Air Products and Chemicals, Inc.

Good morning and welcome to Air Products' third 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 Megan Brent. You may begin.

Hello and welcome to the third quarter fiscal 2026 earnings conference call for Air Products. Our prepared remarks today will be led by Eduardo Menezes, Chief Executive Officer, and Melissa Schaffer, Chief Financial Officer. We have prepared presentation slides to supplement our remarks during the call, which are posted on the investor relations section of the Air Products website. During this call, we'll make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including but not limited to those discussed on this call and in the forward-looking statements and risk factors sections of our reports filed or furnished with the SEC. We do not undertake any duty to update any forward-looking statements. Please note, in today's presentation, We will refer to various financial measures, including earnings per share, capital expenditures, operating income, operating margin, the effective tax rate, ROC, and net debt to EBITDA on a total company basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website in the relevant earnings release section. It's now my pleasure to turn the call over to Eduardo.

Thank you, Megan. Hello, and thank you for joining our call today. Now, please turn to slide three. Earlier today, we reported results for the third quarter of fiscal 2026. In the quarter, we managed volatile marketing dynamics to deliver a 9% increase in operating income compared to the same period last year. Our operating margin of 25.6% was also up compared to the same period last year, largely from volume and price improvement, partially offset by higher costs. Earnings per share were $3.47, up 12% compared to the same period last year. This was above our guidance range, largely due to improved volume and higher contributions from our equity affiliates. Volume improvement was led by higher on-site results, new assets on streams, and heating. The heating headwind in the quarter was 2%, which was better than expected, largely on electronics momentum in Asia. Return on capital of 11.7% was up relatively to prior year and improved sequentially. Moving to slide four, we remain focused on three key priorities for 2026. On earnings growth, EPS are up 14% year-to-date. With another quarter of strong performance, we are raising our full-year earnings guidance, which now implies an improvement of 11% to 12% for the full fiscal year. We continue to expect EPS growth to be achieved primarily through volume growth, from new asset contributions, pricing actions, and continued productivity. Next, we continue to make progress on optimizing our large project portfolio. On June 30th, we announced our decision to exit the Louisiana project, the Casa Grande, Arizona project, and other smaller-scale clean energy distribution projects. As a result, we recorded a pre-tax charge of $2.9 billion this quarter. We are working on opportunities to redeploy the industrial gas assets and sell the ammonia production assets associated with the Louisiana Project. On the Green Ammonia Project in Saudi Arabia, or NGHC, we have now finalized a marketing and distribution agreement with IARA. I will speak to this more in a moment. Finally, on our third priority, maintaining capital discipline, the cancellation of the Louisiana Project will allow us to reduce our capital expenditures. While we expect to reduce capital expenditures overall, we will remain focused on investing in our backlog of traditional industrial gas projects, especially in the electronics end market. In addition to investing in our traditional industrial gas projects, we remain committed to continuing our strong track record of returning cash to our shareholders. Year-to-date, we have returned $1.2 billion to shareholders in the form of dividends. Please turn to slide five. I'm pleased to share that Air Products and IARA have signed a marketing and distribution agreement for renewable ammonia from the NEON green hydrogen project in Saudi Arabia. Under the agreement, IARA will transport and commercialize the renewable ammonia that will be acquired by Air Products from NGHC that is not used by Air Products to produce green hydrogen in Europe. This model creates the first fully integrated value chain for renewable ammonia by enabling products from the world's first large-scale green ammonia plant to be sold and delivered through Yara's existing global supply chain. As a final note, we do not expect this project to have a material financial impact in fiscal year 2027. Please turn to slide 6. for a summary of our current project backlog and an update of our capital expenditure forecast. Before I go into details, I want to provide some context on how to think about our backlog. To be included in the backlog, a project must have reached a final investment decision on FID following a robust review process to ensure we have adequate returns relatively to the risks of the project. Our backlog will include investments in projects with long-term contracts with a strong customer and, in few cases, production facility to grow our liquid bulk and packaged gases business. With this criteria, we currently have a traditional industrial gas backlog of approximately $3 billion in projects. A significant portion of the capital projected for the backlog will support electronic customers. This includes over $1.5 billion in projects wins for air products in the last six months. Translating our backlog into a view of capital expenditures, on the right-hand side of this slide, we are targeting to invest approximately $1.5 billion per year going forward in traditional industrial gas projects. These are air separation and hydrogen projects of varying sizes, and there are new projects being added and completed projects being removed from the list. The CAPEX figures for fiscal year 27 are preliminary and represent the committed spend for traditional industrial gas projects based on our current backlog. As we continue to build our backlog, our focus will be on opportunities that meet our risk-adjusted return thresholds. As we previously disclosed, We are also moving forward with several underperforming projects, given our commercial obligations and product status. Although these projects are not expected to contribute materially to our future operating income, we continue to work to improve their results through commercial negotiations, operational improvement, and productivity. After we bring these products on stream, we expect total capex expenditure of roughly $2 to $2.5 billion per year, which can sustain both our future growth and ongoing maintenance. Again, I want to thank their products team for delivering the results this quarter. Now, I will turn the call over to Melissa to discuss those results in greater depth and review our 2026 outlook. Melissa?

