L'Air Liquide Ord

Good morning, ladies and gentlemen, and welcome to the Air Liquide Q1 2025 Revenue Conference call. All participants are currently in a 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 the call 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 Mission. Thank you very much for attending the call today. François Jacob and Jérôme Pelton will present the first quarter revenue. For the Q&A session, they will be joined by Émilie Morin-Renoir, Group VP, overseeing air-liquid operations in Europe, Africa, Middle East, and India, and by Adam Peters, Group VP, 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 July 29th for our half-year 2025 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 first quarter of 2025. This quarter's performance, once again, shows a strong resilience of air liquid in these turbulent times. We stay, of course, focusing on improving what is under our control while quickly and effectively adapting to the external context. We remain committed to delivering our further elevated margin ambition in spite of the environment. We also continue to progress very successfully on project development, building for future growth.

Let's move now to slide three. The numbers speak for themselves.

Sales grew plus 2% on a comparable basis, demonstrating solid resilience. IM pricing remained accretive and increased an additional 2.5% in Q1. This follows a plus 30% increase over the last four years and is as strong as what we achieved in Q4 last year, excluding Argentina. Jerome will come back to this very good performance in just a few minutes. The momentum on efficiencies is very positive, with plus 17% growth over Q1 last year. Recall, the comparison is against an already very strong Q1 2024. This €131 million of cost savings is our record in Q1. It means plus 40% versus what we were able to deliver in Q1 two years ago. It marks a strong start of the year and demonstrates our focus on executing the group's major transformation plan I presented to you at the full year results in February. Cash flow remains strong and grew plus 5%. Finally, investment backlog reached a record high level at 4.5 billion euros. This is a solid indicator of future growth, which will flow through when the projects under construction start up. By the way, Jerome will also confirm later the increased startup contribution this year compared to last year. So again, a very solid first quarter, showing clear signs that we stay on track to deliver our commitments in terms of performance and future growth. Slide four is a summary of what we are committed to delivering in these turbulent times. resilience. It is worth coming back to the strong intrinsic resilience of our business model. It has proven its stability throughout various crises over the past 30 years. And with our actions in the last three years, in terms of pricing and portfolio management, we have made it even stronger. We have, of course, a resilient, diverse business footprint. We are present now in 60 countries serving all industrial sectors. In addition, the take-or-pay clauses in our large industry and electronic long-term contracts provide resilience and visibility. In IAM, the resilience mainly comes from the rental fees and the diversity of sectors of our 2 million customers, but also our ability to better manage inflation path through and pricing. And finally, our healthcare activity, which represents around 15% of our sales, is uncorrelated to industrial trends. Looking now at the current context, our business model protects us from the direct impact of trade tensions. Our assessment is that we expect limited direct impact of tariffs. Indeed, the vast majority of our business is local. We produce locally, and we sell locally to our customers.

Air Liquide is fundamentally local for local.

After the resilience, second the margin improvement. I confirm we will deliver the cumulative 200 base point of margin improvement by 2026, in spite of the current environment. This will be achieved thanks to our strong performance on delivery of efficiencies and transformation initiatives

as I have described already.

And third, preparing for the future.

Our record high backlog of 4.5 billion euros is robust. It consists of approximately 80 projects signed with customers for at least 15 years. These projects are currently under construction and will fuel predictable growth for the next decade. This provides us with a high visibility which is another strength of our business model. Moving now to slide five, illustrating the continued development of our investment projects in all regions, starting with America. Despite the current environment in Q1, our backlog has increased. This is due, for example, to the ExxonMobil project in Beitan, as our contractually covered engineering and procurement activities for the project are ramping up. We now have $275 million of CAPEX registered in our backlog, out of a total amount of $850 million. Additionally, we entered into several new long-term contracts and a large renewal with pipeline expansion in the U.S. Gold Coast. We also signed a new carrier gases contract in our electronics division. In Europe, let me highlight again our undisputed leadership position in low carbon hydrogen production. We have contracted seven production facilities so far, and four of them are already in operation or under construction. Project development is also progressing with an additional 2 billion of potential capex for projects which have been awarded European Union or national funding since July 2023, when we first communicated this amount. Finally, in Asia, the development of electronic projects in particular is very strong. In Q1 2025 alone, we have signed two carrier cases contracts and have started up two new units. So, as you can see, despite the current environment, our projects are progressing step-by-step, persistently, in all regions, preparing for future growth.

Turning now to slide six.

In spite of the current uncertain environment, thanks to the strong resilience of Air Liquide's business model and the proactive actions we have deployed these past months, we confirm our guidance. We stay the course and remain strongly committed to delivering our elevated margin ambition. Thank you for your attention. I will now ask Jérôme to present the details of our financial performance in Q1. Jérôme, please. Thank you, François, and good morning, everyone. So, I will now review our numbers in more detail. So, coming back to Q1, I am now on page 8. Ruxelles has been resilient overall in a very uncertain environment. the growth of plus 1.7% on a comparable basis, excluding energy plus 1.4x. There is no significant external scope effect in Q1 of 2025. Publishments are up at plus 5.7%, boosted by a positive energy effect of 3.3%, and a positive 4x effect of 0.7%. Please also note that the contribution from Argentina has significantly decreased in Q1, at only plus 0.4%, versus 1.2% in Q4 2024.

