Linde Aktie

Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde First Quarter 2026 Earnings Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir.

Avi, thank you. Good morning, everyone, and thanks for attending our 2026 First quarter earnings call and webcast. I'm Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Matt White, Chief Financial Officer. Today's presentation materials are available on our website at Linde.com in the Investors section.

Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are in the appendix of this presentation. Matt will provide some opening remarks, I'll give an update on Linde's first quarter financial performance, and then Matt will finish the updated outlook, after which we will wrap up with Q&A.

Let me now turn the call over to Matt.

Thanks, Juan, and good morning, everyone. The Linde team delivered another solid quarter against a challenging economic backdrop. EPS of $4.33 grew 10%, operating margins reached 30% and return on capital remained at a healthy level of 24%. The high-quality compounding growth of our company, no matter what the environment, is a testament to the unwavering commitment of all 65,000 employees to create shareholder value.

And given the recent geopolitical volatility, it may be helpful to provide a brief update by end market, which you can find on Slide 3. As a reminder, the top half shows consumer-related end markets at approximately 1/3 of sales, while the bottom half represents industrial-related markets. for the remaining 2/3. The growth rates reflect price and volume, but exclude FX or M&A.

Starting at the top, health care at 16% of global sales grew 1% year-over-year. We provide gases, equipment and services to medical institutions, such as hospitals, and direct to the home. Normally, a resilient market like this should grow in line with demographic trends or low to mid-single-digit percent. And while we're experiencing those growth rates in most countries, the U.S. home care business has been relatively flat. In late 2025, a new U.S. health care policy resulted in less services for a specific piece of equipment, which is reflected in the current run rate and will continue for the next several quarters.

Aside from this particular issue, the rest of health care is performing as anticipated, while providing a resilient balance to the more cyclical markets. At 9% of sales, food and beverage grew 5% from broad-based strength. The largest contributor is the U.S. beverage business, where we continue to see increased customer need for new services and applications. In addition, traditional bottling and food freezing growth remained quite strong, especially in North and South America. Overall, food and beverage has grown mid- to high single digits over the last several years. and is expected to remain a steady contributor.

Electronics increased the most at 10%, primarily driven by continued investments in advanced chips to support AI. The growth is heavily weighted toward the U.S., China and Korea. Since our substantial electronic sales in Taiwan are excluded as a nonconsolidated 50% joint venture. As both the scale and industrial gas intensity continue to expand in this sector, Linde remains well positioned. We're currently investing more than $1 billion of the project backlog and for ultra-high purity plants, which will support the most advanced fabs in the world. And there's more to come as we have a high degree of confidence and adding substantial new projects to the backlog this year.

Moving to industrial end markets. you can see growth across the board, which supports the notion we're starting to lap more difficult comps after years of stagnant industrial activity. Chemicals and Energy, representing 22% of sales increased 3% as growth in Americas and APAC more than offset contractions in EMEA. Americas was driven by higher activity for hydrogen and nitrogen and U.S. Gulf Coast refining and Latin American upstream energy. While APAC increases primarily came from our recent investments in the Jurong Island integrated complex. EMEA continues to experience negative volumes, primarily from on-site customers shifting production to more competitive assets outside Continental Europe.

It remains to be seen what the longer-term effects could be for the Middle East conflict, but so far it appears activity is relocating to more feedstock advantaged assets in Americas and, to a lesser extent, APAC.

And while we're on this topic, I think it's worth providing a brief update on our helium business. Helium was an oversupply for a few years through 2025. But recent events have created acute global shortages. Linde sources from a very broad-based since supply chain constraints are a recurring charge. Therefore, we are currently well positioned despite some of the recent outages. Given our business is largely contracted, the priority is to meet existing customer commitments. After that, we still anticipate excess molecules allowing us to pursue new multiyear contracts with high-quality customers.

Therefore, I don't anticipate significant spot sales this year since we're focused on securing long-term agreements. Returning to the end market slide, Metals and Mining grew 3% and similar to chemicals and energy. The entire growth is coming from Americas, as both APAC and EMEA are relatively flat. A combination of better industrial activity and protectionist policies from U.S. to Latin America have supported local metals production over imports.

Furthermore, we're seeing renewed competitiveness from customers of more gas-intensive integrated blast furnaces when compared to EAFs, primarily from constraints associated with cost-effective scrap, and electrical infrastructure. The last industrial end market of manufacturing grew 5%. Half of the increase came from aerospace activity in the United States, primarily supporting space vehicle production, testing and launch as this end use continues to see strong double-digit percent growth.

We'll isolate aerospace as a separate end market when it consistently exceeds 5% or more of global sales, which will be a function of the frequencies, size and propellent type of future space launch. Excluding aerospace, Romanian end market grew low single-digit percent as strength across the Americas, especially in the U.S., was partially offset by continued weakness in EMEA while APAC slightly improved over last year.

Within the U.S., packaged gases grew mid-single digit and hard goods double-digit percent, which aligns with the recent favorable U.S. production statistics. In hardgoods, growth was bounced between consumables and equipment and driven by energy, construction and general metal fabrication. EMEA activity was softer from continued weak industrial activity including direct and indirect impacts from the Middle East conflict.

And in APAC, we experienced moderate volume growth driven by China and Southeast Asia. In summary, the portfolio is doing what one would expect. As geopolitical events shift production around the world, and secular growth trends drive concentrated investments, our business units continue to adapt and capture their fair share. And while no one can predict how the next few months will play out, let alone the next few years, I'm confident the lending team can navigate the volatility and continue to deliver high-quality compounding growth.

I'll now turn the call over to Juan to walk through the financial results.

Matt, thank you. Please turn to Slide 4 for our consolidated results. Sales of $8.8 billion were up 8% year-over-year and flat sequentially. Versus prior year, foreign currency was a 5% tailwind driven primarily by the strengthening of the euro. Net acquisitions contributed 1% from attractive roll-ups we've been executing globally.

This quarter alone, we signed 9 more bolt-on acquisitions, primarily in the Americas, which will continue adding to future EPS growth. Underlying sales increased 3% versus last year from 2% higher pricing and 1% higher volumes. Volume increase was driven by the project start-ups, primarily in APAC. Both Americas and APAC continue to see base volume growth but it was mostly offset by EMEA due to the weaker economic activity in the region.

Sequentially, underlying sales were flat as higher pricing was offset by lower volumes, mainly in APAC and EMEA. The lower volumes was driven by seasonal factors, especially in APAC, followed by EMEA where we continue experiencing weaker trends in the industrial end markets. Price continues to drive underlying sales growth, highly correlated to local inflation levels. Recall that actual price increases are higher for the combined packaged and merchant gases which represent roughly 2/3 of total sales.

Operating profit of $2.6 billion increased 8% year-over-year and resulted in a margin of 30%, similar to prior year. Sequentially, margins improved 50 basis points, driven by management actions in pricing and cost productivity that more than compensated for seasonal volume declines. We expect management actions to continue to support profit growth and margin expansion for 2026.

EPS of $4.33 was 10% over prior year or 5% when excluding the effects of currency translation. We finished the quarter slightly above the top end of the guidance range due to better effects as the business performed as anticipated, considering the many challenges globally. Operating cash flow was $2.2 billion, 4% higher than prior year. Capital expenditures were $1.3 billion, and as a result, our free cash flow was $900 million, which we used primarily to pay dividends and repurchase shares. The CapEx of $1.3 billion was roughly split between base CapEx and project backlog.

Have in mind that base CapEx is primarily maintenance and all other growth investments not meeting our stringent backlog definition. For example, current investments to serve commercial space. In this quarter, we started up 10 projects from the sale of Gas backlog, mostly in Americas and APAC, with investments of approximately $300 million. Furthermore, we signed 5 new projects that added $100 million to the sale of gas backlog, which ended the quarter at $7.1 billion.

Industry-leading return on capital ended the quarter at 23.8%, a reflection of capital discipline, consistent earnings growth and good backlog execution.

Slide 5 provides further details on quarterly capital management. The operating cash flow trend can be seen to the left with the most recent quarter of $2.2 billion. Note, the first half of the year is weaker due to the seasonality of cash payment timing for interest, taxes and incentives. For 2026, we anticipate a similar trend as last year. To the right of the slide, you'll find a pie chart that demonstrates the balance across investing into the business and returning capital to shareholders. Disciplined capital allocation is a hallmark at Linde and is something that differentiates us from others.

During the quarter, we raised the annual dividend by 7%, making it 33 consecutive years of dividend growth with an average growth rate of 13%. We also repurchased $800 million of stock during the quarter, while reinvesting almost $1.5 billion into the business. Our cap allocation model remains consistent across all environments. In periods of uncertainty and volatility like today, a fortress balance sheet is critical not only to maintain stability but also to capitalize on growth and share repurchase opportunities as they arise.

Thank you. I'll now turn the call over to Matt, who will wrap up with the guidance update.

Slide 6 provides the updated 2026 guidance. Starting with the second quarter. We anticipate EPS in the range of $4.40 to $4.50 or 8% to 10% growth. This includes a 1% currency benefit but consistent with prior quarters, assumes no economic improvement at the midpoint. For the full year, we're updating to a new range of $17.60 to $17.90 or 7% to 9% growth.

Like the second quarter, this includes a 1% currency tailing and assumes no economic improvement at the midpoint. Also note, both ranges do not include any improvements in the helium business versus the February guidance. So any incremental volumes or price would be upside. And when compared to the prior guidance, we raised the bottom by $0.20 from increased confidence in the overall business resiliency. However, we left the top at $17.90 because it's still early to signal increased optimism.

There are a lot of things happening in the world right now, and I'd like a few more months before considering a top end raise. Overall, we had a devent start to the year but remain guarded until we see more clarity on current geopolitical events.

I'll now open the call to Q&A.

[Operator Instructions] And our first question comes from the line of Laurent Favre with BNP Paribas.

- My first question is on margins. You mentioned a strong improvement in the Americas. And I was wondering if you could talk about, I guess, the big moving parts of while Europe was flat. Asia down. Is it Hillion,Is it the rapid cost inflation in March which created the temporary squeeze in and there would be very helpful.

Sure, Laurent. I'll start with -- and we said this last time, and I just want to reiterate it again this time. On a full year basis, we feel pretty confident we're not only going to raise margins for the full year 2026, but probably at the upper end or even above our traditional range that we tend to talk about of 40 to 60 basis points. now stating that in the full year, you're always going to have some moving parts within the quarters.

I think when you think about Europe, clearly, the volume is a bit of a drag. I think within EMEA as a whole, -- we mentioned on the call between a combination of the overall weaker industrial environment, the weaker chemicals environment, add to it, both direct and indirect impacts from the current Middle East conflict we're just not seeing the volume recovery there. But I could tell you we're not happy with the performance. The business team is taking actions to improve that. They know that. So I expect to see some improvements there in Europe.

With APAC, we did mention on the backup slides, we had about half of the sales growth was a sale of equipment. But actually is equipment that is connected to long-term merchant contracts in electronics. So that does come with future contracted merchant sales. But that will tend to be a little bit lower margin on average. It's a kind of a one-off. But also, as you know, Q1 is traditionally weaker in APAC, just given some of the seasonality effects. So I expect APAC to kind of get back up to the 29 type percent margins we saw last year as the team there continues to work towards improving that.

So some of it is timing, some of it is just a little bit of some effects on the volume -- but on the full year, we fully expect to not only raise margins, but probably at the top end or above. And again, this is all ex passed up or down, as you know, which is just more optics on the margin and no real effect of profit dollars.

And as a follow-up, you mentioned that you disclosed commercial space sales when you get to 5% of the group, which is about $1.7 billion. And I think recently or on the prior call, you mentioned that you thought sales in commercial space would get to about $1 billion by the end of the decade. So I'm just wondering, I mean are you now thinking that we may get close to $1.7 billion by the end of the day and it's big change?

Yes. So Laurent, I mean I'll start with -- look, we feel very good about our positioning to support the space economy and as that develops. Clearly, in the U.S., you're seeing that much more rapidly with the private commercial space sector. But even across outside the U.S., we're definitely seeing acceleration in those efforts. With controlling the customer, that's going to be their determination on launch, but it's like I mentioned on the call, it's going to be a function of frequency size and propellentype.

And what that means, I think frequency is self-evident, how many launches occur. -- with size, it could be dramatically different, much larger rockets and much larger booster systems can use orders of magnitude higher of propellant as you can imagine, something, for example, the largest rockets out there versus the smaller ones, you could see 10x difference on fuel and per ton. And then the fuel or propellent type is important because while we supply oxygen for the oxidizer and nitrogen for densification, fuel-wise, there's really 3 types today. You'll see which is either Paratin, methane or hydrogen. Obviously, we supply hydrogen, we do not supply the other 2. We would do only sale of equipment for things like LNG. And so if you do see more hydrogen-based rockets, that could also accelerate the growth for us depending on the fuel type used.

So we feel pretty good about it. You look at the ambition on getting satellites and constellations in space today. You look at the existing population and what needs to be replaced in lower orbit roughly every 5 years, I think it continues to bode well for launch and not only the major players, but there's more room for maybe some new players that can be supporting the demand out there to get more constellations in space. So -- we'll see where it ends up. I think it will all be a function of the launch cadence, but we feel quite good about our positioning to supply that when it happens.

And our next question comes from the line of Patrick Cunningham with Citi.

I guess, first, as you think of maybe the longer-term implications of this crisis, it seems like there's probably a heightened focus on energy security, deglobalization -- so I'm curious as how you're thinking about the potential for -- how potential conventional energy and energy transition projects should trend as a result?

Thanks, Patrick. I mean the natural reaction is exactly like you stated, right? You'll energy independence will be more accelerated. One can argue we've already been deglobalizng as a global economy, and this may have accelerated some of that. But energy security continues to get a lot of highlight in spotlight when you see these supply-type shocks that occur.

But my opinion, ultimately, it still comes down to economics and ability. So while renewable energy will continue to be an area of high interest. It's still going to require government intervention. It will require some support sponsorship, potentially some kind of subsidies as we've seen in certain geographies and so I think without that, it's hard to see that happen on its own as we've seen, but time will tell. I think as far as other hydrocarbons, I absolutely believe you'll see more of that. Clearly, with other LNG and areas that are probably less of concern countries, you could see areas like oil sands of Canada become more interesting, again, just given that the exploration risk is almost nonexistent. They know the product is there. It's just more of a logistics challenge to get it seaborne or to get it pipe to where it's needed.

So I just think that some of the more traditional areas will get another hard look given the uncertainties in the hydrocarbon space. I do think you'll get renewed interest in renewables. But again, without the support of government to help that on everything from right of ways to land to permitting, to bridging some of the economics, it will be hard to see that accelerate at a clip that people wanted to.

Got it. And just on European sort of outlook, how should we think about on-site volumes and potential earnings upside for the balance of the year. I think despite some of the feedstock and energy challenges, we have heard some more advantaged or flexible refining and petchem assets running a bit harder sort of month to date. So -- how do you square that? What's sort of the outlook? What are sort of the -- the puts and takes in terms of mix there as well?

Sure. I think we do have some on-sites that are running well that you could argue are state champions or regional champions. But on the flip side, we've definitely seen some ships production, right? And they're shipping it to some of the assets we supply in other geographies, primarily in Americas. I do think part of it also in Europe right now, in my opinion, you have a bit of a challenge with some of the uncertainties, right, around energy policy around some of the environmental policy. Clearly, there's a lot of imports and not just on the base material side but on the finished goods side as well.

And so at this point, it's hard to see how all of those factors will create any significant change without some catalyst. And whether that catalyst is some type of restrictive import policy or more clarity on the environmental policy. Clearly, with the IAA that could help I think it just needs -- that money needs to find its right on the ground. If it does, that could help turn some of that around. So that's to me what we just need to see. If we see a catalyst there of some significant type that should help and it could be anywhere from maybe some import restrictions to the IAA hitting the ground. But aside from that, it's hard to see a major shift.

And our next question comes from the line of Vincent Andrews with Morgan Stanley.

Matt, certainly back on the space side of the equation and the idea of getting to that 5% of sales. Do you have the capacity you need to get there? Or should we be anticipating some type of capacity increase, maybe it's in different geographies? And would you do that in concert with customers? Or would you do that on your own and make it more of a merchant business? How should we be thinking about that?

Yes, sure. I think it's really in concert with customers. In my opinion, you have several launch providers that are doing a variety of different engine testing, they could do static testing, gimbal testing, whatever they're doing. And the locations they want to do that could very well be different than where their pad is with their launch. Once they start migrating to more frequent launches, which can migrate from [indiscernible] parcels all the way to full launch, you're going to want to make sure logistically, you're as close to the pad as you can be.

So from my perspective, we are working with the major launch providers and also a lot of the up-and-coming providers, to make sure that we have the capacity and the contractual relationships to support them and their ambition. And the way it kind of works is in the early stages, you're probably going to do longer logistics halls when it's more infrequent and intermittent. And then as they get on to a better cadence, then you start talking about new requirements contracts in supporting a more stable launch cycle. -- and that, you put closer. And so you eliminate the logistics cost, which obviously makes their costs lower on the PROPEL. So -- and it's a combination, it will be sale of gas, obviously, that also could be some sale of plant. We do both. We support.

It's very similar to what you would see in the large on-site where at times we've sold plants and sell a gas and we'd literally run the system of all the plants. So I think that's what you're seeing. And as you can imagine, there are some very specific areas where the launch sites are concentrated given FAA regs and what you need to do around that for the airspace. And so that's where we have a very strong capacity today, and we're working to secure more contracts with our customers for the future launch needs.

And our next question comes from the line of Duffy Fisher with Goldman Sachs.

By far, the most incoming questions I'm getting on you guys is around helium. And I know you guys talk about it being kind of a small part of your business. But in the last supply shock we had with Russia, you did see pricing start to roll into some of the contractual business. I guess, how do you see this supply shock playing out differently than what the Russian supply shock did and how long would the straight have to be closed before you'd start to see some of that pricing roll through some of your contractual business?

Sure, Duffy. Yes. Maybe I can level set it with what are we seeing in handling in the first quarter. So I'll start with our Helium business, depending on the time we're anywhere from 85% to 90% contracted on our customer base. So that's kind of a starting point. And when I look at Q1 year-over-year, our global helium sales, for the most part, were roughly flat. And what we saw was a couple percentage decline in pricing year-on-year and a couple of percentage increase on volumes year-on-year. Now as you know, with the Iranian conflict, it sort of happened 2/3 into the quarter. So 1 can roughly argue you had kind of 2 months before and 1 month after based on the date. .

And what we saw, we've been seeing the pricing rise on the average pricing. So even though we're a few percent below pre and post that, there is a difference. And likely that price will continue to go up and roll its way through. I fully would anticipate that to happen throughout the year. Separately, our volumes are up, and we've actually already secured some long-term agreements. I fully expect we'll secure more long-term agreements. That is our priority.

