- Earnings call transcript Q3 2022

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Operator

Good day, and thank you for standing by. Welcome to the Linde plc Third Quarter 2022 Earnings Teleconference. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. And after the speakers' presentation, there will be a question-and-answer session. to conference like to now would hand over the Mr. I Head of Pelaez, Investor Juan Relations. sir. ahead, go Please

Juan Pelaez

and Investors statement Thanks, linde.com everyone, After and Q&A. Today's Financial note are Good And disclosure Chief update XXXX an on The Juan Cecilia. all Executive morning, which with available during slides, Head to presentation some I'm third outlook. in attending again on page Pelaez, the third website then forward-looking section. Linde's Matt numbers performance by X up our on quarter remarks and materials Sanjiv teleconference. the our in joined for Officer; of we statements Matt financial this that, the Please are earnings Sanjiv and presentation. Investor and will reconciliations read Officer. call of webcast. this wrap adjusted the provide this to give it the morning am and will I at quarter appendix Relations. of applies will thank made Lamba, you Chief White, opening

the turn now to over me Let Sanjiv. call

Sanjiv Lamba

EPS basis and a Juan, XX%, operating everyone. flow, ROC good cost employees challenges. once record XX.X%. and underpinned of excluding delivered strong points XX quarter by the economic margins contractual Thanks, FX, a expanded when adjusting while all Linde pass-through, billion cash operating despite again morning, increased for $X.X of

the pleased the it's trends, find help our these growth results confirming company the highlight to team, growth resilience performance, which X. these, remind of on environment. of like business map In which received to relentless I'm by road absolute financial financial the Now important and for you this These stable testament diversified truly slide science-based execution reduction a culture. and any results, the recently in and the investors our in to our see our times capabilities de-carbonize to are initiative, addition achieving quality of to planet. both targets emission can approval targets its

growth segment experience with make robust collectively end XX% up beverage from prior digit to of business markets quarter, year with this versus underlying and each one-third percent, health We electronics double-digit about food double are continue sales up sales almost care slightly and growing last year. volumes. which Resilient pandemic growing down

items Our gases food, consumer carbonated are specific trends. critical electronic packaging respiratory consumption than rather or These everyday such broad applications, beverages, the and volumes track of technologies, for production components. to and levels as

Furthermore, see quite reading despite are we in of be in continue they electronics gases news, fabs So stable every what during economic periods. region. you volatile the may to even healthy supplies into

underpinned We've cylinder ensure to clauses I rentals. contracts. different. including so and confidence contract most recent global on regional I and have industry, absolutely the the force for in The increased our US. significant sale see trends strength note don't project returns more large you're on-site sales fact, today total the In and these structures these demonstrated of markets. protected what are countless of lot including this the of but challenges, a majeure to that portion payment end through the It's hearing I and a probably trends major align awarded reading. cyclical recently volumes, time semiconductor of being bottom Recall And for being to and by a table the to manufacturer clear. of of customer spend we electronics, half electronics language, independent our similar provides fixed the with in a speak won't fees are that, Linde gas billion, after don't backlog important for any contract are pandemic, second $X.X

assets with represent during these customers a their validated end almost allocation running. markets, up addition, be be double-digit last the A to portion disciplined markets of cyclical challenging the of our And capital approach to In percent. continues long-term large are also most to that times. the tend in ones XX% competitive sales,

continue aerospace see is growth Americas. materials; battery we mining strength space; in in broad-based, commercial general hydrogen merchant including especially for to While manufacturing and sales;

Act with strong passage decarbonize Markets. activities ability and US one slide highest hydrogen into atmospheric our the for from X. accelerated time well different Linde, Decarbonized economic New With grouped as can driven market next to significant potential activity fact, economically support IRA security, network, three by continues especially has in The Decarbonized effect, best of investment true This which is we've the quite or and resiliency In Customers find cost being US as combination prospects and across further you IRA, unrivaled the resource Coast, to consumer gas which of our expansion. of Reduction be as a growth these Inflation the of markets is natural the developed new US. this experiencing the to some the on and the categories lower growth energy a Gulf dollar

which Decarbonize Let generated hydrogen for provides asset simultaneous to potential hydrogen This stated own sequester and considering while the me hydrogen of into Scope our exceeds reduction network, production. investment production blue billion emissions the sustainability The the supply and benefits: Linde, of Linde to our Decarbonized represents ability our from start existing $X with production base. emissions existing COX our X goals.

two opportunities. The Customers, represents separate second of category Decarbonize

by enable their intensity is as frackers carbon through The refineries processes first, That customers decarbonize our switching. fuel furnaces. in their to fuel hydrogen, using low to or

