The paragraph introduces a teleconference for Linde's Fourth Quarter and Full Year 2024 Earnings, led by the operator and Juan Pelaez, Head of Investor Relations. Juan is joined by CEO Sanjiv Lamba and CFO Matt White. The presentation materials are available online, and there's a note about forward-looking statements and financial reconciliations. The call includes a presentation by Sanjiv on the company's successful 2024 performance, acknowledging the contribution of over 65,000 employees. Sanjiv highlights the importance of a long-standing culture and mindset in maintaining Linde's industry-leading position, emphasizing four key categories critical to their success.

The paragraph highlights Linde's commitment to financial accountability, sustainable leadership, and continuous growth. It emphasizes the importance of investing in employees and communities and maintaining competitiveness through a safe and diverse workforce. The company is focused on environmental sustainability, increasing its low carbon power consumption by 19% year-over-year, with over 40% of its total power consumption being low carbon in 2024. Linde's sustainability efforts have been recognized by the Dow Jones Sustainability World Index for 22 consecutive years. The paragraph concludes by encouraging readers to explore the company's annual report for more details on its accomplishments.

The paragraph highlights Linde's achievements in both sustainability and financial performance, noting efforts to reduce CO2 emissions and outlining ambitious goals to cut greenhouse gas emissions by 35% by 2035. Financially, the company has led the industry with impressive metrics, including a 25.9% return on capital, increased EBIT margins to 29.5%, and a 10% rise in EPS, alongside returning $7 billion to shareholders. Linde emphasizes the importance of strategic investments and disciplined contract management for future growth, boasting a backlog exceeding $10 billion, with significant projects like a $2 billion venture in Canada. The company aims to expand its industrial gases sector beyond large-scale projects, ensuring a focus on sustainable and profitable growth.

The paragraph highlights the company's focus on smaller growth opportunities, emphasizing record achievements in small on-site contracts and tuck-in packaged gas acquisitions in 2024. Looking forward, it stresses the importance of their EPS growth strategy for 2025, divided into controllable categories of capital allocation and management actions, with an uncontrollable economic component. Capital allocation is driven by a stable management policy, contractual project backlog, share repurchases, acquisitions, and capital efficiencies. The company's backlog is distinct in the industry for its commitment to fixed payment contracts, ensuring reliable EPS contributions. Acquisitions are primarily justified by cost synergies, offering confidence in capital returns and EPS growth.

The paragraph discusses Linde's strategic use of share repurchases to consistently boost EPS growth by 4% to 6%, emphasizing the role of management actions and digital solutions in supporting productivity and cost management. These initiatives contribute significantly to earnings growth, independent of economic conditions, and are expected to drive over 10% EPS growth annually, including in 2025. While capital allocation and management actions are key to their double-digit EPS growth, the company acknowledges that factors like foreign exchange rates and industrial production, which are beyond their control, also influence their performance. As a U.S. dollar-functional company, Linde is particularly sensitive to currency fluctuations due to a significant portion of earnings being in foreign currencies.

The paragraph discusses the company's financial outlook and results for the fourth quarter. It highlights challenges, including a 4% foreign exchange (FX) headwind expected by 2025 and a 0% IP growth assumption. Despite these hurdles, the company's growth strategy remains strong, with ongoing efforts to counteract FX impacts and macroeconomic weaknesses. The intention is to shift these headwinds into tailwinds eventually. The financial results show flat sales of $8.3 billion compared to the previous year, with a 2% underlying sales growth despite a 2% FX translation headwind. Price increases aligned with inflation, while volume growth was offset by regional variances. The stronger U.S. dollar than expected exacerbated the FX impact.

The paragraph discusses the company's financial performance and future guidance. It reports a 9% increase in operating profit, resulting in a 29.9% margin due to pricing, cost, and productivity improvements. Earnings per share (EPS) rose by 11% (13% excluding foreign exchange impacts). Capital expenditure increased by 9% due to contractual projects, while base CapEx decreased. The company is focused on executing a $7 billion gas backlog sale to support growth. Operating cash flow for the year was $9.4 billion, with a significant portion occurring in the second half due to seasonal cash outflows. Capital allocation included $5 billion reinvested into the business and $7 billion returned to shareholders. The company emphasizes disciplined capital management and a strong balance sheet. Full-year EPS guidance is set at $16.15 to $16.55, indicating 4% to 7% growth (8% to 11% excluding currency headwinds). The currency impact is due to the strengthening U.S. dollar, and projections are based on forward currency curves.

