The operator welcomes participants to Air Products' Second Quarter Earnings Release Conference Call. Sidd Manjeshwar, Vice President of Investor Relations, introduces the speakers: Seifi Ghasemi, Chairman, President and CEO; Dr. Samir Serhan, COO; Melissa Schaeffer, CFO; and Sean Major, EVP, General Counsel and Secretary. The discussion will include forward-looking statements and various financial measures, and the speakers will refer to adjusted non-GAAP financial measures. Seifi Ghasemi takes over and greets the participants.

In the second paragraph, the speaker thanks the person for joining the call and emphasizes the company's commitment to safety. They also mention the company's record low injury rates and their management philosophy. The speaker then moves on to discuss the company's financial performance, highlighting their strong earnings and focus on cost reduction and sustainability. They also provide guidance for the third quarter and full year, mentioning potential economic uncertainties. The paragraph concludes with a mention of the company's expected CapEx for the fiscal year.

The company has consistently improved its earnings per share and dividend over the years, and is committed to continuing this trend. They have also maintained a high EBITDA margin and have set a goal to be the safest, most diverse, and most profitable industrial gas company in the world for the next 10 years, with a minimum of 10% earnings per share growth. The CEO expresses confidence in the company's talented and dedicated employees to execute their strategy and deliver value to shareholders.

Melissa, the Chief Financial Officer, discusses the company's second quarter results on Slide 10. On-site activities were strong, with a 2% decrease in volume due to lower demand for merchant products. Price and lower energy costs contributed to higher margins and a 4% increase in EBITDA. GAAP earnings per share was $2.57, while adjusted earnings per share was $2.85, up 4% from last year. The increase was mainly due to favorable pricing and costs, partially offset by lower volume and equity affiliate income.

In the fifth paragraph, the article discusses other costs, currency impact, equity affiliate income, and interest expense for Air Products. The company successfully issued green bonds to fund growth projects, contributing to higher interest expense. The Americas segment saw positive sales and a 15% increase in EBITDA, while the Asia segment had flat volumes due to economic challenges in China.

The electronics market is showing some potential improvement, with currencies and EBITDA being unfavorable due to a weaker Chinese RMB and business mix. Volume was lower but EBITDA remained flat due to lower costs and higher equity affiliate income. In the Europe segment, sales declined 11% but EBITDA was up 5% due to improved contribution margin and lower costs. In the Middle East and India segment, operating income improved despite lower sales volume. In the Corporate and Other segment, sales were down but EBITDA remained stable due to lower costs and contribution from LNG.

The speaker discusses the company's activities in the LNG equipment and technology business and expects positive results in the future. They also thank their teams and highlight the company's strong business model and financial strength. The speaker emphasizes the importance of remaining flexible and agile in a challenging economic and geopolitical environment and thanks the employees for their dedication. They are focused on delivering both short-term results and executing their long-term growth strategy. The speaker then opens the call for questions.

Seifi Ghasemi, CEO of Air Products, addressed a question about the company's projected ramp up in the coming year. He explained that their guidance for the third quarter is lower than expected due to major turnarounds in their plants in Europe and the US. However, they are committed to meeting their yearly goals by bringing smaller plants online, taking productivity actions, and benefiting from their strong LNG business. Ghasemi also mentioned cost reduction actions that are starting to have an impact.

The company is focused on increasing productivity by finding more efficient and cost-effective ways of operating. This may involve doing more with less people or resources. In regards to the Louisiana project, the company plans to produce 3.5 million tons of ammonia, but not all of the hydrogen produced will be turned into ammonia. A significant amount will be used as hydrogen through their pipeline to serve customers. The breakdown of ammonia and hydrogen production is not yet finalized, but the maximum capacity for ammonia production will be 2.8 million tons.

The speaker discusses the potential profitability of their hydrogen project and where the product will be used. They believe there will be demand for blue ammonia, especially for decarbonization of power plants in Japan and Korea and as a fuel for ships. They also clarify that their Louisiana plant will not be fully commissioned in 2028. The speaker also addresses the weakness in equity affiliates' income in Europe and the Mid-East, mentioning higher interest costs as a potential cause.

The speaker asks for comments on the decrease in European volume and the cause of the change. The response includes information on a decline in equity affiliate income due to timing and a decline in volume in Europe due to planned maintenance outages and weaker merchant volumes. The speaker also mentions the ramp up of a project in Uzbekistan. A question is asked about the unfavorable business mix in Asia, to which the speaker responds by mentioning the impact of helium and adjusting to Russian source product.

Air Products CEO Seifi Ghasemi discusses the company's current business conditions in China and expects stability for the rest of the year. He confirms that the Alberta blue hydrogen project is still on track for late 2025 and most of the volume has been committed. He also mentions that there are no contracts signed yet for the NEOM and Louisiana projects, as they are waiting for the right price. In response to a question from Deutsche Bank, Ghasemi reveals that there are no contracts signed for the NEOM and Louisiana projects yet. Goldman Sachs asks about the impact of Europe, excluding Uzbek, and Ghasemi confirms that volumes were affected by turnarounds and weak merchant business.