In other words, underlying comparable growth, excluding Argentina, was significantly stronger at 3% in Q1 2025 versus 0.6% in Q4 2024. Garden services sales achieved a plus 8% increase year-on-year, sales in March better than expected.

As I said during our last five full-year call, we have also regrouped the engineering and construction and most of the GM&T activities into a new engineering and technology business unit. From now on, our financial reporting will follow this new organization. Based on such scope, consolidated sales for engineering and technology have decreased by minus 2.9% on a comparable basis. Ordering time has increased significantly, up 34% versus last year to 665 million euros. I am now on page 9. Our growth in Q1 for gas and services has been mainly driven by the Americas and Asia, while EMEA was flat. On a business-line standpoint, we can see that healthcare and electronics grow growth in Q1. This again highlights the value for diversified development strategies capitalizing on the complementarity and right balance among our different business lines and geographies, which triggers resilience, especially in the uncertain environment, as François mentioned in his introduction. Let us now review more specifically the activity for each of our main geographies in Q1 2025. I am now on page 10. Sales in the Americas have been solid and have grown in all business lines to reach plus 3% on a comparable basis. Large industries were solid, benefited from a major ramp-up contribution in Q125 and from growing base volumes in air gases for chemicals. ICO was strong overall, supported by favorable comparison basis versus to some turnarounds last year, and blockchain activity was solid. In merchants, sales were driven by a continued solid pricing effect at plus 3% year on year. supported by active pricing management at Ergas, 70% of the pricing impact in the Americas, and in Argentina to counter inflation. Gas volumes at Ergas remain resilient overall, with a growth similar to Q4, excluding ARBUs, which were low. Growth in healthcare was very strong, supported firstly by strong pricing and resilient volume in MedGas and proximity care in the U.S. And secondly, also by strong pricing and increased number of patients in home healthcare in that time. Finally, electronic cells were robust, supported by strong growth in advanced material and steady carrier gases started while specialty materials remained low. Cells in EME SRA were flat with continued solid growth in healthcare. In large industry, demanding air gases from customer remained soft, especially in metals and chemicals, Cogen activity was low. On the positive side, hydrogen volume for refining were resilient. In Merchant, cells were positive at plus 2.4%, while underlying cells, excluding the impact of the growth from the activities transferred from GMNT this quarter, were flat. After last quarter of negative impact, pricing effect has turned positive to reach plus 3%, sustained by positive indexation in bulk and continued high pricing in package gains. Comparable sales have been impacted by the divestiture of our affiliates in 12 Western African countries last year. Finally, health care growth was very solid at plus 3%. Sales have been supported by robust home health care activity, notably in diabetes and sleep apnea, with a number of patients increasing. Growth in medical gases remains solid, helped with sustained volumes and pricing. Activity in Asia enjoyed a solid growth in Q1, with all business lines contributing. In large industries, sales growth benefited from a major ramp-up in China, softened by some turnaround this quarter. Sales in merchants were back to positive this quarter, supported by China, where sales were strong at plus 5% supported by Bolton acquisition and despite negative helium effects. Activity in the rest of Asia was more mixed. Electronic sales strongly improved thanks to double-digit growth in carrier gases supported by two startup contributions in China in Q1 2025. Specialty materials turned positive this quarter, while equipment and installation were low. I will now comment on Q1 activity by business line. I'm on now page 11. In merchant, we continue to see sustained pricing with plus 2.5% in Q1 driving groups. Overall volume in gas remain flat, excluding helium, while our goods are down in the US. Pharma, utilities, and IC packaging are posting volume groups. In large industry, now ramp-up contribution offset lower demand. Two major ramp-ups have positively contributed in China and in the U.S. in Q1. From a market standpoint, chemicals have improved in the U.S. while steel and chemicals were low in Europe and refining more resilient. Page 12, electronics have shown growth. Sales benefited from a very solid contribution for carrier gas startup and ramp-up during the quarter. In addition, advanced materials have been strong in the U.S. and specialty materials slightly up in Asia. Finally, in healthcare, we still pursue strong trends with growth well-balanced between medical gases and home healthcare. Home healthcare was, again, very robust, supported by sleep apnea, oxygen therapy, and diabetes. In med-gas activity, sales growth was solid, with sustained pricing, addressing inflation in the Americas and in Europe, with a resilient volume overall.

On page 13, our margin improvement objective is supported by our structural execution plan based on three pillars.

