Linde plc

Ladies and gentlemen, good day and thank you for standing by. Welcome to the Lindy's first quarter 2024 earnings call and webcast. At this time, all participants are in a listen-only mode. And please be advised that today's conference is being recorded. After the speaker's remarks, there will be a question and answer session. And I would now like to hand the conference over to Mr. Juan Pelaez, head of investor relations. Please go ahead, sir.

Abby, thank you, and good morning, everyone. Thanks for attending our 2024 first quarter earnings column webcast. I am Juan Pelaez, 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 disclosures on page two of the slides and note that it applies to all statements made during this conference. The reconciliations of the adjusted numbers are in the appendix of 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, Juan, and a very good morning, everyone. The Lindy team delivered another solid quarter despite stagnant economic conditions across most regions. EPS of $3.75 grew 10%. ROC increased to 25.6%, and operating margins reached 28.9%. These all represent record levels, even though volumes declined 1%. Over the last few quarters, we have seen a row of negative base volumes, which are tracking the stagnant to declining manufacturing environment, especially in EMEA. While volumes continue to track local industrial production, we know there is more we must do to grow. Pricing remains an important lever for us. We're also focused on other growth opportunities, like small onsets, applications technology, and investments, including acquisitions, to grow our network density, even as we trim certain areas of the portfolio, like equipment hard goods, which typically suffer in economic downturns. Add to that the contracted backlog, and we have a solid growth pipeline for the next few years ahead. Let me provide you with some additional color on the trends and opportunities by key end markets, which you can find on slide three. I'll start with the consumer-related markets, which have proven their resiliency time after time. Healthcare has been quite stable year on year. While we continue to see sleep, respiratory, and oxygen demand growing, sales have been partially offset by some rationalization of home care equipment offerings in the Americas and America, which don't meet the investment criteria. Food and beverage grew nicely at 6%. This is mostly driven by food freezing, beverage carbonation, and aquaculture. We continue to see opportunities associated with higher quality and more sustainable foods. Even though we don't talk much about our food and beverage business, I'm excited to see good growth opportunities ahead. Electronics is up 1% with two key trends. which mostly offset each other. On the one hand, we continue to see good growth from project startups, which have delivered fairly steady results, mostly in APAC. On the other hand, this growth was offset in part by lower packaged and merchant volumes to fabs as production levels were softer. The current trend suggests that this has largely bottomed out, with expectations of recovery growing. From where I stand, I have some optimism that we'll see volumes pick up again in the second half of the year. Some of this will be driven by the growing demand for AI chips and new data centers. This is not baked into our guidance at this time. Turning to industrial end markets, metals and mining are flat as pricing increases are offset by volume declines. MES steel mills account for the majority of volume reduction due to weaker industrial activity, but protected by strong contracts. At the same time, we're seeing project backlog opportunities pick up for new low-carbon electric arc furnaces, or EAFs, as well as existing steel customers exploring ways to reduce their carbon footprint. Lindy has recently signed a long-term agreement with H2 Green Steel to supply industrial gases for the world's first large-scale green steel production plant in northern Sweden. In addition, Tier 1 producers like Baohu in China have expanded their relationship with Lindy by decaptivating their ASUs into our existing supply network for the increasing supply reliability and efficiency. We continue to work closely with our steel customers on a range of projects, from supporting expansions to decarbonization. Chemicals and energy were up 4%. driven mostly by higher on-site volumes in the Americas and APAC. U.S. Gulf Coast refining and petrochemical customers ran better this quarter when compared to the planned outages last year, helped today by healthy spreads and access to low-cost natural gas. Furthermore, we continue to see growing interest around decarbonization projects. The manufacturing end market was up 1%. Most of that is pricing. manufacturing volumes are down year on year. The volume decline is split between EMEA and the US. EMEA has experienced broad-based declines in industrial production due to geopolitical and energy challenges. In the US, manufacturing sales are about flat when excluding the timing of gases supplied to the aerospace sector. Elsewhere, underlying manufacturing volumes have been stable to slightly up across a variety of key sectors, including battery manufacturing, pulp and paper, and merchant-scale clean energy opportunities. A good example is our recent announcement to invest in an electrolyzer to grow our merchant hydrogen network density in Brazil and help customers decarbonize. Looking ahead, our base volumes are expected to track local industrial production. Included in there are some encouraging secular growth trends, such as batteries, aerospace, and clean energy. Also, resilient end markets such as food and beverage and healthcare will continue to grow mid-single-digit, driven by demographics and consumer demand. Furthermore, we have a healthy backlog of approximately $5 billion, which will continue contributing to earnings for the next couple of years. However, I'm not expecting near-term improvement in industrial production, especially in certain parts of EMEA. These flat economic conditions are embedded in the guidance assumptions at the midpoint, which Matt will discuss in more detail. Overall, I remain confident that we will continue to be nimble and actively manage the balance between volume, price, and productivity to grow earnings even in these sluggish economic conditions. And when industrial production levels rebound, As they always do, Lindy will be very well positioned to leverage this growth. I'll now turn the call over to Matt to walk through the financial results. Thanks, Sanjeev.