Air Products & Chemicals, Inc. Q3 2026 Earnings Call

Good morning. And welcome to Air Products third quarter earnings release. Conference call Today's call 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 Megan Britt. You may begin.

Hello and welcome to the third quarter. Fiscal 2026 Earnings Conference Call for Air Products. Our prepared remarks today will be led by Eduardo Menezes Chief Executive Officer and Melissa Schaeffer, Chief Financial Officer. We have prepared presentation slides to supplement our remarks. During the call, which are posted on the Investor Relations section of the Air Products website. This call we'll make forward looking statements which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to those discussed on this call and in the forward looking statements and risk Factors sections of our reports filed or furnished with the SEC. We do not undertake any duty to update any forward looking statements. Please note in today's presentation, we will refer to various financial measures, including earnings per share, capital expenditures, operating income, operating margin, the effective tax rate, rock and net debt to EBITDA on a total company basis. Unless we specifically state otherwise. Statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our investor website.

In the relevant earnings release section. It's now my pleasure to turn the call over to Eduardo.

Thank you. Megan. Hello, and thank you for joining our call today. Now please turn to slide three. Earlier today, we reported results for the third quarter of fiscal 2026. In the quarter, we managed volatile marketing dynamics to deliver a 9% increase in operating income compared to the same period last year. Our operating margin of 25.6% was also up compared to the same period last year, largely from volume and pricing improvement, partially offset by higher costs Earnings per share were $3.47, up 12% compared to the same period last year. This was above our guidance range, largely due to improved volume and higher contributions from our equity affiliates. Volume improvement was led by higher on site. Results. New asset owned streams and hidden the hidden headwind in the quarter was 2%, which was better than expected, largely on electronics momentum in Asia. Return on. Capital of 11.7% was up relatively to prior year and improved sequentially. Moving to. Slide four. We remain focused on three key priorities for 2026. On earnings growth, EPS are up 14% year to date with another quarter of strong performance. We are raising our full year earnings guidance, which now implies an improvement of 11 to 12% for the full fiscal year.

We continue to expect EPS growth to be achieved primarily through volume growth from new asset contributions. Pricing actions and continued productivity Next, we continue to make progress on optimizing our large project portfolio On June 30th, we announced our decision to exit the Louisiana Project. The Casa Grande Arizona Project and other smaller scale clean energy distribution projects. As a result, we recorded a pre-tax charge of $2.9 billion this quarter. We are working on opportunities to redeploy the industrial gas assets and sell the ammonia production assets associated with the Louisiana Project. On the. Green ammonia project in Saudi Arabia or NJC. We have now. Finalized a marketing and distribution agreement with Yara. Our. Speak to this more in a moment. Finally. On our third priority. Maintaining capital discipline. The cancellation of the Louisiana project will allow us to reduce our capital expenditures. While we expect to reduce capital expenditures overall. We will remain focused on investing in our backlog of traditional industrial gas projects, especially in the electronics end market. In addition to invest in our traditional industrial gas projects, we remain committed to continuing our strong track record of returning cash to our shareholders Year to date, we have returned $1.2 billion to shareholders in the form of dividends.

Please turn to slide five. I'm pleased to share that Air Products and Yara have signed a marketing and distribution agreement for renewable ammonia from the neon Green hydrogen project in Saudi Arabia. Under the agreement, Yara will transport and commercialize renewable ammonia that will be acquired by Air Products from engaged. That is not used by Air Products to produce green hydrogen in Europe. This model creates the first fully integrated value chain for renewable ammonia by enabling products from the world's first large scale green ammonia plant to be sold and delivered through Yara's existing global supply chain. As. A final note we do not expect this project to have a material financial impact in fiscal year 27. Please. Turn to slide six. For a summary of our current project backlog and an update of our capital expenditure forecast. Before I go into details, I want to provide some context on how to think about our backlog to be included in the backlog. A project must have reached final investment decision on FID following a robust review process to ensure we have adequate returns relative to the risks of the project. Our backlog will include investments in projects with long term contracts with a strong customer, and in few cases, production facility to grow our liquid bulk and packaged gas business.

