Air Products and Chemicals Stock

Good morning, and welcome to Air Products' Third 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 Megan Britt. You may begin.

Hello, and welcome to the Third Quarter Fiscal 2026 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the Investor Relations section of the Air Products website.

During this call, we'll make forward-looking statements which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call and in the forward-looking statements and Risk Factors sections of our reports filed or furnished with the SEC.

We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we will refer to various financial measures, including earnings per share, capital expenditures operating income, operating margin, the effective tax rate, ROC and net debt to EBITDA on a total company basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section.

It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call today.

Now please turn to Slide 3. Earlier today, we reported results for the third quarter of fiscal 2026. In the quarter, we managed volatile marketing dynamics to deliver a 9% increase in operating income compared to the same period last year. Our operating margin of 25.6% was also up compared to the same period last year, largely from volume and price improvement, partially offset by higher costs. Earnings per share were $3.47, up 12% compared to the same period last year. This was above our guidance range, largely due to improved volume and higher contributions from our equity affiliates.

Volume improvement was led by higher on-site results, new asset onstreams and [ helium ]. The [indiscernible] headwind in the quarter was 2%, which was better than expected, largely on electronics momentum in Asia. Return on capital of 11.7% was up relatively to prior year and improved sequentially.

Moving to Slide 4. We remain focused on 3 key priorities for 2026. On earnings growth, EPS are up 14% year-to-date. With another quarter of strong performance, we are raising our full year earnings guidance which now implies an improvement of 11% to 12% for the full fiscal year. We continue to expect EPS growth to be achieved primarily through volume growth from new asset contributions, pricing actions and continued productivity. Next, we continue to make progress on optimizing our large project portfolio. On June 30, we announced our decision to exit the Louisiana project, the Casa Grande, Arizona project and other smaller scale clean energy distribution projects. As a result, we recorded a pretax charge of $2.9 billion this quarter. We are working on opportunities to redeploy the industrial gas assets and sell the ammonia production assets associated with the Louisiana project.

On the green ammonia project in Saudi Arabia or NGHC, we have now finalized a marketing and distribution agreement with Yara. I will speak to this more in a moment. Finally, on our third priority, maintaining capital discipline, the cancellation of the Louisiana project will allow us to reduce our capital expenditures. While we expect to reduce capital expenditures overall, we will remain focused on investing in our backlog of traditional industrial gas projects, especially in the electronics end market. In addition to investing in our traditional industrial gas projects, we remain committed to continue our strong track record of returning cash to our shareholders. Year-to-date, we have returned $1.2 billion to shareholders in the form of dividends.

Please turn to Slide 5. I'm pleased to share that Air Products in Yara have signed a marketing and distribution agreement for renewable ammonia from the NEOM green hydrogen project in Saudi Arabia. Under the agreement, Yara will transport and commercialize the renewable ammonia that will be acquired by Air Products from NGHC that is not used by Air Products to produce green hydrogen in Europe. This model creates the first fully integrated value chain for renewable ammonia by enabling product from the world's first large-scale green ammonia plant to be sold and delivered through Yara's existing global supply chain. As a final note, we do not expect this project to have a material financial impact in fiscal year '27.

Please turn to Slide 6 for a summary of our current project backlog and an update of our capital expenditure forecast. Before I go into details, I want to provide some context on how to think about our backlog. To be included in the backlog, a project must have reached a final investment decision on FID following a robust review process to ensure we have adequate returns relatively to the risks of the project. Our backlog will include investments in projects with long-term contracts with a strong customer and in a few cases, production facility to grow our liquid bulk and packaged gases business. With this criteria, we currently have a traditional industrial gas backlog of approximately $3 billion in projects. A significant portion of the capital projected for the backlog will support electronic customers. This includes over $1.5 billion in project wins for Air Products in the last 6 months, translating our backlog into a view of capital expenditures.

On the right-hand side of this slide, we are targeting to invest approximately $1.5 billion per year going forward in traditional industrial gas projects. These are air separation and hydrogen projects of varying sizes and there are new projects being added and completed projects being removed from the list. The CapEx figures for fiscal year '27 are preliminary and represent the committed spend for traditional industrial gas projects based on our current backlog. As we continue to build our backlog, our focus will be on opportunities that meet our risk-adjusted return threshold.

As we previously disclosed, we are also moving forward with several underperforming projects, given our commercial obligations and product status. Although these projects are not expected to contribute materially to our future operating income, we continue to work to improve their results through commercial negotiations, operational improvement and productivity. After we bring these products onstream, we expect total CapEx expenditure of roughly $2 billion to $2.5 billion per year, which can sustain both our future growth and ongoing maintenance. Again, I want to thank the Air Products team for delivering the results this quarter.

Now I will turn the call over to Melissa to discuss those results in greater depth and review our 2026 outlook. Melissa?

Thank you, Eduardo. Please move to Slide 7 for a high-level summary of our third quarter financial results.

Sales were up 5%, while operating income grew 9% on volume, currency and price, overcoming higher costs from fixed cost inflation. Volume growth was led by our on-site business, driven by contributions from new assets coming onstream in Asia and Americas as well as higher production from U.S. refinery assets. Pricing was up, primarily in Europe and the Americas. With this underlying business performance, operating margin of 25.6%, improved over 100 basis points compared to the prior year. Earnings per share of $3.47 increased 12% from the prior year due to the base business growth as well as strong [indiscernible] contributions. Return on capital of 11.7% was up 60 basis points on strong base business performance and large project optimization.

Please turn to Slide 8. Our third quarter earnings per share of $3.47 increased $0.38 or 12% from the prior year. We saw a 2% headwind from helium this quarter, which was better than our guidance of 3%, driven by improved volume and pricing in Asia, supporting our electronic customers, partially offset by lower space volume in the Americas. Currency was favorable 2% and in line with our third quarter guidance. The base business improvement was driven by on-site volume, including new assets and pricing. We also saw strong contributions from equity affiliates in Mexico and Saudi Arabia. Despite higher costs in the quarter, driven by fixed cost inflation, we remain on track with our head count reduction plan for the year. having recognized approximately $75 million in the savings year-to-date.

Moving now to Slide 9. I will provide an overview of our results by segment. You can find additional details of the quarterly segment results in the appendix. In the Americas, operating income improved 6%, primarily driven by on-site volume, including contributions from our HyCO existing facilities and a new asset in our Gulf Coast hydrogen pipeline. The volume improvement along with pricing was partially offset by higher costs, including fixed cost inflation, distribution and dislocation costs. Asia operating income grew 18%, primarily due to benefits from the gasification assets held for sale, new assets onstream and helium.

In Europe, operating income increased 2%, primarily driven by pricing actions, which more than offset higher power costs. This benefit, along with a currency tailwind of 2%, more than offset higher costs, including fixed cost inflation. In our Middle East and India segment, operating income was relatively flat, while equity affiliates income increased from our joint ventures in Saudi Arabia. Lastly, the Corporate and other segment benefited from productivity as we continue to reduce our corporate SG&A. This improvement was partially offset by lower sale of equipment activity.

Please turn to Slide 10. Year-to-date, we are free cash flow positive as strong operating cash flow exceeded the capital that we spent on maintenance and executing the backlog. We have also returned $1.2 billion in cash to our shareholders in the form of dividends in fiscal 2026. As it relates to our leverage, our net debt-to-EBITDA ratio is 2.1x, which considers our proportionate ownership of the NGHC joint venture assets under construction. We remain committed to bringing the company back to an A/A2 rating over the long term.

Moving now to Slide 11. We expect our fourth quarter earnings per share will be in the range of $3.55 to $3.65, up 5% to 8% from the prior year. We expect to achieve this growth through continued benefits from new asset contributions, pricing actions and progress on our productivity initiatives. However, we remain cautious given our macroeconomic uncertainties. We expect helium to continue to be a headwind due to lower price despite some volume and price improvement in Asia. With this, our fiscal full year guidance is now in the range of $13.39 and to $13.49, which correlates to an 11% to 12% growth from prior year. For capital expenditures, we now expect to spend approximately $3.5 billion this fiscal year. We have reduced the capital outlook to reflect payment timing adjustments, lower expected maintenance and cancelled projects. We will now open the call up for questions. Operator?

[Operator Instructions] We'll now take your first question coming from the line of Duffy Fischer with Goldman Sachs.

Just a couple of questions around your asset at Jazan, given the attack that happened there. So one, I think when you brought that online, it was supposed to contribute about $1.35 of EPS per year. Is that still a good number to, in your Q4 guide, how much is kind of taken out, I guess, for what's happening there? Or does it take a while for that to flow through?

And then just the third one, do you have any third-party insurance for that if that conflict escalates and it becomes somewhat impaired.

Yes, as you know, we've seen the news. And of course, we have information from the site, but I hope you understand for contractual reasons with Aramco, we cannot give you a lot of comments on the project. I can tell you only that the numbers that you have in terms of contribution are in the ballpark, probably a little lower than that, but the numbers are in the ballpark. And we do not expect any financial impact for Air Products in the -- coming from these events.

But as you'll know, Saudi ramp is not commenting on the fact yet. So we need to wait to -- until they do that to provide more information. But again, the most important thing for us, there are no injuries to our employees or to the JV employees and we do not expect the financial impact.

Yes. And if I could just incrementally add one thing, Duffy, if you remember, the contributions for Jazan are a financing receivable. So they do decrease over the life of the agreement. But again, as Eduardo said, you are in the ballpark of contributions for '26.

Next question will come from the line of John McNulty with BMO Capital Markets.

Congratulations on some solid results. So I wanted to just understand, I guess, one of your comments on NEOM and then just get your kind of high-level view there. So I think you said with the Yara contract, there's no impact on 2027. Does that mean you don't foresee any drag on your fiscal earnings from NEOM or benefit for that matter? And then again, I guess, stepping back, can you speak to your level of confidence at this point as to whether or not Yara and yourself, you're going to be able to find a buyer for that volume in calendar '27 that at least clears your offtake agreement. If you can give us any color on that, that would be great.

Thank you, John. Yes, I can confirm that our expectation is to have no gain or loss in 2027. I cannot go much beyond that, again because of the Ts and Cs of the agreements we have with the joint venture and the confidential obligations that we have. But we do not expect any impact in '27 and what we expect going forward is before the beginning of each year, we can give you some more clear picture of what the expectations are.

But as you know, this is an agreement for product that we're going to into market in the -- globally now with Yara. And here, we will evolve with time depending on the market conditions. But for 2027, we are confirming no impact for Air Products.

Your next question will come from the line of Jeff Zekauskas with JPMorgan.

You talked about how the penalty from helium this year is lower than you originally expected? Maybe it's a little bit more than $100 million retax rather than $150 million. If you had to distribute the -- I don't know, the $105 million or $110 million penalty through your business segments, how would you allocate it geographically?

Well, Jeff, we look at this on a global basis. I would say that what we are doing in the heating business is really remarkable. I know when we talk about externally that the impact is 2% or 3%. It's difficult for you -- for everyone to understand what is behind that. But just to give you a picture, 40% of all the volume we sold during this quarter came from our cavern in Texas.

So it gives you an idea of -- in June was even more than that percentage, but give us an idea of how much we are exercising our system to keep our customers supplied and to make sure that we keep our position as a reliable supplier that can sign long-term agreements in this business. So our impact is mostly in price and didn't come from this quarter coming from a year of negotiations that were more than negotiations that we have. from a moment where the market was very short.

So I would say that today, that impact is migrating more to Europe and North America because of the type of customers that we have mostly in the health care space and the MRI sector. But we're very optimistic about the future in the helium side and we have been really gaining a lot of new commitments for volumes in the long term, especially in the electronics area and especially in Asia.

Okay. And in the Mid East equity income was up over $100 million. And I think in the second fiscal quarter, it was closer to [ $80 million ]. So is the -- are the joint ventures operating at a new level of profitability? Or this was just an unusual jump that had to do with transitory items?

Yes, Jeff, I'll take that one. So in the Middle East, yes, thank you. In the Middle East, we are seeing improvements in our equity affiliate income. The improvement in equity affiliate income though globally was amongst multiple joint ventures. One thing I do want to note, we did have an especially strong quarter this quarter in our Middle East joint venture, but that was largely contractually structural and it's driven on a preferred dividend to our joint venture partners, and that's just the timing. So we will see the normal run rate reconfigured in Q4 this year.

Your next question will come from the line of Chris Parkinson with Wolfe Research.

You've had a nice little bump up in your backlog from various electronics projects one official with Samsung and then 2 others, so I think we can all presume who the partners are. Can you just offer a little bit of color on, first of all, how long those projects were being assessed in terms of you becoming CEO or those kind of long-standing being assessed for multiple years. Were they relatively new? And then whether or not that you'd further expect some of those -- even some of the smaller projects to continuously trickle in over the next, let's say, 12 or 18 months or so?

Chris. Yes, I would say that on this backlog, we have one very large project that started in 2022, I believe, that is a product in Taiwan that was multiple phases that we're building more than 5 large aspiration plants. We have now 3 done, and we still have 2 to go. Other than that, all these projects, they are basically coming in the last 12 months. I would like to create credit for that or my presence here, but the reality is the market is going through a super cycle, and we have been working very hard to get our fair share of that.

So we announced 2 very large projects, as you know, one in Korea, one in Taiwan. We have other projects that we are going to announce this quarter that we are talking to the counterparts about issuing the final announcement. And when we look at our list of opportunities, I would say that the lease is long today and it's skewed to the electronics side. So probably close to 2/3 of our opportunities or more than that in the electronics space. So that's not by -- that's where the market is today. I would say that the traditional market in chemicals and steel. There is a lot of capacity in the world, and not to say that there are no opportunities, but they are mostly coming from replacement of old assets and one project here or there.

But the electronics is really where the growth is. And I think we're very fortunate that we kept that capability in the company that we have been executing projects in Asia for a long time and that fits well with where the market is now.

Got it. And just as a quick follow-up, NGHC has indicated there are over 90% complete on the facility, the primary facility and then about 95% plus complete on the solar farm and wind garden plus or minus. I think that update was actually from a few months ago. As that relates to Slide 18, just getting away from the actual agreement with Yara, as the ramp of those facilities begins, can you reconcile the exact timing and how we should think about how that affects Slide 18 in terms of the net debt adjustments? And then also in your 10-K, the debt was listed, I believe, and forgive me if I missed something, but around $4.7 billion in this slide, you have roughly [ 2 5. ] I was wondering what that extra $0.5 billion represents or if I'm just missing something.

Yes, Chris, thanks for the question. So as mentioned before, the consolidation of NEOM is, in fact, because of the EPC arrangement during construction, right? And so deconsolidation will happen once that plant is up and onstream. So after commissioning, we will deconsolidate. That is on Slide 18, what you're seeing here is the deconsolidation and back down to a net debt of around $11 billion, $11.5 billion. The difference between the $5.2 billion debt here, there is no difference. That is our carrying value of the NGHC net debt. The proportion may be just our proportion of that 33%. So there is no difference between what we've reported and what we have here. This is just the deconsolidation of the joint venture after the construction is completed and we've commissioned.

Yes. And just as one point, when Melissa talks about commissioning, you mean being at full production capacity and this is first-of-a-kind plant with a lot of new technologies. So we're expecting a long commissioning process. And that's one of the reasons why we cannot precise exactly when the this change in that consolidation can happen and also our full obligation to buy the product.

Your next question will come from the line of Vincent Andrews with Morgan Stanley.

First, I just want to clarify on NEOM. The comments on no material financial impact for fiscal 2027. Does that -- is that for both the income statement and the cash flow statement? And then also, I think in order, I heard you just say that as it relates to the consolidation that you said something about when there'll be a trigger in terms of when you're obligated to buy the product, is it potentially the case that you don't have to buy product in fiscal 2027? So if you could clarify that, I'd appreciate it.

And then my follow-up would be on the CapEx reduction for the target year. I think you brought it down by about $500 million. If you could just talk about what's driving that and what you think the alternative use of that capital might wind up being.

Yes. Thank you, Vincent. Yes. On NEOM, we cannot discuss the details of our agreements, but as I said, the process for commission will take some time for the facility to get to full production and we're going to need to keep you informed during this period, but we are absolutely confirming no impact on the income statement. And on the cash flow statement, I don't know exactly how to qualify that with Melissa.

Sure. Absolutely. So since we aren't commissioning, the large portion of the spend and any distributions that we put into the joint venture are largely complete. If you remember, this is 73% project financed. And our contributions to the joint venture, again, are largely behind us. So again, no financial impact both to the P&L and no large impact to the cash flow statement.

From a CapEx perspective, we did reduce our CapEx forecast for this year by about $500 million. That's largely just timing associated to the execution and the payments of all of our backlog under execution. So nothing material there. continue to be able to invest in our underlying industrial gas projects and the distribution to those will be against what we've already talked about, really the electronics wins that we're executing right now and projects that we continue to bring on our backlog in outside the electronics space as well.

Next question will come from the line of James Hooper with Bernstein.

Can I start on the Louisiana project and Darrow? Can you go through a little bit more detail what happens to the kit and the main, how you're thinking about it? And any discussions that you've had there, please?

Yes, but what happened to, I didn't get it...

Yes, there are no worries. The Darrow, what we're going to be doing is part of the attribution.

Yes. The -- this is a product we started probably 6, 7 years ago. So the project was in a 7 stage that we have a lot of the equipment already purchased in hand in warehouses and mostly in the U.S., but some in Europe and China. So it is a little -- a very different situation from what we had last year when we canceled the [ wind ] energy project. These are high, let's say, world-class assets. The air separtion plants, the hydrogen purification, the ammonia loop, and we see a lot of value for these assets in the market.

As you can see in the transactions that were announced recently when people buying ammonia plants and so forth. So we are in a process of taking all the data and making sure that we maximize the value we can to cover from these projects by basically using part of this equipment in our own operations like the separation and some other equipment related to industrial gases. And on the case of the ammonia loop, which is a very important asset, making sure that we can commercialize that as a full unit. And in some cases, it's possible to generate projects for Air Products.

I think we became public that one of the products that we executed with a similar ammonia plant that we did in Texas in terms of capacity. It was 3,600 tons per day. those 2 assets that we have from there they are 4,000 tons per day using the same technology. So they are desirable assets and the market is showing that they have significant value, and we can attach, if possible, possibility of supplying hydrogen and nitrogen to these assets. So this is the objective. We are going to work on that in the next few months. We have a team here in our products in engineering, business development, working dedicated to this task. And our objective is to recover as much one as we can and generate new business for the [indiscernible]. Sorry. Go ahead.

And just as a follow-up on that, Eduardo. If you do see a bit of a windfall with leverage starting to get below 2x, how are you thinking about capital allocation and projects or potentially starting a buyback.

Yes. It's -- if we get any money would be a non-GAAP income on top of what we initially forecast. And we're only going to go through our pool, and it will be allocated as we do with the rest of the cash uses and sources that we have. And Melissa can give more color on that.

Yes, absolutely. So as we've talked about cash flow neutrality focused on that this year and moving forward. we do have share buybacks in our capital allocation waterfall. We have a line of sight of being able to start that program towards the end of '27, beginning of '28. But that obviously depends on the projects that we have coming down the pipeline. So will want to invest in high-return projects first and foremost, continue to increase our dividend and share buybacks will become part of that program as we move forward.

Next question will come from the line of David Begleiter with Deutsche Bank.

Eduardo, back on the -- if the project was at full production capacity in 2027 hypothetically, what will the financial impact be on Air Products?

David, as I think we said that many times, this project -- Air Products has an obligation to buy the ammonia as a fixed price and we are exposed to the market conditions on the other side. So again, we will work to be able to provide forecast at the beginning of each year of what the impact will be. It would be premature for us to go much further than that.

So what I can tell you is that for '27, the expected impact is 0, and we're going to have another one for '28. So you basically ask the same question in a different way. I understand the curiosity in the objective of getting this information. But unfortunately, the situation is as a report, not different from the situation that you have from another player in the ammonia market. With the exception that our fixed cost is fixed and it's not a function of fluctuations in natural gas plays.

Understood. Just wanted to try. Just on the Americas on the cost side, do you need additional price increases to offset these higher costs you're incurring in the Americas?

Yes. No, thanks for the question, David. So we are seeing some increase in costs in the Americas largely associated to some project costs and some dislocations driven by maintenance. And of course, we are seeing fixed cost inflation as everybody is. We don't have a significant packaged gas business in Americas, as you know. So our ability to increase pricing is limited to our liquid bulk product. But we do look to continue to overcome price -- with price in the Americas and in all of our regions. And of course, we're looking to drive productivity as well to offset those cost increases.

Your next question will come from the line of Laurence Alexander with Jefferies.

Just 2 quick ones. One, could you give a quick update on what you're seeing on the merchant volumes by region? And secondly, on NEOM, if the strategy -- the original strategy worked out and the green premium evolves and the green ammonia market establishes itself as a separate market with a much higher value. Is their products obligated or constrained to keep NEOM in the portfolio? Or if there was a higher or better strategic owner are you allowed to explore that 5 or 10 years down the road?

Well, starting with the first question on the merchant side. I would say that we see the market in the Americas progressing relatively well, still growing Europe as a whole is a difficult market today. I don't think it's a surprise to anyone that the industrial market in Europe is not growing. And in Asia, it's a little bit of a different scenario. China is still a little better than it was, I would say, a few months ago, but is still a difficult market with a lot of overcapacity that we need to overcome.

And the other markets suffering other than electronics side in Taiwan, South Korea, they are suffering a little bit with high energy costs. So we don't have a big exposure outside of electronics, but the exposure we have in the merchant business there. It's flattish from that perspective. So that would be on the merchant question. On the NEOM question is there are 2 different things, right? One is the product participation in the joint venture that is subject to like any joint venture agreement to roles on if you decide to any of the partners decide to leave the partnership that there are specific rules on how the process works, it works for us, for our partners in every joint venture. So that's one side.

And I would say that everything is possible, but that's a joint venture that we did, we think tend to be on the long term. The other position is the position as an offtaker of the product that we already talked about that. It's a third-year contract. And again, this is a commercial operation that, of course, we could, at some point having a back-to-back or even work in the agreement, although I would expect the project company, the joint venture to expect our products to stay as the offtaker and that we would need to go more in a back-to-back agreement to move a large volume. But frankly, this is not different from what we are doing today with this agreement with Yara, where they will with their marketing capability and their distribution capability, the ships they will go to the market and they intend is to sign long-term agreements. They were not going to be as long as the 30-year deal that we have.

But we don't want them to be as long as that because the expectation is that as we said several times, our price to buy the product from the JV is basically fixed. And we expect in the long term, the market to evolve the prices for ammonia to evolve with the energy prices. So we are looking to initially to have agreements that will be long-term agreements, but very far from the 30-year period that we have with our obligations.

Your next question will come from the line of Kevin McCarthy with Vertical Research Partners.

I wanted to follow up on the helium discussion, maybe with a 2-part question. Can you elaborate on the source of incremental goodness in the earnings function in helium. It was my understanding, you have quite a large percentage under contract. So did that come from new or modified contracts or perhaps the spot market, albeit smaller exposure there or perhaps both?

And then on the supply side, there have been sort of unpleasant goings on in the country of Qatar recently as you are well aware. So can you provide an update on any impact to Air Products there from and also efforts to procure helium from other places in the world?

Yes, Kevin, it's a long question that would need a long answer here, but I would say that on the new agreements that we have signed, a lot of that is new electronic projects that are being built in -- especially in Asia, some in the U.S. So I think we -- with our system and this information that I provided with the cavern that we have and the diversification of sources.

I think we made clear to the customers that Air Products is a very reliable solution. And we have been fortunate to sign a lot of new agreements for products that -- some of these products will start in a year, 2 years and 3 years, but they are very -- they are longer-term agreements than we normally would see in the merchant side. So some of them are connected to this large separation plant projects that we are signing, and they have the same term of our large on-site contracts.

I would say on the source side, we have, for many years, a strategy to diversify our sources between the U.S., Qatar, Algeria. And we continue to do that. It's very hard to predict when the situation in Qatar will improve. I think there were some loads that were able to be filled by Qatar Energy. But frankly, today, you would need to cross to the Red Sea side to ship and the volumes coming out of the Middle East from the source, they have been better in that. So we are not counting on that on our forecast for now.

And as I said, we have taken a lot of product out of our cavern and that we are in a position that we can continue to do that for many, many quarters. So I would say that, that has been our strategy and I'm very happy that we have Kevin today. It's something that our position as an industrial gas company in the heating chain with the end of the BLM became more and more like a middle man position, but middle man with a lot of strength on -- based on the supply chain and the number of containers we have and so forth.

But it's still subject to be squeezed when the market is long by our customers and to be squeezed when the market is short by our suppliers and having the capital and having this ability to draw product for many, many quarters, help us on both sides to negotiate and to have a more stable business.

If I may, a second question on the Yara deal. I appreciate you may not be able to get into specifics. But conceptually, should investors think of that deal as fully hedging Air Products' offtake risk or partially hedging it? Or are there scenarios where you would be obligated to offtake but not able to move the products through Yara?

No, I would say that you should see that as a way to eliminate the volume risk. We still retain the price base. We talked about that before. I think some people underestimate the volume risk and we -- at Air Products, we [ could go and ] do that, right? So we have an obligation to lift all the tons that are produced by the joint venture. And it's -- ammonia is a product that -- it sound like an separation plan that you can find the product.

So you cannot take the risk of shutting down the plant because you have a tank full event, right? So this deal with a counterpart like Yara that owns their own distribution network that owns multiple ships eliminate the risk. The price risk is still there. Most of the price risk will sit with us. We have a scheme, a commission scheme with Yara that they will share the upside with us, and they will have -- they will be incentivized to commercialize this product as green product as much as possible. So I would say that, that was the objective from the beginning and I am very happy with the agreement that we have. And I think this relationship is -- became very, very important for us. And hopefully, it will grow as you guys seen on the GSA announcement as well.

Your next question will come from the line of John Roberts with Mizuho.

Last quarter, you gave us an end market breakdown for Air Products. Maybe could you talk about the volume growth in 3 buckets, semiconductors refining in basic petrochemicals or I think what you call energy and then all other. Were we double-digit percent in electronics and mid-single-digit percent in refinery and petrochem and maybe down low single-digit percent in all other?

John, thanks for the question. So we actually don't usually externally break it down as far as growth by area. I will tell you, though, we continue to see some really strong returns and ramping up in the electronics space, both from a backlog as well as the supply had new assets coming on stream this year, and you are seeing the contributions of those assets in the electronics space. In the refinery space, I would say it's a little bit more of a mixed bag.

In Europe, we're not seeing great volume improvements, but we are seeing great volume improvements in our HyCO business in the Americas. The rest, again, you can see in our volumes, we've seen some improvements in the Americas and in Asia, but not great improvements in Europe. So again, we see good improvements in electronics in our new assets and ramping up as well as our backlog refineries in the Americas and the rest is, again, a mixed bag as you see in our underlying results.

Your next question will come from the line of Josh Spector with UBS.

I just had 2 quick follow-ups. I mean, one, if you're able to disclose on the Yara offtake from NEOM, is the commission structure fixed? Or is it variable? And then second, just on the Americas pricing, I mean, down sequentially, again, I understand the point around packaged gases. Just curious if you characterize that as helium related or if there's something else underlying impacting that?

Yes. I would say on the first question, I think I just explained that, but the scheme that we have, of course, they're incentivized to place more product as green, which implies that is a high-priced product. So it is a variable structure, not a fixed structure. And on the Americas, Melissa?

Yes, absolutely. Thank you. So you do see a topside 1% decrease. But I could tell you, actually, from an underlying, we saw some price improvement in the Americas actually. So price was actually an improvement in merchant pricing. This was more than offset, though, by our headwinds in helium pricing. And that really largely was a slow quarter in the space sector. So we do want to see that hopefully a rebound in the next quarter as we see launches increase.

