L'Air Liquide S.A. ($AI)

Good morning, ladies and gentlemen, and welcome to the Air Liquide Q1 2026 Revenue Conference Call. [Operator Instructions]. I will now hand over to Air Liquide team. Please begin your meeting, and I will be standing by.

Good morning, everyone. This is Aude Rodriguez, the Head of Investor Relations. Thank you very much for attending the call today. Francois Jackow and Jérôme Pelletan will present the third quarter revenue. For the Q&A session, we will be joined by Emilie Mouren-Renouard, Group Vice-President, [indiscernible] EMEA, and by Adam Peters, Group VP, CEO of Air Liquide North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on July 28 for our half year 2026 results. Let me now hand you over to Francois.

Thank you, Aude, and good morning, everyone. It's my pleasure to share Air Liquide highlights for the first quarter of 2026. This quarter, our performance once again demonstrates the resilience and agility of our business model and our outstanding capacity to grow within a complex global environment. Business-wise, our project backlog has reached a new record high, further securing our trajectory for profitable growth in the years to come. Let's move to the next slide. The first quarter results clearly underscore the strength of our model. The numbers speak for themselves. Sales grew plus 3.4%, excluding FX and energy, bolstered by the accelerated integration of DAT in South Korea in January, which was originally planned for the course of H1. This overall sales performance confirms our ability to capture growth organically and through acquisitions in key geographies and sectors. Looking ahead, we remain firmly committed to our margin expansion ambition in spite of the environment. We see this with our operational indicators that are equally strong. IM pricing remained accretive, stepping up sequentially to 3.4% above Q4 last year. This demonstrates our continued discipline and effectiveness in managing value in a demanding macro environment. Efficiency gains. Our momentum here is excellent. We delivered plus 8% growth in efficiencies over Q1 last year. The significant performance considering this comes on top of the almost 30% step change achieved in 2025. It clearly validates that our major transformation program continues to deliver. Cash flow remains remarkably robust, up plus 7%, excluding currency impact, providing us with the financial flexibility to fund our future ambitions. Finally, and this is remarkable, our investment backlog reached a new historic peak at EUR 5.5 billion, up from EUR 4.9 billion at the end of 2025. This provides us with exceptional visibility. These are tangible, high-quality projects currently under construction that will fuel our profitable growth as they come online. In summary, it has been a very solid start of the year, characterized by resilience in our operations, acceleration in our strategic investments, hence, validating our strategy. Moving to Slide 4. I would like, of course, to address the current geopolitical situation in the Middle East and its implications. While our direct financial exposure is limited as the region represents approximately 1% of group sales, we are managing the situation with the utmost discipline and care. Our response to the challenges is guided by clear priorities, safety first. The security of our 500 employees in the region remains our absolute priority. I can confirm that they are all safe and supported. I would like to thank them very much for their outstanding commitment to continue to support our customers in the region. Second, operational continuity. Our local assets remain intact and operational. While some are running at adjusted rates we see, once again, the critical nature of our business, supplying medical oxygen to hospitals, maintaining home health care services in Saudi Arabia, for example, or providing essential nitrogen for refinery safety. Regarding operational challenges. Of course, there is a global helium supply chain. The temporary shutdown of helium production in Qatar affects roughly 30% of the global supply. Having 80% of our global EM volumes contracted with customers, more than any of our competitors, we have to take into account the global shortage early on. In this context, we are operating under a temporary contractual relief and managing the allocation of available volumes taking into account where appropriate, the criticality of specific applications and of course, in full respect of applicable laws. Keep in mind, these are temporary measures and all contracts remain in place. Leveraging our global footprint, we are optimizing supply from our other sources and utilizing our storage assets, such as our cavern in Germany to minimize the impact for our customers. Other challenges include for our customers, energy and feedstock availability or the robustness of supply chains for key raw materials. Regarding inflation, while it represents an initial headwind, our proven ability to manage pricing and efficiencies allows us to protect our margins and drive long-term value creation. Overall, at this stage, we remain confident in our ability to continue to manage the impact of those challenges. In the current context, I