L'Air Liquide Ord

Good morning, ladies and gentlemen, and welcome to the Air Liquids Third Quarter 2025 Revenue 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 over to the Air Liquids team. Please begin your meeting and we 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-Jacques and Jérôme Pelleton will present the third quarter revenue. For the Q&A session, they will be joined by Émilie Morin-Renoir and Adam Peters, both GroupsGP overseeing respectively INIE and North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on February 20th next year for our full 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 walk you through the very solid achievements of the group in the third quarter of 2025. Of course, we are still operating in the same turbulent environment that has defined the market since the start of the year. But despite these conditions, I am glad to report that Air Liquide is maintaining a very strong momentum. We are delivering consistent sales growth that demonstrates far more than just resilience. We continue to grow. Also, we are firmly confident in achieving our margin improvement target driven by the structural transformation underway across the group. At the same time, we've had, again, significant success in business development securing new contracts and reaching a new record high backlog.

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

Sales grew plus 2% on a comparable basis, maintaining the same positive trajectory in spite of everything. All the key indicators are very well positioned and reflect our strong performance again this quarter. IAM pricing remained accretive, increasing above 3% in Q3. This shows a sequential increase versus Q2 2025, demonstrating effective management in a demanding environment. The momentum on efficiencies remained very positive, with more than 20% growth compared to Q3 last year. This means that over the nine months, we have already delivered 15% more efficiencies than in the whole year 2022. This performance is highly encouraging, as it clearly validates that the structural efficiencies from our major transformation program are delivering. I personally like this very much as it allows us to positively improve the margin while accelerating our investments for the future. Cash flow remains extremely robust, going plus 7%, excluding the currency impact. And our ESG KPIs remain on track in Q3. Finally, our investment backlog reached a new record high level, approaching 5 billion euros for the first time in our history. This is a solid, tangible indicator of future growth, which will begin to flow through as the projects under construction are going to start up. In summary, this has been a very solid quarter, perfectly aligned with the positive trend of the first half. These results provide clear evidence that we are firmly on track

to deliver our commitments in terms of both current performance and future growth. You remember that last quarter we introduced the four growth engines of the group.

This is not just a concept. When we look at the slide four, we see concrete wins and illustration this quarter of how those four growth engines are in action. First, We are talking about low-capx growth by getting more out of our existing assets. This quarter, we signed, for example, new contracts to supply hydrogen to two of the largest US refiners. This is a great example of low-capx growth and the benefits of air-liquid assets. We will leverage our existing pipelines and infrastructure for new additional cells. while limiting the investment to only 15 million US dollars. We're simply integrating new compression and distribution gear. Capital intensity is around 0.5 for this project. These types of projects are clearly a reservoir of growth in a lower volume environment because it let us boost sales without the usual capital expenditure. Our second growth engine is investing in our core activities. Our electronics leadership is a key part of this. We closed two major long-term contracts with the leading semiconductor manufacturer this quarter. The first was a 250 million euros investment in Dresden, Germany, our largest ever electronics investment in Europe. The second was 130 million euros investment for two carrier gas units in Singapore. An additional illustration is in home health care, which is another growth driver of our core activities. In Q3, we signed a new large contract in Spain to provide home health care for patients with chronic respiratory conditions. We're investing in an innovative approach where using unique proprietary digital and AI solutions to ensure cost-effective personalized care. In the current very viable environment, we expect home health care to be a steady growth driver for the group. The third engine is the energy transition. A great example, confirming our leadership position in this market, is the 500 million euros investment we decided this quarter for the alligator project in the port of Rotterdam. This massive 200 megawatt electrolyzer will notably supply total energies with green hydrogen through a long-term contract. Finally, our fourth growth engine is acquisitions. In Q3, we announced the agreement to acquire DIG Airgas in South Korea. This is highly strategic because it gives us a stronger foothold in the world's fourth largest industrial gas market. which is expected to double in the next 10 years. Critically, DIG's footprint and operations are also a perfect complement to our current activities in Korea. At this stage, the closing process is going as expected. We also continued making small, targeted bolt-on acquisitions to increase density in our existing operations, like the announcement yesterday of an acquisition to strengthen our footprint in India. All in all, the first three growth engines are currently fueling our €5 billion backlog. When you add the major DIG acquisition and our bolt-on operation, That figure gets close to 8 billion euros in total capital deployment, securing future growth. Return on investment remains, of course, a key priority for the group. In spite of the increased investment in the past three years, and thanks to the improved margins, our recurring ROC remains at plus 11% at the end of September, above the 10% threshold of the advanced target. I will conclude on slide five, showing the robustness of ENFT equation in the current environment, combining very strong delivery of today's performance and steady ability to invest for the future. We proved once again in Q3 that we are on track, thanks to our proactive management of our transformation and strong position on growth opportunities. We are highly confident in our ability to navigate the evolving global landscape and continue delivering value to our shareholders. Thank you very much for your attention. I now ask Jérôme to present the details of the Q3 performance. Thanks, François, and good morning, everyone. I will now review our numbers in more detail. So coming back to Q3 and now on slide 7, group sales have been resilient overall with a growth of plus 1.9% on the comp basis, excluding energy pass-through and forex, there is no significant external scope effect in Q3 2025. Published sales are down minus 2.4%, widely done by the negative forex effect of minus 4.2%, mainly due to USD and the nearly neutral energy pass-through energy effect of minus 0.1%. So gathered services sales achieved a plus 1.9% increase year-on-year, and engineering and technology external sales increased plus 1.7%, while resources are still mostly dedicated to building the many internal projects in the backlog for large industries and electronics.

