Q4 2025 Air Products and Chemicals Inc Earnings Call

Speaker #3: Please stand by . We are about to begin . Good day and welcome to the Air Products fourth quarter earnings release conference call .

Speaker #3: Today's conference is being recorded at the request of Air Products . Please note that this presentation and the comments made on behalf of Air products are subject to copyright by Air Products and all rights are reserved .

Speaker #3: Beginning . Today's call is Megan Britt . Please go ahead .

Speaker #4: Hello and welcome to the fourth quarter and full year fiscal 2025 earnings Conference call for Air Products . Our prepared remarks today will be led by Eduardo Menezes Chief Executive Officer and Melissa Schaeffer Executive Vice President and Chief Financial Officer .

Speaker #4: We have prepared presentation slides to supplement our remarks during the call , which are posted on the Investor Relations section of the Air Products website .

Speaker #4: During this call , we'll make forward looking statements which are our expectations about the future . These statements are based on current expectations and assumptions that are subject to various risks and uncertainties .

Speaker #4: Our actual results could materially differ from these statements due to these risks and uncertainties , including , but not limited to , those discussed on this call and in the forward looking statements and risk Factors sections of our reports filed with the SEC .

Speaker #4: We do not undertake any duty to update any forward looking statements . Please note in today's presentation , we will refer to various financial measures , including earnings per share , capital expenditures , operating income , operating income margin , the effective tax rate and rock either on a total company or segment basis .

Speaker #4: Unless we specifically state otherwise . Statements regarding these measures refer to our adjusted non-GAAP financial measures . Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website .

Speaker #4: In the relevant earnings release section . It's now my pleasure to turn the call over to Eduardo .

Speaker #5: Thank you . Megan . Hello and thank you for joining our call today . Please turn to slide three . Earlier today , we reported our fourth quarter and full fiscal year 2025 results .

Speaker #5: Our numbers show consistent progress . Related to commitments we shared earlier this year . We delivered earnings per share of $12.03 , which is above the midpoint of our full year fiscal guidance range .

Speaker #5: Our operating income margin of 23.7% and return on capital of 10.1% were also in line with our commitments for these metrics . Also this year marks the 43rd consecutive year of increasing our dividend .

Speaker #5: In total , we returned $1.6 billion to our shareholders in fiscal 2025 . I'm encouraged . We are setting challenging but achievable targets and delivering on those commitments .

Speaker #5: We have taken several key actions starting in the second quarter to focus on the core industrial gas business and expect to unlock earnings growth through productivity , pricing , operational excellence and disciplined capital allocation .

Speaker #5: The last three quarters demonstrate that we are already making progress . Moving to slide four , we have three key priorities for 2026 that were part of the strategy .

Speaker #5: We shared earlier this year . First , we expect to deliver high single digit annual EPs growth . To be clear , our 2026 guidance anticipates additional hidden headwinds in a sluggish macroeconomic environment .

Speaker #5: On our second priority , we will continue to make strides to optimize our large projects portfolio . We are working diligently to finalize our Neom project and expect to improve our underperforming project portfolio , with a goal of generating positive cash returns on our third priority , we continue to take actions to balance our capital allocation and improve our balance sheet .

Speaker #5: We expect to reduce our capital expenditures to roughly $2.5 billion per year following the completion of several large projects at this level of CapEx .

Speaker #5: We believe we can support our ongoing maintenance and invest in the traditional industrial gas projects while growing our dividend and longer term returns .

Speaker #5: Additional cash to shareholders via share buybacks in 2026 , we expect our capital expenditures to be about $4 billion . In summary , we expect fiscal 2026 to demonstrate our commitment to continuously driving improvement in our core industrial gas business and growing alongside our customers .

Speaker #5: Please turn to slide five . We highlighted earlier this year that a portion of our productivity improvement will come from returning to an organization headcount , similar to what we had before we started .

Speaker #5: Several large , clean energy projects . This slide offers a progress report on our actions in the savings that are being created since 2022 .

Speaker #5: We have identified a total of 3600 headcount reductions , which translates to 16% of our peak workforce . We expect this reductions to contribute approximately $250 million in annual cost savings , or $0.90 per share , in earnings .

Speaker #5: Once the reductions are completed , these cuts are not something we do lightly , but they are critical to offset inflation and adapt organization to a lower level of CapEx spending .

Speaker #5: Our objective remains to return to staffing levels . 2018 , adjusted for employee growth , to support new assets minus any other productivity we can find with new initiatives like AI .

Speaker #5: Moving to slide six , we have a summary of our expected CapEx expenditures after 2026 . As we have previously said , we are also moving forward with several underperforming projects giving our commercial obligations and project status .

Speaker #5: We have roughly $2.5 billion remaining to be spent on these projects from 2026 to 2028 , though these products are not expected to contribute materially to operating income .

Speaker #5: We continue to work to improve their results through commercial negotiations . Operational improvement and productivity for our Neom project . This slide reflects the CapEx related to our equity contribution to the overall project , which will be completed in 2027 .

Speaker #5: Any further investments for ammonia dissociation in Europe will need to be approved separately . After we bring these projects . On stream . We expect capital expenditures of roughly $2.5 billion per year , which can sustain both our future growth and ongoing maintenance for our blue hydrogen project in Louisiana , we have halted making new commitments until an offtake agreement is reached .

Speaker #5: In this slide , our capital investment for this project in 26 reflects only prior commitments on the project , and we have excluded any spending beyond 2026 .

