Linde plc

Operator: Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde First Quarter 2026 Earnings Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir. Juan Pelaez: Avi, thank you. Good morning, everyone, and thanks for attending our 2026 First quarter earnings call and webcast. I'm Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Matt White, Chief Financial Officer. Today's presentation materials are available on our website at Linde.com in the Investors section. Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are in the appendix of this presentation. Matt will provide some opening remarks, I'll give an update on Linde's first quarter financial performance, and then Matt will finish the updated outlook, after which we will wrap up with Q&A. Let me now turn the call over to Matt. Matthew White: Thanks, Juan, and good morning, everyone. The Linde team delivered another solid quarter against a challenging economic backdrop. EPS of $4.33 grew 10%, operating margins reached 30% and return on capital remained at a healthy level of 24%. The high-quality compounding growth of our company, no matter what the environment, is a testament to the unwavering commitment of all 65,000 employees to create shareholder value. And given the recent geopolitical volatility, it may be helpful to provide a brief update by end market, which you can find on Slide 3. As a reminder, the top half shows consumer-related end markets at approximately 1/3 of sales, while the bottom half represents industrial-related markets. for the remaining 2/3. The growth rates reflect price and volume, but exclude FX or M&A. Starting at the top, health care at 16% of global sales grew 1% year-over-year. We provide gases, equipment and services to medical institutions, such as hospitals, and direct to the home. Normally, a resilient market like this should grow in line with demographic trends or low to mid-single-digit percent. And while we're experiencing those growth rates in most countries, the U.S. home care business has been relatively flat. In late 2025, a new U.S. health care policy resulted in less services for a specific piece of equipment, which is reflected in the current run rate and will continue for the next several quarters. Aside from this particular issue, the rest of health care is performing as anticipated, while providing a resilient balance to the more cyclical markets. At 9% of sales, food and beverage grew 5% from broad-based strength. The largest contributor is the U.S. beverage business, where we continue to see increased customer need for new services and applications. In addition, traditional bottling and food freezing growth remained quite strong, especially in North and South America. Overall, food and beverage has grown mid- to high single digits over the last several years. and is expected to remain a steady contributor. Electronics increased the most at 10%, primarily driven by continued investments in advanced chips to support AI. The growth is heavily weighted toward the U.S., China and Korea. Since our substantial electronic sales in Taiwan are excluded as a nonconsolidated 50% joint venture. As both the scale and industrial gas intensity continue to expand in this sector, Linde remains well positioned. We're currently investing more than $1 billion of the project backlog and for ultra-high purity plants, which will support the most advanced fabs in the world. And there's more to come as we have a high degree of confidence and adding substantial new projects to the backlog this year. Moving to industrial end markets. you can see growth across the board, which supports the notion we're starting to lap more difficult comps after years of stagnant industrial activity. Chemicals and Energy, representing 22% of sales increased 3% as growth in Americas and APAC more than offset contractions in EMEA. Americas was driven by higher activity for hydrogen and nitrogen and U.S. Gulf Coast refining and Latin American upstream energy. While APAC increases primarily came from our recent investments in the Jurong Island integrated complex. EMEA continues to experience negative volumes, primarily from on-site customers shifting production to more competitive assets outside Continental Europe. It remains to be seen what the longer-term effects could be for the Middle East conflict, but so far it appears activity is relocating to more feedstock advantaged assets in Americas and, to a lesser extent, APAC. And while we're on this topic, I think it's worth providing a brief update on our helium business. Helium was an oversupply for a few years through 2025. But recent events have created acute global shortages. Linde sources from a very broad-based since supply chain constraints are a recurring charge. Therefore, we are currently well positioned despite some of the recent outages. Given our business is largely contracted, the priority is to meet existing customer commitments. After that, we still anticipate excess molecules allowing us to pursue new multiyear contracts with high-quality customers. Therefore, I don't anticipate significant spot sales this year since we're focused on securing long-term agreements. Returning to the end market slide, Metals and Mining grew 3% and similar to chemicals and energy. The entire growth is coming from Americas, as both APAC and EMEA are relatively flat. A combination of better industrial activity and protectionist policies from U.S. to Latin America have supported local metals production over imports. Furthermore, we're seeing renewed competitiveness from customers of more gas-intensive integrated blast furnaces when compared to EAFs, primarily from constraints associated with cost-effective scrap, and electrical infrastructure. The last industrial end market of manufacturing grew 5%. Half of the increase came from aerospace activity in the United States, primarily supporting space vehicle production, testing and launch as this end use continues to see strong double-digit percent growth. We'll isolate aerospace as a separate end market when it consistently exceeds 5% or more of global sales, which will be a function of the frequencies, size and propellent type of future space launch. Excluding aerospace, Romanian end market grew low single-digit percent as strength across the Americas, especially in the U.S., was partially offset by continued weakness in EMEA while APAC slightly improved over last year. Within the U.S., packaged gases grew mid-single digit and hard goods double-digit percent, which aligns