I am now on slide eight.

Growth in Q3 for gas and services has been driven by the Americas, when ELEA and Asia were already flat. From the business line standpoint, we can see that healthcare and industrial merchants drove growth in Q3. And electronics is also a strong growth driver if you exclude the sales of equipment and installation. This, once again, highlights the value of our diversified development strategy, capitalizing on the complementarity and right balance among our different business lines and geographies. These regions, coupled with existing capacity, strong growth driver, and increasing performance, as explained earlier by Francois, positions Air Liquide very well for the future. Let us now review more specifically the activity of each of our main geographies in Q3 2025. I am now on slide nine. Driving growth cells in the Americas delivered a strong plus 5% on the COMP basis. Large industry posted strong growth despite a high comparison basis in Q3 2024. The business line benefited from a continued ramp-up in air gases from major air separation units started in February 2024, solid startup contribution, as well as lower turnaround during the period, which more than offset lower base business, especially hydrogen with less import of EVs. As a side note, you may expect a few more turnarounds in Q4. Immersion sales were driven by a positive pricing effect of plus 4.5% year-on-year, which improves sequentially from Q2. Pricing was driven especially in North America by adjustment on cylinder rental, in some regions at Ergas. Gas volumes were flat, and outputs showing improvement were less negative, but an acquisition also contributed to growth. Strong growth in healthcare was achieved through higher pricing in the US and LATAM, coupled with a growing base of home healthcare patients. This growth was further supported by the development of the Inteliox differentiated solution, It offers a digital gauge that provides caregivers with a direct reading of the remaining oxygen time, an excellent example of value creation through innovation. Finally, electronic cells posted normalizing ENI cells versus a record high level last year, offsetting strong growth in advanced materials and specialty materials. Carrier gases were resilient.

Cells in EMEA were resilient with continued solid growth in healthcare.

Large industry posted a slight drop. Hydrogen cells were down in Germany, as were Cogen in Benelux. However, positive air gases overall and robust hydrogen in the Middle East provided a partial offset. In Merchant, cells were flat with still a solid plus 1.5% pricing, despite lower energy indexation in bulk. Volumes were driven down by liquid CO2 and helium, as anticipated. But volume showed resilience, as did packaged gas. To be noted, excluding the negative impacts of helium, merchant sales in Europe were up plus 1%. Finally, health care steady plus 4% growth was supported by an increasing number of patients in home health care, which serves diabetes, sleep apnea, and community care needs in Germany. Med gas sales remained steady. Asian sales were resilient. In large industries, there were continued contributions of startup pop-ups in China and Korea, but offset by low-based business and high comparison basis in Q3-24. Sales in merchant were down minus 1%, or up slightly, excluding the impact from helium. The region saw improving pricing at minus 0.5% versus minus 1% in the second quarter of this year. China posted a positive plus 2% cell growth and above plus 4% excluding helium, with the growth mainly driven by bulk and onsite. Pricing remains weak in China, hampered by helium and the deflationary environment, as anticipated. Activity in the rest of Asia was more mixed. Electronic cells were flat overall, but were above plus 6%, excluding Ni, which is normalizing after a record year. Carrier gases maintained a double-digit sales growth and advanced material short growth, while specialty materials were soft. I will now turn to slide 10, where I will comment on our Q3 activity by business line. In merchants, we saw an increase in pricing to plus 3.1% compared to plus 2.7% in the second quarter. Overall, volume in gases were slightly up, including bolt-on acquisition, and output volumes were less negative, improving sequentially. The main end markets posted volume growth were secondary electronics and packaging globally, materials and utilities in the U.S. and automotive in Asia. In large industries, startup and ramp-up contribution offset lower demand. Major ramp-up indeed has positively contributed in the U.S. and Asia, offsetting lower demand, mainly in ELEA and Asia, while the base business was more resilient in the Americas. Slide 11, electronics, where we continue to build our leadership position, continues to grow at plus 6%, excluding ENI. Carrier gases delivered in the strongholds with eight main startups year-to-date, mainly in China, Taiwan, and Japan. Carrier gases and solid advanced materials in China and U.S. almost fully offset normalizing ENI cells, which are more cyclical and compared to a record high in 2024. electronic specialty materials were flat overall. Finally, health care continues strong growth trends, again, high comparable rates last year. Many come from home health care, notably in Europe and South America, from medical gases in the Americas and from specialty ingredients. On slide 12 now. As a reminder, our margin improvement objective is supported by a structured plan leveraging our unique strengths and based on three pillars. First, IAM pricing continues to be solid despite a high comparable basis as you see on the graph. To be noted, we have an uptick in pricing from Q2 to Q3 despite the lower index in bulks in EMEA, and we continue to focus on price management and pass-through price versus cost dynamics. Regarding efficiencies, as François mentioned, the strong performance of a 23% increase demonstrates that the structural initiatives from our major transformation program are delivering and strongly supplementing our ongoing efficiency program. This impact is, of course, positive on our margin, as it helps to compensate for some headwinds, such as unfavorable currency impacts. Lastly, we have continued to actively manage and optimize our portfolio. We have indeed closed eight Bolton acquisitions year-to-date, as well as announced our agreement to acquire DIG in Korea, in South Korea, as François mentioned. Meanwhile, we executed three divestitures. Air Liquide continues to focus on strategies, profitable and margin-accurate opportunities. On slide 13 now, the 12 months Portfolio opportunities remain stable at a high level of 4.1 billion. Our total industrial and financial decisions for the quarter were also high at 924 million euros, this including the FID for the Eligator project in the Netherlands, the electrification of a net separation unit in China, and a large carrier gas project for a leading electronic customer in Germany. Finally, our investment backlog reached a new record level of 4.9 billion euros with investment decisions entering the backlog more than offsetting medium-sized startups leaving the backlog. Projects in electronics represent one-third of our total backlog in line with our growing leadership in the segment. We achieved 233 million euros of sales contribution for startup and ramp-up year-to-date and we remain confident to deliver at least 310 million euros by year-end.

