Linde (LIN) 30 Jul 212021 Q2 Earnings call transcript

Company Profile

Participants

Juan Pelaez	Head, Investor Relations
Sanjiv Lamba	Executive Vice President and Chief Operating Officer
Matt White	Executive Vice President and Chief Financial Officer
David Begleiter	Deutsche Bank
Tony Jones	Redburn
Bob Koort	Goldman Sachs
Nicola Tang	Exane BNP Paribas
Jeff Zekauskas	JP Morgan
P.J. Juvekar	Citi
Peter Clark	Societe Generale
Geoff Haire	UBS
Markus Mayer	Baader Bank
John McNulty	BMO Capital Markets
Vincent Andrews	Morgan Stanley
Mike Sison	Wells Fargo
Kevin McCarthy	Vertical Research Partners
Laurence Alexander	Jefferies

Call transcript

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Operator

Good day and thank you for standing by. Welcome to the Second Quarter 2021 Linde Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Investor of Head Pelaez, Relations. Juan Please go ahead.

Juan Pelaez

the joined two of you. applies presentation. page our in on website XXXX answer we'll and thank Juan Officer; Head slides and and in and Good Chief and Chief made at Matt forward-looking this and give it presentation on morning, attending available statement to be for Pelaez, reconciliations materials Sanjiv then are the I'm note Please Relations, read that Investor Officer. will outlook thanks now second adjusted Sanjiv and of morning second Financial an our section. the to during quarter this questions. Investors I'm disclosure Matt by White, the your to appendix everyone, webcast. numbers Crystal, this Operating quarter Today's statements update performance, Lamba, all call earnings available and are business of on teleconference. The the Linde's linde.com

Let the Sanjiv. to me call turn over

Sanjiv Lamba

to strategy, many more of challenges really which Linde come. that I'm and for expect Volumes than Thanks, proud everyone. increased presented quarter, recent margin, in to new return the per along Linde results again, through stellar achieving to produced quarter, despite And performance per how second face. EPS, inflation. capital. use we Pricing continue continue year. with leavers the the many constantly you Last including XX% Linde morning, industry-leading and earnings share, $X.X the And the we years a initiatives. on we many productivity business XX.X% records, good a this delivered outlined grew grow employees, operating optimize XX%. once to team performance, the Juan, global I XX.X% X%, multiple to I

path to Given to we expansion, I future said, well clear results also have discuss like our believe slide. to important it's think say it's to on which are I'd far, safe track. a so I next the on That revenue the

when had a unique of advantage option. that Linde sale see customers sale you'll three, of previously slide or a to you that gas offer plant highlighted on I able its of to being So, has

allowing a type almost in are of maintaining clear growth while capabilities participate competitive criteria. our advantage, engineering us opportunity, to Our every investment

are of Going forward, to combined. of and backlog we the going therefore present sale plant gas sale

flows. total stands $X.X approximately our high-quality billion, quarter, with This growth at cash representing project backlog customers and contractual secured

under in but opportunities million growth projects margin accretive spend in per for fixed $X shorter growth we typically and network contractual contain have Now, are These in $X Base density great project secured backlog, opportunities. around execution invest elements times, also or addition to incremental our growth. strategy. to also a base on fee high-quality support parallel, deliver don't long-term this business billion year growth, either they're

glass, small examples and, Some run liquefier the Gulf than year, and growing end and we more projects other year. markets U.S. XX include course, up earlier started of saw that energy paper, Coast these hydrogen the this in pulp small we clean recently we that on-site on-sites. already this We have announced projects with the mining

projects, our captured of In billion of with and $X growth end network to of revenue years, year over four growth already $X.X further secured approximately markets. addition, across incremental a existing investments spectrum CapEx. which plus I been from per network, from these merchant packaged three billion diverse supply dense exclude organic The continues have execute dense our to currently of accounts, next expansion the base the new a we'll we the winning enhances business which stated quality contractually leverage growth business.

course, economic the recovery you're that current through leverage this seeing. the demonstrated growth Of how we

not projects, currently reviewing of planned clean are of for of projects opportunities, more prospective discipline. sit backlog, significant easily than a while plant maintaining electronics we $XX and which I here us energy investment of of this As including billion pipeline of hundreds and, great potential included today, in projects. to a course, represent our gas Both number grow, are investment ways sale and sale sale of of

or outlook shareholders growth Given growth future. capability, remain and business model of can inflation bullish decades today on generate I macro into our strong execution of economic secular growth with a or have proven we what compound for drivers, value Linde's our prospects. Regardless and happens pace the that trends the

world to that ESG been hand I business goals, our our you in these to before are Matt, take over and now who disclose to Matt, financial a we the results near operating call more importantly, I which hand last to diligently working new incorporate to year. mentioned you guidance. our before quarter's and the leaders We've around it in that ESG ESG expected developing want share targets will to goals. we new I comment progress, these future. through with them to on on the Now, Based the Matt? end rhythm. in to make of ambitious I'll I expect the determine goals

