Good morning, and welcome to Air Products and Chemicals First Quarter Earnings Release Conference Call. Today's call is being recorded at the request of Air Products. Please note, that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products, and all rights are reserved.

Thank you, LeAnn. Good morning, everyone. Welcome to Air Products first quarter 2021 earnings results teleconference. This is Simon Moore, Vice President of Investor Relations, Corporate Relations and Sustainability. I'm pleased to be joined today by Seifi Ghasemi, our Chairman, President and CEO; Scott Crocco, our Executive Vice President and Chief Financial Officer; and Sean Major, our Executive Vice President, General Counsel and Secretary. After our comments, we will be pleased to take your questions. Our earnings release and the slides for this call are available on our website at airproducts.com. This discussion contains forward-looking statements. Please refer to the forward-looking statement disclosure that can be found in our earnings release and on slide number two. In addition, throughout today's discussion, we will refer to various financial measures. Unless we specifically state otherwise when we refer to earnings per share, EBITDA, EBITDA margin and ROCE both on a companywide and segment basis, we are referring to our adjusted non-GAAP financial measures, adjusted earnings per share, adjusted EBITDA, adjusted EBITDA margin and return on capital employed. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found on our website in the relevant earnings release section. Now, I'm pleased to turn the call over to Seifi.

Thank you, Simon, and good day to everyone. We thank you for taking time from your busy schedule to be on our call today. We are living at a time when all humanity faces significant challenges. The most important and immediate one is the battle against the deadly virus that has already taken many lives and continues to ravage communities around the globe. We can only fight this deadly and global virus if we work together and stay united. In my more than 45 years in business, I have learned that all problems, no matter how challenging, can be solved if we stay focused and united working to our common goal. So, it is in this spirit of working together as a team that I want to acknowledge the united and extraordinary efforts of all the talented, committed and resilient people of Air Products around the world. They work hard every day to provide critical products and services to our customers. Our people working in solidarity and in a determined way have made it possible for us to keep our 750 facilities around the world operating during this unprecedented crisis.

Thank you, Seifi. As Seifi stated earlier, our company continued to demonstrate resilience, delivering both higher sales and EBITDA this quarter despite the challenges of the pandemic. Our business, which is about half on-site, continued to deliver stable cash flow in-spite of the difficult conditions continuing around the world. Now, please turn to slide 13 for a brief discussion of our first quarter results. Sales of $2.4 billion were up 5% compared to prior year driven by strong price, higher energy pass-through and a positive currency impact. Price actions continue to be an area of focus for us and improved in all three regions. This is the 14th consecutive quarter of year-over-year price gain. Volume was relatively stable, down 1% as the additions of new plants, acquisitions and increased sale of equipment activities were more than offset by COVID-19 impacts and the reduced Lu'An contribution that Seifi mentioned. EBITDA of $932 million was up 3%, as favorable price, currency and equity affiliate income more than offset the impact of lower volume and higher costs, primarily due to higher planned maintenance outages. EBITDA margin declined about 100 basis points as lower volumes, including Lu'An and higher costs driven by increased planned maintenance in North America more than offset the positive price impact. Operating income was 4% lower, while EBITDA was higher compared to last year, largely due to depreciation on new plants, particularly the PBF hydrogen plants that we acquired last year.

Thank you, Scott. Now please turn to slide number 17 for our Asia results. Compared to last year, currency, price and energy pass-through resulted in a 4% increase in sales despite weaker volumes. Currency favorable across most key countries contributed 6%. Overall price rose 1% for the region, which represents a 3% increase for merchant products. I'd like to remind you that pricing was positive for Asia for the 15th consecutive quarter and particularly strong in Korea and Taiwan this quarter. Volumes were down 4% with new plants more than offset by Lu'An, while the merchant business remained stable. Despite the impact of lower volumes, the strong price and favorable currencies kept EBITDA -- we kept EBITDA relatively stable. EBITDA margin at almost 48% was 240 basis points lower, primarily driven by lower volumes mostly from Lu'An. Sequentially, sales were up 1% with favorable currencies more than offsetting the weaker volumes. EBITDA increased 4% primarily driven by lower costs, while favorable currency offset the negative impact of weaker volumes. Now, I would like to turn the call back over to Scott to talk about our Americas results.

