Air Products and Chemicals, Inc. (APD) Earnings Call Transcript & Summary

Welcome, everyone, to our 2021 Chemicals Innovation Conference. My name is Kevin McCarthy, and I cover the chemicals sector here at Vertical Research Partners, along with my associate, Cory Murphy. We're very pleased to welcome Air Products as our first presenting company of the day. Before I introduce our speaker, though, I want to mention that we've prepared a number of questions to kick off the dialogue, but listeners will also have the ability to ask questions. So if you do have a question, please type it into the portal at any time, and we'll try to prioritize those as they come in. With that, I'd like to welcome Scott Crocco, Chief Financial Officer; as well as Simon Moore, who directs the firm's Investor Relations, corporate relations and sustainability efforts. Thank you both for coming. We know you have many options in terms of events. So we appreciate you sharing the time with us today. Great to see you both. So without further ado, what we'll do is I'll turn it over to Scott who will make some opening remarks for about 5 minutes, and then we'll proceed with the Q&A. Scott?

Thank you, Kevin. I really appreciate you and the team having us here today. It's a pleasure, and I want to say hello to everybody on the webcast. So just as Kevin mentioned, just like to make a few remarks here before we get into the fireside chat. First, you all know Air Products very well, right? We're a top-tier industrial gas company, operations all around the world. And you know the industrial gas industry, which is a great industry, and it always will be a great industry. But from a growth perspective, industrial gas base business growth is always going to be in line with industrial production. Maybe there's some emerging markets that it's a little bit higher, but by and large, industrial gas business is going to grow, I don't know, 2% to 3%, whatever the industrial production is. The other way that the industry or the players in the industry have grown historically has been through M&A, most recently with the merger between Linde and Praxair. And so when you look at the growth opportunities, they're not inspiring under the base business. So what we've done, and really what Seifi Ghasemi has done under his leadership, the company has transformed itself into the area of energy, with 3 major platforms, gasification, carbon capture and hydrogen. Now each of these plays right into our core capabilities, engineering and operations. And we have leadership positions in all 3 of them. And I'm sure as we go through the Q&A, we'll talk more about what those leadership positions are and some of those opportunities and so forth. But just wanted to articulate that, that has been the transformation of the company. And now with that, we're looking to grow earnings per share 10% or greater per year on a compound annual growth rate. And we've done that, and we see the opportunities to continue to do this going forward, again, particularly driven by gasification, carbon capture and hydrogen. And not only are those pillars our growth strategy and our business strategy, it's our sustainability strategy, one and the same. We don't have, what's your growth strategy and now let's come over here and talk about sustainability. They are one and the same, and we're focused on executing that. And as I mentioned, we have leadership positions, and we have the capabilities to take advantage of these opportunities in front of us. We have the organization, we have the capability, we have the balance sheet, we see the opportunities. And so now it comes to execution. So again, I just wanted to kind of leave you with the message right out of the gates that the company has transformed itself and is well positioned through our growth, business and sustainability strategy to grow into the future based off of our strengths in these 3 pillars: gasification, carbon capture and hydrogen. So with that, I'll turn it back to you, Kevin, and we can jump into Q&A.

Great. Scott, that's perfect. I appreciate you laying the foundation and certainly would like to touch on all 3 of the areas that you mentioned, hydrogen, gasification and carbon capture. Maybe to start off on the hydrogen side, Scott. If we look at the landscape today, I think 94% or so of your hydrogen sales today are, of course, the traditional gray hydrogen. And you've got a leadership position in blue hydrogen. And of course, green hydrogen is really just starting out, and you're making some important investments there that we can talk about. But if I think about it in those 3 buckets, kind of gray, blue and green, how do you see each of those markets developing over the next 5 to 10 years? And would your answer be much different if we think about the world on a regional basis?

