Matthew Deyoe

Matthew De Yoe from Bank of America asked about the impact of potential new urea capacity in China and the ultimate market size for blue and green ammonia in Asian energy and shipping markets.

Answer

EVP & COO Christopher Bohn (Note: The transcript attributes this to Bohn, but it was likely Bert Frost and others) noted that new Chinese capacity often replaces older, inefficient plants. He reiterated that global demand growth outpaces new supply, tightening the market. Regarding low-carbon ammonia, he estimated a 3-million-ton market by 2030 for Asian power generation, with growing interest from marine and other sectors.

Matthew DeYoe asked about Air Products' performance in Europe compared to Linde, specifically regarding pricing and margin differentials, and the potential to close this gap. He also asked if the $2 billion sunk cost in the Darrow (Louisiana) project could be monetized to another company, potentially recovering 50% of the investment.

Answer

Eduardo Menezes, CEO, acknowledged reports on European pricing but suggested that comparisons can vary based on calculation methods. He explained Europe's fragmented market structure influences margin differences and affirmed that Air Products is not giving back price. Regarding Darrow, Mr. Menezes confirmed that if the project is canceled, monetizing the critical equipment and assets is a definite possibility, and a 50% recovery estimate is not unreasonable, though the exact amount would need assessment.

Matthew DeYoe from Bank of America raised concerns about Air Products' European pricing performance relative to Linde, suggesting price underperformance when electricity costs declined, and asked if there's an opportunity to close this gap. He also inquired about the possibility of monetizing the $2 billion sunk cost in the Darrow (Louisiana) project to another company if Air Products decides not to proceed.

Answer

CEO Eduardo Menezes disputed the direct comparison on European pricing, citing the fragmented nature of European markets and differing competitive positions, while affirming that Air Products is actively managing pricing and not conceding ground. Regarding the Darrow (Louisiana) project, Menezes confirmed that if the project were canceled, Air Products would seek to monetize the sunk costs, suggesting that a 50% recovery estimate is reasonable.

Matthew Deyoe of Bank of America asked for clarification on the company's five-year roadmap, questioning why the NEOM project, which starts in 2027, is shown as a key driver for the 2030 financial profile.

Answer

CEO Eduardo Menezes clarified that the 2030 earnings potential is more significantly driven by the Total Energies contract, which is scheduled to come online in 2030. He confirmed the NEOM project remains on track for a 2027 startup, and the company is actively working to commercialize its green ammonia output.

Matthew DeYoe requested a more granular breakdown of the pro forma Industrials Co. organic sales, specifically parsing out volume and price in healthcare and water versus diversified industrials, considering the pull-forward effect. He also asked for the construction business's comping rate in Q3 and Q4.

Answer

Antonella Franzen, Chief Financial Officer, stated that on a reported basis, healthcare and water were up high single digits (mid-single digits adjusted for pull-forward), while diversified industrials were up low single digits (relatively flat adjusted for pull-forward). She added that the shelter business was down around 2% in Q3 and expected to be down 3-4% in Q4, with the first half of the year seeing a larger decline than the second half.

Matthew DeYoe asked for more granularity on Industrial Co.'s organic sales, specifically breaking down volume and price in healthcare/water versus diversified industrials, and the performance of the construction business in Q3 and Q4.

Answer

CFO Antonella Franzen clarified that on a reported basis, healthcare and water were up high single digits (mid-single digits adjusted for pull-forward), while diversified industrials were up low single digits (relatively flat adjusted for pull-forward). She noted the shelter business was down around 2% in Q3 and is expected to be down 3-4% in Q4, with the full year down about 4%.

Matthew Deo asked about the strong incremental margins on volumes for crop chemicals despite price mix headwinds. He also posed a long-term strategic question about the seed company business model 15 years out, considering lower barriers to entry with gene editing, and whether it might evolve to resemble a CPG company that acquires and markets smaller technology brands, and how this aligns with R&D budgeting.

Answer

EVP of Crop Protection Business Unit Robert King attributed strong incremental margins to the strategic shift towards profitability, focusing on growth levers like new products and biologicals, which offer 10-15% margin advantages and are growing faster. He also cited significant productivity gains from network optimization, delivering $200 million in productivity this year. CEO Chuck Magro addressed the gene editing question, stating that while gene editing tools will be widely available, differentiation will come from germplasm, the capability to gene edit, and the expensive, difficult global seed production supply chain. He anticipates more partnerships due to these requirements, transforming farming and helping farmers, rather than a CPG-like model.

Matthew Deo asked about the strong incremental margins on volumes for crop chemicals despite price mix headwinds, and how the seed company business model might evolve over the next 15 years with gene editing, potentially becoming more like a CPG company that acquires and markets smaller technology brands, and its implications for R&D budgeting.

Answer

CEO Chuck Magro addressed the gene editing question, expressing excitement for its potential to transform farming, but emphasized that differentiation will remain in germplasm and global supply chain capabilities, likely leading to more partnerships rather than a CPG-like model. He highlighted the disease super locus as an example. EVP of Crop Protection Business Unit Robert King explained the strong incremental margins on volumes by pointing to the strategy shift towards profitability, growth in higher-margin new products and biologicals (both double-digit growth), and significant productivity gains from network optimization, delivering $200 million in productivity this year.

