APD - Earnings call transcript Q1 2018 | Air Products and Chemicals, Inc.

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Operator

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

Simon Moore

your I'm Welcome Thank teleconference. first Products' Ghasemi, Good our Relations. This by joined everyone. you, morning, to And Investor quarter and After pleased Products' Chairman, President, Executive CEO; of President responsible Simon Vice Air our our and to be Seifi Moore, Officer; questions. for Executive Crocco, and Financial take be Corning Gases. today comments, John. is Vice to President we'll pleased President Vice XXXX Industrial Scott Chief Painter, earnings results Air

all release per income slides disclosure for This pension earnings the this quarter, refer and chose required costs to earnings Our or this new is slides non-operating page call new it non-service to impact earnings Please Web release. Beginning related other pension statement standard forward-looking the pension expense. the today's of on are adopt many. or our available does in adopted on accounting standard Adopting companies, the airproducts.com. we not two impact does move share this earlier cost, standard. than at the and accounting site we accounting but of overall for to and

and better earned cost interest in in cost benefits For overall pension Again, more of income prior including the this filed increases the about a in information view within deferred purchase a segment $X This our assets our from detailed this of We cost, components these small to amortization and today, increase margins slide in volatile for an points. moving expense, FYXX, planned million of operating as updated you current operating represent operating amounts remain consolidated by cost by return the in component more X-K and Service by doesn’t expected of period resulted summary historically change information can just reflection pension to the and emphasize, income non-operating. find modest the appendix income. income and this and historical moved provides just on change to and in performance operating non-operating we and EBITDA of events. comparisons XX period we basis to results reported today.

Now, over I'm the pleased to call Seifi. to turn

Seifi Ghasemi

Thank you, Simon, busy to very Thank on time schedule our Air your everyone. and call in to be good do We for you morning today. your from interest Products. appreciate taking

committed team excellent talented Air Products another delivered quarter. Our and

of of share XX% the first generated also quarter the that record versus largest up We For to quarter delivered the growth. per increase EPS of EPS of are is share growth XXth the per consecutive have third per fiscal XX% strong a reported last more XXXX, we year XX%, dividend XX%. cash flow pleased year. announce we in is $X.XX or was This share increase This quarter and earning our than year-on-year have history. our consecutive

Our per share, returning to $X.XX year annual is which to dividend our shareholders. equals billion almost now per $X

in the successfully while company with over we winning be importantly, And strong and world XX%. on growth gas team, focused great most most opportunities. operating exciting to a profitable margin safest continue EBITDA new We performance, totally industrial delivering the of have

number slide Now please turn to three.

safety are same improvement performance. XX,XXX all excellence. happens This focused the our a our in also is our You our rate with a strong can This see we of and safety improving reduction around the operational on rate. and injury make totally reduction results lost significant time XX% our of continue in driving employees when only financial injury to progress on commitment XX% of recordable world

number our for slide to which goal turn company. is please Now four, the

This by quarter's on shared explicitly profitable. not does diversity our inclusion commitment dilute most our safest being and our and have goal. the elevated last to on focus in we call, I incorporating As it

being diverse position company over most industrial contribute the as the gas most long profitable In maintaining the our to will fact, term.

the As have. I've or and to real that competitive race, origin We always sustainable country diversity. said, contribute our everyone of is motivation to company, opportunities succeed any we in want the gender, religion, people of and we advantage environment other degree of that the ensure and commitment are regardless dimension of providing orientation, for color, our of right their

to Now please slide turn number five.

you about management overall have Our that we many philosophy to talked times.

be an and value, shareholder cash focused allocation capital decentralized on empowered generation, We to and continue organization.

the to the plan, which slide roadmap can success. point On number six, see our our has five you been

slide of made everyone last We promises like please delivered. have I number to turn we where would the have progress made we three years. and remind seven, Now the to again in

We have and company safest most become profitable in the gas world. the industrial

three year We this in greater assets of delivered XX% year have of years, guidance industry, our have divested created over non-core and our than best year balance the implies last we XX% and sheet EPS for growth and each the in growth. another the per

please The Now well it. is to now what eight. do have we to that positioned great promised are balance have thing we and we grow sheet summary, to the delivered number slide turn do we In Air Products.

forward. of opportunity Products Now move to us and to turn slide the to number for please discuss nine invest Air areas

companies companies. First, or from industrial other assets small medium-sized gas gas and for acquisition of industrial businesses

opportunities gas second we around from a to purchase on the existing The under and gases the This customer in plants customers, industrial term operate a and for facilities is plant own opportunity sell world industrial fixed fee call category. oxygen buybacks contract. of we to based where this is and what area long hydrogen and the see our we asset

perfect growth before of business with production existing us. we every a the example term assets. but to area than project opportunity the is onsite that gasification include is supply based rather of of scope traditional we to our to same our something on supply to operation Lu'An see existing expand do the customers units, model, day, contracts. new this also opportunities of these We our syngas The described for Essentially, as long

Saudi large We in be. projects plant a and industrial project how example great expect can Jazan capital $X coming The market the we building the Arabia in of driven to is the The demand of Jazan industrial is energy requirements growth. more world, gas in are with is third in more opportunity to opportunities close around investment. And the environmental history these of big do the for very billion of area these energy, years. by project the largest industry, of

of that and that great project these of projects gasification I Some am supply. large we that. The about syngas Yankuang is also another example include new can talking announced

to which turn XX the -- what slide or grow consistent to our discuss strategy. recent some in just number described, to our Products of some read I with is with please Air line of Now successes

September, tremendous great Air we for In recent and the examples. X.X syngas, syngas have expand announced First, billion to our Products well opportunity supply Lu'An joint some to the onsite proven model we business venture.

necessary this we venture We close make fiscal joint point during some approvals on and hope progress continue at to the year can on 'XX.

