The operator introduces the Linde Third Quarter 2023 Earnings Teleconference and Webcast. The presentation materials are available on their website and the forward-looking statement disclosure applies to all statements made during the call. CEO Sanjiv Lamba highlights the company's solid performance despite economic challenges, with earnings per share growing 17% and operating margins expanding 550 basis points. CFO Matt White will provide an update on financial performance and outlook, followed by a Q&A session.

Linde has a strong track record of delivering industry leading results and remains focused on sustaining this performance in the face of economic uncertainty. The company's diverse portfolio and long-term contracts provide stability, and its operating model allows for quick adaptation to maintain steady value creation. While some end markets are experiencing a decrease, others, such as food and healthcare, are showing solid growth.

In the third quarter, onsite electronic volumes remained stable but there were reductions in merchant and package gases. However, based on customer feedback, there may be signs of recovery in the first half of 2024. Industrial-related markets make up 2/3rds of sales, with mixed trends seen in manufacturing, chemicals, and energy. U.S. packaged gas volumes remain stable, while metals end market volumes are down slightly. Higher prices and growth from contractual project backlog offset weaker base volumes. Looking ahead to the fourth quarter, the U.S. economy is expected to continue growing, while China and Europe may see flat or mild recovery in certain end markets. Despite a softer macro environment, proposal activity remains strong and backlog has increased.

In the third quarter, Linde's clean energy projects continued to progress well and the company remained focused on safety, compliance, sustainability, and talent development. Despite a tepid global economy, Linde is committed to delivering on its commitments. The company's sales decreased 7% from last year, but when excluding certain items, underlying sales increased 3%. Price increased 5% and volumes were flat sequentially. Year-to-date volume trends have closely tracked with globally-weighted industrial production.

The decline in gas refill volumes is due to existing customers using less gas because of decreased production in their local economies, but volumes are expected to recover as the economy improves. The company's operating profit and margins have increased, driven by price actions, cost productivity, and fixed payment contracts. EPS has also increased, and the company has a strong capital management policy in place. Capital expenditures have increased due to project spending for a gas backlog sale, and the company prioritizes generating operating cash flow.

The company's stable trends and strong cash flow have allowed for a new stock repurchase program and an increase in guidance for the full year. The company's priority is to invest in the business, with surplus cash used for share repurchases. Despite global volatility, the company remains committed to executing their strategy and delivering on commitments.

The speaker, Sanjiv Lamba, discusses the impact of macro crosscurrents on risk appetite and the current state of clean energy projects. He reiterates that technology and scale are key factors in the success of these projects and that they are seeing a strong market in the U.S. with potential investments of $50 billion over 10 years.

Sanjiv Lamba discusses the current and medium-term outlook for China, stating that volumes are expected to remain flat in the near term. He also mentions the potential for adjustments in resources and productivity in the future.

The article discusses the current state of the Chinese market and its impact on various industries. Chemical production has remained flat, but there may be a mild recovery in the near future. Steel and manufacturing have been impacted by the property sector crisis and are not expected to improve in the fourth quarter. However, automotive production, particularly in the EV sector, has shown positive growth. Machinery and metal fabrication remain weak, while electronics volumes are stable but lower than last year.

The company's on-site electronic volumes are stable, but there is volatility in merchant and package, particularly in rare gases. Chip output in China improved in Q3 and is expected to remain at the same level in the last quarter. The company expects a recovery in mid-2024 and sees moderate growth in the next 2-4 years. They have adjusted their management structures and resources in China to focus on pricing, productivity, and cost management. They will continue to invest in the region if there is high-quality growth that meets their criteria.

Sanjiv Lamba discusses recent project wins in both Australia and India, highlighting a large hydrogen supply scheme to Indian Oil and a FEED study for a hydrogen-fired peaking power plant in South Australia. These projects showcase the company's strong relationships with customers and their capabilities in providing technology and operating services. The peaking plant project is breaking new ground and a FEED study is being conducted to determine the feasibility of the project.

The company is working with a power player to develop a joint project and will work together to make a final investment decision. During a conference call, the operator took a question from Duffy Fischer of Goldman Sachs, who asked about the impact of new projects on next year's earnings and the large size of the $15 billion buyback. The company's response was that they will give guidance on next year's earnings next year, but they expect the backlog to contribute around 2% to EPS growth. The company also plans to continue their consistent pace of buybacks, with the $15 billion buyback being in line with their previous programs.

The speaker mentions that they did not give a specific date for their program, but it will likely follow a similar timeline to their previous $10 billion program. They emphasize their priority of growth and investing in the business, but also have excess capital to allocate towards the program. The questioner asks about the decrease in cost of goods sold and the speaker explains that it is due to pass-through costs, fluctuations in engineering sales, and the divestment of GIST.

