Air Products and Chemicals (APD) 24 Apr 192019 Q2 Earnings call transcript

Company Profile

Participants

Simon Moore	Vice President of Investor Relations
Seifi Ghasemi	Chairman, President and Chief Executive Officer
Scott Crocco	Executive Vice President and Chief Financial Officer
Sean Major	Executive Vice President, General Counsel and Secretary
John McNulty	BMO Capital
Christopher Parkinson	Credit Suisse
David Begleiter	Deutsche Bank
Mike Leithead	Barclays
Jeff Zekauskas	JPMorgan
John Roberts	UBS
Jim Sheehan	SunTrust
Robert Koort	Goldman Sachs
Vincent Andrews	Morgan Stanley
Don Carson	Susquehanna Financial
Steve Byrne	Bank of America
Kevin McCarthy	Vertical Research Partners
P. J. Juvekar	Citi
Mike Sison	KeyBanc
Mike Harrison	Seaport Global Securities
Jonas Oxgaard	Bernstein
Dan Rizzo	Jefferies

Call transcript

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Operator

Good morning, everyone. Welcome to Air Products and 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. of President Vice Moore, Investor Relations. Simon ahead, go sir. Please

Simon Moore

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

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

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

Seifi Ghasemi

Simon, and team and joining you thank your Air our hard Products, a to Products our everyone. we for creating call contribution. I another At morning yet focused for employees Air the in good of This year. today. strong motivated and every We all have interest who committed Thank stays appreciate on and serving us our on day their and our you, delivered customers of thank of to and for financial team very want work, safety results. dedication quarter shareholders XX,XXX talented, value

XXth stress quarterly result up currency the $X.XX year-on-year quarterly to This and strong represents quarter XX% have Our that, XXth negative of overcame the quarter, earnings is per $X.XX growth. like adjusted consecutive I that impact. EPS share a reported consecutive we

on a XX% currency is basis. EPS up Our constant

cash generates the XX%. to and with I shareholders, record industrial value company in very We high also safest quarterly extremely continuing with that be dividend financial most and does continue deploy cash gas capital projects world ability significant our to gas while significant above profitable a dividend. position for through our business confident strong in return our return remain a a this of margin remain technological that the flow. We industrial into to generate

everyone Number long Five forward. maintaining X happy is true goal be that to to we Now, XX% my to the Air times come. in providing achieve is environment we to career. committed as have the ago, Slide to gas Slide rate company And part point a most most to it. have have safest as my of the industrial goal. around create to Number X talked on want I employees and am our time goal management don’t the our since by and standing say dwell to journey potential. a by rate very the recordable the world, on expanded move Slide X we work many please that are We Slide philosophy Number years diverse I years we that proud that and continuing our Products being XX% improved turn injury number X X. this so include position our business I their world our have our goal before, set shows achieved for profitable injury safety. throughout we plan and about our the can focused followed are loss And result, our All states excellent in and service customers. this XXXX.

operate; feel and culture their important, change current company best-in-class to company to and to contributions expanding sustainability they maintain and higher performance have achieve position, our a most competencies, recognized is are the we committed a which to that people purpose. in That create continue for turn by solve of to leadership a communities facing shows people committed the of the to to to the process to where part key our committed higher proud gasification valued; challenges company offering that purpose a be innovative company is Number that belong the to Please of our are energy the they our an core environmental X, are company Slide supportive related purpose work We our That human are want grow and our to the race. and milestones is in our which strategy. it. and to higher we

me on the a these projects. take update to provide few an opportunity Let of exciting

on very time commissioned process built Lu'An units, are of and we separation very definitive project are as those are contributing the which is and And Saudi they and being I of our of The main gasifier said many we plants, expect The negotiated for speak. As contract complex the continues they end expected. calendar Jazan Jazan with power on Aramco. run of are as and results air the being discussions to and we them conclusion well by contracts the XXXX. last the budget the quarter, to ASU, in

Juitai are is stream Group project discussion project the our We for the And And This on the are has project but with the are And of us under issues the XXXX. we is that a underway. to support in some project. to related we will construction have for expected of the definitive coal we forward. important as project more very central continuing allocation announcements project, syngas YK very which there that for large optimistic government. still with about is coal, move

on we to of work large the number before have around said addition to projects, these announced continue new gasification opportunities In we very a significant as world.

measured our the committed our be the where continuing remain company to of X, to as goal Now to metrics. most gas you please industrial profitable by the in We world see go of Slide metrics. can of these key profitability results each Number

and a which always particularly to go please slide Now this Slide X, quarter. is my favorite Number

of us proud by Products it. EBITDA see can XX.X%, points very great margin Air people ago. quarterly all a up is X,XXX the basis years of You from which up of is over record our and five This achievement are

turn detail. our over Scott Officer Crocco, call the like Financial Mr. to I Vice to the Now, and Scott? President Executive results Chief to discuss would in