Thank you, Seifi. Please turn to slide 18 for a review of our Americas results. Sales were flat compared to last year. Higher price and energy pass-through were offset by lower volumes. Price was again better across all major product lines. The 3% increase for the region was equivalent to 7% for merchant. This is the 10th consecutive quarter of year-on-year price improvement. Volume was down primarily due to the impact of COVID-19, but partially offset by the PBF acquisition. EBITDA of $400 million was 2% below last year's level, as better price and the PBF acquisition were offset by the volume shortfall and higher maintenance costs. For the quarter, although Americas planned maintenance was higher than last year, it is consistent with what we expect in Q2. EBITDA margin dipped 90 basis points with a negative 80 basis point impact from higher energy pass-through, while the unfavorable cost impact was largely offset by other favorable factors, including price and acquisitions. Now, I'll make some comments on our sequential results. Sales increased 2% as higher energy pass-through and positive price overcame negative volume. Price was up across all major product lines, while volume was weaker, primarily due to seasonality. EBITDA declined 3% as weaker volume was partially offset by better price. Margin was down primarily on higher energy pass-through, which had about a 200 basis point impact. Now, I'd like to turn the call back over to Simon to discuss our other segments. Simon?

Thank you, Scott. Now, please turn to slide 19 for a review of our Europe, Middle East and Africa region results. Our EMEA team delivered outstanding results this quarter. Both sales and profits grew double-digit compared to both last year and last quarter. Price, volume and currency were all favorable and contributed to the 13% year-on-year sales growth. Volumes grew 5%, principally due to acquisitions and higher on-site volumes, which offset the adverse impact of COVID-19 predominantly in our packaged gas business. Price increased 3% for the region and 4% for merchant, with improvement across most major product lines and sub-regions. This is the 12th consecutive quarter of year-on-year price improvement. Currencies were favorable 6%, primarily due to the euro strength versus the US dollar. EBITDA surged 18% to more than $220 million, supported by price increases, favorable currency and acquisitions. EBITDA margin improved 170 basis points. Sequentially, volume improvement was driven by a modest COVID-19-related recovery in our merchant business, acquisitions and higher on-site volumes. EBITDA was also up sequentially and margins remained about flat. Now, please turn to slide 20, global gases, which includes our non-LNG sale of equipment business as well as central costs. Sales increased due to higher sale of equipment projects activity, but profit was lower due to business mix and higher product development spending. As mentioned earlier, we also benefited from the settlement of a supply contract, which offset the gains in project activities last year. Please turn to slide 21, corporate, which includes LNG and other businesses as well as our corporate costs. Sales and profits were higher this quarter versus prior year, driven by LNG project activities as we continued to execute multiple large projects, including Golden Pass and Mozambique, and the massive Qatargas project also began to contribute this quarter. Sales and profits were both down versus prior quarter, primarily due to timing of percent complete activity on the LNG projects. We were excited to announce another new project earlier this week for the Energia Costa Azul LNG export terminal in Ensenada, Mexico. This represents the fourth LNG project we've announced in the last year. Now, to provide some additional thoughts, I will turn the call back over to Seifi.

Thank you, Simon. Now, please go to slide number 22. As we look forward, unfortunately, we do not expect the COVID-19 global crisis to moderate anytime soon. This will continue to have a negative impact on the economies of most of the countries we operate. We have confidence that the vaccine will help to reverse the course, but the rollout is still in earlier stages and the pace of vaccination is hard to predict. As a result, we continue to find it very difficult to make any reasonable projections about the course of economic activity around the world. Therefore, we are not providing EPS guidance or CapEx guidance for quarter two or for our fiscal year 2021 at this time. We hope the outlook will be less uncertain in April. And if so, we look forward to providing you guidance then. However, I want to share with you what we are seeing so far this quarter, that is in the month of January and as of today in February. Representing about half of our sales, our on-site business has been stable and we expect this to continue. With respect to our merchant business, in Asia, our merchant volumes are down slightly versus where they were at the same time last year, which is before the virus crisis began. So, the volumes have reached almost pre-crisis levels. In Europe, we are off to a weaker start, following the holiday season, and continue to see a larger impact on our packaged gases business versus the liquid bulk business. In Americas, merchant volumes remained down, and I would like to remind you again that we do not have a packaged gas business in North America. As we move forward, we remain committed to executing our growth strategy, providing sustainable solutions to help the…