Your next question will come from the line of Patrick Cunningham with Citi.

This is Alex on for Patrick. I think just a quick question on Darrow. I think in the past, you said that you were able to monetize something about $1 billion, I think. I'm just wondering if that still holds true and what the time line could be expected? And then as a follow-up, Wondering if you could provide some update on the Edmonton project.

Yes. On Darrow, I think any number that we gave to you in the past was we qualify them as estimate. We're working on that. I wish we had a very clear time line for that, but we'll take the time that we need to take to maximize the value. And as I explained, the value will come from someone that wants to use these units as a whole, not selling piece by piece. So it will take some time to get there and we will update you as the job develops.

Regarding Edmonton, we have no update from what we had before. We continue to work on the project and we do not have news in terms of start-up dates or costs beyond what we shared with you before.

Your next question will come from the line of Arun Viswanathan with RBC Capital Markets.

Congrats on the strong results. I guess I just had a question there. I think you started the year expecting 9% EPS growth you're now guiding to 11% to 12%. Is it right to assume that most of that was mainly volume upside? And I guess, as you look into fiscal '27, could you provide some maybe some initial thoughts on what portion of earnings growth would maybe trail off because of maybe you're further along in the restructuring actions, but maybe what you pick up because of backlog and maybe some volume upside from helium or any other sources?

Yes. No, thanks for the question, and let's go through this outlook. So we did, in fact, increase to 11% and 12% year-over-year improvement. Very proud of the team for all their efforts to focus in on both the volume growth as well as productivity and pricing. So as we look forward, the largest driver of our improvement is, in fact, market volumes. We do expect market volumes to continue to improve largely as we've talked about in the Americas and specific around HyCO.

We are seeing some green shoots in Asia, specifically in the electronic space, and we do expect those to continue. However, we do have some concerns over the macroeconomic environment, largely in Asia and Europe that we are building into a no significant market growth because of that uncertainty moving forward. We did have some contributions on new assets. So as we've talked about, both the Americas and Asia, we had a 3% year-on-year benefit from those new assets. And we continue to focus on price and productivity. We will have some comp headwind because of our productivity actions, having a year-over-year comp impact. But we do continue to want the team to focus on and continue to find productivity as we move forward.

Okay. And given that you now do less spending committed to Darrow as you move forward. What is the opportunity? I think you did address this earlier, but is there an opportunity to potentially pull forward the buyback capabilities or even potentially pursue some M&A?

Yes. No. As you know, this is very much of an opportunistic industrial gas market, right? And so as projects come forward, we will continue to be very disciplined on our capital deployment we're looking for risk-adjusted returns on all projects that we enter into. But we do have the share buyback in our waterfall. So as we continue to improve our cash position, take advantage of any opportunistic M&A and new projects, then we would look to have any additional investable capital into a share buyback program. And as I mentioned, that will likely come into a line of sight towards the end of '27, early '28.

Your next question will come from the line of Mike Harrison with Seaport Research Partners.

I was looking to ask about the gasification assets in Asia. If you can give us any sense for how much better the earnings contribution is this quarter versus a year ago? And also just wondering how the sale process for those assets is going. If you could give us any sense of the timing of that process and what we might expect in terms of the magnitude of any proceeds.

Sure. We do continue to collect against those gasification assets held for sale. So from a total company perspective, about 1% to 1.5% is the accounting around the depreciation, so the stepping of the depreciation as those assets are put into the asset held for sale category. And about a 1% to 1.5% from a contribution on the past due collections for those gasification assets.

Now addressing your questions on the timing for the sale. We are working very closely with both international and local banks to be able to market those assets. We are having ongoing conversations with good strategic purchasers of those assets. And when we have an update on that timing, we will let you know.

And this concludes today's question-and-answer session. I will now turn the call back to Eduardo for any closing remarks.

Well, thank you for joining our call today. We look forward to discussing our results with you again next quarter. Have a good day. Thank you. Bye.

This concludes today's call. Thank you for your participation. You may now disconnect.

Hello, everybody. Welcome to the 42nd Annual Bernstein Strategic Decisions Conference, both to everybody in the room and those joining us on the webcast. I'm delighted to be joined by the Air Products senior team for a fireside chat. We have both Eduardo Menezes and Melissa Schaeffer on the stage with us today. I'm going to briefly introduce them before getting into the questions.

So Eduardo joined Air Products as CEO in February 2025. He's a 40-year veteran of the industrial gases industry. And prior to joining Air Products, Mr. Menezes held a variety of senior executive roles at Praxair pre-merger and then the combined Linde entity. These included EVP and President of Linde EMEA after the merger. And at Praxair, he held positions, including EVP, Asia, Europe, Mexico and South America; Head of Global Hydrogen; and EVP, North America, Praxair Distribution. Mr. Menezes holds an MBA from the State University of New York and a Chemical Engineering degree from the Federal University of Rio de Janeiro.

And Melissa Schaeffer is the Executive Vice President and CFO. She joined Air Products in 2016 as Vice President, Chief Audit Executive and subsequently progressed through the organization. In 2020, she was appointed VP, Finance-GEMTE, Americas, Middle East and India and appointed CFO in 2021. Prior to joining Air Products, Melissa held the position of global director, Internal Audit at Trinseo and before Trinseo, was at Ernst & Young and Siemens.

A note to the audience. This is an event for you. It's great spending time with the Air Products team, but I've got the pigeonhole system, the iPad here. So if you do have any questions, please put them in the system, and I'll do my best to ask them to the team.

And so with that, should we start from the macro perspective? The Iran War is still top of most investors' minds. I think it would be great if you could give us around the world tour and what you're seeing on the ground and how the impacts of -- what is the impact that you're seeing?

Okay. Well, it's still an ongoing event, if you want. Of course, the major effect on our business is on the energy side. So of course, we had the closing of the Strait of Hormuz. Energy prices went a little higher in Europe. So we had some effect on that. On the other hand, areas like the U.S., anything related to natural gas is pretty much running at 100%. So our hydrogen pipeline in the U.S. is running very strongly. I don't think that affects the, let's say, the overall picture of the U.S. I would say that the rest of the market is pretty stable. Everyone is concerned with the inflation that the fuel prices can generate and the effects on the consumer. But so far, we haven't felt any effects on the overall U.S. market.

In Europe, as I said, it's probably the region that is most affected by the events in the Middle East after the Middle East, of course. We've seen some complicated situations in the chemical industry and refining behaving a little better. It's a region where our products is a little different. It's the only region where we have a packaged gas business. So we have a big component on the retail side. And on that side, I think things are still stable and still okay.

In Asia, different perspectives there. China, we've seen -- China is really the country that is holding most of the impact of the LNG crisis that they are regulating the market, if you want, replacing a lot of LNG with coal, and that's supplying for power and also for chemicals. So we have some business there. I know we talk a lot externally about the coal gasification sites where we operate the coal gasifiers. But we also have a lot of oxygen plants that supply to third parties doing coal gasification. So all these assets are running at [indiscernible] capacity today. People are delaying turnarounds and that kind of stuff.

The rest of the market in China, no -- I don't think it's a secret to anyone that it's a very difficult environment, price negative deflation, industrial prices. So continue to be no major effect, no difference caused by the conflict.

So -- and Asia, then you have the electronics side, which is, of course, is booming, but it's completely unrelated to all this, no effects on that. For Air Products, the impact in the Middle East, we are not seeing a lot of impact on the ground. We have some -- our big projects like Jazan, like NEOM, they are in the West Coast of Saudi Arabia, so a little far from the areas of conflict. Our operations in the East side of Saudi Arabia, in the other countries of GCC. We've seen some impact in the ground at the beginning, but things are basically back to normal at this point. Of course, we have the impact on [indiscernible] that's caused specifically by one company, one supplier, which is Qatar Energy. We are following that very closely. Still no clear dates for the assets to come back on stream. So we are -- we rebalanced our supply. We were working in a different way. We have this cavern in the U.S., and we were able to take some products. So Air Products is being able to supply our customers, and we are basically trying to avoid the effects at this point.

Yes. Okay. So I've got a few follow-ups to the start. It's quite interesting you hear about -- talk about the chemicals end market. So it sounds like booming in the U.S., Europe, but operating rates holding up in China and then Europe is a little bit affected by outages.

Yes. No, I would say that Europe is in a strange point at this exactly moment, right? Because we've seen increasing prices on natural gas, so that goes against them. Of course, the biggest competitor for them is the Middle East, right? So prices went up on the other side. So there is this balance now. But if you have to bet on which side is going to subside first, I think the prices will come down before the natural gas prices, right? So that's a challenge.

And again, we are not a very large supplier of the chemical industry in Europe. Most of our business is on the retail side, the merchant side and our large site plants are a combination between steel and some refining business. So not a lot of presence on the chemical side.

And then North America, to what extent do you think this is -- it's been a common topic, any kind of cyclical recovery. Are you expecting operating rates to stay very high? Or do you think some of -- once the crisis slows down, your hydrogen pipeline flows will slow?

No, I think the pipeline volumes, they will stay. I think hydrogen -- the refining business is pretty stable. As you know, there are no new refineries built in the U.S. for decades now. So you basically have this upgrade of existing refineries that create a lot of volume on the hydrogen side. A lot of talks about bringing more heavy crude from Venezuela and other places. We haven't seen that yet, a little bit here and there, but I would say that there are other demands on the hydrogen side, a lot of demand on the renewable side, a lot of renewable diesel, biodiesel. So that is also pushing the demand as well on the hydrogen side.

Yes. And then Helium, I'd like to talk through a little bit your approach. So do you think that the investors are going to see any kind of -- with the short market and you fulfilling contracts, any kind of shorter-term pricing? Or are you intending to use that longer -- use your kind of leverage to supply for longer contracts?

Well, the helium market was structurally long before this crisis, right? And we have no doubt that we'll return to that position when the crisis stop or a few months or several months after, depends on the amount of damage that was done in Qatar, right? So we know the market will be back to be structurally long 6 months from now, a year from now. We don't know exactly when. So our strategy has been, we have this cavern. We have product in the cavern exactly because we were buying more product than we're selling, right? So we have this imbalance for several years. We are going to -- we are using that to make sure that we solve that problem. We don't have this imbalance going forward. So we're trying to do that, thinking about the long term, thinking about customers that can sign long-term agreements with us. And of course, the electronics area is a very desirable area because not only they can provide you these long-term volumes, but they also have other demand for other products and other gases that the current helium prices put us in a good position to also negotiate some of these deals. So we're trying to do that, thinking about the long term. Every company, we're always going to have a little bit of product that we sell in the spot market for distributors. And of course, on that, we are doing the best we can on pricing, but that's not the main objective for us at this point.

Yes. And just a brief -- is your -- I understand your Qatari plant was actually down before the crisis started. Is that back up and operating? Or is it expected to be operating soon?

No. I think the -- we know that plant was not damaged. And that plant basically -- the difference between that one and the 3 plants there, the one that our products runs or not run, we buy product from is connected to the local natural gas pipeline supply, right? So it's connected to the supply to ammonia plants, to GTL and et cetera. We understand there is some damages on the customer side, but not on the processing side, on the helium side.

I would say that what is constraining that today is really the availability of resources to ship product out of that, right? So as soon as -- and they have to finish the maintenance that they were working on. So we expect that to be done midyear now, so very close. But when we can resume shipments, that's the question. Of course, we are all looking at alternatives. And I think I was talking to people in Saudi Arabia this weekend. And I think the Jeddah airport, you cannot -- it became one of the busiest cargo airports in the world because everybody thought the same thing, everybody trying to move cargo to the west side of Saudi Arabia. So people are trying to rework the supply chains and find a way to move products out.

But on the helium side, not only Air Products, I would say our competitors -- we were fortunate that because of our plant was down, we didn't have a lot of empty containers sit there, but the orders they had and just to move the empty containers has been difficult.

Trucking it across the Suez, not straightforward.

Yes, and finding the ships, the insurance providers and that kind of stuff.

Yes. And then one last one on the high level. Do you think there's going to be any material long-term changes to the industry as a result of this crisis? Or do you think, well, memories will be short and in a year's time, we'll have forgotten about it?

You're talking about the industry in general, the oil and gas industry, right?

Well, the industrial gas industry.

Yes. But industrial gases, I think we are a very -- it's a different business, right, because it's very local. At the same time, we're global companies, but the business is very local. So I don't think we'll be -- of course, there is always a question of when people are going to feel comfortable again to invest, right? So it's the same question you asked about Russia, right? When the crisis started, a lot of the industrial gas companies that have businesses there, let's say, you are in the state of crisis for like 10 years now. At one point, we'll win. If you ask me how long it will take for people to go back, you need to look at history to give you that answer with several years probably.

Okay, great. We're going to move on to strategy. This is the Strategic Decisions Conference, so we'll spend some time on your strategy. So you joined almost 18 months ago, 40-year veteran. Can you -- what were your first impressions of the company? And how did that form the strategy that you set?

I think Air Products is -- the core of Air Products is a traditional industrial gas business, not very different from what I was used to, especially on the U.S. side, capable organization with a lot of people, a lot of tenure. So the core of the business is air. I think we diverted from the core of the business a little bit from going on these very large projects and different things than industrial gases. So when you talk about people in the industrial gas business, we are always comfortable in the gas phase of things. when you start to put liquids or solids like coal gasification is always more complicated. The unit operations are more complicated to run. So we went a little bit on that. And I think the main issue was we broke the model that we went on agreements and on projects that we didn't have firm agreements with end customers, right? And that's -- it's an easy thing to fix going forward, right? But we still need to deal with these other projects that we came from the past. So I think bringing back the business to the basics, and I think it's thinking about price, productivity and improving our day-to-day operations, I think we are very close to where I want to be at this point. The other piece, solving the past problems, it will take the time we'll take to do that.

And just to pick up on that. So you've mentioned in the past to the market 3 plus 3 plus 3 plus 1. So your price and productivity, your volume growth, your project growth and then shareholder returns later down the line. Can you -- is this still the right framing for what you've been trying to do?

Yes. I think we talked about that and Melissa can talk better than me about this. But this is more like an approximation, right, just to put the right numbers there. Of course, we're not going to get the same numbers every year, right, on all these points. I would say that the market piece is the one that we have less control, right? So we -- getting 3% there may be a little tough. One year is going to be a little more, a little less. Good year may get to that point. The price and productivity is something that we have more control. And I think in good years, we can do significantly better, and we need to do better to compensate when the market is not giving us the balance.

And the projects, it seems like an easy task, but it's a lot of hard work to be disciplined to get the right projects to make sure you get this contribution from the projects. And I think that's the math we do.

Yes. No, I think that's spot on. And one of the things that we do talk about and Eduardo said is you don't always get that perfect match of 3, right? And so if you're not getting prices, you've got to go and identify productivity. So there are levers that we could pull within that algorithm to be able to make sure that it sums to that high single digits, low double digits.

And Melissa, if we stay with -- in terms of the kind of pricing approach, has there been changes in KPIs, sales incentives to kind of unlock that price productivity side? Or what are the new initiatives?

So we have reframed our [indiscernible] around certain KPIs, but we've not changed from a pricing perspective, the KPIs, right? One of the things we've actually done quite well in Air Products is really go out and get pricing in volatile situations. So if you remember after the Russian war with the natural gas and energy prices increasing, we were able to go recapture that. The team went out, did what they needed to do, have the right conversations with the customers. We're doing the exact same thing now. It does usually take about a quarter delay to start to see the increases come through the market, but they -- it's in their DNA. They know how to do this. This is a well-exercised muscle. So they're out there. They're getting prices with the energy increases, and we should see that flow through.

And then on the productivity side, where are we in the journey there? Obviously, it looks like headcount is changing and some of the unprofitable projects are coming out. But what's the next stage for that part of the [indiscernible]?

So we started the productivity journey in '23. We started to see that we had taken on probably too many headcount as part of this mega project frame that the previous CEO had put into place. And so we started taking actions then. To date, we've taken about a little more than 10% of the organization out. We still have room to continue to do so. We have a goal to be able to take out about $100 million this year alone. We have about $50 million for the first 2 quarters. So we're right on track. We do think that we will see that continue to flow through '27, but that should really be at the end of the productivity for this exercise. Obviously, we're always looking for productivity, whether it's headcount or efficiencies in the organization. But that's something that we will continue to do. But as part of this program, that will end in '27.

Yes. And it's not only headcount, right? We put a lot of attention on reducing our power consumption, reducing our natural gas consumption and improving our distribution. We are rebuilding our global productivity organization. We have a global organization, not very big, but that really pushes the efficiency projects to the regions and make sure that we are able to replicate projects that we do in one region in another region. So there is a good effort in our products, not different from what I've seen before on trying to get this productivity beyond headcount.

Okay. So we'll change tack to a different part of growth. Let's start with the fun bit, space. So I think can you give -- so obviously, you're a core supplier to NASA's commercial space company. Can you give our audience a little bit of background into what the space business does, the market share and what kind of growth you're seeing and expecting and how you expect the business to progress?

Yes. Well, Air Products is involved in the space program since the late '60s. So we were supplying liquid hydrogen, liquid oxygen to NASA and helium for the space program for many, many years. That part of the program didn't change that much. So still a significant supply on that side. Of course, the biggest change in the last few years is the commercial launches, right? So -- and this is an area that I would say is in flux right now. So you've seen the size of the rockets, the amount of products that they use being changed very quickly. And it's not only the one that everybody talks about, but there are several others as well. But I would say that the -- where this is going to go, it's not very clear at this point, right?

So if you look at one, a very large NASA rocket that would take 600 tons of liquid oxygen, and they were driven by liquid hydrogen and so forth. The rocket that we've seen being launched, I think, 2 weekends ago, that rocket, I think, carried -- I think it was like close to 5,000 tons of propellent. So -- and it's like 80-20 oxygen to methane, right? So it's close to 4,000 tons of oxygen. So when you get to these numbers and people are saying, oh, I'm going to -- at one point, I'm going to be -- and NASA would launch like 4 rockets a year, right? And these people are talking about launching one every other day or one a day or whatever, right? So you start to get into volumes that become impractical to basically move product in trucks. And today, we do not do that for NASA either. You don't come and bring a truck straight to the rocket, right? We have a tank that you fill the tank and then you do the transfer in a few hours to fill the rocket.

But now when you talk about these kind of volumes, you would need a truck. If you launch every other day, you need a truck every 5 minutes. So it doesn't work like that. So the entire industry is trying to understand how this is going to work. They have a tendency to build things by themselves and not a normal commercial practices.

So we have our business with NASA. We have our business for the company. So we -- I think this project we announced is like a token. We're putting the first project outside of Cape Canaveral, very different building in Florida to build in Texas, for example, very regulated in Florida, difficult to find power and so forth and permits and Texas is a little different. It's a private-owned place. But we see a lot of growth in both coasts, and we are trying to prepare for that. But it is a different rationale, and it's a merchant business. It's not an on-site business, right? So...

Well, do you think it does start to -- in terms of the volume ramp-up you described, do you think it starts to become an on-site business?

It will. At one point, you need that solution, right? But -- and I think they are doing that by themselves. They're doing a plan by themselves in Texas as well. The other suppliers doing outside, but they're building one themselves. So at one point, you're going to need to work on all that. But again, to do that in the Cape and the safety regulations and the ability to get power, you will need some thought process behind that, and we'll need to see how that is going to evolve.

And it almost sounds like your main competition is going to be whether they outsource or whether they in-source.

That's always the case for our industry, right? Our customers -- our main customers, our steel customers are the same. Our chemical customers are the same. They always have the option to build and operate. And we need to do something better than they can do themselves, and we need to convince them, right? So that's always the challenge in our industry. I think the industry does a good job being able to get scale, and that's why we convince customers to buy instead of our own by building a larger scale and bringing some other credits to the projects. It's not going to be any different in this case.

Yes. And then last space question. What would you say to investors is the best way to track your space business? Is it where it should be monitoring launches? Or is it California? Obviously, you're very strong because of your industrial footprint there more than other places.

Yes. I think we made this announcement for a new plant there. As I said, a lot of our business today is hydrogen and helium. Hydrogen and helium is different because it's a product that travels more, but it's a question of -- you can use hydrogen or you can use a lot of propellent on another fuel. So we are working on all that. We're going to try to keep people informed. But it's still -- I know it's a very interesting subject, but it's still a very small segment for the industry, right? So we still have to work to see. And how big it will be, it's really a question of how many launches you have at some point, how many players you have.

So moving from a small business now to a bigger business, electronics, which I think is 17% of your revenues. The question that I often get with the semis business is that when is the next stage of growth coming? When do you think kind of fab CapEx has been negative for a couple of -- down year-on-year for a couple of years, and you've got the customers going -- performing very, very strongly. When do you think we start to see more renewed growth from this business?

You mean renewed growth in the sense of...

Yes, acceleration.

I think we are in the middle of that, right? We are In the middle of the largest CapEx expenditure we've ever seen, right? So on the fab side and the demand for industrial gases, it's an interesting industry, right, because the demand keeps growing on the -- and they're using more gases and they're using larger amount of gases, right? So I think we talked about this project we announced in Korea. It's probably the largest site globally for one company for semiconductors. We built the plant for the first phase. And the plant we're going to build now for Phase 5 is probably 6x or 3x the size of Phase 1, 3x the size. So it gives you an idea, right, how much bigger these projects are getting, and they are growing very fast. So I think the that site, if you take the product from all the industrial gas companies supplying that site, is probably larger than the volume of nitrogen it's sold in the entire Gulf Coast of the U.S. So it gives you an idea of -- it's really a completely different scale than we ever seen before.

And just to give the audience a sense, if I've done my math right, on the kind of 5, 6x bigger, that's probably close to $1 billion of CapEx from your perspective to get this or...

We need to go away from these things about talking specific CapEx about specific projects. But we made the point that this is the largest project we ever did in electronics. And I think before we announced a project in Taiwan, also multiphase project that was $900 million. So this is larger than that project we did.

Yes. Okay. So on...

But again, it's a 4-year project, right? So people sometimes they go and say, "Well, you have these projects and your capital allocation?" If you think about this as a 4-year project, it's not exactly 25% every -- but it's -- when you look at the CapEx commitment for us, it's -- and you think about that, we talk about we want to have close to $2 billion in projects every year. This is not a very large project, not even close to be the majority of our CapEx.

Okay. So we'll stay with large projects, and we'll talk about Louisiana Blue. So the market is expecting an update. So my understanding is that you've had bids to -- construction bids to the Board. And then since we've had no -- pretty much no communication since. It looks like you've asked the construction bids to go and do more homework. Would this be a kind of fair summary then?

You are telling me things I don't know. We didn't even talk to the -- we don't have the -- we didn't take to the Board yet. We're working on the project. We're working with our suppliers. We're working for our customers. We are trying to finish everything for the next Board in July, and then we'll try to make a final decision on that.

And can you just talk a little bit about the decision, how you frame the decision. So if it turns out that it's a more expensive project than you announced in December, that mean that it won't go ahead? Or could the other party involved in the project? Could the terms change perhaps?

Yes, I cannot -- if we start speculating, we're never going to end, right? So this project -- the main issue of this project, like I said in the beginning, is the fact that we decided to build a plant without a customer, right? So we decided to build an ammonia plant and our products would be basically commercialized ammonia. We basically -- that project is like that. So we're not going to do that, right? So the most difficult thing, I think, we did was to find a good partner that is willing to own and operate the ammonia plant so this becomes a regular hydrogen project for our product. So this is -- we are trying to develop a regular hydrogen project. The difference here is that it's very large, right? So we need to make sure that we have the cost estimate correct and have the assumptions correct. And it's being built in a time in U.S. that it's not the most easy one, right? So it is -- when you think about the construction of a project like that, for the U.S. terms, I think the numbers that we have, I think, peak construction would be something like 2,000 to 2,500 people, right, in site construction. So this is a very large project.

The project we're building in Saudi Arabia and NEOM at the peak construction at the 3 sites because we have solar, wind and the hydrogen side, we have combined more than 20,000 people. So you can have resources like that in Saudi Arabia because you can import people from South Asia and that kind of stuff. In U.S., it's very complex right now. So we are doing all the homework we can to be sure that we have a feasible project. Our customer is doing the same on that side. I would say that at the current prices of ammonia, any project would be printing money today, but that's not how you need to think about that. So we're working on all that. It's a complex project. And I think the right way to think about it is if it's a good project, we'll do it. If it's not a good project, we're not going to do it. That's the thought process.

I think that's very clear. NEOM, so the other major project that you referred to. So can we just -- firstly, a quick update on construction on the progress and still targeting first volumes next year?

Yes. We are basically done with the power generation side. So we have like close to 4 gigawatts of renewable power between wind and solar. So this is basically done. We are energizing the substations. And that's part of the plan. The most challenging technical part is really the electrolyzers and the hydrogen plant. So -- and we need the power to start commissioning that, and the commissioning is -- when you think about -- we build a lot of hydrogen plants, we build a hydrogen plant sometimes to supply ammonia. And we have one SMR, one equipment that will generate hydrogen. In this case, we have 110 electrolyzers, right? And you cannot commission 110 at the same time. So you need to go one by one, and you cannot start commissioning the ammonia loop before we have a certain amount of hydrogen running. So we're working on -- the plan is in place. Everything is going according to the plan. It is technically a very challenging project because it's the first time that we're building something like this. So we are aware of the challenges, are working on them. And we are expecting to have first ammonia maybe at the beginning of next year. How fast we're going to be able to get to full production, that's where we are working on, but we're going to be next year for sure.

And just a question from the audience on NEOM. What is the range of outcomes at NEOM, I think in terms of -- probably in the context of the Yara, the deal that you've kind of preliminary agreed with Yara in terms of marketing the volumes?

I think we already explained that to everyone that this project only exists because Air Products took the risk of taking the product. So we have a 30-year deal to buy the entire production of ammonia. So at -- basically at fixed price because there is no variation on the raw material cost. And the potential outcomes is the difference between the market and that, right? So if it was easy to solve, if I could have someone taking over that and paying a premium for that, it would be done at this point. But today, of course, the ammonia prices are very high, but that's the challenge that we have. I think with time -- because there is no -- not meaningful escalation from the prices we pay, the more the time goes on, the better this project will look like, right? But carries this ammonia risk price, which is exactly what we are trying to insulate ourselves from the Darrow project.

All right. I'm going to stay with the audience because this is also a question I wanted to ask, and we're going to go to the culture. And this is for Melissa. What are the biggest changes that you've seen in terms of strategy or culture or even financial management since Eduardo joined?

You want me answer that right in front of him?

Yes.

So I would say there are a couple of things. First, we talked about productivity discipline, right? And so we talked about headcount, but it's really much more than headcount that Eduardo has a focus on. It's kind of the energy management, supply chain efficiencies. And so that broader refocusing of the organization to efficiency, I do think it's at our core in our DNA, but he really brought that refocus to the organization.

I think another piece, number two would be really focusing on our core, right, our core business. I think the organization got distracted with these large projects that we just talked about. And it's really refocusing the organization on how to be competitive at what we do best, the core industrial gas. And an example of that is, Eduardo came in and actually restructured our engineering organization. An example is our air separation unit and gasification technology is now centered under our Asian organization who do things on time, on budget religiously. They take it personal when there's a dollar overrun. And so we've now taken that organization and say, okay, here's where we're going to deploy our air separation product lines from and make that more competitive.

And I would say the final piece is a relentless focus on capital discipline. And so we have multiple conversations on projects and are fully focused on making sure that they meet our risk return criteria. And people know that there is a threshold that Eduardo will not go under, and they know that they've got to be able to have and structure the deals to meet those expectations.

I want to pick up a little bit on the reliability point as well because that's always been a market complaint about Air Products is that some of the projects that you've done before your tenure with Eduardo were over budget, delayed and you've seen that in the underperforming. What measures have you -- how have you changed the organization to stop that from happening?

