L'Air Liquide Ord

Good morning, ladies and gentlemen, and welcome to the Air Liquide third quarter 2024 revenue 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'll now hand over to the Air Liquide team. Please begin your meeting, and I will be standing by.

Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations. Thank you very much for attending the call today. François Jacob and Jérôme Pelleton will present the third quarter revenue. For the Q&A session, they will be joined by Émilie Moren-Renoir, Group Viti, overseeing air liquid operations in Europe, Africa, Middle East, and India, and by Adam Titus, Group Viti, CEO of Air Liquide North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on February 21st next year for our full year 2024 results. Let me now hand you over to François.

Thank you, Aude, and good morning everyone. It is my pleasure to be with you today to share the highlights of the third quarter of 2024. In a few words, once again, we demonstrated remarkable resilience delivering a strong performance fully on track in a challenging environment, while actively driving business development to build for the future. Let's start with the financial highlights of our performance on slide three. The numbers speak for themselves. First, the 3.3% comparable sales growth. This underscores the resilience of our business model in soft markets, notably We have seen sequential improvement in comparable sales growth, both with and without the effects of significant devaluation in Argentina. Jerome will come back to the detailed momentum between regions and business lines. Some are confirming their sequential improvement clearly, others are slowing down. The second figure highlights our 100 base point of OIR margin improvement, excluding energy pass-through. By the end of September, it remains ahead of target. This reflects our strong commitment to performance we deliver on our promises. The 100 base point expansion also marks an acceleration from previous periods, demonstrating our strong focus on execution in terms of efficiency, pricing, and portfolio management in spite of macroeconomic headwinds. To sustain this improvement of our profitability, you know that we have launched significant transformation initiatives of our organization and operations. Those initiatives will be more and more visible as they bring structural improvements in 2025, 2026 and beyond. The third figure is our 4.2 billion backlog, which exceeds again 4 billion. This is a solid indicator of future growth when the projects currently under construction will start up. In summary, Q3 reflects our unwavering commitment in three areas, residence, performance, and business development. Let's move now to slide four. At 1.4 billion, investment decisions are at a record level this quarter. These investments include various mid-size projects, and I'm excited to highlight some of the major long-term agreements signed this quarter. Let's start with the most recent one in the U.S., where we will supply oxygen to LG Chem for their electric vehicle battery plant in Tennessee. It is a $150 million investment in an air separation unit, a liquefier, storage equipment, and small pipeline, which will enable us to more than double our local liquid capacities for the industrial merchant market. We will also source renewable electricity to offer low carbon products to customers. This project highlights the group ability to leverage our traditional business model in supporting customers with the emerging energy transition markets. The second project is in China, where we announced the takeover of an air separation unit and the signing of a long-term contract with Wanhua Chemical Group. This is a 60 million euro investment that also includes a new liquid carbon production unit to serve the local industrial merchant markets on top of oxygen and nitrogen. This is also our first contract with Wanhua, the largest polyurethane supplier worldwide. And we look forward to establishing a mutual beneficial long-term relationship with this customer. Let's finish with Europe, with a renewed partnership to supply Orubis, a leading copper producer, with large volumes of oxygen and nitrogen. We will invest 100 million in an air separation unit in Bulgaria to replace older units, consuming 7% less electricity, and we will work with the customer to source part of the energy from renewable electricity. The investment also includes the modernization of four existing air separation units in Germany. These plans will also support the development of industrial merchant markets in both regions. Those three projects and on this quarter across key major economic regions illustrate the strength and adaptability of EDIKID's business model to the current environment. I will now turn over to Jérôme to present the details of the Q3 performance Jerome, please.