First, IAM pricing. It is still solid, despite a high comparable basis as you see in the graph. To be noted, pricing excluding Argentina is at the same level as in Q4-24 at plus 2.2%. As François mentioned, we have also executed very good quarters in efficiencies At 131 million euros, up plus 17% versus last year, this takes into account efficiency deliver thanks to the deployment of our structural transformation initiatives. Portfolio management has been further pursued. We closed three acquisitions in Q1 2025 and executed wine divestiture with a continued focus on strategy, profitable, and margin-secretive opportunities. On page 14 now, the 12-month portfolio of opportunities remains at a record level at 4.1 billion euros. Our total industrial and financial decision for the quarter also reached a record high level of 1 billion euros. And finally, our investment backlog reaches a record level of 4.5 billion euros, well balanced across geographies. It will increase significantly when it includes a full amount for ExxonMobil and Elijah Thorpe projects. And to re-emphasize again, this backlog is only made of gross projects. Projects, to be noted, projects in electronics represent one-third of the total backlog. We achieved 78 million of sales contributions from startups and ramp-ups during the quarter. And for 2025, we are still very confident that the contributions from startups and ramp-ups of projects would increase significantly to deliver more than 310 million euros. Slide 15, as mentioned earlier by François, in spite of the current uncertain environment, thanks to the strong resilience of our business model and to self-help actions, we confirm our guidance. Thank you very much for your attention.

I now hand over to François for the conclusion. Thank you very much, Jérôme.

So as you have seen, we are staying the course, showing resilience and agility in these turbulent times.

Let's stop here and open the floor for Q&A.

As a reminder to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you. We are now going to proceed with our first question. The first questions come from the line of Tom Rickleworth from Morgan Stanley. Please ask your question. Your line is opened.

Francois Jerome, thank you very much for the presentation and the opportunity to ask questions. Two, if I may. The first one is, Obviously, you've delivered resilient results, but you operate in a large number of end markets, and we're all very keen to understand maybe where the fallout's going to land or what you might be seeing in your order books in terms of changing patterns to give us an insight in terms of how the economic outlook is. So any insight you could provide there would be very helpful. The second question, please. The transferred businesses look to have delivered around 0.4% of comparable growth in the quarter. From what I can read, it looks like it's half rare gases and half biogas. Could you unpack, I mean, the growth rate looks to be very strong in these businesses. How much of that is like lumpiness or one time, and what should we expect going forwards, especially around biogas? Is that a more sustainable level of growth that we can expect to see? Thank you.

Good morning, Tom, and thank you very much for your question. Maybe to best answer the first question on what we see, we can do a quick tour, I would say, in the Americas and in Europe, and maybe give you some feel on that, and I may compliment to some of the comments. Let's start with Adam. Do you want to give us a feel of what we see in the Americas?

Yes, absolutely, Francois. Thank you for the question, Tom. So maybe reflecting first on Q1 performance and kind of talking about what we see in the market. I would say we're coming off of a good quarter, and all activities are up across each of the business lines that we have. Crystal ball is a little bit difficult because of, obviously, the uncertainty around tariffs and the like. But when we look to Q2 in the Americas, and I would say in particular in the U.S., we see largely activity levels that are aligned with Q1. So in LI, we see basically flattish expectations for volumes sequentially with limited startup impact, but also a positive delta turnaround impact. In IM, as was mentioned by Francois, we see resilient gas volumes, although we see challenges, I would say, in terms of hard good volumes, largely related to the tariff uncertainty and impacts that we see there and the impacts that that drives in terms of volume expectations from our customers. So I would say that what we have is a, just kind of building off the comments previously, a resilient business model, one that in the context we perform very well in terms of keeping ahead of the cost curve for pricing and and making sure that whatever happens in the market on pricing, we can handle that well. I would say the other point that I would mention is probably around project activity. And we don't see a project activity slowdown. Matter of fact, our development continues on a very strong pace. So we had a good first quarter of this year, building off the momentum from last year. We had some nice signings in the U.S. in particular. And we see that development activity continuing. I think this is where the diversity of the markets that we serve benefits us greatly because we see some traditional industrial gas activities ramping up in terms of prospects for the future and investments. And then in areas like electronics, we see that continuing at an extremely fast pace. So what I would say is the development activities have not really slowed down at all. And what we see is the conversations with customers remain very active and very strong and feeling good about where this is all going to lead. Last point I would make is, I kind of mentioned this during the last call, is that we still, in this uncertain time, don't expect a lot of investment decisions from our clients until some of this happens. Noise kind of settles out, and we see where things go. But that's not slowing the development down, and I think it's lending itself to continued strong prospects for the future. Maybe I'll stop there.

Thank you very much, Adam. Émilie, do you want to speak a little bit about Europe, please?

Sure. Thank you, François. Good morning, Tom, and good morning, everyone. So in Europe, the activity remained steady, I would say. Volumes continued to be soft in Q1, so no major changes, I would say, compared to Q4, 2024. And we anticipate the activity will remain soft overall. So now if we look at more details, In large industry, our revenues were down, impacted by low demand, especially in chemicals and in steel, still struggling. On the positive front, we had a bit of an uptick on hydrogen for refining, so quite resilient here. If I look at merchant business now, volumes remain soft, but overall stable after several quarters of decline, and pricing was strong this quarter, plus 3% in Q1 2025. And health care now, which also represents a significant part of the EMEA, remains solid, driven by growth in home health care and also a balanced contribution from volumes and prices, along with inflation in the medical gases part. So overall, what we do is continuously adapting our structure and cost to the level of activity, obviously, continue our action on pricing, and also continue to develop projects to prepare for the future. And on that front, we still see a good momentum in energy transition in particular, good project development, momentum in hydrogen, in carbon capture projects. So that remains, I would say, solid. So overall, if I summarize, in the short term, we expect activity to remain soft in EMEA. So we work on all the levels. and we're committed to deliver our profitability objectives despite the environment.

