Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to Air Products' 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. Sidd Manjeshwar. ahead. go Please

Sidd Manjeshwar

am we Good Vice quarter Sharon. Manjeshwar, Chief After and Welcome Air Chief Chairman, Treasurer. to President by joined Thank Ghasemi, Seifi Sean and Financial earnings morning, our Melissa results second our I Corporate be President, and XXXX Investor Counsel Sidd to our teleconference. Products' be Secretary. Operating of will Executive today and you, President Relations everyone. General pleased This Vice Dr. comments, take CEO; Serhan, Senior to Schaeffer, our Officer; Major, Officer; Samir your Vice and pleased our President questions. is

for website earnings and Our are available this at the airproducts.com. on our slides release call

outlook regarding and cautionary on opportunities. to contains the statements release our refer forward-looking investment discussion statements, about forward-looking earnings, business Today's Please note is those number X. and earnings including provided that Slide in capital guidance, expenditure

will earnings margin, income, various total today's to financial basis. throughout refer company effective and tax including the margin, discussion, operating both rate specifically and segment measures, on Additionally, we ROCE, operating a we EBITDA, share, Unless per EBITDA measures state GAAP our the these otherwise, referring these are our most non-GAAP release section. our earnings statements relevant financial be of Reconciliation directly measures adjusted comparable found can financial measures. in measures to on regarding to website

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

Seifi Ghasemi

grow everyone. in you that be quarter, taking challenging another for say our to Thank to of delivered time very day proud good call our a results on to set and today. busy people business this environment. your Sidd, schedule you, I continuing Thank our outstanding to from am

talented, carbon our and and and make which motivated at commitment great team the focused Products I thank of like strategy, Air employees Our growth to zero would production our their one is of each work. continued progress for in hard dedicated on to executing low-carbon hydrogen. also

priority. always which number our Now safety Slide highest please turn our performance, is X, to

make that have to working zero we but goal better. clear it XXXX, we made significant progress to see, incidents are accidents. you always is do our to want hard As can zero since and achieve I

shown and Slide times to to success continue our you actions guide many, number forward. critical management we we Air our which which philosophy summarizes will Products' is move X, before, have many as

turn number please Now to X. Slide

quarter second $X.XX lingering share of the last the XX% economic despite parts of earnings for guidance Our headwinds of line many in adjusted and $X.XX world improved per quarter. year the the or top our exceeded versus

and up top We have earnings XX% price which were driven versus of both quarter delivered consistently for collectively and the by volume, year. quarter line growth last

also brought new We enhance further projects that earnings. our on-stream

$XX with $XX roughly billion of energy to billion transition long-term earnings focused will than growth. more Our continue backlog on drive

Now please turn Slide X. to number

up dividend year X% years dividend As our have $X.XX mentioned our quarter, raised more share increase. again we quarterly this per last to XX extending consecutive of of per record quarter, than

$X.X We to commitment cash expect our more demonstrating shareholders XXXX, in pay shareholders. to out to return our than to billion

increases margins dilutive increase it improve the energy margin effect our Slide shows to our of after to to favorite were happy our This two largely caused doesn't the pass-through due cost bottom line. over decline our which the was past that higher sales quarters our but continues my to please Now as X, performance turn be We shows slide EBITDA number time. business over which trend. see

decrease as we in while We productivity to our new projects. margin improve and base business to energy move costs continue expect higher our add

novel met renewable hydrogen hydrogen. thoughts challenges NEOM share are where as we and the producer medium real hydrogen ammonia's a We Now please resources energy and knew mega would with a on few I approaches were for its projects the to to Slide ideas first effective turn being ago, in recognize sometimes like in years number first that an first and to our strategy. the the potential project ideal X, the three When mover we skepticism East transport Middle on hydrogen green launched to initially. capitalize has

announced hydrogen and again we XXXX Gulf the project in on carbon the to mover act on were we sequestration Louisiana When Coast. blue capture U.S. first

dissociation the have to energy and is announcing of become large our a company, companies around hydrogen have a innovation. Now since the and many promise clean significant projects reality. exploring clean hydrogen support want followed and government projects These gained world, ammonia lead

good will We the a for believe because around energy successful the and actually work governments require the industry many companies, organizations these developments transition of world. are different

our hydrogen leading confident leading global to continue to mover in Air that success first clean energy for Products' the and we proprietary hydrogen clean are a support know-how decades advantage the come. as However, experience, development and producer, capture assets will and

is Melissa? my call it the turn our to Officer. Now Melissa to Schaeffer, Chief pleasure over Financial