With this criteria, we currently have a traditional industrial gas backlog of approximately $3 billion in projects. A significant portion of the capital projected for the backlog will support electronic customers. This includes over $1.5 billion in project wins for Air Products in the last six months, translating. Our backlog into a view of capital expenditures. On the right hand side of this slide, we are targeting to invest approximately $1.5 billion per year going forward in traditional industrial gas projects. These are air separation and hydrogen projects of varying sizes, and there are new projects being added and completed. Projects being removed from the list. The CapEx figures for fiscal year 27 are preliminary, and represent the committed spend for traditional industrial gas projects. Based on our current backlog As we continue to build our backlog, our focus will be on opportunities that meet our risk adjusted return thresholds. As we previously disclosed. We are also moving forward with several underperforming projects, giving our commercial obligations and project status. Although these projects are not expected to contribute materially to our future operating income. We continue to work to improve their results through commercial negotiations, operational improvement and productivity. After we bring these products on stream.

We expect total CapEx expenditure of roughly 2 to $2.5 billion per year, which can sustain both our future growth and ongoing maintenance Again, I want to thank the Air team for delivering the results this quarter. Now I will turn the call over to Melissa to discuss those results in greater depth and review our 2026 outlook. Listen.

Thank you Eduardo. Please move to slide seven for a high level summary of our third quarter financial results. Sales were. Up 5% while operating income grew 9% on volume. Currency and price. Overcoming higher costs from fixed cost inflation. Volume growth was led by our on site business, driven by contributions from new assets coming on stream in Asia and Americas, as well as higher production from the U.S. refinery assets Pricing was up primarily in Europe and the Americas. With this underlying business performance, operating margin of 25.6% improved over 100 basis points compared to the prior year Earnings per share of $3.47. Increased 12% from the prior year due to the base business growth, as well as strong equity affiliate contributions. Return on capital of 11.7% was up 60 basis points on strong base business performance and large project optimization. Please turn to slide eight. Our third quarter earnings per share of $3.47 increased $0.38, or 12%, from the prior year. We saw. A 2% headwind from helium this quarter, which was better than our guidance of 3%, driven by improved volume and pricing in Asia, supporting our electronic customers, partially offset by lower space volume in the Americas, currency was favorable 2%.

And in line with our third quarter guidance. The base business improvement was driven by on site volume, including new assets and pricing. We also saw strong contributions from equity affiliates in Mexico and Saudi Arabia. Despite higher costs in the quarter, driven by fixed cost inflation. We remain on track with our headcount reduction plan for the year, having recognized approximately 75 million in the savings year to date Moving now to slide nine, I will provide an overview of our results by segment. You can find additional details of the quarterly segment results in the appendix. In the Americas, operating income improved 6%, primarily driven by on site volume, including contributions from our Hyco existing facilities and a new asset in our Gulf Coast. Hydrogen pipeline. The. Volume improvement, along with pricing, was partially offset by higher costs, including fixed cost inflation, distribution and dislocation costs Asia operating income grew 18%, primarily due to benefits from the gasification assets held for sale. New assets on stream and helium in Europe, operating income increased 2%, primarily driven by pricing actions, which more than offset higher power costs. This benefit, along with a currency tailwind of 2% more than offset higher costs, including fixed cost inflation.

In our. Middle East and India segment. Operating income was relatively flat, while equity affiliates income increased from our joint ventures in Saudi Arabia Lastly, the corporate and other segment benefited from productivity. As we continue to reduce our corporate. S a. This improvement was partially offset by lower sale of equipment activity. Please turn to slide ten. Year to date, we are free cash flow positive as strong operating cash flow exceeded the capital that we spent on maintenance and executing the backlog. We have also returned $1.2 billion in cash to our shareholders in the form of dividends in fiscal 2026. As it. Relates to our leverage, our net debt to EBITDA ratio is 2.1 times, which considers our proportionate ownership of the joint venture assets under construction. We remain committed to bringing the company back to an AA two rating over the long term. Moving now to slide 11. We expect our fourth quarter earnings per share will be in the range of $3.55 to $3.65, up 5 to 8% from the prior year. We expect to achieve this growth through continued benefits from new asset contributions, pricing actions and progress on our productivity initiatives. However, we remain cautious given our macroeconomic uncertainties.

We expect helium to continue to be a headwind due to lower price. Despite some volume and price improvement in Asia. With this, our fiscal full year guidance is now in the range of $13.39 to $13.49, which correlates to 11 to 12% growth from prior year. For. Capital expenditures, we now expect to spend approximately $3.5 billion this fiscal year. We have reduced the capital outlook to reflect payment timing adjustments. Lower expected maintenance and cancelled projects. We will now open the call up for questions. Operator.

Thank you. And if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment Again, you can press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take your first question. Coming from the line of Duffy Fischer with Goldman Sachs.

