Good morning and welcome. My name is Dave Begleiter of the U.S. Chemicals team here at Deutsche Bank. Welcome to the Deutsche Bank Global Materials Industrial Conference. With us today is the team from Air Products led by CEO Eduardo Menezes. Eduardo became CEO back in February following a 36-year career at Praxair and Linde. So I'll leave it with some questions for Eduardo, then we'll open the questions. We'll open the floor. Questions to the floor. We'll go from there. Eduardo, welcome, and thank you for being here. Thank you. Eduardo, you've been CEO now for four months at Air Products. You were a competitor for three and a half decades. How does the reality of Air Products compare to the perception of the company as a competitor and observer? I don't think I was very surprised. As you know, this is an industry with very few competitors. We're all in business for a lot of years, Air Products, 85 years. So it would be surprised to see very different culture, traditional knowledge, or behaviors in competitors in this business, considering the time that you are in and how close the market is. So from that perspective, I didn't see a lot of differences from what I was expecting. I would say that you guys have been following what we were publishing and talking about some of the projects in the last few years. That was a little bit of a surprise, some of the projects. But as I said, this is the way that we're going to go through for a few years until these projects are done. And the idea is to bring the business back to the basics. And at that point, I don't think there will be very significant differences between the competitors. And the fight that we have in the market every day is win or loss by a few inches, not by a lot of yards. On the projects back in May, you committed to the NEOM and Louisiana Blue Hydrogen projects. So why are these two projects worth pursuing for Air Products? Okay. So two different situations, right? So NEOM is a JV project that Air Products owns 33%, and we have a project finance. So it's really not an issue on the CapEx or the execution of the project, which is going very well. I think yesterday we published something on our website showing the progress of the project. We are at close to 80% completion. So the project is moving forward. There is nothing to be done about that, just finishing the project. And the challenge for Air Products, as I said, was to commercialize the product that comes out of this joint venture that we have a commitment to take 100% of the volume for a very long time. As I said on the last conference, the conditions for this agreement, they are, I think, attractive in the medium and long term. So we're going to work to place this product the best way we can to maximize the amount of money we can make out of that project. So that's the situation in NEOM. Louisiana Clean Energy Complex is a completely different case. It's a blue ammonia project in the U.S. that Air Products took the decision to go to FID a few years ago. The project is moving. It's well known that we do not have, at this point, contracted off-takers for the project. Probably not the way I would start this project, but that's why we have. When I look at the project, I look at the economics, I look at the location, I look at the fact that Air Products has a Class VI well identified with a permit well on its way, the fact that we have a pipeline that we can move some of the product. So we believe that the project has the right economics to become a successful project. And the objective there is to find partners to take over the ammonia piece and take over the CO2 sequestration and make sure that we focus on our core business, which is taking natural gas and transforming that in hydrogen and also the nitrogen to supply the ammonia plant. So that's what we're working on. I think we have the right economics. I gave the team and myself until the end of this year to find the right partners for that. And that's the challenge that we have. But I think it's an interesting one, and I think we have the right elements to make this a successful project. But a lot of work to be done. Right, and how are those discussions proceeding with the ammonia plant and the carbon sequestration side? Doing well. I cannot talk about that, of course, but we have several discussions in parallel, and I think people can see the attractiveness of the project. All these projects, they are based on 45Q that we expect that will remain in place. And I think from the perspective of the operator, when you look at these projects, although we do not expect to get to a return very different from our normal projects, the economics of this project will be frontsided. In other words, the first 12 years when you have the 45Q, you're going to generate a cash flow that is better than normal compared to a regular project. This is an $8 billion project. How much have you spent to date on this project? About $1.5 billion, and we have a little more committed for it. So the project, from our perspective, is moving forward. We need to find the right partners to make the equation work well for us. And the most you'll spend is, like you said, $5-$6 billion if you do find partners. Is that fair? That's our objective, yes. Okay. Another key thing from the Q1 call was you committed to be free cash flow positive in 2026. Why was it important to make that statement, and how do you get there? It's important because we need to change the frame. For many years, Air Products was spending way more than what we can generate. It's a fantastic business. It generates a lot of free cash flow. We pay a lot of dividends, which