Yes. As Melissa said, on the traditional projects, right, we -- when you look at Air Products, we really didn't have that problem in Asia, right? I think our Asia organization was insulated from that. Air Products made a decision to move the fabrication of cold boxes to China 20 years ago. And I can tell you that I've been in a lot of shops. And I think our shop is first class, is second to none. I've never seen a best shop than the products -- the one that we run in Caojing, close to Shanghai. So I think we have very good things that were done on that area.

When we went to U.S. and Europe, because we took an engineering organization from 1,000 people to 5,000 people, right? We opened an office in India. We had at some point more than 2,000 people in India doing projects for U.S. and Europe and without really a deep knowledge of the culture of Air Products, the culture for industrial gases. And that create issues on the business, right? So we're simplifying everything. We're putting -- we have a gentleman from China now running all our industrial -- our operation engineering piece from China. The engineering, the cold boxes, everything will come from there. And reality is where volume is and creativity -- innovation comes from volume, right, and that you need that. So I think from that perspective, we're going to do very well.

On the hydrogen side, we haven't built a lot of hydrogen plants, but Air Products had alliances before for 20, 30 years. We have very active ways of partners to build that plant. We went away from that. We are working on bringing that back and making the things simpler. But it's -- we still have -- we're lucky that we still have people in the organization from the past, they understand all that. So we're making the changes and getting back to be very predictable and reliable on our capital projects.

But I'm talking about capital projects in the range that industrial gas company should be doing, right? So when you talk about this project in Korea that we talk about being $1 billion, if you pick a number, it's not one project, right? We're building 7, 8 plants in 4, 5 years, right? But that's the size of projects we do. This very large projects is a completely different animal. And I don't see us doing a lot of these projects going forward, right? I would say that Darrow is an exception because I already bought $2 billion in projects. So it's a different situation trying to deal with. But I see the size of projects and our projects will be different to be smaller projects that we can execute reliably with a team that replicate that time after time and time and time again.

And then one more people question. I think you referred to it, I think, perhaps earlier in that answer is that the team is very similar to the below you had -- very similar before you took over. And the results of the Air Products certainly has been better, the growth is accelerating. How have you been able to get the more performance? Is it just the institutional memory and that they remember how it was and you're unlocking that again?

Well, it's a combination of things, right? I think it's part of that. We have more changes than you believe, than you can see from the outside. But we also have -- and I think it's a question of disciplined approach to the business, right? So even if we have a great month and we don't have anything very exciting to talk about. We have full month reviews for other business one day a month, right? We have another day a month that we look at all the projects and the execution. We have another day a month that we look at new projects and capital proposals, right?

So this discipline of spending the time and people understand that you're looking at the assumptions and the reality is that Air Products was probably approving these projects in a very small group of people. And trust me, if I believe that the people in the business today were involved in some of these projects, they wouldn't be in the business anymore. Unfortunately, that we have a very small group of people approving these projects and moving these things that was not -- the experienced people of Air Products were not involved in the decisions before.

Very clear. Okay. We're going to have to move to the current trading, and we have to ask this question as part of the job. So the first quarter of your fiscal year '26, 11% EPS growth; second quarter, 19% EPS growth; the first half, 15% EPS growth, pretty good first half. But the third quarter guidance is 5% to 8% EPS growth and FY '26, 8% to 10% EPS growth. Given what you've been saying earlier about we should expect to see more pricing or the volume progression seems to be pretty solid, can you put the context of the kind of guidance that you've given and what you've been saying today?

Yes. I think you also need to remember that Air Products always have these issues that the first half was always much weaker than the second half of the year, right, in Air Products. And we are trying to put the discipline to try to eliminate these things. Of course, there is a lot of turmoil at this point. It's very difficult to predict what's going to happen in some of the areas. So when we had to do the forecast for the balance of the year, we elected to keep the numbers that we had before. And we need to see what the effects will be in [indiscernible] in other areas, right? So -- but there are a lot of -- we have a little bit of, as I said, some of the turnarounds in China were transferred to the second half that helped us in the first half that will hurt us on the second half. But Hopefully, we'll do better, but we need to give a forecast that we feel we can comply with independently of the conditions in the market.

I think that's spot on. We had forecasted a quite significant turnaround in Q2 that, again, as Eduardo said, did get pushed to Q3 and even over to Q4. Another piece is, we're still cautious about the underlying in Asia, and I'm cautious about chemicals and the underlying in Europe. I think that hopefully, we'll see upside on that, but we need to be able to see that because in the first 2 quarters, the underlying was pretty flat versus prior year. One of the things that I also need to note is, obviously, on helium, we're maintaining our 4% headwind. We've been able to, as Eduardo had guided the team to do, is really shore up longer-term supply. So we won't see the large fluctuations that we've seen over the last couple of years. At helium, it's really showing up in getting more sustained growth on the volumes, but that comes with some concessions on pricing. So that's what you're seeing a little bit in that 4% headwind is some of the...

Yes. A lot of the headwind comes from renegotiations that we made even before the price. So that's part of the issue there. But if you understand the business, right, so our large customers can be [indiscernible] or the [indiscernible] guys, but we also sell to people that are distributors that will fill balloons, right? So in a crisis like that, they come -- the first thing they do, they come to you and they ask for more volume, right, because they want to make -- of course, we're being careful on that. We are working on all these aspects of the business. But we are trying to manage that for the long term, but we'll try to see whatever position we can do in the short term to make a little more money, we'll do it, but the priority is the long term.

Yes. And then just to follow up on that. So European and Asian, but it sounds like North American volumes should be pretty strong to offset this. So you have -- yes, you've got more difficult comps, but the 5% to 8% still sounds pretty conservative.

Yes. I understand the point, but I hope you understand all the balls in the air as well. As Melissa said, one bankruptcy in Europe is -- we have to count on that. We have the decision that we need to make in there, right, that if we cancel the project, we have an effect on capitalized interest and other things that we have. So we have all these balls in the air, and we try to make a judgment on the forecast that we believe is aggressive, but not over.

Understood. Okay. I'm going to go back to the audience for a closing question. With all the activity around data centers and AI, what is the impact of APD on data center growth? I think we covered that one. But maybe more, how is AI being used and the opportunities at Air Products?

Melissa was just talking to me about a case, so I'm going to ask her to...

So we've got AI -- largely across the organization, people are using AI as part of their everyday productivity. So that's kind of the table stakes, right? Eduardo made the decision to provide Copilot to the entire organization. So that innovation from the ground up is fantastic. We are also seeing it in productivity, for example, I own shared business services for our organization. I was actually in Kuala Lumpur last week and the innovation that those teams are bringing through the utilization of AI and automation is fantastic. We're seeing reductions in cost, but also improvements in productivity for those organizations. We're also utilizing AI, and this is just a few examples, power management, supply chain efficiencies. And so we're trying to really bring it from that grassroots that we started with to more of that transformational AI. And we've got programs throughout the organization really focused on that.

But not only that we gave people the normal Copilot thing, but the Agentic version, right? We have probably 6,000 licenses out of 20,000 employees. So 1/3 of our employees, they have this more sophisticated ability to create agents to -- we have training programs. So we're trying to have a bottoms-up movement. And at the same time, we're taking very large pieces of the business like power management and we have structured corporate projects on that on the other side.

Okay. And then closing question for the last 34 seconds. The legacy, Eduardo. So you've come in, made some changes, things are progressing. Where do you want to really be longer term? How do you want to be remembered towards the end of this...

I went to a Jesuit school, right? So we went -- Jesuit school, in the first grade, you're in the religion class, you ace the test. The priest will give 9 out of 10. And you'll guess then why and 10 is only for God. You need to be humble and you need to understand all we are here is trying to give a small contribution and the company is here for 85 years, and none of us will matter 85 years from now. So we all need to understand.

Well, it was a pleasure. Thank you everybody, for joining, and thank you, Eduardo. I really enjoyed this.

Thank you, James.

Thank you.

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 Megan Britt.

Hello, and welcome to the Second Quarter Fiscal 2026 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the Investor Relations section of the Air Products website.

During this call, we'll make forward-looking statements which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call, and in the forward-looking statements and Risk Factors sections of our reports filed with or furnished to the SEC.

We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we will refer to various financial measures, including earnings per share, capital expenditures operating income, operating margin, the effective tax rate, ROC and net debt to EBITDA on a total company basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section.

It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call today. Before we begin, I want to take a moment to express my appreciation to the entire Air Products team, especially the more than 3,000 employees of our direct operations and minority-owned joint ventures in the Middle East. During this period of uncertainty, our people have continued to show dedication, staying focused on safety, reliably serving our customers and supporting critical projects and operations.

Now please turn to Slide 3. Earlier today, we reported results for the second quarter of fiscal 2026. We delivered a broad-based operating income improvement across our reporting segments. Earnings per share of $3.20 increased 19% compared to the prior year quarter on improved volumes, productivity and currency. We also experienced reduced headwinds from helium with volumes better than expected due to Aerospace. Our operating margin of 23.7% was also up compared to the prior year quarter, reflecting the strong underlying volumes, particularly in our on-site business as well as the continued benefit of cost productivity. Return on capital of 11.4% was in line with prior year and improved sequentially. Overall, we were able to improve our business performance during the first half of the fiscal year and effectively manage the market dynamics that have emerged due to the recent Middle East conflict.

Moving to Slide 4. We remain focused on 3 key priorities for 2026, consistent with our strategic road map. On unlocking earnings growth, we are raising our full year earnings guidance which now implies an improvement of 8% to 10% at the midpoint of the full fiscal year. We expect EPS growth to be achieved primarily through our continued focus on pricing actions, productivity and new asset contributions. Additionally, we anticipate a more favorable operating environment in the second half for improved volumes in several key end markets, including refining, electronics and aerospace.

On our second priority, we continue to make progress on optimizing our large project portfolio. On NEOM, negotiations on a marketing and distribution agreement with Yara are progressing in line with expectations. The project continues to make progress and is ready to produce renewable power that will be used in the commissioning of the hydrogen and ammonia plants. Notably, activities at NEOM have not been impacted by recent events in the Middle East. We continue to monitor the situation closely and prioritize safety.

On the Louisiana project, we have set a high bar for moving forward where we requires a reliable capital cost estimate and construction agreements that meet our project risk-adjusted return requirements. We are currently reviewing construction bids from EPC firms and remain committed to reaching a go/no-go decision in conjunction with our partners by the middle of this calendar year.

Finally, on our third priority, maintaining capital discipline. We are staying focused on our capital allocation, invest in growth projects and returning cash to shareholders. As we have previously indicated, we expect to reduce our capital expenditure by approximately $1 billion in fiscal 2026 and remain on track to achieve that objective. We are focused on investing in our backlog of traditional industrial gas projects and have strengthened our project pipeline in electronics and aerospace. In the electronics area, we are currently executing approximately $1 billion in ASU and hydrogen projects in Asia for several multiphase projects serving semiconductor and memory customers. We expect to add another $1.5 billion to $2 billion to backlog in the next 6 months, including the project we announced yesterday to build, own and operate multiple production facilities in both specialty gas supply systems for a new advanced fab with Samsung in South Korea.

We also have announced our intent to build own and operate a new ASU in Florida to further enhance our support for our space launch customers. Lastly, we remain committed to disciplined capital allocations that ensures that we are well positioned to continue our strong track record of returning cash to our shareholders. In the first half of fiscal 2026, we have returned $800 million to shareholders in the form of dividends.

Please turn to Slide 5. As has been widely reported, recent events in the Middle East have resulted in curtailment of helium supply from Qatar. Helium is an important product line for our products with the largest end market sales in electronics, aerospace and medical. Air Products' helium supply chain is very resilient with one, multiple sources in the U.S. in addition to our long-term partnerships in Algeria with Sonatrach and in Qatar with Qatar Energy. Two, a dedicated helium storage cavern in Texas, which has been operational for nearly 5 years. The cavern contains a significant volume, allowing us to provide high supply reliability to our customers when one of our sources is unable to produce as we are now experiencing. And three, a large helium ISO container fleet produced by our subsidiary, Gardner Cryogenics, which provides flexibility and responsiveness in managing supply flows during periods of uncertainty.

Since the beginning of the conflict, we have activated our contingency plans, drawing product from the cavern and positioning our container fleet to bypass conflict-affected areas. We look forward to our partners in Qatar resuming normal production as soon as possible. But until we -- that can be achieved, we are well positioned to enable supply chain resilience through this current supply disruption. We are working very closely with our customers to meet our commitments to them and capture long-term volume growth in critical end markets.

Moving to Slide 6 before Melissa shares detailed quarterly performance, I wanted to offer some additional context on end market conditions. Given the ongoing conflict in the Middle East, we are closely engaged with key customers in each end market. We are also working strategically beyond current events to fully participate in compelling end market growth. Entering the fiscal year, we have a relatively conservative view given muted outlooks for industrial production and manufacturing growth. Now with our performance through the first half, we are more confident about a sustained level of industrial activity and the potential for continued volume growth in some areas. Though the ongoing conflict in the Middle East introduces some uncertainty, we expect the combination of favorable dynamics in core end markets and some new wins to support volume improvement.

Looking at a few highlights. We see strong run rates across our refining customer base, particularly in the U.S. Gulf Coast, where we serve a large number of complex refineries that can process heavy sour crudes and produce high-demand products such as jet fuel. We expect U.S. refineries continue to run hard, which will support higher on-site volumes.

Moving to Chemicals. We are closely monitoring supply chain conditions that would impact volumes. In Europe, challenges securing feedstocks and high costs that customers cannot mitigate with pricing could have an impact on run rates. Beyond Europe, volumes are relatively stable. Additionally, we expect to see stronger oxygen demand from our coal gasification customers in China where increased oil and LNG costs are supporting higher volumes.

Electronics and aerospace continue to be bright spots. We have historically had a meaningful percentage of our sales in electronics and are benefiting from increased volumes in this end market due to a new asset onstream this year. The industry is in the midst of a historical super cycle period to satisfy AI demands with record CapEx expenditures projected between now and 2030. This expansion will generate expansion opportunities for industrial gas providers. Currently, we are working closely with our large long-term electronic customers in helium supply. Already with the long-term agreements signed during the last 6 months, we expect our helium volumes to large electronics customers in Asia to more than double between 2026 and 2030.

Finally, in Aerospace, we have continued to see volume improvement in launches, engine testing and manufacturing. We were very proud to be part of the recent NASA Artemis II mission where our products supply liquid hydrogen and liquid helium using our proprietary liquid helium pumps. We see a tremendous opportunity to continue to grow in the space area and our recently announced Florida ASU investment is expected to increase our participation with both NASA and commercial launches.

Now I'll turn the call over to Melissa to discuss our financial results in greater depth and review our 2026 outlook. Melissa?

Thank you, Eduardo. Hello, and welcome to those joining our call today.

Please move to Slide 7 for a high-level summary of our second quarter financial results. Sales were up 9%, while operating income grew 19% on volume, currency and lower costs, partially offset by price headwind. With respect to volume, we saw growth from on-site in part due to the increased production from our U.S. refinery assets and new assets coming on stream in Asia. We also lapped a major turnaround in our Europe segment.

Merchant volumes were stable, including a modest improvement in helium. On price, the headwind from helium was partially offset by pricing from non-helium merchant products, particularly in the Americas and Europe. The base business once again delivered this quarter and operating margin expanded over 200 basis points to 23.7%, despite a 50 basis point headwind from higher energy pass-through. We have seen margin expansion in part due to our productivity initiatives. We have recognized approximately $50 million in savings year-to-date from headcount reduction, which is on track with our plan for the year. Earnings per share of $3.20 grew 19% from the prior year and exceeded the top end of our guidance range due to stronger on-site volume and better-than-expected helium volume from space launches. Return on capital of 11.4% was in line with prior year, and up 40 basis points sequentially on strong base business performance while we execute our project backlog.

Moving now to Slide 8. Our second quarter earnings per share of $3.20 increased $0.51 or 19% from prior year. We continue to see helium headwind driven by lower price. In line with our guidance, currency was favorable 3% as the U.S. dollar weakened against our key currencies. The base business remained resilient in an uncertain macroeconomic environment. The growth from our on-site volume, non-helium pricing, continued progress on our productivity initiatives and lower depreciation was partially offset by fixed cost inflation and planned maintenance outages in the Americas. In addition to the strong base business performance this quarter, we also saw improved equity affiliate income, primarily in Mexico.

Moving now to Slide 9. I'll provide an overview of our results by segment. You can find additional details of the quarterly segment results in the appendix. For the second quarter, Americas operating income growth of 2% was primarily driven by on-site volume. Merchant volume was also up, including helium supplied for the space launches. Additionally, non-helium merchant price contributed to the results. This improvement was partially offset by prior year income from a onetime customer contract addendum, lower price in helium and higher power costs and maintenance turnarounds in the quarter.

Operating income grew 25% in our Asia segment, primarily due to continued productivity improvements and favorable on-site and helium volumes. We saw a modest contribution from our new assets as they continue to ramp up, which we expect to further contribute in the second half of our fiscal year. Additionally, reduced depreciation from certain gasification assets classified as held for sale also benefited our results. This improvement was partially offset by a headwind from helium pricing. Europe operating income increased 8% due to the favorable on-site volume, including a prior year turnaround, as well as favorable currency and non-helium price. We saw higher costs in the segment, including depreciation and fixed cost inflation as well as helium volume and pricing headwind.

In our Middle East and India segment, operating income improved on lower cost, while equity affiliate income was slightly positive. Lastly, the Corporate and Other segment results improved due to lower sale of equipment cost headwinds as well as continued strong productivity.

Moving now to Slide 10. Our base business continues to generate stable cash flow as we execute on our project backlog for both energy transition and traditional industrial gas projects. We remain on track to reduce capital spend by more than $1 billion relative to the prior year. Additionally, through the first half of the fiscal year, we returned $800 million in cash to our shareholders in the form of dividends. As it relates to our leverage, our net debt-to-EBITDA ratio is 2.2x. We are committed to bringing the company back to an A/A2 rating over the long term.

Please turn to Slide 11, where we will review our outlook. With a strong first half and outperformance in the market volume, we are raising our fiscal full year guidance to $13 to $13.25 or 8% to 10% growth from the prior year. However, we remain cautious given uncertainty around the macroeconomic environment, especially in Europe and Asia. In the second half, we expect to see benefits from continued non-helium pricing actions and progress on our productivity initiatives, while new assets ramp up. We still expect helium to be a headwind due to lower price while we look to capture long-term volume commitment. Specific to the third quarter, we expect to deliver earnings per share in the range of $3.25 to $3.35, representing a 5% to 8% growth from the prior year. For capital expenditures, we are maintaining our guidance at approximately $4 billion for the fiscal year.

Now we'll open the call up for questions. Operator?

[Operator Instructions] We'll take our first question from John McNulty of BMO Capital Markets.

Since the last call, obviously, the Middle East conflict has hit a lot of kind of things that may have changed. I guess maybe we can start with one on the project. So NEOM, can you give us an update on the progress there as well as at this point, given the spike in gray ammonia prices, concern about industries maybe being beholden to oil, can you tell us if the demand environment has changed all that much for your green ammonia project?

Thank you for the call. Yes, I would say, starting from NEOM, the project, as you know, is on the West Coast of Saudi Arabia. So it has not been affected by the conflict at this point. Of course, we are taking a lot of precautions on the safety side, but we have all the materials in hand. We have the people on-site, and the project is continuing normally, I would say. And in terms of the progress, we are basically done with the renewable power side. We just energized the substation using the grid power. The next step is to basically connect the solar park and start commissioning using our own renewable power. So it's progressing as expected over there.

I would say that in terms of the ammonia price, everyone can see what is happening in the ammonia market. I think prices are getting very close to $1,000 a ton. Of course, that creates some speculation on projects and so forth. But I would say it's too early for us to understand the demand for green ammonia and the impact they're going to have in prices in the long term. Again, this is -- we consider that a temporary effect that will go for a few months. But I think in the long term, it's clear that there is some advantage to be disconnected from natural gas from some areas of the planet. So the U.S. supply of natural gas will be a winner on that perspective. And I think green ammonia produced by clean power in places like Saudi Arabia, we also can benefit from that, but it's a little early to say that.

Got it. Okay. Fair enough. And then maybe just as a follow-up, I guess we were a little bit surprised given what's going on in the helium markets to see that you still expect about a 4% drag on EPS in 2026. Admittedly, we get, look, some of these are contracts that are multiyear and even the ones that reset last year, were going to be a drag. But I guess we're a little bit surprised to not see some updraft in contracts that might be getting signed now or on the minimal part that you have that's tied to spot. So I guess, can you help us to think about what's going on in the helium markets and maybe why that's still pretty much the same drag you expected it to be at the start of the year?

Yes. I would say that to start, right, the helium market, it was structurally long before the war. And of course, with Qatar representing 1/3 of the world's volume of helium, the market is short now, but we all expect that we'll return to the original state in a few weeks or a few months after the crisis is over. So this is a temporary period that we have here. As I described in the prepared remarks, Air Products has a very resilient system that was designed to basically be able to continue to supply our customers in the case of interruption in one of our sources like we're having today. It's designed basically for Air Products volumes, not for the entire market. So we may have a little more volume than we had before when we push our cavern. But it's not that significant and really doesn't allow us to supply the volumes that are not present in the market today.

So of course, we are trying to sign longer-term agreements. That's the objective. I think we also made a comment that this didn't start with the conflict started before that. We were trying to sign these long-term agreements. We made the point to say that our volumes for helium in Asia for electronics will more than double in the next 4 years. In fact, I expect to be more than that. And so we are focused on that, focused on signing these long-term agreements. We may have a little game here and there on the spot market. But it's -- at this point, it would be wrong for us to include that in the forecast, not knowing when the market will come down or come back to normal conditions.

We'll take our next question from Jeff Zekauskas with JPMorgan.

When you think about the Darrow project, you spoke about making a go or no-go decision. Is it possible that, that project could be downsized? In other words, does it make sense to make half as much ammonia given that you've already invested in equipment that you may be able to use, and then what that may do is limit the inflationary factors in building a facility. Is that a possibility?

Jeff, yes. We look at all that, Jeff. It's a little more complicated than that. This plant, I would say there is like 3 different process units. You have the air separation plants, you have the hydrogen generation units and you have the ammonia plants, the ammonia trains. And we do not have exactly 2 trains for each process area. We have one of the process areas that we have 3 trains, which makes very difficult for us to only execute half of the project. So I would say that this would increase the cost significantly because we would need to build a plant larger than the 50% and would make the economics even more challenging than it is to build the entire facility.

Okay. And then secondly, year-over-year, your average prices were down 1%. If we excluded helium, what would your prices have been? Would they have been up 1%, 2% for the company as a whole?

Yes, sure. Thanks, Jeff. I'll take that question. So from a non-helium merchant perspective, pricing actually would have been up about 2%. Half of that we would have seen in the Americas and half of that in Europe. Asia and from a non-helium perspective, was largely flat.

We'll go next to John Roberts with Mizuho.

Issue here for the Yara discussions. Are you and Yara basically on the same page with respect to the risk around CBAM so that it's not a key issue to getting closure on your discussions or is that a key thing that we need to continue to watch here?

I think I mentioned that before. The CBAM is not part of our agreement. Our agreement is a U.S. agreement for hydrogen and nitrogen, so it's more a question for Yara. But I think we -- I mentioned that in the last question, the crisis now is making clear to everyone that the big advantage that you have is to be connected to the U.S. natural gas supply, and I think this is much bigger than the CBAM discussion. But I believe from everything I heard from Yara that they understand what the possibilities are in terms of CBAM and that's not part of our discussions with them.

Okay. And then secondly, do you have any material customers in Asia that are down because of raw material supply constraints, either refineries or chemical plants that are taking downtime because they can't get feedstock?

No, not really. We -- our biggest supply for these sectors are in China. And I would say that China is basically replacing a lot of LNG with the coal facilities that they have. And in fact, we have seen a significant increase in oxygen volumes for this type of plants in China.

Well, next to David Begleiter with Deutsche Bank.

Eduardo, on Darrow, you mentioned a high bar for that project. So is the base case still it does not move forward? And if it does not, do you have projects that you could pivot to in short order with that capital? That's my first question.

We, we...

Yes. So maybe I could take that one, absolutely. So from a Darrow perspective, I think Eduardo has said before that it is, in fact, our base case that we would not move forward. But we need to review the economics as we get the bids in from the construction party that we're talking to. And then we'll make an economic decision on if we move forward from that.

From a capital perspective, we just announced the Samsung project. That is one that we see a significant area of growth in electronics that could quickly replace that capital that we were going to spend on Darrow, and we continue to be very bullish on the electronic space over the next couple of years through this hyper cycle. So again, we have a base case of Darrow of not moving forward at this point in time, but we're reviewing the economics. And again, we are very bullish on other growth opportunities if Darrow does not move forward.

Yes. And I just want to make a point here. When I say base case that for Darrow to move forward, we need to reach an agreement. So until you reach an agreement, the base case is that you're not -- you don't have an agreement today. But we're working on that, and we'll see what the result will be in the next 3 months. But today, we do not have an agreement yet to move that product forward, as you know.

And just on the Americas margins, they were, I think, lowest in 3 years. You mentioned power cost, turnaround expenses. Would you expect margins to recover nicely in Q3 versus Q2 given those headwinds?

Yes. So when you think about margins in the Americas, one thing you obviously need to consider is the energy cost pass-through, which obviously affects margins, right? So we've seen very strong contributions in our HyCO assets, which have an impact from an energy cost pass-through. But we do expect once the energy cost to subside, then yes, our margins would continue to improve. We are continuing to see strong productivity there, which obviously will also contribute to a healthy margin moving forward.

We'll take our next question from Duffy Fischer with Goldman Sachs.

Just a question on the coal gasification plants in China. So one, in the quarter, how much was the benefit from the reduced D&A for moving it out of the segment? And then two, I think you've talked about those being collectively net breakeven on an income basis since they're extensively coal to oil or synthetic oil at the end of the day. I would imagine they're much more profitable now and they're probably paying you the regulated percent where I think before you were saying that they were shorting you on paying. So can you just talk about how the economics of those plants have changed within your P&L? And does that continue to get better from here as long as oil stays above $100?

Yes. Duffy, thanks for the question. And so yes, we have put 2 of our coal gasification assets held for sale in China. The impact to the quarter is a little bit of twofold. So let's say, around 1%, 1.5% as far as the cancellation or the stop of the depreciation. And then you're absolutely right. Coal to methanol, it has improved from an economic perspective. So we are collecting on past dues that we did not have in our previous results because we are being prudent and fully reserving those items. And that collection is really about a 1% to 1.5% tailwind for us as well. But we are actively pursuing the sale of those assets, and we will continue to do so.

Great. And then, Eduardo, if you could maybe just pontificate a little bit. When do you think under 2 scenarios that your helium pricing stops being negative? One, if there's a fairly quick resolution with Qatar; and two, if this stays semi-permanent, what do you think happens with your helium pricing? Basically, when do we see the inflection that helium stops being a negative on price?

Yes. We were expecting helium to bottom by the end of this year. We still expect that to be the case. You need to remember that it's all a function of what you are comparing with, right? So we started from a very high price level. And we're working on signing these long-term agreements. Our agreements are on average between 3 and 5 years, but more recently, we have been signing agreements even longer than that as people get more concerned with reliability of supply, right?

So the system that we have with the cavern that we can bring product to the cavern, store it as a gas and then take the gas as liquid and bring to one of our facilities to liquefy. It's very reliable, but it has a cost, right? So you just think about the, just an inventory. We have hundreds of billions of dollars in helium in our cavern. So this system has a cost. It is much harder to get value for that cost when the market is long. The conversations are much -- it's not easy, but it's a little less difficult to get these long-term agreements right now, and that's what we are focusing on.

We'll go next to Chris Parkinson with Wolfe Research.