will not, and I cannot talk about opportunity. But let's keep in mind that we could see some positive outcomes from the structural shifts that will result on the situation. In particular, liquid is uniquely positioned to capture regional shifts in industrial demand as we have a global footprint. Also, we could expect a rebound effect in the U.S. where lower energy cost and manufacturing policy are attracting global industrial production. Here, our unique position in large industries, industrial merchants and electronics is an advantage. Third, we can anticipate an acceleration of the reshoring trend with strategic autonomy becoming a priority for our customers and for any pace. This is particularly visible in the electronics sectors. It should be seen also in other sectors like what we have experienced for steel in the U.S., but also in Europe. So over the medium term, this conflict reinforces the role of hydrogen in energy, sovereignty and resilience. As hydrogen was losing momentum with only considering decarbonization we already see a renewed interest in Europe, in the Middle East and in Asia to consider hydrogen as a fundamental pillar of energy independence and resilience complementary to electrification. And lastly, the long-term value of being able to provide resilient supply will be probably better appreciated by our customers enabling us to leverage our strong operating liability. Moving to Slide 5. In today's volatile environment, our core strengths allow us to continue preparing for the future. Our performance is anchored by structural competitive advantages. Extensive diversification our business model is naturally hedged across geographies, diverse industrial and health care sectors and an extensive customer base. Local and global agility. Despite our global presence, we maintain a decentralized organizational structure, this allows us to remain agile enough to capture regional growth opportunities while leveraging the scale of the group to drive global efficiencies. Intrinsic resilience. This is the hallmark of our model. It allows us to protect our margins and sustain performance in adverse economic environment and innovation G&A our technological leadership and our ability to listen to our customers remain key differentiators. This allows us to navigate the present environment and continue to proactively build our future. In Q1, there are clear signs of this. We successfully closed the DIG Airgas acquisition ahead of schedule, allowing us to capture the full year contribution of the strategic asset throughout 2026. As mentioned, our project backlog has reached a historic high of EUR 5.5 billion. It is a significant reservoir of growth that will translate into revenue and earnings. And we are pursuing the group transformation to improve the margin, enhance our cash flow and return to our shareholders. In short, we are leveraging our strength to navigate the current environment, while resolutely preparing the air liquid of tomorrow. Moving to Slide 6. I would like to highlight 2 major project wins this quarter. On the left, we are expanding our presence in the U.S. Gulf Coast through a partnership with Hyundai Steel and POSCO. Air Liquide will invest over $350 million to build a world-class air separation unit and extend our local pipeline infrastructure in Louisiana. This project is a perfect illustration of the industrial reshoring trend currently revitalizing the U.S. market. By connecting this new local and steel complex to our existing network, we are not only supporting Hyundai Steel joint venture, but also increasing our network density and scale effect. This allows us, for example, to meet also the growing needs of Koch Methanol, an existing customer on the same pipeline. It is a clear example of how our integrated infrastructure creates a multiplier effect for profitable growth while offering the best competitive solutions to our customers. On the right, we have secured a major electronics project in Hiroshima, Japan. We will invest EUR 200 million to build 2 high-purity carrier gas units for a global leader in semiconductors. This project is critical for the manufacturing of the next-generation chips and reinforces Air Liquide's global leadership in electronics. Our position in Japan is unique, being the only global industrial gas supplier in the national growing market. We have an extensive local footprint with 78 dedicated electronics units and our Electronics Tokyo Innovation Campus. This long-standing presence over 40 years in electronics allows us to partner with our customers and T2 makers on their most advanced technological road maps. These 2 successes are some contributors to our record EUR 5.5 billion backlog. And stay tuned because there's more to come. Turning now to Slide 7. In a global environment that remains complex, the resilience of our business model and the agility of our teams allow us to look ahead with confidence. Based on our selling start of the year and the strength of our strategic initiatives, we confirm our guidance for 2026 and margin ambition for 2027. Thank you very much for your time. I will now hand over to Jérôme to provide a deeper dive into our first quarter financial performance.