Good question. Thanks for that. So from Air Products perspective, we see opportunities going forward in each: the gray hydrogen, the blue hydrogen and the green hydrogen. And we want to be in a position to be able to supply to the customers whatever they -- whatever color they need, whatever color they want. And as you mentioned, we're positioned to do so in each of the 3 areas. Let me just maybe expand on that a little bit. So gray hydrogen is the traditional feedstock of natural gas. We are the world leader in that. We've been doing that for decades, and we are well positioned going forward in that area. Blue hydrogen, as we know, is -- has the carbon capture. And on that one, we are operating, and have been for the last several years, the largest carbon capture facility down in Port Arthur, Texas, capturing 1 million tons per year of CO2, which ultimately then goes into enhanced oil recovery. And so we're well positioned to continue to take advantage of opportunities there. We have SMRs all around the world. And then thirdly, the green hydrogen, and we see lots of opportunities there. And let me just spend a minute, I'll talk a little bit about the supply side and then the demand side on the green, if I could. So green hydrogen being the zero-carbon hydrogen. And what we've done in the NEOM opportunity is we took a step back and looked at the characteristics that are required for a project like this that has scale, substantial size of green hydrogen. In order to do that, you need a place that is sunny during the day, windy at night, have to have large tracts of land, have to have an amenable government, need to have water. So all of those elements come together in NEOM. And so that's from a supply side, that's what we're doing, and we're executing that project. We can talk further about that. And then, of course, then that can be then distributed all around the globe and to the point of use. We'll distribute it as green ammonia, but will dissociate it and then be used as hydrogen. So in terms of then the different geographies, what's really going to drive the demand on these different geographies is government policies as well as economics, but the government policies and how does that play out? And what we're seeing right now is from a blue hydrogen perspective, interest in the U.S., interest in Europe; and, from a green hydrogen perspective, interest everywhere around the globe, including Europe, there's a lot of interest in green hydrogen in Europe. And so we see lots of opportunities across all spans of the hydrogen, and we're positioned to take advantage of each.

Great. Maybe to follow up on your large project in Saudi Arabia, NEOM. Last I heard, I think you were ordering some equipments, proceeding along. If you take off your CFO hat for a moment, Scott, and put on the project management hat, what are some of the key milestones ahead for that project? And from a return on capital point of view, what do you think are some of the key levers, risks and opportunities that could be swing factors as you execute against plan over the next several years?

Yes. Thanks for the question, Kevin. And by the way, you remind me, so CFO now, Air Products almost 31 years, CFO for 8 years. There was a time I'm actually an engineer, and I used to be a project guy way back. And so you bring me back fond memories. As you mentioned, the project is progressing very well. The engineering continues. We've ordered long lead time items. And there's -- based off of travel restrictions, there's perhaps going to be a groundbreaking ceremony later in the year there. So that project is progressing very well. In terms of the project itself and different elements and opportunities, I think about the production joint venture, which we are a 1/3 owner. That has a secure on-site type of characteristics in terms of the profile of that project. And then we are the sole off-taker of that green ammonia. And that's where the upside is, right, owning and managing the full supply chain all the way to the end point-of-use, is where we really see the opportunities to drive value going forward.

And so maybe just to dovetail into the commercial side a little bit, Scott. It's early days still, but I imagine you're starting to have or have already had a lot of conversations with prospective customers. At what point would you start to put contracts into place? What do you think a contractual paradigm could look like? And would it be written around the green ammonia or the hydrogen equivalent? And how would those terms shape up relative to your current hydrogen business, for example?

Yes. Thanks. Another good question. So our strategy is to sign up long-term contracts supplying carbon-free hydrogen, right? So the long-term contracts for the hydrogen. And I'll tell you, there's a lot of interest. There's a lot of activity that's going on. We don't want to get into disclosing the specifics of any contracts and all that. But suffice to say, there is a lot of interest. And I could imagine that bus fleet managers, when they're looking to contract the supply, they want to make sure that the supply is secure. And so back to the long-term nature of the contracts that we'd be looking to sign up.

And then just to shift gears, I wanted to touch on blue hydrogen. You mentioned in your prepared remarks, you already have a sizable presence in blue sequestering, I think, 1 million tons a year at Port Arthur, Texas for EOR, enhanced oil recovery. Is that something that you could replicate? Or how do you see the blue hydrogen opportunity evolving in the U.S.? And does it make sense for other parts of the world as well.