Melissa or Eduardo, just the way your second half guidance kind of just works out, it implies a fairly low single-digit growth rate in terms of EPS for the fourth quarter. Is that -- is there something else going on there? Is there something we should be monitoring in terms of turnarounds, hydrogen demand, you already went over helium, baseline merchant pricing. I just -- or is that just, hey, we want to see how the year turns out -- the fiscal year turns out just based on the degree of uncertainty out of the Middle East?

Chris, thanks for the question. So we have raised our guide, increased about a 10% or $0.10 from the mid, right? And so if you think about the strong first half that we had, if we build on that, first, we look at market volumes, right? We do expect some continued market volume improvements largely in the Americas, like we saw in the first half. We also have new asset contributions that we look to continue to increase, both in the Asia and Americas that will see some contributions continue to increase in the second half. However, we do remain uncertain about the macroeconomic environment, especially in Asia and Europe. Additionally, we're closely monitoring our customer supply chain conditions with impact on the Strait of Hormuz.

And finally, we do have a turnaround that we moved from Q2. We're expecting in Q2 that will move and spread between Q3 and Q4, so that will have a bit of a headwind for us as well. So we do have some green shoots in the Americas from a volume perspective, new asset contributions, but we do want to make sure that we're monitoring closely on the macroeconomic environment in Asia and Europe as well as, again, additional turnarounds.

Got it. And just, as a quick follow-up, in the Samsung release from yesterday, you used the phrase, the greatest investment -- the largest investment in the semiconductor industry, I believe to date or something along those lines. Is that -- just to confirm definition here, considering you, I believe, did $900 million to build something in TSMC, does that imply that the multi-stages for Samsung would be in excess of that amount. Is there any more framework you could perhaps add? And also, just a quick kind of side note is, is this something you expect to be more consistent in terms of bidding activity over the next 12 months or so?

Yes. I think the message is exactly how you described. It is the largest investment we ever made in the electronics side, and we're not going to disclose the number, but the reference that you made through a previous project is correct. So that's all I can say about that. This is probably the largest site for electronics in the world today. Air Products was the first supplier for that site on the Phase 1. And the phases are getting larger in terms of industrial gas consumption. So this is the fifth phase of the site and the volumes we're going to supply under this agreement when it's completely built is approximately 3x larger than what we did in Phase 1.

So that gives you an idea. So it's a very significant project for us. We are very proud to have reached this point with Samsung and -- but it's just a start of -- probably a 4-year construction that we have to do in the multiple phase projects like that things.

And on your other question about -- I'm sorry, the other question about the -- what we expect in terms of bid activity. As we said, there is a -- I've seen numbers in excess of $0.5 trillion of CapEx being spent by semiconductor and memory manufacturers. And of course, there is a lot of projects in industrial gases. They are growing in volume, and we're working hard to get our fair share of that.

We'll go next to Vincent Andrews with Morgan Stanley.

Just looking at Slide 17, corporate and other, the operating income hit was a lot less year-over-year and sequentially. You called out lower changes to sale of equipment project estimates. Can you just give a little detail on that? And then also help us understand whether this is a good run rate for the rest of the year? Or is there just some lumpiness? And maybe the back half will be a little bit higher in the run rate will sort of mean revert higher? That's my first question.

Yes. Thanks, Vincent. So speaking to our Corporate and Other segment, it is a bit of a mixed bag. But you are correct that the vast majority of the improvement was the prior year cost increase that we saw on a sale of equipment project, again, which is a percentage of completion projects, so increased costs go to the bottom line. So it was a bit of a function of a prior year aspect. However, we do continue to have strong productivity in our Corporate and Other segment as well. So we will continue to see that flow through from a year-on-year perspective as we continue to reduce headcount and rightsize the organization.

Okay. Maybe you could just give us a little sense of what that number should look like in the back half. And then I'd also ask, on the tax rate, it came in a bit lower than we thought for the quarter. It was down about 1 point year-over-year and about 0.5 point sequentially. So is this 18-ish percent, is that what we should be using for the back half?

So yes, thanks for the follow-up there. So from an ongoing perspective, I think that the run rate that we had this quarter should be consistent with what we see in corporate for the rest of the year as we should not have any more sale of equipment headwinds. So that comp will continue to flow through for the rest of the year. From a tax rate perspective, yes, 18 is the number that we should be forecasting against. We did have some U.S. investment tax credits and increased estimates for a Dutch investment incentive that reduced our ETR for this quarter, but we should see that flow through the rest of the year.

We'll go next to James Hooper with Bernstein.

First question. Can you talk about -- a little bit about the pricing dynamics for the non-helium gases through the rest of the year? Obviously, you mentioned that plus 2 from Europe and Americas. But will the kind of come in inflation mean that your Asian pricing assumptions will need to change also?

I'm sorry, I didn't get the last part. What assumptions do...

The Asia assumption.

The Asia, yes. Asia is a little different. I think the dynamics there, it's in China is, you know, a hypercompetitive market. I think every Western company will tell you that the PPI, CPI is negative for the last several years, and it's a really difficult fight to keep your prices stable in China. Outside of that, I would say, in Europe and the U.S., we consider the pass-through a separate issue. I would say that in pricing, we continue to make progress, and our goal is always to be able to pass inflation to that we experienced in our business to pricing. So I expect that to continue to be the case in the near future. And with helium, of course, subsiding the effects year-over-year, as I said, by the end of the year, we hope that the helium headwind in pricing will be done as well.

And then just in terms of the follow-up, Slide 6. Can you -- I thought it was very useful. Can you just give us a few indications of where you expect the biggest kind of shifts in your end markets to come from the second half versus the first half? For example, in chemicals. Are you seeing any European volume improvements based on some of the kind of Asian supply outages?

Yes. In Europe, as you know, they benefit in terms of pricing from the absence of the Middle East supply in the market. But on the other hand, they are suffering from cost inflation on oil and natural gas. So it's a difficult dynamic. I don't think the European industry is structurally changing the issues that they have, the chemical industry. I think they will be back when the conflict is over. But I think in this window now, we are basically seeing things a little stable, but Air Products is not a very large supply of the chemical industry in Europe. So you probably can find -- get better answers from other companies on that.

I would say the segments in general, as I said, electronics is a big bright spot for us. We are working to capture that. Same thing with aerospace. Energy in U.S. because of our connection in the pipeline system in the Gulf Coast with refineries, this is running at record levels at this point. So our hydrogen volume never been so high as it is right now. So that's going okay. And the other segments like food and medical, they are very stable, and they are less cyclical than other segments.

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

Can you speak to your degrees of freedom on the supply side of the helium market? I appreciate you have large inventory buffer and you're taking steps to maintain highly reliable supply. But in the scenario where we have a prolonged conflict, what are you doing differently? How much might you be able to increase sourcing arrangements and liquefaction? Maybe you could just kind of frame out how you're operating today versus 2 or 3 months ago.

Yes. I would say, Kevin, most of our flexibility comes from the position that historically we have in the, in Kansas, and in Amarillo area that we have connect -- we were connected with the BLM. We're still connected, but we get very low volumes there. We have some other private volumes that we are able to liquefy at our plant, but we have access to liquefaction capacity. And our project with the cavern was connected to that. So the constraint that we have is really the ability to move the products from Texas to Kansas and then the second constraint would be the liquefaction capacity that we have over there.

So we are working to maximize both points to eliminate these constraints. It is not an easy supply chain because you have to -- from East Texas to Kansas, like 900 miles one way, but we are working on that to maximize that. But we can probably cover one of our sources being down. As you know, in Qatar, we are connected to, Qatar 3, which is a different source. It's not the LNG source. It's the local natural gas grid there. So we are able to replace that, but not much more than that. So I would say that the design was for -- to cover our customers. And if this thing gets prolonged for a long time, it will be a tough time for the market. But I would say that at the end, the customers that need the product the most, I think the market will find a way to keep them supplied. That's my guess at this point, but I can only talk about products in our supply.

Very helpful. If I may, as a second question. Can you speak to what you're baking into your financial guidance for volume growth in the back half of the year? I think your 4% number in the fiscal second quarter was the best in 3 years. And it seems as though some of the impetus behind that is to do with the energy market changes, right? Refinery hydrogen and maybe some gasification as well. But I think PMIs have been broadening and improving. So how are you approaching the back half in terms of call it, nonenergy-related demand trajectory?

Yes, Kevin, we had a lot of debate on that on how to set our guidance. And as you imagine, it's not an easy situation, right? We -- the conflict -- we are in the middle of this conflict. What we have now is a ceasefire, right? So no one can tell you what the situation will be a month from now, 2 months from now, what the oil prices will be, what will happen in the LNG market, what will be the energy prices in Europe and so forth. So in the absence of clarity on this point, what we did was basically, we adjusted the guidance based on the beat that we have in the second quarter. And at this point, it would be premature for us to change what we forecast before for the second half of the year.

I hope that it will be better. But again, anything can happen, right? We didn't expect this conflict to happen. I don't think anyone did. And when the impact we've seen in helium, for example, was not one of the scenarios we expected. We had a scenarios of one of the Qatar plants being down for technical reasons. That always happen, but we never had a scenario that 3 plants will be down at the same time because this trade is closed or because one of these facilities impacted by the war.

We understand that one of these facilities trying to bring it back to production. The one that we are connected is supposed to come back in the near -- in the next few months. Of course, there is the issue of how we move that product considering the logistic issues that you have right now, but there is a lot of uncertainty in the market. And based on this uncertainty, we decided that the prudent thing to do was to keep our second half of the year guidance that we had before.

We'll go next to Patrick Cunningham with Citi.

Just on helium, just additional follow-ups there. If the supply disruption persists, would you need to put customers on allocation? How long does it take alternative supply sources to get qualified with some of the larger semiconductor customers?

Again, we -- from the products perspective, we have the inventory, and we're working to replace the volumes that we were taking from Qatar. In fact, the plant that supplies in Qatar was down since December. So we were not taking product from Qatar since December. So it didn't change the conflict didn't change that much. The situation that we have, and we have enough product to supply our customers, and that will be our position going forward.

Understood. And could you provide an update on the Alberta project in terms of offtakes timing and any update to costs?

There are no updates on the project. We continue to find a way to improve the conditions. It's -- there is some -- on the regulatory side, there is things that are moving in Canada. We're trying to understand exactly what the final legislation will be and the impact that we have in the project, and we have been working with the government of Canada and the government of Alberta to try to improve the conditions the best we can for this project.

We'll go next to Josh Spector with UBS.

I was wondering if you could give us a size of what your backlog is now for profit contributing projects, considering you've signed a few more versus where you were at 6 months ago. Can you help us think about what comes online over the next few years or just a total number for us to be thinking about?

So we look at our backlog in a pretty consistent way, right? So this is things that are going to be contributing, have been approved by the Board. But one thing, obviously, we have talked about is the NEOM project, that is a bit of variability in the impact of that as we lead up to the 2030 when CBAM and RFNBO is fully in ramp. But right now, again, the backlog is $9 billion. I do feel positive about the growth in the electronic space that we'll see continued contributions and winning our fair share of projects in that space.

And we've given the 5-year forecast. Previously that shows our mid- to high single-digit growth from an EPS perspective, both from contributions on the base and market growth as well as new assets coming on stream. And as I've mentioned previously, we have 2 new assets that will be contributing to the back half of this year, and we see that continuing as far as contributions similar throughout the rest of the next 5 years.

Okay. I appreciate that. And maybe you should have qualified and said, excluding NEOM, Darrow and all the projects that you guys have highlighted is nonprofit contributing. What does that trim that $9 billion down to?

So we have a little over 2.5 in our -- what we would call our traditional industrial gas backlog. A significant portion of that is in the electronics space.

We'll go next to Mike Sison with Wells Fargo.

Nice start to the year. There's a relatively sizable IPO coming out the summer in space. Just curious if you could give us your thoughts on your business in that sector, how big is it and where are you positioned?

Yes. It's a segment that is growing very fast, as you know, from the news, it's the situation basically changes every week or every day with the commercial launches. Air Products has a very traditional business in aerospace. We work with NASA since the '60s, and we are a large supplier of hydrogen, liquid hydrogen, liquid helium to the traditional space program, and we are working now to increase our share with the commercial launches. You see forecasts that are -- go from extremely high to out of this world volumes in the segment. And I think like everyone else, we need to see how this will develop and if they're going to really get to the point that they will launch a rocket every day.

So we are trying to make some investments on the area, try to grow our participation in the traditional air separation gases for the segment, but I cannot give you more specific information than that at this point.

And at this time, there are no further questions.

Thank you. So I would like to thank everyone for joining our call today. We appreciate your interest in Air Products, and we look forward to discussing our results with you again next quarter. Have a safe day. Thank you. Bye-bye.

This does conclude today's conference. Thank you for your participation. You may now disconnect.

Hi, good morning. I'm Jeff Zekauskas. I analyze chemicals for JPMorgan. This morning, it's my pleasure to introduce the management of Air Products. Representing Air Products is Eduardo Menezes who's been CEO for 1 year. And Eduardo had a long tenure at both Linde and before that Praxair. And I think he managed every major geographic region at one time or another for Praxair, Linde and he's come to Air Products to change the direction of the company. He's joined by Melissa Schaeffer, who is Chief Financial Officer since 2021 and Megan Britt, the Head of IR is in the audience as is Caitlin Miller, her assistant. The form of our presentation this morning will be fireside chat.

Eduardo, the world has changed with conflict and Iran. Is this something that's touched Air Products' business or touched either demand or the way your customers are looking for your services?

Absolutely, right? So the last 3 weeks, they have been a little hectic to say the least. I would divide the effects in 2 categories, right? So we have the effects in the ground in the region. Air Products has a significant presence in the Middle East. It's a combination of companies that we own 100% that operate in several countries, normally around Saudi Arabia. We have operations in Oman, in Qatar, in UAE and in Bahrain. We also have operations in Egypt and Israel that are also owned 100% by Air Products. And in the Kingdom of Saudi Arabia, we have several joint ventures that we own between 25% and 50%.

And those joint ventures, they vary from the largest traditional industrial gas company in Saudi Arabia that we own 25% for several years now, which is not a big number in terms of revenue, but it's a lot of employees in the area. Then we have the joint ventures with Saudi Aramco in Jazan and in Jubail and we have the project under construction in NEOM. So overall, we have directly and indirectly with the joint ventures, thousands of employees in the region. So main concern is the security of our people, making sure that everyone is safe, making sure that we are taking the right actions to protect the people and the assets, and that has been a lot of the efforts we have.

So these are the direct impact. I would say that other than a closure in the plant, a small plant here and there and some issues bringing people from the outside of the region traveling in and out, we haven't feel a lot of impacts on that. But the business will suffer over there, although it's a small business for us in terms of top line and what we consolidate. That is the impact in the region. On top of that, of course, we have the impact outside of the region with the closure of the Strait of Hormuz. Everybody knows about that, that Qatar Energy and basically stopped shipping LNG, shut down the plants that has an impact -- a significant impact on energy prices in Europe for us that we have a large operation there.

And we have the impact in heating that is affecting the global supply, although at this point, our own production out of Qatar was relatively small. So we are not being affected directly on that, but indirectly within the entire market.

With energy prices, I think energy prices in Europe are $17 an MMBtu on that order of magnitude. And obviously, naphtha values are higher, and so gasoline values go up. How does Air Products prepare for this inflation that it will face in its operations? Are you placing surcharges yet? Or you're waiting to see what the duration of the conflict is.

Yes, you have 2 different kinds of effects there. So natural gas went as soon as they start the war went to equivalent $15 per MMBtu jumped to $18. So you could tell me it varies every day. We have a significant consumption of our hydrogen plants, but those agreements normally we have a pass-through. So that goes straight to the customer. We may have an effect if the consumption goes up or down a little bit, but that doesn't affect so much our bottom line is more an effect on the pass-through on the revenue side. In addition to that, of course, when you have the natural gas prices going up, energy prices go up, right? So we have energy prices going up in Europe, and that affects our gas separation side of the business more than anything else.

On the gas separation side, on the large agreements, where we have pipelines, we have the same scheme that I described for hydrogen and natural gas pass-through. On the liquid business a little more complicated. We have formulas and we have triggers. We have in some cases, we have to do surcharges. So we try to pass that to the customers as fast as we can. But of course, the environment is very complicated right now with this high energy prices in Europe.

So the part of the business in Europe that's affected, I would imagine, would be the merchant business.

Correct.

And so do you try to move quickly or there's a natural piece of inflation that begins to pass through so that the customer gets to see things. And then what you do is you capture the margin with a lag. Is that the general strategy?

Yes. There is always a little bit of a lag, but we try to keep that to a minimum as much as we can. As you never know what the volumes will be after that. So you can be unfair to the customer to yourself if the volumes fluctuate between the time you observed the increase in cost to the time that you are able to pass that to the customer.

So you spoke of Qatar Energy closing its LNG operations or suspending them for a time. And of course, they're a large supplier of helium. When you think about the helium industry, you have caverns and Linde has caverns, Air Liquide has caverns. If you look across the world, how much helium is in those caverns relative to the global market?

Yes, I think you can find information on the size of the cavern, the theoretical size of these caverns, how much is inside the cavern is something that we only know for ourselves, right? We have no clue of how much our competitors have in their caverns. It's a relatively new thing for the industry because before we had the BLM that had a big dome that basically worked as a storage. I think when the BLM started to dwindle, the companies try to understand what to do. I think Air Liquide was the first one to put a cavern in Germany, which was a little bit of a different place.

We opted -- we were the second ones to put a cavern. We opted to do that in Texas. Again, cavern is we do a lot of work to take helium from natural gas to purify and to liquefy that, right? Storing large volumes of liquid is not practical for the temperature and the cost of doing that. So you need to store the gas in a cavern like that. So you need to take the liquid basically pump and vaporize or vaporize and compress, but you need to store that in a cavern in a gas phase. And then you need to take out of the cavern and you need to liquefy that again. So what we elected to do in the U.S., we have big liquefaction plants in the center of the country in Kansas and [indiscernible] of Texas that were designed for operating with the BLM reserves.

So we basically have a structure that we have the cavern in Texas. And if we need to get product out of that cavern, we take the product in the form of gas. We have some special transportation equipment that we bought and we design and bought them specifically for that in the gas phase that moves the product to Kansas and then we can reliquefy the product and put back in the supply chain so it is a little bit of a complicated scheme. It takes some time to basically put that in motion. And we did that since the war started, and we will try to run our liquefaction plant at full capacity as we used to have many years ago. We still run the plant independent of all that, but we still have a little bit of a supply there in the area. But we're going to run that plant at the full capacity using these high-pressure trailers of gas that will bring from Texas.

So when I think about the cavern storage space for the industry. It looks to me like the -- like it's about a year's worth of helium supply if the caverns were full. Do you think that's fair?

I think globally, a little less than that. But for -- we don't -- we didn't design and build this cavern for others, right? We did it for our own supply, yes, that's correct. But if you take the entire global volume and all the caverns together, I don't think we get there. And I think the largest one that was commissioned by our competitor in Texas, I think it was relatively recently. I have no idea how much product they have there, but it's not very likely that it's full. So you need to...

No, no. And Qatar's output I thought was about 55 million cubic meters out of 176 million cubic meter market. So if the industry can liquefy and if its caverns are maybe 60% full. In theory, there should be enough to cover the shortage over even a very extended period of time. Do you think that's fair? Or do you think conditions are different?

Yes, again, I know my numbers. I know for us, it's true. I think for the others, I don't know how much -- the assumption of if the cavern is full is very big. I don't know how much liquefaction they have associated with each of these assets. And again, you need to -- this is not a market that's different from the air separation that we have the control of the molecule, the control of the production chain. Basically helium is a byproduct from natural gas, right? So one of our biggest sources was Algeria, and our plant in Algeria was down for several months. We're very lucky that this plant is back in the last 2 weeks. But we don't control the sources, right? And that's -- and I keep saying that, that the helium market became much more volatile in the last few years, when the BLM went away. I think we -- Air Products is doing the right things, thinking about the security of supply for our customers, and that's what we're focused on.

So we will be able to continue to supply our customers and when we have Algeria full in the supply chain, and we have the liquefaction in the U.S. full in the supply chain. We will have even a little more that we can take over volumes from that are not being supplied by us. But it's not that much and I don't know the position from the others to know if the entire market will be in balance. But I think there is a lot of people talking about that a lot. I think at the end of the day, the most critical customers, the industry will find a way to keep them supplied in the next few months, even if the conflict goes forward. But you're going to have some hiccups here and there, and you're going to have some less vital sectors that will suffer a little more than the electronics or MRIs and that kind of stuff.

Do you hold helium inventory for the large electron customers? Or do they keep their own inventory on hand?

In most cases, the customers don't own the containers. So the industrial gas companies own the containers. So we will have whatever containers we have at the site. And in some locations because of the structure of supply because we supply directly to some very large customers with containers, we also supply our own transfill units where we take helium from large containers and we're putting smaller dewars and cylinders and so forth. So for example, in Europe, we have a place where we have a certain inventory of containers -- full containers because we don't have heating production in Europe, it comes from Qatar, comes from the U.S., from Algeria. So we have some inventory.

But you're talking about high single-digit number of containers. And that can help the industry in -- and I think that all the competitors are the same. I think that will help the industry for a period of a few weeks. But if you go for months, the inventory really will be consumed.

I think helium consultant made a comment that since the conflict began, helium prices were up between, I don't know, 20% and 40%. That's not the industrial gas spot price that's the price of buying helium from a raw source. Is that correct?

No, I think it's a consultant. So you take it to value of that. There are spot sales from some of the sources that, of course, if they have a spot sale, they would go up. But I'm not in that market. I'm not buying spot product in the market. And I -- a lot of our contracts are long term. So they have prices, the ones that are not, we are pricing them as we normally do, in our activities everything.

So has your helium business changed very much in terms of prices or volumes since the conflict began or...

No. You cannot move, you cannot change that much in 2 weeks. It's a 85-year-old company. In 2 weeks, we don't change that much.

Okay. Maybe a last question on helium. Can you tell us just a little bit about the Gartner business that you have? And a little bit about how many containers are shipped either per day or per year? And how Air Products fits into the helium supply chain?

Well, Gartner is a company that has been producing this helium containers for decades now. And in fact, it was an acquisition by Air Products. I don't know 70s or 80s. So we -- it's right there in Allentown so by next door. And the entire helium market globally, I would say, has couple of thousand containers that were built during the history that are still in activity. And we probably have a very significant piece of that was built by Gartner, right? So historically, we keep that business on the side and we produce containers for our products is our first priority.

But if we have capacity, we'll produce containers for others as well. And they do -- their specialties is not really only helium, right? It's deep cryogenics. So cryogenics of helium and hydrogen. So they produce also liquid hydrogen containers, liquid hydrogen tanks, which are very specialized as well for the temperatures that they operate.

Thank you for that. Since the conflict began, there's been all kinds of elevation of petrochemical prices, oil prices, different refinery values. When you look at your business in North America, have the volume patterns changed recently?

Our volumes have been very strong, but I'll let Melissa comment on that as well. In the next 3 weeks, if we have any changes on that.

Yes. The last 3 weeks is a little bit of a near term. But what we did see even leading up to the war was actually we saw the refineries running very strong. So our HyCO business in the U.S. has been running very, very strong. We've got a HyCO asset in Europe that was also running very strong. So we have continued to see those volumes increase both before and during the crisis.

And the chemical industry, do you detect a change in their operating rates in the U.S.

A little too early to say. I think the U.S. will be one of the areas that we'll gain with this crisis because of the natural gas prices. So they should be operating at higher volumes, but it's a little too early to say.

Too early to say. So some of the PMIs -- so the PMIs for January and for February were positive for goods production in the U.S. Did you detect a change in your business? Or since the PMIs were so negative in December and November? Was it more a reaction to that weaker period?

It's a good question. We actually have seen pretty strong volumes in the Americas. We saw relatively strong volumes in Q1. We've seen that continue to progress in January and February. Obviously, we're getting to close to the end of the quarter so we'll be assessing the full quarter. But yes, the answer is we have seen volumes increase in the Americas. Now if that's a short-term phenomenon, we'll see, but it seems like sequentially, we have seen volumes continue to be pretty strong in Americas.

So the industrial gas industry has been characterized over a multiyear period by positive pricing and generally weak volumes are flattish volumes. And in the case of Air Products, I think your sequential prices have been flat for 3 quarters in a row. Now sometimes when you calculate it, there's rounding and so things can kind of move up or change. Can you talk about your -- the last 3 quarters of pricing and why pricing seems to be flattening out for the industrial gas companies, if it is?

Yes. I think there's a lot of things that go on this math, including helium that was under significant pressure in terms of price for the last several quarters. But Melissa, you can...

No, I think that's spot on. So what you're seeing right now, Jeff, is really just the helium story, right? So pricing has taken a hit on helium, which we've talked, right? For the last couple of years, we have seen pricing take a hit on helium. Non-Helium pricing, however, has been pretty strong. So we've seen improvements in both the Americas and Europe and non-helium pricing. Asia is still pretty flat on the non-helium space. But in the Americas and Europe, we are seeing appreciation in pricing.

So I believe last year when you gave your outlook for fiscal 2026. You said helium is tough for us. Maybe it will hurt us by $150 million and I think 95% of your helium business is contracted as under long-term contracts. So because of those contractual obligations, is that forecast still realistic for this year as a base case because of the way the contractual terms worked.

Yes. I think it's a little early to say, Jeff. When we give the forecast, we include in the forecast, our expectation of several renewals of disagreements during the year, right? So -- that is included on the math. And now with this crisis, I would say that we have a better chance to renew these contracts in a better terms than we anticipated before. But again, it's only 2 or 3 weeks, and we need to see what the effects will be.

Maybe you can give us an update on the NEOM project. What's the status? Where is it in its construction? Has it been slowed by the conflict in the Mid East or not really touched very much?

No, it hasn't been touched that much. I would say that the only concern we have right now is for people moving in and out in the region. It's -- traveling is a little bit restricted now. So we put a lot of procedures for that to trying to facilitate that, but there is an effect on that. But we, at this point, we don't expect that, that will have an effect on the schedule of the project. The project is basically 3 different sites, one for wind power generation one for solar. And the site -- the biggest site is where we have the electrolyzers, the hydrogen generation, the ammonia plant, the ammonia tanks and so forth. So I would say that the 2 power sites are almost complete at this point. The solar is basically done. The wind, I think we have 1 or 2 less than 10 turbines to finish. And the transmission powers, the transmission towers are done. So on the power side, we're very close to be completed right now, which is what we had to do because this is a very complicated start-up process and that we cannot start the plant without having the power, right? And we are generating our own power.

So this is done, the construction on the main site is very advanced. I would say that we have several plants that are already -- several areas that are already in commissioning. So we are commissioning the separation plant. We have commissioned the tanks, the flare, things like that. We will progress with that commissioning during this year. And the intent is to start making ammonia by the end of the year and get to full production at some point in 2027. It is a first-of-a-kind plant, never built anything before this size. The aspects of having renewable power that -- and the obligation that we have on ourselves to produce ammonia 100% of the time with renewable power, right, which varies from day to night from wind to no wind and so forth. This is all new in the system. So we are working on all that. It is, I think we have images on our website, is a fantastic project from an engineering point of view. But we are -- we're not going to be done until we're done and the product is in the tank.

So I think the capacity of NEOM is 1.1 million tons of ammonia. So call it 1 million tons. And Air Products hasn't really disclosed exactly what it buys the ammonia for. But I don't know, maybe it's $500 a ton and maybe ammonia, order of magnitude $600 a ton. So maybe you'll make $100 a ton. So is the general expectation that maybe you'll make $100 million a year from NEOM when it's fully up and running plus or minus a little bit. And it's on a $5 billion EBITDA base. So in terms of Air Products. So it's a large project. But for Air Products, these are the rough -- just the rough math.

