L'Air Liquide S.A. (AI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Air Liquide Q3 2023 Revenue Conference Call. Only until we conduct a question-and-answer session, and instructions will be given at that time. I will now hand over to the Air Liquide team. Please begin your meeting, and I will be standing by.

Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations. Thank you much for attending the call today. Francois Jackow, Jerome, Pascal Vinet and Mike Graff will present the third quarter revenue and answer your questions. In the agenda, our next announcement is on February 20 next year for our full year 2023 results. Let me now hand you over to Francois.

Thank you very much, Aude, and good morning, everyone. It is my pleasure to be with you today to share the highlights of the third quarter of 2023. In few words, we delivered more than ever resilience and performance while preparing for the future with major contract signings this quarter. Let's start first with the financial highlights of our performance on Slide 3. As far as our resilience and performance are concerned, all our performance KPIs are again very well oriented, especially given the macroeconomic and geopolitical context and last year comparable in Q3. First, a very resilient top line with a 1.5% comparable sales growth. Let's keep in mind that it comes on top of the 8.3% increase in Q3 2022. It highlights again the strength and the balance of our business model, Healthcare and Industrial Merchant being the strong growth drivers this quarter, while Large Industries and Electronics experienced software activity in line with our expectations. We currently see Q3 as the lowest quarter of the year. Second, 3 performance indicators. Industrial Merchant pricing increased again very significantly at 6.5%, which comes in addition to the plus 18% in Q3 2022. It is a result of our data-driven smart pricing management in an inflationary environment, balancing pricing power, value creation and, of course, customer satisfaction. Second, efficiencies, which have reached a high level at EUR 320 million at the end of September which is year-to-date 22% higher than last year. Then a very strong cash flow again this quarter, growing at plus 9% year-to-date. We are steadfast in our commitment to deliver profitable growth regardless of the macroeconomic conditions. Pricing management and strong efficiencies are very promising for margin improvement, of course. All in all, we remain fully committed to outperform our advanced plan and targets as we maintained strong execution and delivery this quarter. This performance couldn't be achieved without a strong commitment of our teams that I would like to warmly thank today. Looking forward, the investment backlog reached a record high level of EUR 4.2 billion. It shows that we continue to prepare the future whilst remaining disciplined in our investment decisions to optimize value creation. It is a result of several major project signings, and I will now highlight some of these great achievements. Let's start on Slide 4 with the H2 Hydrogen electrolyzer that is now under construction in the Normandy basin in France. This is the largest PEM electrolyzer worldwide by far with a capacity of 200 megawatts. Let me remind you that we have been operating a 20-megawatt PEM electrolyzer in Canada since 2021. and we are about to start another one, 20-megawatt PEM electrolyzer in Germany. So with this Normandy project, we achieved a very significant scale up being the undisputed leader in the PEM electrolyzer operations worldwide. Technology wise, this is made possible, thanks to our manufacturing joint venture and innovation partnership with Siemens Energy with our new state-of-the-art manufacturing plant that will be inaugurated next month in Germany. Business-wise, we signed a long-term agreement with TotalEnergies for 100 megawatts based on our large industry business model. For the rest of the capacity, we will serve other industrial sites, and we will dedicate part of the capacity to develop hydrogen mobility. We will invest more than EUR 400 million in this electrolyzer and have been awarded EUR 190 million by the French government. 