APD - Earnings call transcript Q2 2018 | Air Products and Chemicals, Inc.

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Operator

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

Simon R. Moore

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

and are our disclosure in release Please that website earnings refer the on airproducts.com. X. found be earnings Our slides release for call at statement can available and this to on forward-looking the number our slide

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

Seifollah Ghasemi

everyone. in on today. our talented, Products. second very safety the for morning Simon, time taking you, set in excellent interest your call motivated and be year quarter delivered committed good at and of financial fiscal your busy Air Thank to results appreciate of Air Thank you Products schedule team XXXX. yet The another and do to We from

Our adjusted XX% the last have growth EPS up XX%. consecutive $X.XX earnings than of is fourth we growth, This reported we share quarter that EPS and have delivered were XXth year-on-year year. the versus quarter per consecutive of more

for day quarter. our XX% team the most work committed and gas great every to in company and at for with most have industrial shareholders. margins value safest customers profitable Products, continue people to be over and serve who focused create the We the world, importantly, hard our of EBITDA Air a And we

excellence XX% results reduction in our is same of employees X, time slide operational to what we the to performance. results and improve when our recordable strong totally a of our turn improvement. and XX% with continuous This safety our continue rate. injury of rate happen injury world can please driving on These commitment safety financial around are XX,XXX only lost reduction number our a to all focused in is Now

X, the for be to Now, in most most gas number to industrial our providing company safest, service the please profitable excellent diverse slide is company. turn world, the and our most To customers. which the goal

please our that Now, number to have slide in last about management four to X, years. philosophy many turn you we overall the talked times

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

number which four slide you X, the last the five-point our been roadmap years. On our has to the see plan success over can

X. Now, turn to number slide please

more made on We promises we we years ago. than three have delivered the that over made the you – the to promises over

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

grow we we yet non-core have greater for we industry. our per year with XX% Air this the year delivered delivered a that created earning balance in last years, to Products are and per and now our We year summary, promised, have divested implying assets sheet have have two as we sheet over and XX% And each forward. we the delivered In have what growth. result, growth well-positioned balance share in guidance best as the move of we the have than of another

talked companies companies. of small- to to or acquisitions medium-sized I opportunities continue other three gas great industrial first, To again, gas from that the mention businesses We assets see areas about or in have them you and previously. industrial

call for around customer gases asset in purchase to plants more the own opportunity energy, customers and the to and around industrial the facilities existing what opportunity is based sell industrial by operate requirements fixed buybacks very we from hydrogen and This the area third fee for under this Second, opportunities is oxygen, large a long-term projects on the gas emerging a plant our and demand contract. market industrial where of we category. growth. see syngas environmental the gas we world world and And driven

Now, one great number about. September of I please would our turn to that announced joint slide on of Lu'An year. venture We an X, opportunities a example $X.X is projects the exciting growth provide where last just syngas billion like I to talked of the in update

syngas a venture, majority steam The venture the joint be to Air a will will be and reminder, will provides As paid and the to contract. fixed by Lu'An fee coal, the joint owned joint long-term a Lu'An power joint XX% venture and controlled venture Products. supply by under Lu'An.

to the Air that this Lu'An to a now repeat many efficient Our happened Products and to we announce pleased China been due the efforts approval this transaction. the this ago. that in the be closely team China, I We this and few hours closed has the facilities. formally had so outstanding press can because of formally before expected in government by final just release and are not very done and like entities close to cooperative closed the am own it of agencies I'd support working summer. few Lu'An a get we that We our to ago. with transaction today team government with on indicated we they is since hours just that formally in transaction

like to our a full opportunities contribute perfect our with an for expanded buyback an project project This $X.XX of would fit guidance. updated we of our from this XXXX. is Lu'An our EPS monthly in well to under great fee guidance transaction our the about strategy XXXX gradual onsite business. business to is scope to million on will year It asset a That share we million per the as about we of Gases and $X.XX a facility. included closed, core of transaction including have contribution approximately that as start-up $XXX I receiving investment in modest the is CapEx confirm Now our full the the Industrial is earning example model. based expect begin why that $XXX in

to We our to slide X, go gas number these world of goal which and in the for to each results you measured be three shows industrial committed please metrics our of key metrics. three remain company a Now, most the as the profitable the quarter the by year.

Finally, be It's The continues reminds also which only few have my favorite please to sustainable obviously XX, chart range. years. turn to how to we in far slide. a mid-XXs slide see great come in number margins the us

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

Michael Scott Crocco

billion lower very XX all to on increased volumes by Thank Please much, increases partially Sales the Seifi. and regions, in X% higher currency. Global X% slide results. versus across three X% offset our QX We year project volume last Jazan you activity higher of turn saw $X.X from for Gases.

up denominator as with euro, adjusted improved by calculation basis year. the with Chinese new driven denominator increased merchant the of the based higher Positive includes turn to FY Jazan, Pricing of about driven due were British is points one was $XXX by PMD despite from RMB. half of ROCE gain. year one the declined primarily ROCE benefit X% five-quarter The $XX volumes China non-GAAP the slide QX XXXX by pound, by XX is foreign volumes, because the profit million in while gain, XX%, a higher Excluding XX% Sequential of the the was as income versus tax both last this of driven plants. from margin recognized the XXXX quarters margins the and that due EBITDA XX.X% of up earnings only last average. business. five currency and an currency. XX. We the include Please up a and down per to XX.X% versus and XX% on increased were pricing of gain restructuring plant subsidiaries. China volumes the had increase. sale. points, EBITDA million item was PMD on select This quarter. to were quarter, by XXX PMD QX FY volumes. income we the quarter prior Net positive result share sale primarily basis up the had