Scott Crocco

much, Seifi. very Thank you

of Slide for XX our results. a summary to turn please Now QX

team As strategy. due Seifi also the X% four best X%, was growth negative in X%, change offset over Sales volume roughly Price success $X.X currency delivered is a billion better said, the performance demonstrating up in added of India. impressive another up and as years. our contract Volume quarter. which of by to X% was our price X% and were our

This As company lower impact so the EMEA and as the hydrogen line. we the sales segment other profits quarter full but our effect. supply our began our are includes with change showing for a the no of end has This successful to We customer near in sales saw in India tolling reduces quarterly reminder, second sales for in the on Jazan equipment our we agreed sales into a a we arrangement. impact change convert agreement but December, project. the

points Excluding and particularly grew driven EMEA dollar a primarily XX. positive EBITDA the higher per a as year, basis on EBITDA focused positive Asia. was New modification. and to $XXX of a XX%, product partially to margin including XX.X% by across our this record and and adjusted stay compared Jazan X% again offset XX higher share due results and on-streams, major Slide higher base sales result both well of than strong in Price improved more as all earnings cost. to improved XXX up currencies. Currency prior offset headwind of reduced and Sequentially contract as all equipment strengthened as to volume currency volumes XX.X%, lower unfavorable EBITDA lines. Lu'An due new the the team Asia. year to ROCE and versus against three we pricing, $X.XX the increased million points impact, lunar reached X% basis Please volumes higher of as profits. pricing. price, by regions additional by was job due India as volumes holidays in in volumes and turn Americas our Year plant better last across Great merchant

$X EPS and cost. Our second a quarter pension GAAP includes one-time was million $X.XX, settlement

contributed up or by $X.XX operating adjusted $X.XX of share, EPS together quarter per Volume, Our performance. was costs $X.XX. second strong price and XX% driven

the is such of power cost the in variable costs, as our see price primarily As you variable production net rate merchant on costs increases, of distribution increases impact this and slide, of impact business. shown

The costs. other plant cost line refers to and fixed cost maintenance increases, as such personnel

win quarter this unfavorable, euro. increase previously, and we exchange our to cost by primarily and and labor our and strategy. higher execute the Chinese RMB maintenance. cost $X.XX driven Currency capabilities other in investment and was inflation growth successfully we've as was see associated with The the foreign to due part continue said And to

negative a interest including over Excluding $X.XX. year. interest currency, and non-operating increased or items, the combined unfavorable XX% income, for last EPS expense, non-controlling $X.XX Non-operating

Our compared for prior quarter effective to tax year. XX.X%, rate was flat the roughly

rate tax we approximately effective FYXX, For of XX%. expect an

Now please XX. Slide to turn

generate We continue strong to cash flow.

generated $X.X available pay $X share have high shareholders almost per During us or cash $X.X and cash distributable billion the to last $XX months, XX for about to over allowed still our billion or This as return business. XX and through Slide to increasing create make value almost flow. flow distributable dividends XX% nearly strong of capital billion clear we have gas investments flow dividends reformatted deployment. and information shareholder more we for in This the updates our hopefully progress capital Number core deployment you. it our industrial to cash us enables

the over just five-year of first today. investment from see, additional FYXXXX This can made available through debt available we you $XX is is period the As up capacity over show FYXXXX. billion three components, of now

If of managing the available about about maintain We will months targeted EBITDA, continue billion have AAX we rating. XX debt $X.X this maintain X to a focus debt today. to at our rating balance times level our last on current we

and $X on Second, FYXXXX. to expect cash investible of the flow, between based end billion we now over LTM

Third, to billion of total and we billion M&A This $X.X on billion Though, them. and on total CapEx. and we projects. you spent we've well already growth over see maintenance of $X.X capacity. about XX% available $X.X of M&A spend already already half almost have committed commitments Today, excludes can project our have remaining with about deployed a

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

Seifi Ghasemi

of Thank Asia results that turn Please can Number strong see you team set Scott. great on XX. our our results. Slide Asia to yet you, in another delivered There

continue focused business to New our Asia our Our are region. and and Lunar positions to positive business the from also throughout strong recovered current well remain holiday, potential show very growth growth. positive on contribute. long-term China this And very in continues our We other Year about base

XX% XX% of region year, from was the For for the XX%, up mostly Xth Lu'An. up price negative increased Volumes and by team XXX year-over-year pricing price volume more the Overall, record projects, this EBITDA also primarily favorably to strong offsetting price margin Asia am as of currency. quarter, consecutive very new a points and profitable last both increased result improved profits quarter driven The versus making the in a were performance region. proud by last I and XX.X%, our sales EBITDA and impacted year our volume X% most improvement. than positive of region. margins. of basis

Scott to to Scott? Americas like over the turn to back would discuss I our Now, call result.

Scott Crocco

Thank you, a of Americas Seifi. XX our review for Slide to Please turn results.