Yeah. Good morning. Just a couple questions around your asset. And given the attack that happened there., so one, I think when you brought that online, it was supposed to contribute about a buck 35 of EPS per year. Is that still a good number?, two in your Q4 guide,, how much is kind of taken out, I guess for what's happening there? Or does it take a while for that to flow through? And then just the third one, do you have any third party insurance for that?, you know, if that conflict escalates and it becomes,, you know, somewhat impaired.

Good morning Duffy.. Yeah. As you know, we've seen the news and of course, we, we, we have information from the site., but I hope you understand by, for contractual reasons with Ramco, we, we cannot., you know, give you a lot of comments on, on the project. I can tell you only that,, the, the numbers that you have in terms of contribution are in the ballpark, probably a little lower than that, but the numbers are in the ballpark and we do not expect any financial impact for, for our products in the, you know. Coming from, from this, from these events. But,, as you know,, Saudi Aramco is not commenting on the, on the fact yet. So we need to wait to, to, until they do that to provide more information. But again, the most important thing for us. There are no,, injuries to our employees or to, to the JV employees and,, and,, we, we do not expect the financial impact.

Yeah. And if I could just add one. Thing. Duffy. If you remember the contributions for Jisan are a financing receivable., so they do decrease over the life of the agreement. But again, as Eduardo said, you are in the ballpark of contributions for 26.

Terrific. Thank you guys.

Next question will come. From the line of John McNulty with BMO Capital Markets.

Yeah. Thanks for taking my question. And congratulations on some solid results., so I wanted to just understand, I guess, one of your comments on Neom and then just get your kind of high level view there. So I think you said with the contract, there's no impact on 2027. Does that mean you don't foresee any drag on, on your fiscal earnings from from Neom or benefit for that matter? And then again, I guess stepping back, can you speak to your level of confidence at this point as to whether or not Yara and yourself you're going to be able to find a buyer for that volume in, in calendar 27, that at least clears your, your offtake agreement. If you can give us any color on that, that'd be great.

Thank you. John. Yeah.

I can confirm that our expectations to have no gain or loss in 2027, I cannot,, go much beyond that. Again because of the, the T's and C's of the agreements we have with the joint venture and, and the confidentiality obligations that we have. But,, we, we do not expect any impact in 2027. And, what we expect going forward is before the beginning of each year, we can give you some, some,,. You know, some, some more., clear. Picture of what the expectations are. But as you know, this is an agreement,, for,, product that we're going to need to market in the, in the, you know, globally. Now with Yara and,, and,, we will evolve with time depending on the market conditions, but for 2027, we are confirming no impact for, for our products.

Great. Thanks very much for the color.

Your next question will come from the line of Jeff Zekauskas with J.P. Morgan., thanks very much., you. Talked about how the penalty from helium this year is lower than you originally expected. Maybe it's a little bit more than 100 million pre-tax rather than 150. If you had to distribute the, I don't know, the 105 or 110 million penalty. Through your business segments, how would you allocate it geographically?

Well, Jeff.

We we we look at this in a in a global basis., I would say that,, you know, what we are doing in the, in the helium business is really remarkable. I know when we talk about. Externally that the impact is 2 or 3%., it's difficult for you ,, for, for everyone to understand what is behind that, but just to give you a picture,, 40. Percent of. All the volume we sold during this quarter came from our cabin in in Texas. So it gives you an idea of. And in June was even more than that. The percentage. But gives you an idea of how much we. We are, we are exercising our system to, to keep our customers supplied and to make sure that,, we keep our position as a reliable supplier that can sign long term agreements in this business. So,, our, our impact is mostly in price and didn't come from this quarter comes from, from, you know, an year of negotiations that were more than a year of negotiations that we have,, from ,, from a moment where the market was very short. So,, I would say that,, you know, today,, that impact is migrating more to, to ,, Europe and North America because of,, you know, the, the type of customers that we have mostly in the, in the healthcare space and the MRI sector.

But,, we're very optimistic about the future in the helium side. And,, and we have been,, really,, gaining a lot of,, new commitments for volumes in the long term, especially in the electronics area. And especially in Asia.

Okay. Thank you for that. And in the Mideast,, equity income was up over 100 million. And I think in the second fiscal quarter, it was closer to 80. So. Is the or the joint ventures operating at a new level of profitability or this was just an unusual jump that had to do with ,, transitory. Items.