$X.XX Arthur EPS performance XX% was compensation, volumes Our increased by incentive cost productivity Price Overall, EPS $X.XX $X.XX. by $X.XX COX $X.XX increased per increased was legal a adjusted end Port taken continuing a of or higher offset EPS share. as the versus inflation, including QX reimbursement Net unfavorable last project. our few for year. higher and by a of and together operations cost raw settlement materials factors

In with are the addition, expect, pursuing. associated incurring are higher would you growth we opportunities exciting we as costs

providing been take Evonik to the in Transition cost ended with the these a major this Versum. Finally, Versum as services. Agreements as we and I QX. factor gap and actions both we mentioned or TSA associated Service TSAs had did the providing small costs We includes in saw QX. But in The Evonik expected, ended QX timing TSA reduce previously, to

year. income see was of Equity expect benefit due to currency was favorable across $X.XX JVs, any foreign the from underlying last rate our $X.XX overall a and primarily euro, TSAs. affiliate and Mexico. forward, $X.XX the impact to RMB. don't and added British to Chinese we the particularly several Going tax exchange The due Currency versus pound strength

share. Tax due Act increased to expected, new per EPS As by the lower $X.XX rate about tax the

was to earnings geographical from larger accounting compensation. and $X.XX due impact mix other for The a share-based

expense, income XX%, expect Tax interest, For rate interest $X.XX a non-operating tax to approximately the totaled shares XXXX, benefit unfavorable. including full the of year and outstanding other Act. see new Non-controlling of we the

we million up available We flow distributable flow and There in million. we other cash Now, to maintenance the In value. flow strong Investible taxes, a over of is CapEx, dividends. words, QX choice of cash and XX. $XXX cash two or to quarters was please total is cash cash interest, $XXX create almost cash investible turn to pay flow cash have with were discretion amount almost investible to shareholder million. deploy flow $XXX slide another quarter $XXX of had after million

to deployment on capital the we slide XX, I Turning available that for major like projects to capacity would and have you acquisitions. update

We $X investments cash XX. short-term available billion March as of and invest about have to of

about as Our is March billion. XX debt $X.X of balance

A/AX dialogue our believe At times know, debt about point, active agencies This $X an the targeted at our least rating. this level debt we to billion this to balance we managing about debt a or maintain should current invest. are EBITDA with billion. you rating to of $X.X committed of have As provides enable X.X and capacity

can So, in today, about maintaining total, A/AX billion rating. $X while have deploy we we our

that's investible dividends. CapEx In over per after we and paying generate taxes, cash. Again, of billion $X expect addition, year interest, maintenance to

or times years, least expect X.X have in five which invest not extra we to from next the investing to capacity leverage projects. available over include at So, profitable billion $XX does above

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

Corning F. Painter

with I higher focused Scott. industrial on remains with three pursue coming particular opportunities strength segments plants thank our new of All driving stream improvement regions, gas sales. in business three Thanks, base while EBITDA volume new existing EMEA in regional to business, exciting was who Asia. we would the all strong and like results up on our combination team and Lu'An. like in delivered

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

in mix. the business sales terminated Overall, Latin The due the last were actions I during slightly winter growth, higher by Overall versus strong on volumes there. particularly severe year Merchant to again slightly as prior in our demand despite early demand contract Brazil. positive the pricing quarter impact primarily quarter, quarter. strength achieved Merchant Gulf rounded offset flat overcoming were was to partially pricing driven Coast higher American wholesale lower positive was the volumes. up For were X%, weather negative mentioned by again Hydrogen the but

extreme We just impacted and pricing announced mentioned customers' our The argon operations. hard an to price work both on our continue I increase. and weather

from have dedication. the worked like for I weather and several challenging to while work offset compared that conditions plant In team in temperatures our EBITDA up underlying mentioned. every the volumes customers. team Our higher minimize their impacts, of tirelessly items and was adverse to four hydrogen to EBITDA increase to weather prior more than to as volume due typically contributions was business. are to our the costs. cost Sequentially, down as productivity These maintenance for reduced and plants excellent whole maintenance costs operate to scheduled impact turnarounds Scott X% several year, extend so. due or we would to at improved expect QX, gratitude the major years turnarounds my and high the impact winter major

vary and will costs year-to-year. quarter-to-quarter So, the maintenance

Some of to these plants the over is been for able contracts. original years XX extend that good in operation have been we've the and news

outage older for reliably an customers. is expect plants, a expect, part during As plant. positive is the contract with and for an work more this serve maintenance, to our we done you impact offsetting our old associated would higher customer desulfurization a flue-gas commitment a of these terminating Partially