250,00,000 of CO2 emissions will be avoided from the second half of 2026, when the electrolyzer will be starting up. This is a major step in the decarbonization road map of the Normandy Basin, as illustrated on Slide 5 and fully in line with our advanced strategic and financial goals. Indeed, we showed you this map already in 2021, when we announced the decarbonization plan of the Normandy Basin. We are delivering step by step. First, we have an existing SMR, hydrogen plant at Port Jerome, on which we added a carbon capture unit, Air Liquide proprietary Cryocap technology that has been running since 2015. The CO2 capture is used by industrial merchant customers locally, for example, in greenhouses or to produce carbonated drinks. In 2021, we announced the takeover of another SMR from TotalEnergies that we connected through the creation of a local pipeline network. This is a second step highlighted in the map. Third is the current construction of the hydrogen electrolyzer connected to this pipeline and that will be using renewable energy to produce green hydrogen. Soon, and this is the fourth step we will be able to leverage our industrial infrastructure on the basin to deploy hydrogen mobility. Next steps are under development phases. Number five, the deployment of our offer of carbon capture as a service to other industrials in the basin following the memorandum of understanding that we signed in 2021 And related, number six, to invest in a carbon capture unit for the SMR taken over from TotalEnergies. So as you can see, we are delivering step by step on the road map set up 2 years ago, leveraging strong synergies in the Normandy Basin and creating an ecosystem, which Air Liquide is leading thanks to our unique value proposition. Let's turn now to another major project signed this quarter, also in the energy transition, but this time in North America, to build a low-carbon industrial gas production basin in Becancour, Quebec, Canada. I am now on Slide 6. First, this project addresses a new growing market, the manufacturing of battery components for electric vehicles. We signed long-term contracts with several customers on the basin. In Becancour, we will invest more than EUR 140 million in a new air separation unit sourced with hydropower to produce renewable oxygen, nitrogen and argon. Investment also includes a pipeline network to connect the air separation units with the 20-megawatt PEM electrolyzer producing already renewable hydrogen since 2021. We will reuse the low-carbon oxygen of gas from the electrolyzer in this pipeline network. What you see here is the first of its kind, low-carbon industrial gas platform that will support the decarbonization of local industrial customers. Leveraging on this infrastructure and hydrogen liquefier already in operation. We are also deploying hydrogen mobility in the region. As you can see, we are doing -- as we are doing in Normandy, we are building on our existing basins, leveraging synergies with our industrial activities and solid customer base to develop low-carbon offers supporting the decarbonization of industry and mobility. Let's stay in North America and in the energy transition to discuss another major success for the group this quarter. I am on Slide 7. Since last week, Air Liquide has been named partner in 6 out of 7 clean hydrogen hubs in the U.S. To our knowledge, there has been no other industrial gas companies, nor any industrial player selected in 6 out of 7 hydrogen hubs. So this is an outstanding achievement. To succeed, we leverage both our unique footprint across the U.S. and our leadership expertise in hydrogen. You, of course, understand that this announcement by the DOE is a key milestone which will take some time to fully unfold. By the end of the year, the DOE will start the process of allocating the $7 billion funding. What we know is that Air Liquide will be a key player in the development of hydrogen across the U.S., especially as we have announced in September a collaboration with Trillium, a leading supplier of sustainable fueling infrastructure in the U.S. to pursue the development of heavy-duty hydrogen fueling markets in the U.S. So as you know, we discussed previously the leadership position Air Liquide is taking in energy transition in Europe. We see now with those 2 examples also things unfolding in North America. To conclude with the key takeaways for this quarter. First, this quarter demonstrates 1 more time our commitment and ability to deliver financial performance regardless of the environment, while actively securing future growth. The major successes that I mentioned illustrate the relevance of the Air Liquide value proposition across geographies. And I would like to say there are more to come. I will now ask Jerome to present the details of our activity in Q3.

