Earnings call: Air Products reports growth and clean hydrogen focus

Air Products (APD) has reported a strong finish for its fourth quarter of 2024, with a 13% increase in adjusted earnings per share (EPS) year-over-year, meeting their guidance. The company announced an optimistic outlook for fiscal year 2025, with anticipated EPS growth of 6% to 9%. Despite the sale of its LNG business to Honeywell (NASDAQ:HON), which will not contribute to future earnings, Air Products is strategically positioned to capitalize on the growing clean hydrogen market, with several projects underway and a commitment to returning value to shareholders.

Key Takeaways

• Adjusted EPS for Q4 2024 at $3.56, a 13% year-over-year increase, within the guidance range.
• Fiscal year 2025 EPS forecasted between $12.70 and $13, indicating a 6% to 9% growth.
• Significant growth strategy focus on clean hydrogen, with major projects like NEOM in Saudi Arabia.
• The company expects to return approximately $1.6 billion to shareholders in dividends.
• Air Products aims to leverage its 65 years of hydrogen experience to become a leading clean hydrogen supplier.

Company Outlook

• Adjusted EPS for fiscal 2025 is projected to be between $12.70 and $13.
• The first quarter EPS for 2025 is expected to be $2.75 to $2.85, largely flat due to seasonality and economic concerns in China.
• The company anticipates a conservative 1% to 2% price increase in 2025, with volume growth tied to GDP forecasts.
• Air Products is targeting 8% to 10% growth in EPS over the next decade.

Bearish Highlights

• The LNG business is expected to contribute about 4% to corporate revenue in 2025, representing a headwind.
• Challenges in the Asia business due to supply-demand dynamics and helium market fluctuations.

Bullish Highlights

• The clean hydrogen market is projected to exceed $600 billion by 2030.
• Air Products has multiple clean hydrogen projects in development, including the NEOM facility and partnerships with TotalEnergies (EPA:TTEF).
• The company has a first-mover advantage in clean hydrogen, with strong customer engagement.

Misses

• No significant income from the Alberta project included in the fiscal year 2025 guidance.
• The sale of the LNG business to Honeywell will not contribute to future earnings.

Q&A Highlights

• Discussions are ongoing for additional customers beyond Total for the NEOM project.
• Air Products is seeking offtake and equity partners for the Louisiana project, with a preference for partners able to secure offtake agreements.
• The company is addressing permitting challenges for the World Energy Project and remains committed to its partnership with World Energy despite recent legal disputes.
• Air Products will not make final investment decisions on new projects without securing an anchor customer for at least 50% of the offtake.

Air Products' earnings call revealed a company at the intersection of solid performance and strategic positioning for future growth. With a disciplined approach to capital allocation and project execution, Air Products is poised to leverage its expertise in industrial gases and lead the transition to clean hydrogen energy.

InvestingPro Insights

Air Products' (APD) strong financial performance and strategic focus on clean hydrogen are further supported by key metrics and insights from InvestingPro. The company's market capitalization stands at an impressive $68.19 billion, reflecting investor confidence in its growth strategy and market position.

An InvestingPro Tip highlights that Air Products has raised its dividend for 41 consecutive years, underscoring the company's commitment to returning value to shareholders. This aligns with their plan to distribute approximately $1.6 billion in dividends in the coming year. The current dividend yield is 2.26%, providing a steady income stream for investors.

Despite economic concerns in China mentioned in the outlook, APD's stock has shown resilience, with a one-year price total return of 23.59%. This performance is particularly noteworthy given that the stock is trading near its 52-week high, as indicated by another InvestingPro Tip.

The company's profitability remains strong, with a gross profit margin of 31.67% and an operating income margin of 22.91% for the last twelve months. These figures support Air Products' ability to invest in clean hydrogen projects while maintaining financial stability.

It's worth noting that APD is trading at a relatively high P/E ratio of 27.17, which may reflect investor expectations for future growth in the clean hydrogen market. This valuation aligns with the company's projected 8% to 10% EPS growth over the next decade.

InvestingPro offers additional tips and insights that could be valuable for investors considering APD's long-term potential in the evolving energy landscape. With 8 more tips available on the InvestingPro platform, subscribers can gain a more comprehensive understanding of Air Products' financial health and market position.

Full transcript - Air Products and Chemicals Inc (NYSE:APD) Q4 2024:

Operator: Good morning, and welcome to Air Products' Fourth 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 Mr. Eric Guter. Please go ahead, sir.

Eric Guter: Thank you, Jessica. Good morning, everyone. Welcome to Air Products' fourth quarter 2024 earnings results teleconference. This is Eric Guter, Vice President of Investor Relations. I'm pleased today to be joined by Seifi Ghasemi, our Chairman, President and CEO; Melissa Schaeffer, our Chief Financial Officer; and Sean Major, our Executive Vice President, General Counsel and Secretary. After our comments, we will be pleased to take your questions. Our earnings release and the slides for this call are available on our website at www.airproducts.com. Today's discussion contains forward-looking statements, including those about earnings and capital expenditure guidance, business outlook and investment opportunities. Please refer to the cautionary note regarding forward-looking statements that is provided in our earnings release and on Slide 2. Additionally, throughout today's discussion, we will refer to various financial measures, including earnings per share, operating income, operating margin, EBITDA, EBITDA margin, the effective tax rate and ROCE, 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 website in the relevant earnings release section. Now I'm pleased to turn the call over to Seifi.