is a priority for us. We have to invest in our business to the maintenance and replacement of trucks, cylinders, plants, and that kind of stuff. We still have a good amount of money that we can invest to grow the business and at one point even buy back shares. We have been investing way more than that. We need to make that change. That's why we focus so much on that. We need to stop spending more than we are collecting. The way we're going to get there, the critical path for us is really the Darrow project. It's the largest project by far. Even if you look at Air Products was involved in NEOM, that is a $9 billion project, but it's a third of the project with project finance. So the amount of investment for Air Products is really limited on that one. We did Jazan, which is an enormous project as well. But again, project finance and a joint venture. So Darrow is by far the largest project we have. So the way we're going to get there is really finding this equation on Darrow and finding partners and be able to actually spend the amount of money that allows us to be cash neutral between 2026 and 2028. That's the objective. Got it. Very helpful. On the cost side, headcount has increased almost 40% since 2018. You committed to a reduction over the next few years to almost back to 2018 levels, maybe a little bit higher. Why can't that be quicker, and a lot of these costs being capitalized, such that the impact on the income statement will be minimal or modest? Yeah. I think we tried to explain that. So the company really started this reduction in 2024. So we announced over 1,000 people in 2024. We talked about over 1,000 people now in this time, and we are committing to bring our numbers to the same numbers we have in 2018 plus the operational people that we need to run the new assets. Most of the 40% that you mentioned was on the engineering side, but we had other functions. So the reduction, of course, will affect more the engineering side. But really, that's not how we started because we have all these projects going on. So the first reduction that was done in 2024, I think we're 95% done. That was around $100 million in cost savings for us. This one we announced last quarter is another $100 million. The next ones, that will affect more costs that are being capitalized. I think of these two combined, in addition to the $200 million in P&L effect, we have like $40 million in capitalized costs. Going forward, I think the equation will reverse. In the next cut, we'll be more focused on the costs that are being capitalized, but we're still going to have a little bit that will flow to the P&L on the future costs. Probably maybe $1 per share overall on these headcount reductions, give or take. Is that fair? If you go back to the base in 2024. What other costs or productivity opportunities are there? I know Praxair and Linde was a very strong company on productivity. How do you get that same culture here with those same results? That's a very hard not to use the word that starts with B or L because it's very hard for me to. I apologize. I was making a mistake on that, but no, I think Air Products has good productivity processes. I found some things that we have to improve, so we are working to have better systems to make sure that what we do in Asia is replicated in the U.S. and Europe and so forth, so we are putting a more robust process on the ideation and the replication side of the productivity, but I think, as I said, the cultures are not different. The DNA of the company is not different. Air Products is a company that was always very innovative, very focused on efficiency, on innovation, on asset operation, hydrogen production, so I think it's just putting these resources back to the focus back on where it was before. And again, you need to remember that when you have at one point, I think we had something like close to $30 billion of projects under execution. That takes away a lot of the attention of the company. So as we bring that down, naturally, we're going to have more attention to dedication productivity and other efforts. Got it. Just on pricing, there was this perception by investors, maybe even by myself, that Air Products wasn't as good at pricing as disciplined as maybe Praxair, Linde, or even Air Liquide. Is that perception accurate? And if not, why not? And is there a pricing opportunity here at Air Products going forward? Yeah. I think there is always a price opportunity. The pricing of this business, it's a continuous effort. You always have price opportunities when you sign a new agreement, when you renew an agreement. And we have a lot of our agreements that are basically open that you have price opportunities that you need to manage that process continuously. So that has to happen. I think it happens in every industrial gas company, and Air Products does that. I had the same question, and I went back and looked at the statistics and looked at the numbers. And if you look at the price increases that the companies they publish, the three major companies across the segments and quarter by quarter, you're not going to see that difference. The numbers are very close, ± 1% here or there in this region, that region. I don't think Air Products is very different from the others. We went through a process. There's a lot of. We talked a little bit about that. We cannot disclose numbers because it's not a segment for us. Our competitors talk about that as well, that we have all these complications in the helium market now that the market became long and we have a new source in Russia. I would say that if you look back the last three, four years and what went