The paragraph discusses the impact of currency devaluations on local inflation and potential pricing opportunities, noting that these are not yet factored into the company's guidance due to uncertainty around inflation timing and extent. The company, Linde, provides an EPS guidance range of $3.85 to $3.95 for the first quarter, assuming no economic improvement. The guidance is based on stable base volumes from customer supply contracts, largely influenced by local industrial production. Linde plans to remain cautious amid a potentially challenging economic environment but is confident in its ability to create shareholder value through effective execution, capital allocation, and management. The paragraph concludes with a transition to a Q&A session, with the first question focusing on the impact of political factors on Linde's project discussions, specifically those that are pre-final investment decision (pre-FID).

Sanjiv Lamba discusses the current pace of decision-making for multibillion-dollar projects, noting an increased emphasis on careful planning and consideration, which he views positively. He acknowledges uncertainty in regulatory frameworks due to administrative changes but highlights the enduring applicability of the IRS provision 45Q as a key incentive for clean hydrogen projects in the U.S., independent of the Inflation Reduction Act (IRA). He reassures that 90% of their U.S. projects are relying on 45Q. Additionally, Lamba mentions that Linde is progressing towards its previously announced target of $8 billion to $10 billion in clean energy investments, with significant projects already underway in North America and more being developed globally.

The paragraph discusses the financial outlook for a company's projects and margins across different regions. The company is confident in its investment pipeline, aiming for $8 billion to $10 billion over the next few years. Steven Haynes from Morgan Stanley inquires about regional margin differences, noting that EMEA is ahead of the Americas and the gap with APAC is widening. Sanjiv Lamba responds by emphasizing the company's homogeneous business model and the potential for margin improvements across all regions. He highlights that successful segments with high margins serve as benchmarks for others, and he expects continued improvement in margins for both the Americas and APAC.

The paragraph discusses Linde plc's projected margin expansion for 2025, estimating a range between 20 to 50 basis points. Each segment is expected to contribute to this growth, with no hindrance anticipated in APAC, and continued solid performance in America. During a Q&A, Patrick Fischer from Goldman Sachs inquires about the impact of intellectual property (IP) on earnings per share (EPS) and seeks global insights on IP trends. Sanjiv Lamba and Matthew White respond, explaining that project volumes are independent of IP and tied to contractual agreements, while base volumes benefit from a resilient model, with around 65% of revenues being stable.

The paragraph discusses the relationship between IP (industrial production) and gas consumption. In developing countries, gas usage is expanding, showing a higher leverage of IP, while in developed countries, there's a 1:1 ratio between IP and base volume usage. Global IP is generally low, with some regional variations: EMEA is experiencing a drag, the Americas remain solid, and China's IP figures vary from nearly zero to the official 5%. Sanjiv Lamba addresses how IP influences markets and outlines expectations, focusing first on resilient end markets, which are anticipated to grow.

The paragraph discusses the company's expectations for growth across different regions and sectors. In resilient markets like electronics and food and beverage, low to mid-single-digit growth is anticipated, with lower volumes expected in industrial sectors such as metals and chemicals. In the Americas, low single-digit growth is projected, particularly in Brazil, with U.S. volumes expected to be flat in the first half before gaining momentum in the second half. Europe is expected to continue softening, particularly in Western Europe, impacting sectors like metals, manufacturing, and chemicals. Conversely, the Brazilian market shows promising growth, while the speaker recently visited China to assess its market outlook.

The paragraph conveys that significant economic recovery in China is not expected by 2025, with industrial volumes projected to remain stable but flat, and sectors like Metals and Mining anticipated to decline. The electronic sector is an exception, showing growth due to government investment. The Chinese government recognizes the need for support in personal private consumption and the property market, but insufficient stimulus has been provided. Although there was a slight improvement in industrial activity for exports recently, private consumption has not picked up. While future growth is anticipated, it will likely be slower than previously experienced. Elsewhere in Asia, the market is largely stagnant except for India, which is currently experiencing growth.