Thank you, Eduardo. Please move to slide 7 for a high-level summary of our third quarter financial results. Sales were up 5%, while operating income grew 9% on volume, currency, and price, overcoming higher costs from fixed cost inflation. Volume growth was led by our on-site business, driven by contributions from new assets coming on stream in Asia and America, as well as higher production from U.S. refinery assets. Pricing was up. primarily in Europe and the Americas. With this underlying business performance, operating margin of 25.6% improved over 100 basis points compared to the prior year. Earnings per share of $3.47 increased 12% from the prior year due to the base business growth as well as strong equity affiliate contributions. Return on capital of 11.7% was up 60 basis points. on strong base business performance and large project optimization. Please turn to slide eight. Our third quarter earnings per share of $3.47 increased 38 cents, or 12% from the prior year. We saw a 2% headwind from Helium this quarter, which was better than our guidance of 3%, driven by improved volume and pricing in Asia, supporting our electronic customers. partially offset by lower space volume in the Americas. Currency was favorable 2% and in line with our third quarter guidance. The base business improvement was driven by onsite volume, including new assets and pricing. We also saw strong contributions from equity affiliates in Mexico and Saudi Arabia. Despite higher costs in the quarter driven by fixed-cost inflation, we remain on track with our headcount reduction plan for the year, having recognized approximately $75 million in the savings year-to-date. Moving now to slide 9. I will provide an overview of our results by segment. You can find additional details of the quarterly segment results in the appendix. In the Americas, operating income improved 6%. primarily driven by on-site volume, including contributions from our HICO existing facilities and a new asset in our Gulf Coast hydrogen pipeline. The volume improvement, along with pricing, was partially offset by higher costs, including fixed cost inflation, distribution, and dislocation costs. Asia operating income grew 18%, primarily due to benefits from the gasification assets held for sale, new assets on stream, and helium. In Europe, operating income increased 2%, primarily driven by pricing actions which more than offset higher power costs. This benefit, along with a currency tailwind of 2%, more than offset higher costs, including fixed cost inflation. In our Middle East and India segment, operating income was relatively flat, while equity affiliates income increased from our joint ventures in Saudi Arabia. Lastly, the corporate and other segments benefited from productivity as we continued to reduce our corporate SG&A. This improvement was partially offset by lower sale of equipment activity. Please turn to slide 10. Year to date, we are free cash flow positive. as strong operating cash flow exceeded the capital that we spent on maintenance and executing the backlog. We have also returned $1.2 billion in cash to our shareholders in the form of dividends in fiscal 2026. As it relates to our leverage, our net debt to EBITDA ratio is 2.1 times, which considers our proportionate ownership of the NJHC joint venture assets under construction. We remain committed to bringing the company back to an AA2 rating over the long term. Moving now to slide 11. We expect our fourth quarter earnings per share will be in the range of $3.55 to $3.65, up 5% to 8% from the prior year. We expect to achieve this growth through continued benefits from new asset contributions, pricing actions, and progress on our productivity initiatives. However, we remain cautious given our macroeconomic uncertainties. We expect helium to continue to be a headwind due to lower price despite some volume and price improvement in Asia. With this, our fiscal full year guidance is now in the range of $13.39 to $13.49, which correlates to an 11% to 12% growth from prior year. For capital expenditures, We now expect to spend approximately $3.5 billion this fiscal year. We have reduced the capital outlook to reflect payment timing adjustments, lower expected maintenance, and canceled projects.