through during the scarcity moments in the market in terms of pricing and you look at what the competitors did, I would say that Air Products was probably leading the pack on that one. Maybe that's why we're suffering a little more now, but I don't believe that the perception is correct at this point. What do you expect for merchant prices going forward over the next year or two? Again, we work on trying to have our price and productivity offsetting our inflation by 3%-4%. That's the goal. So it depends a lot on the power pass-through and everything else. But the goal is always to have this equation of price plus productivity minus inflation to give us a 3%-4% gain in our sales line. It's very tough. It's a lot of fights to get there, but that's the objective, and that's what we push for. Very good. We'll open the floor to questions. If there are any questions for Eduardo, just please raise your hand. We'll give you a mic, and we'll go from there. If not, I can keep on going. But if you have a question, raise your hand. If not, I'll keep on going. Eduardo, you've done a lot in your four months here. First, you took about $3 billion write-off back in February for three projects, including Los Angeles Sustainable Aviation Fuel. Why did those projects not make sense? And let's keep it at that, and we'll go on after that. My personal philosophy, a write-off is an awful thing. The last thing you want to do as a manager is a write-off, and you need to do the best you can to make the project work. We only did a write-off for these projects because of the situation we had. We were in a point that we still had to spend a certain amount of money, and the perspective that we have, the NPV of the revenues or the margins after we start up was significantly less than the amount of money we had to spend, and we have contractual conditions that allowed us to do that, so that's why we took this free write-off, so it was basically trying to avoid spending good money after bad, a bad situation that we had, so at that point, it was the right thing for us to do. We know continuing these three projects wouldn't make any sense. Clear. Canada. Blue Hydrogen. You double the cost of the project back at the earnings call and pushed on the timeline by about two years, so really, you said this will be a no-return project going forward, so obviously, not an outcome anybody wanted. What happened in Canada? Why did the project cost double from the last update from the prior management team? Yeah, well, it's a long process. This project started several years ago. I can't tell you exactly the reasons for that. But when you look at a project and you see an increase of 10%-20%, you can't understand. When you see an increase of 200%-300%, it's never only one thing. So it's a combination of things. Normally, your cost estimate was too optimistic. Your execution had flaws. And you get a combination of factors that will result in that. I think at this point, what we could do is to bring the project back under control, have a schedule and a cost that we know we can comply with and move forward with the project. So that's what we have been doing. Unfortunately, we are where we are in this case. Very clear. Also mentioned that the three Chinese gasification projects which are operating don't make any money. That was a surprise to myself and some others. Where do those projects stand? And are there potential candidates to be divested without making any money? Yeah. Well, I don't remember exactly who asked the question during the call, but someone started the question with the assumption that we're making all this money in these projects, and I had to clarify that. There was no way around that, so we have, just to put that in perspective, our gasification in China is a large industry. It uses a lot of oxygen, normally to gasify coal, and from there, they make methanol, all the things, and a bunch of other products. Air Products has several, and the other companies as well, several oxygen plants, supplying oxygen to these processes, and they are okay projects, and we have no issues with this oxygen supply. Air Products, in the last few years, decided to go beyond that and not only own the gas separation plant, but own the coal gasification itself, so we did three projects. One project with a public company that we had difficulties in getting paid and everything else. But at the end of the day, it works relatively well. We get paid late, but we make money on that project, and it's fine. We have two other projects that we did with private companies that the collections are much more complicated. We represent a big piece of their spend. And we are, in some cases, in legal procedures and courts and everything else, trying to make the other party perform the agreement as it should be. In all cases, technically, the plants work well. We're running these plants, I think, better than anyone else in the world in terms of efficiency and reliability. But we have problems with these two customers. Did we think about divesting that? Of course. Of course, we thought about that. It's never easy to divest a business when you have these issues. So we're trying to fix that at the same time that we're running some tries in China, trying to find the right partners to take over that. I think the main issue on these two cases, the first case, it's really a state company that is fully integrated. So they own the coal mines, and they produce methanol or other things or whatever. And the other cases, the private companies, they don't own the coal assets. And that becomes very hard. So we believe that with a little bit of luck and working