Thank you. And we'll take our first question from Duffy Fischer with Barclays.

Yes. Good morning, guys. Two questions on two of your big projects. First one on Lu'An. With the renegotiation of the contract, do the economics change at all once the plant goes back up and running? And then the second one is just around NEOM. And on that one, when should we see the ground breaking kind of by segment, so when should we see the solar and the wind farm start, when will we see the ammonia plant start and then when will we see the electrolyzer start? If you think about that, kind of what's the timing of those relative to each other? And then maybe just the last one tied on there, have you already ordered long lead time equipment for the NEOM project?

Good morning, Duffy. Thank you for your question. With respect to Lu'An, we -- as I said, we have negotiated a reduction of fixed fee during the time the plant is shut down, but Lu'An has agreed to extend the contract. So, once the plant comes back on stream, our overall return will be a little bit better than before. The second thing is that with respect to NEOM, we are finalizing the agreements and all of that, you know how it is, and doing pre-engineering and all of that. We hope to break ground sometime in May, June timeframe. And we have ordered some of the long-term items, we are in the process of doing that in a very -- in the next few days.

Great.

And we expect, obviously, then everything to come on stream as we go forward for startup in 2025.

Terrific. Thanks, guys.

Okay, Duffy?

You bet. Thank you.

And we'll take our next question from Kevin McCarthy with Vertical Research Partners.

Yes. Good morning. Seifi, as you consider future projects in China based on your experience with Lu'An, do you anticipate increasing a sovereign premium or your hurdle rate as you evaluate future projects? And then I had a second question on volume. What was the impact from Lu'An in the quarter? And I think you also mentioned an impact from lower sale of equipment affecting volume in the quarter, if you could quantify that as well, it would be helpful. Thank you very much.

Thank you, Kevin. First of all, I mean, you -- the way you are asking the question about Lu'An as it is something that -- I mean, Lu'An is a specific case. We have gone through that with you in terms of what is happening. We do have four other gasification projects in China, they are operating, there is no issue, we have been paid for the past few years and we continue to being -- continue that. And with Lu'An, the fact that we agreed to a decrease while the plant is shut down is a sign that we are trying to work with the customer because there is a lot -- plenty of new opportunities. So, there is no change in our view about investing in China. We have had an excellent experience. We are having EBITDA margins of 48%. We see significant opportunities. That is the economy of the future, and to ignore it would be really short-sighted. And, therefore, we are -- we continue to be committed to that country the way we have been before. With respect to exactly quantifying those two numbers that you want to do, I'm hesitant to do that because then we will tell you exactly what are the terms and conditions of our contract with Lu'An and with sale of equipment, and that is not very wise for us to do that. I hope you give us a pass on that.

Okay, fair enough. Thank you.

Thank you. Thank you, Kevin.

And we'll take our next question from Vincent Andrews with Morgan Stanley.

Thank you, and good morning, everyone. If I could just ask Seifi, as we're about to go into a period of time where we're going to start lapping COVID, it sounds like you still have some concerns about what that impact could be and so we shouldn't think of it as being maybe a tailwind for you in the coming quarters as we go through the harder parts of that. Is that correct or is there some other things or risks that you see in the outlook? So, that would be my first questions. Thank you.