IRA over business it. from decarbonizing easily pipeline to sequester, incremental base especially benefits in This will the strength addition, our Gulf the investment similar Coast. which existing $XX to to could on-site in ability accelerated our network by model category to be contract The the an own Linde's a revenue to and path our customers, current the and second support and opportunity is carbon Together be emissions operations and would benefit network period. billion, tax in our I connected to currently customers asset credits given of monetizing this exceed capture potential view on existing their

opportunities are of and markets that wins will our new greenfield expect materialize signing These business to to with the represents category, the very be starting project similar I payment new third on-site soon. ammonia. current principles. The billion to some with to too, IRA contracts announce blue and of returns. with are stable we fixed We more follow of of ones of investment than hydrogen a which and larger potential few green to estimate plan the $XX blue and some projects overarching pursued, Regardless related

We with for geologists. not at intend we first, experts subsurface are to The partner Linde underground all operations.

criteria. projects investment earn a Second, commensurate follow In undertaken. other our risk words, for return will the all

Third, industrial core, which we is will management stick of to our gases.

traded chemicals. we We own have our have speculate on or interest products. for no Rather, globally offtakers to

Finally, understand to of it's the the nature tax important in credits IRA. the

credits essentially whether our have are credits are liability monetization develop a grants, pay for Therefore, through us it's understanding the tax a on to used While the against years by or six used first year must US an tax to we third-party. important these projects as like five XX tax that be sold direct Linde of up to cap. these

US energy our the I'm alone speculate the market billion the from the focus tax coupled we ability delivering relentless And in over financial expect our on seeing in in pricing very to percent next XX-plus meaningful keep total now on clean growth next within us secular EPS over you the are Matt what operating course, investment value discipline the through confidence productivity has Overall, clean front on projects walk energy in over and I'll won't the call accelerated numbers. Of several gives decade. growth opportunity credits next transition. excess and today, business over driver announce to exceeds The IRA me the we years. decade. to with US bullish opportunities $XX the the for our base the turn near-term. the what Linde I to of This and is of

Matt White

the the Thanks slide billion contractual an over Sanjiv. represents of Sales $X.X energy for year pass-through, quarter which as reached of of billing X% sequentially. to and results. energy escalate. XX% to X% continue grew turn last costs year-over-year third prices Cost higher Please overview X

dollar on merely unfavorable but translation This no dollars, reminder this currency And the has and deconsolidation. profit every a As the major growth gross-up effect engineering as X% dilute mostly is by strengthened the against Divestiture margins. US X% is currency. to offset Russian from a is favorable headwind relates X% project operating in billing. of of of has will contractual operating timing

taking Sequentially, and are came XXXX. X% a over and Americas XX XXX strong pricing XX.X% expanded over underlying pass-through Volume XX% consolidated increased one-third year XX the as year and margin continues demonstrating stable the ex partially regions profit X% the XX% cost represents Return increases currency. lower around items, growth as expand than ex as Pricing volumes weaker the be in than offset EMEA. growth pass-through growth broad-based prior EPS Operating remainder sales in more XX%, of is recover Linde's basis in package of operating exceeding in by expect a project when volumes $X.XX This to more volumes capital basis all slightly sustainable from offset double-digit excluding merchant EMEA. which ex-FX X% XX.X% by portfolio. last volume margins is of a from of points and or and EPS sequential macroeconomic still APAC backlog the lag record year. breadth increased world base. APAC, over We percent factors. of these of the to of Excluding eighth for XX% above profit from a normal driven factors row price actions from margin, full and excluding capital quarter points declined pass-through. resulted improvements effects points in conditions growth when $X of basis a inflation. of Underlying both from seasonal in and operating Americas on another similar EMEA reached billion effect combination and of the in weaker to proactive

modes investments also opportunities, for how approach clean which an trend cash disciplined other in and across have part management. track expect significant than the to asset ROC a intensity, multi-decade although we record. integral enables of capital mentioned, different capital near our all future. is The greater result of capacity no investments, we growth large intend supply we unrivaled of is energy network Our successful Sanjiv which leading without wins industry announce three ample to

one important stable metrics geopolitical quarter against backdrop be interest Cash and current with X the third Slide owners flow of key uncertainty risk, most rising of returns Our capital rates. on the details more indicator the to especially industry. expect provides longevity, our a making commensurate long-term continues ROC in of company stability management. and

the trends up cash operating year. flow see XXXX, QX sequentially last can and with You from XX% being highest X% of

as define right base all dedicated CapEx, $X non-project to billion we cash billion which In initiatives. growth are represents to The addition we which CapEx half that deployed part approximately flow, available quarter. operating flow. at flow investments, $X.X cash the per shows of slide how of cash remains Recall steady less year-to-date base

allocation As policy a simple reminder, is stable. and our capital

rating an the year. to mandate maintain a A have We each credit while growing dividend

I current thus recapitalizing priority metrics $X.X single are better on to Year-to-date of balance CapEx used leftover the totaled based meet opportunities. which billion opportunities business an investments is in and repurchases. are we rating acceleration core Our of for than that anticipate criteria a and credit any our and sheet. actively cash have the invest stock acquisitions, A is set our between Currently

substantial of slide to back our long-term quality from macro dividends guidance owners of irrespective to drive billion steady shareholders This in wrap demonstrates continue I'll $X.X will returned and growth up slide that form clearly stock portion year. increase while XX% climate, repurchases, the the of Linde we've last with on a an year. each sharing X. Finally, with

