Operator:

Good morning and welcome to Air Products Third Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Sidd Manjeshwar.

Seifi Ghasemi:

Thank you, Sidd, and good day to everyone. Thank you for taking time from your busy schedules to join our call today. Before I discuss our results, I would like to introduce Eric Guter, who is with us today. Eric has been with the company for nearly 30-years, most recently serving as our Vice President of Hydrogen for Mobility. He will bring a wealth of knowledge and experience to Investor Relations. I'm happy that he has agreed to take on this new challenge. Eric, would you like to say a few words?

Seifi Ghasemi:

Thank you, Eric. And as we have announced, Sidd will be leaving the company to pursue other career opportunities. Sidd has made great contribution to Air Products. I want to thank him for continuing to build strong relationship with investors and analysts and for his work over the past few years at the company. Sidd and Eric are already working closely together to ensure a smooth transition. Now, please turn to slide number three. As always, I would like to begin with our record on safety, which is our top priority at Air Products. We have made significant progress on both our employee loss time, injury rate, and recordable injury rate since 2014. We are proud of this improvement and we are very proud to have the best safety record in the industry. But we always strive to achieve zero incidents and zero accidents. That is our ultimate goal. Slide number four summarizes our management philosophy. We have shared this with you many times before. We are, as we have been for the past 10-years, committed to these principles and practice them every single day. Now, please turn to slide number five. Our third quarter adjusted earnings per share of $3.20 per share exceeded the upper end of our prior guidance range of $3 per share to $3.05 per share, and improved 7% over last year. Our results reflect strong underlying performance in the Americas and Europe. Additionally, we saw improvements across our organization, driven by our price and pr0oductivity actions. We continue to execute our two-pillar growth strategy, which includes driving operational excellence and growth in our industrial gas business, while executing our energy transition projects focused on clean hydrogen. Now, please turn to slide number six. We are maintaining our full year adjusted earnings per share guidance of $12.20 per share to $12.50 per share. And we still expect our CapEx to be in the range of $5 billion to $5.5 billion in fiscal year 2024. Now, please turn to slide number seven. During our fiscal third quarter, in addition to achieving 7% earnings per share growth, we have also reached overall significant milestones. In June, we announced a very large scale long-term green hydrogen supply agreement with TotalEnergies. Beginning in 2030, Air Products will supply TotalEnergies with 70,000 tons per year of green hydrogen for 15-years. This pioneering agreement, which has already generated significant interest from other customers validates our long-term strategy and demonstrates a strong demand for green hydrogen. We are seeing the development of significant demand for green hydrogen in Europe. And as a result, we are even more excited and committed to our strategy to be a pioneer in the production of clean hydrogen. In July, we announced the planned sale of our LNG process technology and equipment business to Honeywell for an all-cash price of roughly $1.8 billion. The divestment of this business will allow us to focus on our core business, while bolstering our balance sheet and our liquidity position. Also in July, we were pleased to announce our collaboration with Mercedes-Benz to help decarbonize the heavy transport sector. Air Products was among five other companies that took delivery of Mercedes-Benz's hydrogen fuel cell trucks. This is a significant milestone toward the eventual mass production of hydrogen fuel cell heavy-duty trucks. In a related development, we have also announced our plans to build a network of permanent commercial hydrogen fueling stations along the Trans-European Transport Network. Now, please turn to slide number eight, which illustrates our greater than 10% average growth rate for our adjusted earnings per share in the past 10-years. Our goal is to extend this trend for another 10-years, while remaining the safest, most diverse and most profitable industrial gas company in the world. We have done this before, and I'm confident we will do it again. Now, please turn to slide number nine. We take a balanced approach to determining our dividend. We are confident that our cash flows from operations and our ability to raise capital through financing and other strategic initiatives will allow us to continue rewarding our shareholders through increased dividend, while meeting the cash needs of our growth strategy. Now, turning to slide number 10, which as I always say, is my favorite slide. It shows that our EBITDA margins have significantly grown and now, it stands at 42%, leading the industry by far and demonstrating our persistent focus on effectively running our base business. We are very much focused on profitability, and this slide is a living proof of that. I want to thank all of our employees for delivering these outstanding results in very challenging economic conditions. At this point, I would like to turn it over to Melissa Schaeffer, our Chief Financial Officer to provide a summary of the third quarter financial and business segment results. Melissa?

Seifi Ghasemi:

Thank you, Melissa. Now, please turn to slide number 14. Our industrial gases business is a great business, and we are committed to invest and grow it. Our recent announcements to expand our membrane production facility in St. Louis and to build two new air separation units in Georgia and North Carolina are just the latest examples. We are also leading the way to deliver low-carbon hydrogen at scale to help decarbonize the industrial and heavy-duty transportation sectors of the economy. Our two-pillar growth strategy drives our company towards these two goals in parallel. The outstanding results and the significant project milestones that we were able to achieve this quarter demonstrates that we have the right strategy, and as I always say, we have the commitment and motivation of our employees to make it happen. Now, before I open it up for industrial -- for questions, I want to make some comments about our Management Board and succession planning. The formation of the Management Board was a strategic step to delegate more responsibility to our senior executives, who are close to the business. You have seen our public announcements and our 8-K filing on these organizational changes, and I don't really have any additional comments to make on them. On a personal basis, you all know that I am firmly committed to our two-pillar growth strategy and I have -- as I have articulated that many times. I fully intend to continue leading Air Products ensuring that our growth strategy is fully implemented, our mega projects are built, and we are serving our customers with low-carbon and zero-carbon hydrogen. However, with our continued commitment to good governance and succession planning, it is prudent and good practice to have a fully qualified individual who can be my successor if something unexpected were to happen to me. I currently serve in three roles at Air Products. Chairman of the Board, Chief Executive Officer, and President. With good governance in mind, I have decided to bring into the company a fully qualified potential successor as President and a Member of our Board of Directors. This person should be well-known to investors with a clear record of success, preferably a current or former CEO of a public company with significant international experience and relationships. I have started this process and we will take our time to find the right person for the job. At this point, I will be delighted -- we all will be delighted to answer your questions.

John McNulty:

Yes. Good morning, Seifi, and thanks for all the color and on the -- and the commentary around the management committee. It's definitely helpful in terms of how to think about things going forward. So, I guess one of the things I wanted to dig into one of the newer, I guess, events that came up during the quarter was on the green hydrogen announcement with Total. It came -- admittedly, it came earlier than what we were thinking in terms of offtake arrangements. So, I guess, can you speak to, one, maybe what brought that forward or kind of brought the timing of it maybe a little bit earlier than expected? And then two, you spoke to kind of how that's heightened incremental demand for green hydrogen. Can you speak to that and maybe the potential for further offtake arrangements as we look out over the next 12 months or so?

John McNulty:

Got it. Thanks. Thanks so much for the color. Maybe just as a follow-up, so can you give us an update on the progress that you're making with the Louisiana project? And I guess somewhat tied to the Total arrangement, it seems like if the market is opening up for green, I would imagine it's opening up even more quickly for what should be a more cost effective solution, which would be blue. So can you speak to maybe that dynamic as well?

John McNulty:

Great. Thanks very much for the color, Seifi.

Jeff Zekauskas:

Thanks very much. Is the NEOM project still to come on stream at the end of calendar 2026? And what's the state of your hydrogen dissociation technology?

Jeff Zekauskas:

Okay, great. When you -- when I look at Air Products' results, which I think are not dissimilar from what's happening with Air Liquide or Linde, there's been a slowdown in volume over time and there's also been a slowdown in price change. Now, it's hard to know whether raw materials have moved down and so, probably on-site prices have moved down, which in the end doesn't really matter very much. But can you talk about the sequential change in merchant prices and the overall volume slowdown in the industrial gas industry?

Jeff Zekauskas:

Great. Thank you so much.

Operator:

And our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Seifi Ghasemi:

Good morning, Vincent. Yes, in terms of our relationship with TotalEnergies, we have a very good relationship with them. Obviously, we have been working with them for a few years. In terms of the status of the project, we have put that project on-hold until we get our permits. We always said that that would probably -- process will probably take a year and we still expect that. In terms of the demand for the product and all of that, SAF seems to be very much in demand. And as you have seen, Vincent I mean you're very well-informed, and a lot of people are trying to make SAF all over the world. So we just got a contract to supply hydrogen to a unit in Europe. So we feel pretty good about that project, but it is on-hold until we get our permits. And considering that we are operating in the State of California, we just have to wait-and-see how that works out.

Seifi Ghasemi:

Yes. I would like to turn that question to Melissa to give you a color on that.

Vincent Andrews:

Thank you very much.

Operator:

And we'll take our next question from David Begleiter with Deutsche Bank. Please go ahead.

Seifi Ghasemi:

Good morning, David.

Seifi Ghasemi:

Our Alberta project will come on-stream sometimes in '25 and whether it will contribute to our fiscal year results, we have to wait-and-see exactly when that project comes on the stream. We are building a plant in the middle of Alberta, you know what the winters are like. So it's anybody's guess how much construction and how fast construction we can do during this winter. So I don't want to commit to any specific date. We are going to give you -- when we issue our guidance for the year, we are going to be conservative and assume no contribution from that project in '25.

Seifi Ghasemi:

David, you make a very good point. Number one, we didn't want to change the guidance for the year, quite honestly. So by default, you end up with the numbers that you have, because I thought if you start changing the guidance for the year, it might get misinterpreted. Because we either had to move the bottom-up or the top-down but there is good reason for the wide range, David. And you see the news, the geopolitical situation in the world is very unstable. We are going through an election cycle and the Federal Reserve hasn't made up their mind about exactly what they want to do. There is a lot of unknowns and therefore to try to kind of thread the needle and come up with a $0.05 range and so on, we did that last quarter because it was -- I was not as worried about the overall geopolitical situation as I am now. But overall, I think, you should focus, I would appreciate if you focus on the year guidance rather than just the quarter guidance. We are going to be somewhere between $12.20 per share and $12.50 per share, right.

Seifi Ghasemi:

Thank you.

Chris Parkinson:

Great. Seifi, you've put together a couple of decent quarters, I should say, good between the US and Europe. And yet the macro, I think across all geographies has been fairly choppy and you've been navigating a lot of -- a lot of difficulties across-the-board and yet you're kind of moving in the right direction now. So can you just kind of give us a quick update on kind of some of the key things that you're seeing on a regional basis, specifically what's the latest in manufacturing and electronics, perhaps a little update on Helium in Asia. Putting everything together now that we are in a more favorable trajectory, I'd love to just hear your thoughts on entering 2025? Thank you so much.

Chris Parkinson:

Thank you for the color.

Operator:

And we'll take our next question from Duffy Fisher with Goldman Sachs. Please go ahead.

Seifi Ghasemi:

Good morning, Duffy, how are you?

Seifi Ghasemi:

Sure. Duffy, our intention is that we kind of go -- own the whole supply chain. We produce the green hydrogen, we move it, whether it's in form of liquid or in form of ammonia that we then crack. Then we build the station, we will own the station, we might own the station jointly with some other people, but we will have control over the station, and we will sell it to the end-customer to the truck company or the train company or anybody else. So we want to own the whole supply chain. And that is why in terms of economics, obviously, it depends -- the capital deployed, it depends on the number of stations we are going to build. That will be a gradual development depending on how much product we have and all of that. I mean, right now, we fully intend to build these stations in Europe and in California. But in Europe, if we sell-out NEOM all for application of decarbonizing refineries, then obviously, we will build a NEOM 2 and therefore building the stations will be a little bit delayed. And same thing in California. So it very much depends on how the market develops, but the idea is exactly what you said that we will either own their stations 100% or we share the ownership with Air Products in control, so that we make sure that our molecules are the molecules that are going through it. And if other people built stations, we might or might not sell them the molecules. It depends.

Seifi Ghasemi:

And what drives that is, Duffy, that's obviously a very good question. What drives that is that number-one is, look, when you look at our results in the last 10 years or 15 years or 20 years, the fourth quarter of our fiscal year is one of our strongest quarters. It is not only one of, it is our strongest quarter. So we expect that we would have better results than the $3.20 just because of the cyclicality. The second reason is that we have taken serious productivity actions. You are seeing some of the results in this quarter, but you'll see a lot more of that in the next quarter. And then the third thing is that we do have some new smaller projects coming on-stream that will contribute. So we feel pretty confident that we should be able to, as you said, bridge that $0.30 and deliver the midpoint of what we have delivered $0.48 that we need to get to the midpoint of our guidance.

Seifi Ghasemi:

Thank you.

Salvator Tiano:

Thank you very much. This Salvator Tiano filling in for Steve. So firstly, I want to go back a little bit to the Louisiana project where you mentioned you're still on track for a 2028 start-up. And you made the comment that blue ammonia would be sold to the export market for energy. However, it seems like companies such as some of the major Japanese utilities will probably not need that much ammonia, if any at all at that time, perhaps you have to wait two or three years. So is it safe to assume that you will not focus on ammonia till perhaps 2030 or are there any other outlets for that when you start-up?