Yes. So we do. We see opportunities in the U.S. for blue hydrogen. We see opportunities in Europe. And as you've mentioned, we've been operating, I think it was 2013 or so, the Port Arthur facility. So we've got a lot of experience there. As I mentioned before, one of the big drivers will be various government policies and so forth and the various interests of the government. One thing that will be a consideration on these various opportunities is what to do with the captured CO2, right? And you had mentioned around enhanced oil recovery, which is what is being done with CO2 capture down in Port Arthur. There's also the sequestration. And the sequestration is going to be driven by the pore space. And so where is it that's being captured and what's the geology in that location if the objective is to sequestrate. So that's going to be one of the considerations as these opportunities continue to develop.

I want to talk a little bit about China. It sounds like China has got a serious interest in green hydrogen as best we can tell. On the other hand, they've got, and you've got a number of different coal gasification projects there that were one of the 3 pillars that you outlined at the top of the conversation. And so if we think about those 2 routes to hydrogen, gasification versus development of a nascent green hydrogen market, what are your thoughts as to how China will strike a balance there? And I would imagine you're ready, willing, able to participate either way, but how do you see that market evolving?

Yes. We see a lot of opportunity in China, both from a gasification perspective and from a hydrogen perspective. And I'll look to the latest 5-year plan that came out, I think it was the 14th 5-year plan that came out just in the spring. And both gasification and hydrogen are key components included in the 5-year plan and supported by the government. Gasification as an environmentally friendly use of coal and hydrogen, whether it's for transportation or industry. And I'd tell you, lots of interest in both, particularly in hydrogen with the team over there. The level of interest from a variety of different governments and otherwise in China around hydrogen is just phenomenal. And we are positioned -- as the world leader in hydrogen, we're positioned to take advantage of those opportunities just as we are with the gasification opportunities.

And just to follow-up on that. What do you think the competitive landscape could be like down the road, 5, 10 years in the green hydrogen space? Are there, I don't know, major energy companies or smaller gas or alternative energy companies that you would foresee entering the space? Or are the barriers too formidable? What do you think that landscape looks like moving forward in China and maybe elsewhere?

Yes. And just in general, I mean, as you know, there's lots of discussion, there's various announcements and so forth. From our perspective, first of all, the first-mover advantage is tremendous, right? And what we're doing and what we've done in NEOM as the first mover is absolutely phenomenal. The other thing that we strongly believe is in order to get the scale, you need to go to locations that have these various characteristics like I described, right? It's got to be sunny during the day. It's got to be windy at night in order to get that continuous operation. It's got to have large tracks of land, you have to have amenable government and water and so forth. And so we've got that in NEOM. And that's the way that we view the -- this opportunity as opposed to these smaller regional sort of announcements, I'll put it that way. But if you -- if in the end, if you're looking to put a facility in a part of the world that is not sunny often during the day, it's not windy at night, there's not that much land, if you don't have those characters, you can have those announcements, but then what's the practical reality of those things being built and the competitiveness of that. So we think there will be -- there's a lot of attention to that, both from a demand perspective as well as a supply perspective. And frankly, it's from -- and credit to Seifi and his leadership in building this NEOM project together as the first mover. Up until the announcement last summer, it was kind of a hypothetical. On the scale that we're talking about for green hydrogen is hypothetical. And then Air Products moved forward and announced it, and we're executing it. Now it becomes reality. So various governments and other organizations can say, well, this is going to be there. And so now let's make plans now for that 2025 when the green hydrogen is there and not just talking about it. So that first-mover advantage is very important. There will be other competitors, folks who'll come on the scene, but we've got, I don't know, 5-year head start on players like that. So really feel good about our position.

It's a good point. You certainly put an important stake in the ground with a $7 billion project there. So I appreciate that. One of the things that you've talked about as it relates to the current hydrogen businesses is the opportunity for some of your refining customers to convert over to renewable fuels. And I think you've commented in the past that, that conversion could require 4 to 5x the amount of hydrogen, which I think is quite interesting. So California seems early here. Do you expect other states to kind of follow? And should we see more and more of these refinery conversions over time? And as that happens, do you think it will be a needle mover for the existing gray hydrogen business?