X% the There For excluding to $X.XX to $X.XX to headwind. sequential a assumptions represents driving EPS from X% this. be growth, estimated This anticipated XX% currency is or are QX quarter, three the X% to $X.XX or fourth an midpoint. decline major

project results been the decline billing expect had to in has organization I strong timing. profit rebuilding due are by streamlining this while project Engineering the QX. from competitiveness project we naturally still And sizable progress sales the engineering maintain business engineering have and lower QX Americas the lumpy and a First, and backlog and quality to to driven timing. is X% results,

where worsen stabilize sequential January but seemed they to anticipate currency wait driving EPS see another rates to X%. we'll by finish. down to Second, in October until have Rates ultimately to we

you assuming also Consistent this business Finally, we can divestiture base the placeholder. effect a are model a midpoint. better the GIST non-core prior so completed growth at but conditions merely more with of assumption details in the economic of no the we end at Note, This of recessionary minor impact. guidance and end at appendix, X%, QX September. is quarters provided the future we the the at top thus had

are Overall, conditions XX% And to the when growth guidance we'll quarter, if if execute $X.XX last continues be XX% range resilient, to results. better excluding $XX.XX through So demonstrated of better. team QX mitigate. the global better, no the The is actions to The take full worse, higher from despite exception. currency. driven than represents we'll challenges. to midpoint year of last they're XXXX by year conditions and recessionary do will Linde high-quality performance We've $XX.XX

the now call what news, deliver. turn read to Question-and-Answer the you Q&A. So, can I'll of in over regardless to you Linde count Session

Operator

Générale. first Société Please take now will you. question from from ahead. Instructions] Thank Peter Clark go We [Operator our

Peter Clark

sorry. Yes. Good or morning, good afternoon everyone

out called to gases think across brought Marketing's White I ago the in management you practice. and And pitch over good regions. year team inflation know You a best I try

you that it what how you. price environment? in you wondering, this added think Thank inflation gave from and competition an against or heads-up Just a the advantage you

Sanjiv Lamba

coming I'd things of there that as consequence inflation that happened say through. Peter, two are a

inflation in not You early were and transitionary. we process, Peter at said it that, recall very the it's working we that through looking believing might and

execution in about have I the That's lies drives day. is one think group example teams The that relentless we proven we a practice that here been broadly. difference that as more what And of over pricing the culture. now. And that's shared brought every all obviously Peter execution. best within LatAm

are of decisions They're requires end You know by because -- at performance day. culture any organization. the performance that is know month, of come the review and about month that pricing out rhythm as made a that that It every look deviations doing every every really made. down and at we've week that's have driven the conversation is been they we piece well every we culture that the And Decisions that our of not as underwritten I or to month the under of we sit other the think progress or it. have cadence that. the that drives made by of made operating

Peter Clark

And little I one. can in sneak a

the other at On suffering these getting customer, small quite customer, all? current change customer, you in concerned behavior industrial smaller the Because we've are heard how are European in medium-sized seeing companies any about environment. customers

Sanjiv Lamba

couple ways Peter, address to of there a are that.

how there at a that the I receivables happen base accounts receivables. customer or we're but that And generation confirm I'm seen the to expectation, to what's say different currently I at. markets As I we've look certain well. resilience very responding. end a that is small-sized quarter predict likely I happening for think the is reflect that look as beyond, obviously, and receivable we across and amount indicator which important across I to cash now medium paying to of factors to two markets to that, Europe, what's as the lot can not next within can you of particularly customers a remain are are think going One attention in

other piece remain out volumes pandemic markets, mention remained when reasonably and at and most if includes came they've I The over minus out well. but is, end impact of stable. softened as small other see that you you you there, care, medium-sized health the reasonably for customers just EMEA significant Yes, a strip a you little, the to they And stable. I'd that look know the three volumes

Peter Clark

Thank very much. you, Perfect.

Operator

go Sachs. ahead. question from now Fischer next from will We Goldman Please Duffy take our

Duffy Fischer

guys. good Yes, morning

Act. of Just around and the questions slide four Inflation a Reduction your couple

typical size projects sale around sale of just the be? end average plant? out can how you IRA to of do or the if much the projects of two percent it you your grow years, of will one, maybe think? you Second, absolutely three backlog do versus What size And kind first, that gas increase? the will up being for you think backlog have of think look bogey of do your what relative then historically, the we last what So, should

Sanjiv Lamba

Thanks, Duffy.