To conclude,

In spite of the current turbulent environment, thanks to the ongoing demonstrated resilience of our business model and our disciplined self-help actions, we confirm our guidance. Thank you for your attention. We can now open the Q&A session. Back to you, François. Thank you very much, Jérôme. So let's start the Q&A session. Thanks.

Thank you so much. Dear participants, if you wish to ask a question, please press star 1, 1 on the telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. This will take a few moments. And now we're going to take our first question. And it comes from the line of John Campbell from Bank of America. Your line is open. Please ask your question.

Thank you. Good morning, everyone. Thanks for taking my questions. Two, if I can, quickly. I wanted to get a sense for the feeling you maybe have on the activity levels in the fourth quarter. It looks to me like organic growth in the third quarter was slightly stronger, perhaps, than some had expected, etc. It looks like in several areas, such as large industries or healthcare, the year-on-year comparison basis gets sequentially noticeably easier in the fourth quarter relative to the third quarter. So any comments you could perhaps give on the fourth quarter and even looking further ahead, perhaps into 2026 for the electronics segment, where active organic growth has been perhaps slightly sullied by normalizing equipment sales? That's the first question. The second one, if I can, relates to any of the latest details you can give us on amendments related to the corporate tax rate in France. I noticed there were some potential revisions in an amendment yesterday evening. Thank you.

Thank you very much, John, and good morning. Regarding the trend, I think overall we are in the same kind of environment. What we have seen in Q3 is, to some extent, an acceleration of the growth in some segments at the end of Q3. To some extent, Q3 was better than what was maybe expected at the beginning of the Q3. So that's positive news for sure. We do expect Q4 to be above Q3. But again, in the current environment, we have to be cautious. I mean, there's so much variation in the Indian market and so many things happening from one week to another one, I would say. But overall, the trend should be positive. We do expect, I mean... momentum to continue in the Americas overall, and also some comparison effect being positive in Europe overall. Regarding the key markets, indeed, as we mentioned, I mean, large industry should see some pickup, and we do expect the same probably for industrial merchants, mostly driven by the U.S., as we have seen in the past quarter. Electronics overall is probably likely to be flat. Let's keep in mind what Jerome has mentioned about the comparison effect, which is still quite strong. And healthcare is remaining very strong and should continue its progression. So all in all, Q4 should see, I mean, continuous momentum and improvement, but again, in the current environment, let's be careful. You know very well that our strategy has been very clear in that in the current environment and regardless of the environment, we are determined to improve the margin with many actions which are self-help action. The transformation program that we are doing is contributing clearly, so that should give us a good visibility and good confidence for Q4 regardless of the environment. Jerome, comments on the French corporate tax. Thank you very much for this important question. I would say for the question you raised on what's happening right now, it's a bit difficult to comment. You know, it's a discussion. We have potentially an amendment, but nothing has been voted yet. So I will not comment on the impact of 2026. What I can tell you, at least for 2025, and something we already mentioned, The effective tax rate that we can expect for the year, for the year 2025, should be around 26%, which is something which is coming mainly from the impact of the LOAD finance for 2025. But for 2026, it's a bit early. And of course, we'll come back, I would say, later when we have more certainty on the topic. Thank you.

Thank you very much, Gérôme.

Thank you, Jean.

Next question, please. Thank you. Just give us a moment, and now we're going to take our next question. And it comes from Alejandro Villal from Santander. Your line is open. Please ask your question.

