Air Products and Chemicals Q3 2021 Earnings Report

Air Products and Chemicals EPS Results

• Actual EPS: $2.31
• Consensus EPS: $2.36
• Beat/Miss: Missed by -$0.05
• One Year Ago EPS: $2.01

Air Products and Chemicals Revenue Results

• Actual Revenue: $2.60 billion
• Expected Revenue: $2.47 billion
• Beat/Miss: Beat by +$129.94 million
• YoY Revenue Growth: +26.10%

Air Products and Chemicals Announcement Details

• Quarter: Q3 2021
• Date: 8/8/2021
• Time: Before Market Opens
• Conference Call Date: Monday, August 9, 2021
• Conference Call Time: 10:29AM ET

Air Products and Chemicals (NYSE:APD) is a global supplier of industrial gases and related equipment and services, headquartered in Allentown, Pennsylvania. The company produces and delivers atmospheric gases such as oxygen, nitrogen and argon, as well as specialty and process gases used across a wide range of industrial applications. Air Products designs, builds and operates gas production facilities, merchant distribution networks and on-site gas systems for customers that require reliable, high-purity gases and integrated supply solutions.

The company’s product and service portfolio includes packaged and bulk gas supply, pipeline distribution, on-site generation, gas handling and storage equipment, and engineered systems for gas liquefaction and purification. Air Products is active in hydrogen production, distribution and fueling infrastructure and provides technical and project engineering services for large-scale gas facilities. Its offerings are tailored to sectors such as refining and petrochemicals, metals and mining, electronics and semiconductor manufacturing, healthcare, food and beverage, and general industrial manufacturing.

Air Products operates internationally, serving customers through a combination of global merchant operations and engineered on-site plants. The company emphasizes operational reliability, safety and technical expertise in delivering continuous gas supply and turnkey project execution. In recent years it has also focused on low-carbon and energy-transition solutions—such as hydrogen and carbon-management technologies—to help customers meet evolving environmental and decarbonization goals.

Air Products and Chemicals Q3 2021 Earnings Call Transcript

Key Takeaways

• Air Products reported adjusted Q3 EPS of $2.31, a 15% year-over-year increase despite higher development-related costs.
• The company has deployed or committed nearly $18 billion in growth projects—1.5 years ahead of schedule—and now plans to deploy over $30 billion of capital through fiscal 2027.
• Sustainability remains core to the strategy, highlighted by a CAD 1.3 billion net-zero hydrogen project in Alberta (2024), a partnership with Cummins on hydrogen fuel-cell trucks, and the 3rd by 30 carbon-intensity reduction target.
• Strong cash flow generation—about $2.6 billion of distributable cash flow over the last 12 months—and a 45%+ dividend payout ratio support both shareholder returns and ongoing investments.
• Longtime CFO Scott Cracco will retire September 30, with Melissa Schaeffer succeeding him as Chief Financial Officer effective October 1.

Presentation

[Operator]

Good morning, and welcome to Air Products and Chemicals third quarter earnings release conference call. Today's conference is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products, and all rights are reserved. Beginning today's call is Mr. Simon Moore, Vice President of Investor Relations. Please go ahead, sir.

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Thank you, Rochelle. Good morning, everyone. Welcome to Air Products third quarter 2021 earnings results teleconference. This is Simon Moore, Vice President of Investor Relations, Corporate Relations, and Sustainability. I am pleased to be joined today by Seifi Ghasemi, our Chairman, President, and CEO, Scott Crocco, our Executive Vice President and current Chief Financial Officer, Melissa Schaeffer, who we announced is succeeding Scott as our Senior Vice President and Chief Financial Officer, and Sean Major, our Executive Vice President, General Counsel, and Secretary. After our comments, we'll be pleased to take your questions. Our earnings release and the slides for this call are available on our website at airproducts.com. This discussion contains forward-looking statements. Please refer to the forward-looking statement disclosure that can be found in our earnings release and on slide number two. In addition, throughout today's discussion, we will refer to various financial measures.

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Unless we specifically state otherwise, when we refer to earnings per share, EBITDA margin, the effective tax rate, and ROCE, both on a company-wide and segment basis, we are referring to our adjusted non-GAAP financial measures, adjusted earnings per share, adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and adjusted return on capital employed. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section. Now, I'm pleased to turn the call over to Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you, Simon, and good day to everyone. Thank you for taking time from your very busy schedule to be on our call today. Today, in addition to announcing our results, we do have a significant announcement, which is updating our future plans for growth and capital de-deployment. Before we get into the details, I would like to say a few words about our CFO transition, which we announced last month. Please turn to slide number three. Following this call, Ms. Melissa Schaeffer will succeed Mr. Scott Crocco as our Chief Financial Officer and assume leadership responsibility for our worldwide finance organization. Scott is retired from Air Products on September 30th as part of the smooth transition. Today, I want to recognize and thank Scott, who has had a distinguished 31-year career with Air Products.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Scott started in our career development program and ultimately progressed to the highest role in finance, serving as our Executive Vice President and Chief Financial Officer. Clearly, that achievement is a testament to Scott, particularly his strong work ethic, his drive to deliver, and his focus on creating shareholder value. Scott, I would like to say publicly what I have told you privately, that it has been a privilege working with you for these past seven years, particularly as we have executed our growth strategy and won world-class projects in gasification, carbon capture, and hydrogen. These projects continue to differentiate the company and position Air Products for significant growth into the future. Particularly, I want to thank you for leading our effort to position us for the successful closing of the Jazan gasification and power project and for your efforts related to the project financing of this significant investment.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

I appreciate all you have done to help us move forward. I wish you great health and happiness in the future. Thank you again for all you have done for Air Products. Scott, at this point, would you like to say a few words?