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

Asia, slightly in of Overall, to result Our onsite pricing Sales and plant new margin new our a Merchant year, India, Easter, program packaged shifting prior demand growth. India, up was volumes by underpinned and where turn gases high and sales gas basis the strong contribution XX% by from this liquid success. but year. up in XX% quarter Gases compared three-quarters EBITDA a with impact. currency. XX% currency profit to increased into by operation as India, hydrogen EBITDA was the new volume acquisitions. growth. which excluding in prior few hydrogen points, higher Please X% EBITDA pricing pricing the X% pricing plant And from driven in plant comparatively its QX down volumes compared sales to strong were continue is deliver prior franchise. and Rotterdam both XXX a XX, contributed volumes, Merchant year, full to slide our and costs, in was margin positive small natural was of up year, X% actions third despite favorable about up modest XX% supported were Other we favorable bulk driven of up of by

added New half versus and third, us. onsites demand China the X% a of while to and divestitures volume Pricing for over balance region another our sequentially. and up acquisitions contributed the prior and for in net retail sales X%. contributed growth. XX% supply business down about X% positives was just shift The year remained Base

sequential believe dipped last the favorable by higher increase. points, As Year the primarily our pricing the to call, the began approach trend and margin the and are to currency in QX the New slightly Lunar Lunar positive the spot the positioned of XX% pricing market we predicted improved in due opportunity impacted XX last EBITDA our continue were FY and quarter. New was to market drove with higher XXXX. we contract which comparisons up we Strong and easing Sequential basis Between pricing in plant demand EBITDA holidays termination to Year. the pricing. volume, and due sale prior quarter conditions,

Lunar Products our Samsung's welcomes the Excluding exciting the since first has safety. related was continue announcement an update project. others we and the and QX productivity fab Pyeongtaek the plant Xi'an, New compared This XXXX. a on while Air Year is opportunity China. flat profit new despite since team announced third In semiconductor business win the provided The Korea. – successfully Seifi Samsung to to nearly this sale, on supply major execute February, Lu'An been slowdown. to we of Xi'an Electronics' second the the to beginning in Samsung fab being significant year; Tanjung, base supplying

down central to costs. Industrial of segment, comment closer end sales as sale the equipment includes equipment well on a Finally, Gases Gas air were which our please business brief as of as slide profits get our Sales the turn XX separation to project. and unit for Jazan Global business we

about XXXX while revenue lower result expect should We this be flat. in profits in to FY

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

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

Simon R. Moore

Please to Corning. slide XX. you, turn Thank

there LNG that due Corporate Our higher to our business, container were business as Corporate of project however activity our are remains includes costs. mentioned. segment the and LNG some in interest cost LNG in part helium renewed slightly were flat future costs signs growth-related our Corporate projects. up Scott Sales weak

still an XXXX, anticipate segment. Corporate we earnings for FY don't headwind For the

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

Seifollah Ghasemi

Simon. again, Thank you

Products' moment to take few talk about me future. a Let Air exciting

Our team of feels are few achieved on that have the in board very years. we what proud last the

continue Our opportunity our to the provide safety, productivity to and operating build us success. performance on

have about the before, pursue sheet I balance now optimistic to As remain Air Products growth. we and the aggressively said very organization We future.

to we While political we on cannot do continue or are we predict will worldwide control developments, have and the or Products Air commitments. we that control and over economic performance of our growth deliver operational confident

As Scott the billion continue of that able at Industrial execute and we five that invest I develop in five next when deploy be the to all the and so years. in to this cash projects business, us $XX to discussed, flow balance very can we next will years. core capital Gas provide least capacity our over strong believe sheet our

opportunities well and buybacks We gas projects asset continue to great typical in industrial acquisitions, as projects. of number see significant more mergers large and new as

turn Now, number to please XX. slide

is day working to the service and share, year industrial most a the gave be excellent customers. our hard of all for midpoint to again up part most $X.XX are the We profitable every guidance the momentum, our safest, to due this you of in Continuing positive last $X.XX $X.XX our the from very the to we company quarter, per to Lu'An in providing guidance project. range we closing world at increased have gas diverse

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

XX% to we $X.XX now three capital the in a guidance billion last range per XXXX, of $X.X of our year up fiscal to a be in to expect $X.XX, quarter XXXX. $X the earning Including billion project, to fiscal year expenditure X% year. For share over is Lu'An our

you out, work our to and performance that very is turn Air us competitive be that commitment what generate world allows see This total I'm the our is please to of believe great to advantage safety I thank operational Now, Products. done XX. I this people for to number the slide real the part want proud I of XX,XXX can and the to motivation hard There, superior of commitment before, team. their around today. as point we we all at winning have team and have want and

Now, questions. we are to delighted your answer

Operator

we Susquehanna. Please from question you. ahead. take with go today Don Thank will our Carson first And

Donald David Carson

Scott, question last if take out a think Yes, on base – plant, up contributing Jazan, base business. about XX% that new to mentioned from about you when I quarter base was be X%. That pickup a volume business you your business. half appears was half only

comment the outlook, as be improving? are business? the So, from And on result, good a forward we expecting base can you some margins loadings base merchant going incremental should business

Seifollah Ghasemi

to...? like would Scott, you

Michael Scott Crocco

Sure.

out, future though pointed improvements. on had fundamental performance will good each knows geographies, what base And you business the continue holds, the we to loadings we As the but feel as who improve. of across the

it's capacity low-XX% improved well. we're Asia, in utilization and as in to in been the I upper-XXs, we've the think past, up that's we've mentioned been in crept so Europe

the quarter we feel we in So, optimistic cautiously about about very see and outlook. good are what this

Seifollah Ghasemi

add. may volumes follow. momentum Don, if and do this is see if I positive positive in pricing momentum there will volumes, is on obviously Seifi, We

are... we So

Donald David Carson

Okay.