And that's how I would see that play out. Now when you think about the helium situation, you have 2 sort of distinct issues happening at once. You obviously have the Strait of Hormuz with Qatar and their inability to get product out and also the question of how much capacity is out for multiyears based on damage. Separate and distinct you have this Russian issue going on, which is probably a little more political in nature. Now we don't take Russian supply, as you can imagine, but that is having an effect primarily on the Chinese market that one could fix itself much quicker, as you could imagine. And so that one will see how long that lasts. But I think either way, the way we built the guidance, we just didn't want to take a view eitherway -- we just left it as we had it. But when opportunity presents itself both on pricing and volume, that will be incremental. and that's something we will get above how this is guided today.

And our next question comes from the line of David Begleiter with Deutsche Bank.

Matt, on electronics, I know you're expecting a couple of large contracts this year. Are they still in progress on the come for this -- for FY '26.

Yes, David. So consistent with the prepared remarks, we have a pretty high degree of confidence that we'll be announcing some here shortly. And when I think about the project backlog itself for sale of gas, we're sitting a little over $7 billion right now, and I'd look to these being added. And based on some timing of some other projects, I'd fully expect us to have a higher backlog by the end of the year based on this higher than the $7 billion and could potentially have an 8 handle on it. based on this. So we feel pretty good about that. And that's something I expect in a few months, we'll be able to lay out there. .

Very good. And just on the Wood side, there's been some confusion, some conflicting on new stores. Can you level set us as to where you stand on that project and what's embedded in 2026 guidance?

Sure. Yes. I think, David, you may recall in prior conversations, when we described this project and other very, very large projects like it, they tend to phase and how they start off, you'll start up pieces and phases. And originally, our expectations were that we'd be bringing nitrogen on mid this year and then the ATR and what's called the TNS for the sequestration back end of this year. And the reason was that they could make gray hydrogen as soon as possible and then convert it to blue by end of the year. .

And on the nitrogen, we still fully expect that. So that will be a pro rata, so to speak, start-up on the backlog this quarter. But on the ATR and the S, that has slipped a few months into essentially Q1 of next year. The construction and subcontractor environment in the U.S. Coast remains challenging. And we've had some delays there, but I rest assured the team is 100% focused on this to get this up as fast as safe and as reliably as possible. So that's our focus, but this slip has caused a little bit of that. So my expectation on that project is you'll have a small portion in contributing the start-up this year through the atmospheric side of it. And then the hydrogen and TNS side will kick into probably Q1 of next year.

And our next question comes from the line of Josh Spector with UBS.

I was wondering if you could talk about the overall volume landscape across kind of the major areas here between Asia and then Europe and the Americas. I mean understanding your guidance is there's kind of no economic improvement. But I mean, just the geographic location of your assets relative to where there's disruption, it would seem like there's probably some volume benefits on the Americas and Europe side versus Asia. I'd be curious, one, is that right? Or is there more disruption in Asia that makes it kind of even? And then also if you can comment just in your North America specifically, -- are you seeing any kind of benefits from what we've seen from positive PMIs in the last few months?

Yes, Josh. So let me start with the first part. Definitely, we are seeing improvements in Americas on the dislocation or shifting the product. We are seeing some contraction in EMEA both Continental Europe. Now we have a very, very small Middle East business. But as you can imagine, that's most impacted as a percentage basis. But Continental Europe itself, we also saw some drag there. .

And then APAC for us is relatively neutral to slightly positive. So when you kind of break those 3 down in Americas, as I mentioned on the prepared remarks, we're seeing not only benefits in the U.S. Gulf Coast refining. I mean you think about refining in the U.S. Gulf Coast, you tend to have very high Nelson complexity. You have ability to use a variety of slates of crude. And so given where the [indiscernible] spreads have gone, given their ability to manage some of the crude spreads, I think they're in a very, very strong position. And a lot of their product is supplied via the continent -- and so they can take advantage of that, and we've seen that.

We've also seen Latin American upstream improvements, given the price of seaborne Brent. It just makes it more attractive for them to produce. So we clearly seen that. In EMEA, you've seen, as we mentioned, some of the chemicals was 1 of our weaker performing chemicals and energy, as we've seen some reduced volumes on that front.

APAC, I think with APAC, there's probably -- it's a tale of 2 stories in the sense that certain countries are very negatively impacted, but we really don't supply that. When you think about Japan or certain industrial markets, maybe in Korea, they rely on seaborne delivery for some of their hydrocarbon chain, that is very negatively affected, right, whether it's NAFTA or LNG or oil. But we are really not supplying many of those. We have no presence in Japan.

On the flip side, coal to coal to chemicals or coal to something in China is actually performing better. And we're seeing that -- we have several customers that are CX customers within China and they do have an advantage in this scenario. So the simple way I think about it is, if your feedstock is coming in on a ship, it's probably a tough scenario for you. But if it's land-based, right, either a pipeline or maybe even a railcar, you're probably in a little bit better position, and that's kind of how I would say we're seeing it play out today.

As far as sort of the PMI, yes, that was kind of per the prepared remarks. Our hard goods business is up double-digit percent right now in the U.S. packaged business. Our packaged gases are up mid-single digit. And really, where we're seeing that strength is on some of the construction energy side, which you can imagine, plays a little bit to some of the hyperscaler constructions and things you're seeing on that front. And so I think that continues to be good. Metal fabrication continues to be strong. we've really seen that pick up across -- and on the hard goods, it's really split between consumables and equipment, which is a healthy split. So I think you're absolutely seeing that positive benefit from the U.S. PMI [indiscernible].

If I could just also quickly clarify a prior question is that when you've talked about commercial space getting to $1 billion, my understanding is that was more commercial space launch. You have another $600 million plus in commercial aero, that's more of the coatings business. So your prior comments were more that maybe you get to that 5% in 2030 time frame, maybe -- and then maybe your comments today about some of the disclosures is maybe you can get there sooner than expected. Is that the right interpretation? Or do I have it wrong?

No, I think you're right, Josh. I mean, look, I've used the red aviation within aerospace. And yes, aviation is a very different animal. That's for primarily Jet Engine and that business system quite well in addition. But one, there's always a say, never give a number in a year, right? But I think we put something out there to give us enough room to do it, but we feel quite good on not just our propellent launch infrastructure and capability, but even when you get to things like electric propulsion for positioning of space vehicles on things like Xenon, Crypton, Argon. And so -- when you add all the opportunities together, yes, I think we feel pretty good about our ability to grow this business quite well. And really, like I said, it will just be a function of the space launch. But you are right that any of those numbers fully exclude aviation, or anything to do with land-based pieces around jets or engines.

And our next question comes from the line of Matthew DeYoe with Bank of America.

Good morning. European energy price is clearly up from pre-conflict levels. And I know it gets passed through on Onsite. But how are you managing merchant and package pricing -- is this going to be something where you go out with structural price or your surcharge? Is it not enough inflation yet to be pushing price more in Europe than normal and if you are, what do you -- what should we think about as being kind of the year-over-year price traction for the EMEA market come like 4Q?

So Matt, the way to think about it is, is it a sustained increase in energy? Or is it a volatile up and down right now, so far, it's been volatile up and down. When it's volatile up and down, it is surcharging, that goes up, that goes down, and that's what we're seeing. When you see a sustained long range, it eventually -- then it becomes price, and it starts to work its way into the overall inflation of the market. 2021 was an example of 2022, I should say, in early 2022, as that evolved throughout the year, you saw a more sustained impact to inflation that worked its way through the entire economy. It started the surcharges, it eventually became price. Right now, it's just surcharges. .

But if it does stay sustained and you start to see it show up in a lot of the major basic inflation metrics, then it does find its way in a price. That's the way I would characterize it today, and time will tell how that plays out.

And our next question comes from the line of Michael Sison with Wells Fargo.

I guess, it's going to be what the third or fourth year of no economic improvement for industrial demand. I can't imagine the Iran conflict is going to help that moving in the right direction. So just curious, what do you think this sort of needs to happen. It just seems like overall, there's been some impairment for industrials. And what do you think needs to happen to get that overall globally to improve over time.

Well, Mike, I think some level of stability always helps, right? When you think about industrial demand, at least in my opinion, it tends to be large items, nondurable -- durable goods, non-resi infrastructure. and to embark on those kind of projects, they usually require financing. They usually require a long-range view on a return profile. They usually require some form of government engagement support. And so right now, it's been a little volatile. It's been volatile in the macro.

One can argue in certain micro politics and microeconomics. It's been volatile in certain countries. And so I think that's been part of the challenge. Additionally, the service economy, the consumer has been pretty resilient over the last few years, which has held GDP up -- if that changes, I think that could actually ironically bode well for industrials because then there could be more call it action to support injections into economies -- and you can argue that IAA to some extent, is that, right?

You've seen continued lagging in Europe, and they've made the determination they need to inject capital into the economy. And that capital tends to be more industrial intensive. Now it has to reach the ground -- it has to have clarity around its use and its ability to be deployed, but that's kind of the type of catalyst. And look, I think the Americas and the U.S. especially has been a little bit of an indicator that, to some extent, certain placed protectionist policies can work. I mean, we've seen it in the metals. We've seen it in some other areas. Yes, it brings some confusion initially, but the U.S. has seemed to bounce back. And so we all know there is excess capacity in certain markets in the world, and we kind of know where it's coming from. And so I think it's really a function of how -- who is making the capacity for what -- so we'll see. I think right now, though, the Americas, we continue to feel pretty bullish on and the trajectory it's on. And as I mentioned, I think with EMEA, it really is going to come down in some catalysts to try and change that trajectory. And APAC is fine right now. I think APAC is -- we're seeing certain geographies do better than others, clearly. But our Chinese business is very stable. India is growing, and we'll just have to see how the rest play out.

Great. And then a quick follow-up for Chemicals and Energy, sales were up 3% in the first quarter on Slide 3. What do you think the run rate of that is heading into the 2Q? I would imagine March was much stronger than the other 2 months given the conflict. Just curious where that segment is sort of moving into this quarter.

Sure. It's led by the Americas, as mentioned, and we really haven't seen any reason that, that should decline or abate. I think the strength is still there and is still anticipated. So in the comps, as I mentioned, definitely get a little easier here and now as we start to lap as we mentioned, a couple of years of some industrial stagnant conditions. So -- we'll see, but I feel pretty good. I remain positive throughout the year, and we'll happen to -- we'll see how much it remains positive.

And our next question comes from the line of Jeff Zekauskas with JPMorgan.

In your commentary on the Americas or the first quarter, you talked about weakness in chemicals and energy end markets. And I assume that, that will strengthen. So as a base case, should volume of 2% year-over-year move up to, I don't know, 3 or more in the second quarter and are there also pricing opportunities because energy and chemicals are better?

So Jeff, I think with chemicals and energy, yes, we're better in Americas, but weaker in EMEA, as mentioned. I think -- this is -- yes, mostly on site. So the pricing will just be a function of the annual escalation, which the contract would stay. That being said, we are seeing some more merchant activity for upstream oil, primarily Latin America, which is an opportunity for further volume expansion. So I feel pretty good about the Americas position, competitiveness and capability in chemicals and energy.

As mentioned before, it's been on a good trend and I'd expect that to continue. And recall, there were a little bit of some normal weather aspects that happened in Q1, which could always dampen it a little bit, and you get through that by Q2. So we feel pretty good about what we could see in Q2 on those trends. And again, it always comes down to my mind, the same basic situation, which is the lowest cost suppliers in this environment tend to win in these times of supply shock stress. And when you think about a lot of the assets in Americas with their advantaged feedstock, their infrastructure, their capabilities, the complexity they can handle, they tend to be some of the lowest cost and best producers in these environments. And so I feel pretty good about how they'll perform looking forward and especially in the near term.

Okay. And then secondly, your other income in the quarter was $63 million versus $26 million a year ago. What happened there? And was the currency benefit in the quarter about 3% on EPS or maybe $80 million pretax? Or do you have a different number?

Okay. So let's just take the second question first. On FX, the simple way to think about it is just take whatever we put in the sales variance. So in this case, we had the 5% globally, and that pretty much drops all the way down. That's that sale, that's SG&A, that's operating income, that's EPS because of the way our business is structured, it's very localized. And so our exposure to sales on translation is quite similar to our exposure to costs. So 5% would be that impact. .

As far as other income, yes, in the last few years, other income has been anywhere from $100 million to $200 million. I would expect this year for the full year, we'll be on the lower end of that range. And to sort of characterize what is there, right? It is operating income. It is part of operations. But we tend to put things there that usually are settlements, could be time lags, could be gains, losses on sales of things. So we put it there generally to isolate it -- so it doesn't get embedded into the sales and cost of goods sold from a trending perspective.

So in this particular quarter, we had a gain on a sale. It was a cash gain, it was a real gain. But that basically created that. I don't expect very much in the next couple of quarters, hence why I think the full year will probably be in the lower end of the range from the last couple of years.

And our next question comes from the line of John Roberts with Mizuho.

Could I ask if Sanjeev is not available today? Or is this the new format for the earnings call?

So John, yes, if you may recall in the past, we've always kind of alternated. -- and sometimes, Sanjiv would be on -- or Steve would be on or not, and Sanjiv would kind of evolve to that. So no, he's not on today, but he will definitely be on in a future call. .

Wanted to make sure he didn't -- he knew he was missed. I'm a little confused about EMEA. I thought the shortages from the Persian Gulf conflict were so severe that Europe was actually going to have to run at higher rates. -- even though it's higher cost, we're going to need most of the latent capacity in the world to run higher. And so it sounds like you're still expecting it to be soft in the June quarter in EMEA.

Well, let's start with, as you know, the guidance of what we said is no economic improvement at the midpoint. So that's just the baseline based on the guidance. So if you take that and extend it out, what it's implying is what we're seeing in Q1 just continues going forward. Whether or not it improves, we'll see. But from what we experienced in our EMEA in Q1 on the Onsite and chemicals and energy on a year-over-year basis, we saw a decline based on the effects from those operating assets to the customers.

And our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Matt, just to follow up on the volume discussion. If I look at your Americas number of plus 2%, I think that's the best that you've posted since the third quarter of 2022, which is coincidentally when we tend to think of the onset of the industrial recession, certainly in the chemicals industry anyway. So I'm listening to you today, talk about hard goods up double digits, Energy and Chemicals trending for the better. Do you have enough confidence to say we're now on the cyclical upswing? Or do you think there's too much war-related uncertainty and potential for an oil shock to start playing offense, if you will, in the Americas.

So Kevin, I always remain a little guarded, right? I think I need to. But I sort of think about it as we have an engine here with a few cylinders, right? And 1 cylinder is Americas, 1 is APAC and 1 is EMEA. And we're not running on all 3 cylinders. So while the Americas both results and trends, I think, are positive. We're just not seeing that in EMEA, for example, today. So I think to see a true what I view as global recovery, I'd like to see all 3 running in the same direction. .

But time will tell how that ends up. But I feel in the Americas, and like you mentioned, the packaged gas is what we're seeing on some of the competitiveness in the U.S. Gulf Coast. That does include commercial space, as you know, -- we expect that to continue to post some pretty good numbers. As far as are there offsets to that or not elsewhere in the world, that's the thing -- the challenge that we need to see to kind of break out of this and start to see global positive volumes.

So I will say at a global basis, while we showed 1% global volume, which is mostly our project backlog contribution. We did turn positive on base volumes. It's just not positive enough to round to 1%, but it has started to turn positive. So we'll see if that trend continues and actually breaks out and rounds to a positive base volume. But right now, you're seeing puts and takes around the world, and we'll see if the comps lap to where that could be positive.

And then I wanted to follow up on helium as well. I guess my simple question would be how much incremental volume opportunity do you think may be available again, through long-term contracts that you're pursuing. Maybe you could speak to your flexibility on sourcing and how much of an inventory cushion you may be able to take advantage of here.

Well, I mean, we feel good about our sourcing and we feel good about our capability to not only meet our current customer contractual commitments. But that we would have some excess molecules and assets to be able to deliver to future new customers. As far as how much, it's really just going to be a function of the extension of this situation and where it goes, but we will be selective. We want to make sure we get the right kind of contracts that make sense with the right kind of customers that we know will make that commitment to supply. So time will tell. I mean we've already been able to sign a few new long-term commitments and we'll just have to see how it plays out over the next several quarters.

And our next question comes from the line of Laurence Alexander with Jefferies.

So 2 quick ones. Just first, are you seeing in any regions or significant delays in projects where you're seeing kind of the CapEx decisions at least get delayed, if not even if the underlying -- if the production rates are fairly stable. And secondly, if customers are -- have to shut down capacity because of outages -- because of feedstock supply issues, whether a government mandated or just they can't get the molecules. Your contracts don't give them any adjustment for that. I mean they still need to pay you the same rate or pay the full exit penalty. Is that correct?

Okay. So first on the delays. Just to segregate. No, in our backlog, no, no concern, right? What's in our project backlog right now is moving forward as expected. No concerns on that front. As far as potential new projects to be signed with customers' willingness to go to FID essentially sign a contract, it depends on the end market. I would say, as you imagine, electronics, commercial space, you're seeing a continued very strong push to move forward with projects and investments. .

I think when you get to the more traditional industrial markets, it's really geographic specific right now. I think in the U.S., there are a lot of interest for future investments. I think places like India, you're seeing some good positive views, but in other parts of the world, not so much. So that's more of a geographic specific. As far as contracts, I mean, what it gets to is force majeure language. This has been something you focus on heavily in any contractual business.

We've worked and tested our [indiscernible] language over many, many decades. Economic is not a force majeure as you can imagine. And so this is something that we always will work with our customers in these scenarios. But when we build these assets, we don't benefit when things go great, and in the same token, we don't take the downside when they don't. So from that perspective, we are well protected against any type of economic force for sure or other aspects of that. But it's really something that's going to be a contract-by-contract review.

And our final question comes from the line of Arun Viswanathan with RBC Capital Markets.

Congrats on the results. Just a quick question on the earnings algorithm. So if I heard you correctly, it sounded like FX was maybe 5% contribution Q1 of that 10% that you saw, you're guiding to 7% to 9% for the year. So do you expect FX would continue to play that contribution for the year EPS? And if you do fall short of your 10% goal, is there other actions you would consider getting up there, maybe increased buybacks or management actions or anything else that we should consider?

So Arun, I think with the Algo, as you well know, we have the management actions, we have the capital allocation, we have the macro. If you just take the macro in isolation, yes, we put a 1% FX tailwind in the assumption. I will say, and as you probably well know, we base this number on sort of the first of month forward, which is about a month old. Right now, spots are better. The foreign currency strengthened since that time. So that would provide FX upside at these spots remained, but we can set that aside. .