Thanks, Francois, and good morning, everyone. So coming back to Q3 sales. I'm now on Page 9. Comparable group sales have been resilient overall. Gas & Service sales for Q3 have shown a resilient plus 1.7% increase versus last year. . Turning to the much smaller segment. Engineering & Construction sales have been stable at minus 0.8% year-on-year compared to high third-party sales last year. Order intake has increased up to EUR 1.2 billion quarter Q3 year-to-date, the highest level over the past 10 years with the majority of group projects. Global Markets & Technology stood at minus 3.9% as a consequence of the small biogas distribution divestiture scope effect last year, while organic growth remained strong at plus 6% and order intake has reached EUR 224 million the last quarter. So overall, group sales are up plus 1.5% on a comparable basis for the third quarter, while published sales are down minus 17.4% as a consequence of the high energy price decrease, which translates into minus 13.3%. Energy LI pass-through effect, which, as you know, has no negative impact on the operating margin value. ForEx exit is also negative at minus 6.3%, and the significant scope effect is slightly positive at plus 0.7%. So from a business line standpoint, Industrial Merchant and Healthcare drove grow in Q3, while large industries showed a mixed permits and electronics compared with an exceptionally strong comparable basis last year. On a geographic standpoint, except for Asia, Asia, which was impacted mainly by a market downturn in electronics, all other geographies posted resilient growth. This highlights again the value of our global development strategy and the resilience of our model, capitalizing on the complementarity and optimal balance amongst our geographies and business lines. Let us now review the activity for each of our main geographies. I am now on Page 11. After a strong Q2, sales in the Americas remained solid at plus 2% growth. Large industry volumes in air gases have been impacted by lower demand in chemicals and steel, while we saw better hydrogen demand with positive volume and solid cogen in the U.S. Activity has also been impacted by some customer turnarounds. In merchant, sales have grown solidly, supported by a high pricing effect of plus 5%. Gas volume in the U.S. are resilient and impacted by 1 less working day with positive dynamics in construction and aerospace. Growth in health care has been very strong at plus 12%, supported by strong pricing in Proximity Care in the U.S., while medical gases and Home Healthcare have been very dynamic in Latin America. Finally, electronics have been impacted by a very strong comparison basis in Q3 last year. Advanced Materials have been affected by the slowdown in memory production, while carrier gas sales have been solid. Sales in Europe have increased by 3% compared to Q3 last year despite a still very challenging environment. In large industry, volumes in hydrogen have improved for refineries although demand in chemicals and steel customer remains soft. Energy prices, while significantly reduced versus last year remain higher than before the energy crisis. Note that the energy combined effect was not significant this quarter. In Merchant, sales have grown significantly, supported by the strong pricing effect of plus 10% on top of a plus 30% pricing effect last year in Q3 2022. Volumes excluding helium and CO2, which have been impacted by supply chain constraints for months, are showing resilience, whilst also impacting by the 1 less working day effect. Volumes are growing in automotive, fabrication and pharmacy. Finally, health care growth was strong. Sales have indeed been supported by both the dynamic home health care activity, notably in diabetes and sleep apnea and by some growth in medical gases with high price effect in response to inflation and growing volumes. I am now on Page 12. Sales in Asia have been impacted mainly by the slowdown in electronics. In Large Industry, sales and volume remained affected by low demand, notably in chemicals in China, while Korea is growing. Sales have also been impacted by customer turnaround, notably one customer stoppage in China that will last until the end of the year. Sales in merchant have grown significantly, supported by a solid pricing effect at plus 6% despite a high comparison basis last year in Q3. In China, sales have been strong, supported by volume which have increased, particularly in the fabrication sector. As mentioned before, electronic sales slowdown was driven by a very high comparable basis in Q3 last year, which grew plus 22%. As regards to Advanced