Thank you, Francois, and good morning, everyone. We will now review our activity numbers in more detail. So coming back to Q3 sales, I'm now on slide six. Sales have remained resilient on a comparable basis, including energy . There are no significant scope effect this quarter. Gas and services sales for Q3 achieved a plus 3.6% increase versus last year. In the smaller segment, engineering and construction are really stable, with order intake rising to 1 billion euro year-to-date, 80% of which attributed to group projects. Global markets and technologies are down minus 4.6% due to a scope effect following the divestiture of aerospace and defense business, while order intake reaches a solid 573 million euro year-to-date. So overall group sales are up 3.3% on a comparable basis for Q3 year-on-year, while public sales are down minus 0.7% as a consequence of the energy price during the quarter, which translates into minus 0.9% energy LI pass-through effect, which, as you know, has no impact on the operating income. Additionally, a negative forex effect of minus 3.1% was mainly due to the Argentina devaluation over the period, Argentina contributed to plus 2% to the group plus 3.3% comparable cells in Q3. Again, Argentina has no impact on public variation. There is no significant scope effect, as I said, over the period. The plus 3.3% comparable growth in Q3 showed a sequential improvement after plus 2.6% in H1. This is also the case when you exclude Argentina. Slide 7 now. of all gas and services business line deliver growth in Q3, led by healthcare and improved electronics. Geographically, both the Americas and Asia have been dynamic. This highlights again the value of our global development strategy and the resilience of our business model, capitalizing on the complementary nature and optimal balance between our geographies and business line. Let us now review the activity for each of our main geographies. My comments will be mainly related to Q3. They are now on page eight. After an already good Q2, sales in the Americas have been strong and have grown in all business lines to reach plus 8% on a comparable basis. That includes plus 5% from Argentina, mainly because the impact of hyperinflation is not upset by the devaluation when we exclude the currency impact. Large industries now, in the US, are benefiting from the major startup contributions driving the recovery. Base volume has been growing and chemicals in both air galleys and hydrogen, while we face some customer turnarounds, mainly in . In merchants, sales were driven by a continued solid pricing effect of 6.9% year-on-year, supported by active pricing management and campaign , which is 60% of the pricing back in the Americas. And in Argentina, 45% of the pricing impact to counter local hyperinflation. Gas volume at Ergas remained a resilient overall, excluding outflows. Growth in healthcare was sharp, supported by solid volume and high pricing in proximity care in the U.S., with again a strong pricing in Argentina and increased number of patients in Natal. Finally, electronic cells were strong, supported by growth in carrier gases and strong equipment and installation activity while materials remain low. Sales in Europe now are slightly down, with sustained growth in healthcare. In large industry in Europe, demand from customers still remain stable, while hydrogen volume for refining and chemical input. In addition, as mentioned in H1, comparable sales continue to be adversely affected by the sale of a co-gen unit in Germany in general. In merchants, as explained in the last two quarters, we saw a decrease in bulk pricing due to the energy indexation in our contract in the context of the decline in energy price. On the other hand, excluding this energy component, thanks to proactive action, pricing has stayed positive and strong, offsetting almost all the indexation impact, which is a remarkable performance. Volumes remain soft, but slightly improving compared to the previous quarter. Finally, healthcare growth was very solid at plus 3%. have been supported by strong home health care activity, notably in diabetes and sleep apnea, with an increased number of patients. Growth in medical gases remains solid, with both volume and sustained processing action in response to inflation. On page nine, activity in Asia returned to growth in Q3. In large industry, the activity increased in China, benefiting from a major hydrogen startup in March. On the positive side as well, volumes were less impacted by customers around, especially in China. Cells in Merchant were slightly negative, mainly impacted by helium in China. Activity excluding helium has been quite tough in China in bulk, but strong in packaged gases, benefiting