Thanks, Francois, and good morning, everyone. I will now review our numbers in more detail. So turning to Page 9 for Q1 2026. When you exclude FX and energy, Air Liquide delivered a plus 3.4% top line growth, which includes a significant scope contribution of DIG Airgas. As a reminder, the closing of the DIG Airgas was accelerated and now benefits Air Liquide for the full year. On a comparable basis, we again delivered sustained plus 1.9% sales growth despite the challenging macro and geopolitical under. As published, we are down minus 3.5% in due to unfavorable FX effect of minus 5.9% and minus 1% of an early pass-through impact. Turning to Slide 10, strong mid-single-digit growth in the Americas was a driver of comparable gross sales growth of plus 2%, including contribution from DIG, Asia was up plus 8% in an otherwise contrasting market, while EMEA remains stable. Looking now at the business line, stand correlated to the macro industrial environment continue to steady climb by plus 4%. Electronics and Industrial Merchant were, again, growth driver, contributing plus 3% growth each large industry remains contrasted, as I will describe over the next few slides. Let's now move to Slide 11, where I will review the Q1 activity for each of our main geographies. The Americas broad growth engine provided a plus 5% increase on a comparable basis. At plus 8%, large industry sales were strong once again. Driven by the U.S., we experienced very high demand on the Gulf Coast pipeline network for both air gases and hydrogen partially, sorry, due to the Middle East conflict refineries are now running at full capacity, and we see increases in chemicals. Merchant posted a strong plus 5.3%, driven by robust pricing and resilient volume. Gas volumes were slightly positive, and Harwood showed improvement, albeit still soft. Liquide are going to improve, driven by construction and metal. The shutdown of the Qatar Energy Sourcing starting much had limited impact in Q1. Growth in Health Care show continued trend at plus 6.6%, driven by sustained high pricing, especially in the U.S., along with the deployment of the value offer in Telix in proximity care. LatAm further increased the number of home health care patients and also benefited from solid pricing. In Electronics, the very strong work in carrier gas for new project start-up and ramp-up was offset by high Q1 2025 base in equipment and installation. This latter negative comparison will diminish starting in Q2. Overall sales in EMEA now were flat, but with continued solid growth in health care. Large industry was soft with low hydrogen and Cogen. Airgases were stable with high activity in South Africa compensating for low euro. In Merchant, overall sales were stable. Overall sales were stable, excluding exceptional sales of rare gases in Q1 '25, pricing increased to plus 1.7%, an acceleration from Q4. Finally, healthcare growth was robust at plus 4.3%, supported by an increased number of patients in home health care and solid activity in medical gases, which more than offset small divestiture. Finally, mixed Asia post in Q1. The accelerated closing of DIG Airgas in Q1 contributing meaningfully to growth in Asia, where we have delivered a plus 8% in total on a comparable basis was relatively stable. In large industry, underlying demand was contrasted with growth in Korea and Japan, but lower volume in Singapore and China following customer turns. Sales in merchants were low with headwinds from helium and soft, but slightly improving pricing. China was slightly positive, excluding [indiscernible] with some bolt-on contribution and less negative pricing, bright spots remain mainly by bulk and on-site. Finally, electric sales improved by plus 5.3%, strong worth in carrier gases driven by start-up and ramp-up as well as steady high advance material. I want to comment on our Q1 activity by business line on Page 12. In Merchant, we saw increased pricing at plus 3.4% with price management above the cost curve, representing a slight acceleration from Q4. Overall gas volume were [ Avignon and Garbut ] showed improvement with still soft activity in the U.S. [indiscernible] team was down slightly with strong activity in the U.S., nearly offsetting low activity overall in EMEA and contrasted Asia. Moving to Page 13. There was again a strong underlying momentum in Electronics at above plus 5%, excluding E&I, sales benefiting from a strong growth engine of carrier gases we start up and ramp up, in particular in Asia and the U.S. as well as solid advanced material performance in Asia. This growth was somewhat offset as E&I sales compared to high Q1 2025. This E&I comparison headwind should moderate in Q2. Finally, care saw balanced growth with strong contribution from increased pricing in medical gases supported by value offers and an increased number of patients in home health care. This case growth more than offset the small divesture in Europe and Japan. I'm now on Page 14. We remain extremely focused on our execution and on delivering our margin improvement ambition, which is based on 3 pillars. First, industrial merchant pricing continue to be dynamic and in fact, slightly accelerated to plus 3.4% as we adapt to inflationary measures and focus on price management above the cost. Second, to reiterate Francois' comments earlier, momentum in efficiency gains were excellent, building up a record in 2025 with the plus 27% increase, we continue to deliver at EUR 142 million, we delivered plus 8% growth in efficiency over Q1 last year. The dedication of our teams and execution of our transformation program is clearly delivering very strong results. Thirdly, we're active in portfolio management. We closed a very exciting strategic acquisition of DIG in South Korea as well as 3 bolt-on in the U.S. and China. [indiscernible] nation executed to divestiture we continue to take the mine the portfolio with a focus on profitable and margin accretive opportunities. On Slide 15 now, showing our investment KPIs. It was a great start of the year with Q1 investment decisions reaching the high level of EUR 1.5 billion, and this excluding the financial decision related to the acquisition of DIG Airgas in Korea. Industrial, the decision reached an all-time high with several successes in electronics carrier gases project and a major large industry project in the U.S. as of with 2 examples earlier. Therefore, investment backlog reached a new record high at EUR 5.5 billion. This backlog is very well diversified, including nearly 75 projects across all geographies and well balanced between large industry and electronics. Finally, our 12 months portfolio of opportunities at high EUR 4.5 billion the current 12 months portfolio consists of around 40% projects in Elecys and the third energy transition. On top of that, the portfolio beyond 12 months remains dynamic and totals above EUR 10 billion. On Page 16 now, and as mentioned earlier by Francois, for 2026, we remain aligned with our ambition to improve operating margin by plus 100 bps, excluding energy, I'm confident in our ability to deliver our recurring net profit growth at constant exchange rate. We also confirm our further expansion of higher margin improvement in 2027 to reach plus 60 bps of cumulative improvement over 6 years, 2022 to 2027, following our February announcement, I am pleased to confirm that with both our Capital Markets Day on October 1, we are eager to use this time to share the next chapter for our strategy. Thank you very much for your attention. We can now start the Q&A session.