Speaker #5: Like in the case of Neon , downstream investments , they would need to be justified and approved based on firm offtake commitments . I'll talk more about the Louisiana and Neon projects in our next slide .

Speaker #5: On traditional growth , we expect to invest approximately $1.5 billion per year going forward . These are as operational hydrogen projects that we normally execute in 18 to 30 months .

Speaker #5: So there are always new products being added and completed , products being removed from that list . The CapEx figures for fiscal year 2027 and beyond represents our expected average spend .

Speaker #5: Our focus will be , as always , on opportunities that meet our return thresholds with quality customers and contractual offtake . Moving to slide seven , I wanted to close with a brief update on neon and Louisiana .

Speaker #5: Start with neon . The project is progressing well and is about 90% complete . Solar and wind power generation will be completed by early 2026 and will start commissioning the Electrolysers and ammonia production .

Speaker #5: We expect to have ammonia production on stream with full product availability in 2027 . We are , of course , following the regulation developments in Europe .

Speaker #5: It is important to highlight that the scale of the energy transition is such that the volumes required to meet even the smallest mandates , such as the red three EU mandate to convert 1% of fuel sold to Fnbo fuels , would create a green hydrogen demand equal to approximately seven times the total production of our Neon project by 2030 .

Speaker #5: Obviously , a significant part of the volume is expected to be supplied by local electrolysers using renewable power , but it's important to highlight that our solution to bring green ammonia from Saudi Arabia for dissociation in Europe is competitive in terms of pricing and requires zero public subsidies .

Speaker #5: As mentioned before , the market for green ammonia is also being developed , and that will be our main target for from the time the Neon project starts .

Speaker #5: Additional feedback on the market development will be provided during 2026 . Regarding our Blue Hydrogen project in Louisiana . We are evaluating proposals to divest the carbon sequestration and ammonia production assets .

Speaker #5: We will only go forward with this project if we can sign firm offtake agreements for hydrogen and nitrogen from the facilities that will be owned and operated by Air Products .

Speaker #5: And of course , these agreements will need to comply with our return expectations with one or more high quality counterparts . As previously committed .

Speaker #5: We expect to provide further updates related to this project prior to the end of 2025 . So in less than two months from today , let me finish by saying that I'm excited to launch my first full operating year with their products team .

Speaker #5: We have been working hard to right the ship and bring the company back to a position where we can deliver maximum value to our shareholders , customers and employees .

Speaker #5: Now I'll turn the call over to Melissa to discuss our financial results in greater depth and discuss our 2026 outlook . Melissa .

Speaker #6: Thank you . Eduardo and welcome and hello to those joining us on the call today . Please move to slide eight for a high level summary of our financial results .

Speaker #6: We ended the fiscal year with earnings per share of $12.03 , delivering our commitment to our shareholders and above market consensus with respect to sales , favorable volume for on site and non helium merchant were more than offset by 2% headwind from the prior year .

Speaker #6: LNG divestiture , as well as project exits . Volume was also lower due to the reduced global helium demand . Pricing was favorable for helium merchant products across all regions .

Speaker #6: Operating income was down on volume and higher cost , partially offset by non helium price . The higher costs were driven by depreciation , largely offset by productivity improvements , net of fixed cost inflation , operating income margin of approximately 24% declined 70 basis points compared to the prior year , largely driven by higher energy cost .

Speaker #6: Pass through return on capital of 10.1% was lower versus prior year . As we continue to exit on our project backlog . Moving now to slide nine .

Speaker #6: Our fiscal year earnings per share of $12.03 decreased $0.40 , or 3% , from prior year , driven by a 4% headwind from LNG divestiture and a 2% headwind from project exits .

Speaker #6: Without these discrete items , EPs would be up 3% . Additionally , we continue to see headwinds from helium , including unfavorable comparable volume and pricing across regions .

Speaker #6: Despite these headwinds , we continue to deliver on our base business with stronger non helium pricing actions , ongoing productivity across our segments , and favorable on site and merchant contributions .

Speaker #6: Moving now to slide ten . I will provide an overview of our results by segment for the full fiscal year . You can find additional details of the quarterly segment results in the appendix .

Speaker #6: For the fiscal year , Americas results were down 3% . As a reminder , we reported a one time asset sale associated with an early contract termination at the request of a customer in the prior year .

Speaker #6: Fourth quarter , which alone resulted in a 3% headwind in the Americas . Additional drivers include headwinds from project exit and Helium and higher maintenance related costs .

Speaker #6: These were partially offset by strong non helium pricing actions . Productivity improvement , and favorable on site contributions from our Heico business . Asia .

Speaker #6: Fiscal year results were relatively flat , as lower helium was offset by a favorable on site non-healing price and productivity during the quarter .

Speaker #6: We made the decision to sell two coal gasification projects within Asia , which are now within assets held for sale . Europe's FY 25 results improved 4% as non helium merchant pricing , productivity and favorable on site contribution was partially offset by lower helium and higher costs associated with two depreciation and fixed cost inflation .

Speaker #6: The full year Middle East and India equity affiliates income decreased 2% from prior year , primarily due to lower contributions from our joint venture .

Speaker #6: The full year results for the corporate and other segment were primarily impacted by the headwind from the prior year sale of LNG , partially offset by lower changes to the sale of equipment .

Speaker #6: Project estimates , and lower costs . With our continued focus on productivity improvements . Moving now to slide 11 , we continued to generate strong cash flows from our base business , supporting investments in both energy transition and traditional industrial gas projects .