As far as the management actions and the capital allocation, look, we know we need to get back to that 8% to 12% range, excluding macro. I think we had a little bit of a drag, as you know, with helium for a period of time. We have about 1% or so drag just on the engineering business from its timing of projects, which is really more just a function of what is done as internal projects that's capitalized versus external projects for a profit. And so we've got to get through those 2, and I think that can get us back into that 8% to 12% range. p

So we'll see -- right now, it's 7% to 9% kind of range we have out there, and we've got to work through to get higher than that, right? And we know that. And so -- that's how I would think about it. But the algo is still intact, and we will take incremental actions if we need to bridge this further to help get us back to that double-digit EPS growth.

And that concludes our question-and-answer session. I would now like to turn the call back over to Mr. Juan Pelaez for any additional or closing remarks.

Abby, once again, nice job. Thank you, everyone, for participating in today's call. If you have any further questions, please feel free to reach out to me directly. Have a great day. .

And ladies and gentlemen, that concludes today's call, and we thank you for your participation. You may now disconnect.

Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde Fourth Quarter 2025 Earnings Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir.

Thank you, Abby. Good morning, everyone, and thank you for attending our 2025 fourth quarter earnings call and webcast. I'm Juan Pedes, Head of Investor Relations, and I'm joined this morning by Sanjiv Lamba, Chief Executive Officer; and Matt White, Chief Financial Officer. Today's presentation materials are available on our website at the linde.com in the Investors section.

Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are in the appendix of this presentation. Sanjay will provide some opening remarks, and then Matt will give an update on Linde's fourth quarter financial performance and outlook, After which, we'll wrap up with Q&A. Let me turn the call over to Sanjiv.

Thanks, Juan, and good morning, everyone. The economic environment in 2025 was a study in contrast. On 1 hand, exuberant investment in AI and digital infrastructure drove unprecedented activity. On the other hand, traditional industrial markets like manufacturing, metals, chemicals and energy faced continued retrenchment. This divergence was exemplified in both concentration of returns from the S&P 500 and in persistently weak manufacturing indicators.

This created a challenging backdrop for many of our customers operating in these sectors. Despite these headwinds, Linde employees once again rose to the challenge, delivering industry-leading results in areas that matter most to our owners. I've highlighted a few of these accomplishments on Slide 3. Running a global enterprise requires balancing the needs of many stakeholders while delivering against both near- and long-term expectations.

The 4 areas you see on this slide people and communities, environmental stewardship, financial performance and future growth represent that balanced approach and remain the foundation for Linde's long-term value creation for our owners. Let me start with people and communities. Our employees are the backbone for Linde's success. In 2025, we once again delivered best-in-class safety performance because nothing is more important than ensuring our employees and contractors return home safely every day.

We also continue to build an inclusive culture across the footprint of more than 80 countries. Female representation reached nearly 30%, and we progressed multiple employee initiatives that earn third-party accolades as well. As a local business, we also strive to be a good neighbor. This year, our teams completed almost 900 projects across the world, supporting health, education and community wellbeing, mainly driven by committed Linde volunteers who pitch in to lead and support these projects.

In addition to supporting local communities, Linde is also a good citizen to the planet, through actions to improve our environmental footprint. In 2025, we made substantial progress on this front by increasing active low-carbon power sourcing by 23%, we enabled 50% of Linde's annual power consumption to be low carbon. This in turn supported almost 2 million metric ton reduction of absolute CO2 emissions. Moving us forward on the ambitious 35% reduction target by 2025.

And we've kept a close eye on the future as well as 2/3 of our backlog supports contracted clean energy projects. In addition to which, we also signed more than 90 new gas application wins, many to help customers further decarbonize their operations. These are just a few of the highlights. And many more can be found in our annual sustainability report, which will be released in the second quarter.

Of course, we must deliver on financial performance. since management's primary role is a steward of shareholder capital. Despite weak industrial environment, Linde achieved annual record levels for EPS and operating cash flow and operating margins. The 24.2% return on capital, not only leads the industry, but also validates the long-term disciplined capital allocation policy. which enabled a return of more than $7 billion to shareholders.

In good times and bad, you can count on Linde to remain laser-focused to deliver shareholder value. Finally, we must position Linde for future growth to remain the long-term compound. From my perspective, this is the strongest strategic position Linde has held during my tenure. Our project backlog stands at a record $10 billion. And this number does not include over $0.5 billion of investment for rocket propellant to contracted space launch customers.

In fact, we fully expect continued investment in the sector as we expand our network to support this rapidly growing opportunity. Linde remains the anchor industrial gas supplier for some of the largest and most successful clean energy and advanced electronics fabs in the world. In fact, I'm highly confident that we will announce new signature fab wins in the coming months.

We also continue to see a robust M&A pipeline for accretive tuck-in acquisitions that further enhance our supply density. In summary, Linde delivered a resilient performance in a challenging 2025 environment. But looking ahead, I know we can do better. Certain regions of the world are still not showing signs of near-term recovery. and we are taking actions to align our resources accordingly. In other words, growth remains geographically uneven, and we need to adjust our organization to reflect that.

Considering this, in the fourth quarter, we initiated additional restructuring actions to better position the company for 2026. These actions will have cash payback levels and timing like prior programs. So I expect the bulk of the benefits to be in the second half of the year. When combining these incremental actions with our existing productivity initiatives and a record backlog of secured growth I'm confident we will deliver a stronger EPS growth that our owners expect and have enjoyed for many years. I'll now turn the call over to Matt to walk through our financial results.

Thanks, Sanjiv. Fourth quarter results can be found on Slide 4. Sales of $8.8 billion increased 6% over prior year and 2% sequentially versus prior year foreign currency translation provided a 3% tailwind as the U.S. dollar weakened against most currencies, especially the euro. I expect this trend to continue into 2026, which we'll discuss later with guidance.

Excluding FX, underlying sales increased 3% from 2% pricing and 1% volumes. The 2% price increase aligned with globally weighted inflation after considering APAC challenges associated with helium and China deflationary conditions. Volume growth was driven by project startups in Americas and APAC, as base volume growth in Americas was more than offset by continued industrial softness in EMEA.

Sequentially, volumes were flat as normal seasonal declines were offset by project start-ups. Operating profit of $2.6 billion was up 4% from prior year and resulted in a 29.5% margin. The quarter margin dilution was attributed to timing of other income, which was down over $30 million. Note full year operating margin is up 30 basis points which is within the range of our long-term margin expansion expectation of about 30 to 50 basis points per year. EPS of $4.20 increased 6% and as a lower share count more than offset the impact of a higher ETR.

Noble stepped up share repurchases in the fourth quarter to $1.4 billion, as we saw an attractive buying opportunity from the stock decline. You can see the 17% growth in CapEx led by spending for the record project backlog. This trend coupled with the increased acquisitions has led to more capital-intensive growth, which negatively affected ROC. This was anticipated as I expect this metric to remain in the low to mid-20% range for the next few years. Slide 5 provides more details on capital management.

Operating cash flow exceeded $3 billion in the fourth quarter from stronger collections and inventory management. As mentioned in prior calls, operating cash flow is seasonally stronger in the second half of the year, due to timing of tax incentive and interest cash payments. The pie chart to the right summarizes full year allocation of capital.

About $6 billion was invested for growth, including half towards secured growth of acquisitions and project backlog contracts. Another $7.4 billion was returned to owners as dividends or share repurchases. This level of distribution requires a focused and disciplined management of both operating and investing cash flows. In fact, sustainable stock repurchase programs are anchored by consistent excess free cash flow after dividend payments, something Linde has demonstrated for several decades.

I'll wrap up with guidance on Slide 6. For the full year, EPS is projected in the range of $17.40 to $17.90 or 6% to 9% above 2025. This range assumes a 1% FX tailwind and 0% base volume change at the midpoint. Consistent with prior guidance, we're not going to make predictions on macroeconomic climate, rather, we'll anchor the midpoint at 0% and let investors insert their own views.

The 1% currency tailwind is based on early January forward rates. Note that there could be FX upside if current spot rates hold since the U.S. dollar has weakened over the last month. For the first quarter, we took the same baseline volume assumption, but set the FX tailwind to 3%. Since Q1 of 2025 had the strongest U.S. dollar baseline. Note the 3% quarter assumption still aligns with the 1% full year assumption so we don't anticipate as much FX benefit in the second half of the year.

As Sanjiv mentioned, we have a strong backlog of projects, productivity, and self-help actions to support 2026 EPS growth. However, we also believe it's still early in the year and thus wise to remain prudent on the outlook. I've said before that heroes aren't made in the first quarter. So we want to remain vigilant and guarded as the 2026 landscape starts to take shape. I've provided annual guidance now for over a decade. And through that time, I've determined there are 2 things in February that I can be highly confident on.

Number one, no one knows what will happen in the economy. And number two, regardless of what happens in the economy, Linde employees will rise to the occasion and leverage our unique supply network, culture and operating rhythm to create shareholder value in any environment. I'll now turn the call over to Q&A.

[Operator Instructions] And our first question comes from the line of David Begleiter with Deutsche Bank.

Sanjiv, just on Europe, are there -- are you seeing any signs of progress in that region and I did see that pricing did slow to plus 1% in Q4. Do you think you can still get pricing roughly plus 2% in the region during 2026?

David, EMEA tends to be an area that we put a lot of attention to, as you would expect, And unfortunately, based on what we see at the moment, I have to say that the market continues to see broad-based weakness. That's been the theme for a number of quarters over the last couple of 3 years now. There are some bright spots in EMEA as well. I'd say Europe, North with the Scandinavian countries continues to grow even in these conditions. So that's good news.

But beyond that, there's a little bit of optimism coming out of Germany. I tend to be very cautious on that. the recently announced manufacturing numbers moved up a little bit in Germany. I would watch that to see if there is any momentum underpinning that. Beyond that, there doesn't seem to be catalyst to really get to a recovery in Europe that would be substantive. On pricing, Europe's had a fantastic track record in pricing in Linde.

The EMEA business does a really good job around that, have done so. I expect them to fully find pricing in line with their weighted CPI, which is what my expectation of that business remains and you should see that in the coming year as well in 2026. Beyond that, I'd say, I think there's a lot to watch out for the complexity of Europe and the European Union, unfortunately, makes execution of any changes there or indeed any capitalist there somewhat provides a bit of a skeptical view from our perspective until we actually see it happen on the ground.

And our next question comes from the line of Duffy Fisher with Goldman Sachs.

Maybe if you could just go around the rest of the world, you talked a little bit about Europe and maybe about your end markets. You're not putting any growth in your estimates but what are you seeing? Obviously, you've got pretty good connectivity with the market. So what's your gut say your different end markets and your different geographies end up growing this year?

Thanks, Duffy. Let's do that. But before I kind of give you a walk around the wall, why don't I say this because it kind of prefaces a little bit and the market slide in some ways, validate this. So you will see the end markets lives showing all green, right? And essentially suggesting year-on-year growth across all end markets. And yes, recently, ISM, PMI, et cetera, have shown a slightly more positive trend.

As I stand here today, I'd say to you if I was reflecting back on the last 12 months, I am today slightly more positive on the industrial activity that I foresee for this year and the potential for growth as well. Now I'll add to that a caution as you would expect. We live in a hyper dynamic world. Things change every day. So you would expect us to bring you a far more informed and insightful view in April when we have this conversation. But fair to say we -- and I'll say this about particularly, we've been very conservative in how we are looking at the markets, and you'll see that reflect in the guidance as well.

Now let's walk around and just tell you what I've seen in the last quarter and first part of this month as well or last month now. Let's out Americas. The U.S., and I've said this over and over again, proven to be a really resilient market. Sales are up across almost every end market obviously, electronics, commercial space kind of stand out in that in terms of growth that we've seen there. Manufacturing has been stable.

There is still some caution when we speak to our customers. I look at a leading indicator, you hear we talk about the hard goods business, often or our package business often is a good leading indicator. Now hardgood sales, particularly in automation saw a pickup in the last quarter. But beyond that, on consumables, we haven't seen anything reflect the pickup. So the expectation at this stage is people are investing in the automation equipment to be prepared for any recovery that might happen or indeed to look for more productivity. So a little bit difficult to gauge, which is why I say when we come back in April, you'll have a far more informed -- we will have a far more informed view and you'll get a far more informed view of what we think is likely to happen for the rest of the year.

If I think about Lat Am, Across the ball, LatAm sales have been stable and growing. Brazil stands out as having had a really good year last year, and we saw that play out in Q4 as well. Canada, on the other hand, remains flat, and I don't see any catalyst for that changing anytime soon. If I move from the Americas to talk about APAC, I think the best way to talk about APAC is to start with China. In my assessment, the China markets that we supply and work with closely are largely bottoming out.

In fact, in the recent e-mail I got from Will Lee, who is the President of our China business, he wrote, I have to say with some pride he wrote that after quite a few quarters, our China business, our merchant business to our end customers, not distributors and channels, but to our end customers, grew at a rate higher than the published IP number, which, as you all know, was 5% for the last quarter, and we tend to take that with a pinch of salt as well.

So the rate of growth in China has certainly in the last quarter, shown an improvement. The China team has done some excellent work to get that growth. So I'm happy to see that. But I remain watchful to see whether we see that momentum carry on into Q1, which obviously will be disrupted by the Chinese New Year. So we'll have to kind of look through and sift through the data to see if that trend is holding. India also had a continued strong growth. I think we were happy to see that almost all end markets in India were improving and moving forward.

And in fact, by distribution modes as well, we saw growth across all of those distribution modes. Again, the India team does a really good job of making sure we win more than our fair share. So happy to see that momentum. But again, I also expect further growth and momentum in the Indian market, given that 2 of the recent events will support that growth story there. First is the EU prepaid agreement that will help kind of build some momentum around industrial activity and exports from India. And of course, the U.S. India tariffs getting sorted out is also an element that will provide some catalysts for further growth.

The rest of APAC, to be honest, largely stable, nothing exciting. Australia, which has had a tough year in 2025. We saw some -- I mean, they were still declining in Q4, but we saw some signs of that stabilizing and my expectation is Australia should see -- the comps will also get better as you can expect, but you should see some kind of a recovery this year as we move forward. So that's kind of a walk around the world. And I think if I was to just talk about end markets, I'd say to you, electronics stands out.

We are seeing good, strong growth there. My expectation remains that we'll see a lot more investment in that space. And you hear me talk about it when I talk about backlog. I'm sure there'll be a question on backlog, and I'll talk a bit more about how I see that playing out. And of course, the other markets also appearing to be stable to slightly up as we spoke.

And our next question comes from the line of Laurent Farber with BNP Paribas. .

Sanjiv, I don't want to disappoint. So it's a question on the trajectory of the sale of gas backlog. So with Bamon start-up and -- I guess we would be coming down towards $5.5 billion. I heard your conviction on electronics. I'm just wondering, I guess, what sales we should be focusing on if $5.5 billion new norm? Or would you hope to get back closer to $7 billion in the next year or so?

Laura, you know the answer to that. We will be heading towards that $7 billion mark. You know I was going to say that anyway, right? So let's just break out what happens with backlog every year. And I say this often, and I think it's worth reiterating that. the best backlog is 1 that shrinks before it goes back up again. So my expectation is this year, as you know, in 2025, we started about $1 billion of projects. This year in 2026, is a big year for us. .

You all know that OCI Wood site startup is going to be phased through the course of the year. So I would expect fully that the backlog will see projects between $2.5 billion to $3 billion to come off and get started up and start contributing to revenue and earnings. So that's exactly what we would like to see happen. The pressure on the businesses and the teams are aware of my expectations that we will grow back the backlog and I feel good about the pipeline of projects that we're currently working on and some fairly advanced as well, which I expect we will fully make, as I mentioned in my prepared remarks a little bit earlier.

Some really large wins around fabs that I'm hopeful that we will be able to get to a point of being able to get to announcing -- having signed them up and put them in the backlog soon. So yes, the target is to get back to that $7 billion. We will be close to that mine view. We'll see whether we get there across it or how close we can get that business to get.

Yes. So maybe we get in the second half if it rolls forward. Is that reasonable? And then just to think about net margin expansion, how do you see OpEx inflation tracking of the year?

Thanks, Tony. So the easy way to answer that is, typically, you heard us say this previously as well. So I'll just reiterate that. Our restructuring paybacks on a cash basis tend to be on average about 2 years -- 2026, my expectation remains that we will be above the long-term margin range that we normally offer you. We always say 30 to 50 basis points is what you should expect. My view is in 2026, we will beat that number.

And our next question comes from the line of Josh Spector with UBS.

I had a couple of questions I put together around the space opportunity for you guys. I mean, first, I want to ask if any of that is contributing to the CapEx increase you're projecting for 2026. And then secondly, if you could provide your view of the size your share and the growth that you expect, your competitor made some comments the other day. wondering if you could set the view on what you're seeing? And how do you factor this in to guidance. Is it material to 2026. It's not macro growth, it's not backlog. So is it in there? Is it upside? How should we think about that?

Josh, I briefly glanced through the report that he set out. It was a nice report. Well done. I'll say this to you, the CapEx in the backlog section does not include about $0.5 billion of projects that we have invested in, and we continue to make investments in 2026 as well to be able to support this growth opportunity. So spot on, this is a secular growth opportunity. We are excited about it. .

We are really well positioned to be able to serve this. The 2 major investment hubs that we see around this [indiscernible] that question around this. Look, the easy answer to this is we only measure by the number of launches where Linde is directly involved. In some cases, others are also involved in launches, so they may be double counting. I think about 6 months ago, one, I think it was in the second quarter. We talked about more than 3/4 of all launches are supplied by Linde.

At that point in time, that was absolutely the right number. I think the number ranges between 65% to 75% on average, and I think that's a really robust number, and we do that by launch. Last year, there were 189 launches. You can do the math. I mean, Johan can help you with some of the details if you need [indiscernible] solid growth, extremely well positioned. Florida and Texas is where bulk of the launches are expected and you know what, we are expecting to get more than a fair share of that, just given the unique position we built up there. In fact, we started up a plant and Brownsville earlier this year in early January, in fact.

So we just can't get enough -- enough product availability in our network to be able to make sure we meet all of that demand. It is factored into the guidance. It's a secular trend for sure, but remember -- and I'm looking forward to having a $1 billion business here that I can split it up in the end markets and show to you guys separately. I expect to see that happen in the next few years. But it isn't big enough to move the needle for Linde as a company overall.

So it's in the guidance. We are excited about a double-digit growth [indiscernible] expect to see that [indiscernible] continue over the next few years. And at some stage, we'll spit out, and you'll actually see the numbers and feel good about -- [indiscernible].

[indiscernible] And the new customer wins in oxyfuel combustion. Can you just help us understand the specific customer user base, whether it's concentrated in any particular region what sort of contribution this has to the backlog and overall growth algorithm.