[Operator Instructions] We are not going to proceed with our first question. And the questions come from the line of Alex Sloane from Barclays.

Two from me, please. The first 1 on large industries, I guess, Middle East disruptions, obviously, tightening global energy and logistics flows. In that backdrop, do you see European industrial customers becoming relatively more competitive versus Asia? And if so, could higher utilization in Europe as well as in North America more than offset any softness that you're expecting to see from Asian customers? I guess, put more simply, can we expect large industries comp growth to improve over the balance of year from Q1. That would be the first one. The second one, just on electronics. Obviously, a good mid-single-digit growth rate, excluding E&I. Those comps ease from Q2. Should we expect that kind of reported electronics growth to step up to the mid-single-digit level mechanically? Or is there anything we should consider from an underlying volume perspective as we think about growth in electronics going forward.

Thank you very much, Alex. So we'll ask Emilie to comment on Europe and probably, Adam will also comment on the large industry momentum that we see in the U.S., and then we come to electronics. Emilie, please? .

Thank you, Francois. So on the large industry in Europe, I'd say, overall, the activity remains stable and resilient, but it's contrasted depending on the different markets. So if I go a little bit more into detail to answer your question, so on the chemical side, volumes were rather a bit better than, but here it's not a one-size-fits-all story. It really depends on the customers, the places and the feedstock they have access to. So we still see some bubbles or pockets of opportunities where companies benefit from better feedstock, or if they can be flexible to run on different feedstock and that flexibility definitely gives them an advantage to run as opposed to maybe in other places overseas. . In refining, doing well in Q1 with upward volumes, and we expect large players in refining to continue to run at a relatively high load in Q2. And on the metal market, we see good momentum in volumes in Europe driven by the CBAM, and also import protest to incentivize reshoring and production in Europe as opposed to imports from overseas. So these protective measures definitely have a positive impact and that should continue over the remainder of the year.

Thank you very much, Emilie. Adam, news from the U.S.

Yes, absolutely. Thanks, Francois. And Alex, thanks for the question. Large industry is certainly a bright spot in the U.S. since the start of the year. If you -- maybe a little bit of context for everybody. If you look at our positions in Texas and Louisiana, in particular, we have a very extensive pipeline network in both of those states. So along the U.S. Gulf Coast, extremely strong position serving the chemical industry and refining in particular, but also a bit on the steel side. We've seen that network fill out quite well. So if you look at what's happening in the Middle East crisis at the moment. The U.S. remains very strong in terms of having advantaged feedstocks for the chemical industry. So natural gas pricing remains favorable, and this is really resulting in chemical company outputs that are increasing. So we've seen that. We've benefited from that. And we continue to see that going into Q2. I think the timing of this will depend on how long it takes things to stabilize in the Middle East, but it's a very strong story there. We are currently the -- well, we are the leader in serving the chemical industry with air gases, but we also have a very strong position in hydrogen serving refiners. Refiners are also running at max rates. And basically, what we see is the opportunity to really ramp up production in accordance with what's happening. You can see that in our results for the first quarter with 8% growth in Large Industries in Q1. So a good outlook good position, leveraging our infrastructure that we have and our historic positions and strength in this market.