have in I'd included fiscal stress, due for the government guidance However, as approvals, any October, we to have our and some the 'XX. year of contribution Lu'An timing we not did like in project uncertainty from in or necessary not, EPS we CapEx to

joint We billion China. on Yankuang November, venture to you keep in updated will our In with progress. we continue syngas announced $X.X

updated. earlier to this on progress month, an announced syngas Shell's the finalizing contract, acquire And and supply continue keep technology also we'll to this We our coal supporting we position area. and in make gasification supporting you our agreement strategy

to supply speak, phase Finally, syngas an BPCL’s announced we to project petrochemical earlier agreement to India. in Kochi, X

we on the new Our integrated stream brought their facility plant to will be supply XXXX in large with refinery.

supplying customer acquiring ASU about, December, industrial asset of and and we gas buyback the assets outsourcing sale announced an agreements to supply to opportunities Jinmei and our finally, new sites major see have more becoming unit and And with these great large new comfortable projects suppression to of gas on projects for announced expanding include the example their in terms of great asset We the gas that existing so China. on another China, In long we buyback major been Korea. have long-term supply we in two for Notably, in assets plans in air A the acquire and in And Samsung’s world. three continue of Korea. we around contracts model. deal closed talking agreements. Huayu began recently industrial in signed customers China called term a

great we progress stream fiscal make the Finally, expect to continue in XXXX. currently year and starting project phases on on in Jazan

in announced we yesterday dividend continuing our mentioned, I largest Air to shareholders. to retain Products’ cash increase commitment the As history,

gas industrial improvements three to to measured further in to go as We metrics for year. We you by please key be key our results which three metrics. move focused committed of the shows XX, these the quarter goal world our the driving and on most each remain the we the of profitable remain forward. number Now as slide company

Finally, which see years. turn us reminds a number side. far to the have great be margins please my come in slide to favorite and sustainable it to is XX% continues only mid how It range XX, in we few

your will to discuss and like to Simon, Financial I to Mr. after and make from come questions. will our to and Officer, to Scott results be detail. Crocco, Scott? Now closing Executive Vice our some back we in would I the Then comments remarks Chief President then turn pleased answer call Corning over

Scott Crocco

you, Thank much very Seifi.

the quarter, for would have to of to brief Jobs the I Cuts expect to Please Products. Act provide I summary XX. in turn the our like Before results Air Tax impacts U.S. discuss a we slide on

about the First, me talk statement let impact QX. for income

Overall, the the rate increased QX our rate under results until points, estimated as tax XXXX, our January Although, QX, blended full act basis per the by reflect reduced this quarter's year the was tax not share. the tax tax EPS about after rate in of new end XXX by our about required. tax U.S. which reduced $X.XX X, is which fiscal act for affected new

U.S. activities see, from As deduction and rate other you lower tax tax benefits partially positive deductions. production changes reduced including U.S. the by changes, of to offset was the the act can impact compensation

the our increase act reduce to $X.XX by year full XXXX, to in by to the XXX EPS rate range per basis points about the somewhere $X.XX per about expect This to points to For tax we XX%. XXX about share share. would XX% tax basis of new

effect effect year as for the of is taxes U.S. full that approximately expect takes activities of For other impact offset XXXX, the and the foreign a changes net fiscal similar repeal deduction, XXXX. by rate we production and in U.S. lower the credits year

a would I going book tax about use So XX% Products Air rate forward. effective to model XX% to

associated earnings, liability $XXX we offsetting to repatriation with a in $XXX assets U.S. $XX current affiliate repatriation our on of paid about recorded The per reasonable the now that negative equity the keep over quarter the charge items the tax income. next million with million rate. Please We had are Turning years. tax estimates. benefit $XXX totaled million recognize of at charge, a share. foreign or tax deemed a based these $X.XX in be million will to related the tax this the lower to deemed deferred of non-GAAP due liabilities the mind revaluing our and Partially eight had

me tax comment cash no cash the let on Finally, expected tax QX. impact was There in impact.

subsidiaries year XXXX, about the in repatriation rate benefit and on $XX of full new from corporate mostly the cash lower ventures. the we million foreign cash as tax modest For tax $XX tax the offset by to joint expected a from of taxes the expect is reduction million act from

taxes cash expect still million range XXXX. about for would we the $XXX in of So

the from capital we tax lower of to the $XX payment XXXX, of year a of million foreign million act by tax the of expensing reduction of deemed of the the about to investments repatriation cash full immediate the the $XX impact earnings. being and offset partially positive For tax rate, expect with first

to now results number QX XX. on Turning our slide

X%; EPS, plant this impacted base $XXX added about associated X% merchant XX% currency in was China whole mentioned, up higher business the quarterly significant amount growth; by points. all sale XX% basis Pound was team. of India to X%. driven from billion sale about positive driven negatively margins plants, up the EBITDA Seifi contributions gas the year high was As and termination new three plus were with and the contract price business; of by of as Chinese growth natural Air driven basis points, X%, volume and by negatively business hydrogen growth; Products’ British new a about $X.X record impacted the base Sales congratulations by X% energy XX pass-through plant pricing. was volumes by points. Asia Volumes currency XX%, was a and the Euro, The versus in regions, of by to plants last Asia Asia increased and were the XX% of was driven another up pricing prices were contract and plant and plant EBITDA improved about China positive, margin sale and the margins XX by XXX down RMB. basis the due million on XX.X% termination