Salvator Tiano:

Perfect. And I wanted to go back a little bit to the World Energy Project. You mentioned that it's roughly a one year timeline to get the permits. I think the project itself was announced over two years ago. So is it safe to assume you didn't actually apply for permits till over a year-after that? And when is kind of the one year deadline that you kind of alluded to? And does this mean at that point, you're going to proceed with a final FID and we're going to -- we'll know if it's a go or no-go?

Salvator Tiano:

Thank you very much.

Operator:

And we'll take our next question from Mike Leithead with Barclays. Please go ahead.

Seifi Ghasemi:

Well, you know you're asking a very good question. Obviously, the answer to that is yes. But I hope you have some sympathy with me that we are negotiating with people to sell them something and you don't expect me to be sitting here on a public call saying, hey, we're going to make a lot of money, right? So we have to be cautious in terms of our comments. But you can be sure that as I have always said, we have taken the risk and therefore, the reward should be higher than what we do when we do things that are no-risk, not risky.

Seifi Ghasemi:

I did only commit to that if we have announced enough projects so that the investors see that we are sold-out. I don't want to say that, okay, we have sold 35% of NEOM, therefore, we should rush and go and build NEOM number two. I'd like to wait until we have sold 80% of NEOM and then commit to that. So we are going to be conservative and cautious and not to get ahead of ourselves. But the fact that we have demonstrated that there is significant volume demand is a good sign because until a few months ago, you have seen the slides from some of our competitors where they put it in writing that there is no demand for green hydrogen. So I think -- and now it's obviously a little bit of a different story. There is demand for green hydrogen. But I would like to give some confidence to the investors that we are truly have signed enough things that it is sold-out before we commit to additional projects. Depending on how fast those things come, you're right, it might be that in a year we will announce a new NEOM project, but it will depend on how fast we progress with signing contracts for the current production.

Operator:

We'll take our next question from Mike Sison with Wells Fargo. Please go ahead.

Seifi Ghasemi:

Well, good morning and thanks for your comment. It would be very difficult right now to give you details. We are going to give you all those details when we announce our fourth quarter results. But in general, I would like to say that Air Products, 10-years ago, we committed to delivering an average of 10% growth in earnings. And today, we are committing that for the next 10-years, we will do the same. So, our target, our goal, our challenge is to deliver at least a 10% growth for next quarter -- for next year. But we will -- obviously, we are going through the budgeting process. We have all of the details and then we'll give you a number when we announce our results in late October or early November.

Seifi Ghasemi:

Thank you. Operator And we'll take our next question from John Roberts with Mizuho. Please go ahead.

Seifi Ghasemi:

Good morning, John. The guidance that -- the overall guidance that we have been telling people is if the gray price is something, the blue prices at least twice that and the green price is twice that. So it's double for blue and then double for green. And that is the kind of overall guidance for pricing. So I think you all have a pretty good idea of the kind of pricing that we are looking for and we are getting that. And I think that the pricing change will improve as we go-forward when the demand exceeds the supply.

Seifi Ghasemi:

Well, the thing is that there is some element of that, but we do take that into consideration when we give the pricing. I mean, if it's very difficult to serve a customer, then obviously the price will be significantly higher than , as you said, somebody is next door.

Seifi Ghasemi:

Thank you.

Josh Spector:

Yes, hi, good morning. So I wanted to follow-up on the question earlier around your commitment to announce additional projects. I think during the quarter, you've been more explicit that you won't FID, I believe, any projects until you get more offtakes. And I wanted to see how precise we should be taking that language. So you talked about NEOM earlier, but as we think about Louisiana, should we think about both of those need to reach 80% offtakes before you announce anything else or is your expectation to be looser than that?

Josh Spector:

Thanks. I appreciate that. And just a quick follow-up then on Texas, I guess, specifically, do you consider that a new project? So if we get IR clarity, IRA clarity in the next, I don't know, six, nine months, but Japan takes longer to say what their credits are going to be for blue hydrogen into utility, coal, energy production, is that something you would FID, that Texas project without that Louisiana project sold out or is the Louisiana project or whatever project sold out the limiting factor, in your view?

Josh Spector:

Understood. Thank you. Yes, thanks, Seifi.

Operator:

Thank you. The next question comes from Patrick Cunningham with Citi. Please go ahead.

Seifi Ghasemi:

Yes. I'm not sure I would have understood. Can you just hold on? Let me -- Sidd, can you?

Seifi Ghasemi:

Well, the IRA is as the part that is related to us, it has two dimensions. One dimension is the so called 45Q, which is that you get $85 per ton of CO2 that you sequester. I think there is not much controversy around that rule. No matter which administration you have, I think that will get support and that is why we are building the project in Louisiana, we feel very confident about that. The challenge is on the other part, which is called 45V, which is the $3 subsidy for green hydrogen. And the controversy is very simple. What is the definition of green hydrogen. Is it enough to say, oh, I connected to the grid, I'm getting electricity, I'm breaking down water and therefore, I'm making green hydrogen and therefore give me the $3 irrespective of the fact that I might be using the electricity that is made by burning coal. That is the controversy. Obviously, Air Products' position has been crystal clear from day one that we believe that green hydrogen means that you are using green electricity. If you are not using green electricity, then it is not green hydrogen. And green electricity should also be available 24 hours a day. That means you need to prove that every hour you have green electricity. You can't make a lot of green electricity during the day that the sun shines and then say, okay, now in the night, I'm going to connect to the grid. So we have been very clear with our three pillars and that is what we think is the definition of green. The administration, the current administration has agreed with us. That is the way they have issued the rules that are public right now. The issue is they have not finalized the rules. And from what I hear, they are saying they are not going to finalize the rules until after the election. So, the issue is, if they have a change of administration, would the new administration see those rules as good or bad or do they want to modify? And we are not going to go and commit billions of dollars building a facility not knowing what the exact interpretation is. So we are going to wait until we have rules that have been approved, Press and the Treasury Department that we can certainly count on and then we will proceed. Sorry for the long answer, but I just wanted to address the whole issue.

Seifi Ghasemi:

Thank you. Okay, operator, last question please.

Dan Rizzo:

Hi, this is Dan Rizzo on for Lawrence. Thank you for fitting me in. And I'm sorry if I missed this, but, but have you provided an update on the status for the hydrogen project in upstate New York? I don't remember that being mentioned recently.

Dan Rizzo:

And I'm sorry, just remind me when coming online?

Dan Rizzo:

Thank you very much.

Operator:

This concludes today's call. Thank you for your participation. You may now disconnect.

Operator:

Good morning, and welcome to Air Products' Second Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved.

Siddharth Manjeshwar:

Thank you, Katie. Good morning, everyone. Welcome to Air Products' second quarter 2024 earnings results teleconference. This is Sidd Manjeshwar, Vice President of Investor Relations. I am pleased to be joined today by Seifi Ghasemi, our Chairman, President and CEO; Dr. Samir Serhan, our Chief Operating Officer; Melissa Schaeffer, our Chief Financial Officer; and Sean Major, our Executive Vice President, General Counsel and Secretary. After our comments, we will be pleased to take your questions. Our earnings release and the slides for this call are available on our website at airproducts.com.

Melissa Schaeffer:

Thank you, Seifi. Now please turn to Slide 10 for a review of our second quarter results. Compared to last year, on-site activities were robust driven by higher demand for hydrogen and contributions from new assets. The volume was down 2% primarily due to lower demand for merchant products. Price contributed 1%. The combined impact of pricing and lower power costs across most regions resulted in strong contribution margins. The declining natural gas prices in Europe and North America resulted in lower energy cost pass-through, which has no impact on profit but contributed to higher margins.

Samir Serhan:

Thank you, Melissa. Please turn to Slide 12 for a review of our Americas segment results. Compared to last year, underlying sales were positive with price and volume together up 4%. Merchant pricing was 6% higher, which corresponded to a 3% overall price improvement for the region. Volumes grew 1% as a strong demand for hydrogen more than offset weaker merchant volume. EBITDA was up 15% driven by higher price, volume and equity affiliates' income. Of the 1,000 basis point improvement to the EBITDA margin, roughly half was attributable to lower energy cost pass-through. Sequentially, EBITDA was 5% higher, mainly due to higher price and equity affiliate income.

Seifollah Ghasemi:

Thank you, Dr. Serhan. Now please turn to Slide #17, Air Products has a great business model and continues to operate from a position of financial strength. While we execute our bold growth strategy in this challenging and continuously changing macroeconomic and geopolitical environment, our organization must remain flexible and agile. On a daily basis, our employees are committed to taking action that improves our safety performance, simplifies work and reduces costs so that together we can deliver productivity to the bottom line and continue to earn the right to grow as we pursue our strategy.

John McNulty:

So I think the first one is just on how you're thinking about the cadence of the earnings as it progresses through the year. Obviously, 2Q came in pretty solidly, 3Q, maybe a little bit below what we and the Street were looking for, which kind of makes for a really steep ramp in the fourth quarter. I guess, can you help us to think about what drives that ramp, whether it's some of the projects or the Corporate line coming off, I guess, can you help us to think about the cadence for the year?

John McNulty:

Yes. No, that's hugely helpful. Yes, it definitely helps to bridge in a reasonable amount. And I guess, maybe to that, as the follow-up or my second question, you had alluded to in some of the prepared remarks cost reduction actions and things that were starting to help on the margin side. And then -- and actually just in your last answer, you gave maybe -- you intimated that there's there is some help there. I guess can you help us to think about some of the actions that you're taking and if it's any specific division or how we should be thinking about that.

Operator:

We'll go next to Jeff Zekauskas with JPMorgan.

Seifollah Ghasemi:

Jeff, very good question as usual. Jeff, first of all, the number that you're saying, 3.5 million tons of ammonia, that assumes that we will take all of the hydrogen that we produce at that plant, all of the deep blue hydrogen that we produce will be turned into ammonia. That is not necessarily the case. As you know, we have a huge pipeline that goes all the way across the Gulf Coast of the United States. There is significant demand for blue hydrogen, for real blue hydrogen, not fake blue hydrogen. And therefore, we expect that a significant amount of the hydrogen we produce will be used as hydrogen through our pipeline to serve the customers that we have because they would be in need of that.

Melissa Schaeffer:

Yes. Thank you, Seifi. So Jeff, what you're seeing in equity affiliate income is a little bit of timing, but we did see a bit of a decline in our Jazan joint venture. This is really a onetime item from the previous year and some higher interest expense for this quarter. So again, it's primarily timing, not an underlying business issue and a prior year onetime issue.

Steve Byrne:

Just curious about the business mix that was unfavorable in Asia. Was that primarily helium? And can you provide an update on how that business is going in Asia? Are you adjusting to the Russian source product coming in, in your outlook in the next couple of quarters?

Steve Byrne:

And a question about the Alberta project. Are you still expecting that blue hydrogen project up there to start up sometime in late 2025? And just curious, how much of the volume of that plant would you say has now been committed? Can you provide any update on that?

Steve Byrne:

And you have contracts on that, Seifi?

Operator:

We'll go next to David Begleiter with Deutsche Bank.

Seifollah Ghasemi:

David, no, we have not signed any contracts that we are in a position to announce for that project yet.

Seifollah Ghasemi:

Not yet. And we have been very specific about this thing. That is not by accident. That is by design. We are not going to sign any contract for either 1 of these 2 projects until we get to the stage that we can get the price that we expect. We have taken the risk of being the first mover in this area of green and blue, and therefore, we deserve returns which are more than a plain vanilla, going and building an air separation unit. So we are going to wait until we can extract the right price.

Patrick Fischer:

First question, just on Europe. Could you take out the Uzbek impact and just let us know what volumes did in Europe excluding that? And then what was the split of that number between your turnarounds and the weak merchant business?

Samir Serhan:

Yes. I would emphasize what you mentioned, Seifi. We would really not like to get into those details. I mean...

Samir Serhan:

But we've highlighted before that the Uzbekistan project is expected to really produce around $0.35 per year of earnings.

Seifollah Ghasemi:

Melissa, do you want to answer that?

Operator:

We'll go next to Michael Leithead with Barclays.

Seifollah Ghasemi:

I have no idea what you're talking about in terms of $0.50. It is impossible to have $0.50 hydrogen. To make hydrogen, you make -- you must have the unit -- to make hydrogen, you need about at least 50 to 60-kilowatt hours of power, and even the cost of power at $0.05, that's $3 a kilogram for hydrogen, excluding your capital costs and excluding your running costs. So I'm not familiar with that number. I don't know what you are referring to.

