Air Products and Chemicals, Inc. (APD) CEO Seifi Ghasemi presents at J.P. Morgan 2024 Industrials Conference (Transcript)

Key Points Industry and Company * Company: Air Products and Chemicals, Inc. (NYSE:APD) * Industry: Chemicals, Industrial Gases, Hydrogen Production Core Views and Arguments * Large Projects and Financial Demands: Air Products is investing $5-5.5 billion annually in capital expenditures (CapEx) for two large projects, with cash flow of$4 billion and $1.5 billion in dividends. This results in a cash burn of$2.5-2.8 billion for at least the next two years, raising leverage from 1.5 to 2.5x [2][3]. * Financial Capacity and Leverage: Air Products has the financial capacity to absorb the cash burn and maintain its A rating. The company aims to keep leverage between 1.5-2.5x, balancing opportunity and risk [3][6]. * Louisiana Project Expansion: The Louisiana project's scope was expanded from 5-5.5 million tons of CO2 sequestration to 10 million tons due to increased incentives under the Inflation Reduction Act. This expansion leverages existing infrastructure and reduces future costs [7][9]. * Blue Ammonia Demand: Air Products expects strong demand for blue ammonia in Japan and Korea for use in furnaces and marine shipping. This demand is driven by environmental regulations and corporate sustainability goals [16][17][18]. * Green Hydrogen Demand: Air Products believes there is strong demand for green hydrogen in Europe, driven by environmental regulations and the need to reduce carbon emissions. Green hydrogen is priced based on the cost of capital and the absence of raw material price escalation [41][44]. * NEOM Project: The NEOM project is a green hydrogen production facility in Saudi Arabia, serving European markets. Air Products is the general contractor, managing engineering, construction, and project delivery [31][37]. * 2024 Earnings: Air Products faced challenges in 2024, including incorrect estimates of the Chinese economy and helium prices. However, the company remains committed to meeting its earnings expectations through cost control and productivity improvements [48][50]. Other Important Content * Tax Credits: Air Products can manage tax credits associated with carbon capture projects, as they can be received as cash in the first five years and traded thereafter [13][15]. * Permitting Process: The federal government's decision to give Louisiana primacy over the permitting process for Class 6 wells is a positive development for the Louisiana project, reducing the time frame for permit approval [23][25]. * Geopolitical Risks: Air Products acknowledges the potential impact of geopolitical events on project timelines, but remains confident in its ability to deliver projects on schedule [40].