'll talk about backlog generally, then we'll talk a little bit about the Korean Win. So in Q4, I did say that you should expect us to announce some electronics projects. This is first of a few that I expect that we will be announcing. The backlog overall, you know, $10 plus billion, $7 billion of that is sitting in the sale of gas side, which is where most of the interest is. And my expectation is that this year, probably towards the second half of the year, we will start up about a billion out of that backlog.

Speaker Change: Let me go back to backlog, there and I'll talk about backlog generally then we'll talk a little bit about the Korean but so in Q4 I did say that you should expect us to announce a electronics projects. This is first overview that I expect that we will we will be announcing the backlog overall, you know 10 plus billion 7 billion of that is sitting in the sale of gas.

Speaker Change: <unk> side, which is where most of the interest is and my expectation is that this year probably towards the second half of the year, we will stopped up about 1 billion out of the backlog the best thing that happens in our backlog as I've always said as you know you start the projects up and it comes out of your backlog and their backlog strength now.

Sanjiv Lamba: The best thing that happens to the backlog, as I've always said, is, you know, you start the projects up and it comes out of your backlog and your backlog shrinks. Now the good news is I fully expect that we will end the year with a backlog with a seven handle on it. In fact, I expect it will be slightly higher than what we have today. So I feel pretty good about the projects that we're currently developing. Despite everything you read in the news, you know, we have a good pipeline of projects. I think Matt made the point really, really eloquently earlier on.

Speaker Change: The good news is.

Speaker Change: I fully expect that'd be will end the year with a backlog with a seven handle on it in fact I expect it will be slightly higher than what we have today. So I feel pretty good about the projects that we're currently developing despite everything you read in the deals we have a good pipeline of projects I think Mike made the point really really eloquently earlier, all our algorithm says that.

Sanjiv Lamba: Our algorithm says that our capital allocation will deliver 4 to 6% of the EPS growth. And you know, feeding into that is high quality projects. And much of those projects will come from our traditional end markets. There'll be some from clean energy, but much of the project development will actually come and the project wins, will come from a traditional end market.

Speaker Change: Our capital allocation will deliver 46% of the EPS growth and feeding into that is high quality projects and much of those projects will come from our traditional end markets.

Speaker Change: Some of them clean energy, but much of the project development will actually come into project wins have come from our traditional end market. So that's kind of what gives us confidence that the backlog is going to look pretty good and the project win rate is looking particularly strong at this point in time, given the circumstances in which we're operating.

Sanjiv Lamba: So that's kind of what gives us confidence that the backlog is going to look pretty good and the project win rate is looking particularly strong at this point in time, given the circumstances in which we are operating.

Speaker Change: Thank you.

Laurent Favre: And your next question comes from the line of Laurent Favre with BNP Paribas. Your line is open. Hi Monique, actually you just kind of answered what I had in mind, which was away from Dow, have you seen any risk around delays or slowdowns on what is currently in the backlog, so startups that were due in Q2 that may be delayed to H2 for instance, or indeed lower at the time from customers. But Sanjiv, as you just said that you are quite confident to sign those projects, can you talk about the areas where you see the biggest?

Speaker Change: And your next question comes from the line of Laura Pfeifer with BNP Paribas. Your line is open.

Speaker Change: Oh hang on.

Speaker Change: Just kind of answered what adding lines, which was away from Dow.

Speaker Change: Have you seen any risk around delays and slowdowns on what is currently in the backlog. So that's a.

Speaker Change: That's why did you in Q2 that may be related to H. Two final scan. So indeed blowouts attach on testing is essentially a as he just said that you were quite confident to sign those projects can you talk about the areas, where you see the biggest commitment.

Sanjiv Lamba: either geographically or in terms of environment.

Speaker Change: Either geographically or in terms of end markets.

Sanjiv Lamba: Yeah, and, you know, why not do two things? I'll just talk about how I'm seeing the markets for the rest of the year more broadly. And then we talk about some of the investment trends that we've seen as well. And, you know. Matt mentioned earlier on that, you know, from a guidance point of view, and you've seen this as well in the slides, you know, we're considering recessionary conditions now at the midpoint. And, you know, as I look around, when you think about end markets, resilient end markets are still going to grow. That's led by electronics, food and beverage, etc., you know, low to mid single digit.

Speaker Change: Yeah.

Speaker Change: And.

Speaker Change: Why not do two things I'll I'll, just talk about how I'm seeing the markets for the rest of the year more broadly and then we talk about some of the investment trends that we're seeing as well.

Speaker Change: Matt mentioned earlier on that you know from a guidance point of view and you've seen this as well in the in the in the in this slide.

Slides, we're considering recessionary conditions now at the midpoint.

Speaker Change: And.

Speaker Change: As I look around but do you think about end markets are resilient end markets are still going to grow that's led by electronics food and beverage et cetera.

Speaker Change: Low to mid single digit it's the the more cyclical markets on the industrial sector, which is likely to see lower volumes.

Sanjiv Lamba: It's the more cyclical markets of the industrial sector, which is likely to see lower volumes, you know, towards the rest of the year, mainly in metals and chemicals. So, you know, that's kind of where you're thinking about from an end market perspective. As you look at geographically, we expect volumes in Americas to remain flattish for the year. That's kind of built into how we are thinking about the guidance. The resilient end markets obviously will continue to find their growth, but they will be more than offset by software industrial sector, not dissimilar to what we saw last year.

Speaker Change: Z towards the rest of the year, mainly in metals and chemicals. So that's kind of where you're thinking about from an end market perspective as you look at geographically, we expect volumes in Americas to remain flattish for the year I was kind of built into how we're thinking about the guidance.

Speaker Change: The resilient end markets, obviously, we'll continue to find that growth, but they will be more than offset by softer industrial sector not dissimilar to what we saw last year. So I think we've got to see that trend maintain America's flattish is how you should think about it Europe.

Sanjiv Lamba: So I think we'll kind of see that trend maintain. America's flattish is how you should think about it.

Sanjiv Lamba: Europe, you know, there is, unfortunately, as we've said before, no catalyst for change to the current trajectory. So we see continued softening in demand, mainly in Western Europe. Again, resilient end markets will continue to grow, but I expect that more than offsets, that is more than offset by the industrial sector, metals, manufacturing, chemicals, energy, all of them will see lower volumes versus prior year. So that's where I think most of the weakness will lie. In Asia, China is a mixed bag. I said that in my prepared remarks. I think as we look ahead, I'm not expecting any growth from China for the year.

Speaker Change: There is unfortunately is as we've said before no catalyst of change to the current trajectory. So we see continued softening in demand mainly in western Europe again resilient end markets will continue to grow but I expect that more than offsets.

Speaker Change: That is all more than offset by the industrial sector metals manufacturing chemicals energy all of them will see lower volumes versus prior year. So that's where I think most of the weakness will lie.

Speaker Change: Asia, China is a mixed bag I said that in my prepared remarks, I think as we look ahead I'm not expecting any growth from China for the year.

Sanjiv Lamba: There are some green shoots, batteries, electronics, you know, they are areas where you are seeing some growth, but metals and chemicals will continue to be weaker for the rest of the year. I also expect in Q2 in particular the export-driven markets. You know, manufacturing in particular will see continued softening given the tariff headwinds and the uncertainty that kind of lies around that.