Excluding basis cost. higher points, down these XX two planned EBITDA were due maintenance items, margins to primarily

provide more me some on sale. contract associated Let termination Asia background the plant and

customer. from sales but not down sales We on sale see we planned and outage term One of the in to The plant from and the due no profit and of income tax to Net prior X%, equipment denominator agreement totaled and the as versus us to with $X.XX ownership, because cost result points and of denominator earlier. a XX this XX% reduce adjusted the customer going increase. profit significantly items our turn a primarily our increased this but was our recognize non-GAAP forward. pleased points Sequentially, gain contractual XX. increased PMD from we now in negotiation had quarter gas quarters steel the year versus them basis supply is the the onsite higher calculation were increased. last this satisfied related are purchase per four exposure had basis is this, the the of new long the are per Please long OIE. and earnings China as quarter, customers has the and This share ROCE with to change from profit to sale The quarter approached share act, of and lower with this outcome the slide to EBITDA the includes and end term do by the had us. only sale. I five and declined average will denominator to right discussed maintenance ROCE XX.X% The of XX% by or despite sequentially XX the based year.

last continuing $X.XX XX% EPS Our $X.XX or increased adjusted of operations year. QX versus

tax As from new act. $X.XX this the I benefit includes the mentioned,

positive Overall, materials Excluding China. the the higher this EPS $X.XX benefit, our performance maintenance merchant was together EPS as the and was EPS didn't as includes termination sale we China last increased repeat, by $X.XX as $X.XX, driven in XX%. Price by items pricing. increased still and unfavorable that for year cost well plant $X.XX Net volumes some had cost This share. contract up raw well taken per as planned higher by of inflation.

included expense on cost other major consolidated is P&L. factors, income the a the line As reminder, the and in

payment quarters these and the The are received ended last primarily as agreements recent provide shared from This service line. service to shown during down $X transition and or this about quarter QX. TSAs, million SG&A. the for cost this was to expense other we As Versum income is I in TSA is quarter, services providing and Evonik. both services via are The in we Evonik

expect Equity favorable, the between associated overall income act due particularly to expect foreign end exchange I end mentioned finish $X.XX providing excludes taking new number the earlier. Mexico. British of our of to pound TSA that We new remain to and affiliate to interest the and related savings. Other and $X.XX Interest in gains the were actions unfavorable. TSA charge $X.XX RMB. the Versum at a strength the to the $X.XX, committed act. services, gap these We year losses cost $X.XX to brief last and primarily due a underlying non-controlling QX. added cost of totaled rate with outstanding tax interest with benefit non-operating added Euro, would the expense, due versus income. was tax Note across and Currency but reduce see primarily the income income this tax $X.XX to The JVs, shares an to due

XX. to QX quarter up flow million. cash another Now almost in to over million please with slide distributable flow We turn $XXX cash strong $XXX had

with situation. an discretion is value, cash what payments this dividends, change. investible more track Investible been from our deploy. don't It year is XX we've current flows from year. and interest, after cash that our taxes, billion capacity, record cash we of and than acquisitions funding to more of is well updated balance maintenance including flow We expect raising as to we aligns CapEx think dividends. then and or the Investible amount describing have our of see growth flows. our capital, pay choice create dividend cash Certainly, closely we've per our sheet cash slide $X as we given You'll

we in $XXX million You QX. almost flow see generated cash of can investible

Seifi As QX a on few earnings and CapEx in acquisitions mentioned, close guidance. we these and have our during did included

is for create right including now cash that it CapEx Again, to investible growth can shareholder the $XXX deploy value. we total the the Our choose generated in million. about QX, acquisitions represents metric how think to we cash order flow as is

to you capacity. slide would to Turning XX, update our capital I like deployment on

I mentioned, capacity enable available and projects as this acquisitions. view As just we to

have of cash just a We under over term just to $X we invest. and investments After December $X maintaining of billion operating billion XXst. have available modest cash of as balance, cash short

balance December $X.X is as XXst about billion. of debt Our

to As are committed you know, our to balance current our A/AX maintain we managing rating. targeted debt

We X.X range support of in months level would EBITDA. level $X the billion, to on approximately would times expect billion. this this XX debt trailing billion enable range the EBITDA X.X debt of $X to a Based a of the $X.X in

our maintaining A/AX in available can we've rating. today and $X debt about between our cash capacity, additional while So deploy we total, billion

maintenance we dividends. over after that billion CapEx, I interest, also and investible $X to paying is year per of previous cash generate As slide, discussed expect taxes, the on

have in least we to three expect over available created capacity contributions invest, projects. to EBITDA the total next of So $X a investing years, by including billion not profitable at from extra

our segment begin to results, Corning. of turn to review business the I'll Now call over the

Corning Painter

Scott. customers, for combination was stronger segments plants creating to and of the end a was like plants would of China three the across team covering gas markets. overall Volumes Pricing mentioned. from merchant range up and Thanks, Scott all driving close broad quarter a to with sales the were staying regions new posting industrial The coming onstream, particularly wide positive strength biggest I based, this gain. regional volume our for China competitiveness that and our Asia thank growth opportunities. also

Now gases for our review please turn to XX of slide a results. Americas

For the higher not impacts volumes, were X% strong, wholesale replaced of taking even the a was the on the North including quarter, of patch, sales demand opportunities were plant By as up that molecule by volumes, in molecule, market, we American hydrogen plant. Its in the merchant of by Gulf elsewhere. the impact so one particularly large end we higher contract. much offset activity advantage say volume in wholesale Coast oil

weaker prior planned costs, versus demand slightly partially be to than higher volumes merchant comparison. will of offset the impact. the termination basis but by offset volume we XX% planned margin year-on-year basis factors Going American to lower pricing impact. mix. the and equipment liquid lower, and down EBITDA primarily oxygen higher the up prior-year. to and outage negative Overall, also North X% margin caused the forward, from wholesale than wholesale pricing higher equity more sales flat we the driven costs would compared impact which XXX points. America, more was expect was and down Sequentially, year advance gases income to outage as Latin argon, was achieved These was quickly seasonally contributions better points and EBITDA margin replace liquid nitrogen higher maintenance rounded contract affiliate In sale XXX positive maintenance, by was volumes as and in