The paragraph discusses the impact of energy costs on GIST, a low-margin business, and the efforts made to increase productivity and efficiency in response to inflation. The speaker also mentions the pass-through of energy costs and the pursuit of variable cost efforts to improve efficiency. In terms of pricing, there was a flat sequential pricing in the Americas and APAC, but a spike in power costs is expected to be recovered in the next few quarters. The speaker also mentions that pricing is still being obtained in certain areas.

The speaker discusses the expected lag in pricing and reminds listeners of the correlation between pricing and globally weighted CPI. They mention that globally weighted CPI ended up at 5% and pricing year-on-year also increased by 5%. The speaker expects this trend to continue and mentions that they are working to recover increased costs. They also clarify that the sequential sales change in the Americas is actually 2.49% but was rounded down to 2% due to rounding and footing. They expect a healthy sequential price increase in the Americas.

The speaker is addressing two questions. The first is about the Department of Energy's announcement of hydrogen hubs, in which the company is involved in one located in California. The speaker emphasizes the importance of network density in the company's business development and mentions the complexity of securing funding for these projects. The second question is about the company's EMEA margins, which have seen a significant increase and are now ahead of America. The speaker acknowledges the structural advantage of EMEA but expresses confidence in continuing to improve margins.

The speaker discusses the success of the EMEA region in achieving a 30% profit margin, which is a significant improvement from its baseline of 19.2% in 2018. They attribute this success to a consistent focus on pricing and productivity, as well as maximizing the value from their high net worth density. The speaker also mentions that the company will continue to aim for 20-50 basis points of margin expansion every year, and that they are taking actions to potentially increase the top end of their EPS guidance range for the year due to the challenging economic environment.

The company is taking action to address the impact of the coronavirus, particularly in heavily affected areas. They are tightening discretionary spending and controlling headcount additions in order to prevent further negative effects. They have done similar actions in the past when faced with similar situations. The recent power spike in the United States is expected to have an unfavorable impact on margins, but they anticipate recovering in the next 1 to 2 quarters. Without the power spike, the Americas margins would have been higher than EMEA margins.

Sanjiv Lamba discusses the current state of the helium market and expects it to remain tight due to volatility and technical challenges. He also confirms that the company has canceled contracts in Russia and does not expect any significant changes in the near future. He believes that the BLM divestiture will be a long and complex process, but the market has already factored in its limitations. Overall, he expects the market to remain tight.

The speaker believes that the Electronics sector will remain stable and the recovery is not expected until mid-next year. They also mentioned that the acquisition of nexAir has allowed them to be more competitive in terms of pricing and margins in the U.S. packaged gases market.

Sanjiv Lamba explains the concept of network density and how it relates to the acquisition of nexAir. He describes network density as creating a dense network to optimize cost and enhance margins. The nexAir acquisition is performing better than expected and they are in the process of integrating it into their system. They are supporting nexAir's growth in the South of the U.S. and seeing benefits due to near-shoring and re-shoring sentiments.

The speaker discusses the benefits of the nexAir acquisition, including integration benefits, revenue upside from cross-selling, and expanding network density. They also mention their focus on optimizing and increasing market reach. In response to a question about hydrogen projects, they state that most of the projects are insensitive to interest rates and are still making good progress despite high rates and capital cost inflation. They also mention policy support for these projects and state that they are not seeing any scaling back of their current projects.

The speaker explains that their company has a commitment to achieve 10-plus percent EPS growth and has a track record of exceeding that. They break down the growth algorithm into three key levers: backlog, margin expansion, and capital efficiency. They expect the backlog to continue growing due to larger projects, and they plan to achieve margin expansion through cost management and efficiency. They also aim to improve capital efficiency by investing in high-return projects.

The company expects to see 1-3% EPS growth from their backlog of signed contracts, and 4-6% growth from a combination of pricing and productivity. They have a strong track record of positive pricing and are well-equipped to handle inflation. The company is deeply focused on productivity and has thousands of projects in play to drive COGS reduction and improve the bottom line.

The speaker discusses the various factors that contribute to EPS growth, including cost management, volume, cash generation, and share buybacks. They emphasize their commitment to achieving 10-plus percent EPS growth and their confidence in their ability to do so regardless of economic conditions. The call concludes with a reminder to contact the speaker for any further questions.

The operator is ending the conference call and thanking the participants for their participation. They are also informing them that they may now disconnect from the call.

This summary was generated with AI and may contain some inaccuracies.