The paragraph discusses Linde's strong market position and attributes its success to several factors, including its unique operating rhythm, performance culture, and extensive global networks. These elements contribute to Linde's margin improvements and pricing power. Despite recent management changes, the speaker expresses confidence in Linde's continued market leadership and competitive advantages, emphasizing that the company's established strengths cannot be easily replicated by competitors. The paragraph concludes with a transition to the next question from Laurent Favre with BNP Paribas.

In the paragraph, Laurent Favre asks about the company's health care segment, noting that there has been around 0% organic growth in 2024, and inquires about price versus volumes and potential challenges. Sanjiv Lamba responds by highlighting expectations for mid-single-digit growth in the long term within the health care sector, which comprises the hospital care and home care businesses. Lamba explains that current numbers reflect portfolio rationalization in the U.S. home care business, specifically at Lincare, and indicates progress despite inflationary challenges. He anticipates that once these actions are completed, growth will align with long-term expectations. Favre then asks about future projects, specifically in electronics, noting a lack of significant new projects recently.

In the paragraph, Sanjiv Lamba discusses the success and ongoing projects in the electronics sector, highlighting an all-time record sale of gas backlog with electronics comprising 20%. He mentions the company's successful project with TSMC at their Phoenix facility and their continued wins in the electronics market. During a question session, Jeff Zekauskas from JPMorgan inquires about the company's cash flow in relation to EPS growth and market share in the industrial gas market. Matthew White addresses the cash flow question, explaining they evaluate the ratio of OCF (Operating Cash Flow) to EBITDA and aim for it to be in the low 80s. He notes that changes in cash flow resulted from the unwinding of their engineering portfolio over the past 24 months, due to a halt in cash deposits as they completed sanctioned projects.

The paragraph discusses financial challenges faced by an engineering business due to rapid unwinding of contract liabilities, leading to a disparity between OCF and EBITDA growth. This issue stemmed from compressed project timelines caused by sanctions, which affected cash flow. The speaker anticipates alignment in growth rates by 2025 as these challenges are addressed. Additionally, market share is not a primary focus, but the business is winning a larger share of major contracts, evidenced by a record gas backlog exceeding $7 billion with solid contract terms ensuring guaranteed returns.

The paragraph discusses the strategic focus of a company, emphasizing its success with a record backlog in large projects, indicating strong market positioning. For the merchant and package business, the company highlights the importance of network density over market share, as density often signals market leadership. The company claims to have developed a robust network that enhances market position, customer relationships, and margin expansion, maintaining its leadership status. The paragraph concludes with the operator introducing a question from Steve Byrne of Bank of America Merrill Lynch, asking about the comparison of contract terms and returns between small on-site wins and larger projects, and the gases driving these small contracts. Sanjiv Lamba expresses enthusiasm about addressing this question.

In the last 12 months, the company signed 59 long-term contracts and is constructing 64 plants, averaging more than one plant weekly, to boost revenue and cash generation. The focus is on small on-site facilities, which are ideal for generating annuity income. These facilities predominantly use oxygen and nitrogen, with plans to incorporate electrolyzer-based hydrogen in the future. An example is their collaboration with a client in Illinois using their OptiMelt technology to enhance decarbonization by recovering heat, improving efficiency, reducing natural gas usage, and increasing furnace throughput. This approach is also applied in industries like paper, pulp, and electronics, primarily using nitrogen.

The paragraph discusses the benefits of small on-site gas projects, which are equally split between different technologies and have contract terms similar to larger projects, ranging from 10 to 15 years. These projects have a much shorter execution timeline, typically taking 9 to 15 months to deploy, compared to the longer duration of larger projects. The execution is less risky because customers handle some civil work, facilitating quicker implementation. The returns on small on-site projects are higher than those of larger projects, benefiting the company's portfolio. The company has focused on this segment for the past few years, resulting in signing 59 long-term contracts and building 64 plants, making it an exciting part of their portfolio.