We will now open the call up for questions. Operator?

Thank you. And if you would like to ask the question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you can press store one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take your first question, coming from the line of Duffy Fisher with Goldman Sachs.

Yeah, good morning. Just a couple questions around your asset at Jezan, given the attack that happened there. So one, I think when you brought that online, it was supposed to contribute about $1.35 of EPS per year. Is that still a good number? Two, in your Q4 guide, how much is kind of taken out, I guess, for what's happening there, or does it take a while for that to flow through? And then just the third one, do you have any third-party insurance for that if that conflict escalates and it becomes somewhat impaired?

Good morning, Daphne. Yeah, as you know, we've seen the news, and of course we have information from the site, but I hope you understand that for contractual reasons with Remco, we cannot give you a lot of comments on the project. I can tell you only that the numbers that you have in terms of contribution are in the ballpark, probably a little lower than that, but the numbers are in the ballpark. and we do not expect any financial impact for our products coming from these events. But as you know, Saudi Aramco is not commenting on the fact yet, so we need to wait until they do that to provide more information. But again, the most important thing for us, there are no injuries to our employees or to the JV employees, and we do not expect a financial impact.

Yeah, and if I could just incrementally add one thing, Duffy, if you remember, the contributions for Gizan are a financing receivable. So they do decrease over the life of the agreement. But again, as Eduardo said, you are in the ballpark of contributions for 26. Terrific.

Thank you, guys.

Next question will come from the line of John McNulty with BMO Capital Markets.

Yeah, thanks for taking my question, and congratulations on some solid results. So I wanted to just understand, I guess, one of your comments on NEOM and then just get your kind of high-level view there. So I think you said with the ERA contract, there's no impact on 2027. Does that mean you don't foresee any drag on your fiscal earnings from NEOM or benefit, for that matter? And then, again, I guess... Stepping back, can you speak to your level of confidence at this point as to whether or not Yara and yourself, you're going to be able to find a buyer for that volume in calendar 27 that at least clears your offtake agreement? If you can give us any color on that, that would be great.

Thank you, John. Yeah, I can confirm that our expectations to have no gain or loss in 2027, I cannot go much beyond that. of the agreements we have of the joint venture and the confidentiality obligations that we have. But we do not expect any impact in 27, and what we expect going forward is before the beginning of each year, we can give you some more clear picture of what the expectations are. But as you know, this is an agreement for... Thank you very much. Your next question will come from the line of Jeff Zekakis with J.P. Morgan. Thanks very much.

You talked about how the penalty from helium this year is lower than you originally expected. Maybe it's a little bit more than 100 million re-tax rather than 150. If you had to distribute, I don't know, the 105 or 110 million penalty through your business segments, how would you allocate it geographically?

Well, Jeff, we look at this in a global basis. I would say that what we are doing in the heating business is really remarkable. I know when we talk about externally that the impact is 2% or 3%, it's difficult for everyone to understand what is behind that. But just to give you a picture, Ivo Bols, Walter Nelson, Francesco Maione, Evgeny An We are exercising our system to keep our customers supplied and to make sure that we keep our position as a reliable supplier that can sign long-term agreements in this business. So our impact is mostly in price and didn't come from this quarter, it comes from an year of negotiations that were more than a year of negotiations that we have. from a moment where the market was very short. So I would say that today that impact is migrating more to Europe and North America because of the type of customers that we have mostly in the healthcare space and the MRI sector. We're very optimistic about the future in the heating side, and we have been really gaining a lot of new commitments for volumes in the long term, especially in the electronics area, and especially in Asia.

Okay, thank you for that. And in the Mideast, equity income was up over $100 million, and I think in the Second fiscal quarter, it was closer to 80. So are the joint ventures operating at a new level of profitability, or this was just an unusual jump that had to do with transitory items?