notably from the contribution of Bolton Acquisition. The rest of Asia experienced better volume year-on-year with stable pricing. Cells in electronic are improving compared to a low base in Q3 last year, with growing cells in carrier gases supported by start-up contributions, and in advanced material with double-digit rules, while equipment and installation also posted ISETs. Only specialty materials remain stuffed. In Africa, Mediolis set up a 6.5% excluding the diverse share of 12 countries in Africa. In our industry, the activity was resilient across the region. Merchant growth excluding this diverse share were dynamic thanks to strong pricing at plus 6.7% and robust volumes in bulk and packaged gases. Healthcare has been strong as well. I will now comment on our Q3 activity by business line. I'm now on the page there. You see that in Merchant, we continue to see solid pricing, albeit up to 6.5% last year. Overall volumes remain soft. Pricing is still strong, especially in the Americas, while flat in Europe for the reasons I explained earlier. Markets such as food, technology, research, and chemicals in America, IC packaging and fabrication in Asia are posting volume growth. In large industry, activity is improving through trends varied by geography. Startups are positively contributing in China and the U.S. From a market standpoint, chemicals have improved in the U.S., refining in Europe, while steel has been soft oil. Again, activity was impacted by the sale of the co-gen unit in Europe in Q1, as well as turnaround, however, less than in Q2. I take the opportunity to highlight the planned large turnaround at Yambou in Saudi Arabia in Q4. Page 11. Electronics is growing with solid contribution from startup and ramp-up. Indeed, we have very solid contribution from startup and ramp-up during the quarter. In addition, advanced materials have improved. Equipment and installation have been at record level in the U.S. and Asia as well, while overall specialty materials are still low. Finally, in health care, we still pursue strong trends with growth in both MedGaD and home health care with high pricing and volume increase. Home health care was again very robust with lip apnea, oxygen therapy, and diabetes growing. In MedGaD activity, cell growth was solid with steady pricing addressing inflation in the Americas and Europe, and solidarity. On page 12 now, this plus 100 basis point of margin improvement year-to-date is supported, as said by Francois, by our plan structure around three pillars, and that continues to deliver. First, IM pricing remains solid despite the high comparable basis, as you can see. We have also significantly ramped up our efficiency year-to-date, reaching a record $353 million 10% versus last year, we are very well ahead of our annual target thanks to an acceleration of structural efficiencies, as mentioned by François earlier, while procurement and industrial efficiencies continue to deliver. I take the opportunity to bring you more visibility on Severance Cost Expedit for 2024, linked to the transformation plan, a new organization which should be close to 200 million for the year. Moving now to portfolio management, it has been further pursued and accelerated. We closed 14 Bolton acquisitions over the period and executed five of these each year, with a continued focus on strategic, profitable, and margin-accurative opportunities. As François highlighted, we remain deeply focused on margin improvement, working on all possible levels. As stated before on page 13, our pricing action continued to deliver to reach plus 4.1% over 2023, The decline in pricing for bulk activity in Europe was expected because it is linked again to the energy cost decrease due to the indexation. However, we experienced continued accretive margin contribution and spread between pricing and cost have stayed positive. The Americas are also strong in pricing, and in Asia, pricing would be slightly positive when we exclude Chilean. On page 14, the 12-month portfolio of opportunity below one year, as you see disclosed, is stable. at a high level of 4 billion euros. This portfolio, again, is very well balanced between energy transition, electronics, and also traditional business. Our industrial and financial decision for the quarter reached a record high level of 1.4 billion euros. And finally, our investment backlog remains also very strong at 4.2 billion euros, well balanced across geographies and business. As you can see, we achieved €185 million sales contribution for startup and ramp-up year-to-date, and we expect to reach a full-year startup contribution to sales between 230 and 250 million this year. Thank you very much for your attention. François, back to you.