Speaker Change: There are there are some green shoots batteries electronics. They are they are areas, where you are seeing some growth, but metals and chemicals will continue to be weak over the rest of the year.

Speaker Change: So I expect in Q2 in particular, the export driven markets.

Speaker Change: Manufacturing.

Speaker Change: In particular, we will see continued softening given the tariff headwinds and the uncertainty that that kind of lies around that.

Sanjiv Lamba: The bright spark in Asia-Pacific is India, and we obviously see continuing trend of investments and volume growth over there, and we are obviously, as you know, well-positioned to participate in that. South Korea, I mentioned the project that we've just won, which hopefully gives you a sense of how South Korea growth will look. Some growth this year, but obviously a lot of project activity continuing over there, which looks good.

Speaker Change: The bright spot in Asia Pacific is India, and we obviously see continuing trend of investments and volume growth over there and we are obviously as you know well position to participate in that South Korea I've mentioned the projects that we've just won which hopefully gives you a sense of how.

Speaker Change: South Korea growth will look some growth this year, but obviously a lot of project activity continuing over damage, which looks good. So if I summarized from an outlook perspective, which is then reflected back into our guidance Americas flattish APAC largely balanced despite the headwinds in China, and Europe, or EMEA, I really where youll.

Sanjiv Lamba: So, if I summarized from an outlook perspective, which is then reflected back into our guidance, it's America's flattish, APAC largely balanced, despite the headwinds in China and Europe or EMEA, really, where you'll see weakening volumes kind of reflecting in that outlook that we presented. Now, you know, against this backdrop, as we think about CapEx, it is the secular growth opportunities that are particularly driving the CapEx growth for us. So electronics will play a big part in that, but alongside that, there are wins happening geographically, you know, in Asia in particular, which are more metals, chemicals, these are smaller wins, but notwithstanding, they kind of add to the overall portfolio of wins we're looking at.

Speaker Change: C weakening volumes kind of reflecting in that in that outlook that'd be that'd be presented.

Speaker Change: Against this backdrop as we think about Capex. It is a secular growth opportunities that are particularly driving the capex growth for us. So electronics will play a big part in that but alongside that they're all wins happening geographically.

Speaker Change: Asia in particular, which are more metals chemicals be the smaller wins, but notwithstanding they kind of add to the overall portfolio wins. We're looking at so we will see some clean energy projects, but we are going to see a lot of electronics projects, we're going to see some metals, we going to see some refining even some chemicals projects come through in other parts of the world and I think that's what will create the ballot.

Sanjiv Lamba: So, you know, we will see some clean energy projects, but we are going to see a lot of electronics projects. We're going to see some metals. We're going to see some refining, even some chemicals projects come through in other parts of the world. And I think that's what will kind of create the balance to get us to the backlog that I referenced earlier on. Thank you.

Speaker Change: To get us to that backlog that I referenced earlier on.

Speaker Change: Okay.

Speaker Change: Thank you.

Jeffrey Zekauskas: And your next question comes from the line of Jeff Zekauskas with J.P. Morgan. Thanks very much. I have a couple of questions around. In 2024, your other... 200 million, that's sort of a positive. And normally that that number is pretty low.

Speaker Change: And your next question comes from the line of Jeff Zekauskas with J P. Morgan Your line is open.

Speaker Change: Thanks very much.

Speaker Change: Couple of questions around your income statement.

Speaker Change: In 2020 for your other income.

Speaker Change: With $200 million.

Speaker Change: Sort of a positive change of about 234.

Speaker Change: And normally that that number is pretty low.

Matt White: What's your expectation for 2020? Secondly, in your SG&A expense, I think it was down 9% from $860,000 to $780,000. How did you do that? you know, in that number. And if your SG&A was fly. roughly are operating. you talk about. how you're coping with that, is your SG&A going.

Speaker Change: What's your expectation for.

Speaker Change: 2025.

Speaker Change: And secondly in your SG&A expense.

Speaker Change: I think was down 9% from.

786.

Speaker Change: How did you do that.

Speaker Change: Okay.

Speaker Change: Is there something unusual.

Speaker Change: In that number.

Speaker Change: And if your SG&A was flat.

Speaker Change: Full year operating profits would have been flat.

Speaker Change: In the quarter.

Speaker Change: So can you talk about the different pressures that your income statement seems to be under.

Speaker Change: And you know.

Speaker Change: How you are coping with that is is your SG&A going to be down 9% for the year or was the first quarter unusual.

Matt White: Jeff, I'm going to let Matt, who's looking forward to responding to you on these questions, respond back. But I'm just going to touch on SG&A and tell you this very briefly. It takes a lot of hard work and management actions. And as you know, last year in the third quarter, we took the restructuring charge. That's all being executed as we speak, and that obviously is reflected in the SG&A line, in addition to the fact that we have lower incentive compensation that's sitting in there as well, which obviously gets normalized over time.

Speaker Change: Jeff I'm going to let Matt.

Speaker Change: Looking forward to respond to you on these questions respond back, but I'm just going to touch on SG&A and tell me of this very briefly.

Speaker Change: So a lot of hard work and management actions and as you know last year in the third quarter, we took a restructuring charge that's all being executed as we speak and that obviously is reflected in the SG&A line in.

Speaker Change: In addition to the fact that we have lower incentive compensation, that's sitting in there as well, which obviously gets normalized over time, but I am sure Michael that were far more elegant response to that.

Matt White: But I'm sure Matt will have a far more elegant response to that. Matt, please. So, let's start with other income. You know, first, what's in it, right? Probably is a good way to start. And other income for us, what we put there is either large items, extraordinary, either gain or loss that we feel are operating related, obviously, but either are large enough we carve out or could be based on a prior timing. So last year, about a quarter of that number, you may recall, was a large insurance claim that we had. We actually spiked that out in Q1.

Speaker Change: So let's start with other income.

Speaker Change: First what's in it probably is a good way to start and other income for us what we put there is either large items extraordinary either gain or loss that we feel our operating related obviously, but either are large enough, we carve out or it could be based on our prior timing.

Speaker Change: So last year about a quarter of that number you may recall was a large insurance claim that we had we actually spiked that out in Q1 in fact, when you look at the Q1 year over year, you see a fairly large drop in other income going from almost $60 million or $20 million.

Matt White: In fact, when you look at the Q1 year over year, you see a fairly large drop in other income going from almost around $60 million to $20 million. So that actually was a large insurance. Now clearly, we had losses prior to that and going forward on that because it included a BI element. So to some extent, you have a little bit of a timing mismatch because of the claim you got in insurance against the backdrop of some ongoing BI impact from that incident that occurred. And that was actually in the other segment, you may recall, on our materials business.

Speaker Change: So that actually was a large insurance now clearly we had a losses prior to that and going forward on that because it included a b I element. So to some extent you have a little bit of a timing mismatch because of the claims you got the insurance.

Speaker Change: The backdrop of some ongoing by impacts from that from that incident that occurred and that was actually in the other segment you may recall on our materials business.

Matt White: Outside of that, there are going to be some gains and losses on certain sales, but we also did have some other offsetting items actually above other income that we had talked about in the past as well. Now, we don't give a projection on that number, but I fully don't expect 2025 to be near that level. In fact, you already saw it in the first quarter, as I mentioned, we're already down $40 million. So I think 2025 will be more representative of 23 or prior years as whereas we didn't have such a large insurance benefit or some of the other items that occurred.