Yes, hello. Thank you for taking my questions. The first one is about the investment backlog that you highlighted in 25. The contribution of this backlog is about 300, 340 million euros. If you can give us some guidance or some outlook about next year, your expectations of the contribution from the new projects, from the start-ups, And the second question is about the self-help programs you mentioned, about efficiencies. We have seen this acceleration of more than 20% year-to-date. If you can elaborate about which are the sources of these additional efficiencies and the outlook for next year as well, if you can continue to generate these efficiencies. Thank you.

Alejandro, good morning. Thank you very much for those two questions. Jérôme, do you want to take the two questions?

Yes, François, I can take it.

So as related to the backlog, you're right, the backlog is a record high, nearly 5 billion. It's a historical backlog. And of course, just to remind you, it's made by projects that are signed so that we deliver growth in the coming years. And we are particularly aware that for this year, The impact will be at least 310 million euros. And that's where we stand right now for the contribution. So as you see, it starts to be a significant contribution on the top line. As related to efficiencies, you're right also. We're very happy with the trend on the efficiency and plus 23% versus last year. As François said, we are the number that represented the full year impact of 2022. Just as in mind that these efficiencies are rising. There are multiple, you know, that's the result of the transformation program that we have, you know, that we are executing right now, that we're already commenting many times. There are different folders. There is, of course, an acceleration in industrial efficiencies, you know, that we have created the group industrial efficiency, the group industrial direction, and this is accelerating, and we're very happy with the trend that's coming. We have also an acceleration in procurement as well, which is also delivering, and we have also a contribution for all the restructuring measures that we are setting, which are also delivering. So, all in all, plus 23% is a strong number, and it's much better than what we were able to do in the past, and we can be very happy with, of course, the impact on the market that we're translating into.

Thank you very much, Jérôme. Next question, please.

Yes, of course. Now we're going to proceed to our next question, and it comes to the line of Thomas Rigglesworth from Morgan Stanley. Your line is open, please.

Thanks very much for the opportunity to ask questions, too, if I may. Firstly, on the large industries in Europe, you call out hydrogen in Germany. Is that purely the force majeure, or are you seeing other impacts weighing on that market? And then secondly, kind of more of a longer-term question, obviously CBAM's coming in next year. You know, do you think that will drive an acceleration in the investment opportunities that you see? Do you think people are going to start to react now to CBAM and there's been a wait and see? And alternatively, do you think people will now start to look to shift capacity out of Europe into other geographies because of CBAM and the fact that it's actually more efficient to do so? more environmental, stroke green, stroke renewable projects in the Middle East and the US. Any comments there would be very helpful. Thank you. Thank you very much, Tom.

I will ask Emilie to speak about the hydrogen in Germany, and I will comment on the CBAM.

Yes, thank you, Francois. Good morning, everyone. So, on the hydrogen in Germany, So it's mostly related to events at our customers, indeed. So we shouldn't read too much into that. Overall, in Germany, the business and the activity was resilient, which, given the current context, is already good news. And you've seen some good level also of project development. And you've seen recently the Elbe announcement, where we are investing 250 million euros in Germany in the semiconductor industry. So you see the economy, despite the headwinds, is resilient. We also hope that the infrastructure fund driven by the government, the German government, will deliver results and positive impact on us. So we shouldn't read too much into this hydrogen industry, mostly due to customers.

Thank you very much, Emilie. Regarding CBAM, you are absolutely right, Tom. This is coming into force in Europe, so it's going to create a new environment It's a little bit early to say exactly what's going to happen in the industry, but if I step back and I look at the impact for air liquid, I think overall it's going to be a positive trend because at the end of the day, it's really putting value on carbon and low carbon products. So today we see industry which are getting organized in Europe to drive decarbonization for sure. But what we see also, and I had many discussions with customers in different geographies, that they are starting to decarbonize their own processes to be able to import to Europe. And this is the case for sure in China, which is driving decarbonization opportunities in China, but also in the Middle East and in the U.S. And as you know that we are clearly, I mean, a leader in terms of solutions to decarbonize the manufacturing processes, we will capture the opportunities being in Europe or being in the other countries. So all in all, I think it's a very positive signal towards the decarbonization of the industry.

Thanks very much, both.

Thank you. Now we're going to take our next question. And the question comes, Lan, of Tony Jones from Rothschild & Co. Your line is open. Please ask your question.

Thank you, and good morning, everybody. I've got two questions, if I may, too. On comparable growth, good results at 2%, but I just wanted to break it down into the growth factors. So if I weight a price from merchants, that gets me to about 1.3%, 1.4% of the group. new projects just over 1%. So that implies underlying volumes are down around 1%. I think firstly, is that correct? And then secondly, is that the right sort of run rate we should be thinking as we go into early part of 2026? And then secondly, my questions on uses of cash. Early Key's not got a lot of debt and your choices are either cash return or CapEx, but instead we've seen more acquisitions, could you talk a little bit about the selection criteria for that? And when you're making your acquisitions, is this about accessing new growth or a creative margin expansion? Thank you.