Thank you very much, Jérôme. I am now on page 15, where we summarize the key takeaways from this third quarter. As you see in the third quarter, we continue to deliver according to our advanced strategic plan. The sequential sketchboard demonstrating our strong resilience, enhanced performance driven by the ongoing structural transformation of the group, which will lead to sustainable efficiencies, and a strong backlog consistently exceeding 4 billion, laying a solid foundation for the future. In that context, We confidently reaffirm our guidance for 2024 and the updated ambition for 2025. Thank you very much for your attention. Now we will open the floor for Q&A.

Thank you. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please then hear your name to be announced. To withdraw your question, please press star 11 again. We will now take our first question. Please stand by. And the first question comes from the line of Alexander Jones from Bank of America. Please go ahead. Your line is now open.

Good morning. Thanks very much for taking my questions. Two, if I may. The first on electronics. Other players in the sort of equipment value chain have talked about customers deferring orders and even plant startups. be interested in what you're seeing in your conversations with customers and whether that might affect growth in future courses, particularly in carrier gases. And then the second question on margins, you know, continued very impressive improvement this quarter. Can you talk about how, if anything, you've – the changes you've made in sort of incentive structures in the organization have contributed to that? Are you now incentivizing more employees on margins or adding margins to scorecards where previously they might have been focused on something else? Thanks very much.

Thank you very much, Alexander, for your two questions. Let's talk first about electronics. So as we were discussing, we have seen in Q3 clear signs of recovery globally in the electronics business. And if we look at this from different angles, clearly, I mean, we have seen growth in some key regions, mainly the U.S., Taiwan, China, Japan, Korea were quite strong. Looking at the products, the carrier gas was in the high single-digit growth, which basically reflects, I mean, our strong portfolio in the carrier gas and the new projects also coming online. And we have seen also clearly strong growth in the advanced material and the E&I business with double-digit growth for those two segments. Finally, if we look at the type of customers and what we have seen in the different sub-markets of the electronics, clearly we have seen the logic segments with a very strong growth, double-digit growth in most of the geographies. The memory market also was growing quite strongly. However, the analog business for our customer, which is the smaller share of our business for Semicon, So, a decrease in the quarter. So, what we can expect and what we hear from customers, and we have frequent contact with customers. I was in Asia last week. Clearly, we see a continuous recovery in the Q4 and looking forward, being fueled by the carrier gas business. Again, more than 40% of our portfolio, and also the development of advanced material. in that segment, reflecting basically the sequential recovery of this segment. Let's keep in mind, however, that for us in our business, we have a fairly high comparable for the Q4, with one-off sales last year in ENI and advanced material. But again, the underlying trend is growth looking forward. Finally, I'd like to mention the confirmed acceleration in the projects and for new fads and expansion. This is a global trend, and we have seen in the past few months and past few weeks continuous acceleration, new requests for quotations coming in different parts of the world. Again, that illustrates, I mean, the trend of the electronic segment. For the margin, clearly what we have set is an overall plan for margin improvement, and Jerome mentioned some of the key elements. You had a specific question about incentives and how we are driving this performance culture in the group. Yes, we have adjusted our way we incentivize our teams and especially the management, with margin being one of the key criteria. for the bonus and the long-term incentive. Thank you very much.

Next question, please. Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead. Your line is now open.

Yeah, hi. Thanks. You know, my first question was on this takeover. If I'm not mistaken, Vanua, I think from what I've seen, they typically use Linder as a supplier of industrial gases. So I'm just curious, this plant that you are taking over, is that something that was built and operated by Vanua themselves? But maybe the engineering part, is it from Eliquid or is it from Linder? And if it's from Linder, how do you manage the transition to to maybe a liquid equipment over time. I'm just curious, how does the value accretion economics work for such projects where maybe the original equipment might not be actually be supplied for by a liquid. And maybe if you can give any sort of indication of what is the revenue or earnings or potential of this project just to understand the value creation upside that you might have. from this business. And the second question I had was just looking at your large industries business, especially in the US or America, almost 11% growth organic, just seems quite strong. And you are calling out rebounding chemical volumes. It just feels like the chemical demand in general isn't that great. So I'm just curious if you can shed some light on on what might be happening in your U.S. on-site business, and just broadly speaking, what are the trends that you see in Q4 or just at the moment across some of your key divisions? Thank you.