Matt White

operating volume also This low marks X% prior manage economic year increased for geographic our leverage the which fourth the end sequentially drove Price four Please overview increased metals X% cyclical of second in XX% energy quarter quarter XXXX Operating eighth to despite in from cost QX, profit points represents basis prior of and the chemicals, sequentially. versus over all was the markets. over last XX.X% continue since pass-through measures. of XX%. XXX to Sequentially, contracts. Sanjiv. prior EPS quarter XX% increase, sequentially, and of have slide productivity XXXX supply for Thanks, and XX rate this increased pricing all costs year, than on-site $X.XX from the billion volumes growth the XX% This margin XXXX Operating from are volume versus related X% Manufacturing, increased $X.X We've is $X.X also and evident increased XX% and recovery. XXXX point QX, provided to X% of results. an of was a markets. modes expansion, X% from we year inflation. to X%, pass-through. basis and quarter. across year row points up the the headwind of consecutive expansion, billion margin combination from and basis Sales actions demonstrating as XXX first turn of X% volumes more a point segments a increased

important steady XXXX growth capital from profit of distinguish prudently every increased important XX.X%. quarter, mentioned a recovery. metrics to demonstrates growth, I which It clearly base. in one As a has this it's the last record managed to industry, which over mere ROC, is rose this believe true from quarter since most

more Linde fact, high-quality on model. overall following a ability growth the disciplined consistently has In proven to allocation allocation five industry-leading provides capital Slide model, including cash capital that color management. deliver by

over repurchases. want the into this the to invest You allocated table third first million quarter half improve this and year. increasing XX% see first can quarter. only see reward To for business the how right, the capital dividends year-over-year business, with half year. can last on flow simply, is of cash back you to expect up this to with and the to left, our we in Stated we QX year. I sequentially and the the that timing progression the share cash shareholders grow $XXX we flow the operating when had Note compared Since last cash taxes operating higher of related,

slide we below think on with returned billion you guidance shareholders. I find approach. into We is six. to can which the last pie the I'll to set including the ranges. up invested how and billion this slide similar confirms guidance, chart business quarter, back $X.X $X.X wrap This

This to no quarter is underlying improvement Third X% currency QX, XX% this headwind. assumes over XX% XX% sequential in $X.XX guidance prior the Compared represents and growth and to year to growth XXXX. XX% economy to a $X.XX. foreign over

volume new this call like while XXXX, raising full $X.XX positioning XXXX, our the end to next we and trends value with at assured provide upper in and guidance. ability of least are not range. $X.XX or industry-leading from stable to guidance more the prior In quarter, we'll will the This updated above confident at QX if XX% from For Until Linde and $XX.XX. over updated quarter highly EPS Rest remain XXXX consistent Q&A. a time, this be long-term XX% quarter increase grow the last that we time. words, we call fourth or year I'd meaningful range. at and to is And we outperformance $XX.XX now, guidance fourth range have QX by an other from for the are improve, And higher to to year last hand creation.

Operator

from our first question And from Instructions] Bank. [Operator you. Deutsche David Thank Begleiter comes

Your line open. is

David Begleiter

that think gain you growth this quarter map you Did Sanjiv, versus the morning. do industry? Good XX% this versus you. quarter, share in what you volume of you the do think competitors? Thank was

Sanjiv Lamba

for that thanks David, question.

share recovery. of around. all that saw, as all in markets ongoing see reality that's some recovery happen say We've you an I markets we're would seen that that our but solid set we as have as element We'd economic So, economic through. growth The what we mentioned is gain, come of That's end seeing business we along. part some kind transactional that we strategy. saw across leverage and well.

David Begleiter

Very back buybacks should think half thinking the buybacks, how about Matt, the good. year? And in of about share we

Matt White

Yeah.

towards allocation sweep policy, as cash David, to our So from buybacks. capital you know, we'll continue excess

pace. good to as been So, mentioned, $X cash And QX higher. I We're a I on be year-to-date, over expect we've billion.

which So, as kind lot deviate be in be pretty our in growth, mentioned, priority need But the also shares current continues day to we'll do. Sanjiv to market. repurchasing there, we're of every we but why And pattern. I much from reason have opportunities see going to a no our of to we invest obviously,

David Begleiter

Thank you.

Operator

you. Thank

Jones Tony Our from comes next question Redburn. from

Your is open. line

Tony Jones

and you One Yeah. morning. on got Thank actually. was Good for ask me I've two, questions. thanks volumes. letting

X%, Asia. reported, down at of of QX, quarter if slightly for volumes are about in sort So, this cost QX price that adjust the I and has look XXXX, just and XXXX X% sort implies versus in but up then pass-through say

that I optionality looks flow X% XXXX investments? the solid. right? think the volume second should you. few then growth a we here. of to as backlog Thank in really imply some a about maybe sorry. versus it is Asia-Pacific? X% just trending Does of awhile, How it and of been Firstly, quarters? next quite underlying a that we for And post-pandemic in down can it's couple is the And but I'm further guess, timing the of asking that? project use looks also If sort things like CapEx effects percentage cash Or sales, question,

Sanjiv Lamba

jump them. ask I Matt into don't to the and and CapEx talk volumes just through Why piece thanks. the then Tony, reconcile I'll

the in I sale and give electronics and gas how as energy coming clean some gas plants and today side, said view sense we as activity, others. well, CapEx, pipeline proposal one sale past, suite traditional providing course that across that improvements example, seen of sale and to both of on are of reasons I've an from of that was activity of we on markets us and a chemicals think and and, opportunity. Just of see of more the the you including projects particularly proposal I've the

So, to pipeline CapEx see the defined. that I reflecting that do opportunity expect we just