Thank you very much. For the first question, Jérôme, do you want to comment on that? And I will make some comment on the strategy for the acquisitions. On the comparable cells, you know, we are basically adding, I can break it down rapidly by sub-segment that would be helpful. In merchant, we have plus 2.7% growth with pricing at plus 3.1% with improved volume. And large industry, we have basically startup contribution that offset low demand. Electronic, we have growth, but, you know, it's negative because we have a stronger ENI comparable growth. Last year, and healthcare is close, coming from volume and price. So as regard to volume coming in the months to come, it's a bit difficult to say. You know, we're quite cautious, but overall, we see better, I would say, better volume, especially in our goods. We're still negative around in the U.S., for example, but it's much lower than last year. So all in all, we can see that the trend in Q3 was better than before. Now, maybe you want me to talk about the cash also? We'll talk about the strategy for the acquisition. So, the first thing is that thanks to all the improvements in the profitability, as you mentioned, the cash flow of the group has increased significantly. So, we have basically the means to deliver and to execute our strategy. The first priority is to invest our core business, and you see, and Jerome mentioned it, We are deciding on new investment. We have a very strong backlog and we can afford basically to take the opportunity and to seize the opportunities in our core markets and core opportunities. So that's number one. Number two, clearly, I mean, we have also the means to make acquisitions. When we are making acquisitions, there are different types of acquisitions. There are the Bolton acquisitions, which are mostly present in IM and in home health care. The purpose is to increase the density, to take position, to consolidate some key markets, or sometimes to enter into new areas which can complement what we have. Typically what we have done in India, is the illustration of that, a very good complementarity to our existing footprint, allowing to cover better, I mean, some key markets. At the same time, I mean, there are some strategic opportunities, whether we see, I mean, the opportunity to take position in key markets, the one that we have done in Korea is exactly this. It's positioning us for the future and for the growth. But as I mentioned, and Jerome mentioned that previously, of course, when we look at an acquisition, there is a strategic fit and the opportunity to grow. And our acquisitions are there to grow the business and to develop the business. But of course, we are looking at the positive contribution of those acquisitions, either because those are existing businesses with good profitability or because we see synergies and integration. And typically, the Bolton acquisition acquisition, for example, the one that we are doing in the US or in China, in this category, we can improve the profitability because of the integration in a much larger and more efficient organization. So once again, I mean, this is part of the capital allocation of the group targeting growth, but of course, contributing positively to the net profit improvement of the group.

Thank you. That's really helpful. Appreciate it.

Thank you very much. Let's take the next question, please.

Yes, of course. Just give us a moment. And the next question comes from Chetan Udashi from JP Morgan. Your line is open. Please ask your question.

Yeah, hi. Thanks for taking my question. I had a couple of questions. First is on your pricing in merchant in the US. You're noting some of that is because of the higher cylinder rentals. I'm just curious whether this is more... pass-through of higher running costs because I suppose you also have to pay more for sourcing these cylinders or is this real incremental sort of, you know, benefit for Elecate from higher pricing in the U.S.? And the second one was in your large industries business. I'm a bit surprised that Asia underlying is weak because, you know, especially in chemicals when we look at The production of chemicals in China, it's been growing very, very strongly at the expense of, of course, Europe. So I was surprised that Asia is actually not up in terms of on-site. So any indication on dynamics in Asia? Thank you.

Thank you very much, Chetan, and good morning. Adam, can you speak a little bit about what we see in the merchant in the U.S. and the good momentum overall?

Yes, absolutely, Francois. And Shetan, thanks for the question. So looking at the IAM business in the U.S. in particular, and I'll speak to the pricing point as well, but I think we've seen obviously a resilience in the gas side, which has been great, and that's maintaining well. And we've seen sort of an inflection point on the hard goods piece. And this is a positive piece that we've seen, particularly towards the end of the quarter. And, you know, a little bit early to say that there's a trend in terms of volumes on the hard good side, but certainly a nice inflection towards the end of the quarter, which is great. On the pricing in particular, we always try to stay ahead of the cost curve. And so what we do is we monitor very closely, as you know, price pass-through and making sure that what we do from a pricing standpoint contributes positively to margins. So this is very well ingrained into our normal operating model for all of our associates across the U.S. in terms of our pricing campaigns, our pricing tools, and the like. And we maintain a good momentum in that regard. So even when we think forward about cost increases related to inflation and the like, our goal is to stay ahead of the cost curve and make sure that what we do from a pricing standpoint is accretive to our margins.

Thank you very much, Adam. Regarding the large industry in Asia, I think, Chetan, what you should look at is clearly the different impacts. We have seen a positive contribution of startup of the business, but clearly there has been significant turnaround in some key facilities impacting us. So I think what you should read there is mostly, I mean, the impact of the outage and the maintenance at some key customer, especially on the ICO business, but also air gas in some cases, especially in China. So that's probably the reason for the uncorrelated performance of large industry in Asia compared to what we see. from the demand side. But again, it's mostly related to specific maintenance and turnaround at customer sites.