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Yes. Thank you very much, Seifi. I really appreciate the kind words and the support and the leadership you've provided over these past seven years. It's been an honor to work alongside you and the rest of the leadership team to set Air Products on a path where the sky truly is the limit. With strong cash flows, significant capital deployment capacity, and continued dividend increases, Air Products operates from a position of strength. I have no doubt there will be many more profitable growth opportunities ahead. I remain excited about the future of this amazing company. Melissa and I have worked closely together over the past few years. There's no doubt she will continue to excel and help others to do the same. I look forward to continuing the transition with her over the coming weeks. Again, thank you very much.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you, Scott. I do appreciate your comments. Let me now introduce Melissa Schaeffer. One of the things that you learn right away about Melissa is that she is a passionate and driven individual. For Melissa, it's all about excellence. She is driven to win. Along with that spirit, she brings deep leadership and financial experience from inside and outside Air Products to this new role. She is a great example of the culture we are building here, and I have no doubt she will continue to create an environment where people belong and matter and contribute to their fullest. Melissa held financial roles of increasing responsibility with Siemens, Ernst & Young, and Trinseo before coming to Air Products. She joined us as Vice President and Chief Audit Executive in 2016.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

She then became our Vice President, Finance, with financial responsibility for our mega projects as well as Air Products' largest supporting segment. Melissa Schaeffer has been a key part of our growth and success over the past five years, and I'm delighted she will be our Chief Financial Officer. Melissa Schaeffer, would you like to say a few words?

[Melissa Schaeffer, Incoming SVP and CFO at Air Products and Chemicals]

Thank you for the kind introduction, Seifi Ghasemi. I wanna thank Scott Crocco for the tremendous example he has set as our CFO. I appreciate the opportunity to join the earnings call today and say hello to all of you. I look forward to meeting more of the investment community and sharing Air Products' Q4 and full-year results with everyone on our next call. Air Products is truly at the heart of providing energy and environmental solutions, which makes this company a truly special place to be. I'm looking forward to our finance organization and the broader Air Products team working together to bring those sustainable growth solutions forward to serve our customers, support our communities, and of course, reward our shareholders. Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, thank you both, Scott and Melissa, for your comments. Now let's turn to our business results. The stability of our business and the dedication of our people have been on full display as the talented and committed people of Air Products delivered good results again this quarter. Our people working together have kept our 750 facilities around the world operating and our customers supplied through the COVID-19 pandemic. In support of the hard work and dedication demonstrated by our employees, we have not reduced our staff or cut salaries during this difficult period. I am proud to say that Air Products is emerging from this crisis an even stronger company than before. We have continued to acquire new assets and businesses, successfully raised prices, and brought new plants on stream.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We have also strengthened our organization by adding resources in various functions, mostly in engineering and project development, to help us successfully pursue and execute the many exciting future projects we have in front of us. At the same time, we also delivered earnings per share of $2.31 this quarter, which is 15% higher than last year, despite absorbing costs related to our growth-driven development efforts. I am extremely proud of the accomplishments that we have achieved as a team, and I would like to thank all of our employees at Air Products for their dedication and hard work. We continue to execute projects and deliver strong financial results while maintaining our unwavering focus on safety.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

As slide number four shows, despite the challenging COVID-19 conditions, our team continues to focus on working safely, following our strict protocols to help protect themselves, our customers, and our communities. As always, safety is the most important focus for all of us at Air Products, and our goal will always be zero accidents and zero incidents. The slides number five, six, and seven include our goal, our management philosophy, and our five point strategic plan. You have seen these before, and these are the principles that we will follow every day, and they will continue to guide us in the future. Now please turn to slide number eight. We believe the environmental sustainability challenges facing the world are significant.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

The scope and complexity of the mega projects necessary to address these challenges requires talented people with a variety of skills and backgrounds from different parts of the world to work together as one team. As I mentioned earlier, we can solve these problems no matter how challenging, as long as we all stay focused and united, working toward a common goal on a global basis. We believe this is the calling of our company and the higher purpose for all of us at Air Products. Now please turn to slide number nine. We recently published an annual sustainability report, which highlights our sustainability-driven growth opportunities and our many accomplishments in this area.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

For instance, Air Products help our customers avoid 72 million tons of CO2 equivalent emissions, which means that for every ton of CO2 that we emit in making Air Products, we help our customers avoid three tons of CO2 emissions. In addition, more than half of our offerings are sustainable, and close to one-quarter of our electricity purchases are from renewable sources. We have also set new sustainability goals, which are very much aligned with our growth strategy. Our third by 2030 goal aims to reduce our carbon intensity by one-third by 2030. Our growth opportunities will enable progress toward this goal, and therefore we expect to see significant progress later in the decade as our major projects come on stream and start to positively benefit our results. At Air Products, sustainability is our growth strategy. Sustainability and our growth go hand in hand.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

As we strive to solve the world's environmental sustainability problems, we are also creating growth opportunities for the company. A prime example of such an opportunity is our innovative world-class net zero hydrogen project in Edmonton, Alberta, that we announced last June, and I will talk about a little more later on. Please turn to slide number 10, which highlights our key gasification projects. We are committed to our gasification strategy and are pursuing exciting projects around the world. We do expect to announce additional gasification projects in the future. Specifically, I would like to give you an update on the two large gasification projects, which I have discussed on previous earning calls. First, our $12 billion acquisition of Jazan gasifier and power plant from Saudi Aramco. We continue to make significant progress working with our partners and the lenders.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

The team has worked hard to bring the project to the final stages of project financing, and we still expect this project to reach final financial close by the end of our fiscal year, that is September 30, 2021. Second, regarding Lu'An, the plant is operating at full capacity. As I mentioned last quarter, we expect to recognize reduced fees through FY 2022 before we return to the full fee in 2023. Now, I would like to provide an overview of two new and very exciting developments before I discuss the major announcement we are making today, which is our capital deployment plans for the next six years. First, on slide 11, you can see the overview of the Alberta project that we announced last month. This innovative project includes gasification, carbon capture, and hydrogen.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

The three pillars of our growth strategy coming together in one project to support the energy transition. This project is fully aligned with Canada's clean energy diversification strategy and enables Canada to advance its competitive low carbon economy. It uses locally available hydrocarbons to make net zero hydrogen. As summarized on slide 12, the hydrogen will be produced using autothermal reforming technology, enabling 95% of the CO2 produced by the project to be captured and stored. To achieve net zero, the remaining 5% carbon footprint will be offset by exporting the electricity generated by this net zero hydrogen. The output, the net zero hydrogen will be supplied to our customers on our existing pipeline in Alberta. As well as used to produce liquid hydrogen for the mobility and merchant markets.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