Seifollah Ghasemi

have than bullish we before. ...actually more been

Donald David Carson

these issues some other bidding competitive your environment these cause on projects. I some in projects? new that as for have not aggressive major And to after new them be going primary competitors the of of Seifi, what's assume

for on competitive competition does the and projects? returns who's real new the these So, imply environment what

Seifollah Ghasemi

changed competitive environment that much. hasn't the Well,

very on we a make competitors these us projects. if least just And projects major that, And the at rate you pressure had the customers publicly, all sure because take have disclosed below as of they XX% of we don't competitive returns Our which internal are project. get But very compete with expectation know, return. on bids. of return the every that are and we competitive they strong the

higher And whether our is the principle, projects if good our obviously We but return, it. guiding a competitors take of there wants that's or at had of to that get competition is another than significantly project threshold. lot lower that, one our have for So then not. they

Donald David Carson

you. Thank Okay.

Seifollah Ghasemi

Thank you.

Michael Scott Crocco

Thanks.

Operator

with from come And question the next Roberts John UBS. will

John Roberts

just to Praxair-Linde assets Thank I you. some still confirm Could the in for the possibly acquire you're sale of merger? discussions to related that

Seifollah Ghasemi

please. John, good comment morning. I cannot on that,

John Roberts

talk that? non-GAAP just the the then, And you generated what Okay. the were in activities benefit could quarter, $X.XX about that

Michael Scott Crocco

a part legal Was of we that some time ago of entities get did some of restructuring a able were and when sort benefit. that acquisition moved to a we

subsidiaries, And adjustments made that. contributed so, that some some we foreign as I mentioned, to

John Roberts

if maybe I... Then,

Seifollah Ghasemi

tax working a on It's some consolidate thing the you this get a consolidation been that have is when subsidiaries of matter what of We you a it, that the number while. for And of the is. benefit.

John Roberts

couldn't first answered, forward the question the expect the and reimbursement on since COX would year-over-year without you that maybe unfavorable issue? XX had, slide the then, And get going what you cost TSAs

Seifollah Ghasemi

are these current project. We you old on will your I know, that out to number working because continue to working your cost are have on, to mean those kind projects. – we fact and times, them in of the a legal And charge you people as on is were so of a it used of the rules and the costs, you significant cost projects when

that. do you can't Now,

it. expense You

those we need they and billion, expecting are we So $XX bid we the going are bidding if of to projects deploy on to a costs. are lot on and

is So thing that projects. be these to us win natural with going is a that we as

John Roberts

you. Thank

Seifollah Ghasemi

you. Thank

Operator

Next Fischer is with Duffy Barclays.

Duffy Fischer

on economy you that Is said just share seeing just comment guys down getting dynamic there Mexico? there? strength Can you Is the better? business? happening morning. Are some good down something with were market you you Mexican in taking your Yes, general

Seifollah Ghasemi

in a Mexico Corning? will business comment. Corning of is and in of charge kind our make

Corning F. Painter

are oilfield there, say, broad-based. seen a in several would pickup business packaged across The that for nitrogen there around relatively that so good, like pipeline of a the business thing improvement sort see injection gas of of and say we we've to lot lines. continue, the the is Mexico, projects in infrastructure I'd is on I going environment and

Michael Scott Crocco

And just reminding....

Duffy Fischer

Okay.

Michael Scott Crocco

actually of course, see wouldn't so equity affiliate the you for an us, our reported numbers. that's, in volume ...everybody

Duffy Fischer

on Fair. And Lu'An look the then like and an project? of you might get there the we when City the that progression timeline announcement on can comment project? What's

Seifollah Ghasemi

We a involves of don't because it, different continue too it is a to want we anxious entities. put a Duffy. moving a working lot from we on make huge point project don't view, and want progress; on negotiating I are to of it that it to and timeline sound is forward, but

Duffy Fischer

Great. Thank you, guys.

Corning F. Painter

you. Thank

Operator

Stephen And America go Bank Lynch. Merrill with of we'll to Byrne

Stephen Byrne

Thank and invested gasifier that would Lu'An Hi. project? return the on would that you have differentiate try both yourself both? What improved more say projects ASUs capital there the example you the to this operating operating by you. or for? the primary in Is of is gasifier owning combination an the you the value drivers for and efficiency an Has having

Seifollah Ghasemi

we of obviously are had you One $XXX the operational is we just deployed their oxygen, business that that were and supplying efficiency million there Well, several the when all is fundamental benefits. return. our that of mentioned. But driver at

of business million $XXX same the return deploying are we even our at higher. or Now, kind of

that that about. an growth, this means returns So we can so capital invest at create we opportunity kind to are talking us that for is the of more

to significantly mean up this, opportunities X% going growth, the It I and of amount gives excited creating we us gets GDP are creates everybody despite growth but deploy additional capital. So GDP. about like

Stephen Byrne

with commensurate Seifi, downtime? been facilities of the less your in efficiency on And comment an always say safety that of has and/or also you there you Would operating the improvement then, performance company.

Seifollah Ghasemi

at EBITDA look margin. our Because course. of Yeah,

through We almost and better is have of XX% gone Yes. $XXX XX%. million the efficient. fact improvement. company up much Obviously, is million, $XXX from the come XX%, that has more running is to That that

safety responsibility. achieving one who has of a is we don't want I good anybody I the at that hurt think the We record excellent reasons definitely to a but level operational moral that mean, company are is efficiency. a – get has safety

Stephen Byrne

you. Thank

Seifollah Ghasemi

you, Thank sir.