Thank you very much, Adam, and Alex, and this is true for many of the comments, of course, in the current environment. We have to be a little bit cautious, but just to also put things in perspective. In March, we have seen record volume on oxygen, nitrogen pipeline but also on our hydrogen pipeline in the U.S. So yes, indeed, we are benefiting. We'll see how long it lasts, but I think that's a great position to be in the U.S. for sure. . Regarding the electronics, 2026, indeed, we see a positive momentum, clearly, and a good trend. And we are trading towards the single-digit growth. for the Electronics business, probably more visible towards the second part of the year because there is still a little bit of the comparison effect with the but the underlying growth is very strong. Carrier Gas is in the range of 6%, 7%, 8%, 9% depending on the region or 10%. So when we listen to our customers, clearly, they are providing a positive feedback today, for many of them, the operating rate is in the range of 90% for their fab. And the forecast for 2026 and 2027 is to be above the 90%. Of course, very strong momentum in the most advanced node logic fabs and the memory where ADT is very strong. As we will discuss probably later on, there are, of course, some questions about the midterm regarding the supply of some critical materials, including helium, but so far, for our customers, this has not been a bottleneck. Let's keep in mind finally that the investment momentum is super strong. and we have been very successful. In Q1 2026 alone, we have already decided more than 90% of all the electronic investment of last year. So just to put things in perspective, very strong momentum in investment and quite successful track record for us. So this clearly confirms that electronics remains the strong long-term growth driver for Air Liquide and that's what we see. Thank you.

We are now going to proceed with the next question. And the questions come from Alejandro Vigil from Santander.

Alejandro Vigil from Santander. The first 1 is related as well about the organic growth outlook for the year. I think market expectations was some acceleration of the growth during the next quarters. But now we have these Middle East crisis. If you can give us some color about how you see organic growth performing in the coming quarters from this about 2% this quarter. And the second question is about the transformation plan. We see this acceleration in cost cutting and the guidance for 2016 and Basically, my comment is, if this is a conservative guidance? Or you see more and more upside in these numbers as you are delivering the current plans? .

For your 2 questions. If we talk about the outlook. As of today, our assumption is that Q2 will be more or less similar to Q1 in terms of growth. We clearly continue to see some positive trends, either globally, health care, for example, semiconductor, I just mentioned about that, but also defense and aerospace. Regionally also, we see some positive trends still in Europe, as mentioned by Emilie, U.S. refining, petrochemical also, but U.S. manufacturing overall and industrial construction. . But of course, there are great uncertainties regarding the outcome of the Middle East conflict. And there are many potential impacts, headwinds, but also, and we have to recognize that tailwinds. And as the new order is unfolding, we said, of course, being resilient, able to leverage the challenges into growth opportunities. This is why Overall, we remain confident for our growth and margin objective for 2026 and 2027. So that's overall the outlook for the rest of the year. Transformation, Jérôme?

Yes, the transformation. Thank you, Alejandro. This is going very much in line with our expectation, and we are moving on this transformation. We are basically not at all at the end of the journey. You saw the very good track record we had during the last 2 years in terms of acceleration of vision and margin. We are still moving on very clear and we have a very strong contribution from efficiencies during the first quarter were up plus 8% versus last year. This is, I would say, on top of what we have done last year, which was very significant, plus EUR 600 million of efficiencies. And there are basically 4 pillars. We explained that many times. We are streamlining the organization, and we're working on industry-owned initiatives and commercial initiatives, and we're also leveraging our business service centers. We are moving on, and that's clear. When we look at today, the operational efficiency is very much aligned with what we do. If we try to display by levels, about 40% to 50% of the efficiencies in Q1 are coming from operations. So industrial initiatives are paying of streamlining of the organization. We have also a significant acceleration also on procurement, which will be roughly 1/4 of this. And finally, we are also having the impact of the tax decrease coming from what we prepared last year in terms of restructuring. You see the cash flow is going up plus 7%. There is a strong leverage coming from top line to cash flow. So everything is moving as expected. And as I said, France during his introduction and reinforce, we are very much in line with our past 100 basis point improvement for the year and plus 460 for the period 2022 to 2027.So we are moving on as expected.

We are now going to proceed with the next question. And the question comes from the line of Thomas Wrigglesworth from Morgan Stanley.

Two questions, if I may. Firstly, just looking at the merchant pricing, the 3.4% what's required for the rest of the year for you to fully pass through the higher energy costs that you'll suffer there. And you spoke on the second question if I may. You spoke to large industries in Europe and the picture there kind of heading into 2Q. But what's the picture in Asia as well? We hear obviously very mixed signals across the various markets from Southeast Asia being softer in chemicals to China seeing lower run rate. So I'd be very keen to hear how you're thinking about your Asian Large Industries business and the impacts from the Middle East in 2Q?

Thank you very much, Tom, and good morning. I will ask Emilie and Adam to talk about pricing in the 2 regions, and then we'll come back to the large industry piece. Emilie, do you want to start with Europe? .

