L'Air Liquide Ord

Good morning, ladies and gentlemen, and welcome to the Air Liquide first half 2024 results conference call. All participants are currently in listen-only mode until we conduct a question-and-answer session, and instructions will be given at that time. I would now like to hand over to the Air Liquide team. Please begin your meeting, and I'll be standing by.

Good morning, everyone. This is Aude Rodriguez, Head of Invector Relations. Thank you very much for attending the call today. Francois Jacobs and Jérôme Pelson will present the first half 2024 performance. For the Q&A session, they will be joined by Pascal Binet, Executive VP overseeing the Europe industry and the Africa Middle East Hub, the Industrial Merchants Activity and Group Safety. Adam Peters, Group VP, CEO of Air Liquide North America, is on the phone with us from the U.S. In the agenda, our next announcement is on October 23rd for our third quarter reunion. Let me now hand you over to Francois.

Thank you very much, Aude, and good morning, everyone. It is my pleasure to be with you today to share the highlights of the first semester of 2024. In a few words, we demonstrated great resilience, delivered a strong performance, and we continue to build the future. The first half set of results demonstrate our capacity to be extremely resilient in soft markets while we are gaining momentum on three fronts. First, the improvement of our financial performance. Seventh, concrete major announcements confirming the strong investment potential looking forward. And there is clearly more to come. And third, we are gaining momentum in our commitment to perform. not only with stronger efficiencies this semester, with 13% versus last year, but also several structural efficiency initiatives. I will come back to each of these points in the following slides. Let's move to slide four. To start with, we demonstrated our ability to continue to grow in soft markets. A few comments here. First, the solid comparable sales growth 3% needs to be qualified this semester due to Argentina's devaluation. Nonetheless, even excluding this effect, the sales growth is positive in soft markets. So when I say soft markets, since, as you can see from most of the macro indicators, there is no clear signs of strong pickup in the volume, clearly What we see is slightly higher sales growth in Q2 around plus 1% globally versus Q1. This is in line with the sequential improvement we mentioned in the last calls. We are getting more and more of positive signals regarding low levels of inventory, advanced orders, but it is probably still too early to confirm the real pickup in demand. All in all, once again, very resilient top line, improving sequentially. Regarding the profitability, we achieved a strong OIR margin improvement, plus 100 base point and even plus 110 base point for gas and services excluding energy pass-through. This is an acceleration compared to our updated trajectory for 2024-2025. The fact that we are over delivering shows our strong focus on execution in terms of efficiency, pricing, and portfolio management, regardless of the macroeconomics condition. Also, the recurring return on capital employed, ROCE, continues to improve at 10.7%, and despite adding higher investments under construction, not contributing yet to the results. As a reminder, ROCE remains the main financial KPI of our industry. Again, this strong performance was achieved despite an adverse environment, once again, demonstrating the resilience of our business model and the unwavering commitment of our teams, whom I would like to thank here very much. At the same time, we continue to build the future, as illustrated by the investment backlog exceeding €4 billion. Let's keep in mind, as Jérôme will explain, that this backlog is conservative, as we are, for example, only accounting for €120 million out of the US$850 million of the BAYTON ExxonMobil project. I also want to highlight that we are fully in line with our CO2 trajectory, and more than 40% of our portfolio of project opportunities is directly linked to the energy transition. On slide five, Our recent announcement on major projects have confirmed the investment potential. Starting with the ExxonMobil. As a reminder, this flagship project is a great illustration of how hydrogen can enable decarbonization of the industry. The vast size of the hydrogen production by ExxonMobil required Air Liquide to develop the largest oxygen production platform in the Americas. with the added benefit of being low carbon oxygen, two-thirds less CO2 footprint than current production. This project of 850 million marks the largest industrial capex in the history of Air Liquide. Also, with our air gas footprint, we will leverage the number one position of our industrial merchant distribution network and marketing capabilities to sell significant volumes of argon and rare gases. Despite its size, let's be clear, we view this as a standard core business project with a long-term LI contract, monthly fee, and tech or PEC losses, and meeting our return on investment criteria. Eliteed will also get access to significant volume of low-carbon