with the recent favorable U.S. production statistics. In hardgoods, growth was bounced between consumables and equipment and driven by energy, construction and general metal fabrication. EMEA activity was softer from continued weak industrial activity including direct and indirect impacts from the Middle East conflict. And in APAC, we experienced moderate volume growth driven by China and Southeast Asia. In summary, the portfolio is doing what one would expect. As geopolitical events shift production around the world, and secular growth trends drive concentrated investments, our business units continue to adapt and capture their fair share. And while no one can predict how the next few months will play out, let alone the next few years, I'm confident the lending team can navigate the volatility and continue to deliver high-quality compounding growth. I'll now turn the call over to Juan to walk through the financial results. Juan Pelaez: Matt, thank you. Please turn to Slide 4 for our consolidated results. Sales of $8.8 billion were up 8% year-over-year and flat sequentially. Versus prior year, foreign currency was a 5% tailwind driven primarily by the strengthening of the euro. Net acquisitions contributed 1% from attractive roll-ups we've been executing globally. This quarter alone, we signed 9 more bolt-on acquisitions, primarily in the Americas, which will continue adding to future EPS growth. Underlying sales increased 3% versus last year from 2% higher pricing and 1% higher volumes. Volume increase was driven by the project start-ups, primarily in APAC. Both Americas and APAC continue to see base volume growth but it was mostly offset by EMEA due to the weaker economic activity in the region. Sequentially, underlying sales were flat as higher pricing was offset by lower volumes, mainly in APAC and EMEA. The lower volumes was driven by seasonal factors, especially in APAC, followed by EMEA where we continue experiencing weaker trends in the industrial end markets. Price continues to drive underlying sales growth, highly correlated to local inflation levels. Recall that actual price increases are higher for the combined packaged and merchant gases which represent roughly 2/3 of total sales. Operating profit of $2.6 billion increased 8% year-over-year and resulted in a margin of 30%, similar to prior year. Sequentially, margins improved 50 basis points, driven by management actions in pricing and cost productivity that more than compensated for seasonal volume declines. We expect management actions to continue to support profit growth and margin expansion for 2026. EPS of $4.33 was 10% over prior year or 5% when excluding the effects of currency translation. We finished the quarter slightly above the top end of the guidance range due to better effects as the business performed as anticipated, considering the many challenges globally. Operating cash flow was $2.2 billion, 4% higher than prior year. Capital expenditures were $1.3 billion, and as a result, our free cash flow was $900 million, which we used primarily to pay dividends and repurchase shares. The CapEx of $1.3 billion was roughly split between base CapEx and project backlog. Have in mind that base CapEx is primarily maintenance and all other growth investments not meeting our stringent backlog definition. For example, current investments to serve commercial space. In this quarter, we started up 10 projects from the sale of Gas backlog, mostly in Americas and APAC, with investments of approximately $300 million. Furthermore, we signed 5 new projects that added $100 million to the sale of gas backlog, which ended the quarter at $7.1 billion. Industry-leading return on capital ended the quarter at 23.8%, a reflection of capital discipline, consistent earnings growth and good backlog execution. Slide 5 provides further details on quarterly capital management. The operating cash flow trend can be seen to the left with the most recent quarter of $2.2 billion. Note, the first half of the year is weaker due to the seasonality of cash payment timing for interest, taxes and incentives. For 2026, we anticipate a similar trend as last year. To the right of the slide, you'll find a pie chart that demonstrates the balance across investing into the business and returning capital to shareholders. Disciplined capital allocation is a hallmark at Linde and is something that differentiates us from others. During the quarter, we raised the annual dividend by 7%, making it 33 consecutive years of dividend growth with an average growth rate of 13%. We also repurchased $800 million of stock during the quarter, while reinvesting almost $1.5 billion into the business. Our cap allocation model remains consistent across all environments. In periods of uncertainty and volatility like today, a fortress balance sheet is critical not only to maintain stability but also to capitalize on growth and share repurchase opportunities as they arise. Thank you. I'll now turn the call over to Matt, who will wrap up with the guidance update. Matthew White: Slide 6 provides the updated 2026 guidance. Starting with the second quarter. We anticipate EPS in the range of $4.40 to $4.50 or 8% to 10% growth. This includes a 1% currency benefit but consistent with prior quarters, assumes no economic improvement at the midpoint. For the full year, we're updating to a new range of $17.60 to $17.90 or 7% to 9% growth. Like the second quarter, this includes a 1% currency tailing and assumes no economic improvement at the midpoint. Also note, both ranges do not include any improvements in the helium business versus the February guidance. So any incremental volumes or price would be upside. And when compared to the prior guidance, we raised the bottom by $0.20 from increased confidence in the overall business resiliency. However, we left the top at $17.90 because it's still early to signal increased optimism. There are a lot of things happening in the world right now, and I'd like a few more months before considering a top end raise. Overall, we had a devent start to the year but remain guarded until we see more clarity on current geopolitical events. I'll now open the call to Q&A. Operator: [Operator Instructions] And our first question comes from the line of Laurent Favre with BNP Paribas. Laurent Favre: - My first question is on margins. You mentioned a strong improvement in the Americas. And I was wondering if you could talk about, I guess, the big moving parts of while Europe was flat. Asia down. Is it Hillion,Is