Yes, sure. So pricing in Europe. So we've been really proactive in increasing prices in anticipation of any cost increase due to the Middle East prices and to any inflationary pressure. So pricing is ahead of the cost curve, leading to a good back through actually, in Q1 this year, it's a bit higher than Q4. So we've seen this acceleration already, and we'll continue to see that over the next quarter. We've learned from the previous crisis, for sure, we are now fast. We have the tools, we have teams well equipped and well incentivized to increase prices at a very rapid pace. So we've put the right formulas in bulk to reflect our energy piece as well. We know they're effective. So overall, I would say, very good dynamics in Europe in pricing management should continue for the rest of the year.

Thank you, Emilie. Adam?

Yes. Well, Emilie, I think you did a great job of answering that. I think it's not different in the Americas. If I look at it, pricing remains a very strong lever for us. I think our coverage across all 50 states in the U.S., our density that we have in our merchant business is very, very solid. And the tools that we have in place, the incentive systems and the like make sure that we have put in place very strong proactive pricing to stay ahead of the cost curve in the U.S. and in the other parts of the Americas as well. So I think the situation remains very much the same as what Emilie mentioned for Europe and a very good lever for us going forward that's really built into the DNA of our company.

Thank you very much. So coming back to the large industry in Asia overall, the growth has been lower maybe than what was expected overall, but it's quite contrasted between the region. You see that we still have a good momentum in Korea and Japan, for example, mostly down was China and Singapore. When we look at the reason for that, most of the reasons are related to customer-specific activities and especially a turnaround maybe some extended turnaround given the overall market condition. But that's what we have seen for Q1. . Now looking ahead, I think we have a mixed signal or things that could impact. There are talks about potential curtailment of either energy supply, natural gas or naphtha, feedstock for some of the customers in the region. So far, we have not seen customers being impacted, not our customers, at least. But this is something to clearly watch for the region. At the same time, for us, we do expect, I mean, the plans we have been turned down to restart. And we have also some new start-ups coming up for the rest of the year. So we do expect, I mean, a much better momentum for Asia, but we have to watch that. Also when you look at the country mix, let's also keep in mind that when you are looking at the country mix where we operate compared to what has been said and maybe others -- we are not really positioned in large industry in some of the countries, which are the most impacted with the energy crisis when you talk about Philippines, Vietnam, Malaysia, example. Those countries are highly dependent on supply, and there's a very significant impact. This is the same in India also, where overall, our merchant and large industry business which is mostly Airgas is quite resilient. So that's the picture, again, for Asia, large industries should come up. But again, in the current environment, we need to be cautious.

Francois, if I can just sneak in just a follow-up. So it feels like merchant pricing is going to be better. Electronics is now moving out of the base effects on equipment and installation, going back to more normal growth rates, large industries, looks like it's lapping at low levels with mixed picture. I therefore, struggle with your 2Q comparable growth looks like 1Q comparable growth that seems very conservative in the light of the picture you're painting from those -- from large industries from electronics and other components.

You're talking globally, you're not talking about Asia?

Yes. Now I'm talking globally. Yes, I'm just looking at the comment you made to the answer to the previous question.

I think overall, in the current environment, I mean, you have to be a little bit cautious in looking at the market read offers. Again, we have a very strong basis. We think that there are some positive trends. But again, as the things are unfolding almost by the hours, you have to look and to anticipate some of the repo effects. So that's probably, I mean, what is driving the outlook overall for the world in general. So again, we have strong basis, very strong resilience. I have outlined quite a bit of positive trends, let's see.

We are now going to proceed with the next question. And the questions come from the line of Martin Roediger from Kepler Cheuvreux.

Yes. I have 2, please. your facilities in Middle East, what happens if they get damaged or destroyed, I think about your Yanbu facility, are you fully covered by insurance? And if you are covered and in case you receive any insurance payment, will that be booked in operating recurring income or an exceptional item? And secondly, you talked in your hand out about the increasing role of hydrogen in energy sovereignty, and you mentioned renewed interest in, for example, Europe and in Asia. My question is do you have feedback from governments or companies that there is a concrete action plan to implement more, especially green hydrogen?

Thank you very much, Martin. I will let Emilie answer the specific question on the Middle East assets. .

Well, overall, in the Middle East, as a reminder, we operate in 5 countries. We have about 500 employees, like Francois mentioned. All our employees are safe and sound, and this is really the priority. The safety of our employees, of course, comes first and foremost. In terms of assets, so of course, asset integrity is of also a priority of ours. All our customers first, continue their operations, except in Kuwait, and all our plants are running to serve them. None of our plants have been hit or damaged, and again, except in Kuwait, all our plants are running to serve our customers, our patients. Our largest presence is in Saudi Arabia. It's on the West Coast. So it's where we supply some key customers in the Yanbu area, as you know. And this area is along the Red Sea. So less impacted for sure by the Middle East conflict and by the closure of the Hormuz Strait. And overall, the protection of our assets is, of course, a key priority for the group.