For was the hydrogen for sales both in X% quarter, X% Coast, primarily Demand Gulf higher by driven volume facility X%, is the new the increased robust supported and Baytown by in which higher Canada. price.

of impact was this in the excluding week, announced XXX points, higher our margin a this increased North up for ASU to Earlier America support for on business Freights the weak. America, the Overall, the Our region. contributed merchant base on-stream ninth and local Steel's first also of X%, years improvement came cost of consecutive quarter that while EBITDA volume new remains in market, through. second River grow EBITDA Americas Steel a energy expansion were builds continued success Latin positive ASU XX% is ASU new pass pricing. years. River higher over four of basis almost it driven over project in our we and points, big a by Big million primarily reported XX for of Arkansas. $XXX XX% EBITDA and volumes basis This performance few and up merchant will best the margins ago. the

like would to over Simon turn I discuss other our call Simon? Now, to to the back segments.

Simon Moore

Scott. a review you, turn XX EMEA Thank of results. to our Please Slide for

basis. up change. economic firm. volume X% price limited from improved constant Reported X% saw Compared Our improvement. pricing and EBITDA unfavorable all Price X% merchant EMEA sales marked across X% quarter was quarter negative across offset all price basis a currency held currency products on up was X% XXX to impact of last as increase year, the the currency. Reported business positive produced The of major fifth improved points. strong EBITDA $XXX consecutive reduction margin contract EBITDA million despite and operational results year-on-year sub-regions. improved X% We due while this sales and to India growth

EBITDA risk points. to at India the impacts. future Excluding point, as continue margin Brexit contract to negative although was basis about see seen results, our not we we have XXX change, And up this any a potential significant

to cost. XX turn Gases, project business, includes Sales to and due as as Global air we separation please Slide declined gas business LNG of industrial Jazan approach which unit sale segment, equipment well ASU costs. to our lower project. as central as and activity the successful Please corporate well equipment of Now our which very Slide conclusion as corporate other sale turn our businesses, of includes EBITDA XX,

the proprietary announced our the a revenue show technology a to Although, equipment improvement, we project we in LNG yet equipments expect later to sale LNG profit anticipate to our booked contribute Golden project of recently business. coast. to on the this and export win the Since this are quarter calendar percentage have supply where We major Pass in XXXX. sales of this turnaround earnings and and based Gulf to is profit completion, project in

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

Seifi Ghasemi

Simon. July grow investment the conference company's Please five XX% first Slide to with I to Almost the turn XXXX per annually. least promised my in you, during ago, Number XX. share Thank years earnings at by call community, of

last As we better average over and than have growth five cumulative rate years. achieved you can done see, the that XX%

great and team what Products. Air have the We promised Thanks more. to at we delivered

Our to the average rate to in least a cumulative be, goal XX% coming years. of growth continues achieving at

to Now influence do over Air can the Products as are do the Air we at political we we uncertain that coming control economic the a an developments. changing And Products, have that world's years, about we to should talking in react do company But understand and we, or live world. cannot what world.

our have on we productivity continue go as own to which strong, focused and allow We capable which remains promises opportunities, our a creating investors on us deliver and flexible will organization, forward. growth to to

now for year, Slide So turn what please promised Number to we this XX.

at XX% range increasing year to fiscal currency XXXX EPS are XXXX performance. over fiscal for guidance our headwinds the $X.XX. $X.XX very Despite represents our our year to of We strong growth midpoint, a guidance

X% is three quarter year fiscal $X.XX, over to For to year. per XX% guidance of $X.XX XXXX, last earnings our up share

CapEx to of year increased billion fiscal $X.X XXXX. We forecast billion our have range also for slightly to a $X.X

Our future. the continues team to around be about excited world Air Products'

our and to Our plan productivity five going point strategic provides safety, growth. the framework our of forward. performance continue provide foundation drive success continued operating to the And our

We exciting pursue knowhow the ahead. And to Slide see that and financial to have the talent capacity, turn the XX. Number please we technological opportunities successfully the finally,

employees a all this generate what front team and As and motivation with to superior our Air to work, always, thank commitment performance. advantage in of the the I very continue winning our us and competitive commitment again am want spirit XX,XXX great world at I real the This our safety together. of hard we energy Products. is is to embracing winning us have operational for to the proud and around and opportunities of part be their of of team. for allows

Now, we to questions. answer will delighted your be

Operator

with [Operator Thank We'll first you, BMO question Instructions]. take from McNulty John Capital. sir our

John McNulty

arena. lot coal It of the seems in gasification a there's opportunities like

a investment projects think help at that bigger lot what for you forward? the us like, partner are about sounds you're it highlighting, or the certainly how considering. a some when prioritize Can going as least of picking you You're future we you're of understand these priorities projects to

