Laurent Favre

Laurent Favre asked about Axalta's margin assumptions for the year, specifically regarding sales growth, productivity, pricing, and the margin of safety around raw materials and pricing. He also followed up on regional refinish trends, asking if Europe was seeing top-line deterioration similar to the U.S. and if this was factored into 2026 guidance.

Answer

CFO Carl Anderson outlined revenue assumptions for 2026, including low single-digit price mix growth, flat volumes (down in H1, up in H2), and a low single-digit FX tailwind. He projected EBITDA margins above 22% for 2026, driven by incremental revenue conversion and $30-$40 million in carryover cost actions and productivity gains. CEO Chris Villavarayan clarified that Q4 refinish sales grew in South America, Europe, and Asia, with North America being the primary weakness due to destocking. He expects Q1 volumes to be down, Q2 flat, and Q3/Q4 slightly up, leading to flat to slightly up refinish volumes for the full year 2026.

Laurent Favre (BNP Paribas) questioned the margin assumptions for 2026, given the low single-digit sales growth guidance, and asked about the baked-in margin of safety regarding raw materials and pricing. He also inquired about regional refinish trends, specifically if Europe was experiencing similar top-line deterioration as the U.S., and how this factored into 2026 guidance.

Answer

CFO Carl Anderson outlined that 2026 revenue assumptions include low single-digit price mix, flat volumes (down in H1, increasing in H2), and a low single-digit FX tailwind. He expects EBITDA margins to be above 22%, driven by incremental revenue conversion and $30-$40 million in carryover cost actions from previous initiatives, plus continued productivity gains. CEO Chris Villavarayan confirmed that South America, Europe, and Asia refinish markets grew in Q4 2025 as planned, with Q1 2026 volumes expected down due to destocking, but Q2 flat and Q3/Q4 slightly up, leading to flat to slightly up refinish volumes for the full year.

Laurent Favre inquired about the company's capital allocation priorities, specifically balancing deleveraging, share buybacks, and potential M&A.

Answer

CFO Carl Anderson stated that with net leverage at 2.5x, the priority is allocating capital to share repurchases and opportunistic M&A, as deleveraging will occur naturally. CEO Chrishan Anthon Villavarayan added that the company's focus is now on its 'growth algorithm,' and they will actively look for M&A that adds growth above their current end markets.

Laurent Favre asked about the trajectory of Linde's sale of gas backlog, specifically whether the $5.5 billion figure represents a new norm or if the company aims to return closer to the $7 billion mark in the coming year.

Answer

Sanjiv Lamba, CEO, affirmed the target to return the backlog to the $7 billion mark. He explained that $2.5 billion to $3 billion in projects, including OCI Woodside, are expected to start up and contribute to revenue in 2026, reducing the current backlog. However, he expressed confidence in a strong pipeline of new projects, particularly large fab wins, to replenish and grow the backlog.

Laurent Favre questioned the trajectory of Linde's sale of gas backlog, specifically if the $5.5 billion level after the Beaumont startup is the new norm or if the company aims to return closer to $7 billion in the next year.

Answer

Sanjiv Lamba, CEO, affirmed the target to return towards the $7 billion backlog mark. He explained that in 2026, projects valued between $2.5 billion and $3 billion, including OCI and Woodside, are expected to start up and contribute to revenue and earnings. He expressed confidence in the current project pipeline and anticipated large new fab wins to replenish the backlog.

Laurent Favre asked about Linde's project backlog, specifically the expectation to defend the $7 billion target by year-end despite Q3 startups, and the potential for new project intake in Q4. He also inquired about opportunities in traditional metals and steel projects in the U.S., separate from electronics and decarbonization.

Answer

Sanjiv Lamba, CEO, confirmed that Linde is on track to maintain a $7 billion backlog by year-end, even with $1 billion in project startups. He also noted that tariffs are driving continued expansion opportunities in the U.S. steel and metals sectors, where Linde is well-positioned to supply gas for new projects.

Laurent Favre from BNP Paribas inquired about the company's project backlog, specifically asking if Linde expects to maintain a $7 billion backlog by year-end despite project startups and if significant new projects are anticipated in Q4. He also asked about new opportunities in the U.S. steel and metals sector, distinguishing them from electronics and decarbonization projects.

Answer

CEO Sanjiv Lamba confirmed that Linde is on track to end the year with a $7 billion backlog, even after starting up $1 billion in projects. He also noted that tariffs are driving continued expansion opportunities in the U.S. steel and metals sector, where Linde is well-positioned with key players for new expansion projects and increased gas demand.

Laurent Favre of BNP Paribas questioned the customer appetite for new projects amid the weak macro backdrop and asked if there was a risk of the project backlog finishing the year below $7 billion.

Answer

CEO Sanjiv Lamba reaffirmed his expectation that the backlog will end the year with a 'seven handle' (i.e., above $7 billion). He stated this is despite another $1 billion in projects starting up in the second half, expressing confidence that the opportunity pipeline will yield sufficient new wins to replenish and grow the backlog.

