L'Air Liquide Ord

Good morning ladies and gentlemen and welcome to the AIR LIQUID first half 2025 results conference call. All participants are currently in listen mode only until we conduct a question and answer session and instructions will be given at that time. I will now hand you over to AIR LIQUID 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 first half 2025 performance. For the Q&A session, they will be joined by Émilie-Maureen Renoir and Adam Peters, both VPs overseeing respectively EMEA and North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on October 28th for our third quarter of the news.

Let me now hand you over to François. Thank you, Aude, and good morning, everyone.

It's truly my pleasure to be with you today to share the highlights of NEKIDS' very strong performance in the first half of 2025. In what continues to be a turbulent environment, we have once again demonstrated our remarkable resilience. We are staying the course, focusing on optimizing what is within our control, while consistently evaluating and adapting to the evolving external landscape. In this first semester, we delivered profitable growth and achieved major commercial successes, preparing for the future.

Let's turn to slide three.

The inherent strengths of our operating model and the transformation momentum supported by our teams have enabled us to deliver positive performance across all our KPIs. Remarkable achievements given the current macroeconomic and geopolitical context. Sales grew plus 2% on a comparable basis, demonstrating solid resilience and ability to continue to grow. Several key performance indicators reached record levels reflecting our strong operating discipline and the increasingly visible contribution of our transformation momentum throughout the organization. We achieved a record gas and services OIR margin improvement, reaching plus 130 base points, excluding the energy pathway effect. We delivered record high efficiencies, reaching 287 million euros, a significant plus 23% compared to H1 2024. Our recurring ROCE significantly improved to 11% in spite of increased investments, which is remarkable. And our ESG KPIs remained firmly on track with a few noticeable progresses this semester. For example, the startup of six PPAs for an additional 1.4 terawatt hour per year of renewable energy sourcing. Or, regarding the ecoregion offer, we have signed contracts with more than 100 hospitals to supply them with low-carbon oxygen. Finally, our solid investment backlog stands at a new record high of 4.6 billion euros. These are CAPEX commitments for signed projects that are already under construction, directly securing our future growth. Therefore, in H1 2025, despite the macroeconomic conditions, we have successfully delivered simultaneously on growth and profitability, while diligently preparing for the future. This is truly the inherent strength of Air Liquide. Starting with performance on slide four, in H1 2025, we continue to execute and accelerate on the structural transformation program we launched one year ago. As a reminder, this ambitious program is built around four main initiatives, all of which are looking at structural improvements of the performance and leverage, of course, the power of data and artificial intelligence to maximize their impact. While we are rigorously executing every action within this program, let me deep dive on one specific initiative. I will focus on streamlining the organization to give you a tangible sense of the transformation which is ongoing. Let's turn to slide five. Indeed, in the first half of 2025, we have already significantly streamlined our organization. This slide provides concrete examples of actions driving structural efficiencies. First, as part of our global initiative, we have successfully removed up to three management layers in several parts of the organization and also removed the four regional hubs organization. In addition, we have reduced the number of management units across several functions including clusters, industrial directions, home healthcare, procurement, and IT. The figures on the slide truly speak for themselves, showcasing the extent of this transformation. But beyond these global changes, we have also launched and implemented many local initiatives. We have previously shared some of these examples, and they highlight the breadth of the transformation. As an illustration, the merger of medical gas operations in Europe now under the same operational and management team as industrial merchant. In France, we have completed the home healthcare restructuring. Also, our industrial merchant and healthcare operations in Canada are now under direct air gas management. In Asia, Our large industries and electronics operation now share the same smart innovative operations center, providing many synergies. And as you know, we've merged our engineering and construction and global markets and technologies teams into a single engineering and technology business unit with common management and support functions. These examples illustrate just one of the four core initiatives of our comprehensive transformation program. This program is driving profound structural changes that impact our entire organization and the way we operate. It starts to generate the ongoing efficiencies that Jerome will discuss shortly. I want to thank our teams for their strong commitment to make this transformation a success. Now moving to slide six.

I would like to focus on sustainable profitable growth. Indeed, Air Liquide is and consistently remains a growth company.

Keep in mind that we have been posting positive comparable sales growth for the last 19 quarters. Quite an achievement as a lot happened in this timeframe. If we step back, we see clearly that our growth is supported by foreign genes that we can powerfully activate depending on market context and opportunities. First, low-capase growth from optimized utilization of existing assets. These engines maximize the value of our existing asset base. It includes two key levers, pricing and volumes. This is clearly a reservoir of growth in today's environment of lower volumes, where most of the assets could be boosted with no requirement for additional capex. Second, growth from investments in our core activities. This engine benefits from our leading innovation and technology capabilities and the fundamentals of our business model. While carrier gas projects in electronics are a strong growth driver, it's important not to underestimate the growth investments we continue to make across large industries, industrial merchants, and healthcare, as we see a continuous flow of opportunities in all those segments. Third, the energy transition. This growth engine goes beyond just low-carbon hydrogen. It includes low-carbon oxygen, like for the Exxon project in the US, and CO2 management solution.

