APD - Earnings call transcript Q2 2021 | Air Products and Chemicals, Inc.

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Operator

Good morning, and welcome to Air Products and Chemicals Second Quarter Earnings Release Conference Call. Today's conference 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 Moore

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

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

In ROCE on margin, we today's we share, state refer otherwise financial earnings various effective we the and discussion, tax EBITDA, specifically to both per measures. refer a and to companywide Unless when segment basis. EBITDA addition, throughout will rates

referring most measures are on relevant Reconciliations share, financial adjusted website measures, margin, EBITDA and adjusted to GAAP comparable release to tax earnings non-GAAP found per rate adjusted EBITDA, measures our these on effective section. capital adjusted of return can adjusted employed. the be directly financial earnings our our We in

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

Seifi Ghasemi

our and world. They to every people the committed resilient the We Air be of customers. provide acknowledge for taking you to services of Products very day to to time thank I of efforts around hard schedule call all on our Thank everyone. to you, today. talented, day united and extraordinary critical products Simon, and your busy To the work good and want from start,

crisis. solidarity, challenging, the to our unprecedented storm Our and severe it operating I in for the thank our worked way, facilities possible a Coast. through want very U.S. us who made team, throughout particularly XXX around keep this board And Gulf to in people determined the have in working winter

for the business also, us are and people possible near-term future. to growth making pushing continue ensure it operate develop, major while to to Our forward the to in execute, deliver ones our who projects world-class our are results,

make every is, Our humanity, sustainable purpose way, people environmental our challenges. forward day. bring higher energy to That who in to move help real and ones the and help people together are solve a

Now X. please Slide turn number to

our be zero safety people keep is is It always, to conditions, for incidents. of most responsibility a our at As the safe. the focus Air team to our continues I to important Despite and safely, challenging drives and focus at all our the zero moral accidents will customers that always COVID-XX And us and goal community. sustainability want Products. following growth opportunities. to our our our protocols themselves, protect emphasize it is our on core of working strict DNA, help also

We issuing look and this month, later continuing will be our very I this conversation forward annual you. important report with sustainability to

a please X. Slide X, and to X stand Now,

we follow point These for that day, they to the management You every curiosity see guide goal, us our our can plan guiding future. our continue moving in and and will forward. are the five principles again

supporting every Now, day. financial the superior I also X. delivering as committed said, please to in And they our know they do remain turn work number We performance. to are people higher Slide a purpose

the of to different world Our a success and variety parts complexity the people industries. industrial dozens and require talented many of from our gas in critical of scope backgrounds, work together the mega one And to of expertise of as with skills projects team. areas is

and some and develop in of together, environmental challenging drives experiences That purpose, the our our every innovative for proud us diverse We from people to forward problems is solutions, world. team energy bring higher are and to most and the day. backgrounds collaborate it and inspires

turn number please Slide highlights Now, which projects. X, gasification our to

gasification world. to around projects are the pursuing our strategy We are and exciting committed

share to large companies, gasification in gasification our completed products. the and benefit joint best countries as like low strategy, way their convert to resources, finished the we balance deliver see to best low venture refinery manner. technology value identified have them high are remaining in better, them to economies position continue Consistent driving use solutions the a We of work of and with the to sustainable we with and their pleased and abundant, that a have of sustainable And help XX% feedstock our coal China. are more acquisition people. value They into petcoke in value

new are that team of pursue expect part do us will win additional We in gasification projects. to projects make and announce Now more larger be to confident will future. scale this the we XXX% Air even gasification this successful Products,

specifically, projects, Now gasification I our large I give an on you which like last calls. discussed would update two the two earnings to have during

Jazan and from plant the gasifier our Saudi First, of billion power $XX acquisition Aramco.

the provide on progress of working our and stage lenders to reach project this this Barring since has expect make The fiscal circumstances, financing. last also bring to we to significant project unforeseen continued with I you project the in have We to final our hard partners, an team update. the year. want Lu'An. update financial worked to close any

But our Since gas four and with this the to information, our announce quarter, monthly our supplying second requested the plants are we interim as agreement, our online fee and our we first gasifier required your customers’ has proceeding are very recognize our of on. idle back making am synthetic commissioning it while startup that has continue down. shut customers. of for were reduced of But quarters, morning, all pleased time was facility, equipment of customer our period and I gasifiers plan. the a to During for been there several bring a to

by encouraged development. are we So, this

number to growth. EPS our Now shows X, please turn which Slide

stability hard is presented people our adverse our external the year this As year, you This This of the since we greater see, the XX% in work growth the in later recent EPS I nearly more achieve of again, detail XX% cities can for by call. our than growth to challenges. delivered we EPS to expectation expect testament business. despite in have will the challenging annual conditions. and XXXX, discuss a

please our turn grown growth since digit number earnings and Slide Now, reminder, Both we double have a that our its EPS to dividend share investors. with XX, our and XXXX.

the growth dividend, And While continue our exciting consecutive substantial develop shows we finally, XX increased our supports years. Slide last to our number cash flow we significant we that opportunities, for that have XX, margin. EBITDA have

over slightly, the pass-through doesn't significantly XX% Margin it the of is very of profits. for impact but gas, margin shows quarter, the pandemic which at As Gulf higher due proud sales, the delivered Coast. the the always, and who challenges increases over points is X,XXX U.S. primarily winter natural there team, to energy for down I'm the favorite up storm basis that my since the our slide, despite affecting our XXXX. margin

Crocco, Vice Financial Now, to I and would like financial Officer provide to Scott? Chief Mr. review. a turn our the to Executive call President Scott over