Speaker Change: Outside of that.

Speaker Change: There arent going to be some gains and losses on out on certain sales, but we also did have some other offsetting items actually above other income.

Speaker Change: We had talked about in the past as well now we don't give a projection on that number but I am fully don't expect 2025 to be near that level.

Speaker Change: In fact, you already saw in the first quarter as I mentioned, we're already down $40 million. So I think 2025 will be more representative of 'twenty three or prior years.

Speaker Change: As whereas we didn't have such a large insurance benefit or some of the other items that occurred in 2004 as far as SG&A.

Matt White: As far as SG&A, we'll start with about a quarter, that's currency, okay? So obviously, we talk about the FX heard on OP, but in SG&A, we equally have costs that are foreign denominated, so you get that benefit. But even outside of the FX, we did take a restructuring charge in Q4, as you know, we need to see the benefits of that. And those benefits primarily manifest themselves in lower headcount and lower SG&A spend. So there is the benefits, the productivity associated with that. Right now, my expectation is the actions we've taken, for the most part, have offset any normal growth in merit or SG&A.

Speaker Change: We will start with about a quarter thats currency. Okay. So obviously, we talk about the FX hurt on O P. But in SG&A, we equally have costs that are foreign denominated. So you get that benefit but even outside of the FX. We did take a restructuring charge in Q4 as you know we need to see the benefits of that and those benefits primarily.

Speaker Change: Manifest themselves and lower head count and lower SG&A spend so there is the benefits the productivity associated with that right. Now my expectation is the actions we've taken for the most part have offset any normal growth and merit or SG&A, but on top of that we did have a fairly size.

Matt White: But on top of that, we did have a fairly sizable year-on-year reduction of incentive comp. We are a pay-for-performance culture, and we're not performing. We understand that. We're not meeting our targets, and therefore, the incentive comp is lower. So I expect it could remain lower for the remainder of the year. It will probably be a little lumpier, because it's a function of the projections and the forecast of the payout ratios, but I fully expect lower compensation payout this year than prior year, and that'll be reflected in the accruals, because our shareholders also are suffering through this, so we need to as well.

Speaker Change: <unk> year on year reduction of incentive comp.

Speaker Change: We are a pay for performance culture, and we're not performing we understand that were not meeting our targets and therefore, the incentive comp is lower so I expect it could remain lower for the remainder of the year. It will probably be a little lumpier because it's a function of protections in the forecast of the payout ratios, but I fully expect lower compensation payout.

Speaker Change: This year than prior year and that'll be reflected in the accruals.

Speaker Change: Because our shareholders also are suffering through that so we need to as well.

Operator: Okay, great. Thank you very much.

Speaker Change: Okay, great. Thank you very much.

Speaker Change: Okay.

Steven Byrne: And your next question comes from the line of Steven Byrne with Bank of America. Your line is open. Yes, thank you. Matt, you mentioned a few minutes ago that you attributed productivity and price The drivers of that 120 basis point operating margin improvement year-over-year, that more than offset lower volume. and, you know, a little bit of, uh, the, of, uh, cost-increased parking. And my question for you is, Can you size those two buckets, the productivity and pricing? How would you size those two to drive that margin expansion? And maybe more specifically on productivity. What all are you doing these days on driving that?

Speaker Change: And your next question comes from the line of Stephen Byrne with Bank of America. Your line is open.

Stephen Byrne: Yes. Thank you.

Matt: Matt you mentioned a few minutes ago.

Stephen Byrne: You attributed productivity and pricing.

Stephen Byrne: The drivers of that 120 basis point operating margin improvement year over year.

Stephen Byrne: More than offset lower volumes.

Stephen Byrne: And a little bit of.

Stephen Byrne: Of.

Stephen Byrne: Okay.

Stephen Byrne: The cost increased pardon me.

Stephen Byrne: And my question for you is.

Stephen Byrne: Can you size those two buckets, the productivity and pricing how would you size those two.

Stephen Byrne: To drive that margin expansion.

Stephen Byrne: And maybe more specifically on productivity.

Stephen Byrne: What all are you doing these days on driving that.

Matt White: Historically, headcount reduction was a big lever for you guys, but moving forward, do you still see that as a meaningful opportunity and any changes in your approach at achieving that productivity gain? Yeah, sure, Steve. So we'll start with how to size it. So I think an easy way to think about this is going back to the earnings algorithm. And as you recall, we give three pillars, capital allocation, which we say is about four to 6% management actions, which is at least another four to 6%, if not more. And then the macro, which is based volumes and FF.

Speaker Change: <unk> head count reduction was a big lever for you guys, but moving forward do you still see that as a.

Speaker Change: A meaningful opportunity and any changes in your approach and achieving productivity gain.

Steve Haynes: Yeah sure, Steve so far start with how to size it.

Speaker Change: So.

Speaker Change: I think an easy way to think about this is going back to the earnings algorithm and as you recall, we gave three pillars capital allocation, which we say is a 4% to 6% management actions, which is at least another 4% to 6% if not more and then the macro which is base volumes and FX.

Matt White: management actions represents price, less costs and the product. We always think about that as a spread. So each one in an individual is not as important as the spread. So while price is important and while cost is important, the spread between the two is the most important. So as long as you achieve positive spreads in all of your geographies, that will be 100% contribution towards margins. It is purely margin accretive in that regard. And. The management actions over our prior two to three decades of EPS growth has consistently contributed probably close to two-thirds of our EPS growth in the algorithm.

Speaker Change: Management actions represents price less cost and the productivity.

Speaker Change: We always think about that as a spread.

Speaker Change: So.

Speaker Change: Each one in an individual is not as important as the spreads so while price is important and while cost is important the spreads between the two is the most important.

Speaker Change: So as long as you achieved positive spreads and all of your geographies that will be 100% contribution towards margins. It is purely margin accretive in that regard.

Speaker Change: And.

Speaker Change: The management actions over our prior two to three decades of EPS growth has consistently contributed probably close to two thirds of our EPS growth in the algorithm.

Matt White: And so when you think about more than half of your growth coming from that area, that, by default, will result in a margin accretion aspect. Now, I will say in tougher times, and arguably, we're in a little bit of a tougher time right now, you're going to see larger margin expansion because the management actions as a percentage of the whole algorithm is greater. And then when you see recovery times, and I mentioned 2021, where we grew EPS 30%, when you see recovery times, then the margin may not expand as much as you normally would see it because macro becomes a much bigger driver.

Speaker Change: And so when you think about more than half of your growth coming from that area.

Speaker Change: That by the fall will result in a margin accretion aspect now I will say in tougher times.

Speaker Change: <unk> arguably we're in a little bit of a tougher time right now youre going to see larger margin expansion because the management actions as a percentage of the whole algorithm is greater.

Speaker Change: And then when you see recovery times that I mentioned 2021, where we grew EPS, 30%. When you see recovery times, then the margin may not expand as much as you normally would see it because macro becomes a much bigger driver you will get we'll get margin expansion just not at the same level you might with a management action. So I think from that and that's how we think about it as far.