It is there to remain. Finally, M&A, our fourth growth pillar, involves both bolt-on and strategic acquisitions.

These four growth engines are supported by our strong fundamentals. We enjoy a healthy balance sheet, to finance industrial and financial investments. And thanks to our diversified footprint in terms of geographies and markets, we can seize all those opportunities when they appear. Let me now illustrate two of these growth levers to support what I just mentioned. Let's turn to slide seven. Firstly, electronics activity is a perfect illustration of our second growth engine, investments, in core activities. Over the past 18 months, we've achieved major commercial successes across all regions, significantly reinforcing our number one position in the global electronics market. These successes represent close to one billion of new investment secured by long-term contracts. Let's look at some key examples. Our most recent announcement is a 250 million euro of investment in Dresden, Germany, to supply a leading semiconductor manufacturer. The state-of-the-art factory is the highest header investment for the semiconductor industry in Europe, and it is also for us in electronics in Europe. In the US, we have been committed an additional $50 million investment to build a new gas production plant for another leading semiconductor manufacturer. This is part of the $350 million invested in the US over the last 18 months, with the largest being our $250 million project for Micron announced last year. In Asia, we recently announced a $70 million investment to supply ultra-pure carrier gases to major sumicon manufacturer in Singapore. Overall, we've secured over 450 million Euro in investments in Asia during the past 18 months. We also recently announced something which is quite important, which is in Korea, the startup of the largest molybdenum plant in the world for the sumicon industry. This is a key strategic investment for a liquid as molybdenum is emerging as a promising replacement for tungsten in advanced chip manufacturing, particularly those driving AI applications. This highlights Air Liquide's unique innovation capabilities and position in advanced materials, further enhancing our leadership in the electronic sector. These are just a few examples which demonstrate how our investments in core activities continue to fuel our robust growth.

Turning now to slide eight.

Let me share more on our energy transition growth engine. We recognize that the current uncertain environment presents challenges for regulators in establishing effective financing frameworks. This in turn can lead to customer hesitation on major investment decisions. Despite this challenging backdrop, there are opportunities. Air Liquide has been successful in developing energy transition projects with our customers. We have a targeted strategy of selecting the most promising investments in this space. And this strategy is delivering results. We have been highly successful signing major energy transition projects representing over 2 billion euros in investments. These projects are currently under construction and are already included in our robust backlog, securing our future growth. For instance, the first startup of a 200 megawatt electrolyzer in Normandy, France, is expected by the end of next year. I was there just a few days ago, and this is really an impressive first of its kind facility. Other significant projects will follow. like the recently confirmed FID for Eligator 200 megawatt electrolyzer in the Netherlands. They will contribute to our growth trajectory. In parallel, we continue to develop new, very promising energy transition projects. It is an important growth pillar for Air Liquide, but of course, not the only one. 60% of our investment opportunities remain in our core activities. This clearly shows that we leverage all our strengths for sustainable growth and do not depend on any single one engine.

I will conclude on slide 9. Enricid is delivering today.

In H1, we have demonstrated strong resilience, delivered record high financial performance, and achieved commercial successes securing future growth. Combined with these fundamentals, looking forward, we rely on two key elements, our ongoing transformation initiative and our four growth engines. Those growth engines have been the reservoir of growth of existing assets, the core investments, the energy transition, and the M&As. They will allow us to seize opportunities across environments, ensuring we deliver both in the short-term and in the long-term. In essence, in H1, we have demonstrated that with our ongoing transformation, Heritide stands as a highly resilient, more and more efficient, and sustainably growing company. We are very well positioned to navigate the evolving global landscape and deliver continued value to our shareholders. Thank you very much for your attention. I will now ask Jérôme to present the details of the H1 performance. Jérôme, please. Thanks, François, and good morning, everyone. I will now review our numbers in more detail. So, regarding our first half results, I am now on page 11. Group cells have been resilient overall on a comparable basis, excluding energy pass-through and forex. Gas and services sales for H1 achieved a plus 1.8% increase versus last year. The new engineering and technology BU is also up plus 1.8% on a comparable basis.

Order intake reached 642 million euros, up 41% versus last year, out of which third-party sales represented 38%.