Yeah. Jeff., I'll take that one. So,, in the Middle East. Yep. Thank you. In the Middle East, we are seeing improvements in our equity affiliate income, the improvement in equity affiliate income. Though globally was split amongst multiple joint ventures. One thing I do want to note, we did have an exceptionally strong quarter this quarter in our Middle East joint venture, but that was largely contractually structural. And it's driven on a preferred dividend to our joint venture partners. And that's just a timing. So we will see the normal run rate., reconfigured in Q4 this year.

Great. Thank you so much.

Your next question will come from the line of Chris Parkinson with Wolfe Research.

Thank you so much., you've had a nice little bump up in your backlog from various electronics projects., one officially with Samsung and then two others. So I think we can all presume who the partners are., can you just offer a little bit of color on, first of all, how long those projects were being assessed in terms of you becoming CEO or those kind of long standing being assessed for multiple years? Were they relatively new ?, and then whether or not that you'd further expect some of those, even some of those smaller projects to continuously trickle in over the next, let's say, 12 or 18 months or so. Thank you.

Thank you. Chris. Good morning.

Yeah, I, I would say that on this backlog, we have one very large project that started in,, in 2022, I believe that is,, is a project in Taiwan that was multiple phases that were building ,, more than five large air separation plants. We have now three done. And we still have two to go,, order than that.. All these projects, they are basically coming in the, in the last 12 months., I would like to create credit for, for, for that or by, or my presence here. But the reality is the market is going through a super cycle and we have been working very hard to, to get our fair share of that. So,, we, we announced,, two very large projects, as you know, one in Korea, one in Taiwan., we have other projects that we are going to announce., this quarter that we are talking to the counterparts about,, issuing, you know, the, the final announcement. And,, and when we look at our list of opportunities. I would say that, the list is, is long today. And,, it's,, it's skewed to the electronic side. So probably,, close to two thirds of our opportunities are more than that are in the electronic space.

So, so that's,, that's not, you know, by, by., that's where the market is today. I would say that,, the traditional market in,, in chemicals and steel,, there is a lot of capacity in the world. Not, not to say that there are no opportunities, but,, they are mostly coming from replacement of old assets and,, and,, you know, one project here or there, but,, the electronics is really where the growth is. And,, I think we're very fortunate that we kept that capability in the company that we have been executing ,, projects in Asia for a long time. And,, and that fits well with where the market is now and.

Just, as a quick follow up,.

Nhrc has indicated there over, you know, 90% completes on the facility, the primary facility. And then about 95% plus complete on the solar farm and one garden plus or minus. I think that update was actually from a few months ago when it as that relates to slide 18., you know, just getting away from the actual, you know,, agreement with Yara, but as the ramp of those facilities begins, can you reconcile the exact timing and how we should think about how that affects slide 18 in terms of the net debt adjustment, and then also in your 10-K, the debt was listed, I believe, and forgive me if I missed something, but around 4.7 billion in this slide, you have roughly five, you know, two five. I was wondering what that extra you know,, you know, half a billion represents and or if I'm just, you know, missing something. Thank you so much.

Yeah. Chris, thanks for the question. So as mentioned before, the, the. Consolidation of Neom is in fact, because of the EPC arrangement during construction. Right. And so the Deconsolidation will happen once that plant is up and on. So after commissioning, we will Deconsolidate. That is on slide 18. What you're seeing here is the Deconsolidation and back down to a net debt of around 11, 11.5., the, the difference between the 5.2 and debt here. There is no difference. That is our carrying value of the net. Debt. the proportional may be just our proportion of that, that 33%. so, so there is no difference between what we've reported and what we have here. This is just a deconsolidation of the joint venture. after the construction is completed and we've commissioned.

Yeah. And just as one point when you, when Melissa talks about commissioning, I mean, you know, being at a full ,, production capacity and,, and this is a, you know, first of a kind plant with a lot of new technologies. So we expecting a long commissioning process and,, and, and that's,, you know, one of the reasons why we cannot precise exactly when the, the, the, this change in that consolidation can happen. And also, you know, our full obligation to, to buy the product.

You.

Your next question will come from the line of Vincent. Andrews with Morgan Stanley.

Thank you. And good morning., first, I just want to clarify on Neom, the comments on no material financial impact for fiscal 2027., does that. Is that is that for both the income statement and the cash flow statement? And then also, I think I heard you just say that,., as it relates to. Consolidation, you said something about when there will be a trigger in terms of when you're obligated to buy the product. Is it potentially the case that you don't have to buy product in fiscal 2027?, so if you could clarify that, I'd appreciate it. And then my follow up would be on the CapEx reduction for the target year. I think you brought it down by about $500 million. If you could just talk about what's driving that and what you think the alternative use of that capital might wind up being.

