The speaker, Sidd Manjeshwar, welcomes participants to the Air Products' Fourth Quarter Earnings Release Conference Call. He introduces the other members of the company's leadership team and mentions that the call will be recorded and subject to copyright. Sidd also mentions that the company's earnings release and presentation slides are available on their website. He cautions that the discussion may include forward-looking statements and refers to various financial measures that will be discussed. He then introduces Seifi Ghasemi, the Chairman, President, and CEO of Air Products, who will lead the discussion.

The speaker thanks the listeners for joining the call and highlights the company's strong focus on safety and management philosophy. They also discuss the company's strong business model and long-term strategy, including a focus on clean hydrogen projects. The fourth quarter earnings exceeded expectations and showed significant growth compared to the previous year.

In fiscal year 2023, the company's adjusted earnings per share increased by 12% and they have a track record of consistently delivering double digit average earnings growth since 2014. The company credits their success to their two-pillar strategy and their dedicated employees. They have also been able to increase their dividend for over 40 consecutive years and have seen a steady increase in their EBITDA margin. Despite challenging economic conditions, the company remains optimistic about their future and expects a 13% increase in adjusted earnings per share for fiscal year 2024.

The company expects new projects and improved LNG sales to drive earnings per share growth next year, with a 10-16% increase in the first quarter. They also plan to invest between $5-5.5 billion in capital expenditures. The company will provide updates on major projects, including a blue hydrogen and ammonia clean energy complex in Louisiana. This project was announced in October 2021 and has been positively impacted by recent legislation and increasing demand for blue hydrogen and ammonia in other regions.

The company has decided to move forward with their project to produce low carbon intensity blue ammonia, as there is a growing demand for decarbonization in various industries. They have received final investment approval from their Board of Directors, with a new estimated cost of $7 billion. The project is expected to have double digit returns and produce hydrogen and ammonia at low carbon intensity.

The company expects to achieve double-digit returns on capital by being the first to produce low carbon hydrogen and ammonia products at a large scale. They have seen a consistent trend of double-digit earnings growth in the past 10 quarters and have achieved underlying sales growth despite economic challenges. The fourth quarter results show a 4% increase in merchant price and flat volumes, offset by declining natural gas costs. The impact of currency was minimal.

The company's EBITDA and EBITDA margin improved in the fourth quarter, with favorable prices and lower energy costs contributing to the increase. ROCE also increased, and the company expects this trend to continue as they bring new projects online and invest their cash. Adjusted earnings per share also improved, thanks to strong pricing and higher equity affiliate income, partially offset by unfavorable costs. The company remains committed to maintaining their current credit rating and estimates they can invest over $30 billion in the next 10 years.

The company has a backlog of over $19 billion, with a focus on investing in high return projects for long-term shareholder value. In the Americas segment, profits and volumes improved due to a strong demand for hydrogen, resulting in a 17% increase in EBITDA and a 1100 basis point improvement in EBITDA margin. In the Asia segment, volumes were negatively impacted, but the company maintained focus on price, resulting in flat price and volume. In Europe, costs decreased and volumes were strong in the onsite business, but weaker demand for merchant products led to flat overall volumes.

The Middle East and India segment saw a 15% increase in EBITDA due to lower power costs and stronger currencies. The region's EBITDA margin also improved, with two thirds of the increase attributed to lower energy costs. The recently announced blue hydrogen project in Europe is expected to contribute significantly to the segment's growth. Sales were lower compared to last year due to lower volume, but the second phase of a design project and equity affiliate income helped drive overall results.

The Corporate and Other segment of Air Products saw improved sales and profits due to higher LNG equipment activities and a new project in Malaysia. The company credits its success to the commitment and hard work of its employees and their ability to create innovative technologies and processes. The company's higher purpose is to address energy and environmental challenges through collaboration and innovation.

The team is focused on sustainable growth and is ready to answer questions. The first caller, John McNulty from BMO Capital Markets, asks about the Louisiana project and the $2.5 billion in additional spending. Seifi Ghasemi explains that the increase is due to inflation, interest on capital, and the decision to build bigger infrastructure for potential future expansion.

The company's $2.5 billion increase in expenses is due to various factors such as water supply, land preparation, and expansion. The board supports the decision and expects double-digit returns on the investment. The demand for the product is strong and the project is exciting and unique. The Netherlands project is also expected to have double-digit returns, but specific details about capital and expenses are not disclosed.

The company has started a net-zero blue hydrogen project in Edmonton, Canada, and has now moved on to a larger project in Europe with a long-term off-take agreement with Exxon Mobil Esso. The project involves capturing CO2 from existing hydrogen facilities in the Port of Rotterdam and another Exxon hydrogen plant. The project will have a double-digit return and is receiving positive feedback. The project is not a new plant, but rather an upgrade of existing facilities to reduce CO2 emissions. The exact amount of the project is not disclosed due to NDAs.

The company is investing in a project in Louisiana, but the benefits will not be seen immediately when the first phase starts up. The total CapEx spent will be $7 billion, but the return on investment may not be received in the first year. The company may need to take additional measures to ensure they deliver their guidance. There is also weakness in the Chinese economy, which may impact the project.