Seifollah Ghasemi:

I'm sorry, I'm sorry. Now I understood your question. Yes. They are -- those are not that they are buying hydrogen at that price, sorry, about that. They are giving subsidies for people to use hydrogen. Some countries are giving $0.50 a kilogram. Some countries are giving as high as $8 a kilogram. It depends on the country, and it depends on which tranche and all of that. But whatever subsidies they give, it's welcomed because that encourages use. My apologies at the beginning, I thought that they were buying hydrogen at $0.50. No, no, those are subsidies in terms of -- yes.

Seifollah Ghasemi:

Yes.

Seifollah Ghasemi:

Melissa, you want to go ahead and answer that?

Operator:

We'll go next to Marc Bianchi with TD Cowen.

Seifollah Ghasemi:

Well, it will eventually cannibalize that because I think, eventually, everybody will be using blue hydrogen. I mean, 10 years from now, I don't think anybody will be using gray hydrogen. So -- but the thing is that we expect volumes to grow. The volumes, as you saw even this quarter on our pipeline system is, we are totally sold out. And if we had any more hydrogen today, we could sell it. So we expect that there will be significant growth in addition to what is in the pipeline. And in the long term, we are going to make only blue hydrogen. I mean, 15 years from now, we will not have any SMRs running.

Seifollah Ghasemi:

Dr. Serhan, you want to comment on that?

Operator:

We'll go next to Vincent Andrews with Morgan Stanley.

In terms of pricing, I think that right now, with the inflation the way it is, I'm sure everybody is paying attention that consumer price index is up 30% in the last 4 years. So we are having serious inflation, and that is giving us the ability to go to the customers and ask for higher prices. And as you saw in the U.S., our merchant pricing was up 6% in the quarter versus quarter of last year. So we -- as I've said in my prepared remarks, our focus is on two things:

cost, pricing. Those are the things that affects our short-term results and obviously executing our projects.

Operator:

We'll go next to Kevin McCarthy with Vertical Research Partners.

Seifollah Ghasemi:

Kevin, Air Products is right now involved in not only trying to deliver short-term results that meet the expectations of our investors and our own goal of 10% per year increase and, at the same time, executing $20 billion of projects. I don't think this is the time to try to do any kind of a financial engineering and all that because that would be significantly distracting to the management and to our people. We should continue doing what we are doing. And when the investor anxiety has disappeared once we have signed 20-year, 30-year contracts for the 2 big projects that we have underway. And once our hydrogen business, blue and green hydrogen business becomes reality and produces EBITDA and producers returns and all of that, that is at the time that one can talk about those kind of things. This is not the time.

Operator:

We'll go next to Patrick Cunningham with Citi.

Seifollah Ghasemi:

Dr. Serhan, you want to take that?

Patrick Cunningham:

Yes, on the major turnarounds in Americas and Europe.

Patrick Cunningham:

Got it. And then do you have an update on permitting and preliminary engineering for the North Texas project? And when do you anticipate FID there?

Christopher Parkinson:

Great. Can you just quickly take us for a trip around the world in terms of the merchant operating rates and what you're seeing? I think those on the Street are hearing a few varying kind of takes on what's happening with the global economy. So we'd love to hear yours.

Seifollah Ghasemi:

Chris, the products that we are going to make, the potential users for green hydrogen are steelmaking, refineries, shipping, using green ammonia as fuel for ships to meet the very stringent requirements in Europe and hydrogen for mobility. Those are the 4 areas that will eventually -- the offtakers for the product. And we are obviously talking to people in all of those 4 sectors. We don't have anything to announce. And if we are talking to anybody, we are under NDA, therefore, we cannot announce anything or give any details. But those are the sectors that we will be using green hydrogen.

Operator:

We'll go next to Josh Spector with UBS.

Seifollah Ghasemi:

Serhan, do you want to take that?

Joshua Spector:

Okay. All right. And if I could just ask then on Asia with helium specifically, you commented earlier that it stabilized. But I think from the last call you were talking about lowering pricing and regaining margins -- or regaining volume, sorry. Has that played out? Has it stabilized lower? Or have you regained any volumes? Where is that?

Operator:

We'll go next to Laurence Alexander with Jefferies.

Seifollah Ghasemi:

I would like to have Dr. Serhan answer the first question. And the second question, I'm not sure we want to disclose that in detail.

Operator:

We'll go next to Mike Sison with Wells Fargo.

Seifollah Ghasemi:

We have really not -- volume growth, not on the base business. But we will have volume growth based on new plants coming onstream. But most of it -- yes, sir.

Seifollah Ghasemi:

As high as we can get. Because if we have a product that nobody else has, then why should we be satisfied with a specific return? And I, obviously, do not want to disclose that, but -- any kind of a return. We are -- we have a product that is going to come onstream that people are going to need. Nobody makes that product today. So what is the price for that? The price for that is not calculated on the basis that this is my capital, this is the return, and therefore, we do that. When you have somebody that people need, you extract the maximum price.

Seifollah Ghasemi:

Right. Obviously, we haven't disclosed some of that yet. But we know what is going on in the marketplace, and our goal is to get the maximum return for our investors, not to sit down. And if it was just a matter of saying, "This is my investment and this is a 10% return and this is the [ price ]." Then you don't need to pay somebody $15 million to be CEO of Air Products. Then anybody can do that.

John Ezekiel Roberts:

Seifi, did you say 15 years from now, Air Products will not have any SMRs running? Did you mean not running without carbon capture? Or -- can you talk about the average useful life left on the SMRs?

John Ezekiel Roberts:

On the lower natural gas feedstock cost for hydrogen, besides the pass-through impact on margin, I think you also get to key the benefit of efficiency improvements. And those efficiency improvements, I guess, are worth a lot less when gas is low. Is that a meaningful headwind? Or is that immaterial right now?

Operator:

At this time, there are no additional questions in queue. I'd like to turn the call back over to our speakers for any additional or closing remarks.

Operator:

Thank you. That will conclude today's call. We appreciate your participation.

Operator:

Good morning, and welcome to the Air Products' First Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Sidd Manjeshwar. Please go ahead sir.

Seifi Ghasemi:

Thank you, Sidd, and good day to everyone. Thank you for taking time from your very busy schedule to be on our call today. As always, I would like to begin with the slide number three, our safety performance, which is our number one priority at Air Products. I'm very pleased to share that our employee recordable injury rate in first quarter was 78% than in 2014, and our employee lost time injury rate was at a record row, the best in the industry. Our ultimate goal will always be zero accidents and zero incidents. Now, please turn to slide number four, which summarizes our management philosophy. These principles remain fundamental to how we manage and grow our company. Now please turn to slide number five. I would like to take a few minutes to discuss the results for this quarter. Our first quarter adjusted earnings per share of $2.82 was 7% higher than last year. Our business performed well and we are moving forward. There were several positive contributions to this result that included strong conversion margins, robust on-site activities in Americas and Europe, and higher quality affiliate income globally. Despite the year-to-year improvement that I just mentioned, our results diverged from the guidance range that we have given you due to several items that they're not factored in our first quarter 2024 outlook. We have given you a forecast and we are delivering less than the forecast, but again I’d like to express that we are 7% higher than last year. These factors that affected our guidance are

Samir Serhan:

Thank you, Melissa. Please turn to slide 12 for a review of our Americas segment results. Compared to last year price and volume together were up 5%. Hardware, merchants and price increase of 6%. This represents a 2% price improvement for the region overall. This shows contribution margin improvement. Volume grew 3% due to strong demand for hydrogen. EBITDA was up 9% driven by strong price as well as favorable volume and equity affiliate income, while partially offset by higher planned and maintenance costs. EBITDA margin was up by almost 800 basis points driven mostly by lower energy cost pass-through. Eventually, EBITDA decreased 7% mainly due to seasonality as demand moderated and maintenance activities picked up during the winter. Now please turn to slide 13 for a review of our Asia segment results. The challenging economic conditions in China and the weak electronics market continued to put pressure on the region. Prior to last year, our volumes were flat for the region as higher on-site activity offset lower helium demand. Price jumped 1% as we continued to focus on price over volume. EBITDA and EBITDA margin were down primarily due to the unfavorable helium volumes and higher costs. Sequentially, results improved relative to the unfavorable business mix in the previous quarter. Please turn to slide 14 for a review of our Europe segment results. Volumes were up 9% benefitting from better on-site activities including the new project in Uzbekistan. Compared to last year merchant pricing remained stable relative to the decline in energy costs, contributing to margin improvement. EBITDA was up 28%, driven by favorable volume, lower power costs and stronger currencies against the US dollar, which more than compensated for increased cost due to inflation and planned, maintenance activities. EBITDA margin was over 1,000 basis points higher about half of which was due to the impact of lower energy cost pass-through. Sequentially results improved driven by favorable price, volume and costs. Now, please turn to slide 15 for a review of our Middle East and India segment results, compared to last year sales decreased due to lower volume, EBITDA improved due to the completion of the second phase of the Jazan project in mid-January of last year. Please now turn to slide 16 for our corporate and other segment results. This segment includes our sale of equipment businesses, as well as our centrally managed functions and corporate costs. Despite higher sales from LNG activity, EBITDA declined due to higher costs in our non-LNG sale of equipment business as Seifi mentioned before. Our activities related to the LNG equipment and technology business are robust. We continue to have constructive conversations with customers, who are interested in our offerings. And we expect our LNG related projects to improve the corporate segment moving forward. At this moment, I also would like to thank our teams around the world for their effort and demonstrating their determination to overcome the challenges we are facing. Now I would like to turn the call back to Seifi to provide his closing remarks. Seifi?

Operator:

Thank you. [Operator Instructions] And we'll go first to Jeff Zekauskas from JPMorgan.

Seifi Ghasemi:

Gulf Coast ammonia is consists of two different parts. One if the hydrogen plant and other one is the actual ammonia plant. I can comment on the hydrogen plant, because we own that and that is a sale of gas. That is on the stream and it's producing revenue. And on the other part, I don't want to comment, because we don't own that facility and I like the owners to make a statement on that if it's necessary.

Seifi Ghasemi:

Jeff, you are absolutely right that is the case. In the first quarter, our costs were higher, because of the sale of equipment issue that you mentioned. And we expect that in the -- as we go forward, that would not be repeated and therefore our year-to-year costs will be lower as I had mentioned to you before.

Seifi Ghasemi:

Thank you, sir.

Mike Harrison:

Hi, good morning.

Mike Harrison:

I was hoping that you could give a little bit more detail on what is going on within the helium business? Is that a situation where demand is lower or a situation where you guys are struggling to get the volumes of helium that you need? And also, which regions have the biggest exposure to helium? It seems like this is mostly an Asia issue at least in the first quarter?

Mike Harrison:

All right that's very helpful and then my second question is related to your guidance. It looks like the implied guidance for the first-half of the year is around $5.50 in EPS and you're expecting maybe something closer to $7 in the second-half? Can you talk about the visibility that you have that gives you confidence on a much better second-half and maybe help us bridge the improvement that you're expecting in the second-half versus the first-half that, that $50 or so.

Mike Harrison:

Thank you very much.

Operator:

Thank you. We'll go next to John Roberts from Mizuho.

Seifi Ghasemi:

John, first of all, thank you for your question and I hope all is well with you. There is no weakness in on-site in China. You know, our on-site business is take or pay across the world, therefore we don't see any issues there. The fundamental issue is on the merchant side and helium, and that is related to the economic activity. I just like to caution everybody on the call that the economic situation in China is not as robust as people might think. We, as you know, we make products that are used instantaneously. We are a great leading indicator. And things are not really that exciting, that part of the world.

Seifi Ghasemi:

Thank you.

Steve Byrne:

Yes, thank you. I was just looking at the location of Jazan and it seems to be within 100 miles of quite a few of these recent strikes in Yemen and just wanted to ask, is everything there okay at the plant or do you see any access to labor or risks of this issue going on right now?

Steve Byrne:

Very good. Thank you. And can you provide any more detail on the CapEx target for the year, the $5 billion to $5.5 billion. Can you just highlight what are the largest project within that list. I was just curious whether you are moving forward with the project in North Texas this year?

Steve Byrne:

Thank you.

Operator:

Thank you, we'll go next to John McNulty from BMO Capital Markets.

Seifi Ghasemi:

Well for the past six or seven years I have always been telling people that I personally believe that dividend should be a percentage of the stock price and we had given people a guidance that we target that we pay about 2.5% of our stock price as dividends and we were doing that. But now with the stock price where it is, and you are talking about now more than $7. It is significantly higher than that. So I don't see why we should significantly increase the dividend than the stock prices where it is, because the shareholders are getting more than 2.5% from the stock and then 10% growth and it becomes at least almost again 12.5% return if they buy the stock. If there is no issue with respect to our cash or our cash flow and so on, but we also have investors who believe we shouldn't pay any dividend, but obviously that will never happen and they are never going to reduce the dividend. But the rate of increase is very directly related to the stock price, my friend.