Seifi Ghasemi: Thank you, Eric, and good day to everyone. Thank you for taking time from your busy schedules to join our call today. Please turn to Slide 4 of the material we have posted on our website for this call. Ten years ago, we set a goal for Air Products to be the safest, most diverse and most profitable industrial gas company in the world, delivering excellent service to our customers. I am very proud to say that thanks to the outstanding efforts of all of our talented, dedicated and committed people at Air Products, we are today the safest and most profitable industrial gas company in the world. We have achieved what we set out to do, and now we are ready to move forward. On the Slide 5, I'd like to point to our safety track record, which is our number one priority. We have made significant progress on both our employee lost time injury rate and recordable injury rate since 2014. We are very proud of this improvement. We will continue to strive to achieve zero accidents and zero incidents as the ultimate goal. We believe that all incidents and accidents are preventable. Now please turn to Slide 6 for a look at our fourth quarter results. Our fourth quarter adjusted earnings per share of $3.56 was at the upper end of our guidance range of $3.33 to $3.63, up 13% over last year, driven by our three largest reporting segments. Both productivity and pricing actions contributed positively this quarter. We successfully completed the $1.8 billion sale of our LNG, process technology and equipment business to Honeywell at the end of September. The LNG business was part of our full fiscal year 2024 results. But with the sale, we no longer -- it will no longer contribute to our earnings going forward. Our adjusted EBITDA margin was up 460 basis points and our adjusted operating margin increased 350 basis points versus prior year. Please turn to Slide 7 for our fiscal year 2025 outlook, which is 2.5% higher than last year. We expect our ongoing business, which excludes the LNG business to deliver adjusted earnings per share of $12.70 to $13, demonstrating an improvement of 6% to 9% over last year. We expect our first quarter adjusted earnings per share to be in the range of $2.75 to $2.85, which is flat to up to 4% when considering the LNG divestiture. As you know, our first quarter is typically our weakest quarter, impacted by seasonality. In addition, we are not forecasting any significant growth for this quarter due to our concerns about the economic activity in China. It is possible that economic activity in China might improve with actions that the Chinese government might take in the future, but we have not included that in our forecast. We are proud of our results this quarter, and I would like to thank the talented and dedicated people at Air Products for helping us to deliver these strong results. Working together, I am confident that we can achieve what we have put forth in our guidance for fiscal year 2025. Now please turn to Slide 8 where you can see our strong sustained performance over the long term. We have achieved a 10% annual growth rate in our adjusted earnings per share since 2014. We have delivered consistent results throughout significant ups and downs in the world economy. And as I just mentioned, we expect to continue that trajectory in fiscal year 2025 with adjusted EPS growth ranging from 6% to 9% on a like-for-like basis. Now please turn to Slide 9. Another top priority for us is to consistently return cash to our shareholders. Our sustained growth has enabled us to achieve a 9% annual growth rate in our dividend since 2014, and we plan to return about $1.6 billion of cash to our shareholders in dividend payments this year alone. We are proud of our record of increasing our quarterly dividend payments for 42 consecutive years. We take a balanced approach to determine our dividend, and we are confident that our sustained performance will enable us to continue rewarding shareholders through increased dividends while also meeting the cash needs of our growth strategy. Now please turn to Slide 10, which is my favorite slide, again demonstrating on long-term performance. Our adjusted EBITDA margin has expanded by almost 2,000 basis points over the last 10 years. We are now at a 44% adjusted EBITDA margin. We lead the industry when it comes to adjusted EBITDA margin, and this track record demonstrates our focus on effectively running our base industrial gases business. Now I would like to turn the call over to Melissa Schaeffer, our Chief Financial Officer, to discuss our quarter four results. Melissa?

Melissa Schaeffer: Thank you, Seifi. Please turn to Slide 11 for a detailed review of our fourth quarter results. Compared to last year, volume and price each improved 1% with positive underlying sales in our three largest regional segments. Higher on-site volume, including new assets more than offset lower demand for merchant products. Overall, price improved modestly driven by positive pricing results in the Americas and Europe. Declining natural gas prices, primarily in North America, resulted in 2% lower energy cost pass-through, which has no impact on profit. Adjusted EBITDA increased 12% on favorable volume and price, which contributed to over 450 basis point improvement to adjusted EBITDA margin. Sequentially, sales and EBITDA improved across most reporting segments, driven by favorable on-site volumes. Now please turn to Slide 12 for a discussion of our adjusted earnings per share. Our fourth quarter adjusted earnings per share of $3.56 was up $0.41 or 13% versus last year, driven by strong operating results. Overall, volume was up $0.15 on higher on-site partially offset by lower merchant demand. Price, net of variable costs, contributed $0.23 driven by both pricing gains and lower power costs. Cost was favorable $0.05 as our productivity actions more than offset the impact of inflation. Now please turn to Slide 13 for a brief discussion of our business segment results. You can find individual slides covering each of the business segments in the appendix. Looking at each business segment. Americas overall pricing was 3% higher, while volume was flat. This translated to a 6% merchant pricing gain for the region with improvement across the product line. Adjusted EBITDA increased 11% and adjusted EBITDA margin improved over 650 basis points in each case, primarily due to strong pricing and favorable mix driven by onetime asset sale associated with an early contract termination at the request of the customer and higher hydrogen demand. Additionally, lower energy cost pass-through improved margin by approximately 200 basis points. Moving to our Asia segment. The 7% volume improvement was driven by our on-site business. including contributions from new assets. Adjusted EBITDA increased 21% and adjusted EBITDA margin improved almost 500 basis points. In each case, primarily due to favorable on-site volumes and costs. Looking at Europe's results, price was 2%, up with broad-based improvement across the region. Volume was flat as a new asset in Uzbekistan offset weaker merchant demand. Adjusted EBITDA improved 17% and adjusted EBITDA margin increased nearly 500 basis points in each case, mainly due to improved price. Switching to our Middle East and India segment, lower merchant volume negatively impacted sales and adjusted EBITDA. Unfavorable costs also contributed to lower adjusted EBITDA. For our Corporate and other segment, sales and profit were lower this quarter, primarily due to lower sales and higher cost estimates related to our sale of equipment activity. Finally, I'd like to close out the review of our performance and quarterly results on Slide 14. Our core industrial gas business remains as strong as ever, delivering significant EPS growth over the past decade and achieving industry-leading profitability and adjusted EBITDA margin. Air Products pioneered the on-site business model more than 80 years ago and about half of our business today is on site, proportionally higher than our peers. Our on-site business has contractual pass-throughs, which enables us to pass energy costs and other cost inflation to our customers. This, combined with our take-or-pay provisions in our customer contracts, enable the stability of our business. We generate strong and steady cash flow that supports reinvestment aligned with our disciplined capital allocation strategy. As we continue to show, this also fuels our ability to consistently return capital to shareholders with continued increases to our dividend. Through our core industrial gas business, we supply customers in dozens of industries with critical products and services, with the goal of being the safest most diverse and most profitable industrial gas company in the world. Now I'll turn the call back over to Seifi.