And are these turnarounds in chemicals, I suppose?

Yes, those are mostly chemicals. So the ICO, it's mostly the gas supply and the air gas also is mostly for the chemical. So that's why you see this impact. Understood. Thank you. All right. Thank you very much. Next question, please.

Yes, of course. And now we're going to take our next question. And it comes to the line of Jean-Luc Romain from CIC Market Solutions. Your line is open. Please ask your question.

Good morning. I would like to have more information about your project. Jean-Luc, can you speak up? Because it's difficult to hear you. I'm trying. I would like to have a little more detail about your acquisition project in India. How does it compare to the acquisition project in Korea? I think it's smaller, but I would have to have an idea of the relative size between both companies. And my understanding is that the company you're bringing to India is kind of a subsidiary of, or was a subsidiary of a Chinese industrial business company.

Thank you very much, Jean-Luc. And I will ask Emilie to speak about this nice acquisition in India.

Good morning, Jean-Luc. So, yes, we've announced that we are in the process of acquiring Nova Air, this industrial gases company in India. It's a small acquisition. It's below $100 million. So it's a small scope, so it's really very different, obviously, from the acquisition we are doing in Korea. It's a bolt-on acquisition, like we said, and it's to both densify and extend our presence in India, like François explained. And remember, we are present, or we've been present in India since 1992, both in the gas and service business. as well as engineering and construction. We have a department there which is growing, several manufacturing entities in India, and we just inaugurated our global capacity center there in Sine. So overall, this will expand our presence in India, which we consider to be really an area for growth. So it really well aligns with our growth ambition in this country.

And, Jean-Luc, I think if I heard correctly, I mean, you were mentioning, I mean, is that a subsidiary of a Chinese company? It's a private equity fund, PAG, who is the owner, so that's why maybe you thought that, but it was a private equity fund who owned that company before. Okay. Thank you very much. We have next question, please.

Yes, of course. And now we'll take the next question. It comes from from BMP. Your line is open. Please ask your question.

Yes, thank you, and good morning. Two questions, please. The first one is on helium. It seems to be getting worse to the point where Gazprom is reported to delay the second stage of the expansion. And you're now talking about pressure in Europe as well. Can you help us understand the magnitude of the worsening for you? And also, how do you see the risk of a spillover also coming to the US? I understand the sanctions. but it seems that the sanctions are not really having any impact, certainly on your European business. And then the second question for Jerome on the 100 million positive impact from the accelerated cash depreciation in the U.S. Is it 100% of the potential for you at this stage, or is there more to come? And also, can you talk about the magnitude of the equivalent measures in Germany? Because I think that's also something that they are working on from next year.

Good morning, Laurent. Thank you very much. For the helium overall, let's keep in mind that helium represents 3 to 4% of the turnover of air liquid. So in terms of impact on the cells, it's quite limited overall. We have seen the market being clearly disturbed by, as you mentioned, from the sourcing piece, Russia and Gazprom, with some products flowing in some regions of the world which are not following the sanctions on this. And also from the demand side, where we have seen lower demand in some key markets. As far as air liquid is concerned, I mean, we are managing this business very tightly, and the impact on the negative in terms of volume and what we see in some markets on spot pricing is very limited. Keep in mind that We have worked a lot on the supply chain by diversifying our sources of helium. We are not taking any product from Gazprom, of course, but also adding the cavern, which is for us a great way to manage the situation between the market demand and the production side. And also, and it's very important in the current timing, we have developed, I would say, original marketing approach in the past few years where we have converted many of our contracts to medium-term to long-term contracts. Probably 70% to 80% of our volumes are under those type of contracts, which is giving us very good stability and visibility in terms of market. And this is true for the IM market, but also for the electronics market, which is growing. So again, all in all, yes, there are some disruption in this market today, but I think we are managing that very well overall as far as we are concerned. For those who don't hear, Giro, please. Yes, of course. Thank you very much, Giro. Good to hear you. You're right. The recent adoption of the OBB legislation, bonus tax depreciation, allows for 100% tax for fiscal depreciation on your project. which is a significant increase because we have 60% in 24 and 40% in H1. So the impact in Q3, we are benefiting from, you know, one of positive cash impact of 100 million. If you want Q2, you have three figures, and that's where we are today. But we will continue to benefit from this increase in the fiscal depreciation because, you know, we'll continue to invest in the U.S., as you know. So definitely it's a very good thing for the – for the cash flow. As related for Germany, you know, there are discussions on corporate tax. I know that it's a bit early to say. Of course, we'll come back to you when we have more clarity on that in that regard, if I may say so long. Thank you very much, Jérôme. We have another question, please.

Yes, of course. And now we're going to take our next question, and it comes to the line of Geoff Herr from the BS. Your line is up, and please ask your question.

Yeah, hi, good morning. I just wanted to ask quickly about the backlog, obviously going up to 4.9 billion. Could you just give some explanation as to what growth you've seen? And obviously with the DIG acquisition, what do you expect that to add to the backlog when we get into 2026 when the deal is completed?