it the rapid cost inflation in March which created the temporary squeeze in and there would be very helpful. Matthew White: Sure, Laurent. I'll start with -- and we said this last time, and I just want to reiterate it again this time. On a full year basis, we feel pretty confident we're not only going to raise margins for the full year 2026, but probably at the upper end or even above our traditional range that we tend to talk about of 40 to 60 basis points. now stating that in the full year, you're always going to have some moving parts within the quarters. I think when you think about Europe, clearly, the volume is a bit of a drag. I think within EMEA as a whole, -- we mentioned on the call between a combination of the overall weaker industrial environment, the weaker chemicals environment, add to it, both direct and indirect impacts from the current Middle East conflict we're just not seeing the volume recovery there. But I could tell you we're not happy with the performance. The business team is taking actions to improve that. They know that. So I expect to see some improvements there in Europe. With APAC, we did mention on the backup slides, we had about half of the sales growth was a sale of equipment. But actually is equipment that is connected to long-term merchant contracts in electronics. So that does come with future contracted merchant sales. But that will tend to be a little bit lower margin on average. It's a kind of a one-off. But also, as you know, Q1 is traditionally weaker in APAC, just given some of the seasonality effects. So I expect APAC to kind of get back up to the 29 type percent margins we saw last year as the team there continues to work towards improving that. So some of it is timing, some of it is just a little bit of some effects on the volume -- but on the full year, we fully expect to not only raise margins, but probably at the top end or above. And again, this is all ex passed up or down, as you know, which is just more optics on the margin and no real effect of profit dollars. Laurent Favre: And as a follow-up, you mentioned that you disclosed commercial space sales when you get to 5% of the group, which is about $1.7 billion. And I think recently or on the prior call, you mentioned that you thought sales in commercial space would get to about $1 billion by the end of the decade. So I'm just wondering, I mean are you now thinking that we may get close to $1.7 billion by the end of the day and it's big change? Matthew White: Yes. So Laurent, I mean I'll start with -- look, we feel very good about our positioning to support the space economy and as that develops. Clearly, in the U.S., you're seeing that much more rapidly with the private commercial space sector. But even across outside the U.S., we're definitely seeing acceleration in those efforts. With controlling the customer, that's going to be their determination on launch, but it's like I mentioned on the call, it's going to be a function of frequency size and propellentype. And what that means, I think frequency is self-evident, how many launches occur. -- with size, it could be dramatically different, much larger rockets and much larger booster systems can use orders of magnitude higher of propellant as you can imagine, something, for example, the largest rockets out there versus the smaller ones, you could see 10x difference on fuel and per ton. And then the fuel or propellent type is important because while we supply oxygen for the oxidizer and nitrogen for densification, fuel-wise, there's really 3 types today. You'll see which is either Paratin, methane or hydrogen. Obviously, we supply hydrogen, we do not supply the other 2. We would do only sale of equipment for things like LNG. And so if you do see more hydrogen-based rockets, that could also accelerate the growth for us depending on the fuel type used. So we feel pretty good about it. You look at the ambition on getting satellites and constellations in space today. You look at the existing population and what needs to be replaced in lower orbit roughly every 5 years, I think it continues to bode well for launch and not only the major players, but there's more room for maybe some new players that can be supporting the demand out there to get more constellations in space. So -- we'll see where it ends up. I think it will all be a function of the launch cadence, but we feel quite good about our positioning to supply that when it happens. Operator: And our next question comes from the line of Patrick Cunningham with Citi. Patrick Cunningham: I guess, first, as you think of maybe the longer-term implications of this crisis, it seems like there's probably a heightened focus on energy security, deglobalization -- so I'm curious as how you're thinking about the potential for -- how potential conventional energy and energy transition projects should trend as a result? Matthew White: Thanks, Patrick. I mean the natural reaction is exactly like you stated, right? You'll energy independence will be more accelerated. One can argue we've already been deglobalizng as a global economy, and this may have accelerated some of that. But energy security continues to get a lot of highlight in spotlight when you see these supply-type shocks that occur. But my opinion, ultimately, it still comes down to economics and ability. So while renewable energy will continue to be an area of high interest. It's still going to require government intervention. It will require some support sponsorship, potentially some kind of subsidies as we've seen in certain geographies and so I think without that, it's hard to see that happen on its own as we've seen, but time will tell. I think as far as other hydrocarbons, I absolutely believe you'll see more of that. Clearly, with other LNG and areas that are probably less of concern countries, you could see areas like oil sands of Canada become more interesting, again, just given that the exploration risk is almost nonexistent. They know the product is there. It's just more of a logistics challenge to get it seaborne or to get it pipe to where it's needed. So I just think that some of the more traditional areas will get another hard look given the uncertainties in the hydrocarbon space. I do think you'll get renewed interest in renewables. But again, without the support of government to help that on everything from right of ways to land to permitting, to bridging some of the economics, it will be hard to see that accelerate at a clip that people wanted to. Patrick Cunningham: