Operator: Good morning, ladies and gentlemen, and welcome to the Air Liquide Q3 2026 Revenue Conference Call. All participants are currently in listen mode only until we conduct a question and answer session, and instructions will be given at that time. I will now hand over to the Air Liquide team. Please begin your meeting and I will be standing by.
Aude Rodriguez: Thank you, Heidi. Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations. Thank you very much for attending the call today. François Jackow and Jérôme Pelletan will present the third quarter revenue. For the Q&A session, they will be joined by Emilie Mouren-Renouard and Adam Peters, both Group VPs overseeing respectively EMEA and North America. Adam is on the phone with us from the US. In the agenda, our next announcement is on 19 February next year for our full year 2026 results. Let me now hand you over to François.
François Jackow: Thank you, Aude, and good morning, everyone. It is my pleasure to present Air Liquide's operational highlights for the third quarter of 2026. This morning, you will see that these good results show our ability to deliver growth across variable macroeconomic environment, demonstrating the structural resilience and agility of our business model. You will also see, and this is a most noticeable point, that this quarter marked a confirmation of the inflection in our top line sales momentum, especially in Electronics and Industrial Merchant. This is fully in line with the trajectory of our BEYOND strategic plan presented two weeks ago. Today, with many actions announced at the Capital Markets Day already launched, we are clearly in full motion and well aligned with our BEYOND strategic plan. Let's look at the figures on slide 3.
François Jackow: Our third quarter results underscore the positive contribution of the actions taken recently and confirm we are fully aligned with the trajectory of BEYOND. First, top line acceleration. This is the most noticeable result of the quarter. Q3 confirms the inflection initiated in Q2. We now stand at sales growth above 4%, excluding Forex and energy, and reaching 5% for Gas and Services. This is driven mostly by Electronics and Industrial Merchant. Of course, in the current environment, we should stay cautious for the future, but the fact that the volumes are now positive is very encouraging. On top of this, at +5.3%, Industrial Merchant pricing demonstrate again our ability to effectively manage the cost curve. Also, efficiency momentum remains outstanding, over EUR 440 million year to date.
François Jackow: This significant achievement confirms that our transformation program continues to yield structural results and is well aligned with our margin ambitions under BEYOND. Operating cash flow remains robust at +6%, excluding currency impact. This provides us with ample financial flexibility to fund our strategic capital allocation priorities. Finally, our investment backlog reached another all-time high at EUR 6.2 billion, up from EUR 6 billion at the end of June. These are, as you know, high quality projects under construction that will directly fuel our profitable growth as they ramp up. This high backlog and the recent signings show that we continue to secure our long-term growth momentum in line with our BEYOND ambition. In summary, few days after the CMD announcement, you see that already in Q3, we position ourselves well in line with our BEYOND profitable growth trajectory, accelerating top line growth, driving pricing, and delivering efficiencies.
François Jackow: I would like to come back to the acceleration of the top line and start on slide 4 with our electronics business. It is delivering an excellent momentum, up +12% this quarter. Carrier gases, which account for around half of our total electronics revenue, as we mentioned during the CMD, marked an acceleration with double-digit comparable sales growth, supported this quarter by five startups and several unit ramp-ups. This is just the beginning of the contribution of the increased investment in the past years, providing, as you know, thanks to the solid business model, high visibility, recurring, and contractually secured growth. I would say the story keeps going. Securing growth for tomorrow, we have doubled our investment decisions in the first nine months of 2026 compared to the full last year. This includes several major strategic wins.
François Jackow: Please remember our recently announced EUR 170 million investment in Japan, where we have invested more than EUR 800 million in the past five years. Japan is clearly back in the semicon race. Being the only international gas player present in Japan is a clear competitive advantage, and I would say it shows. Also compelling is our market-differentiating advanced materials portfolio. As we discussed during the CMD, this segment naturally tracks technology demand cycles, as shown on the graph. It is currently experiencing a strong growth surge, reaching +27% in the third quarter. This may not be always the case, but it is clearly driven by the accelerated demand for advanced chips and memory in AI applications. Overall, you can see that our momentum and outlook across electronics is already very consistent with our BEYOND trajectory of greater than 10% annual growth rate in sales. Moving to slide 5.
François Jackow: Growth in Industrial Merchant served as another major engine this quarter, delivering over 5% comparable sales growth. Sustained high pricing was amplified by the positive inflection in volume growth, excluding helium. In fact, the Industrial Merchant volumes have now been positive since Q2 and accelerated further in Q3. This sales growth is the highest in three years. Taking an optimistic view, this performance, and again, more than 7% IM sales growth excluding helium, may point to the early stages of a broader recovery, supported by underlying volume growth across all our geographies in Q3. This being said, regarding helium, while market conditions are somewhat improved, supply constraints remain a headwind today. Also encouraging is a volume pickup in US hardgoods. Hardgoods delivered solid growth this quarter, fueled by construction, government, defense, and also aerospace sectors.