Yes. So just appreciate the point. I'll just clarify one thing. There's been a few refineries that have gone through or going through kind of the reconfiguration for the renewable fuels. And on a hydrogen intensity basis, the process would be 4 to 5x more hydrogen intensive. The actual hydrogen demand will be dependent on the capacity of the facility, right? And so there's been -- there's some of that going on. There's a lot of talk of other reconfigurations and exactly how many happen and when they happen to be determined. There are opportunities, I just don't want to misrepresent it. And as you point out, California has done some things. And then what are the other states going to do as well to further increase the demand for this? So it's another opportunity that we have. And again, very, very well positioned to take advantage of those opportunities.

Okay. A question for you on the financial side, Scott. You've had a strong balance sheet, continue to enjoy some excess capital. I think you're levered maybe half a turn of EBITDA as of your last quarterly report. And obviously, you're generating cash as you go. So based on the project potential that you foresee to fund gasification, hydrogen, all the rest, do you think there'll come a point where the leverage will kind of normalize or escalate? What would you consider proper steady state balance sheet for the company? So maybe kind of some thoughts on level and timing there?

On timing. Sure. So first, very important to us. We are committed to our A rating, right? And then ultimately, the rating agencies will decide exactly what different metrics determine that A rating, but we are committed to that. We speak with them, both Moody's and S&P, regularly, right? They are insiders, and we share with them not only the status of the current projects, but what are the future projects as well. So very importantly, we're committed to the A. And then on a gross debt-to-EBITDA basis, round numbers, let's call it, like a 3x debt to EBITDA. And as you pointed out, we're currently on a net debt basis, we're about 0.5 turn. On a gross debt basis, we're a little bit over 2, right? So we've got -- we have additional capacity from leverage. We also have $6 billion of cash on the balance sheet, largely the product of, it's just about a year ago that we raised $5 billion of 2% money fixed and all that. So we have the cash. In addition to additional leverage capability, we have the cash to deploy. And we would see with those opportunities, we will -- I would expect to get to that kind of fully levered. By the way, it's important to point out that right now, 3, as you know very well, they're rating agencies, it's not just one number, right? There's a variety of things that they look at. And we're also doing kind of the shorthand here at 3x. We also talk with them regularly around what are the opportunities, where are the opportunities, what's the nature of the risk. And as we deploy the capital, depending on the types of investments we have, it could potentially increase the level of leverage that they'd be willing to give us and still maintain the A. If I go back to when Seifi first came in and we were making adjustments to the portfolio, recall, we spun off our Electronics Materials business, became known as Versum, and then they went public. And then we also sold our chemicals business, PMD. When we did that, the security of our cash flows increased because both of those businesses were more commodity. And the rating agencies acknowledge that with the change in the portfolio, the leverageability goes up. So we'll also see how we deploy this capital and potentially, we could take it higher. But that would be once it's deployed and through conversations with the rating agencies. But again, importantly, that we're committed to the A. The other thing in terms of the timing, too, is these are big projects and so that ebbs and flows. And the nature of the project will also determine the timing. Meaning, like IGCC is a -- it's an asset purchase. So you write a check, and you immediately get the inflows. So you get EBITDA in that can then be leveraged. PBF was an asset purchase that we did about a year ago, right? So we ended up writing a check, but we immediately get that EBITDA, which then can be further leveraged. That compares to, if it's kind of the traditional organic spending, where you might have a 3- or 4-year WIP spending curve, 5-year WIPs, it's all outflow, and you don't get the EBITDA until years out in the future. So those are all the various dynamics that will be at play as we determine when we're fully leveraged. And again, there are active regular discussions with the rating agencies and explain to them what the cadence of this is going forward. But important point, we see a lot of opportunities. We're well positioned for them. And we have the balance sheet, whether it's existing cash or additional leverage capabilities to pursue them.

Yes. That's a great point. I don't want to spend too much time on the balance sheet, but I'm tempted to follow up and ask you, Scott, if the rating agencies give your credit for your mix of mode of distribution. I think in Asia, for example, you're 60% plus on-site. And North America, I think it's 40%, 45%. And those numbers are going to be moving higher, right, as you execute against the existing project pipeline. So does that create more stability and reliability of cash flow that would support more leverage in the future in the eyes of the rating agencies?