Yeah. Thank you. Yeah. On the on the on neon. We we cannot discuss the details of our agreements, but,, as, as, as I said, the, the, the process for commissioning will take some time for the facility to, to get to,, full production and,, and,, we're going to need to, to keep you informed during this period, but we are absolutely confirming the no, no impact on the, on the income statement. And on the cash flow statement. I don't know exactly how to, to qualify that, but. Melissa, you know.

Sure. Absolutely. So since we are in commissioning the large portion of of the spend and any distributions that we put into the joint venture largely complete, if you remember, this is 73% project financed ., and our contributions to, to the joint venture again, are largely behind us. So again, no financial impact both to the P and L and no large impact to, to the cash flow statement from the CapEx perspective, we did reduce our CapEx forecast for this year by about 500 million. That's largely just timing associated to the execution and the payments., of, of all of our backlog under execution. So nothing material there. We continue to be able to invest in our underlying industrial gas projects., and the distribution to those will be against what we've already talked about really the electronics wins that we're executing right now., and, you know, projects that we continue to bring on, on our backlog in outside electronics space as well.

Next question will come from the line of James Hooper with Bernstein.

Hi. Good morning. Thank you for taking my questions., can I start on the Louisiana Project and Darrow, can you go through a little bit more detail on what happens to the kit in the land, how you're thinking about it in any discussions that you've had there? Please..

Yeah. But what happened to. I didn't get it.

Yeah. No. No worries. the the Darrow what we're going to be doing.

Is the equipment. Yep. Yeah. The, the. You know, this is a project we started probably 6 or 7 years ago. So the project was in, in a, in a certain stage that we, we have a lot of the equipment already purchased in the, in, in, in hand in warehouses and, you know, mostly in U.S., but some in, in Europe, and in China. So it is a little, you know, very different situation from what we had last year when we cancelled the World Energy Project. You know, these are, you know, high you know, I'd say world class assets, you know, the air supply plants, the. The, the. Hydrogen purification, the ammonia loop. And and we see a lot of value for these assets in the market. As you can see in the transactions that were announced recently, when people are buying ammonia plants and so forth. So we are in the process of, of,, taking all the data and, and making sure that we maximize the value we can recover from this projects by basically,, you know, using part of this equipment in our own operations, like the operation and some other equipment related to industrial gases. And on the case of the ammonia loop, which is a very important asset, you know, making sure that we can commercialize that as a full unit.

And in some cases, it's possible to generate,, projects for, for our products. I think we, we became public that one of the projects that we executed was, was a similar ammonia plant that we did in Texas in terms of capacity was 3600 tons per day., those two,, assets that we have from there, they are 4000 clones per day using the same technology. So ,, they are desirable assets. And, and the market is, is showing,, you know, that,, they, they have significant value. And,, we can attach, if possible,, you know, possibility of supplying hydrogen and nitrogen to, to these assets. So, so this is the objective,, we are going to work on that in the next few months. We have a team here in our products., you know, in, in engineering business development, you know, working, dedicated to, to, to this,, task. And our objective is to recover as much money as we can. And generate new business for the.

Company.

Sorry. Go ahead.

Thank you. And just and just as a follow up on that Eduardo,, if you do see a bit of a windfall,, with leverage starting to get below two times, how are you thinking about capital allocation and projects or potentially starting a buyback?

Yeah, it's, it's,, if we get any, any money, it would be a non-GAAP,, income on top of,, you know, what? We, we initially forecast and,, it will only going to go to, to our,, you know, our pool and it will be allocated as we do with the rest of the, the cash uses and sources that we have. Melissa can give more color on that.

Yes, absolutely. So, you know, as we've talked about cash flow neutrality,, focused on that, this year and moving forward,, we do have share buybacks in our capital allocation waterfall. We have a line of sight of being able to start that program towards the end of 27, beginning of 28. But that obviously depends on the projects that we have coming down the pipeline. So we will want to invest in high return projects first and foremost., continue to. To increase our dividend and share buybacks will become part of that program as we move forward.

Thank you.

Next question will come from the line of David Begleiter with Deutsche Bank.

Thank you. Good morning. Eduardo back on neon. If the project was at full production capacity in 2027, hypothetically, what were the financial impact be on on Air Products?