François Jackow: While all this is very positive, and it is an early signal, visibility, of course, in Industrial Merchant remains shorter than in our long-term contracted businesses, especially in the current environment. I would say we should remain cautiously optimistic. Overall, our strong sales growth in Industrial Merchant this quarter positioned us very well to execute and deliver our BEYOND strategic plan trajectory of +4% to +6% revenue growth. As a reminder on slide 6 now, BEYOND is our compass for the next five years, anchoring our execution and operational discipline. I want to take, of course, this opportunity to once again emphasize the three core pillars underpinning our ambition. Profitable growth with a +10% EPS CAGR, lasting value creation with ROCE exceeding 11% by 2030, and a positive impact with a 33% reduction in Scope 1 and Scope 2 CO2 emissions by 2035.
François Jackow: Q3 performance clearly demonstrates that we are on the right trajectory to deliver on these commitments. Turning now to slide 7. Following our Capital Markets Day, we have moved swiftly into execution. First, we launched our post-CMD engagement with strong momentum. Externally, we met individually with more than 100 investors on two continents, as well as held analyst meetings in both Europe and in the US. Internally, we onboarded the organization through our Global Engagement Day, connecting with our 65,000 employees worldwide, and also a specific three-day session with our top 200 leaders aligning on execution priorities. Needless to say, execution is fully underway with the initial launch of our key BEYOND initiatives. Lastly, as a clear sign of our momentum and our confidence in our strategic roadmap, we have already initiated our EUR 4 billion share repurchase program at full speed.
François Jackow: Following this week board authorization, we will deploy the first EUR 1 billion tranche to be executed by the year-end 2026. We are fully engaged and executing with speed and confidence. Thank you for your attention. I will now hand over to Jérôme to provide a deeper dive into our Q3 financial performance. Jérôme, please.
Jérôme Pelletan: Thanks, François, and good morning, everyone. I will now review our Q3 numbers in more details. Turning to page 9 for Q3 Gas and Services sales. When you exclude FX and energy, Air Liquide delivered +5% top-line growth. That includes a positive significant contribution from the DIG Airgas integration, somewhat offset by our partial biogas divestiture. As a reminder, the closing of DIG Airgas was accelerated to early January, and therefore now benefits Air Liquide for the full year. On a comparable basis, we deliver sustained +3.6% sales growth in a contrasted macroeconomic environment. As published sales are up with an impressive +10.8%, benefiting from a favorable effects of +1.5% and a +4.3% energy pass-through impact. A key feature in Q3 was the accelerating energy impact, more than 90% of which was concentrated in EMEA, driven by natural gas pricing increase.
Jérôme Pelletan: On page 10, the key drivers of comparable group performance of dynamic growth in the Americas at +6% and a strong sales pickup in Asia at +7%, reaching +17% when you include the DIG contribution. Meanwhile, EMEA remained flattish at -0.5% or +0.5% excluding the combined effect. You will recall that combined effect creates distortion during period of high energy price volatility. While current price level are less extreme than in Q3 2022, this mechanical base still amplifies our comparable sales impact by a factor of 2 in Large Industries EMEA. For a detailed breakdown of the calculation, please refer to the appendix. Looking at performance by business line, as François Jackow outlined, Electronics delivered booming momentum at +12% comparable growth, and notably Industrial Merchant posted +5% growth and +7% excluding helium, supported by strong pricing action and increased volume excluding helium.
Jérôme Pelletan: Healthcare delivered a resilient +3%, including some portfolio adjustment, while Large Industries remained mixed at -0.5% when you exclude the combined effect. Let's now move to page 11, where I will review Q3 activity across our main geographies. First, the Americas delivered a +6% increase on a comparable basis. In Large Industries, strong hydrogen and air gas demand in the US was supported by high customer demand across chemical and refining sectors. Industrial Merchant also posted strong results supported by dynamic pricing at +6.5% and recovering volumes, including in autos. At +7.9%, Healthcare grew solidly to sustain high pricing, especially in the US, as well as increased volume. In Electronics, carrier gas ramps up and strong advanced materials growth were offset by lower equipment and installation sales. However, our E&I order book is increasing.
Jérôme Pelletan: Overall sales in EMEA were flattish, slightly positive when you exclude the combined effect. Large Industries was indeed impacted by an unfavorable combined energy effect, lower cogeneration activity, and soft European chemical demand, though supported by robust hydrogen volumes in refining. Industrial Merchant growth is improving significantly with increased pricing at +4.2% and positive volume growth excluding helium. In Healthcare, performance remains solid, driven by robust medical gas sales that was partially offset by a slight decline in home healthcare, reflecting portfolio optimization and the divestment of non-accretive activities in France and Switzerland. Finally, Asia posted a strong sales pickup, up +7% on a comparable basis and a very high +17%, including DIG Airgas. This acquisition has been extremely successful to date. In Large Industries, hydrogen output in Korea supported activity against an otherwise soft demand backdrop.