Absolutely, it does. And as you point out, right, our portfolio is predominantly in the on-site business. It compares to our peers that are much less. And as we've deployed capital under Seifi's leadership, it's been heavily in that on-site model. And again, if I go back to, I think it was like 2016 or so when we spun the Versum, it was the absence of that element of the business, which was more commodity driven, it wasn't long-term take-or-pay contracts, that as our portfolio shifted and eliminated that element, our ability to increase the leverage increased because the remaining portfolio had more stability, more security. And then we've continued to invest predominantly in the on-site model, which, again, translates into more security, which means more leverageability. And again, we've got great relationships with the rating agencies. And I'll say it my way, they understand what we're trying to do. They understand our growth strategy. But it's, "So I hear what you said, let me see what you do, right? And so just go and do it." And then we'll -- but we continue to talk along the journey.

Yes, sounds reasonable. We have a question coming in from the portal, Scott, and it goes as follows: You mentioned strong interest in Europe for blue and green hydrogen. Can you talk about the blue hydrogen market there today? What about the regulatory environment in Europe, is more supportive of future growth there, I guess, in blue and green?

Yes. So first on -- so thanks for the question. There are certain areas even inside of Europe, but I won't get into specific countries, but certain ones are kind of mandating, hey, we want green. And -- but unfortunately, certain parts of the world don't have sunshine all the time during the day and don't have wind at night. And so what's developing then is a need for, frankly, imports. I mean I could imagine that governments want to have it made indigenously. But again, if it's looking for green, then -- and you don't have the elements required in order to produce green on any sort of reliable scale, then those that are the types of things that are being developed now. From a blue perspective, again, there's lots of interest, and we're looking at. The element around that is, is it -- what do you do with the captured CO2. And so part of the challenge is just identifying areas where there are either it is for enhanced oil recovery or is the geology appropriate for the pore space for sequestration. Those are that we've got opportunities in Europe that folks are interested in, and we're looking at.

Great. Just to switch gears and move beyond hydrogen for a moment. Want to talk another light gas, helium. It's been a very strong market, I think, for you and others that participate there. We have the Amur project in Russia on our radar screen. I'm sure you're tracking that as well. What are your thoughts on the helium market over the next couple of years, I guess, both from a demand-side, as presumably, we'll start to see ongoing recovery in demand for helium, but then also the supply side with this new project in Siberia coming and ramping? What does the timing look like there? And what do you think could happen to prices over the next few years?

Good. As you know, Air Products is the leader in the helium supply. From a demand perspective, we absolutely see, that once we get on the other side of COVID, a recovery as well as continued growth in demand for helium, whether that's in electronics, space, medical, et cetera. So we see continued growth there. From a supply side, as you mentioned, one of the big questions right now is that Russian project. When does it come on stream? Is it later here in '21, '22 or '23, so that both the timing of when it comes on and then at what rates as it ramps up? So we're watching that, and we'll see how that plays out. I don't know exactly what will happen there. From a pricing perspective, frankly, I would just rather not speculate on pricing at all, if you'd allow me to pass on that.

Fair enough. Fair enough. We've talked about NEOM. Your other very large project is, of course, Jazan in Saudi Arabia. And I thought some of the commentary coming out of your earnings call was constructive. It sounds like you're working through financing today. What are the last boxes that you need to check on Jazan? And is that plant running at all? Is it ready to run? And it sounds like you can kind of hit the ground from an economic perspective really on day 1 after closing the deal. So what would you say is the latest update on Jazan?

Yes. Thanks for that. And what I -- I don't want to get into kind of doing interim updates on a weekly basis or whatever. And so on this one, I'll just -- I'll reiterate what Seifi said on the call just a couple of weeks ago from our earnings call. And that is that we have made significant progress on the project, working very, very constructively with our partners as well as the lenders and trying to work through all of the various details that come with any project financing. And that barring any unforeseen circumstances, we'd expect the financial close in this fiscal year. And then as you point out, is the nature of this is once we do close, there will be immediately a contribution. As I mentioned earlier, on the nature of the spending, there'll be an outflow, but then there'll be an immediate contribution to earnings once we close.