The project represents a CAD 1.3 billion investment and is expected to come in stream in 2024. We also, as you can see on slide number 13, we continue to focus on the very exciting hydrogen for mobility market, and we are pleased to announce a project with Cummins to accelerate the integration of hydrogen fuel cell trucks globally. Cummins will provide hydrogen fuel cell electric powertrain in integrated into heavy-duty trucks for Air Products as we begin the process of converting our global fleet of 2,000 distribution vehicles to hydrogen fuel cell vehicles. We expect the first unit to be online in 2022 and the full conversion before 2030. Let me give you the highlights of our significant announcement today.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Three and a half years ago, in 2018, we announced publicly that Air Products growth strategy, guided by the global energy transition and based on the three pillars of gasification, carbon capture, and hydrogen, had the potential to create significant growth for our company. That we could foresee deploying or committing $15 billion of capital in the five year period from 2018 to end of 2022. At that time, I remember clearly that our announcement was received with a degree of skepticism. Well, today, I'm happy to show you, as you can see on slide number 14, that we have deployed or committed almost $18 billion of capital, 1 and a half years ahead of our plan.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

I want to state that on the aggregate, the return on this capital is in line with the guidance we have been giving our investors before. This validates our long-term strategy. Now that we are ahead of the plan, the question raised by our investors was, "What about the future?" I had promised the investors that we would address this question sometime during the summer of 2021. Here we are today, summer of 2021, announcing, as you can see on slide 15, that based on what we see ahead, implementing our four focused strategy and based on a conservative estimate of our financial capacity, Air Products expects to deploy or commit more than $30 billion of capital for the 10-year period from 2018 to the end of 2027. Later in this call, Scott Crocco will go through the details.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Today, I wanted to make the point that, as before, we are pursuing a growth strategy. We do have the right strategy to move forward. We are aided by the mega trend of energy transition. We have the people and the core competencies, and we have the financial strength to make our dream a reality and deliver on what we promised our investors. Now please turn to slide 16, which shows our EPS growth. As you can see, we have delivered greater than 10% annual EPS growth since 2014 when I was appointed Chairman, President, and CEO of the company. These results are the testament to the hard work and commitment of the people of Air Products, and I want to thank them again for their continued hard work and commitment.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Please turn to slide number 17, a reminder that we share our earnings growth with our investors. Both our EPS and dividend have grown double digits since 2014. We are committed to delivering increased dividend while we continue to develop our exciting growth opportunities. We have significant cash flow that supports our substantial dividend and our growth strategy. Finally, slide number 18 shows our EBITDA margins. As always, my favorite slide. There it shows that the margins is up 1,200 basis points since 2014. Now I'm happy to turn the call over to Scott to provide a financial overview. Scott?

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Thank you, Seifi. As Seifi mentioned earlier, the stability of our business and the dedication of our people have been on full display. We continue to execute projects and deliver strong financial results despite the unprecedented challenges posed by the pandemic. If we compare our volumes this quarter to Q3 of fiscal year 2019, or in other words, before the pandemic, our volumes are up 8%. Our trailing four-quarter distributable cash flow has held steady at approximately $2.6 billion for the past two years. Air Products is emerging from this pandemic an even stronger company. Our sales, EBITDA and EPS grew double digits this quarter. All three regions reported higher sales in EBITDA, and our price and volume continued to be strong despite lower earnings from Lu'An and the ongoing COVID-19 impact.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Now please turn to slide 19 for a brief discussion of our third quarter results. Sales increased 26% compared to prior year, reaching $2.6 billion, driven by very strong volume, better pricing, higher energy passthrough, and favorable currencies. Volume improved 12% as COVID-19 recovery, new plants, and acquisitions more than offset reduced Lu'An contributions. Although the pandemic has eased, the volume recovery has not been consistent across our product lines. We continue to experience the negative impact of COVID-19, although the impact this quarter was more modest than last year. Prices were again up, with improvement in all three regions. This is the 16th consecutive quarter of year-over-year price gains. Overall, prices were up 2% in total, which represents a 4% increase for the merchant business.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

EBITDA climbed 11%, approaching the $1 billion mark, as favorable volume, price, currencies, and equity affiliate income more than offset higher costs, which were impacted by inflation and higher maintenance. EBITDA margin declined 520 basis points, primarily due to higher costs and higher energy passthrough, which increases sales but not profit. Higher energy passthrough negatively impacted margin by about 200 basis points. Higher costs included higher maintenance spending compared to last year, due mainly to low spending in the prior year, resulting from less access to sites due to COVID-19. ROCE was 240 basis points lower. The increase in the denominator from the additional $5 billion of debt reduced ROCE by about 300 basis points. Sequentially, sales were up 4%, supported by 5% seasonally stronger volume and 1% higher price.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Energy passthrough was lower by 2% as energy prices returned to a more normal range following the effects of the winter storm in the previous quarter. Please turn to slide 20. Our third quarter GAAP EPS was $2.36 and included a $0.05 tax benefit, primarily resulting from reserve adjustments related to a 2017 tax election on a non-U.S. subsidiary. Excluding the non-GAAP item, our third quarter adjusted EPS was $2.31 despite the ongoing impacts of the pandemic and was $0.30 above last year. Volume was favorable $0.26. COVID-19 recovery, new plants, and acquisitions more than offset reduced Lu'An contributions.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

As a reminder, it's important to recognize that as the 60% majority owner of the Lu'An joint venture, 100% of the negative impact from Lu'An is included in the volume line because we consolidate the operating results. This is partially offset by the positive impact reflected in the non-controlling interest line, as the net income shared by our partner is also reduced. Price net of variable costs contributed $0.05, as our price increases more than covered variable cost inflation. We continue to execute pricing actions in response to rising variable costs such as power and fuel. Like the prior few quarters, our plans to add resources and strengthen our organization to support growth have increased our costs. America's maintenance costs were lower last year due to COVID-19 limitations, and there were temporary COVID-related government incentives in Asia last year.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Currency and foreign exchange contributed $0.12, with the Chinese CNY and EUR accounting for roughly half of the impact. Equity affiliate income added $0.04 on strong underlying business results, while non-controlling interest was also favorable $0.05 on lower profits from our consolidated joint ventures, primarily Lu'An. The effective tax rate of 18.2% was 110 basis points lower than last year due to a change in U.K. tax law. We expect our effective tax rate to be slightly below 20% in fiscal year 2021. The remaining $0.04 includes a favorable $0.05 in non-operating income, primarily driven by lower pension expense and an unfavorable interest expense of $0.01. Now please turn to slide 21.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