Jérôme Pelletan: That said, we have seen an improvement in Southeast Asia, particularly in Singapore. Industrial Merchant saw positive sales momentum in all countries and particularly in China, with overall pricing up +2.1%. Electronics delivered outstanding growth at +17% overall, with carrier gas up +15% alongside, very strong advanced material and booming equipment and installation sales. I am now on page 12 to comment on activity in our Industrial business line. Merchants showed strong momentum, delivering +5.3% comparable growth and +7.2% excluding helium. Pricing increased to +5.3% as we maintain active price management to manage a cost curve during persistent inflation. Volume excluding helium were up +2%, led by construction in the Americas, beverages in EMEA, and technology sectors in Asia.
Jérôme Pelletan: Once again, we are pleased to see that as a Q2 of sequential volume growth in Industrial Merchant, win growth in all geographies. Large Industries recorded broadly stable sales at -0.5%, excluding the combined effect, as start-up contribution and record US volume mostly offset low European activity and flat Asian demand. Turning now to page 13. Electronics posted outstanding +12% comparable sales growth. Carrier gases and advanced materials, which together account for around 70% of Electronics revenue, both grew at double-digit rates, driven by the global AI surge. Equipment and installation sales were also strong, especially in Asia. In Healthcare, sales growth stood at +3%, where robust medical gas activity with steady pricing supported by value offers helped mitigate lower home healthcare sales stemming from portfolio management and the divestment of non-accretive activities in France and Switzerland. Moving now to page 14.
Jérôme Pelletan: We remain extremely focused on our execution to deliver our margin improvement ambition, one of BEYOND key levers for driving +10% EPS CAGR to 2030. First, Industrial Merchant pricing remained dynamic at +5.3% Q3, bringing our total pricing effect to +38% since 2022. Second, efficiency gains reached EUR 441 million year-to-date, reflecting successful ongoing deployment of our group transformation initiatives. Efficiencies and active price management continue to drive margin and align us with our BEYOND objective of +400 to +600 basis points on margin improvement during the period 2026 to 2030. Third, on portfolio management. Year-to-date, we closed the DIG Airgas strategic acquisition and added 10 bolt-ons across the US, Canada, Brazil, and China. We executed four divestitures, including one large scope biogas divestiture in Europe and in the US, and three small divestitures in Europe and Mexico. Our bolt-on acquisition pipeline remains highly robust.
Jérôme Pelletan: By the way, we expect organic bolt-ons to contribute approximately +1% toward our BEYOND sales growth target of +5%. To be clear, this baseline figure excludes any significant impact from any larger strategic acquisition. I am now on page 15 with our investment KPIs. Year-to-date investment decision reached a record high of EUR 4.1 billion, already exceeding our total for all 2025. This is driven by a record level of industrial decision, including major Electronics products in Japan and on-site units across the US, China, and Southeast Asia. Our investment backlog has again expanded to a new record of EUR 6.2 billion. This backlog is well diversified across 70 projects and well-balanced mainly between Electronics and Large Industries. Finally, our 12-month portfolio opportunity remains sustained at a high EUR 4.8 billion, despite the record level of decisions made, resulting in opportunities transitioning into the backlog.
Jérôme Pelletan: Furthermore, the portfolio beyond 12 months continues to exceed EUR 10 billion. Finally, on page 16, we confirm our full year 2026 outlook will remain aligned with our ambition to deliver +100 basis points of operating margin improvement excluding energy in 2026. We are also confident in our ability to further increase our operating margin and deliver recurring net profit growth at constant exchange rates. We also reconfirm the additional +100 basis points in 2027, bringing cumulative margin expansion to +560 basis points over the six-year period from 2022 to 2027.
Jérôme Pelletan: Our solid performance and momentum to date are well aligned and give us complete confidence in achieving our 2026, 2030 BEYOND strategy objectives. The launch of our first share buyback tranche to be executed by end of 2026, detailed earlier by François, directly reflects this confidence and our focus on generated compounding shareholder value. Thank you very much for your attention, and I guess we can start the Q&A session.
François Jackow: Thank you very much, Jérôme.
Operator: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will take our first question, and the question comes from Alex Sloane from Barclays. Please go ahead. Your line is open.
Alex Sloane: Yeah. Hi. Good morning, all. Thanks for the opportunity to ask questions. Two from me, please. Firstly, on Large Industries. If we look at EMEA Large Industries in the quarter, it looked quite challenging at headline level, but as you explained, several one-offs and obviously a mathematical impact. As we look forward, as Normandy starts ramping up, I think, from Q4, could you maybe quantify the contribution you are expecting from that project to Large Industries growth in Q4 and 2027? And I guess, with maybe maintenance in Europe dropping out, should we expect some sequential improvement in Large Industries in Q4? And beyond that, I would be interested, what do you think needs to happen for Large Industries to step up to get into the 1% to 3% target growth range you outlined as part of BEYOND? That is the first one.