Okay. What about the project pipeline in general, Scott? I mean from my vantage point as an analyst that follows the broader chemical industry, it seems like purse strings are loosening. We're certainly seeing M&A pick up. But from a capital expenditure point of view, it feels like companies are a little bit more willing to reinvest at this point. What do you see among your customers? Do you think that the project pipeline is likely to grow in dollar value over the next few years? What are your thoughts on the broader capital cycle there?

Yes. So we -- yes, we expect to see continued increase in the opportunities. I will say maybe unlike some other companies, we didn't see any trough or decline during COVID at all through this whole cycle. We continued to see opportunities and increasing opportunities. And part of that is evidenced by the PBF acquisition that we did a year ago, the Indonesia announcement, the NEOM announcement, I think that was last July. And so right through all -- as well as, frankly, we continue to see the base organic opportunities in electronics and otherwise. And so going forward, we continue to see those opportunities at an increasing rate, too, right? It's in all fronts, including the gasification and the blue and the green. And like we talked about, we've got the balance sheet, whether it's the cash or the additional leverageability staying within the A and the positions in each of them, the gasification, the technology is there, the expertise in carbon capture, and then, of course, the NEOM project that's being executed now.

You mentioned PBF a couple of times, Scott. And for maybe some of our listeners who aren't as familiar, that was a decap deal, decaptivation deal, whereby you're acquiring existing assets rather than building new ones. Are you pleased with the deal? And do you see more opportunities like that out there at this point? Or based on the world shaping up and improving, recovering here, is there a less sense of urgency among some of the counterparties to raise capital? How would you characterize that?

So in terms of the PBF deal, yes, we're very pleased with that, very pleased with the transaction. So thanks for asking. In terms of decap, and I mentioned, reiterated that the IGCC is a decap, right? Every opportunity that's out there, we are looking at it. And there are opportunities. However, a lot of times, those are very difficult to complete. And Seifi often talks about this, right? He can go to his counterpart at a different company, the Chairman, the CEO and say, hey, from a strategic basis, this makes all the sense in the world. Air Products, this is what we do, we know how to do it. We have the operating expertise, and so we can come in there, and we can keep that facility running at a higher percentage, which means keep the customers supplied more, which means they can make more product. And so it makes all the sense in the world. They can focus on what they do, and we focus on what we do. Plant goes down, they have to take a long extended outage. Plant goes down, if we own it, we've got the -- first of all, it's going to go down less because of our expertise. If it does go down, we can fly in the spare parts and all that sort of stuff. So it makes all the sense in the world. But then when we get down to the operating level, somebody that's lived and breathed blood, sweat and tears these assets, wait a minute, somebody else is coming in and they're saying they can do it better than me and all that sort of stuff. So often, what makes all the sense from a strategic perspective, getting it done further down in the organization is more difficult. So -- but we're looking at all of them. And we'll see if we have any more that play out.

I guess elsewhere, on the subject of capital allocation, M&A activity seems to be picking up. Obviously, the industrial gas industry is pretty well consolidated today. One of, I think, real positive investment characteristics. But it's not 100% consolidated, right? And so you've got a number of joint ventures. Maybe there are interesting, small and mid-sized companies out there. Are you seeing activity pick up from your vantage point? Or should we just think about external growth as just a much lower priority or lower potential compared to the large projects that you're working on?

Right. In terms of the scale of the impact, there are small regional kind of plug-in opportunities. And we've done some in Europe, for example. But -- and they're good, right? They're just natural extensions, and we get them quickly integrated and all that. But in terms of big and impactful, it's not going to move the needle. It's going to be helpful to that particular geography. And then from kind of the joint ventures, right, we've got a great set of joint ventures, particularly our INOX joint venture in India, we've got Sapio joint venture in Italy and then the Infra joint venture in Mexico. Each of those, very, very well-run organizations. I don't see those as being something that we would buy up into a controlling position anytime soon. So I don't really think that's imminent. So in terms of the small regional things, they're out there. We're looking at them. We've done some, and we'll continue to do some. But in terms of moving the needle, they won't move the needle. And again, to reiterate what I mentioned at the beginning. In terms of the base opportunities, we continue to see the base industrial gas opportunities, and we're winning those. But in terms of the real growth and the exciting growth and that's going to drive that earnings per share 10% or more, that's the 3 pillars of our growth platform that I spoke of earlier.