The stability of our business allows us to continue to generate strong cash flow. Over the last 12 months, we generated about $2.6 billion of distributable cash flow, or almost $12 per share. From our EBITDA of about $3.8 billion, we paid interest, taxes, and maintenance capital. Note that our maintenance CapEx is a little higher than usual, driven in part by spending on our new global headquarters. From a distributable cash flow, we paid over 45% or over $1.2 billion as dividends to our shareholders, and we still have about $1.4 billion available for high return industrial gas investments. The strong cash flow, even in uncertain times, enables us to continue to create shareholder value through increase in dividends and capital deployment. Slide number 22 provides an update on our capital deployment.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

As Seifi mentioned, we've extended our time horizon another five years to 2027. Since we see tremendous project opportunities beyond the original capacity of $15 billion, we think it's appropriate to extend the timeframe for at least another five years. This updated view of our capital deployment potential shows over $30 billion available through fiscal 2027. The $30 billion includes over $9 billion of cash and additional debt capacity available today, almost $15 billion we expect to be available by 2027, and almost $7 billion already spent. We believe this figure is conservative given the potential for additional EBITDA growth, which generates additional cash flow and therefore additional borrowing capacity. We will continue to focus on managing our debt balance to maintain our current targeted Aa2 rating.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

You can see we've already spent 22% and have already committed 57% of the updated capacity we show here. In short, we exceeded the commitment we made to you in 2018 and have substantial capacity available to deploy to support our growth strategy. To begin the review of our business segment results, I'll turn the call back over to Seifi Ghasemi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you very much, Scott. Now please turn to slide number 23 for our Asia results. Sales increased 15% compared to last year, supported by strong volume, better price, and favorable currencies. Volumes were up 6%, reversing the negative trend of the previous four quarters. Base volumes, driven by COVID recovery and the addition of numerous small new plants, more than offset the reduced Lu'An contribution. Asia pricing overall was positive 1%, primarily driven by good performance in China across most product lines. This was the 17th consecutive quarter of year-on-year price improvement in Asia. Sequentially, price was also positive by 1%. EBITDA increased 9%, driven primarily by favorable price, volume, currencies, and equity affiliate income. Costs compared unfavorably, partly due to inflation and COVID-related incentives last year. I should say COVID-related government incentives and costs last year.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

EBITDA margin of 47.4% was 270 basis points lower as reduced Lu'An contribution and increased costs more than offset the benefits of higher price, volume, and equity affiliate income. Operating income and margin compared unfavorably to EBITDA and EBITDA margin due to higher quality affiliate income and additional depreciation from new plants. Sequentially, sales and profit improved as economic activities rebounded following the Lunar New Year holidays. Now, I would like to turn the call back to Scott to talk about America's results.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Thank you, Seifi. Please turn to slide 24 for a review of our America's results. Sales surged 25% over last year. Volume, price, energy pass-through, and currency were all positive. Volume grew 9%, primarily due to COVID recovery, higher medical gases in South America, and one-time items. Most merchant products have returned to their pre-COVID levels, but hydrogen volume has not yet fully caught up. While the demand for transportation fuels has improved as people resume travel, the increases are not even across different types of fuel. Gasoline and diesel volumes have rebounded. The demand for jet fuel, which consumes more hydrogen on a per unit basis compared to gasoline, still lags. The industry has shifted to use more light, sweet crude, which requires less hydrogen. The industry's inventory level remain high. Price was again strong.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

The 4% increase for the region was equivalent to 8% on the merchant business. Price was better across all major product lines, and this is the 12th consecutive quarter of year-on-year price improvement. Energy cost passthrough is again higher as natural gas prices remained elevated versus last year and drove a 10% sales increase. EBITDA reached $465 million, a 13% increase over last year, as better volume and price as well as one-time items more than offset power and other cost inflation and higher maintenance. Our maintenance costs were unfavorable versus last year because limited maintenance work was possible last year due to the restrictions imposed by COVID-19 protocols. Following the successful completion of the turnarounds this quarter, we expect our maintenance activities to moderate next quarter.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Higher energy cost passthrough negatively impacted EBITDA margin by over 400 basis points or almost 90% of the reported decline. Compared to last quarter, Americas volumes increased 6%, driven by stronger hydrogen volume, partly helped by recovery following the winter storm and one-time items. Price also improved 1%, up across all major product lines. Energy passthrough was lower sequentially as the natural gas price came back down after the spike caused by the winter storm. EBITDA increased 4% sequentially, supported by improved volume and price as well as one-time items, while cost was unfavorable. EBITDA margin was 120 basis points better, primarily driven by about 350 basis points of favorable energy passthrough, while strong p-price partially offset higher costs. Now, I'd like to turn the call back over to Simon to discuss our other segments. Simon?

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Thank you, Scott. Now please turn to slide 25 for a review of our Europe, Middle East, and Africa region results. Our EMEA team delivered another set of outstanding results this quarter. Sales jumped 45%, and volume and EBITDA were both up about 25% versus last year. COVID recovery and acquisitions primarily drove the 24% volume increase. Our liquid bulk business has returned to its pre-COVID level, but the packaged gas business still lagged. Price increase for the 14th consecutive quarter and was higher across most major product lines in all the subregions. The 1% price gain for the region corresponds to a 2% improvement for the merchant business. Real price increases were partially offset by unfavorable mix since the demand across the product lines was not even. We are also executing additional pricing actions to recover the recent power cost increases.

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Currencies were a favorable 12%, primarily due to the strong EUR and GBP versus the U.S. dollar. EBITDA was up 25% to over $210 million, driven primarily by the strong volume. EBITDA margin was down 540 basis points, with higher energy passthrough responsible for about 200 basis points. The remaining roughly 300 basis point reduction was mainly attributable to unfavorable costs, mostly power and other cost inflation. Compared to prior quarter, sales rose 7%, primarily supported by positive 5% volume, but EBITDA was down 2% and margin was about 300 basis points lower as this volume gain was more than offset by higher costs, including power and other cost inflation and lower equity affiliate income.