Patrick, I always love a question on gas application wins, and I think this is reduced natural gas consumption and increased -- what a real win-win story that was. And I think that's what we're seeing play on this. So we're seeing this across the world, to be honest. There is a little bit of a concentration in terms of China wins being disproportionately high but we see the wins both across the Americas and EMEA as well. It's great technology. Customers are loving it. And I think we've seen that momentum that we've built up on business development and this playing out and actually those wins being signed up and actually under execution as we speak.

And our next question comes from the line of Vincent Andrews with Morgan Stanley.

You mentioned $400 million of bolt-ons were completed in 2025. Just curious how much of an impact that's happening to the top line in '26 and also if you could talk about that lever in general of capital allocation and how much -- particularly as we remain sort of at the bottom of the cycle, is there increasing opportunity to do more bolt-ons or decaps at this point in the cycle? And should we be thinking about this as more of a growth lever than perhaps expand over the past 5, 10 years?

Vince, it's Matt. I can handle that one. So as you see from our sales variance, we're getting a 1% right now. It is a weaker percent, but it rounds to 1% on the acquisitions from the 2025 contribution. Right now, we expect we should be able to maintain that into '26. Time will tell. But as you can see, the sort of $400 million to $500 million number, at least on this current baseline is able to get us around at 1%. As far as how we think about them, we -- number one, we buy into density. We want to buy into our core strength, and we're buying based on synergies. We justify these on the synergies we can bring with our existing network and our existing density.

We don't really tend to speculate on the growth around them. So any growth we can achieve is usually upside to the model. And as far as the sentiment, yes, I would say a lot of these are regional players. They're generally smaller independents. The concentration of that right now is more in North America. There is some in parts of Asia, we're seeing in China and in South Pacific area. That's where you tend to see a little bit more of the independent opportunities. So this is something that we've been doing for a long time. We have a very strong capability on not just identifying and acquiring but more importantly, integrating and achieving the synergies that we set forth.

So it's absolutely integral to our growth, but we also are not going to lose our discipline and we're not going to get out of our swim lane, so to speak. So expect to continue to see these kind of numbers and where opportunities present themselves for larger ones, we will absolutely be in the mix. and we'll make sure we continue to apply our investment criteria for each incremental opportunity.

And our next question comes from the line of John Roberts with Mizuho.

Sanjeev, late last year, it sounded like you were working on a new 6-point blueprint to extend the growth for Linde. Have you formalized that? And is there anything you can tease us with? .

John, I'd love to tease you, but I'm probably going to resist that temptation. We have a growth 6 out there. You've seen that. You were here with us in Danbury in December, I recall, and I showed you a page out of my notebook. So those growth 6 have been formalized. They have been rolled out. We are measuring progress against that. And at Linde, we are an execution machine. So once we set the goals, I think that's when the execution delivers. So I'm feeling good about how momentum is picking up on that. But those elements. And I think I'd say to you, there is no rocket science over there. These are things that we know how to do well, and we just focus the organization to go out and get the wins in particularly in an economic environment where there is a natural momentum coming for growth.

So it's good to see that we are getting traction across the organization in there. And while today, I haven't spoken about small on-site. Small onsite sit within that piece, acquisitions Matt just talked briefly about the expectation that we want to see that 1% top line and a little bit more coming through on the bottom line once we integrate them effectively.

So those would be all elements that you should see within that, as would be application sales, et cetera. So the growth 6 we rolled out, the organization knows it well. They live and breathe it every morning. And when they don't, I remind them very quickly. So feeling good about where that stands.

And our next question comes from the line of Matthew Deo with Bank of America.

I hear you on the China IP commentary and the growth that's encouraging. I wanted to dig in a little bit more on APAC, if I could. Manufacturing as an end market looks to be pretty weak on a 1-year and 2-year stack. So I'm just trying to get a sense for what exactly is it issue there? Which specific end markets are maybe causing the trouble? And if that was a particular area where you saw some strength because it seemed like data a softer 4Q as well? And then conversely, this bucket of other it's actually doing seemingly pretty well. I don't want to get lost rounding on some of these breakouts, but what is that in relation to? And if I could, just 1 more attack on it, Vincent. How -- it seems like these acquisitions aren't immediately accretive. And if you do a steady cadence, maybe that's irrelevant. But how long does it take for a year like an acquisition to show up on the bottom line?

All right. Let me talk about -- Matt, let me talk about APAC and then I'll ask my math to give you a quick view on the other piece, which you always ensures is doing what it needs to do to make sure it's accretive to the business overall for the PLC overall. Look, in APAC, you have to split that by different regions, and I'm going to give you a little bit of a deeper dive there just to kind of give you a sense. So let's start China. We talked about China earlier on. China manufacturing, as you know, a lot of that underwritten by in large-scale exports to markets, which may or may not be welcoming those exports in but has provided a little bit of momentum.

And within that, there are clear green shoots in manufacturing the EV piece when I was with BYD, 1 of our customers in China, the Chairman was complaining that he wasn't seeing as much growth as he was expecting and he was unhappy that he was only growing 28%. Okay, 28% of this environment is a good place to be, right? So things like that, battery developments continue to be positive within that piece. So also in manufacturing is commercial space today. We haven't split it out and we've been talking about space quite a lot, so I won't repeat all of that, but there is clearly momentum over there as well.

So you put that piece together. And obviously, commercial space applies more to the U.S. market than APAC, but we have had some small contributions in APAC as well. So that's kind of the broader piece around China. RSP has been down and RSP -- manufacturing numbers continue to reflect that broad-based weakness. We are seeing that things are a little bit better in the fourth quarter versus what they were in the first and second quarter. So expectation remains that you might see a continued improvement or a gradient towards a recovery in the RSP or the South Pacific market, Australia being the large market there.

And then India, I kind of briefly talked about providing a bit of tailwind on the manufacturing side, particularly, again, the expectation with the free date agreement and the tariff issues getting resolved you will see further improvements there. So I'm not sure that's entirely factored into the 1- to 2-year outlook that you're looking at, where I think there is probably a degree of disappointment is ASEAN. If you recall, ASEAN used to have a reasonably strong growth, but not as strong as China and India, but nonetheless, in the middle part, and we haven't seen that. they largely -- they have been stable but flattish at best. And I think, unfortunately, the ASEAN futures are inextricably linked to what happens in China and the weakness in China has permeated there as well. So again, a recovery on that will take a little longer. So your view on a slightly softer outlook there would be absolutely right. But that's kind of where manufacturing [indiscernible] Matt, do you want to comment on the other...

Yes, sure. And Matt, I think 2 questions, right? One on M&A timing and 1 on other segments. So we started an M&A timing, I would say that for an average M&A deal, generally, we tend to see full run rate synergies within 12 to 24 months. [indiscernible] between 0 and 6 months. You're also going to have supply of merchant, those are more a function of attract expirations of the target that we acquire. And obviously, as those either leases or those supply agreements lap, then we substitute with either our sites, our supply. But all in, I'd say, usually somewhere between 12 and 24 months, you have full run rate and you get a pretty significant chunk that you can get within the first 0 to 12 months.

So that's how I think about the synergy timing. As far as other segments, just to kind of remind what's in there, there's really 3 pieces that are in the Global other. You have what we call sort of our global helium supply group. And what they do is they sell all the helium intercompany to the geographic regions. And they also sell some wholesale direct out of this segment. So clearly, you saw some retrenchment and pricing impact in the helium business, of which is reflected in this other segment.

Now going forward, I do expect some relief on the supply side and that should start to manifest itself in the other segment in time. But it obviously had to take the brunt of these changes in the intercompany transfer pricing and some of that over the last 2 years. The second business in here is our global materials business. They continue to perform quite well, actually. This is mostly in the aerospace and in primarily 3D printing powders. As you can imagine, that is a pretty hot field right now when you think about aerospace and commercial space.

So they've been growing quite nicely. You may recall, first quarter of last year, we had a large insurance claim that also is in this business to the tune of around $40 million or so. That is part of the other income online that you may have seen a change year-on-year for full year. And then the third piece is our corporate overhead costs. We put all of the overhead costs in this bucket. We do not allocate it. So as you can imagine, the goal is that our wholesale helium business and that our materials business, can basically pay for all the corporate overhead to run a publicly listed company. So every time this is positive OP, we're achieving that. And from our perspective, that's our goal is to continue to have positive OP in this business to be able to basically subsidize the cost to run this company.

Our next question comes from the line of Jeff Sokoskus with JPMorgan.

A 2-part question. Manufacturing PMIs in the U.S. in January went from negative to positive. Is that something that your business can perceive. And do you feel that there's an acceleration in U.S. manufacturing growth relative to the fourth quarter? And then secondly, can you discuss how much helium was a drag on your either EBIT or prices or EBITDA in 2025? And how you expect helium to perform in 2026 and why? .

Thanks, Jeff. So I start with the U.S. manufacturing, the BMI, et cetera, have shown a positive trend. You're right. I'd just say it's too early to tell. As I said before, when I kind of talked about my walk around the wall, I do see -- I am a little bit more positive, but still, we would say started in how we think about the manufacturing developments playing out in the U.S. particularly.

Yes, we have more conversations with customers, the reshoring, near-shoring kind of efforts that we've been talking about for some time, continue to progress. Semiconductors are well ahead, as you know, but other sectors end markets moving forward as well. So I'd just say it's a bit early to call. I think the next couple of months will give us a much better view but there is some potential for a very resilient U.S. market to see some good growth probably towards the end of this year or the back end of this year anyway.

And anything before that, we'd be thrilled. As you know, we would be able to get the tailwind and make a really strong impact on our earnings should that happen. On helium impact, just on 2026, I see nothing different, Helium, is going to be long in the medium term at least. But I'd say to you, again, as a reminder, Jeff, and you know this well, Helium is a low single-digit business for us. When we look at the overall portfolio, I think you're aware that pricing has been high single-digit negative on helium for a few quarters now.

I'm not seeing anything change dramatically in the helium space. There are differences across the world, regional differences, that is. China, clearly very long seeing the impact of the Russian helium coming into that market and in some ways, leaking out a little bit to other markets from there as well. whereas the other markets in Europe and the U.S. or Americas probably a little bit more balanced from that perspective.

You might also be aware that we made an investment, a couple of investments, including 1 in the cabin, which actually provides us with a really good opportunity to balance supply/demand in a way that works for us and gives us an opportunity for us to continue to optimize that piece. Anything else?

Yes, Jeff, this is Matt. I think just to answer your other question on impact in '25. I tend to combine helium and rare gas. And when you combine those 2, the kind of range we laid out is about a 1% to 2% headwind on EPS, I would say towards the upper end of that range is how I would think about both of those. To Sanjay's point, helium at this point, hard to see any real change in the supply demand dynamics.

Rare gas does feel a little bit better right now, especially with some of the electronics recovery. And so that's the way to think about the '25 impact. And then as far as '26, we'll see how that plays out in that range.

And our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Sanjeev, would you comment on your U.S. packaged gas business sales trends with regard to both gas and rent and hard goods. Just curious as to whether you're seeing any improvement on the leading hard goods side and then more broadly, besides hard goods, are there any other businesses that you would tend to look to across Linde's portfolio that you would consider leading maybe certain markets or even individual customers that have been useful leading indicators in the past? .

Thanks, Kevin. So I think I've briefly alluded to this before, let me kind of maybe provide a slightly more detailed view on this. So the U.S. packaged gas business, as you've rightly pointed out, Kevin, is a leading indicator that we watch closely. And within that, there are 3 separate elements that you can look at, the gas consumption, the consumption of consumable hard goods and the consumption or purchase of hard goods automation equipment, right?

I mean each 1 of them give us a different perspective in terms of how we see U.S. manufacturing more broadly playing out. And what I'd say is the U.S. hot goods automation equipment sales in the fourth quarter were up again, I think we said that in prior quarters as well. So we were seeing investment in hard goods automation. It usually has 2 potential outcomes. One, that there is an expectation of a pickup in the order intake and therefore, growth as a consequence of that.

And along with that, there is a shortage of skilled labor and therefore, automation becomes more attractive for the small to medium enterprises or even in some cases, large customers which we'll talk about in a minute. So that is a good trend as things stand. I think we want to watch the next couple of months to see how that plays out. But an initial investment in automation equipment is a good sign.

Having said that, on the consumable end, we do not see that optimism or that growth come through. Consumers are flat at best, maybe a little bit down. and gas is following a very similar pattern. So I'd say to you, people are preparing for what is likely to come and have some maybe what I would call cautious optimism around growth in manufacturing and some level of recovery beyond where we are today.

But we aren't seeing that natural consumption just yet. So you have to hold your breath for a while. Now talking about customers, 1 of the areas we look at quite carefully is automotive and large ag equipment. There are usually good indicators as to how we see manufacturing trends pay out. And I think the feedback from those customers broadly tends to continue to be cautious with an expectation that hopefully, things will improve in the second half, but caution for now.

And as I said before, a bit early in the year for us to give a more insightful or informed view on how we are expecting the markets to play out.

And our next question comes from the line of Laurence Alexander with Jefferies.

This is Dan Rizzo on for Laurence. You mentioned during the commentary about doing some restructuring cost cutting. I was just wondering if that's like addressing like cyclical issues that can be kind of added back when things do ultimately turn? Or if this is more of a structural permanent changes that you're making in different regions based upon what you see over the long term?

Dan, this is Matt. I can handle that one. Yes, when we put it into restructuring, we viewed as structural, right? We view this as changing our organization or changing how we're addressing our market in a structural way. The kind of cyclical that you referred to tends to be more just a function of our normal ongoing attrition, ebbing and flowing of our headcount. .

These restructuring charges we took are predominantly related to head count options around the world. So this is more a function of that. The majority of it right now is in the Engineering segment, given how we're navigating that business and organizing that business. given how we're looking at some of the third-party opportunities. So that's really how I would describe that, that this is not expected to come back. It is more a function of how we run our company.

So I guess does that mean that there will be significant leverage when things do turn though or I mean -- or do you have to -- I guess I was just wondering if you have to higher back what...

Yes. I mean that is the expectation. I mean, look at 2025 as an example, and I'll just use SG&A as a proxy line kind of understand that. Our SG&A during calendar year 2025 is up 3% year-over-year, right? And when you take the M&A portion, obviously, we acquired SG&A. And there is about, I'd say, probably 0.5% or so of FX. It's just footing to 0 on the table.

But you're looking at probably 1.5-plus percent of that growth was just FX and acquired SG&A. So our underlying SG&A is only 1% and change. Why? Well, you've had about a 3% or so merit inflation cycle, and that was mitigated against the actions we took back last year from October coupled with some of the productivity initiatives. So this is kind of how we need to think about it that you have to get ahead of this. You have to get ahead of the inflation, you have to structure your organizations around the regions you operate in. And that's 1 of the I'll say, attributes of this very local model is that we can quickly act in each individual region around what is occurring in that region without having any ramifications or impacts in other parts of the company. because we do not have integrated supply chains in our company.

They are stand-alone markets that are fully self-sufficient in each small geography they operate and allows them to adjust quickly to the conditions they're seeing, and you see that benefit in our cost stack.

Matt, the only thing I'd add is, what does happen is when there is a bit of volume tailwind, you get a pickup in volumes because of industrial activity, that leverage then flows through very quickly to the EPS, and I think that's what we were able to show in 2021, we always give that as a good example where volumes went up 7%, 8% and we saw EPS grow up 30%. So that -- maintaining that tight control on the cost structure and ensuring that we are well positioned for any recovery as and when it happens, I think, has always held in good stead for us. .

And our next question comes from the line of Eric Boys with Evercore ISI. And hearing no response, we will move to our next question. It comes from the line of Arun Viswanathan with RBC Capital Markets.

I just wanted to, I guess, understand the EPS guidance just a little bit. Back in December, you guys had discussed the possibility of getting to 10% plus, the guidance here is maybe slightly below that and maybe that would be mostly attributed to the base business as maybe you discussed. But if you were to see a pathway back to that level, what would you think would really need to improve maybe Europe? Is there anything in the backlog that space or electronics that we could point to?

Run, it's Matt. Yes. So we'll start with its guidance, and it's early in the year, as you know. So when you kind of think about the 6% to 9%, I mean, I agree with you, the upper end of that range maybe catches below 8% to 12% that we've laid out there ex economic impact. So we know we've got room to improve. We know we've got opportunities that we need to pursue this year. .

But at this stage, I think it's appropriate for us to just remain guarded. I do feel better the comps we have this year are definitely better than what we were facing this time last year on a year-over-year basis. And time will tell where we ultimately finish. But I can say that between the project backlog between the acquisitions we've done, so the capital contribution of our algorithm, we feel quite good. When you look at the management actions of price and productivity, and we took actions this quarter to better position us.

Sanjay mentioned, we continue to expect to price with inflation. And so from the elements of both management actions and capital contribution, we still feel quite strong about that algorithm, and we expect to deliver on the expected range. Time will tell where we finish and time will tell what will happen on the macro piece. So but our -- we know our goal is to get that double-digit percent growth in long term, and we will get back to them.

Arun, we talked a lot about how we should describe this guidance and the words we used internally when we were discussing it are guarded, prudent, and I would say conservative, Time will tell. .

And our next question comes from the line of Eric Boys with Evercore ISI.

Could you please provide a time line update on when you anticipate your unit to start up at TSMC's Arizona Fab 2? And then could you remind on how gas intensity increases from Fab 1 to Fab 2 and what that means from a profitability standpoint for Linde?

So as you know, our plans for Fab 1 and 2 have -- are in operation already. Fab 2, as you're aware, probably from TSMC is ramping up at their end, and obviously, where they're fully supporting them on that. So those assets are on the ground. They have been commissioned. They are in different stages of utilization, Fab1 fully utilized, fab 2 kind of ramping up exactly as planned. The next round of fabs is now under discussion and being worked through.

And as you know, the yields that came out of the first couple of fabs surprised -- positively surprised everybody. So the commitment to major investments in advanced nodes at Phoenix is strong. And with that comes higher gas intensity. I think, one, you've done a paper where you've done a lot of work around gas intensity. You should reach out, Eric, to woan and have a chat with them. He'll show you some of the analysis we've done around gas intensity. 2 things happened, right? Because we're going to advance nodes, the intensity of usage of gas goes up per node.

But more importantly, we also see new gases being introduced and used in much bigger quantities. And I think that -- all of that contributes then the overall increase in gas intensity for these green fabs.

And our final question comes from the line of Abigail Evertz with Wells Fargo.

I wanted to follow up on your walk around the world, and if I missed this, I apologize. But could you clarify your pricing expectations for Americas and APAC for the year?