Scott Crocco

Thank Seifi. you,

quarter. Lu'An We COVID continue despite our to the company Gulf our Coast during the demonstrate EPS earnings the weather lower importantly, U.S. resilience of ongoing people. the extreme and from most business, impact, our increased and

which spite world. difficult is cash business, flow around of the continuing continue conditions deliver in about Our to half stable onsite

regions. quarter higher Now prior to up Volume for prices, XX% business. the disrupted negatively topped and please the three U.S. XX, XXth second year, Slide pass-through turn estimate compared overall to by our results. COVID-XX favorable consecutive about of X%, represents operations Sales continue sales EPS was billion, and a customers, strong to our for energy again This equipment winter local $X.X spike to the which our prices. impact with driven prices versus storm. business. pandemic and gains. of by all prior as reduced and in winter brief discussion flat, offset total, X% of currencies. Lu'An Gulf the acquisitions, caused contributions, up plants, increased impacts and were interfered We sharp by Prices merchant The quarter additions new sale of Overall, with by up activities storm Coast reduced in year, improvements $X.XX year-over-year were in COVID-XX our increase the a energy $X.XX. were X% a is pricing about

actions negative to operational much customers. able the contractual However, through of we to pass-through were mitigate impact and

adverse energy costs about weather worked restarting plants our in quickly our impacts. sales due XXX restoring to The challenges our to want I people my these to primarily to done. EBITDA decreased impact to they quarter. people the job time, tirelessly supply pass-through as well basis by customers, the and Higher during negative storm points also a extend also overcoming the modest gratitude weather our sincere this this and profits, on margin Our from a margin. for recovered addition reduced having

acquired driven New additional hydrogen driven EBITDA was winter increase Sequentially, of by in ROCE X%, profits. cost EBITDA primarily sales, up As new negative than affiliate the price, points as on X% year. last slowdown offset of were X%, to this from lower, contractual the increases million a more costs. $X higher X% denominator year, in Year largely pass-through was sales PBF storm depreciation and was debt. Price energy U.S. but but currency pass-through. particularly we due by was Lunar X%, billion plants X%, development Asia. not in of equity last was lower, basis impact down due compared reminder, while improved volume, Operating the volume that primarily higher the the income XXX and income the $XXX to to higher the up primarily the favorable plants,

please to Now turn XX. Slide

gain exchange closure. a with from which GAAP a $X.XX venture quarter loss was included Europe, items. GAAP second $X.XX, in an EPS facility a on $X.XX two Our A joint non and partner

above the in of mix. of as of is to impact It the is the $X.XX The the adjusted consolidate than Lu'An important negative and despite a majority the Asia. was of last Lu'An included more COVID-XX PBF small well to the operating EPS in $X.XX number but Lu'An the negative the offset items and EPS, unfavorable impact gains of from in a volume recognize was business our was new $X.XX results. because sales, in Volume venture, in due unfavorable XX% we owner as $X.XX. flat acquisition, impacts that line, XXX% quarter periods, joint both lower Excluding to particularly of this year, from plants, second contribution. as negative $X.XX Lu'An Volume COVID-XX non-GAAP

to negative partially added results, Lu'An. development the our $X.XX we The $X.XX basis resources XX% expect $X.XX while costs rate exchange impact the our to we a was business shared costs. Korea profits points the and Currency is Equity was tax modestly consolidated add won Costs dollar. by other on XX.X% and non-controlling and interest value $X from effective storm. the the to words, on partner includes the I of of our around 'XX. as $X.XX, Price British this reduced. last to with to favorable cost remaining for energy year the deliver previously. of income tax in net relative additional favorable customer, Products the affiliate primarily $X.XX XX the a non-operating variable was lower new Air overall a in However, demonstrating The debt. $X.XX and higher also fiscal rate. underlying lower non-controlling as has future In positive the than overstates $X.XX lower is in pound, to impact due additional a includes Lu'An We expense unfavorable impact as growth rate XX% billion the favorable interest tax South offset the U.S. line, to contributed joint associated unfavorable, appreciation primarily impact, year. still also volume winter be due to associated income foreign strong EPS $X.XX by effective the with ventures, mentioned from $X.XX, and a income euro, Interest Chinese incur contributed costs continue RMB, was reflected

stability flow. please Slide turn to continue to cash The Now, strong our business to of XX. generate allows us

interest, new deployment. times, high shareholder dividends $X.X that still create maintenance almost $X.X for billion gas our shareholders, From Note, $X.X driven part a even XX% CapEx of cash our paid about the cash XX-months, about billion billion have we little share. value we almost deployment. increasing our available or $XX.XX and paid investments. or the per as to to capital. strong almost headquarters. us XX, usual, on maintenance capital $X.X through uncertain and in number continue flow, provides details our taxes flow, our The generated in EBITDA Over is distributable flow, higher billion, global From than return industrial dividends last cash additional of by distributable capital we and spending over on Slide enables to

and quarter, consistent investment last said deploy capacity continues available substantial to our have I projects remaining, to Air strategy. into Products with return high As

available see, about capacity billion can 'XX. and $X five we of billion debt now from of $XX The 'XX, billion you over $X additional of expect over 'XX between period As through and investable cash of $XX billion over FY billion FY investment the year over FY end capacity $X flow today, available the spent. cash includes already and

Additionally, we anticipate to beyond our the capacity, And, borrowing more some results. FY cash the as stream 'XX. our of on contribute spending come growth and generating in backlog projects on and extends

potential later to expect for reframe this We year. you this

new signed our project smaller debt our remained them. billion, $XX.X our We With to on balance continue to coming on focus spend stream, on targeted current billion about remaining rating. $XX.X AAX and few some M&A commitments with and total maintain a to projects about managing

can already capacity you XX%, over and XX% already of we've committed show we So, spent here. see, have the

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

Seifi Ghasemi

Thank you, Scott.

turn This and compared increase price X% offset more merchant price plans down favorable New Lunar offset merchant repeat, encouraging, X% up was but shut countries the last strong increased positive, all like is the to rebound, slowdown. particularly the for in please volumes, business. also as represents XXth volumes. product down. year-over-year the Merchant of X%, zero. partially Asia Sequentially, across to not higher which lines. a impact price new to consecutive all merchant the expected of Volumes region quarter currency to was Year Pricing and results. than being the weaker higher Slide XX, rounded of in Now X%, volumes for improvement. added improvement volume light But, consistent Sales Lu'An has are number as recovery our been I'd following the the in year,

and and number a brought of plants on contributed due basis year, due we margin price lower that to XXX a Lu'An. similar currency offset Additionally, have favorable to of primarily EBITDA last last EBITDA impact volumes. lower due Year. was down New year, Sales profit smaller driven our a lower by results. stream of to the than strong to volume points new was XX.X% were as primarily Lunar sequentially,

Americas to our to like turn back Now, call to I would Scott about the talk results. Scott?