Vincent, good morning, first of all. Thank you for bringing your very tough question. I know that everybody is very optimistic, wants to be optimistic, all of us have been wanting to be optimistic -- in the summer when the number of cases had got down, the number of deaths were down and then you saw what happened. I have no idea what is going to happen. I hope that the vaccine and all of that will work, but there's still 4,000 people a day are dying, the number of cases is now -- has come down, but still there is 100,000 cases a day. I don't know whether there will be another round, there will be another variant and so on. So, we don't want to get ahead of ourselves. I know that everybody -- and believe me, us more than anybody else would love to be done with this COVID and go back to our normal lives, but I'm responsible for giving investors a balanced view of what we expect and I just don't want to run ahead of ourselves and tell everybody that everything is rosy. The part of the world, which is especially giving us problem is actually the United States of America. The volumes are down. So, I don't know how it will work out, but if it does for the better, then we are in a better shape. But we just may -- you can accuse us of being conservative, maybe we are, but we just want to have a balanced view, Vincent.

That's fair enough. And just as a follow-up. There was elevated planned maintenance expense this quarter and the prior quarter. How should we be thinking about that over the next couple of quarters? Are you done with that or is there more to come?

On that one, I would say that you should see the numbers become better as we go forward because a lot of the higher maintenance was driven by the refinery shutdowns and all of that. That's not our -- under our control. A lot of people took advantage of the COVID thing to have turnarounds. So, I'm hoping that those numbers will look better as we go forward.

Okay, thank you very much.

Thank you, Vincent.

And we'll take our next question from Bob Koort with Goldman Sachs.

Good morning, Seifi.

Good morning, Bob. How are you this morning?

I'm well, thank you. But I was a little confused in the commentary about COVID punishing your US business, where you note that you don't have a packaged gas business and yet that was the source of COVID pressure in Europe. So, is it something to do with the refining industry or could you give us a little more color on what particular end markets may be causing you trouble from a COVID standpoint in the Americas?

Helium. We sell a lot of helium to MRI machines and to balloons and all of that. People are not doing elective surgeries, the volumes of helium is down and people are not having many parties and the general activity is down. So, that is one thing. And also the volumes on our hydrogen pipeline is down, some of it is because of the refineries being shut down, but overall the activity, people are not driving as much. So, those are the things that has been causing us trouble.

Thank you. That's helpful. And then may I ask on Lu'An, and maybe you're reluctant to provide the specifics, but do you have comfort in knowing exactly why they haven't restarted and that gives you the confidence that it happens sometime? It would seem like coal gasification when oil has rallied as much as it has may be more competitive, maybe a little more color there would be helpful.

With respect to Lu'An, there are a lot of different -- you can put in the several different cases about why the plant is shut down, the re-organization and all of that, and I don't want to publicly talk about that because it has a reflection on the management of that company and I don't want to be negative on them. But the Lu'An situation did resolve itself, we are confident that that plant will restart and the arrangement that we have come with the company is accommodating us, accommodating them and they have a lot of new projects underway that we want to participate in. So, I'm not as worried about Lu'An as our investors seem to be, but we need to wait and see and we report to you what we know as of the time that we are reporting to you.

Perfect, thanks.

Thank you.

And we'll take our next question from John Roberts with UBS.

Thanks. Seifi, Jazan began starting up last quarter, I think. Where are they in the process of their ramp up?

They are still commissioning the different units of the facility and we are obviously helping them. I believe -- I don't know the exact number, but we almost have close to 200 people helping them commission the facility. I'm not sure that crude has been officially introduced into the stream and that's a question that should be directed towards Saudi Aramco. But overall, we have, as I said, large number of people working with the Saudi team in a very productive way to start up the facility.

And then secondly, the refining industry is under a lot of pressure. Are your refining customers generally at minimum take on their contracts? And as they restructure here over the next several quarters or a couple of years, is there anything we need to look out for in terms of the integrity of their contracts?

About the integrity of the contracts, no. The fact that our customers are not taking as much as they used to take before is a fact, as I told you, the volume in our pipeline in the Gulf Coast is down, but it's very regional. I mean, different parts of the world is different than, for example, in California, our pipeline volumes are doing okay. So, it depends on which region you are, but there is no question that overall people are not driving as much and therefore there is an impact on the refining industry that you know that better than I.