Yeah, Jeff, I'll take that one. So in the Middle East, we are seeing improvements in our equity affiliate income. The improvement in equity affiliate income, though, globally was split amongst multiple joint ventures. One thing I do want to note, we did have an especially strong quarter this quarter in our Middle East joint venture, but that was largely contractually structural and it's driven on a preferred dividend to our joint venture partners. And that's just the timing. So we will see the normal run rate reconfigured in Q4 this year.

Great. Thank you so much.

Your next question will come from the line of Chris Parkinson with Wolf Research.

Great. Thank you so much. You've had a nice little bump up in your backlog from various electronics projects. one official at Samsung, and then two others, so I think we can all presume who the partners are. Can you just offer a little bit of a color on, first of all, you know, how long those projects were being assessed in terms of you becoming CEO, or those kind of longstanding being assessed for multiple years? Were they relatively new? And then whether or not that you'd further expect some of those, even some of those smaller projects to continuously trickle in over the next, let's say, 12 or 18 months or so. Thank you.

Thank you, Chris. Good morning. Yeah, I would say that on this backlog, we have one very large project that started in 2022, I believe, that is a project in Taiwan that was multiple phases that we're building more than five large exploration plants. We have now three done, and we still have two to go. Other than that, all these projects, they're basically coming in the last 12 months. I would like to create credit for that on my presence here, but the reality is the market is going through a super cycle and we have been working very hard to get our fair share of that. So we announced two very large projects, as you know, one in Korea, one in Taiwan. We have other projects that we are going to announce this quarter that we are talking to the counterparts about issuing the final announcement. And when we look at our list of opportunities, I would say that the list is long today and it's skewed to the electronic side. So probably close to two-thirds of our opportunities or more than that are in the electronic space. So that's not by... That's where the market is today. I would say that the traditional market in chemicals and steel, there is a lot of capacity in the world. Not to say that there are no opportunities, but they are mostly coming from replacement of old assets and one project here or there. But the electronics is really where the growth is, and I think we're very fortunate that we kept that capability in the company that we have been executing and that fits well with where the market is now.

And just as a quick follow-up, NGHC has indicated there are over 90% completes on the facility, the primary facility, and then about 95% plus complete on the solar farm and wind garden, plus or minus. I think that update was actually from a few months ago. As that relates to slide 18, just getting away from the actual agreement with Yara, but as the ramp of those facilities begins to Can you reconcile the exact timing and how we should think about how that affects slide 18 in terms of the net debt adjustment? And then also in your 10K, the debt was listed, I believe, and forgive me if I missed something, but around $4.7 billion. In this slide, you have roughly $5.25. I was wondering what that extra half a billion represents or if I'm just missing something. Thank you so much.

Yeah, Chris, thanks for the question. So as mentioned before, the Consolidation of NEOM is in fact because of the EPC arrangement during construction, right? And so the deconsolidation will happen once that plant is up and on stream. So after commissioning, we will deconsolidate. That is on slide 18 what you're seeing here is the deconsolidation and back down to a net debt of around 11, 11 and a half. The difference between the 5.2 debt here, there is no difference. That is our carrying value of the NGHC net debt. The proportional may be just our proportion of that 33%. So there is no difference between what we've reported and what we have here. This is just the deconsolidation of the joint venture after the construction is completed and we've commissioned.

Yeah, and just as one point, when Melissa talks about commissioning, it means being at full production capacity, and this is a first-of-a-kind plant with a lot of new technologies, so we're expecting a long commissioning process, and that's one of the reasons why we cannot precise exactly when the Your next question will come from the line of Vincent Andrews with Morgan Stanley.

Thank you and good morning. First, I just want to clarify on NAOM, the comments on no material financial impact for fiscal 2027, is that for both the income statement and the cash flow statement? And then also, I think, Eduardo, I heard you just say that as it relates to the consolidation, you said something about when there'll be a trigger in terms of when you're obligated to buy the product. Is it potentially the case that you don't have to buy product in fiscal 2027? So if you could clarify that, I'd appreciate it. and then my follow-up would be on the CapEx reduction for the target year. I think you brought it down by about $500 million. Can you just talk about what's driving that and what you think the alternative use of that capital might wind up being?