-- mean, see backlog. marginal flow anyway, don't expect changes Matt? that around how concerns I I no that but see are pipeline I the notwithstanding to I absolutely So, into

Matt White

quarter. is yeah, is we X%. would this your X% volumes QX just is have question, seen calculation but Tony, what the XXXX actually it's more to globally And around versus And it's Thanks. volume from leading, answer about Asia-Pac Yeah. close,

how But XXXX. QX, And the we're So, APAC the across calculated were maybe digits I'm XXXX volumes about if pretty board single or for the you sure much in above versus deconsolidation all in regions. the X% not mid QX, off that.

we're I XXXX. traction metric patterns well when to that and you X% seeing would X% So, look obviously say the right the right at price as and versus

Tony Jones

Good great. detail. That's you. Thank

Operator

you. Thank

Our comes Koort Sachs. Goldman Bob next from from question

Your line is open.

Bob Koort

very morning. you Good Thank much.

Sanjiv Lamba

morning. Good

Bob Koort

Thanks. to And your Yeah. have I anything investment? was what gasifiers? about wanted project start that it's biggest ask those if progressing, in Island think Jurong learned building you to up How's the that about ever I going XXXX.

Sanjiv Lamba

Thanks Bob.

you So, as complete been decades. COVID gasifiers for on Bob, some mechanically be point track dates has progressing And there rightly we'd of site few our investments larger a been Singapore set we've well. Obviously, of out, one out as that schedule as plus by or originally largely to getting weeks. to our that's our still that's customer, that impact well running honest, on the at minus

none us. is really, for building an of From So, decades well. of engineering point this we've new gasifiers as view, for been

that into to So, we've that a learning there's of put lot that project. been organizational able

So, it's quite coming nicely. along

Bob Koort

guys it globally the Is be locally be you you can economy, updated if might, latest follow-up, you ammonia, I give an that's to going. hydrogen be going whole evolving? how Is if to a developing. your going which us as And electricity single hydrogen on way the any in have gasifier interesting complexes I Is thoughts distributed on best seat wonder in it hydrogen? going areas? to see ecosystem from it produced that thoughts that's

Sanjiv Lamba

to a question. Sure. great provide Bob, Sure. and Happy that's that,

is, it out, a specifics asked. rightly very talking more developing about space, So, clean we about But dynamics as fast energy more broadly. you talk point start you've the just and and of what more

that we So, see of most about local our to where ecosystem around strategy, building heavy business are Korea, where and duty take that driven think liquid creation how for attempt vehicles. strategies execution a terms the our demonstrating fueling and view is, are of whole kind terms in we we South liquefier when putting believe our are execution, we model locally in, where market, we local of a we in the to value strategy

So, of our that's strategy. kind broadly

to I Now, I that But but obvious obviously, approach a there more that local, we that cases taken we've electricity large talked as would will production model production which effective And to to the a it and to you certainly we in not have the gets advantages. also be but previously with some some cost make would put. which to do portfolio markets, content we effectively could way And to to competitive Northern be take some it. again, must an value, larger supplemented creating both might add complex best existing get greater recognize be that see there. cost you hydrogen to that of then expect have distributed from as about we by mean, if that to that how for complex, entirely have low get buys some it Africa the you be all and in and green example, it Europe as facilities, market, to put across feed export an see allows larger pipelines large would you'd traction that of you have installations that do and this. facility, that very example, to hydrogen Europe, may some there's repurpose to sure some being

we Chile think, similar with green were that would So, to in changes generate put ability the color markets close desert that's -- give the -- it into that to happened solar, see looking one example it. -- to that advantage hydrogen, power, the has you take move that you renewable and is of Does the for? very high-quality then

Bob Koort

so Yes. much. Perfect. Thanks

Operator

you. Thank

comes from Paribas. from question next Nicola Our BNP Tang Exane

Your line is open.

Nicola Tang

the backlog a billion. itself billion been backlog growing. like color anything, so thanks I was much the What's of around If of that. Hi, pretty interesting everyone years around backlog. it think the really size or some the ago. billion more $XX the to couple and wanted a ask for project $X $X.X at I The itself bit little solid -- hasn't

the billion, net-net backlog, you're projects on potential to question areas talked was will I've out potentially seeing areas. at you talk like, sort Do current in or project those next that that a basis? was into backlog? that the around online, mentioned more it timing Yeah, then, of project see curious, and in be then about As you where curious If I existing those sort of you're seeing can backlog. traditional growth Rajiv, drop activity? the activity expect projects of stable you will pickup pause potential and hundreds come you activity backlog the And got the understand, about a levels actually then $XX -- but second to I what or step, industrial was, what of in similarly that. the I'll adding

Sanjiv Lamba

Thanks Nicola.