U.S. feedstock Coast. As weather the into impacts and we’ve Gulf from and QX, modest we some seen customer very move in negative demand cold the utility

up XX, Now, with X%. up Middle and XX% were to energy pass currency Europe, business. to up Africa up review X% costs our please XX%, slide East turn volumes Sales and through

operation drove while sales the merchant plant growth, a hydrogen business significant its volume second contributed of new completing in India growth. portion quarter Our full X% of our

affiliate flat India mix. this compared the in business owned customer slightly the to prior higher has and versus reported as As segment XXX% XX% of EMEA a Asia continues and energy to primarily sales due almost was the in positive cost natural higher of positive but year, basis reminder, last hydrogen partially India India, rest in rounded by while margin also XX% gas real equity currency the higher to was income. through was in Overall, to again completely with reported India EBITDA was pricing points, up pass product be the offset comparatively our XXX pricing higher-merchant facility to plant down which plant EBITDA due contributing. year and new new costs. is

down Asia, to factors, outage quarter. seasonal where these was slide XX, planned due sequentially Excluding strong EBITDA large Sales gases growth. turn only the X% power planned including maintenance to a sale XX that to on basis the deliver continue the cost, strong up margin and growth, points, mentioned were lower higher EBITDA and down was profit OIE primarily earlier. XX%, outage Scott in business Please our sales costs.

were up X%, business. streams plant the X%. on up the still sales underlying by Excluding from was region up Underlying merchant and new this, driven volumes Pricing XX%. were for contribution X%

addition strong In a we will concluded particularly repeat. which not significant and spot had base to pricing, sale, January merchant in

to to is fundamentals Chinese we with positive and know balance QX believe working But expect remain of in ease up that, our supply diligently team demand maintain momentum. We Year. coming and the XX%. EBITDA underlying New pricing was out the I the

XX% volumes, due favorable pricing and currency. the increased higher Excluding sale, the to and termination plant contract EBITDA strong

right excluding was the higher XXX plant of points. contributing. incurring growing to sale, retail is margin, up new and and support course business. is action, sourcing the think business this our distribution and costs EBITDA are basis contract We the We certainly termination

for for number two Korea. coal long-term opportunities, the new purchases in to supply syngas, Asia gasification is and to ASU in As The of on new winning with new awards business, Samsung exciting execute produce the safety. projects job base a mentioned, continuing team and great productivity doing we agreements of Seifi announced while

Finally, to unit were XX industrial central brief business, sales up air slide our on by slightly, includes equipment gases business Jazan segment, gas $XX please project. our as Sales comment million down while turn cost. as which the profits global a separation for well were driven

We continue the to great progress as make fiscal phases on have on-stream and said, project in XXXX. early Jazan in expect we

I'll our call Now back segment. the over corporate turn to Simon on for a comment

Simon Moore

Please Thank you, Corning. turn XX. to slide

includes Our driven Helium container business, primarily business our LNG and Sales LNG profits and down, project costs. lower our Corporate segment our were corporate activity. by

For the still headwind we corporate segment. expect an earnings FYXX, for don’t

back pleased I'm turn the discussion outlook. of a for to call Now to our over Seifi

Seifi Ghasemi

Thank again, Simon. you,

Before few we to Air comments like a I Products' make take would questions, your about future.

to are discussed build I our our we ago. the promises on opportunities have earlier, very strong delivered that success. are And we of excited about on from proud having As years we two

performance operating strong. to and be productivity safety, Our continues

But We Air cannot over We we have continue of to to be political economic our future do Products, and control on of and worldwide about predict have optimistic we feel can developments. Air not growth over or the Products. operational control obviously continue the do confident we performance deliver we and goals.

best I gas and significant company are sheet, as of provides create in a more flow our our truly believe billion shareholders. balance $X in We as significant business over utilizing won't that four and to Products committed generation the strong know, Rest with the cash will confident great projects, of to and expected return our the portfolio over we new asset gases be profile we are capacity in significant invest assured, Air will industrial mergers value see three risk in for value unless for the the you amount As create large opportunities our that industrial well of typical our shareholders. disciplined buybacks money acquisitions, our years. staying projects. us to our next successful industry, invest to an and actions invest

Now please slide XX. turn number to a

and our and our Our world, great remain to the diverse the gas motivated you team for up focused our year on guidance in excellent dedicated, talented XXX. hardworking, safest is positive guidance XXXX the a service profitable last gave fiscal providing from company range of of and $X.XX being XXX industrial employees have most customers. quarter. momentum, This increased we to we Continuing to

coming remaining performance. this Scott act, in the from from business with improved increase to new As $X.XX mentioned, the tax our $X.XX is confidence of

Our guidance year. new strong XX% our every at XX% performance. in to EPS XX% least to over commitments our growth represents We grow remain XXXX fiscal to our on very deliver confident year by ability

share year This of earning two second $X.XX, $X.XX the fiscal quarter over XX% our For year new the XXXX, from per XX% guidance $X.XX includes is quarter fiscal tax to act. is to up a which approximately of XXXX.

expect our in spending year. quarter one acquisitions, Excluding the now $X.X Including capital still tax act over last to be of billion in billion impact, fiscal our quarter two guidance we $X.X the XXXX. is up to XX% range XX% to year our

I M&A from guidance I'd not EPS do and CapEx our the before, mentioned and like to or future this, Lu'An project contribution any As opportunity. stress any include

could add to potentially in on our in results that opportunities other any significant guidance for XXXX, fiscal now. included but have working certainly are not other our acquisition We

committed please Now to gas We our slide in profitable the and the safest, turn number XX. industrial to goal most world. diverse remain being company most of

cost the see. we controlling growth to We our will that many in focus safety, investing on and opportunities strategic continue

is motivated our where out believe advantage Air committed real Now we please of Products. to again turn number competitive the slide point once and people that to want I XX,

advantage from conditions deliver weather kinds commitment of Our drivers our all to product of severe competitive to comes products the our to transport our in customers.