hydrogen, which will unlock opportunities to service customers through our extensive pipeline and storage facilities. Being selected for this project by a Tier 1 partner is a tremendous success and a key milestone for the group. Electronics is another key growth driver for the group, as illustrated by the Micron project supported by the US CHIPS Act. It's a major signing with a long-term partner leading artificial intelligence solutions. We will supply an ultra-pure carrier gaseous solution through a long-term contract, and we will invest more than $250 million. This is a very large-scale plan for electronic business. Innovation was a key element of differentiation, including a higher energy efficiency. Once again, we have also been able to develop synergies with industrial merchants through our air gas platforms. And a key focus was also to develop a sustainable solution with an optimized land footprint and 100% use of renewable electricity within the next five years. This is a major win for megaproject plant to develop electronic business in the US where we see continuous growth momentum. Project development is also progressing well in Europe. In France, we are developing solutions to decarbonize hard-to-abate industries such as cement and lime production in the Dunkirk Basin. The D'Artagnan project, I hope you like the name, has taken a major step forward, receiving a grant for more than 160 million euros from the European Union. This marks an essential milestone towards the implementation of the capture and sequestration business supported by the infrastructure needed to reduce CO2 emissions in France and in Europe. This being said, let's keep in mind that the vast majority of our investment decisions this semester were directed towards more traditional projects, allowing us to maintain a solid and balanced portfolio of growth. The Ourobis announcement that you have seen yesterday is an illustration of those. These three projects, exemplify air-liquids leadership in energy transition and electronics. These new investments will drive accelerated growth beyond 2025, the next strategic period following our current advanced plan. Moving to slide six, I would like to come back to the recently announced simplified organization of the group as an illustration of our sustained commitment to performance. This new organization by removing existing management layers, aims at fostering agility, improving efficiency, accelerating decision-making, and leveraging the company scale to deliver competitive advantage. In addition, a single world group industrial direction will be created, replacing the matrix industrial organization by business lines. The objective is to leverage our know-how and optimize the group industrial processes, ensuring higher standards of safety, quality, reliability, and efficiency for our customers. Regarding global and corporate functions, such as IT and procurement, we are structuring the services to the operation by leveraging our scale and expertise, and also by being more prescriptive, engaging directly with operations through more efficient integration. This simplified organization should enable us to better serve our customers and patients while boosting further the level of engagement of our teams to deliver enhanced value. The streamlining of our organization is one, of course, among several other initiatives to boost efficiency. On slide seven, I would like to outline that the strong financial performance also reflect significant progress in our sustainable roadmap. We are making progress in the modernization and electrification of our assets, in the deployment of carbon capture solutions, like, for example, to decarbonize the air liquid's largest hydrogen production unit in Europe, and we signed new long-term sourcing contract for renewable electricity. In addition to reducing air liquid emissions, Our projects will enable the decrease of CO2 emissions of our customers with two recent examples mentioned here. And as noted on the slide, Air Liquide also successfully issued a 500 million euro green bond in very favorable conditions to finance energy transition efforts. All in all, impressive progress towards furthering our commitment to sustainability. The slide eight outlines the key takeaways of this first semester. By actively deploying the advanced strategic plan, we have been able to deliver resilient comparable sales growth, a significant 100 base point OIR margin improvement, the signing of major projects in energy transition and electronics, two of our main growth drivers, and the launch of structural efficiency projects. To conclude, I am on slide 9. While we are gaining momentum this semester, we are demonstrating that we can deliver margin improvement at a faster pace than our initial 2024-2025 upgraded trajectory. With this, we have confidence in our ability to deliver on our commitments in terms of performance for 2024 as well as on our previously announced advanced objectives of doubling the initial margin improvement ambition by 2025. Thank you very much for your attention. I will now ask Jérôme to present the details of our financial performance in H1.