Seifi Ghasemi: Thank you, Melissa. Now I would like to take this opportunity to discuss our growth strategy. Please turn to Slide 16. Our growth strategy consists of two pillars: our excellent core industrial gases business and our developing clean energy business. Our core industrial gas business is an industry leader. It is a stable business and grows at GDP, or industrial production levels, around the world. We continue to optimize for maximum efficiency and invest strategically to maintain our market share. In '23 and '24, almost half of our capital investment was related to our core industrial gases business. Second, we see tremendous opportunity in clean hydrogen, driven by strong demand for decarbonization solutions that we are already seeing play out today. We are particularly optimistic about the use of blue hydrogen in the form of clean ammonia to minimize the use of coal in Asia's power plants. Another promising demand is the use of blue ammonia directly to power ships. Dozens of such ships are already on order or under constructions. We are equally excited about the application of green hydrogen to meet Europe's emission reduction mandates across the heavy industrial and transport sectors. Green hydrogen has real demand today, and we expect to drive outside growth relative to our core industrial gas business over the long term. The two pillars of our growth strategy are complementary and interrelated, underpinned by our core competencies technology and of course, more than 65 years of hydrogen experience. We are committed to efficiently running and growing our core industrial gas business, while pursuing strategic high-growth and high-return opportunities in clean hydrogen. Now please turn to Slide 17. I want to expand on my comments about how we developed our clean hydrogen platform. Clean hydrogen is not a new business for Air Products. It's merely an extension of our existing core business. As I said, Air Products has been supplying hydrogen for more than 65 years over which time we have developed key customer relationships that span both the private and public sectors. About 30 years ago, Air Products pioneered the on-site hydrogen business model to take-or-pay provisions and contractual pass-through supplying hydrogen over defense to refineries in California. We then gradually expanded to the U.S. Gulf Coast, Canada and Europe. We capitalized on global desulfurization regulations to ultimately become the world's largest hydrogen supplier with the most extensive hydrogen pipeline system. Now we are well positioned to capitalize on the next phase of hydrogen development, which is clean hydrogen supported by the need to decarbonize hard-to-abate sectors. We moved first with focus and conviction to capture the important first-mover advantages, which I will talk more about in a moment. Consistent with our traditional hydrogen business, clean hydrogen offtake will also follow the on-site business model, and we anticipate these projects will provide attractive returns. Our strategic first-mover actions are now creating the opportunity for us to become the world's largest clean hydrogen supplier. Please turn to Slide 18. There are clear advantages in moving first. We have been able to secure optimum locations for renewable resources, including for areas with strong sun and wind generation at the same time to produce low-cost green hydrogen. And for blue hydrogen, we have been able to gain access to the right geologies needed for carbon sequestration, which is the key enabler to making blue hydrogen. As mentioned, we also have been able to apply more than 65 years of hydrogen and technology expertise, which sets us apart. Finally, as we have demonstrated, the first mover gets the best seat at the table with customers to negotiate the best offtake agreements. On Slide 19, you can see an overview of the various regulatory drivers for clean hydrogen in Europe and Asia, focusing on heavy industry and transport sectors where battery electric meters are not effective. A wide range of industries need to decarbonize using clean hydrogen and we continue to extend our reach into these sectors. Now turning to Slide 20. Let me underscore the significant demand for clean hydrogen today. Various leading companies, including TotalEnergies, as one key example have issued request for quotation, requesting capacity equal to requirements that far exceed the capacity of our green hydrogen project and the construction in NEOM. Taking a step back, TotalEnergies's RFQ or as large as it is 500,000 tonnes per day accounts for only 10% of gray hydrogen now used by European refineries. And the output of our NEOM project is less than 5% of the gray hydrogen used by European refineries. And beyond refineries, there is demand for several other hard-to-abate sectors, including shipping and steelmaking. This strong demand in the market today gives us great confidence in our ability to load the green hydrogen facility and their construction in NEOM. Turning to Slide 21. This demonstrates the sheer scale of the clean hydrogen industry in the coming years. Clean hydrogen is expected to be more than $600 billion market by 2030 and eventually exceed $1 trillion by 2050. There is significant demand now, and that demand is expected to grow significantly over the long term. Air Products, capturing even a very small portion of that demand means that we will be well positioned to deliver significant growth. To demonstrate how large this market opportunity is, Air Products currently approved clean hydrogen projects account for less than 1% of future market expectations. Before we discuss our key projects, please turn to Slide 22 with important takeaways about our strategy and disciplined approach to creating shareholder value. Our core industrial gases business remains fundamentally strong with industry-leading adjusted EBITDA margin and solid GDP and industrial production growth. We are adding to this strong foundation by pursuing attractive growth opportunities in clean hydrogen. Driven by decarbonization, future clean hydrogen demand is expected to be significant. We ultimately need to capture, as I said before, only a small portion of this anticipated high growth market for our initial projects to be successful. We believe favorable supply-demand dynamics will enable us an attractive return on green hydrogen. We are pursuing this strategy prudently and only approve new projects. And I'd like to stress, only approve new projects after securing anchor customers. As we have said before, we will not take any final investment decision on new projects until our current facilities are loaded, at least, 75% or more. We have focused teams within Air Products, executing these 2-pillar strategy. Our employees are dedicated to the ongoing success of both our core industrial gases business and our clean hydrogen business. Now I would like to take a moment to provide an update on our key project on Slide 24, where you can see an actual recent aerial photo of the NEOM project and their construction. I'd like to stress, this is a real project. It's not a computer-generated slide. It covers the ammonia production site, the electrolyzer facility and the jetty. Although this view covers a vast area, it does not capture the wind farms located 50 miles to the north near the Gulf of Aqaba, and the solar farms situated 40 miles to divest on the other side of the mountain range. We are full speed ahead on this project. Please turn to Slide 25. We have made immense progress on this green hydrogen project. Construction is about 60% complete, and we are on track to bring this facility on the stream at the end of 2026. There are 18,000 workers on the site building this facility today. Importantly, roughly 35% of the total amount of the production has been contracted on a take-or-pay basis. Negotiations are underway for additional offtake which would exceed the production of the facility. NEOM has been financed by 23 banks providing more than 70% of the total capital needed. Air Products is investing about $800 million or less than 10% of the total project cost. This is significantly less than the $1.7 billion that we originally projected for this project and illustrates our ability to execute highly successful project financing. Now please turn to Slide 26. In June of this year, we were delighted to announce a 15-year agreement to supply 70,000 tonnes of green hydrogen annually to TotalEnergies beginning in 2030. This was a milestone for us and the pay nature of this agreement will drive stability in growing our clean hydrogen business. This pioneering agreement validates our clean hydrogen strategy and demonstrates significant demand for green hydrogen with one of the largest energy companies in the world. Moving to Slide 27. Let me share the status of two other major clean hydrogen projects. First, our Canada Net-Zero Hydrogen Energy Project. We have committed 60% of the capacity on a long term take-or-pay contract, and we are in active discussion for the remainder of the capacity. As for our Louisiana project, the Blue Hydrogen project, we have submitted for permits, which we expect to be issued in '25 and '26, and we have received major pieces of equipment already in the site in readiness for construction work. We are in active discussion for offtake from this facility, also in discussions with possible equity partnership and also assessing project financing for this project, and we will keep you updated as we move forward. Moving to Slide 28. As we have said before, we have put a sustainable aviation fuel project in Paramount, California on hold until we get our full permits. With regard to the proposed $4.5 billion joint venture to produce green hydrogen in Northern Texas. This project never reached final investment decision. It does not meet our established guidelines for new low-carbon project investments and therefore, we have stopped our involved in this project, and we have sold our development rights to our partners. Finally, on Slide 29. You can see that we continue to focus on our core industrial gas business, which accounts for more than 50% of our total fiscal '23 to fiscal '25 CapEx. Much of that CapEx is focused on growth. Projects for core industrial gas business and clean hydrogen both need to meet or exceed our internal return targets. We regularly evaluate alternative funding opportunities to optimize our cash allocation. Beginning in 2027, we anticipate meaningful decline in net debt-to-EBITDA ratio as well as possible net cash flow. Now for an update on succession planning. Please turn to Slide 33. As this cost in our last earnings call, we have decided to bring into the company a fully qualified potential successor, as President and a Member of our Board of Directors. This person should be well known to investors with a clear record of success, preferably a current or former CEO of a public company with significant international experience and relationships. This Board-driven process is being led by our Independent (LON:IOG) Director, Mr. Ed Monser with the support of the full Board and the executive firm, [indiscernible]. I'm happy to say that qualified candidates have already been identified, and we are anticipating announcing the President's name in the first half of fiscal year 2025. Now please turn to Slide 33. At Air Products, our two pillar growth strategy includes running our core industrial gas business efficiently and continuing to invest and grow it. At the same time, levering our 65 years of hydrogen experience to serve the large high-growth clean hydrogen market. We expect our clean hydrogen projects to achieve higher returns than our core industrial gas business. And the thing all of this is our relentless focus on thoughtful strategic capital allocation. Being a prudent steward of Air Products' capital has been and will continue to be our top priority. Now please turn to Slide 34. The people of Air Products are working hard every day to deliver for our customers, do so safely and deliver best in result profitability. Our operating discipline, combined with our focus on delivering shareholder value gives us confidence as we enter into the next chapter of our growth at Air Products. And now we will be delighted to answer your questions.