Got it. And just on European sort of outlook, how should we think about on-site volumes and potential earnings upside for the balance of the year. I think despite some of the feedstock and energy challenges, we have heard some more advantaged or flexible refining and petchem assets running a bit harder sort of month to date. So -- how do you square that? What's sort of the outlook? What are sort of the -- the puts and takes in terms of mix there as well? Matthew White: Sure. I think we do have some on-sites that are running well that you could argue are state champions or regional champions. But on the flip side, we've definitely seen some ships production, right? And they're shipping it to some of the assets we supply in other geographies, primarily in Americas. I do think part of it also in Europe right now, in my opinion, you have a bit of a challenge with some of the uncertainties, right, around energy policy around some of the environmental policy. Clearly, there's a lot of imports and not just on the base material side but on the finished goods side as well. And so at this point, it's hard to see how all of those factors will create any significant change without some catalyst. And whether that catalyst is some type of restrictive import policy or more clarity on the environmental policy. Clearly, with the IAA that could help I think it just needs -- that money needs to find its right on the ground. If it does, that could help turn some of that around. So that's to me what we just need to see. If we see a catalyst there of some significant type that should help and it could be anywhere from maybe some import restrictions to the IAA hitting the ground. But aside from that, it's hard to see a major shift. Operator: And our next question comes from the line of Vincent Andrews with Morgan Stanley. Vincent Andrews: Matt, certainly back on the space side of the equation and the idea of getting to that 5% of sales. Do you have the capacity you need to get there? Or should we be anticipating some type of capacity increase, maybe it's in different geographies? And would you do that in concert with customers? Or would you do that on your own and make it more of a merchant business? How should we be thinking about that? Matthew White: Yes, sure. I think it's really in concert with customers. In my opinion, you have several launch providers that are doing a variety of different engine testing, they could do static testing, gimbal testing, whatever they're doing. And the locations they want to do that could very well be different than where their pad is with their launch. Once they start migrating to more frequent launches, which can migrate from [indiscernible] parcels all the way to full launch, you're going to want to make sure logistically, you're as close to the pad as you can be. So from my perspective, we are working with the major launch providers and also a lot of the up-and-coming providers, to make sure that we have the capacity and the contractual relationships to support them and their ambition. And the way it kind of works is in the early stages, you're probably going to do longer logistics halls when it's more infrequent and intermittent. And then as they get on to a better cadence, then you start talking about new requirements contracts in supporting a more stable launch cycle. -- and that, you put closer. And so you eliminate the logistics cost, which obviously makes their costs lower on the PROPEL. So -- and it's a combination, it will be sale of gas, obviously, that also could be some sale of plant. We do both. We support. It's very similar to what you would see in the large on-site where at times we've sold plants and sell a gas and we'd literally run the system of all the plants. So I think that's what you're seeing. And as you can imagine, there are some very specific areas where the launch sites are concentrated given FAA regs and what you need to do around that for the airspace. And so that's where we have a very strong capacity today, and we're working to secure more contracts with our customers for the future launch needs. Operator: And our next question comes from the line of Duffy Fisher with Goldman Sachs. Patrick Fischer: By far, the most incoming questions I'm getting on you guys is around helium. And I know you guys talk about it being kind of a small part of your business. But in the last supply shock we had with Russia, you did see pricing start to roll into some of the contractual business. I guess, how do you see this supply shock playing out differently than what the Russian supply shock did and how long would the straight have to be closed before you'd start to see some of that pricing roll through some of your contractual business? Matthew White: Sure, Duffy. Yes. Maybe I can level set it with what are we seeing in handling in the first quarter. So I'll start with our Helium business, depending on the time we're anywhere from 85% to 90% contracted on our customer base. So that's kind of a starting point. And when I look at Q1 year-over-year, our global helium sales, for the most part, were roughly flat. And what we saw was a couple percentage decline in pricing year-on-year and a couple of percentage increase on volumes year-on-year. Now as you know, with the Iranian conflict, it sort of happened 2/3 into the quarter. So 1 can roughly argue you had kind of 2 months before and 1 month after based on the date. . And what we saw, we've been seeing the pricing rise on the average pricing. So even though we're a few percent below pre and post that, there is a difference. And likely that price will continue to go up and roll its way through. I fully would anticipate that to happen throughout the year. Separately, our volumes are up, and we've actually already secured some long-term agreements. I fully expect we'll secure more long-term agreements. That is our priority. And that's how I would see that play out. Now when you think about the helium situation, you have 2 sort of distinct issues happening at once. You obviously have the Strait of Hormuz with Qatar and their inability to get product out and also the question of how much capacity is out for multiyears based on damage. Separate and distinct you have this Russian issue going on, which is probably a little more political in nature. Now we don't take Russian supply, as you can imagine, but that is having an effect primarily on the Chinese market that one could fix itself much quicker, as you could imagine. And so that one will see how long