back come And backlog. I with let pickup start then over activity project So, referenced. the the me we that to

you $X.X the is startups by backlog billion, gets So, said, that we it as have. impacted

through that going had flow as startups some of those you've later impact well. that some are we'll press releases to actually recently that see this we So, and around -- year, we have some got

the couple because know Again, Now, close come more before we that very backlog, of we the because but kind projects the a just control which see many just the through, coming you doesn't second of improvement you often than in controls terms as can Nicola, backlog contract timing, in often think on. of you timing projects, I'll on us wins, we out, an announce this, not one you into it. recap don't these of know, formally timing, notwithstanding are that, in will let of bring half signed them that closed be but but we will

be backlog be putting million, for contract. to which matter. larger obviously something conditions stringent. very They And more guaranteed ensures are incremental, projects, secured have growth. a $X have a cash profile, that, incremental then must as it a needs doesn't Our that by to guaranteed It backlog flow for that the than has

conditions of we be see then later obviously in those this early year met of to the the some backlog number next and as flow projects a that year. have well. into So, part will And

gas on are So, going we sale developments that and plant the on backlog, side. the reasonably both in I've see sale to been that of confident of the

activity. move proposal I'll Now, the on to

production are capabilities lot in been at the industry been in for obviously a at to about in Samsung, by And area projects TSMC, has moment one we stages press, So, list a me space. long There's all are about at amount activity. you've around electronics in are chip of to ramping XX of heard its going proposal the but significant investing I'm various electronics. Nicola, time And that is where before, activity by that now. see reality GlobalFoundries. talk going And part a is, the development by shortages, as one be people time And area a which there really particular you've a a looking large whole in months particular, our about references Intel, of by being that Nicola. surprise, spent up who in that of sub therefore, hearing is

some actively seal also in is to where solutions? their around or can capture around us, even Nicola, suite in also I've to -- of but We're with around even in linked seeing energy, we emissions, and might them seeing area of we're create Now, area, that, seeing the kind seeing in really we we some we're technologies their emissions? the one call refining, technical some, chemical, carbon reduction before engage The chemicals this and making is it -- a other clean addition which surprise projects. refining, reducing in the last we even have projects. that, steel companies help can do said How this. of what case full but

We the pick activity solution seeing a of many a our we're partners to holistic on of ability that have and customers up provide lot And again, space. move forward. in working to with that

Nicola Tang

nicely somebody, had the it initial and XX decarbonization can and/or wondering wider what And use of on the proposal was point. for mean U.S. for any you? COX means if I that progress framework the of whether on industry, what and any on there's gases you Linde That side on thoughts suppose? sort links question last potentially the quite sort to my I for

Sanjiv Lamba

things in need of happen, We've So, regulation heard pickups, happen to for the deep. we economy, That's particularly obviously couple seen with much the Europe. and me broadly decarbonization very Nicola, say three hydrogen that this more you've a before.

we are of guidance your see in and absolutely and provide actively the space is momentum Europe incentives, think that I kind penalties which allowing quite the build sticks, that, to aggressively. point valid

that was So, good to see.

area facilities the also sure that, coalition well. as at in to we're whether looking progress differences funding, it's European in I've leveraging make elsewhere that to the participating that incentives, -- in are whether to other to it's is it's the broader points economies. are happening contract encouraged support we course, gypsy and We make of for said U.S., whether just that see

Now, I'm hopefully that space, by for proposals that currently the view that up -- any is And space. move in our XXQ, in inadequate to incentives build some forward in the Senate but offers encouraged the is House. on and the of substantial that'll U.S. conversations that going the momentum

there to looking So, forward quite I'm seeing closely. developments

that we solution actively happening if Hence guess, am I to happen, currently development sure case, to is make do the need we're trains vehicles, either that ability talking are developments, buses, that that things or see to middle indeed available trucks, of curve know and we lacking technology cost-effective encouraging need duty, cost finally, to scale, roadmaps happen. actively. which is in large at that good I the to risk we recognize the in possible. in say timing there the sure of adoption endpoint the available in And was about we other necessary is that of challenge -- green we is from there is take worked on, space. to making the at them we're today. and So, the think, a right that that partnerships I number to create space couple the for for much those or the that which that as a and consumption that the solutions that scale provide heavy get repeating but the And with in very closely hydrogen those be that. call, still need have that technology I ensure We scale green ourselves, currently remains this think myself up, promoting technology and of are a years as available creates ferries, momentum that many but scalable, a working the I of to last green is has being I won't blue And That do I before and but particular, the that challenge point, need. we

I've see for, these I provided but you development and because worth looking recapping, border that actually are investment momentum So, and ensuring today the think we see you was than this things are that the that answer in space. that were know the sustains, I

Nicola Tang

great. you much. so Thank That's

Operator

Thank you.

Our Zekauskas next from JP Jeff from question Morgan. comes

is open. line Your

Jeff Zekauskas

much. very Thanks

capital returns though which economy. Have up up, your growing given capital going projects returns your years? programs changed an of or have natural returns on over Your capital moved That the on couple in on cost the the same? your staying on-site are is reduction really is, the and on-site and past

Matt White

Matt. is are you? the same. this How Jeff, So, our investment criteria is

So, at But point, in we've a we see that execute projects us projects, model to we at exact And which our business acceleration and two these deliver our we therefore, on projects, the the and we going returns and expectations that continue, then, giving And basis. metric return maintained bode growth And the continue as deliver the entered well on significant those to throughout this on on a the significant your capital. we're expected startup it trends on remained continue should getting the intensive we this on. point, non-capital this combination that into of projects is long and for how look have, to that happen them we have, the same. given forward. as density

Jeff Zekauskas

-- made area, that or possible in some -- projects, projects else the And or the contemplate when of the Okay. East that? Thank whether for hydrogen your or you're is you of somewhere projects are are it's those ammonia you involved jurisdiction, that. not any various doing in being Australia that builders Mid with working any with contemplate in you you