Operator: [Operator Instructions] We'll move first to John McNulty with BMO Capital Markets.

John McNulty: Yes, good morning, Seifi. Maybe I can start with something on the more immediate term. You've got some growth despite a difficult environment, looking out to 2025 versus 2024, I guess. Can you help us to kind of basket that a bit? How much comes from price? How much comes from some of the new projects that you've been gradually ramping through '24, and how much comes from core growth?

Seifi Ghasemi: Good morning, John. Thank you for your question. John, for fiscal 2025, we obviously one of our major concerns and unknowns, is how does the demand develop in Asia. We have a pretty decent handle on our opportunities in Middle East, in Europe and in America. The big unknown is China. That is why we have taken a conservative approach there. Things might change depending on what the Chinese government does, but we're going to be cautious. In terms of right now, our expectation for price overall is similar to last year, about 1% to 2% price increase. Our volume growths are very much adjusted to the expected GDP and industrial production growth forecasted, for the different regions in the world, which is not that much. It's about sometimes 2%, 3% depending on which area you are. And then, we do not have too many significant large projects coming on stream, but we do have a lot of smaller projects coming on stream, which are going to contribute to our growth. We feel pretty good about our fiscal year guidance. I have to admit that we are very conservative on the first quarter, because of the immediate weakness that we see in China.

John McNulty: Got it. Okay. No, that's helpful color. And then maybe I can just ask a question on Louisiana. So you kind of mentioned a bunch of things going on there. You're looking for offtake partners. You're also looking for equity partners and maybe even project financing, I guess. Can you speak to what you see as the ideal equity partnership arrangement that you, that you're kind of pursuing at this point, and how we should be thinking about that?

Seifi Ghasemi: Well, the ideal thing would be to have equity partnership with somebody who is going to take the optic. So that's kind of the obvious solution. But there are a lot of people who are have raised significant funds, so called clean funds and want to participate in equity with us. But our preference obviously would be with somebody who is going to take the offtake.

John McNulty: So it's less about coming up with a partner to take on some of the manufacturing, or other certain parts of the project. It's more about coming up with a partner for the off take. Am I thinking about that, right?

Seifi Ghasemi: No, I think we would be interested in partnering with people on the manufacturing part too. Equity participation in the entire project.

John McNulty: Got it. Okay. Thanks very much for the color.

Seifi Ghasemi: Thank you.

Operator: We'll move next to Jeff Zekauskas with JPMorgan (NYSE:JPM).

Jeff Zekauskas: Thanks very much. I think that there are two prominent activists that seem to be involved in your products, and one of them published a large slide deck, maybe generally speaking, all about the de risking of various projects. When you listen or look at the activist approach to Air Products, how do you reflect on it? Is it something that leads you to change your behavior in any way or not change your behavior? How do you assess the different new owners and Air Products and their ideas about the company?

Seifi Ghasemi: Jeff, thank you for your question. Air Products has 220 million shares. We have many, many investors and we have respect for all of our investors. As you know very well, we meet very often with our investors, and we believe the view of all of the investors is as important as the view of one investor. So I don't want to single out the fact that we listened to a particular investor, we listen to all of our investors. And the suggestions that have been made by all of our different investors, is pretty consistent. They want us to focus on our base industrial gases business, which we are. And they also want to make sure that we are investing in the developing clean hydrogen business in a responsible way. And we are obviously doing that. And all of our investors throughout the years always ask about succession planning, and we have always been very diligent about succession planning, and we have now laid out very specifically what we want to do. So as I said, we listen to all of our shareholders, and we take their views very seriously and consider them and then act on them if necessary.

Jeff Zekauskas: Then for my follow-up, I think on Slide 20 you said you expect to fully load NEOM before the on stream date. The commitment with Total I think is for 2030. So does this fully loading NEOM mean that it would be fully loaded for 2027, or does it mean that it would be fully loaded for 2030? In other words, from the assessment of the profit contribution of NEOM, should one expect a full loading for 2027 if you're mechanically complete at the end of 2026?

Seifi Ghasemi: Jeff? We expect to fully load NEOM, and we are working toward that in 2027. Yes, that is our expectation. That is what we are working on. Because there are other customers beyond Total. Total, we got their permission to announce it publicly with the other people. We don't have such permission. And when the time comes, we will announce that.

Jeff Zekauskas: Thank you so much.

Seifi Ghasemi: Thank you, sir.

Operator: We'll move next to Patrick Cunningham with Citi.