Alex Sloane: Second one, just a quick one on electronics. Advanced materials, obviously pretty exceptional growth in the quarter, 27%. Could you maybe unpack how much of that growth, that strength reflects innovation from your side that is gaining commercial traction versus underlying semicon market momentum? I guess strategically, I would be interested, to what extent is having this differentiated advanced materials offering helping you win carrier gas projects? Obviously, you have strong momentum with new signings. Thank you.
François Jackow: Alex, thank you very much. I will ask Emilie to speak about the Large Industries in Europe, and I will talk about the electronics.
Emilie Mouren-Renouard: Thank you, François. Good morning, everyone. Thanks for the question. Maybe, let me give you a bit of some flavor of what is happening in Large Industries in Europe, trends and outlook as well. We have seen this quarter high energy prices in Europe. Energy effect is high, as you have seen, and also what we call the combined effect that you referred to. Overall, I would say the activity in EMEA in Large Industries is contrasted depending on the different markets we serve. If we look at the chemical industry, volumes in this market are pretty much suffering from high energy costs, especially this quarter, with energy price a significant surge. Natural gas price in Europe is now 10 times the price in the US. The chemical industry structurally faces challenges, and in terms of outlook, we do not see or we do not expect any uptick.
Emilie Mouren-Renouard: Second, on refining. Refining is doing well. Still upward trend in volumes, especially for hydrogen for us. Most refiners in Europe are running at maximum capacity, and we expect, in terms of outlook, that large players will continue to run at high load. Of course, it will also depend on the Middle East prices, and for us, it is obviously positive and leads to high hydrogen demand. Metals continues to be slightly better sequentially, and this uplift is mainly driven by the protective measures that Europe has put in place to protect the steel industry on the continent. Going to your question on Normandie. The electrolyzer should start production of the first hydrogen molecules very soon, in the coming weeks. We will start first train 1 and then train 2, followed by a ramp up, like every project we have, in H1 2026. The electrolyzer is fully loaded.
François Jackow: All right. Thank you very much, Emilie Mouren-Renouard. On electronics, yes, indeed, to come back to the advanced material, which is showing a tremendous growth. I think overall, to answer your question, this is clearly the results of the position that we have built over years in term of research, in term of development, but also in term of manufacturing capabilities. We have a unique set of molecules. Many of them are either patented as a molecule themselves, I mean, the application, or sometime it is the production process. For example, in molybdenum, as we mentioned before, the fact that we have a unique equipment to deliver this solid precursor into a gaseous form, I think is really a competitive advantage. So I would say clearly, again, the results of the innovation. The fact is, as you mentioned, that of course we need to have customers.
François Jackow: There is a higher and higher demand for those kind of molecules, which, by the way, and that is part of the variability in this business, are based on agreement, which are three to five years. So there is a rotation in the molecules, of course. But there is a demand, which is growing demand. It is not only volume, it is, I would say, the type of demand and the quality of the demand, because those molecules are really best suited for the most advanced chips and memory. Those are exactly the products which are today enjoying a very significant growth because of the more sophisticated needs in AI application, especially. Again, our position that we have built over the year, giving us a competitive advantage. You had a point about, is this helping us to gain carrier gases? Typically, those are purchased in a different way.
François Jackow: That is the beauty, I would say, and the power of the advanced material. When we talk to the customer, it is typically for the people who are developing the process, who are looking at the R&D, the new ways to produce the most advanced memory and chips, more than, quote, unquote, "utility for the carrier gas." So I think clearly we reach a higher level in the organization of our customer. So I think overall, even if those are not directly connected, there is no bundle offer. Clearly, the fact that we become a strategic partner in term of development and innovation for those semicon companies is giving us a competitive edge on the overall electronics business.
Alex Sloane: Makes sense. Thank you.
François Jackow: Thank you very much.
Operator: We will take our next question. Your question comes from the line of John Roberts from Mizuho. Please go ahead. Your line is open.
John Roberts: Thank you. On slide 15, the backlog of EUR 6.2 billion, and then the next beyond 12 months, 4.8. How much of that is electronics? Is electronics accelerating as we go beyond the backlog into the next 12 months?
François Jackow: Good morning, John. Thank you very much for your question. I do not know if you are calling from the US, but we appreciate your early morning call. Jérôme, could you answer the question, please?
Jérôme Pelletan: Yes. Thank you very much, John. Thank you for your question. You pointed out electronics in the backlog is about 40% of the backlog today, which is very significant. It is showing you the acceleration of this wave that we have talked for, I would say, already four months. You saw that during the first nine months, we signed, I would say, more project than quite the number of projects we signed during the full year of 2025. So it is showing you momentum. We see that both, of course, in the backlog, but also in the portfolio, where the very significant part as well is coming from electronics. Not only electronics, we have a large part of Large Industries business, which I would rather say rather equal, but the electronic is slightly above. So very strong momentum, and this should be continued in the next years.