So overall group cells are up plus 1.8% from the count basis for the first half, while published cells increased by plus 2.6%, benefiting from a positive energy effect at plus 2.3%, partially offset by the negative 4x at minus 1.5%. There was no significant scope effect during the period. Please also note that the contribution from Argentina significantly decreased in H1 2025 at only plus 0.4 versus 2.1% in H1 2024, and comparable growth specific to Q2 was at plus 1.9%, showing a slight but encouraging sequential increase from plus 1.7% in Q1. I am now on page 12. All origins are growing. From a business line standpoint, H1 growth was mainly driven by healthcare, Again, our diversified business line and geographical footprint complement each other, creating an optimal balance that fosters resilience, especially valuable in the current economic environment. Let us now review more specifically the activity on our main geographies in Q2 2025. I am now on page 13. So sales in the Americas have been strong overall, reaching plus 3% on a comp basis. Large industry cells in the U.S. were solid and benefited from a major slump up in air gases. Growth in hydrogen and cogen was strong. Immersion cells were driven by the continued solid pricing effect at plus 3.6%, supported by active pricing management at air gas, which is close to 75% of the pricing impact in the Americas. On volumes, gas remains resilient overall, while our goods remain low. Healthcare saw vigorous growth at plus 11.2% compared to last year. This was driven by robust pricing in the U.S. and strong volume as a consequence of an increased patient base in LATAM from healthcare. Finally, electronic cells were fueled by solid volume on carrier gases and advanced material, yet they did not fully offset the decrease in sales of equipment and installation compared to a record level last year. Sales in EMEA are resilient, supported by solid growth in healthcare. In large industry, customer demand remains low, particularly in the chemical and steel sector, and soft in oil and gas, mainly in France and the Benelux. Immersion pricing stayed solid at just 2.5%, driven by favorable indexation in bulk, and sustained high pricing in packaged gases, While volume remains soft, they are still growing, excluding the last year's divestitures of our operations in 12 African countries. Finally, health care delivered robust growth at plus 3%, mainly driven by dynamic home health care activity. Activity in Asia was soft in Q2, with growth driven mainly by electronics and large industries. In large industries, sales growth was supported by the startup of the takeover of a unit of Wanhua in China that we announced last year, and volumes ramped up in Korea, partly offset by turnaround. Merchant sales were generally soft, in line with our expectations. While pricing remained low because of neutral inflation, it showed improvement compared to Q1. On China, China's sales were robust, supported by Bolton acquisition in packaged gases, and this despite challenges in the helium market, The rest of Asia remain globally stable. Electronics finally again saw a sudden increase driven by double-digit growth in carrier gases from startup contribution. It was partly offset by lower sales on equipment and installation and advanced material, the latter impacting by the strong comparable basis last year. I will now quickly comment on our Q2 activity by business line. I'm now on page 14. In merchants, we continue to see solid pricing, with plus 2.7% in Q2, slightly higher than Q1. Overall gas volume remained flat, while our goods were down in the US, in line again with our expectations. In large industry, we saw growing sales driven by the US and China. On page 15, next, we move to electronics. With seven startups in H1, carrier gases cells continue to grow this quarter, but could not offset decreasing sales in equipment and installation after record level last year and low advanced and specialty material sales. Finally, healthcare is the growth driver this quarter, with sustained and resilient growth in both medical gases and home healthcare. Moving now to our margin on page 16. As François highlighted, our transformation initiatives are clearly paying off. Group operating margin in H1 improved by a solid plus 100 basis points. And for gas and services, the increase is even more significant at plus 130 basis points. Of course, this excludes the energy pass-through effect. Purchases have seen only limited increase following energy cost increase, mainly natural gas. Personal costs are flat despite the inflationary environment thanks to the benefits of our organizational simplification plans. Depreciation is likely to end up worse, affecting the startup of our new production units. On page 17 now, the ongoing margin improvement is supported by three pillars of our structured execution plan. First, IM pricing remains solid, with plus 30% increase since January 2022, and a sequential increase in Q2 2021 versus Q1. Secondly, we deliver 287 million of efficiency in H1, an increase of plus 23% compared to H1 2024. This improvement reflects the acceleration of our structural transformation initiative effect, as François spoke in his opening section. Lastly, we continue to pursue active portfolio management, which was seven acquisitions in the first half of 2025, and executed three divestitures with a continued focus on strategic, profitable, and margin-attractive opportunities. Let us now review the bottom lines of the P&L. I'm now on page 18. Non-recurring operating income and expense accounting for 47 million euros, mainly due to the restructuring costs linked to our transformation plan. Net financial costs already decreased by minus 14, with lower net cost of debt, mainly due to reduced factoring costs. The average cost of debt decreased slightly to 3.3%. Our effective tax rates are at 25.1%, an increase compared to last year. This rise is primarily due to an exceptional one-off tax surcharge in France in 2025. So net profit growth is at plus 8% excluding FX, and recurring net profit excluding FX is up significantly at plus 10.3%. On page 19 now, our robust cash flow generation allowed us to finance a rising capex of $1.7 billion. Our net debt is at $9.8 billion as of June 2025, marking a $635 million increase from December 2024, following the payment of $2 billion in dividends in May. Our gearing is stable at around 33.5%, adjusted, of course, for the dividend payment seasonality effect. I'm now on page 20. As you can see, recurring return on capital on credit continues to rise, now 11%. while we continue to grow our investment. This is well above our advanced objective and another clear sign of the improvement of the group's performance in the last years. Moving now to page 21, we will now review our main head investment KPI. Firstly, as of June 2025, our 12-month portfolio investment opportunities remain strong at 4.1 billion euros. This diverse portfolio includes many projects, with over 40% dedicated to energy transition, mainly in Europe and in the US. Additionally, about one-third of these opportunities are in electronic business, which projects across Asia, US, and Europe. Secondly, on investment decisions, we reached a record 2.3 billion for the first semester. And last, the investment backlog reached a new record of 4.6 billion euros. Current investments are diversified, spread across approximately 80 projects across all geographies, And a third of this investment in progress corresponds to projects in the electronic business. As a reminder, and also mentioned, this backlog is only made of gross projects. In H1, we achieved 1.157 million euros of sales contributions from startups and entrepreneurs. For 2025, we are confident that the contributions from our startups and entrepreneurs of projects will deliver more than 310 million euros. On page 22, as François mentioned in his introduction, we confirmed our guidance for 2025 as well as our plus 460 basis bond margin improvement outlook until the end of 2026 for the five-year period.