Patrick Cunningham: Hi, good morning. I wanted to, with the LNG out of the business, what should we expect in terms of the corporate line for 2025? I know you've taken significant productivity actions. So what might be the offsets from cost reduction on the corporate line?

Seifi Ghasemi: Well, that's a very good question and I'd like to give Melissa a chance to respond to that. Melissa?

Melissa Schaeffer: Yes. Hi. Thank you, Seifi. So LNG is about a 4% contributor or about $0.49 to the organization, obviously evenly distributed throughout the quarters with some timing based on delivery of the product. So we're seeing about a 4% headwind going into FY 2025 or again about $0.49 for the full year.

Seifi Ghasemi: So if I may add to that, that means that during 2025, we obviously have taken and will continue to take actions in terms of productivity, and we obviously have growth from the, as I said, smaller projects. And we hope that the strong economic activity that we saw in the U.S. will continue in 2025, which we think it will. And in Europe we have opportunities for some of our on sites to do a little bit better than they did last year.

Patrick Cunningham: Okay, understood. Very high, very helpful. And could you provide a more general update on the World Energy Project? What is holding up the permitting process? Is there anything about the relationship or project budget, that we should know there?

Seifi Ghasemi: What is holding up the permit was the fact that the permit that was issued was challenged, by some people who call themselves environmentalists, but they are doing an environmental friendly project. But they go and object to our permit. But so that is what is holding it up. And we have decided that we do not want to take the risk of building the project and continuing, with the project and then get challenged again. So we want to make sure we have all of the permits before we go forward. That's the reason we have put that project on hold. In terms of our relationship with our partners there, the relationship between Air Products and World Energy is excellent. And we are working in concert, hand-in-hand to make that project a successful investment. At the same time, as I say on the slides, Air Products is looking at other alternatives for that project, because some people have expressed interest in kind of buying us out of that project. And we obviously will listen to our alternatives.

Patrick Cunningham: Understood. Thank you so much.

Seifi Ghasemi: Thank you.

Operator: We'll move next to Steve Byrne with Bank of America (NYSE:BAC).

Steve Byrne: Yes, thank you. Wanted to just drill into NEOM a bit more, Seifi four years ago, I believe you were talking about a downstream CapEx budget for NEOM of $2 billion. What is the status of that now given? I think back then your focus was Asia, it's now Europe. Do you have a strategy of what do you need to invest in Europe, to distribute the green ammonia, and then crack the hydrogen? Perhaps comment also on your ammonia cracking technology and the efficiency. And just lastly that, the 35% seems more than total. Does that mean you've picked up other long-term take or pay contracts?

Seifi Ghasemi: Well, thank you for your question. The amount of investment in the downstream obviously depends on who the final end customers are. But $2 billion order of magnitude for that is in the ballpark. But it might be a lot less than that, depending on who the actual customers are going to be in terms of. As I said, there are a lot of ways to sell the product out of that plant. One is to take it, crack it and put it in a refinery. Another one is that some people might be interested in just buying the ammonia FOB NEOM and using it for applications that you don't need cracking. So there is a lot of different possibilities there. And as we finalize the contracts we will give you more visibility on that.

Steve Byrne: And maybe just one more on this. Europe prefers the pathway forward being green, not blue. If that were to change for economic reasons, what would be your end market outlook for NEOM under that kind of a scenario?

Seifi Ghasemi: Well, first of all, can I may just make a comment. We are committed to low carbon hydrogen, green and blue. That is why we are doing the project in NEOM for green and the project in Louisiana for blue. Because we think the lowest cost place to produce green is in Northern Saudi Arabia, and the lowest cost place to produce blue is in U.S. Gulf Coast. That no place in the world can compete with the U.S. Gulf Coast, because of the low natural gas. But more importantly, when people talk about blue, they need to keep in mind, you can only make blue if you have a place to sequester the CO2, and it is not that easy to find those places. So we are committed to both of them. And we look at those opportunities in an equal way. We don't have any preference for one or another.

Steve Byrne: Thank you.

Seifi Ghasemi: Thank you.

Operator: We'll move next to David Begleiter with Deutsche Bank (ETR:DBKGn).

David Huang: Hi, this is David Huang here for Dave. I guess one of the concerns investors have is on your large headcount increase since you started the journey in Green Hydrogen. How much of the headcount increase through the years is related to the Clean Hydrogen projects? And if you can talk about how the staff is being deployed to support these projects? And additionally, I guess given the SAF project that's on hold and you're no longer pursuing the Texas project, are there any opportunities to reduce some costs here in the near term? And how should we think about this scale if you have any of those plants?

Seifi Ghasemi: Well, the thing is that I think we need to explain that because the big headcount increase was in order to engineer NEOM and our Blue Hydrogen project and several other projects that we had. So those headcounts are going to come down, but they are not going to affect our bottom line because those costs were capitalized as part of the capital. So our earnings per share and so on was not being affected by those increases. We did have increased costs, significant increased costs in terms of development costs while we were developing those projects. Those costs are going to come down. And I'm sure that you have taken a look at our SG&A line and you see that our SG&A for the quarter is less than last year's quarter and for the year it's less than last year. So the headcount thing which went up, is going to come down. But in terms of our bottom line, we are going to continue march toward the 8%, 9%, 10% growth on EPS as we have done in the past 10 years.

David Huang: Okay.

Seifi Ghasemi: And at this point in time, I'm sorry, please go ahead.

David Huang: Oh, go ahead.

Seifi Ghasemi: No, I was just going to say at this time, other than NEOM, where most of the engineering is basically done, we are working on engineering on our project in Louisiana and one or two other projects in Texas and our Edmonton project. Other than that, we are not working on any other major project. And as you just saw, we just cancelled any commitment or any engineering effort that we are going. We were spending on the North Texas in Green Hydrogen project because it did not meet our criteria, which was that we do not make final investment decision until we have an anchor customer and until we have loaded 75% of our existing facilities. So as a result, there are no too many other projects in the pipeline. We always think about these things and so on. But we will only move on those once those criteria are met. Okay?

David Huang: Yes. And then just another question on Alberta. Just to clarify, this is not included in your FY '25 guidance, and if not, when do you expect the plan to start up?

Seifi Ghasemi: No significant income is included in our fiscal year 2025 income for that project. Yes.

David Huang: Okay. Thanks.

Seifi Ghasemi: Thank you.

Operator: We'll move next to John Roberts with Mizuho (NYSE:MFG).

John Roberts: Thanks, Seifi. I'm guessing the board has already been maintaining some level of contact with prudential president candidates that could be available on short notice, especially since the departure of Dr. Serhan. Do you think the search for a President could be over before the proxy is filed for the shareholder meeting? Slide 31 suggests it could go beyond the shareholder meeting.