Speaker #6: Additionally , we returned $1.6 billion in cash to our shareholders . We remain committed to disciplined cost control , a reduction in capital expenditures and strategic asset actions aimed at unlocking value and generating cash .

Speaker #6: Moving now to slide 12 . We will review our outlook for fiscal 2026 . For the full year . We expect to deliver earnings per share in the range of $12.85 to $13.15 .

Speaker #6: An improvement of 7 to 9% from the prior year . Despite a helium headwind comparable to FY 25 . This growth is expected to be achieved through new asset contribution and continued focus on pricing actions and productivity .

Speaker #6: We also expect a 1% benefit from the rationalization of projects , in large part due to the two Asia gasification assets we wrote down in fiscal 2025 .

Speaker #6: We are focused on delivering these results in line with the five year roadmap . We introduced earlier this year . For the first quarter of 2026 , we expect to deliver earnings per share in the range of $2.95 to $3.10 , representing a 3 to 8% improvement from the prior year .

Speaker #6: Our outlook assumes growth from continued pricing actions and productivity , as well as a benefit from the rationalization of projects and lower planned maintenance , partially offset by lower helium .

Speaker #6: As a reminder , we expect our first quarter to be lower sequentially due to normal seasonality . With respect to capital . We expect to spend approximately $4 billion as we execute on our project backlog , including approximately 1 billion on traditional industrial gas projects , and invest in ongoing maintenance .

Speaker #6: As we look to de-risk our Louisiana projects and optimize our portfolio, we expect to be modestly cash flow positive in fiscal year 2026 and are committed to staying cash flow neutral through 2028.

Speaker #6: As we close out on several projects now , we'll open the call up for questions . Operator .

Speaker #3: Thank you . If you would like to ask a question , please signal by on your telephone keypad by pressing star one . We ask that you please limit yourself to one question and one follow up .

Speaker #3: Asking your questions one at a time . If you're using a speakerphone , please make sure your mute function is turned off to allow your signal to reach our equipment .

Speaker #3: Again , press star one to ask a question . We'll pause for just a moment to allow everyone the opportunity to signal . And we'll go first to Jeff .

Speaker #3: Secaucus with J.P. Morgan .

Speaker #7: Thanks very much . In your opening remarks , I think you said that you were evaluating proposals to divest the carbon capture piece of the Louisiana Project , but you're still evaluating whether you would proceed with the project .

Speaker #7: So could it be that those two events would be linked ? That is , you would sell the carbon capture piece to a party and then work with them to provide them hydrogen or hydrogen and ammonia .

Speaker #5: Good morning Jeff . Yeah . Let me let me try to explain that the the you know , the idea of this project is basically to transform into a regular hydrogen and air separation project where we supply hydrogen and nitrogen to someone that will produce ammonia .

Speaker #5: The CO2 that is being produced by the facility . You know , has to be sequestered in order to for you to capture the 45 Q credit .

Speaker #5: So what we're basically saying is that our product was developing by itself . Its own poor space to to do that . And what we're trying to do at this point , we're evaluating proposals for someone to to buy the porous spaces from , from us and provide the service of the CO2 sequestration or to or to just buy the porous space from us and provide the services from another location that that this company may have .

Speaker #5: So , so that's that's the , the , you know , the , the picture in terms of the CO2 sequestration . And yes , this is connected to the overall project , although , you know , if if we decided not to go forward , of course , we still have this asset that is the part of space that we can we can try to to monetize in the market .

Speaker #7: And as for the Alberta project , we because the cost overruns have been so high , why don't you simply stop the project or impedes you from stopping it ?

Speaker #7: And would that project have to be money-losing on an EPS basis? Because the depreciation charges are just going to be so high from the cost overruns when it comes, if it comes on.

Speaker #7: And would that project have to be money losing on an EPs basis ? Because the depreciation charges are will will just be so high what

Speaker #7: .

Speaker #5: this project has explained before . We have long term commitment for , you know , almost 50% of the volume with a major customer .

Speaker #5: That depends on us . So we have a contractual commitment that we take very seriously . So we need to finish the project and supply the hydrogen to to this customer .

Speaker #5: And , and we have some additional volume that we are working hard to find other ways to , to place in the market .

Speaker #5: As , as you probably know , we already have infrastructure in place in Edmonton . We have two other sites that are connected through a , you know , a pipeline and this third site will also be connected there .

Speaker #5: So we we can move the product from these three sites to basically all the refineries that are located in that area . So that's that's the work we are doing with the additional volume .

Speaker #5: But our commitment to go forward is , is basic . Basically what we need to have in order to fulfill our contractual obligations .

Speaker #7: Thank you so much .

Speaker #5: Thank you .

Speaker #3: We'll go next to David Begleiter with Deutsche Bank .

Speaker #8: Thank you . Good morning . Eduardo , on the cost savings and the employee headcount is the 20,000 headcount you're targeting the new a new base or could it go lower from there ?

Speaker #5: Yeah , this is this is what we are expecting to have at the end of this year . You know , we we continue to find ways to rationalize our workforce to make sure that we use all the technologies available .

Speaker #5: I think we we , you know , I think we demonstrate that we are reducing our s year by year and , and , you know , if I'm , you know , my , my recollection is correct .

Speaker #5: I think we , we said that our original number when we were in 2018 was close to 18,500 people . You know , and our objective is to go back to that number , you know , plus the people that we absolutely need to operate some assets that we added since since that , since that date .

Speaker #5: So I would say that we still have some room to grow , but , you know , it's it's an ongoing process to always optimize and make sure that you are as competitive as possible .