Matt White: You will get a margin expansion, just not at the same level you might with a management action. So I think from that, and that's how we think about it, as far as productivity initiatives, clearly, you're going to have technology advancements will always give us opportunities, AI being the current version, but there's always going to be developments that give us opportunity to do more. And I would never underestimate that as the world changes, new opportunities create themselves. When you see even areas where you might have some slowdowns, we will look at new ways of how we do our distributions, how we source our product.

Speaker Change: Our as productivity initiatives.

Speaker Change: Clearly youre going to have technology advancements will always give us opportunities you know AIB in the current version but.

Speaker Change: Theres always going to be developments that gave us opportunity to do more.

Speaker Change: And I would never underestimate that as the world changes new opportunities create themselves when you see even in areas, where you might have some slowdowns, we will look at new ways of how we do our distributions how we source our product it's always a discussion of fixed versus variable cost and what's the appropriate way to address the market for the <unk>.

Matt White: It's always a discussion of fixed versus variable costs, and what's the appropriate way to address a market for the time we see it operating in a certain capacity. And by doing that, we can find synergies by increasing or decreasing the operating leverage of the business by either extending more variable costs or by reducing variable and going fixed costs for greater recovery. So it is always a continuous effort. It's always evolving. There's never an end game. That's why we never name our programs. It's integrated with the culture. And so from that end, it's not one silver bullet.

Speaker Change: We see it operating at a certain capacity and by doing that we can find synergies by increasing or decreasing the operating leverage in the business by either extending more variable cost or by reducing variable going fixed cost for greater recovery.

Speaker Change: So it is always a continuous effort, it's always evolving there's never an end game, that's why we never name our programs.

Speaker Change: And Greg integrated with the culture, and so from that and it's not one silver bullet. If there was then I probably wouldn't believe it.

Matt White: If there was, then I probably wouldn't believe it. It's a lot of things. And to that point, Steve, let me just give you a bit of color. There is no one silver bullet, and we are grateful for that because we want every part of our business engaged in productivity effort every day. Last year, we did 15,515 projects. This year in the first quarter, we've done more than 4,000 projects, more than 4,000 It takes every part of the organization to look at the opportunity every day and make sure that gets happened. Not only does it get executed, it's actually then recorded, and the learnings are then cascaded to the rest of the world.

Speaker Change: It's a lot of things and to that point.

Speaker Change: Steve Let me just give you a bit of color. There is no one silver bullet and and we are grateful for that because we want every part of our business engaged in productivity efforts every day.

Speaker Change: Last year, we did 15515 projects.

Speaker Change: This year in the first quarter with more than 4000 projects more than 4000 projects.

Speaker Change: Every part of the organization to look at the opportunity every day and make sure that that gets happened normally doesn't get executed its actually didn't record it and the learnings have been cascaded to the rest of the world I'll give you a couple of quick example, just to illustrate how practically we're looking at productivity. So obviously ASU operations are very powerful.

Matt White: I'll give you a couple of quick examples just to illustrate how practically we're looking at productivity. So obviously, ASU operations are very power intensive, as you know. We are one of the largest purchasers of power globally. Optimizing that, even by a small percentage, has a big impact. So we have a power optimizer model that is currently using AI to optimize the way we operate our plants, depending on the level of customers' demand, on the tank levels that we have, the tank level our liquid customers have, and the power pricing that's going to happen from a predictive point of view.

Speaker Change: Intensive as you know we are one of the largest purchases a bar globally opt.

Speaker Change: Optimizing that even by a small percentage has a big impact. So we have a power optimize the model that is currently using AI to optimize the way we operate our plants depending on the level of.

Speaker Change: Customers demand on the tank levels up behalf tag level, our liquid customers have and the power pricing thats going to happen to get a predictive point of view. There is a good example of something which we perfected over many years now being you know kind of having its biggest impact because we're able to do it real time using an AI model.

Matt White: There's a good example of something which we've perfected over many years, now having its biggest impact because we're able to do it real-time using an AI model. Two other quick examples. The other one would be distribution. One of the things that, you know, we are doing is deploying telemetry so that we understand exactly the tank levels that exist within our customers' tankage and our ability to then distribute and schedule that distribution load in a way that further optimizes and creates efficiency on the use of the asset, as well as ensures that we are getting to the point where the customer's at a load level that we think is appropriate for us to refill.

Speaker Change: Two other quick examples the other one would be distribution one of the things that we are doing is deploying <unk>. So that we understand exactly the tank levels that exist within our customers' tankage and our ability to then distribute in schedule that distribution load in a way that further optimize this.

Speaker Change: And creates efficiency on the use of the asset as well as ensure that we are getting to the point, where the customers at a low level that we think is the appropriate for us to refill. So again, a lot of sophisticated machine learning models sitting behind that which dragged the telemetry track the usage of the customer typically has and based on that do predictive.

Matt White: So, again, a lot of sophisticated, you know, machine learning models sitting behind that, which track the telemetry, track the usage that the customer typically has, and based on that, do predictive scheduling. Those are two examples. I mean, we have 105 use cases on AI models that we are deploying as we speak. So, there is a lot of opportunity around this.

Speaker Change: Schedule. It those are two examples I mean, we have 105 use cases on AI models that we are deploying as we speak. So there is a lot of opportunity around this I'm excited about as well.

Matt White: I'm excited about a third, well, about 31, 32% of all our productivity efforts come out of digital in the asset. Very good, thank you.

Speaker Change: Well about 30 31, 32% of our all our productivity efforts come out of digital and AI solutions.

Speaker Change: Pretty good thank you.

Mike Sison: And your next question comes from the line of Mike Sison with Wells Fargo. Your line is open. Hey, good morning. Just a quick follow up on your 2025 outlook. When you think about sort of economic contraction, your volumes are down 1% in Q1. Does it Should it stay around that level, or does it get a little bit worse as the year unfolds? And then, you know, longer term, Sanjiv, it's been a pretty unusual downturn for industrial demand. What do you think, what are you looking for to maybe see a green shoot or so longer?

Mike Sison: And your next question comes from the line of Mike Sison with Wells Fargo. Your line is open.

Mike Sison: Hey, good morning.

Just a quick follow up on your 25 outlook I'm when you think about it.

Mike Sison: So the economic contraction does your volumes were down 1% in Q1 does it say.

Mike Sison: Is here to stay around that level or does it does it get a little bit worse as the year unfolds and then longer term sanjiv its been.

Mike Sison: Pretty unusual.

As you all downturn in industrial demand.

Mike Sison: What do you think what are you looking for to maybe see a green shoot or longer term.

Matt White: So Matt, why don't you talk about the 2025 outlook in terms of the guidance that we provided? Yeah, I think, Mike, I'd say, let's start with not much different than how we normally approach it. So when you think about every 1% of base volume assumption, roughly 2% EPS impact, give or take, maybe 1.5% depends on the margin profile of the business. And so within that context, we still feel very confident around the backlog contribution. So that 1% we have will continue throughout the year positive. And then it's really just a function of the base assumption.

Mike Sison: So when you talk about the 2025 outlook in terms of the guidance that we provided you I think Mike I'd say, let's start with not much different than how we normally approach. It. So when you think about every 1% of base volume assumption, roughly 2% EPS impact give or take.

Mike Sison: Maybe one 5% depends on the margin profile of the business.