Materials, volume are temporarily impacting by the slowdown of memory players. Same dynamic for equipment and installation. On the other hand, gas vector have been solid, thanks to a more resilient business model. In Africa Middle East, we have seen sales growth in all activities. In Large Industry, the activity remains solid. Merchant growth is strong despite the effect of the divestiture in the Middle East completed in 2022, thanks to strong prices and increased volume bulk and cylinder. Finally, as cell have grown, particularly in Saudi and Egypt. I will now comment on our Q3 activity by business line. I am now on Page 13. In Merchant, pricing has been staying at a high level while gas volume remains resilient. The very good point, again, is that pricing has indeed continued to stay strong at plus 6.5% in Q3 to address inflation, increasing on top of an already very high basis last year. The other good news is that gas volume is still resilient overall with notably growing volume in Senador for the quarter despite 1 less working day. Volumes in our end markets, automotive, fabrication and pharma have been positively oriented. From a large industry standpoint, activity also still low as stabilized. Overall, by market, chemicals activity whilst still low, has been stabilizing, whereas metals is slightly better. Hydrogen for volumes for oil and gas in the U.S. and in Europe were better oriented. Volumes are still impacted by customer turnaround, mainly in the Americas and in Asia, we had positive contribution from start-up and ramp-up. On Page 14, in Electronics, activities decreasing impacted by a comparison with a very high base last year. Sales in Advanced Materials, Specialty Materials and Equipment and Installation have been impacted by the slowdown in memory market. Carrier gases sales were very solid, supported by volume startup. Finally, in Healthcare, we have had strong growth in all segments with still high pricing and volume improvement. Women care was again very robust, with strong sleep apnea and diabetes in Europe. Medical activity has been strong with high prices in Americas and Europe with resilient volume. As highlighted by Francois, we continued to deliver on performance through strong pricing and discipline. Our pricing first. We continue to stay strong at plus 6.5% on top of the very high comparison basis in 2022. I will comment more on the next page. At the end of September, we delivered a plus 9.2% pricing. You can see on the graph that since 2020, IM price have increased by more than 30%. We have also significantly ramped up our efficiencies to reach EUR 320 million year-to-date Q3, plus 22% versus last year with a strong rebound of industrial efficiencies. We continue to deliver on our active portfolio management strategy. And finally, we delivered a strong cash flow, very strong again this quarter, increasing by plus 8.6% year-to-date versus last year. I said earlier, we keep a very strong focus on margin improvement working on all possible levels. As you can see on Page 16, our IM pricing actions continue to deliver as pricing remains strong in every geography to reach plus 6.5% overall in Q3. In Q3 alone, Europe achieved a nearly 10% year-on-year pricing impact. The Americas, plus 5.1%. And Asia increased at plus 5.7% on year-on-year. All this come on top of plus 18% pricing overall in Q3 last year. Page 17. The 12 months portfolio of opportunities remain at a very high level at EUR 3.4 billion, supported by energy transition projects around 40% of the portfolio, including several U.S. IRI project. In addition, our portfolio of opportunities behind 12 months is also rising. Our industrial decision have reached a record level this quarter of EUR 1.2 billion, which is a significant increase versus last year. In large industry, 2 significant project in energy transition have been awarded. Francois described them earlier and another significant 1 in electronics. Finally, our investment backlog is very strong, has now reached a record level of EUR 4.2 billion with a balanced breakdown between both large industry projects located in our main geographies and Electronics, mainly in Asia and in the U.S. I am now on Page 18. As you can see, we had about EUR 200 million of sales contribution from start-up and open during the first 3 quarters, and we expect to reach a full year startup of contribution to sales of around EUR 270 million due mainly to a slight shift of the U.S. project start-up to 2024. To conclude, we are confident and we confirm our guidance for this year. Thank you very much for your attention. I guess we'll now open the Q&A session.