The pricing expectations, Abigail, remain consistent with the view that we've always given, which is globally weighted CPI, we should be at or around that. And I think consistently we have, including the last quarter, if you take out the impact of helium and China deflation weakness, we are seeing our businesses perform to that. That's a long-term trend. As you know, we've had positive pricing for 25 years. and we see that continuing for this year as well.

And that concludes our question-and-answer session. I would now like to turn the call back over to Mr. Juan Pelaez for any additional or closing remarks.

Avi, thank you very much for hosting this call. Everyone in line, we appreciate your participation, and have a great day. .

And ladies and gentlemen, that concludes today's call.

Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions].

Please be advised that today's conference is being recorded. And after the speakers' presentation, there will be a question-and-answer session.

I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir.

Abi, thank you. Hello, everyone, and thanks for attending our 2025 third quarter earnings call and webcast. I'm Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Sanjiv Lamba, Chief Executive Officer; and Matt White, Chief Financial Officer.

Today's presentation materials are available on our website at linde.com in the Investors section. Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during the teleconference. The reconciliations of the adjusted numbers are in the appendix to this presentation. Sanjiv will provide some opening remarks, and then Matt will give an update on Wendy's third quarter financial performance and outlook, after which, we will wrap up the Q&A.

Let me now turn the call over to Sanjiv.

Thanks, Juan, and good morning, everyone. Once again, the third quarter has proven the strength and resilience of our model. EPS of $4.21 grew 7%. Operating cash flow grew 8% and and we generated $1.7 billion of free cash flow. The backlog remains at $10 billion, contractually securing long-term EPS growth while increasing our network density.

Despite the challenging macroeconomic environment, Linde employees continue to generate shareholder value while maintaining industry-leading results across key metrics that matter most to our investors. This culture of ownership, deeply ingrained throughout our organization is a foundation of our performance culture. And it serves us well in both good times and bad.

Given the current economic uncertainty, I thought it would be helpful to provide you an overview of what we are seeing around the world. Slide 3 provides the end market trends for organic sales which include both price and volume. Starting with consumer-related end markets, which make up about 1/3 of global sales. Healthcare encompasses both institutional and home care sales, primarily for respiratory ailments.

You may recall last year, we proactively pruned certain parts of the U.S. home care portfolio. which laps by the end of this year. Going forward, I expect health care to remain a stable and steadily growing segment. Food and Beverage continues to grow low to mid-single digits, driven by a combination of consumption trends and innovative application technologies that enhance food quality and preservation.

This is a work horse of the portfolio that may not get a lot of the spotlight but it provides consistent growth and is remarkably resilient. Electronics at 9% of sales was the fastest-growing end market this quarter. Note, this 9% does not include an additional 2% of electronic sales in Taiwan through our nonconsolidated joint venture, which is also growing well.

The 6% growth we achieved is evenly split between on-site project start-ups and demand for processed gases and advanced materials. Growth was fueled primarily by higher chip production in Korea, Taiwan and the U.S. and some lower rent ships in China and Southeast Asia.

We observed increased fab activity in Q3, spurring merchant and packaged gas demand as well as new all side bidding opportunities, particularly for cutting-edge advanced nodes. I expect this end market to provide robust growth for some time and serve as an important part of our project backlog growth.

Turning to industrial end markets, which account for about 2/3 of our sales. As many of you know, this is an area we've been cautious on for several quarters in a row. So recent macro trends have not been a surprise. Starting with metals and mining, which were slightly up, largely due to inflationary price increase, while base volumes were mostly negative. Metals trends were region-specific and also impacted by tariffs.

China is up well line benefits from supplying Tier 1 customers, but I believe the trends for Tier 2 and Tier 3 steel mills are considerably more stressed, but we do not supply that. U.S. been as bright spot for metals, not just production levels, but also new capacity opportunities as they've been supported by the new tariffs. Europe by contrast is the weakest as demand continues to drop led by weak industrial activity.

We've been supplying steel mills for many decades, and we have seen the cycles. We have confidence in the competitiveness of our customers, but also the opportunity to deploy our applications that enable our customers to either reduce energy consumption, debottleneck and enhance efficiency.

Chemicals and Energy are up 1%, driven by inflationary price increases. Overall, base volumes are down as chemicals is one of the most challenged end markets today. The U.S. and China saw flat volumes. India continues to see moderate growth. While the rest of the world is seeing volume decline as they adapt to trade policies and lower demand. Europe remains the weakest with continued broad-based demand challenges. Fixed payments are being made. So the profit impact for us is therefore limited.

Despite the current challenges, I expect this cycle to rebound as all prior ones have, especially given our confidence in the cost position of our top-tier customer base. Manufacturing, which grew at 3% year-on-year was the fastest-growing industrial end market. I start with the Americas.

We are seeing solid volume growth, especially in the United States. We seem to have lapped some of the tariff concerns, and this has translated into a healthy uptick in manufacturing activity. In addition, I'm pleased with the momentum in our commercial space business. Growth has been strong as we remain the trusted supplier of fuel for rocket launches and satellite propulsion systems. This sector continues to present exciting opportunities for Linde as we invest in additional capacity.

Turning to APAC. Manufacturing volumes are holding steady. China's numbers appear to be leveling off, while India remains on a strong growth trajectory. Europe, again, continues to face challenges with widespread softness in manufacturing activity.

Summarizing these trends. Consumer markets are performing as one would expect. Pricing continues to track inflation. And despite some of the volume challenges from the ongoing industrial recession Linde is well positioned to supply as industrial activity and volumes recover. In other words, it's business as usual.

Finally, more recently, I've heard some talk of a potential recession and the possibility of an economic contraction. As far as I'm concerned, we've been in an industrial recession for more than 2 years. And here at Linde, we've taken proactive steps while navigating contractions across several industrial end markets. We've been making our model recession resistant for many years now, stressing on productivity and efficiency within our business, focusing on targeted high-quality growth while maintaining disciplined capital management.

Our operating model is designed to plan for the worst and be ready to capitalize on opportunities as they come. When things get tough, there is no group in the world that rather have in my corner, the [ Destiny ] team.

I'll now turn the call over to Matt to walk through our financial results.

Thanks, Sanjiv. Third quarter results can be found on Slide 4. Sales of $8.6 billion were up 3% from last year and 1% sequentially. The Recent weakness in the U.S. dollar led to a currency tailwind of 1%. Tuck-in acquisitions in Americas and APAC added another 1% and An engineering impact decreased 1% from project timing.

Excluding these items, year-over-year underlying sales increased 2%. Price increases of 2% were broad-based and aligned with globally weighted inflation except for helium, which continues to experience price pressure from excess supply. Overall volumes were flat as contribution from the project backlog was offset by weaker base volumes driven primarily by European industrial customers.

As Sanjiv mentioned, the weaker industrial activity was not a surprise as trends mostly followed our guidance expectations. Underlying sales were flat sequentially and as seasonal increases in APAC were offset by seasonal decreases in EMEA. Note, we had a supplier settlement in the U.S. home care business broken into 2 separate payments to Linde. The majority was paid Q3 2024, as disclosed in the 10-Q.

While a final smaller payment was received in the second quarter 2025. The payments were covered prior excessive costs and resulted in a current quarter operating profit headwind of approximately 2% or 40 basis points versus last year, and 1% or 20 basis points sequentially. Aside from this, profit growth was primarily driven by price increases.

EPS of $4.21 increased 7% or 4% more than operating profit primarily from a lower share count and tax rate. While the share count is part of our ongoing repurchase program, the tax rate relates to favorable timing versus the upcoming fourth quarter.

We anticipate full year ETR to be in the mid- to high 23% range, which is similar to 2024.

Slide 5 provides an update on capital management. Operating cash flow increased sequentially to $2.9 billion, or 8% over prior year. Second half operating cash flow is seasonally higher. So I expect a similar level for the fourth quarter. Overall, despite economic headwinds, the bar chart validates our resiliency through significant free cash flow generation.

To the right, you can see how we deployed year-to-date capital with $4.2 billion invested into the business using our disciplined investment criteria and $5.3 billion return to shareholders. We have an underleveraged balance sheet with significant access to low-cost capital. So we're well positioned to capitalize on future opportunities.

I'll wrap up with a guidance update on Slide 6. Fourth quarter EPS guidance is $4.10 to $4.20. And or 3% to 6% growth. While this assumes a 2% FX tailwind, it also assumes an approximate 2% tax rate headwind, so these 2 mostly offset. As mentioned earlier, third quarter tax rate was slightly lower than the run rate, but we anticipate fourth quarter to be higher.

There aren't any structural reasons rather just timing effects. It's possible there could be upside to this tax rate estimate, but time will tell. Excluding these 2 items, underlying EPS growth is holding in the mid-single-digit range as we maintain the assumption of base volume contraction at the top end of guidance, similar to last quarter. The quarter guidance rolls up to a full year range of $16.35 to $16.45 or 5% to 6% growth against the challenging macro backdrop.

In summary, we remain cautious on the outlook. It's difficult to identify near-term catalysts, which could materially improve industrial activity. for the remainder of 2025. And while we may take this prudent view, it does not negate our ability to generate shareholder value. Over the last 2 years, the global economy experienced recessionary industrial conditions with restrained capital activity. Linde has grown operating cash and EPS, mid- to high single digits while contractually securing a record high-quality project backlog.

Looking ahead, if conditions worsen, we're prepared to take appropriate mitigating actions. And when things recover, we're well positioned to capitalize. Either way, we won't spend time predicting the future, but rather focusing on the actions to shape it.

I'll now turn the call over to Q&A.

[Operator Instructions]. And our first question comes from the line of Laurent Favre with BNP Paribas.

My question is regarding the backlog. And I remember that 3 months ago, you were talking about defending the EUR 7 billion by year-end despite startups. I was wondering if you think -- I mean, I'm not aware of any significance new intake in Q3. Are you expecting significant new projects coming in, in Q4?

Thanks for that question. Obviously, the backlog at $7 billion. This is the sale of gas backlog is at a record level. I had said 3 months ago, my expectation is we will end the year with a 7 handle on the backlog despite starting up $1 billion in projects during the course of the year. We're on track for that. And I believe at this stage, we are on track to getting that 7 handle by the end of the year as well.

And you talked about new projects in -- on the steel side, in metals in the U.S. Can you talk about that opportunity? Is it something for [ Denise? ] Or do you see multiple opportunities over the next 12 to 18 months?

So I just want to make sure I understood that correctly. You're asking about opportunity pipeline broadly and then in the U.S.

No, it was more about Metro,I would say, traditional projects away from electronics, away from decarbonization.

Good question there, Laurent. So yes, I think we are seeing that as a result of the tariffs that steel and metals broadly are likely to see some continued expansion in the U.S. We find ourselves well positioned with the right players who are contemplating that expansion. So the answer is, yes, we are looking at steel and metals opportunities and potential for new expansion projects, which will lead to greater gas demand, which we will either feed from our existing network or with additional assets that we are proposing to put.

Our next question comes from the line of Duffy Fischer with Goldman Sachs.

Yes. If you would, could you take a peek into next year? You've got, obviously, the Q4 guide out. that is a baseline to springboard into '26. How comfortable do you feel? What does the project startup look like next year?

And then if you just kind of anniversary the price you have now, how much benefit does that look like it will bring in '26. So just anything that you can kind of see forward into 26 would be helpful.

So Duffy, in 2 weeks' time, we will have the entire team here going through a rigorous plan process. The planned presentations will happen there. And we will come back to you and give you good visibility on next year and provide the guide for next year as well in February, as we normally do, which you're aware of. So I want to go through that process.

Our planning process is fairly rigorous. And I think that's what gives us the confidence to come out and give visibility on next year. I'll say a couple of things to kind of vet your appetite a little bit while you wait for us to come in February. The backlog that we have under execution, obviously, is a strong input into continued EPS growth that we are likely to see into next year and beyond. So expect that for sure.

And of course, there is a variable in all of this, as you know. And our EPS algorithm, which holds well today and shows that management actions and capital allocation does what needs to do at the end of the day, the variable that we'll be looking at for next year will all be around the macro. And I think that's going to be one of the factors that we will spend a lot of time talking about and planning for to ensure that we have a solid guide when we come in February.

And our next question comes from the line of Matthew Deo Matthew DeYoe with Bank of America.

I could be wrong, but I think this is like the first quarter in some time where pricing didn't really move up sequentially and I don't know maybe it's just coincidence or rounding, but I think just a question on like the backdrop for pricing and whether you remain confident that you can continue to to move the needle just given some of the slower macro that we're talking about here.

Matt, this is Matt. I think when you think pricing sequentially, you're always going to have timing differences of when the anniversaries are for certain contracts for the escalations on certain contracts. So that's a normal part of our process. I always like to look at year-over-year as the key way to understand our pricing and then compare that to how the globally weighted inflation is.

And when we look at the 2% we have year-over-year, that's pretty much aligned with what we're seeing in our geographies on a weighted inflation basis. So I probably wouldn't look too much into the sequential timing just because of some of the different timings of when increases occur.

Matt, I might just add one comment, which is helium and rare gases, which is a drag on pricing, has been something we've mentioned in the past as well now. Remember, helium and rare gases for us is a small portion of our revenue. So the overall impact for us at the enterprise level isn't that great. But nonetheless, that's been a drag for us, particularly in APAC, which you've probably seen.

And our next question comes from the line of David Begleiter with Deutsche Bank.

Matt, one more try on 26. Do you need base or organic volume growth to achieve your EPS growth algorithm next year?

David, so when you think about the algorithm, there's the 3 parts, as we've described in the past. -- and the capital allocation part and the management action parts don't need any economic co. And as we've said time and time again, those 2 parts, we view kind of mid-single digit individually. And so the combination of those 2 should get us to about 10% or hopefully a little more without any help from macro.

And then the third piece is the macro, which really we view has 2 parts. The FX translation, given we're dollar functional and the base volumes that we see. Even though they're under contract to customers, how many molecules they take will drive that base volume. So that's the part that's been the drag, the headwind for a few years now. But the rest of the model continues to deliver on the algorithm, hence, why we've been able to achieve the growth we have with even the face of negative base volumes. And up until recently, unfavorable FX translation.

So we feel quite good about management actions, and we feel quite good about our capital allocation portion of the backlog and we've talked about the strength of our backlog projects coming on stream. We've talked about the free cash flow that we can deploy on everything from stock repurchases to M&A activity. So we feel good that, that will deliver, and we feel good the management actions will continue to deliver. So the macro, as Sanjiv mentioned, we'll give more of an update on that on February and how we view that and how we will put that together in the guide in February.

Our next question comes from the line of Tony Jones with Rothschild.

This is Mato speaking on behalf of Tony. So I'd just like to ask 1 question about the project backlog and what major end markets do you expect to drive growth once the electronic CapEx cycle peaks over the next year or so.

Thanks. So our view remains that the electronic cycle doesn't peak next year. The electronic cycle in our mind is here for the next 5 to 7 years and potentially a little bit beyond that as well with all the build-out that's contemplated. Now having said that, the visibility we have on the electronic cycle comes through the engagement with various of the leading semiconductor companies and who are currently contemplating fab expansion.

So that's what gives me the confidence to give you that sense that I expect that electronics in the capital cycle or CapEx investments to continue for some time to come. Beyond that, today, we have a fairly strong pipeline of projects that we're working on. And that happens to be across a number of end markets. And I still feel pretty confident that we will continue to see growth certainly in electronics, as I mentioned, but also in a number of other areas, including steel in parts of the world where we continue to see some possible opportunities.

We mentioned the U.S. is one. India is potentially another we expect chemicals and refining in other parts of the world to also continue to see some level of activity. And last but not least, while we don't explicitly look at decarbonization projects separately, they sit embedded within our end market Companies are still looking at their programs for decarbonization and that will continue to provide an opportunity pipeline that looks pretty good, certainly for projects that have strong economic basis on which to progress.

And our next question comes from the line of Vincent Andrews with Morgan Stanley.

Just wondering, as we're far enough along in the fourth quarter, are you getting any sense particularly maybe in Europe, that we'll see earlier than normal seasonal shutdowns? Or is the sense you're getting that -- I think there was a comment to this, that maybe there's a little bit less pessimism now that some of the trade deals have gotten pushed along. So just any thoughts on that would be helpful.

So generally, Vince in Europe, Q3 tends to have a seasonal impact, and my expectation remains that Q4 will largely be flat. When I look at the broader European context today, unfortunately, as you know, we are seeing negative volumes there sequentially. That industrial market remains soft. I don't see a catalyst for change in the near term to kind of change that fundamentally.

I'll talk about a couple of geographies that are looking like we might see movement. So I'll start with Germany to begin with. The economy is slow. You probably just saw data that came out yesterday and this morning, suggesting that maybe a slight uptick there is an expectation, and again, we don't base our plans and strategy on hold. But generally, there is an expectation and hope in Germany that the spend on infrastructure the $500 billion that's been planned, will provide an [ infinitive ] or momentum for industrial activity to pick up I don't see that happening before middle or maybe even Q3 of next year. But nonetheless, that is something that people are looking forward to. U.K. economy, on the other hand, also large in the European context remains stagnant, and we aren't seeing much movement there.

And I can't see really a catalyst there either for a fundamental change. there is a bright spot in Europe. I have to mention that, which is the Nordics. The Scandinavian businesses seem to be seeing growth. They seem to be seeing some momentum, and that's good news, but they aren't large enough to move the overall European context. So -- for the rest of the year, I expect that declining trend that we have in volumes to remain consistent.

Sequentially, you should expect that to be flattish. Nothing beyond that at this stage.

And our next question comes from the line of Patrick Cunningham with Citi.

One of the desired outcomes from the trade and tax policy is clearly an increase in U.S. manufacturing. And it seems like we've lapped some of the tariff concerns. You started to see some uptick here -- how would you frame the market risk near term, which seems to be getting a bit better versus what maybe your customers are saying in terms of doing new projects, CapEx plans and level of certainty on sort of forward growth expectations?

Patrick, that's a good question. Let me kind of give you a 2-part answer to that. I'll talk to you about our U.S. package business that reflects the near-term realities of what we're seeing and what we saw in Q3. We expect that to be consistent into Q4, and I'll give you a little bit of a sentiment view from what I'm hearing from customers as well. Let's start with the package business.

So the package business, the U.S. package business grew mid-single digits organically. That's volume and price together. Gas volumes were down low single digit. They were impacted by Helium as well within that. So the industrial demand underlying there was quite stable. Hard goods sales were up mid-single digits. Volumes are particularly up due to growth in automation and equipment sales.

Now that's usually a good sign because it shows that customers are preparing for order book pickup to happen and therefore, getting ready for that. So that's a good signal that we obviously track quite closely. So I'd say that growth in automation equipment suggesting that they're willing to make some of that upfront investment to be prepared for the orders as they come through.