Sanjiv Lamba

Right. slightly picture just a give want a the of kind hydrogen sense guess, on you where our of stand you Jeff, saying we well, by I as I And to so, that broader headline we to give are. yes, piece.

projects. So, space, up opportunities hydrogen previous last the you call, every was, of had so CapEx, on across related run know, that we couple we a a range that I've We billion. Linde council. in call last The of we our value month, to, that adding review the mentioned XXX review meet as we weeks saw what -- $X.X before about this whole projects probability ago all

carbon -- -- these some see are one again, which large of mobility look we've two seen projects, well increase a are in be as then to But the areas projects obviously your And somewhat where at beyond of to number is point, ammonia as So, capture. elements, large both projects, we to hydrogen being we of added of large the and that. of kind size of which on that, tend larger space number as smaller. these projects, downstream the the get

different working So, own players is are a were customers also we be the you with the has Linde of yes, out aware loop. answer technology Jeff, ammonia and number Engineering. of may who at looking ammonia Linde loop that its

in a in the and So, we've done elsewhere, Eastern number loops of these Middle and East U.S. ammonia including in Europe the

advantage those provide solutions, of which of to tie technologies our in of being unique very attractive it to and makes customers. have we all those that able So, many

Jeff Zekauskas

much. very Thanks

Operator

Thank you.

Our from Citi. next from question comes Juvekar P.J.

is line open. Your

P.J. Juvekar

ITM of projects, technology examples Sanjiv through give the Sanjiv, hydrogen green can joint winning and morning, does in Yes. PEM you venture, you that? give sort Matt. and Good deal any advantage with have since your the of you

Sanjiv Lamba

hi. PJ, Yes.

So, yes, of course.

is ITM unique in many PJ. with deal ways, the So,

again, happens. The equity called above the size for unique space. ILE, that that scale projects good projects is pursuing. and developments up But us ITM, first them. gives them that large in the that PJ, there of activity, investor that technology to particular to we an joint having advantage venture which ITM we have we ITM, we're are where with a we A earlier larger with And referenced the are what in grade of access more competitive venture all game on scaling and Linde is a joint up as importantly, is And in Engineering/ITM means proposal on. that still support I are that at seeing looking being lot in able

We customers. are very in with close those of in some discussions cases a number select

to develop as that ourselves find pleased really quite see linkage ITM actively, we these and leveraging So, that projects.

P.J. Juvekar

you X Class on hydrogen, us to green Plug Thank fuel trucks Power Class over also of Can And convert a update sticking had Great. use cells an you. some to that? your X to to you give and their deal with Great. hydrogen.

Sanjiv Lamba

PJ, while hydrogen up. with of own working many most Plug they ways. we in different with we So, We an requirements are facilities as Plug example, Power don't have work and their the supply today, Power

in We yet, kind a but are looking development announced progressing hasn't on which fronts over been spaces, we other at there. of of also different a collaborative are number

have we players agreed with One few then of hydrogen. as on cells will that trucks products we that our moving other admit the be here things Plug I be well with to a fuel and must trialing is we'll Power our and

already South those we trials move Korea in forward. the and seeing plan for and with for So, they to U.S., a be progressing place have how Europe

So, in again, activity space. that of lot happening a

are really trucks get with waiting PJ, to bated We the these breath, on road.

P.J. Juvekar

Great. you. Great. Thank

Operator

you. Thank

Clark from question comes next Our SocGen. from Peter

line is open. Your

Peter Clark

Yes. everyone. you. Good morning, Thank

accelerated the know actually The the the been probably seeing back in U.S. following by at because you you hard of in business that out still dragged quarter, in first the share. and but hard lot the a question first construction, saw biggest you've around business, double-digit and you growth quarter, the in what the goods, a in mix. first is now looking particularly I had of good. on Particularly actually I they're second down from quarter, lot a competitor there's know the has market gas it’s differences -- first packaged question about there

you wondering, seeing the question and So, is it excited or share, I'm about regional? very you maybe all organic And is then, you the just some the with internally just criteria you. Obviously, what potential targets acquisition investment wondering second mix and given fit you're the I'm your potential are around all you for many that can not just have, with investments. money? line, the taking do the on are potential return, that. on Thank

Sanjiv Lamba

great Thanks A question. Peter.

forward those We they've U.S. moving gas to gas So, the strong way the goods. -- am thrilled on but with and I really in as growth have Peter, is sequential admit, at both team hard double-digit received elements see business that on both I of the packaged growth, well. moment,

you some very space, And our Anecdotally, we but own the tell And moving particularly see comparison certainly share, That anecdotal, will space. are think, read, in strongly I of kind is you obviously, the taking about but us I conclusion. competitors you to right can of people want at I've we numbers. don't kind know the So, forward. comment but talking that. reality I the is of that growing tell that are will get that its to I look on --

bit about acquisition on strong performance space. there a investments both on goods gases. If and very again, I hard move the little and So, over to talk

are size of one the as sensitized come merger, given you'll and we regulatory stand in we So, challenges, appreciate, having to where acquisitions lift of happen. three on how very approvals the our Peter, through years can -- large

pool much opportunities with are of left we So, smaller there. a

requirements have And, larger requirements, become criteria to acquisitions We where larger well. challenging, will regulatory that's good of a course, to the and we've do our go will more antitrust, trips in And local tuck-in typically will The they up environments tuck-in you little do up. as kind as after from particularly investment we markets something of or most any we we a understand as et live them. our day, soon got find as cetera. that, know to of acquisition, ones high-quality

forward? certainly you could. where happen? tuck-ins of to through, expect doing see number them, find long Will pursue we if we us all a I come day do we Yes. So, opportunities Most large see those acquisitions likely moving will

