Linde PLC (LIN)

• Linde has a strong project backlog, including significant projects like the $2 billion investment with Dow Chemical, which provides secure, contracted growth and is expected to contribute 1% to 3% of EPS growth through about 30 project startups over the year. - -
• Linde leverages its technological expertise and innovative solutions to secure large-scale decaptivation opportunities and low-carbon hydrogen projects, enhancing network density and creating value, as demonstrated by recent decaptivation of assets in India. - -
• Linde continues to demonstrate strong pricing power across its base gases in the merchant and packaged gases businesses, sustaining positive pricing even in challenging economic conditions. -

• Linde is experiencing mid-single-digit declines in hard goods sales, reflecting a broader industrial weakness in manufacturing sectors globally. -
• The company anticipates continued economic weakness, with no meaningful catalysts for improvement, and has initiated targeted cost reductions affecting approximately 2% of its global workforce. -
• Recovery in the electronics sector is moving slower than expected, indicating potential challenges in this key market segment. -

1. Economic Contraction Guidance
   Q: Where are you seeing macro pressures today?
   A: We are seeing pressures in the European market, reflected in volume developments. - In China, the underlying industrial progression is not reflecting the stimulus, and we are unlikely to see a catalyst for change in the near term. - However, North America, primarily the U.S., has been resilient thus far. - Other bright spots include India and Mexico, where we are seeing consistent growth. -

2. Q4 Volume Outlook
   Q: Does Q4 contraction reflect seasonal slowdowns or more?
   A: The expected economic contraction in Q4 is across base organic volumes and not seasonal. - We view it as a sequential contraction due to macroeconomic pressures. - Extended outages could indicate weakness as customers may not have the order intake or workload. - We are taking actions around it and getting ahead to prepare. -

3. Capital Allocation and Buybacks
   Q: Will capital allocation split change in 2025-2026?
   A: No, our capital allocation policy remains consistent. - After maintaining a single A credit rating and raising the dividend every year, our priority is to invest in the business using our investment criteria. - With the increase in our sale of gas backlog to $7 billion, we'll allocate more CapEx to build these projects. - We expect buybacks to be consistent next year with this year. -

4. Project Backlog and Growth
   Q: Can you discuss the path to $8–10 billion investment?
   A: We have signed up about half of the $8–10 billion target between OCI and Dow Phase I. - We are doing front-end work on several projects and feel confident about reaching our target over the next few years. - Despite some cancellations in the industry, we remain selective and focused on low-carbon hydrogen projects, where technology is mature and returns are promising. -

5. Cost Reduction Impact on EPS
   Q: Will new cost reductions lift EPS by 1–2%?
   A: We expect this action to provide a roughly one-year return. - The full run rate will take effect in the second half of next year, and we anticipate the majority of the benefit in 2025. - This is incremental and part of our management actions to get ahead in a weaker macro environment. -

6. Electronics Business Outlook
   Q: What happened with electronics sales this quarter?
   A: Electronics sales were up 9% year-on-year. - Sequentially, gas sales were up, but our advanced materials business saw some destocking in electronics components during the quarter. - We expect this to normalize in Q4, leading to solid sequential growth. -

7. European Industry Risks
   Q: Any concerns about European customer shutdowns?
   A: We have not heard from any major customers in Europe discussing major closures. - We are tracking the situation closely, but our solid contracts protect our investments if customers decide on shutdowns. -

8. Healthcare Business Pruning
   Q: What's the status of healthcare portfolio pruning?
   A: The pruning of our home care business, largely in the U.S., is expected to be completed by the end of the year. - We anticipate structural growth rates between low single-digit to mid-single-digit in healthcare moving forward. - We continuously evaluate our portfolio and will consider further divestments as needed. -

9. Decaptivation Opportunities
   Q: Are you seeing more decaptivation opportunities?
   A: We assess 8 to 10 decaptivation opportunities globally each year and are selective. - The recent decaptivation of two ASUs in India allowed us to integrate them into our network, enhancing network density and creating value. -

10. ATR Design and Hydrogen Network
    Q: Have you designed an ATR like this before?
    A: Yes, we have designed and operated ATRs before, including one in La Porte, Texas. - We are building similar technology at OCI. - We plan to leverage our established footprint to build a significant hydrogen network in Alberta, promoting network density and value creation. -

11. Pricing and Margin Outlook
    Q: Did price/mix grow sequentially in packaged and merchant?
    A: We continue to see positive sequential and year-over-year pricing in our merchant and packaged gases. - Pricing in merchant and package is about double the global number we report. - Helium pricing is slightly declining to flat, but overall, our pricing tracks with the globally weighted CPI in our regions. -

12. Hard Goods Demand and Consumer Behavior
    Q: How is hard goods demand and customer behavior?
    A: We are seeing mid-single-digit declines in hard goods sales, reflecting industrial weakness, particularly in manufacturing. - Globally, consumers are cautious on large spending due to economic uncertainties. - In the U.S., while consumer behavior has been strong, we are seeing signals of concern, like rising delinquencies on auto loans. -

13. Initial View on 2025
    Q: Will 1H '25 be similar to 2H '24?
    A: We will come back in February to provide a comprehensive view on 2025. - We are currently planning and will share more details at that time. -

14. Dow Project Phase II
    Q: Will Dow Phase II be larger than Phase I?
    A: We expect the investment in Dow Phase II to be a little bit lower than in the first phase. - We have done initial planning, and the decision will be made over the agreed timeline. -

15. Portfolio Management
    Q: Any plans to divest in other regions?
    A: We continuously evaluate our portfolio and consider divestments where appropriate. - We have a healthy pipeline of tuck-in acquisitions and will continue to optimize our portfolio for value creation. -

16. Sale of Gas Backlog Timing
    Q: What's the timing on new backlog projects?
    A: Traditional projects take about 3 years from announcement to completion. - Larger clean energy projects, like Dow, may take 4 years plus due to scope. - The remainder of the backlog follows a more normalized timeline. -

Quarterly guidance for Q4 2024:

• EPS: $3.86 to $3.96 - (no prior guidance)

Annual guidance for FY 2024:

• EPS: $15.40 to $15.50 - (lowered from $15.40 to $15.60 - )