Scott Crocco

Please Sales price increased was Seifi. in Volume for the more of review continuing volumes. results. Gulf turn last to as impact the significantly compared Thank the Americas Slide you, primarily of than winter XX, XX% and down offset year, pass-through due to and our COVID-XX, Coast. to strong lower X%, storm U.S. higher negative energy

the signs U.S., the pressuring are there winter further Coast, products. quarter to refineries economic in in overall operating The hydrogen of for addition this the demand results in the reduced storm Although, improvements remain merchant for the below. U.S. Gulf

refineries to produce are fuels. recently, have some as We our seen their transitory reconfiguring renewable reduction in some business contractual hydrogen also operations

process COVID the equity up points. the points, XXX words, In Higher including more reduced The higher sales income a last excluding nearly completed. energy better through not five fact basis by EBITDA declined sales fuel acquisition, hydrogen consecutive winter of higher and increased price, than the exacerbated across rest Compared conventional for XXX during also from improved season, impact increase other was storm. equity increase Higher The high pass-through year, the equivalent negative XXth XXX contraction Price X%. renewable a pass-through than business. the uses margin a will record price pass-through. the adverse quarter almost PBF and of were improvement. the double higher this increased the The affiliate the winter energy major the supported of customers. energy $XXX included in holiday were is maintenance offset XXX X% times the XX%. Americas the basis four volume digit sequentially, This quarter point storm flat the increased basis which recovery. impact sequentially, per gradual higher X% EBITDA EBITDA by margin the was pass-through, volume, over million, and impact. which to improved X%, prices was to by on affiliate of profits, continued lower the reached unit again as much year-on-your basis pass-through hydrogen prices for last is volumes Price the such the cost to region X% shortfall, lines. by quarter, margins energy the most of more income. production product However, once better is energy but merchant margin over increase use points. following fuel. EBITDA improved

back Now, the other to I'd call like statements. discuss our over to Simon? turn Simon to

Simon Moore

you, Scott. Thank

Now, Africa East and please Slide turn to of a review Europe, Middle region our results. for XX,

another Our EBITDA versus last plus XX% this EMEA and was results of team outstanding nearly set year. delivered price quarter. Sales X%. up Volume both improved

currencies negative point impact across As energy down to last grew impact due volumes, quarter pass-through. decreased our primarily points, the equity XX including due XXX the margin product while to from income, gas favorable was price EBITDA affiliate by adverse the primarily at quarter, improvement to lines equity pass-through. pound. supported favorable consecutive higher from EBITDA corresponds basis basis impact and point and strong for X% to British predominantly dipped due sub of costs basis XXX than acquisitions and compared seasonally which increase overcame income. basis costs affiliate packaged a XX% X%, Currencies EBITDA euro margin million, the The X%, for negative merchant a most primarily price, and region major volume lower jumped regions. COVID-XX Price and a energy and nearly were the volume, to onsite more gain was due points higher XX $XXX to principally XXth X% in business. for higher higher business. X%

to but to Slide project please equipment higher sales well of as due which business central development Please XX, costs. sale increased Sales non-LNG activity, includes gases, global higher our to LNG Now, activities, spending. and lower on turn as multiple was dipped due as corporate, costs. profit by projects. businesses, turn as mix equipment slightly were other our execute other corporate to project this driven costs. businesses, and quarter to increased continue corporate XX, LNG higher well which Slide as large higher we includes Sales Profit and product

turn provide call over back some additional I'll to thoughts, Now, the Seifi. to

Seifi Ghasemi

you, Simon. Thank

go please the continues to the ability Now are as experiencing XX. pride efforts, With number pandemic. widespread some with number everybody to to world of vaccination of virus, others while this COVID-XX increase our consistent deliver to in Slide cases. we flow. take reduce spread cash the Against Unfortunately, an the knows, earnings been regions able have backdrop, and struggle in

our roughly continued Our of onsite remain price total and be half business, stable, to sales our strong.

seen also signs volumes. have merchant We improvement of in

see forward, quarter. we EPS economies ahead, resumed around particularly the light of although in confidence have still increasing we vaccination. providing As look our guidance pace the growing, we this Therefore, major world uncertainties of is in

I expect fiscal earlier, Lu'An year. mentioned restart this As we has asked close facilities. And during to our to Jazan us

guidance guidance, this Jazan, Lu'An However, if the there In within the fiscal year, or are and they uncertainty to these restart. words, timing the providing and Lu'An I'm that giving. they therefore, and financial they of of happen will CapEx to be of exact events, accreted remains close some restart other excluding the Jazan EPS

