Linde plc

Good day and thank you for standing by. Welcome to the Lint PLC First Quarter 2022 Earnings Teleconference. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. I would now like to hand the call over to Mr. Juan Villas, Head of Investor Relations. Please go ahead, sir.

Thanks, Sergei. Good morning, everyone, and thank you for attending our 2022 first quarter earnings call and webcast. I'm Pompilias, head of investor relations, and I'm joined this morning by Sanjeev Lamba, chief executive officer, and Matt White, chief financial officer. Today's presentation materials are available on our website at lindy.com in the investor section. Please read the forward-looking statement disclosure on page two of the slides and note that it applies to all statements made during the style conference. The reconciliations of the adjusted numbers are in the appendix to this presentation. Sanjeev will provide some opening remarks, and then Matt will give an update on Lindy's first quarter financial performance and outlook, after which we will wrap up with Q&A. Let me now turn the call over to Sanjeev.

Thanks, Sawant, and good morning, everyone. I'd like to start off by addressing the recent global events and the tragedy occurring in Ukraine. The senseless invasion has caused widespread casualties and destruction at a level not seen in Europe for generations. As a global company, integrated within countless communities across the globe, Lynda must do its part to help. I'm happy to report that all of our 121 Ukrainian employees are safe. And I'm incredibly proud of the courage and determination they've demonstrated throughout the crisis. including several who have chosen to continue producing and delivering life-saving medical gases. We are supporting their needs directly and indirectly, including through contributions of approximately $2 million. I can only pray that all the global pressure and support is enough to bring this war to an end and allow the efforts to begin towards healing and rebuilding Ukraine. Given these circumstances, we are scaling back gas operations in Russia. We have already seized supply to certain customers and initiated the divestment process for some industrial assets, all in an effort to reduce our footprint, which is already quite small, at approximately 1% of sales. Furthermore, we have stopped new investments and business development while winding down several engineering projects. Given this, we have removed second-half Russian earnings contribution from the guidance. Matt will speak more on this. However, we are scaling back responsibly as we continue to support our employees and their efforts to supply critical gases for medical and safety needs. Now, in the light of uncertain economic climate, I thought it would be helpful to highlight trends we're seeing by end markets and geography. Let me now go on to slide three. which gives you a summary of Q1 growth rates by key end markets. Two overarching points are that the organic growth of 9% from a strong 2021 foundation and broad-based increases across both consumer and industrial-related end markets. At 17% of sales, healthcare trends are roughly flat, as greater medical procedures in the developed markets were offset by lower hospital oxygen in developing markets such as Latin America and Eastern Europe. Now, fortunately, it appears COVID oxygen needs are abating. So I expect healthcare to return to its long-term growth rate of mid-single-digit percentage as we continue to expand patient offerings for both hospital and home. Food and beverage continues robust year-on-year growth. as most parts of the world have returned to restaurant dining, as well as increased applications for bulk food and beverage production. This resilient market should grow low to mid-single-digit percent. Note that the sequential trends are down due to normal seasonality from fourth quarter holiday season. Electronics, at 9% of sales, remains one of our fastest growing end markets, especially in Americas and APAC. The primary gases sold to these customers are ultra high purity nitrogen, hydrogen, helium, and rare gases. That includes neon, which represents less than 1% of total sales. However, given the amount of attention this molecule has recently received, it's fair to say that we're well positioned as one of the largest producers of neon in the world, with the vast majority of it being refined at our own sites in the US and Germany. We are, of course, working closely with our customers to address their increased demand. The electronics market grew 13% versus last year with a mix of underlying growth and project startups. And I fully expect to announce more new project wins in the course of this year.