and maintenance commitment to keep from challenging day and hard to to even plans from customers. our operators our reliable out conditions supply hurricanes advantage in the competitive work Our severe comes who other and during workers running our ensure day

sales of for Our our competitive creating in Products our from develop the Air customers. who people value work day every advantage to comes by bring hard to commitment opportunities and new

work level who the team of motivation commitment advantage and to competitive company and winning of to rest a motivation privilege of highest our people. world it the the team. this competitive comes comes our be consider hard I the from performance. Yes, to part commitment Our all honor advantage run from an of our and the over our of

delighted we answer are questions. your Now to

Operator

[Operator question our with first And Bank. Begleiter David Instructions] take from we'll Deutsche

David Begleiter

Are on us that just there syngas you on project. any can with India project? the metrics share Seifi,

Seifi Ghasemi

you say Did there are any…

David Begleiter

with share can you metrics on financial that project? Any us

Seifi Ghasemi

well The return that guidance above project the rate is of is it's called you, that which above we've so return, internal XX% on well told that.

David Begleiter

project? capital And to be in deployed this

Seifi Ghasemi

the $X exact David, We it billion amount not is project. of but capital, cannot the disclose a

David Begleiter

just and of seeing a pricing traction business? get merchant on you pricing in gas think when And can we in core U.S. what positive Europe, more type you and Seifi the little the are price

Seifi Ghasemi

future that. been I'd we because past, Corning you like to that. of the as don't and comment of David, pricing, expand positive, to as commenting of be and don't want future. as But the But has far that on to has want Corning? pricing industry, that for in pricing comment we on we the nature happened what But on know, can the on our

Corning Painter

we Europe a Americas. think and Europe and Yes, Obviously, so your I positive quite in about us. Americas, it's have the questions net story for in the pricing. Both strong in are Asia probably

same to same degrees, have move pricing, current of do simply more mix of are terms molecule, progress. is growing there's real mix, been and typically larger product we We customers challenge meaning just bought. which molecule, say customer, year-on-year the molecules Yes able customer which same there's, year-on-year But prices? in in environment, and real activity have in taking So being some those with have. I'd more same a

Operator

Zekauskas go to We'll Jeff next JPMorgan. with

Jeff Zekauskas

been your at syngas much your traditional look and oxygen of has industrial been of you backlog those of and gases, has sorts backlog the hydrogen and argon, backlog, how much your things. how When nitrogen,

Seifi Ghasemi

Approximately XX% about is is business. XX% syngas and traditional the

Jeff Zekauskas

rate? And changes the in at look taxes. XXX you of out that to over then next that that and that be taxes would the we commentary, repatriation revaluation your corporate of about pay said Should impacts cash you'll the as And million. netted years, to amount $XXX there's excluding the you annual eight deferred additional negative normal $XXX

Seifi Ghasemi

like the amount in That tax to of that correct. against the -- years. lower we out lower the next States that, cost is the rate. will is have cash obviously, the cash in because the would of company But benefit United I of go eight net of that

net can you balance real you the So present calculate when value. that,

Corning Painter

longer. the if it. have But build there a just a that, I timeframe of obviously it’s in feel think we further some about the maybe I that go on years the with way Its to out. just little eight is And maybe Jeff, could timing that even take deferred might to reasonable taxes,

Operator

from will question our We Barclays. Fischer next Duffy take with

Duffy Fischer

sale. to wanted little of Just out bit more plant a flush the

just XX% number going gave off Corning So your in the EBITDA. volume that in of XX% the Delta

million price Is EBITDA. million $XXX way right If calculate about out in an $XX that the is that about it, in to strip recognized sale you get underlying? you profit of to

Seifi Ghasemi

Duffy, usual, As your doing you very are math. good at

Duffy Fischer

that away that’s I if going to then it is $XX that times, go $X.X or quarter? about the million from year And historically million for a plant that sold that underlying about mean you a assume we’ve seen XX profit would

Seifi Ghasemi

that. I way can looking a more Well detail at through -- no, go the can we that. not think detail that with on But lot Simon that’s you of offline give correct

Duffy Fischer

last the then just Seify. And one,

With get the comfortable the years? the the three portfolio big syngas in project two syngas or would you be stuff, letting over how to next

Seifi Ghasemi

for are about XX%. We shooting

Duffy Fischer

backlog. of that’s the XX% Well

how a it being it, had much Half so of am like at talked So having the about that, I wondering of all years. could end or $X of the of day? in billion just number to invest syngas of you before over

Seifi Ghasemi

are we targeting than XX%. now, more Right

Operator

We to with a for Goldman Koort next Bob will Sachs question. go

Bob Koort

have Can a component one Scott, the might to component Scott, you price were if and this, a the but XX, I show cost up missed On Maybe EPS. Xx you the I could. price? why for slide talk costs

Scott Crocco

have of inflations. On as last course, lots -- that cost higher of in that didn’t quarter we had some Good items And well as news as year. this maintenance. had repeat, always, we we happened things planned

raw the I changing in items that input point there. any would the materials netted those in the power out is and are cost there be key that driving also cost in will are year-on-year. price So

is costs from is $X.XX the that input of still which item below. down price net above, those separate recovered cost and So

Bob Koort

from environmentalism the go seems I Can fuel up. And follow that traction, for as could all, to a chemicals? it of you potential then Seifi, away a how talk and beginning Within source. China, lot is coal obviously, if that’s there coal move a about and some impacting liquids maybe growth into

Seifi Ghasemi

talking coal coal, turning is about environmental pursuing obviously producing environmentally view That are push obviously a high gasifying is here into and producing projects in are that for chemicals. from friendly to by very the we sulfur point we is for positive especially it use coal of the But power. way development because less the an us,