Mike Sison: And so within that context, we still feel very.

Mike Sison: Around the backlog contribution so that 1% we have a will continue throughout the year or positive and then it's really just a function of the base assumption and so we put a placeholder in there today, a 2% negative EPS contraction, which represent about one to one 5% top line negative base volume and we will see I mean, what I wanted to reiterate consistent with prior.

Matt White: And so we put a placeholder in there today, 2% negative EPS contraction, which represent about 1 to 1.5% top line negative base volume. And we'll see. I mean, what I want to reiterate consistent with prior times, this is not our economic call per se. It's just the placeholder taking kind of the current situation and extrapolating it out. We're going to take actions to mitigate, we're going to take actions to work around it, and time will tell what actually happens. So that's really how we did it. I'd say nothing really different than that. Thanks, Matt.

Mike Sison: Times. This is not our economic call per se. It's just the place holder, taking kind of the current situation and extrapolating. It out we're going to take actions to mitigate we're going to take actions to work around it and time will tell what actually happens. So that's really how we did it I'd say nothing really different than that.

Sanjiv Lamba: So on the industrial Long-term development, Mike, you know, it's difficult to predict next week, so you're asking me to look a lot longer than that. I'll tell you a different way to think about the industrial growth as we go forward. Obviously, we've talked about an industrial recession for some time now, and, you know, your comments, you know, kind of illustrate that. As you think about the long-term trends, I'd say to you, you need to be looking at maybe three or four different elements that are going to drive that. The first, secular growth. You know, we've said before, things like, you know, end markets like electronics, given AI data center growth, there is a direct correlation to what you'll see around semiconductor growth underpinning the electronics end market that we have.

Speaker Change: Thanks, Matt so on the industrial.

Mike Sison: The long term development Mike.

It's difficult to predict next week, so youre asking me to look a lot longer than that I'll I'll tell you a different way to think about the industrial growth as we go forward. Obviously, we talked about an industrial recession for some time now and in your comments you know kind of illustrate that as you think about the long term trends I would say to you you would need to be looking.

Mike Sison: Maybe three or four different elements that are going to drive that the full secular growth.

Mike Sison: We've said before things like get to end markets like electronics, given AI data center growth. There is a direct correlation to what youll see around semiconductor growth underpinning. The electronics end market that we have and I think you should expect to see that growth continue in fact, I've said earlier on today and in my in my comments.

Sanjiv Lamba: And I think you should expect to see that growth continue. In fact, I've said earlier on today in my comments on the backlog that I expect that we will continue to see that reflecting the recent win with Samsung, but hopefully others as well as we move forward. So there'll be secular growth drivers like that. That'll continue to be an exciting part of the kind of growth algorithm underpinning any industrial recovery that we see longer term.

Mike Sison: The backlog that I expect that we would continue to see that.

Mike Sison: Selecting the recent win with Samsung, but hopefully others as well as we move forward. So there'll be secular growth drivers like that that will continue to be an exciting part of the kind of growth algorithm underpinning any industrial recovery that we see longer term the.

Sanjiv Lamba: The other piece that I think is worth mentioning is there are high growth markets around the world where we have obviously a very strong footprint. Being in 81 countries is an advantage in the sense that we are well positioned in the market that we expect to see either as a result of some of the arbitrage coming out of the tariff developments or as a result of just locally driven consumption driving growth in markets. So markets like India, which we kind of mentioned a couple of times, a bright spark as far as growth is concerned. Obviously, we still expect, you know, Mexico, Indonesia and other markets like that to continue to have a growth trajectory that will hopefully help the overall industrial recovery piece.

The other piece that I think is worth mentioning is there are high growth markets around the world, where we have obviously, a very strong footprint being in 81 countries is an advantage in the sense that we are well positioned in the market that we expect to see either as a result of some of the arbitrage coming out of the tariff developments or.

Mike Sison: As a result of just locally driven consumption driving growth in markets. So markets like India, which we kind of mentioned a couple of times a bright spot as far as growth is concerned obviously, we still expect Mexico, Indonesia and other markets like that to continue to have a growth.

Mike Sison: Trajectory.

Mike Sison: Hopefully helped the overall industrial recovery.

Sanjiv Lamba: Last but not least is new growth markets. These are nascent. You don't hear us talk too much about it, but examples of aerospace, where we are seeing significant growth and expect to see continued growth in that sector, I think is an area that will continue to gain in size and scale. And as it does, it'll actually support the elements of growth that we talk about longer term. Longer term, I'll also say to you that quantum computing is another trend that we expect will have an opportunity. Well, it does need to mature. It is still nascent technology, but as it matures and scales up, the fact that quantum computing requires cryogenic cooling is an exciting opportunity from a Linde perspective.

Mike Sison: Last but not least is new growth markets.

Mike Sison: These are nascent you'd all know.

Mike Sison: Talk too much about it but examples of aerospace where we are seeing significant growth and expect to see continued growth in that sector. I think is an is an area that we'll continue to gain in size and scale and as it does it'll actually support the elements of growth that we talk about longer term longer term I'll also say to you.

That you know quantum computing is another trend that we expect will will have an opportunity.

Mike Sison: Well it does need to mature it is still nascent technology, but as it matures and scales up.

Speaker Change: Fact that clinical beauty requires cryogenic cooling is an exciting opportunity for Melinda perspective, we have some great proprietary technology around that and we're excited to see what happens in that space. Even today, we are providing some cryogenic cooling technologies even for the pilots that are happening around the world. So I see that as another example of a new growth market that will continue to.

Sanjiv Lamba: We have some great proprietary technology around that, and we're excited to see what happens in that space. Even today, we are providing some cryogenic cooling technologies, even for the pilots that are happening around the world. So I see that as another example of a new growth market that we'll continue to pursue. Those will really drive that industrial recovery, obviously underpinned by a recovery in the normal cyclical cycle that you'll see for most industries that will obviously come back. That's always been the case, and we fully expect that. Obviously, a bit of stability around trade rules and so on and so forth will kind of accelerate that recovery as it happens.

Speaker Change: Pursue those will really drive that industrial recovery, obviously underpinned by a recovery of the normal cyclical cycle that youll see for most.

Speaker Change: Industries that will obviously come back that's always been the case and we fully expect that obviously a bit of stability you know around trade rules and so on and so forth will kind of accelerate that recovery as it happens.

Patrick Cunningham: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Okay.

Sanjiv Lamba: And your next question comes from the line of Patrick Cunningham with Citigroup. Your line is open. Hi, good morning.

Speaker Change: And your next question comes from the line of Patrick Cunningham with Citigroup. Your line is open.

Speaker Change: Hi, good morning, healthcare starting to trend positively positive growth year on year, how much portfolio rationalization is left to go there and when do you expect to return to the long term growth rate and the related follow up while it's not currently at the top of the list for the administration would you see deregulation in U S health care as an.

Sanjiv Lamba: You know, healthcare starting to trend positively, you know, positive growth year on year, how much portfolio rationalization is left to go there? And when do you expect to return to the long term growth rate and related follow up?

Sanjiv Lamba: Well, it's not currently the top of the list for the administration. Would you see deregulation in US healthcare as an opportunity or perhaps a threat to LendCare?

Speaker Change: Acuity or perhaps a threat to lincare.