Let me with question start the first. backlog off

in actual you number weighted billion close I will that obviously trending those $X the recall, in be part obviously talked to These to decisions of in past in projects a in this to order when I've That's a will $X conservative. three are decisions $X I'm number, by decisions billion. of obviously look expecting at Remember, to the and next around up about given projects. billion. the billion in these As calls, related And then size Duffy, backlog, the about global the of number. probability of billion next of that's the years. $X we to tend Today, quite two accelerated IR something years couple to end the $X

as both of we sale in able have sale that returns. this -- them our industry and of both ensure execute plant to being far do As to capability unique our the in of of advantage both have gas enhance we and is actually concerned

So certainly risks our call. keep. something make is the want from projects, work with I to that want way the optionality sure associated that that perspective of I that that quality make final we we before that the through And to

to and fact and appreciate developers that we that well. actually customers recognize offer that flexibility Our the as have

you opt would number that to this out of the at where see size you and to XX probably $XX-plus that to risks find I where projects a you as So, XX expect. we happen sale bit Largely model. about to you're of say of on going That different though base sale you in particular we to principal the look we're are talking is then percentage plant projects of the projects billion a it's bit gives as attribute going little to terms of of out a is project size a to to I'm a It give these of what There gas that probably we not scope sale as the an we what of up of number. fair you projects depending make principally plant. gas itself. kind that of That's of they see kind range on model would no that I versus say like large average for view. can

Duffy Fischer

guys. thank you Terrific,

Operator

Steven Richardson next go will from now question Please ISI. We take from Evercore ahead. your

Steven Richardson

hydrogen Hi, good of would gas on in CapEx the subsurface. some Where end of questions thinking of projects then you're you you expertise is the part a limiting about of limiting on them how subsea also do morning. I that to couple needs you exposure blue that. the that or the these appreciate your industrial and to comments a consortium, A kind be secure your of setup? this in Sanjiv something in can think terms in greater of scope And project partner fee? think for

Sanjiv Lamba

Steve. Thanks

first. talk let about scope the So me

that got take we in allow So technology we moment. There HISOP, technology then within typically sequestration. We rate us PSAs for and we've carbon capability the call bring. is capture capture that absolutely proprietary are storage world-leading and are every that our that it some PSAs forward is COX absorb think that [ph]. hard at These instance. pushing COX to almost That we scope is

scope. So always be quite to that of will our that's sure want the excited the and we within make part technology

do that but happens that you including typically, scope that more that longer monitoring COX going Beyond we It's partner to pressurize something and part is around beyond are would COX would to that COX that term on. etcetera. would give all what our flexible of like transport the downhole that ensuring also and that be obviously to we

the from models follow. we'll hopefully them the concerned that working range various as partners approach being in near already having been approach are a we've that partnerships subsurface we far Steve would project There's are itself. there to venture consortium joint As the on whole partners announce term within to as and

put us. project together. actual that and is is to range of defines then the find the that that on partnership best We So kind that available whole scope depending market where

Steven Richardson

to can jump-off in how you've you're appreciate Again customers. the if for we thinking about right And Americas detail about a if end quick here. to decarbonized blue could is great. have think think start anything a we about the okay of the I contracts can the we a to we so it can got project that looks example some tenor mean the that what just Or point at That's follow-up natural and the conversation of for hydrogen, like? together where work But on on-site all what in you solution? timing can interim contract the incentive is high coming curious saying, Just customers you the build-out. this convert on that the opening if this now hydrogen are

Sanjiv Lamba

into Steve actively number in if tends like it's you is engaged a think have talk to Decarbonize of to an would network facilities definitely asset. this you us. into as we with that the today on hydrogen as COX hydrogen conversations and an blue offer where incremental When example very goes customers latter What customers. of feeds about transform where the existing happen existing capture of we are service about our an that and that's gray Linde existing

of the of number asset the our footprint quite Gulf one And given strength way U.S. the we're have network So Coast. where seeing in kind a interested and that of think about that's customers to it. we that's

decarbonization kind want that is ways urgency supporting. comes to and that benefit actually in conversations underlying I is there them there is of that that, the to many pushing want for sure the cases. keep depends addition of this in kind this given progress in and out in In that IRA you try timing mind to effort happen takeaway that the customer it to monetize is of from both will contracts on XXV the The of to XXQ just be base many

Steven Richardson

Thanks so much.

Operator

ahead. next from of We Please will Byrne America. Steve from go take our question now Bank

Steve Byrne

for kind what And the blue might it green about kilogram, for but gray, $X.XX Falls I Yes. would estimate you of recall green. And I didn't actually Thank the $X.XX hydrogen. production pre-IRA. you. Perhaps that comments I costs below all a I of $X for recall you being at Sanjiv, gray cost that blue, and hear $X.XX. perceived project summer as have longer-term Niagara least had your was that a correctly making structure during I some suspect

So, view? where three, see you pipeline you that see do the And your the Is Would share lay-up close. from? right customers, post-IRA a these you most of demand getting pretty look bit -- green they're where in do but coming incremental seems development it blue like a for like now? the demand for