that lasts. But I think either way, the way we built the guidance, we just didn't want to take a view eitherway -- we just left it as we had it. But when opportunity presents itself both on pricing and volume, that will be incremental. and that's something we will get above how this is guided today. Operator: And our next question comes from the line of David Begleiter with Deutsche Bank. David Begleiter: Matt, on electronics, I know you're expecting a couple of large contracts this year. Are they still in progress on the come for this -- for FY '26. Matthew White: Yes, David. So consistent with the prepared remarks, we have a pretty high degree of confidence that we'll be announcing some here shortly. And when I think about the project backlog itself for sale of gas, we're sitting a little over $7 billion right now, and I'd look to these being added. And based on some timing of some other projects, I'd fully expect us to have a higher backlog by the end of the year based on this higher than the $7 billion and could potentially have an 8 handle on it. based on this. So we feel pretty good about that. And that's something I expect in a few months, we'll be able to lay out there. . David Begleiter: Very good. And just on the Wood side, there's been some confusion, some conflicting on new stores. Can you level set us as to where you stand on that project and what's embedded in 2026 guidance? Matthew White: Sure. Yes. I think, David, you may recall in prior conversations, when we described this project and other very, very large projects like it, they tend to phase and how they start off, you'll start up pieces and phases. And originally, our expectations were that we'd be bringing nitrogen on mid this year and then the ATR and what's called the TNS for the sequestration back end of this year. And the reason was that they could make gray hydrogen as soon as possible and then convert it to blue by end of the year. . And on the nitrogen, we still fully expect that. So that will be a pro rata, so to speak, start-up on the backlog this quarter. But on the ATR and the S, that has slipped a few months into essentially Q1 of next year. The construction and subcontractor environment in the U.S. Coast remains challenging. And we've had some delays there, but I rest assured the team is 100% focused on this to get this up as fast as safe and as reliably as possible. So that's our focus, but this slip has caused a little bit of that. So my expectation on that project is you'll have a small portion in contributing the start-up this year through the atmospheric side of it. And then the hydrogen and TNS side will kick into probably Q1 of next year. Operator: And our next question comes from the line of Josh Spector with UBS. Joshua Spector: I was wondering if you could talk about the overall volume landscape across kind of the major areas here between Asia and then Europe and the Americas. I mean understanding your guidance is there's kind of no economic improvement. But I mean, just the geographic location of your assets relative to where there's disruption, it would seem like there's probably some volume benefits on the Americas and Europe side versus Asia. I'd be curious, one, is that right? Or is there more disruption in Asia that makes it kind of even? And then also if you can comment just in your North America specifically, -- are you seeing any kind of benefits from what we've seen from positive PMIs in the last few months? Matthew White: Yes, Josh. So let me start with the first part. Definitely, we are seeing improvements in Americas on the dislocation or shifting the product. We are seeing some contraction in EMEA both Continental Europe. Now we have a very, very small Middle East business. But as you can imagine, that's most impacted as a percentage basis. But Continental Europe itself, we also saw some drag there. . And then APAC for us is relatively neutral to slightly positive. So when you kind of break those 3 down in Americas, as I mentioned on the prepared remarks, we're seeing not only benefits in the U.S. Gulf Coast refining. I mean you think about refining in the U.S. Gulf Coast, you tend to have very high Nelson complexity. You have ability to use a variety of slates of crude. And so given where the [indiscernible] spreads have gone, given their ability to manage some of the crude spreads, I think they're in a very, very strong position. And a lot of their product is supplied via the continent -- and so they can take advantage of that, and we've seen that. We've also seen Latin American upstream improvements, given the price of seaborne Brent. It just makes it more attractive for them to produce. So we clearly seen that. In EMEA, you've seen, as we mentioned, some of the chemicals was 1 of our weaker performing chemicals and energy, as we've seen some reduced volumes on that front. APAC, I think with APAC, there's probably -- it's a tale of 2 stories in the sense that certain countries are very negatively impacted, but we really don't supply that. When you think about Japan or certain industrial markets, maybe in Korea, they rely on seaborne delivery for some of their hydrocarbon chain, that is very negatively affected, right, whether it's NAFTA or LNG or oil. But we are really not supplying many of those. We have no presence in Japan. On the flip side, coal to coal to chemicals or coal to something in China is actually performing better. And we're seeing that -- we have several customers that are CX customers within China and they do have an advantage in this scenario. So the simple way I think about it is, if your feedstock is coming in on a ship, it's probably a tough scenario for you. But if it's land-based, right, either a pipeline or maybe even a railcar, you're probably in a little bit better position, and that's kind of how I would say we're seeing it play out today. As far as sort of the PMI, yes, that was kind of per the prepared remarks. Our hard goods business is up double-digit percent right now in the U.S. packaged business. Our packaged gases are up mid-single digit. And really, where we're seeing that strength is on some of the construction energy side, which you can imagine, plays a little bit to some of the hyperscaler constructions and things you're seeing on that front. And so I think that continues to be good. Metal fabrication continues to be strong. we've really seen that pick up across -- and on the hard goods, it's really split between consumables and equipment, which is a healthy split. So I think