In this paragraph, Seifi Ghasemi, the CEO of Air Products, answers questions from Vincent Andrews, an analyst, about the company's infrastructure and real estate spending. Ghasemi assures Andrews that the company will price their product in a way that will result in a double-digit return on their $7 billion investment from the start. Andrews also asks about the impact of a potential delay in a Canadian project on Air Products' economics, to which Ghasemi responds that they are committed to meeting the requirements of their customer, Exxon, and have other customers lined up as well. The analyst then asks about any other changes in project costs and timelines, to which Ghasemi does not provide any updates.

In response to a question about project costs and inflation, Seifi Ghasemi explains that there has been no significant change in the profitability of their projects and that they will provide more details in future earnings calls. He also mentions that the company has already provided capital for their major projects and does not expect any significant inflation on those. When asked about a 1% decline in European pricing in the first quarter, Ghasemi declines to provide specific details due to company policy against discussing forward-looking information.

The speaker reiterates their company's policy of not making predictions about the future and apologizes for not being able to answer a question. They also discuss their philosophy of not rushing into long-term agreements and mention that they are the only company currently building a plant, giving them an advantage in the market.

The company's main goal is to make money for shareholders, so they will not sell their unique product at a low price. They believe the demand for their product will increase and they want to get the maximum value for it. The company's operating cash flow has been lower than their CapEx and dividend, but they expect it to increase once their project is up and running. The CEO, Seifi Ghasemi, will make a general comment and then Melissa will provide more details if needed.

The company is committed to maintaining their A rating and will not leverage more than 3.5 times. If they reach this limit, they will slow down on projects and not be irresponsible. They plan to go to the debt market this fiscal year but expect to be delevered as they bring on new assets. Working capital was a use of $424 million and undistributed earnings of equity method investments were negative $260 million.

The speaker explains that $685 million was pulled away from cash from operations, resulting in flat cash flow for the year. For 2024, they expect a working capital outflow of $3.5-4 billion, but this will be largely funded by ongoing influent trade activities. They also mention a planned investment of $7 billion in Louisiana, but clarify that this does not necessarily mean $7 billion will be spent on building the project.

The NEOM project is progressing well and is expected to meet its deadline of the end of 2026 or beginning of 2027. The company is almost done with the engineering and is currently constructing the plant. Discussions about off-take agreements are ongoing, and there have been public announcements about demand for green hydrogen in Europe. The company is also considering project financing for the project, similar to what was done with the Jazan project.

The speaker discusses how a large oil company announced a need for 500,000 tons of green hydrogen by 2030, which is equivalent to three times the capacity of NEOM. This will create a lot of demand for the project, but they are waiting to price it appropriately in order to get a good return. The speaker also mentions that their target for internal rate of return is greater than 10%, and this includes the benefit of IRA. They have always aimed for a minimum of 10% IRR, but most projects have produced more than that, such as the Jazan project which has a return of over 15%. The inclusion of IRA depends on the project and its impact.

The IRA project was designed to provide a good return for the company while also incentivizing customers to use the product. The company expects to see a $700 million uplift in operating income once the plant is fully operational, but this may vary depending on financing options. The cost increase from 4-5% to 7% has not affected the company's pricing assumptions, and the Board approved the project at $7 billion with the expectation of being able to sell the product at a premium. Investors can easily estimate the potential revenue from the plant by assuming a production of 3.5 million tons of blue ammonia and a higher price than gray ammonia.

Air Products CEO Seifi Ghasemi discusses the profitability of a blue ammonia plant, stating that it can easily make over $1.4 billion in EBITDA. He also mentions the importance of executing the project and obtaining permits for sequestration. In response to a question about the U.S. government's plan to establish regional hydrogen hubs, Ghasemi downplays its impact on their business and emphasizes the significance of their own project, IRA.

The speaker explains that the $7 billion contribution from the infrastructure bill will not have a significant impact on their company's plans and projects. They also address the decrease in corporate costs and mention their efforts to control them in the future.

The CEO of Air Products discusses the expected reduction of corporate costs in 2024 due to the success of their LNG and other businesses. He also mentions the strong demand for blue hydrogen in the Americas, specifically in the U.S. Gulf Coast where they have a 700-mile hydrogen pipeline. He does not expect to drop the ammonia part of the Louisiana project, but may focus more on producing blue hydrogen if they expand the project. He also mentions a project in the Netherlands with Air Liquide and Porthos involving blue hydrogen.

Seifi Ghasemi, speaking about the blue hydrogen project in Netherlands, believes that while it is a practical option for the country due to its existing infrastructure, the rest of Europe will still prefer green hydrogen for new applications. He expects a combination of the two types of hydrogen to be used. When asked about volume outlook for the coming year, Ghasemi states that the company has based its budget on positive industrial production in the U.S., flat production in Europe, and a decrease in Asia.

During a conference call, Air Products CEO Seifi Ghasemi was asked about the Rotterdam project and the cost involved in disposing of CO2. Ghasemi stated that Porthos will charge $10 per ton for disposal, which will be passed on to customers. He also mentioned a charge for capital and sequestration, but could not disclose the exact numbers as they were not allowed to do so. However, he did mention that the Dutch government is providing incentives for the sequestration. When asked about the capital cost, Ghasemi stated that it is somewhere between $100 million and $1 billion, but they are not allowed to disclose the exact number. The call ended with Ghasemi thanking everyone for their participation and wishing them well.

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