Thank you very much, Shetan, and good morning. I will speak about the one-four takeover in China, and Adam will comment on the U.S. large industry momentum that we see. So the one-fly takeover is a great success. The unit that we are taking over has been engineered and supplied by Air Liquide Engineering. So that's Air Liquide Technology. Let's keep in mind that we have a strong engineering business, especially in China, where we do some third-party sales. And that's one example where we have developed the Intimacy with the customer and convince the customer to switch from the captive production to the overall offense model clearly we were able to demonstrate i mean the the know-how of a liquid in term of operation with this customer and also we have been able to leverage our position in the merchant business in china to add a merchant side of this business and as i mentioned before to add an Argonne column to be able to supply the local market. So that's a great success with a leading customer in its segment and clearly strengthening our position in China, both in large industry and in the local merchant market. Regarding, I mean, the contribution, Chetan, you know very well our business, so I will let you, I mean, make your own calculation. It's typical capital intensity. We said that we invested around 60 million euro, so you can do the math. Keep in mind that the nice thing with this kind of project is we have limited capex risk. because we are taking over a plant which is almost completed, meaning that the startup will come sooner, and contribution will be during the year of 2025, and also limit the risk in terms of construction risk. So that's for one more. Let's talk about the U.S. Adam, do you want to give some colors on what you see in the large industry in North America?

Absolutely, Francois. Thanks for the question, Shekhan. So in the U.S. and large industries, we've got a very strong presence for the chemical sector along the Gulf Coast in Texas and Louisiana in particular, but not only there. And I would say that what we've seen probably benefiting a bit from the low price of natural gas and the favorable conditions that we have on the Gulf Coast is a nice rebound in terms of overall activity for chemicals. I think a lot of this has to do with the customer mix that we have, and I think it also has to do a bit with the startup that we saw in Q1, reflecting a bit of the growth that we've seen. So overall, when we look at our volumes, particularly in the chemical sector, but not only in the chemical sector, we're pretty happy about where things are and kind of the overall growth that we've seen. So I would say that that's probably the overall picture that I can provide.

Thank you very much Shetan.

Next question please. We will now go to our next question. Please stand by. And the next question comes from the line of Peter Clarke from Bernstein. Please go ahead. Your line is now open.

Good morning everyone. I've got two questions. The first one is on the hard goods which you call out a marked decline in the third quarter. My understanding was it was already down big single digits, so I'm assuming it's clearly a lot worse than that, maybe high single digit, whatever. I'm just wondering, I presume that's mostly the market. I know you were doing some rationalization there, but that's just a reflection of what's going on in the market. And then the second question, there's been a lot of contrasting news flow, particularly in Europe, actually, on the green hydrogen development and the blue hydrogen development over the summer. So just your take. I know you're pretty positive on both, really, and But thanks for your take on what's going on on the green and blue hydrogen development in Europe. Thank you.

Thank you very much, Peter, and good morning. I will ask Adam to talk about what we see especially in the air gas market. Green hydrogen, giving a perspective, green and blue hydrogen, giving a perspective from Europe, but also from the U.S., from Emily and from Adam. Adam, do you want to start with the output in air gas days?

Sure, absolutely, François. So, Peter, thanks for the question. So, yes, certainly when we look at hard goods, keeping in mind that hard goods in the U.S. and for our air gas business represents just a little bit more than 25% of our sales on a year-to-date basis. And so when we look at that, we definitely see a volume decline, I would say, sort of mid-single digits in terms of comparable growth in hard goods in Q3. We think that there's some effect of this being driven by the uncertainty, by the higher interest rates really kind of having an impact on overall demand, I would say. I would say that when we look at this compared to our peers, because we definitely follow this in terms of how our peers in hard goods are doing, and I would say that the same trend is notable for all major players in the hard goods market in the U.S. We have a really good pricing campaign. Last impact that we had in the pricing campaign was in March of this year. And I would say overall, we're managing that well. We continue to manage the pricing point well to make sure that we watch the volumes well and then also take a look at the impact that we see from our main competitors to make sure that we're tracking that well. So a little bit of a decline there, like I said, mid-single digits. When we look at Q4 and kind of an outlook on hard goods, we see sort of the same situation continuing. However, our outlook for 2025 – we feel a little bit better about because of expected interest rate cuts. We think this, along with the election uncertainty being behind us, is going to create a bit of a tailwind effect, especially in certain areas like defense spending, energy transition, affecting electrical equipment and the like, and heavy machinery spending. So I would say overall we're watching it closely, and that's kind of a picture of hard goods, keeping in mind that our gas finds remain quite resilient.