David as a as a, I think we said that many times this project., a product has an obligation to buy the ammonia as a fixed price. And, and we are exposed to the market conditions on the, on the other side. So,. Again, we will work to,, be able to provide a forecast at the beginning of each year,, of what the impact will be,, it. Would be premature for us to go much further than that. So what I can tell you is that for 27, the expected impact is zero. And we're going to have another one for 28. So,, you basically asking the same question in a different way. I understand the, the, the, you know, the, the curiosity and the, and the, in the objective of,, you know, getting this information, but,, unfortunately, the situation is as, as a, as I report, not different from the situation that you have from another player in the ammonia market, you know, with,, with the exception that our fixed cost is fixed and it's not a function of, fluctuations in natural gas prices.

Understood. And just wanted to try just on the one last thing on the Americas,, on the cost side, do you need additional price increases to offset these,, higher costs you're incurring in the Americas?

Yes., no. Thanks for the question, David. So we are seeing some increase in costs in the Americas. Largely associated to some project costs and some dislocations driven by maintenance. And of course, we are seeing fixed costs and inflation as everybody is. We don't have a significant,, packaged gas business in the as you know. So our ability to increase pricing is, is,, limited to our liquid bulk ,, product, but we do look to continue to, to overcome price with price., in the Americas and in all of our regions. And of course, we're looking to drive productivity as well to offset those cost increases.

Thank you.

Your next. Question will come from the line of Laurence Alexander with Jefferies.

Hi., just two quick ones. One, could you give a quick update on what you're seeing on the merchant volumes by region? And secondly, on, on Neom, if the strategy, the original strategy worked out and the green premium evolves and the green ammonia market establishes itself as a kind of separate market with a much higher value. Is there a products obligated or constrained to keep Neom in the portfolio? Or if there was a higher or better strategic owner? Are you allowed to explore that 5 or 10 years down the road?, well, starting with the first question on the on the merchant side, I would say that,, you know, we see the market in, in the Americas, you know, progressing relatively well ., you know, still,, growing .. Europe as a whole is, is a difficult market today. I don't think it's surprise to anyone that,, you know, the industrial market in Europe is,, not growing,, and in Asia, it's a little bit of a different scenario, you know, China,, is still, you know, a little better than it was. I would say a few months ago. But,, it's still a difficult market with a lot of overcapacity that we need to overcome.

And, and,, the other, the other markets, you know, suffering other than electronic side,, in, in Taiwan, South Korea, they are suffering a little bit with high energy costs. So,, we don't have a big exposure outside of electronics, but,, you know, the little exposure exposure we have in the merchant business there,, it's,, it's flattish, you know, from, from that perspective. So, so that would be on the, on the, on the merchant question on the neon question is,, you know, there are two different things, right? One is the products participation in the joint venture that is subject to, you know, like any joint venture agreement to, to, to rules on, on, on. If you decide to any, any of the partners decide to, to, to leave the partnership that, you know, there are specific rules on how the process works, you know, works for us, for our partners in, in every joint venture. So that that's one side. And I would say that everything is possible, but that's,, you know, that's,, joint. Venture that we did with the intent to be on the, on the long term,, the other, the other position is the position as a, as an off taker of the product.

That's,, you know, we, we already talked about that. It's a 30 year contract and,, and again, this is a commercial operation that,, of course we could at some point,. You. Know, having a back to back or even,, work on the agreement, although I would expect the, you know, the project company, the joint venture to, to expect their products to, to stay, you know, as the off taker and that we would need to go more in a, in a back to back,, agreement to, to move a large volume, but frankly, this is not different from what we are doing today., with this agreement with Seattle, where, you know, they will,, with their marketing capability. Their distribution capability, their ships, they will go to the market and they intend to sign long term agreements. They're not going to be as long as the 30 year deal that we have. But,, we don't want them to be as long as that because the expectations that the, as we said several times, our price to buy the product from the JV is basically fixed. And we expect in the long term, the market to evolve the prices for ammonia to evolve with the energy prices.

So ,, you know, we, we are looking to initially to have agreements that will be long term agreements, but very far from the 30 year period that we have with in our obligations.

Thank you.

Your next question will come from the line of Kevin McCarthy with Vertical Research Partners.

Yes. Thank you, and good morning., I wanted to follow up on the helium discussion, maybe with a two part question. Can you elaborate on,, the source of incremental goodness in the earnings function and helium was my understanding. You have quite a large percentage under contract. So did that come from new or modified contracts? Or perhaps the spot market, albeit a smaller exposure? There?, or perhaps both. And then on the supply side,, you know, there have been sort of unpleasant goings on in the country of Qatar recently as you are well aware. So can you provide an update on,, any impact,, to Air Products there? Therefrom? And also,, efforts to procure helium from other places in the world. Thank you.