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Please turn to slide 26, Global Gases, which includes our non-LNG sale equipment businesses as well as central costs. Sales increased due to higher sale of equivalent project activity, but profit was lower due to business mix and higher product development spending. Sales and profits were roughly equal to last quarter. Please turn to slide 27, Corporate, which includes LNG and other businesses, as well as our corporate costs. We were pleased to be selected for Nigeria LNG's Train 7 project, building on the success of the Air Products LNG equipment and technology for the first six trains. Corporate segment sales were higher this quarter, driven by increased project activities as we continued to execute multiple large LNG and other projects, but profit was lower on higher corporate costs. Sales and profits were roughly equal to last quarter.

[Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability at Air Products and Chemicals]

Now, to provide some additional thoughts, I'll turn the call back over to Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you very much, Simon. Now please turn to slide number 28. Air Products continues to deliver consistent earnings and cash flow. Our on-site business, which is roughly half of our total sales, remains stable. We have seen signs of improvement in merchant volumes, particularly relative to the very challenging quarter three last year. As I mentioned earlier, Ruwais facility is operating at full capacity, and we expect the Jazan transaction to achieve financial close by the end of September 2021. For quarter four of fiscal year 2021, our earning per share guidance is $2.44-$2.54, up 11%-16% over last year. This makes our guidance for our fiscal year To be $8.95-$9.05, up approximately 8% over last year and within the range we shared with you last quarter.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We continue to see our CapEx at approximately $2.5 billion for the year 2021. Our fiscal year 21 EPS and CapEx guidance obviously exclude any contribution from Jazan. We continue to execute our other projects, bringing them on a stream and finalizing agreements with our customers. We are committed to our capital deployment strategy and to growing our pipeline of projects. We continue to be very optimistic about our focused long-term growth strategy. The capital deployment projections that we shared with you today for the next six years clearly demonstrate our significant growth potential in the years to come. Please turn to slide number 29. The only sustainable long-term competitive advantage of any company is the degree of commitment and motivation of the people in the enterprise. We are fortunate to have that commitment with our people.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

By working together against the hardships of the pandemic, supporting our customers and each other, I'm proud to say that we have made our company even stronger in the process. Not only have we continued to strengthen our base business, but also further extend our core competencies pursuing our growth strategy. Our gasification, carbon capture, and hydrogen growth platforms all support the drive for a cleaner environment, and we are executing mega-scale projects in all three areas. We all know that the world's desire for clean energy will only accelerate. Our differentiated growth strategy and unmatched expertise have positioned Air Products for continued strong success and growth well in the future. As always, I want to again thank our customers around the world.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

In innovating alongside you, the dedicated and committed people of Air Products are doing their part to achieve our common higher purpose of creating a better world for everyone. Now, we are very pleased to answer any questions that you have.

[Operator]

Thank you. If you would like to ask a question, please press star followed by the digit one. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one, and we'll pause for just a moment. Our first question, we'll hear from Vincent Andrews with Morgan Stanley.

[Vincent Andrews, Analyst at Morgan Stanley]

Thank you. Good morning, everyone, and congratulations to Scott. Very well done and distinguished career, clearly. Seifi, could I ask you on the new sort of outlook for capital allocation, maybe two pieces about it. You know, one, how are you thinking about how much of it will be sort of in that mega project category that, you know, we've seen with NEOM and so forth versus sort of the more traditional industrial gas projects? Second to that, you know, as I think back over the last three and a half years of the first CapEx outlook, you know, the menu of things you were interested in expanded, you know, into gasification, then we got into green and blue hydrogen, now carbon capture.

[Vincent Andrews, Analyst at Morgan Stanley]

I would assume that we're gonna see the future CapEx skew more towards those latter categories, but I'm also curious whether there's anything else that's on the horizon that's not currently on the CapEx menu that we should start thinking about?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, good morning, Vincent, and thank you very much about your comment about Scott. He's a great guy, we all know that.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Yeah, thanks, Vincent. I really appreciate that.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

With respect to your specific question, Vincent. Out of the additional $12.5 billion, $12 billion that we announced in the next six years, we expect about $5 billion to be in support of our existing business and the balance of it being the large projects. In terms of the focus, we are going to stay very focused, Vincent, and spend our money on gasification, hydrogen, which is blue and green, and CO2 capture. We are going to try not to venture too much outside of those three specific areas. There is significant opportunity. Now that you asked the question, it gives me. We came up with the $30 billion not because of lack of projects. It is because we wanted to demonstrate what is our financial capacity to maintain our A rating.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

As we go forward, obviously, we will get it. We cannot project you EBITDA for 2030. That's why we are constrained. There are a lot of projects in the areas of gasification, hydrogen, and CO2, as you will see in the future. We are going to stay focused on that because I believe by being focused, you get results rather than being all over the place.

[Vincent Andrews, Analyst at Morgan Stanley]

Thanks very much.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you, Vincent.

[Operator]

Next, I'll move to Jeff Zekauskas with JPMorgan.

[Jeff Zekauskas, Analyst at JPMorgan]

Thanks very much. I've a two-part question. If you, if you look at your European operations and your Asian operations over the last 3 quarters, they're sequentially flat. The, the Asian EBITDA is a little bit better, the European EBITDA is not. Why is that the case given that the global economy has been improving? Secondly, in your reconciliation tables, in your return on capital, your return on capital has gone from 12.4% a year ago to 10. You know, it's kind of moved down sequentially. Why is that? What are the factors that you are encountering that's lowering your capital returns?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Good morning, Jeff. Two very good questions.