Yeah, thank you, Vincent. Yeah, on NEON, we cannot discuss the details of our agreements, but as I said, the process for commission will take some time for the facility to get to full production, and we're going to need to keep you informed during this period, but we are absolutely confirming no impact on the income statement. and on the cash flow statement, I don't know exactly how to qualify that, but Melissa, you know.

Sure, absolutely. So since we are in commissioning, the large portion of the spend and any distributions that we put into the joint venture are largely complete. If you remember, this is 73% project finance. and our contributions to the joint venture, again, are largely behind us. So again, no financial impact both to the P&L and no large impact to the cash flow statement. From the CapEx perspective, we did reduce our CapEx forecast for this year by about $500 million. That's largely just timing associated to the execution and the payments of all of our backlog under execution. So nothing material there. We continue to be able to invest in our underlying industrial gas projects and the distribution to those will be against what we've already talked about, really the electronics wind that we're executing right now and projects that we continue to bring on our backlog in outside electronic space as well.

Next question will come from the line of James Hopper with Bernstein.

Hi, good morning. Thank you for taking my questions. Can I start on the Louisiana project and Dara, can you go through a little bit more detail on what happens to the kit and the man and how you're thinking about it and any discussions that you've had there, please?

Yeah, but what happened to... I didn't get it.

Yeah, no, no worries. The Darrow, what we're going to be doing is... Oh, the equipment. Yeah. The...

This is a project we started probably six, seven years ago. The project was in a seventh stage. We have a lot of the equipment already purchased in hand in warehouses, mostly in the U.S., but some in Europe and China. It is a very different situation from what we had last year when we canceled the World Energy Project. These are high, let's say, world-class assets, the air separation plants, the hydrogen purification, the ammonia loop, and we see a lot of value for these assets in the market, as you can see in the transactions that were announced recently when people buy ammonia plants and so forth. We are in the process of taking all the data and making sure that we maximize the value we can recover from these projects by Basically, using part of this equipment in our own operations, like the air separation and some other equipment related to industrial gases. And on the case of the ammonia loop, which is a very important asset, making sure that we can commercialize that as a full unit. And in some cases, if possible, to generate projects for our products. I think it became public that one of the projects that we executed was a similar ammonia plant that we did in Texas in terms of capacity. It was 3,600 tons per day. Those two assets that we have from there are 4,000 tons per day using the same technology. They are desirable assets and the market is showing that they have significant value and we can attach, if possible, a possibility of supplying hydrogen and nitrogen to these assets. So this is the objective. We are going to work on that in the next few months. We have a team here. in our products in engineering, business development, working dedicated to this task. And our objective is to recover as much wine as we can and generate new business. Sorry, go ahead.

Thank you. And just as a follow-up on that, Eduardo, If you do see a bit of a windfall with leverage starting to get below two times, how are you thinking about capital allocation and projects or potentially starting a buyback?

Yeah, if we get any money, it will be a non-GAAP income on top of what we initially forecast. And it will only go to our pool, and it will be allocated as we do with the rest of the cash uses and sources that we have. Melissa can give more call on that.

Yes, absolutely. So, you know, as we've talked about, cash flow neutrality focused on that. and moving forward. We do have share buybacks in our capital allocation waterfall. We have a line of sight of being able to start that program towards the end of 27, beginning of 28. But that obviously depends on the projects that we have coming down the pipeline. So we will want to invest in high return projects first and foremost, continue to increase our dividend, and share buybacks will become part of that program as we move forward.

Thank you.

Next question will come from the line of David Begleiter with Dosha Bank.

Thank you. Good morning. Eduardo, back on NEOM, if the project was at full production capacity in 2027, hypothetically, what would the financial impact be on our products?

David, as a... I think we said that many times this product has an obligation to buy the ammonia at a fixed price, and we are exposed to the market conditions on the other side. So, again, we will work to be able to provide forecasts at the beginning of each year of what the impact will be. It would be premature for us to go much further than that. So what I can tell you is that for 27, the expected impact is zero, and then we're going to have another one for 28. So you're basically asking the same question in a different way. I understand the... The curiosity and the objective of getting this information, but unfortunately the situation is, as I report, not different from the situation that you have from another player in the ammonia market, with the exception that our fixed cost is fixed and it's not a function of fluctuations in natural gas price.