Thank you very much, Emilie. Maybe I don't want to make the answer too long, but I think, Tom, your question is covering many of the topics of interest for everybody for sure. So maybe I'll just add a few comments and we may have a chance to come back to some of those. Speaking about Asia, I'd like to focus a little bit on China because we have seen in Q1 a very strong activity in China. at least for us, where we were able to grow above GDP, actually. And we are, I would say, reasonably optimistic about what we can see looking forward. But just maybe an overall comment. It's absolutely clear that in the current context, we should be cautious in making any forecast. There's a lot of uncertainties. I think we all see that. Q1, as was mentioned by Jerome, you have seen was quite resilient. And if we just look at the underlying growth in Q1, we were, if we remove the Argentina effect at 0.6 for the group at Q4 percent, and we are more than doubled, 1.3 percent basically in Q1. So we see that it's not only resilient, but we are able to capture some growth. And looking forward, as mentioned by Adam and by Emilie, we do expect similar trends overall. But I would like just to make that last statement and to say that in any case, regardless of the environment, we stay absolutely committed to margin improvement and we will invest whenever and wherever we see opportunities. Maybe we'll take the second question, which is more specific. Jérôme? Yes, thank you very much, Tom. Yes, you already felt some of the activity that was transferred in biogas during the quarter. Just to remind you, at the scale of the group, it's a very insignificant effect. We have the reconciliation in the management report. But just to come back on the biogas and maritime effect, I would say, you know, in this kind of cells, there may sometimes be seasonality, and those will not necessarily be recurring.

But as I said, it's quite minor.

Okay. Thank you very much. Okay. Thank you very much. Thank you, Tom.

Much appreciated.

We are now going to proceed with our next question. And the questions come from the line of Tony Jones from Red Barn Atlantic. Please ask your question.

Good morning, Francois and Jerome. Thanks for letting me ask a couple of questions. Firstly, on pricing, how do you see the dynamic, particularly in merchants versus costs over the next few quarters? It looks like energy costs might be flat down, but there is underlying OPEX inflation. So I'm keen on your view on whether pricing will still hold up at this sort of 2% to 3% level. And then secondly, I think this is maybe for you, Jerome, on the project backlog, from some of the comments you made about the Exxon project dropping out, is there a chance we could see the project backlog start to shrink because we've not had as many announcements in the past few quarters? So is that correct, or are there some big projects imminent, potentially in electronics? Thank you.

Thank you very much, Tony. Maybe to be as precise as possible, we'll go in the Americas and in Europe regarding pricing in merchant especially. And Adam, do you want to start for the US, please?

Yes, absolutely. So price management is something that I think we have a very strong history of doing and one that we have a very good track record and performance in. So we've got very good tools, very good systems on how to do this to make sure that we stay ahead of the cost curve. And I see that as a real strength that we have in the group and certainly in the Americas as well. So I would say in terms of continued diligence on that, I would expect that to remain. When we look at pricing around gases, this is very, very clear. In a high inflationary market, we've done this in the past and we'll continue to do that going forward. When we look at tariff impacts and we look at what that can mean for pricing, I see it in the same way. I see it as the way to manage pricing effectively ahead of the cost curve and staying in line with that. So I see that really continuing in the same way. And I would say that overall, we would expect pricing to remain in line with what we've done in the past quarter and even in the past year.

Thank you very much, Adam. Amy, did you want to comment? Because, indeed, I mean, the situation is evolving, especially on the front of energy pricing in Europe.

Absolutely. Thank you, François. So, overall, we continue to have a very dynamic and active pricing management in Europe, like in the rest of the group. You've seen the pricing up this quarter, plus 3%. supported by energy price increases and other pricing actions really across the merchant business line and the EMEA geography. So if we look a bit more into the details, so first of all, pricing gradually improved over the last year, turned positive in the last quarter, fourth quarter of 2024, and is now strong at 3% in Q1. First, the bulk, so in bulk, There's the energy portion of the price that is indexed on energy, and due to recent energy price increase, this portion of the price has naturally increased. The rest of the price impact was due to other pricing action on the rest of the price elements, so the non-energy-related indexes, where we also had strong pricing action. And finally, on the packaged gases side, we continue to have very active pricing campaigns in packaged gases across the board. So, if energy prices go up, of course, the portion in the bulk price related to energy increases. If it goes down, it decreases. But we manage this, and overall, what we look at is the path through. So, overall, all this contributes, even if energy goes down, to a positive contribution to margin improvement. So very good dynamics in 2024 to summarize. Prices are managed on a continuous basis and we expect pricing and more importantly, contribution to margin to continue over the year.