Seifi Ghasemi:

Thank you.

Seifi Ghasemi:

Well that's one then I'm going to get into disclosing the operational details of our customers and I'm not -- I don't have the privilege of doing that because of the confidentiality agreements we have. So if you give me a break, I cannot answer that question in detail. Sorry about that.

Seifi Ghasemi:

Thank you. Appreciate that.

Vincent Andrews:

Thank you and good morning, everyone. If I could just ask on the helium, what was sort of the surprise in the quarter on the electronic side of the equation, like so what's really changing with those customers? Is it something in particular, or is it just the economy there is decelerating? And are we at the point with it in the electronics piece that you're comfortable that, you know, that aspect has flattened out at a level that you're comfortable with. Maybe we could start there.

Vincent Andrews:

Okay. And then as a follow-up, in the fiscal second quarter, you know, we obviously just had another winter storm or winter freeze in the Gulf Coast area. Are you anticipating that, you know, you're going to have some downtime associated with that or customers are going to have downtime from some plants being turned off in preparation for that weather event?

Vincent Andrews:

I just meant what had already happened, the storm that happened in January. Is that already baked in?

Samir Serhan:

Minor issues really that happened. We still see very strong hydrogen demand even during that phase.

Seifi Ghasemi:

Okay, Vincent. Thank you.

Seifi Ghasemi:

Excellent.

David Begleiter:

Thank you. Good morning.

David Begleiter:

Good morning. Just staying on helium, can you quantify the impact of the year-over-year helium profit decline in Q1? And your expectations for the full-year in terms of helium profit decline?

David Begleiter:

Understood. Thank you. And just on the Alberta project, now that we're within 12 months, hopefully a startup, do you have timing of that project ramping up earlier next year? And how should we think about the earnings contribution throughout the calendar year ‘25 for Alberta?

David Begleiter:

The Alberta project. When will it come on stream and how are you thinking about the earnings cadence post its start-up early next year?

Samir Serhan:

Thank you for the question. We remain incredibly excited about our first blue net zero hydrogen project that's in the construction phase right now. We look to bring it on stream in fiscal year ‘25 in line with our customer plans. There are no updates in regard to the deployed capital and also the government incentive we provided that already. So again, we're really fully committed to this asset and things are going well, and we're aligned with our customer IOL.

Samir Serhan:

It's in fiscal year ‘25, I mean, in the second-half.

Samir Serhan:

This is really an alignment with the plan, the renewable refinery.

Seifi Ghasemi:

So basically everything is going well for that up to now.

Seifi Ghasemi:

Thank you.

Josh Spector:

Hi, good morning. So I wanted to follow-up just on the guidance and maybe ask specifically, you know, when you talk about the challenges and uncertainty, China and helium demand, et cetera. I guess to hit your second-half, do markets need to improve or are you assuming any improvement there? Or is status quo plus what you see coming online enough to get to what your expectations are today for the second-half?

Josh Spector:

Okay, thanks. That's helpful. And just on the sale of equipment, so when you talk about the increase in cost there, is that cost to execute? Is that material issue a specific contract? Just thinking about how unique or one off that is. And when you talk about your LNG wins and you've been talking about more projects coming online or sales in the next couple of years, is that a risk we need to think about with some of those contracts underwater or some other cost issue?

Josh Spector:

Okay, yes. Thank you.

Operator:

Thank you. We'll go to Marc Bianchi from TD Cowen.

Seifi Ghasemi:

Well, on the other three, we don't have anything substantial to report other than what we have told you before. So, things are going okay with them as of right now. So we do not have anything material that has happened to report to you.

Seifi Ghasemi:

NEOM, we are expecting December 31, 2026. With Louisiana, what we have said up to now has been fiscal year 2028 and with SAF it is somewhere around fiscal year 2027, depending on us getting all of the permits that we need. So, I'm sorry, with [Indiscernible], I'd like to correct that to 2027, I think I said ‘28, but in 2027. That's approximately the timeline for those projects.

Seifi Ghasemi:

We do not have any involvement in that and I don't want to give you a scientific answer, but that's a little bit of a pie in the sky that there's hydrogen sitting there that you need to do to reveal and it will come out at zero cost. But we are not involved in any projects like that. And we are not going to get involved in that because we just do not think that that is reality.

Seifi Ghasemi:

Thank you.

Mike Leithead:

Great. Thank you.

Mike Leithead:

Good morning. Could you maybe update us on the state of your ongoing discussions for green and blue ammonia potential off-take? Should we expect some off-take announcements later this year? Or do you still believe it's better to wait until closer to project start-up to formalize some of those?

Mike Leithead:

That makes sense. That's Great. That makes sense. And then maybe on a similar note, I believe that the Treasury Department recently came out with guidance around the green hydrogen tax credit. I think most people viewed it as fairly strict although I also believe Air Products' plans are pretty well aligned with this guidance. Bigger picture, do you have any concerns about the strict interpretation limiting the U.S. industry's ability to take off or do you actually see it as advantageous for Air Products?

Mike Leithead:

Great. Thank you so much.

Operator:

Thank you. We'll go next to Duffy Fischer from Goldman Sachs.

Seifi Ghasemi:

Good morning, Duffy. How are you?

Seifi Ghasemi:

Duffy, I'm glad you asked this question, but I'll have Melissa go through the details. But my friend, our EBITDA is going up. If our EBITDA is going up, the cash coming to the company is going up. What we are reporting is accounting and it's the timing of the cash. We report the number because we book it, but when we get the actual cash it's different because of our equity affiliates. But I think the best person to qualify to answer this, because I don't want to get into accounting details, Melissa, would you please explain that?

Seifi Ghasemi:

Okay, Duffy?

Seifi Ghasemi:

Duffy, I'm glad you asked that question. We are very excited about that. I think it was the right decision and that will cut about -- we think about a year on the time line of us getting the permit for the Class 6 well. And we do have an excellent relationship with the State of Louisiana, but it's not the relationship. We are going to do the right thing by having the State Louisiana review that. We gain time because the State of Louisiana will have less Class 6 wells to deal with than EPA. So it's just a matter of the workload and they did the right thing by distributing the workload. Therefore, now the State of Louisiana will have fewer applications, and therefore, they can approve our project by about a year faster than the federal government would have done that. So that is why it is very helpful and very impactful and gives us a lot more confidence in terms of our ability to get the Class 6 permit if we need it.

Seifi Ghasemi:

Thank you very much.

Kevin McCarthy:

Yes. Thank you and good morning. Seifi, I wanted to come back to the helium market dynamics. I heard your comments on the demand side. My question is, have you witnessed any material changes on the supply side of the global market such as the operating status of Gazprom's Amur project in Russia? Or is it strictly a function of demand in terms of the volume shortfall that you cited in the quarter?

Kevin McCarthy:

Okay. That's helpful. And then secondly, I had a few sort of housekeeping questions possibly for Melissa. I think you mentioned devaluation of the Argentine peso and we talked about the cost overrun from the sale of equipment project. Can you quantify the impact of some of those issues in the quarter?

Kevin McCarthy:

Okay. And the SOE, no comment on that one?

Kevin McCarthy:

I see, okay. Thank you very much.

Operator:

Thank you. We'll go next to Patrick Cunningham from Citi.

Seifi Ghasemi:

Well, quite frankly, we did -- that is one of the areas where we did better than we expected. Our results in Europe are excellent, the margins are up 1,000 basis points, and that is because people have done a good job hanging on to the price while energy prices are going down. How this will develop in the future obviously depends on what happens to energy prices and so on. But I'm very proud of our people in terms of their performance and in terms of making sure that they maintain the pricing and we have been successful. And as Dr. Serhan was saying, our European business did very well during the quarter.

Seifi Ghasemi:

Dr. Serhan, would you like to answer that?

Seifi Ghasemi:

Okay.

Seifi Ghasemi:

Thank you. Operator this would be the last question, okay.

Seifi Ghasemi:

Sorry. I made a mistake about the timing, we can answer some more questions, if necessary. If people have questions, go ahead.

Seifi Ghasemi:

Well, the thing is that -- I don't like to give you a general answer in the sense that if you're up year-on-year and in the meantime China is going down, helium volumes are lower and we have had these headwinds, then the only reason that it's going up is because some of the other projects are contributing, of course. So that's the way I would like to leave it with you, okay? Negative is still going up. Therefore, the other products are contributing, yes.

Seifi Ghasemi:

I think Air Products will deliver on the average an EPS growth of the 10% that we have delivered before. That's our goal. And one year, we might be 9%, one year we're going to be 11%. But overall, we are going to continue on that trend. And we promised that 10-years ago, we have delivered, and I fully expect that we will continue to deliver that.

Seifi Ghasemi:

Thank you, sir.

Dan Rizzo:

Hi, this is Dan Rizzo on for Laurence. Thank you for getting me in. I just want to make sure that of the projects under execution that's listed on page 19, the next one that's going to come online is the one in Alberta, Canada, correct?

Dan Rizzo:

Are there, and this will be my second question, should the other projects come on right behind that? Or will there be, I don't know, year like delays? Or I'm just trying to think of the cadence as these are coming online.

Dan Rizzo:

Okay, thank you very much.

Operator:

We'll go next to Laurent Favre from BNP.

Seifi Ghasemi:

Well, it is related to the fact that we are building this plant in California. And you know in California, it usually takes a long time to get permits. So it is dependent on the timing of the permits for construction for that facility. Once we have a final, final ruling on the permit, then we will be able to give you a definite date about when that plant is going to come onstream.

Seifi Ghasemi:

I'm not sure I understood the question.

Seifi Ghasemi:

The return on the project is fixed. We are going to get a return on the capital that we spent, no matter what the capital is. Okay?

Seifi Ghasemi:

Thank you, sir.

Operator:

And we'll take our last question from Sebastian Bray from Berenberg.

Seifi Ghasemi:

Well, you're asking a very, very good question and I would like to tell you that we are the first mover in these projects. We are investing significant amount of money being the first mover. We -- obviously, my job is try to maximize return for the investors. And if we were the first mover and we took the risk, as they say, building these facilities before we had contracts, we should get rewarded by that and not just have projects which have the standard returns but be rewarded with a higher return. That's one thing. And then the second thing is that we genuinely believe that where we are in these projects, we will have a product which will be in significant demand as we get closer to people trying to comply with the rules that are already in place, in Europe especially. By 2028, a lot of the industries have to use the products that we make, and we don't see that many people making the product. So in that case, we are not in a hurry to give it away. Obviously, our job is to maximize profit for the company, get the best that we can, and that is the philosophy that we are following. It is not because of concerns about the other things that you mentioned, no. I think that the subsidies and so on are going to get enacted. Every day that goes by you see the governments taking action. Recently it was Japan, before it has been Europe, it's well established, U.S. with the IRA. So events as you go forward every day points in the direction that hopefully our strategy is the right strategy, and we want to take maximum advantage of that.

Seifi Ghasemi:

Okay. Sorry, we gave you a long answer, but I hope we addressed your issue.

Seifi Ghasemi:

Yes. Well, that's again a very good question. We make our estimate -- Melissa, why don't you answer that?

Seifi Ghasemi:

And with respect to FX, when we give you an estimate, we give you an estimate based on the exchange rates as of today. So that is -- we are not assuming any significant change in the exchange rate.

Seifi Ghasemi:

Okay. Thank you very much. I really appreciate that. Operator, since there are no other questions, I would like to thank everybody for joining our call today. We again appreciate your interest in Air Products, and we look forward to discussing our results with you in 3 months. All the very best, and thank you for listening.

Operator:

Good morning, and welcome to the Air Products' Fourth Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Sidd Manjeshwar. Please go ahead sir.

Seifi Ghasemi:

Thank you, Sidd, and good day to everyone. Thank you for taking time from your busy schedule to be on our call today. I would like to begin with the Slide #3, our safety performance which is our number one priority at Air Products. I'm pleased to share that our safety record has improved compared to last year continuing the significant progress we have made since 2014. Our ultimate goal will always be zero incidents and zero accidents. Now please turn to Slide #4, which summarizes our management philosophy. We reiterate these principles every quarter because they are fundamental to how we manage the company and continue to profitably grow our earnings per share. Now pleased to turn to Slide #5. Air Products has a very strong business model and a long-term strategy to deliver consistent earnings growth for the short and the long-term and I stress the long-term. Projects in our onsite business where we have long-term take or pay contracts with our customers drove our volume growth this year despite economic weakness across the regions. Our onsite business generates stable cash flow and consistently contributes about half of our total sales. Also noteworthy is that strong pricing action in our merchant business as well as our ability to contractually pass through energy costs in our onsite business, helped us mitigate inflation as well as higher power and energy costs, which we experienced last year. We also continue to successfully execute our long-term strategy to be the leader in blue and green hydrogen for the future with a significant number of clean hydrogen mega projects and their execution. Nobody in the world is matching what we are doing. Finally, our backlog of over $19 billion sets up a multiyear framework for double digit earnings per share growth, which has been our goal since 2014 and remains our goal for the future. Now please turn to Slide #6. Our fourth quarter adjusted earnings of $3.15 per share exceeded the top end of our guidance for the quarter and improved $0.30 or 11% versus last year. For the full year fiscal 2023, our adjusted earnings per share of 11.51 one improved $1.26 or 12% over prior year, continuing our strong track record of consistently delivering double digit average earnings growth per share since 2014.