[Operator Instructions] We will take our first question. Your first question comes from the line of Alexander Jones from Bank of America.

Two, if I may. The first, just to follow up, Jerome, on your comments on margins. I wonder if given the stage of the year, you can be a little more quantitative on the guidance for the year. I know in the first half, you delivered 80 basis points pension ex the energy effects. Should we expect anything similar in the second half? Or are there other moving parts that we need to be aware of? And then the second thing to follow on the comments on the electrolyzer project in Normandy. I guess you've got -- you're increasing the scale of electrolyzer 10x with this project. Can you talk a little bit about the operational risks that come with that and how you manage that within the return profile that you demand from the project?

Thank you very much, Alexander. So Jerome, can you talk about the first point?

Yes. Thank you very much, Alexander. So on margin improvement, I will tell the following effect. Clearly, performance remains a key focus as we have demonstrated in what we've been to deliver -- able to deliver in H1. As you recall, plus 80 basis points, which is remarkable given the challenging environment. But still in the framework have advanced, plus 160 basis points of margin improvement over the 4 years, even though you know that we have outperformed for the time being. What we can say is you have seen the pricing management, I would say, result, which was very significant in Q3. You have seen as well that we have a strong efficiency in this quarter, year-to-date plus 22%, EUR 320 million. So this is very -- and also a very strong cash flow. So all of these are quite promising for the margin improvement. So I will say this, for the time being, we are absolutely committed. We are absolutely committed. We were confident and we will deliver margin improvement in the second half. That will be my statement today.

Thank you very much, Jerome. So on your question regarding the project in Normandy. So indeed, it's first of its kind, the largest in the world, 10x larger than anything that has been ever built. We feel very confident about the technology. You recall that we are using fully our partnership with Siemens Energy. We do believe they are an extremely strong partner from an industry realization point of view, but it's really a complementary partnership. Because with them, we are bringing a lot of operating experience. We have today more than 40 electrolyzer in operation in the world. So we have thousands of operating hours. And in the design, already, we are including a lot of things that we have learned. We are also taking a conservative approach in how we are considering the operation with some of the things being unknown and for which we have taken provision to be able to replace pieces of equipment, if needed, as we go. But I think that's something which is well managed. Keep in mind also that before the startup of the plant, we will have another plant, which is using the same technology in Germany that we are starting in a few weeks, which will provide a very useful also operating experience. So all in all, I think we are quite confident about this technology. Clearly, Air Liquide is leading the way. But we have a very strong credential and strong ground to be confident for the scale-up of this technology.

We will take our next question. Your next question comes from the line of Gunther Zechmann from Bernstein.

Gunther Zechmann from Bernstein. A couple of questions, please. Firstly, good to see the strong growth in health care pricing, a business that historically had deflationary pricing, which you turned around to positive pricing. Could you just comment more quantitatively as to what level of price increases you've seen in that business? And also what's been contractually put through for the coming quarters? That's the first question. And then secondly, sorry to keep it quite short term. But you mentioned, Jerome, on the introductory remarks, that Q3 is trough for growth and that electronics, in particular, should improve from here. Can you just give us a near-term outlook on the next 1 or 2 quarters in terms of the order book in the electronics business, please? And if I can sneak 1 more in. Any quantification of the IRA-related projects that you've signed in the U.S. cumulatively would be very helpful.

Thank you very much, Gunther. So let's talk about the health care first. As you can see, I mean, the health care business line overall is showing very strong growth, which I think is good. We have passed the COVID effect. And both the medical gases and the Home Care are showing high single-digit growth overall. If you look at the details and to answer your question on the pricing, clearly, most of the contribution in the medical gases worldwide is coming from the pricing contribution. The volumes are slightly positive, I would say within what we historically have seen in that market. What is new clearly is the fact that we have a strong high single-digit pricing for medical gasses. This is true in North America, where we have been leveraging our position and offering also. But I would say in all parts of the world, including in Europe. For the home health care, the contribution is split between the volume growth and the pricing. But there again, compared to what we have seen in the past, the pricing contribution is much stronger. I think this is the result of all the work that we have done to really demonstrate the value of our offering. I think to some extent, if I may say so. I mean, the COVID period has helped to show the value of a medical oxygen and also being a health care professional, reliable supplier into med gas and the home health care. So I think that's really a shift in the structure of this model because, as I mentioned earlier, now in most of the new tenders for public hospitals in Med gas, we are able to include indexation and price increase to reflect the increase of the cost. So that's for the health care. To talk about the electronics and what we see today for the next quarter, maybe Mike, you can answer that? And also some comments on the IRA projects.