John Mcnulty: So, as you know, we've, you know, let's talk about healthcare broadly and I'll break it up into two parts. Obviously, we have a very strong hospital care business, you know, that has got a steady growth rate, continues to be in low to mid single digits. And, you know, we see that across the world and obviously post COVID, there's been a greater appreciation of the need for setting up the infrastructure. And so therefore, you know, some of the, even on the equipment side, we see some potential continue to help with that infrastructure build out. So I expect to see that growth continue to be stable, steady, and continue going forward.

Speaker Change: So as you know.

Let's talk about health care broadly and I'll break it up the two bonds. Obviously, if you have a very strong hospital care business.

Speaker Change: That is about a steady growth rate continues to be in low to mid single digits and we see that across the world and obviously post COVID-19 has been a greater appreciation of the need for setting up the infrastructure and so therefore, you know some of the even though the equipment side, we see some some potential continuing to help with without infrastructure.

Build out so I expect to see that growth continue to be stable steady and continue going forward. The homecare business, obviously in the U S attracts a lot of attention.

Sanjiv Lamba: The home care business, obviously, in the US, you know, attracts a lot of attention. We have been trimming that portfolio, as you're aware, and we are leveraging technology today to try and make sure that that business becomes more efficient, reduces the amount of paper that is there, digitizing a lot of processes, et cetera. That's where I think the thrust of our effort in LinkEd continues to be. It's a business that has to be focused on improving service levels and making sure that we are working on productivity every day. And as part of that, we will continue to look at our portfolio and whatever we need to do, we'll continue to do.

Speaker Change: And we.

Speaker Change: We have been trimming that portfolio as you are aware and we're leveraging technology today to try and make sure that that business becomes more efficient reduces the amount of paper that is dead digitizing a lot of processes et cetera, that's where I think the thrust of R. F.

Speaker Change: And in linked that continues to be it's a book, it's a business that has to be focused on improving service levels and making sure that we are working on productivity every day and as part of that we will continue to look at our portfolio and whatever we need to do we continue to do this isn't a one off exercise we look at our portfolio all the time across all our businesses and the.

Sanjiv Lamba: This isn't a one-off exercise. We look at our portfolio all the time across all our businesses, and the home care business is no different.

Speaker Change: Homecare business is no different to that.

Speaker Change: Okay.

Speaker Change: Yeah.

John Roberts: And your next question comes from the line of John McNulty with BMO Capital Markets. Your line is open. Yeah, good morning. Thanks for taking my question. So The U.S. has seen some onshoring already. You guys have been a decent beneficiary on like the electronics front and semiconductor side. While the tariff situation doesn't seem quite settled at this point yet, if the U.S. continues this kind of protectionist mode, do you see other opportunities in some of your other businesses where you might see outsized growth, whether it's tied to, you know, there's some expectations for maybe aluminum and steel picking up in the U.S.

Speaker Change: And your next question comes from the line of John Mcnulty with BMO capital markets. Your line is open.

John Mcnulty: Yes. Good morning, Thanks for taking my question.

Speaker Change: So.

Speaker Change: The U S has seen some onshoring already you guys have been decent beneficiary. Unlike the electronics from semiconductor side with while the tariff situation doesn't seem quite settled at this point yet if if the U S continues this kind of protectionism or do you see other opportunities in some of your other businesses.

Speaker Change: This is where you might see outsized growth, whether it's tied to.

Speaker Change: Some expectations for maybe aluminum and steel picking up in the U S relative to other regions of that kind of thing I guess can you help us to think about maybe some of the good guys around some of the tariff discussion versus all the bad guys. We've been hearing about for the past few weeks.

Sanjiv Lamba: relative to other regions, that kind of thing.

Sanjiv Lamba: I guess, can you help us to think about maybe some of the good guys around some of the tariff discussion versus all the bad guys we've been hearing about? John, I think the tariff discussion sometimes becomes one-sided where people are only looking at the risks around that. I think to your point, as the tariffs play out and as they stabilize, people will make decisions around re-shoring, on-shoring back again, and I think that's where you will see some movement. I will tell you in the short term, there isn't any development today that I can point to other than electronics where that has a substantive impact.

Speaker Change: Okay.

Speaker Change: So John I think the tire discussion, sometimes becomes one sided where people are only looking at the risks around that I think to your point.

Speaker Change:

Speaker Change: As the tariffs play out and as they stabilize people will make decisions around re shoring onshoring back again, and I think that's where you will see some movement.

Speaker Change: I will tell you in the short term there isn't any development today that I can point to other than electronics, where that has a substantive impact, but do we hear conversations and I'll be being reached get all people, reaching out to us and having conversations around the potential of setting up new capacities in the U S. Yes, we sell.

Sanjiv Lamba: But do we hear conversations and are people reaching out to us and having conversations around the potential of setting up new capacities in the U.S.? Yes, we certainly are seeing some of that happen. So my expectation remains that as the conversations around tariff stabilizes, we will see more growth. I mean, the administration describes it as an industrial resurgence in the U.S. Even if that happens in part, it will still be a very attractive opportunity for us just given our density across the U.S. and our presence. We feel really good about the fact that as and when that on-shoring, re-shoring process takes off, we will be well positioned to participate in that and see some growth in that.

We are seeing some of that happen. So my expectation remains that you know as as.

Speaker Change: As the conversations around tire stabilizes, we will see more growth.

Speaker Change: I mean, the administration describes it as an industrial resurgence of the U S.

Speaker Change: Even if that happens, but it will still be a very attractive opportunity for us just given our density across the U S and our President's we feel really good about the fact that as a grander onshoring reassuring process takes off we will be well positioned to participate in that and see some growth in that.

Sanjiv Lamba: I'm not going to speculate on the sectors or end markets where we're going to see most of that, but clearly, electronics is already in play, as you know. We want to build the Phoenix supply to the Phoenix fab for TSMC. We are building at Taylor, Texas for Samsung. We're also building for other players in the U.S. So we certainly see that growth potential on the electronic side. For the others, whether it's aluminum, steel, batteries, and so on and so forth, I think there'll be a number of end markets that the potential for on-shoring will look attractive.

Speaker Change: Im not going to speculate on the sectors or end markets, where are we going to see most of that but clearly electronics already in play as you know.

Speaker Change: We want to build the Phoenix.

Speaker Change: Supply to the Phoenix filed for TSMC, we are building.

Speaker Change: Texas for.

Speaker Change: Samsung will.

Speaker Change: Also building with all the other players in the U S. So we certainly see that growth potential on the electronic side, but the other Seattle, whether it's Oliver steel.

Speaker Change: Batteries, and so on and so forth I think there'll be a there'll be a number of end markets or the potential for onshoring will look attractive, but we'll have to wait and see how that develops.

Sanjiv Lamba: But we'll have to wait and see how that develops.

Operator: Great, thanks very much for the call.

Speaker Change: Great. Thanks, very much for the color.

Speaker Change: Yeah.

John Roberts: Your next question comes from the line of John Roberts with Mizuho. Your line is open. Thank you. Nice results.

Speaker Change: And your next question comes from the line of John Roberts with Mizuho. Your line is open.

John Roberts: Thank you and nice results.

Sanjiv Lamba: If general inflation picks up, do you think your pricing would accelerate or because of the weak macroeconomic backdrop here, we might get a disconnect between inflation and your pricing? it picks up.