Melissa Schaeffer

Seifi. you, Thank

XX% earlier, continued all and performed business versus efforts. this digits Air their double were mentioned and the Seifi outstanding I, for would team Price As headwinds. too, despite last metrics our profit like very thank significant well quarter year. Products gained to up volume macroeconomic

to the bond of and €XXX million amount of our In $XXX finance million framework. green after were issuance proud principal March, successful with announce we publishing green our first-of-its-kind

to execute offerings, same bonds green the first these Products U.S. Air became multicurrency With investment-grade the on day. issuer

projects proud company further blue demonstrates which hydrogen category, to very as advancing to position eligible are a first energy be chemical world's expenditure the qualify the U.S. in leader transition. green an our and we Additionally, as

X%. company, about across by translation a which reduced partially cost and strong which been the equates sixth X% eight pass-through gain comparison the XX% to higher and to review volumes last X% In X% positive saw on-site year, compared price for consecutive by price year, our Now better of please results. energy This the X quarters. a Slide to an currency quarter driven This for total sales lower increases. for is Volume primarily consecutive regions. gains price by U.S. was double-digit offset from quarter of turn we positive both second all increased to Merchant EBITDA last for dollar, activities. has

Despite phase project contribution XXX second higher basis of improved higher XXX volume steadily, EBITDA than climbed headwind, Jazan offset and than EBITDA this margin the price, points higher XX.X%, is and points year. costs. reaching last which from the strong basis XX%, was as ROCE the more

improvement volume as would results. equity volume up bring our sheet We further on-stream continue cash Adjusting new merchant expect projects on-site X% XX.X% for balance been affiliate to to was work. business. we driven improve our ROCE EBITDA to and ROCE and quarter. X%, better by and put this cash, the our on driven up was by in Sequentially, have

share of to per our please Slide Now results. turn a XX for discussion earnings

GAAP share share. two of included which items, per had of a combined Our earnings non-GAAP $X.XX impact second quarter $X.XX per

announced business to uncertainty recorded coal withdraw Russia's permanently we charge invasion First, Indonesia $X.XX the suspend the due regarding of of construction for from to our gasification previously a Ukraine asset the ongoing related to country. and primarily a in actions decision plant and

of the non-service versus defined year Secondly, last a cost gain plans benefit resulted components our year. in $X.XX $X.XX an this

our affiliate cost items, adjusted compared to up quarter per second equity non-GAAP strong volume earnings together driven and Price, share, $X.XX was last higher added and $X.XX pricing by income. $X.XX. the Excluding year, or XX%

improvements costs, does not than offset this run variable Cost net a $X.XX. of contributed our rate. more contributed was headwind volume cost actions represent new an quarter, variable and increase price over of additional Price, $X.XX, $X.XX this Our increases. but

costs growth and this activities, on-stream of inflation items to addition increased planned we quarter we strategy, project and to saw the related the to other our do not execution costs expect maintenance onetime In repeat.

income our results other from higher. of $X.XX of second the and Meanwhile, Jazan unconsolidated Europe phase the in ventures good project the and equity completion affiliate the Americas drove joint

Our XX% tax basis consolidated also performed lower unfavorable expect rate well in was XXX line. joint shown points benefits year. improved XX% to due shared as FY our to rate effective this quarter. the with And for an partners interest effective tax this The results tax We non-controlling the still XXXX. of ventures we

to XX. turn Slide please Now

distributable to including and flow improve, Our driven cash cash tax maintenance interest, growing and by CapEx. EBITDA expenses, cash stable continued

or about cash billion $XX XX per months, of we share. $X.X last the generated distributable Over flow over

and as $X.X to billion From our flow, than our dividends paid shareholders over $X.X to we maintaining while growth. distributable cash more for billion invest XX%

cash which dividends of deploying creating flow, high-return stability increasing ability and projects. especially challenging in and demonstrates business, by strength grow us value our shareholder for continue the Our capital to our enables to conditions,

Slide an provides XX of update our capital deployment.