[Jeff Zekauskas, Analyst at JPMorgan]

Good morning. Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Yes. Two very good question. Number one, when you look at it, the way you say that it is flat, the global economy is improving. Please take note that the global economy is improving and people going to restaurants and flying around. In the major economies that we are operating, the industrial economy has not improved that much. That's number one. The second thing, our results are significantly affected by Lu'An. You know that very well because Lu'An had an EBITDA contribution every year at full capacity under normal circumstances of almost $150 million, $160 million a year. When that number comes down, then it distorts all of the numbers. Please look at our volumes. Another thing is that our results are affected by another significant item, which I have mentioned many times before.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We are investing in increasing organization significantly to develop these new projects. When we announce in projects like Canada, we have been working on four other projects. Each one of these projects costs four or five, $10 billion, $10 million to develop. We are spending that money because we are investing for the future. That is taking also hitting our results. Look at our volumes. If you look at our volumes, our volumes are better than all of our competitors during that period. We have grown our base volumes. If you take all of the mumbo jumbo out of the people's results and our results, our volume growth has improved better than anybody else. It's 12%. Therefore, I don't keep it with the margin for very region, as online results. That's number one.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

The second thing with respect to the return on capital employed, it depends, number 1, how you calculate it, because if you can calculate our return on capital employed the way other people calculate it, where they don't consider the cash, we are at 15%, not at 10%. The second thing is that our return on capital employed has gone down because we borrowed $5 billion that is still sitting on our balance sheet and we haven't deployed that. Once we deploy that, once we pay for the Jazan $2.5 billion, your return on capital employed jump up.

[Jeff Zekauskas, Analyst at JPMorgan]

Okay, good. Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Is that okay, Jeff?

[Jeff Zekauskas, Analyst at JPMorgan]

Yes. Thank you, sir.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Absolutely.

[Jeff Zekauskas, Analyst at JPMorgan]

Yep. Thank you, sir.

[Operator]

We'll move on to John Roberts with UBS.

[Josh Spector, Analyst at UBS]

Yeah. Hey, guys. This is Josh Spector on for John this morning. First, just on behalf of the team here at UBS, just want to say congrats to Scott on his retirement and welcome, Melissa, to the team. Happy to have you here.

[Josh Spector, Analyst at UBS]

Thank you.

[Josh Spector, Analyst at UBS]

Going to the Thanks. Just sticking on the volume point within the regions, you know, with the project starting up, it's become a little bit tougher to tell where the merchant levels are versus 2019. Could you walk through the different regions and help us understand how much volume you might be lower in aggregate relative to 2019? Or in other words, how much recovery is left to get there? Then second would just be in some of the one-time items you called out in the Americas, can you quantify what that is or give us some insight on what that is that's benefiting you guys in the quarter? Thanks.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Sure. Thank you very much. I think that, during the course of his comments, Scott mentioned that if you take our volumes and compare it to pre-COVID, we are 8% ahead in terms of our merchant volumes. We are actually volume-wise ahead of where we were before the COVID started. That's why the previous point that I was making. With respect to your second question about one-time items, we don't want to give too much detail about those because it involves customers and so on, and some of the people don't want to exactly for us to disclose exactly what we settled for them if they close the refinery or something like that. Apologies for not answering that question.

[Josh Spector, Analyst at UBS]

Okay, thanks. If I could just try again on the volume side. On a like-for-like basis, you would say volumes are 8% ahead. That doesn't include contribution from new projects, or are we mixing up things there?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

There are new projects, but it is not substantial. Even if you exclude the new projects, we are ahead.

[Josh Spector, Analyst at UBS]

Okay, thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

We'll move on to Steve Byrne with Bank of America.

[Steve Byrne, Senior Chemicals Analyst at Bank of America]

Yes, thank you, and our best to you, Scott. There were a variety of comments made about the year-over-year comparison. Some of those you would've had visibility on, like Lu'An and some of your corporate costs perhaps. What would you say was most surprising to you on the cost side or that impacted your results in the quarter that were different from your expectations a few months ago?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, the expectation that we had was that the U.S. economy, on the industrial side especially, would be stronger than it is, and especially also I mean, the hydrogen. Those things didn't develop to our expectation. The rest of it, we did have visibility, you're right. Those were the surprise was the performance in Americas.

[Steve Byrne, Senior Chemicals Analyst at Bank of America]

Okay. Thank you, Seifi. One quick one for you on your helium business. Any comments on the outlook for you, particularly given the large Russian project in development? Any concerns there?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, Steve, I mean, you are very knowledgeable about what is going on in the details. There is this big project, high helium project that the Russians are working on, the so-called Amur project. That project has significant amount of capacity. When and if, or, I mean, I shouldn't say if, when it comes onstream, whenever it is, it will obviously change the supply-demand basis in the helium worldwide, and it will have an effect on prices. We don't know when that is going to be, and that project has been delayed many times. When that happens, it will obviously have an effect. It hasn't happened. We don't expect it to happen next quarter, but it might happen in the future.

[Steve Byrne, Senior Chemicals Analyst at Bank of America]

Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

There is a lot of volume of helium that can come on the stream. Is that okay, Steve?

[Steve Byrne, Senior Chemicals Analyst at Bank of America]

Yes, thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

Next, I'll move to John McNulty with BMO Capital Markets.

[John McNulty, Analyst at BMO Capital Markets]

Good morning. Thanks for taking my question. Again, congratulations, Scott. It's been a pleasure working with you. A question on the global business and the corporate lines, because the revenues keep going up pretty meaningfully. You've got some of the big new LNG business coming in, yet the profits year-over-year have definitely faded. I guess, can you give us a little bit more color as to the drivers behind that and when we might be through that, whether it's incremental costs or expenses on the corporate line and maybe some of the business mix changes on the global side? Just 'cause it is a little bit surprising that it seems to be holding back the revenues as much as it has been.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

John, first of all, good morning. Hope all is well with you. Second thing is that, John, we are talking about deploying $30 billion of capital. That means those projects need to get engineered and built before they contribute to the bottom line. We have added, without exaggeration, close to 2,000 people to our engineering and project management and business development staff in the last two years. 2,000 people. If you take $100,000-$120,000 per person, that becomes a lot of money. We have absorbed a lot of costs because of pricing and all of that. Still, we are spending a significant amount of dollars in order to position ourselves that not only we develop these projects, but that we also execute them and build them.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

When we do that, I mean, people know how to do the math better than anybody else. If we deploy the $30 billion by 2027, which we say we will, and we say that the return on that thing is expect $0.10 operating profit for every dollar, that is $3 billion of operating profit in addition to what we are doing. You do that after tax, and then you come up with, you know, a significant number with respect to more than $10, $11, $15 per share. We need to make that a reality. That is not going to happen by itself. We are going to be absorbing a lot of additional costs in the meantime.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

A year from now, two years from now, depending on how many projects we have, if the next year we come and say that, "Look, we have spent 30, now we have to increase it to 40," we will have to add more people. There is a sequence to this thing. We need to spend the money to develop the project, to get the project, as you know, the new rules is such that you cannot put the projects on the balance sheet, you win them, and those that you win, you have to eat the cost. That's the accounting rules. That is where I think the investors need to have a little bit of patience with us because these costs are going to be with us.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Quite honestly, it is amazing that the effect is not as much as it could be. As I said, 2,000 people, it's costing us $240 million-$250 million a year to support those people. Okay, John Roberts?