Speaker #8: Very good . And just back on Louisiana , if you do move forward with that project , with these off taker partners , you suggested , what would what would what would be the cap , the CapEx remaining to air products ?

Speaker #5: Yeah , we we will provide that data . Dave . When we we update the project , I think it's I hope everybody understands that what we are saying is , you know , trying to summarize that , you know , no off take deals , no FID .

Speaker #5: So , you know , a product is started . This project without having offtake deal . We paused the project . We're working hard to find a solutions for that .

Speaker #5: You know , the economics of the project , when you look at the natural gas price , the infrastructure that we have in place and the 45 Q is , you know , it is the right place to install green or blue hydrogen and blue ammonia projects .

Speaker #5: I think , you know , both other ammonia producers and , and even our competitors that are doing similar projects in Texas and Louisiana are saying exactly the same thing that you can be competitive even against gray ammonia in Europe .

Speaker #5: So we're working on that , trying to find a solution . You know , I understand we are , you know , basically 45 days away from from the end of the year .

Speaker #5: And if I really didn't think that we have a chance to to have something , I it would be much easier for me to to say that today .

Speaker #5: But we still believe that we can find an interesting solution for this project . And , and we will provide a full update before the end of this year .

Speaker #8: Thank you .

Speaker #3: We'll go next to Duffy Fischer with Goldman Sachs .

Speaker #9: Yeah . Good morning . Just want to get some insights into the growth in the next year . You know . So at the midpoint of your guide you're up 8% .

Speaker #9: But there's a -4% from helium . So that's really 12 Melissa called out one from the shutdown of the sale of the Chinese assets , which gets you to 11 .

Speaker #9: So of that 11% growth underlying , can you break that out kind of new projects price efficiencies , how you deliver that and is that smooth throughout the year ?

Speaker #9: Or are the oncoming projects back end loaded ?

Speaker #5: Yeah , we we expect a contribution from new assets in , you know , both in Asia and the Americas that , you know , can give us around , you know , two , 3% growth .

Speaker #5: And then the balance will come from price and productivity . I would say half and half . There we are working very hard on the on the on the productivity side as , as we mentioned in our headcount slide and and on the pricing is a continuous work for us .

Speaker #5: The helium headwind that we have is very similar to what we had this year . I would say that , you know , when we say that this is the headwind for for 2026 is basically agreements that we are reviewing and we're signing this year in 2025 , over the previous year .

Speaker #5: Now , the fiscal year , you know , a products most of our volume comes from from large liquid customers . You know , as you know , our packaged gas business is basically limited to Europe .

Speaker #5: So we we pretty much know where these agreements are going to be next year . And that that's where they are at the fourth quarter of this year .

Speaker #5: So , so we we we're pretty comfortable that we understand well the headwind that we have in helium and , and the base business , you know , as I said , 3% of new assets and the balance coming from productivity and price .

Speaker #9: Great . Thanks . And I'm sure it's not your favorite subject , but helium was mentioned 29 times in your slide deck this quarter .

Speaker #9: You know , what is your view on the helium industry going forward ? Do you think we've stabilized at this point ? So 26 will be the last year of headwind , or do you think we continue to see headwind into 27 and 28 for that product ?

Speaker #5: Yeah , I didn't count the number of times Duffy . But but thank you for pointing that . Yeah , it's it's it's a you know , we we have a lot of debates on that .

Speaker #5: If , if we have a structural change in the market or just a part of the cyclicality that you always had in helium .

Speaker #5: Right . I would say that , you know , there was some significant changes in the way the market operates because of the , the disappearance of the , the , you know , the BLM in as , as a major source of helium in a globally in , in the United States and and that took away a little bit of the the inventory that you had that were able to to regulate the market a little bit .

Speaker #5: I think most of the major players now , they they are now installing their own storage . So we have our own cavern , our true competitors , they they have their own caverns as well .

Speaker #5: So I hope that this will help regulate the market a little bit . And and you know , from what I see today , I see still some decline in , in 27 , but not at the same level that we had this year .

Speaker #5: And , and at the best guess that we have is that that will be the lowest point and the market will stabilize . But we need to see how the sources develop and , and , and you know , how the effect of this , this storage of helium will have in the overall marketplace .

Speaker #9: Great . Thank you guys .

Speaker #10: Thank you .

Speaker #3: We'll go next to Patrick Cunningham with Citi .

Speaker #9: Hi .

Speaker #11: Good morning . If if you decide to forego downstream investment in Neo , maybe based on unfavorable regulatory environment , whatever it may be , what do the commercial options look like .

Speaker #11: And would you expect to see any positive EPs contribution in 2027 under a scenario where you have to sell ammonia exclusively ?

Speaker #5: market Yeah , we for green and blue ammonia or low carbon ammonia , whatever you want to want to call . It's developing .

Speaker #5: So , you know , I expect that we're going to have the ability to sell some of our production in the beginning of the operation , as green .

Speaker #5: And that percentage will grow with time . You know , what is exactly the numbers ? You know , as you know , ammonia , it's it's own market .

Speaker #5: It has different pricing dynamics . So we're going to need to wait a little bit more to to give you a forecast for 2027 .

Speaker #11: Understood . And then maybe just a quick one on equity affiliates income . We saw meaningful growth in the Americas this quarter . Can you provide some color on what was driving that and what we should sort expect for step up or step down across all the regions and equity income next year ?

Speaker #5: Yeah , I can I can ask Melissa to to answer . But it's basically Mexico for us . And in the , you know , they have been having very strong second half of the year .