Okay. And a question for you on leadership, I guess, at Air Products, but also more broadly. I mean Air Products elevated Samir Serhan to Chief Operating Officer about a year ago, I think it was May 2020. One of your competitors made a similar move in October of 2020. So my question would be, do you think we'll see a new wave of leadership at Air Products and/or the industry over the next year or 2? And if so, what that -- what might that mean in terms of strategy and industry trends in your view.

Sure. So first, I won't comment on the competition, but I'll comment on Air Products. And as Seifi has told investors now since he's come, he is committed to Air Products for the long term. And often, he says, hey, there's only 2 ways that he's going to leave Air Products. And that's either to be fired or he goes out horizontally, right? And frankly, he's not on this call. I don't know if he watches or not, but just somehow as time goes on, that guy gets more energy, as time goes on. I don't know how he does. But we've got a great leadership team. Dr. Serhan is doing a terrific job. And in terms of the strategy, right, the strategy from the top, Seifi and the Board all the way through the management team understands it and there's focus on executing.

Maybe in the final minutes, we have, Scott, I wanted to give you an opportunity to talk a little bit about ESG. In your 2020 report, I think you talked about more than $100 million in cumulative energy and water cost savings. Maybe you can kind of talk through how you're able to do that. And looking ahead, what are the important goals and savings we should look forward to?

Yes. Thanks for that. And I'll address your question. And then if I could, I would like to just expand a little bit about the broader sustainability and ESG. So first, on your question around the energy and the water and all that, that's driven by plant efficiencies and the productivity. And we're always focused on that, and we have been and we'll continue to drive those improvements. That's from SMRs and our ASUs. So that's the source of it, and it's just driving efficiencies and productivity. If I step back, though, and I expand to more broadly to sustainability and ESG. Sustainability and the environmental piece is core to our values. It's what Air Products does in terms of helping provide the world with cleaner energy and helping our customers be more sustainable. And that is a core value to the company. And so we talked about the environment, which is very important. We talked about that a lot. But just I'd like to make a comment or 2 on the social and the governance piece. You might recall last summer when we rolled out our targets, yes, there was a CO2 intensity target. There were also targets around diversity. It's very clearly stated, Air Products is interested in being the safest, most diverse and most profitable industrial gas company in the world. It's very important for us to have an environment where people want to come to work because they're valued, inclusive, respected and treated with the dignity that everybody deserves and to work in an environment that is ethical and, frankly, very well run, if I bridge over to the governance side. We've got a world-class Board that demands, and now back to the CFO role, right, a well-controlled, well-governanced organization that embraces people and creates an environment which is inclusive to do things for the greater good, right? This is the higher purpose. And it's -- yes, absolutely. When we're growing the organization and building the capabilities to execute our growth strategy going forward, this is something that really is important as part of the recruiting, and we've seen that. It's important to the existing employees, our current employees and being part of something bigger than yourself and being part of an organization that treats people with respect and is well governed and helps the environment and helps customers improve the environment. That's our higher purpose. That's what we're focused on. And frankly, that -- as Seifi often talks about, that's what creates this competitive advantage. The only real sustainable competitive advantage is the commitment and motivation of the organization. And that's how we create that.

Perfect. I appreciate the thoughtful and more comprehensive answer very much. And I think that's a great note to end on, Scott. I wish we had more time, I feel like we could keep going for quite a while, but we are right at time, and I want to keep the conference on schedule. So with that, I'd like to thank you very much for your attendance and the insights this morning. Much appreciated, and all the best to Simon and yourself. Thanks.

Thank you, Kevin. Really appreciate it. Stay healthy. Look forward to seeing in person soon.

Likewise, all the best.

Cheers. Cheers.