Seifi Ghasemi

if that sense, the sold; ourselves second them. or the market how they projects what project; and we is The the we make satisfied going fuel do expected said. we market part thing is is is the prices; do market that position the case means that one. come customer is expenses, that's part are economic and we olefins, first their project; many are are the this focus not that then for are is we making all when we going doing if of whatever the be the they always end who what it very, what quite are that. out an whether of have it this full what world, we is that that is the very, the that thing Once these as that on where viable. look diesel passed said very we if project and assessment, unless is is project is to difficult have the very dealing them there project and actually or John, of with; make is many of at then does to that that strength; economically making product; number have That their financial in honestly economic we test passed their of there is a and are Then test that it

where the message in the look project and for. give we we it many said in will this the do China, is have this India, what at and it Aramco, have it to or projects it you like, that. is me do look So times that economical it for is want a I makes we the Saudi that is at We don’t that project world. is look sense if whom I project is oh, no is don’t in basic project matter don’t at we

are we the those follow. So that criterias

John McNulty

I are that rather quarter out were ago out are as they highlighted evaluating. XX-plus look you to when what What saw least we years guess there, last producer started know, is those up XX, portion know you the projects there I were of XX already projects where projects at back, "You of and what, at that the then business. outsource the there And similar kind we'd refining I you'd industry outsourcing the with saying, don't running this," actual think

we that thinking and about opportunities should how be the So there?

Seifi Ghasemi

Probably XX% that category. in to them of XX% are

Operator

Next question comes from Suisse. Parkinson Christopher Credit of

Unidentified Analyst

on Then should quarter. trends discuss the basis? the seeing on Lunar this are I from mean, there we how APAC, regarding wondering end you I quarter, that also any accelerate. that you any you the key are saw slower in impact China. is in for can volumes good This the and New Chris. about seeing Year markets think just was Congratulations you if Kieran in you're particularly sequential

Seifi Ghasemi

many we any you see least weakening don’t about know inventory. With at have particular I've that the respect this had our don’t is that well very one said business we times, China, lot to And any -- of interesting in businesses. thing of the in -- any a we exposure

our that economy well. going we is very And why our is is see numbers. in New concerned China were conservative whatever a that and So Lunar the China instantaneous performance about this we very Year, that's you year doing were these, exactly very year we is Chinese our continue Year, and every down the optimist. and to for the other like very The quarter. be doing and went in fell it came New although, economy well guidance it back in between

very are We on China. bullish

Unidentified Analyst

And look year? then the of I very for the you elements Maybe fourth a when back discuss for third you. half then appreciate can little key are bit it I I strong outlook guidance, thank quarter and the your implies like full-year fourth stronger positive think just the quarter, than that that just driving the it at quarter.

Seifi Ghasemi

momentum the before. we expect have might would continue that seen that pricing than seen we First better become have even and we of actually what all,

thing one that So keeps optimistic. is us that

is negative on until Brexit thing we delayed other significant don’t any is expect October, The effects so that. that

not with to as some our very that. to at start to which LNG together effect that end a started all little end know, expect least bit since Texas. big The we is a would anything. makes of that did expect that able negative getting higher is working we the project Pass we we forecast, we [indiscernible] other our us is the as of optimistic better. be the And you you soon from our contributing But what be project, meet meet on have paid is that business, And fourth that currency that win Golden thing project, we goal higher or in that thing of, the this And of contribution as it, is put is

Operator

from comes question next with of Bank. The line Begleiter David Deutsche

David Begleiter

you regions? merchant gains pricing, you the merchant price major in can of each through the on go Just the realized three

Seifi Ghasemi

know David, on Well, you and lot know that half price site a you is business our increase is there and of of in anybody than business there. not better our

you that achieved merchant thumb, by can the given in that each XX% have -- So multiply X%, and see business. in regions. region, numbers it a X%, as is we for with take you a two you rule you the And a end-up the of different what we strong it’s it

David Begleiter

just to any And elongated YK given the part your Seifi, projects, the finalize on concerns timeline here? on details

Seifi Ghasemi

us, for allocation big mean to when coal concern. any big a is any government central The don't have because project XXX% a that want company I not issue to the wants a don’t source do That project I of of support project. guaranteed. that of project to the allocation need is important but coal gasification coal. is is get No, that very they The government. strong the central That issue is the coal a to YK has of we happen.

what expect the but project, it fully today. we longer negotiation sense different a But expect that that to than I little think is we than be eventually The a of go might with bit will happen. lot taking timing good project forward. expected, and So what that I that is it makes a

Operator

Duffy Next Fischer Barclays. go to with we'll

Mike Leithead

Nice this Asia? operating a rates I give dynamics. particularly hoping morning. to you This and today, maybe America on was you the Duffy acceleration are North quarter. is merchant can of sense on guess Leithead actually where Mike in for this follow-up I pricing think

Seifi Ghasemi

low The XXs. is that in Sure. about are mid-XXs. around about And operating in North in we rates Asia the mid-XXs. areas rate in America in rates in operate operating the the Europe operating are