Matthew Deyoe of Bank of America asked if Corteva benefited from the absence of dicamba, its view on a potential return, and whether the strong Crop Protection margin is sustainable into the third quarter.

Answer

EVP Judd O’Connor stated that while there was likely a benefit, the Enlist system was already gaining significant share and can compete effectively if dicamba returns. EVP Robert King affirmed that CP margins are sustainable, supported by ongoing cost reductions and a favorable mix shift to new products and biologicals.

Matthew DeYoe asked for clarification on the implied Q4 2025 guidance, specifically the deceleration in year-over-year growth, and whether it's due to seasonality, regional mix, or higher costs.

Answer

SVP of Finance and CFO Al Mistysyn explained that the Q4 sales guide (consolidated up low to mid, Paint Stores Group up low to mid) reflects normal seasonality. He noted that Q3's stronger exterior gallon sales contributed to beating forecasts, and Q4's smaller sequential size means exterior sales will be dependent on Southeast and Southwest performance. He indicated no dramatic changes are expected, with a similar outlook across other segments.

Matthew DeYoe asked for an explanation of the implied fourth-quarter guidance, specifically addressing the expected deceleration in year-over-year growth. He questioned whether this deceleration is primarily due to seasonal factors, regional mix issues, or other factors such as higher costs or a general slowdown.

Answer

Al Mistysyn, SVP of Finance and CFO, stated that consolidated sales for the fourth quarter are expected to be up low to mid-single digits, with the Paint Stores Group also in that range. He attributed the third-quarter beat to stronger exterior gallon sales and noted that the fourth quarter is seasonally smaller, with exterior sales heavily dependent on weather in the Southeast and Southwest. He concluded that there is 'nothing dramatically changed' or to 'read into that' beyond these exterior sales dynamics.

Matthew DeYoe asked about internal discussions regarding a dividend, board receptiveness, and how Axalta's appetite for acquisitions changes given its current valuation.

Answer

Carl Anderson, SVP and CFO, stated that Axalta sees tremendous value in its stock, leading to significant share repurchases, including up to $250 million in Q4. He noted that a dividend is a board decision, likely to be discussed more when the next plan launches. Anderson added that current trading multiples make M&A more challenging, hence the pivot to share repurchases. Chris Villavarayan, CEO and President, emphasized that confidence in achieving the $1.2 billion adjusted EBITDA target for 2026 reinforces the focus on buying back Axalta stock.

Matthew DeYoe of Bank of America questioned why, given the success of the 'A Plan' and a peer's internal focus, now isn't the time for a more structural portfolio move. He also asked how Axalta achieved positive OEM auto pricing amid reports of index-based declines.

Answer

President and CEO Chris Villavarayan responded that the priority was first to strengthen the company's operational and margin foundation, which has been achieved. He indicated a new strategic plan for 2029 will be unveiled in early 2026, addressing portfolio and growth. CFO Carl Anderson explained the positive OEM pricing resulted from about eight discrete, well-executed actions across all regions, noting that even without these one-time benefits, Mobility margins exceeded 18%.

Matthew Deo questioned if the polyethylene (PE) demand multiplier has been diluted, citing domestic sales below expectations and GDP, and how to reconcile lower inventories with industry rate reductions. He also asked if U.S. assets might need to de-rate if European capacity rationalization stalls.

Answer

Chair and CEO Jim Fitterling acknowledged that while the PE multiplier might mature to a lower range (e.g., 1.2x GDP), he doesn't believe it has fundamentally shifted. He emphasized that product mix, with Dow's focus on elastomers, functional polymers, and flexible packaging, plays a role. Fitterling also highlighted that the supply chain is currently operating hand-to-mouth with low inventory, and the larger question involves rebalancing trade and bringing sidelined participants back into the market, rather than a fundamental shift in the multiplier.

Matthew Deo questioned if the polyethylene (PE) demand multiplier has been diluted, citing domestic sales growth below GDP, and sought clarification on inventory drawdowns occurring due to lower industry operating rates. He also asked if U.S. assets might need to de-rate if European capacity isn't removed and new capacity continues to be added elsewhere.

Answer

Jim Fitterling, Chair and Chief Executive Officer, clarified that domestic sales and production are distinct. He believes the PE multiplier remains around 1.4x GDP, potentially maturing to 1.2x. He highlighted Dow's product mix, including elastomers and flexible packaging. He asserted that the world has sufficient isocyanates capacity, and the primary issues are trade rebalancing and market participants remaining on the sidelines. He emphasized a 'hand-to-mouth' supply chain with minimal inventory build and concluded that the high-level GDP multiplier has not fundamentally shifted.

Matthew Deyoe of Bank of America sought clarity on the weak retail seed sales in the first half, asking about the price versus volume dynamics and the likelihood of recovering that volume next year.