Seifi Ghasemi and Samir Serhan of Air Products and Chemicals Inc. are asked by Duffy Fischer about the company's earnings and the difference between GAAP and non-GAAP. They decline to disclose specific details, citing competition sensitivity, but mention that the Uzbekistan project is expected to produce $0.35 per year of earnings. They also mention a $0.20 charge for business and asset actions, mainly related to severance costs. In response to another question about the European Commission's green hydrogen subsidy auction, Ghasemi expresses surprise at the mention of $0.50 hydrogen.

The speaker discusses the cost of producing hydrogen, stating that it requires at least 50-60-kilowatt hours of power and costs around $3 per kilogram, excluding capital and running costs. They then clarify a question about the European Union's hydrogen subsidies, explaining that these are not for buying hydrogen at $0.50 per kilogram, but rather for encouraging its use. The speaker also mentions the joint venture in Jazan and confirms that the company receives regular dividends from the joint venture in line with their earnings.

The speaker explains that their company is receiving expected dividends and that there may be a market for their blue hydrogen, which could eventually replace gray hydrogen. The company expects significant growth in their hydrogen volumes and in the long term, they will only produce blue hydrogen. The speaker also mentions that the electronics market outlook is looking better and there are signs of it picking up, but the company is being conservative in their outlook for the second half of the year.

In the paragraph, Vincent Andrews from Morgan Stanley asks Seifi Ghasemi about the company's second quarter performance and whether it was due to lower costs in the power and natural gas sectors. He also asks about the company's ability to reprice if costs go back up. Ghasemi responds by stating that the strong performance was due to better volumes in the US and Europe and cost actions taken by the company. He also mentions that the current inflation allows them to ask for higher prices from customers, as seen in their 6% increase in merchant pricing in the US. The company's focus is on cost and pricing to achieve short-term results and executing projects.

The speaker discusses the company's ability to adapt to changing environments and mentions their goal of 10% earnings growth. They are currently focused on delivering results and executing projects, and do not plan on any financial engineering or IPOs at this time. They believe that investor anxiety will decrease once long-term contracts for their projects are signed.

The speaker emphasizes that the hydrogen business is not yet ready to be valued, as it is still in its early stages and there are many factors that could affect its worth. They also mention that entering into long-term contracts may help alleviate pressure on the company's multiple, but there is no set timeline for when this information will be disclosed to the public. The speaker also references a memo from the listener on this topic.

The company's criteria for extracting value from projects is based on securing contracts for the next 30 years. They are willing to sign contracts with clients who are ready to pay taxes in the future, but the timing depends on when the clients need the products. The company is confident in the demand for their products and believes they deserve a higher return on their projects due to the risks they have taken. They point out that their base business is the most profitable and should be valued similarly to other companies. They also mention the demand for their products in various regions due to regulations.

The speaker acknowledges the pressure to make short-term decisions but is committed to creating long-term value for shareholders. They mention potential turnarounds in Europe and Americas that could affect volume and margins in the third quarter. The speaker also discusses the progress on the North Texas project and the decision to wait for finalization of rules before making a commitment to FID.

The speaker discusses the uncertainty surrounding the definition of green hydrogen and the impact it has on their decision to make a FID on a project. They also provide an overview of the current global economy, mentioning potential improvements in China and steady growth in Europe and the US. The speaker is asked about the comments of competitors and peers on their initiatives and the potential impact on their partnerships.

Seifi Ghasemi and Samir Serhan discuss the potential users for green and blue hydrogen, including steelmaking, refineries, shipping, and mobility. They mention that they are in talks with various companies in these sectors, but cannot disclose any details due to non-disclosure agreements. They also mention that the company is experiencing a high number of turnarounds and maintenance for its hydrogen plants, which will have an impact on EPS in the third quarter.

The company has significant expenses in maintaining its facilities in the U.S. Gulf Coast, California, and Canada, as well as in Europe where they are undergoing a major turnaround. In Asia, they have stabilized helium prices by lowering them. In North America, merchant pricing has increased by 6% across the board, and the company has seen strong performance in their on-site hydrogen business. They decline to disclose the amount of capital invested in gray hydrogen. The quarter was well-received by analysts.

In the fourth quarter, the company is expecting volume growth due to new plants coming online. The return premium for the NEOM and Louisiana projects is not based on a specific return, but rather on the value the company brings to the market as they have a unique product that is in high demand. The company plans to extract the maximum price for their product.

The CEO of Air Products, Seifi Ghasemi, discusses the current demand for deep blue hydrogen and the company's focus on maximizing returns for investors. He also clarifies that in 15 years, the company will not have any SMRs running without carbon capture. Additionally, Ghasemi mentions that lower natural gas feedstock costs have a negative impact on efficiency improvements.

The speaker thanks the participants for joining the call and expresses appreciation for their interest and questions. They look forward to discussing results again next quarter and wish everyone safety and good health. The operator then concludes the call.

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