Understood, and just wanted to try it. Just on the Americas, on the cost side, do you need additional price increases to offset these higher costs you're incurring in the Americas?

Yes. No, thanks for the question, David. So we are seeing some. increase in costs in the Americas, largely associated to some project costs and some dislocations driven by maintenance. And of course, we are seeing fixed costs and inflation, as everybody is. We don't have a significant packaged gas business in the Americas, as you know. So our ability to increase pricing is limited to our liquid bulk product. But we do look to continue to overcome with Price in the Americas and in all of our regions. And of course, we're looking to drive productivity as well to offsite those cost increases.

Thank you.

Your next question will come from the line of Lawrence Alexander with Jefferies.

Hi, just two quick ones. One, could you give a quick update on what you're seeing on the merchant volumes by region? And secondly, on Neon, if the strategy, the original strategy worked out and the green premium evolves and the green ammonia market establishes itself as a kind of separate market with a much higher value, is there a products obligated or constrained to keep Neon in the portfolio? Or if there was a higher or better strategic owner, are you allowed to explore that five or 10 years down the road?

Well, starting with the first question on the merchant side, I would say that we see the market in the Americas progressing relatively well, still growing. Europe as a whole is a difficult market today. I don't think it's a surprise to anyone that the industrial market in Europe is not growing. In Asia, it's a little bit of a different scenario. China is still a little better than it was, I would say, a few months ago, but it's still a difficult market with a lot of overcapacity that we need to overcome. And the other markets are suffering, other than the electronic side. In Taiwan, South Korea, they are suffering a little bit with high energy costs. So we don't have a big exposure outside of electronics, but the little exposure we have in the merchant business there, it's flash from that perspective. So that would be on the merchant question. On the Neon question, there are two different things. One is the product's participation in the joint venture that is subject to, like any joint venture agreement, to rules on if you decide to, any of the partners decide to to leave the partnership. There are specific rules on how the process works. It works for us, for our partners in every joint venture. So that's one side. And I would say that everything is possible, but that's a joint venture that we did. We intend to be on the long term. The other position is the position as an off-taker of the product. We already talked about that. It's a third-year contract. and, again, this is a commercial operation that, of course, we could at some point, you know, having a back-to-back or even work on the agreement, although I would expect the, you know, the project company, the joint venture, to to expect our products to stay as the off-taker and that we would need to go more in a back-to-back agreement to move a large volume. But frankly, this is not different from what we are doing today with this agreement with Fiata where they will, with their marketing capability and their distribution capability, their ships, They will go to the market and they intend to sign long-term agreements. They are not going to be as long as the 30-year deal that we have, but we don't want them to be as long as that because the expectations that, as we said several times, our price to buy the product from the JV is basically fixed. and we expect in the long term the market to evolve, the prices for ammonia to evolve with the energy prices. So, you know, we are looking to initially to have agreements that will be long-term agreements but very far from the 30-year period that we have in our obligations.

Thank you. Your next question will come from the line of Kevin McCarthy with Vertical Research Partners.

Thank you and good morning. I wanted to follow up on the helium discussion, maybe with a two-part question. Can you elaborate on the source of incremental goodness in the earnings function in helium? It's my understanding you have quite a large percentage under contract. So did that come from new or modified contracts or perhaps the spot market, albeit a smaller exposure there, or perhaps both? On the supply side, there have been unpleasant goings-on in the country of Qatar recently, as you are well aware. Can you provide an update on any impact to air products they're from and also efforts to procure helium from other places in the world? Thank you.