[John McNulty, Analyst at BMO Capital Markets]

Got it. Yes, no, fair enough. Very helpful color on it. Thanks. Thank you million, Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

We'll move to Kevin McCarthy with Vertical Research Partners.

[Kevin McCarthy, Analyst at Vertical Research Partners]

Yes, good morning. Seifi, over the last several quarters, we've seen inflation accelerate pretty broadly, and a lot of specialty chemical companies are feeling the effects of that in today's market. Air Products, of course, is blessed in that you pass through a lot of costs, but, as you've been discussing, I think there are other costs that aren't passed through. My question would be, you know, do you think there's any need or opportunity to accelerate the pace of pricing given that backdrop of industry inflation? How might your answer differ by region of the world?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, that is a very good question, Kevin. First of all, I mean, the way we operate is that our base business, people increase prices to cover inflation. That is the minimum we expect them to do. The other cost increases, obviously, as I mentioned before, is adding additional resources. Our philosophy is that if our costs go up, prices need to go up. As compared to other chemical companies, we have another benefit is that our raw material price doesn't go up because our raw material is really air for most of our products. If it is natural gas, we do pass it through.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Overall, as I've said many times before, with my 40, 20 year experience in industrial gases, inflationary times are, in general, positive for industrial gases because it gives you a license to increase prices. If we, I mean, in our call, we mentioned price increases on an overall basis. If you take just our merchant price increases, we have had price increases this last quarter of 7% in Americas, 2% in Europe, 3% in Asia. Total company, 5% in price increase. For dimensions are. That is significant, and it's keeping us up to date with inflation. Yeah. Okay?

[Kevin McCarthy, Analyst at Vertical Research Partners]

Thank you for that.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you, sir.

[Operator]

We'll move on to David Begleiter with Deutsche Bank.

[David Begleiter, Analyst at Deutsche Bank]

Good morning, Seifi. Of course, my congrats to Scott as well. It's been a pleasure. Seifi, just on Jazan, if you do assume financial close by fiscal year-end, should we still presume a full year of earnings contribution for Jazan next fiscal year?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

It is going to depend on the details of the final structure of the financing and all that. Yes, we have said that once we do financial close and we pay a certain amount of money, we are going to get the BFC or the basic facility in accordance with how much money we have put in.

[David Begleiter, Analyst at Deutsche Bank]

Very good.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We should expect, yeah, good contribution in 2022. Yes.

[David Begleiter, Analyst at Deutsche Bank]

Very good. Do you have an update on the NEOM and Indonesian projects? Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

I, the NEOM project, we obviously are working on it. We have, I think at least around 400 people working on that project. Project is moving forward. We are, you know, clear at preparing the ground, and the engineering is going forward. We are making progress on that project. With respect to Indonesia, I don't have any update. Indonesia has a lot of issues there with the COVID-19 and all of that, so I don't really have any update.

[David Begleiter, Analyst at Deutsche Bank]

Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

We'll move on to Mike Harrison with Seaport Research Partners.

[Mike Harrison, Analyst at Seaport Research Partners]

Hi, good morning, best wishes to Scott and congratulations to Melissa on the new role.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Mike Harrison, Analyst at Seaport Research Partners]

In terms of the Americas business, you mentioned that we're up sequentially on stronger hydrogen demand. I think that's related to the Texas freeze and some improvement in refinery utilization. You also mentioned that some of these refineries are using more light and sweet crude feedstocks, which require less hydrogen. Can you talk a little bit more about the longer term effect of that trend?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, for the longer term, we are actually very bullish about our hydrogen pipeline in the Gulf Coast. We expect that the hydrogen network to be really sold out in about two years' time because the fundamental drivers for growth are there, the refineries will come back, and there is a significant trend, and Mike, you know that very well, toward converting the refineries into making renewable diesel. We, as we have said, the intensity of hydrogen for renewable diesel is higher than other things. We remain very optimistic about that. It's just quarter by quarter, the numbers move out, move, but for the longer term, we are very optimistic about that hydrogen pipeline and that whole infrastructure there.

[Mike Harrison, Analyst at Seaport Research Partners]

All right. In the EMEA business, you mentioned the higher power cost and the need to go after additional pricing there. Can you just talk about those dynamics a little bit more? I guess, is there some seasonal improvement in the power situation such that if you wait it out, maybe the cost will come a little bit lower?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, I don't think so. I think that in Europe, there is a structural issue that when you decide that you don't want to use nuclear and you don't want to decide that you use coal, then the other alternative sources of energy are more expensive. I mean, in some parts of Europe, energy costs last quarter was almost 100% more than last year. I think that power cost increases in Europe are going to be a thing of the future. That's why a lot of these things that people talk about making green hydrogen using the grid in Europe is kind of a little bit of a pie in the sky. Overall, I think that our job is to increase our prices to compensate for the power cost.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Our contracts are structured that way. Sometimes we might get a little bit of a lag in implementing that, but our people know exactly what they need to do, and in time we will catch up.

[Mike Harrison, Analyst at Seaport Research Partners]

All right. Thanks very much

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Power prices in Europe are going to ease.

[Mike Harrison, Analyst at Seaport Research Partners]

Thank you very much, Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you very much. Thank you.

[Operator]

Bob Koort with Goldman Sachs will have the next question.

[Bob Koort, Analyst at Goldman Sachs]

Thanks very much. On Jazan, Seifi, are the gasifiers running now, so it's just a function of paper shuffling to start accruing the benefits?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Bob Koort, good morning. How are you this morning?

