Air Products and Chemicals, Inc.

Morning and welcome to the 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. Sid Manjeshwar. Please go ahead, sir.

Thank you, Lynette. Good morning, everyone. Welcome to Air Products' fourth quarter 2023 Earnings Results Teleconference. This is Sid Manjeshwar, Vice President of Investor Relations and Corporate Treasurer. I'm pleased to be joined today by Sefi Ghasemi, our Chairman, President, and CEO, Dr. Sameer Serhan, our Chief Operating Officer, Melissa Schaefer, 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 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 number two. 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, both on a total company and segment basis. Unless we specifically state otherwise, statements regarding these measures are referring to our adjusted non-GAAP financial measures. Reconciliation of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section. Now with that, I'm pleased to turn the call over to Seyfried.

Thank you, Sid, and good day to everyone. Thank you for taking time from your very busy schedule to be on our call today. I would like to begin with slide number three, our safety performance, which is our number one priority at Air Products. I'm pleased to share that our safety record has improved compared to last year, continuing the significant progress we have made since 2014. Our ultimate goal will always be zero incidents and zero accidents. Now, please turn to slide number four, which summarizes our management philosophy. We reiterate these principles every quarter because they are fundamental to how we manage the company, and continue to profitably grow our earnings per share. Now, please turn to slide number five. Air Products has a very strong business model and a long-term strategy to deliver consistent earning growth for the short and the long-term, and I stress the long-term. Projects in our on-site business, where we have long-term take-or-pay contracts with our customers, drove our volume growth this year, despite economic weakness across the regions. Our on-site business generates a stable cash flow and consistently contributes about half of our total sales. Also note for the is that strong pricing action in our merchant business, as well as our ability to contractually pass through energy costs in our on-site business, helped us mitigate inflation as well as higher power and energy costs, which we experienced last year. We also continue to successfully execute our long-term strategy to be the leader in blue and green hydrogen for the future, with a significant number of clean hydrogen megaprojects and their execution. Nobody in the world is matching what we are doing. Finally, our backlog of over $19 billion sets up a multi-year framework for double-digit earnings per share growth, which has been our goal since 2014 and remains our goal for the future. Now, please turn to slide number six. Our fourth quarter adjusted earnings of $3.15 per share exceeded the top end of our guidance for the quarter and improved 30 cents or 11 percent versus last year. For the full-year fiscal 2023, our adjusted earnings per share of 11.151 improved $1.26 or 12 percent over prior year, continuing our strong track record of consistently delivering double-digit average earning growth per share since 2014. We are very proud of the accomplishment in 2013, despite the unfavorable economic conditions. In addition to the strong results, we also made significant progress in our critical deployment, in our capital deployment strategy this year. Gazan phase two was completed, Both Gulf Coast Ammonia and Juitai are operational. NEON project financing was more than two times oversubscribed and closed successfully. We also added our four significant LNG sale of equipment projects. And I'm very pleased to announce that the natural gas to syngas facility in Uzbekistan is operational and contributing to our earnings. Before I go any further, I want to take time to thank all of our employees around the world, every one of the 23,000 of them, for their dedication and hard work, which has made it possible for us to deliver these impressive results despite significant economic and geopolitical headwinds. Now, please turn to slide number seven. We are continuing to deliver on what we promised to our shareholders in 2014, executing to deliver an average of at least 10% growth in earnings per share each year as we move forward. We believe our two-pillar strategy of focusing on our base business while extending our leadership in the growing demand for clean hydrogen It enabled us to continue to deliver double-digit growth in our EPS as we go forward. Now please turn to slide number eight. We are proud again of our accomplishment of more than 40 consecutive years of dividend increases. As you can see on this slide, since 2014, we have increased our dividend on an average of 10% every year. Slide number nine shows our EBITDA margin trend, continuing to be my favorite slide. Our margins have increased to nearly 40% in the second half of fiscal year 2023, confirming the strength of our business model and the significant cash flow that we generate. Now, please turn to slide number 10, for our fiscal year 2024 outlook and guidance. Although there will continue to be challenging economic conditions in the near term, I remain very optimistic about Air Products' future. Our capital deployment strategy and strong business model will sustain our double-digit average earning growth rate. Therefore, For fiscal year 2024, we expect adjusted earnings per share in the range of $12.80 to $13.10 per share, up 13% at the midpoint over last year. We expect new projects, many of which are already on the stream, to drive our earnings per share growth next year. Additionally, We also expect improved LNG sale of equipment activities to add to our favorable results in 2024. And for the first quarter of 2024, our adjusted earning per share guidance is 290 to 305, up 10% to 16% over last year. We also see our CAPEX for next year, somewhere between $5 to $5.5 billion. Now, please turn to slide number 11. I know that some of our investors refer to our major project commitments slide to track our projects. However, the size and scale of these projects, which all have multi-year execution timeframes, certainly now warrant more time and attention than we can give them in a single line on a single slide. Therefore, we remain committed to providing investors visibility and meaningful updates to schedule capital and offtake status as we continue to progress our major projects. So, From time to time, we will give you a more depth look into our projects. Today, we have decided to give you an update on our blue hydrogen and blue ammonia clean energy complex in Louisiana, which is one of the largest projects that we are executing. Please turn to slide number 12. We announced our intent to build this world-scale facility in Louisiana in October of 2021. As we moved forward with detailed planning to execute this project, a significant positive event happened in August of 2022, when the United States Congress passed the RRA legislation, which created tax incentives for the production of blue and green hydrogen. In addition, By 2022, it was becoming more and more evident that the future demand for blue hydrogen and blue ammonia is improving significantly, supported by positive developments in other regions of the world, particularly in Europe and Japan. Not only is there a growing need to decarbonize the heavy transportation and industrial sector, such as steel, but also other growing applications, including using low carbon intensity blue ammonia to fuel ships, reduce emissions from power plants and more. These events, especially the passage of the IRA legislation, led us to consider that now rather than later is the best time to build the infrastructure for this project to accommodate future expansion. It is important that we pre-invest in the infrastructure needed for future expansion now so that when the demand increases rapidly, as we expect it to, we will be able to bring the next phase of this project on the stream as fast as possible. In addition to the increased cost to build the infrastructure Obviously, the project cost has gone up due to inflation that we are seeing in the past three years since we announced the project and anticipate in the future to build this facility. In addition to all of this, we have included in the $7 billion funds to cover the interest on capital that we will be using as we build this plant. This facility is a huge facility. We are very excited about its future. We remain totally committed to this project and its profitability. It is a unique one-of-a-kind project that will put us significantly ahead of anybody else in the world in the production of this product. We see significant demand for the product that this plant will produce. As a result I am very pleased to announce today that our Board of Directors has given us final investment approval to proceed with the project at the new capital estimate of $7 billion. We expect this project will deliver double-digit returns to our investors when it is fully on the screen. As you know, this project will produce hydrogen and ammonia at very low carbon intensity. As the first company to make these unique low carbon hydrogen and ammonia products at a large scale, we expect to get a premium for the product, which will allow us to achieve double digit returns on capital. Additionally, the scale of our activities will provide a cost advantage over other similar projects in development at this time. We are really excited about the future of low-carbon hydrogen and ammonia. This project in Louisiana is well underway, and we are laying the groundwork to meet the expected additional demand in the future The additional infrastructure we are building now will continue to be a competitive advantage for air products in the future. Now, it is my pleasure to turn the call over to Melissa Schaefer, our Chief Financial Officer, to give you a summary of the fourth quarter 2023 results. Melissa?