Speaker Change: If general inflation picks up do you think your pricing would accelerate or because of the weak macroeconomic backdrop here, we might get a disconnect between inflation and your pricing.

Speaker Change: Inflation as you know.

Speaker Change: We are an inflation plays you've heard us say before we like inflation. It allows us to move the pricing forward and absolutely you know.

Speaker Change: As you know we've said many times in the past a good proxy bought pricing is globally weighted CPI. So as it picks up there's an opportunity for us to continue to price that there is no divergence to that model. We have done that over 25 years, we expect to continue to do that.

Speaker Change: Thank you.

Kevin Mccarthy: And your next question comes from the line of Kevin McCarthy with Vertical Research Partners. Thank you and good morning, Sanjiv. From my perspective, Linde's had a very accurate and appropriately cautious view of China in recent years.

Speaker Change: Yes.

Speaker Change: And your next question comes from the line of Kevin Mccarthy with vertical Research partners. Your line is open.

Kevin Mccarthy: Yes, Thank you and good morning, so cheap from my perspective lenders had a very accurate and appropriately cautious view of China in recent years. So it would be very interested to hear your updated thoughts on the near term, what you're seeing and hearing from your customers in April and May across end markets and then in turn.

Sanjiv Lamba: So I'd be very interested to hear your updated thoughts on the near-term, what you're seeing and hearing from your customers in April and May across end markets. And then in terms of, let's say, medium-term planning for China, how much runway do you see on productivity in that country specifically? Are you trying to counterbalance macro risk versus cost help in your algorithm within China? So Kevin, given where we are today, it's probably easier to speak about the medium term than the near term. But I'm going to address both. I'm going to address both.

Kevin Mccarthy: Let's say medium term planning for China.

Speaker Change: How much runway do you see on productivity in that country, specifically trying to counterbalance macro risk versus.

Speaker Change: Cost cost helped in your algorithm within China.

Speaker Change: So Kevin given where we are today, it's probably it's easier to speak about the medium term that the near term, but I'm gonna addressable I'm going to address both now let's start with the medium term to begin with and I've said. This a couple of times I think it's worth repeating it.

Sanjiv Lamba: Now, let's start with the medium term to begin with, and I've said this a couple of times. I think it's worth repeating it. The days of, you know... 8, 7, 8, 10% growth in China longer. And we are, you know, looking, our medium term view of China growth is it will be moderated to low single digit from an IP perspective. I'm not going to comment on GDP. IP is where we follow, you know, low, maybe low to medium single digit is the best we will expect to see out of China medium term in terms of growth.

Speaker Change: The days of it all.

Speaker Change: 878, 10% growth in China of long haul.

Speaker Change: We are looking or medium term view on China growth is it will be moderated to low single digit from an IP perspective, I'm not going to comment on GDP IP is very full.

Speaker Change: Low maybe low to medium single digit is the best we will expect to see out of China medium term in terms of growth.

Sanjiv Lamba: Our efforts in China over the last couple of years now, as you would normally expect, we will front run these efforts. We saw the development in China a couple of years ago and said, we are treating our Chinese business as a mature business. And therefore, we expect them to take all the actions we would expect from a mature geography anywhere else in the world, which means pricing, productivity, automation, offshoring, non-value-added activities, and so on and so forth. And I think I still see a fair amount of productivity opportunities sitting in the Chinese business. Also, given that they are leading in many ways around the AIPs, that we are actually seeing the AI-led use cases for China being quite attractive.

Speaker Change: Our efforts in China over the last couple of years now and as you would normally expect we will front run. These efforts we saw the development in China, a couple of years ago, and said, we are creating Chinese business, our Chinese business as a mature business and therefore, we expect them to take all the actions we would.

Speaker Change: Spec from a mature geography anywhere else in the world, which means pricing productivity automation offshoring.

Speaker Change: Offshoring.

Speaker Change: Non value added activities and so on and so forth and I think.

Speaker Change: I still see a fair amount of productivity opportunities sitting in the Chinese business.

Speaker Change: Also given that they are leading and in many ways around the AIP is that we are actually seeing the AI led use cases with China being quite attractive I think we gave an example in one way it may have shown this.

Sanjiv Lamba: I think we gave an example and Juan may have shown this video at one stage where we are rolling out a smart plant operations where we're using drones and robots to actually do a lot of the normal work that we would do on an air separation unit, doing readings, looking at pressure gauges, looking at temperature gauges, and making sure that that information is filtered into an AI program that then provides alerts and allows human intervention to take place. Obviously, that then results in being more productive at that particular site. In a couple of provinces in China, we've been able to get approval to reduce the amount of manning on the site as a result of that.

Speaker Change: This video at one stage, where there we are rolling out a small plant operations, where we're using drones and robots to actually do a lot of the normal work that we would be would do on an on an air separation unit doing readings looking at pressure gauges looking at temperature gauges, and making sure that that information is filtered into an AI program.

Speaker Change: That then provides alerts allows here.

Speaker Change: Human intervention to take place, obviously that that results in being more productive at that particular site and a couple of provinces in China, we've been able to get approval to reduce the amount of money on the site as a result of that so that's an example for you all.

Sanjiv Lamba: So, there's an example for you of a program that we are now rolling out to entire business in China, which will cover a large number of plants for us, giving us benefits coming out of production. So expect strong productivity benefits from China to continue. And that's kind of where that business stands.

Speaker Change: Got it.

Speaker Change: Graham that we are now rolling out to entire.

Speaker Change: In China, which will cover a large number of plants for us, giving us benefits coming out of production.

Speaker Change: So expect strong productivity benefits from China to continue and that's kind of where that business stands on the near term.

Sanjiv Lamba: On the near term, let me just, I'm just back from China about four weeks ago. I'm headed there in two weeks time. And that's largely spending time with our customers, speaking to my CEO counterparts to understand how they are looking at the market. And I'll give you a quick view on how, I'm just gonna give you a few as an example to what we are seeing in terms of outlook, which will I think hold for most of the year. So steel was very weak, metals generally, and steel specifically was weak in the first quarter. We expect a mild recovery over there because there were a couple of turnarounds that happened in steel, but broadly steel for the year will continue to be lower than previous year.

Speaker Change: Just.

Speaker Change: Back from China about four weeks ago I'm headed there two weeks' time, and that's largely spending time with our customers speaking just my CEO counterparts to understand how they are looking at the at the market and I'll give you a quick view on how I'm just kind of give you do too as an example to what we're seeing in terms of outlook, which will I think called for.

Speaker Change: Most of the year. So steel was was bearing the metals generally in steel specifically was weak in the first quarter, we expect a mild recovery over that because there were a couple of turnarounds that happened in steel, but broadly still for the year will continue to below the previous year I think in the metals market are reflective of the general.

Sanjiv Lamba: I think the metals market are reflective of the general industrial lower or declining industrial activity set. As far as chemicals are concerned, we are also expecting chemicals to continue to be a little bit softer. And I think that trend is likely to hold for the rest of the year as well. And in fact, probably beyond that. So there's nothing to suggest, in either of those end markets, you will see anything different.

Speaker Change: Lower or declining industrial activity set.