billion roughly today, capital at potential fiscal stable of $XX $XX already includes Our expect by which and spent. over $XX available be about cash XXXX available $X billion billion, we capacity to remained deployment through additional XXXX debt billion and

capacity generate cash additional still and EBITDA which is additional capacity. given conservative would growth, additional for this believe potential borrowing the flow We

targeted our focus always, debt balance to continue rating. to As maintain A/AX managing we our current on

phase of from contribution gasification Indonesia. expected Jazan finalization project to including lower backlog We of the completion developments, the successful and of the coal second our reflect for have recent our withdrawal our our financing equity project, NEOM from the in adjusted the

Our current looking substantial $XX the projects. backlog of we billion add about will provide are of growth to amount and future, in additional a

capacity XX% updated We on have the this already XX% we show committed of slide. spent and

create still made the high-return way capacity that high-return projects shareholder these investing investment invest long substantial have is in We to and great run. for have to in best projects. progress believe remaining value the We

evaluate to to entrusted best by our deployment cash the the determine options capital to us our continue We use available and way shareholders.

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

Dr. Samir Serhan

Melissa. you, Thank

across our segments improved During price businesses. volume. the regional saw our last second improvements in and Results driven versus quarter, broad-based of year, by strong we each

we commercial to sure the on-stream value And offerings. hard worked new around successfully the drive of our realize we world our in results. brought Our that projects teams help make to

maintenance regions, We planned volumes customer but saw improved in quarter. again to elevated this our multiple activity turnarounds due

our we project In base addition energy transition-related sizes in to opportunities of investment significant various business. see investment,

to the in our region continue and projects traditional industries. win We share across various of fair

activities small- to project Asia particularly Our mid-sized in robust. were

continue to We on-site in midsized globally. business see small our strength to

XX%, EBITDA a demand. was results. Now in was increase. price third a higher as row Sequentially, hydrogen onetime planned Americas Slide of volume. higher driven inflation volumes margin offset other offset and items. flat and favorable of as XX%, that were affiliate by our year, EBITDA supported Compared the XX% costs. price flat Americas XX% largely strong to maintenance income positive equity segment EBITDA up review please higher up we price last higher costs, turn Merchant improved XX roughly and on was activity, quarter price exceeded a On-site to by for a

also our reliability monoxide successes carbon customers. we new long-term LyondellBasell. secured Gulf This Yesterday, Texas network projects. pipeline in our announced largest traditional from world's and Eastman in contracts monoxide carbon supplier enhance with off-take expand in projects to enjoyed U.S. and we Coast two the world-scale will Additionally, larger project

strategy while growth committed low- are and pursuing We zero-carbon in to base hydrogen. our our business

to turn Please Slide a results. our of Asia review for XX segment

improved COVID-XX of which year, XX% and certain X% effect assets than Our higher seasonal Sequentially, lingering price application. variable improved electronics, of driven costs. new by EBITDA Lunar Compared up impact. volume parts glass was costs. in slowdown. of energy mostly the flat in negative to China the currency more improved including X% offset XX%, results [indiscernible] new a chemical Volume year, the assets past was Year to XX last as offset the in Asia on-site, and despite the higher in Merchant over almost despite New addition

segment please Now review of Europe for Slide results. to a turn XX our

gain nearly For drove quarter Europe, sixth for higher. of significantly region's price compared the XX% region. year, And double-digit merchant margins price. the is the pricing and merchant the consecutive gain last is in This profits to story

margin driven energy also we EBITDA as volume up backed points was volumes. by more recovery while by pass-through. higher equity income down. increased basis our to EBITDA EBITDA income. come the activities well and improved, margin higher was affiliate than EBITDA on-site and the XX%, a equity energy lower continue XXX costs favorable as higher Sequentially, more hydrogen driven saw as volumes than in Additionally, cost affiliate as

income. sales Now to and Middle negatively for of review XX please higher impacted a Stronger Slide India base turn volume segment operating results. East but our increased activity maintenance

first the of of mid-January, expected, added Jazan income project, as consistent our equity second we The which Jazan in our drove affiliate closed EBITDA it higher. second and and to contributed Both phases commitment. have project we with phase

turn businesses resources profit Please segment this Other lower functions sale Other Corporate as Slide results. to as and contribution business The centrally to and for well managed quarter, by This sales our equipment add cost segment corporate segment our continue strategy. lower our costs. XX from sale and of includes as and our and we for Corporate growth equipment higher of a to driven our support were our

wins that future. and Customers of are in to four and to making technology very recently. LNG resulted are announcements sell equipment see additional project look forward pleased in LNG we in and the We projects announced interested our significant our equipment, work we two

the business and hard around outstanding already Melissa mentioned, a world. of commitment this of have quarter Seifi testament and our our resilience people As the and results of to the the are work

turn I back Seifi? remarks. would closing over his call like now to provide the to to Seifi

Seifi Ghasemi

Thank you, Dr. Serhan.