Sure. So first of all, on electronics. Yes, as Jerome pointed out, in Q3 we were down [indiscernible] very strong comparator in Q3 of last year. Basically, the highest quarter we've ever seen of 21% growth. The lower demand is really driven primarily by the memory market, which we saw a very significant run-up in during the COVID years. And right now, that's a bit softer. In terms of logic, we continue to see resilience in the logic sector and significant growth continuing for all of the advanced nodes. For us, our carrier gas business remains very strong, materials, both specialty and advanced as well as E&I have kind of followed the market trend that we've seen. But in general, the long-term growth fundamentals still remain very strong while PCs and smartphones and tablets are still looking to recover. There is a lot of strength evolving in cloud computing and infrastructure, automotive, basically anything associated with IoT or artificial intelligence as well as virtual reality. So the market continues to look forward. We continue to see investment opportunities really in all geographies, Asia, the Americas as well as in Europe. And really, we see that we're kind of at the bottom of where we are in the cycle. And while we may not see full recovery until well into next year, we do see a very, very strong fundamental in the investment opportunities. And to tie that in place, we actually see investment in electronics actually improving in terms of the original forecast this year. So the equipment spend has actually improved from where it was earlier in the year and construction of new fabs is actually up 8% on a year-over-year basis. So I think the fundamentals are still there, and they're still very strong. In terms of the IRA and maybe where we are with the whole hydrogen hubs at this point in time, which are primarily at this point of outgrowth of the Bipartisan Infrastructure Act. This is kind of the evolution that we have talked about, where we've seen in Europe a lot of strength in driving the energy transition with announced projects. We've talked about the fact that there's that same growth dynamic and desire in the U.S. And now we're starting to see that come to fruition. And I think the beginning of that is the announcement we saw around hydrogen hubs, where they're going to go ahead and basically allocate $7 billion to 7 hubs with the intent to basically kickstart the national clean hydrogen ecosystem. And as part of that, likely we will see the production of about 3 million tonnes of hydrogen and the elimination of 25 million tonnes of carbon from the atmosphere on an annual basis. So a lot of strength behind this, a lot of drive behind us. As Francois pointed out, we are a name partner in 6 of the 7 hubs. We are in the early stages of what that development means. There are 4 major stages or 4 phases to this whole project. Before you enter the first phase, you've got to negotiate with the DOE in order to go ahead and finalize all the terms and all the conditions. So it's a little early to talk about specific projects and what will evolve. But it's fair to say in the 4 major hubs that we've announced for, we have anchor projects in each of those. And in all 6 hubs, not only are we directly involved, but we are also eligible for demand-side funding. So as Francois talked about something Trillium and how that might evolve, that could be part of a demand-side perspective.

Thank you very much, Mike. And please also keep in mind that those hubs are not only mobility for hydrogen. We discussed that quite a bit, and there has been quite a bit of discussion around that. But there is also an industrial side on this, especially the one in Houston, for example. So we will play the 2 cards, of course, I mean, the industrial side of those and the mobility market.

Thank you very much. Next question, please?

We will take our next question. Your next question comes from the line of Martin Roediger from Kepler Cheuvreux.

Three questions. Firstly, the operating cash flow before working capital. On reported data, it was down by 7% in Q3, but 9% before FX effects. That means FX had a drag of 16%. Can you provide some color how a 6% drag on sales can impact cash flow by minus 16%? Secondly, on pricing in Industrial Merchant. I see an acceleration in pricing in Middle East Africa in Q3. Can you elaborate on that? What is the driver for that? And because we saw that pricing for other regions is shrinking or is softening versus previous quarters. And then thirdly, you mentioned in your speech strong volumes in Industrial Merchant in China in the third quarter. Can you provide any color on the end markets, please?

Very much, Martin. So Jerome will talk about the cash flow and Pascal will talk about the pricing, especially in the Middle East, and I'll come back to China at the end. Jerome?