Thank you very much, Adam. We'll come back to you for the green and blue hydrogen development in the U.S., but let's turn over to Emilie to speak about what we see in Europe. Emilie, please.

Thank you, Francois. Good morning, everyone. So in Europe, regarding green hydrogen, I would say overall we continue to see this momentum. Now if I give you a few examples, maybe. We have started this year Trailblazer in Germany, our first electrolyzer, set electrolyzer in Europe of 20 megawatts. This electrolyzer is serving both the industry and the mobility sector in Germany. And as you all know, we also have in construction right now the Normandy proton exchange membrane electrolyzer, 200 megawatts, that will be up and running in 2026. And this electrolyzer will both serve the industry, the oil and gas customers we have in the basin, as well as the mobility around the access end, light duty, heavy duty mobility. So, very active in terms of business development, as well, active project development, good pipeline in project. We're still waiting, like our customers do, for some clarifications around regulations, but overall, to conclude, still a very good momentum green hydrogen development in Europe.

And clearly what we continue to see in Europe is what we mentioned before, is that the refining biofuel market is the one which is driving this demand short-term. We see potential in the chemical industry, maybe in the steel industry, but that's more mid-term. But again, most of the opportunities today are driven by the refining and the transformation of the refining market in Europe, and that's quite active. Ben, Adam, what do you see in North America?

Yes. So if we take a look at the development in North America around hydrogen, I'll be just a little bit broader beyond green hydrogen. I would say that we're very active in this space for sure. So certainly in terms of looking at the infrastructure that we have along the Gulf Coast, the impact that can have on blue hydrogen for... for instance, is quite strong and the development continues to be very, very good. When we look at the upcoming election, I think this is going to create some certainty around investment decisions that will take place in the 2025-2026 timeframe, which I think will be great. When I think about 45B, for example, which I'm sure everybody's followed quite closely, we should have clarity around 45B At the end of the year is what we're anticipating based on our conversations with officials in Washington, D.C. When I think about the hydrogen hubs that we're part of, so we're certainly part of six of the seven hydrogen hubs that have been part of the DOE program in the U.S., and we're prudently watching those. Where projects are more aligned with blue hydrogen development, I would say those are moving forward quite well. On the green side, things are a bit delayed, and certainly that'll clear up with the clarification around 45B. But overall, we remain prudent in our approach until the uncertainty clears, but very bullish in terms of the developments overall. And I think we're well positioned with our customers and with potential customers in this space.

Thank you very much, Adam. Thank you, Peter. Next question, please.

We will now take our next question. And the next question comes from the line of Jeff Hare from UBS. Please go ahead. Your line is now open.

Yeah, good morning and thank you for the call. You're obviously tracking ahead of the targets, the updated targets that you gave in February this year of sort of roughly 80 basis points per year for 24 and 25. Should we expect that to continue into 2025 in terms of the run rate being higher than what you've what you guided through back in February.

Good morning, Jeff. I will ask Jerome to answer this question.