Operator

SunTrust. Jim is Next Sheehan with

James Sheehan

North my you covered America talk question. didn't regions Merchant America. about in well? you've Can but the other I Thanks operating mention think as North rates for taking

Seifollah Ghasemi

that. on comment can Corning,

Corning F. Painter

LIN Yeah, the we agreement. And of so wholesale large I'd the very on we side. replaced a termination have long-term that LOX, largely say

I think the bit take longer. a going little is argon to

that helped And we our the I'd ground However, But in range below market today, terms and argon team move is in performance. just has an covered along. in has that's certain mid replacing to volume the tightness tremendous of us that I improving mid-XXs certainly in think say, slightly story for us to loading. are the

James Sheehan

And as crude that prices you into see do for you? that higher, a oil moving as major far Is XXXX factoring how tailwind your Great. outlook?

Seifollah Ghasemi

our side of Jim, said always upstream business, have we we much that in prices so going oil that very involved are doesn't the oil crude affect us. not because not to to business material the that's be

James Sheehan

Thank you.

Seifollah Ghasemi

Thank you.

Operator

you. be - quarter expectations of bit of ramp on And more a And just just walk Parkinson So, preliminary year for to Chris XXXX? (USA) you. thoughts noise greatly balance given anything fiscal your thoughts on any fiscal Securities on importantly, the in and years you in Credit XXXX Parkinson cadence with rough Can are the Thank and little your appreciated. Suisse. go would what XXXX? we'll the that Thank Christopher Suisse Perfect. Jazan S. LLC Yeah. Credit on just us through an update

Seifollah Ghasemi

that I I'm you you. understand can is help The so Simon, sorry, not Chris. out? great, connection fully me didn't

Simon R. Moore

So, was, of couple on next Chris, stand kind I of Seifi, question update how think you your the and we on the over where years? it looks project could an give Jazan,

Seifollah Ghasemi

Yeah.

My Sorry, Chris. on (USA) LLC I Suisse I - am. we S. Parkinson Chris, making... you that didn't are Securities phone Christopher Credit apology. the hear

Seifollah Ghasemi

Not problem your no fault. at all. No,

on progress Jazan. excellent making are We (XX:XX:XX)

ahead are schedule. of We

to time it. expect expect project XX% that are with We and the we fully that close we at the done to onstream come

very customer, desert. our of – the can has is a for demonstrated It billion Air are of it's capable middle to positive and executing us. Aramco, $X So, a the deliver a very Products in that positive, very we Air project story important Products very,

and it's So, a story a it's for good great people. our us achievement for very

very backlog We overwhelmingly of Parkinson backlog. second S. are vast And proud all of that. onsite on LLC Suisse question The (USA) just is Christopher Securities Great. - majority a your Credit any particular which on end-markets you'd you're sticky to transactions. to given increase paying to exposure attention something over can your you Is further comment incremental business, but COX the recent time? like

insight would there your any Thank appreciated. Just broad on you. be thinking

Seifollah Ghasemi

Chris. Absolutely, environment and focused always sector basis, On say very downstream specialty oil particular sectors chemicals also and energy we a on the obviously are gas we in Yeah. side, very macro market. and to coal are the But just from areas we the are switching A focused major going of that crude there oil amount are companies you lot as very gasification. and of projects know. providing the Those downstream. significant emerging are

major because is a in China Aramco in of coal projects There is obviously the the emerging the are in gasification doing. cheap and there's and there markets. shift in U.S. natural what large the see significant gas You shift

environmental Securities we are and you like business. and obviously the as – emerging - Parkinson energy, requirements Fair that's markets; focused Christopher Thank So onsite S. much. we (USA) on Suisse very I Credit said, enough. and what LLC

Seifollah Ghasemi

Sure.

Operator

go with to Bank. David We'll Begleiter Deutsche

David I. Begleiter

Thank you. morning. Good

Seifollah Ghasemi

Good morning, you David. doing? How are

David I. Begleiter

Seifi, cycles, why? on to difficult so, get proving Americas you. if cycle thank pricing, than this just Well, prior to is pricing be and more

Seifollah Ghasemi

if last production a demand in up, up of and follow. the selling in Industrial and we that go up LIN then LOX, industrial we in year-to-year rates pricing always And subject you selling we going around our LAR, commodity. have Pricing X%. utilization see is basically, said will pricing, David, States are are our supply, United the facilities. utilization is production to

cycle to now. right in of the we And points it if direction. the just results everybody that to you and else, see that it be course So that's of natural seemed

David I. Begleiter

Very good.

Seifollah Ghasemi

production activity. Overall, industrial

David I. Begleiter

additional those some impact And Americas in just QX might contract offset profitability? Understood. you elements you the costs termination, quantify QX, could by in that Americas' maintenance mentioned the

Seifollah Ghasemi

that But information would then is, is lot contracts The extension. news we a are mentioned, life old are have turnaround very a competitively. undergoing plants plants much of we is of years fact so-called these XX give have these won the this of that because ago. bit good as Corning little it all contracts Quantifying difficult renewed. And too be very therefore, a been that

maintenance we and that to bottom that goes that ordinary report expenditure of our Some on of is CapEx line. maintenance in some

David I. Begleiter

Understood.

Seifollah Ghasemi

development It's negative a a positive than rather development.

David I. Begleiter

Right, right.

much. very you Thank good. very No, Okay.