Yes, Gavin. It's a Long question that would need a long answer here, but I would say that... On the new agreements that we assign, a lot of that is new electronic projects that are being built, especially in Asia, some in the U.S. So I think with our system and this information that I provided with the cavern that we have and the diversification of sources, I think we made clear to the customers that everything We have been fortunate to sign a lot of new agreements for products that some of these products will start in a year, two years, and three years. But they are longer-term agreements than you normally would see in the merchant side. So some of them are connected to these large separation plants I would say on the on the on the source side We have, for many years, a strategy to diversify our sources between the U.S., Qatar, Algeria, and we continue to do that. It's very hard to predict when the situation in Qatar will improve. I think there were some loads that were able to to be filled by Qatar Energy, but frankly today it would need to cross to the Red Sea side to ship, and the volumes coming out of the Middle East from this source, they have been very limited. So we are not... We're counting on that on our forecast for now. And as I said, we are taking a lot of product out of our cavern. And we are in a position that we can continue to do that for many, many quarters. So I would say that that has been our strategy. I'm very happy that we have a cavern today. It's something that our position as an industrial gas company in the heating chain with the end of the BLM became more and more like a A middleman position, but a middleman with a lot of strength based on the supply chain, on the number of containers we have and so forth. But he's still subject to be squeezed when the market is long by our customers and to be squeezed when the market is short by our suppliers. and having the cavern and having this ability to draw product for many, many quarters, you know, help us on both sides to negotiate and to have a more stable business.

Thank you for that. If I may, a second question on the Yara deal. I appreciate you may not be able to get into specifics, but conceptually, should investors think of that deal as fully hedging air products as offtake risk or We're partially hedging it. Are there scenarios where you would be obligated to offtake but not able to move the product through YARA?

No, I would say that you should see that as a way to eliminate the volume risk. We still retain the price base. We talked about that before. I think some people underestimate the volume risk. And we, our products, we could not do that. So we have an obligation to lift all the tones that are produced by the joint venture. Ammonia is a product that, you know, it's not like an air separation plant that you can fend the product, so you cannot take the risk of shutting down the plant because you have a tank full event, right? So this deal with a counterpart like Yara that owns their own distribution network, that owns multiple ships, eliminate that risk. The price risk is still there. Most of the price risk will sit with us. We have a commission scheme with FIARA that they will share the upside with us and they will be incentivized to commercialize this green product as much as possible. I would say that that that was the objective from the beginning and I'm very happy with the agreement that we have and I think this relationship became very, very important for us and hopefully it will grow as you guys seen on the GCA announcement as well.

Thanks very much.

Your next question will come from the line of John Roberts with Mizuho.

Thank you. Last quarter you gave us an end-market breakdown for our products. Maybe could you talk about the volume growth in three buckets, semiconductors, refining, and basic petrochemicals, or I think what you call energy, and then all other. Were we double-digit percent in electronics and mid-single-digit percent in refinery and petrochem and maybe down low single-digit percent in all other?

Hey, John, how are you? Thanks for the question. So we actually don't usually externally break it down as far as growth by area. I will tell you, though, we continue to see some really strong returns and ramping up in electronic space, both from a backlog as well as supply. We had new assets coming on stream this year, and you are seeing the contributions of those assets in electronic space. In the refinery space, I would say it's a little bit more of a mixed bag. In Europe, we're not seeing great volume improvements, but we are seeing great volume improvements in our HICO business in the Americas. The rest, again, you can see in our volumes, we've seen some improvements in the Americas and in Asia, but not great improvements in Europe. So, again, we see good improvements in electronics in our new assets and ramping up, as well as our backlog, refineries in the Americas, and the rest is, again, a mixed bag, as you see in our underlying results.

Thank you.

Your next question will come from the line of Josh Spector with UBS.

Yeah, hi, good morning. I just had two quick follow-ups. I mean, one, if you're able to disclose on the Yara offtake from NEOM, is the commission structure fixed or is it variable? And then second, just on the Americas pricing, I mean, down sequentially, again, I understand the point around packaged gases. Just curious if you characterize that as helium-related or if there's something else underlying impacting that. Thank you.

Yeah, I would say on the first question, I think I just explained that. The scheme that we have, of course, they incentivize to place more product as green, which implies that it is a higher-priced product. So it is a variable structure, not a fixed structure. And on the Americas, Medusa...

Yep, absolutely. Thank you. So you do see a topside 1% decrease, but I could tell you actually from an underlying, we saw some price improvement in the Americas, actually. So price was actually an improvement in a non-merchant pricing. This was more than offset, though, by our headwinds in helium pricing. And that really largely was a slow quarter in the space. So we do want to see that hopefully rebound in the next quarter as we see launches increase.