You very much, Emilie. Speaking about the role of hydrogen and the renewed interest, yes, this is something that we are clearly hearing from major stakeholders. Myself, I was in the European Commission even last week meeting 2 of the main commissioners on these very specific topics. And as you know, I mean, the European Commission is looking at plans to increase the energy resilience in Europe. And I would say hydrogen is on the list because of the very diversified ways to produce hydrogen. The fact that you can rely on international supply chain, but you can also produce locally hydrogen. And you can use hydrogen in a lot of different forms to complement electrification of industry and mobility. And I think that's a clear example of the resilience of hydrogen in the energy mix. If you just take the normal projects that we are going to start up later this year, this is a clear example where we used to produce hydrogen with imported natural gas. And with this activity, we will be producing hydrogen using renewable electricity and low carbon electricity being produced locally. So not only it's reduced the carbon footprint of our customers. But clearly reinforce the sovereignty and in the current pricing, also the cost competitiveness of the solution. So I think there is more than an interest. There are working groups and working teams on that. I mentioned the European Commission, but they will in [indiscernible] and also in Japan a few weeks ago, same kind of discussion. And again, for the mobility and the industry. And maybe just a last example, I think there are some countries which are already taking up the requirement for FNB or hydrogen in Europe. I know that Belgium is looking at that. And Germany has just passed the plan to increase significantly the percent of low carbon hydrogen in the [indiscernible] mandate, which is going exactly in the same direction. And finally, on the mobility, there is regain interest on all mobility, of course, because it's clear that electric vehicles and especially heavy duty will not be enough, but also a lot of discussion about aviation fuel, especially in the current context. So again, very concrete discussion. Action plans, I believe, are being put in place Here, we have the team with government and stakeholders. So I mean, it will take probably a few weeks and few months to unfold, but clearly a renewed interest in the current context.

Can I get the follow-up question or answer from Emilie about the insurance coverage for your facilities in Middle East and how that will be...

I would suggest that we take that offline because we have still quite a list of questions. So for fairness for all the interveners let's take that offline. But the answer in short is yes, we are current.

We are now going to proceed with the next question. the question comes from the line of Tony Jones from Rothschild & Co.

Tony Jones from Rothschild. I have 2. On helium, can you talk about the pricing ranges that you're realizing now as we go into Q2 for the non-contracted business. So I suppose that's like a spot market and how you expect that to translate to contracted pricing over the next few quarters? And then separately, on the Middle East and highlighting North American strength. I'm very interested in customer feedback. Are you picking up any renewed interest in new capacity for industries like petrochemicals, potentially refining in North America given the low cost and supply integrity. It's been a long time since we've had a lot of new capacity added.

Thank you very much, Tony. So maybe on helium and I would like to give a little bit of context because I know there has been a lot of questions on this topic. So just to put again things in perspective, the helium sales are around 3% of energy total sales. It's, of course, a byproduct of the natural gas extraction. And as you know very well, there are different sources. U.S., Qatar and Russia were accounting for probably 85% of the total sources. There are many applications that's where, I mean, the question on the pricing is coming, being for maybe 20% medical application and the growing application, which is also around 20%, which is the electronics, but many other things in metal fab, in space, in fiber optics and so on. . Most of the contractual volume for us are in the electronics and the large industrial merchant customers. So with the LNG in Qatar stopping, we basically had minus 30% of the helium sourcing being unavailable. So that's why, I mean, being, I would say, responsible and given the inertia and the supply chain, we have anticipated the disruption in the supply chain and we were anticipating a globally short market. By the way, and maybe some of you are not yet fully aware of that, the market is getting shorter with the announcement last week that there has been an export control from Russia. So overall, this is not the first time that this market is facing an unbalanced situation between the supply and the demand. But given the potential of magnitude, we have requested indeed a temporary relief from our supply contracts in order to allocate bonus based on application, criticality and of course, local regulation. Let's keep in mind, that, again, these are temporary measures and the contracts are still in place. which means that for all those customers, we are working with them to find the best solution to continue to supply their critical needs. For the rest of our customers, we are delivering as much as we can. We are not the only supplier by the way, in this situation in the past few weeks and days several of the global helium suppliers have also put in place allocation. our pricing policy is to make sure that we pass through the additional cost of logistics, reliquefaction of the client from the cabin, for example, to make sure that we cover those additional costs. Overall, I would say that we are working with all our customers to minimize the impact, and again, we are relying on the diverse sourcing. It's not only Qatar. We have other sources, and we have, of course, the [indiscernible] which has been in operation for 10 years now. And the last point I'd like to make on the situation because, again, there's a lot of questions. and people are following very closely what is happening globally. You should note that an immediate relief would be the restart of the LNG plant in safe, much more than the opening of the almost rate. because we are, in fact, and we have done that in the past, and we are still doing it, able to export Isocontainer from Gaslan by road. So that's why this is the critical element, much more than the reopening of the most strength. And finally, I would say that we are working well with our customer at this stage and manage overall the impact for the group. Let's maybe ask Adam to comment on the U.S. and what you see and what your customers are telling us?