Speaker #5: Yeah .

Speaker #6: Thanks , Eduardo . So absolutely . So our Mexican joint venture did see improvements year over year . We do expect about a flat going into FY 26 .

Speaker #6: However, we did see a slight decline in our joint venture in 2025. We actually look for that to be a pickup in 2026.

Speaker #6: Obviously , interest rates do impact that . So as interest rates do decline , we will see improvement on the equity affiliate contributions from our joint venture .

Speaker #11: Thank you .

Speaker #3: We'll go next to Josh Spector with UBS .

Speaker #12: Yeah . Hi . Good morning . Eduardo I wanted to just ask you about the decision on Louisiana . I mean , I think based on investor expectations , you might have had some license to maybe push out a decision there a little bit beyond year end .

Speaker #12: But you've made a commitment to communicate something here in the next couple of months. So I'm just curious if you could talk about the range of scenarios there.

Speaker #12: Is that a go or no go meaning cancel decision , or do you see a scenario where some decision gets pushed out beyond the year end timeframe ?

Speaker #5: Yeah , I understand the the the curiosity . Josh and I , I , I , you know , we would like to be able to communicate more at this point .

Speaker #5: But we really need to wait until the end of the year . Again . This I would say that , you know , if we are telling you that we believe that we we have a reasonable chance to communicate something by the end of this year , it means that we have very advanced negotiations .

Speaker #5: And with counterparts on that . Right . It is a it is the largest project , you know , or it would be the largest project products ever , ever built or probably any other industrial gas company .

Speaker #5: So it's very complex negotiation . And we have been working on that for several months now . I would say that from that perspective , it's going well .

Speaker #5: I my main concern on this project really is on the on the , on the , on the capital estimate for the project , you know , when you look at the slide , you can see a picture of cold box that we manufacture for this , for this , this project .

Speaker #5: So we have all the major equipment done , we have all the engineering done , but we still need to do the construction and the construction market in the United States .

Speaker #5: Is very hard at this point . A lot of competition from data centers and other people trying to to build all structures and coming from different industries and able to pay different prices .

Speaker #5: I think this is affecting projects for the entire , you know , chemical industry . So we are looking at that very carefully , trying to understand what is real , what is not , and what is a bubble with the the , the point that if you , you know , look at our slides , you can see that we made a point about applying for a major air permit source , air source permit .

Speaker #5: They're in Louisiana. And we did that because, you know, our potential counterparts asked us to have the flexibility of running the plant on a gray mold.

Speaker #5: If something happens with the CO2 sequestration that we didn't , you know , expect to to to do or still don't expect to do because the CO2 is a big contributor for the project .

Speaker #5: But , you know , and it's something that the other products are doing , you know , and we decided to apply for that for that major permit .

Speaker #5: And that will take several months . It will probably take up to mid 2026 . And and from there you need to do civil construction .

Speaker #5: So really the peak of the mechanical and electrical construction would be like mid 2027 . And and the judgment that we need to make is how , you know how hot or not hot the , the US construction market will be at that point .

Speaker #5: So so that's where we have been working a lot of details behind that decision . And we will communicate clearly where we are in the project before the end of this year .

Speaker #12: Okay . Thank you . And just a quick follow up , just with the guide for 26 . You know , your comments are minimal .

Speaker #12: Volume growth to something to that extent . Just wondering if you can quantify minimal . Are we talking about near zero growth . And basically if we end up having a macro environment that looks like where we've been at the last couple of quarters , is that a risk to your guidance or is that largely baked in ?

Speaker #12: Thanks .

Speaker #6: Yeah , sure . Thanks . Thanks for the question . So so let's be clear . So again , as we stated , we do see a several new assets coming on stream , both in the Americas and in Asia .

Speaker #6: Those will be ramping towards the back half of of this fiscal year . So there is growth in volume associated to new assets from a market volume perspective .

Speaker #6: We're not forecasting a significant market growth at this time , given the macroeconomic headwinds . However , if we see that improve , obviously our results will improve .

Speaker #6: So definitely volume from new assets . But at this time , not forecasting significant market volume due to those headwinds .

Speaker #12: Okay . Thank you .

Speaker #3: We'll move next to Vincent Andrews with Morgan Stanley .

Speaker #13: Thank you . And good morning , everyone . Just trying to reconcile the CapEx slide in this deck versus the one in the last one .

Speaker #13: It looks to us like your CapEx forecast for fiscal 26 is gone from about 3.1 billion to 4 billion . So so first of all , is that correct ?

Speaker #13: And secondarily , if it is what's what's changed in that slide ? That's causing that .

Speaker #6: Yes . Thanks , Vincent , for the question . And I'll take this one . So the CapEx guide that we gave in in the second quarter , obviously was an estimate , right .

Speaker #6: So as we go through the year , we sit with all the regional presidents and really do a bottom up forecast on the capital that we're going to spend over the next couple of years .

Speaker #6: So we've refined that . We've adjusted based on new wins in all the different regions and our estimating around a 4 billion CapEx .

Speaker #6: Obviously , maintenance is a component of that CapEx . We're looking to improve on maintenance and take that down . So this could improve that CapEx number .

Speaker #6: But again , that's really a bottoms up review that we do as part of our plan . So there was a small variance between the Q2 time frame CapEx forecast and what we're projecting right now .

Speaker #13: Okay . And then just as a follow up , separately in the corporate segment , which came in certainly better than what we had , and I believe better than where consensus was the slide .

Speaker #13: And I apologize if you already spoke to this . The slide speaks to lower changes of sale of equipment project estimates . What is that ?