John Roberts: In that backlog-
François Jackow: As we have also-
John Roberts: Go ahead. Sorry.
François Jackow: Go ahead, John. 42%-
John Roberts: I was going to-
François Jackow: Of the backlog electronics.
John Roberts: Yep. I was going to say, is the backlog primarily carrier gases? I don't think of advanced materials as being a backlog business like the carrier gas business.
François Jackow: No, you are absolutely right. In the backlog, we have only investment. So the advanced material business is not part of the backlog. Those are for electronics carrier gas business mostly. Yes, indeed.
John Roberts: Thank you very much.
François Jackow: All right. Thank you, John.
Operator: Thank you. We will take our next question. The question comes from Martin Roediger from Kepler Cheuvreux. Please go ahead. Your line is open.
Martin Roediger: Yes. Thanks for taking my question. It is on electronic sales in Americas, which decreased organically by 4.8% in Q3. It was weak also in recent quarters. It seems to be the opposite trend versus the strong growth in Asia. Why is this the case? That is my first question. Maybe one follow-up, it is a clarification question on your guidance for Q4 sales growth being similar to Q3. I guess you refer to comparable sales growth. Does it also include the same kind of energy pass-through FX in Q4 versus Q3? Thank you.
François Jackow: Thank you very much, Martin. Adam, electronics is doing so great. What are you doing in North America?
Adam Peters: Thank you, François. Martin, thanks for the question. The US in electronics is booming, and actually our sales are booming as well. What we see is an impact related to E&I. If you look at our portfolio in the US, we have a portfolio that basically enters every stage of the sales cycle. We have, as we talked about, the carrier gas business, which is really driving the long-term acceleration of growth that we see, and the development activity is very strong in this right here. On the E&I side, on the beginning of a wave, we see as construction starts with a new fab, the equipment business starts to pick up. What we saw in the past 2 years was a hyper-acceleration of equipment sales in the US for chemical and gas distribution equipment that is coming off of its peak, in 2026.
Adam Peters: That's what we see. What that's doing is it's offsetting all the gains that we see in both the materials business as well as in carrier gas. It is a decent-sized portion of our portfolio. Historically it's been at a level that doubled in 2024, and then it accelerated again in 2025. What we're coming off of is that high peak. What we see going forward is that we will have this year-over-year effect behind us, but then we start to see yet another wave. We see this wave upon wave of electronics activity in the US, which continues to accelerate.
Adam Peters: It's a very exciting time, and I think our position in the US in electronics across the full suite of our portfolio is great and really positions us well going forward. Really in short, what you see is a year-over-year impact coming off of an absolute high in 2025, and that's why the offset takes place and you don't see it in the high level sales number, in electronics in the Americas.
François Jackow: Thank you very much, Adam. To come back to your second question on the trend for Q4. Clearly you see, in Q2 and confirm in Q3 a positive momentum, as we discussed just a few minutes ago, the peak in electronics, in Industrial Merchant, in volume especially. However, we have to recognize that in this global context, it remains quite variable. That's why we see at this stage the growth in Q4 to be very similar to what we have seen in Q3 on a comparable basis. Regarding the energy, again, very difficult to predict the energy market, especially with the uncertainty in the Middle East, as we see, and potential impact on pricing of energy. Overall, our assumption is to continue to see the same trend in the energy, hence the energy contribution. Thank you very much.
Operator: Thank you. We will take our next question. The question comes from John Campbell from Bank of America. Please go ahead. Your line is open.
John Campbell: Hi everyone. Thanks for taking my questions. I have two. There is no denying why the electronics comparable growth was very strong in Q3. I would be interested if you can perhaps quantify how much of that 12% came from the start and ramp up of new assets. Maybe do you have a sense at this stage on the Q4 comparable performance? Second question kind of follows on from one of the earlier ones. Energy inflation is clearly accelerating in Europe and perhaps to a lesser extent in the US. Thinking about Q4, do you think merchant pricing can accelerate sequentially across Americas, EMEA, and Asia? Thank you.
François Jackow: Thank you very much, John. Regarding the first point on the electronics and the contribution, I do not think we specify this and outline this in our external communication. What we can say is that we had five startups, but typically the first few months, the contribution is quite small. We had ramp-ups of units which were started in the previous quarter, and this is more significant. We see also overall the operating rate of our assets and the demand of the customer, which is ramping up.
François Jackow: So difficult to give you an exact number, but you should expect this kind of contribution, given the backlog that we have in electronics to continue, in the next quarter over 2027 at least, and 2028. Regarding the impact of energy and inflation overall on merchant pricing, maybe let us speak about the US first with Adam and, Emilie, if you want to comment also after. Adam?