Peter Clark

you. Thank it. Got

Operator

you. Thank

comes Haire question next from UBS. Geoff Our from

is open. line Your

Geoff Haire

morning. Good

Just have two quick questions.

that First just at energy that from you just does it benefit that looking of then, obviously cash could flow, does, And are margin has rising out? And down cash and which in any possibly if check, year-on-year break costs? I that Are negative impact? you report, the flattened improvement QX quarter include all, a higher other the any and sequentially, within mentioned you've taxes. have the operating -- cash flow in can the there movements

Matt White

answer Okay. Hi, Geoff. It's Matt. that. I can

it got your just think I make sure right. first I So, question, to

asking related to about one you kind of again? energy. margin I You Can repeat were that lost.

Geoff Haire

Yeah.

you've improvement, since trying come be you've And within that every would I'm a to not been trying quarter had rising margin as look improvement you've net give to well? costs. margin to you margin merged. rising reporting, benefit the the improvement energy big you've energy you've I'm at understand margin so, what Does obviously obviously So, got of that -- almost is, just costs?

Matt White

Yeah.

dilute what pass-through. one, call -- will costs So, that's and the on rising that cost we energy actual the your margins

So, we isolate costs pass-through. grossing simple up. as And obviously what that is, it's

So, amounts. you'll see equal the sales and cost dollar of goods rise

will you're on up doing your effect a has negative gross margin, gross or a variable but have because contribution effect. on it therefore, contribution simply So, effect our it no dollars,

cost is So, gas natural as and that that we electricity energy. pass-through isolate out primarily

you're Obviously, components will as commodities drive those in those through, they that. them will type inflation rises, dilute we our So, margins. pass but to tend seen

while mentioned XX year-over-year, that XXX pass-through. this a margin, point related basis cost bps includes So, on up for to to example, headwind we're our I'd

that, points excluding have been we would year-over-year. XXX up basis So,

contracts So, but we be are it diluted. our as passing enable, will it through

to yeah, payments timing operating $XXX incremental the the is about $XXX with far as your sequentially, As taxes was purely made. when that and million just were cash year-over-year, flow, point, that of million it's impact

In addition, so are is probably million we and working capital, or $XXX of that growth part unfavorable, about was growing.

consuming of board. conversion we're our good bit our quite across look they're cycles, when at But cash So, capital. the I DSOs, a working

timing. engineering Another is piece simply

was you saw our confidence to a As a their cycle? of have we plants. backlog. that more have degree of negative entire of Sanjiv high on cash bit as tend What of engineering mentioned, a including sale of is but You consuming a backlog, downside,

backup, of cash feel good both well forward looking as we where our about making cash as So, and something and this pretty that's timing will will taxes. around on working capital, turn feel QX some I be flow

Geoff Haire

Thanks.

Operator

Thank you.

Mayer Baader Our comes Markus next question from Bank. from

Your line is open.

Markus Mayer

from questions gentlemen. morning, side. Good Two my Yeah.

the XXXX already business startups business the your effect the price, of on question that oil recovery of you your effect First or second of to think on will be a you year the we this Can't new there underlying next business, out on need and strip if XXXX, basically all, recovery can business. And to kind also together, back And the a levels. was prices or positive see need nitrogen to there? of be you oil expect year this what your not, business? given nitrogen recovery fund

Sanjiv Lamba

Thanks Marcus.

this that. and on through a seen nitrogen your and of That's using been nitrogen, works large can't to really recovery you a as you got It's question been period, really stable right is, doesn’t customers for a fairly or it couple haven't that. provide know, stable through. step So, that we significant so who do we've volatility field. recovery, linked great volatility, geology are using nitrogen of that lot for in The that then enhanced are you out as you process the Marcus, in

So, levels. you it's that stable see fairly

yes, number startups, do of of happening. terms a In have startups we

release of release more you covers towards a from we I next don't startups happening time press some a time, be well, the that do provide but year. name know, few as this them, to want of As -- of beginning happen. kind to yes, a have there'll year end that'll those. And of we few

Markus Mayer

But of some us growth, of kind can magnitude the give indication? you kind of

Sanjiv Lamba

EPS two that backlog how our over that, that and you impact when to the I'll think to roughly a our getting and about that bring just one level. we to EPS have. we what I'd say, converted back backlog which about to to growth, something is That's we've point us correlation, provides is you one you from comes currently about startup percentage into in the that So, three-to-four-year the -- down backlog that's really think way like past, think through I startups therefore that Marcus, see a a way gives period. And said

Markus Mayer

Thank Okay. you.