Sanjiv Lamba

you've Right. as case Steve, got good or the be. might good, memory

way and was prices gas it for gas that place. that was couple So I blue of the change XXQ X.XX offered the I gray, gray today ago. around wrong that you along if all X.XX green natural are benefit for natural make with And coming think are here I parity for not But XXX. to over the of will at parity, X.XX well. about close the I validate as quarters I'm and for price at would Obviously in and of point They I moot you say. is think almost a blue

cost scalability with As context. far I'll now green kg anywhere point a from is three. trending a blue of issue that view the attractive. is the $X and that in as XXX green and green bit with a XXV But more about The is talk XXX pretty to between, concerned remains

a again, as the talk heading would point blue remains lack huge and bit certainly where pricing which quite to long-term inflection scale green availability but inflection concern. little reasonable today today. a referenced is previous of being energy It's with The in which lot market scale-up Not at and happen. isn't $X that incentive while green for substantially, and about my significant that's some available point you've see me good inflection at ability combination an on energy scale. but as tested. us see higher because around to max that XXX acceleration. a renewable that Coming why per that's get really than costs. the down cheap to moving reliable its the come kg for And for is renewable a think remains it's XXV of of at acceleration point I So challenge to really what I of as getting the the long-term is here. heard this driven, the far offering really and conversations impediment hydrogen direction of is I That right it because answer access today ability technology quite has scale-up development green as available to there, in available see has in And unfortunately we I are of the me to

So that, you a that available blue decade a reliably great green sense. scale plus large-scale I ultimately a at is of cost as expect industrial to which summarize bridge where conversion makes lot of

Steve Byrne

Thank you.

Operator

ahead. our Leithead Barclays. go from Mike next Please take question will now from We

Mike Leithead

Thanks. Great.

think for guess buybacks Two assuming balance include here. be Obviously, parameters is made like I'm one sheet. kind housekeeping. a Do third from ones And or about at? is growing a Matt, And faster comment to just staying be ideal leverage that within since recapitalizing share I should quick quarter benefits quick is growing you ratio? your correct? three mean just you I your, that buyback guidance, XQ you'd three of, count? using EBITDA Just the the what's that should credit a maybe with in

Matt White

Mike. Hi,

up. taking the in that building debt are imply means, and Yes, essentially sheet could through balance essentially order. you So them the buybacks reduce equity our correct recapitalize

So correct. that is absolutely

of, on as I things like under EBITDA, that again which metrics, at the at correct call I they options for. the certain ideal you what we simplified under you higher leverage leases looking rely to A ratio the a as a area. mid-twos X.X at aiming on still when far today scale rating that buyback are in with realize and we've EPS your proprietary of times buyback. we, into kind when debt agencies know of sort single then definitely rate the do as use in capitalized that as which think, guidance our you the pensions. But and the far to of There bit effect. get benefit the have look we're your showing or can are be take the the AX Moody's work But metric that that some and past. their S&P As is And probably we to Clearly adjustments own for as we think what I on the seen know a that are the it's, of, And is share you'd -- yes sort generally way feasible it might count. have aligned. affects But ratings ensure of as you cumulative little

doing in effect a any of tends quarter lag So you're to anyways. given have what more

would maybe it more impact in quarter and the little fourth fourth a bigger QX then be the quarter. we've what now, in function done bit a do do in we and of what And going a what So forward. we will to of have

So quarter. there a there completed what be will will in function but in the here little it third bit we a be more of

Mike Leithead

Great. Thank you.

Operator

question our We now from Nicola take next Tang. will

Please open. go is line ahead. Your

Nicola Tang

a year? a volume you of expect that Thank still start-up impact little Could track Just year? buy should bit QX. what XXXX. And you into about on share ask Exxon a talked Can for about the on you. us is give next contribution X% think sort in next sorry the I -- for you we confirm

Sanjiv Lamba

the year as your commercial have that structure we want question of and Exxon but place second well. that reflected to track from on And entirely, Nicola year. progressing year confirm you'll expect just that gas of I heard in for project to to see I didn't next get next didn't for and is I I sale the get Nicola. next that you and question part a

Nicola Tang

I XXXX. project start-up asking the was for contribution overall just in

Sanjiv Lamba

Right.

of an what see start-up excluding expect start-ups is -- we start-ups year. of But by of you expect We was $X should obviously, large we project see. same expect similar upped as perspective, a this this contribution, about a on year that which said to level should see earlier we from course would single which Exxon in the you billion year, next the that

Nicola Tang

you. Thank it. Got

Operator

go Zekauskas We Please from will question now our Jeff take JPMorgan. next from ahead.