you're absolutely seeing that positive benefit from the U.S. PMI [indiscernible]. Joshua Spector: If I could just also quickly clarify a prior question is that when you've talked about commercial space getting to $1 billion, my understanding is that was more commercial space launch. You have another $600 million plus in commercial aero, that's more of the coatings business. So your prior comments were more that maybe you get to that 5% in 2030 time frame, maybe -- and then maybe your comments today about some of the disclosures is maybe you can get there sooner than expected. Is that the right interpretation? Or do I have it wrong? Matthew White: No, I think you're right, Josh. I mean, look, I've used the red aviation within aerospace. And yes, aviation is a very different animal. That's for primarily Jet Engine and that business system quite well in addition. But one, there's always a say, never give a number in a year, right? But I think we put something out there to give us enough room to do it, but we feel quite good on not just our propellent launch infrastructure and capability, but even when you get to things like electric propulsion for positioning of space vehicles on things like Xenon, Crypton, Argon. And so -- when you add all the opportunities together, yes, I think we feel pretty good about our ability to grow this business quite well. And really, like I said, it will just be a function of the space launch. But you are right that any of those numbers fully exclude aviation, or anything to do with land-based pieces around jets or engines. Operator: And our next question comes from the line of Matthew DeYoe with Bank of America. Matthew DeYoe: Good morning. European energy price is clearly up from pre-conflict levels. And I know it gets passed through on Onsite. But how are you managing merchant and package pricing -- is this going to be something where you go out with structural price or your surcharge? Is it not enough inflation yet to be pushing price more in Europe than normal and if you are, what do you -- what should we think about as being kind of the year-over-year price traction for the EMEA market come like 4Q? Matthew White: So Matt, the way to think about it is, is it a sustained increase in energy? Or is it a volatile up and down right now, so far, it's been volatile up and down. When it's volatile up and down, it is surcharging, that goes up, that goes down, and that's what we're seeing. When you see a sustained long range, it eventually -- then it becomes price, and it starts to work its way into the overall inflation of the market. 2021 was an example of 2022, I should say, in early 2022, as that evolved throughout the year, you saw a more sustained impact to inflation that worked its way through the entire economy. It started the surcharges, it eventually became price. Right now, it's just surcharges. . But if it does stay sustained and you start to see it show up in a lot of the major basic inflation metrics, then it does find its way in a price. That's the way I would characterize it today, and time will tell how that plays out. Operator: And our next question comes from the line of Michael Sison with Wells Fargo. Michael Sison: I guess, it's going to be what the third or fourth year of no economic improvement for industrial demand. I can't imagine the Iran conflict is going to help that moving in the right direction. So just curious, what do you think this sort of needs to happen. It just seems like overall, there's been some impairment for industrials. And what do you think needs to happen to get that overall globally to improve over time. Matthew White: Well, Mike, I think some level of stability always helps, right? When you think about industrial demand, at least in my opinion, it tends to be large items, nondurable -- durable goods, non-resi infrastructure. and to embark on those kind of projects, they usually require financing. They usually require a long-range view on a return profile. They usually require some form of government engagement support. And so right now, it's been a little volatile. It's been volatile in the macro. One can argue in certain micro politics and microeconomics. It's been volatile in certain countries. And so I think that's been part of the challenge. Additionally, the service economy, the consumer has been pretty resilient over the last few years, which has held GDP up -- if that changes, I think that could actually ironically bode well for industrials because then there could be more call it action to support injections into economies -- and you can argue that IAA to some extent, is that, right? You've seen continued lagging in Europe, and they've made the determination they need to inject capital into the economy. And that capital tends to be more industrial intensive. Now it has to reach the ground -- it has to have clarity around its use and its ability to be deployed, but that's kind of the type of catalyst. And look, I think the Americas and the U.S. especially has been a little bit of an indicator that, to some extent, certain placed protectionist policies can work. I mean, we've seen it in the metals. We've seen it in some other areas. Yes, it brings some confusion initially, but the U.S. has seemed to bounce back. And so we all know there is excess capacity in certain markets in the world, and we kind of know where it's coming from. And so I think it's really a function of how -- who is making the capacity for what -- so we'll see. I think right now, though, the Americas, we continue to feel pretty bullish on and the trajectory it's on. And as I mentioned, I think with EMEA, it really is going to come down in some catalysts to try and change that trajectory. And APAC is fine right now. I think APAC is -- we're seeing certain geographies do better than others, clearly. But our Chinese business is very stable. India is growing, and we'll just have to see how the rest play out. Michael Sison: Great. And then a quick follow-up for Chemicals and Energy, sales were up 3% in the first quarter on Slide 3. What do you think the run rate of that is heading into the 2Q? I would imagine March was much stronger than the other 2 months given the conflict. Just curious where that segment is sort of moving into this quarter. Matthew White: Sure. It's led by the Americas, as mentioned, and we really haven't seen any reason that, that should decline or abate. I think the strength is still there and is still anticipated. So in the comps, as I mentioned, definitely get a little