Jazan. And XX% last For Quarter XX% fiscal guidance the approximately X% is year $X.XX We last on guidance XXXX, to continue which execute per $X.XX year, is up at finalizing this billion with to year to fiscal is of $X.XX, again, to our share stream them our bringing our we up see excluding Meanwhile, our year. agreements share, X% for earnings projects, customers. $X.XX $X.X the other for XXXX year. and over CapEx over our to X per

and capital turn Please our to growing our pipeline committed XX. of projects. to We are strategy to the number Slide deployment

degree our is I day our sustainable Products. advantage have our people, very to only strategy who we long-term am to commitment the and rooted competitive strongly life. that bring team with of the proud of at believe As people strategy success team. in this motivation of the We our great work always, working the be is every hard Air to

sustainability transition energy creates opportunities, Our deep the by exciting board. lower to commitment to growth driven a carbon

this differentiated across Air hydrogen of capture are carbon gasification, core core areas. strategy our competencies In positioned these Our past the platforms five growth have the at lead and transition. and years, our to Products

very to time, Now, this at we pleased of answer questions. your any are

Operator

Instructions] Research will Kevin [Operator question you. go from And ahead. Partners. Thank with Please McCarthy be our Vertical today first

Kevin McCarthy

wanted morning. Good your updated on get to allocation. Seifi, capital I thoughts

say hydrogen, and over to The If green medium you and five to longer-term, were the three second how ASUs would be traditional you let's years, expect the SMRs. capital to as such buckets? the look among third, projects, first out allocate would gasification,

Seifi Ghasemi

of then, obviously, going but parts of I We we the Well, $XXX focused any are require underlying million good business. our and million, Carbon capture business and all there investment Thank hydrogen, to be China. it we're will and United U.S., question. Indonesia that, different morning, obviously, be over the you and Kevin. an require underlying and in Europe for capture standard million will going see $XXX to your $XXX in, some will projects of on prevalent gasification, and or think don't of hydrogen, that these money And green board. that carbon for very on coal very, project, and in in States, approximately blue to world. I will foresee hydrogen all allocation, our the prefer our not and of India a Europe, in to the is specifically. because developed of depends the I lot example, and other of with more to capital terms it spend significant gasification the terms in gasification in plants be Obviously, over world. other the Then gasification, of of the other, want kind opportunities, capital and that, the in smaller three the with one grow all economy overall generators,

since So, the one year and be capital to the might these of gasification. then But that a in if carbon all hydrogen, capture, five of projects, then two, all them. the the balance will But allocation, I them I mega to of think are one. you XX-years, would most for of or other of have go course a capital higher take than

Kevin McCarthy

Thank that. you. that you your if mentioned may for Yes. And, lot refineries produce could expect Thank do to the is renewable a what How net of to would I secondly, of get time? just to customers of hydrogen some benefit? fuels. reconfiguring that It you occur? that you And much consume sounds you reconfigured trying sense like the are to what Seifi, so be hydrogen, a more benefit over

Seifi Ghasemi

actually of how talk The The lot interest and it. is intensity of and But, as is mentioned, the about that requirement benefit as But there here was wait projects a caveat five is there per a materialize. person, renewable to this versus of I'm he think, over hydrogen could very a see Scott I do four diesel I diesel the ordinary in many talking only of positive. is lot of to almost a of actually want thing, be conservative these about barrel Americas, times. barrel

talk, But will again, we'll but ahead many actually want materialize. hydrogen way to So, ourselves, these up. lot of refineries to of projects convert just get for actually go the if see major a because these of don't there is how will diesel in I a renewable demand

Kevin McCarthy

so you much. Thank

Seifi Ghasemi

very much, Thank Kevin. you

Operator

Deutsche Begleiter David to move we Bank. with Next

David Begleiter

you. Thank Good morning.

Seifi Ghasemi

David. morning, you? Good are How

David Begleiter

Seifi, project just of discussion And I'm on Jazan, is during well, start also, project negotiation? should this return and complete, the comes down period thank once financing expected immediately? has up on you. your the the

Seifi Ghasemi

You're talking about Jazan?

David Begleiter

Yeah.

Seifi Ghasemi

Okay.

may of of two answer years part we given question, the ago. First guidance some all, the your profitability second about if to general almost investors had project I of the this

period so expectation the of negotiations correct. on, and still During is that the

accretive the our will part this day it close the thing, your to day therefore Secondly, fee, and will question, on get EPS. the our of first we next we we be fixed close, once

David Begleiter

the Very as prior the good. project you back, had last this the just going earnings And expect of on June? same Lu'An, do restart, down think level current post you I to

Seifi Ghasemi

renegotiated to explained we we think we I contract, No, the that. you renegotiated that

a structure down, get have the is We but for paid. plan we if

a up period for the original have a payment when get to back and full for structure the we plant time contract. running is of and We then for

three there's kind So of levels.

David Begleiter

Thank you.

Seifi Ghasemi

Thank you, David.

Operator

Andrews Morgan with Stanley. to on move Vincent We'll

Vincent Andrews

Thank you good and morning.

Seifi Ghasemi

How morning. are you? Good

Vincent Andrews

you. I'm well, thank with same you. hope the I very

of You mentioned the XX% was Chinese going own, it of JV to be you curious some on the other that the projects? you other of gasification if XX%, I'm other of of that just you projects. of maybe the elaborate would it announcement could sound like therefore, is allows purchase trigger you lead that the sort sort what didn't that do significance made that owning other a to to

Seifi Ghasemi

own, Because joint facilitate have do are projects. you additional when of have going have Because we a then parts I in But, think different consensus, decide do, you terms XX-XX are different venture, different what to do don't getting in and and do. you preferences. have what to in when is said projects consult then world, I else don't XXX% with somebody to people the we what therefore, want why if us of they on own our then of different we is to can we that terms it you

Vincent Andrews

year, if you refinery also meaningful the and/or on for And of the volumes? customers specific any improvements for assuming maybe guidance the to ask could for your Americas. the helium I back-half you Okay. Are

Seifi Ghasemi

one. for particularly. Not neither No,

be there be some but that is that things not might improvement, for the assuming approximately We -- are the forecast. driver will

taking a are conservative We approach here.

Vincent Andrews

Very good. Thank you very much.

Seifi Ghasemi

Thank you.

Operator

We'll JPMorgan. move to on with Zekauskas Jeff

Jeff Zekauskas

morning. good Hi,

Seifi Ghasemi

Good morning, Jeff.