Jeff Zekauskas

quarter it raw speak did returns on widen did interest interest the sequentially its you its or shrink? And price of to Linde -- effect third expense and time? the Thanks over very In rates materials your that much. margin higher can did for out, versus

Sanjiv Lamba

you I'll interest seeing and what the of take through side Matt question to Jeff, we're things. on ask the first talk

Jeff Zekauskas

you. Thank

Sanjiv Lamba

way describe as explain the a it of, the you've best EMEA put obviously in we sequentially kind slightly table see that. slag in region So a did to up. will you on And the which improved. APAC have stable just EMEA is the seen well. to, margins and was our slide We Americas

that APAC record This as sequentially, despite And to But quarters. you've EMEA we So, was UK we excludes XXs seen offsetting inflation from that XX%. have actions XX%. in cost were more in pass-through make is and be previous had and pricing that both we lag move XX%. able to or working seeing recovery seeing and pricing as expect that. of and yes, and Americas forward. team were very record Germany electricity of through EMEA there. In the sure month a lag. And a than for there pricing so, and far EMEA any is some We're a and conscious our reflect obviously price recovery in I fully We as will as increases there

Matt White

And Jeff, Matt. is this

maybe to your get a on can high-level then question. I answer So provide the specific and interest expense,

is debt I'd -- which about our is to current say structure. essentially what interest expense, thinking when about. going structure think components there's really two net you're to One So debt modeling be to referring

the the our line. interest fixed interest outflow. then it's volatility FX in interest effect that But whether income interest So and or always we occurs some and as secondly, both the do on have that cash debt, variable

rates be the to But Some where whatever are. loans, we unhedged volatility will points derivatives the they on this may intercompany have the intercompany have to is up would related based move on the to be currencies. on market and line actually down get the prevailing interest based you marked loans, that that bigger interest

they're do create volatility tend effect unhedged cash intercompany. interest actually have loans. on to on They So the line they the because no

right And say think number which that deposit bonds. The our is interest is have mid-XXs right mostly rate is paper. when now. is you now run So debt is is to right of I now earning our about the you low-XXs somewhat fixed. exclude variable our close which our our sort It's debt somewhere of structure when capital commercial what would to we interest cash in rest

bond and is rates. will layered then see anticipate So what wouldn't right change And that yield point certain have at be you have interest would prevailing material I you in. in that maturing might now essentially what And will will do issuance. that then bonds the you when much of obviously a are at issuance, be that next until the you lower markets new bond a in that

from volatility And start seeing bond the go is the the on we net rates, my to in to to prevailing interest perspective I see mostly future of would rise. market based So rates. least then today at FX as what expect you're

Jeffrey Zekauskas

Okay. Thanks so much.

Operator

question from next our Please take Begleiter now will go Deutsche Bank. from David ahead. We

David Begleiter

how Thank about these competition for shaping you. these given how the projects? projects? is intense question we rate less first of traditional normalized the Back My above uniqueness up can your or projects? to Is Sanjiv, think return projects? should Slide we X. these on And your returns it on actually the more

Sanjiv Lamba

have are to criteria these David, meet that investment far the we as concerned, set projects as out. we same

we're have return say the there to projects. risk returns vis-a-vis see that energy profile on same we So -- we for to provide risk when want expect free the with we commensurate no that pass we taking be They clean that board. is

that assure return will as rest well. can profiles that you on ongoing our So reflect an basis

a varied little space. think bit concerned, I as in is far is this As competition competition

of role have have As a we play. range you'll who players appreciate, to a all

we've maybe particularly people game the a in skin to that comes subsurface of the risk up believe they've but market sure well the are example we piece forward. skin with teeth as we really that us ensuring partner concerned. make as seeing move for is game far as alongside critical is make has offering And shape lot a sense in partnerships also in part a as both I a as of of got decarbonization as offtake got good that that, profiles that good our managing in and We to partnerships some sometimes strongly think bringing that offtaker an

there's space we -- no it's kind -- of piece see So moment what and watch seeing. that a market it range evolves. competition an to how of we're that's evolving But the at

David Begleiter

on elevated given with energy contracts, on price And issues good. any just your take or contracts seeing the are Very any current environment? Europe you pay

Sanjiv Lamba

that to no. answer Simple is

are There are those contracts. take-or-pay but customers are takeaway who in at the moment enforced being strong below have some We happening. contracts payments are Europe, and

David Begleiter

Great. much. Thank you very

Operator

ahead. Morgan Andrews will from We Please now Stanley. question take go from our next Vincent

Vincent Andrews

from Thank get you balance just mark-to-market then and the morning, that everyone. wanted and Matt, back sheet these on borrow Linde how and can where think you on into. days to a circle feeds question good you at

are As higher you're in you projects and new discussing terms returns financing of project baking how in like? the costs

Matt White

Vince. Sure,

And already the making I investments. don't fees. projects you know we're perspective. the incorporate embedded that into think bake And facility is, that it and as recovery prevailing with take to on XX-XX-year we reason current me the rates the inflation we with

these back does you when it the to them. tend is rates, adjustment need as to projects we we come see inflation So as finance don't And anyways. that mechanisms through debt elevated build

they years several you to anyways. build As take know,

many So the continues model quite that and to with be long-term well been that. decades from that perspective, enables we've contractual you to incorporate know, on as our recovery cycles through inflation interest rate resilient

single you As from of a – the of more a far on to would higher would benchmark course expect we've ones but spreads AA we be lately better should yes, we're decide mean When been I our market, borrowing it's as we the tended rates, But that's to today. better or be spreads. A the go to some I see.

benchmark can kind of pretty and of today, you borrow point, about the of the lowest our you've capital would take demonstrated and and feel But still rating access of [ph] seen at. some I around. that's just cost this better spreads our sort or take to good at capital some get the we So what at

Vincent Andrews

much. Okay. hear. Thanks Good to so

Operator

Please question take now next will Laurence from go Alexander Jefferies. our We from ahead.