Seifi Ghasemi: Well, at this point in time, I do not expect for us to name a President until March, April, May. We have identified very highly qualified people. They are being interviewed by our board and going through the process. I mean, choosing a President for Air Products, we have to go through the process. Our board needs to feel very comfortable and they need to meet the criteria that I set out that we want people who have been CEOs of public companies, people who have not been CEOs of public companies do not qualify. So the process is underway. I just wanted to give you an update. But we have no expectation of announcing a President before, as I said before, March, April, May, depending on the availability of the people, because if these people are CEOs of current companies, they have obligations and to unwind their present position. So it's not going to be -- you can't just snap your finger and have them start. Okay, John, thank you.

John Roberts: Yes. That's all I have. Thank you.

Seifi Ghasemi: Thank you. Thank you very much, John.

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

Chris Parkinson: Great. Thank you so much, Seifi, regarding the Louisiana project, obviously it's fairly sizable and there's a lot of focus on both manufacturing as well as the offtake agreements in terms of redistributing potentially some of that project risk. However, one of the things that's been on my mind and I think a lot of investors has been just given the size of the facility, just the construction outlay and how to think about the various units going into that just relative to the size of everything else that's been done in the United States over the last decade or decade and a half. So, can you perhaps just give us a little bit more detail on the various stages on how we should be thinking about that development or evolution of that project and whether or not it has to be all at once or you're thinking about it in various stages, perhaps one through three, just any color there would be particularly helpful? Thank you.

Seifi Ghasemi: Well, thank you very much, Chris, for your very thoughtful question. The project in Louisiana, the most important part of that project was finding a place that is credible and proven that you can sequester CO2. We have achieved that. We have identified sites. We have the rights to that. We have done extensive work, spend about $75 million with seismic studies and so on to prove that it is possible to sequester CO2 in there. We have submitted all of that to the Louisiana Department of Environmental Resources for an application for a Class 6 well. We have gotten feedback that our application is complete. That means that they accept that they have done all of the work and now we need to wait until they make their assessment and issue the final permit for us to construct that. That was the major risk for that project. The rest of the project, what is it? It is making the hydrogen that we know how to do, it is POX units. It's our own technology. We have similar units in operation around the world, and therefore there is no technology risk there. And then the ammonia plant is the ammonia plant. Everybody is very familiar with ammonia plants. So we are not taking any technology risk. The CO2 sequestration is secure. And now it is the question of how fast we build this thing. We have said previously that this project, we expect to come on stream sometime in 2028, depending on the timing of the permits. We feel pretty good about that. We feel pretty good about the number that we have announced publicly, about $7 billion. So right now our task is we don't want to spend $7 billion of Air Products capital into the project. So the issue is, how do we finance this thing? Do we finance it the way we finance NEOM? Do we bring in an equity partner? Those are the things that we are evaluating. And in the meantime, we are not in a hurry. We have time. We have done most of the engineering. We are going to start bringing contractors where the engineering is done so that we can get lump sum prices from the contractors. So we are executing this project in a very prudent way and trying to find the optimum way for us to finance the project. In terms of the demand for the product we feel very good about that, because the demand is not only decarbonizing and reducing the use of coal in Asia, but another significant demand which is developing, as I mentioned in my prepared remarks, is ammonia as a direct fuel for ships. Low carbon ammonia using as a direct fuel for ships significantly reduces the emissions. It makes ships comply and it is very attractive to the people who ship their product across the board because that helps them to decarbonize their Scope 3 emissions. So we feel very good about that project. And as I said, as we move forward, we'll update you about the progress on all of those fronts.

Chris Parkinson: It's very helpful. And just a real quick one here is, regarding the CapEx of the NEOM, the 2 billion of the offtake. You mentioned a few questions ago that there could be a material difference between the initial expectation, and I believe it was to everything to Asia and Europe in terms of transportation and buses and everything else we discussed back in 2020. But if we just took something such as the total agreement and said, hey, that's roughly one third of the production, let's call that of the original amount, $667 million, what is the difference roughly, just purely roughly, of kind of that implied number of, let's say the legacy thought process and what you could be looking at today? Is that like a 10% difference to refineries in Europe or is that something that could be more significant like a 30% or 40% difference in terms of like how we're thinking about the offtake CapEx of the project? Thank you so much.

Seifi Ghasemi: Well, thank you very much. I'm just trying to fully digest your question, Chris. In terms of you're asking a very good question. But fundamentally, originally when we announced the project, we said that we will need $3.7 billion of cash. And we broke it down to $1.7 billion invested in the project and $2 billion for so called terminals to sell it. What we are saying is that the 1.7 investment in the production is now $800 million, because we were able to successfully project finance this. The $2 billion for the downstream part, I can make a commitment exactly what that would be, whether it's half of it, 10% lower and so on until they finalize who the offtakers are. So that's where we are, Chris. Okay? So overall in terms of our total commitment from before, the number has not really changed. Okay?

Chris Parkinson: Thank you very much as always.

Seifi Ghasemi: Thank you, sir. Thank you very much, Chris.

Operator: We'll move next to Mike Sison with Wells Fargo (NYSE:WFC).

Mike Sison: Hi, good morning, Seifi, traditional hydrogen projects, historically you tend to sell that out with offtakes when you sign them. Was that the case when you sort of created the business 60 to 65 years ago? And do you think at some point for the clean hydrogen projects that demand will be big enough? When you announce a project, you'll have offtakes immediately?

Seifi Ghasemi: That is kind of what I was trying to allude to when I said that in the future we will not take an FID on any clean hydrogen project until we have an anchor customer. Just like our industrial gases business, when we go and sell oxygen to a steel plant, we build the air suppression unit. 50% of the offtake is guaranteed with a takeover bay to the steel maker and then the other 50% is merchant that what we do. So we are saying that in the future we wanted to be the first mover. We did what we did with NEOM and with -- and it has turned out to be a good experience. We are trying. We are seeing that we can load these facilities. Now we are saying that in the future we are not going to announce a project without having and telling you a clear view of who will take 50%, 60% of the product on a long term basis. That's okay.

Mike Sison: Yes, that's great. And then just a quick follow up. When you think about your earnings growth for '25, 6% to 9%, I understand the economic environment isn't great. But if you think about longer term and you execute well on your pretty well publicized growth strategy, '26, '27, '28, what do you think that growth rate should kick up to as your clean energy projects kick in with the growth from your core industrial gas business?