Operator

Thank question McNulty comes you. BMO next John And Capital from Markets. our from

open. is line Your

John McNulty

my Good Yeah. taking question. for Thanks morning.

them So, I inflation. guess, which tied the of same topic, to be two would

materials, in backlog got of in much that us hyperinflationary And been are about? that projects up maybe we necessarily So, a to of point the about inflation? backlog, locked you've at the this et kind how almost cetera, obviously, that of you so market. that don't not the the really to is we're locked already and in equipment, percent kind have have Can that worry have terms think what of you remind in

Sanjiv Lamba

plant project, sale or the fairly when on we then, of but so, a costing we with of detailed that we vendors get stage into whether Sure. point the as John, And a by a well. the costs sale all gas get in a OEMs side of our in other -- particular, very at securing mechanism. lock into it's

costs So, of are when pretty already most in much. our we locked of, the backlog are stage in

stand. we give So you that should a of sense how

we developing that proposals seeing to now, inflationary into already that and -- factoring customers. providing we're trends the we all As are those

that process John, of experience sure in So, having team. process strong and make lot again, have we engineering around very that good rigorous our place, it diligent managers, mechanisms a is of innovate coverage or to and

John McNulty

I saw even further your we should that's how seeing, we you're acceleration inflationary putting just about No, the given from more already, like does pricing levels environment, think it. pretty price guess, look some something that it And that I but tied that? given can know could Got that we the see this And we're kind business, that, through. that lofty it's of see helpful. that, inflation then, we the your of environment, -- Is given Asian into business, European acceleration. just

Sanjiv Lamba

pricing through as So, shown, of kind of know through And John, -- and the you'd on-site the part line. little large very we've a that's business X% a comes comes great package the merchant comes and through pricing question. about that overall really

can segments, across you on the therefore, that math a package. merchant says number single and mid digits So, average, you'll and different particularly do from to on get those pricing

to I you that for about Now, forward. now, as that concerned. our team job of a far is team making to continue inflation we the been telling has We've remain done this as quarters fabulous do that move ahead expect and two as curve we sure of

are making our So, sure for We customers. were pricing. with working us those that we that having conversations

us. through, for inflationary trends it come of remains on top mind we see to continue those As right

John McNulty

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

Operator

you. Thank

Our next question comes Stanley. from Vincent Morgan Andrews from

is open. line Your

Vincent Andrews

you. Thank

does what base could the -- about, why talk about to how sort that can Is see, returns And $XXX to of question, as far menu talked a billion $X sort you I you backlog? billion the traditional there of just as us -- how Just choose isn't versus opportunity million, that it CapEx of or to CapEx be is? the a robust $X it you $X why billion? compare of

Sanjiv Lamba

bit I'm a a question, there. question. itching about been small Vince, asked to that's in on-site, because a good that's you glad so talk great I've Sure. little that lead

So, that. let just me pose describe --

on-site projects think we So, is the great a small to have and point. essentially, illustrate example just I when

-- have we Here we have so long-term contracted. these are contracts,

XX timelines. shorter million We execution These kind But small call there's also want on-sites. secured signed are to about first cash it on-site in the than because projects day. And year, is, less of were more We've today small each are every I have projects they we'd typically, individually, there. half have in $X love of this solid -- than They reason what to good, flows more we already. XX talk these already. returns. the of particularly up than these XX And do accretive, our projects

about, are strong good love revenue the that's we over These year, good that advantage actively in point synergies us you that And giving plants, so from this number because us really here's strong solid period just that over -- through. synergies we go a a got last I through. XX% this really leverage project, how really -- these Now that. over a that two see in on in a XX% of the put jump well. execution merger most year. And winning other make there are the to merger suites why while and get think, of as is last we'll I think we we Same return, and which I flowing I we than And higher being here true. to brought in example And of we never quickly. packaged revenue kind but an we points, execution. is deals of space. That work But about great, technologies, position example think a and put that's never can talked them that the very it,

Now through CapEx. base all come of that these

see the what am. of number I demand. clearly, $X in and does will what And that isn't of flexes are. and the to we the excited that There about it what we cap that with am billion? the market needs I flex So, a business with market

I -- All big. to those all investments Good sense. that any anytime, day, or to it of this investment have quality projects have hope needs. criteria. our small meet That's do, needs happy

Vincent Andrews

sort was And maybe That and be of to the sort past. as more should. feels reading backlog, backlog into great. combining this plant of of a sale follow-up me, just just you're gas I sale the you're than I But spend bringing it the might -- business and sale that bit now of plant the sale but front of stage in than see I it's margin the versus perhaps of lower a the business, the business clearly a gas. a to little more CapEx that of light obviously that's a

have margins you're having about And years thinking there you do a come? business basis? am in prominence is of and to the the correct of improve there engineering returns, So, the about be or to to hearing the more going plan quarters I wondering, on go-forward that we're just and sort I'm it a more kind

Matt White

question. great a That's

sale offer models leverage, attractive the proposal gas keen right? that works able business offer sale is to So, am advantage, the be in get model, on of to which not where cases well. for an the those customer to or And about we take I think in point the our for back competitive in to the the talk So, let me right? of range the and be is, a just full a opportunities see and opportunities, just how if I business may, us starting with model which particularly looking quite I able unique that, want that have about participate and to marketplace. two plant to we concept of of me either step we to So, at that some is ability do going

Now, the profiles are a little bit different.

It light. EPC right structure ROC saying in It's flow for accretive. doing that, positive us. an asset cash us for You're type is is

we day-out those at advantage capabilities sure that think, to as that level need And have. strong leverage our much and fact competitive we we engineering a we and make we a tremendous the really as So, have is day-in do executing want that capabilities to. we

understand the are aren’t just where do are to, I other. giving use I Now, you one want and These for I of that recognize that and make options exercise options have these what's best two those to -- to organization. kind and sure or I I do can them and need two where we prominence the

investment I space And of we advantage bringing there execute maintain that there. every I principles advantage want that are the to in get, to And and have the that One, unique ability think want the approach and is discipline I this Now, opportunity to two on. criteria. be kind two underpinning to my able in two, I together. my

Vincent Andrews

very you it. Excellent. Thank Appreciate much.