Thank you, Emilie. I think Tony, one of the key things to keep in mind is that I do believe that today air liquid is much more reactive in terms of managing the environment and the pricing. We know that in the current world, things are changing and could change very, very fast. But I would like to praise the actions of the team, which are extremely proactive in anticipating being either the tariff, the energy pricing, the inflation, and so on, which make us quite confident in our ability to not only pass through, but to continue to improve the margin. Project backlog, Jerome. Yeah, thank you very much, Tony, for your question. You're right, the backlog is It's a record high, and we're very happy with that, 4.5 billion. I just want to be very clear, it's not only because of Exxon. We are having some projects, especially in electronics, that we have signed into one in Asia and in the U.S. that are also contributing to increase this backlog. And again, just to remind everyone, This backlog is a gross backlog. It's only made of gross projects, first. Second, as you've seen as well, the portfolio of opportunities is also very strong at 4 billion. So you see there is more to come. And in the momentum that we see in the pipeline of 12 months, we see also solid prospects. So again, we're very confident on the fact that those will materialize. And overall, we can say the backlog will stay strong along the year. Thank you very much, Jérôme. Thank you, Tony.

Next question, please.

We are now going to proceed with our next question. And the questions come from the line of Jean-Luc Romain from CIC Market Solutions. Please ask your question.

Good morning. Another question on the backlog. You mentioned electronic is approximately one-third of your investment backlog. What's the proportion of energy transition-related projects, and is it the same proportion in the opportunities set?

Okay. Thank you. Good morning, Jean-Luc. Thank you for your question. Jerome, do you want to answer the question of Jean-Luc, please? Yes. So, basically, in terms of backlog, you're right. Electronics represent 34% of the backlog. So, it's a thing. In terms of energy transition, communicate on the opportunities. So, we can say that today, you know, we have around 40% of energy transition project in the portfolio. And you've seen in the specifications and areas,

like you often know, will continue to have a very good prospect. So that's basically what we have so far.

Thank you very much. Thank you. Thank you, Jean-Luc.

Next question, please. We are now going to proceed with our next question. And the questions come from the line of Peter Clark from Bernstein. Please ask a question.

Yes, good morning, everyone. Two questions, hopefully quite simple. Just drilling down a bit more into the comments around hard goods. I mean, I think last year we were trailing down mid-single digit, and you were hoping, of course, that things would improve going into 25. Obviously, you're probably changing your view on that, but I'm right in thinking you're still probably down mid-single digit, and you're not expecting too much going forward, given the uncertainty. And then on the ExxonMobil, thanks for the comments already, but you... We're waiting on two things with Q4, obviously the 45B clarification and then I think the CFD in Japan regarding the clean ammonia story. And obviously since that time, we've had a lot of more uncertainty built up with Dodge and departments disappearing and stuff like that. It's nice to see you've got a third book. So I assume you're still confident on booking more over the summer of the ExxonMobil contract. But just your thoughts on that or what the current feeling is because there's so much uncertainty around the whole story now.

Good morning, Peter. Thank you very much for your two questions that I will ask Adam to answer. First on the hard goods, and then we move to the Exxon and the project development. Adam, comments on hard goods, please?

Yes, absolutely. Thanks, Peter. So if we look at hard goods, the hard goods volumes are down, I would say, and overall we see this kind of uncertain period. I think a few things to remind. Hard goods is... is really not a strategic segment per se for us. It's really an enabler to sell more gas. And so it's something that we value very much because our customers value it and they see it as a really important piece of what we do. When we look at the hard goods volumes, and I would say this is more related to some of the uncertainty we see, the high interest rates and the like overall, which are driving this kind of uncertainty in the economy. This is delaying capital equipment purchases by our customers. And this is why we see this kind of uncertainty, I would say, on the hard good side. We see the same trends from our competitors. So when our competitors publish information, we see the same thing from them in terms of the uncertainty in this market. This uncertainty, I would say, is sort of an indirect impact from tariffs and overall market uncertainty. And this is where we have this kind of uncertainty Lack of clarity, I would say, or kind of a fuzzier crystal ball in terms of what volumes will do. When we look at our ability to manage pricing in that, as mentioned previously, we have a very strong ability to do that. And we would say overall, our direct impact is very, very limited from a tariff standpoint. What are we doing to manage that? So when we look at it, we're trying to offer our customers different options in terms of hard goods from other countries. We manage some with hard goods from the U.S. directly, which I think helps our position with local production and local selling. And so we've got options that we can provide our customers to kind of manage through that and help them in what they need to do to make equipment purchases overall. So we expect sort of a continuation in terms of uncertainty around hard goods. um from a volume standpoint but overall from a pricing standpoint we see this as something that's uh manageable and uh well within our um uh well within our control to handle thank you very much you want to comment on the exxon project and what we see looking forward regarding the environment and the regulation and some of the key drivers yes absolutely so uh You're absolutely right. The two drivers around 45B and around the CFD in Japan were two important aspects of what we see in this project. What I would say from a positive standpoint is a continuation and no slowdown in terms of the activity that we have in terms of engineering and procurement on the project. A good level of confidence in that backed by a contractually covered position in terms of our engineering and procurement activity on the project. In terms of where we see the regulations landing and how that's going to play out, 45Q has been in place and already implemented in the U.S. for some time. 45V, the regulations were clear in January. And now what we're sort of waiting on is this reconciliation package in the U.S., and how all that unfolds in terms of the various regulations that are underpinned in the U.S. So I would say that the activity continues. The project work continues for us. We still wait for clarity around what's going to happen in terms of the reconciliation package in the U.S. And then I think that we would expect a decision more in the second half of this year um but obviously that uncertainty is uh is driven by the timing specifically around the cfd and uh the reconciliation package in the us thank you thank you very much thank you very much uh peter um

Can we move to the next question, please?