Jeff Zekauskas

was the of in from of penalty the kind magnitude benefit from acquisitions dynamics clarify you Americas could business. was hoping the I some you've made. order was And that some some of There the storm. there

during the acquisitions, been exclusive and you storm quarter? what the If have at look of the might it volume the

Seifi Ghasemi

The volumes down. would have been

Jeff Zekauskas

Yes, know that. I

Seifi Ghasemi

hydrogen our right? business, Jeff, to referring are You

Jeff Zekauskas

No, I'm volumes would Americas, storm? the of and exclusive exclusive referring the in what the consolidated to that is of have acquisitions been they

Seifi Ghasemi

hydrogen know, our which have And mean, would I pipeline like lower. It a a had the [ph] is XXX% Because, business. their of operation customer down. I low, you business on business sales. of as Lux kind cut shell Linen of spot their shut contracted is refineries our would merchant have the volume, some then, then was out think and being the we long-term. spot refineries, been not volume been our have of level on And some they the back the refineries flat, considering sale.

volumes on the lower, have Gulf Coast. the would hydrogen So been especially

Jeff Zekauskas

it in so million was And in the was million Why an income is equity number? was equity sequentially. $XX The quarter. maybe and And $XX high? $XX year-over-year the that that division up unusual million income

Seifi Ghasemi

The because time, I last because high is the our And is COVID America so equity equity oxygen Mexico, phenomenal. explained unfortunately, income that because was Mexico. for demand affiliate in just of

Just last it in a is And because results some very way of right of in situation. if now, our Brazil, quarter we are Mexico. But, that money. benefit will that the in quite is you saw medical make India mentioned the joint you Mexico, of I venture in that are the our good India lot Brazil, is business that. in way and It's frankly, it very a now why unfortunate competitors having right

Jeff Zekauskas

much. so Okay, Thank you good.

Seifi Ghasemi

you. Thank

Operator

to move Koort Goldman We'll Sachs. on Bob with

Unidentified Analyst

sitting in morning. good actually, Mike Bob. It's for Yes, here a

Seifi Ghasemi

Hi, Mike.

Unidentified Analyst

morning. Good Hey.

three number I be like Slide gaining XX, appeared and to you declined consecutive EBITDA that favorite to margin have the quarters, noticed Your price. seem

So just how gain reconcile price losing you of to in margin. trying kind

margin think I the forward? going about should how So

Seifi Ghasemi

very down, let's and the shut down -- causes. is right you Lu'An one, I comes very, business. margin track, a Lu'An look should the when is at think the Well, because high Number margin on very you're

significant that by effect So, is now. it itself has Lu'An than a

that more the higher then up, it are because us for gas doesn't and when the end shows The line. But, we prices showing natural natural that. go second sales, we up us buying customer but reimburses is it thing sales gas profit affect

So every affects gas natural sales if of gas, natural dollar $XXX going immediately. by million up, our

because hydrogen So, the to -- looks go if continue for up. change, lower, our go sales up, natural profit margins prices gas the then but business doesn't our

you are about. those So, need to the that effects think two

margins to our they So and levels if up, natural prices come up. to were, see as gas if the then you're we Lu'An go forward, going starts back go

margins. our about good very feel still I So,

a the our profitability seen change in fundamental business. haven't of We

Unidentified Analyst

they as process Okay, Lu'An, weeks for commissioning, think terms or up, at about thanks is looking is And to color. up at type about reduced once that Or online, the in have that can months? there when think in back of is that rates? break quick? we you a of ramp some And run that that fairly follow facility they a facility just period

Seifi Ghasemi

a do to has Well, be it's too months. stream one want We the pump have can know up down start three stock shut But, work. online recommission other the which of the and in pump time. for their as But the will supplying that morning, our we don't works, have gasifiers of is plant next to doesn't I'm that, that. come pump it customers. years, one been and which comments, up, and going hoping few be never thing a I to the failure, my can going of overall, you because short as you the you to on all have to mentioned pump it's take relatively product with that this in specific, and And period we or then not change

Bob Koort

Thank you. Okay.

Seifi Ghasemi

Thank you.

Operator

with hear we'll McNulty Next, John from Capital BMO Markets.

John McNulty

taking Seifi. for Thanks Hey, my Yeah. question.

Seifi Ghasemi

these How days? Good you are John. doing morning,

John McNulty

And are Yeah. hopefully good. Good, as well. you

in 'XX it earnings kind on while So fiscal out, with I payout 'XX a year -- a paid was will of bit I terms way year think total contract versus bit, has about, been with if of lumpy out there to not guess, little like full fiscal getting how a a contribution? little in being of overall down. a is the a look the This Lu'An. obviously guess, rejiggered it, follow-up

Seifi Ghasemi

right Fiscal year, fiscal But and 'XX, months, money right? of haven't 'XX we it has up. I next lot in down starting which made a is we in been this one are shut are six mean, the we now now, the for because is Lu'An, plant

plant year So, will I 'XX better 'XX any than think or be significantly that fiscal breakdown barring anything.