Speaker Change: Far as chemicals are concerned we are also expecting chemicals to continue to be a little bit softer and I think that that trend is likely to hold for the rest of the year as well and in fact, probably beyond that so there's nothing to suggest.

Either of those end markets, you will see anything different.

Sanjiv Lamba: The areas of growth, you know, the green shoots are around battery and EV development. You read about it in the press. I visited the BYD facilities four weeks ago, spent time with the chairman, you know, spoke about their vision, and they have a fairly significant plan in terms of continuing to grow that base that they've built up on EVs. About 40% of all EVs in China, 40% of all cars in China are today EVs, and the expectation is that number will continue to grow. So that's an example of, you know, some development of green shoots around EVs and battery.

Speaker Change: The areas of growth.

Speaker Change: Green shoots around battery EV development, you'll read about it in the press.

Speaker Change: I visited the BYD.

Speaker Change: Facilities four weeks ago spent time with the chairman.

Speaker Change: Spoke about their vision and they have a fairly significant land in terms of continuing to grow that base that they've built up on evs about 40% of all Evs in China, 40% of all cars in China up to date Evs and the expectation is that number will continue to grow. So there's an example of some development of green shoots there.

Speaker Change: On Evs in batteries. The other piece I think that I think is also growing.

Sanjiv Lamba: The other piece that I think is also growing at a reasonably fast pace is electronics. The government has. you know, has a stated intent of becoming more self-reliant, and it is ensuring that there is incentive available for electronics companies to continue to expand and grow. Obviously, they don't go to the advanced nodes that you see with TSMC or Samsung or others, but nonetheless, you know, in just in terms of the amount of chips being manufactured in China today, that expectation remains that you'll see a lot of growth.

Speaker Change: Greg at a reasonably fast paced with electronics.

Speaker Change: The government has.

Speaker Change: As a stated intent of becoming more self reliant and it is ensuring that there is incentive available for electronics companies to continue to expand and grow obviously, they don't go to the advanced nodes that you see but TSMC or Samsung or others, but nonetheless, you know and just in terms of the amount of chips being manufactured in China today.

Speaker Change: Expectations remain that Youll see a lot of growth there.

Sanjiv Lamba: The areas where I see the greatest stress in the near term are going to be the merchant and package business, which are really correlated directly to manufacturing, and the fact that we have punitive tariffs in place that are going to upend that manufacturing process over there. You should expect weak demand. I think there will be industrial deflation that are likely to continue in that space, and really, I think there will be pressure at least in the second quarter, potentially a little bit beyond that, as you think about that space around general manufacturing. That kind of, I think, is where things stand with China today.

Speaker Change: The areas, where I see the greatest stress in the near term are going to the merchant and package business, which are really correlated directly to manufacturing and the fact that we have punitive tariffs in place that are going to up and that manufacturing process over there you should expect weak demand I think there will be industrial deflation that will likely to continue.

Speaker Change: That in that space and really I think there'll be pressure at least in the second quarter or potentially a little bit beyond that as.

Speaker Change: As you think about that space around general manufacturing.

Speaker Change: That kind of I think thats, where things stand with China today to not expect and we have not built in and we do not expect any recovery in China. This year.

Sanjiv Lamba: Do not expect, and we have not built in, and we do not expect any recovery in China this Very helpful. Thank you.

Speaker Change: Very helpful. Thank you.

Josh Spector: And we will take our final question from Josh Spector with UBS. Your line is open. Hi, good morning. Thanks for squeezing me in. Sanjiv, I wanted to follow up on one of your early comments in the prepared remarks. You talked about Europe and a more pragmatic decarbonization approach and leading to some encouraging conversation. So I just want to see if you could translate what that means for Linde. Where does that add opportunity for you? Is that projects? Is that demand? Or what does that mean? Thanks. Thanks, y'all.

Speaker Change: And we will take our final question from Josh Spector with UBS. Your line is open.

Josh Spector: Hi, Good morning, Thanks for squeezing me in Sanjiv I wanted to follow up on one of your early comments in the prepared remarks, you talked about Europe in a more pragmatic decarbonization approach and leading to some encouraging conversations. So I just wanted to see if you could translate what that means for for Linda where does that add opportunity for you is that projects.

Speaker Change: Is that demand or what does that mean.

Speaker Change: Thanks, you also I think the simple answer to that is you know.

Sanjiv Lamba: So I think the simple answer to that is, you know, Europe has struggled with with regulatory, you know, regulatory frameworks being led by ideology rather than pragmatism. And I think for the first time, not for the first time, we've worked hard at this over the last 18 months to get a general appreciation that low-carbon hydrogen has a very important role to play as people think about decarbonization in Europe. Because that's the only way you're gonna get a cost-competitive solution for decarbonization of large industries, which have substantive CO2 or greenhouse gases. And I think that's probably where my commentary earlier on, my prepared remarks, was reflecting on growing conversations and potential for regulatory change that will accept carbon capture and sequestration as an acceptable solution supporting low carbon hydrogen growth.

Speaker Change: Europe has struggled with with regulatory.

Speaker Change: In a regulatory.

Speaker Change: Frameworks being led by ideology rosin pragmatism and I think for the first for the first time, we've worked hard at this over the last 18 months to get a general appreciation that low carbon hydrogen has a very important role to play as people think about decarbonization in Europe, because that's the only way you're going to get a cost competitive.

Speaker Change: A cost competitive solution for decarbonization of large industries, which are substantive seo to greenhouse gas emissions and I think that's probably where my commentary earlier on my prepared remarks was reflecting on drawing.

Speaker Change: Conversations and potential for regulatory change that will accept carbon capture and sequestration as an acceptable solution supporting low carbon hydrogen growth. A specific example of that would be you're aware that we have signed a project development agreement with <unk> for the development of low carbon hydrogen projects.

Sanjiv Lamba: A specific example of that would be you're aware that we have signed a project development agreement with Equinor for the development of low carbon hydrogen projects in Europe, and that would be a direct beneficiary if the regulatory framework was to move forward. We still have to wait for that to happen, but we do see greater pragmatism and certainly an openness to understanding the benefits and understanding the science behind the conversation we're having. Obviously, in the U.S., low carbon hydrogen or blue hydrogen has a significant potential because of the support coming from the government through the 45Q elements, but also because the natural gas pricing and availability underpins that growth.

Speaker Change: In Europe, and that would be a direct beneficiary if the regulatory framework was to move forward.

Speaker Change: We still have to wait for that to happen, but we do see greater pragmatism and certainly an openness to understanding the benefits and understanding the science behind the conversations we're having obviously in the U S low carbon hydrogen or blue hydrogen.

Speaker Change: It has it has a significant potential because of the support coming from the government through the 45 key elements, but also because the natural gas pricing and availability underpins that growth.

Speaker Change: Yeah.

Speaker Change: Okay.

Juan Pelaez: And I would now like to turn the call back to Mr. Juan Pelaez for closing remarks. Thank you everyone for attending today's call. I wish you all a good day.

Speaker Change: And I would now like to turn the call back to Mr. Juan plans for closing remarks.

Speaker Change: Thank you everyone for attending today's call and wish you all a good day.

Operator: And ladies and gentlemen, that will conclude today's call, and we thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen that will conclude today's call and we thank you for your participation you may now disconnect.

Speaker Change: [music].