Speaker #13: What does that mean ?

Speaker #6: Yes . Thank you . So we do have certain sales . It's a very small part of our business . But what we would call a sale of equipment when we sale , sell a project to a company that's not going to be a long term sale of gas project .

Speaker #6: We have had some cost increases associated to certain projects that our sale of equipment that are , again , accounted on a percentage of completion accounting perspective .

Speaker #6: So as cost increases , there , we show that in the PNL we did have some smaller cost increases this year compared to last year .

Speaker #6: And that's really what you're seeing flow through . There .

Speaker #13: Thank you .

Speaker #6: Thank you .

Speaker #3: Next to Chris Parkinson's with Wolfe Research .

Speaker #14: Great . Thanks for taking my question . So let's talk about your base business a little bit , particularly electronics . Can you just go over kind of how we should thinking about the intermediate to long term growth algo that you have in your portfolio and how that exposure evolves with M2 , HCM growth and everything else ?

Speaker #14: I'd love to hear your thoughts on that , as well . As you know , where you think air products just broadly stands relative to peers in terms of what's embedded in , let's say your non large projects outlook as it relates to your backlog .

Speaker #14: Thank you so much .

Speaker #5: Thank you Chris . Yeah . Electronics represents roughly 17% of our total sales in in our products . It's it's a very important segment for us .

Speaker #5: We were really the the pioneers in the in the in the area . You know initially with Intel now with the the other players .

Speaker #5: You know , it's a market that is expanding very quickly . We , we , we have plans that we're commissioning right now .

Speaker #5: We have investments on on other plants in Asia that we're doing . And we are in the process of participating bids for several others .

Speaker #5: As you know , the investment in this area has been very , very strong . So it's it's it's probably the the , the brightest area we have for our traditional business .

Speaker #5: And it's an area that we have been focused a lot . I really on your point on the on the audit , on the other products .

Speaker #5: I really would like to get a little more clarification . Exactly what you are asking , other than the the portfolio of new products .

Speaker #14: It is . Are you happy with where your existing electronics backlog exists relative to peers , given everybody's been growing over the last few years , or is that something you'd like to focus on as CEO ?

Speaker #5: Yeah , no , no , I will never be happy with that because I always want to have more than that . We're working very hard to to , to to get some new opportunities .

Speaker #5: I , we believe that there are some new projects that we will be able to to announce in 2026 . And I but I still believe that we have a very , very strong position .

Speaker #5: This market and I , I have no . You know , no other way to to to make comparisons with our , our competitors .

Speaker #5: I think our position on , on that market is , is stronger than it is in , in most , most markets .

Speaker #6: And if I could add one point. So, one of the assets that we spoke about is coming on stream this year in the electronic space in Taiwan.

Speaker #6: So that's the starting of the ramp of that project . So that's one good example of in the near term where we're going to see improvements in the electronics space for air products .

Speaker #5: Yeah . And and the reality is in these places , you know , it's it's like a continuous project . Right . Because they have so many expansions and and we are always building new plants in , in Asia .

Speaker #5: And , and hopefully we'll be able to move that to other regions as well as this customers , they they start to invest outside of Asia .

Speaker #5: .

Speaker #14: Got it . And just as a quick follow up , you know , to the extent that you can , can you talk about just kind of how we should be thinking about the run rates from Uzbekistan as well as like GCA and some of these other projects which have had some maintenance or kind of been more start and go .

Speaker #14: Could you just perhaps just give us a little framework on how we should be thinking about those as well ? Thank you so much .

Speaker #5: Yeah , it was is is a very large . You know , gas facility . It's operating well . We had maintenance this year , but it was , you know , scheduled maintenance .

Speaker #5: You this kind of plants , you have to do that every few years . So no , no real issues there . And and the plant is running at very high .

Speaker #5: You know , rates at this point and GCA is a project that we are still working on to , to to basically bring to completion and , and it's one of the projects that we expect to contribute this year in 2026 .

Speaker #14: Thank you so much .

Speaker #6: Thanks , Chris .

Speaker #3: We'll go next to John Roberts with Mizuho Securities .

Speaker #15: Thank you . And nice quarter and guidance . Are you still anticipating doing ammonia cracking in Europe and building an ammonia cracker there ?

Speaker #5: We we we are still waiting to see what the final regulation will be in Europe . As you know , they have this you know , regulation to convert 1% of the fuels to rainbow .

Speaker #5: This is for 2030 . Now this has to be transposed by each country . There is other regulations that probably not going to move .

Speaker #5: But this one , everything indicates that , you know , the what you see in in most countries they are even proposing higher percentage than that .

Speaker #5: So I think Spain is 4% . Germany is one and a half , but all this has to be ratified and the expectation now is that we'll see the this this transposition of the regulations by March of 2026 .

Speaker #5: So when the regulation comes out, then we're going to understand the size of the market with the best information we have today.

Speaker #5: It's not a huge percentage of the fuels , but when you think about , you know , green hydrogen volumes that are really , really small , that will generate a market , I think in our slides we said that if if the number is 1% is like seven times the volume of neon at the current regulation levels that we see , that number is more like 20 times .

Speaker #5: Again , these volumes , they can be supplied by local production using electrolyzers with renewable power . Or they can be supplied by cracking ammonia coming from a place like Saudi Arabia .

Speaker #5: So it's really a a way to do some arbitrage on power prices and so forth . So we need to see how this ends .

Speaker #5: We need to see how the market develops and what opportunities we have . If the project makes sense again , and if we have a offtake agreement , then we can do an FID and move forward with this project .