We are now going to proceed with our next question. And the questions come from the line of Laurent Farz from BNP Paribas. Please ask your question.

Yes, good morning. Two questions, please. The first one on efficiencies at 131 million. I mean, usually Q1 is the smallest quarter of the year for efficiency gains year-on-year. Is there any reason why the cadence this year would be different, or are we okay to assume that there would be a ramp-up during the year? That's the first one. And the second one on LI euthanization rates. In particular, in chemicals, we're hearing a lot about a slowdown or the collapse of demand in March. And I was wondering, have you started to approach take-or-pay levels in the different regions? Any data on euthanization rates would be helpful. Thank you.

Thank you very much, Laurent. On efficiencies, Jérôme, do you want to make some comments? Yeah, of course. Thank you very much, Laurent, for this question. You're right to point that efficiency number in Q1 was very strong at 131 million euro, plus 17% versus last year. If you try to, I would say, to break down this, there is a There is, I would say, significant component. There is, of course, part of that significant, nearly half of it, is coming from industrial efficiencies. We are stopping, and you know that we have also accelerated on our industrial efficiencies in our firm this year. We are also accelerating on procurement, and for roughly a quarter of that. And the rest is coming from transformation initiatives that start to deliver. So that's basically... explaining the significant number, which is very strong, as you see. As to move forward, I will not give you numbers, but we are very much, I would say, focused to deliver efficiency, which is part, of course, of margin improvement. And Laurent, I think this is a very important point and very encouraging. We talked about our transformation and what we want to do in terms of structural efficiencies for the group. I think it's too early for sure to claim a victory, but we start to see some positive signals and we are extremely committed to accelerate those structural efficiencies. Some of them, when we move into a A new system, a new organization takes a little bit of time, but we start to see already this contribution. So I think we feel very strong about our objective for the year, but not only for 2025, but looking forward. And that will support for sure the margin improvement ambition that we have. Now to talk about what we see in terms of operating rate. Probably we will focus on the U.S. and in Europe, where we have most of our customers. We will start with Europe, and Emilie comments about the chemical industry, and then we'll come back to Adam.

Sure. Thank you, François. Good morning, Laurent. So, in Europe, the chemical demand is rather low, like I said. Both chemicals and steel are quite struggling in Europe, and they have started to restructure and do cost-cutting measures. For the chemical part, we know they highly depend on energy costs, natural gas in particular, and energy costs was quite high, and it's still trending higher than the pre-crisis level if you compare those energy costs with the U.S. and Asia in particular. Chemical industry also suffers from overcapacity, I would say, coming from Asia in particular, and low demand. So low demand, high energy cost, and overcapacity leads, of course, to a chemical demand from our customers in Europe, which is quite low, and we anticipate it will remain very soft. Second point is on the take-home pay. To go back to your question, this is something we look at very carefully month after month. So far, what we've seen is that it's about the same level in terms of how many customers and how much volumes we have at take-home pay level in Europe compared to Q4. It's a little bit trending better than Q4, actually, but let's say it's stable overall. So no degradation in terms of customers trending at take-home pay level in Europe. And the last comment I want to make is we've also been seeing kind of a wake-up call in Europe, and we will see where it leads us, but with the clean industrial deal that was launched by the European Union, and it's three pillars on automotive, on chemical, and on steel, plus all the additional spending in defense. We might see an uptick on those markets in Europe, so we follow that as well very carefully.

Yeah, thank you very much, Emily. As I said before, very difficult to give any forecast looking for the rest of the year. But indeed, I think those are important signals that could turn out to be positive for the industry in general in Europe. So let's wait and see. And for sure, we'll be able to capture any growth when and if this happens. Maybe the situation is to some extent different in the U.S. for the chemical industry. Adam, do you want to make some comments on this?

Yes, absolutely. So, you know, if you look at our volumes in the chemicals business in the U.S., our volumes remain, I would say, flat sequentially, but at a good rate. So we see some impacts from ramp-ups with select customers in the chemical sector and We see a lower level of turnarounds in the sector as well. And we are nowhere near the take-or-pay level. So we're well above the take-or-pay level in the U.S. And I would say that volumes remain stable going forward and resilient and quite solid overall. So I think that's probably the main comment I would make.

Thank you very much, Anand. Thank you. Thanks a lot. Can we move to the next question, please?

Sure. We're now going to proceed with our next question. And the questions come from the land of Jeff Hare from UBS. Please ask a question.