So the projects are involved that. China's and all five of is the if thing for very And of actually is you and coal the obviously thing we year that gasification. significant a designated very why study details there of push plan, XX us is much for environmental in number for positive

Operator

We’ll take next from Don question with our Capital. Carson Susquehanna

DonCarson

on the and I business, merchant had leverage operating merchant can there. going Europe, about What's rates? much what talk margin expect? the incremental are you North operating we impact merchant How going can America see up the and on China Question in they leverage operating and can say it in

Seifi Ghasemi

to Corning that. have I'll address

Corning Painter

it’s by challenge of overall we that, the and of a We when factors that But positive has is So positives merchant. absorbing large numbers both cost we’re some new of the same that business to higher repeating. North still however, just that's overall for had. a that contributing certainly the say good we our in a we to out The are from America, so published volumes course year maintenance signing, I agreement the results. the last mentioned team. want in challenge that accomplishment wholesale loss Scott not report

Seifi Ghasemi

very But significant the in in U.S. that and in operating is is around Usually operating is leverage right But China. to your gets specific, to pricing industrial XX%. U.S. not then what now when Jeff are you rates XX% that the rates be happening have business and Europe. gases and Europe, around case in yet

Donald Carson

a on deployment. Seifi Then follow-up capital

at total far? roaster the given, in of thus how you projects deployed you all have of look you you've the $X that much signed If billion

Seifi Ghasemi

quite of projects are and in that them some the about and add Yankuang process committed. that is frankly, the almost project you up big of $X announced $X have if it out Well so like of billion we on, billion, the

Operator

next our we For question, Credit will go to with Parkinson Suisse. Christopher

Christopher Parkinson

maintenance appreciated? in as more a the business, was pretty greatly planned of hydrogen. this solid IG and as little Americas, margins, these just just on a but in give Can mentioned but for the well fronts of you merchant there Thanks. will little, volumes appear hit color around balance anything which the Scott some just be year note

Seifi Ghasemi

of timing it's those, And expense. under control this customers turnaround is control, each maintenance turn $XX so of I'll things, over say planned expand a not our our want lot it of that. is to $XX our turnarounds to and those these think Corning facilities what But these is of big hydrogen are under million having money are is the basically -- the of on customers. I called I and year, that to million one in cost our

thing So is that need it's timing, but to do. a Corning? that we necessary it

Corning Painter

in the just conditions. Yes, interested think so market you’re I

is backed nitrogen going enlarge, America are We there’s see demand point, bit very remains broad seen coast, the as think a So as this I'd into I And we in the say customers change had we hydrogen say oil based higher our probably strength back by strong. well. but for market. bounce fully the I’first But really just now. at period field in And quite this that little more North nearly we've quickly. right a would I field Gulf pretty in cold prices. Oil services say weathers underlying that from

Christopher Parkinson

you helpful? the comments merchant year? any will become side for you you then on terms in in momentum in additional And lines any dynamics steel the remaining Can fiscal closures, would a just progress quick and just on throughout help comment And end have of any be comps still also trends facility Thanks. trends instance? maintain you Are supply as by more if derivative market believe year 'XX? the price. demand that Or market just the regional Chinese would question there do quick from difficult

Corning Painter

I growth would going first for New to space China see think, momentum of there's had demand the world is degree coastal the think dynamics volumes is, maybe the I to impact. of supply from how So in Obviously, being for the probably down workshop We're Chinese the point very But overall take quickly the those a I’d key remain certain there there. world, the there's out today. year expect positive We last be little reverse all, order, of see in to broad I industrial based inland. just area cause demand industry. the than a to the induction Year that, shutting Coming It'll that. interesting stronger furnaces. rebound bit the broad

as us. come we're dynamic year. think to coming think furnaces all, demand remain perhaps a strengthen All going I what in see into that'll probably new to the for it's positive I some we going is from

Seifi Ghasemi

like in developments just the positive we China. I'd stress very to on that Chris about that are

Operator

SunTrust. question go we'll For Jim Sheehan with our next to

Unidentified Analyst

for in bidding you interested you you how divestitures acquisition along the Praxair of Jim. And outside Linde opportunities China? significant is see be quantify can on those Pete Do much This of any might for? lines,

Seifi Ghasemi

do are opportunities Well, M&A don't we but in that, of of working to some we more terms outside on opportunities, I China. see that. of want say than

In be see this what we they we terms of what out. what divest, to comes and But any on of have thing, thing. to said think we think the Praxair and they actually out we of Linde But have we that always have if out don't have comes have $X knowledge to thing for inside of wait into billion compete for probably opportunity interested million that about to there in us will invest, and million about an in to sale, about to EBITDA. billion $XXX when will have we obviously, which sure. that would $X.X be And play, $XXX of

Operator

Steve question America. with our from of next take Bank We'll Byrne

Steve Byrne

your ASU coal over from a would in more technological technology you interest with long for either that acquired. say gasifications or advantage, technology derived your it you process, been driven? the coal or growth have you a derived Do driven prospects around Shell technological a or technology you demand by there. advantage, Is time bring Is given to it syngas

Seifi Ghasemi

we the ourselves in knowhow we reason and the and position, is advantageous operations demand bring the a obviously of in both, ASUs It because we is will primary our maintenance now to of but order technology, large have our And is But that put then to terms that actually there. advantage. technological in Shell only not competitively facilities, buy wanted a that. competitors have

Steve Byrne

royalty come technology? any with revenue Does bearing that

Seifi Ghasemi

much. Not

Steve Byrne

of production new air most capacity And shuttered? derived the would retrofits demand polluting that syngas inefficient to be old that and projects are projects that of or and you gasifiers incremental say need coal these on are side, are