Melissa Schaeffer:

Thank you, Seifi. And my thanks to the people of Air Products who have again delivered double digit average earnings growth in a difficult environment, an impressive trend that we have achieved in nine of the past 10 quarters. Now please turn to Slide 13 for a review of our fourth quarter results. In comparison to last year, we have again achieved underlying sales growth despite ongoing economic weakness. Merchant price was 4% higher compared to last year with positive pricing in most regions. This corresponds to a 2% price improvement for the whole company. Higher onsite volume, including strong demand for hydrogen and higher LNG sale of equipment activities, were offset by one-time opportunities in the prior year, resulting in flat volumes for the company overall. Declining natural gas costs in Europe and the Americas reduced energy cost pass-through to our onsite customers. This 14% decline in sales has no impact on profit, but was a significant contributor to our higher margin. The overall impact of currency was minimal as a strengthening of the euro and British pound against the U.S. dollar was mostly offset by a weak Chinese RMB. EBITDA of $1.3 billion improved 10% as favorable price, variable costs and equity affiliate income more than offset higher other costs. EBITDA was up in four of our five reporting segments. EBITDA margin jumped more than 700 basis points with lower energy cost pass-through contributing to about two thirds of the improvement. ROCE progressed steadily to reach 12%, which is 90 basis points higher than last year. We expect to maintain this steady progression as we continue bringing new projects on stream and put the cash on our balance sheet to work. Adjusting for cash, our ROCE would have been relatively flat at 13.4%. Sequentially, results improved primarily due to increased LNG sale of equipment activities as well as onsite. Now please turn to Slide 14 for a discussion of our earnings per share. Our fourth quarter adjusted earnings were $3.15 per share, up $0.30 or 11% compared to last year, due to strong pricing and higher equity affiliate income, partially offset by unfavorable costs. Price, net of variable costs, contributed $0.44 this quarter, benefiting from both price actions and lower power costs. Cost has been unfavorable impact of $0.28 driven by higher inflation and higher maintenance as well as our ongoing efforts to support our growth strategy, including bringing new assets on stream. Accurate affiliate income was $0.19 higher due to the contribution of the second phase of the Jazan project and positive results from other unconsolidated joint ventures across the region. The remaining items including non-controlling interest, interest expense, and the tax rate together had a modest negative $0.03 impact. Now please turn to Slide 15. We remain committed to maintaining our current targeted A/A2 rating. And with our strong cash flow and additional debt leverage, we estimate that we can put more than $30 billion to work over the next 10 years. Today, we have a backlog over $19 billion with approximately $15 billion of projects focused on the energy transition. We believe that investing in these high return projects is the best way to create long-term shareholder value. Now to begin the review of our business segment results, I'll turn the call to Dr. Serhan.

Seifi Ghasemi:

Thank you very much, Dr. Serhan. I appreciate that. Now please turn to Slide #22. We present this slide during every earning call because it is our core belief that the commitment and motivation of our people are the key drivers of our success. After all, technologies, processes and physical assets, which are often cited as competitive advantages, are all created by people in the organization. At Air Products, we have built an outstanding organization. Our people working together are creating innovative technologies, processes and facilities that are making us a first mover in supporting the transition to lower and zero carbon energy and decarbonizing the transportation and industrial sectors. We are doing this alongside our excellent core industrial gases business which is also underpinned by sustainability and delivering significant productivity and environmental benefits to our customers around the world. At Air Products, our higher purpose is to bring people together to collaborate and innovate solutions to significant energy and environmental challenges in our world. I can say that our entire team is focused on sustainable growth opportunities generating a cleaner future for humanity. With that, we are now ready to answer any of your questions and we welcome them. Operator, we are ready for questions please.

John McNulty:

Yes. Good morning. Thanks for taking my question. So I guess I wanted to dig into the Louisiana project a little bit more and the incremental $2.5 billion dollars of spend. I guess it sounds like there's a bunch of buckets including capitalized interest, taking over more utilities, kind of expanding the scope of the project. I guess, can you help us to put into buckets where the bulk of that $2.5 billion is going?

John McNulty:

Got it. Thanks very much for the color on that. And then I guess my second question would just be on the Netherlands project. It sounds like it's an interesting kind of emerging opportunity. Can you help us to think about how much capital may get put to work on that project and how you're thinking about the returns for it as well?

Samir Serhan:

Thanks, Seifi. We're really not going to talk about the specific about the capital for the project. But again, it's a very exciting opportunity. It's our third project in our first mover advantage when it comes to blue hydrogen. We started with the net-zero blue hydrogen project in Edmonton, Canada, and we went to the Louisiana Darrow project. And now this is really the third and it's really the biggest also in Europe. Very excited about it with long-term off-take agreement with a subsidiary of Exxon Mobil Esso. We capture -- we will capture CO2 from our existing hydrogen facility in the Port of Rotterdam and we will also capture CO2 from another Exxon hydrogen plan where we basically provided to Porthos to sequester under the North Sea. Again, emphasizing the double-digit return for the project and coming on to the…

Samir Serhan:

Thank you.

Operator:

We'll hear next from John Roberts from Mizuho.

Seifi Ghasemi:

I can answer that, and then if Dr. Serhan wants to add to that. But fundamentally, it is an existing plant that we have – existing plants that Exxon has. We have their technology and the know-how, we are going to put carbon capture on these existing units and capture the carbon and put it in this pipeline to go and be sequestered. So we are actually reducing CO2 emission into the air. This is not a new plant that people say, what you are building a new plant you are capturing the CO2, but you're not really reducing existing emission. This is really reducing existing emissions. And that is where our technology is, and that's where our know-how is. And therefore, it's a very positive project, it's received very positively. And it is a significant project. You don't want to disclose the exact amount because of the NDAs that we have. But it is not a $10 million project, but it's not a $2 billion project either, but it's a substantial amount of capital. Dr. Serhan, do you want to add in?

John Roberts:

And on the volume weakness in China, could you peel apart syngas versus electronics versus merchant boxline [ph]?

John Roberts:

Great. Thank you.

Operator:

[Operator Instructions] We'll hear next from Vincent Andrews from Morgan Stanley.

Seifi Ghasemi:

Vincent, excellent question. We are not going to leave any money on the table. We are going to price the product in such a way that we get double-digit return on the project on the $7 billion right from the start.

Seifi Ghasemi:

No, no, after you.

Seifi Ghasemi:

Well, the way I would like to answer that is that first of all, we are committed to meeting the requirements of our customer. So whenever our customers comes on stream, we will have our plans ready for them. They are a very valued customer. You know who they are, Exxon, and they are one of our largest customers, and we have a lot of respect for them. And we worked with them very closely. In terms of if they are delayed, then we are ready not 100% of the product is going to them. We have other customers that we believe will be taking the product on time. We have a liquid hydrogen plant that we are going to feed. Therefore, we would expect that the effect on products would not be that material.

Operator:

We'll hear next from David Begleiter from Deutsche Bank.

Seifi Ghasemi:

Well, first of all, with respect to other projects, there is no material change in the profitability of those projects that we want to bring to your attention now. And as I said in my call, with some of these bigger projects as we go forward in our earnings calls, we give you more detail about the different projects. The second thing is that if you take a look at the inflation thing, we -- one of the biggest projects we are executing was Jazan. That is already done. The next project, a big project was NEOM. We have already given you the capital for that, and we don't expect any significant inflation on that. That is in our backlog. Vidara [ph], we gave you the numbers right now. The projects that we are doing, the other projects that we are doing are in such a way that the return is connected to the capital. So even if the capital goes up, the return doesn't go down. So there is nothing that material to report at that stage.

Seifi Ghasemi:

Well, I would obviously love to answer your question in detail. But you know that we do have a very strong policy and we adhere to that. All of us at adhere to that. We do not talk about forward-looking on price. That is not appropriate in our industry, and we can talk to you about what has happened in the past, but we do not have any opinion or any suggestions about what is going to happen in the future. And so my apologies, I will not be able to answer that question following our policy and my Chief Legal Officer is nodding, he said that I'm doing the right thing.

Operator:

We'll move next to Mike Leithead from Barclays.

Seifi Ghasemi:

Well, on that point, I have been very kind of -- very clear about what is our philosophy. We could have signed agreements, long-term agreements for selling that product two years ago. But we always said that we do not want to do that because as we go forward, it is going to become very clear to prospective customers that there are not that many plants or sources of low carbon – the level of low carbon intensity, hydrogen and blue ammonia that we are going to produce. And therefore, the value of our products will go higher. We are not in a hurry to sign long-term agreements. The demand is going to be there. But right now, if you are negotiating with any of these prospective customers, to be very frank, they give you a list of 20 projects that, oh, wait a minute, I can buy from this guy in the Middle East and this guy in Louisiana and this project and this project. All of those projects are paper projects. Nobody is doing anything. We are the only people who are actually building a plan. So we have another two years, three years before these plants come on stream. We should not be in a hurry to go and sell this stuff cheap just because that makes everybody feel happy. We – our business, our goal, our responsibility is to make as much money as we can for the shareholders. We think the value of these products will become higher as we get closer to where the demand is there, and there is not that many people who are supplying it. So do not expect for us to come in and make a big announcement about selling this product in the near future, because we are just not going to do that. We believe that the demand is there. Our customers know that the demand is there. It's just a little bit of a game about at what point people are going to come to the table, and we just don't think that right now is the time to do that. But obviously, at some point in time, we do want to sell the product, there's no question about that. But it's just the fact that we are trying to get the maximum value for the very unique product that we are going to be making. Nobody else in the world is producing this kind of product. And by the time this plant comes on stream, there is nobody else who is going to be producing this product at this scale because nobody has made the commitment and it takes a long time to develop these projects and build these projects.

Seifi Ghasemi:

I'll make a general comment, and then I'll turn it over to Melissa to give you more details if necessary. But fundamentally, we have always been telling you that we are committed to maintaining our A rating. That means that we will not lever the company more than about 3.5 times. If we ever get to that stage, we'll stop doing projects. We are going to be responsible. We have significant opportunity. And as Melissa has shown you on the other slides, we still have a lot of headroom to lever the company before we run out of cash. But if we ever get to the stage, I just want to make the point, if we get to the stage that we are getting to the limit of 3.5 times then we would slow down on the projects. We are not going to be irresponsible and try to lever the company because we are very committed to our A rating. That is the general comment. Specifically, Melissa, do you want to add to that?

Mike Leithead:

Great. Thank you so much.

Operator:

Jeff Zekauskas from JPMorgan. Your line is open. Please go ahead.

Seifi Ghasemi:

Good morning Jeff, as usual you are asking a very good and a very detailed question. And I'm going to refer that details to Melissa to give you some color on that. Melissa?

Unidentified Analyst:

Okay. All right. For my follow-up, if your investment in Louisiana is going to be $7 billion, is that $7 billion to be spent by 2026? And so should we assume that your CapEx in 2025 and 2026 should be higher than the $5 billion to $5.5 billion range you've got for 2024?

Unidentified Analyst:

Yes. Thank you so much.

Operator:

Moving next to Marc Bianchi from TD Cowen.

Seifi Ghasemi:

Our NEOM project is moving forward very nicely. We are certainly almost done with the engineering. We are actually constructing the plant. We have, as you saw an announcement today by a NEOM Green Hydrogen company that they are taking delivery of the wind turbines. So that project is expected. But right now, the time line that we have announced is at the end of 2026, beginning of 2027, and we fully expect to meet that deadline. So that -- in terms of discussions about the uptake, again, there are comments that I made about Louisiana apply to that. But also at the same time, there has been public announcements by other people about their demand for green hydrogen in Europe? You saw that one of the largest oil companies in the world announced that they will need 500,000 tons of green hydrogen by 2030, just to put it in perspective, 500,000 tons is equivalent of three times the capacity of NEOM. So there is going to be plenty of demand for that project but we will wait, as I said, in terms of our strategy to price that appropriately so that we can get appropriate return on that project.