Dan Rizzo

the should five a assume products, talked if I taking the exceed the within, new is on green Dan was Rizzo the at for but return on XX years? how You should below with is the the return capital, point my I Or blue it on and gray, to traditional we in opportunities return new questions on about next know This opportunities? Laurence. about just hydrogen, capital capital this for we think Thank bit for the should for -- investments. on you these wondering, don't

Sanjiv Lamba

is our commensurate in me currently of with risk that And return on. the double-digit look by that, that take unlevered approve. therefore, terms has the reflected investment projects we go let capital today. IRA our -- on back energy support reflected capital return on criteria business within expect we elements, would that we you see in that look holds, to is investment our in at not capital space, and projects, there support I question out obviously, I blue the as clean in or changed to to projects earlier the that for whether it's that these we what That So, that what from the projects continue investor well on for return and the saying profile view. criteria that return of available that is set is or at customer's through to green. of return responded some our accelerates decision-making that point returns course, our and Obviously, is supports the

Matt White

cash an IRR decisions, more could make add I Dan. we maybe make it an essentially our on point, basis we cash And unlevered after-tax just one When basis.

change. won't that So,

metric. more the of accounting know, is you ROC an As

our in But a it's about forward. obviously, basis we wouldn't mentioned, we're at I in on we project I getting any IRR Sanjiv business on of to when that. in decisions XX.X% today, which any So, form. more way from benchmark portion or make mean going an how noncapital we think benefits continue look that the as there expect

Dan Rizzo

much. very you Thank right. All

Operator

now take question from next will We Geoff from our UBS. Haire

is line go ahead. open. Your Please

Geoff Haire

Act Reduction that the Good Inflation thinking investments hydrogen With flight of talk does to about the understand the what changing you to ask opportunity Europe slightly. a terms lot are influence carbon the of fly in morning. Europe, way Thank US, for low politicians' Europe? done you the question. for how going in the from for in in I'm

Sanjiv Lamba

because with It's leadership of as of the conversations, Geoff. That's over things. political in Two well a couple a topical parts number I've of had had I -- Europe. great question, different last days

happens I pace recognized have think the IRA the that leadership political many the to terms and of First, and people its moving amount clean that kind it of to change work envious to many of that at are fair energy European of has effect came on of and be a Europe, a they point able Commission get to of time obviously, a as given decision-making. in in requires galvanizing in including change surprise which US the

Europe course. you that then that I of and them Today that needed. to that They are The needs other all clean quick that has in Europe energy in to two green than bridge to let energy. awareness think detail, the led about I'll some quote planned know fact actions hydrogen has you but burning a examples very getting only, blue effective know. piece, of that I'll may them urgent is for are coal as clearly just had not give you they there acceptance conversations. is changed the recognize fact a I more was provides greater due

the Europe pragmatism, cetera. no intensity welcomed hydrogen on was in versus par. on making was green, low past carbon discrimination really that that blue into lacking et which There So was sure against

a I think I'm they desperately processes Europe, into in the the they have and I significant recognized the talk near in cetera case change we'll that of green that And clean amounts that and Europe energy see Europe while developing blue, in in think build that also ensure they that's of projects to fact fundamental expecting that that. term. this need to leverage needed can ammonia, et is about some be import and to to infrastructure to able other hydrogen, change place see is

they opportunity the it. some real going do soul about So something and provided are for has say searching I'd IRA Europe to

Geoff Haire

Thank you.

Operator

from take We next will question now John our Roberts.

Your go ahead. open. please line is

John Roberts

Thank you.

understand customer, expect perspective trying cover existing cost get customer's an for contracts hydrogen to where sequestration credits add to to anticipate how refinery refinery a sequestration? work? is the you just you the the to adding existing I'm just the do And from customer pay of existing do to blue this If you how to premium hydrogen, for going that this? expect

Sanjiv Lamba

significant example. we themselves at that look renewable California that and attract which to and their places own more are as having, product attractive leverage then towards when in fuels, discussions moving like out trying come John, customers hydrogen cases we're blue further into the an customers slate benefits of some that

to accelerating incentives that the at consider to California's moving provides of blue premiums XXQ that if perspective you fuels and that the a standard broad-based and renewable moving So accessing adoption it. significant premiums pay blue even low-carbon to does them does credit in to I come the support return -- allows become for to with of on further accessing But I'd decision blue say as on would look marginal framework hydrogen terms a truth, available and benefit point hydrogen return IRA the hydrogen, of in on from well. through

John Roberts

Thank you.