Yes. It's -- well, first of all, the plant can make a little more than that. I think that is the expected volumes around 1.1 million tons. The plant is -- I think, is weighted for 4,000 tons a day so you can do the math. But it's -- because you have to count on these fluctuations on day, night and power and so forth, right? So net production, around 1.1 million. That's the expectation at this point. Yes, the price is something that we keep very disclosed, if you want, for now. It is a new product. It's the first large-scale green ammonia plant in the world. So you are doing your math with what you think the price is there versus what the market price is for gray ammonia, right? So it's a simple math and that you can think that way. But of course, our objective, we didn't build that plant to sell ammonia at gray ammonia prices, right? That would be a mistake, right?

And we could have made a mistake, but not on that on purpose, right. So the objective here is to sell that as a premium, right? So how much we're going to be able to sell as a premium on year 1 is a question mark, but I can guarantee you the number is going to be lower than the number that we're going to be able to sell in year 5 or year 10 or year 15. So there will be a progression in the margin because our cost is basically fixed for the duration of the green because we don't have a variable cost, so back integrated.

So we're working very hard to maximize the numbers. We -- there are a lot of announcements in this industry. I think 2 days ago, there was a big announcement from other people. But no one can show you a plant that is really under construction that is really going to be there. And frankly, very difficult to find a place better positioned to do this project than Saudi Arabia because of the wind and the solar characteristics, the value of the land and so forth. So I think we're going to have a project that, in the long term, will be a very good project for our products. Short term, it's difficult to forecast, and we are going to work as much as we can to make as much as we can. But your math is based on current prices, which, by the way, are higher than that now because of the conflict as well. But we'll need to see what happens there.

So it sounds like you aspire to earning more than $100 a ton.

It's simple math. We talked about that. The total project, $8 billion -- I think, $9 billion if you take 30% of ownership of Air Products, right, we -- $100 million is not the right number for if your investment is $9 billion so it's not that difficult.

So is the basic plan to sell ammonia up until 2030 rather than hydrogen from the plant at NEOM. And then you'll see what the status of your total relationship is in Europe because you're obligated to provide them with hydrogen.

Yes. We'll know way before 2030, what we'll be doing in terms of hydrogen in 2030. But 2030 is a day today from the EU for the new legislation that you have to use RNBO fuels. There is still -- there is a directive from the EU that has been transposed by each country. They are delaying the process. Now they tell us that they're going to have the transposition done by the summertime. So hopefully, by some point at the end of this summer of this year, we'll know how much demand will be in Europe for this product so we have to wait for that to understand, and we're going to need to make investments to transform this ammonia into hydrogen, right? In the meantime, we need to do something with the ammonia that we're buying since 2027. So that's why we're working on that. And of course, even after that, if the market is better for ammonia, then it is for hydrogen, that's what we're going to do. It's not a -- we don't have an obligation to go one direction or another. We need to do the best we can for our own shareholders.

It is the contractual arrangement with Total, an arrangement where either party can decide not to go forward with the arrangement, if it's economically unfeasible for either party.

It's not economically feasible if the legislation doesn't support the project the way we want, the project to go forward. So it's related to what will be the legislation in each country. And again, it's for the countries where they have operations and they are interested in having hydrogen supply. So if they do not have a refinery in Portugal, it doesn't matter what the legislation is for Portugal just for mainly Belgium, the Netherlands, Germany and France, which are the biggest targets here.

Of course, there's your Darrow project with the with the Europeans. When you think of where you were with Yara when you first negotiated the agreement and you think of where you are now? How is your attitude towards the project different? That is what understandings do you have or how do you think about the project differently now than when you did when you first announced it?

No, it's -- what we're trying to do is really a partnership, a strategic partnership between the largest hydrogen producer in the world with the largest ammonia producer in the world. So we're not doing that, thinking about the short term. We're not talking about that, doing -- thinking about only 1 specific agreement. We're doing that, thinking about what we can do together. I think the level of cooperation is very high. We are working together on the understanding on the development of the project, the context that we have of engineering companies, Yara is participating, helping with the design and giving their opinions on things that we should have done. So we are trying to work together in this phase. And I think nothing changed at this point. We're going to get to a resolution by midyear. And if we both sides believe that we have a feasible project we're going to go forward. If we don't, we're not going to go forward. It's simple.

Okay. Thank you very much. Thank you for your attendance.

Good morning, and welcome to Air Products' First 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 Megan Britt.

Hello, and welcome to the First Quarter Fiscal 2026 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the Investor Relations section of the Air Products website.

During this call, we will make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call and in the forward-looking statements and Risk Factors sections of our reports filed with or furnished to the SEC.

We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we'll refer to various financial measures, including earnings per share, capital expenditures, operating income, operating margin, the effective tax rate, ROC and net debt to EBITDA either on a total company or segment basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section.

It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call today. Please turn to Slide 3. Earlier today, we reported results for the first quarter of fiscal 2026. We delivered 12% improvement in adjusted operating income that was broad-based across our reporting segments. Earnings per share were $3.16, up 10% relative to the prior year on stronger productivity despite weak economic conditions. .

Our operating margin of 24.4% was also up, while return on capital of 11% was slightly lower than last year but remained stable sequentially. I'm pleased with the progress that our global team is making to improve our bottom line results, and the first quarter represents a solid start to our fiscal year. I have now been at Air Products for full year. In that time, we have taken significant actions to refocus on the core industrial gas business, including project cancellations, head count optimization and asset rationalization that are showing up in our results.

Moving to Slide 4. We are focused on 3 key priorities for 2026 consistent with the longer-term strategy that we shared last year: one, unlock earnings growth; two, optimize large projects; and three, maintain capital discipline. On unlocking earnings growth, we are affirming our full year earnings guidance, which implies an improvement of 7% to 9% at the midpoint for the full fiscal year.

EPS growth is expected to be achieved primarily through continued focus on pricing actions and productivity and new assets contribution. We are on track to deliver in line with these expectations despite continued healing headwinds in a sluggish macroeconomic environment that will limit volume growth for the fiscal year. Despite these headwinds, we see pockets of resilience from key sectors, including refining, electronics and aerospace.

For example, earlier this week, we announced our latest supply contracts with NASA to provide liquid hydrogen to multiple U.S. facilities. On our second priority, we continue to make strides to optimize our large project portfolio. Coming into our products that prioritize descoping and derisking our clean energy project portfolio. Along this path, in December, we announced that we are in advanced negotiations with Yara International on the low-emission ammonia projects in Saudi Arabia and the U.S. I will share more detail about our next steps in a minute.

Finally, on our third priority, we continue to take actions to drive discipline in our capital allocation to improve our balance sheet position while at the same time, investing in a strong base business growth and returning cash to shareholders. As we have previously indicated, we expect to reduce our capital expenditures by approximately $1 billion in fiscal 2026 and remain on track on that objective.

Fiscal 2026 in the first part of 2027, our heavy CapEx period for the clean energy products in Canada and the Netherlands, and we expect CapEx to decline significantly after these products go on stream. On return of cash to shareholders, we announced earlier this week that our Board has authorized an increase in our dividend, marking our 44th consecutive year of dividend increases. We remain committed to disciplined capital allocation that ensures that we are well positioned to continue our strong track record of returning cash to our shareholders.

Please turn to Slide 5. In December, Air Products issued a joint press release with Fara International announcing that we are in advanced negotiations for the low-emission ammonia projects in the U.S. and South Arabia. We believe that the potential collaboration provides a strong strategic fee based on complementary capabilities. The collaboration would connect the global industrial gas expertise of Air Products with the global money supply network and world-leading crop nutrition and ammonia expertise of Yara.

In Saudi Arabia, we are in advanced negotiations on a marketing and distribution agreement where Yara would distribute and commercialize all the renewable ammonia that is not used by our products to produce green hydrogen in Europe. We expect to have that agreement finalized in the first half of 2026. For the U.S. product in Louisiana, our goal is to have a traditional industrial gas project is scope and return for our products. To that end, we are in negotiations for Yara to acquire the ammonia production and distribution assets from our Louisiana project and execute a 25-year hydrogen and nitrogen supply agreement for an industrial gas facility that we would build and own and operate by our products.

Moving to Slide 6. I want to be very clear that we have set a high bar for moving forward with the Louisiana project, which aligns with our disciplined capital allocation strategy. Already, we have taken action to find a world-class partner for the ammonia production. In this way, we would have traditional industrial gas company scope with a long-term offtake agreement to supply hydrogen and nitrogen to Yara.

We also required a partner for the carbon capture and sequestration scope prior to taking a final investment decision. We have already launched an RFP process for the CO2 transport in storage scope and are in active discussions with several key sequestration service providers. More importantly, we must have a highly reliable capital cost estimate based on agreements with reputable EPCs that meet our return requirements.

[indiscernible] requirement for Air Products is having a project return on the go-forward capital significantly higher than our traditional hurdle rates. We expect to have full clarity on the project costs in the next few months. Overall, the project has many positive economic aspects, including location and the ability to receive tax credits, which drives significantly higher returns per share for the project during the first 12 years of operation.

We are monitoring recent reports related to fertilizer C-band tariffs in Europe. C-band came into effect in January 1, 2026, and proposes to modify the current scheme would need to be discussed and approved by the EU. Any change in the CBN rules would have an indirect effect on our potential Louisiana project as only gray ammonia imports as subject to significant CPM tariffs. Overall, Yara bears the regulatory risk related to C-band changes if the project goes forward.

We are following this subject closely with Yara and continue to work on the cost asset. Please be afraid that the Air Products management team and Board will take the time needed and drive a very high level of diligence on the capital cost before we reach our own FIT.

Now I will turn the call over to Melissa to discuss our financial results in great depth and review our 2026 outlook. Alisa?

Thank you, Eduardo. Hello, and welcome to those joining our call today. Please move to Slide 7 for a high-level summary of our first quarter financial results. With respect to sales, volume was flat as favorable on-site volume was offset by lower helium, which included a sizable nonrecurring helium sales in the Americas in the prior year. providing for tough comparisons in the first quarter.

Price improved on non-Helium merchant products, particularly in the Americas and Europe. Operating income was up 12%, and margin was up 140 basis points on business mix and non helium price, offset a tough year-on-year comparison. Margin also improved despite a 50 basis point headwind from higher energy cost pass-through driven by the Americas. Lower costs also improved results primarily driven by productivity net of fixed cost inflation and lower maintenance.

Earnings per share of $3.16, which grew 10% from prior year, exceeded the top end of our guidance range. Return on capital of 11% was lower versus prior year, but stale sequentially as we continue to execute on our project backlog.

Moving now to Slide 8. Our first quarter earnings per share of $3.16 increased $0.30 or 10% from prior year. Despite continued helium headwinds and which include the prior year nonrecurring helium sale in Americas of approximately $0.10, the base business continued to demonstrate strong resilience in an uncertain macroeconomic environment. Favorable on-site volume, non-Helium pricing actions and ongoing productivity improvements drove results this quarter.

Moving now to Slide 9. I will provide an overview of our results by segment. You can find additional details of the quarterly segment results in the appendix. For the quarter, Americas sales were up 4%. The driven by higher energy pass-through, operating income improved on price, onset volume and lower maintenance, partially offset by prior year nonrecurring items and fixed cost inflation.

Sales in our Asia segment were up 2%, while operating income was up 7%. This improvement was driven by productivity and reduced depreciation from certain gasification assets held for sale, partially offset by lower [indiscernible]. We saw a modest contribution from our new assets as they continue to ramp up, contributing further in the second half of the fiscal year. Europe sales and operating income both increased due to volume and price as well as favorable currency.

Higher volumes were driven by on-site including a prior year turnaround and non-Helium merchants. Operating income was also impacted by higher costs associated with depreciation and fixed cost inflation despite productivity improvements. In our Middle East and India segment, operating income improved on lower cost, while equity affiliate income remained flat.

Lastly, the Corporate and Other segment results improved from lower costs, including productivity actions. Moving now to Slide 10. We continue to generate strong cash flows from our base business. Our investments in both energy transition and traditional industrial gas projects remain on track with our expected capital spend for the fiscal year. Additionally, we returned nearly $400 million in cash to our shareholders and increased the quarterly dividend, marking the 44th consecutive year of dividend increases. As it relates to our leverage, our net debt-to-EBITDA ratio is 2.2x.

As a reminder, we are currently consolidating the joint venture investment in the neo green hydrogen project on our balance sheet during the construction phase. And as previously communicated, we plan to deconsolidate once the project is on stream and being operated by the joint venture. Therefore, we have adjusted our leverage ratio to better represent Air Products investments.

Please turn to Slide 11, where we will review our outlook. We are maintaining our fiscal full year guidance of $12.85 to $13.15 given uncertainty around the macroeconomic environment. We remain focused on delivering these results through pricing actions and productivity while bringing new [indiscernible] assets on stream from which we expect increased contributions in the second half.

For the second quarter of 2026, we expect to deliver earnings per share in the range of $2.95 to $3.10, representing a 10% to 15% improvement from the prior year. Our outlook assumes growth from pricing actions and productivity, partially offset by lower Helium. As a reminder, we expect our second quarter earnings per share to be lower sequentially due to the normal seasonality. Particularly related to the Lunar New Year and higher planned mine. We are also maintaining our guidance for capital expenditures at approximately $4 billion in fiscal 2026. as we work to derisk our Louisiana project and optimize our portfolio. Now we'll open up the call for questions. Operator?

[Operator Instructions] We'll take our first caller from David Begleiter with Deutsche Bank.

This is Emily Fusco on for Dave Begleiter for -- you're targeting double-digit return on the go-forward CapEx, how should we think about the returns on the $2 billion of capital already invested in the project? And is the 45Q credit included in the double-digit return on a go-forward CapEx?

I imagine this question is related to the project in Bero,right? So Yes, the 45Q credit is going to be taken by Air Products, and it's included on the return. And it's an overall return for the project in the go-forward basis, and that's all we're going to disclose at this point. .

We'll take our next question from Duffy Fisher with Goldman Sachs.

First question is just on helium. Obviously, this quarter, you had to eat the onetime sale a year ago in your year-over-year comps. But could you just talk about how much the kind of continuing business is still down? And how much of a headwind do you think that will be kind of in Q2 and throughout the rest of the year?

Duff. Yes, we -- I would say that in general, we had better-than-expected quarter. I think the volume from the Aerospace segment in the Americas was very strong for helium for us in the last quarter. Other than that, we continue to see the same trends we've seen before. As we said, we've continued to try to increase our volumes for new accounts. And we're working very hard to increase our sales with new customers and new deals, especially on the electronics side. But I would say, overall, the information that we gave you in the beginning of the year that we would be down for the year around 4% EPS effect is still our best forecast at this point.

And then on the gasification plants in China, what was the benefit from moving them to for sale -- and then what's the expectation for kind of timing? And should we expect any meaningful proceeds coming from those?

It was about 1%, David, from the overall results for the quarter. I would say that the -- we're still working on the process to sell the assets. We received some offers, we proceed with the negotiations. It's always difficult to forecast these things, but we still expect to get this done on this fiscal year. Hopefully, sooner than later.

We'll take our next question from Jeff Zekauskas with JPMorgan.

Is Air Products receiving income from -- or full income from Gulf Coast ammonia? And how much did you invest in that project? And what are the assets that you actually own?

Thank you for the question, Jeff. Yes, we are in the process of starting the plant. So the plant is making product it was running at up to 80%, 90% capacity for the last few months. In fact that this week, we are taking a turnaround that we were expecting to do that to finalize the less components, and we hope to be up and running at 100% and finalize all the commitments from that side in the next few weeks. So that's the overall picture of the project. .

I think when Air Products announced this project 5, 6 years ago, I think we made clear what the investments were on the numbers I can go offline and get to the numbers that we published at that time. Air Products in this case, we own the SMR. So the hydrogen production. We own the assertion plan. and the customer owns the ammonia production and the [indiscernible]. So this is basically the setup that we have there. The plant is connected to our hydrogen pipeline system, and, in fact, import some hydrogen. So we have a reformer data that I think is around 175 million cubic feet a day, which is probably 70% of the total volume required by by the ammonia [indiscernible] when running at 100% and the balance of the hydrogen is imported through the pipeline.

In your corporate line, it looks like there was some kind of sale of equipment cost overrun. How much was that? And -- how much was that versus last year?

Jeff, this is Melissa. We did see some increase in our sale of equipment this quarter. In the Q, you will see that we had an impact to our results of about $30 million this quarter. That is comparable to what we saw last year in this quarter. And we -- obviously, as we bring this on stream, we will stop seeing that headwind in our results. But again, it was about $32 million this quarter. And as you know, that is a percent of completion accounting and so that is our best estimate of future cost as well. So we recognize the full future cost. .

We'll take our next question from John McNulty with BMO Capital Markets.

Maybe on the first one, can we unpack a little bit the margin improvement seen in the Americas. Certainly, it looks like price may have helped, but the volume drop of, I think it was 4% is pretty meaty. So I guess, can you help us to unpack where that 150 basis points of improvement came from?

Yes, I'll let Melissa answer the question, but that onetime helium impact that we have is reflected in the volumes in the Americas. Melissa?

Yes, absolutely. Thanks for the question, John. So we did see strong on-site volumes in the Americas. This is specific to our HEICO and non-Helium merchants. So positive in the volumes. Price was also strong in the Americas this quarter across products outside of Helium. And then costs, unfortunately, costs were slightly negative, driven versus prior year. But obviously, we're continuing to look for cost productivity. So the margins were better this quarter, but we're continuing to see improvement there as we continue to focus on productivity.

Okay. Fair enough. I appreciate the color. And then can you give us an update on Alberta at this point in terms of the potential for project offtakes, how that's progressing as well as any updates on the construction timing and costs.

Yes. The construction time and cost is still the same, John. We did the same estimate that we provided probably a year ago, so around $3.3 billion and start up in the first part of 2018. So we continue to work in that direction. I think we have much high level -- higher level of certainty in this project than we had before in terms of scope and costs.

The negotiations with other potential offtakers continues. It's not something that we will be able to talk about until we have something more definitive to share with you.

Our next question comes from Vincent Andrews with Morgan Stanley.

Eduardo, I wanted to ask you on the fiscal fourth quarter call, you were asked about you spent $2 billion on Daro so far. And how much of that could you recover? And I think you said you could recover about half of it through sales of equipment and so forth. But I wanted to make sure that, that was not interpreted entirely is the answer to this question. Maybe it is, please tell us. if you decide for whatever reason not to move forward with Daro, is it just that you sell the equipment and whatever else, and you recover $1 billion to $2 billion spent -- or would there be other cost to Air Products, small or large to not move forward with the project? And then I have a follow-up.

Yes. I think where we we try to say that we -- nobody really can answer that question, right? So that 50% is -- at that point for us a gas, the number can be higher, it can be lower. It's impossible to determine what the the value will be to recover the -- if you don't go forward until you get that negotiation because at the end of the day, it's the value that equipment has to a potential buyer, right? So of course, we are looking at that in parallel. I would say that the assets that we are -- that we built already in some cases, for this project, we are very specific for this project, probably for the exception of the ammonia loop, which is quite standard and similar to through other projects. So that asset will have a better chance of getting a high market value. As operation plans are also common, but this is a very high pressure in the plant that was designed and built for for the U.S. under U.S. [indiscernible] and so has a limited market.

So at the end of the day, we cannot -- no one can tell you exactly how much that will be recoverable if we don't go forward. I would say that this is really the exposure that we have is the capital that was spent before we decided to stop new purchases in a project, which we did one month after I joined the company. So the only money we are spending in this project is really the equipment that is arriving that we purchased before that time.

Okay. And just as a follow-up, I know you're intending to make a go/no-go decision on this by the middle of the year, but is that firm date or now with this CBA uncertainty, which let's just assume, is very important to Yara's economics, if there's a need to push that out while the EU finalizes whatever it is that they're going to do or not to -- is it possible that the timing of final investment decision could move later into the year?

No, there is no 100% or anything in [indiscernible] right? But I would say that our goal is around the mid of the year. The main issue for us continues to be the -- to make sure that we have a capital cost that we feel we have high certainty of execution. So that is what we are working on. The issue of the CBM as we tried to explain that in our slides. It's a very indirect -- if something happens, it's an indirect impact it is an indirect impact to Yara to be honest, by the way this agreement would work, we would produce hydrogen and nitrogen sell that to them, they would make ammonia and from there, it becomes their accountability. They can take ammonia, sell them on in the U.S., ammonia in Asia or in Europe. If it goes to Europe, it still is subject to a very low CBM tariff. The impact is really indirect if something happened with the [indiscernible] what happens with the gray sales.

So all -- this is a decision that [indiscernible] has to make. Verbally, we understand from them that they believe is a low probability, but it's something that they need to take into account in their decision, and we'll wait for that. But at the end of the day, I would say that 99% of the decision is related to the construction cost more than anything else.

Our next question comes from James Hooper with Bernstein.

Thanks for the question. First question is about the space opportunity. Clearly, you've just signed some contracts with NASA this week. Can you talk a little bit about the kind of the opportunity there, your opportunity with commercial space providers, how that business is performing and where you see the growth in the outlook is? And then I've got a follow-up to that. .

Yes. It's a very hot segment. It's a segment that products participate since the 60s since we started supplying liquid hydrogen for NASA and continues to this date. I would say that probably over 2% of our total sales is in this segment in aerospace, when you add all the products, hydrogen, helium and oxygen and nitrogen. So it continues to be a very important segment for us. Of course, the market is changing. There is more commercial launches. Some of them use hydrogen, some of them do not use hydrogen. So we are working on these opportunities, and we are trying to grow our market share, but it's a very important market for us. But I think Melissa, you will have more [indiscernible].

Yes. Yes. Thanks, Eduardo. So having many conversations because this has gotten a lot of attention lately. So based on the customers we serve, it's our estimate that Air Products is about 40% to 50% of the total space market share in the U.S. And from a growth trajectory, I think our expectations is that for projected sales, we see about a 6% to 7% growth per year. So obviously, a market where we have been focused on for many decades and something that we're going to continue to focus on. .

And then just on your volumes. It was interesting at the European volumes are up 5% year-on-year. is Europe back? Are we looking at some recovery here? Or are we remaining cautious about European volumes?

We remain cautious. A lot of things go in this calculation. So we have some turnarounds last year. So that we are lapping these turnarounds this year. So that created a good tailwind for us on the volume side. But things in Europe, as reported, they are I'd say, complicated at this point. But I would remind that our business in Europe is different from our business in other areas of the globe because it's really fully integrated into packaged gases and other areas. And I like the other industrial gas companies, we see much more pressure in the large customers in [indiscernible] than we see in the retail in the package gas and so forth.

So it's still an important business for us, very profitable. We have a very experienced management team that is doing the blocking and tackling and being able to extract good results despite the economic environment we have there.

We'll take our next question from Chris Parkinson with Wolfe Research.

Now that you're a year in, and you've had a time to evaluate prior pricing strategies as well as the cost fund. How do you see these things progressing throughout the year? I imagine you have a good handle on cost now. But also it seems like there's this divergence between kind of cost pricing improvements versus obviously some helium headwinds. And I'm just kind of curious on what the cadence of that narrowing is as we progress through the fiscal year. So any color on those 2 topics would be greatly appreciated.

Thank you, Chris. You're breaking a little bit. But if I understand correctly, it's about the pricing opportunity. As you can see in the results in the first quarter, a lot of our gain coming from and productivity. I think this is -- again, this is the normal block and tackling of the business. When you operate in 40 countries and you have over 20,000 employees. That's what you do. I think Air Products has a good management system and good management talent to continue to make progress in both price and productivity. .

I would say that we expect that going forward for the balance of the fiscal year, then the results will be from those 2 aspects to be similar to what we had in the first quarter. The situation hearing is an exception that we are also working on to do the best we can in a long market. But I would say, outside of Helion, we have the right tools and we keep pushing and we expect the same results we had in the first quarter.

Got it. And just as a quick follow-up. There's obviously a lot going on in the tech world right now. And just given the scale that you have in Asia has rolled some of those customers a broad -- can you just perhaps just give us a little bit of insight in terms of how the investment community should be thinking about content when we're looking at things like N2, HBM, et cetera, et cetera. In terms of purify nitrogen, Neon, all specialty rare gases, -- how should we be thinking about the growth in your customers relative [indiscernible] when we should be seeing that show up in your results presumably throughout this year and obviously, for many years to come.

Yes, Electronics is the star segment of the market nowadays. Of course, with AI, you can see in the results of the chip manufacturers, results of ASML and so forth. We see a lot of RFPs, a lot of inquiries. It is a market that traditionally the products are getting -- the products increasing size, getting bigger and bigger. And we used to have the products coming every 2, 3 years and what I think we've seen in the last 24 months, and we'll continue to see in the next 24 months is an acceleration of this investment decisions by the large chip manufacturers. And we have very strong positions, as you know, in Asia. We continue to push hard on signing new business over there. We are executing projects that combined in one side can go up in CapEx to close to $1 billion, and we see an opportunity for new projects in the same range of CapEx being decided in the next 12 months.

Yes. And one additional comment to your question, Chris. And you did mention that new assets. We absolutely are having new assets come on stream as we talked about when we set our guidance. And additionally, as we talked about, this is a ramp, as you know, with the electronics business. So we will see the majority of those contributions towards the back half of this year.

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

I wanted to unpack if I could, the upcoming deconsolidation of Neom, can you comment on the expected timing of that event and the specific trigger. And then with regard to the financial impact, I appreciate the color that you provided on Slide 10 with regard to your net debt balance and leverage ratio, I wanted to ask whether there would be any appreciable impact on your income statement as well moving through that event?

Yes. Thanks, Kevin. So we've been talking about the deconsolidation for quite a while now, but I think we need to unpack it a little bit more for our investor community. So because we are the EPC or the engineering procurement and construction group, Air Products to the joint venture, we do consolidate that because we do make the key decisions during that period of time. So at this point in time, with that control aspect, we do consolidate.

Once the joint venture is operational, however, the decisions are even amongst the 3 shareholders. So during operations, which as we've talked about, is in the mid '27, we will then deconsolidate that joint venture. As you rightly mentioned, that means that the debt would come off of the full balance sheet and would be within the equity affiliate line, so you will see the reduction in our debt profile at that point in time.

As we lead up to the deconsolidation in '27. Obviously, the operating company will be adding resources. So we will see additional costs being run through the O&M as we lead up to the onstream. And once that is deconsolidated, obviously, you'll see that come off, and we will only see the impact of 1/3 of that operating cost. So there will be a slight increase in operating cost as we ramp up, getting closer to onstream in '27, and that would then be deconsolidated, and you'd only see the 33% through the equity affiliate line.

Understood. Very helpful. And then secondly, if I may, can you comment on the sequential price change for helium and whether or not your Asia price of negative 1 would have been flat or possibly positive if we were to carve out Helium?

Yes. Thanks for the question. So yes, we continue to see Helium as a headwind, both to volume and price. For this quarter, on a global perspective, price was a 1% decrease from helium specifically. In Asia, Asia is an interesting market right now because of the macroeconomic headwinds. We would have seen price up slightly. However, because of the helium impact, we did see that negative in Asia.

However, in Americas and Europe, the price would have been up quite more significantly, but the helium headwind did bring that down a bit. But Asia, without a doubt, is the largest impacted region.

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

I wanted to ask about Europe operating margin. It looks like you saw about 150 basis points of sequential decline from Q4 into Q1. And I think the energy pass-through maybe should have been a little bit favorable sequentially. The top line was pretty similar. Depreciation was lower, is this maintenance costs that we're seeing there? Or maybe help us understand what was causing that sequential margin headwind? And how should we think about margin trajectory in Europe in the rest of the year?