Mike Leithead

was project just the optimism starting I you will event? to like is a that's where that of year signed, market. as tailwind dynamics and think the maybe we or to It maybe of on this XXXX then back get in to pick-up to could area. LNG activity the be you closer market characterize seems overall you outside start hoping And a do

Seifi Ghasemi

fiscal end XXXX, at of year our ends September. the in Well,

have did impact we a as So to that's positive project, very Golden optimistic that we the from But but go about we huge. be forward, business. are going Pass not

you us business As $XX of million EBITDA that use to nothing. year, a make know and today making it's

we $XXX So that rate will in three, we next think time years. the million to in get that four

very optimistic We LNG the divesting that's of we it. why are business about never considered

technology, We we Almost around large world. all and have XX% of of the XX% in them a projects huge our technological the happening many -- use the LNG see advantage. and U.S.

business. to we for a very positive continue -- we that So expect future

Operator

Your question comes with Jeff Zekauskas from line JPMorgan. next the of

Jeff Zekauskas

the The essentially? Lu'An EBITDA XX%. the and was margin margin, in Is Asia is difference now maybe project the roughly year-ago XX%, in it a

Seifi Ghasemi

mission significant it. is was that there No, have amount obviously significant the last is in gotten I that the is affecting we last our of mean, is Lu'An a But ahead obviously quarter fact year. XX% pricing also, of pricing. fact

that a doing good beside people our that productivity very and there under the keeping cost a And contributor. in control. So are positive job is

forward. And what have that have maintain a I'm very So proud overall, they done. optimistic to been we margin as said eager we I'm go kind as that of I of

Jeff Zekauskas

in the the trying said that by negotiate gasifier you think the power earlier terms final the to I you're end in of JV, call Jazan the the For year.

when income your terms, those would negotiate that successfully begin you to project statement? If affect

Seifi Ghasemi

the then If it in and year impact then be end XXXX. contribute be definitely it'd we will year. will year financially of the by of XXXX, will But fiscal completed the successfully the obviously XXXX end negotiations in close in complete this by that XXXX and and the project impact big

Operator

to And we'll John UBS. with go Roberts

John Roberts

do local largely rates was in unrelated, completely are by exchange. I more bit terms dollar guess exchange you foreign in that could currency the flat or are you ability Do sense was price little giving roughly to think pricing you once pricing in in year-over-year. offset think Pricing a currency? say

Seifi Ghasemi

do with to board. And our on nothing different is parts is lower has prices dollar of like that. has business or like up ability no not currency the absolutely the our effect anything cost. the crude whether it is increase low in oil to or The down, This it

So is it John. totally independent,

John Roberts

I XXXX, but budget this know know whether the it's to be a And point, for since 'XX. halfway fiscal have XXXX through with XXXX At do budget? or too early we're then CapEx CapEx you up stable will

Seifi Ghasemi

I will No, CapEx XXXX $X of billion. our expect probably north be

Operator

we'll Now Jim SunTrust. go next Sheehan with to

Jim Sheehan

you Europe earnings how for pay did on you ACP acquisition, much comment about will how and Can the much that represent? contribution it

Seifi Ghasemi

always The amount that than more we $XX you operating we thumb $XXX of is have give of about million. disclosed you tell that. us obviously $XXX we rule It's take for should that that, I And if think million. income the spend million that

Operator

to go Goldman Sachs. Koort Robert next Now with we'll

Robert Koort

business load When maybe seeing at fertilizer in then there. get And I synthetic look easily if making about glycol gas or or Brent you to pursuing, we talked prioritize breakeven we're are In gasification project breakeven play. type guess for that about there. olefins, comes to Seifi, coal $XX your starts range to in interest you're up you or the those, project portfolio fuels applications greater higher maybe natural coal gasification? to that maybe in levels

Seifi Ghasemi

Yes.

Robert Koort

And broad China, in globally? are more or they are those exclusively

Seifi Ghasemi

goes up, projects of number big. obviously that price come becomes oil the As by of the we

you right So on are that.

Robert Koort

it? ability made gasifiers to I been of shareholder when portfolio there starting the they and suggest Or frustration they couple in expressed off take them technology? capital an on that do think has and go own has advertise an here speak they've let operate in the you're Can the to there that in customer years, the can gave process and gasifiers to I about more gasification what some an points you improvements de-cap know how make I Seifi, operate now last gasification? aggressively. existing to operation a with will ask and there to over would better Shell, there advantage. you be business, history you'd their that of to opportunity that -- maybe you side, you -- been have deploying de-cap the Is certainly overtime existing them improvements selling Is hands the

Seifi Ghasemi

are Jazan Well, are the of we of quite Bob, accurate project I will Saudi Arabia, example best you use. mean you in And IGCC for just is what all the are in very frankly, and argument that the the to refinery, technology they terms buyback. said we the talking is in the using gasifying exactly we project and asset went that have technology. Saudi about. shale that of We Shell the Aramco improvements And bottom

there So of is you're are others talking about. example And like ideal pursuing. we obviously that that are an what that

Operator

we'll go Morgan with Vincent to Andrews Now Stanley.