Answer

EVP & President - Global Retail Jeff Tarsi attributed the weakness entirely to two volume-related factors: significant 'prevent plant' acres in the Southern U.S. due to historic wet weather and a crop mix shift from cotton to lower-revenue sorghum. He stated he expects 100% of the 'prevent plant' volume to return next year with normal weather, while the cotton acreage recovery will depend on commodity prices.

Matthew Deyoe from Bank of America questioned if Westlake's long-term strategy as a net short ethylene buyer is changing given rising prices and peers securing supply. He also asked for an explanation for the high decremental margin in the HIP segment, which appeared to be around 80%.

Answer

President & CEO Jean-Marc Gilson responded that while Westlake is currently comfortable with its short ethylene position, the company remains open to opportunities to reduce that short position depending on market conditions. EVP & CFO Steven Bender attributed the year-over-year HIP volume decline, which drove the decremental margin, to lower activity in the Compounds and Exterior Building Products businesses.

Matthew Deyoe of Bank of America sought clarification on the O&P Americas operating rate guidance and questioned the reasons for the Technology segment's year-over-year EBITDA decline despite higher volumes.

Answer

EVP Kim Foley clarified that the 90% rate was for crackers, while the 85% target is for the entire segment, allowing for mix optimization. CEO Peter Vanacker explained the Technology segment was impacted by dramatically lower licensing demand and a one-time 'low double million' EBITDA hit from an inventory and currency correction on the catalyst side, which is not expected to recur.

Matthew Deyoe of Bank of America asked for a deeper dive on Europe, questioning if on-site customer volumes are at their contractual minimums and what the long-term impact of regional deindustrialization might be.

Answer

CEO Sanjiv Lamba confirmed a bearish short-term view on Europe but noted that all on-site customers below their minimum take-or-pay volumes are paying as contracted. For the long term, he pointed to Germany's €1 trillion investment in defense and infrastructure and the eventual Ukraine rebuild as potential catalysts that could change the industrial outlook, though he remains cautious on the timing.

Matthew Deyoe from Bank of America asked for a breakdown of the puts and takes on price, raw materials, and cost cuts for the second half, noting that the expected cost savings seemed like they should drive more margin improvement.

Answer

CFO Vince Morales clarified that the previously announced $75 million in restructuring benefits is a full-year target. With approximately $30 million realized in the first half, the second half will see an incremental benefit, but not the full $75 million. He also noted that some incremental pricing actions taken in Q2 are expected to benefit results in the second half.

Matthew Deyoe from Bank of America requested a breakdown of the puts and takes for margins in the second half, questioning why the previously mentioned cost savings didn't seem to be driving a larger margin uplift.

Answer

CFO Vince Morales clarified that the $75 million in restructuring benefits is a full-year target, not an incremental amount for the second half. With about $30 million realized in H1, the remainder will contribute to H2 performance. He also noted that incremental pricing actions taken in Q2 are expected to benefit the second half.

On behalf of Matthew Deo from Bank of America, a question was asked for clarification on the assumptions behind the updated guidance range and for an update on resolving production bottlenecks for Cuprion.

Answer

EVP & CFO Carey Dorman explained the guidance range is wide due to uncertainty around potential tariff impacts, with the high end assuming strong EV and smartphone activity. President & CEO Benjamin Gliklich added that the primary focus for Cuprion is scaling manufacturing, with the first production line expected to be commissioned by year-end to relieve the initial bottleneck.

Matthew Deyoe from Bank of America asked for details on the strong Life Sciences margin in Q2 and the reason for the expected decline back to the mid-teens level in subsequent quarters.

Answer

Christophe Beck, Chairman & CEO, attributed the strong Q2 margin to a favorable mix from high-growth, high-margin biopharma sales. He explained the expected moderation is a deliberate strategy: the business's underlying margin is in the mid-20s, but Ecolab is reinvesting the difference to fuel long-term growth in R&D, capacity, and sales capabilities to capture its significant market opportunity.

Matthew Deyoe from Bank of America challenged the company's value creation narrative by pointing out that the ECU index in Q2 2025 was not far below 2021-2022 levels, yet segment EBITDA was dramatically lower.

Answer

President and CEO Ken Lane clarified that the index is intended to demonstrate the stability of ECU values at the trough, which is a key goal of the company's value-focused commercial model. He attributed the EBITDA difference to being at trough demand levels for seven consecutive quarters, a stark contrast to the market ramp-up seen in late 2021. The current strategy is to maintain discipline and value through these prolonged trough conditions.

Matthew Deyoe from Bank of America inquired about the impact of the data center and AI build-out on the flooring business and sought clarification on the expected revenue and EBITDA contribution from recent acquisitions.

Answer

Chairman & CEO Frank Sullivan acknowledged that RPM is seeing benefits from data center construction, particularly in its Fibergrate business, but feels there are more opportunities to capture. VP & CFO Russell Gordon confirmed the annualized revenue for The Pink Stuff is £150 million and Ready Seal is $40 million, noting that acquisition-related deal costs were elevated in Q4 and will continue to be in Q1.