Seifollah Ghasemi

you. Thank

Operator

Stanley. with Next is Morgan Vincent Andrews

Vincent Stephen Andrews

just opportunity I as sort improving there's and $XX I'm thinking bring to types just about that think up? be wondering those you XX% do mean, an rates, going things, an think Seifi, this economy, be Thank opportunity billion, over to interest the target? rising you, next of think minimum to return and raise good the morning, you five would everyone. of that years I'm

Seifollah Ghasemi

Vincent, first question, answer of all, XX% good your when the morning. minimum. XX% – To is we Vincent, say

a won higher have today. that's that lot We of than projects

and on honestly, things project, So – about price on do whenever a are bidding competitive cost we nature, obviously the the there. We we basis. market price we on the things quite based a not

we So projects. the had that, we been kind and below which take that that line; bottom is of is XX% have projects XX%, don't our we mentioning that have XX%; keep that

Vincent Stephen Andrews

Okay.

what foreign So just you nothing will follow-up, could remind exchange just a change there. guidance you're quarter? us And expecting versus last as from and

Seifollah Ghasemi

Scott, do you want to mention this?

Michael Scott Crocco

Sure, sure.

for So question, let take – me let through me thanks you you take through. the

moved about are. $X.XX. at higher a had of as versus at is doing just everything level, And on we and up So, we and as $X.XX. the we we X.XX what the that's about quarter currency makes RMB is of That's you And the else remainder we've RMB of impact top the $X.XX. then mentioned X.XX, is latest wherever up rates at this year, end quarter what last prior sideways know pound had euro from for of

$X.XX, to on developed, to full but had more just for we like forward So look when said year, now maybe we what's of currency $X.XX, $X.XX. previously it's kind would the on the more $X.XX be the closer

couple to just you. Let also sensitivities of just me to try provide a reiterate that we for everybody,

the to a – sorry, it's So, doing translational just bring just it exposure, into dollars. are no U.S. mathematic in – there's first I'm grounded mathematics It's back economics. rates, exposure transactional these

to So, for an the RMB, would $X.XX the then XX% Tai $X.XX; euro, Korean an annual the individually the and about swing a there's Canadian $X.XX and on of is is XX% be same about with per won, a swing each EPS basis about $X.XX swing. if the XX% dollar dollar, the EPS pound, year, euro

that sensitivities. take projection what a but also we're little the So to and for with not wanted share the through I you seeing you bit only year, and

So, that's hopefully, helped.

Vincent Stephen Andrews

helpful. much. Thank very you That's very

Seifollah Ghasemi

Thank you.

Operator

Juvekar go with to Citi. And P.J. we'll

P.J. Juvekar

Hi. morning. Yes. Good

Seifollah Ghasemi

doing? are P.J. How Good morning, you

P.J. Juvekar

into bid these do competitors the syngas good, consider for Lu'An gas you you? and for you or Good, Seifi, running suppliers, field is or projects as traditional a when gas other core Seifi. wide industrial you are the like open YK,

Seifollah Ghasemi

in every open-field as that talking and we of times there. own, they basis a people, into these if active. thing run our a been whom are They with do and are customers with we us No, of relationship but on totally as operate their this are it's they have competitors are ambitions and not lot we have very they they them. projects that opportunity an the on have and that they their we They of customers, the share do, a lot project have so our we don't exactly have there smart see to, done,

P.J. Juvekar

you region highest then, incremental leverage you going other do And you geographically, incremental margins you do the to forward? in Okay. have or think in sales, words, think which have where the highest

Seifollah Ghasemi

actually margin Right around be places But markets think is emerging opportunities growth highest mean, markets. It is places region we be actual our the like, it that China, currently we be East, the significant United in will will It's for XX%. States. the Middle will now, United like margins, Those there margin the that. incremental of be Russia growth terms of terms we highest as will forward, it where and us have But States the area business. for in total dollars. move the I the are sales highest are

P.J. Juvekar

Okay. Thank you.

Seifollah Ghasemi

you. Thank

Operator

Vertical now Kevin with go Research to And we'll Partners. McCarthy

Kevin W. McCarthy

good Yes, morning.

Seifollah Ghasemi

Kevin. morning, Good

Kevin W. McCarthy

as in mechanisms challenge. the cited if seeing chemical what so, tension? across might logistics companies have that the have if rising to need that, you future costs I'm combat you're industry or of place in a number and A wondering

Seifollah Ghasemi

that us, For is not Kevin. an issue,

know You very our business well.

is local; extensive gases you business we very had business, logistics would apply very, an which if Our packaged don't. the and

not for Kevin. an So that is us issue,

Kevin W. McCarthy

I Products impact can reasons not restrictions environmental supply on a there's in time. if we the China in rely second, business and for wondering seen China factor lot of a And over of winter good. pronounced I'm be if We've more if on or obviously that may. Very a to Okay. question patterns. and those historical related to seasonality any the that's seemed Air

Seifollah Ghasemi

impact us. There is on no

that, You for more the can us rely gasification long-term, the environmentally it then on historical pressure for and coal becomes is better the because beside factors even pronounced. more

Kevin W. McCarthy

Thank you Understood. much. very

Seifollah Ghasemi

sir. Thank you,

Operator

Bob And Koort to we'll Sachs. with Goldman go

Robert Koort

Thanks think me sales in you Americas, missed actually drove what profit $XX million showed how more the very declined, – operating that? might much. it, but of improvement have Corning, but could sense little a I a the you I were that components give

Corning F. Painter

little So P&L. had say, improvement. that, Scott let's still we there our an the We cost but of operating had base some are of that bit mentioned the less a cost items in

Robert Koort

your some function on down, a there of little like to it and ambition Okay. stay it throwing I Scott, a the on now last was path, of wasn't margin is that a maybe in guide? seems at your And earnings Why update these more the function continuing guidance little little you're better, since a maybe bit then, surprised tax in the a ambition Lu'An scaling elevated? at of not end maybe is got guidance, FX costs is better the other maybe is you've maybe there Jazan the of things. number more

Michael Scott Crocco

are we Bob, X% raising guidance. by our

at to X.XX%. So X.XX% are now we X.XX% X.XX%; at to were we

$X.XX. So our we bottom increased estimate the have of by at least

does. exactly it's as to what difficult very go obviously So, economy predict forward, we the

at guidance. conservative a our next are time are you seeing thought we prudent about and at we elements. the will a We quarter are make end positive of and obviously we not. all we are have But but stay positive, can increase the we to where if where it's we But this you are, things given judgment of momentum where

Robert Koort

Seifi. Thank it. you, Got

Seifollah Ghasemi

Thank you.