[Bob Koort, Analyst at Goldman Sachs]

Doing great.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

You just asked me a question that I cannot answer because we have been prohibited by Saudi Aramco to talk about the state of operation of the refinery and what stage it is and how it is operating and so on, for security reasons. I cannot tell you what is operating, what is not operating, and all of that. I mean, if you want, you can ask that question from Saudi Aramco, but I think they will say probably the same thing that I said. I apologize.

[Bob Koort, Analyst at Goldman Sachs]

Okay.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

You asked the question, and I cannot answer it. Sorry about that.

[Bob Koort, Analyst at Goldman Sachs]

How about on the debt facility that was launched back in May? Is that the final piece that has to be concluded?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

That is, the final piece that needs to be concluded. That is underway. We are very close.

[Bob Koort, Analyst at Goldman Sachs]

Gotcha. Okay.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We are very.

[Bob Koort, Analyst at Goldman Sachs]

Thank you, Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Very close. Thank you.

[Bob Koort, Analyst at Goldman Sachs]

Scott, really enjoyed working with you over the years.

[Scott Crocco, EVP and CFO at Air Products and Chemicals]

Thanks, Bob Koort. Likewise.

[Operator]

And we'll move on to.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Okay.

[Operator]

Duffy Fischer with Barclays.

[Duffy Fischer, Analyst at Barclays]

Yes, good morning. Thanks. First question, just around Lu'An. Seifi, I think you mentioned that you thought it was gonna get back to a run rate of $150 million-$160 million of EBITDA, but I didn't understand, was that in the fiscal 2022 for you guys or is that calendar 2022 for the customer?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

It is in fiscal 2023.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

2022, I mentioned in the call that it will be low.

[Duffy Fischer, Analyst at Barclays]

Oh, okay. 2022 is low, 2023. Okay, fair enough. Then, second one on your Alberta project, I believe one of your big customers up there is Suncor, and they had announced about a month earlier than you guys kind of a similar project. Does your project supersede what they were going to do, or is there enough space up there that both of you can do a large green hydrogen project?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, I obviously don't want to speak for Suncor. They are a customer of ours, but we are not the only supplier. They have their own SMRs. What they intend to do, our contract with them lasts until 2028. I don't know what the, you know, what is their intention about doing a project to replace their own SMRs, doing a project to re-replace their own SMRs and what they buy from us. That's something that you have to talk to them. I don't want to be speaking for them.

[Duffy Fischer, Analyst at Barclays]

Okay.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Their project, they announced it will come on stream in 2028, and our project would come on a stream in 2024.

[Duffy Fischer, Analyst at Barclays]

Okay, thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

Next, we'll hear from Marc Bianchi with Cowen.

[Marc Bianchi, Analyst at Cowen]

Thank you. A fuel cell company, which is, was a hydrogen customer, noted on their earnings call that they transitioned away from Air Products 'cause they were unhappy with supply and pricing. The same company is also building out their own green hydrogen supply chain. Maybe you want to respond to that situation since it was mentioned on an investor call recently. The question really is more broadly, what do you say to investors that might be concerned about competition for hydrogen distribution in mobility applications?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Well, first of all, with respect to that specific customer who made those comments, I wish them very good luck into what they are doing. We have stopped supplying them for a very simple reason, because we think the product that we have is worth a lot more, and we can sell it for a higher price to other people. Therefore, we are in the business of making money. There was no sense for us to continue to sell hydrogen at low prices. That's why we stopped dealing with them. In terms of building their own plant, as I said, I wish them good luck, and I hope they are successful. As far as other people want, wanting to get into the business, that's perfectly fine. We have been in the business of making hydrogen for the last 60 years.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

A lot of people are waking up in the morning and now want to get into the hydrogen business. I wish them good luck. There is plenty of opportunity, plenty of demand for this product, and if they want to get into it, they are more than welcome. I don't think we are concerned about that. We welcome competition. We have competition in everything else we do, and therefore I have no concern about that, and I wish everybody good luck who wants to get into the business. We just have a minor 60 years of head start on them, but that people might consider is not that significant, but they'll find out what it takes.

[Marc Bianchi, Analyst at Cowen]

Thank you, Seifi.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

We'll move on to Mike Sison with Wells Fargo.

[Mike Sison, Analyst at Wells Fargo]

Hey, good morning. Hey, Scott. Congratulations. Hope you find a fun place to retire, like Cleveland. Just one question on the 2027 goal, Seifi. You've talked about demand being really good for hydrogen and other areas. Is it possible that, A, you could maybe deploy that capital sooner than 27, or is it maybe you have to spend more potentially if demand is gonna be that strong?

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

We believe is that the demand is very strong, and we do believe that we will commit more than that. That's our view.

[Mike Sison, Analyst at Wells Fargo]

Great. Thank you.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

Thank you.

[Operator]

At this time, I would like to turn the call back over to Seifi Ghasemi for any additional or closing remarks.

[Seifi Ghasemi, Chairman, President, and CEO at Air Products and Chemicals]

I just want to thank everybody for being on our call and listening to our presentation. We appreciate your interest, we obviously look forward to discussing our results with you again next quarter. As I said earlier, please stay safe and healthy, and all the best. Thank you very much for being on our call.

[Operator]

That will conclude today's call. We thank you for your participation.

Participants

Executives

• Melissa Schaeffer, Incoming SVP and CFO
• Scott Crocco, EVP and CFO
• Seifi Ghasemi, Chairman, President, and CEO
• Simon Moore, VP of Investor Relations, Corporate Relations, and Sustainability

Analysts

• Bob Koort, Analyst at Goldman Sachs
• David Begleiter, Analyst at Deutsche Bank
• Duffy Fischer, Analyst at Barclays
• Jeff Zekauskas, Analyst at JPMorgan
• John McNulty, Analyst at BMO Capital Markets
• Josh Spector, Analyst at UBS
• Kevin McCarthy, Analyst at Vertical Research Partners
• Marc Bianchi, Analyst at Cowen
• Mike Harrison, Analyst at Seaport Research Partners
• Mike Sison, Analyst at Wells Fargo
• Steve Byrne, Senior Chemicals Analyst at Bank of America
• Vincent Andrews, Analyst at Morgan Stanley