the numbers right, we can probably find someone that owns coal assets that is interested in doing that. So that's what we're working on. Another project the prior management team did was a. Can I just fix one thing here? You said that we don't make any money. That's not exactly what I said. I said that the operating profit or the EPS from this project's contribution is zero. This project, just to get to zero, you need to cover your depreciation, which is very significant. So there is cash, positive cash going on. So from an accounting point of view, we don't have earnings. No, very clear. Yeah, a question from the audience. That'd be fantastic. One of the dynamics that's become a bit complicated associated with the projects is the growth in the D&A. And so as we think about EPS growth, which I think you've sort of pointed to, how should we think about that relative to free cash flow growth? You've obviously spoken to getting to free cash flow neutral. But as the EPS steps up, is there a much greater step up with all of these projects that basically have no operating profit? You mean from the cash flow point of view? Yeah. From the cash flow point of view, they don't affect the cash flow. Will these projects that you've sort of written off at $5 billion, those will yield a decent free cash flow? Yeah, they will be similar. The cash flow will be similar to the depreciation of the assets. As you think about deploying that, how do you think about deploying that cash flow? The deployment of the cash flow, the entire, it's an exercise that we do for the entire company, right? So we have priorities on how we allocate capital. So again, dividends, maintenance capital, and projects with good returns, that's the priority for us. And at one point, we need to start also bringing down our debt. But I think so far we are in good numbers. And I think the natural increase in EPS is going to have from that perspective, we should be fine. Eduardo, one concern for investors is you wrote up $3 billion in February. Alberta, $3 billion challenged. You highlighted a $5 billion also challenged project. You're talking about $11 billion of capital that the prior management team didn't really deploy properly. Will this limit your ability to grow in the future? You've developed a basic strategy. Are your hands at all constrained by the prior team's lack of capital discipline? Yeah, I understand what he's saying. I'm not going to talk about that. I think when Air Products started this journey, right, it started from a position that it basically had zero or even negative debt. So if you look at five, six years ago after we sold the Versum business, I think the cash was, the debt was negative. Yes, we have these projects. It's complicated. At the end of the day, five years from now or three years from now, we're going to finish all this wave. We're going to have a business that is exactly what we have in the beginning, plus the growth. The difference is that where you're going to find these numbers is on our debt. That's why the commitment of being cash flow neutral, not growing this debt, is so important for us. But that's where you're going to find. I don't think it precludes us at the level that it is now. It doesn't preclude us to make more investments. But again, we need to invest within the cash flow that we have. And you're not going to see slides again talking about our debt capacity. And that makes no sense for me in a capital-intensive industry. Good. You revealed a high single-digit EPS growth target through 2029. What's your growth algorithm to get there? Yeah, I, too, internally try to make it very simple to our people so they remember that. As I said, the equation is very simple. It's three plus three plus three plus one. So 3% on that price plus productivity minus inflation that I talked about, 3% from new projects, and 3% from growth on the volumes, on industrial production and market share or whatever, and 1% on share buyback. Those are the exact numbers, not really, right? So it's a little plus or - 1% there. So normally, we try to get a little more than 3% on price and productivity. The contribution from projects is a little lumpy. So normally 2 to 3. And the industrial production is something we can control. But normally, industrial gas is, I tell people that I'm in this industry for 40 years. And when I started, the largest customers were the steel customers. 20 years ago, became the chemical refining customers. Today, our largest customers are the electronic customers, right? The chip manufacturers, right? So the industry evolves. And the opportunities for the usage of industrial gas is it's always changing and improving. So I think with that profile, we have everything to do in our base volume a little better than industrial production. So that's the mindset we need to have. And that's the numbers. In the first few years for Air Products, with the cash situation that we have, we cannot afford to do the buyback of shares. But we hope after the wave of these projects that will be part of our capital deployment. Right. How many of these new projects? These are traditional industrial gas-type projects. How is the pipeline for these projects? Was that pipeline not focused on by the prior team? Is it being rebuilt? And how's the competition for these projects from your former employer and your other peers, etc.? Yeah, it's as it always was. It's very difficult. It's not only the traditional industrial gas companies, right? So when we go to Asia now, you see more and more of the Chinese companies participating in the industrial gas business, sometimes even going beyond China. So I've