Thank you very much for your attention. I now hand over to François. Thank you very much, Jérôme. So, I think we are going to

take the Q&A now.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 1 1 again. Please stand by. We'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question. And it comes from Laurent Favre from BNP Paribas. Your line is open. Please ask your question.

Hi, good morning, and thanks for taking two questions. The first one is regarding leverage and gearing. I think you mentioned that you've got gearing adjusted at 33.5%. I think it's one of the lowest levels we've seen since the acquisition of air gas. I was wondering if you could talk about the plans for, I guess, leverage. Where would you see ideal leverage for you? And in terms of M&A as well, if you can talk about how you would assess the value creation merits from a financial standpoint on acquisitions. The second question maybe for Emily is around the alligator projects. You've got 60% of the capacity with long-term commitments. Can you tell us what the plan is for the remaining 40% of the capacity? Is it to go after merchant opportunities, or would you hope to sign further long-term commitments before the start-up? Thank you.

Thank you very much, Laurent, and good morning. Thank you for your two questions. I would ask Jérôme to answer the first one, and Émilie, indeed, to talk about this beautiful project delegator.

um all right so yeah thank you very much lauren good good to talk to you uh you you said it uh we have a gearing which is a quite stable 33 in each one uh and the balance sheet is quite it's quite strong coming from a long a long story uh so we are clearly at the opportunity to save a part of of record of investment and you know it's something that we said every time um

We are very much, I would say, positioning to continue to grow and to take additional investment opportunities. And we have some, and you know what we see both in terms of portfolio opportunities, which is above 4 billion, and that we have clearly, you know, some opportunities that we continue to say that it's translated into investment decision. So we will continue to favor, you know, our industrial project. Of course, we also, and in a sense, we can also go to some acquisition at some point. But, you know, basically, our opportunity is very to go to direct opportunities of investment.

Then after that, if we would not be in this position, and, you know, it's something that we discussed a lot, if we would not be in a position to, I would say, allocate this cash flow to to investment and long-term growth opportunity, then we would return more to the shareholders, but we believe today we are not in that situation. So that's where we are.

Thank you very much, Jérôme. So next question, Émilie, please.

Sure.

Good morning, everyone. So on the EleGator, EleGate has taken a major step early July as we got to the EleGator project. SID to invest more than 500 million euros and launch the construction of an alligator in the Netherlands. So maybe as a reminder, it's a 200 megawatt electrolyzer dual technology that we will build, own, and operate with renewable power already secured. It will be located in the port of Rotterdam and will be connected to our pipeline network. So, indeed, it will supply total energy refinery with renewable and low-carbon hydrogen through a long-term contract, but it will also supply hydrogen for the industry in the area. As I said, this electrolyzer is connected to our pipeline network, offering us several opportunities for other uptakers. We will also develop in the area mobility, transport market, especially heavy-duty mobility. RET will leverage our leading electrolyzer technology manufactured by our joint venture with Siemens Energy for this project. So overall, I think this milestone really demonstrates our ability to develop solid business models in the field of energy transition and more particularly low carbon and renewable hydrogen and leverage our differentiated technology innovation as well as our strong relationship with our strategic customers.

Thank you very much, Emilie. And Laurent, you know that this investment, and it's the same for Normandy, one of the very strong points is that we follow our strategy, which is to base this on industrial demand to get the economies of scale. And, as mentioned by Emilie, and this is the case in the northern part of Europe, but also in the Seine Valley, to connect that to the pipeline system. So that gives us a lot of flexibility to find different customers, to meet different needs, and also to use, I mean, this very good basis in terms of economies of scale to supply mobility projects when they arise. So that's a strategy for alligator, same thing for Normandy, which is clearly demonstrating our leadership. Hydrogen for the industry, but also for the mobility, the big one today being, of course, for the industry.