Operator

Kevin Research from Vertical next question our now Partners. take McCarthy will from We

is line Please open. head. Your go

Cory Murphy

hardgoods be demand business on that in in Good and can would leading In what I Murphy for for terms you. your seeing rent? Thank on you curious so a tend you're gas the the comment slower ahead? of business any This portend if Cory hardgoods you're as is morning. Kevin. recall trends macro seeing growth indicator, packaged to gases opposed to

Sanjiv Lamba

Thanks.

the both as business are on you and things both gases say digits business double to stand. hardgoods I'd hardgoods package both growing side, So

two you as catch that equipment sales to on about still sure they many of On at the suggest hardgoods plagued kind on people able aspects see putting tell growth can we're it, the I ground look indicators of manufacturing we talk supply would issues as that well that and consumable chain are the side, well equipment activity, different have both seeing broadly. to around to up with cash some I make demand economic the are side leading you more when of on we sales. what as see

point -- still at as I'm about seeing time things pretty still US in about are where feel And hardgoods I stand. we talking So this development good the here.

Cory Murphy

it. Got you. Thank

Operator

question ahead. from Sison will Fargo. our now We next Mike from take go Please Wells

Mike Sison

quarter. Nice guys. Hi,

of or unfold positive that If scenario? you outlook in Just your demand your of curious I'm sort volumes what do sort recessionary volume remained growth. no given would that in XXXX, negative conditions impressed goes firmly think

Sanjiv Lamba

more quite just a full you the to are in lot but Again, as do our the speculate exercise. give to through element and the run next think a and the of go through going and last the their own resilience explained case, just love out we get earnings where to that. XXXX. know including volumes volumes point planning we're of in outlook these we'll when tested quarter much of very of another not But our top just sure. these in But all next stands resilience over preserve you addition of through is call, our one for detailed going back showing Mike our we'll recognition to contractual the and I'd to in in even assumptions people again, I'm We'll actually for you a course you fact at Mike, sometimes over period well. quarter that Hey planning our three-day recognize A have, give I We're line structure particularly. granted. model, from I I will we'll come we that and the But that I'll processes. guys defensive that challenged world of is here in in down for important that our to you the business times want to that the each is that. able -- make take have profit that

Mike Sison

Okay. Thank you.

Operator

We will go question now ahead. take Partners. from Seaport Mike Harrison from Research Please our final

Mike Harrison

questions. Hi. Good two I have morning.

electronics. And in the some is for around that gas the to then second First in costs? recent could Europe, and you prices realize question of mean all, any thoughts natural Are decline on going what of that? your

has some semiconductor from have around on electronics the spending fabs? producers. Thank might and that you. longer-term those additional capital some there headlines impacts negative that near-term acknowledged in on some Curious You business, been color there your if for is reduction

Sanjiv Lamba

Mike. Thanks

around We've So, quickly on just contractual to continued gas seen pass-through been pricing. cost able volatility our gas structure. on EMEA. push natural natural that we've very through Obviously,

to will come the natural We do continue consequence. will as a margins prices same. enhanced get gas significantly, down If

As how our which concerns as no should Obviously, a a of lower us. it's result positive math will you around broader be hopefully that clear economy from for works, perspective. know, and natural really pass-through pricing economic the some gas and tailwind help

As break into let of that concerned, parts. two Electronic kind segment as me far up is

in their Let's and Act investments a of start of of similar investments regions to with out Europe out if level, US largest we CHIPS commitments in act pushing from same long-term forward. not have made In recently, fab conversations of the of staying customers localized being increasing the have the levels. more the drive to seen as investments at some move terms their I with investment our continues and them

in tend countercyclical. strategy to the of for stable to those invest them. Some I'd mid-term, say. fairly a That's see well worked been I them expect remain levels And that's

five that's next now four the years. to So until from

at in the of that. course, I to growth near our in press, those have read There our that fair we'll Of embargoes customers Q&A about to They we reflected from in really term in want consume, a investors good longer-term effect the fact might pointed you to see investments China which as well. pull of that that unimpacted concerns that might -- so consume I that the despite continue in. continue current but our exist. a more that see of to winning we what End that's by consumers In is are large position are most the feel earlier what than confirm I we on we I result the And be every on kind again, markets. of that of demand And the see from fab continue made to gases on forth are our China, and yet as share comment and continued good that I've supply. an volumes so some heard be China around and to

Operator

turn additional would now back Juan any I to or Pelaez like call closing to the for remarks.

Juan Pelaez

line the any call. day. you everyone of out a have today's Cecilia, participating your if to on thank Please rest in feel thank Take reach you. And care. questions. further free Have for you great

Operator

you will for may That call. Ladies you. participation. Thank Thank conclude you gentlemen, and conference now your today's disconnect.

Linde (LIN) 27 Oct 222022 Q3 Earnings call transcript