Now please XX. turn to Slide number

results quarter our guidance. exceeded second Our previous

However, Therefore, $XX.XX to for raised the a to global guidance announced $XX.XX the as per $XX.XX to our XXXX whole share uncertain. fiscal outlook quarter. $XX.XX economy modestly we versus have remains last year

the including For second is XX% last project. $X at see to approximately the $X.X year, $X.XX to per the that quarter We billion around of XX% phase earnings $X fiscal third year. billion XXXX, guidance we our over Jazan the to billion up year our $X.XX, for this of still share for paid CapEx

Slide the the to develop number model, we business. were on-site first the turn hydrogen of business Products Air years XX. the was, to pioneer XX also ago, please and on-site Now

the of the opportunities Now we to large provided low-carbon enormous hydrogen are again transition. spearheading development projects the intensity energy address by

This culture charge. the lead and by drive lead courage people our of who the to have our to shared part is

mentioned an motivation. have It our and has long-term I people. our its and the the commitment motivation and future. many rooted is leaders enterprise in competitive the their is by of advantage into principle and demonstrated As commitment past times, This of people clearly been the

to are are questions. questions. we we ready Operator, Now for pleased very your answer

Operator

David Bank. go Instructions] first [Operator Begleiter take Deutsche We'll question our ahead. with from Please

David Huang

here Huang This is Dave. for David

the you're seeing region? maybe trends merchant by April about volume in First, talk May, can and you

Seifi Ghasemi

after see improvement should as seeing in strength, economy Well, Chinese we quarter that we I the middle the continue the Lunar in the benefit economy that general, of the the usually to last in are say and and of But in have like New to see we don't the about the seen in we that Year, gained the quarter, that comment pleased China quarter. we quarter. would are in you next the with

down. you are and Europe, just flat. energy economy related yet. They we enough? the pricing But well, obviously, costs. little the And not are not that we the is significant that it's gaining time, compensating flat into at good in but know least remain not volumes bit David, the don't very action growing In amount see are recession, of maybe same the a going that with volumes, to that we Is at much, a U.S.,

David Huang

Yes. second, And I the projects. guess,

background going what's to factor prices? Just guess related can back delayed project that I discuss for then related Indonesia that to driving a cancellation, Was Can two your has the to the And Is higher another been you coal you give decision? quarters. that us that the the delay? decision? project in

Seifi Ghasemi

coal and had the product. with that respect Coal reason to from was about years prices do With of price going that mean, the we final started almost Indonesia, Sure. ago. The to we five up have withdraw is I the these price main project nothing Indonesia things. increase

waiting not continue time, the that for can't the had levels. to precedents at be met And those cash just other just and approvals, places, decision have to we project had and our therefore, kind we the and of opportunities drawn. were at of at we that deploy basis was to decided conditions you approved different getting be condition point some The in that

give us that investors the flexible. the hope of I we the fact are benefit

income places about we deploy it the getting can't And therefore, deploying around billions for capital in where at keep you react to we without for we will money dollars of decided the We long Air and to are are time of the not other world, millions, hear the a it. somewhere -- future. sitting And we Products circumstances. an

customer to doing customer The is second some is on Jiutai, completed to the business why are two for that us you're the very we has familiar comment But and with having facility raw to provide we and with that started. The have utilities it any on-site this us delaying give issues respect time. material get that, quarters. like with,

Operator

ahead. next Please Bank We'll move Byrne America. of with to question go our Steve from

Steve Byrne

Yes.

the driven get your be U.S., existing capture to are if renewable methane those whether hydrogen in diesel? you willing on higher would whether premium is blue that a hydrogen the a CI add lower customers just And to wondering to volumes so, And score? presumably pay Regarding for reformers? reconsidering carbon by

Seifi Ghasemi

put they and reformers, intensity, that diesel Steve, California. the them diesel for some provide yes, that you're blue existing that for LCFS absolutely customers. capture converting credits to are renewable about of right if can fact customers lower a are hydrogen on hydrogen we in the considering customers that carbon that asking methane our renewable the and carbon our with Therefore, selling hydrogen get making provide are blue our we increases

to project addition is big project In -- all about Louisiana in our producing hydrogen. our know, as that, blue you

drive absolutely you're will So right. demand. Those things

We can significant are a that anybody very create will excited first Air and about come be would with Products. blue that, and hydrogen up opportunity it for who