Thank you very much. We take the next question, please. Thank you. Just give us a moment.

And the question comes line of questions. John Campbell from Bank of America. Your line is open. Please ask your question.

Yeah, thank you. Good morning, everyone. Two questions, if I can. So regarding your significant electronics investment in Dresden, I wanted to know if you anticipate if this investment will entirely fulfill the anticipated needs of projects in that area, or should we perhaps keep an eye out for other gas contracts developments in Germany? And perhaps could you clarify for me how this investment decision has been recorded in the context of first half results? Is it in the backlog as of the end of June? My second question relates to US Blue Hydrogen. So we now have 11th hour clarity over the 45 V tax credits. I wanted to ask if you have noticed any impetus among potential developers now to get their projects over the line To give you an example, I noticed that Chevron submitted tax abatement requests to Texas authorities shortly after the Senate approved the tax bill. Do you have a line of fight potentially on that project? Thank you.

Thank you very much, John, and good morning. So I will ask Emily to talk about the... has been a major project and uh adam to comment on the on the us and what we have seen following also the uh uh one big beautiful build because i think there's a lot to to take away and quite positive uh out of this and adam will speak more about that so uh emily please sure um so good morning so on this project elitida has been awarded a long-term contract to

build, own, and operate new state-of-the-art industrial gas production units in the heart of what is called the Silicon Saxony in Dresden in Germany. So we will supply large volumes of high-purity gases to one of our major customers and one of the leading semiconductor manufacturers in the world. It's a bit more than €250 million of investment, and it is the highest-ever investment fairly key in electronics in Europe. So this will really significantly enhance our number one position in global electronic market and in Europe. So the market in Europe is forecasted to grow with demand for semiconductor products, but also driven by sovereignty purposes and resilience of semiconductor supply chain. In this region in particular, we're also benefiting from decades of established partnerships with customers and also from highly skilled workforce. So really our idea is to continue to expand and benefit from this growth in the market in this region in particular, but overall in Europe in electronics. So to conclude, this project is obviously well aligned with our strategy and one of our four growth engines, strategic investment in our four activities. Eliteed is already the leading industrial gas supplier to the semiconductor industry in Europe, and this will reinforce our number one position in Europe, which will enable us to continue to grow in this market with higher demand.

Thank you very much, Émilie. And if you have been to Dresden, you see clearly the footprint that we have with multiple units. We have also pipeline connections going to different customers. We know that there are several other projects in the area, and we are, I think, very well positioned to capture also this growth in what is the really heartland of Europe for semiconductor industry. Emilie, you had also a question on the backlog.

So in terms of backlog, we have in our backlog today for this project, 124 million euros already accounted for in the backlog.

Thank you very much. Adam, do you want to speak about what we see in the U.S. following some of the recent legislative events?

Yes, absolutely, Francois. And good morning. Good morning, John. Thanks a lot for the question. I'd like to maybe step back on the one big beautiful bill and talk about the impact to Air Liquide, which I think is very positive, actually, and then come specifically to your question around 45V and what we can expect there. You know, the beginning of this year and the administration change and the like, I think there were sort of three areas of uncertainty that we were facing in the U.S. One of them was around the reconciliation bill or what we call the big, beautiful bill for the Trump administration. The other one was around interest rates. And the third one was around tariff uncertainty. I think on July 4th, when the one big, beautiful bill was passed into law, this took away one major uncertainty factor about how things are going to progress. and opening up the doorway for final investment decisions from customers and certainly from us. So if I look at the bill itself and I look at what passed into law with that bill, and coming specifically to your question around 45V, 45V was passed in such a way that basically it allows companies to have until January 1, 2028 to start construction on projects, and this really reflects projects which will benefit from low carbon hydrogen, including blue hydrogen, as you mentioned. So it gives a runway of two and a half years to develop those projects and start construction in order to make those work. So to your point specifically, I think this is going to open the doorway for a number of projects to move forward in the low carbon space to allow for the development of an ecosystem for hydrogen in the US. So this is, I think, very exciting. Specifically to the Chevron project, I don't know if there's anything in particular to talk about on that one there. This is something that we have followed extremely closely over the past two years in terms of developments in blue hydrogen. There have been many, many projects that have been on the table in terms of development and the like. I imagine now with the passage of 45V in terms of clarity, we'll have more and more projects come together. Chevron is certainly a company that we've worked with in the past and continue to work with. So I won't comment specifically on that, but I think that we'll start to see more projects develop and come to fruition from serious players in the market, which I think is great. A couple other points to mention on one big, beautiful bill. One is around 45Q. So this is the carbon tax credit that comes for carbon sequestration and utilization. This actually improved under one big beautiful bill. So now carbon utilization has the same tax credit as carbon sequestration at $85 per metric ton. So I think this was an advantage also for energy transition. Another one for Air Liquide is around the corporate tax rate. So there was talk of a corporate tax rate basically for foreign companies with business enterprises in the U.S., and this was removed from the bill. So while this was a little bit of a concern point during the negotiation of the bill, I think it's a very positive outcome at the end of the day. The final one I'll talk to is around the CHIPS Act. You may know in the U.S., the CHIPS Act for reshoring the semiconductor industry was in place for projects that started by the end of 2026. It was previously an investment tax credit of 25%. That's been raised to 35%. And this also, I think, bolsters the investment opportunities that we see from large clients that we partner very closely with in the U.S. market. So there's a number of other provisions. I'll stop there. But altogether, I think this bodes very, very well for the investment landscape in front of us in the U.S.