Seifi Ghasemi:

Well, it's a combination of all of that. We have always said that 10% IRA is the minimum. That really translates to what you said, $0.10 of operating profit on a dollar of investment. Those two go together. We do expect, and we have demonstrated that. Now that you have all of the detailed numbers, please take a look at the return we are getting on Jazan. In Jazan, it's a $12 billion project. And if you look carefully, you'll find out that in terms of IRR, the return on that is more than 15%. So we obviously, as I said, the price our products not based on just the return, the price is based on what the market bears. And -- but if it goes below 10%, you usually don't do the projects unless it is phenomenally strategic and we don't have that -- too many of those. So overall, the 10% IRR is our minimum. And we expect most of our projects to produce more than that.

Seifi Ghasemi:

Well, the IRA, it depends on which project and how much it affects that and all of that. But IRA obviously, we've had. But as you know, IRA was designed in such a way that we would be able to get a good return, but also price the product to encourage the customers to use that because it was an incentive for that. So it's going to help both sides.

Seifi Ghasemi:

Thank you.

Mike Sison:

Hey, good morning. Nice quarter and outlook. I apologize. I just want to ask Louisiana again. Maybe I just don't understand. So I take the $7 billion and then your normal 10% of capital should be applied on the $7 billion? Or is that less than $7 billion?

Mike Sison:

Okay. And then given that the cost has gone up from 4 5% to 7%, is the pricing assumption on what you're going to sell has that changed? And does that 10% return change on a certain price that you need to get for the product?

Mike Sison:

Understand. Thank you very much.

Operator:

Kevin McCarthy from Vertical Research Partners. Your line is open.

Seifi Ghasemi:

For that particular project, which is part of the infrastructure project, we have never really emphasized that too much because that in terms of helping what we are doing is not comparable to the IRA. It is $7 billion spread over a lot of different projects. By the time it gets to any one-off individual company and so on, the amount is not that much to move in either. We obviously welcome any kind of investment to promote the use of hydrogen. That is a positive thing. But in terms of any kind of a material – we are part of the [indiscernible] in, I mean, they have an NDA, we cannot talk about it that much. But fundamentally, that contribution from that infrastructure bill, as you said, $7 billion divided by all of these projects is not going to move the needle for us in terms of what we were or we were not going to do that. We have never counted that as being anything significant. That is not comparable anything like the IRA because with the IRA, it becomes very meaningful when you start. We are sequesting in Louisiana, 5 million ton of CO2 at $80, that's $400 million a year of contribution. Obviously, it costs some money to sequester is. But as I said, the numbers are not comparable. So on the infrastructure bill, we have always said it's a good thing. It obviously is a good thing, it's better than nothing, but it's not something that will make any material difference to what we are doing or not doing.

Seifi Ghasemi:

Sure. I have made this statement in the last quarter, and I'd like to reiterate that, that we do have programs in order to control our corporate cost. We had a significant amount of corporate costs in 2023 because we were pursuing a lot of projects and starting up a lot of projects, those things do cost money, we don't expect that the amount will be as much in 2024. In addition, the fact that our LNG business and so on and the other businesses are doing well, will help on that. So we do expect a reduction of that corporate cost in 2024 versus 2023, quite a significant amount.

Seifi Ghasemi:

Sure. Thank you.

Stephen Byrne:

Yes. Thank you. Was the strength in hydrogen demand during the quarter in the Americas, specifically in your U.S. Gulf Coast pipeline? And if so, what fraction of those pipeline customers are you in dialogue with about switching them from gray to blue? And if the demand outlook in that region for Blue hydrogen is so robust, are you – might you potentially consider reducing the design and scope of the Louisiana project and drop the ammonia piece of it, which would include the offshore port and so forth in addition to an ammonia reactor?

Stephen Byrne:

And then one follow-on with respect to the Netherlands blue hydrogen project, I believe Air Liquide is also involved in a project with Porthos. And my question for you is, as Netherlands is moving in this direction of blue hydrogen, do you see potential that the rest of Europe might relax its preference for green and embrace blue more?

Stephen Byrne:

Thank you.

Operator:

[Operator Instructions] We'll hear next from Josh Spector from UBS.

Seifi Ghasemi:

Well, on that point, the way we have looked at this thing and – it's very difficult to obviously predict the future. But overall, the way we have looked at this thing that you know that our business is very much related to – not to GDP but to industrial production. So the way we have kind of budgeted ourselves is that industrial production in the U.S. will be positive. And not double digit or anything like that. Last year, it was about 2.5%, something like that, maybe a little bit less than that. So positive in the U.S., flat in Europe, and down in Asia. That's the very much overall economic condition under which we have produced the guidance for next year.

Seifi Ghasemi:

Well, they are going to charge us $10 per ton for disposing the CO2, which we will obviously pass through to our customers. We wouldn't be paying for that. And then we obviously – we have a charge for our capital, and then there is a charge for the sequestration. And I don't think we are at liberty to quote the number that Porthos is going to charge us but at some point in time, they might decide to make that public.

Seifi Ghasemi:

But Dr. Serhan is adding that the Dutch government is also contributing on the cost for the sequestration.

Seifi Ghasemi:

We haven't disclosed that. We are not allowed to disclose that. But as I said, it is more than $100 million and less than $1 billion, so somewhere in between.

Seifi Ghasemi:

So sorry about that. We are not allowed to disclose the number. Okay.

Seifi Ghasemi:

Thank you very much. Okay. With that, I think we have significantly gone over time. Is there anybody else in the queue, operator?

Seifi Ghasemi:

Okay. Well, with that, I would like to thank everybody for being on our call today. We appreciate your interest in Air Products, and we look forward to discussing our results with you again next quarter. Stay safe, stay healthy and all the best, and have a great day.

Operator:

Good morning, and welcome to Air Products' Third Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Sidd Manjeshwar. Please go ahead.

Seifi Ghasemi:

Thank you, Sidd, and good day to everyone. Thank you for taking time from your busy schedule to be on our call today. The committed and dedicated people of Air Products, delivered another set of outstanding results this quarter driven by a strong organic sales growth, demonstrating the strength and stability of our business. At Air Products, we have an excellent and resilient industrial gas business, that is the foundation of who we are and what we do. We supply customers in dozens of industries. Customers would depend on our people's expertise to make their products and processes more efficient and sustainable. We have been doing this for the last 83 years, and we will continue to do all we can to be the safest and most profitable industrial gas company in the Board, providing outstanding service to our customers. But at the same time, we are using all of our experience, financial strength, and core competencies as the Board's leading supplier of hydrogen. We'll implement our low and zero-carbon hydrogen megaprojects around the world. When it comes to generating a cleaner future now, we want to lead the way, decarbonizing heavy-duty transportation and heavy industry around the world, with clean hydrogen at very larger scale. This combination is our growth strategy, and it is the path forward for our continuous success and profitable growth in the quarters and years to come. I want to thank the hardworking and talented team at Air Products, we make all of this possible. Now please turn to Slide number 3, our safety performance, which is always our highest priority. We have worked hard to realize significant progress since 2014, but we always drive and strive to do even better. Our goal is to achieve zero incidents and zero accidents. Now, please turn to Slide number 4, which summarizes our management philosophy. We have shown you this slide every time that we have an earning call. But I cannot emphasize enough our commitment to the basic principles delineated in these slides. These principles will guide our actions in the future. Now please turn to Slide number 5. Our third-quarter adjusted earnings of $2.98 per share improved $0.40 or 16% versus last year and exceeded the top end of our guidance for the quarter. Both price and volume were again positive. We continued to demonstrate significant pricing strength while our volume improved for the ninth consecutive quarter, driven by strong onsite performance, including improved hydrogen demand in Americas and over 30 new assets that we have brought onstream. Additionally, we anticipate the recently announced $1 billion acquisition of the natural gas-to-syngas facility in Uzbekistan and the new LNG sale of equipment projects will add significantly to our future earnings. As you can see on this slide, we have delivered an average of 11% cumulative average growth rate of earnings per share in the last nine years. Now please turn to Slide number 6. We are committed to rewarding our investors by providing a healthy dividend and return cash to them. We are proud of our record of more than 40 consecutive years of dividend increases. We expect to return more than $1.5 billion of dividend to our shareholders in 2023 and also this slide demonstrates that we have increased our dividend by an average of 10% in the last nine years. Now please turn to Slide number 7, which shows our EBITDA margin. This continues to be my favorite chart. This graph is self-explanatory and clearly demonstrates the significant improve of our margins as compared to nine years ago when I had the honor and privilege of becoming the Chairman, President, and CEO of Air Products. Now please turn to Slide number 8. I would like to again highlight the two fundamental pillars of our growth strategy. Our resilient core industrial gas business and the low-and zero-carbon hydrogen projects, the mega projects each underpinned by sustainability. By running our existing business efficiency every quarter, we were able to deliver double-digit earnings per share growth in eight of the last quarters. And we continue to advance our blue and green hydrogen projects to help decarbonize the transportation and the heavy industrial sector of our economy. We expect these world-scale green hydrogen project to significantly add to our already strong profit stream in the future. Now it is my pleasure to turn the call over to Melissa Schaeffer, our Chief Financial Officer. Melissa?

Samir Serhan:

Thank you, Melissa. During our fiscal third quarter, we again saw broad-based improvements across our businesses, extending the positive trend from previous quarters. Results improved in each of our regional segments versus last year, driven by strong price, strong volume, productivity actions, despite the challenging operating conditions around the world. Before I discuss the results of each region, I would like to provide a brief update on our major projects. First, turning to Slide 13. You will see that, we have enhanced how we present our major projects, clarifying the project investment amounts, specifying the long-term nature of the related offtake agreements, and highlighting energy transition projects. We believe this new format provides a clear overview of key projects in our backlog and provide near-term and long-term visibility. Now please turn to Slide 14. I'm pleased to say that the Jiutai gasification project is in operation. Our team executed the project in the midst of COVID lockdown and supply chain disruption, including several months of severe lockdowns during the start-up period. We were able to complete, this complex project with outstanding safety performance and come in under budget. The team of over 3,300 workers during peak construction completed nearly 13 million hours without a lost time incident. I would like - to thank the team for a job well done. Our team in the America has also overcome many challenges to execute the Gulf Coast ammonia project, which had nearly 1,300 workers during peak construction and completed over a 3 million hours without a lost time incident. The facility is currently in a start-up and we expect to begin delivering hydrogen to our pipeline system this month. Finally, following many years of hard work, we announced the $1 billion acquisition of the natural gas-to-syngas plant in Uzbekistan. As part of one of the most advanced energy plants in the world. This acquisition include the two largest auto-thermal reformer in the world in short ATR. This is the same ATR technology, we're deploying in our net zero energy complex Edmonton, Canada. This will further enhance our industry leading hydrogen production capabilities driven by our own partial oxidation technology in short POX, P-O-X. This is the technology, we have acquired from GE several years ago. This POX technology which we are deploying in our clean energy complex in Louisiana has been a proven mainstay for efficient syngas generation for many decades. We will operate multiple POX units at the Louisiana facility, each of which will be the world's largest. POX and ATR are the two leading processes for the production of a blue hydrogen. Having the capability and the flexibility to use both leading technology to produce a blue hydrogen at world scale will further extend our leadership in low carbon hydrogen production. Now please turn to Slide 15. For a review of our Americas segment's results. Compared to last year, Americas EBITDA was up 18% driven by higher price and volume. Merchant price improved 11%, which corresponded to 4% improvement for the region overall. Volume grew 6%, driven by on-site including strong demand for hydrogen. EBITDA margin jumped more than 1,100 basis points driven by strong price, lower energy costs pass through, which drove about three quarters of the margin improvement. Sequentially, EBITDA increased 10%, mainly on better hydrogen volume and lower variable costs. Lower energy costs pass through also drove roughly around two-thirds of the margin improvement. Now please turn to Slide 16 for a review of our Asia's segment results. Our results in Asia improved despite the currency headwinds for recovery in China and higher energy costs across the region. Compared to last year, EBITDA was up 10% despite a 5% negative currency impact. Positive price and volume more than offset higher costs. Merchant price increased 9% which more than offset higher variable costs. Volume improved 8%, primarily to better onsite, including the addition of over 30 new assets in the past year. Our activities in the electronics sector [indiscernible] calendar robust accounting for many of the new projects. We also added projects in the chemical, glass, and other applications. Sequentially, volume was up 2%, following the Lunar New Year holidays. Please now turn to Slide 17 for a review of our Europe segment results. Our team in Europe has worked hard to maintain positive momentum. Compared to last year EBITDA increased more than 20%, driven by the impact of our pricing actions. Merchant price improved 10%, which equates for a - towards 6% gain for the overall region. This is the seventh consecutive quarter of double-digit merchant price gains for the region. Volume was up modestly, on better onsite. This is particularly driven by improvement in hydrogen. This more than offset weaker demand for merchant products. EBITDA margin was about 800 basis points higher and included the impact of lower energy costs pass-through, which benefited margin by around 300 basis points. Sequentially, the region's EBITDA held is steady, as favorable energy costs offset the lower price. Lower energy cost pass-through also benefited EBITDA margin by about 150 basis points. Now please turn to Slide 18 for a review of our Middle East and India segment results. Compared to last year, our merchant volume and price pushed sales higher, but the increased costs negatively impacted operating income. The second phase of the Jazan project, which we closed in mid-January of this year added to our equity affiliate income, and it drove the region's overall results. The Jazan project has contributed as we expected, consistent with our commitment. Please now turn to Slide 19 for our Corporate and other segment results. This segment includes our sale of equipment businesses, as well as our centrally managed functions and corporate costs. The sales and profit for this segment were lower this quarter due to lower sale of equipment activities and higher cost resulting from ongoing support for our growth strategy. We do however continue to have robust discussions with customers interested in our LNG technology and equipment. But I'm pleased to announce two significant sale of equipment project wins with Qatargas and NextDecade. This is in addition to the two project wins announced in May. We plan to expand our production facility in Florida again and expect increasing LNG project activities to improve the segment results. Echoing what Seifi and Melissa have mentioned earlier, the outstanding results this quarter again showed the resilience of our people and our businesses. I also would like to acknowledge the hard work and commitment of our teams around the world. I would like now to turn the call back to Seifi to provide his closing remarks.