Steve Byrne

on what to seems can is Americas, drove in primarily is outlook year-over-year. that? And It the it? more What if provide in drag it And more other your granularity was be the $X.XX costs? you in this $XXX looks what than for as million

Seifi Ghasemi

the which the onetime it there accrue all, if have had Obviously, main doing will incentive are that throw what usually other cost. reason is for be. some has comp we items that drove were will is receive that. that. It higher, should compensation. for to And it that better, some that really people do businesses we incentive go And in First of the items onetime to twice the it with quarter,

$X.XX, the -- cost a projects fact been that lot and investing that $X.XX like down will is driven that that are in We the of the costs, be expect we And that capitalize those come with the and development more in we cannot future past. number therefore, it something by to to has us.

bit have other compensate productivity measures. We a and to

Operator

from McNulty our ahead. with move Capital question We'll John next BMO to Please go Markets.

John McNulty

North you with guys about a we projects green like should put it some is thinking these of about was X% had And think that? of be you almost treasuries. make guess to Seifi, America? for finance mode about? it so project we in kind to really cost some blue reasonable hydrogen and line potentially putting borrow It green this does bonds. like So about of out in the to when think a How more looked projects, into cheap X.X%, be I thinking baseline

Seifi Ghasemi

John, Well, of day morning. you very is very interest of one very, John, appropriate $X.X pleased statements. with us rate We the all, a It good first for absolutely means the raise hope there is the that. that are billion, all we got that were bonds. took only for demand well. green which and making correct to lot

project projects. power for on of more of firing And does a big these Products And the lot that finance of us look increase projects. that encourage more doing it Air will to terms our and in

are pay, very we happy day, at And would that the the reserve federal does. interest obviously, we end what rate the that about So of the that. depend on

and . said, But to it this And about closest very borrowed that. -- almost right in of is will significantly the news us which us, very very doing we projects are the and as right, help good financing you future more for are in now, you we treasuries, happy

John McNulty

it. Got

-- kind it's net least -- to that's big project. or also, have of And rest Okay. project guess update know us projects zero the how is zero the project of that? one demand largely blue half can on or I progressing? is product to hydrogen the you've give the hydrogen and you or an coming the demand the net And blue up hydrogen that than Can Alberta at first taking the of as I that of you product. if got or production of then for you've customer more allocated of speak bulk you

Seifi Ghasemi

a very question. good that's John,

well. project moving that of First is all,

that more. possibility we will the looking seeing and we operation When We operation are and are there. demand facility, that that that sold to the is of significant expect do it, there. clearly this actually a of phase expanding out we we more at of see did amount be of first announced include to a we say We three-phase

is the for solution. Considering little something. the of all obviously, is than -- United of moving carbon hydrogen of in had -- the Canada the that refineries oil is the tax. States. a in world and A demand these to the do towards bit part it's Canada, actual blue hydrogen industry lot different in actually And

land We are there. a very pipeline there, the position our with have in we with good

John, optimistic. So, optimistic that, very we are very about

Operator

to Mizuho. our with question Christopher next move Please go We'll Parkinson from ahead.

Christopher Parkinson

of ability how how growth the being the thinking about geared that's So of projects bid obviously, do to again, some next much U.S. Indonesia to from I everyone's and the forefront of the from on you with basis, project. are towards years used your on your on for elsewhere considerations a has specifically basis, of a everything the IRA? aspects for go-forward your mean, U.S.? focusing But kind brought the relative few blue being capital to backlog hydrogen that once increasing

Seifi Ghasemi

because the project. question project, profitable Chris, in things. sense profitability If projects, do is the world, the for at significant your me no blue Products to very the and address of hydrogen. at of the there it the of I've is you we another for in especially on there that. of a and IRA do it. States, has Air to that will viability we project that But part we look the is us leader we project at will created and the those hydrogen makes United the gives green opportunity When some for that look look said, very, specific opportunity an a always thank question

that Northern need in we I be U.S. hydrogen there's significant There part the our United part, of are be will in in in possibility are opportunities to realized blue demand. definitely significant the expect the the hydrogen the because another a investments sequestration United be can a We building future, definitely States. there the because announced. States is therefore, of States for significant of facility a -- the Coast green of of Gulf hydrogen because And in United that Texas giga green project we've

the that very production easily are and because about and bullish cheap that. natural make we Therefore, -- So export are hydrogen gas then it for it. can prices we blue

about are we is IRA happen, excited in promote going big And on That to that. a very United designed to that. We States. investment will be and the participant is

these, I I U.S., of you exactly it. are book But time, five the it XX% projects, investment in same at but next our mean, other if the years, of So can't will give substantial will the part be in a there as the be interesting I will in and few they to interesting increased if was with in world. the are minutes of other parts of other telling finance John of lead the to us McNulty ability parts projects ago, some the project growth do further a we world