Thank you very much, Adam. And thank you, John.

um let's move to the next question please yes of course just give us a moment and the question comes line of jean-luc romain from cic market solutions your line is open please ask your questions

Good morning and thank you for taking my questions. One refers back to the hydrogen projects in the Netherlands. I think the Dutch government announced some help for some projects last week before you announced ELEGATO. How much of the 500 million capex could be covered by European Union subventions. That's the first question. Second question is could you update us on your carbon capture projects for cement plants and like EQM and other ones?

Good morning, Jean-Luc. Thank you very much for those questions on the NS transition in Europe. Emily, do you want to give us some light on this? Sure. So thank you for the question.

Indeed, we received Several fundings for Alligator are coming from Europe and also coming from the Dutch government more recently. Overall, if you can have an order of magnitude for these projects, electrolyzers and more energy transition projects, we are about between 30% and 50% of CAPEX subsidies that we typically receive a combination from Europe and governments. On the cement projects, So overall, I would say in the seventh activity, our customers are still very active in terms of development. You know, I would say, of course, there are still uncertainty in the regulation, but seven players are very active to continue on their journey to decarbonize their plants. We are actively working with them. Now, it depends. Before taking SID, it depends on ETS price. It depends on some other mechanisms, such as carbon contract for difference, for instance, and it depends on the price. the viability of the whole CO2 chain from the capture unit to the sink. But overall, I would say still a good momentum on salmon projects. They still benefit from a lot of funding as well from Europe, and we accompany them along their journey to develop their fortress.

Angelique, you know very well that for those projects, infrastructure is very important and there has been recently quite a bit of progress in that. I mean, the ratification of the London Protocol to be able to export CO2 from one country to another one in several European countries, for example, but also the availability of some sinks and expansion, like the Northern Light announcement. So we see clearly things which are moving ahead in this space with good momentum from the customer side, as mentioned by Emilie. So thank you very much.

We move to the next question, please.

Yes, of course. Just give us a moment. And the question comes from the line of Thomas Wigglesworth from Morgan Stanley. Your line is open. Please ask your question.

Thanks very much for the opportunity, both. First question, if I may, just in terms of the near-term dynamics, possibly more as a read for other industries, could you talk a little bit about how your comparable growth is progressing as we exit 2Q? Specifically, do you think that you can kind of repeat the rate of comparable growth in that we're seeing in the first half and the second half. I'm particularly interested if you're seeing offsets like certain areas or regions that are cooling, if you're able to offset that with growth in other areas above and beyond the kind of the new projects that you've called out.

Okay, thank you very much. Good morning, Tom. So, I think given the context we've expect probably the same top-line momentum for the rest of the year. This means that the cells will remain resilient in all the geographies with overall positive cell growth in all the business lines of Air Liquide. We could see some upsides, and we hear some positive things from customers. But I think in the current context, given all the uncertainties, we have to be cautious about that. It's true that we start to see some momentum in electronics. As mentioned by Adam, we start to see also some momentum, maybe some effect of the new policy in the U.S. But again, I would really appreciate We prefer, and that's what we are doing internally, stay cautious and probably confirm the trajectory that we have seen so far. This being said, we also expect to see the same momentum in terms of project development with a very strong portfolio of projects in electronics, in the energy transition, but also more in, I would say, the classical large industry, especially in the U.S. So all those are, again, positive signs for the midterm. This being said, and maybe just to conclude, For us, for Air Liquide, for the management team and the teams, we will continue to really focus on what we can control. We will, of course, also leverage the transformation initiative to continue to deliver higher profitability. And for sure, we remain agile and seize the opportunities along our four growth engines.

And first of all, just a follow-up to that, please. Obviously, the margins running ahead of your guidance. So will you revisit what your targets are out through 26 at some point? And could you grade the outperformance that we've seen versus on a run rate basis? Can that continue to accelerate through the next couple of years?

But, Tom, I think, you know, it's quite early to update, I mean, the guidance that we gave. What I can say is that based on the results, based also on the momentum, the real momentum of our transformation program, we feel extremely confident that we will deliver our commitment for 200 base point improvement for 2025 and 2026. So that's where we are today. We are extremely focused on the execution, but things are going well. It's a challenge. It's not easy every day, but we are making very significant progress. And since you see more and more the structural transformation of the group are contributing, I'm confident that looking forward, this will continue. Thank you very much. Very clear. Thank you.