Adam Peters: Yes. If we take Industrial Merchant, I will address specifically your question on pricing, but I want to talk very quickly, if I can, about what we are seeing overall. What we see overall in the Industrial Merchant space is volume growth across all sectors with the exception of food, beverage, retail, and services. I think this is promising and talks to the point that François raised earlier about where we see the activity level across the Americas. When you talk about pricing in particular, pricing, as you have seen quarter after quarter after quarter, continues to be strong and really ties to our approach to this, our tools, our reward systems, and the like with our people to make sure that we have the right price pass-through effect.
Adam Peters: We do not really talk about or provide guidance on where pricing will go, but what we can say is that that price pass-through remains strong, and it continues in a good way because of the tools and systems that we have in place. This will continue in Q4, it will continue through next year as well, because it is really part of our structure and how we approach this.
François Jackow: Thank you very much, Adam. Any comments on Europe, Emilie?
Emilie Mouren-Renouard: Yes, thank you, François. On the energy inflation, first of all, on Large Industries, remember our business model protects us well and all the energy cost is passed through to our customers, so we bear low risk. On Industrial Merchant, yes, we have been very proactive in increasing prices. We reacted quickly in anticipation of cost increase due to the Middle East crisis, but also due to the energy price increase we have seen. Pricing was ahead of the cost curve, leading to good pass-through. We have accelerated in Q2 in Europe and then again in Q3, reaching a +4.2% pricing in Q3 in Industrial Merchant.
Emilie Mouren-Renouard: Remember also we have put in place in the bulk business in Europe all the right formulas to reflect the energy piece. It is really especially important now as energy prices in Europe have increased very significantly. So it is very important that we are covered on that front. In IM, we just increase pricing or add surcharges to face the inflation and energy price increase. Overall, I would say very strong pricing management in Europe will continue in the next quarter. Overall, more generally speaking, overall good momentum in IM in EMEA pricing, but as well, a slight uptick in volumes.
John Campbell: Thank you.
François Jackow: Yeah. Thank you, Emilie. I think that is really a positive and great news for Europe in terms of volume, because we have not seen that for some time. I know that feeds you and the team. We look forward to seeing how this continues. Thank you very much. Next question, please.
Operator: Thank you. Once again, if you do wish to ask a question, please press star one one on your telephone. We will take our next question. The question comes from Tony Jones from Rothschild & Co. Please go ahead. Your line is open.
Tony Jones: Good morning, everybody. Thank you for taking my questions. I have two. Firstly, on EMEA and thinking particularly about Large Industries, I had a look back, and I think there is only one quarter in 4 years where comparable growth has been above 1%. It has largely been down. What is the plan here? Is there any potential for a review of specific countries or end markets? You did say earlier, I think, on the call, that you do not expect any improvement to be happening in the near term. So I was just wondering, is this structurally impaired? Then totally different question. On space, could you update us how Air Liquide is positioned regionally, and do you expect any sale of gas or sale of plant contracts to be announced in 2027? Thank you.
François Jackow: Thank you very much, Tony. Emilie?
Emilie Mouren-Renouard: Yes, thank you for the question. Well, like I said earlier, the Large Industry in EMEA is contrasted depending on the different markets, but it is true that on the chemical industry side, we do not foresee an uptick. Given the high energy cost, but also all the other challenges that this industry is facing, especially in Europe. So what we are doing, and this is part of our BEYOND strategy, is we review all our key basins, basin reconfiguration initiatives, that is how we call it. So basically, we can do asset restructuring based on what we see as the long-term demand from our customers, where the competitive pressure is in a given basin, and what we have in terms of asset capacity.
Emilie Mouren-Renouard: So that is what we are doing, and if we have to restructure some of the basins we are into, we will, and that is exactly what we are considering right now. Overall, I want to say we are still very well protected, both by our contracts, long-term contracts, of course, in Large Industries, and our business model, which is very resilient, and by the diversity of the customers and the activities we are in, as we are not just supplying the chemical industry, obviously. Also, of course, we have in Europe a few startups that will help in the coming future, especially in energy transition. Remember, we have five large energy transition projects under execution right now.
Tony Jones: Thank you very much.
François Jackow: Yeah, thank you very much, Emilie. This is part of the BEYOND plan where we all see the transformation in Europe manufacturing. We want to make sure that we are ahead of the curve, that is why we are taking many action, as you say, to deal with this change, but also position ourselves for opportunities and opportunities for growth. Regarding the space, as we discussed before, you know that we are well-positioned. Today we are supplying a full range of products and services to the industry. We are supplying bulk product, liquid oxygen, liquid nitrogen, for example. We are supplying on-site. We operate over the fence in several locations in the world, for oxygen, for nitrogen, for hydrogen also, with on-site hydrogen.
François Jackow: We supply equipment, sometime highly specialized cryogenic equipment, but also for some customer, air separation units, whenever they want to own and operate by themselves. So it is today a variety of supply, and we are, I think, very well positioned on all those segments, having been in the space industry for more than 50 years, in Europe and in the US. The other day I was reminding somebody that we have been supplying NASA since 1968, I believe, and we are a key player there. What is changing today is we see a great momentum with hybrid players that we are also supplying with all the products and services that I mentioned. So, yes, there will be additional sales as we are supporting this industry. Most of the growth is going to come from North America, where again, we are well-positioned.