Unidentified Analyst

for This is Vincent. [indiscernible] on

So the just a projects. gasification question quick around

the is an how projects and So China, you wondering in happened anything very in of that that has was explosion But on maybe that in the impacting give fertilizer bullish on update changed that XX you're number? terms number that. mentioned I seeing. you of the explosion with project us just plant number earlier, you can are Obviously, the plus

Seifi Ghasemi

nothing Well, first no impact. we do explosion of has has to are what all that doing. It

Unidentified Analyst

from else. saying? it's terms new mean a seeing in -- of I is more not guess olefins guess, I anything just impact I projects, you what are guess, in perspective are any or I whether regulatory from you that

Seifi Ghasemi

That's correct.

Unidentified Analyst

the us And that, to drove then could CapEx. on for just give was wondering if you CapEx as follow-up a color maybe I increasing XXXX. just some what quick as

Seifi Ghasemi

In that Scott answer XXXX, that. can I think

Scott Crocco

some we're referring range I bottom the the Speakers], we're it's think better of half to spending that of [Multiple way on. projects from taking up the year, are other estimates the through smaller and spending just that you

Unidentified Analyst

well. And just as quick one may then if follow-up I

volumes have obviously. You

comps view what as will last there quarters next tough I -- year. curious just couple But there at to You the look had going next for as of your the of you quarters? volume couple

Seifi Ghasemi

not I'm I honestly quite the question. sure understood

Unidentified Analyst

quarters. Just are for for volume what the it's your your actually expectations and -- coming

Seifi Ghasemi

in For general… for just Europe everywhere or else

Unidentified Analyst

For Europe…

Seifi Ghasemi

we to Europe, run expect the continue. For rate

delayed, volumes the We and Brexit I are pricing positive Europe. Europe as about are about we remain not, in said, in we concerned not

Operator

Carson line comes of Next with from Financial. question Don Susquehanna

Don Carson

that? much How X, that momentum EBITDA EBITDA go due India what's I slide, on due upward price. I that tolling to want new to favorite conversion to of that was record margins the on Number most your -- to your XX.X%. of the And to assume in impact margin Slide

this at the point seem getting we didn’t pricing inflection but get well earlier. pricing in XXs, industry in you're are into So you be here? you to pricing an till Traditionally,

guess the So level. to I think of you final used was EBITDA question normalized is margin a XX%

XX% normal? new the XX%, is So

Seifi Ghasemi

number. XX number The that the terms India, in of one is -- about it's basis of the that’s effect points

back quarter. XX% to would The this do I've second the very thing EBITDA that an from told that. to always you're We suggest that people modeling margin I Products, XX%. well is margin EBITDA way when with respect where would Air did of model be, And still

hit quarter But what start will XX% brings. We around the to average. will will I I that predicting that see want to it we be on XX.X% next every But is we safe quarter. don’t think assume

Don Carson

is pricing be you've on lower And sustainable? at in pricing, you seen you than you get needed pricing getting inflection Again, to where the here improvements to think point merchant pricing? rates do historically the an seem at we're

Seifi Ghasemi

and I it. trying answering not maybe was heard your question to Don, I

You considering know our that comments don’t on any pricing of we make nature like industry. to the

hook me So of need let that. to the off you

Operator

go Steve Bank we'll with Now America. to of Byrne

Steve Byrne

your more shift and and erect capital location fabricate more to to belt lower competitiveness? these develop that be to one you large fabricated of say central now in fabrication? a you total able to expect more under locations going field change at time of and is your What that your are equipment coal would be your do overtime that you a projects projects backlogs. get costs, and versus And these capability fraction of For gasification as of installed at

Seifi Ghasemi

coal a main answer exclusively respect time. manufactured Those coal them me coal mostly with one right -- these to the With Let ourselves that we gasifications, is are the unit, the boxes air in separation at China. now part make boxes.

as south our So of we we expanded Shanghai. in expand, operation have in China, Caojing,

to if And we get that capacity, stage know As that additional we continue where expand, a we to we facility. go. expand to we need

these the brought not are and them a and built we the do And and at an So coal engineered different assembled lot like -- set. prefabricated with locations are manufacture drop electro they at of and of together that site. gasification is together rest ourselves, facilities, designed them

constraint no on is our there these. manufacture So to ability

Steve Byrne

Just the site. capital gasifier like some projects? ultimately you furnaces being a for Could units and in to are total fabricated these the and anticipate direction job moved then reducing that shipped costs