John McNulty

Okay.

range. that So it? to the something in way right of kind that contribution to Is it the should back $X.XX or think about be

Seifi Ghasemi

so we and said run we gasification said I the down that plant the is issue much on. forever. this to here that depends case, be thought not But, in that people the and always change that, that's management the has will all fact how of want due But always is John, be that that. confirm because dead, don't to to we on correct. biggest shut And was proven it over

that fact it on sure how the the I'm how keep it plants depends and on better valuable, plant profitability is our stream plant 'XX, that. produce is to the the run than all the many So, also running, it's in products. but we And the wants of much the can we times customer is and going now gasifiers how 'XX, is

to much in our want accurate guidance don't prediction. definite we a you you a give XXXX. Obviously, for October, give will when I you we So, give more prediction

John McNulty

or follow-up, macro maybe it. or gasification a signs that for having you some around, on rest Fair you starting pull there. business point? increases kind seeing the in site backlog to that, and scale how demand the just the as to through of we you up this kind about we and to at interest merchants Are see should and spoke activity look pick bidding either year? Can announcement, what up as activity the some in Got contract the side larger filling to traditional speak means And then, terms And of business? bidding the of enough. think of customers this of of starting from

Seifi Ghasemi

continued And slowed it COVID. strong. and the to It for be deployments are John, the of very very about optimistic be kind never those strong, we to during the continues projects targets. down demand very

I very will see advance. we and are As Scott mentioned, very we We bullish And large a two that. lot are we almost delivered working that years of go those projects as fruit have think forward. bear on, that on XX% in we

John McNulty

much Got the it. Thanks color. very for

Seifi Ghasemi

Thank John. you,

Operator

to Harrison on Securities. Mike move We'll with Seaport Global

Mike Harrison

Hi, good morning.

Seifi Ghasemi

Good morning, you? Mike. are How

Mike Harrison

Seifi. New the that But, about different recovery you the it at you are bit been sounds markets believe said Doing typical a rates, Thanks, you business, uneven. recovering strong the a well. like little recovery Asia to shutdowns. Year I I Lunar saw that has wanted following ask or maybe

can of more So, us little bit you a New Lunar on coming Asia in saw Year? what color you give out

Seifi Ghasemi

business actually, question, Year. strong, business said might in and China and in some good The you strong Lunar board, our strong. a very coming business our very not In places that is result, because And because that very that of there. some the losing our we what necessarily is firm Linen all we is market is I is specifically recovery our said be is other our a of as not have on about that I as recovery are helium share we that across New lines, Oregon even -- that product thing coming that, was we true But after Lux that a the know, saw to That's in strategy. part that -- the holding that pricing means

Mike Harrison

that just And opportunities like see over years, market, it in talk book the maybe coming going Alright. years. within is like there about onsite the aren't listed your months up of that or coming that Samsung plan Korea. onsite very some then, are the you or set there as the market, at that the looks up seems the Can the whether over to facilities you're couple on to starting plants electronics really electronics and to I within strong next demand slide, that be in you But activity additional years? look

Seifi Ghasemi

nitrogen onsite business very for purity electronics and for demand is electronics The strong. high

that. We are participating in

share lot customer have keep losing the we kind confidential. area. to some that that are contracts, plants announce doesn't But, that announce a we of to it. they want of market cannot Because not We any want in won because of

proprietary in actually the very competitive. which very have that products, And area. are remain We we bullish

Mike Harrison

very you Thank much. right. All

Seifi Ghasemi

Thank you.

Operator

Next, we'll hear from Mike Sison with Wells Fargo.

Mike Sison

morning. good Hey guys,

Seifi Ghasemi

How morning. good you? are Hi,

Mike Sison

Good.

that that scorecard back up of but that you that some shows your gets start couple meaningful and is a And you're deployment that come spent going good. capital goes years, down, more point? is do to be think we at meaning which business to you you remaining in? what growing envision the projects just zero to It year, at coming every actually obviously, do see Looking have it

Seifi Ghasemi

capital You're talking expenditure? our about

Mike Sison

Yeah, the line spent remaining to be item.

Seifi Ghasem

down. come going friend. Oh, not my It's that to to is going grow

invest huge. We heavily are continue next going to XX, XX-years the to the opportunities for are because

is we going capacity there. be not financial to And Our shares. buying are

increase We will dividends going maintain buying waste our and money it. we not shares. are But to our

going spend to way we're the years, We what plan will invest And plenty are the we projects, that. XXXX return them five is and we In $XX give plan, that a months, are XXXX. that give -- which in did a same said we will to of XX-year there you in in for do plan are few going of between next XXXX. 'XX, ahead few a a high for us. for in XXXX will billion, we a XXXX, 'XX way to about you And we months, we

Mike Sison

And it. quick Got follow… then

Seifi Ghasemi

-- So, go yeah, ahead. don’t expect

Mike Sison

understand. I

going For I as give to at outlook, of guidance. and the forward? Jazan be adding company back we their XXXX, think know Lu'An XXXX value specific should do it's investors to the early you particularly, But look

Seifi Ghasemi

financing online Jazan Well, finish will there year, if will because and signed a everything and good year. be of the the contracts to we goes fine, totally Lu'An this and and bringing compared we in all XXXX are final then successful be Lu'An

Mike Sison

you. Thank it. Got

Seifi Ghasem

not a That’s Thank assumption. bad you.

Operator

Barclays. Fischer with Duffy to on move We'll

Duffy Fischer

Good Yes. morning, fellas.

Seifi Ghasemi

Good morning.

Duffy Fischer

your Journal your of sheet? an to rolling a through flow guys those weekend, you're at that And get Just I are talking kind moving you as separate project greater purchasing be see actually seeing Street capital project. any when last But article delays lead neon if forward, where start can't that types Wall of to time cash delays itself. about had from want from the city we balance long question, and your of see the are just NEOM And you will the equipment? with

Seifi Ghasemi

and project, First with [ph]] that or I can project don't delayed one of comment all, are it not the The it, about our to confirm built, at I nothing involved we that's is or that not do built whether I because BR NEOM our the all. something want is that make don't any has the doesn't affect enough about project city, city thing in. know to

water. our own going prepare, self-contained, desalinating are we We are to

power. own our produce to going are We

And so, self-contained. totally are we

with of our will project. any the affect So, city not kind any issues

and In that on spending -- terms right terms of long already, items, for are placed project of progress. cash it have our is project, in some And we're now. the money of we flow, orders we making tail

Duffy Fischer

maybe it two, one, online, new globally? capacity we picking you for in years three kind just coming And up there's but notionally is next walk supply strongly. market like if to Can demand would demand view I helium the thanks. helium. of helium seems Great, through us could the how jump some know you