Operator

Thank you.

question next Wells Mike Fargo. comes from from Sison Our

open. is line Your

Mike Sison

for industrial think Hey, morning. a given And step-up inflation we're in the gas do couple you there. just at good in of for to as environments demand. Nice curious, there years? I'm head inflationary we this next the multiplier quarter Historically, industrial good could be be into demand of where cycle, tend sort for gases

Sanjiv Lamba

question. Hey, Mike. That's a good

pricing about typically we most with Inflationary say we side, like before. spend environment, a -- as talking also, us good us to ability of right. because the contractual have open much through pass our our inflation inflation that actually pricing. on heard inflation, of So, the opportunity when on we think the what the side, onto pricing conversation it's Largely happens but to And you've structures the time for we you're customers. about

up do areas I yes, of typically that's happen actively. and play demand Now, the see constraints recoveries on Inflationary environment, we play where when some pick side And as out think will demand see well. some inflationary and into to that in we see lead industrial environment, we that we some activity that --

Mike Sison

Great. Thank you.

Operator

Thank you.

from Our next Partners. question Kevin from comes Vertical Research McCarthy

open. Your line is

Kevin McCarthy

deal does to to more continent? do it in early an the How with arena, to of energy I partnership see morning. Snam investments on Is you could if Northern has going flesh develop inexpensive side? days? the substantial hydrogen capital wondering more perhaps you are you that future Good Maybe up have you Europe. what any, the update technology making economics, move that last out if in how projects And in clean that commercial in production and so, on December was announced Africa the barriers, to provide or Sanjiv, the paradigm year there. the the to European if from can

Sanjiv Lamba

good Thanks, question. Kevin. That's really a

partnership with substantial common in the critical how understanding to happen. met particular Europe that of hydrogen we So, the like-minded of the what forward our are of partnership is Europe, and view be needs and appreciation getting and in to happen needs development in for something vile mainland Snam to market common to move gone that kind needs is

of Now, these take as as we and that of we in with think watching Europe all are kind And as activity things, how to and speak. a is, are time, lot waiting of as aware, see that, funding things you there part the happening I Kevin, develops.

that do in same complex. out want is of that. number activities you But to European need admit do It which Union there's question, just almost we that's will us has before is, the partnership I must actually for and that a moving regulatory about what terms substantial unfortunately, and environment, as the see be on need controls. So, through the come talk a little substantial country either momentum. some time for that, administrative and available Nicola's get suite for bit developments a happen of it's with have you whole it out go we I elements and want -- of the I time to at able into some take but earlier and here Europe bit some these then repeating of that said to things happen. a And myself -- these encourage happen. itself place, -- that that to the of right? other -- goes to at developments to One, level, is need barriers of process a some or and bureaucratic, you in of see how make be accelerate question allocations couple And a your become then here, but funding create to I be forward. in will part I'll happening of to tandem, to of incentives

So, is -- the of there is it's a just part process. whole piece that,

kind is hydrogen Europe the of side, develop roadmap happens need green. mentioned, piece can a green. the doubt happen a that on today technology I on number is blue part absolutely today be whole on that will provides will be the other On my of where is is that chosen the that today. it and suite that. view in My you you scale assumptions There to scaling true up Technology true to for come. of blue that to able no of on for and before technologies mind do years Linde exists

development the which want certainly towards, see kind that to it, scale on green Europe is So, select to -- lean very happen. side, I we will need and forward technology of is move to but

five that technology is a three of years kind I out. That's roadmap. think to

becomes that's up then capital -- a this why point to to a those see And I green. as able roadmap Europe, -- you which electrolysis that up create as effective energy. where Africa is attractive efficiency renewable efficiency a concept point to get in in and a the so and position to work for for Northern capital cost also know, to whole can everywhere low need You development of advantageous both technology progress. available not cost that's down be bring Africa Again, need in in you particular. progress you to

actively it we but are still activities in progress. those is of involved all as move forward, We in work

Kevin McCarthy

Very Thank you, helpful. sir.

Operator

will Thank you. from from take our question Jefferies. And last Alexander Laurence we

open. line Your is

Laurence Alexander

just customers earlier existing than on-site reopening on you elaborate inflationary seeing Good start the front morning. to in or the around normal negotiations contract cycle? you get discussion of Can Are renewals pricing?

Matt White

are or prior would pretty pattern exploration. I mean, two consistent with you Jeff, three expect. Things as Matt. the normal usually It's to say Hey, to would Laurence, I is years sorry. no.

any You the don’t begin impact talk type that. on and inflationary any of usually to environments have about renewal

Laurence Alexander

Okay. you. Thank

Operator

call turn And I'd back conclude for to today's any conference. Thank the remarks. that does to for over you. session like closing now question-and-answer our Pelaez Juan

Juan Pelaez

call. And online thank Crystal, everyone thank you. participating today's you for

reach you have day. to questions, out. a If great any free Have feel

Operator

may this concludes for and you participation a and today's call. Ladies disconnect. day. conference Everyone wonderful you gentlemen, now your Thank have

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