Seifi Ghasemi

using gasification you're of a the are clean Most of is about none opportunities old coal. very way polluting, gasifiers Greenfield No, that plants. of these talking are

Operator

Andrews We'll take Morgan from question Stanley. Vincent next with our

Vincent Andrews

wont’s second things Scott, maybe margin the recur on that's I then in are just given ask help last Americas about some the give could margins maintenance had and replaced you this sequentially, us positive just should sequentially? thing to quarter. there But the any wholesale think year you just in we that quarter, how

Seifi Ghasemi

hand be expand that. margins on Corning But we it to to to that competitive. like the over I'd obviously going to are think Well,

is Let's We growing, do margins, growing losing Europe very business margin, it about bullish industrial quarter-by-quarter. is around conventional very opportunities gases, our for clear. our but world. We just growing, are any we think is is remain the make just it and China U.S.

are about strong what's going we are actually So pretty confident and feel fundamentally, about on very Corning? we But, that.

Corning Painter

said. building just just So on everything Seifi

the whole maintenance of So to during very the we that the gases, demand course strong. merchant feel year. going and remains We're hydrogen the underlying have package other

Americas. say our overall don't that's in as And exactly map coming But spending maintenance we the one out. the so strengthening out I picture sequential-to-sequential, would is really

Vincent Andrews

that question. that hasn't then maybe there’s answer been guess as $X allocated $X now billion Seifi. just I billion to less And previous for to out follow-up a from

United putting all? at your or investment tax the in the in change Does of all are focused to U.S.? you States, environment all the that on in change the calculus Given money at incrementally work some focused at anymore that

Seifi Ghasemi

our number a money that on the can after, we of to lot spend one United good Listen, our there's project in is of if go that any reasons. because one, priority States,

doesn't of after hope There's that no now; that investing. every after, U.S. U.S. The number focused go about I if And will the project; So the go we there's the in project focused one the investing opportunities, in in absolutely in focused other not on that not we too. world, is fact on U.S., time, right and everyday in we for we single that. push our the big very U.S., can many are we some we parts are are that priority the question in mean that's we to issue but we are that there're that; will ones need any announce

Operator

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

Kevin McCarthy

cold you the to net the Just are bad, about quarter? how to effect along results Gulf see? customer that neutral to regards that outages good, of With weather U.S. or versus in the your second costs to the Do think trying any Coast. fiscal be you expect

Seifi Ghasemi

for can question. that. answer you Thank the Corning, Kevin

Corning Painter

in we of think positive when terms that for given disruption the have market, happened a expectations including we weather. say I But Kevin, us. the guidance I the it's in what's reflects would a quarter, our for have never just

Kevin McCarthy

development. pleased plant expand you to you that the And a customer with mentioned were that as follow Seifi. well. motivated up, may, expand purchase if then as you I Can What China the your from you? steel Perhaps think for And to termination. upon on can want you contract the I

Seifi Ghasemi

on Corning ahead. that, can go expand

Corning Painter

say, a gas customer. had who sale customer with of in, acquired less let's was a concept. that got into the then we steel another by contract bought company, So

a to process, we are their up an examples same gas. wanted understanding They SOE of good plant we’ve thought us. the the it in point a cell for faith termination things. that just look good just converted negotiations, a have to We how win-win that and into I taken of out to thought quarter, going we and have be was was a we've -- came with basically contract. good We they where

progress do be more we in of transformation So I don't to that the market traditional a some continue industrial think there're China some environment. gas and to of that

Seifi Ghasemi

they obviously transaction the was And of wants supplying very us was It’s the and -- plant for also of owners it do. customer. are do always the customer than that that new their the of rather is way we decided that, steel simply that all us. very to the the cost And rather of they they capital the what financials own their of all preference do that the just it. on financially Kevin, And effective fact

a And to work so higher at that they money have return. put

Corning Painter

our the a in a changing being stepping it in. had that And fact say with new lot to would I customer do was flexibility

Operator

P.J. Citi. We will Juvekar go with to now

P.J. Juvekar

or bidding advantage syngas in sheet. can for what and you large this into plant large the you explain competitors for you’re do large your run Quickly, competition then kind And of balance projects? ASUs of these strong When China?

Seifi Ghasemi

We of our trust running the through basis the customer, who that -- -- its they the we relationship we are returns, delivered, are technology. financial standard have just the the I with and not not that like the -- know you compete just with competitors, on make the of its that it’s we them the price, would demonstration combination to have

advantage are acquisition the an we to going Shell of with the Now technology. have

many compete with years. a things of basically we the like all people with and we have it’s we of for So that competing combination compete been

P.J. Juvekar

implements Will coal of impact tax are China carbon environmental say, if talked gasification. project? advantage Let's of the the And you What future. the to the coal economics that risk about the gasification? in

Seifi Ghasemi

implement they chemical. is coal do -- J., gasification the gasification about is Well, coal thing that this producing if the P.

of because So going price increases whatever it okay to chemical, the say the I'm not just they do in, put they tax can't gasification. coal

So not that to you into of fundamental is energy source Then them to the China country. coal coal to import have you are going you has. do and are is the only going do? thing The what if buy chemicals out these that gasification,

if able to high use Otherwise, government. to else now. sulphur that coal this And a and independent, be cant to is only As is That syngas. the being do turn high they they of a you would that result, is which coal they that, X% has their chemicals import have what with want option, advantage into right it. priority is do coal anything X%, the gasification why for to

So it's financially very attractive.

Corning Painter

Can just build on I it.

which a you gasification the we set after that has sulphur So, it. remove gasified in

can applications, because here use in the So literally can't out. that coal another we're sulphur I mean get element other And legally use going which it really to you you is an a was the to giving that around any has work other very stream benefit capture. within Coal gasification concentrated COX of of process. incentive you there easier almost would be carbon

Seifi Ghasemi

produce just about syngas, The kind of center gasification facility what that COX produce is you you building point is what that called is is the capture where ready. a Corning said the process any are to if

capture then lot in enhanced put for You other a recovery and can of actually into oil that applications.