Operator:

[Operator Instructions] We'll take our first question from Christopher Parkinson with Mizuho. Please go ahead.

Seifi Ghasemi:

Thank you very much, Chris. You are asking a very good question. We provided this slide to give you a 10-year view because we are at a long-term strategy and we wanted investors to get as clear a view of the future as we can provide right now. We obviously appreciate that there is a very dynamic situation about different projects in different parts of the world. So I'd like to say, that the comment that I make is based on what we know today. Based on that, I think a significant part of that investment is going to be in the United States, as a result of the IRA and the opportunities that that creates for us. But obviously, the Board is developing different people or coming up with different projects and all of that, and we participate in those. But right now I would say that a significant part of that $30 billion will be investments in the United States that we have already committed to and we will commit as we go forward. Okay, Chris?

Seifi Ghasemi:

I'm just trying to make sure I understood your question because the sound wasn't that good.

Seifi Ghasemi:

I would like to have - Dr. Serhan is the Chairman of the Company, that we have formed to run Jazan, so I'd like to turn it over to him to answer the question.

Christopher Parkinson:

Thank you.

Christopher Parkinson:

Thank you.

David Wong:

Hi. I guess you have very strong margins this quarter in Europe. How sustainable are those margin levels, then how should we think about those going forward?

Samir Serhan:

I mean, really the team in Europe has been doing an outstanding job. I mean, we deal with all of the challenges in Europe about the war, about energy cost fluctuation. But no doubt about it, the industrial output in Europe is not growing at all. I mean, and that is definitely a challenge that we're monitoring. But to make - I mean, some of the segments we support is better than last year. We see a gradual improvement in electronics, with some of the customers there. The low natural gas pricing, we see some of the chemical-defining fertilizer business are picking-up activity. Construction is still challenging there, which helps our package business that it's still really down compared to previous years. So, again measured costs.

Seifi Ghasemi:

I'd like to turn that over to Melissa to answer. Melissa?

David Wong:

Just your corporate costs overall, it's higher than the prior year. I guess, how much was from lower equipment sales? And then how much was from increased investment spending this quarter?

David Wong:

Okay. Thanks.

Operator:

We'll move to our next question from Steve Byrne with Bank of America. Please go ahead.

Seifi Ghasemi:

Dr. Serhan, you want to answer that?

Steve Byrne:

Okay, I'm just curious - yes. Yes. Thank you. With respect to NEOM, have you reassessed whether or not you need to invest downstream in distribution? It's been three years since you announced that project and you at that time you were thinking you would need to build some downstream pipeline capacity for the green ammonia. Do you have a view now of where you might be able to sell that green hydrogen from NEOM?

Steve Byrne:

Thank you.

Steve Byrne:

Yes. Thank you.

John Roberts:

Thank you. Hi, Seifi. I'll just ask one question here. When do you think we'll get the first conversion of an existing U.S. hydrogen plant from gray to blue?

Samir Serhan:

No, it's fine. Nothing to add.

John Roberts:

Right. Thank you.

John Roberts:

Thank you.

John McNulty:

Hi, good morning, Seifi. I wanted to -

John McNulty:

I'm great. I'm great. Hopefully, you are as well. Wanted to ask on the Uzbek project, that you're bringing on. I guess, I guess a couple of questions on that. Can you help us to understand, because it looks like it comes on at some point relatively early in '24, but -- so can you help us to understand the timing of it? And also the EPS contribution that you expect it to give, as you look to 2024? And then I guess also tied to that project, yes, how do you think about the returns for - I know you look for a 10% plus return, but I also know you risk adjust those as well. So, I guess, how should we be thinking about that for the Uzbek project?

Samir Serhan:

It starts really with what is really included in this acquisition. So this is really the two largest world scale ATRs in the world. There is also a hydrogen unit through a large air separation units around 12,000 tonne per day. The plant is already built, it's in the process being commissioned right now and that's why we see it is going to be a set of our earnings next year 2024 and it would be fully in the numbers for 2025. Again, we're very proud of the project and really operating those ATRs with Haldor Topsoe technology is really going to give us lots of know-how about how to really optimize our positioning in blue hydrogen in the future.

John McNulty:

Got it. Perfect. No, thanks for the color. And then maybe just as the follow-up, you've got the Alberta project or Edmonton project coming on next year. It does seem like the demand for clean hydrogen is picking up in the region. Is that project sold out at this point based on the contracts that you've locked up?

Samir Serhan:

Thanks, Seifi. IOL is the anchor customer for this project. We're working together with them to bring our respective facilities onstream. Please note the products out of this project will go into our existing pipeline systems, which we have a system in Edmonton, Canada. And this will be feeding IOL, our customers and also hydrogen for mobility because we are building a fueling station also they have to use low-carbon hydrogen for mobility. It's going very well. I mean, working very closely with IOL as the anchor customer.

John McNulty:

Got it. Thanks. Thanks very much for the color.

Operator:

Our next question comes from Mike Sison with Wells Fargo. Please go ahead.

Seifi Ghasemi:

In terms of 2024, and what comes from there, I would - I appreciate if you have some patience and we will disclose that to you in - at the end of October, obviously. I don't want to get ahead of ourselves. But in terms of our CapEx, our expectation today is that our CapEx next year will be approximately $5 billion to $5.5 billion, the same as this year. That is based on what we know today. Okay, Mike?

Seifi Ghasemi:

Thank you.

Josh Spector:

Yes. Hi. Thanks for taking my question. Just first on the Canada Blue Hydrogen project, just the slide that you updated on the backlog, maybe has a little bit less of a discreet timing elements out there. Do you still expect that in 2024, and I guess, fiscal '24 for you guys or has anything changed there? And same thing with the SAP project, has that moved from 2025 to 2026, or is the timing relatively unchanged?

Samir Serhan:

No, over the year.

Samir Serhan:

Yes.

Josh Spector:

Yes. I guess how about the SaaS plant? And just my follow-up, I guess, on Canada would just be are you looking about the returns there as being the three-year post grant number. So the $1.2 billion or $1.6 billion. What are you basically returns off of?

Josh Spector:

The $1.6 billion minus the $475 million.

Samir Serhan:

The visibility we have, and we expect that by the end of the year, that we will get the construction permits. But again, it really will depend on the officials and the state of California. Okay.

Seifi Ghasemi:

It's - Melissa, do you want to answer that?

Seifi Ghasemi:

Okay.

Seifi Ghasemi:

Sure.

Mike Leithead:

Great. Thanks. Good morning, guys. Seifi, just one question…

Mike Leithead:

On your blue ammonia facility, a large fertilizer company last night paused their clean ammonia project, basically saying the costs are coming in higher and they're not seeing downstream applications develop as fast as they thought. I was hoping if you could speak to those two factors, cost and offtake agreements as it related to your projects?

Samir Serhan:

Thanks, Seifi. I mean, definitely in the context of the soft global economy, global COVID pandemic, shortages in labor materials, supply chain disruptions, record inflation rate, I think we definitely at the bar sure that we can deliver. I mean, we show that on Jazan, we showed it on Jiutai. We showed that on Gulf Coast ammonia and projects that you don't really hear too many about 160 of them were closed and bought on stream during the COVID period. So I think, again, we managed to show that we are walking the talk basically and we delivered on these things. With the challenges that exist, we do see something like the inflation subsiding slowing down. But it's not going any - but we're really having the execution, basically where managing these challenges and deliver on our commitment, which is the 10% EBITDA during the contractual life of these assets.

Mike Leithead:

Fair enough. Thank you so much.

Operator:

Our next question comes from Duffy Fischer with Goldman Sachs. Please go ahead.

Seifi Ghasemi:

Thank you for the question, and I really appreciate the fact that you use the adjective pontificate, because that is what I continue to be doing, because - it's very difficult to see the future. But right now, the way that we are seeing right now, things developing in China and in Europe. China, we have seen some slowdown. It is not affecting our business in a significant - in a material way, but it is affecting our business. But the future is very much dependent on what the Chinese government decides to do in terms of any kind of a stimulus or not. That is very hard to predict. And obviously, we will react to that. The good thing is that a significant part of our business in China, something like 65% of it, is on-site business. So there is a lot of stability there. In terms of Europe, I hate to put it this way, but it really depends on the weather and the energy cost. Because if the weather becomes significantly core and energy costs go up, it will have a significant effect. If they become lucky like they were last year, then the effect will be less and the energy cost will stay low. But overall, it is a little bit of an unpredictable situation. That is why we, as a company, the way we deal with this, is we are very focused on productivity. And as you saw and as you heard Melissa explained, we have taken actions in terms of productivity, and we are taking a charge for that in order to make sure that we are prepared just in case things do not turn out, to be as rosy as some people are predicting. Dr. Serhan and Melissa, any additional color on this?

Melissa Schaeffer:

Yes. So I'll just add one comment specific to Europe. So, we are in a situation where we have now lapped the strong pricing momentum. So that although we are seeing a slight decrease sequentially, we still have very strong pricing in Europe. And so I think we just need to remember that lapping the comps are tougher, but it is still very strong pricing in Europe. So we need to hold on to that, to continue to show the strong returns in Europe.

Seifi Ghasemi:

Duffy, that is a very good question. Right now, our best information based on discussions with customers, is that Europe is very much committed to green. That they are - that the argument is that blue hydrogen is a transitional thing. So why go through the channel - go to blue and then go to green. You know, we're going to go green, therefore, let's make the leap. And therefore, I'm sure you have seen some of the announcements with respect to, for example, the €2.2 billion that the European Commission approved for Tyson Group, that is clearly was approved for use of green hydrogen. So that is the direction we see in Europe. In Korea, in Japan, I think it will be more oriented at the beginning towards blue because that is going to be used for decarbonizing the power plants. And in the United States, we have to see, but the good news for us is that, we are seeing significant discussion on both, but that it is not as people predicted, that in the U.S. it would all be blue hydrogen. Right now we are talking to companies who are very interested in green hydrogen in the United States, to make their products in the United States, whether it's a seed or chemical.

Samir Serhan:

Thank you.

Operator:

Our next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Seifi Ghasemi:

Very good, Jeff. And good morning, to you. Jeff with respect to comparison, you are comparing us to a company which has a different strategy and a different - so I don't want to comment on their results. You are comparing year-to-year because last year, our pricing was significantly better than the other people. So year-to-year, we are not going to show as much as an increase, because if they had a very low performance last year, this year, year-to-year, it looks better. I think that is the main reason for the price increase. And so that is my general comment on that. But overall, we are very much focused on being a green energy growth company. We are an industrial gas company and at the same time. So we are pursuing a totally different strategy, as you know I have talked before. The fact that our volumes are up, and I think this will continue to be the trend that we will beat other people on volume growth is because we are investing in the future, and we are winning our share or even better than our share of the smaller projects than people have been talking about. So as a result, volume growth is obviously the key thing we're focused on. Pricing, we are holding our own. There is no significant difference in the pricing because if it was that the market shares will change. And the market shares are staying stable. So that is the question that I have, first one. On the second question that you have in terms of the efficiency of the crackers that we think we have versus the conventional list that you use 20% to 30% of that. We have talked about this thing. It is a technology we have been developing but the person who is doing that on a day-to-day basis is Dr. Serhan and I like him to make some comments about that. Samir?

