Linde plc

Good day, ladies and gentlemen, and welcome to the second quarter 2019 Lindy Earnings Conference Call. At this time, all participants are listed in the limoed. Later, we will conduct a question and answer session, and special will follow at that time. If anyone should need to address this at any time, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I will now like to turn the conference over to your host. Juan Perez, Director of Investor Relations, you may begin.

Thank you, Nicole. Good morning, everyone, and thank you for attending our second quarter earnings call and webcast. This is Juan Perez, Head of Investor Relations, and I'm joined this morning by Steve Angel, Chief Executive Officer, and Matt White, Chief Financial Officer. Today's presentation materials are available on our website at lynda.com in the Investors section. Please read the forward-looking statement disclosure on page two of the slides and note that it applies to all statements made during this teleconference. The reconciliations of the performer numbers are in the appendix to this presentation. Steve and Matt will now give us an update on Lindy. We will then be available to answer questions. Let me turn the call over to Steve.

Thank you, Juan. This is our first full quarter operating as one company. As you can see, we posted strong financials and raised guidance again for the full year. I'll come back to our expectations for the second half later. The cellar gas backlog of $4.7 billion has increased considerably as a result of the ExxonMobil Singapore project added this quarter. The Lindy Engineering third-party backlog also remains strong at $5 billion, bringing the total amount of project work to nearly $10 billion. We think a 50-50 relationship between Cellar Gas and third-party is a nice balance. Our focus continues to be on Cellar Gas, but we certainly want to take advantage of all the good third-party business available to us. The cellar gas project proposal pipeline still has some momentum, driven primarily by petrochemical activity in the U.S., but also in Asia. Some milestones during the quarter. We deployed $1 billion to shareholders between dividends and share buybacks. We completed our squeeze-out of the remaining shareholders of Lindy AG. We closed on our South Korea divestiture and have reached agreement on one of the Indian divestitures. We now expect the value of our Asia divestitures to be in excess of $1.7 billion, which is higher than originally anticipated. We are making good progress on our cost synergies and restructuring initiatives. As expected, the timeline is more extended in regions like Europe, where we need to engage the works councils on our restructuring plans. Having said that, discussions continue to be constructive. Integration is going well. The organization is set. Voluntary turnover remains at low levels. There is a high degree of energy and collaboration. The organization is adapting well to an accelerated operating rhythm. We have early wins we can point to in practically every area. There is a strong pull for best practices, technology, and plan capabilities. In short, the organization is excited about the potential for our new company. Regarding the macro going forward, I'm sure you're going to think I'm too cautious, too pessimistic. Maybe I am, but this is a scenario that can easily play out. Let's start with Asia. Though a good result in Q2, I see more tepid volume growth going forward. China growth is slowing. The key PMI indicators are sliding. IP has been trending down. And key metrics such as electricity consumed for industrial production was only 0.5% higher in May. And for the entire economy, electrical consumption was barely over 2%. China is slowing and so is the rest of Asia. The good news is project startups will provide some nice lift for us beginning next year. Europe. I see weakness across the Eurozone. Industrial production for June was negative 1.3% year over year. The fact we serve diverse end markets mitigates against this impact. And we have a good self-help story. But the macro headwinds are clear. The Americas, solid quarter in Q2 as pricing and merchant volume growth buoyed results. However, cylinder gases volumes, which primarily serve metal fabrication markets, flatlined in Q2 as hard goods turned negative. However, pricing continues to be a good story here. After a sluggish start on the year due to a shortage of Venezuela crude, hydrogen volumes are improving. as refiners take advantage of favorable margin spreads. Overall, we expect slowing growth, but solid price attainment for the remainder of the year. Obviously, if the underlying global economy does well, we will do well. If it falters, we still have a resilient business model and a strong self-help story to sustain performance. My priorities going forward, best-in-class safety, compliance, sustainability, and diversity, driving a successful integration and building a high-performance culture, synergy attainment, cost, capex, and growth, and implementing best-in-class price management systems and a robust productivity initiative. And now I will turn it over to Matt.