Thank you very much, Geoff. Maybe let's comment a little bit by geography, what we see in the backlog and what we see in terms of business development opportunities. So, Adam, do you want to comment on quickly what you have in the backlog and what you see in terms of business development opportunities, both, I guess, in LI and electronics? And same for Emilie, maybe in the key region?

Yes, absolutely, Francois. So starting with the Americas, and Geoff, thanks for the question. So the backlog remains strong. I think one of the comments that Francois made was around the four growth engines that we have. And if we look at existing assets and how to leverage those, that certainly plays into our backlog. And it's a low capital intensity growth that we see happening in the near term, which is great. So we don't have to wait for full construction on those assets to deliver on those hydrogen opportunities that we see right around the corner. So this is one that we see contributing to growth in the near term being 2026, 2027. When we look at other opportunities, we see we have a number of projects which are under execution today in the electronic space in North America, as well as in the typical large industry space across the U.S. and a little bit in Canada. The development piece continues to be extremely robust for us in North America, and this is one where we're looking at not only the development on the energy transition side, where we continue to follow that very, very closely, including projects like Exxon, which continue to be developing well. We also see it in other areas on the traditional side of industrial gases around the steel sector, around refining and the like. And then certainly on the electronic space. So the backlog continues to be strong in North America, and then the development activity continues to be very strong as well. So maybe I'll stop there and turn it over to Emily.

Thank you very much, Adam.

Thank you, François and Adam. So in Europe, I would say the business development is still very active. So two things. So on the backlog first, we still have a good backlog. The projects that are in our backlog are are strong, they are with a long-term contract, with solid customers, they progress as planned, and they will deliver results. We've had two additional projects, like you've seen, Elbe in the semiconductor industry in Germany, and Elevator in the Netherlands for a 200 megawatt electrolyzer. So, the backlog, again, is strong and solid. For what is being developed right now, we continue to see a good pipeline of opportunities and active project development. I would say both in energy transition as well as in other activities, core activities. Two other sectors where we see maybe the most drive are RF and BO hydrogen. So there's still room here for good projects with strong customers. And we have a solid of takers and second in the cement sector. industry. Seven players are continuing on their journey for decarbonization. And we are here to support them and we have active discussions with them. So overall, I would say momentum is still here. You've heard the recent wins and really major ones in Europe. Eritrea continues to be in a leading position in energy transition and overall broadly in the industry in Europe. So we are well positioned to seize any opportunities whenever and wherever they happen.

Thank you very much, Emilie. So maybe I will conclude with Asia. I know because Emilie is very positive about Europe and she's right actually because we see quite a bit of opportunities for sure. I will conclude with Asia and close the loop on your question, Geoff. We see a sustained pipeline of opportunities in Asia for sure. There are two main drivers as far as we see currently. The first one is electronic, clearly, where we see again and again a strong pipeline of projects. which, by the way, gives us the opportunity to be quite selective in terms of strategy and profitability for the project. But as we are number one globally and number one in Asia, I think clearly we see this as a strong potential. And we continue to see, I mean, projects being developed around the decarbonization, either around the carbon capture or conversion of some unit to limit the carbon footprint, which, by the way, close the loop to what we mentioned before about the seabank. A great illustration of that is the momentum that we see in China, still very strong, both in terms of electronics, along all the types of demand in the electronics industry, but also decarbonization, mostly conversion of some projects using steam from coal towards electricity, with a very significant carbon footprint reduction. So extremely positive for the planet, but also for us as we are able to secure long-term contracts. There's probably more to come soon on that topic. Finally, in other countries, we see also, depending on the country momentum, you had a specific question about Korea and GIG. Of course, I mean, we still need to wait for the closing to happen. And as I mentioned before, everything is well online. We have a very solid portfolio of projects. We have more than 20 projects which are under execution within GIG. So we do expect these to contribute. And this is not taking into account what should come, which is the next wave of major electronics investment in Korea, driven mostly by AI with some of the key players who have announced the project but not yet launched the start of the project. So all in all, very strong pipeline of projects in Asia. I do believe we have... maybe two more questions before we stop. So the first one, please.

Yes, of course. And the question comes from the line of Georgina Fraser from Goldman Sachs. Your line is open. Please ask your question.

Thank you so much. Good morning, everyone. I've got two questions, and the first one If we can just really zoom out, how do you explain the lack of growth in large industries over the last four years and what's needed to resolve that situation? And then second question is the super strong backlog. It does seem like despite all of our fears, the energy transition is still a big part of the driver of the backlog. Can you talk about how the capital intensity of the backlog is evolving? Thank you.