Operator

Zekauskas And Jeff to JPMorgan. go we'll with

Jeffrey J. Zekauskas

Good morning. very much. Thanks

Seifollah Ghasemi

Good morning? Jeff. are you this How morning,

Jeffrey J. Zekauskas

question Maybe I'll try way. a in Good. Bob's different

think for the profit even year-over-year the I EBITDA you're higher X%. volumes than in growing your returns half though and Shouldn't has or your you're reporting? X% first flat what operating been be Americas

Seifollah Ghasemi

that to – and be I would costs some obviously, of like And we that the turnaround of that. Corning we other of is some not have we pursuing some of us have helped that Well, some do as the Scott the the fact this mentioned, terms for year and have mentioned, exist one-offs did it costs all year. that in projects costs But of last better.

getting I for the are you up obviously if through So take – dollar of dollar sales, off, this and the one-offs the incremental go to every we of $X.XX bottom are thing, of are we we really line. details

for and the we margins not company a fact aggregate, that I'm in is losing are result but the like so So then you put all on, what you that big of worried about us see.

Jeffrey J. Zekauskas

expect last return going capital Can whether about or four X%. when your lower, or incrementally some the employed the you I up? like go on you and to on items. your Okay. and five But from Earlier decrease capital quarters, employed talk Scott noise call, through XX.X% commented one-time is I on incremental return think on if it moving around it that's the at it think in the year-over-year keeps capital what's he return looks to and XX.X%, in attributed return capital you on to look on

Seifollah Ghasemi

if answer qualified Scott And comment. is a that. to make then there is I'll most anything,

Michael Scott Crocco

to remarks. Sure. Jeff. prepared my And Thanks, just back

billion the that into $X PMD ROCE gain in part of goes the that that of dilutes calculation, had, the points. about So we base calculation XXX almost as that basis

comment the my it with that the – booked comes as so of mathematics five on last in math that's quarters gain for that's just associated the the that. PMD around year the we denominator So increment, in

Jeffrey J. Zekauskas

Right.

Michael Scott Crocco

return start accretive well. as come out Back be projects those contributing, of that rate question, to will minimum as and your after-tax done backlog and all are these they the XX% around as to on on of capital the basic internal and return

Seifollah Ghasemi

One lot add, a us Jeff, showing are comparing you're to would XX%. is if thing that capital of calculate you are capital, the capital have I if it that our way you the we since return to our the other like return on that others, we – we about calculate on other cash, on calculating is if way people it, decreases actually return –

that is there subtle So thing also.

Jeffrey J. Zekauskas

much. Okay. Good. Thank you so

Seifollah Ghasemi

you. Thank

Operator

Harrison with Global we'll Mike go Securities. And Seaport to

Michael Joseph Harrison

Hi. Good morning.

Seifollah Ghasemi

are doing? How Mike. you morning, Good

Michael Joseph Harrison

and JV the couple Seifi. just of Lu'An A questions kind modeling-related you, on Thank well. of question. Doing

receiving margin? up taking which monthly think more high-margins the we should raw of in or it tolling sort ownership that lower any and low as of would that revenues receive revenue about at relatively make you higher fee, a a a talked you of You which as about being end do materials relatively arrangement

Seifollah Ghasemi

We the of do take not any raw material. ownership

Michael Joseph Harrison

Okay.

So it's rate. a of tolling more

Okay.

Seifollah Ghasemi

yes. Kind of,

Michael Joseph Harrison

if in then for And the terms I understood of mentioned but the $X.XX, fiscal XXXX, expectation $X.XX, EPS including annual correctly of in only you're you guidance.

Seifollah Ghasemi

Yes.

Michael Joseph Harrison

we third of should and due costing some to that startup you much and those fiscal fourth the startup how quarters? as think headwinds in Is headwinds

Seifollah Ghasemi

gasifiers a not there get Mike. we my fee gasifiers, these on is based the It's – And monthly No. onstream. friend. are coming four startup paid It headwind,

out of obviously, the four gasifiers time. are same So, not they starting at the

the So when first comes amount. onstream, gasifier get certain we a

the expect fourth XXXX, we will the the by second, October get and and all basis. third we on four onstream we to The have an then in annual there, which gasifiers and is but will of get

Michael Joseph Harrison

does on XXXX? for the we you. at one Thank you just as that your obviously heat the look question picking other What's related up. still is ask can forecast I what maybe pressure If right. exchangers, but under commentary activity some All like to LNG sounding now that

Seifollah Ghasemi

XXXX. We are doldrums not comes But be until and we positive but increase substantial we expect I don't that any there, have it therefore we said sooner expect that have out would a that business the it. come expecting really not don't seen if to of

Michael Joseph Harrison

much. very you Thank

Seifollah Ghasemi

Thank you, Mike.