Larger projects, and I think answer your question around customer sentiment now, I'd say that there remains a degree of caution. There is no question we've lapped the tariff concerns, but there still remains a degree of caution. And I think we see people progressing on looking at their major expansion projects or CapEx investment into the ground, but we still see a degree of caution around that.

Probably I say when I look at broader manufacturing the volumes are resilient, but suggest that, that trend is likely to continue into Q4 with hopefully the pickup happening in the first half maybe middle of next year in terms of actual projects on the ground, ensuring that volumes have a pickup.

And our next question comes from the line of John Roberts with Mizuho Securities.

I think China is lowering the prices quickly on electrolyzers, the same way they did on equipment for solar and wind. Do you think that might cause any recovery in green hydrogen ammonia? It's been very quiet in the last couple of years here.

John, I think the Chinese cost curve on electrolyzers alkaline in particular, has been declining for some time. This isn't necessarily new -- they've had a couple of hiccups around the scale-up technology being reliable and working through. But notwithstanding that, I fully expect Chinese electrolyzers to provide a very -- a good option in the market as people evaluate the economics of green hydrogen or renewable hydrogen.

What I would say to you, though, is that the issues with renewable hydrogen are slightly more fundamental, and they come with 3 parts, and I know you know this, John, but I'm going to repeat this anyway. The first issue is around scalability of that technology because we are still talking in terms of 5-megawatt stacks, 20-megawatt stacks that isn't scale at which we can really operate.

So you have hundreds of modules to come together in case you want to build a 200 or 500-megawatt facility, which again, in the larger scheme of things, when you compare that to a large steam retail reformer is a fraction of what the steam methane reformers deliver. So I think from that scalability point of view, there is a challenge for electrolyzers as is the challenge around reliability in terms of being able to operate clearly not 24/7 because of the availability of renewable energy. But even from the grid, I think the ability to give that 247 consistently over the course of the year is still fairly challenged around electrolyzer technology. So that's the first piece.

The second piece is what you referred to, which is capital efficiency or the lack thereof. And I think that's being addressed in part certainly by the Chinese more rapidly than anyone else. I've said this before, so at the risk of repeating myself, that's probably the cost curve on the capital side needs to probably get a reduction of between 60% to 70% before you start seeing an inflection point which makes renewable or green hydrogen more competitive.

And last but not least, in all of this we shouldn't forget the fact that we need availability of electrons generally, but renewable energy, in particular, because that's what the preferred option for green or renewable hydrogen is. And as you know well, today, any electron gets taken out very quickly. And all of this build out on data centers and AI-led data center development means that renewable energy is going to get scarcer, if you will, from a renewable hydrogen perspective. So that's something also that is structural for now that needs to get addressed before we get to a point where you see that scale-up happen.

And our next question comes from the line of Jeff Zekauskas with JPMorgan.

In your commentary on the APAC segment, you said your prices would have been up or they were up in all areas, except for helium and rare gases. So if half of the penalty is Helium, maybe that's $15 million. And in your other segment, you're losing about $15 million in that segment used to earn about $15 million.

So the helium hit there is at least $15 million, maybe it's $30 million, so it looks like maybe the helium penalty this quarter was $50 million year-over-year. It had to be a minimum of $30 million and so if you annualize that, that's trimming your EPS growth by about 2%, maybe it's 1.5% to 2.5%. Is that the correct math?

So I'm sure you've done the math. I'll let Matt kind of respond back to that. I'll just give you my flavor on what is happening to APAC pricing to just reconfirm that APAC pricing excluded helium and rare gases. So I would urge you to not forget that. So APAC pricing, excluding helium and rare gases, is positive.

Now you have to remember in APAC also that China is going through deflation. So we do see that reflected the Chinese pricing more broadly. But Matt, what do you say to the math that Jeff just put.

Yes. I think on a high level, Jeff, would agree with the basics of your math. When you think about full year, we'll stick with full year basis rather than quarter. But on a full year basis, between helium are gas, if you take both the volume impact because you did see some curtailment of volume, whether it's for balloon or whether it's for MRI, coupled with some of the pricing impact you could argue on a year-on-year basis, that's probably a 1% to 2% impact, probably in the lower end of that range, but on the EPS year-on-year.

That -- at APAC, unfortunately, is impacted the most. Given that's where the larger percentage of demand for those products are. But that is how I would summarize. I mean when you think about helium and rare gas, it is low single-digit percent of our global sales. And just given some of the volume and pricing impacts, you have seen an impact year-on-year related to that. So I would say pretty much flows close to those numbers, but we hopefully have seen some stabilization definitely on the pricing of rare gases, and helium, I think it still remains to be seen on some of the Russian supply.

And our next question comes from the line of Mike Sison with Wells Fargo.

Sanjiv, I wanted to dig in a little bit on your comments on the chemical industry. Unfortunately, I see a red today for our sector in terms of stock prices. But you had commented that you saw the cycle will turn positive. We've seen a lot of companies this quarter have asset write-downs. There's more announcements of asset reductions or rationalization, particularly in Europe and other parts of the world. So what do you think -- why do you think there could be a recovery in the sector over time.

And I just worry that maybe the structural issues that could prevent a recovery anytime soon. So just curious on what you think needs to happen for that industry to turn the corner.

So Mike, that's a good observation. I think the chemical industry, as I said in my remarks, is probably the most impacted at this point in time. And therefore, every view on the industry are all perspectives and the industry tend to be quite negative.

The reality is, and you know this well, Mike, we've seen the chemical industry go through these cycles before. There are some elements that are structural. There is nothing that we have to accept that, particularly Europe, right? And we have seen the rationalization of capacity in Europe, supporting capacities elsewhere in the world. The one market where chemicals is still doing reasonably including in the last quarter was China.

Now obviously, a lot of capacity put in China on chemicals, which doesn't help the global supply-demand situation. But nonetheless, we have seen chemicals continue to have reasonable growth in China in the quarter and the expectation remains that, that will be the case. I do expect that with the rationalization in Europe, you will see the broader chemical asset base, start looking at the recovery or rebound over time.

I'm not suggesting it's happening tomorrow anytime soon. but I do expect that cycle to turn. And based on the feedback we have from many of our customers now, the expectation remains that once the rationalization actions have been taken into account, there will be a fundamental shift back to a point where you will see that chemical industry come back a little.

Got it. And then just one quick follow-up. SG&A was up 9% year-over-year, sequential 3. Any particularly, any reason for that trend? And how do you see that going forward?

Yes. The answer for that is fairly simple, Mike. I always look at SG&A because quarterly trends have things in and out. You've got merit, you've got inflation, you've got stuff like that. I always look at year-to-date. Year-to-date, SG&A is up 1%. And really, I think when you dig a little bit deeper under that, we've got M&A impacting that by about a percent, we've got inflation impacting that by about 2%. And then we have, as you know, a whole restructuring set of actions happening, which take down our SG&A by 2%. So net-net, year-to-date, we're up about 1%.

And our next question comes from the line of John McNulty with BMO Capital Markets.

Maybe a follow-up around some of the European capacity closures. So it looks like there have been a lot announced at this point. And so far, you all seem like you've avoided being tied to too many of them likely a lot of good partnerships that you've kind of picked over the years. I guess can you help us to think about at least given the announcements that have come out in the last quarter or so if there's any speed bumps that we should be aware of as we look out over the next year or 2 where assets are getting shut down, maybe you get a big onetime payout and then the business disappears. I guess how should we be thinking about that?

John, I'd say to you that the rationalization has been something that we have looked at. And to some extent, we internally had kind of mapped out what we thought the pace of that would be. All of that's playing to exactly how we thought it would be.

So I'm not seeing any surprises in there. I would also say to you that there are a few customers that are below MTOP at the moment in Europe, largely around steel and chemicals. And I think we still are being paid. The thing that I look at when I look at these large customers is whether we're getting paid the fixed fee, and that's what contractually protects us from any exposure. So we see that happen. I do not expect any significant rationalization impact of the order and kind of the way you defined it where things stand down with large one-off payments.

We are just seeing -- again, it's the pedigree of the customers we have, the cost positions that they have, which ensure that these Tier 1 customers in the chemical sector that we serve will remain. They will be much, much the last man standing, if you will. And I feel good about that portfolio.

And our next question comes from the line of Josh Spector with UBS.

I had a follow-up just on the manufacturing comments. I mean, I think if you look at the declines you're calling out in Europe and then the growth in the U.S. side or Americas broadly, I mean you're doing much better than the PMI metrics than what we're looking at.

So just curious if you could comment maybe in a little bit more detail by market or wins and how that is driving itself the quarter maybe some of that's redundant with your answer, Patrick, but I wasn't sure if there's anything else to add.

Yes. So I think as I explained there, Josh, the manufacturing piece more broadly is seeing, 2 things are happening, right? We're lapping the tariff concerns or the trade concerns that were there, and I think that's resulted in manufacturing coming back and rebasing. So the uptick in manufacturing that I referenced earlier on is driven by that.

And then obviously, we are seeing some of the clarity that is now coming into the market, allowing people to plan and progress with their activity and potentially expansion in that space as well. I won't point out any specific elements. I'll give you a couple of examples. So the U.S. manufacturing, clearly, I've given you the example of the U.S. packaged gas business, that is a great proxy for U.S. manufacturing has done well, mid-single-digit organic growth.

That is, of course, both price and volume. But I'll also give you examples in China, as an example, which we've been struggling with manufacturing being in steady decline. We have seen particularly around selective subparts of the manufacturing end market. We've seen EVs and batteries show some growth, so we are seeing a bit of mix back around the world.

The U.S. leaves that in terms of the manufacturing activity and the growth we see in there. We're seeing, obviously, India, I gave you the example of China, where we see manufacturing broadly remain struggling is Europe. And I think it should come as a surprise to you. We've been kind of looking at that, and it is exactly as we had expected, unfortunately.

Now the expectation there is that the $500 billion spend in Germany is going to spur some of that manufacturing activity I'd love to tell you that it's going to happen on the first of January 2026, but you and I both know that by the time the German system puts its whole process around that, it's going to be a few quarters before we get the benefit of that. And you will see that play out. I think there's a certainty around that. But again, we'd love to watch for that to happen before we can really kind of comment on that.

And Josh, this is Matt. The only other one thing I'd add to Sanjiv's points are, we do put commercial space in the manufacturing, that is growing and clearly driving some of the growth in that end market. That obviously will not correlate with PMI, given it's a very different type of growth trajectory, but that is also having a positive impact on the manufacturing end market.

Matt, I don't know how I forgot that because I think the space is an end market by itself. I think -- it's about time we grew that enough to be able to show that as an end market. But yes, very healthy double-digit growth, feeling really good about aerospace broadly and commercial space specifically, Josh. And I'll just give a bit more color there just to say, look, the reason we're excited is not only have we seen as a reliable partner by almost all the space large companies.

But as the companies are ramping up their activity and accelerating their manufacturing process around both the production of engines, testing of engines and obviously launch, we see this significant opportunity for growth, and we are putting a lot of capacity on the ground today, particularly in the U.S., to serve that additional oxygen, nitrogen, hydrogen demand and, of course, rare gases for propulsion systems for satellites as well. So yes, that certainly sits in manufacturing, and Matt was absolutely right in just pointing that out.

And our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Sanjeev, you commented in the prepared remarks with regard to electronics, that you expect robust growth for some time. So I was wondering if you could unpack that for us a little bit. For example, what sort of industry level growth do you see over the next few years, however you think about that, square inches of silicon or otherwise? And in the past, I think that you've asserted that industrial gas demand into electronics actually grows at a premium rate due to shrinking nodes and maybe changes to chip architecture, et cetera. Is that still the case? And what is that premium? And how do you see it evolving with AI, data centers, et cetera?

Sure, Kevin. That's a great question. So as I said in the prepared remarks and also in the response to a question earlier, we still see a very robust pipeline for growth over the years to come over there. I think when you think about semiconductors broadly, the expectation remains that over the next 5 years or so, you should see semiconductor industry grow to $1 trillion. I think the expectation of growth between 9% to 11%, I think depends on which study you pick up.

Within that, clearly, as you're aware, logic is the steady growth element in there. And of course, memory more recently driven by BAM really is seeing a significant pickup as well, and that's where a lot of the capacities today, both in terms of logic for the GPUs as well as HBM and memory are really finding the investments play out.

I would say to you that I expect that the 9% to 11% growth range is a good number to begin with. You will see, as it always happens once fabs come on the ground, in terms of actual consumption from an industrial gas perspective, we tend to start the plants up and obviously, you see a bit of a momentum there and then evens out and gives you that 9% to 11% longer term. So I feel good about how we will see that reflected both coming from logic as well as HBM, particularly, but memory more broadly as well.

The second part of your question was around the intensity of gases. And the answer is absolutely yes. The more advanced nodes we see the intensity of gases goes up and has continued to go up. The tools that we now see with the OEMs who are putting the tools together or even looking at the next generation of tools and our R&D engagement with them suggest that, that gas intensity increased continues to be the case. And that's what gets us excited, right, that there is significant growth happening, but not just that you're actually seeing a higher intensity of gas application in that process as well.

I know for a fact that one has done some really good work around that gas intensity analysis. If you want we can reach out to him, he can share some more information with you.

And our next question comes from the line of James Hooper with Bernstein.

My question is more on the margins in EMEA. I mean 36% is very, very impressive, and you've done over kind of 200 basis points year-on-year, excluding pass-through. But are we starting to reach terminal velocity on margins here? -- without kind of volumes coming back, how much further can we go? And what levers you're looking to pull to keep growing here?

James, this is Matt. I think starting with -- yes, as you look at EMEA right now, clearly, you have negative volumes and positive price. And that combination is creating a very strong margin contribution result year-on-year. And as we mentioned on the volume side, the industrial on-site customers are primarily driving a portion of that, so we are still getting paid, but they are, in some cases, noticeably below the [indiscernible] loans.

So you will get a little bit of a boost on that. When you see some recovery in those on-site customers, I don't expect any margin expansion, if anything, you might have a minor margin dilution simply as you start to bring up some of the power costs, which essentially flows through. So that component would have an impact on the recovery.

As far as base merchant and package recovery, that would be margin accretive, right? That would be, as you would expect, as that volume flows back through. So we've always tend to found in our history that in more difficult times, our margin expansion tends to be greater and that's simply because of the earnings algorithm that we talked about earlier, that you tend to have more contribution from management actions, which can be highly margin accretive.

When we get recovery periods, we still get margin expansion but not at the same clip, simply because then you shift more of your growth towards volume. And you just get a little bit of a mix change effect there. So that's how I think of EMEA, but they are doing what you would expect this model should do in the environment they're in, which is they're getting price to inflation, their fixed contracts are maintaining, as you would expect, and they're managing their cost back given the environment they're in.

And our next question comes from the line of Laurence Alexander with Jefferies.

Would you mind updating specifically on packaged gases 2 issues. One is what you're seeing in terms of demand trends there, particularly in sort of the welding applications. But also -- where we are on the regional consolidation in Europe versus the U.S. And how much further you think you can go in terms of consolidating the U.S. market? Like where do you think your market share might top out.

Thanks, Laurence. So I described the U.S. package business earlier on. And I think within that, the comment I made was we're seeing certainly on the hard goods side, in the last quarter, in fact, we saw mid-single-digit growth from an organic sales perspective.

Volumes were up, particularly driven around growth in automation and equipment. And that's a good sign because that shows that the building end of the manufacturing cycle is looking stronger. Obviously, some of that is going into large construction projects, including data center, something we don't normally talk about. But -- and obviously, LNG projects in the U.S., et cetera, which are driving some of that growth. And I think the growth still looks pretty robust.

And as manufacturing laps all these concerns around tariffs, et cetera, we have an opportunity to see a good growth pattern there as we look ahead into the future.

On consolidation, I'll give you a global view and then I'll focus a bit on the U.S. because that's where the action is. So there was consolidation and there are opportunities for consolidation on tuck-in acquisitions in the packaged gas space. And we've seen that now taking the model that we've got in the U.S., and we've applied that in elsewhere in the world, including in Asia and increasingly now looking at opportunities in Europe as well.

So there are opportunities for consolidation globally. The biggest opportunity lies in the U.S. There is no question around that. And while I do not comment on the market share piece, I can only say this to you, I still believe we have a number of opportunities for tuck-in acquisitions in the U.S., and we have the balance sheet strength and the appetite to go about doing that.

From memory, I'm just trying to think back. I think we closed 18 deals last year globally. This year, we're saying about 1% of our sales are going to come from acquisitions. Much of that is going to be tuck-in acquisitions coming out of the packaged gas space. So we feel really good about that space. We expect significant opportunities still in that space for us to continue to do that.

And just if I may, on the cylinder rental price increases over the last 5, 7 years, given how soft the end markets have been, have you seen any material pushback or pricing fatigue where you may need to -- where you feel you need to walk back the cylinder rentals to help the market? Or just describe what's going on there?

The easy answer is no. We have a robust rental process and of course, our customers see the value that comes out of that and the rental stream and the growth we've seen within that has matched CPI globally weighted CPI that we see as a proxy for price increases that we would normally expect. So we've seen exactly that trend come through on rentals as well.

And our next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Last quarter, you mentioned maybe some thoughts around this investment in Europe and your thoughts that maybe that would not continue. Maybe you can just provide an update and updated thoughts there as well as here in the U.S., you just mentioned strong opportunities. However, we're also seeing some rollbacks here. So maybe you can just kind of elaborate on how you think the path forward could look in both those regions from an industrial and investment standpoint.

Sure, Arun. So let me give you a quick -- I give a walk around the world, so you've got a sense of what the different end markets are doing. I'll now maybe channel that is the opportunity pipeline that we're looking at. So it's fair to say that most of our opportunity pipeline today comes from the Americas and Asia. That's where the opportunity pipeline today is providing projects that we're currently working on. And if those projects meet our investment criteria, then obviously, these are projects that then go into the backlog and get developed.

Now, the U.S. opportunity remains robust. We see opportunities across a spectrum of end markets. I gave examples of electronics earlier on. We talked a little bit about steel. Clearly, even in other end markets, we are seeing opportunities for growth in the U.S. market. So it's a robust pipeline of projects that we see in that space.

On Europe, I'm not sure I quite got your comment on this investment. What I would say to you is that the number -- the opportunity pipeline for Europe or EMEA, in our case, looks a little bit lighter when compared to either Americas or APAC, not surprising, as you would expect, just given the industrial weakness that is currently there in Europe, but we still do have a number of projects in Europe that are progressing, some of them are latest decarbonization, whereas others are related to growth in other different end markets.

So we still see opportunity pipeline in Europe that over time as we develop that, we'll convert into projects that we will take into the backlog or into base growth.

And our final question comes from the line of Mike Harrison with Seaport Research Partners.

You have highlighted in the past some opportunities for AI to help you improve operational efficiency and productivity. I was wondering if you could speak about any new use cases that you've found for AI that you may be implementing as we get into next year?