Tony Jones: Thank you very much.
François Jackow: Thanks a lot.
Operator: Okay. We will take our next question. Your question comes from Jean-Luc Romain from CIC IB. Please go ahead. Your line is open.
Jean-Luc Romain: Thank you for taking my question. It relates to the weight of, sorry, energy transition project in your investments under construction and in the next 12 months opportunities. What is the weight of it? You mentioned 40% for electronics or more or less. What is the weight of energy transition project?
François Jackow: All right. Good morning, Jean-Luc. Jérôme, can you answer this question, please?
Jérôme Pelletan: I am not sure we answered the question, but I would say a significant part of backlog in Large Industries is made of energy transition. I would say it is the most, I would say, significant part in the backlog of Large Industries. That is basically what we have.
François Jackow: Large Industries is what? Is 40%?
Jérôme Pelletan: Roughly less than 40%, and the significant part of that-
François Jackow: Okay.
Jérôme Pelletan: Is energy transition, Jean.
Jean-Luc Romain: Thank you very much.
François Jackow: All right. Thank you very much. Next question, please.
Operator: We will take our next question. Your question comes from Chetan Udeshi from JPMorgan. Please go ahead. Your line is open.
Chetan Udeshi: Yeah. Morning, all. I have two questions. Firstly, just on your buyback that you have decided to accelerate or pull forward. I am just curious what is driving that. Is this more confidence that you can probably do better in terms of margins in H2, given the momentum that you have seen? Or is there other reason why you decided to pull it forward? That was my first question. Second question is, I am a bit curious. You are guiding to, let us say, around 3% organic sales growth.
Chetan Udeshi: Consensus next year is 4.5%. Within that 3%, right now you have electronics growing at 10% to 12%. You have pricing in merchant, which is already at 5%. So what can really change next year to see that uplift in organic growth to where consensus is, which is 4.5%? I know you do not guide, but I am just curious, what do you think can improve so much to drive 1.5 percentage points growth acceleration next year? Thank you.
François Jackow: Thank you very much, Chetan. On the first point, the share buyback, I think we are fully consistent with what we said at the Capital Markets Day. We are extremely committed to our capital allocation. We want to continue to invest in our core business. We want to seize any opportunity in acquisition, and we want to increase the return to our shareholders. So that is what we are doing. In today's world, there is no reason to wait. We have, thanks to all that has been done by the teams in terms of improved profitability and cash generation of the group, the ability to do strategically the capital allocation that we want to do. And that is why we decided to start right away. Our commitment remains to do EUR 4 billion share buyback in 2027, 2028 timeframe.
François Jackow: So that is part of this program. Of course, how do you read that? Yes, you can read that in the confidence that we have in the strength of our business and our ability to create value. Also you can read our commitment to go into a full speed execution of all the BEYOND programs. So that is what it is. I think it is very important in this program to stay flexible. Again, the flexibility is based on internal ability to allocate the funds, but also on market opportunities that we see. So we see there is a good window, we take it, and we move ahead as we do on many other things. For the guidance for next year, Chetan, wait a little bit. We are still in late October. We are, again, very confident in our trajectory for BEYOND. The plan will continue to unveil.
François Jackow: We want to see the confirmation, as we said, during the road shows of the volume uptick in the different parts of the business. We will see a contribution of the investment also that we continue to do. There are bolt-on acquisitions which are ongoing. You see that in the various geographies and parts of the business. All this is going to contribute. Here we are talking about the five-year plan. You see that all the signs in Q3 confirm the trajectory we want to continue.
Chetan Udeshi: Thank you.
François Jackow: Thank you very much.
Operator: Thank you. We will take our next question. The question comes from Laurent Favre from BNP. Please go ahead. Your line is open.
Laurent Favre: Yeah. Morning all. Actually, two similar questions to what Chetan just asked. On the buyback, you have gone from doing, I guess, or announcing EUR 4 billion over two years to EUR 1 billion over two months. I am just wondering, what is your thinking on the pace of the buyback for the remaining three? Could we see this done by the end of 2027, for instance? That is the first question. The second one, I know you no longer disclose the impact of startups.
Laurent Favre: This would be really helpful for us to have, let us say, a broad understanding if you combine all the startups of what the contribution was or is, let us say, in your 2026 framework, and then whether or not you are assuming there is a step-up on that in 2027. You have talked about the investments that will start up. You have talked about Normandy, but of course, given all the noise on subsidies and energy management, it is impossible for us externally to have a good gauge. I think it would be really helpful for modeling.
François Jackow: Thank you very much, Laurent, and good morning. Jérôme, do you want to come back on the share buyback?