Thank you very much, Jeff. So thank you for the question. You saw that we disclosed our margin year to date this quarter. Basically, what we wanted to do, we wanted to show you that we are on track and committed. And this, again, despite the environment, so that's quite important, I would say, commitment. And this is showing, again, our commitment to deliver performance. That's very well done. So we have done plus 100 basis points here today, end of June. We are plus 100 basis points end of September. So for the year end, I would say, Josh, you can draw the line, okay? I can say this way. So now for our guidance, you recall very well that we write in February to achieve plus 320 basis points for the period I would say it's too early to date to update this trajectory. And I will stick to that. We will discuss that at some point later, but again, our position is too early to update this trajectory. And again, what is important, this again shows that we're on track and very committed.

It's a good question, but clearly we are focused on the current environment to deliver one milestone after the next one. you see that we are delivering, even over-delivering, and this is the mindset that we have, and we'll continue to do that.

Okay, thank you.

Next question, please. We will now take our next question. And the next question comes from the line of Sebastian Bray from Berenberg. Please go ahead. Your line is now open.

Hello, hello. Good morning, and thank you for taking my questions. I'd have two, please. The first is on the Normandy Electrolyzer project in Europe. When in 2026 is this expected to come online? I haven't been able to identify this from the press reporting around the project. I suspect it's right at the end of the year, but I'm not 100% sure. My second question is on CapEx and the composition of startups for 2025. Can you give an idea of the regions and markets across which the over 250 million of startups are guided for are taking place in 2025, wherever bigger ones? And I've also noticed that there's a range of about 1 billion euro of CapEx for next year, and it seems like some investments have been deferred a bit on the new energy side. Could we go as high as 4.5 billion euro in 2025 on CapEx? Thank you.

Good morning and thank you very much. I will ask Emilie to precise the information on the Normandy project, the electrolyzer. And Jerome will talk about the CAPEX and the startup mix. So Emilie.

Thank you Francois. So what I can confirm about this Normandy electrolyzer is that yes, the startup is planned for 2025 as scheduled. The execution is ongoing so far and on time.

All right. Jérôme? Yes. So maybe on the first question on the contribution startup amount. Basically, you know, we are confirming 230, 250 for this year and above 250 for next year. What does it represent? We do not communicate basically on the startup by region, You know the breakdown of our backlog. You see that it's very well balanced between geography and business lines. So I would say that it's aligned with this, and we are very confident to reach those numbers. So the first question. The second question is on the rapidity of the CAPEX. You know, especially in those days, you know, the engineering and procurement phase can take time, and it's not so intensive in CAPEX. cap takes longer that can create some some a little bit of lag between investment decision capex but clearly you know for next year we have not we have communicated but for the year we should be uh i think capex which is around 3.7 billion somehow for you know for the 2024 and we'll update at some point for next year but that's basically you know directly clearly an understanding of the fact that between investment And this is a question that we have often about the profile of the CAPEX.

Again, I would like to reinforce what Jerome has mentioned. For many of the energy transition projects, the projects themselves are bigger and more complex, so there is more upfront engineering, which in the current context, I think, is probably a good thing confirm and to have less viability on the capex. At the same time, I mean, the customer side also is taking more time than a traditional project because very often those are large projects, for example, when you convert biorefinery. We notice also more and more that on the electronics side, the projects are taking a little bit longer between the world of the contract and the startup. This is due again because of the size of the fabs which are being constructed. You see many of the announcements of our customers for startups now in 2028, sometime 2029. So we align our schedule to this also. This is part of the strategy to be early in terms of build to manage the engineering and to also manage the procurement. So I think this is normal and it's becoming more and more visible as the share of those mid to large size projects increase in our portfolio. But as mentioned by Jerome, we see the capex gradually increasing. It's not again because investment are deferred, because this is not the case. It's a natural cash curve of those projects. And we do expect next year to be at 4 billion or above the 4 billion capex for the overall investment. All right. Thank you. Next question, please. Thank you very much. Next question, please.

We will now take our next question. And the next question comes from the line of Jaydeep Pandya from On Field Research. Please go ahead. Your line is now open.