Seifi Ghasemi

look the costs it depending a The for cost projects, hopefully at reduced movie pre-fabricate projects Jazan, the be time. most you are, these capital on like did in we When can and significantly on break and where effective Jazan, area. show you can they them if you we at of down

had erector together that and it piping set. of shipped all the was like see rest ton unit plan. in which an actually was of We of the and put the with lowest then You the then cost, manufactured China, was it XXX

a did expensive. that would do and been all building in a we of Jazan, the which -- So did have lot very not lot cutting we of and

that air which XX% the do about Caojing it separation part manufacture to several then So put and big in we it site project is the part, There and is of of terms separation the in ship trying what in one you is on cost reduce these job pieces cost. usually to that about together. is,

Steve Byrne

involved out XX,XXX just say would you your are engineering And what in employees, of construction? fraction and lastly

Seifi Ghasemi

number were construction it, for more we XX% a plant About supervising construction, Jazan, people people like of we building to on supervision than our but a the the have had the are give number when of it Jazan XXX are you of are actual construction project. Out engineering, permanent Air about just And building we about They we people. and proud and it. project we XX% the employees. we who the very they people are locally actually have the plant of not building are XX,XXX, Products Those are that of employees hired dedicated and X,XXX. when they're management we long-term people, for engineering

Operator

go Vertical with Partners. Kevin Research McCarthy Next to we

Kevin McCarthy

competition competitive the have some a anecdotally specifically seem the that it was Curious nature of How your of you? wondering for sense the I projects are you to could and focus. your of their level if source competitors on in into of intensity arena, gasification often terms XX would you and the comment degree Seifi, different in in strategy global what there. majors? survey running if a other And customer is you plus

Seifi Ghasemi

know how how a to customers asking very with are many best for in I all competition, offer they answer and are people you am of me is cannot speak they they follow if these try customers. projects, our no talking to to when Well, always the we that on are obviously I our difficult other are position optimistic and that, very behalf dealing we I because competitors. continue I our that to that that really can give We they comment question, as not hope don’t strategy. have If us, strategy of behave about their that. we to

want So that's the extent comment to this. that on I

Operator

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

P. J. Juvekar

on chemicals if So my lot around that technology? gasification still to they are technology the you question being have similar there Do consume will world. of crude projects discussed your any to gases. And not,

projects? for of hearing or those request ASUs So about what seeing bids for you are

Seifi Ghasemi

would I be for looking on those think Well, projects, all ASUs. this of people for

by the not therefore, the provide ASU, if but the different current equipment. ourselves, sale differentiate as the we And the you, most China, sale you the ASU see, gas. do the gasification. the many, themselves, than customer to want to most offer which buy competing existing an usually for to been but there are making customers package sale And also rather of they trying of of in time just than are have ASUs of only gasifiers a equipment We rather which all of that

a depending if insist to unit, that the no, separation bigger I happy trying are usually them are because bit we So ourselves just customer by bigger the customer bid, air on be ourselves a But package for the we separation -- give by a package. differentiate is, getting want we we I'll unit. build air differentiate customer. to to the But giving to the usually trying who

P. J. Juvekar

And past. then a Europe, pricing on there your in has lagged the question

some you there Europe? away know them? seeing business a new Now are I from you And And in solid pricing. from recently you businesses merchant getting in that U.S. low are What from were some margin behavior are seeing is walked What player merchant the in created also X% kind the in you Europe. in merchant new players of past

Seifi Ghasemi

have It's too these don’t on Quite few that to we in months. business that. people for soon been comment usually honestly, anyway, on but comment a us for

to and key else, the away are business and getting that product, customer reason we I make gone prices. are all to we assessment our February have away this ability the pricing up us that you the our difficult will to the from is very said Otherwise, increase is they to willingness the wants price it's can. never said volume, is walk costs publicly an that that. this thing saying on conference. The what So because But at And the is prices. from P. to in J. increase of giving that, thing, we margin if walk willing go the from of key low the we buy are somebody is a

right. a is strategy that us. That's exactly different So for

Operator

Mike KeyBanc. Sison next to go with We'll

Mike Sison

slide. goal, given one those projects -- year you looks gasifier that growth, where growth Jazan year be EPS like When think XXXX XX% goal? next be on and Could your coming coming maybe outpace you've could XXXX on, about got projects on you a that four

Seifi Ghasemi

we what We that always than -- and promise what them deliver promise. we always can more we deliver say usually

But ahead don’t turn I of So, be saying to true. to you're get hope out what want myself. I would

Mike Sison

one again, And actually one then just pretty sweet. very quick margins on Asia good,

impressive If given is level? what then do level? think that forward you think year, impacts And you sustain that XX% the about of the margin can pretty that you second half going

Seifi Ghasemi

Asia our expect numbers. continue to at margins around those in I to EBITDA be

Operator

Mike We'll next Instructions] Seaport Securities. Global Harrison [Operator with to go

Mike Harrison

you're specifically the I play that wanted China. Can China? areas in trying wanted little to momentum demand you in differently. a the sense what bit go dynamics and seeing supply of about I how there? Just ask LOX/LIN the question at a get to sustainable could be comment on pricing in you pricing