So Mike, I don't know how much time you have, but I could carry on the use cases for AI. Obviously, it's very topical. No discussion today is complete unless we've talked about AI. In our case, of course, we've been doing a lot of work with data, which we've been capturing for about 30 years plus and a lot of machine learning work that's been done over the last 4 or 5 years. So much of that is in deployment today.

Off the top of my head, I'd say to you, we have about 300 use cases or above that. And they range across the entire spectrum of operations, some of the front end of the sales process and some in our engineering and design process as well. So a healthy number of use cases, very robust deployment process. We have an AI council that ensures that, that deployment works well with the overall strategy that the company has laid out for ourselves. And we're excited about that.

And the one change I would say to you is rather than just look at stand-alone use cases for AI, we are now looking at different domains and trying to understand how we can introduce AI tools across the domain, so that we can harvest some value. We track AI projects just like we track all our productivity projects. It's on our internal platform in which they get reviewed and validated. And the AI team, I can tell you has very stretching goal in terms of what it needs to deliver as a benefit. So we will use that -- look at every use case and look at the business case underpinning that.

And those benefits are looking interesting and exciting as we speak. But again, all of that scales up over the next 2 to 3 years to have some major impact on the business.

And I would now like to turn the call back to Juan Pelaez for any additional or closing remarks.

By, thank you, and thanks, everyone, for participating in today's call. Have a great day.

Ladies and gentlemen, that will conclude today's conference call, and we thank you for your participation. You may now disconnect.

Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde Second Quarter 2025 Earnings Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

And I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir.

I appreciate it, Abbie. Good morning, everyone, and thank you for attending our 2025 second quarter earnings call and webcast. I am Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Sanjiv Lamba, Chief Executive Officer; Matt White, Chief Financial Officer.

Today's presentation materials are available on our website at linde.com in the Investors section. Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during this teleconference. The reconciliation of the adjusted numbers are in the appendix of this presentation. Sanjiv will provide some opening remarks, and then Matt will give an update on Linde's second quarter financial performance and outlook, after which, we will wrap up with Q&A.

So now let me turn the call over to Sanjiv.

Thanks, Juan, and good morning, everyone. I'd like to thank our Linde employees for once again delivering solid results. EPS of $4.09 and operating margin of 30.1%, both represent all-time quarterly highs, against the backdrop of a challenging macro environment. Operating cash flows grew 15%. And ROC of 25.1% continues to comfortably lead the industry. And these results are underpinned by a healthy balance sheet that ensures access to low-cost capital. Overall, Q2 was a successful quarter, which Matt will provide some more further details. But before that, I'd like to review one of my top priorities, which is to ensure future growth for Linde.

Slide 3 highlights the sale of gas project backlog, which is one key element of that future growth. One cannot discuss project backlog without first aligning on definition of what is included. And unlike others in the industry, Linde's definition has been clear and consistent with the most disciplined criteria.

Inclusion in Linde's project backlog requires incremental growth, secured by contractual fixed fees with high-quality customers. Contract renewals, plans without customer commitments or LOIs are not included in our backlog. It's important to make this distinction because backlogs are simply not comparable within the industry. And while many like to [ tout ] the overall size of the backlog, it's the turnover of the backlog, which is one of the most important metrics, which actually can be seen in the center graphic represented by wins and startups.

In a little over 4 years, the sale of gas backlog has approximately doubled, from $3.6 billion to $7.1 billion. The same is true for the number of projects, moving from 33 projects to 70 projects. During this time, we added $9.2 billion of new projects, and more importantly started up $5.7 billion of these wins. This represents more than 150% backlog turnover in 4.5 years. So while I'm pleased to see a sale of gas current backlog at record levels, I'm equally encouraged by the accelerated turnover from timely execution and strong contracts.

Of this $7.1 billion backlog, almost 3/4 are in the Americas, mainly the U.S., our future plants serving the electronics end market and clean energy. To the right, you will see some of the high-quality customers that make up the majority of this backlog. One recent ad is the Blue Point project, which is a JV between CF Industries, [ Jera ] and [ Mitsui ] that will produce low carbon ammonia in Louisiana. We're proud to have been selected as their industrial gas partner due to the capability and track record of our U.S. Gulf Coast team. The addition of this facility will help further build out supply density in a fast-growing region in the U.S.

Furthermore, this win represents a third large clean energy contract signed, bringing the total to approximately $5 billion, which validates that the right low-carbon projects will continue to reach FID and execute contracts. Also not included in the slide is the sale of plant backlog, which today stands at $3.2 billion, and typically converts one-to-one sales over a 3-year cycle.

Now it's important to note that while we've made nice strides with the backlog, it does not represent all investments for future growth. We actually spent over $1 billion in CapEx annually for what we call base volume growth. Decisions for making these investments follow the same process as the backlog and require a consistent risk versus return criteria. [ I'm just ] missing one or two key requirements to be classified as backlog.

Most based growth CapEx supports packaged and merchant supply [ modes ] and is critical to further developing network density. Now small on-sites, an important supply bridge from merchant to on-site can also be included as base CapEx, when individual plant CapEx is less than $5 million.

One recent base growth addition includes a Southeastern U.S. merchant investment in support of space launches, a sector that continues to offer attractive growth opportunities. While these wins are contractual commitment by customers, the lack of guaranteed fixed fees precludes eligibility in the backlog.

Finally, I'd be remiss not to mention the role of small tuck-in acquisitions can play for sustained high-quality growth. While I don't expect this number to be an overly large driver, it can consistently deliver an annual percent of two bottom line improvement, from both acquired profits and self-help synergies.

For the second quarter, you can see the 1% top line increase from U.S. and APAC bolt-on acquisitions, mostly in packaged gases. Overall, despite the unfavorable economic backdrop, we are forging an independent path to growth. This comes not only from a high-quality disciplined project backlog, but also incremental base CapEx investments and roll-up acquisitions.

I'm highly confident in the Linde team's ability to not only win more than our fair share of high-quality opportunities, but also to execute them as promised, to deliver value for both customers and shareholders. Simply stated, I continue to be bullish on industrial gases as a critical foundation in making our world more productive, and I'm certain Linde will remain the undisputed leader in this effort.

I'll now turn the call over to Matt to walk through our financial results.

Thanks, Sanjiv. Slide 4 provides a summary of second quarter results. Sales of $8.5 billion increased 3% over prior year and 5% sequentially. Year-over-year FX headwinds abated as we saw a 3% sequential improvement from broad-based weakening of the U.S. dollar. Cost pass-through trends were driven by energy fluctuations but have no impact on profit. And as Sanjiv mentioned, acquisitions lifted sales 1% over prior year from synergistic deals in the U.S. and APAC. Excluding these items, underlying sales grew 1% over prior year and 3% sequentially.

Broad-based price increases continue to track with globally weighted inflation, except for helium [ in ] China. Volumes are down 1% from last year as weaker base volumes, primarily in EMEA, more than offset contribution from the project backlog. As mentioned in prior calls, much of this decline stems from existing contractual customers using less gas in their operations. So any recovery would be immediately beneficial. And while volumes did increase 2% sequentially from seasonal effects, the core trend remained somewhat stagnant.

Operating profit of $2.6 billion increased 6% over prior year. The operating margin of 30.1% increased 80 basis points, or 100 basis points when excluding the effect of cost pass-through. EPS of $4.09 also increased 6% from prior year as a lower share count was mostly offset by a higher effective tax rate.

Despite the base volume headwinds, business quality continues to improve from self-help actions. Further support of this quality can be seen in operating cash flow growth of 15%, as well as a healthy ROC exceeding 25%. More details on capital management can be found on Slide 5.

The operating cash flow trend shows sequential stability in the first half of this year, consistent with our commentary from last quarter. Recall that the first half of the year is seasonally weaker due to timing of certain cash impacts like taxes, interest and incentive compensation. I expect a step-up for the back half, like what we experienced last year. Base CapEx is stable which has enabled healthy levels of cash flow available for shareholder returns, M&A and project investments.

The pie chart represents a steady and disciplined capital allocation policy, which deployed almost $6.5 billion year-to-date. Of this $2.8 billion comprises investments that met our risk reward criteria, an increase of 20% over last year. Equally important is our ability to consistently access low-cost capital. This quarter, we issued bonds of [ CHF 0.5 billion ] with an average yield less than 1%. Ability to raise cost-effective capital will continue to be a key component of shareholder value creation, especially as we see greater discrepancy across interest rate policies.

I'll wrap up with guidance on Slide 6. For the third quarter, we're providing a guidance range of $4.10 to $4.20, or 4% to 7% above last year. This includes an assumed 1% currency tailwind, which would be the first quarterly FX benefit since late 2023. While the FX assumption improved from our prior guidance level, we mostly offset that with a more negative assumption of the economy as the top end now assumes economic contraction.

During the second quarter, we were able to capture the full FX upside on top of meeting the original expectation. However, the currency volatility, and general economic uncertainty, don't give us enough confidence to raise the outlook at this time. Rest assured, we'll strive to outperform this projection, but time will tell if we're being too conservative or not.

For the full year, we simply approached it the same way as the third quarter, updated the improved FX but offset with an assumption of a contracting economy at the top end of the range. This resulted in a new range of $16.30 to $16.50, or 5% to 6% growth, including a 1% currency tailwind. The last time we saw a full year currency tailwind was 2021. So I believe it's appropriate to remain guarded.

In summary, the EPS algorithm remains intact. Linde employees continue to manage what's within their control to deliver value, but we know there's always room to improve. The current negative volume headwinds are a function of contractual customers taking less gas due to the economic uncertainty. Between internal initiatives and industrial recovery, I expect this level to improve like it always has. And when that happens, coupled with the self-help growth initiatives that Sanjiv laid out. I'm confident Linde will return to the double-digit EPS growth that our owners have become accustomed to.

I'll now turn the call over to Q&A.

[Operator Instructions] And our first question comes from the line of Duffy Fisher with Goldman Sachs.

Congrats on a really good quarter. We're hearing a lot of different [indiscernible] from the companies in this space over the last week just where [ businesses locally ], whether it's the [indiscernible] and stuff like that.

So could you take some time and just go geographically [ end-by-end markets ], is kind of what you're seeing and what you expect to see in the back half of the year?

Thanks, Duffy. That's a good place to start. So why don't I do just walk you around the world and share some insights.

I'll start off here in the Americas. And I'm expecting volumes to be flat, maybe very slightly up, led essentially by growth in the resilient end market, but being partly offset by softer industrial sector. I have to say I remain positive on the U.S. market. In Q2, we saw volume move in line with slightly positive IP numbers that were published earlier this week. Year-on-year volumes were up for metals and mining, chemicals, energy, food and beverage, electronics, while manufacturing showed a slight decline.

Now sitting in manufacturing is our commercial space market, which continues to be a very attractive growth opportunity. And Linde, of course, is well positioned in that space. The opportunity to supply fuels for rocket launches, [indiscernible] systems for placing satellites into orbit. It's fueling double-digit growth [indiscernible] in that particular market, or end market.

And not only do we supply the leading and probably the most well-known company for space launches, but also working with many others who are looking to scale up, and we expect to see that growth continue. So our recent announcement regarding the new investment in Texas and Florida is likely the first of many that you'll see. And again, we're trying to see how we take this business globally. And in doing that [ or ] finding opportunities in Europe that are starting to look attractive as well. So that's really Americas for you with a lot of confidence in the U.S. market, if you will.

From that excitement of space, I have to bring you down to some ground realities when I talk about Europe. So Europe is expected to continue see softening in demand, led primarily by Western Europe. Any growth in the [indiscernible] end markets will be more than offset by a decline in the industrial sector. Across metals, manufacturing, chemicals, energy, all with volumes lower than last year. So in the short term, Europe has several challenges to get their economy back on their feet. And I currently don't see any catalyst for economic improvement this year. Volumes, therefore, likely to be negative in the second half.

I think it's going to be driven almost entirely by the industrial sector. Our team in Europe is doing all they can to manage through this economic environment, working on levers that they know and are in control of such as price, productivity, cost actions, and of course, you can see that reflected in the double-digit EBIT growth that they were able to provide in the quarter. But looking ahead into the rest of the year, I'm not feeling any level of confidence that you're going to see improvement, if anything, you're going to see a likely decline continue there.

If I move on to Asia, I'll start with China maybe and just tell you, China remains a mixed bag. You've heard me say this in previous calls. I expect China to remain flat for the year, and that continues to be our expectation. There is EVs and batteries and electronics end markets that will continue to grow, but that will be more than offset by much weaker metals and chemicals for the remainder of the year.

Industrial activity in Australia is seeing declines, which are similar to Europe, almost across all industrial sectors. Really a reflection of the level of industrial activity in the country. Again, the Linde team there is busy executing their self-help actions, which will show results at the back end of the year and beyond.

Now the bright spot in APAC remains India with merchant volumes growing in the teens, and a healthy opportunity pipeline for new investments. This is unfortunately offset by declines in the ASEAN countries. South Korea, the other main market in APAC, mainly driven by electronics, end market is also expected to see some growth. So all in, I'd say when you wrap it all up for APAC, it's probably going to be just balanced or flat volumes for the year.

That essentially is how we are seeing the market. I think the summary is resilient end markets continue to have low to mid-single-digit growth, more than offset by the industrial sector, largely across the board, particular negativity coming out of EMEA.

And our next question comes from the line of David Begleiter with Deutsche Bank.

Sanjiv, your price mix has been very stable over a number of years. Do you see any risk of not getting future price increases given the weak macro we're now in?

So David, I've often quoted that over the last 25 years, [ Fraxel Linde ] has always achieved positive pricing. Being -- be it through economic cycles, which are up or down. And I think I'd say to you that remains the expectation going forward as well. A great proxy for our pricing is globally weighted CPI. You should see us track to that as we do at the moment.

And I guess when I look at pricing today, and you can see the numbers as we provided in the deck, you'll see that pricing across all countries is actually pursuing that and in line with that globally weighted CPI. There is an exception, China, which sits in APAC, which has got some challenges, particularly around helium pricing, where we are seeing high single-digit kind of price declines. And some rare gases as well. And a little bit more pressure on China pricing generally. But beyond that, every other country is tracking in line with our expectations.

So I do not see any reason why we would not see positive pricing going forward. I've said this many times in the past, David, that the way we create value for the customer, and the fact that we are a small sliver of the cost stack, I think that balance always works in our favor when we have a conversation on pricing.

And our next question comes from the line of Vincent Andrews with Morgan Stanley.

I wanted to ask on margins, particularly in the Americas, where margins were flat year-over-year, but you did have positive price and volume. But in some of the other segments, you had margin expansion year-over-year with maybe not as robust volume and price.

So is that a function of the business mix in the quarter in the Americas? Or is there something else going on?

I'll let Matt respond to that and then I'll add a couple of comments at the end.

Vince. I'll start with any time you look at quarters, you can always have some noise and some bumpiness. I mean we always tend to see that within the quarters. For me, the most important thing is how you're tracking full year and year-to-date.

That being said, yes, you're going to have some mix in there, primarily with some of the home care, I'd say, that might be a little bit of an impact. But we feel quite good at almost 32% margins we're tracking. We clearly see more room to improve. We expect to improve that further. So I wouldn't look very far into a single quarter at this point. And I don't think there's anything really of concern on a go-forward in my basis. But [indiscernible] Sanjiv?

Thanks, Matt, I think you've actually covered it all. All I'd say is the expectation of margin expansion is something that we have laid out. That 30 to 50 basis points of margin expansion is how you should be thinking about the margins across all the segments.

And our next question comes from the line of Laurent Favre with BNP.

I was wondering if you could talk about the appetite on your projects from customers given the macro backdrop that you are indicating? Is there any risk of, I guess, a slowdown, or slippage on intake so that your backlog may finish the year below $7 billion?

So Laurent, I said this in the last call, as I recall, my expectation remains that we will end the year with a backlog with a [ 7 ] handle on it. Now this despite the fact that we will start up another $1 billion of the investments that are currently sitting in our backlog in the second half of this year, and most of that will start ramping up towards the back end.

So our view, my view remains and our business is currently supporting and giving me confidence that there is enough opportunity pipeline on projects that we're currently working on that we will be able to bring home a $1 billion to get that backlog to $7 billion plus.

And our next question comes from the line of Jeff Zekauskas with JPMorgan.

Both you and [ Air Products ] had very strong EBIT growth in Europe. I think for both of you, it was double digits, which was a step-up. Did something happen in Europe to the industry in general? Was it a function of currency? Was it a function of other factors?

And secondly, your competitors in [ Allentown ] also said that the [ Gilian ] penalty to them was $0.55 or $0.60 a share as they estimated for 2025. When you heard that number, did you say, oh, that makes sense? That's a comparable -- sort of comparable to what we're experiencing, or do you have a different experience if you are quantifying it?

So Jeff, I'll let Matt talk about the EBIT growth, and then I'll give you a comment on [indiscernible]

Yes, Jeff. So I mean just using our table in the back with EMEA, clearly, FX is part of that, right? You've got a 4% component of our 11% growth. Obviously, the euro has strengthened, the sterling has strengthened. So that's definitely helping.

But on top of that, we continue to have pricing opportunities. We continue to have productivity opportunities. So while the volume is negative, a large portion of that are with the on-site contracts, which are heavy volume effect, but they tend not to be overly impactful to the operating profit given the fixed fee structure.

And so that's kind of the makeup that we have strong contracts. We continue to price to inflation. We have a lot of productivity initiatives, and we're getting a fairly nice tailwind on the FX. And the combination of all that is giving us the double-digit [ OP ] growth despite some of the underlying macro challenges that you see. Clearly, when we lap that and that stabilizes, that should give us some opportunity. But at this stage, we're not banking on that, and we're not guiding that. We're just kind of expecting a continuation of the same.

And on helium, Jeff, I'd say to you, as you're aware, of course, that our exposure on helium is very different and much smaller than our friends you referred to earlier. So what I'd say to you, the trends I see in helium year-to-date, our helium volumes are flat. We have not seen a decline. And yes, pricing is down high single digit. And that's really just a function of the oversupply in the market, particularly around Asia, and maybe a little bit of cooling off in demand on the electronics side of things.

So our expectation remains that helium supply will be long. You would have seen our recent announcement that we are putting a 3 billion cubic feet helium [ cavern in ], and that really is around making sure that we are optimizing the sourcing end of things, giving ourselves more flexibility with the [ cabin ] to ensure that we have a plan in place that addresses the sourcing cost issues associated with that and creates productivity out of that -- productivity benefit out of that sourcing. So I think, [ Stan ], I think we don't really see a concern. And again, as I've said before, not -- it isn't a significant exposure for us.

And our next question comes from the line of Matthew DeYoe with Bank of America.