Thank you. Next question, please. Yes, of course. And now we're going to take a question from James Hooper from Bernstein. Your line is open. Please ask your question.

Good morning, and thank you very much for the chance to answer questions. My first question is a little bit about the transformation initiatives. You said that you set up a group industrial department. Can you give us a little bit more detail about what this group is intending to do? And do you see the kind of central costs being therefore higher from here on for delivering more efficiencies? And then secondly, just to follow up on Tom's question, can we go a little bit more detail into electronics and the outlook for kind of carrier gases, advanced materials, equipment installations, and how you see that progressing around the regions, please? Thank you.

All right. Thank you very much, James, for those questions. We'll talk about the transformation and maybe Jerome and also Adam will talk a little bit about the electronic outlook overall. As you mentioned, I mean, that was an important step where before we had five industrial directions for each business line, the IM, the large industry, the electronics and so on. with quite a bit of overlap, but to some extent also probably some silos. So we have put all that together. So there is a little bit of cost to bring that all together, taking into account that we are absolutely convinced that as an organization, this will be more efficient, that will leverage all the skills of the group, and of course, offer opportunities for people to contribute to different parts of the business. So what are we doing there? We have already started to identify, I would say, the best practice within Air Liquide, but also with the industry in general. So the benchmarking part has been extremely important. Make sure that, for example, we take the best practice of the electronic business in terms of reliability and we use that in other parts of the business. So we continue and we have set up a whole system on that. We have also with that defined a very strong set of KPIs and management system to make sure that we manage the performance of our industrial operation much more closely. And we give also the tools of everybody in the company to understand where they are and how they can improve, making also available best practice and standard practice for them. What we have done, which is extremely powerful, is that we have identified a limited set of initiatives where we want to enforce that. We used to have a culture maybe where it was a little bit of a menu because we were a very decentralized organization. So people can pick and choose basically what they wanted to do in terms of operation. We are much more streamlined and I would say clear on what are the expectations. And we are much more focused. We are a centralized team who can implement the solution, for example, for the most advanced process control and data management across the group. So we have a kind of a squad team which is working on that, working with the operation, and implementing those initiatives across the group. We have done more than 400 site visits and action plans, so that's ongoing. We start to see the benefit already, but that's ongoing. The last thing I would like to mention, of course, is the fact that with this unified industrial direction, we can leverage even more the use of data that we have been developing for the past 10 years. We have been using AI for many of our models. We have close to 10,000 models within our operations which are using AI. But the next revolution is really to leverage the GenAI capabilities. Many people are talking about that. Very few are actually doing it in a sense where it's adding value. That's what we are working on, and that's where this industrial direction Give us, I mean, the visibility to focus on what is the most relevant, what is going to contribute the most, and to go the fastest on that. So, again, we have put the foundation. It's the beginning. We start to see already progress and contribution from the industrial direction, but definitely more to come. Now let's move to the electronics. Adam, maybe you want to give us a little bit, I mean, what you see from the U.S., but also global customers, and Jerome will complement on this.

Absolutely, Francois. James, thanks a lot for the question. So we talk about electronics. One of the slides that you saw in the deck was around our position in electronics being number one globally and really enhancing that position with the major investments that we see in each of the geographies around the world. When we look at the market dynamics and you think of the reshoring activity that's taking place in the U.S. right now, and that'll be enhanced further by the CHIPS Act, what that's allowing for is next-generation advanced fabs to be built in the U.S. in particular, which will utilize many molecules that Air Liquide produces in terms of advanced materials, but also leverage carrier gases for infrastructure build-out and basically being that core anchor point for each of those investments. And I would say that we're in a very strong position and have leveraged that strong position in terms of landing new agreements, not only in the U.S., but also in Europe with some major wins that Emily mentioned earlier, as well as in Asia. And I believe that when you look back at the first half of this year, our growth in those two areas, in advanced materials and in carrier gases in the U.S. in particular, were a solid double-digit percent growth over previous year. The downside that offset that was on the E&I piece. And I don't look at that as a negative. I look at last year as a very solid year for equipment installation activity. It was actually a record year for us in terms of equipment installation, really building on the fact that many customers were starting to build out new fabs in the U.S. market and enabling us to sell equipment and help them with turnkey solutions for that. But now we're on the other side of that and basically starting to build out the more material side of the business as volumes begin and will take off in the years to come. So the prospect is still very strong for electronics, and it still remains a very good growth driver for us. I would also say that, as I mentioned earlier, with the CHIPS Act enhancement for a 35% investment tax credit for our customers by the end of 2026, it's a – Nice enhancement for them to increase their investment in the U.S. market and reshore activity further here, which creates even more opportunity for us. Maybe I'll stop there and turn it over to Jerome.