Yes. Thanks for the question, Mike. So the specific margin for Europe actually is being affected by cost. And so we have some significant productivity in that region. However, we did have sizable depreciation. So the depreciation year-over-year is, in fact, I believe, up a bit. That is largely some in-sourcing and some purchases of our supply chain assets that we are seeing a hit of depreciation and some fixed cost inflation. They are largely wage inflation that we're seeing in Europe that is shrinking the margin.

And there is also some seasonality in the quarter, which is normal for this last quarter of the calendar year.

All right. And then my other question is if you can comment on what portion of your customers are running below take-or-pay minimums in terms of their volume consumption right now. And I'm just curious, is that most pronounced in Europe? Or maybe if you could comment on what you're seeing region by region in terms of take-or-pay minimums.

Yes. We don't normally disclose that, Mike. We have some cases in Europe and -- but I would say that is not a very large percentage of our business, but Melissa.

So one of the things that we do track is really utilization. So if I think about utilization across the Americas, Europe and Asia, it's pretty similar in the mid- to high 70s. So that's pretty similar to what we saw in fiscal '25 as well. So we're not seeing a significant change in utilization, but they're.

[indiscernible] it's case by case and -- of course, the steel industry, the chemical industry in Europe is being affected, but it's not a it's not affect every customer in every location in the same way, right? So it's a question of where your assets are and what customers you have. I think if you want to put this way, we -- I don't think it's a question of [indiscernible]. It's a question of the work that was done 20, 30 years ago. selecting the right customers. But so far, we're not having a lot of impact in Europe and with the caveat that we our on-site business in Europe is not as big as it is in Asia and in the U.S.

We'll take our next question from John Roberts with Mizuho.

Back to CBAM, for ammonia. Is Section 27 a key issue to watch here? And do you know what the next step is on Section 27. I don't think it's approved yet.

Yes. I'm not an expert on you regulations, John. I don't know anyone is. But from what I understand, this is a proposal that has to be approved and there are several levels of legislation in Europe, one of the directives, which is like suggestions that the countries have to implement. CBM is more like a tariff. So it's a legislation also has to be approved by the entire EU and any changes have to be approved as well. And as you probably know, the CBM is connected to the CO2 ETS scheme. So it's really a compensation for European producers for the CO2 tax that they have to pay. And this CO2 ETS scheme is in place for probably 15 years now. And I would say that to make a change there, you will need to make a change in the entire CO2 ETS scheme.

So that's why I think people are telling us that the probability is very, very low. But again, it's -- our job is to run the business and make our decisions and the regulatory is just a signal that we need to use to make those decisions.

Okay. And then in the U.S., is contracting for new electric power an issue at all in bidding for new ASU business with all the data center competition and so forth.

Yes, no question. We are seeing increases in power costs for new contracts. We have a very sophisticated power procurement process in the products, as you can imagine, is the main input that we have in our Separation business. So it's an ongoing relationship with suppliers. I would say that if you have something new today, you would need you to go and negotiate the tariffs. But -- at the end of the day, when we have like an on-site contract, as you know, this is a pass-through in the formulas that we have. So [indiscernible] the customer side and for the merchant product, any energy that we use in the energy in the to make liquid oxygen, liquid nitrates and so forth. We we work very hard also to pass those costs to our customers.

So it's not that we are completely immune to power, but we work very hard to make sure that we pass this cost to the market. And and try to be ready for any cost increase. But there is no question that the data centers, they are creating demand and they are creating distortions in the power market today.

Our next question comes from Patrick Cunningham with Citi.

Just a few follow-ups related to prior questions on Neon. Is there any dependency on the relationship with Yara at Darrow. And are these go, no go decisions being viewed separately? And do you foresee the same [indiscernible] related risks for Yara's appetite for the [indiscernible] offtake? .

No, there are no dependence between the true project or the 2 potential contracts. And again, is the same answer from the other one, right? The the product from Neon is will be green. So that's going to be absolutely 0 CBM effect on that product. The effect on other products coming to Europe would be an indirect effect on the overall market, and we need to see if that happens, what the effect is. But again, going back to my previous answer, it's very, very uncertain that there will be any impact on the CBM scheme today. But -- and if there is, it's going to be an indirect impact on this project.

Got it. That's very helpful. And what do you anticipate the run rate contribution of the Neon JV will be from an equity affiliates perspective? And should we expect that to be at a loss when the asset first ramps up given the debt profile and initial fixed cost burden?

No, it's not going to be at a loss and -- but we cannot disclose results from our joint ventures that we own 33% or expected results in this case. But it's not going to be [indiscernible]. .

We'll take our next question from Josh Spector with UBS.

I guess, I'll follow up on Darrow and CBAM, and see if maybe you'll answer it a little bit differently at all or not. But when you think about like the decision here that Yara would need to make. I understand CBAM doesn't impact Air Products directly, but it does impact the economics for Yara, assuming they're intending to bring that into Europe. And if they say that we don't know what the regulation is going to be, and we need another year to think about it. We want to see if anything is going to change. Is that time value something that you're willing to accept or does that then trigger we need to look at a plan B or some of these other options because we're not going to sit around for a year. How do you game theory that yourself?

Yes, it's a theoretical question at this point, -- so we didn't, let's say, think about that, and I need to see when that happens. I would just say that the way we look at this project, when I came on board here, -- now our products was building a full ammonia project and doing the CO2 sequestration itself and was going to be an ammonia producer and [indiscernible]. We stopped the project as it is, right? So today, the the base case is that we stopped the project.

But we -- at the same time, we said the project has positive attributes and has a chance of being a good project. So let's try to find let's try to see if there is a solution to generate some value from this project. And I think we did the most difficult step at this point, which is to find a credible really world-class partner that would be willing to take the commercial risk on the ammonia, which is what they say [indiscernible] buying the hydrogen and the nitrogen and making the ammonia. So we are taking that commercial in operational risk of the ammonia. So this is the most difficult piece of the puzzle here. we need to make sure that the capital cost is -- that the product is feasible for both parties. So the project -- the capital cost will be within the numbers that we assume to be with them.

But I would say that at this point, this is more like which one is the plan A, which one is a plan B. It depends on how you see it. But where we are today, if nothing happens, we're going to go back to where we were 11 months ago, which is we're not going to go forward with the project as proposed. So that is the situation. And I would say that -- the way I look at this is that we have only 2 possibilities, right? We're not going to go forward or we're going to go forward with a good project, right? And those are the only 2 cases I'm working with -- of course, there's a lot of work to make sure that when you go forward that you are certain on your capital cost and the project is good, but those are the true outcome. So I hope our shareholders are looking at this is a free option for a good project on top of the current base case, which is not going forward.

Our next question comes from Matthew DeYoe with Bank of America.

I have 2. But so Uniper from Germany announced an agreement to offtake 500 kt of green ammonia from the new Amgen green hydrogen project in India, which looks to be commissioning 2028. Can I ask if you bid on this project? And if you did, why you don't think you won or if you didn't bid on it, why you didn't considering kind of the profile at [indiscernible]. And then last -- sorry to ask another one on there, I guess. But from what I understand, the company is kind of bidding the construction across a few different EPCs to try to lock in fixed economics. Is there any reason to believe the strategy would be more successful than just choosing like one?

Okay, 2 different questions, right? So on the green mode, right, I -- it's a complicated subject here. I would the way I like to think about this is if you want to make ammonia starting from the [indiscernible] like, for every metric ton of ammonia, you need about 10 megawatts of power, right? So when I see people saying, we're going to develop this project in a place like India, and we're going to have a price of ammonia and I read the same articles you probably read. So people talk about $600, $700, something like that. You need to -- when you see a number like that, you need to realize that it's like exporting power from India. Investing a lot of capital to at the end of the day, export power from India at $60 a megawatt or $70 a megawatt, right so which is lower than the local price. So it's very difficult to understand the economics when people talk about doing green hydrogen and green ammonia in this type of jurisdiction.

When our project in Saudi Arabia, it's public information, you can look around. Saudi Arabia has a very active renewable power market and they sign agreements with power prices below $0.02 or $20 per megawatt. So we are within that system. We are building our own renewable power. And our -- let's say, if you want to calculate our internal power cost for our project is also below $0.02 per kilowatt or 20 per megawatt. So our project is under construction. We can show you the videos, we can take you there.

The power economics makes sense. And I'm not going to make comments about what other people are doing in MOUs and that kind of stuff. There are a lot of activities like that in Europe, a lot of announcements. But the only real project being built at this point is ours. I understand in India, it's a little different because they're trying to use an existing facility and I'm not doubting that they will, at the end, build something. But I would say that the regulatory risk, the -- if something looks too good to be true, normally this right now to have this kind of exporting power at this low price from a country like India, it's a question mark for me. So that's the green ammonia piece on the on the [indiscernible] side, your question about the EPCs. We're not going to make a comment on what we're doing in our activities. I would say that in general, this project is a very large block plant with very well-defined blocks. So you have an asset duration plant, you have a hydrogen plant, we have an ammonia plant. So you can go in different directions, and it is a question of to determine what makes sense. You need to go through a process. And you need to understand the local market, know how what is the appetite of the APCs and what alternatives they have.

So -- we are looking at every case here, and we are trying to make sure that we do the best for our shareholders, for our customers, in this case, for Yara and in fact, they will participate in the process with us. and we are not ready to say exactly how we're going to execute this project at this point.

We'll take our last question from Lorex Alexander with Jefferies.

A question around sort of AI-related productivity. If it comes in better than expected or compared to expectations a few years ago, do the benefits accrue to your on-site business? Or do your contracts mean that you pass some or all of that benefit through to the customers? And then similarly, I guess, for merchants, it would be more just sort of competitive dynamics in the local market. Is that fair?

Yes. It's -- AI is -- can be used everywhere, right? So when you talk about how you're using it and where the benefit will accrue it depends on what the usage is, right? So you say I'm using AI to lower my power costs in the negotiations with my power suppliers. If I have an agreement with the customer that is really pass-through on the cost that will be somehow share. If we use AI to reduce our power consumption, normally, we will capture that to our products because at the end of the day, what we do, we give the customer a guarantee of a maximum power consumption.

So it's case by case. But that's a very specific application of AI. We're using a lot of AI to look at our, let's say, administration, our SG&A activities, our engineering activities, and those are internal costs, and those are not contractually past to customers, although like any other company, we try to be more efficient in order to be more competitive in the marketplace. So you can make the the conclusion as well that in the long run, somehow these benefits will go to our customers. But it's very difficult to determine what share that will represent at the end. I hope that was clear. I'm not sure if that's exactly what you're asking.

This concludes our question-and-answer session. I'd like to turn the conference back over to Eduardo for any additional or closing remarks.

Thank you. I would like to, again, thank everyone for joining our call today. We appreciate your interest in Air Products, and we look forward to discussing our results with you again next quarter. Have a good and safe day. Thank you. Bye.

This concludes today's call. Thank you again for your participation. You may now disconnect, and have a great day.

Good morning, and welcome to the Air Products Update 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 Megan Britt. Please go ahead.

Hello, and welcome to our update call. On the call today, our Chief Executive Officer, Eduardo Menezes will provide a short business update, followed by a Q&A session. Melissa Schaeffer, our Chief Financial Officer, will join Eduardo for the Q&A session.

During this call, we'll make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to those discussed on this call and in the forward-looking statements and Risk Factors sections of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements.

It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call. Earlier today, Air Products issued a joint press release with Yara International, announcing that we are working to establish a long-term partnership for low-emission ammonia projects in the U.S. and Saudi Arabia.

We have 2 primary goals for the proposed partnership. For the U.S. project in Louisiana, our goal is to have a traditional industrial gas project scope and return for Air Products. To that end, we are in advanced negotiations with Yara to sell the ammonia production and distribution assets from our Louisiana project and execute a 25-year contract for the supply of hydrogen and nitrogen from our industrial gas facility.

Separately, in Saudi Arabia, we are in advanced negotiations with Yara on a marketing and distribution agreement where Yara would be responsible for transportation and commercialization of all the renewable ammonia that will be acquired by Air Products from our NEOM joint venture that is not used by Air Products to produce green hydrogen in Europe. The agreements for both projects are being developed in parallel.

The final investment decisions of our FID for Louisiana is targeted by mid-2026, with project completion by 2030. The total cost of the Louisiana project is estimated to be between $8 billion and $9 billion. Approximately 75% of the capital is related to the industrial gases portion of the project that will be owned and operated by Air Products. And approximately 25% of the capital is related to the ammonia production and shipping facilities that will be owned and operated by Yara.

Air Products as a project developer will use the next few months to solidify the construction costs with qualified contractors. We are committed to disciplined capital allocation and we only move to FID for the Louisiana project if we are highly confident that the project can be executed within the estimated CapEx.

The marketing and distribution agreement for Saudi Arabia is targeted to be completed during the first half of 2026 with first supply expected for 2027. Air Products is honored to work with Yara, a leading global crop nutrition and ammonia company.

Overall, we look to reshape the Louisiana project into a traditional industrial gas project for Air Products with a, a core industrial gas scope; b, an offtake agreement with a trusted partner; c, a de-risked execution once EPC arrangements are finalized and d, an attractive return. Additionally, this partnership connects the largest green and blue ammonia projects worldwide with the largest global ammonia supply network with 12 ammonia vessels and 18 ammonia import terminals, maximizing the project value for Louisiana and NEOM by utilizing both organizations extensive experience and core competencies.

Before I turn to your questions, let me reiterate that our announcement today has no impact on the adjusted earnings per share and capital guidance for 2026 that we provided on our fourth quarter earnings call.

With that, I'll turn the call over to Megan.

Thanks, Eduardo. Operator, please provide the Q&A instructions to participants in the queue.

[Operator Instructions] We will take our first question from Jeff Zekauskas with JPMorgan.

Is the -- does the carbon capture stream in the end belong to Yara? Or is that a separate profit stream that would belong to Air Products?

The carbon -- the CO2 stream will, let's say, belong to our products. It's basically the credit comes to the emitter of the CO2 in this case, Air Products.

And is the poor space capability, 5 million tons? Or in theory, can the poor space hold, I don't know, 10 million tons. Is there a size of that capability?

The poor space that Air Product is developing can hold -- we expect that it can hold 10 million tons a year of CO2. But we're still finalizing the arrangements for the CO2 sequestration that can be -- we can use our pore space, we can use someone else's pore space or we can have a combination of both. So this is in final phase as well, and this will be finalized during the next few months before we get to FID on the project.

We will take our next question from John McNulty with BMO Capital Markets.

Eduardo, it sounds like you still have at least a little bit of wood to chop before you get to kind of mid-26%. I guess what do you see as the biggest hurdles in getting to FID at this point? Is it more on the construction cost? Is it some of the air permits? I would think the air permits are just a matter of time. But I guess, can you help us to think about maybe what you see as some of the bigger hurdles?

Yes, John, good question. We have been working with Yara for several months now. So I think we understand exactly where we are in these areas. The air permit, as you said, is more a question of time. It's really the construction cost that, as I said in my prepared remarks that we are trying to make sure we are highly confident that we can reach the CapEx number that we have as a target, right?

The situation in the U.S. for projects is a little bit difficult right now. A lot of competition from data centers. Some of that being more expectations than anything else. And frankly, one of the main objectives we have with this announcement today is to make sure our potential partners and suppliers, they understand how real, how critical this project is. And we fully expect to have a firm construction costs by mid next year that allow us to move to FID.

Okay. Got it. No, that's helpful. And then I guess, just as the follow-up, for the NEOM side, it sounds like the production part of the project is largely kind of in stone at this point. I guess, can you help us to think about the capital that Air Products may need to put to work on the distribution arm, whether it's or your side of it or even anything to help with Yara bringing their production or distribution side of it -- excuse me, bringing their distribution side to the market?

Yes. I would say that we are very excited about this development with Yara regarding NEOM. I think if you think about -- whatever you think about green hydrogen and green ammonia, there is no question this is a new product. And as every new product, it has this issue of this chicken and the egg situation. You have no supply because you don't have demand, you have no demand because you don't have supply.

Our project is the first real step to fix that for that product, right? So we are the first world-scale ammonia production, green ammonia production. And in the first step, this product will be available or in a tank in Saudi Arabia. This alliance with Yara, as we said, really working together with someone that has its own fleet of ammonia ships and it has several -- I think the number is 18 terminals in Europe, really will make this product available in many locations.

And we hope that this will completely change the expectations on how this product will develop. That said, on your specific question about investments by our products. The facility in NEOM, as you know, is a JV. So we own 1/3 of that facility, and we are responsible for 1/3 of that investment, which is also project finance, about 70%. Anything beyond that, we're only going to be executed if we have firm agreements with customers.

So we announced several months ago an agreement with Total for producing green hydrogen starting with green ammonia. That agreement is still in place. Part of that agreement expects that we will better mine together with Total, where the facility will be built depending on the legislation in Europe. And as soon as we have that definition, we'll make that decision of moving forward with that investment.

That's the only investment we have so far in our products. And we're only going to move forward if we have other customers that are willing to take green hydrogen that we'll need in our dissociation of green ammonia. So the agreement with Yara basically moves the sale of green ammonia for every other application straight to Yara. And we hope that, that will allow us to rapidly increase the percentage of ammonia that is sold as green versus gray.

We will take our next question from David Begleiter with Deutsche Bank.

Eduardo, back on the carbon sequestration, do you expect to manage that portion of the project yourself? And if not, how much of the $85 per ton credit do you expect to realize?

No, we don't expect to manage that part of the project by ourselves. We have several counterparts that are interested in investing in and taking care of the CO2 sequestration. Our scope will basically stop at the compressor and they will take the CO2 from there and do the sequestration using our pore space or using their pore space.

And again...

I missed the second part of your question.

Yes. How much of the $85 per ton credit would you expect to realize? Is it a...

Yes. The credit of the 45Q comes to, in this case, to a product, right? What you have is a commercial agreement with someone that will do the sequestration of the CO2 and we are in negotiations with this with several providers for that. And I cannot give you an exact number on that, but it is a fraction of the $85.

Got it. And just to be clear, how many tons of CO2 is this -- will this project produce?

I think the official number is 5.5 million tons.

We will take our next question from Duffy Fischer with Goldman Sachs.

Question just on the economics. If you do go forward with Louisiana, and let's just say it's at the midpoint, $8.5 billion, that makes your cut about $6.4 billion, should we think about the traditional 10% EBIT return for every dollar of capital, so that would be $600 million to $650 million of EBIT accretion when the plant is completed. Is that kind of the right ballpark?

I know you guys love to answer these questions. And as you know, it's very difficult for us to give exact information on that. I would say that what we said is that we expect a normal industrial gas return for these projects, and I will stick to that comment. I would just tell you that because of the CO2 credits, the 45Q, this project will tend to be skewed for the first 12 years of the life because that's the time that you have to receive the 45Q credits. So the EBIT for the first 12 years should be higher than the normal EBIT we would have in industrial gas project.

And then on the NEOM offtake agreement, do you guys bear all the risk of price and Yara will basically just take a fee on selling it? Or what's their incentive to try to grow that market themselves? And will they take any of the risk on pricing or margin?

Yes. We -- as you know, Yara is the largest ammonia trader in the world. They have a very keen interest in developing renewable ammonia, both blue and green. This is an opportunity for them to commercialize that product from Air Products.

As we said in the announcement, it will be based on a commission. And of course, as you can imagine, the commission increases as the prices go up. So it is a deal that I believe it's a good deal for Yara, but it's also a very good deal for Air Products as we would not need to have sales force and marketing -- development marketing structure and so forth.

The other point that I think it's important for people to realize is that our products today has both the price and the volume risk, right? So we have to lift every ton from our joint venture. And differently from other ammonia producers, our joint venture doesn't have any incentive to reduce production in case the market is long or the prices are low, whatever, right? So the joint venture has an incentive of producing 100% of the volume. And having a partner like Yara with this infrastructure that they have with the ships, the terminals really eliminates this volume risk that we have today. So that's a big incentive for Air Products on this deal.

We will take our next question from Patrick Cunningham with Citi.

And maybe first, just on Louisiana on -- I guess for the performance level requirements to secure investment in ammonia production, what does this mean for the timing of when you would receive the cash investment from Yara?

Yes. The sound is not very good traffic. But if I understood correctly, I think you're asking about the ammonia assets that will be acquired by Yara. So this is a transaction that we'll close only when the plant starts because we started the engineering for the project.

But we will have progress payments exactly like we would have in any project like that with the difference that the final payment at the end will be little larger than what would normally be in a normal transaction of a sale of a project. So this is something that we are still finalizing with Yara. But I can tell you that, that will be a progress payments during the execution of the ammonia project.

Understood. And then just in terms of getting green ammonia landed in Europe and eventually converted to hydrogen later in the decade, if you do land further agreements that justify moving forward, does Yara have right of first refusal on distribution, shipping of that ammonia overseas? Or was any of that covered in this agreement?

No. We cannot disclose these issues, Patrick. We are -- we negotiated all these items with Yara. Again, the conversion of ammonia back to hydrogen is not a simple process. It requires a lot of capital. I would say that from a products point of view, unless we can get a very good return in this ammonia to hydrogen dissociators, we would be perfectly fine selling the ammonia as green ammonia with Yara taking care of that part of the project.

We will take our next question from Chris Parkinson with Wolfe Research.

Eduardo, if you mind me asking, were you regionally hopeful that you would have partnerships announced on the CCUS side this morning, and therefore, kind of getting -- projecting your total CapEx, including what's already been spent below the $5 billion marker? Or are we thinking about that the wrong way?

I -- can you repeat the question, please, the first part of the question?

Yes. I think I heard it. So Chris, I think you're asking about the sequestration scope. So just to be clear, the sequestration scope is not included in that CapEx number. So that is contemplating a partnership. We are in current discussions with a number of key partners to be able to progress that scope, but it will be very much a service type fee that we will pay along the course of the project, but no additional CapEx would be needed from Air Products side if we outsource that.

Got it. Helpful. And then just a rent question. One of a competing project was recently, let's say, delayed indefinitely, which had a -- what I'll refer to as the plethora of MOUs on the ammonia side, specifically for Japanese energy transition.

Is that announcement essentially too little too late? Is that something that you could consider with your partner for kind of further assessing the overall market for blue ammonia over the next few years? Or is this just you have an agreement that's progressing well over the next 6 months, and that's basically the only item that you're currently focusing on?

Thank you, Chris. Yes, it's -- as you know, that project that you mentioned is very different from our project. It's larger in total hydrogen production, but it had smaller ammonia component was only, I believe, 1.1 million tons a year of ammonia versus the 2.8 million tons we have in our project. So it's a very different project. We are following up what happened there.

But we -- as you know, today, the first day we're disclosing our agreement here. I don't expect that the people involved in these other projects, they had any knowledge of that. So I don't know what they would like to do or what they may come and propose. But at this point, between us and Yara, we have 100% of the volume committed, right? So 80% of the volume going to Yara to make ammonia and 20% of the volume coming to Air Products to be injected in our pipeline, and we sold as hydrogen to our refinery and chemical customers.

We will take our next question from John Roberts with Mizuho.

Is Yara precluded from moving green ammonia to Europe if a customer wants to build their own cracker or do a JV cracker?

Yes. In principle, Yara will -- Yara is -- they are the experts on commercializing ammonia, right? So they know the customers, they know the market, and we can see that kind of operation happening.

We will take our next question from Josh Spector with UBS.

It's Chris Perrella on for Josh. Just a follow-up on the Darrow project for the 20% of the ammonia that you're taking, when you guys do the math in the economics, are you expecting any premium for that being blue carbon hydrogen in the project returns? Or are you basing the base return on gray hydrogen?

Yes. The 20% we will take as hydrogen, right? So no ammonia on that point. Yes, we expect some premium on that. We have, as you know, our pipeline in that area goes from Louisiana to Texas. We move over 1.5 billion cubic feet a day of hydrogen. So this will be equivalent to 12% of our total volume today. And we have a few customers that ask for blue, and we are in negotiations for that volume. Remembering that Air Products today, we have a site in Port Arthur where we capture the CO2. So we already commercialized some blue hydrogen in our pipeline.

All right. And just a quick follow-up. How much of the Darrow CapEx out of that $8 billion to $9 billion have you already spent for that?

Have I expensed?

Has spent?

Okay. Yes, yes. I think we already said that, that's about $2 billion being between spent and committed because we basically have engineering close to 90% done at this point. We have a lot of the main equipment, the critical equipment like compressors, cold boxes, they are already in hand. So we have a lot of things that we started 2, 3 years ago. So we have a lot of that CapEx that was already spent.

Is any of that eligible for -- or you would get CapEx from Yara for any of that to reimburse what you bought? Or does that come later in the process?

I think the way to think about this, as we said, around 80% of the CapEx will be there by Air Products, 20% by Yara of the total project. And I'm sorry, 25% by Yara, 70% by Air Products. And that includes whatever capital we had spent for the ammonia project. So we're going to need to sit down and make the adjustments. And in whatever way that is spent that is related to the ammonia projects, we expect that to be paid by Yara.

We will take our next question from Vincent Andrews with Morgan Stanley.

First, I just want to clarify the $8 billion to $9 billion, if I heard the answer correctly. That would not include any CapEx for sequestration, but your point was in the incremental CapEx for sequestration would be incurred by a third party. Are both of those statements correct?

Correct.

Okay. And then secondarily, the press release indicates that Yara will pay approximately 25%. So is there any meaning behind that approximate? Is there a ceiling on the amount of CapEx that they would be responsible for in the event that there's a material CapEx overrun?

And secondarily, will there be any limitations on Yara in terms of what they can do with capital between now in the time that they would owe you payment in terms of the minimum balance sheet leverage level or maximum balance sheet leverage levels or anything like any security that's going to be provided to you?

Well, I would say, Vince, that this is an agreement between 2 very sophisticated parties, right? So Yara is the largest ammonia producer in the world. They know exactly the value of the product. They know exactly how much they can pay for hydrogen and nitrogen to make their project feasible. We are the largest hydrogen producer in the world. We understand exactly how much we need to charge for our hydrogen and nitrogen to make our project feasible.

So we have been working together for several months. We reached the point that we understand exactly what the conditions will be. The only point spending now, I would say, is the construction cost is to validate the CapEx is within this $8 billion to $9 billion that we mentioned in our press release. Exactly the reason why we have this approximately is because there are things in flux like construction costs, like tariffs, things that we need to adapt during this -- the next few months. And that's the reason why we use the word approximately there.

Regarding the other part of your question about guarantees and so forth, we are very comfortable working with Yara. Personally, I have been working with Yara for 20 years. I was a Board of JVs with them. I negotiated M&A transactions and even similar agreements to this one with them. It's really a first-class organization, majority owned by the -- directly or indirectly by the government of Norway. So I can imagine a better partner for a long-term project like this one. And it's really not strong concern for us in terms of payments for the project, the ammonia booked.

We will take our next question from James Hooper with Bernstein.

Congratulations for the announcement. First question, what happens if this project doesn't make it past FID and construction cost comes in too high? Are you still progressing on the license that you mentioned at the last set of results about potentially gray hydrogen? Or is there plan B in your project?

No. In principle, if we cannot get to a CapEx number that we can both live with, we're not going to have an FID. It's -- we're going to remain disciplined on our capital. I would say that we are making this announcement today because we believe that we have a path to get there, but things can happen. And until we get these agreements with construction companies done, and we have a final CapEx picture that we can rely, we still need to make a decision about the FID if we're going to go forward or not.

Yes. And just on the -- so is it still -- if it doesn't go forward, is still gray an option based around what the permit you're applying for...

Yes. The project is designed in a way to produce blue. So the capital is higher than the capital that you will have for a gray project. And what makes the project feasible is the 45Q credits, right? So the 45Q credits, I think even during this call, someone asked about the volume, I said 5.5 million tons, someone mentioned the value of the credit being $85 a ton. So you can make the math, it's a lot of money that is involved on the credits, and that's what it makes the project feasible.

And that's -- frankly, that's what made the project attractive to Yara to move this product through Europe and be able to be competitive with blue ammonia in Europe versus locally produce gray ammonia. So this project needs to be developed as a blue ammonia project.