easier here and now as we start to lap as we mentioned, a couple of years of some industrial stagnant conditions. So -- we'll see, but I feel pretty good. I remain positive throughout the year, and we'll happen to -- we'll see how much it remains positive. Operator: And our next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: In your commentary on the Americas or the first quarter, you talked about weakness in chemicals and energy end markets. And I assume that, that will strengthen. So as a base case, should volume of 2% year-over-year move up to, I don't know, 3 or more in the second quarter and are there also pricing opportunities because energy and chemicals are better? Matthew White: So Jeff, I think with chemicals and energy, yes, we're better in Americas, but weaker in EMEA, as mentioned. I think -- this is -- yes, mostly on site. So the pricing will just be a function of the annual escalation, which the contract would stay. That being said, we are seeing some more merchant activity for upstream oil, primarily Latin America, which is an opportunity for further volume expansion. So I feel pretty good about the Americas position, competitiveness and capability in chemicals and energy. As mentioned before, it's been on a good trend and I'd expect that to continue. And recall, there were a little bit of some normal weather aspects that happened in Q1, which could always dampen it a little bit, and you get through that by Q2. So we feel pretty good about what we could see in Q2 on those trends. And again, it always comes down to my mind, the same basic situation, which is the lowest cost suppliers in this environment tend to win in these times of supply shock stress. And when you think about a lot of the assets in Americas with their advantaged feedstock, their infrastructure, their capabilities, the complexity they can handle, they tend to be some of the lowest cost and best producers in these environments. And so I feel pretty good about how they'll perform looking forward and especially in the near term. Jeffrey Zekauskas: Okay. And then secondly, your other income in the quarter was $63 million versus $26 million a year ago. What happened there? And was the currency benefit in the quarter about 3% on EPS or maybe $80 million pretax? Or do you have a different number? Matthew White: Okay. So let's just take the second question first. On FX, the simple way to think about it is just take whatever we put in the sales variance. So in this case, we had the 5% globally, and that pretty much drops all the way down. That's that sale, that's SG&A, that's operating income, that's EPS because of the way our business is structured, it's very localized. And so our exposure to sales on translation is quite similar to our exposure to costs. So 5% would be that impact. . As far as other income, yes, in the last few years, other income has been anywhere from $100 million to $200 million. I would expect this year for the full year, we'll be on the lower end of that range. And to sort of characterize what is there, right? It is operating income. It is part of operations. But we tend to put things there that usually are settlements, could be time lags, could be gains, losses on sales of things. So we put it there generally to isolate it -- so it doesn't get embedded into the sales and cost of goods sold from a trending perspective. So in this particular quarter, we had a gain on a sale. It was a cash gain, it was a real gain. But that basically created that. I don't expect very much in the next couple of quarters, hence why I think the full year will probably be in the lower end of the range from the last couple of years. Operator: And our next question comes from the line of John Roberts with Mizuho. John Ezekiel Roberts: Could I ask if Sanjeev is not available today? Or is this the new format for the earnings call? Matthew White: So John, yes, if you may recall in the past, we've always kind of alternated. -- and sometimes, Sanjiv would be on -- or Steve would be on or not, and Sanjiv would kind of evolve to that. So no, he's not on today, but he will definitely be on in a future call. . John Ezekiel Roberts: Wanted to make sure he didn't -- he knew he was missed. I'm a little confused about EMEA. I thought the shortages from the Persian Gulf conflict were so severe that Europe was actually going to have to run at higher rates. -- even though it's higher cost, we're going to need most of the latent capacity in the world to run higher. And so it sounds like you're still expecting it to be soft in the June quarter in EMEA. Matthew White: Well, let's start with, as you know, the guidance of what we said is no economic improvement at the midpoint. So that's just the baseline based on the guidance. So if you take that and extend it out, what it's implying is what we're seeing in Q1 just continues going forward. Whether or not it improves, we'll see. But from what we experienced in our EMEA in Q1 on the Onsite and chemicals and energy on a year-over-year basis, we saw a decline based on the effects from those operating assets to the customers. Operator: And our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Matt, just to follow up on the volume discussion. If I look at your Americas number of plus 2%, I think that's the best that you've posted since the third quarter of 2022, which is coincidentally when we tend to think of the onset of the industrial recession, certainly in the chemicals industry anyway. So I'm listening to you today, talk about hard goods up double digits, Energy and Chemicals trending for the better. Do you have enough confidence to say we're now on the cyclical upswing? Or do you think there's too much war-related uncertainty and potential for an oil shock to start playing offense, if you will, in the Americas. Matthew White: So Kevin, I always remain a little guarded, right? I think I need to. But I sort of think about it as we have an engine here with a few cylinders, right? And 1 cylinder is Americas, 1 is APAC and 1 is EMEA. And we're not running on all 3 cylinders. So while the Americas both results and trends, I think, are positive. We're just not seeing that in EMEA, for example, today. So I think to see a true what I view as global recovery, I'd like to see all 3 running in the same direction. . But time will tell how that ends up. But I feel in the Americas, and like you mentioned, the packaged gas is what we're seeing on some of the competitiveness in the U.S. Gulf Coast. That does include commercial