Yes, Kevin, it's it's a long question that would need a long answer here, but,, I. Would say that,,, on the, on the new agreements that we assign a lot of that is,, new electronic projects that are being built in, especially in Asia, some in the US. So,, you know, I think we, with our system and, and this information that I provided with the Kevin that we have,, and the. Diversification of sources. I think we made clear to the customers that a product is a very reliable solution. And we have been, fortunate to, to sign a lot of new agreements for projects that some of these projects will start in a year or two years and three years., but they are very, you know, they are longer term agreements than we normally would see in the, in the merchant., side. So some of them are connected to ,, this,. Large air separation plants,, projects that we are, we are signing and they have the same term of our. Large on site controls., I would say on. On the, on the, on the source side ,, we have for, for many years,, strategy to diversify our sources between the US,, Qatar, Algeria and,, and,, we continue to do that.

I, it's very hard to, to predict when the situation in Qatar will improve., I think,, you know, there will be, there was some loads that were able to, to be filled by, by Qatar energy,, but frankly, today you would need to cross to the, to the Red sea side to, to ship and, and the volumes coming out of the Middle East from this source. They have been very limited. So,, we are not counting on that on our, on our,, forecast for now. And,, as I said, we are taking a lot of product out of our cavern and,, and, we are in a position that we can continue to do that for many, many quarters. So,. You know, I would say that that has been our strategy and,, I'm very happy that we have a Kevin. Today. It's,., it. It's something that, you know, our position as an industrial gas company in the, in the heating chain,, with, with the, the end of the BLM became more and more like a middleman. Position. But a middleman with a lot of strength based on the, on the supply chain and the number of containers we have and so forth.

But it's still subject to, to be squeezed when the when the market is, is, is long by our customers and to be squeezed when the market is short by, by our suppliers and having the Kevin and having this ability to draw product for many, many quarters, you know, help us on both sides to, to negotiate and to have a more stable business.

Thank you for that., if I may. A second question on the yard deal. I appreciate you may not be able to get into specifics, but conceptually, should investors think of of that deal as fully hedging? Air Products offtake risk or, or partially hedging it? Or are there scenarios where you would be obligated to off take,, but,, but not able to ,, move the. Product through Yara.

No, I would say that,, you should see that as a, as a way to eliminate the volume risk., we still retain the price risk. We talked about that before ., think,, you know,, some people underestimate the, the volume risk, you know, and,, and. We,, you know, our products, we could not do that. Right? So we have an obligation to, to, to lift all the tones that are produced by the joint venture. And it's,, ammonia is a product that,, you know, you, it's not like an operation plan that you can vent the product. So,, you can. Not take the risk of shutting down the plant because you have a tank full event, right? So that this deal with,, with,, a counterpart like. Yara that owns their own distribution network that owns multiple ships, eliminate that risk the price risk is, is, is still there., most of the price risk will, will sit with us., we have,, you know, a scheme,, commission scheme with Yara that they will share the, the upside with us and they will have, they will be,, incentivized to commercialize this product as green product as much as possible. So, so ,, I would say that, that, that, that, that was the objective from the beginning.

And I, I'm very happy with the agreement that we have. And,, and I think this,, you know, relationship is,, is became very, very important for us. And,, and hopefully will grow as you, as you guys see on the, on the GCA announcement as.

Well.

Thanks very much.

Your next question will come from the line of John Roberts with Mizuho., thank you. Last quarter, you gave us an end market breakdown for Air products. Maybe could you talk about the volume growth in three buckets, semiconductors, refining and basic petrochemicals? Or I think what you call energy. And then all other where we double digit percent in electronics and mid-single digit percent in refinery and petrochemical and maybe down low single digit percent in all other.

Hey, John, how are you? Thanks for the question. So we actually don't usually externally break it down as far as growth by, by area. I will tell you though, we continue to see some really strong returns and, ramping up in the electronics space, both from a backlog as well as the supply. We had new assets coming on stream this year, and you are seeing the contributions of those assets in electronic space in the refinery space. I would say it's a little bit more of a mixed bag in Europe. We're not seeing great volume improvements, but we are seeing great volume improvements in our business in the Americas. The rest, again, you know, you can see in our volumes, we've seen some improvement in the Americas and in Asia, but not great improvements in Europe. So again, we see good improvements in electronics in, in our new assets and ramping up as well as our backlog refineries in the Americas. And the rest is again, a mixed bags, as you see in our underlying results.