And that concludes today's question-and-answer session. Ms. Britt, I will turn the conference back to you for any additional or closing remarks.

That will conclude today's call. We thank you for joining and for your interest in Air Products, and we hope you have a safe and wonderful day.

Once again, this will conclude today's conference call. We do thank you for your participation, and you may now disconnect.

I'm Patrick Cunningham. I cover chemicals here at Citi. So for our first fireside chat today, we have Air Products. Air Products is a global industrial gases company with an 85-year history and advantaged supply positions operating in approximately 50 countries. The company supplies essential industrial gases, related equipment and applications expertise to customers in industries like refining, chemicals, metals, electronics, manufacturing, medical and food. As the leading global supplier of hydrogen, Air Products also develops, engineers, builds, owns and operates some of the world's largest clean hydrogen projects, supporting the transition to low and zero carbon energy in the industrial and heavy-duty transportation sectors.

Joining me today from Air Products will be Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Executive Vice President and Chief Financial Officer. Eduardo joined Air Products in February 2025, bringing 30-plus years of industry experience. Since then, he has continued to refocus on the core industrial gas business strengths while optimizing Air Products project portfolio. Melissa Schaeffer has been with Air Products since 2016 and leads the company's global finance organization. Both have articulated the strategic road map Air Products is following, targeting further margin expansion and earnings growth and aiming for industry-leading adjusted operating margins.

So look, I think a natural place to start would be your 2 largest outstanding projects, Louisiana and NEOM. Maybe first on Louisiana. It seems like you have several options on the table and only a few weeks left in the year. Any update on the direction that project is heading? How some of your commercial conversations are progressing there?

Patrick, thank you for having us here. Yes, as I said, since the day I came to Air Products, this is a very large project that probably didn't start the way I would start that project. So we started that without having a customer. But the fundamentals of the project are sound, right? So if you look at the infrastructure you have in the Gulf Coast, the price of natural gas, the ability that we have to move hydrogen long distances in our pipeline and you look at the 45Q incentives in the U.S., the project makes sense as designed, right? So our project is a little different from other projects in the same space. It's very large. We're going to make 750 million cubic feet a day of hydrogen, but 80% of that hydrogen was supposed to be converted into ammonia and only 20% would stay as hydrogen and be moved into our pipeline.

So the fundamentals of the project makes sense. We have been working very hard to identify and to work in agreements with ammonia producers that would take over the ammonia loop and operate the ammonia facility, produce ammonia, handle the storage and handle the shipment of ammonia, and we would concentrate ourselves in the separation and the hydrogen producing equipment. So not very different from a similar project that you have in the Gulf Coast was with OCI and now Woodside. So same kind of structure.

The difference is our project is 2.5x the size. So it takes a little time to find the right place to get this done. I self-imposed myself a deadline at the end of the year. I fully expect by -- in the next 2 weeks to have a communication and explain where we are in the project. We made significant improvement -- significant developments on that, but I cannot say more than that at this time.

Yes. And maybe I just have to wait a couple of weeks here for the news, but what sort of -- you talked about OCI, Woodside, that being sort of similar project. Obviously, that has more sort of conventional returns for the industrial gas producers operating there. So how do you think about the return hurdle you need to make a go/no-go decision to justify executing that project with whatever the remaining capital outlay may be?

Yes. It's the kind of return you expect in industrial gases. Our industry, we always try to have certainty on return in exchange of more reduced number than a producer will expect by itself. But we expect the project to have the similar returns of our hydrogen pipe. So this will be exactly a hydrogen and nitrogen project for Air Products, not more, not less. So that's all we're going to do is to produce hydrogen and nitrogen and supply to our customers.

Understood. And then maybe just on NEOM. It seems like construction is progressing well, on track for 2027. I think you mentioned on the last earnings call, you would likely sell some ammonia from that asset as your offtake for green hydrogen is later in the decade. So conceptually, I guess my question is, does this make your downstream marketing of NEOM offtake an underperforming project similar to how you maybe classified some other parts of the portfolio? And then I have some follow-ups there as well.

No, I wouldn't say that. I would say that the project was conceived that way, right, that all that ammonia would be produced in Saudi Arabia, exported to Europe and then converted back to hydrogen. Of course, you can generate clean or green hydrogen in Europe without having that. So you can have electrolysis, you can have a process in Europe using power there to produce green hydrogen. The play here is really an arbitrage on power costs and capital costs between Saudi Arabia and Europe. And I think from that perspective, the project -- the fundamentals of the project are still okay.

So in other words, we will be able to -- we are able to produce green hydrogen in Europe using this ammonia at a price that is competitive against someone producing green hydrogen in Europe from electrolysis from wind or solar power in Europe. That says only that we can run faster than the other guys, right? We still need to run faster than the or the line or whatever you want. So how much market will be developed in Europe, that's a question of regulation in Europe and how that will become a reality. We try to follow that as close as we can.

The EU has some regulations that ask all the member states to use at least 1% of their fuel as renewable fuel. And most places, they -- or all the places so far, they accept that what they call the refinery routes. In other words, that if you use green hydrogen in your refining process to produce your regular oil products, that counts against your RF MDO targets of 1%. Now this regulation has to be what they call transposed to every country in the EU, and they are in different stages.

I think only Denmark approved that so far. In other countries, they are in different stages in the parliament. Most countries, they -- the large countries, they are even proposing higher percent than 1%. So I think Spain is 4%, Germany is 2.5%. So there is several proposals in parliament on these different countries. But we're going to need to wait and see, hopefully, by the summer of '26, they will make that definition, and that will be appliable in Europe -- applicable in Europe, I would say, in 2030. So that's the perspective from the green hydrogen point of view.

Our plant is expected to start in 2027. So between 2027 and 2030, I'm 100% sure we're not going to have a significant market in Europe, right, for green hydrogen. So we are trying to develop other ways to commercialize ammonia because at the end of the day, Air Products has the accountability to lift every ton of ammonia produced by that plant. So I have to find a market for that, and we're working on that as well. And we expect to have something to inform how we're going to do that by first half of next year, if not earlier than that.

I mean, how is that market developing? And I guess, how can investors get comfortable with what the returns may look like from 2027 to 2030 as you sell green ammonia? Like do you expect to get a premium? Is this more of just a cash return on that downstream marketing?

Yes. It's -- ammonia is a commodity, right? So we can't control the price exactly on the marketplace. So I can tell you that today, the price is very good, but there's no guarantee that it's going to be the same 6 months from now or 2 years from now. So I would say that our project, the big advantage we have because we are back integrated into power, right? So we generate our own solar and wind power. Basically, we have no variable costs. The price we have in the beginning of this agreement will basically be the same price 5 years from now, 20 years from now. The only cost increase we'll have is for local labor, and that's very small compared to the overall cost.

So it's -- I think in the long term, it's a very good bet on that project. In the short term, we're going to need to see what happens there. And that's part of the work we are trying to do in the beginning is to try to see how we can insulate ourselves from these variations in the market. But it's -- there is a lot of work to be done to get there.

Understood. And somewhat related, I think you have a commitment to be free cash flow neutral to positive in 2026. You talked about this $4 billion CapEx number as that you have out there for 2026. Is that number a best case scenario if you ultimately decide to pursue some additional investment in NEOM and Louisiana in 2026, what's the sensitivity around that number for the project?

I'll let Melissa talk more about that, but you need to remember that our fiscal year ends in September, right? So for 2026, this number includes all the investments we have in these projects. I think we already made that point that for Louisiana, we are -- we received a minor air source permit for the project. We applied for a major air source permit because our potential customers ask for that, and that will take until probably mid-2026.

So the capital cost -- the CapEx that we have forecasted for Louisiana, it's already -- it's things that we already committed a year or 2 years ago. There is really no field activity at this point for that project. So long story short here, the CapEx includes all the scenarios that we have.

But Melissa, you can add.

Sure. No, you're spot on. So yes, we have talked about cash flow neutrality through '28. And in fact, we have a line of sight of cash flow neutrality to slightly positive in '26. Now obviously, some other nonstrategic assets like our old headquarters land that we'll be selling in downtown. So certain one-offs that are going to get us to cash flow neutrality in '26 through '28. As Eduardo mentioned, absolutely, the forecast that we provided does include Darrow moving forward. And so we've taken that into consideration, but there will need to be certain financing actions that we take to be able to get there.

One thing I do want to remind everybody, and we've talked about this, but I think often people don't utilize this within the models is NEOM will be deconsolidated in '27. So right now, the NEOM debt sits on our financials. In '27, when we deconsolidate that, that will come off. So we will be very quickly back into the metrics that we need to be and our balance sheet will be largely delevered at that point in time. So that's something that I just want to remind everybody as they're forecasting the free cash flow as well as the leverage metrics, and that's something to take into consideration.

Got it. So I mean just putting all of that together from the first few questions, it doesn't sound like there's a scenario where CapEx meaningfully steps up again because you decide maybe the returns justify economics like in terms of reinvesting it.

Not for 2026. For 2027, depending on how Darrow will move forward, we'll need to see what the numbers will be. And again, we are working on that. This is a massive project, right? So a little bit of change can change a lot in the overall numbers, but we'll give guidance at the right time regarding 2027.

Understood. And I just wanted to go back to NEOM just briefly. I think one of the links in the chain for getting green hydrogen landed in Europe would be building ammonia cracking capacity. I think one of your competitors recently started a pilot scale ammonia cracker. Can you just remind us the journey that Air Products has been on there, what you would need to see to make that investment and what it might look like?

Yes. We have been developing our own solutions as well in this area. The agreement that we disclosed, I think, 1.5 years ago with Total to give an idea, that agreement is for something like 200 tons a day of hydrogen. That plant that you saw the announcement, I think they talk about 30 tons, but it's not 30 tons of hydrogen, 30 tons of ammonia that will be cracked. So that will be probably 5, 6 tons of hydrogen. So the scale is very different. We have been working on our own solutions and pilot scale and so forth.

But the real challenge here is to come with a solution for larger amounts and trying to be efficient and try to reduce the cost of converting the ammonia back to hydrogen. So we have our own programs on that. And it's always a challenge to find room in your budget for this large pilot projects and that we're working on and find a solution for that. But we may go in a different direction on building our first facility that it's not halfway, but it's more like a commercial scale facility than a pilot.

Understood. And then maybe just pivoting to some of your other projects. Can you speak to some of the improvements you're hoping to deliver for Rotterdam and Edmonton, whether it's from a capital cost or commercial execution standpoint? And just in the context of making go-forward investments, can you just remind us how much volume commitment do you have there already?

Well, it's -- I think I've talked a little bit about these projects, right? The first thing I tried to do was to -- what is a joke, the first thing you need to do when you are in the hole is to stop digging, right? So you need to stop digging. So we try to put the project under control and make sure we understand the schedule and the cost of these projects. So we -- I think we did that. We are satisfied now that we're executing the project, and we're going to be able to deliver the project in the numbers that we informed our shareholders and our Board and so forth. So that's the first thing we did.

Then now we need to try to see how we can improve that. I would say that on the capital side, it will be difficult to make a change because we already made a big effort to put the project back in control. So I don't see a significant improvement that we can make in the CapEx cost. I would say the volumes are the challenge here. The Edmonton project, we have around 40% to 50% of the volume contracted. Right now, we are working to -- we have a pipeline. We are connected to several refineries there with gray hydrogen. We're working to try to find more customers for this plant.

The situation in Canada, if you don't follow, it's very fluid right now. You think about Europe. Canada is even more complex today in terms of regulations and that kind of stuff from the U.S. And they just announced like a new MOU between the federal government and the provincial government of Alberta for CO2 minimum prices, which is a good thing for us, but they still need to go into the details and talk about free allowances. It's a very complicated regulatory environment there. It's way more complicated than the U.S., much more similar to Europe, and I would say even more complicated than Europe right now.

So we are trying to understand exactly how this will -- how the market will end in Canada, what the incentives will be. I would say that if you want to do biofuels in Canada today, it's probably the best place in the world today because of the incentives they have and the objectives that the government has to commercialize canola oil, but we need to see who else is going to invest there and try to make that jump. But I think there is no question that we have the right infrastructure in place with the pipeline and we have the right connections there, but the regulations will be important there.

In Rotterdam, we have -- in fact, we have 3 projects in Rotterdam. The largest one is a new -- completely new SMR with CO2 capture. We call that HyCO5. This one has like 40%, 50% of the volume contracted with one biofuel customer that is always building expansion. That is moving ahead. Same situation, we need to find additional customers for the additional volume. So we're working on that. That's one project.

The second project is a CO2 capture of an existing reformer that we have there that we call HyCO4. That one is basically fully contracted between product from our reformer and product from a refinery that is close by that is sending the CO2 to us. So this one is fully contracted.

And we have a third project in Rotterdam that was supposed to be the first ammonia import terminal with ammonia crackers and liquefiers. We're definitely moving forward with the liquefier, but we are -- at this point, we paused the rest of the investments to see how that market will develop because at the end, we -- until the regulation in Europe is there from 2030, there is not a lot of incentive for people to pay premium prices for that product.

So the liquefier is connected to our existing infrastructure, so we can produce the product in gray or blue or green, whatever the hydrogen we have, and that will go forward. But there are 3 different projects. The liquefier is a merchant project, so we need to develop that market. We have an existing liquefier there that we are replacing. But -- so 3 different situations. One, we have 50% volume contracted. The other one is fully contracted and the other one is a merchant project that we're going to need to develop when the project is -- the plant is ready.

And maybe just wrapping up just with core industrial gas business and how you view that broadly. I mean I think there's been this perception that the Air Products has taken its eye off the ball on core growth areas, whether it's electronics or decaps or maybe even lost out on some more capital-efficient energy transition projects. So like do you feel like you can win your fair share of projects in attractive growth areas during this transition time?

Yes, I believe so. I don't completely disagree about the assumption that we took the eye out of the ball. It's natural, right? If you're executing a project like NEOM, it's $8 billion, $9 billion project and then you have a $30 million exploration plan, it's not very hard to think about where you're going to send your [indiscernible], right? And that's part of the issue we had at Air Products. And I have been working on fixing that. So we basically now have kind of we split our engineering organization. One will be focused only on the exploration side, the other one hydrogen side.

So we are trying to make sure that we are competitive on the traditional projects. I don't think -- when I say took the eye off the ball, it's not every day, not that we've completely lost our capability. So we're still very strong on that side. We are executing a lot of projects in Korea and Taiwan on electronics. And we expect to see more projects coming out of that. But we definitely feel the need to be more focused on these projects to be more competitive, and that's why we made the changes we made in the engines.

Understood. And look, we've gone this far in our chat without talking about quarter-to-date trends. How do you see the core industrial end markets and regions shaping up to end the calendar year and maybe exiting into 2026 at this point?

Yes. It's not a great environment, but industrial gas is a very resilient business. As we said in the beginning, we go from CO2 for carbonation of soft drinks all the way to chip manufacturing for semiconductors. So every place in between. So it's a very resilient industry. We expect to see an environment that will not going to help us a lot in 2026. But we include that in our forecast in our numbers that we gave a guidance for EPS. And we're going to need to work on that. It's -- I think in just quickly, the U.S., low growth, a little bit of -- it's a difficult market now for new customers making investments. I would say that the tariffs, the labor situation is not very helpful at this point in the U.S.

We talk about all these data centers and it's true, there's a lot being done on that. But basically, we're bringing new competitors for the engineering and construction market, right? When Google or Meta will talk about building a data center, if the building costs x or 1.5x, really doesn't make a big change for them compared to the amount of money on GPUs and chips they have inside the build, right? So they have been inflating the market a little bit in that side. So we have to be very careful and our customers as well, right? They're thinking about twice, 3x before they authorize a new investment in U.S. So that's the challenge that we have right now here. But the basic market, it's working well and normal customers in steel and chemicals, we don't see a decline there.

Asia, again, booming in Korea and South Korea and Taiwan because of electronics. China, hypercompetitive market, not a lot of growth, but we still see the market whoever has an asset is operating the asset at full capacity. But it is a little difficult, not now, but I say, for the last 4, 5 years in China with deflation and the CPI declining and that [indiscernible]. And Europe is probably the most affected area. We see a lot of the product from China that cannot move to the U.S. right now moving to China and moving to Europe, and that is affecting local manufacturers in Europe.

Europe is the place where our product is more diversified. So we have a packaged gas business different from the U.S. or Asia. So -- and we really -- I don't know if it's -- we're being fortunate on that side. We didn't -- we were not affected in large facilities that closures of customers affecting us. But of course, we -- you read about that every day. There is a rationalization of steel, rationalization of chemicals, and it's something that we keep our eye on. But it's not something you can control, but it's more about what customers you have to begin with.

Got it. That's helpful. And maybe your $13 guidance for fiscal year anticipates some continued sort of tough environment from the helium market, and that's been a fairly tough market for you. I guess, first, can you unpack how much of that has been and will continue to be price versus volume? And then if you could just remind us how much of your volume is contracted for the year versus what may be susceptible to additional changes in the market dynamics?

Yes. Our guidance already includes what we expect that will happen this year, right? And now helium is a product that you can go all the way from very -- we can commercialize in the form of full [indiscernible] of container, very large quantities all the way to for people doing filling balloons for [indiscernible]. Air Products, most of our volume is on the large side. We don't -- as you know, we don't have a very large packaged gas footprint other than Europe. So we -- and these agreements, they tend to be for large customers, they tend to be 3 to 5 years.

So we know very well what will happen during the fiscal year 2026 at this point. So that is included in our base. It's still a product that it's very profitable for us. It's above our average profitability. It's just -- it was a product that we're making a lot of money in '23, '24. And I would say Air Products is a little more exposed because if you look at the percentage of our sales is larger than our competitors because we -- I would say, until 5 years ago, we were the #1 helium supplier globally and maybe 3, 4 years ago. And we use that to -- in our advantage when the market was short. And now that the market is long, I think we took the right approach of developing this can that we can store helium. And now we see our competitors doing the same. So hopefully, the market will become a little more rational in the near future, but we still have these issues that we have new sources coming from Russia and other places and that they're making their way to the market.

Understood. And we have a few minutes left. So I just want to open it up for any questions from the audience. Otherwise, I'm happy to crack on. Just on the cost side, you've committed to pretty healthy rightsizing, 60% of the actions already completed. How should we think about the timing to realize cash cost to deliver on the remaining 40%?

Melissa?

Sure. Yes, absolutely. So we have -- you're spot on, 6% of the actions have been completed to date. We saw about a $100 million cumulative cost savings in FY '25 from the actions that we had previously. We're looking for about that run rate into FY '26. So as we continue to complete the majority of the remaining actions in '26 and a little bit in '27, we are looking for about $100 million cost savings. Now of course, wage inflation does eat away on that, right? So we do need to continue to look for additional productivity, not just in headcount, but across the organization with efficiencies and other productivity actions. But that is in our forecast about $100 million of additional cost savings.

Understood. And just related to those cost actions, I guess, if there are further changes to the project landscape like potential write-downs, like is there a potential to be more aggressive on the cost actions? Or maybe said differently, how much of the cost structure that remains after these actions is devoted to some of these outstanding mega projects?

Yes. The projects, we may have that situation. But at the end of the day, the cost for the people working on the projects is normally capitalized and does not affect the ongoing costs.

And you mentioned some of the portfolio optimization, some of the assets held for sale there, right? Is there more to go there beyond just gas station assets, what may or may not happen with energy transition? Like how do you think about the rest of the portfolio?

Yes, there is other stuff we're working on. We need to get that done to be able to communicate that. But as you know, Air Products has some very important positions in joint ventures. And we are very satisfied with our joint ventures. We believe that there is no there is no desire from our side to exit any of these joint ventures. But there is opportunities for consolidation for optimization, and we're working on that. And that's part of the gap closure that for the financial side that Melissa mentioned for 2026.

But we understand exactly what we said when we talked about being cash neutral for 2026. She used 2 examples of the projects in China and the land sales that we have of the old headquarters. But we have 2 or 3 other actions we're working on, and that gives us the confidence to generate the cash we need to be the cash neutral.

Understood. And maybe I'll just close with this one. I think there's obviously a lot baked in, in terms of cost takeout and rightsizing, but I think it doesn't include additional opportunities for efficiency and productivity. So maybe what might you hope to bring to the table from an efficiency productivity standpoint, areas where you can potentially leverage AI or other new technology?

Yes. We are trying to -- like everybody else, are trying to understand exactly how to use AI in the company. So we took an approach to approach this issue from both sides, from the top and from the bottom. So from the top, we have some institutional projects, if you want, with data scientists and sometimes external consultants and so forth to working on things that are very large and important for us. So power management, for example, is an area that is very important for industrial gases. we can fluctuate our demand using liquid storage and other methods. And that's very helpful for potential suppliers of power. So we're trying to optimize that to minimize our overall power cost. But that's a corporate program that we are using AI.

At the same time, we make the -- we decide to give access to AI tools, the genetic models and so forth to the vast majority of our [indiscernible]. So we basically let them have the tool and let's see what they can develop. I would say Air Products is well prepared for that. We work in a lot in the industry. I've seen a lot in terms of industrial gas companies. We are probably in a position that we may be the only one that uses the same ERP and have the same instances in every location in the products, right? So we have that in place, and that is very helpful because with that base, you can put the right guardrails, you can build the connectors and then you can go to your organization and say, okay, now you have the AI tool and you have this base, you feel free to develop new applications and new agents and so forth.

And we are doing a lot of fun things and having internal competitions, agent of the month and who develop the most interesting things. So there is a lot going on, on that side. And we are using -- we have a robust productivity program in Air Products that has been in place for many years. And we have now identified every project that we have in productivity that use AI or can use AI, and we are trying to revisit them and see what else we can squeeze out in terms of productivity. But at the end of the day, it's a balance here. If you go to people and say, use this tool, they're always going to be concerned about themselves. Are they going to be affected by that. So you need to do this leap of faith from giving them the tool and say, use it and let's see what we can get and do not talk about headcount and stuff like that at this point. We just need to see what we can get out there.

That's great. Well, I wish we had another half an hour, but we'll have to leave it there. So please join me in thanking Eduardo and Melissa.

Good day, and welcome to the Air Products Fourth Quarter Earnings Release Conference Call. Today's conference 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 Megan Britt. Please go ahead.

Hello, and welcome to the Fourth Quarter and Full Year Fiscal 2025 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer; and Melissa Schaeffer, Executive Vice President and Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the Investor Relations section of the Air Products website.

During this call, we'll make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call and in the forward-looking statements and Risk Factors sections of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements.

Please note in today's presentation, we will refer to various financial measures including earnings per share, capital expenditures, operating income, operating income margin, the effective tax rate and ROC either on a total company or a segment basis.

Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section.

It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call today. Please turn to Slide 3.

Earlier today, we reported our fourth quarter and full fiscal year 2025 results. Our numbers show consistent progress related to commitments we shared earlier this year. We delivered earnings per share of $12.03, which is above the midpoint of our full year fiscal guidance range. Our operating income margin of 23.7% and return on capital of 10.1% were also in line with our commitments for these metrics. Also, this year marks the 43rd consecutive year of increasing our dividend. In total, we returned $1.6 billion to our shareholders in fiscal 2025.

I'm encouraged we are setting challenging but achievable targets and delivering on those commitments. We have taken several key actions starting in the second quarter to focus on the core industrial gas business and expect to unlock earnings growth through productivity pricing, operational excellence and disciplined capital allocation. The last 3 quarters demonstrate that we are already making progress.

Moving to Slide 4. We have three key priorities for 2026 that were part of the strategy we shared earlier this year. First, we expect to deliver high single-digit annual EPS growth. To be clear, our 2026 guidance anticipates additional helium headwinds in a sluggish macroeconomic environment.

On our second priority, we will continue to make strides to optimize our large projects portfolio. We are working diligently to finalize our NEOM project and expect to improve our underperforming project portfolio with a goal of generating positive cash returns.

On our third priority, we continue to take actions to balance our capital allocation and improve our balance sheet. We expect to reduce our capital expenditures to roughly $2.5 billion per year following the completion of several large projects. At this level of CapEx, we believe we can support our ongoing maintenance and invest in the traditional industrial gas projects while growing our dividend and longer term, returning additional cash to shareholders via share buybacks. In 2026, we expect our capital expenditures to be about $4 billion.

In summary, we expect fiscal 2026 to demonstrate our commitment to continuously drive improvement in our core industrial gas business and growing alongside our customers.

Please turn to Slide 5. We highlighted earlier this year that a portion of our productivity improvement will come from returning to an organizational headcount similar to what we had before we started several large clean energy projects. This slide offers a progress report on our actions in the savings that are being created. Since 2022, we have identified a total of 3,600 headcount reductions, which translates to [ 16% ] of our peak workforce. We expect these reductions to contribute approximately $250 million in annual cost savings or $0.90 per share in earnings once the reductions are complete.

These cuts are not something we do lightly, but they are critical to offset inflation and adapt the organization to a lower level of CapEx spend. Our objective remains to return to staffing levels 2018 adjusted for employee growth to support new assets, minus any other productivity we can find with new initiatives like AI.

Moving to Slide 6. We have a summary of our expected CapEx expenditures after 2026. As we have previously said, we are also moving forward with several underperforming projects, giving our commercial obligations and project steps. We have roughly $2.5 billion remaining to be spent on these projects from 2026 to 2028. Though these products are not expected to contribute materially to operating income, we continue to work to improve their results through commercial negotiations, operational improvement and productivity.

For our NEOM project, this slide reflects the CapEx related to our equity contribution to the overall project, which will be completed in 2027. Any further investments for ammonia dissociation in Europe will need to be approved separately. After we bring these projects on stream, we expect capital expenditures of roughly $2.5 billion per year, which can sustain both our future growth and ongoing maintenance. For our blue hydrogen project in Louisiana, we have hard making new commitments until an uptake agreement is reached.

In this slide, our capital investment for this project in '26 reflects only prior commitments on the project and we have excluded any spending beyond 2026. Like in the case of NEOM downstream investments, they would need to be justified and approved based on firm offtake commitments. I'll talk more about the Louisiana and NEOM projects in our next slide.

On traditional core growth, we expect to invest approximately $1.5 billion per year going forward. These are as operation hydrogen projects that we normally execute in 18 to 30 months, so there are always new products being added and completed products being removed from the list. The CapEx figures for fiscal year 2027 and beyond represents our expected average spend. Our focus will be, as always, on opportunities that meet our return thresholds with quality customers and contractual uptake.

Moving to Slide 7. I wanted to close with a brief update on NEOM and Louisiana. Start with NEOM, the project is progressing well and is about 90% complete. Solar and wind power generation will be completed by early 2026, and we will start commissioning the electrolyzers and ammonia production. We expect to have ammonia production on stream with full product availability in 2027.

We are, of course, following the regulatory developments in Europe. It is important to highlight that the scale of the energy transition is such that the volumes required to meet even the smaller mandates such as the Red III EU mandate to convert 1% of fuel sold to RFNBO fuels would create a green hydrogen demand equal to approximately 7x the total production of our NEOM project by 2030.

Obviously, a significant part of the volume is expected to be supplied by local electrolyzers using renewable power, but it's important to highlight that our solution to bring green ammonia from Saudi Arabia for dissociation in Europe is competitive in terms of pricing and requires 0 public subsidies. As mentioned before, the market for green ammonia is also being developed, and that will be our main target for -- from the time the NEOM project starts. Additional feedback on the market development will be provided during 2026.

Regarding our blue hydrogen project in Louisiana, we are evaluating proposals to divest the carbon sequestration, and ammonia production assets. We will only go forward with this project if we can sign form offtake agreements for hydrogen and nitrogen from the facilities that will be owned and operated by Air Products. And of course, these agreements will need to comply with our return expectations with one or more high-quality counterparts. As previously committed, we expect to provide further updates related to this project prior to the end of 2025, so in less than 2 months from today.