Yes. Thank you, Martin. So basically, on the cash flow, what is important is to discuss probably excluding FX because there is a mix of ForEx during the quarter compared to last year that was positive, plus 8% last year. And as you saw, it was negative this quarter. So all in all, the cash flow is good. It's at plus 9%, excluding FX. This is comparing to last year, cash flow at plus 16%, which was very much driven, and it was an exceptionally high due to the impact of also the peak of the pricing effect as you noticed, it was at plus 18%. So all in all, this is a good cash flow, but I would say that it's very important when we discuss the cash flow about -- excluding FX effect, in fact, that would be would be my comments.

Okay. Thank you very much, Jerome. Pascal?

So on the pricing in IM, I guess you've seen that we continue to deliver on pricing. It remains very positive in all geographies. The 6.5% overall in Q3, 5% to 6% in the Americas and in APAC, and it's 10% in Europe and 12% in EMEA. So what we are demonstrating is our ability to pass through all our costs in terms of pricing. And in the case of EMEA we have more inflation right now in some of the countries we operate in, and we are just passing through this inflation to our end users. So nothing special about EMEA. Just the same recipe we have applied everywhere worldwide.

All right. Thank you very much, Pascal. So a few words on Industrial Merchant in China because we hear a lot about the slowdown in China. But when you look at our numbers, they are pretty good, actually, because they are high single-digit growth overall for our industrial merchant in China for this quarter. If you look at where this is coming from, basically, there is a pricing impact, which is limited because we are basically at a flat pricing. Keep in mind that in comparison with many other countries, the inflation is now very low in China, below 1%. So most of the sales growth is coming actually from the volumes and again, quite strong. So when we look at this, we see very strong volume in our packaged gas business, strong volume also in our bulk business. So I think that's very good. That's the result of our footprint and our development. And you remember that we had a mix of organic growth and acquisition quarter after quarter. So that's paying off with a very good density in terms of Industrial Merchant in some key regions. And when you look at the market, you see clearly there is a very strong growth in the materials and energy segment, the methodology, the primary production, some of the glass also. So I think this is good. The automotive and fabrication is also, to some extent, a good, a little less, but it's stronger also. So everything related to automotive overall and metal fabrication. And also, as I mentioned, a lot of sales related to the packaged gas business that we are doing, which is extremely solid. So all in all, I don't think I can complain at all for the industrial merchant in China, which is strong and which should continue in that way. Thank you very much. Next question, please?

We will take our next question. Your next question comes from the line of Charlie Webb from Morgan Stanley.

Maybe just kind of following up on the comments around Q3 being the trough. Just helpful to understand what's inflecting as you kind of move forward? Or is it more just comparatively, things are perhaps less tough as we think about electronics? Just trying to understand that comment a little bit. It'd also be useful to kind of hear about large industries in terms of where you see customer utilization rates moving into the fourth quarter. Obviously, you talked about it being somewhat flattish at these levels Q-on-Q in Q3. But how do you see that trending in Q4 based on what you see today would be very helpful.

All right. Thank you very much, Charlie. So if we look at the different markets, overall, indeed, large industry, we have seen stabilization of the demand and still chemical and as mentioned, mixed in refining in Q3. We do expect a similar trend, maybe a little bit of upside in some regions, for example, in North America and potentially also in Europe. So I think also due to the comparison effect, as you mentioned, that will be much stronger and back into the positive ground for the next quarter for large industry. But again, we see a general trend being stabilization and probably a little bit of upside in some regions. Industrial Merchant, as we mentioned, still the pricing, as mentioned by Pascal, will continue with positive pricing. The volume based on what we are seeing today are still quite resilient in most of the region of the world with some upside, as I mentioned, in China, for example, but that could be the case also in other parts of the world, especially in the Americas. Electronics, I think Mike mentioned that. So we do expect, I mean, some pickup in Q4, but probably more largely during the year of 2024. And finally, for the health care, we do expect continuous strong growth above the historical average, both for medical gases and for home health care for Q4.

That's very helpful. And just in terms of the ramp-up and start-ups, obviously, you lowered the expectation for '23, presumably mostly just phasing, pushing that into '24. Any particular projects or kind of end markets is that the electronics projects that have been delayed? Is that what's the winner?