Yeah, good morning, Jerome and Francois. I just had two questions, really. One was, I think I heard Jerome say that your volumes in March were ahead of what you were budgeting. If I did hear that right, is that continued into April, if you could comment on that? And then finally, the impact on IM pricing in Asia Pacific, is the downturn you're seeing in pricing all related to helium pricing in China, or are there other issues as well? Could you just expand on that, please?

Thank you very much. Jérôme, do you want to make a comment about the volume? Yeah, exactly. It's more volume and says overall, Geoff, that when we were at the end of March, not having the cool results, we were a little bit more skeptical. But in fact, we had a better number in March than what we were expecting. So how could you say with this? I think it was a good thing. It's just showing, again, that our fundamentals have been resilient in terms of volumes, but also pricing. and the resilience of the business overall. So, yes, it was good. Now, I will not comment about outlook, but definitely it was something that we acknowledged. Thank you very much. I will comment on Asia and what we see in Asia in IM. I think overall, this is Probably the only region where we see slightly negative pricing overall in Asia. And as you mentioned, there is a significant impact of the helium trade in Asia, and especially in China, and mostly in China, to this negative pricing. The rest of the IEM business is, depending on the country, slightly positive, neutral, or slightly negative. But again, the main impact is on here. If I zoom a little bit on China, because that's clearly something of importance, even if China overall, keep that in mind, is more or less 10% of the group for all the business lines. But if I zoom in on industrial merchants, as I mentioned before, we have seen overall strong growth of sales. in the mid-single-digit cells. And if we look at the volume and we exclude helium, we are at a very high single-digit number for volume for iron. So it's quite positive. Again, it's due to what we see in terms of activity, our footprint, of course, which is extremely focused on some key regions. our ability also to continue to consolidate and to do some Bolton acquisition in China. So I think that's positive, even if for China, and if I exclude Helium, there again, depending on the region, we see slightly positive, neutral or slightly negative pricing. But that's one of the reasons I think we should consider China as a potential upside in this overall economic assessment. Again, with all the cautious that I mentioned before. But we start to see some signs that the stimulus packages that have been launched over the past few months in China contribute. So, of course, there's a lot of turbulences depending on the impact on the supply chains, but the underlying seems to be more positive than what we have seen last year, for example.

Thank you very much, Josh.

Maybe we move to the next question.

We are now going to proceed to our next question. The questions come from the line of Chita Nudeshi from JP Morgan. Please ask your question.

Hi, thanks. I have a couple of questions. The first one is just a simple one. Are you able to break the 3% price increase in merchants in Europe? into how much of that is actually related to the bulk indexation on LG versus the underlying increase. If you can split that, that would be great. The second question, I guess a bit more difficult one, but have you done any analysis of how much of your customers might be actually shipping, let's say, from one region to the other? which might be at risk. You know, for instance, you know, let's say some, some metal production in Europe being shipped to us, which might become unviable if, if the new tariffs come into play and then what it actually means for, for Elecate. I don't know if you've done any of these analysis. Is it, is it neutral impact? Do you see maybe a negative or perhaps even a positive? I don't know, but any analysis that you might have done on the, indirect impact actually from your customers shipping stuff between regions. Thank you.

Thank you very much, Chetan, and good morning. Emily, maybe you can give some comments, even if we don't disclose the specific pricing, but maybe some element of context to help Chetan understand.

Yes, thank you, François. So, Chetan, yes, in Q1, we've posted a 3% price increase in Europe, partly due to bulk prices and partly due to packaged gases actions as well. So, it's, I would say, half-half BG and bulk prices. And on bulk, we don't typically disclose how really our contracts are made and how our indices are made. contributing, but yes, part of it is due to energy, like I explained before, and it will go up and down depending on the energy cost and price that we pay, and the rest is due to other indices and other price actions that we do on a continuous basis. But basically, on the PG front, it's half of the pricing impact, and we do that very actively. It doesn't depend on energy cost.

Thank you very much, Emily.

Maybe on the next question, regarding the impact on customer and behavior of customers, yes, we are looking at this, and this is basically also what our business lines are doing and following very closely, large industry for large customers, industrial merchants, but also electronics, taking into account that with more than... to millions of customers in all the countries. It's not absolutely clear today that there is a consistent trend because the supply chains are quite diverse and also the strategy of companies are quite diverse. It looks like, I mean, we have seen some pickup in activities in the second part of March, which was maybe not expected because of all the announcements. Now it seems that some companies are defining different strategies. They are also view of the situation for the next 90 days. But I would say overall for us, we should be in a position to capture growth wherever it is. You know very well that being present in 60 countries, basically we are able to follow our customers and follow the load of the customer. So I think for Air Liquide, more reshoring local production will be positive because as we are present in all the regions, we will capture the growth wherever it is. We are close to the end. I think maybe we have two more questions to take before we conclude. Please go ahead.

We are now going to proceed with our next question. And the question comes on the line of John Campbell from Bank of America. Please ask your question.