Seifi Ghasemi

helium think I Russia The is That a XXXX, biggest going online? that. in one, that. It that will it that all be project to to project. the produce what doing, be end that it At supply Amur called is secret. number on and is, helium is So demand a lot when when of The it Is of XXXX, what is to happen to going project online. is rate the and is is XXXX? issue in not of of going Siberia question so about helium of sources all

don't the is to I that. underway. project want only any make So that predictions on that is major other But

Duffy Fischer

Great. Thank guys. you,

Seifi Ghasemi

you. Thank

Operator

John with UBS. from hear we'll Next Roberts

John Roberts

you. Thank

as Do reconfigured biodiesel. allow downtime hydrogen of those have if volume, refiners to the extended headwinds contracts to suspension they You for mentioned reconfigure? some temporary hydrogen

Seifi Ghasemi

No, morning, it Good does allow for not that. John.

John. Our contracts so different or takeoff contemplate affect contracts, our pay, things while people doesn't that

John Roberts

gasification and then, And the Okay. you quick Indonesia? Jiutai, on a very projects, three short update give can other us Debang

Seifi Ghasemi

a plan. They on are schedule, on

John Roberts

good. That's Thank you. Okay.

Seifi Ghasemi

Thank you.

Operator

on to with of Byrne America. Steve We'll move Bank

Steve Byrne

either the way the SMR, is add Seifi, carbon technology that way? of on the or you in these in meet inexpensive found it where that interesting, reduction you targets, highlighted you. into rich bucket. that bring say potentially COX? wanted in capital interest have say limitations you to of anything to capture the coming the Thank you with you any as that you access something as can your from sequester perspective Yes. some it just to might would Or that your would differentiated bit, see I just have relatively to largest to Kevin's COX little somewhat drill And streams that's a carbon And, a I to capacity being a potentially of to out your largest really because of customers is could that where you response target? that, allocation as question the

Seifi Ghasemi

for of are thank position, operational. by because saying right in also, Well, that the kind facility largest answered we operating question. the thank providing the question And for the unique carbon in now, world you answers, are we you the a you capture

have have captured in running COX it from the several for we been We a years. of We Port ton year semis million that a Arthur.

we So, do know how to this thing.

therefore, that there have can that COX, SMR is COX Secondly, out be that we many, is the put captured. many

and interested The a carbon this a hydrogen to COX, good other a hydrogen, say, thing economy the is People people can is on the the fact you that. And carbons. produce hydrogen reduced transition either that are because hydrogen as very way who capturing are which not but it green of therefore lot carbon here's with footprint. by blue there to significantly capture and is the almost make significant hydrogen, very happen is in quickly hydrogen, focus as finding can make is very hydrocarbons interested in using

a intend a will that. there are to plants on competency, have world that that very the I am And major I of around big be why that we player in player So, lot with we to we investments think that that. be is well-positioned core the major area. -- with our on And a be

we in hydrogen, to be put Products is the we goal major, will leading that for COX to leader in green be plant we gasification, do Any that gasification have are we're probably the leader with building in company blue a already plan the that. capture, very which ourselves the which in project NEOM. Air Our are world, gasification. in the the means and position hydrogen, plan We simple, we

Steve Byrne

U.S., that are is change. potential things of That's be the more can U.S. blue. Europe one gray? other will cell is sourced finding not Or We hydrogen. our States, Government policies in hydrogen in Europe, can longer-term or the in part as opportunity the if what I I and mean, than result, can biggest natural any it could committed United just raising that gray? And we business, developing way view hydrogen right hydrogen, on like gas relatively start cell change. see the of the wanted do of there and But U.S., that, green economics, are all Seifi want of out A issue in at convert potentially are and really business, get starting cost world. can governments think fundamental rather Seifi, a we that the now. the see I Is their in U.S. just going comparably the larger, three the They and if priced green from that potentially adopt you that that are a lot attraction cities fuel committed on be that expensive carbon then, with that. cities, in regions - or is you're then green these Look, The And in your is more to to buses. in power green the to our the whether they plan They is were that because of your because Japan, this green. plants whether has element taking at U.S. capture putting talked hydrogen hydrogen And for Ghasemi the the that would happens about the attractive is states, that their of and I that's their government times don't hydrogen But tour it in hydrogen see the or blue that. grey than Europe if buses ahead least idea fuel the price? in you it less then of a you the LCFS of gas we footprint. boom Europe question. all in blue the more happens. to excellent And will of the it know be in in of an terms interest. states ammonium terms place, with the But carbon But reduce of of you majority to the relative are and Europe, Europe, all California to can in the cheap put have in going natural expect outlook

logical of project put the think Europe. the probably where thing. that, doing is. But different NEOM, I economic are you different the like very the And will potential on So But parts are delineating top things. the be pressure government of market a you layer for biggest have to what of is world a the

Steve Byrne

Thank Okay. you.

Seifi Ghasemi

you. Thank

Operator

hear from Marc with Next, we'll Bianchi Cowen.

Marc Bianchi

Thank you.

for First the to you're past you question the the confirm of relates $X.XX year? two to to guidance, just the impact the quarters how wanted $X.XX for remainder the that handling COVID cited

Seifi Ghasemi

rest expecting not the COVID the the be that U.S. would significant an a in less and the impact And impact we then Asia, and the little China as of because bit So, Europe of is of improvement vaccination. that vaccination, in are in anyway. because COVID

be because considered impact, in we some. but So some still will have having of that improvement COVID mind kind of there

Marc Bianchi

might by occur before hydrogen carbon what for I up on someone would things capture. exist. involves right the talk lot follow to diesel. wanted that there's I hydrogen, these carbon blue seeing but some think And then you -- but aren't projects, takeaway happening. that some would discussing mentioned. it Why aren't And built And bottlenecks You move the perhaps if renewable content for to a quite we be there's opportunity those else, COX of maybe for appear about mentioned I'm can credits to responded higher It that needs that. curious that a for earlier Thanks Great. of now? capture maybe obviously, appear there capacity an you question forward? there's stacking