Speaker #5: If not , we'll need to go in a different direction . But at this point , indications are that there will be a market not huge market , but , you know , very significant compared to the existing volumes in terms of green hydrogen and green ammonia .

Speaker #15: Thank you .

Speaker #3: We'll go next to Lawrence Alexander with Jefferies .

Speaker #16: Good morning . Earlier this year when you put out the target of 6 to 9% growth through 29 , what was your assumption around Neom .

Speaker #16: Was it your predecessors framework of realized prices would be roughly double the market price ? Was it just a placeholder ? 10% IRR ?

Speaker #16: Was it , you know , can you give us some sense of what was embedded in that framework from from the Neom asset ?

Speaker #5: No , we didn't . We didn't add any kind of , you know , very large contribution from neon . You know , at this point , we have the contribution from the JV point of view , the contribution from the product that we will need to sell from there is something that , as I said before , we we need to continue to to work on to , to get a better understanding of what the numbers will be .

Speaker #5: But on our guidance for that . You know , high single digits between now and 29 , we want to with a minimum contribution from from that project .

Speaker #16: Thank you .

Speaker #3: We'll go next to Matthew Dio with Bank of America .

Speaker #17: Morning . Two questions for you and I apologize . The first one is going to be a little long , but so if I look at your performance versus Lindy , Europe really shows is the biggest opportunity for improvement .

Speaker #17: And notably , I think price there has kind of underperformed materially . If you if you go back or look even to Covid or pre-COVID , I know helium is probably in there , but I think fundamentally when electricity prices rolled over in 22 and 23 , it looks like air products just handed price back to customers .

Speaker #17: And Lindy didn't . And so net , you have a pretty wide margin differential between the two . I mean , when you you kind of agree with that view .

Speaker #17: But is there an opportunity to catch up on the price differential or is raising price unilaterally like too difficult ? And then as my second , is there a world where you can just monetize the 2 billion sunk cost in Darrow to another company that's looking to do a project along the Gulf Coast that might have maybe different strategic goals from a products .

Speaker #17: So , I don't know , maybe you can get like 50% of that . Right . Is there a world we can walk away with $1 billion and just say , you know , that's better than just a full project , project walk ?

Speaker #5: Yes . On the side with the the last question first . Yes , absolutely . I you know , as I said , we we have a lot of the critical equipment done for the project .

Speaker #5: The project , you know , has , you know , good economics . So I that's definitely what would happen if , if we decide to cancel , we would try to monetize as much as we can .

Speaker #5: And I don't think you are your you . Know , estimate of 50% is is a bad estimate at this point . But again , this is something that you need to go and understand and see how much you can recover from that .

Speaker #5: On your first question . And I and I , I've seen your your report on prices in Europe and I think we're still trying to understand exactly the comparisons there , because when you do comparisons quarter by quarter , not in a , in an average for the year , you get different results .

Speaker #5: And and I , I think we we can talk offline and explain a little bit of that to you . But when you look at , at performance in Europe , yes I understand our competitor improved a lot .

Speaker #5: Their performance I , I have a personal understanding of what exactly happened there . You know , you always need to understand that Europe is , you know , it's easy to talk about as one market , but there are several different markets in Europe .

Speaker #5: It's easy to see that when you think about an island like the UK , but the reality is , when you talk about industrial gases , Iberia is an island .

Speaker #5: Italy is an island . And and really the only large common market you have in Europe is , is , you know , the space between France and , and , you know , Benelux and Germany , Eastern Europe , you know , also doesn't have the same geographical barriers .

Speaker #5: But , you know , the density also , you know , leads to the point that you have several different markets there . So , so when you when you think about that and you I forgot about Scandinavia , that's also a separate market .

Speaker #5: And you look at the positions that we have and the positions that our competitors have , you know , the margins are a little you know , you can't you can't understand a little bit the difference in the differences in margin .

Speaker #5: I'm not saying that we cannot improve our business in Europe . We're working to , to , to to do that , to make it better on , on , on , on every line of business that we have .

Speaker #5: But I think the difference in performance is a little smaller than , than what you are . You are calculating there just because of the , you know , the positions that we may have or not in places like Scandinavia or Eastern Europe , but so that's that's the point .

Speaker #5: I can guarantee you not going to we're not giving price back . And and we're working on our , on our pricing day by day in Europe .

Speaker #5: And , and I look forward to have our group here reaching to you and talk about the difference on how you calculate that when you look at quarter results and annual , you know , cumulative results on pricing .

Speaker #18: The .

Speaker #3: Tarun Viswanathan with RBC Capital Markets .

Speaker #19: Great , thanks for taking my question . Just just to clarification on the helium headwind . So I think maybe this year came in just slightly below your expectations .

Speaker #19: Maybe I think you were getting a 55 to $0.60 . Maybe that's 49 . So maybe that was a little bit better . So maybe just clarify that and then on the helium headwind for next year , it looks like Q1 is is maybe a -6% , but then the full year is , is a negative four .

Speaker #19: So that appears to be projected to get better as you move through the year . What's your confidence in that I guess , and is there a possibility it could get worse .

Speaker #19: And then for my second question , just on CapEx , is there a possibility that maybe what kind of flex do you have there ?

Speaker #19: Would you go down to maybe three and a half if if necessary for fiscal 26 , and how soon do you make those decisions ?

Speaker #19: You know , what kind of freedom are you giving yourselves to or time to , to make some , some more difficult decisions ?