Alrighty, your next question will come from the line of Patrick Cunningham with Citi.

Hi, this is Alex on for Patrick. I think just a quick question on Darrow. I think in the past you said that you were able to monetize something about of a billion dollar, I think. I'm just wondering if that still holds true and what the timeline could be expected. And then as a follow up, I'm wondering if you could provide some update on the Edmonton project.

Yeah, on Daryl, I think any number that we gave to you in the past was, you know, we qualified them as estimated. We're working on that. I wish we had a very clear timeline for that, but we'll take the time that we need to take to maximize the value. And, you know, as I explained, the value will come from someone that wants to use these units as a whole, not selling piece by piece. So it will take some time to get there, and we will update you as the job develops. Regarding Edmonton, we have no updates from what we had before. We continue to work on the project, and we do not have news in terms of start-up dates or costs beyond what we shared with you before.

Your next question will come from the line of Arun Vishwasanathan with RBC Capital Markets. Arun Vishwasanathan Great.

Thanks for taking my question. Congrats on the strong results. I guess I just had a question there. I think you started the year expecting 9 percent EPS growth and you're now getting to 11 to 12 percent. Is it right to assume that most of that was mainly volume upside and I guess As you look into fiscal 27, could you provide maybe some initial thoughts on what portion of earnings growth would maybe trail off because of maybe you're further along in the restructuring actions, but maybe what you pick up because of backlog and maybe some volume upside from helium or any other sources? Thanks.

Yeah. No, thanks for the question. And let's go through this outlook. So we did, in fact, increase to an 11% and 12% year-over-year improvement. Very proud of the team for all their efforts to focus in on both the volume growth as well as productivity and pricing. So as we look forward, the largest driver of our improvement is, in fact, market volumes. We do expect market volumes to continue to improve largely, as we've talked about, in the Americas. and specific around Tyco. We are seeing some green shoots in Asia, specific in the electronic space, and we do expect those to continue. However, we do have some concerns over the macroeconomic environment, largely in Asia and Europe, that we are building into a no significant market growth because of that uncertainty moving forward. We did have some contributions on new assets. So as we've talked about, both in America and Asia, we had a 3% year-on-year benefit from those new assets. And we continue to focus on price and productivity. We will have some comp headwind because of our productivity actions having a year-over-year comp impact. But we do continue to want the teams to focus on and continue to find productivity as we move forward.

Okay, thanks for that. And given that you now do have less spending committed to Darrow as you move forward, what is the opportunity, I think you did address this earlier, but is there an opportunity to potentially pull forward the buyback capabilities or even potentially pursue some M&A? Thanks.

As you know, this is very much of an opportunistic industrial gas market. As projects come forward, we will continue to be very disciplined on our capital deployment. We're looking for risk-adjusted returns on all projects that we enter into, but we do have the share buyback in our waterfall. As we continue to improve our cash positions, take advantage of any then we would look to have any additional investable capital into a share buyback program. And as I mentioned, that will likely come into a line of sight towards the end of 27, early 28. Thanks.

Your next question will come from the line of Mike Harrison with Seaport Research Partners.

Hi, good morning. I was looking to ask about the gasification assets in Asia. If you can give us any sense for how much better the earnings contribution is this quarter versus a year ago, and also just wondering how the sale process for those assets is going, if you could give us any sense of the timing of that process and what we might expect in terms of the magnitude of any proceeds. Thanks.

Sure. We do continue to collect against those gasification assets held for sale. So from a total company perspective, about a percent to a percent and a half is the accounting around the depreciation, so the stuffing of the depreciation as those assets are put into the asset held for sale category. And about a one to one and a half percent from a contribution on the past due collections for those gasification assets. Now, addressing your questions on the timing for the sale, we are working very closely with both international and local banks to be able to market those assets. We are having ongoing conversations with good strategic purchasers of those assets. And when we have an update on that timing, we will let you know.

And this concludes today's question and answer session. I will now turn the call back to Eduardo for any closing remarks.

Well, thank you for joining our call today. We look forward to discussing our results with you again next quarter. Have a good day. Thank you. Bye.

This concludes today's call. Thank you for your participation. You may now disconnect.