seen that in a few places. So it's a tough business. But I think we have the right elements to participate in that. So Air Products, as I said, always had good engineering capabilities. We have fantastic capabilities in terms of manufacturing of cold boxes and equipment for gas separation in China. We are the largest operator of hydrogen reformers in the world. So we have these capabilities in the company. We need to focus. We need to make sure that our product lines are updated and competitive and be in the marketplace. And a lot of opportunities in Asian electronics and some opportunities in the U.S. and the Americas on chemicals. So we are participating in the market. We're trying to increase our competitiveness in this area. Very good. If there are questions from the audience, please raise your hand. One right here. Good morning. Thanks for your time. Could you just provide an update on what you're seeing just in the end markets broadly? You touched a lot of different areas: industrial, electronics, refinery, metals, and mining. Just how are customers reacting in this environment with trade uncertainty? Just any regional color would also be helpful. Thanks. Yeah. Yeah, the uncertainty is clearly an issue. So we have been facing some people delaying some decisions on new projects. I would say that the day-to-day business is not so impacted by tariffs from the outside. But our customers are taking longer to make decisions in projects, right? And that applies to steel and chemicals. I would say chemicals are having a very difficult time in Europe, in the industry in general, with energy prices and everything else that is happening there. On the other side, you have electronics that is booming, right? So we have a lot of products under execution in Taiwan, in Korea, in China. And it's an area that we're all focused on trying to get the largest possible share that we can in this industry, right? But in general, there is, it's not easy even for us, right? When you think about our projects, when we buy something for our projects, we don't buy off the shelf, right? We normally order a compressor or column or whatever that takes eight to 16 months to manufacture. And it's very hard when you don't know what the tariff will be to figure out where to place this order. So we are all facing the same issues. And hopefully, things will calm down, and we'll be able to put that in the back and continue to do the business. That's where we are. Let's take it back on that question. Is anything getting worse in the markets? Or is anything getting materially better? I know electronics remain strong, but any changes in the last few weeks or months? No, I don't think in the last few weeks we've seen a big difference on that. As I said, with chemicals in Europe, it's a challenge. But it takes a little time to get to the industrial gas supplier, right, on what we do. Okay. Any questions from the audience? If not, just finishing up on NEOM, the opportunity there. How much do we think about what happens when the project comes online? Your production costs, the market for green ammonia? You've pushed out the downstream investments in Europe. So you have the entirety of the projects vying to market. What's the strategy for these products? Yeah, I just want to say that I didn't push the industrial piece for a later date in Europe. Now, Europe did that, right? So the regulation of RED III and so forth, they have been delayed, so that's the situation we have, so at this point, we expect that we're going to need to place most of the product as green ammonia. We're working very hard on finding the right partners for that. I hope to have news for that by the end of this year that I can share with people, but again, we understand the challenge is something that was committed several years ago, and we need to do our best to make the best of this case. As I said, I think in our pricing there, because we own the power generation, we own the solar and the wind farms, and basically have zero variable costs, our price is basically firm for the next 25 years, right? There's very little escalation for the next 25 years. I would say that we have a risk in the first few years, and we have a great opportunity in the mid to long term for this project. I know you've not quantified the cost of the green ammonia, but is a number around $200 per metric ton a good base to look at for that cost? I can't comment on that. Fair enough. And lastly, as you sit here, what are the biggest opportunities over the next six months for you at Air Products, either from an earnings perspective, a capital perspective, or a project perspective? What are you most focused on and potentially excited about? We are trying to do, unfortunately, we have to do everything at the same time, and so we have a big push internally on productivity, on adjusting our headcount, and make sure that we have better processes, make sure that our people are using the right tools to be more productive, so we have a big push on that, we have a big push on the point that you made about being more competitive on our product lines and make sure that for the traditional gas separation hydrogen business that we win more than our fair share of the business, so we have a big focus on that, and we have a focus on finishing these projects and commercializing these other two big projects, so these four things, they go together. Unfortunately, we cannot say I'm going to focus on only one of those because we're not going to succeed if we cannot all four work properly in the next six months. Excellent. Our time is up. Eduardo, thank you very much. Thank you. It was well.