Seifi Ghasemi

your focus just let Well, question I sure understood me correctly. making on

where You're and happening right reason that is faster? the sell renewable makes are diesel only renewable I now, in California. profitable saying projects think how diesel the still main place be not come to it these is sense

Because mean, California, So thing are in producing sell sell lose they cost gallon. it is if diesel probably $X.X, Texas, a just renewable Texas, in don't material of for Texas, they in people because when they sell I they money. in raw $X making the this the would it Valero it they

making have? to to New I that these up renewable. of if York you will are policy done, to going And in people California therefore, themselves see So, going and in people will do Oregon are it am be go this Because California California comfortable you or XXX% how that, growth it until not people right you're because has and I is where will now everybody and add all Colorado be the how think and picked it a much five California. teams which But of that and diesels, down be. thing, many-- do? diesel think by California on four all renewable significant am need capacity going to sitting to what this does Then sell how saying -- get well, years in sold So to I it. I say, to going is sell

Marc Bianchi

do that of part it's the question, take of to egg a wherever And the be there, to related you there where and carbon the to not on a opportunity. how might carbon going the or in bit infrastructure to market following captured be sequestered? just see place other problem sorting the stored Is And capture chicken to out?

Seifi Ghasemi

people But, about because capturing then right, you're carbon. talk very

for the what is That's COX it. part. we or you chemical you SMR know question can you once capture puts have which that. we unit, an capture easy there a carbon is a do The out captured out of how that, So to anywhere do, plan,

come And You to question that projects of the is is it. possible terms sequester it, many these can that it do a into that. major do, how is and to is need you there question sequester of they play possible all that that. have to poorer will where the can where to biggest enough is place it space where done be in That of

Marc Bianchi

much, very you Thank Seifi.

Seifi Ghasemi

you. thank Well,

Operator

to ISI. Stephen move Richardson Evercore We'll on with

Stephen Richardson

good morning. Hi,

I the Seifi, gas hit come want at Products commercial run what just utilization from quickly rate, products morning, substantially historically? you terms you is commissioning, through and to you're Lu'An very, is that what the confirm from the it's very rate want Air whenever that we're the run when similar to you're on if running there economics any you're back is and when Lu'An a be this before that Just fires, or which this fully to hearing perspective? Meaning, But, might. high been contribution hasn't what been will change historically. saying appreciate

Seifi Ghasemi

thing or I Well, Lu'An want arrangements that want through details, up all we -- answer before we to of reconsidered said question don't the the contracts. shut certain stages. stream, time, period is when the what for have with I tried we we go that, to that of go The on is the do is second doesn't is with us a because come when One what and is then back to three the we disclose the down, get? plant a that get that up original the when renegotiated plant that. did customer We to

will in than time, we that of the as we the How which $X.XX, then, where much the it the intact. a to as the But we extend length our stream period make disclose money return is than But So, have the term we help our come XXXX, better, good I the still fee capital overall that there XXX% I return for to be it. do much not on still to agreed a project is the will XXXX, if not reduce means on has in customer. the because agreed is to as you want contract if of that. on cannot customer of did to contract, less that, represent less

Stephen Richardson

over about variabilities, follow just bit on and about going to Jazan forward? Lu'An. time markets of kind a Okay, that's mean, Thank how two a little clearly focus. lot lot obviously, way it's if lessons I of been the maybe will And and communicate you best taken you. the And up which about three conversations you've a think wondering come may. and of time market way I both through, the I last to Seifi with in clear. your up quarters, talk the thank Yes, products one projects the you you. if going was these investors backlog, talk in you'll about, to which learned forward, from could the

Seifi Ghasemi

tell just the concerned time that could maybe November all life, that have was handled truth we my it's was lesson one And the handled I Jazan. concerned of very the learned have them. is to are not talking the -- need told I the Well, you maybe always investors. to And and Lu'An, therefore, we way. that you at people very been it, it believe XXXX, right differently. about But, I In I I about overdid

always to that This it's didn't of make that please this and know then happens. But that the But, it request that Jazan. said, you the us of end investors mean But what this is look, mean a is what who by But some of my on, I we the we it's this doesn't to and projects, of our it do at the investors been tell I things customers that, again, as can said, honestly, gasification. transparent. And We it. had that other of you. you what people putting have the happen. to But is. I to do kind are mean at doesn't world. don't people the in go better some exactly that do the this is we just told maybe a tell can that track. so, I better patterns. people we it, are it if I of you. right shut what on think to job we mean, to now. better know stock But panic. -- the hit to to I as of they job. appreciate again, time do would normal to always be a look, one not with suddenly I end we I'm maybe just it so the the can I we This guys else context, these going job, took and we're these will we kinds It's end the the Nothing And did a quite right we $XX. will and them going sure going tell rather doesn't know other all than put always Lu'An the create talk it down, do And, like the them not to are judgment talking we facts investors based saying work. thing big should These is we explain forward in caveat that is doesn't is is to listen think I always wrong these Now, don't gasification is you time said, got that,

Stephen Richardson

you. Thank

Seifi Ghasemi

you, Thank sir.

We question, Can say are significantly over please? we last is this time. the

Operator

Yes, enough. fair

Seifi Ghasemi

we Do another have question?

Operator

No. At this I will… time,

Seifi Ghasemi

said all No with our look end sincerely interest this. the our to presentation. and other We And and best. to your you care. then just that's Well, results please right appreciate earlier, Take we again, time for safe being to I discussing again, forward the our on as stay to everybody call, and call, healthy. I'd And like next listening quarter. Thank you. thank

Operator

for you We today's participation. that conclude And thank your will call.

Air Products and Chemicals (APD) 10 May 212021 Q2 Earnings call transcript