Thank you. So I just wanted to dig in on Europe a bit. So I guess, first, if we decelerate again next year, would you still feel the volumes hit your on-site? Or are customers kind of largely at the low end of their commitments?

And then just longer term, right? We have this de-industrialization of Europe. We're probably in the early innings of just chemical plant closures, I would suspect other industrial plant closures. And I know you've got contracts here, right, but there's a merchant, there's package. So let's -- can we just hash out what this looks like across the top line for you as you look out 2 years, 3 years? Is Europe just going to be a minus 2%, minus 5% for you? Or how do you manage what might be [ loss ] of density on closures?

Matt, good question on Europe. And clearly, as you can see, we remain bearish on Europe and it's reflected in our guidance as well. But -- so that is -- that is a view for the short term. I'd say to you, we are both cautious and conservative around our expectations from Europe. I said before in my commentary that I do not see a catalyst for that fundamentally changing in the near term.

Now for the quarter, as you saw, the impact did come through. So the general macro environment that affects the merchant and package side of the business, from various end markets, but in particular, manufacturing and a little bit of chemicals and metals, led to that negative volume decline that we showed, exacerbated of course, by the on-site volume decline that you just mentioned. So that's what kind of came through.

As you know well, on the on-site, the contracts do protect us well. And really, the question I ask every month is for customers who are below and top on those contracts were on [ size ]? Are they paying up, and that is a critical assessment that we make. And you know what, every customer is paying us. So those signals look good.

But the longer term is a question that you're also referring to, and I have been bearish on the long term, but I'm going to give you a couple of perspectives, which are kind of suggesting that you will see some potential change happen.

I'm going to start off by a conversation on Germany. As you are aware, [indiscernible] Germany has made this extraordinary commitment to investing EUR 1 trillion over the next 10 years in defense and build-out of infrastructure. That's a very significant industrial [ stimulus ] the German economy. And while you debate the reasons, the reality is it will have an impact and will uplift [indiscernible] Germany, but also more broadly because supply chains are integrated across a slightly broader Western European region. You will feel that impact come through somewhere else as well.

So while in the short term, we are seeing some of these challenges reflect in the chemical industry, in particular, but the longer-term view, which I think is expected to start showing some initial signals -- sense of initial signals over the next couple of years, both from an increased level of infrastructure spend and defense spend, I think, will be an important part in how we look at the long-term view on Europe.

There's one other thing which I want to just cover off briefly, which is on Eastern Europe. And this relates to conversations around Ukraine rebuilt. Now I recognize we need to take that with a pinch of salt, just given everything that we're reading in the newspapers at the moment. But the reality is at some stage, there will be a resolution of sorts, and that will result in potentially moving the Ukraine rebuild forward. Large numbers being thrown around. I [indiscernible] again, a fairly large pinch of salt.

But we have operated in Ukraine over the last 3 years. We continue to supply steel mills medical facilities, et cetera, with product even today. And we are pretty strongly positioned for any recovery that happens in Ukraine, not just for the Ukrainian business, which might all [indiscernible] on the smaller end. But by the infrastructure and footprint we hold in Eastern Europe broadly, which is a very strong footprint supporting whatever happens in Ukraine.

So those two -- those two developments, I would say, Matt, are going to detail how the longer-term development in Europe is going to look like. And again, we'll have to wait and watch how that plays out. I obviously can say with a high degree of confidence that Germany will go through that recovery in the foreseeable future. Ukraine, we'll have to just see when that happens.

And our next question comes from the line of Mike Sison with Wells Fargo.

Nice quarter. I just wanted to dig into a little space a little bit. The recent agreement to merchant contract, as I recall. So when do you think -- when do you think these will convert into an on-site, and maybe frame up the growth potential since we're sort of in an early phase of the development for that industry?

Sure, Mike. Great question. So I said in my commentary earlier on describing my walk around the [ world ] that I do see space as a very attractive opportunity for growth. And the fact that Linde has been so well positioned, particularly in the U.S. with a history of more than 5 decades of supporting space development and more recently, significant rocket launches. Our two new investments are going to significantly spur that growth momentum.

Now having said that, let me give you a couple of data points just to help you kind of frame the growth potential that you were asking about. So over the last 3 years or so, we've seen our supplies in the space and our revenue generated from that commercial space segment almost [indiscernible]. We today supply, I would say, more than 4 out of 5 launches that happen in the U.S. And the investments we're making in the infrastructure through the air separation plants, the distribution equipment, because much of this liquid is carried in and out using tankers, hydrogen production, related infrastructure, all of those by the end of the next couple 3 years, we would have invested just under $1 billion in building this infrastructure to support the space ecosystem going forward.

I also mentioned that I see not just one, probably the most prominent launch company. I mean [indiscernible] name them, but I know you'll know who they are. We'll have a prolific number of launches. But actually, we're seeing that spread in many other companies in that space now scaling up and looking at future programs as well. So again, I see that opportunity pipeline for growth being very, very attractive.

They have strong customer commitments, Mike. So just to make the point on-site versus merchant, the critical factor here is you have a strong customer commitment, and we have strong long-term customer commitments. It's just a commercial structure that doesn't allow us to classify that. And as you know, we have a very disciplined and rigorous definition of backlog that I spoke to earlier, so we just don't put them in the backlog for that reason. But the customer commitments are there, and they are over a long term.

And our next question comes from the line of John McNulty with BMO Capital Markets.

Nice results in a tough environment. Just wanted to dig a little bit more into the sale of gas project backlog. And in particular, just get some color as to whether you see the return profile of those projects having improved over the last few years as that backlog has built up?

It seems like with one of your competitors maybe focused in other areas, the opportunity set might be higher for you just given there's maybe less competition for that? But I guess, is that a fair way to think about it? Or maybe you can add some color to it?

Sure. The sale of gas backlog in every individual project that sits in there, all 70 of them, John, have gone through the rigorous process of being assessed at our investment committees, against that investment criteria that we set out. And not only do we go through that process with some rigor, and they've met the investment criteria, they obviously get approved and go into the backlog. So the return profile hasn't moved significantly because the risk return equation has to play out based on the investment criteria that we have. So I feel pretty good about the return profile that we have.

But an equally important portion of that return profile is how well do you execute? The point I made earlier on in my prepared remarks around the turnover of the backlog is absolutely critical. For an industrial gas company, it is very important to be able to execute them in a timely manner to have a strong contractual position to ensure that you're monetizing that project and creating a return that were promised, when they were presented at the Investment Committee. And I feel really good about the capabilities that we have within Linde, both on the engineering side. Our team does a phenomenal job over there, and on the gas side, where we do some great contracting and work closely with customers. That's really what's reflected in that return profile, which you then see as we start these projects up, come back and reflect on the EPS growth that we commit out of these decisions that we make. So I feel good about that.

I'll give you one of the data points since you asked about how that competitive kind of environment look. [indiscernible] actually did a really nice study a couple of years ago, which looked back and said, if you think about the competitive dynamics when you're bidding out these projects, about half the time the decision is a make or buy decision. As you know, our customers are sophisticated. They will make a make or buy decision. And of course, if there are projects where we have an interest, we are usually able to get that converted into a sale of gas project because we can show the benefits and the benefits of the reliability [indiscernible] delivery of product coming with the benefit of network density. I think that's a very compelling case for the customers.

But about half of those projects are [indiscernible]. About 1/3 of the projects are where you see one of the competitor in the [ frame ]. And the rest, you see multiple competitors. We tend to be very selective about projects in what's left over. So from our perspective, that hasn't changed. That analysis is still relevant. And I think we obviously have to be have to have a compelling proposition for our customers when they look at it for them to move over.

And our next question comes from the line of Patrick Cunningham with Citigroup.

I'm curious on the electronics outlook for here. It seems year-on-year and sequential growth is down slightly. How much of this is helium pricing, or maybe there was some modest pull forward in positioning in 1Q? And how would you characterize the shape of volume and new project starts for the balance of the year?

Thanks, Patrick. So let me just start off by making sure that this is understood well. The industrial gases sales to the electronics end market grew both year-on-year and sequentially. The drop that you see in the end market slide that we have in the tech is all driven by our Advanced Materials business that sits in the global Other segment, which provides electronics targets to some of these electronics customers. The instance over here was destocking happening with one of the larger customers, and that's going to correct itself in the second half. So really no concerns there.

Just to clarify what the Advanced Materials group is doing over here. So essentially, the Advanced Materials group develops and builds, manufactures, precious metal targets, which are used in the chip making process to deposit a [indiscernible] film of materials onto the semiconductor wafers. So the process about sputtering, what happens is we provide high energy particles bombarding the target that's been set up. And what it does is it checks these atoms to then provide a coating, a very thin level of coating on the wafer, forming layers for components like transistors, interconnects, et cetera. All of this is about putting very precise material deposition on the integrated circuitry. And that's what sits in that Advanced Materials business, which is the reason why you see that slightly negative.

Now as far as electronics outlook is concerned, my expectation remains that we have a very healthy -- not expectation. The fact remains that we have a healthy pipeline of projects that are going to come up in the next 12 months or so, and we will obviously be participating. And as you would expect from Linde, [ be ] winning more than our fair share of those projects. The outlook for both new projects as well as startups remains on track with the backlog that we've just shown you.

And our next question comes from the line of John Roberts with Mizuho.

The Economist Magazine this week has a story on what's called [ green bushing ]. So your backlog, you said it's going to grow. The point of the story was that companies are still going forward with their energy transition investments. They just don't talk about it as much. It's not making the headline.

So 2 or 3 years from now, do you think energy transition will be still as big a percentage of your backlog? Or based on what you're currently talking to customers about, are they actually pulling away? Because we don't hear a lot of companies talking about their energy transition programs anymore?

John, we recognize that customers will continue to need to decarbonize our operations. I expect the demand for low-carbon products to continue to grow over time. It's just a hype and the euphoria has gone away and reality is [indiscernible] and that reality is a more stable, economically viable set of projects, which will go to FID and get contracted. Those are the kinds of products [indiscernible] at the risk of saying I told you so we've said this for the last, I don't know, 3 years. None of this should come as a surprise to you or anyone else who has been on these earnings calls because we've said, look, it's unrealistic to expect this green hydrogen to get up to a point where it's at scale, it's cost competitive and it actually adds and creates value. We've always said that, that's probably a 5- to 7-year window for the technology to mature, and then you will see the commercials play out.

So I'm not surprised by this article. The reality is low-carbon alternatives, which is low carbon hydrogen, otherwise known as blue hydrogen, or low-carbon pneumonia, or products of that [indiscernible] will still have a demand in the marketplace, and we see solid projects with good economic cases supported further by incentives such as the 45Q remain around. And we are developing a number of those even today why we execute a number of those around the world as well.

So my view is, I think this trend is not going to stop. There is an increasingly an economic case for it. So good projects, which create that economic value will still see progress and move to FID and get contracted.

And our next question comes from the line of Josh Spector with UBS.

I wanted to ask just coming back to the guidance assumptions around things. Linde's approach has been -- we're seeing the market like [ X ] and we're forecasting [ X ]. It seems like in this case, we're seeing the volumes down 1%, and now your forecast is maybe at the midpoint, down 2%, something like that.

So I'd just be curious, obviously, it's a weak market, no one is expecting anything incredibly exciting here. But are you seeing anything either in June, July trends, I would say you that there is weakening, and that's more of a correct way to think about it? Or is this just added conservatism for everything we don't know about FX included?

Josh, it's Matt. So I think we'll start with the volumes, to your point, they're down 1% in the quarter, but the base volumes are down 2%. So when we think about sort of our economic projection, we're really talking to the base volumes because the backlog is pretty much on autopilot, right? That's contractual. So that is independent of any macro view.

So starting with the minus 2% on the base volumes that occurred this quarter. To your point, the current guide on the top end is assuming that 2% year-over-year continues out for the back half. Now while the year-on-year assumption in the top half is being held consistent last year, the comps got a little easier. So it does imply the worsening on a sequential basis. We'll see if that happens.

When I think about it in combination, clearly, FX rates improved meaning the dollar weakened, given the uncertainty, given some of the flight to different currencies. So it isn't related. And so I think from this perspective, maybe you see [ current ]. Maybe see the dollar strengthen a bit, things stabilize, maybe you see the opposite. But at this point, I think about them in combination. And we'll have to see how it plays out.

But the top end pretty much has about a 2% base volume negative assumption, which is probably double the effect on EPS for the remainder of the year. And we're going to do what we can to do better than that. But that's what we laid out. This is what we set down, and we'll have to see how it plays out.

And our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Matt, what impact, if any, does the passage of the [ one ] Big Beautiful Bill Act have maybe internally for Linde, or I appreciate any thoughts you may have on any early feedback from your customer base as to potential stimulus in the Americas?

And just wondering if it has any meaningful impact at all on your '25 guide? Or how you're thinking conceptually about the '26 outlook?

Sure. So I think when we start thinking about the bill, and I'll stick mostly to the taxes right now. What it mainly did was make permanent a lot of the existing tax policy that we were operating under since the 2017 act. And that in and of itself, I think, is positive and that it gives more confidence looking ahead.

When you think about the U.S. tax policy, it had a lot of temporary items. And those temporary items can be difficult to do long-term planning, and long-term investments in the country because of the uncertainty, whether those temporary items will continue or not. And with the passage of the bill, it made many of these things permanent. And I think that [indiscernible] of itself is good.

Now when you look at kind of breaking it down for us, on an ETR basis, I'm not expecting much impact. Again, our current run rate had in it primarily the 2017 effect, and this just extends and makes that permanent. So if anything, if this didn't pass, I would have expected a worse ETR. But given it is not, I expect no change.

On the cash tax front, this will be net beneficial. And the primary driver is the reinstatement of the bonus depreciation. You may recall that was something that was part of the 2017 act. However, it phased out and essentially has been gone for probably a little over a year, with both the reinstatement of that and the retroactive nature back to January this year will give cash tax benefits to companies that make large capital investments into the country of which we will benefit from the -- especially given the vast majority of our backlog right now has U.S. exposure.

And what that also will do is make IRRs on projects better. We saw the same effect in 2017. How much the IRR improves? It's a function of a couple of different things. But I'd say, on average, you'd probably see -- you can see almost 100 basis point improvement. So anyone making long-term investments in the country now will get a tailwind from the accelerated depreciation. [indiscernible] get more confidence from making permanent a lot of the tax policy. And I think all in all, that will be a positive development.

Now aside from income taxes, clearly, 45Q was enhanced a bit. We view that as positive. That's something that, as Sanjiv mentioned, is the I'd say the primary incentive that was being looked at for a lot of the blue projects. And by making that even more attractive, I think that will further help any views to use that.

So for us, we view it as a net-net positive. I would say, for anyone constructing in the country would view it as positive for capital intensity. And any type of low-carbon products, especially with a hydrocarbon base would view it as positive. So that's kind of how I would summarize it.

And our next question comes from the line of James Hooper with Bernstein.

I wanted to go back to Europe and a little bit about the energy transition there. Clearly, your backlog is a very small percentage European. And we've seen some of your competitors winning low carbon hydrogen projects. We've seen it since you last reported, we've seen the action plan and the start of a plan to make a plan, if you will.

Do you see this being more of an opportunity for your backlog going forward? And has this made you any more positive on [indiscernible] energy transition in the region?

James, I will say that there is a measured level of pragmatism in Europe today around the energy transition and the goals. Remember, however, the people that we are speaking to and primarily in this instance, the German government, the new government that's come in and giving them a sense of how we think about this regulatory framework that's in place. There is, of course, all of Brussels to still contend with. But there is a higher degree of pragmatism. There is clearly a move towards getting a bit more practical around some of the target setting, et cetera.

So yes, I do see that as potentially having a beneficial impact on energy transition projects, which would have an economic basis, and which would support a cost-effective decarbonization program for Europe. But there is a -- in Europe, most things will take time, and this will be no exception to that. So while I appreciate the pragmatism I'm seeing, I still expect that it's going to take as long as it takes for them to actually enact whatever bills are needed to get to a point where you get cost competitive hydrogen in those countries to support the decarbonization effort.

And our final question comes from the line of Chris Parkinson with Wolfe Research.

Sanjiv, you actually just hit on this a little bit, but behind everything else that's on in Europe on kind of the clean energy side, there's also been a lot of debate amongst the [ EU 27 ] states regarding just improving efficiencies, protecting the chemical industry. Obviously, a lot of your core customers have been actively involved in the discussions.

Could you potentially -- and there's been a lot of news even in the last 3 weeks or so. Could you just give us a little insight on how integral you are to those conversations? How the Linde platform could perhaps help along in terms of basically setting some guardrails?

And then also in terms of just the potential for greater infrastructure growth spend towards the end of the decade? I mean, is it wrong to think about Europe slightly differently these days? Or is it still essentially the status quo over the longer term?

So Chris, I kind of tried to describe this earlier, I'll say to you, let me deal with the infrastructure project first because that really is somewhat fundamental to any industrial recovery that's going to happen in Europe. And I think when I talk about infrastructure, I'm including defense is part of that.

Germany's commitment to EUR 1 trillion, I think, is clearly a very significant milestone for Germany as a country for the balance sheet and the ability to kind of finance that kind of spend. So in many ways that spending is certainly going to change our perspective -- has changed our perspective on how we think about the recovery -- industrial recovery in Europe longer term. That's a 10-year program. I manage people's expectations by telling them that look, for any procurement process to come in place, to handle that kind of spend, and for infrastructure projects, that is the need for permitting, et cetera, which across Europe generally, and Germany specifically, all take time. So don't expect any exciting announcements in the next couple of years.

Maybe the back end of next year, you will start seeing some of those early projects announced. But really, most of that allocation, you should expect in the following year beyond that. So it's going to take some time, but the longer-term view around the European economy and industrial activity, is benefiting from these commitments that have been made. Obviously, Germany has made that very significant and specific commitment. Other countries have now signed up to this 5% spend for NATO. Some of that is infrastructure, 1.5% and 3.5% is defense. All of that's going to drive some level of industrial activity. So absolutely right in saying that the perspective on Europe has changed a little bit.

I'm still cautious when I look at that, and we have to see this play out and get enacted and then transacted before I would tell you with confidence in the next year, I would see this kind of growth. But for now, I think the -- directionally, it's headed in the right direction.

And your earlier commentary on Linde's position in most of the serious conversations that happen in Europe particularly given our position in Germany. We are both consulted and part of many groups that are working to ensure that the real challenges that industry in Europe broadly faces because most of them being customers of ours is being adequately communicated to those who are making these decisions.

And that concludes our question-and-answer session. I would now like to turn the call back to Juan Pelaez for any additional or closing remarks.

Thank you, [ Abby ], and thank you, everyone, for participating in today's call. Have a safe day.

And ladies and gentlemen, once again, this concludes today's call, and we thank you for your participation. You may now disconnect.