Thank you very much, Georgina, and good morning. Good to hear you. So the first one on the large industry, clearly we have mixed trends in this segment. We have seen projects, and we are investing on projects, mostly driven by the energy transition. And at the same time, we have seen the declining base or declining volumes in many of the industrial locations. So those are the two effects, taking into account that It's quite stabilized today in terms of a decrease in the volume in most of the region of the world. The most impacted one has been Europe, clearly. So if you look at the operating rate of the large industry assets in Europe, it's lower than usual, for sure. And for the U.S., it has been stabilizing overall. When we talk about the new project and the contribution of the new project, you have seen quite a bit of investment, as we discussed before. We have to take into account that only a small portion of the new investment in large industry is already start-up and contributing. Keep in mind that many of those projects, they take three to four years to build, especially the one in the energy transition, which are a little bit longer. So you don't see the full benefits of the new investment in large industry, which means that all in all, I mean, the new startup and the small contribution of the new investment barely compensate the decline in the volumes. Again, this is a segment where we have clearly a reservoir of growth. The contract that we signed in the US is a clear illustration of that. With only a small investment, we were able to leverage our existing pipeline and existing assets, which were not fully loaded, and get new sales at a very low capital intensity. So again, what is needed is basically demand, underlying demand, And whenever it will happen, we are in very well position to capture this growth with no or minimum capex in large industries. Regarding the backlog and the capital intensity in the backlog, I think overall the capital intensity is a little bit more difficult to read than previously for different reasons, as I explained before to some of you. The capital intensity, which is the ratio between how much capital you invest and how much sales you get, is directly impacted by the cost and the price of energy. And today, we see that the price of energy is very different from one region to another one. So this means that the... the capital intensity of the backlog is highly dependent on the geographical split of the project within that backlog. That's one element. The second element is that we see that In the energy transition, there are more projects where, for example, the customer is supplying the renewable electricity. That's the case for Total Energy in Normandy. And we basically sell to them, I mean, the hydrogen, which means that at the end of the day, the capital intensity of this part of the project is higher than a classical project. which means that all in all, I mean, again, it's very difficult to predict. It's a little bit higher probably than a few years ago when the energy overall was quite low in terms of price, because on average, the energy is higher. But that's what I can say for this capital intensity. Which leads me to another point, which is the fact that in the future, it's going to be more and more difficult to use the capital intensity the same way, ratio of sales versus the investment. What you should be looking at is the return of the capital implied and employed, and then looking at how much profit OIR or EBITDA is generated by investment, which I think would be a much better way to see the contribution to the growth of the investment that we are doing.

I hope that was clear, Georgina.

Very much. Thank you, François.

All right. Have a good day. Thanks.

Thank you. And now we're going to take our last question for today. Just give us a moment. And the question comes from the line of James Cooper from Bernstein. Your line is open. Please ask your question.

Good morning, everyone. Thank you very much for taking my questions. I've got two final ones, please. Just firstly on electronics. So on the slides that you showed, it was plus six, excluding E and I. Can you give us some indication of when you expect E&I to get more positive? And then thinking about the component parts of the growth, how do you expect this to evolve in the coming quarters and years? And then secondly is about China and the Asia business. The plenum was last week and the initial details of the five-year plan have come out for China. How do you think that, you know, going forward, this will affect your Chinese business, and what do you think it means for demand in the rest of the region? Thank you.

Thank you very much, James. For the first one, Jérôme, do you want to comment on the electronics? And I will comment on China. Yeah, thank you very much, James. You're right to underline the fact that the growth on electronics is very solid on carrier gas. On carrier gas, very much has gone double digits, which is, again, very, very strong, and we expect this growth to continue in the years to come because that very much reflects our leadership in this side. For E&I, it's a bit difficult because, you know, by definition, it's more volatile. We expect this to be more normalized during the current of the course of the next year, maybe around Q2, probably.

But again,

Don't pay too much attention on this because by definition, it's a more volatile market. Thank you. Thank you very much, Jérôme. So on China, as you mentioned, I mean, last week there was the meeting to set basically the course for the next few years. So a little bit too early to conclude on exactly what's going to be the contribution. But overall, what we can take already out of the discussion and some of the communication is clearly that there is a strong focus on industry and manufacturing to make sure that it stays a key pillar in the economic development of the country. At the same time, the decarbonization is still, of course, on the agenda. So I think those are very important for us overall, given our footprint and our offering to the market. So I see that as being positive and potentially very positive for the growth opportunity in China. I think one of the effects clearly which is needed is to continue to build the confidence of the end market, taking into account that this is one of the key factors to increase also the local spending in China. which is something which is important for the, I would say, the state of the economy. But all in all, clearly, we can see that already as a sign for more quality growth in China, in the industry. And again, given our footprint, we will be able to seize those opportunities, being in the industrial merchant overall, in the electronics or in the large industries. So thank you very much. We will conclude this session. Thanks again for all your questions. I would like to just quickly summarize some key takeaways. In Q3, we once again deliver continuous growth and, as you have seen, a strong operational performance. All this while, and we discussed quite a bit, successfully securing major projects for the future. Combining our growth for both engines with our ongoing transformation, we are, with all the management team, fully confident in our ability to navigate these turbulent times. And of course, to continue to deliver both on performance targets and growth, creating value for our shareholders. Thank you very much for your attention, and we wish all of you a very good day. Bye-bye.

This concludes today's conference call. Thank you for participating in Manal Audits Connect. Have a nice day.