Operator

next from our question John UBS. Roberts take with We’ll

John Roberts

until tax Scott, start reform January didn’t X.

quarter? understand the in of has three benefit. 'XX of am this even I this in I lower is fiscal rate of of ‘XX will guess you'll December four assume recruit benefit quarters quarters September And quarter because I tax a just more, trying the fiscal to December a go So tax why have down the little three essentially quarters And those quarter benefit. rate bit 'XX?

Scott Crocco

underlying first in of So base terms rate. our

You’re absolutely right.

of million]. quarter one [XX have XX, quarters We three

We’re required that to an take estimate blend and together.

bit XX.X. the by tax with little had first underlying a here a the lower the we share adjusted principally that pointed for the quarter, it's as in compensation. after ATR accounting even new based So had you for But act. too, driven We

and in points. at versus XXX that about talked basis maybe about last down we look So when year, total we’re we

the of XXX share XXX act of and comp. Now the is tax which the that is based coming from from balance

in of tax as point estimates. rate implementation we are the as all type I to XX when then full that's best this in look into the And think it the my think elements XX And these rate so carry maybe -- the at a I be forward, used. a it's XX to the to prepare at to well. I then remarks got going of But and act, various the for we time, reasonable year, said of you’ve timing at

John Roberts

it globally maybe could split India remind gas have between EMEA hydrogen and industrial versus atmospheric us you Corning, regional reporting And then Is you Asia. on your group gas up why side? you how on the the

Corning Painter

capabilities our time in -- however. say I of we’re point, point that. did Yes, would a Clearly, tremendously we this at reflection Asia, syngas that's up in at when beefing

Seifi Ghasemi

way put on that, we numbers. didn’t reporting all of you of traditionally, want if of that in change not But India that terms that the terms how we separate have together operationally, we reporting honestly are lot from reporting terms to report and about, quite of the we confuse we the in in run want that, But talking But to and we that didn’t comparison Europe. because to years. create confusion to Middle-East of previous a about results, been

Operator

We’ll with take Harrison Seaport our next from Global Securities. question Mike

Mike Harrison

that the there? are forward? as In at your sales. pricing and going exclude helping sustainable the just about margin Asia improvement how other margin and you really maybe I impact the of there, performance dynamics that improvement the terms this of of the Can that underlying Is quarter, the impact work plant is, talk

Seifi Ghasemi

pages two has of Corning that. details on

And question. so he'll your answer

Corning Painter

like if sub-regions leverage in results. our actual motivated maybe their volume building are again own on I organized a to forward. loading, it’s you're say things on them of and incremental I think, with that add it for would incentive plan the by just all is and you'd us team now big highly that's those right that us own on pricing Asia positive pulling

to fullest. So they take and get let's volume the let's and get of price, let’s to opportunity the just driven absolutely advantage this are the

Mike Harrison

running that your XX%, I add get commented China. merger the expect capacity the mentioned know so? or to Are for which year any haven't of where over in on see part one China you concerned point might LOX/LINin at expectations to we they're or debottleneck But there rates capacity is or which additions. competitors over capacity otherwise are utilization And on from your next your

Corning Painter

give and quite really an to though want where it’s options on this we are in all roadmap opportunity strategic area at China, a Clearly, exactly we're think of focused don't clear our I point. that.

Mike Harrison

And sneak Seifi. one thoughts more in, if share I on opportunities. Any updated can repurchase

Seifi Ghasemi

interested. Not

Operator

take Jefferies. We'll with [Operator Lawrence our Alexander Instructions] question next from

Lawrence Alexander

that And of discuss pay acquisitions EBITDA you more of if little forward, the translate or below pricing Are accretive globally or the and the Just this from of a if the any are onsite syngas tailwind have does a on Can the to such not continues both threshold, of into volume XXXX. growth quarter. the out merchant strength next then detail plants on bit give that you years. any profit take to thinking one margin. pools XXXX, other we're much had offset some margin do extent. couple projects, going you in very how in And the assets for business, does the end growth market quickly

Scott Croco

is This Scott.

Let XX is maybe so, points like that at or something basis me first pricing take the The from one. the impact company…

Seifi Ghasemi

you we projects negative between somewhere look expect we Actually, are none the and And on some our going they onsite when a go taken as the at we projects have to that to Therefore, overall, But Lawrence not have margin margins, is and of margins. to them to that projects taken -- might before, of their cause overall effect have we taken have come the as they margin. have to going maintain of actually said XX%. down. an margin, we EBITDA that the XX% that improve around onstream,

Lawrence Alexander

just you a little clarify bit. I can that guess, if

If overshoot basically to of or you going a bit rest a probably see? little what's four be the your before the your tailwind then is over be that XX merchant you it's And already is tight from tailwind here. years, pricing point flattish, three a basis things offset or get to XX% if shouldn't more

Seifi Ghasemi

are are Products you But to guidance margins with I think conditions give us that the trying assuming right agree the getting overall our Air 'XX and for into and track 'XX. don't and to that, I for positive want we now You're on to... but

Operator

the And that I'd like session. today's Seifi this question-and-answer any remarks. final Ghasemi concludes conference Mr. back turn to At for time, to

Seifi Ghasemi

schedule call. interest and appreciate forward you. With everybody discussing being Thank results the Have our we very day Thanks from like presentation. quarter. look on busier and for time a our We the to your you with much. you to would your taking again to for best. thank that, to I very Thank listen all nice next

Operator

for Thank you conference. participation. This today's your does conclude

disconnect. now You may

Air Products and Chemicals (APD) 26 Jan 182018 Q1 Earnings call transcript