Seifi Ghasemi: Well, I think that if we put everything together and things work out the way we are, we think it is, we will be able to deliver about 9%, 10%, '25, '26 and then '27, '28 can be significantly higher than that, because these projects coming on a stream with the kind of volumes that they are talking about, we can have significant growth higher than 10%. That's why I feel confident to say that for the next 10 years, considering what is going on, I think Air Products will deliver at least 10% growth in EPS as we go forward, at least.

Mike Sison: Great, thank you.

Seifi Ghasemi: Thank you very much.

Operator: I'll move next to Josh Spector with UBS.

Josh Spector: Yes, hi, good morning. I wanted to ask a question on the NEOM offtake. There's just been some chatter I guess more recently around some finer details around that contract. So you highlighted take or pay. You mentioned you're comfortable with the returns. I guess some of the questions have been if there's any qualifying events, be it regulatory or credits, that need to be put in place before that contract goes into effect or whether you would say what you have today is more ironclad. There's nothing that needs to happen for that to hit your return targets?

Seifi Ghasemi: Well, that's a very detailed question about the details of the contract. We are continuing to negotiate the details, but I have my Chief Legal Officer, Mr. Sean Major, who was very instrumental in negotiating that contract. So I think it's better if I turn it over to him to try to amplify on that. Sean?

Sean Major: Yes. Thank you, Seifi. We are generally comfortable with that contract. It's consistent with similar offtake agreements, and we're fully confident that will be fully operational, consistent with the terms of the agreement.

Seifi Ghasemi: Okay.

Josh Spector: Okay. Appreciate that. And just on another note, if I could just ask, on your approach to project returns when using leverage or not using leverage, I guess now a couple of your bigger products, you're talking about using more leverage. Do you expect that when you employ project financing, are you targeting a higher equity return or is that still in the framework that you would target that greater than 10%, 12% return? So how should investors kind of work that into our framework of what the flow through is on Air Products equity return from investments?

Seifi Ghasemi: Well, I'm very happy that you asked the question. We evaluate the projects on the basis of unlevered IRR. That is our criteria. Then later on, if we are able to project finance it, obviously, hopefully the financing is less than our cost of capital and therefore the return on equity will be higher than the IRR. So we do not approve projects on the basis of leverage. It is all unlevered. And then if we are able to finance it, then obviously will improve the return on equity that Air Products has put into the project. That okay?

Josh Spector: Yes, very clear. Thank you.

Seifi Ghasemi: Thank you very much.

Operator: We'll move next to Kevin McCarthy with Vertical Research Partners.

Kevin McCarthy: Yes, thank you and good morning. Seifi, on Slide 29, you indicate that you would expect to return to a positive net cash flow position starting in 2027. And I was wondering if you could elaborate on some of the assumptions behind that goal. For example, would it be contingent upon bringing in a partner and/or project financing in Louisiana, or could you get there on an organic basis, so to speak, without the benefit of those actions? And perhaps there are other assumptions you might like to speak to.

Seifi Ghasemi: Thank you very much, John, for the question. I'd like to turn that over to Melissa to answer that. Melissa?

Melissa Schaeffer: Sure. Thank you, Seifi. So our current assumption does not have project financing or equity partnership built into the assumptions. This is purely the timing of our on streams and the ramp up of those projects. So again, no project financing or equity partnerships built into those assumptions. Thank you.

Seifi Ghasemi: Okay, John.

Kevin McCarthy: Yes, thank you Seifi. If I may, I wanted to ask also on Slide 21 and 22, you provide some detail regarding the future growth of clean hydrogen. I think the source of that is a Deloitte study from 2023. And so I'm curious, some of your peers inside and perhaps also outside the industrial gas industry have talked about some attenuation of timelines and some uncertainties on the regulatory and economic side. So my question would be, how does your internal view today compare with this forecast? Is it better or worse or perhaps similar if you look at it perhaps on a bottom up basis given your unique insights and conversations you're having all over the world. How would you describe that trajectory relative to the way it was in 2023?

Seifi Ghasemi: Again, an excellent question. We are actually, what we see is more bullish than what is on those slides and those projections. The reason is that, when you say other people, other people don't have anything to sell and as a result they are not engaged with the people who want to buy. I mean, why would anybody go and talk to one of our competitors when they don't have a plan? We are the ones who are engaged with real customers. So we have a much better view. This is one of the things about being the first mover. I mean, if you are a customer, if you are a steel plant, if you are a refinery and you want to make a commitment about going to green hydrogen, there is a hell of a difference between us sitting across the table with them and showing them a picture of NEOM rather than somebody saying that, well, I might have a project in Timbuktu that might produce green hydrogen in the future. So we have a much better visibility in terms of what the real demand is and what the real customers are talking about. So as I said, we are obviously very excited about the opportunities and we see that growing every day because more and more people are talking to us. I mean, right now we are in a position to send people to go visit NEOM. And once they visit, they are a lot more enthusiastic in talking to us than they were before. So we have put ourselves in a favorable position because we took the risk to be the first mover.

Kevin McCarthy: Thank you, Seifi.

Seifi Ghasemi: Thank you.

Operator: We'll go next to Mike Leithead with Barclays (LON:BARC).

Mike Leithead: Great, thank you. Good morning. First, Melissa -- good morning Seifi. You made a comment, Melissa, about a onetime asset sale benefit in America. Did I hear that correctly? And just how much of an impact was that?

Seifi Ghasemi: Well, the impact wasn't that huge, but I like to turn that over to Melissa to qualify that. Melissa?

Melissa Schaeffer: Yes. Thank you, Seifi. So Seifi is right. It was not material to our overall results. This is a normal cancellation of a project where we then sell the asset. So very immaterial to our overall results and something that is in the normal course of our quarter-to-quarter business.

Seifi Ghasemi: Melissa did a great explanation, if I may just add. It is not uncommon, and we have a long-term agreement with the customer. In the contact, the customer has an option to come and terminate the contract, pay us a cancellation fee, because they want to do something different with the asset. So this was a small refinery in Southern part of Texas, and that's what happened. It's not anything unusual as part of our normal course of business. Sorry, you had another question?

Michael Leithead: Yes. Seifi, I wanted to go back to World Energy I think you said in a prior answer that your relationship there is excellent. But there was a lawsuit that became public about 2 weeks ago that shows Air Products went World Energy, a good amount of money that World Energy has since defaulted on. So how do we square that?

Seifi Ghasemi: That is the normal course of business. It's a guarantee about certain payment it is insignificant, but it obviously does become public. And we obviously always protect our rights and so on, but that doesn't mean that there is a bad relationship between Air Products and World Energy. Just normal course of routine I can have Sean make a comment on that, if you want, Sean?