Operator

we'll Sison with go to Mike KeyBanc. now And

Michael J. Sison

good Hey, Nice quarter. morning.

Seifollah Ghasemi

Mike. Thank you,

Michael J. Sison

– is XXXX. in you nice when Seifi, Lu'An a be going to contributor here

projects. take a that's the so growth the You contribute XXXX, year? – When major to in much can earnings so, have those other coming yeah how at I on question. next look And slide project

Seifollah Ghasemi

We makes come XXXX don't by will XX%, people expect increase do you that what exactly we EPS calculate to we we from those. But but that easy projects least very don't have so the our and don't specific then it that it want of don't from for mind, returns if we disclose are to specifically, contribution that. our at I that to said some want because new disclose

Michael J. Sison

in your follow-up, the slide market over been a capital backlog. couple of opportunity electronics next a years? year and How an market for the project – that area as has much this deploy then that you in And good how on Okay. you can big of

Seifollah Ghasemi

is right Well, that fast market now. very growing

what I you and And people year, have to the up, next new more will love that. more a happen we build bit little Corning all think make it comment this. year contributed in than $XXX projects if that there. But of depends add new probably this fabs of million on I Corning? on

Corning F. Painter

of say list this Yeah. activity which is is lot Taiwan meeting And team, expect I the still quite robust with in good just another so the us, year I right was we of where prospect Korea, China – would a is China, and now. hunting. for

Seifollah Ghasemi

by And we add are that I the one. depends like very, well-positioned to way very that on It on...

Operator

you. Thank

Seifollah Ghasemi

Thank you.

Operator

We'll Laurence Alexander Jefferies. go with to

Laurence Alexander

was wanted if the down of gasifiers lose your slightly are see in XXXX, that's or the part But would My with that a and XXXX if if regardless clarify I if had gasifiers; the paid be model? revenue you traditional ASU the then you operating. or to customer you the say that just that's if different would correct stream. you the impression with Could as two once it running, up fee sounds was morning. things. onsites oxygen of Good

Seifollah Ghasemi

no, no. No,

Laurence Alexander

And secondly – go ahead.

Seifollah Ghasemi

have get we of get in is Sorry reason fee full if gasifiers getting the – the we not is we customers' to are then to The two interrupt run, you. are the for needed BFC. are the the only That because demand Once that of gasifiers still all four our now case. right running, XXXX, getting we fee the we startup.

it's is the the same, the adjusted period. during startup exactly model So

Laurence Alexander

second then then about comment flog a you made one guess just to on Merchant the have were of in And tailwind. I I Okay. price think about and you quarter $X.XX the a the more bullish that FX than one horses business. a again, last were previous following is you volumes

you're $X.XX You about by $X.XX a get but from $X.XX. JV only moving the or range the about

of for projects squishiness the kind it you're incremental, about efforts guess thinking the year the is implication or the to the to $X.XX some is investments because other So way getting just growth maybe you're an it at... just pursue $X.XX just or through or that halfway allowing is cushion? you economy that growth that drag. what the it's I'm I and only want that have more in Is

Seifollah Ghasemi

it's... No,

Laurence Alexander

investments of ...is you take ramping tailwinds? to the growth are up advantage

Seifollah Ghasemi

of want effect the coming But the I we do right to in do us we had onstream the mean, of saying, because FX, other or the absorb we results. not we it been positive higher higher of – think pursuing we have the turnaround do of I opportunities. see as see do of of and to that confirm like see you I some numbers million that positive now. exact Lu'An don't confirm effects the quoted, but see last our they cost terms hydrogen during the $X in maintenance year, facilities cost cost

So those haven't that increased our reasons more $X.XX. are the guidance principal we two by than

Laurence Alexander

Perfect.

you. Thank Okay.

Seifollah Ghasemi

you. Thank

Operator

are this other there And gentlemen, at time. no questions

Seifollah Ghasemi

look next again listen on Very to to day. very our good. Well, the in interest our that great for case then, a I very, your would schedule you to presentation. like forward Have discuss again quarter. you from time taking with results We your much. to very Thank thank call. and everybody being for do busy Thanks appreciate

Operator

you conclude may participation That much. does everyone And I for our thank very today. your thank to and now would you conference like for disconnect.

Simon R. Moore	Air Products & Chemicals, Inc.
Seifollah Ghasemi	Air Products & Chemicals, Inc.
Michael Scott Crocco	Air Products & Chemicals, Inc.
Corning F. Painter	Air Products & Chemicals, Inc.
Donald David Carson	Susquehanna Financial Group LLLP
John Roberts	UBS Securities LLC
Duffy Fischer	Barclays Capital, Inc.
Stephen Byrne	Bank of America Merrill Lynch
James Sheehan	SunTrust Robinson Humphrey, Inc.
Christopher S. Parkinson	Credit Suisse Securities (NYSE:USA) LLC
David I. Begleiter	Deutsche Bank Securities, Inc.
Vincent Stephen Andrews	Morgan Stanley & Co. LLC
P.J. Juvekar	Citigroup Global Markets, Inc.
Kevin W. McCarthy	Vertical Research Partners LLC
Robert Koort	Goldman Sachs & Co. LLC
Jeffrey J. Zekauskas	JPMorgan Securities LLC
Michael Joseph Harrison	Seaport Global Securities LLC
Michael J. Sison	KeyBanc Capital Markets, Inc.
Laurence Alexander	Jefferies LLC

Air Products and Chemicals (APD) 26 Apr 182018 Q2 Earnings call transcript