Hi, good morning. Yeah, thanks for taking my question. I wanted to follow up on one that Peter asked about the Exxon Baytown project. So I'd like to ask perhaps if you can confirm, and it seems to be implied by your decision to increase it in your backlog, that you remain highly confident that the project will most likely FID in the second half of this year. Would you say that you expect it to be able to qualify for around $1 per kilo of U.S. 45E production tax credits? And how confident are you that it can qualify for the Japan CFD, perhaps relative to Middle East and Blue Ammonia projects, as the Japan subsidy scheme seems to be somewhat more subjective than the criteria for the U.S. tax credit? Thank you.

Thank you very much, John. You know that we typically don't speak on behalf of our customer, but Adam, do you want to give us a feel about the level of confidence that we have based on the multiple day-to-day interaction that we have with our customer?

Yes, absolutely. So I'd say that our confidence remains very strong. If you look at it, we have followed probably 25 different projects along the Gulf Coast that are related to ammonia. And this one has the fundamentals and the partners and the like that make it among the strongest. It has the scale that make it among the strongest. And if you look at the way that they are progressing and the avenues that they're following in terms of regulatory and provisions in both Japan and the U.S., I would say that they are extremely active in those conversations, and we're certainly actively involved as well. So I would say the confidence remains strong. What can I give you as far as a bellwether for that confidence is the fact that our engineering and procurement activities are continuing at the same pace, despite the fact that the decision is pushed later this year. So to me, I'd say... That's probably the best thing that I could tell you is that, you know, we don't see a slowdown on our side and that we remain very, very close to this and active on it. In terms of the subsidy itself and which one they're going after, it's hard for me to speculate in terms of or really comment on that in particular. But, you know, we know the importance of the regulatory environment in the U.S. as well as in Japan, among other reasons, to bring this across the finish line.

Thank you very much, Adam. Thank you, John. Last question, please.

Sure. We are now going to take our last question. And the question comes from the line of Georgina Fraser from Goldman Sachs. Please ask your question.

Thank you very much. Good morning, everyone. I have two questions left. One is, you had very dynamic growth in carrier gases in Asia in the first quarter. I was wondering if you could give us a bit more insight on the drivers of that and what's going on in the electronics industry in the region. And then second and last question of the call. Francois, you mentioned that we should maybe be thinking about upside potential in China and that you're seeing pretty solid underlying momentum there. I'm sure that you'd understand that a lot of market observers are assuming that strength in China right now is in preparation ahead of U.S. tariffs. I was just wondering if you could give us a bit more insight into what you as a real market participant are seeing on the ground and stimulus measures, which customers, which industries are making you a bit more confident that there's real underlying momentum and not just stocking. Thank you.

Thank you very much, Georgina. The first question on the carrier cases in Asia, clearly, I mean, we see a strong momentum, as you mentioned. The good thing is that we have a good visibility on that, and we have a clear schedule about the startup and investment, and investment that we have done in the past few years is delivering. So we see that, I would say, everywhere in Asia. We see also, I mean, a good activity rate and good progression of advanced material in Asia. Maybe to try to understand the market driver, as you mentioned, we should put China on one end and the rest of Asia on the other end. For the rest of Asia, we see a very strong momentum being driven by the most advanced logic, especially, and this is related to the need for artificial intelligence-related chips in particular. The same trend is also impacting the memory business and for the most advanced memory business, which is good for the carrier gases, but also very good for the advanced materials. And we see that basically in Taiwan, in Japan, for example, with strong growth and momentum. In China, what we see is really the development of the ecosystem, which typically is more on the low-middle range type of products, but with still a strong underlying demand. Memory, for sure. Logic, clearly the less advanced. To some extent, the analog, even if analog overall is highly related to devices and automotive, which is to some extent a little less growing than it was just a few months ago. But clearly we see that due to the scale, the growth in China is quite significant. uh in in electronics so you see that even if overall same kind of underlying trends and growth for sure because there is a need for more products it's slightly different in term of actual execution between china and the rest of asia but overall are quite positive it's probably going to be one of the area, which is going to pick up the most whenever the situation is going to be more clear, taking into account also that depending on the outcome of the tariff, other regions may benefit. You know that we have a very strong position in the U.S. also, and we see increased demand and some movement towards shifting some production to the U.S. for sure. Finally, maybe to come back to China and what we see. Today, as I mentioned, we have seen and enjoy strong activity in China in Q1. Some of it maybe at the end of the quarter in March could be related to advance order or pre-ordering to make sure that the supply chain can go through the tariff. It's clear. But we see also that the underlying stimulus are producing some effect. Clearly, there has been a focus on some key strategic industries. like the automotive, but also overall sector which are related to the energy transition, not only to decarbonize the processes and the manufacturing in China, but also to develop technology and scale to be able to supply the needs in China and also to export. As I mentioned also, maybe finally, the electronics activity, which is very strong in China, And there is no reason for this to stop, given the scale and the need there, with clear progress also in terms of technology moving up in the value chain. All right, I will stop here. Thank you very much. This concludes our session. We all appreciate all your insightful questions, for sure. In short, I would say that despite the current turbulent times, the numbers speak for themselves, and you can see that we are staying the course. As mentioned by Ode, in two weeks, we have our General Assembly in Paris. I look forward to seeing some of you, I hope, there. In the meantime, I wish all of you a very good day. Thank you very much.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Speakers, please stand by.