Sean Major: Thanks, Seifi. I think it's important that particular piece of litigation does not involve World Energy and our relationship with World Energy continues to be very strong and robust. Thank you.

Seifi Ghasemi: Okay.

Michael Leithead: Okay. Fair enough. Thank you.

Seifi Ghasemi: Thank you very much. Any other questions, operator?

Operator: We do. We will go to Duffy Fischer with Goldman Sachs (NYSE:GS).

Duffy Fischer: Yes. Good morning, guys. First question is just around the Asia business. Price being down, -- is that more an indication of just what's happening generally supply/demand is a little bit out of whack? Or is that still the hangover from helium prices falling and hurting pricing overall in Asia?

Seifi Ghasemi: It is a combination of both of them. It is supply-demand and there is some impact on helium, because of the helium coming from Russia.

Duffy Fischer: Okay. Thank you. And then I just want to go back to the headcount comment you made. Again, headcount for you guys is up about 4,000 people in the last several years. And I just wanted to - so none of that headcount is really running through the P&L in the EPS that you guys delivered last year. All of that is basically being capitalized? Or is there some percentage split between what's being capitalized and what's running through the P&L.

Seifi Ghasemi: Well, why don't I have a address that. Melissa?

Melissa Schaeffer: Yes. No. Thank you, Seifi. So there are a good portion, because the vast majority of the growth was in our project delivery organization. So a large portion of that is capitalized. But obviously, there are portions of that that are part of a project development organization as well as support organization to really support the growth strategy. So the vast majority is in fact, capitalized, but there is a portion, obviously, for support. But I do also want to comment that we did take productivity actions over the last 2 years, reducing our head count by almost 1,000. So obviously, we are being diligent that when there are opportunities to reduce head count, we are strategically doing so. Thank you.

Duffy Fischer: Great. Thank you guys.

Seifi Ghasemi: Thank you very much.

Operator: We'll move next to Laurence Alexander with Jefferies.

Laurence Alexander: So, good morning. One short-term question on the price - the merchant pricing that you're seeing in North America. What do you see - what are you using for next year's outlook as to how solid pricing will be? And kind of can you just elaborate on the dynamics there? And then secondly, you made a comment around how -- as the first mover, you're getting better contracts than you would expect to guess in the future. Can you unpack kind of some - or give some examples around that? Because I appreciate kind of the marketing angle of being able to show people you have the facilities first. Can you walk through kind of the contractual differences that - the opportunities that you've been able to capture that you would never get again?

Seifi Ghasemi: Well, thank you for your question. With respect to our pricing assumption for 2025, that is a little bit of a forward-looking statement about pricing, and we usually do not do that. So if you forgive me, I cannot really answer that question because that's not appropriate for us to make comments about future pricing. With respect to the contracts, well, if we are the only people who are going to have green hydrogen available. By the time that people need to comply with the regulation within you think that we would be in a better shape to negotiate the contracts than somebody who might have something available in 2035. So I think being the first mover and having the product, please don't forget, nobody else in the world is going to have a green hydrogen at the quantities, commercial scale to decarbonize a refinery by 2030. Any new project requires permitting, plan. Those things take a long time. Believe me, we started on the project in Saudi Arabia and our green hydrogen projects in 2017, our project is going to come on stream in 2027. Takes us 10 years. It's a long process. That is what I was referring to about why we have an advantage.

Laurence Alexander: Perfect, thank you.

Seifi Ghasemi: Okay. Thank you. Operator, we have time for two other questions, please.

Operator: We actually have one more question holding. We will go to Sebastian Bray with Berenberg.

Sebastian Bray: Hello, good morning and thank you for taking my questions. I have two please. Have first is on the Middle East segment. Jazan, I think, was a bit shy -- the whole Middle East and India line was a little bit shy of consensus expectations. And I think this is the second time this has happened, has anything happened at Jazan that makes that business less profitable in 2024 than in previous years, has anything shifted in the contract? Is there anything else within EBITDA on line for Middle East and India that would explain that? And my second question is more philosophical. The company has costed up significantly with a lot of personnel to in-house expertise across the hydrogen chain. Carbon capture probably some terminal and transport as well. If I take the target for net cash flow positive by 2027. To me, that implies, okay, we do Neon Louisiana, but we don't necessarily do any other projects in the meantime in a big way. How is it going to be able to continue to use the expertise of all of these people? Or are they still focused on those two projects?

Seifi Ghasemi: Well, thank you very much I will answer the second question, and then I will turn it over to Melissa to answer your first question about the Middle East. With respect to your second question, I do not think that it is a correct assumption that we are doing 100% of what we are doing right now about NEOM and about Louisiana in-house. That is not a correct assumption. We are not experts in carbon sequestration. We are going to get people who are experts on that to engineer that. That's what they are doing. And to do that for us. We are not going to be designing Class 6 wells. I see that is the -- we have people who oversee the process. But we are going to go to people who are Board experts on these things, and they will do that for us. When it comes to some of the in engineering or the detailed engineering of some of these facilities, we are using some of the largest engineering firms in the world to do those. But we are keeping and what we have put together is the key people for the key technologies. I mean in NEOM, building the ammonia plant is not the key technology, building the solar plant is not the key technology or building the wind farm is not the core technology. The real expertise is how do you put these things together and run them simultaneously so that it works. That is the know-how that we have people and we are going to be very protective of that know-how. And then in Louisiana, we are doing some of the engineering, but not all of it. We do not haven't hired new people to start designing rebars for foundations. We are focused on the key technologies that enables the implementation of these products. So I just wanted to explain that. And now I'd like to turn it over to Melissa to answer your question about the Middle East. Melissa?

Melissa Schaeffer: Great. Thank you, Seifi. So just a couple of points on our Middle East and India segment. What you're seeing there is really a decline in our merchant demand, coupled with slightly down in pricing largely in the United Arab Emirates. As it relates to our Jazan joint venture, that is actually performing as expected. We are flat year-over-year, and we continue to see very good results in our Jazan joint venture. Thank you.

Sebastian Bray: Thank you.

Seifi Ghasemi: Okay. Operator, any more questions?

Operator: We don't. And Seifi, I would like to turn the conference back to any additional or closing remarks.

Seifi Ghasemi: Okay. Well, thank you. At this time, I would like to thank everybody for participating in our call. I appreciate you taking time to listen to our presentation, which was a little bit longer than usual. I appreciate that, and we look forward to talking to you next quarter. And in the meantime, have a great day, good health and success. Thanks, everybody.

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

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