Jérôme Pelletan: Yeah, of course, François. Good morning, Laurent. You said, I would say all of it, François. We decided to accelerate to show that we are completely committed and we are in motion. That is really a good sign that we are. We have the balance sheet, we have the momentum, and we have decided to accelerate on this. By the way, it is interesting to see that we could not go quicker than what we did with all the quiet period and the commitment we have made. Being able to execute a EUR 1 billion share buyback program by end of 2026 is quite not only ambitious, it will be done, but it is something that is showing our commitment.
Jérôme Pelletan: So we are committed basically on our EUR 4 billion buyback. We said during the Capital Markets Day that it will be done by end of 2028 the latest. So we stay committed, and we are staying flexible. More to come. But that is clearly showing that it is showing not only our confidence but also our commitment to make it happen. Thank you, Laurent.
François Jackow: Yeah. Thank you very much. Do you have comments on the startup, Jérôme?
Jérôme Pelletan: Well, the startup, there is clearly a startup contribution this year, and it will be also some next year, and it will be showing the density and the variety of our backlog. Today, we do not communicate on the transformation of backlog into sales for the reason that we explained during the Capital Markets Day. Yes, for sure, there will be a startup contribution. There is in 2026, and there will be in 2027. I think on this question of startup, maybe to help you a little bit, Laurent and others, I think overall, we see the projects which are delivering as expected. The ramp-up is what it is. Given the fact that the projects are larger, typically, the ramp-up takes a little bit longer than what we had 5 or 10 years ago. That is something to keep in mind.
Jérôme Pelletan: If you really want to understand and to model the growth of the group, you should really pay close attention to the base, I would say, and to the Industrial Merchant, because Industrial Merchant, almost 50% of the group. Then you have the base. We see very well that some of the things which are holding us this quarter are, for example, the base in Large Industries. That is probably a first order of importance, I would say, in the growth, how we will be able to extract more value from the base that we have. As we discussed during the Capital Markets Day, you remember, the asset utilization program, those are the kind of contribution which are very significant given the size of the base that we have. I hope it helps you along.
François Jackow: Thank you very much. I do believe we have one last question.
Operator: Thank you. Please stand by. Your final question comes from the line of James Hooper from Bernstein. Please go ahead. Your line is open.
James Hooper: Morning, thank you very much for taking the questions. Two, please. Can you give us an update on the helium situation, how things are easing, and how you see volume is progressing there? Last question on engineering. Clearly, you have been allocated more resources to the internal customer to execute the backlog. Is this the new normal, do you need to add more engineering capacity, given you mentioned space customers or others earlier in this call? Thank you.
François Jackow: Thank you very much. Quickly on the two questions which are important. The helium situation, so again just to put things in perspective, helium is a little bit less than 3% of the group sales overall. What we are seeing today is the situation is still, I would say, under tension globally for all the players, and several players have declared force majeure, several of the international ones in different locations. So the situation is, again, under tension. What we can say for our customer is that we have managed to continue and to ensure continuous supply for our critical customer, especially in electronics. So that's a very important point. From the supply side, we see, in fact, a partial recovery of the capacity coming from the Middle East gradually, week after week.
François Jackow: It's still not at full capacity, but it's improving, and that has been improved over the past months, I would say, even further. So we watch carefully the situation. The fact, again, that we have a cavern is helping us a lot. We have also secure other sources of helium to help us continue to meet our commitments. So overall, I would say improvement on the supply side. Let's be cautious looking ahead. Regarding engineering, I think that's a very good question, and you know well that we have a very strong proprietary engineering capabilities, both to develop our own technology, but also to execute the plans and the investment that we have.
François Jackow: Given the size, the magnitude, and the acceleration of the Air Liquide investment for the overall defense business, we want to put a priority to support those investments because managing properly this investment is absolutely key in the value we deliver to our customer, but also to manage the timing, the schedule, and the budget is absolutely critical. That is what we are doing today. We are ramping up our engineering capabilities wherever we need to do that. Keep also in mind that we operate as a global engineering organization where we can leverage our resources in China, in India, in the US, in Europe, of course, or in Japan. We leverage our full network of engineering, continue to focus on that. This means that our third-party sales, which are important overall, are less in term of fraction of the overall engineering activity.
François Jackow: You should expect that this will be the case for the months, if not the years to come, given, again, the increased investment and the fact that this is the priority for us on how we can create value for our customers. Thank you very much. I will stop here. Just maybe to wrap up, I do believe that you see well that the key takeaways from today's announcement is that the Q3 confirms a clear inflection in the top-line sales momentum, anchored by a strong performance in Industrial Merchant, as we just discussed, and Electronics, of course. This is clear that while the macroeconomic visibility remains limited, we view these indicators as clearly encouraging signals for the months ahead.
François Jackow: As demonstrated today, shortly after the CMD, you can clearly see that our strategy is in full execution, and we are fully in line to delivering the growth and financial targets of our BEYOND strategic plan. Thank you all for your attention. Well appreciated, and I wish you a very good day. Thanks.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