Yeah, thank you very much, Adam. Jerome, briefly, because I see that we have a few more questions. Yeah, of course. Let's go quick. But basically, Jeff, thank you for the question. In terms of electronics, you know, the underlying demand remains strong, and whatever, you know, tariff or whatever, talk about that. So long-term basis, there is absolutely no discussion that this will continue to grow. As we have to specifically 2025, you know, we believe today that in the second part of the year, we have, you know, the impact of all the good projects we signed on the ramp-up of, you know, of startup and ramp-up of carrier gases. You know, it's more than 50% of our mix in electronics. So this is going well. We should have also an accelerating advanced material compared to the months before. We will have to compare to a high base on equipment and installation. We have a very significant base that we have to compare. But overall, we should go in H2 overall in electronics. Thank you very much. Again, overall, we feel very confident about this market where we are number one. And when you look at the trajectory, all the forecasts of the industry show that the segment will double by 2030. So it's a growth engine for the group for sure. I think we have maybe time for at least one question.

We'll see if we can do more. Ciao. Next question, please.

you for the opportunity please just please go ahead sorry um just want two quick questions one was that thank you very much for the details on the industrial transformation program that you gave um those details and that program is that going to last just up until the end of 26 or is there more opportunity around what you're doing into 27 into 27 and beyond or will there be new programs that you will look at and then the second question is just obviously you had an EBIT loss in the non-gases and services business of 190 million. That's obviously impacted by the disposals that you made in engineering. Is that the sort of run rate on the EBIT loss of the non-gases and services business that we should expect as we go through into the second half and beyond, or were there one-offs in that that we need to be aware of?

Good morning, Geoff. Thank you very much for your two questions. So, Jerome will answer the second part. For the first one, definitely, This is just the beginning. So we are setting up the foundation. Today we have a lot of other initiatives that we could launch and more will come, as we see also development in AI and Gen AI. So I think really we are opening a new era in terms of industrial performance. So there's more to come beyond 2026 for sure. Jérôme, do you have a comment on the second question? No, I'm not so clear about the question, but basically, you know, We do not have any write-off related to engineering construction. What we have specifically for the non-recurring item for H1 was really the restructuring cost that we put in exceptional cost. We cannot give you more detail on that.

Of course, as the second part of the year, we might come back as this is going to fruition. But so far, that's where we are.

Okay. Okay, thank you. Thank you very much.

So we'll take two more questions, but we try to be very brief.

Thank you very much. And the next question comes from Georgina Fraser from Goldman Sachs. Your line is open. Please ask your question.

Thank you so much for squeezing me in. Two quick questions. One of them is I'd love Air Liquide's read of the inflationary environment. So if you could give us your thoughts on how pricing should develop in each of the regions in the second half of the year. And then my second question was, I was surprised that Americas was the strongest region in the first half. Could you just explain what was driving that so I've got a better grip? Thank you.

Thank you very much, Georgina. Thank you for your two questions. For the inflation, we do expect things to continue on the same trend overall. We still see a very strong momentum in North America, especially, and this is a mix of course, I mean the environment, but I mean the skills of our teams, not only to follow, but to also the inflation, but also to provide the value added services and innovation to our team. In Europe, I mean, we resist very well and we continue to pass positive pricing There is one area in the world where it's more challenging. It's China today. For some part of the business, especially on the bulk, the helium, of course, but it's a very specific case where we are basically price neutral for this. But we have a very strong growth for the IM. It's high single digit growth in China. But the pricing is probably the weakest for the group in China. For the rest, it remains solid and will remain solid. For the US and the contribution of the US, I think it's different things. The overall very strong resilience, of course, of the model. Good development in terms of pricing, as I mentioned. But also, we have to recognize the contribution of the healthcare activity being extremely solid. At the same time, very solid in the U.S., in North America, for med gas for the hospital, with a very strong growth there. but also the home care activity, mostly in LATAM, which was extremely strong and robust in terms of growth. Keep in mind also that we had some startup effect in the large industry, in the US especially, that contributed to that. Once again, I think we have to keep an eye on the U.S. because we know that the U.S. economy is one which is very reactive. Again, it's too early to give a direction, but we start to see, at least on the project, I mean, some things which are happening. And given our footprint overall, you know very well that we will be able to seize any opportunity for growth in the U.S. I think we have to stop here now. So this will conclude this session. Thank you very much for all your questions. To summarize, we delivered, again, a strong performance in the first half while being able to prepare the future. The future goes through successful development on major projects, as we have just discussed. With our strong ongoing transformation, Air Liquide stands as a highly resilient, increasingly efficient, and sustainably growing company. We are very well positioned to navigate the evolving global landscape and deliver continued value to our shareholders. Thank you very much. For the ones who are going to take some vacation, I wish you a very good summer break. And thank you again for your attention. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect. Dear speakers, please stand by.