Christopher Parkinson

of you're on a things it flattish would the just helpful. on about quick specifically how I'd improve world? were rest when, things like bit that suspecting update of in were the basis. you Asia your the just latest a very particular, give And greatest lot Asia macro That's just versus on on in more follow-up, Can a and seems little thinking as us volume say, a sequential

Seifi Ghasemi

by million have $XXX $XXX million, old the we We smaller $XXX say -- project. but have not did now seen Asia them standards, significant XX because we smaller we Chris, million, are Sure. our about projects. big They smaller projects projects. in projects, they call of used to executed be growth

semiconductors, significant we traditional additions. In additions glass, other nitrogen that. generators have and in significant of have and all In we

well. very doing are we So,

the about part terms economic We our are more in we in growth. and part continue the share gaining optimistic of world be market than fair that world, of of to that

Operator

our question go Vincent to from ahead. Please Stanley. Morgan next Andrews move We'll with

Vincent Andrews

to intentions follow allocate wanted post in Just the up to going IRA. on forward the capital U.S. your more

at those preference be perhaps or have of more sort mega towards or two? you if investments, be the or they'll those preference to if will projects you Louisiana on-site a have big the of structure thoughts or mix if any akin projects of a curious, Just or thought they customer whether both, between a

Seifi Ghasemi

side Vincent, our at to sites. as are good side other the on-site It The announcements, from Vincent, of those project LyondellBasell. it's of Eastman announcement is a on will customer mixture talk the the of the out to those last have things, one Eastman you. always put that seen projects we night, is be on you and

stand-alone do dedicated we doing of model we them and of ones both: been of or mixture continue has our So, pipeline where a will can ones that. feed our will or which two a we combination the

The increase and the refinery Therefore, that way and board. the has not has has the transportation to steel has in every plant has across for only to States hydrogen has cement decarbonize. interesting to one that. blue green United is this decarbonize. Every hydrogen. they do do to thing decarbonize. is do decarbonize, to Every that that Every is Everybody to to demand customer Every It plan decided is to want decarbonize. glass in using heavy has plant that.

on-site, there, demand of will and be that it of will be that. standalones So and mixture all a

So as say. of will doing all be the they above, we

Vincent Andrews

all follow-up, capital with the activity a all types. of there's as more obviously invest to IRA, gas And competition for of projects post Okay. this in

So in non-IRA-driven, for more the competition sort you of sort yet? gas better because of the happened not has available traditional capital? of Or projects, are that project seeing returns

Seifi Ghasemi

time. in happen will it think I

that on will correct. happen very time, Your assessment yes. It is in

Operator

question We'll our Mike with ahead. Leithead go move from Barclays. Please next to

Mike Leithead

sequentially? you volume last First It was up up quarter, earnings versus price EBITDA speak in to looks on like and Can Europe. down was X%, question XX%. the improvement was just

So can you just talk to the big margin improvement there?

Seifi Ghasemi

fact prices were it. going when the we lagged up that by driven big energy the improvement is significantly, beginning Yes, the margin at

issues increase keep we ago, years margin X.X of prices. enough recall, about you As with erosion -- a energy our because fast prices had keep up we with couldn't of the lot investors up to

have caught up now So, we that. with

the end for prices we making of line. the cycle, energy gives kind the more and profit margins now are lost and therefore, to opportunity So, It's it at an what bottom decreasing other before. us make of increase up our to

Mike Leithead

John if World that second, zero us one earlier status ask update project. then SAS of upcoming about could step about And Energy facility Could and That's asked Great. your just maybe project, helpful. the further net I current take the hydrogen the on XXXX? you following for next

Seifi Ghasemi

We are project. working on that

we gotten going need, waiting Engineering have one actual -- two most the that start of of We is them or on. they construction. for almost and are to permits

planned, as So that right project moving is now. forward of as

for Now people we in be we how And sustainable look decarbonize. improving. and so forward, But the interested to they and at demand be fuel to seem very can project other that to project. opportunities can the the moving is product, have other enhance that airline seems