space, as you know, -- we expect that to continue to post some pretty good numbers. As far as are there offsets to that or not elsewhere in the world, that's the thing -- the challenge that we need to see to kind of break out of this and start to see global positive volumes. So I will say at a global basis, while we showed 1% global volume, which is mostly our project backlog contribution. We did turn positive on base volumes. It's just not positive enough to round to 1%, but it has started to turn positive. So we'll see if that trend continues and actually breaks out and rounds to a positive base volume. But right now, you're seeing puts and takes around the world, and we'll see if the comps lap to where that could be positive. Kevin McCarthy: And then I wanted to follow up on helium as well. I guess my simple question would be how much incremental volume opportunity do you think may be available again, through long-term contracts that you're pursuing. Maybe you could speak to your flexibility on sourcing and how much of an inventory cushion you may be able to take advantage of here. Matthew White: Well, I mean, we feel good about our sourcing and we feel good about our capability to not only meet our current customer contractual commitments. But that we would have some excess molecules and assets to be able to deliver to future new customers. As far as how much, it's really just going to be a function of the extension of this situation and where it goes, but we will be selective. We want to make sure we get the right kind of contracts that make sense with the right kind of customers that we know will make that commitment to supply. So time will tell. I mean we've already been able to sign a few new long-term commitments and we'll just have to see how it plays out over the next several quarters. Operator: And our next question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: So 2 quick ones. Just first, are you seeing in any regions or significant delays in projects where you're seeing kind of the CapEx decisions at least get delayed, if not even if the underlying -- if the production rates are fairly stable. And secondly, if customers are -- have to shut down capacity because of outages -- because of feedstock supply issues, whether a government mandated or just they can't get the molecules. Your contracts don't give them any adjustment for that. I mean they still need to pay you the same rate or pay the full exit penalty. Is that correct? Matthew White: Okay. So first on the delays. Just to segregate. No, in our backlog, no, no concern, right? What's in our project backlog right now is moving forward as expected. No concerns on that front. As far as potential new projects to be signed with customers' willingness to go to FID essentially sign a contract, it depends on the end market. I would say, as you imagine, electronics, commercial space, you're seeing a continued very strong push to move forward with projects and investments. . I think when you get to the more traditional industrial markets, it's really geographic specific right now. I think in the U.S., there are a lot of interest for future investments. I think places like India, you're seeing some good positive views, but in other parts of the world, not so much. So that's more of a geographic specific. As far as contracts, I mean, what it gets to is force majeure language. This has been something you focus on heavily in any contractual business. We've worked and tested our [indiscernible] language over many, many decades. Economic is not a force majeure as you can imagine. And so this is something that we always will work with our customers in these scenarios. But when we build these assets, we don't benefit when things go great, and in the same token, we don't take the downside when they don't. So from that perspective, we are well protected against any type of economic force for sure or other aspects of that. But it's really something that's going to be a contract-by-contract review. Operator: And our final question comes from the line of Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: Congrats on the results. Just a quick question on the earnings algorithm. So if I heard you correctly, it sounded like FX was maybe 5% contribution Q1 of that 10% that you saw, you're guiding to 7% to 9% for the year. So do you expect FX would continue to play that contribution for the year EPS? And if you do fall short of your 10% goal, is there other actions you would consider getting up there, maybe increased buybacks or management actions or anything else that we should consider? Matthew White: So Arun, I think with the Algo, as you well know, we have the management actions, we have the capital allocation, we have the macro. If you just take the macro in isolation, yes, we put a 1% FX tailwind in the assumption. I will say, and as you probably well know, we base this number on sort of the first of month forward, which is about a month old. Right now, spots are better. The foreign currency strengthened since that time. So that would provide FX upside at these spots remained, but we can set that aside. . As far as the management actions and the capital allocation, look, we know we need to get back to that 8% to 12% range, excluding macro. I think we had a little bit of a drag, as you know, with helium for a period of time. We have about 1% or so drag just on the engineering business from its timing of projects, which is really more just a function of what is done as internal projects that's capitalized versus external projects for a profit. And so we've got to get through those 2, and I think that can get us back into that 8% to 12% range. p So we'll see -- right now, it's 7% to 9% kind of range we have out there, and we've got to work through to get higher than that, right? And we know that. And so -- that's how I would think about it. But the algo is still intact, and we will take incremental actions if we need to bridge this further to help get us back to that double-digit EPS growth. Operator: And that concludes our question-and-answer session. I would now like to turn the call back over to Mr. Juan Pelaez for any additional or closing remarks. Juan Pelaez: Abby, once again, nice job. Thank you, everyone, for participating in today's call. If you have any further questions, please feel free to reach out to me directly. Have a great day. . Operator: And ladies and gentlemen, that concludes today's call, and we thank you for your participation. You may now disconnect.