Seifi Ghasemi:

Well, Dr. Serhan just gave you more information, but you were saying 10% and he's not talking single digits, which is good news. But Jeff, if I may just summarize, I'm very proud of our team. We do have very good people, and they have developed this technology. And this is going to be a competitive advantage that we will end up having as we go forward on this conversion of ammonia to hydrogen. All okay Jeff?

Seifi Ghasemi:

Thank you. Do we have time for one more question? And please go ahead.

Steve Haynes:

Hi, thanks for squeezing me in. This is Steve Haynes on for Vincent. Maybe just a quick one on the fourth quarter guide. I think 4Q usually steps up a bit more seasonally than what you have baked in? I know you just kind of talked about some macro uncertainty in China and in Europe, but is there anything else in there that's causing a little bit of the more muted 4Q ramp? Thanks.

Steve Haynes:

Thank you. Appreciate it.

Operator:

This concludes today's call. Thank you again for your participation. You may now disconnect, and have a great day.

Operator:

Good morning, and welcome to Air Products' Second Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Sidd Manjeshwar. Please go ahead.

Seifi Ghasemi:

Thank you, Sidd, and good day to everyone. Thank you for taking time from your very busy schedule to be on our call today. I am proud to say that our people delivered another set of outstanding results this quarter, continuing to grow our business in a challenging environment. Our team also continued to make great progress in executing our growth strategy, which is focused on the production of low-carbon and zero carbon hydrogen. I would like to thank each one of our talented, dedicated and motivated employees at Air Products for their commitment and hard work. Now please turn to Slide #3, our safety performance, which is always our highest priority. As you can see, we have made significant progress since 2014, but we are always working hard to do better. I want to make it clear that our goal is to achieve zero incidents and zero accidents. Slide #4, which we have shown you many, many times before, summarizes our management philosophy which is critical to Air Products' success and will continue to guide our actions as we move forward. Now please turn to Slide #5. Our second quarter adjusted earnings of $2.74 per share improved $0.40 or 17% versus last year despite the lingering economic headwinds in many parts of the world and exceeded the top line of our guidance for the quarter. We have consistently delivered earnings and top line growth driven by both price and volume, which were collectively up 14% for the quarter versus quarter of last year. We also brought new projects on-stream that further enhance our earnings. Our roughly $16 billion of backlog with more than $11 billion focused on energy transition will continue to drive long-term earnings growth. Now please turn to Slide #6. As mentioned last quarter, we have again raised our quarterly dividend this year, up 8% to $1.75 per share per quarter, extending our record of more than 40 consecutive years of dividend increase. We expect to pay out more than $1.5 billion to our shareholders in 2023, demonstrating our commitment to return cash to shareholders. Now please turn to Slide #7, which shows our EBITDA margin trend. This continues to be my favorite slide as it shows our business performance over time. We were happy to see our margins improve over the past two quarters after the decline which was caused largely due to the dilutive effect of higher energy cost pass-through that increases our sales but doesn't increase our bottom line. We expect our margin to move higher as energy costs decrease while we continue to improve productivity in our base business and add new projects. Now please turn to Slide #8, where I would like to share a few thoughts on our hydrogen strategy. We knew being a first mover in real mega projects has its challenges and that novel ideas and approaches are sometimes met with skepticism initially. When we launched the NEOM green hydrogen project three years ago, we were the first hydrogen producer to capitalize on the ideal renewable energy resources in the Middle East and the first to recognize ammonia's potential as an effective transport medium for hydrogen. When we announced the Louisiana blue hydrogen project in 2021, we were again first mover to act on carbon capture and sequestration on the U.S. Gulf Coast. Now the promise of clean energy is a reality. These projects have gained significant government support around the world, and many companies have since followed our lead and want to become a hydrogen company, announcing large clean hydrogen projects and exploring ammonia dissociation innovation. We believe these developments are actually good for the industry because a successful energy transition will require the work of many different companies, organizations and governments around the world. However, as a global leading hydrogen producer, we are confident that our experience, know-how and proprietary assets will continue to capture the first mover advantage and support Air Products' success in leading clean energy and clean hydrogen development for the decades to come. Now it is my pleasure to turn the call over to Melissa Schaeffer, our Chief Financial Officer. Melissa?

Dr. Samir Serhan:

Thank you, Melissa. During the second quarter, we saw broad-based improvements across our businesses. Results improved in each of our regional segments versus last year, driven by strong price and volume. Our commercial teams around the world worked hard to make sure that we realize the value of our offerings. And we successfully brought in new projects on-stream to help drive our results. We saw elevated planned maintenance activity due to customer turnarounds in multiple regions, but our volumes again improved this quarter. In addition to energy transition-related investment, we see significant investment opportunities of various project sizes in our base business. We continue to win our fair share of traditional projects across the region and in various industries. Our small- to mid-sized project activities in Asia were particularly robust. We continue to see strength in our small to midsized on-site business globally. Now please turn to Slide 13 for a review of our Americas segment results. Compared to last year, Americas EBITDA was up 14%, supported by higher price and volume. Merchant price improved 21%, the third quarter in a row that we exceeded a 20% increase. On-site volumes were up on a strong hydrogen demand. EBITDA margin of 37% was roughly flat as positive price offset higher costs, largely driven by higher planned maintenance activity, inflation and other onetime items. Sequentially, EBITDA was flat as favorable price and equity affiliate income offset higher costs. Additionally, we also enjoyed successes in larger traditional projects. Yesterday, we announced two new world-scale carbon monoxide projects in Texas with secured long-term off-take contracts from Eastman and LyondellBasell. This project will expand our world's largest carbon monoxide pipeline network in the U.S. Gulf Coast and enhance supplier reliability to our customers. We are committed to our base business while pursuing our growth strategy in low- and zero-carbon hydrogen. Please turn to Slide 14 for a review of our Asia segment results. Our results in Asia improved despite the lingering effect of COVID-19 in certain parts of China and higher energy costs. Compared to last year, EBITDA was up almost 10% despite a 7% negative currency impact. Merchant price improved to 12%, which more than offset higher variable costs. Volume improved 7% driven by [indiscernible] on-site, including the addition of over 13 new assets in the past year, mostly in electronics, glass and chemical application. Sequentially, volume was flat as the new assets offset the seasonal Lunar New Year slowdown. Now please turn to Slide 15 for a review of our Europe segment results. For Europe, compared to last year, the story is price. And nearly 20% gain in merchant pricing drove the region's profits and margins significantly higher. This is the sixth consecutive quarter of double-digit merchant price gain for the region. Additionally, on-site activities backed up as we saw a recovery in our hydrogen volumes. EBITDA increased more than 30%, while EBITDA margin was more than 750 basis points higher as energy costs continue to come down. Sequentially, EBITDA was higher driven by favorable volume and equity affiliate income. EBITDA margin also improved, driven by the higher volumes and equity affiliate income as well as the lower energy cost pass-through. Now please turn to Slide 16 for a review of our Middle East and India segment results. Stronger base volume increased sales but higher maintenance activity negatively impacted operating income. The second phase of Jazan project, which we closed in mid-January, added to our equity affiliate income and it drove EBITDA higher. Both the first and second phases of Jazan project have contributed as we expected, consistent with our commitment. Please turn to Slide 17 for our Corporate and Other segment results. This segment includes our sale of equipment businesses as well as our centrally managed functions and corporate costs. The sales and profit for our Corporate and Other segment were lower this quarter, driven by a lower contribution from our sale of equipment business and higher cost as we continue to add resources to support our growth strategy. Customers are very interested in our LNG technology and equipment, and we are pleased to see that our work resulted in four project wins recently. We announced two significant LNG sell of equipment projects and we look forward to making additional announcements in the future. As Seifi and Melissa have already mentioned, the outstanding results of this quarter are a testament of the resilience to our business and the hard work and commitment of our people around the world. I would like now to turn the call back over to Seifi to provide his closing remarks. Seifi?

Operator:

Thank you. [Operator Instructions] We'll take our first question from David Begleiter with Deutsche Bank. Please go ahead.

Seifi Ghasemi:

Well, we usually don't comment about the quarter in the middle of the quarter. But in general, I would like to say that we are pleased with the improvement in the economy that we see in China after the Lunar New Year, the Chinese economy gained strength, and we are seeing the benefit of that as you have seen in the last quarter, and we should continue to see that in the next quarter. In Europe, the volumes remain flat and maybe a little bit down. But obviously, we are compensating that with the pricing action related to energy costs. And in the U.S., you know very well, David, it's just flat. They are not gaining significant amount of volumes, the economy is not growing that much, but at the same time, we are not going into a recession, at least we don't see that yet. Is that good enough?

Seifi Ghasemi:

Sure. With respect to Indonesia, I mean, coal prices have nothing to do with these things. Coal price is going up and increase the price of the final product. The main reason that we withdraw from Indonesia was that we had started the project about almost five years ago. The project had condition precedents that had to be met and we just were not getting those conditions approved at the different levels. And therefore, at some point in time, you kind of just can't continue waiting for approvals, and we decided that we have opportunities to deploy our cash at other places, and that was the basis of the decision to be drawn. I hope the investors give us the benefit of the fact that we are flexible. We are not -- we react to the circumstances. And we can't keep millions, billions of dollars of Air Products money sitting somewhere for a long time without getting an income for it. And therefore, we decided to deploy the capital at other places around the world, and you will hear about where we are deploying it in the future. The second comment with respect to Jiutai, we have completed the facility on time. But like any on-site business that you're very familiar with, the customer has to give us utilities and provide this raw material for us to get it started. The customer is having some issues with doing that, and that is why we are delaying two quarters.

Steve Byrne:

Yes. Regarding the higher hydrogen volumes in the U.S., is that presumably driven by renewable diesel? And just wondering whether those customers would be willing to pay a premium for blue hydrogen to get a lower CI score? And if so, are you reconsidering whether to add carbon capture on your existing methane reformers?

Steve Byrne:

And can you provide more granularity on what drove the $0.44 drag in other costs? It seems as if this was primarily in the Americas, it looks to be more than $100 million year-over-year. What is in that? And what is your outlook for it?

Operator:

We'll move to our next question from John McNulty with BMO Capital Markets. Please go ahead.

Seifi Ghasemi:

Well, first of all, good morning. John, hope all is well. John, you are absolutely making very, very appropriate and correct statements. We were very pleased with the interest rate that we got for the green bonds. It took us only one day to raise the $1.1 billion, which means that there is a lot of demand for that. And it does encourage us to look for project finance on a lot of our projects. And that will increase the firing power that Air Products in terms of doing more and more of these big projects. So we are very happy about that. And obviously, at the end of the day, the interest rate that we pay, that would depend on what the federal reserve does. But right now, as you said, we borrowed almost -- closest to treasuries, which is very good news for us, and we are very happy about that. And you are very right, it will help us significantly in financing the projects in the future and doing more of this .

Seifi Ghasemi:

John, that's a very good question. First of all, that project is moving well. We are seeing a significant amount of demand there. We clearly see that we will be sold out of that facility, and we are actually looking at the possibility of expanding that operation to include more. When we announced it, we did say that this is the first phase of a three-phase operation and we expect to do more there. Considering all of the oil industry in that part of the world and the demand for -- obviously, in Canada, it's a little bit different than in the United States. Canada is moving towards the actual carbon tax. A lot of these refineries actually had to do something. And hydrogen is -- blue hydrogen is the solution. We are in a very good position with our pipeline there, with the land we have there. So, we are very optimistic about that, John, very optimistic.

Christopher Parkinson:

So obviously, everyone's focusing on some of the aspects of the Indonesia project. But how much of your considerations for the next few years has to do with your increasing ability to bid on blue hydrogen projects and everything that's kind of being brought to the forefront from the U.S. IRA? I mean, from a relative basis, how are you thinking about that capital being used elsewhere for your backlog growth on a go-forward basis, once again, specifically geared towards the U.S.?

Christopher Parkinson:

That's very helpful. And just as a quick follow-up, just on Asia in particular, it seems like things were a little bit more flattish on volume when, I'd say, a lot of us were suspecting that things would improve on a sequential basis. Can you just give your latest and greatest update on how you're thinking about the macro specifically in Asia versus the rest of the world?

Operator:

We'll move to our next question from Vincent Andrews with Morgan Stanley. Please go ahead.

Seifi Ghasemi:

Vincent, it's always good to talk to you. It will be a mixture of those things, as you have seen from our announcements, Vincent, the announcement that we put out last night, those are on-site projects at customer sites. The Eastman project is on the side of Eastman and the other one is on the side of LyondellBasell. So, we will do a mixture of both

Seifi Ghasemi:

I think it will happen in time. Your assessment on that is very correct. It will happen in time, yes.

Mike Leithead:

First question on Europe. Can you just speak to the improvement in earnings sequentially? It looks like versus last quarter, volume was up 3%, price was down and EBITDA was up 21%. So can you just talk to the big margin improvement there?