Operator

Spector next Josh the comes go ahead. Please move We'll with UBS. question from

Chris Perrella

It's for the wanted quarter again. boost to in Chris volumes those on as and customers potentially up customer operate maintenance Josh. from the to that I begin all sequentially Perrella on follow impact the just how volume

Seifi Ghasemi

well, hoping Chris, is you that. are a look guidance that in why the have to we have of do our if robust that terms you'll pretty when to to guidance we you, at the $XX.XX. to fourth meet decent math, sequentially see $XX.XX you that and need share earnings you And given quarter notice of

do exactly you expect said. we So, that what

Chris Perrella

up volume, European the had on-site with follow-up in a just I know picked then And the that Right. Europe.

business more on color merchant you on-site seeing and some the Just you're the Europe? what in both give could in

Seifi Ghasemi

Yes.

Our kind compared of is to on-site flat, are and to report. volumes midstream better, nothing significant doing business last year our

Operator

John go Roberts Please question Suisse. comes from with Credit next Our ahead.

John Roberts

Products see its the on And here. question do disassociation technology? major is you those one of one just first Where projects? we'll when think ask Air I'll

Seifi Ghasemi

excellent question. John,

X.X of we have process crack back these. of how building developed of the we to and We years technology you are years, one And have to And operating X before at terms of will we are about put -- actually blue of or to in going hydrogen. these to have the in even things that or designing the expect commercial one scale into I green in ammonia it. ammonia

ordinary I'm going about that. are test and it build optimistic We to very it with ammonia.

the have works. We it technology,

John, before. we So people, as that's that we about over competitive advantage have talked have

Operator

Mike comes Please Our next go question Partners. from Research with Seaport ahead. Harrison

Mike Harrison

of you equipment ammonia that could for John about as dissociation sell asked the others that on question cracking in technology. are get sale who to a hydrogen? Maybe interested something the just potentially follow-up a to the Is that

Seifi Ghasemi

is gas. think cracking we what suggest build probably we to Mike, that on is the anybody sell a to hydrogen them the that one, somebody will the and we for sale in interested will plant molecules, if I the it that they do the ammonia back them of ammonia, original nitrogen if from -- Even to have crack else. them comes and ammonia

take that. a I the want at doing this to But is will see same customer don't a think technology. way at And that I it it. I the that huge if specific don't licensing quantities, predict us proprietary technology stage. LNG is look don't don't there wants license who be we future. But we our we

Mike Harrison

we Are or a of they then obviously, right. to increase energy All start in you what at quite as power were come they've spike could costs the your year? another energy And that in Europe, the down you in fall look expecting winter bit terms from for and and winter. expectations this see there? But power where costs over and are

Seifi Ghasemi

to make because will that question that be I nobody project depends to the that, the in thing knows to is what right? credible comment a would move, happen Europe, very that It on not right? pretend depends cannot energy to how happen. going in will else I know. on because will prices future If it it on what It be I really difficult any don't answer world.

have don't Mike. something just I So I want pretend that no -- as I know if to don't idea, I

Operator

next question from Partners. Vertical Kevin Research with go We'll our Please take McCarthy ahead.

Kevin McCarthy

comment I XX, look the to be remaining you backlog. spent future would If amount show as at the on of and billion Slide $XX.X your backlog? on recent trajectory Seifi, the you

you Presumably, to down $X of think sequentially. trend billion that's some year or that's over the as But you that Indonesia. on about next can how that so? number redeploy you would expect I capital, maybe comment

Seifi Ghasemi

grow will are backlog expect in because I continue lot that backlog -- will is the of go of Go fully up. that to projects, because things that up of on we is a one one not is It which things amount that, the the Kevin. working we put we is cleared that itself that have a until get permits we that in Northern But doing -- so it get by for And we our are hydrogen put will Texas. obviously, zero amount. backlog significant green and the project on. not And in

Kevin McCarthy

I co-product new see. yesterday, to I CO as may, with secondly, announced think regard monoxide then your carbon you of a and if contracts I And projects that normally of hydrogen.

so molecules? hydrogen And And fate color to the and hydrogen of additional you what the you from if so, and will get new speak in those can plant what City? Texas process maybe