Laurent Favre of BNP Paribas asked about the risk of delays for projects currently in the backlog and sought details on where Linde sees the strongest commitment for new projects by geography or end market.

Answer

Sanjiv Lamba, CEO, provided a detailed geographic outlook, expecting flattish volumes in the Americas, continued softening in Europe, and a mixed performance in APAC, with India as a bright spot. He noted that new project wins are being driven by secular growth in electronics, as well as opportunities in metals and chemicals, particularly in Asia.

Laurent Favre of BNP Paribas questioned the flat organic growth in the healthcare business during 2024 and the outlook for 2025. He also asked for an update on new project wins in the electronics sector.

Answer

CEO Sanjiv Lamba attributed the flat healthcare performance to portfolio rationalization in the U.S. homecare business. He expects the segment to return to its typical low-to-mid-single-digit growth after these actions are lapped. Regarding electronics, he confirmed it represents 20% of the record sale of gas backlog and that new project wins would be announced shortly.

Laurent Favre inquired about PPG's M&A strategy, specifically whether 2026 would be a quiet year for share buybacks while awaiting clarity on potential asset divestitures from recent announcements in Germany, Amsterdam, and Philadelphia, which are expected in H2 2027.

Answer

Chairman and CEO Tim Knavish stated that 2026 would not be a quiet year for buybacks. He emphasized PPG's strong balance sheet provides optionality to pursue potential spin-offs in 2027 without impacting the ability to conduct buybacks in 2026. He noted PPG's track record of nine consecutive quarters of buybacks and a disciplined quarterly review process for capital allocation decisions.

Laurent Favre asked if the potential for assets to be spun out from recent industry announcements in Germany, Amsterdam, and Philadelphia would lead to a quiet year for buybacks in 2026 as PPG awaits clarity on these M&A opportunities.

Answer

Chairman and CEO Tim Knavish stated that PPG's strong balance sheet provides optionality for both potential M&A (from assets spun out of other deals) and continued share buybacks in 2026. He emphasized that the company evaluates buybacks quarterly and is not concerned about its ability to pursue both if opportunities arise.

Laurent Favre of BNP Paribas asked about PPG's capital allocation strategy, specifically the intention and intensity of share buybacks, given the current market uncertainty and the company not proceeding with a recent acquisition.

Answer

CEO Timothy Knavish reiterated that PPG's strategy has shifted to prioritize organic growth over M&A. He noted the price for a recent asset was not right. Regarding buybacks, he highlighted the six straight quarters of repurchases as the best use of cash and stated that while he won't commit to a specific number due to market variability, the same decision-making process should be expected to continue.

Laurent Favre asked about the outlook for the Aerospace business, considering the ongoing headlines about potential slowdowns at major OEMs.

Answer

Chairman and CEO Timothy Knavish stated that PPG is not seeing a slowdown, citing a large order backlog and red-hot military demand that allows for production flexibility. He projected high single-digit growth for Q4 and another 'outstanding year' in 2025. SVP and CFO Vince Morales added that any moderation in growth rate is due to the law of large numbers, not a weakening of the robust industry fundamentals.

Laurent Favre of BNP Paribas asked about planned changes to the organization, management structure, and incentives. He also questioned if the company was considering any divestitures of specific business lines or country operations as part of its capital allocation review.

Answer

CEO Eduardo Menezes indicated that while there will be ongoing changes, no drastic restructurings are planned. He acknowledged the employee reductions are difficult but necessary. On divestitures, Menezes gave a firm 'no' to selling any major operations, such as the South Korean business, stating that while very small, non-strategic positions could be considered, the company is committed to its core industrial gas footprint.

Laurent Favre of BNP Paribas questioned the nature of the R&D cost reductions, asking if the savings were temporary or represented a structural shift in the company's investment strategy.

Answer

Pierre Brondeau, Chairman and CEO, described the R&D savings as sustainable. He explained they stem from a more disciplined discovery process, better screening tools, and improved governance to eliminate duplication between central and regional R&D. He assured that these changes do not impact the launch of key new products.

Asked about the commercial structure of soda ash contracts and related energy hedging, the phasing of the Green River expansion, and Solvay's potential CapEx for the Neom project.

Answer

Soda ash contracts are ~30% long-term, 50% annual (mainly Europe), and the rest shorter-term (seaborne/Asia). The Green River expansion is ongoing and will be ready in 2025 for the export market. The Neom project will be done in partnership with a low CapEx contribution from Solvay, starting with a 0.5 million ton tranche. On energy, they use energy adjustment clauses in contracts, limiting both upside and downside from price swings, and manage exposure dynamically.

Laurent Favre of BNP Paribas asked for an update on plant utilization rates at the end of Q2, comparing Europe with the rest of the world, and whether lower European production could be offset elsewhere.

Answer

Mike Graff, Executive VP, reported very high utilization rates in the Americas across chemicals, steel, and refining. Francois Jackow, Executive VP, noted high utilization in Asia, particularly in a tight China market. Pascal Vinet, SVP, stated that European utilization rates have not seen significant changes, with solid volumes despite slightly lower activity in steel and chemicals due to customer turnarounds.