Yes. Absolutely, Francois. Thank you, Tony, for the question. So maybe 1 bit of context here. If you look at the opportunity slate that we have in the U.S. in particular, it's actually -- it remains very robust. So when it shifted, I would say, over the past 12 to 18 months, more towards traditional industries, for industrial gases, steel, petrochem, refining, but also very much towards electronics, as was previously mentioned by Francois and Jerome. We absolutely see an increase in terms of conversations from customers in the refining space. A little bit less so on the pet chem side so far, but we still see some opportunities there as well. So it remains a very dynamic and positive area for investment for the group in the U.S. and I think leveraging our strong position on the Gulf Coast in particular. So very active discussions going on across the spectrum in traditional industries, like we've seen also from the recent signing that we had with Hyundai Steel in Louisiana. So it's a pretty exciting time for development in this market.

Let's move to the next question, please.

We are not going to proceed with the next question. And the question comes from the line of Jean-Luc Romain from CICC.

I have 2 questions. First relates to your EUR 3.5 billion backlog. Could you remind us more or less how much time we should expect between the backlog and the start-up of all of these projects and how much time to is project to be at more or less 100% of the design turnover? That's the first question. Second question relates to recently announced discovery of Nation in France. Do you think Air Liquide might have a role in case this is economic to develop in terms of logistics or whatever for these new resources?

Thank you very much, Jean-Luc. I will be short because I know that we have quite some questions have only time for 1 additional question. So first question on the backlog. Typically, those projects which are becoming larger projects, if it's quite diversified, are taking 3 to 4 years to be completed between the FID and the first start-up, and depending on the project, it could take 2 to 3 years to ramp up to the full capacity. . Regarding the question on native hydrogen, what is called sometime the white hydrogen. There's a lot of discussion about that. Of course, we are fueling the topic. Right now, it's quite far away in terms of opportunities and feasibility. If it happens that some hydrogen is available. Of course, given our position, and it will organize, I mean, the logistic and the valuation of this natural resource but this is a little bit far down the road. Maybe we have the last question?

So we are now going to proceed with 1 last question. And the question comes from the line of Sebastian Bray from Berenberg. .

The large industries in Europe seem to still have a relatively soft volume development in Q1 of 26%. My understanding is that the refineries in Europe were probably less badly affected by the Middle East and the Asian counterparts. What was the primary driver of this? Was it the chemicals industry? Was it refining? Or was it something else? And quickly, if I might add 1 on CapEx. The backlog at Air Liquide is up by about EUR 1.5 billion in the space of 18 to 24 months. The consensus CapEx is barely changed. What do you think is a reasonable level of CapEx to anchor around for 2027. Could it be EUR 4.5 billion or higher?

All right. Emilie?

Yes. On the large industry in Europe. So we still see a relatively stable activity, like I explained before. And then in terms of the Middle East impact, like I said, on the refining probably less impacted or at least we see upward volumes. What we see also on the refining side of things, is renewed interest for low-carbon hydrogen [indiscernible] low carbon. We see that in all the basins we operate in Europe. We are extremely well positioned to supply those customers with low carbon hydrogen and we are planning to leverage our key position to continue on this journey, of course.

And Sebastian, for the question on the CapEx. So we have probably CapEx for industrial investments, around EUR 4 billion for the year 2026. Keep in mind that on top of that, you have DIG for EUR 3.8 billion also. There is delay, I would say, between the backlog and the decision and the CapEx, as you know very well. That's just due about the investment curve. And with those projects being quite intense in engineering study, the CapEx tends to come a little bit later than on traditional standard projects. . All right. Thank you very much. I think this concludes our session. Thank you for your attention, of course, and for your many questions. Our results this quarter confirm the robustness and resilience of our business model. I think that you have seen that and, of course, the success of our proactive management and cost discipline. Clearly, we start the course. And with the recall investment backlog, we are building significant momentum for the future. I wish all of you a very good day. Thanks a lot.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.