Seifi Ghasemi

that. Well, don't very very from end, of what is us Air we CO But put make constraint We advantage the Products doing. then has, there's a here that customers a of example a question. the to other absolutely transparent can the is good that we and obviously announcement are actually and volumes that. is It -- and to the the you're lot you price want about good we're did competitive because out hydrogen. disclose all is the by-product of want and But They right. know

pipeline. do we our But have

therefore, do Our and and need pipeline demand will it. pipeline the we We hydrogen is additional The hydrogen, there. put sold our in sell is out.

for was that of displaced a has were advantage basically competitive who have. one that we been the on the to there that of have one reasons because we an projects. those they get long incumbent we So And main time didn't them, able

Operator

Our next Cowen. Bianchi with from CD question comes Marc ahead. go Please

Marc Bianchi

a close believe the Could call. to there be the earnings was NEOM you project comment dry supposed status I after on of last the shortly finance?

Seifi Ghasemi

condition, then called And their happened. close. dry And commitments. the money. the The banks are is and we we close that, the kind wet the of where happens time close, has what dry of money to wet make the of have lot the precedents a has basing commitment, close actually all now, months two, is and on receive three lawyers spent make the usually after happened enough after The

-- underway. So, process that that is is

underway we until have there. we'll and to And get you we close, press in get close time and process had going take immediately there, release done. to the know. out some a put It's the is order wet So the dry let get obviously when we

Marc Bianchi

But what expectations still versus your track Okay. prior on were?

Seifi Ghasemi

correct. is That

Marc Bianchi

question, question with going relates hydrogen. intensity is the broad IRA, the how also the to but into making to handle specific carbon around I IRS more is, a looking other that's The tracking of part first, electrolysis electricity specific had

as uncertainty to how that's happen. some there's think to going I

that to under And or I'm backlog how got might either any apply in consideration. wondering of the projects you've

New of more question how IRA to to have And to Republicans uncertainty I'm things. project with are where think and you're to opportunities the wondering exposure I then looking handle if there think some some will to pause IRS gives perhaps, issue. at. that And broadly, there's I that any areas there's as IRA, York might seem trying be then that dismantle

Seifi Ghasemi

all, with a IRA, right. you're It's first of law. Well, absolutely

good addresses it legislation on global right focused is for thing because the was be them It which business. for make our Now promotes what apply I translated has it. think world how comments. From do. That decarbonization to the a is would IRA I is of and in it you like warming. terms rules hydrogen, to that see -- into just to we obviously

Products would happen I Now cannot very say on that like to the to position of in it specifically, will I of terms is all what clear. political that, situation. Air comment But and

getting Niagara power, hours of from XX New all, power project with in a First It green. continuous York, the are we day, is our Falls.

don't that see with and you that because that you doing that so and adopted. prove is that call not year that a when it that. over make believe can any not we average sense. doesn't hydrogen only can have But public That Therefore, make issue we has Europe every we it faking been green green on very is hour, the and are you rule

is in to anything be United has States And that which besides that, you the make tradable. a product

that -- during of hourly green. basis, made it day are follow some the measuring well, using we green audit and production because to on the has you the dirty but to be I'm the had lead shining. the to grid power making in make saying, rather green But than more Europe an that the need call we during I'm it green. is sold I sun So prove terms night, hydrogen, I making

have a position we So that. on

Energy of the that. the of We to government, have to expressed Department all position and that

you So, that, we are very where we are public on right. that. very about stand But

and of like they get But projects All do in our stress that the were translated need these so we pre-IRA. project things into to Louisiana that I on, to they're -- would announced, law. all

projects. price is be then have -- be wasn't hydrogen the demand think these But hydrogen reason from of exist, there incentive the that The higher. the help. we you will primary If If IRA because will doesn't that the price benefit that primary did IRA will reason did IRA exists, and will there's because we lower of So that. someone. we for the will customer be

Operator

additional to That concludes to closing back Ghasemi, over I'd turn today's question-and-answer session. floor any the remarks. you like Mr. for or

Seifi Ghasemi

today. our early in know I to you in is. appreciate everybody results for Thank your to we thank look call We like that. much, appreciate do sometime how joining quarter really our busy and with Air discussing very again forward interest August. I Products, I would next everyone you

everyone. healthy, and and you. Thank safe the best to stay Please all

Operator

participation. call. today's concludes you Thank again your This for

have disconnect, You great a and day. may now

Air Products and Chemicals (APD) 9 May 232023 Q2 Earnings call transcript