Let me finish by saying that I'm excited to launch my first full operating year with Air Products team. We have been working hard to right the ship and bring the company back to a position where we can deliver maximum value to our shareholders, customers and employees.

Now I'll turn the call over to Melissa to discuss our financial results in greater depth and discuss our 2026 outlook. Melissa?

Thank you, Eduardo, and welcome and hello to those joining us on the call today. Please move to Slide 8 for a high-level summary of our financial results.

We ended the fiscal year with earnings per share of $12.03, delivering our commitment to our shareholders and above market consensus. With respect to sales, favorable volume for on-site and non-helium merchant were more than offset by a 2% headwind from the prior year LNG divestiture as well as project backlog. Volume was also lower due to the reduced global helium demand. Partially was favorable for non-Helium merchant products across all regions. Operating income was down on volume and higher cost, partially offset by non helium price. The higher costs were driven by depreciation, largely offset by productivity improvements, net of fixed cost inflation. Operating income margin of approximately 24% and declined 70 basis points compared to the prior year, largely driven by higher energy cost pass-through. Return on capital of 10.1% was lower versus prior year as we continue to exit on our project backlog, as we continue to exit on our project backlog.

Moving now to Slide 9. Our fiscal year earnings per share of $12.03 decreased $0.40 or 3% from prior year. driven by a 4% headwind from LNG divestiture and a 2% headwind from project exits. Without these discrete items, EPS would be up 3%. Additionally, we continue to see headwinds from helium, including unfavorable comparable volume and pricing across regions. Despite these headwinds, we continue to deliver on our base business with stronger non-helium pricing actions, ongoing productivity across our segments and favorable on-site and merchant contributions.

Moving now to Slide 10. I will provide an overview of our results by segment for the full fiscal year. You can find additional details of the quarterly segment results in the appendix.

For the fiscal year, America's results were down 3%. As a reminder, we reported a onetime asset sale associated with an early contract termination at the request of a customer in the prior year fourth quarter, which alone resulted in a 3% headwind in the Americas. Additional drivers include headwinds from project exits and helium and higher maintenance-related costs. These were partially offset by strong non-helium pricing actions, productivity improvement and favorable on-site contributions from our HyCO business.

Asia fiscal year results were relatively flat, as lower helium was offset by favorable on-site, non-helium price and productivity. During the quarter, we made the decision to sell 2 coal gasification projects within Asia, which are now within assets held for sale.

Europe's FY '25 results improved 4% as non-helium merchant pricing, productivity and favorable on-site contribution was partially offset by lower helium and higher costs associated with 2 depreciation and fixed cost inflation.

The full year, Middle East and India equity affiliates income decreased 2% from prior year, primarily due to lower contributions from our Jazan joint venture.

The full year results for the Corporate and other segment were primarily impacted by the headwind from the prior year sale of LNG, partially offset by lower changes to the sale of equipment project estimates and lower costs with our continued focus on productivity improvements.

Moving now to Slide 11. We continue to generate strong cash flows from our base business, supporting investments in both energy transition and traditional industrial gas projects. Additionally, we returned $1.6 billion in cash to our shareholders. We remain committed to disciplined cost control, a reduction in capital expenditures and strategic asset actions aimed at unlocking value and generating cash.

Moving now to Slide 12. We will review our outlook for fiscal 2026. For the full year, we expect to deliver earnings per share in the range of $12.85 to $13.15, an improvement of 7% to 9% from the prior year. Despite a helium headwind comparable to FY '25, this growth is expected to be achieved through new asset contribution and continued focus on pricing actions and productivity. We also expect a 1% benefit from the rationalization of projects in large part due to the two Asia gasification assets we wrote down in fiscal 2025. We are focused on delivering these results in line with the 5-year road map we introduced earlier this year.

For the first quarter of 2026, we expect to deliver earnings per share in the range of $2.95 to $3.10, representing a 3% to 8% improvement from the prior year. Our outlook assumes growth from continued pricing actions and productivity as well as a benefit from the rationalization of projects and lower planned maintenance, partially offset by lower helium. As a reminder, we expect our first quarter to be lower sequentially due to normal seasonality.

With respect to capital, we expect to spend approximately $4 billion as we execute on our project backlog, including approximately $1 billion on traditional industrial gas projects and invest in ongoing maintenance. As we look to derisk our Louisiana projects and optimize our portfolio, we expect to be modestly cash flow positive in fiscal year 2026 and are committed to staying cash flow neutral through 2028 as we close out on several projects.

Now we'll open the call up for questions. Operator?

[Operator Instructions] We'll go first to Jeff Zekauskas with JPMorgan.

In your opening remarks, I think you said that you were evaluating proposals to divest the carbon capture piece of the Louisiana project, but you're still evaluating whether you would proceed with the project. So could it be that those two events would be linked, that is you would sell the carbon capture piece to a party, and then work with them to provide them hydrogen or hydrogen and ammonia.

Jeff. Yes, let me try to explain that. The idea of this project is basically to transform into a regular hydrogen and air separation project, where we supply hydrogen and nitrogen to someone that will produce ammonia. The CO2 that is being produced by the facility has to be sequester in order to -- for you to capture the 45Q credit, right? So what we're basically saying is that Air Products was developing by itself its own porous space to do that. And what we are trying to do at this point, we evaluate any proposals for someone to buy the porous spaces from us and provide the service of the CO2 sequestration or to just buy the porous space from us and provide the service from another location that this company may have.

So that's the picture in terms of the CO2 situation. And yes, this is connected through the overall project. although if we decided not to go forward, of course, we still have this asset that is the porous space that we can try to monetize in the market.

And as for the Alberta project, because the cost overruns have been so high, why don't you simply stop the project? Or what impede you from stopping it. And would that project have to be money losing on an EPS basis because the depreciates are -- will just be so high from the cost overruns when it comes -- if it comes on?

Yes, Jeff. This project, as I explained before, we have a long-term commitment for almost 50% of the volume with a major customer that depends on us. So we have contractual commitment that we take very seriously. So we need to finish the project and supply the hydrogen to this customer. And we have some additional volume that we are working hard to find other ways to place in the market. As you probably know, we already have infrastructure in place in Edmonton. We have two other sites that are connected through a pipeline. And this third site will also be connected there. So we can move the product from these three sites to basically all the refineries that are located in that area.

So that's the work we're doing with the additional volume. But our commitment to go forward is basically what we need to have in order to fulfill our contractual obligations.

We will go next to David Begleiter with Deutsche Bank.

Eduardo, on the cost savings and the employee headcount, is the 20,000 head count you're targeting a new base? Or could it go lower from there?

Yes. This is what we are expecting to have at the end of this year. We continue to find ways to rationalize our workforce to make sure that we use all the technologies available. I think we demonstrate that we are reducing our SG&A year-by-year. And if I'm -- my recollection is correct, I think we said that our regional number when we were in 2018 was close to 18,500 people. And our objective is to go back to that number plus the people that we absolutely need to operate some assets that we added since that date. So I would say that we still have some room to go, but it's an ongoing process to always optimize and make sure that you are as competitive as possible.

Very good. And just back on Louisiana. If you do move forward with that project with these offtake or partners you suggested, what would be the CapEx remaining to Air Products?

Yes. We will provide that data, Dave, when we update the project. I think it's -- I hope everybody understands that what we're saying is trying to summarize that no offtake deals, no FID. So Air Products started this project without having an offtake deal. We paused the project. We're working hard to find solutions for that. the economics of the project when you look at the natural gas price, the infrastructure that we have in place and the 45Q, it is the right place to install blue hydrogen and blue ammonia projects. I think both other ammonia producers and even our competitors that doing similar projects in Texas and Louisiana saying exactly the same thing that you can be competitive even against gray ammonia in Europe.

So we're working on that, trying to find a solution. I understand we are basically 45 days away from the end of the year. And if I really didn't think that we have a chance to have something, it would be much easier for me to say that today. But we still believe that we can find an interesting solution for this project, and we'll provide a full update before the end of this year.

We'll go next to Duffy Fischer with Goldman Sachs.

Just want to get some insights into the growth into next year. So at the midpoint of your guide, you're up 8%, but there's a negative 4% from helium. So that's really 12%. Melissa called out one from the shutdown of the sale of the Chinese assets, which gets you to 11%. So that 11% growth underlying? Can you break that out kind of new projects, price, efficiencies, how you deliver that? And is that smooth throughout the year? Or are the oncoming projects back-end loaded?

Yes. We expect a contribution from new assets in both in Asia and the Americas that can give us around 2%, 3% growth. And then the balance will come from price and productivity. I would say half and half there. We are working very hard on the on the productivity side, as we mentioned on our headcount slide and on the pricing is a continuous work for us.

The helium headwind that we have is very similar to what we had this year. I would say that when we say that this is the headwind for 2026 is basically, agreements that we are reviewing and we're signing this year in 2025 or the previous year, now the fiscal year. Air Products, most of our volume comes from large liquid customers. As you know, our packaged gas business is basically limited to Europe. So we pretty much know where these agreements are going to be next year and that's where they are at the fourth quarter of this year.

So we're pretty comfortable that we understand well the headwind that we have in helium, in the base business, as I said, 3% of new assets and the balance coming from productivity and price.

Great. And I'm sure it's not your favorite subject, but helium was mentioned 29 times in your slide deck this quarter. What is your view on the helium industry going forward? Do you think we've stabilized at this point? So '26 will be the last year of headwind? Or do you think we continue to see headwinds in the '27 and '28 for that product?

I didn't count the number of times, Duffy, but thank you for pointing that.

Yes, it's -- we have a lot of debates on that. If we have a structural change in the market or just part of the cyclicality that you always had in helium, right? I would say that there were some significant changes in the way the market operates because of the disappearance of the BLM as a major source of helium globally and in the United States. And that took away a little bit of the inventory that you had that were able to regulate the market a little bit. I think most of the major players now, they are now installing their own stores. So we have our own cavern, our two competitors, they have their own cavern as well. So I hope that this will help regulate the market a little bit.

And from what I see today, I see still some decline in '27, but not at the same level that we had this year. And the best guess that we have is that, that will be the lowest point and the market will stabilize. But we need to see how the sources developed and how the effect of this storage of helium will have in the overall marketplace.

We'll go next to Patrick Cunningham with Citi.

If you decide to forgo downstream investment in NEOM maybe based on unfavorable regulatory environment, whatever it may be, what do the commercial options look like? And would you expect to see any positive EPS contribution in 2027 under a scenario where you have to sell ammonia exclusively?

Yes. We are still talking about the guidance for 2026, right? So we're going to work, we are working on this issue. We're going to work during the year. And by the end of 2026, we'll be able to give you more guidance on that.

Now there's no question that in the beginning of this project, we'll need to commercialize the product as ammonia. The market for green and blue ammonia or low-carbon ammonia whatever you want to call, it's developing. So I expect that we're going to have the ability to sell some of our production in the beginning of the operation as green, and that percentage will grow with time. What is exactly the numbers, as you know, ammonia, its own market. It has different pricing dynamics. So we're going to need to wait a little bit more to give you a forecast for 2027.

Understood. And then maybe just a quick one on equity affiliate income. We saw meaningful growth in the Americas this quarter. Can you provide some color on what was driving that and what we should sort of expect for step up or step down across all of the regions and equity income next year?

Yes, I can ask Melissa to answer, but it's basically Mexico for us and they have been -- had a very strong second half of the year.

Yes. Thanks, Eduardo. So -- absolutely, so our Mexican joint venture did see improvements year-over-year. We do expect about a flat going into FY '26. However, we did see a slight decline in our Jazan joint venture in '25, and we actually look for that to be a pickup in '26. And obviously, interest rates do impact that. So as interest rates do decline, we will see improvement on the equity affiliate contributions from our Jazan joint venture.

We'll go next to Josh Spector with UBS.

Eduardo, I wanted to just ask you about the decision on Louisiana. I mean I think based on investor expectations, you might have had some license to maybe push out a decision there a little bit beyond year-end, but you're having the tax commitment to communicate something here in the next couple of months. So I'm just curious if you could talk about the range of scenarios there. Is that a go or no-go meaning cancel decision? Or do you see a scenario where kind of some decision gets pushed out beyond the year-end time frame.

Yes. I understand the curiosity junction. We would like to be able to communicate more at this point, but we really need to wait until the end of the year. Again, this -- I would say that if we are telling you that we believe that we have a reasonable chance to communicate something by the end of this year, it means that we have very advanced negotiations and with counterparts on that. But it is the largest project or would be the largest products ever built or probably any other industrial gas company. So it's a very complex negotiation and we have been working on that for several months now.

I would say that from that perspective, it's going well. I -- my main concern on this project really is on the capital estimate for the project. When you look at this slide, you can see a picture of coal box that we manufacture for this project. So we have all the major equipment done. We have all the engineering done, but we still need to do the construction. And the construction market in the United States is very hard at this point. A lot of competition from data centers and other people trying to build all the structures and coming from different industries and able to pay different prices. I think this is affecting projects for the entire chemical industry.

So we are looking at that very carefully trying to understand what is real, what is not and what is a bubble, with the point that if you look at our slides, you can see that we made a point about applying for a major air permit -- air sources permit there in Louisiana. And we did that because our potential counterparts asked us to have the flexibility of running the plant on a gray mold, if something happens with the CO2 sequestration that we didn't expect to do or still don't expect to do because the CO2 is a big contributor for the project.

But it's something that the Air Products are doing, and we decided to apply for that major permit. And that will take several months. It will probably take up to mid-2026. And from there, you need to do civil construction. So really the peak of the mechanical and electrical construction would be like mid-2027. And the judgment that we need to make is how hot or not hot the U.S. construction market will be at that point. So that's where we have been working a lot of details behind that decision, and we will communicate clearly where we are in the project before the end of this year.

Okay. And just a quick follow-up just with the guide for '26. Your comments are minimal volume growth to something to that extent. Just wonder if you could quantify minimal. Are we talking about near 0 growth. And basically, if we end up having a macro environment that looks like where we've been at the last couple of quarters, is that a risk to your guidance? Or is that largely baked in?

Yes, sure. Thanks for the question. So let's be clear. So again, as we stated, we do see several new assets coming on stream, both in the Americas and in Asia. Those will be ramping towards the back half of this fiscal year. So there is growth in volume associated to new assets.

From a market volume perspective, we're not forecasting a significant market growth at this time given the macroeconomic headwinds. However, if we see that improve, obviously, our results will improve. So definitely, volume from new assets but at this time, not forecasting significant market volume due to those headwinds.

We will now move next to Vincent Andrews with Morgan Stanley.

Just trying to reconcile the CapEx slide in this deck versus the one, the last one. It looks to us like your CapEx forecast for fiscal '26 has gone from about $3.1 billion to $4 billion. So first of all, is that correct? And secondarily, if it is, what's changed in that slide that's causing that?

Yes. Thanks, Vincent, for the question, and I'll take this one. So the CapEx guide that we gave in the second quarter, obviously was an estimate, right? So as we go through the year, we sit with all the regional presidents and really do a bottom-up forecast on the capital that we're going to spend over the next couple of years. So we've refined that. We've adjusted based on new wins in all the different regions and are estimating around a $4 billion CapEx. Obviously, maintenance is a component of that CapEx. We're looking to improve on maintenance and take that down, so this could improve that CapEx number. But again, that's really a bottoms-up review that we do as part of op plan. So there was a small variance between the Q2 time frame CapEx forecast and what we're projecting right now.

Okay. And then just as a follow-up separately in the Corporate segment, which came in certainly better than what we had, and I believe better than where consensus was. The slide, and I apologize if you already spoke to this. The slide speaks to lower changes of sale of equipment project estimates. What does that mean?

Yes. Thank you. So we do have certain sales. It's a very small part of our business, but what you would call a sale of equipment. When we sell a project, to a company that's not going to be a long-term sale of gas project. We have had some cost increases associated to certain projects that are sale of equipment that are again accounted on a percentage of completion accounting perspective. So as cost increases there, we showed that in the P&L. We did have some smaller cost increases this year compared to last year, and that's really what you're seeing flow through there.

We'll move next to Chris Parkinson with Wolfe Research.

Let's talk about your base business a little bit, particularly electronics. Can you just go over kind of how we should be thinking about the intermediate to long-term growth algo that you have in your portfolio? And how that exposure evolves with M2, HPM growth and everything else. I'd love to hear your thoughts on that as well as where you think Air Products just broadly stands relative to peers in terms of what's embedded in, let's say, your non-large prone outlook as it relates to your backlog.

Thank you, Chris. Yes, electronics represents roughly 17% of our total sales in Air Products. It's a very important segment for us. We were really the pioneers in the area, initially with Intel now with the other players. It's a market that is expanding very quickly. We have plants that we are commissioning right now. We have investments on other plants in Asia that we're doing, and we are in the process of participating bids for several [indiscernible], as you know, the investment in this area has been very, very strong.

So it's probably the brightest area we have for our traditional business, and it's an area that we have been focused a lot. I really -- on your point on the other products, many would like to get a little more clarification exactly what you're asking other than the portfolio of new projects.

Are you happy with where your existing electronics backlog exist relative to peers, given everybody has been wrong over the last few years? Or is that something you'd like to focus on as a CEO?

Yes. No, no. I will never be happy with that because I always want to have more than that. We're working very hard to get some new opportunities. We believe that there are some new projects that we will be able to announce in 2026. And I -- but I still believe that we have a very, very strong position in this market, and I have no other way to make comparisons with our competitors. I think our position on that market is stronger than it is in most markets.

And if I could add one point. So one of the assets that we spoke about is coming on stream this year is in the electronic space in Taiwan. So that's the starting of the ramp of that project. So that's one good example. But in the near term, where we're going to see improvements in the electronics space for Air Products.

Yes. And the reality is in these places, it's like a continuous project because they have so many expansions and we are always building new plants in Asia, and hopefully, we will be able to move that to other regions as well as these customers, they start to invest outside of Asia.

Got it. And just as a quick follow-up. To the extent that you can, can you talk about just kind of how we should be thinking about the run rates from Uzbekistan as well as like GCA and some of these other projects which have had some maintenance or kind of been more start and go. Could you just perhaps just give us a little framework on how we should be thinking about those as well.

Yes. Uzbekistan is a very large syngas facility it's operating well. We had a maintenance this year, but it was scheduled maintenance this kind of plants you have to do that every few years. So no real issues there and the plant is running at very high rates at this point. And GCA is a project that we are still working on to basically bring to completion, and it's one of the projects that we expect to contribute this year in 2026.

We'll go next to John Roberts with Mizuho Securities.

Are you still anticipating doing ammonia cracking in Europe and building an ammonia cracker there?

We are still waiting to see what the final regulation will be in Europe. As you know, they have this regulation to convert 1% of the fuels to [indiscernible], this is for 2030 now. This has to be transposed by each country. There is other regulations that are probably not going to move. But this one, everything indicates that the -- what you see in most countries, they are even proposing higher percentage than that. So I think Spain is 4%, Germany 1.5%. But all this has to be ratified and the expectation now is that we'll see this transposition of the regulations by March of 2026.

So when the regulation comes out, then we're going to understand the size of the market with the best information we have today, it's not a huge percentage of the fuels. But when you think about green hydrogen volumes that are really, really small, that will generate a market. I think in our slides, we said that if the number is 1% is like 7x the volume of NEOM. At the current regulation levels that we see, that number is more like 20x. Again, these volumes, they can be supplied by local production using electrolyzers with renewable power or they can be supplied by cracking ammonia coming from a place like Saudi Arabia. So it's really a way to do some arbitrage on power prices and so forth.

So we need to see how these ends. We need to see how the market develops and what opportunities we have. if the project makes sense again. And if we have an offtake agreement, then we can do an FID and move forward with these projects. If not, will need to go in a different direction. But at this point, indications are that there will be a market, not a huge market, but very significant compared to the existing volumes in terms of green hydrogen and ammonia.

We'll go next to Laurence Alexander with Jefferies.

Earlier this year, when you put out the target of 6% to 9% growth through 2019, what was your assumption around NEOM? Was it your predecessors framework of realized prices will be roughly double the market price? Was it just a placeholder, 10% IRR? Was it -- can you give us some sense of what was embedded in that framework from the NEOM asset.

No, we didn't add any kind of very large contribution from NEOM. At this point, we have the contribution from the JV point of view, the contribution from the product that we'll need to sell from there is something that, as I said before, we need to continue to work on to get a better understanding of what the numbers will be. But on our guidance for that high single digits between now and the 29% we count with a minimum contribution from that project.

We'll go next to Matthew DeYoe with Bank of America.

Two questions for you. I apologize, the first one is going to be a little long. So if I look at your performance versus Linde, Europe really shows the biggest opportunity for improvement. And notably, I think price there has kind of underperformed materially if you go back or look even to COVID or pre-COVID. I know Helium is probably in there, but I think fundamentally, when electricity prices rolled over in '22 and '23, it looks like Air Products just like handed price back to customers and Linde didn't. And so net, you have a pretty wide margin differential between the two. I mean when -- do you kind of agree with that view, but is there an opportunity to catch up on the price differential? Or is raising price unilaterally like too difficult?

And then, as my second, is there a world where you can just like monetize the $2 billion on cost in [indiscernible] to another company that's looking to do a project along the Gulf Coast that might have maybe different strategic goals from Air Products. So I don't know, maybe you can get like 50% of that, right? Is there a word we can walk away with $1 billion and just say that's better than just a full project walk.

Yes. On the -- we start with the last question first, yes, absolutely. As I said, we have a lot of the critical equipment done for the project. the project has good economics. So that's definitely what would happen if we decide to cancel we would try to monetize as much as we can. And I don't think you're your estimate of 50% is a bad estimate at this point. But again, this is something that you need to go and understand and see how much you can recover from that.

On your first question, and I've seen your report on the prices in Europe and I think we're still trying to understand exactly the comparisons there because when you do comparisons quarter-by-quarter or not in average for the year, you get to different results. And I think we can talk offline and explain a little bit of that to you.

But when you look at performance in Europe. Yes, I understand our competitor improved a lot of their performance. I have a personal understanding for what exactly happened there. You always need to understand that Europe is -- it's easy to talk about as one market, but there are several different markets in Europe. It's easy to see that when you think about an island like the U.K. But the reality is, when you talk about industrial gases, Iberia is an Ireland, Italy is an island. And really the only large common market we have in Europe is the space between France and the Benelux in Germany. Eastern Europe also doesn't have the same geographical barriers, but the density also leads to the point that you have several different markets here.

So when you think about that, and you forgot about Scandinavia, it's also a separate market. If you look at the positions that we have and the positions that our competitors have the margins are little -- you can understand a little bit the differences in margin. I'd not say that we cannot improve our business in Europe, we working through to do that, to make it better on every line of business that we have. But I think the difference in performance is a little smaller than what you are you were calculating there just because of the positions that we may have or not in places like Scandinavia or Eastern Europe.

But -- so that's the point I can guarantee you we're not giving price back and we're working on our pricing day by day in Europe. And I look forward to have our group here reaching to you and talk about the difference on how you calculate that when you look at quarter results and annual cumulative results on pricing.

We'll move next Arun Viswanathan with RBC Capital Markets.

Just a clarification on the helium headwind. So I think maybe this year came in just slightly below your expectations. I think you're guiding at $0.55 to $0.60, maybe that's $0.49, so maybe that was a little bit better. Maybe you can just clarify that.

And then on the helium headwind for next year, it looks like Q1 is maybe a negative 6%, but then the full year is negative 4%. So that appears to be projected to get better as you move through the year. What's your confidence in that, I guess? And is there a possibility that it could get worse?

And then for my second question, just on CapEx, is there a possibility that maybe -- what kind of flex do you have there? Would you go down to maybe $3.5 billion if necessary for fiscal '26? And how soon you make those decisions? What kind of freedom are you giving yourselves to or time to make some more difficult decisions, I guess, if you need to?

Great. Thanks. I'll take this question. So let's start on helium. So you are right. We had forecasted between $0.50 and $0.55 headwind on helium for the full year. We came in at $0.49. So a little bit better than we had forecasted, but not significantly off. For FY '26, we're looking about the same run rate as what we saw in FY '25. Obviously, there are areas that we're going to continue to look to be able to push volume and price, but this is a difficult market.

One of the things that I do want to remind everybody is that in Q1 last -- or this year, we had a bulk helium sale that we disclosed. That is causing a significant headwind as we lead into FY '26. So that is the difference in Q1 that you're seeing as a year-on-year comp that is giving us a little bit of a tough headwind. But again, full year, about 4% is what we're forecasting, 4% headwind coming into FY '26.

Now on CapEx. So for CapEx, it's really a component of execution against our projects, right? So as long as we're continuing to execute against the projects that we have in our backlog, we will see that $3.5 billion to $4 billion. That is not something that would significantly change or that we need to make a decision on.

Now as for [indiscernible], we obviously have commitments on purchase orders that were continuing to progress, but no new commitments are being made. So I don't see a significant variance or decision point that would change the FY '26 CapEx forecast. So between $3.5 billion and $4 billion is a number that I am pretty confident on.

We'll go next to Kevin McCarthy with Vertical Research Partners.

Can you elaborate on the decision to sell to coal gasification projects in Asia curious about what exactly you're divesting, whether you have any firm deals in hand today? If so, cash proceeds and any impact on your sales in Asia?

Yes, Kevin. We -- as we explained, I think, 2 quarters ago, we have three major coal gasification in China -- projects in China where we own and operate the coal gasification part of the project. We have several others that we have the oxygen plant, but that's a different story. Out of these three projects, [indiscernible] is the largest one, and we have absolutely no issues with this project. It's operating. It's probably one of the largest coal gasification sites in the world, and this is continuing normally.

We have two other sites that those are the sites we're taking actions that we have no operating issues, but we have customer issues. And we have been trying to work these issues for some time. These projects really -- they have been a drag for us in terms of operating profit. We have been booking only the sales that they have been able to pay. So the impact on sales is not exactly very large for us. And we decided to -- after several months of negotiation we decided to set these assets aside for sale. And we are in the middle of that process. I cannot give you specific data and value of when we can close this sale and the amount of money that we're going to be able to collect.

But of course, we're trying to maximize the valuation. And we believe that the entire asset may have a better owner than us and the current owner of the syngas to methanol to other things plant. So we hope that we'll be able to find that and monetize this asset better than what we would have if we keep running these plants.

Eduardo. My second question is a bit of an unusual one. Would you comment on the market for rare gases, like Crypton, Xenon, Neon, are you seeing any escalation of competitive intensity in Asia? And if so, is it meaningful? Or is it simply too small to matter given the small size of those markets.

Yes. Air Products, unfortunately, is not a big player in this market, traditionally. So it's not something that we focus a lot. We have seen some degradation in pricing and increasing in the competition level from other players. But really, it's not something that affects us that much. So I don't think I would be the right person to give you a feedback on that.

We will take our final question from Mike Sison with Wells Fargo.

One quick one on Louisiana. If you get to partners for sequestration pneumonia who want a similar return that you would want, is there still a good return on the hydrogen that you would do longer term? I suspect that -- that's kind of what the board of partner is looking for. So maybe just flesh that out as a scenario.

Every -- we are looking at this, Mike, as a normal hydrogen project for us. So we have our criteria. The customer has its own criteria. And it needs to work for both sides for the product to move forward. That is all I can tell you. If it doesn't work for them, you're not going to work for us. And I believe there is a room today to get to the right returns. As I said, to get the right returns, you need to have a commercial negotiation on pricing, but we also need to have a firm estimate on the capital cost, and that's also part of the equation here.

And that will conclude the Q&A portion of today's call. I would now like to turn the call back to Eduardo Menezes for any additional or closing remarks.

I would like to thank everyone again for joining our call today. We appreciate your interest in Air Products, and we look forward to discuss our results with you in the next few quarters. Thank you, and have a great day. Bye.

Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.