Okay. Thank you.

Your next question will come from the line of Josh Spector with UBS.

Yeah. Hi. Good morning. I just had two quick follow ups. I mean, one, if you're able to disclose on the Yara offtake from Neom is the commission structure fixed or is it variable? And then second, just on the Americas pricing, I mean down sequentially. Again, I understand the point around packaged gases. Just curious if you characterize that as helium related or if there's something else underlying impacting that. Thank you.

Yeah, I would say on the on the first question,, you know, I think I just explained that, but,,, the scheme that we have, of course, the incentivized to, to, to place more product as green, which implies that it has a, is a higher,, price product. So it is a, is a variable structure, you know, not a, not a fixed structure. And,, on the, on the Americas medicine,.

Yeah, absolutely. Thank you. So you do see,, an top side, 1% decrease, but I can tell you actually from an underlying,, we saw some price improvement in the Americas actually. So price was actually an improvement in the non merchant pricing. This was more than offset though by our headwinds in helium pricing. And that really largely was a slow quarter ., in, in the space. Sector. So we do want to see that hopefully rebound in the next quarter as we see launches increase.

Alrighty. Your next question will come from the line of Patrick Cunningham with Citi.

Hi.

This is Alex on for Patrick., I think,. Just a quick question on Darrow., I think in the past you said that you were able to monetize ,, something about of $1 billion, I think,, I'm just wondering if that still holds true and what the timeline could be expected. And then as a follow up,, wondering if you could provide some update on the Edmonton project.

Yeah. On the, on Darrow,. I, I, I think any number that we gave to you in the past was, you know, we Qualify them as estimated. We're working on that. I wish we had a very clear., timely. For that. But we'll take the time that we need to take to maximize the value and ,, you know, as I explained, the value will come from someone that wants to use this units as a whole. Not, not selling piece by piece. So it will take some time to get there. And, and, we will update you., as, as the job develops., regarding,, Edmond. We have no,, updates from what we had before. We continue to work on the project and,, and,, we, we do not have, a news in terms of,, start up dates or costs., beyond what we share with you before.

Your next question will come from the line of Arun Viswanathan with RBC Capital Markets.

Great. Thanks for taking my question.. Congrats on the strong results. I guess I just,, I had a question there ., I think you started the year expecting 9% EPS growth. You're now going to 11 to 12%., is it right to assume that most of that was, was mainly,, volume upside? And I guess as you look into fiscal 27,, could you provide some, maybe some initial thoughts on what portion of earnings growth would, would maybe trail off because of,, you know, maybe you're further along in the restructuring actions, but maybe what you pick up because of backlog and maybe some volume.. Upside from, from helium or any other sources. Thanks.

Yeah, no, thanks for the question. And let's go through. Through this outlook. So we did in fact, increase to an 11%. And 12% year over year improvement. Very proud of the team for all their efforts to to focus in on both the volume growth as well as productivity and pricing. So as we look forward, the largest driver of our improvement is in fact market volumes., we do expect market volumes to continue to improve largely as we've talked about in the Americas. And specific haco. We are seeing some green shoots in Asia, specifically in electronic space. And we do expect those to continue. However, we do have some concerns over the macroeconomic environment, largely in Asia and Europe, that we are building into a no significant market growth because of that uncertainty. Moving forward. We did have some contributions on new assets. So as we've talked about, both the Americas and Asia, we had a 3% year on year benefit from those new assets. And we continue to focus on price and productivity., we will have some comp headwind because of our productivity actions., having a year over year comp,, impact, but we do continue to want the teams to focus on and continue to find productivity as we move forward.

Okay. Thanks for that. And,, given that,, you now do,, have less spending committed to Darrow as you move forward,, what is the opportunity? I think you did address this earlier, but is there an opportunity to potentially pull forward the buyback?, capabilities or, even potentially pursue some M&A ?, thanks.

Yeah. No, as you know, this is very much of a, an opportunistic industrial gas market, right? And so as projects come forward, we will continue to be very disciplined on our capital deployment. We're looking for risk adjusted returns on all projects that we enter into. But we do have the share buyback in our waterfall. So as we continue to improve our cash positions,, take advantage of any opportunistic M&A and new projects, then we would look to have any additional investable capital,, into a share buyback program. And as I mentioned, that will likely come into a line of sight towards the end of 27, early 28.

Thanks.

Your. Next question will come from the line of Mike Harrison with Seaport.

Hi. Good morning., I was looking to ask about the gasification assets in