Speaker #19: I guess if you need to . Thanks .

Speaker #6: Great . Thanks . I'll take this question . So let's start on helium . So you are right . We had forecasted between 50 and $0.55 headwind on helium for the full year .

Speaker #6: We came in at 49 . So a little bit better than we had forecasted , but not significantly off for FY 26 . We're looking at about the same run rate as what we saw in FY 25 .

Speaker #6: Obviously, you know there are areas that we're going to continue to look to in order to be able to push volume and price.

Speaker #6: But this is a difficult market . One of the things that I do want to remind everybody is that in Q1 , last or this year , we had a bulk helium sale that we disclosed that is causing a significant headwind as we lead into FY 26 .

Speaker #6: So that is the difference in Q1 that you're seeing as a year on year comp that is giving us a little bit of a tough , tough headwind .

Speaker #6: But again, for the full year, about 4% is what we're forecasting. A 4% headwind is coming into FY26. Now, on CapEx.

Speaker #6: So for CapEx , it's really component of execution against our projects , right ? So as long as we're continuing to execute against the projects that we have in our backlog , we will see that three and a half to 4 billion that that is not something that would significantly change or that we need to make a decision on .

Speaker #6: Now , as for Darrow , we obviously have commitments on purchase orders that we're continuing to progress , but no new commitments are being made .

Speaker #6: So I don't see a significant variance or decision point that would change the FY 26 CapEx forecast . So between three and a half and 4 billion is a number that I pretty confident on .

Speaker #19: Thanks .

Speaker #3: We'll go next to Kevin McCarthy with Vertical Research Partners .

Speaker #20: Yes. Thank you. And good morning. Can you elaborate on the decision to sell to coal gasification projects in Asia? I'm curious about what exactly you're divesting, and whether you have any firm deals in hand today?

Speaker #20: If so , cash proceeds and any impact on your on your sales in Asia . Thank you .

Speaker #5: Yes , Kevin , we we as we explained , I think two quarters ago , we have three major coal gasification in China , projects in China where we we own and operate the coal gasification part of the project .

Speaker #5: We have several others that we have the oxygen plant , but that's a different story . Out of these three projects , Luan is the largest one , and we have absolutely no issues with with this project .

Speaker #5: It's operating . It's , you know , probably one of the largest coal gasification sites in the world . And , and this is continuous continuing normally we have two other sites that those are the sites we are we are taking actions that we have no , no operating issues , but we have customer issues and and we have been trying to work these issues for some time .

Speaker #5: This this projects really they have been a drag for us in terms of operating profit . We have been booking only the , the , you know , the sales that they are being able to pay .

Speaker #5: So the impact in sales is not exactly very , very large for us . And we decided to to , you know , after several months of negotiation with decided to set these assets , these assets aside for sale and , and we are in the middle of that process .

Speaker #5: I cannot give you a specific date and value of when we can close this . This , this sale . And and the amount of money that we're going to be able to collect .

Speaker #5: But of course , we're trying to maximize the valuation . And and we believe that , you know , the , the , the entire asset , you know , may have a better owner than us and the and the current owner of the , the , you know , the syngas to , to methanol to all the things plant .

Speaker #5: So we we hope that we'll be able to find that and , and monetize this asset better than what we would have if we keep running these plants .

Speaker #20: Thank you for that , Eduardo . My second question is a bit of an unusual one . Would you comment on the market for rare gases like krypton , xenon , neon ?

Speaker #20: Are you seeing any escalation of competitive intensity in Asia ? And if so , is it is it meaningful or is it simply too small to matter given , you know , given the small size of those markets ?

Speaker #5: Yes, products, unfortunately, are not a big player in this market traditionally. So it's not something that we focus a lot on.

Speaker #5: We have been we have seen some degradation in pricing and increasing in in the competition level from other players . But really it's not something that affects us that much .

Speaker #5: So I don't think I would be the right person to to give you a feedback on that .

Speaker #20: Okay . Good to hear . Thank you so much .

Speaker #3: And we will take our final question from Mike Sison with Wells Fargo.

Speaker #21: Hey , one quick one on Louisiana . If if you get two partners for sequestration , ammonia . Who want , you know , a similar return that you would want , you know , is there still a good return on the hydrogen that you would do longer term ?

Speaker #21: I suspect that , you know , that's kind of what what a partner is looking for . So . Maybe just flush that out as , as , as a scenario .

Speaker #5: You know , every every , you know , we are looking at this like as a normal hydrogen project for us . So , you know , we we have our criteria .

Speaker #5: The customer has its own criteria . And you know , it needs to work for both sides for the product to move forward .

Speaker #5: That's all I can tell you . It's if it doesn't work for them , you know you're not going to work for us either .

Speaker #5: And and I , I believe there is a room . Today to to to get to the right returns . As I said , you know , to get the right returns , you need to have a commercial negotiation , pricing .

Speaker #5: But you also need to have, you know, a firm estimate on the capital cost. And that's also part of the equation here.

Speaker #22: You .

Speaker #21: Got it . Thank you .

Speaker #5: Thank you .

Speaker #3: And that will conclude the Q&A portion of today's call . I would now like to turn the call back to Eduardo Menezes for any additional or closing remarks .

Speaker #5: I would like to thank everyone again for joining our call today . We appreciate your interest in our products , and we look forward to discussing our results with you in the next few quarters .

Speaker #5: Thank you and have a great day . Bye .

Speaker #3: Thank you . Ladies and gentlemen , that will conclude today's call . We thank you for your participation . You may disconnect at this time .