Seifi Ghasemi

pricing have China do Mike, mid-XXs. as to get mentioned regions the power. is rates you before, around I you mid-XXs then to And that in operate operating when getting the we in

is, loss nobody I plant if stays a up. it the which new way the in pricing rates and has stays away. because economy our will, the So going is And the been operating it right brand way think building

continue good we to that momentum. would So I have expect

Mike Harrison

then two of as are were from two about projects of of fiscal some first them that appendix wondering, the have projects a fiscal the U.S. was listed of full during also second a wondering still there, all the And see of 'XX, was quarter four Korea, did I quarter just starting-up in -- number or your in contribution them them of I those in you we ramping-up? during

Seifi Ghasemi

Yes, we do.

Operator

of question Oxgaard from Bernstein. line with Jonas the comes next The

Jonas Oxgaard

you But from tailwinds I was there. on currency any some had do you hefty this? the get currency headwinds pretty wondering, side CapEx

Seifi Ghasemi

is you dollar are Well, mean are you that make of to get a that do. I there, content that, extent projects I of right. we we do not guess the huge but, a some lot the tailwind we from

Jonas Oxgaard

reflected in help me the size guidance? And impact is that guidance? how in you Can reflected your that's and your

Seifi Ghasemi

of projects it's the capital the The our not numbers. that fact go will that cost and minutiae, is to material down,

bit on we quarter-by-quarter. currency to than headwind go go the forward, you little we subside the expect As a

the us in telling currency will be Scott none that. than what that currencies have can amplify same, and as of next $X.XX predict third than quarter rates stay the we me Scott that. But was the on a expect about the headwind the to for much for and before should Obviously, hopefully quarter less will not as after headwind of So less the call, that we But if the of all quarter. happen that. can

Scott Crocco

to build want said this $X.XX in see got as unfavorable here we've just you and If quarter. we've on

projecting you the fourth where out third just the is go, that And quarter, to are. come going we just at And reminder, -- don't There we rates but much on don't steady year Seifi just compare them as they impact, we've just exchange it's as a even down $X.XX, rather in quarter to to earlier a in the is when a quarter versus as way versus see headwind. the quarter, our third because all projection are mentioned, the change then prior see as less look the And $X.XX this them call, quarter the quarter, quarter where fourth bringing and be try don't so again, where we $X.XX we when prior just of were in translation. want not no fourth bit. hold to we For math mentioned And that. just get we're talking we maybe project rate, third as economic to year, is back. rates to we're year, last it the little

on XX% figured And sensitivities XX% take this swings the just of currencies since I'm on would for it lastly through. around basis, subject, about So of in a swing I given an R&D in annual the past be $X.XX.

currencies, the just dollar. dollar of For the there it Each be a euro, XX%, you swing the then to won, to in roughly when just is Korean you the dollar approach throw XX% Taiwanese Canadian by company. the XX% And pound, would like U.S. there move $X.XX. and And basket other it's about at of each. them XX% sales about $X.XX is what given $X.XX I've of

So take through some I those it just numbers. I figured of

Jonas Oxgaard

pays Do local or or sign usually signing. the take so -- you in dollars follow-up that them a you're As currency?

Seifi Ghasemi

currency. country -- customer their it’s in the and of depends It some how depending local on countries, the currencies; terms' in countries, and we in it’s in dollar some feel expectation about

Jonas Oxgaard

biggest the sways take you if the And China one, future? coal that as

Seifi Ghasemi

Reminbi Chinese. China, are In that contracts in we in have local the

Operator

Laurence from with Jefferies. Our of comes next line the Alexander question

Dan Rizzo

This quantify changed backlog I'm it and this how has Rizzo for sorry you But quarter? on the did missed is this. if Dan Laurence. I

Seifi Ghasemi

to you do Simon, make prepared want to since any comment? slide, you the you -- want

Simon Moore

said, total we project about our billion. As commitments $X.X are

we I around commitments we And that's is billion those $X from to on just clear value on up What billion. that think of be total last have again the time. spend to about the $X.X that's have. remaining

Dan Rizzo

Could we one some question. evolve take-or-pay rather just large see in arrangements gasification then regions? to where JVs And than the other

Seifi Ghasemi

and of project, is ourselves gasification is the like of [indiscernible]… some them them JVs now XXX% right Well, some

Scott Crocco

so to they all just If I take-or-pay, that… just could add, are be clear about

Seifi Ghasemi

or all whether JV not, it's Yes, take-or-pay. it's

Operator

Instructions] [Operator

Seifi Ghasemi

no and run your being to for Well, everybody thank there busy to other over your would listen very like our questions, Thanks a best. we with time. interest from since time nice to taking look presentation. again results day the you our are all we next Have call. on discussing appreciate And quarter. the schedule We and to have I for Thank forward you again. very our

Operator

that And call. for today's participation. their conclude everyone does thank again We

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