In the paragraph, Matthew White, responding to a question, explains that the company does not separate the contributions from pricing, productivity, and cost management in their guidance. He notes that there is a combined 10% contribution from capital allocation and management actions, which is roughly split 50-50. Historically, management actions have contributed more, but considering varying inflation levels in different countries, maintaining a positive spread of price to cost inflation is crucial for margin expansion. For guidance purposes, they are assuming a 5% contribution from each, and the company plans to take further actions to improve this. The conversation then shifts to a question from John McNulty regarding the $10 billion backlog in the sale of gas and equipment, querying the extent of exposure to tariffs and currency fluctuations.

The paragraph discusses the company's $10 billion backlog, detailing the distribution between the sale of equipment (SOE) and the sale of CASA. It explains their strategy for handling tariffs, noting that their contractual agreements usually mitigate the impact on the SOE side, while tariffs on gas sales have had a minimal effect. Past experiences indicate that tariffs have not significantly affected firm offers, often being offset by currency devaluation. The company feels confident in managing tariff impacts and the current status of its projects. Following this explanation, Peter Clark from Bernstein asks about the effect of currency fluctuations on the company's guidance, particularly in markets like Mexico and Brazil.

In the paragraph, Matthew White discusses the impact of foreign exchange (FX) on tariffs and market risks, particularly highlighting the devaluation of Latin American currencies like the Mexican peso, Brazilian real, and Argentinian peso in 2024. He notes that while European currencies remained relatively stable or favorable early in the year, Latin American currencies experienced significant devaluation. The U.S. dollar saw a substantial appreciation, influenced by geopolitical events, as indicated by the DXY index. This led to the devaluation of larger currencies such as the British pound and Australian dollar in the latter part of the fourth quarter.

The paragraph discusses the impact of tariffs and devaluation on production, emphasizing that the company's operations are localized, leading to indirect effects from tariffs. The focus is on capturing market shifts due to production relocation rather than reduction. The paragraph also notes an expected increase in capital expenditures (CapEx) for 2025, driven by a record gas sale backlog of $7.1 billion and significant ongoing projects, including those related to clean energy and electronics. These projects are the main contributors to the increased CapEx, with potential implications for further increases in 2026. The conversation also briefly mentions an upcoming question from John Roberts with Mizuho.

The paragraph discusses questions posed to Sanjiv Lamba about the helium market and a new CCS (carbon capture and storage) hub investment in Jabal. Lamba mentions that the helium market remains stable with no significant price movements, as supply and demand continue to shift. Regarding the CCS hub, he provides a high-level view, explaining that it is part of a three-way joint venture for a large CCS project in Saudi Arabia. Further details will be available after the project reaches the Final Investment Decision (FID) stage.

The paragraph discusses a joint venture led by Saudi Aramco, SRB, and Linde, which is working on a carbon capture and sequestration (CCS) project. The project's first phase aims to sequester 9 to 11 million tonnes of CO2 annually, with the potential to become the world's largest CCS project by capturing 53 to 54 million tonnes annually by the end of the third phase. The project's front-end engineering design (FEED) is complete, and financial assessments are currently underway, with a final investment decision (FID) expected soon. Additionally, there's potential for a blue hydrogen project leveraging the CCS infrastructure, pending investment criteria. The paragraph concludes with a query from Dan Rizzo of Jefferies about the potential hydrogen projects in the EU and Japan, prompting an anticipated response from Sanjiv Lamba.

The paragraph discusses the strategic development of high-quality projects in the U.S., Canada, the Middle East, particularly Saudi Arabia, and potential projects in Europe and Asia, focusing on low carbon and blue hydrogen. While projects in Japan are minimal, Japan remains a crucial import market for clean hydrogen and derivatives like ammonia and methanol, supporting its decarbonization efforts. The Far East, including Japan and Korea, is significant for export potential. In Europe, there is active discussion and interest in clean hydrogen, including both green and blue hydrogen initiatives.

The paragraph discusses the challenges faced in Europe regarding hydrogen market goals, highlighting the complex regulatory framework and the lengthy process for decision-making and investment. These hurdles are believed to hinder fully achieving the desired hydrogen aspirations. The call concludes with Juan Pelaez thanking participants and inviting further questions.

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