Thanks a lot. It's sort of a basic question, but, you know, we have seen some shutdowns of capacity in Europe in, you know, industries like chemicals and probably also refining. You know, having discussed this topic with a few chemical companies, one of their headaches is how do they get out of the take-or-pay contracts with, you know, likes of yourselves. So are you starting to have these discussions, especially in Europe? And sort of what is, let's say, situation with regards to these exit clauses, like, and what is your strategy? Are you wanting to take these plans on board or is there a hefty payment that'll come towards you if these are, you know, if there are shutdowns in this regard? That's my only question. Thank you.

Thank you very much for this question. Overall, we don't see an increase in this kind of discussion where customers are stopping their activity today in Europe. This is part of the normal portfolio, and from time to time, we are facing this kind of situation. So keep in mind that, especially in large industries, that's where we have the long-term commitment, we have a very strong contractual framework. And this is one of the trends of the model. This is one of the things that we really insist on. This is a basis of our model in the large industry where basically there are take-off pays and commitments from the customer and from ourselves to supply the customer until the end of the contract. Whenever, I mean, the site is shutting down, we work with the customer to find the best commercial solution Keep in mind also that we are a global company, so there are ways also to compensate on other locations, on other sites. Or if we don't find other ways to compensate outside of this perimeter, we find commercial settlements which can take different forms. But again, this is the exception, and at this date, we don't see an increase in Europe on such discussions.

If I may just squeeze one more follow-up, a bit of a technical question. What is the thumb rule increase in hydrogen demand if a refinery switches from a traditional refinery to a biorefinery?

What is the increase in hydrogen demand when a refinery is moving to a biorefinery? It depends a little bit on the specificity of the project, but overall, we see an increase in the demand. which may be related to two things. The process itself, which requires quite a bit of hydrogen in the hydrogenation steps. And again, the quantity of hydrogen depends on the specificities of the feedstock and also on the end product. But overall, I mean, there is a very significant hydrogen demand, and again, higher than in a classical refinery. But what we see also is that During this restructuring of the traditional refineries, sometime the refiners are shutting down existing internal sources of byproduct hydrogen, which basically change the balance of hydrogen on the site and requires more hydrogen. So all in all, in all those transformation, we see an increase in the hydrogen demand from the refinery. Thanks a lot. All right. Thank you very much. Let's move to the next one.

Thank you. The next question comes from the line of Thomas Rigglesworth from Morgan Stanley. Please go ahead. Your line is now open.

Francois Jerome, thanks very much for the opportunity to ask questions. First question, if I may, you're talking about proactive price actions in Europe to offset the energy-linked contract price declines in the merchant business. Could you just give a bit of color around when that campaign started and how long, you know, that camp, you know, these 5.4% you call out in 3Q will roll for before you need another campaign?

Okay. Thank you, Tom. Good morning. Emily, can you speak about the specificities about the pricing action in Europe, please?

Absolutely. Thank you, Francois. So overall, in Europe, we have a very dynamic and active pricing management with price increases almost fully offsetting the negative impact of energy price indecision in our bulk contract. So, basically, we went from negative price impact in Q1 due to our energy indecision in our bulk contract mechanically with energy deflation to now flat pricing thanks to very active pricing campaigns, notably in packaged gases, as well as price action on the non-energy-related indices of our bulk contracts. So, overall, this very active pricing on a continuous basis is able to almost offset the negative impact of energy deflation. We also continue our tax management of the spread between price and cost, and all this generating a positive contribution to margin input. So, as a conclusion, for Europe, prices are managed on a continuous basis, and we expect pricing to remain stable in Europe in Q4 with about the same dynamics and the same levels as what I just described.

All right. Thank you very much, Emilie. I think we are reaching the end of the list of the questions, so thank you very much. This does conclude our session. Thanks a lot for your attention and insightful questions, of course. To summarize, in the coming months, we will remain focused on execution, particularly on implementing the group structural transformation to achieve our advanced midterm objective and, of course, create value for our shareholders. I wish all of you a very good day. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.