Thank you.

Thank you, John.

And we'll take our next question from Jeff Zekauskas with JP Morgan.

Good morning, Seifi.

Good morning. How are you, Jeff?

Sorry. In terms of Jazan, what's the issue in the negotiation? That is, why wasn't the deal closed earlier and what are the issues that you're trying to work out in order to get to a resolution and how long do you think it might take?

Well, the things that we have to discuss is, as I told you before, Jeff, one was the fact that when we initially negotiated the contract with Saudi Aramco, we expected a significantly higher interest rate for the $7.2 billion of debt that we have to finance. Today, because of the market condition, the actual interest rates are obviously lower than that. So, the issue that we have had to negotiate and we have negotiated that, but that is how much of that saving goes to each partner, that's basically it. I mean, we were assuming X amount of interest, now it is lower. Therefore, the -- so who gets the benefit of it and how much of it. So, that was one issue in terms of negotiation. The second thing is that we are trying to arrange $7.2 billion of debt. That is not an easy task with a lot of banks involved and all of that, and that -- the terms, conditions and all of that. So, those are the two issues that we need to work out. In terms of how long it takes, I think -- I'm hoping that we will be done with this thing by the May, June, but it takes time and it is unpredictable. There is a lot of factors. This is a geopolitical thing. The view of the banks changes every day, the view of Saudi Aramco changes every day. So, I'm not pessimistic, I'm actually optimistic, I think we will get this thing done at some point in time. But the issue -- those are the two issues that we are working on. I think one of them, we have worked on. I think we have an understanding with the senior management of Aramco in terms of what we are going to do in terms of sharing of the profit, but the devil is in the details. All of this has to be translated into actual contract language and the debt has to be arranged. So, that's what is taking time.

Okay. And then my -- thank you for that. My second question is, I guess, a question of clarification to Scott. Scott, when you were reviewing the Americas business, did you say that you thought the -- either the operating income or the EBITDA in the second quarter would look like the first?

Scott, would you please answer that, I don't remember --?

Sure. Happy to. Yes, yes. Thanks, Jeff, for the question, I appreciate it. And my comment, that was regarding the maintenance spending. And as Seifi mentioned, those terms are driven by when our customers take turnarounds, planned turnarounds. So, it's a technical term here. And the spending on that and the expenses that we'll incur, it's kind of lumpy. And my comment in there is for the second quarter, not be surprised if we see the same sort of level of maintenance that we saw in the first quarter.

Okay, great. Thank you so much.

You're welcome.

Thank you, Jeff.

And we'll take our next question from PJ Juvekar with Citi.

Yes. Good morning, Seifi.

Good morning, PJ. How are you this morning?

Doing well. Doing well. So, question on Lu'An. You mentioned that you have three other gasifiers that are running in China. So, wondering, what is the underlying issue with Lu'An? Is it just -- is it -- looks like it's company specific, and is it that it's not profitable at current coal price or is it the downstream process into fuels that that is an issue, can you just shed some light on that?

PJ, number one, we have four other gasify -- gasification projects that are working. They -- it is a specific issue related to Lu'An. And as much as people would like to -- me to convert that into economic region, I think it has to do, and I need -- as I said, I need to be careful because I don't want to say anything kind of implying that there is a little bit of a confusion with the management there. So -- but the state of Shanxi has decided to consolidate all of the chemical facilities into one facility. They have new people and all of that. And those people have said they want to look at everything and look at our options and all of that. That is more of a reason for keeping the plant shut down than anything to do economically and all of that. But the fact that coal prices are higher in China significantly in the last few months because of the winter and the fact that the parent company can sell coal, I mean, you can make a lot of theoretical argument, but it's just basically that the new management is taking their time trying to assess their options.

Okay, thank you for that.

Okay. Thank you.

And then just quickly on your EMEA. You have a packaged gas business down in Europe. Would you say that post-COVID that that business will have the most upside recovery? Thank you.

Yes, it will. Yes, it will. By the -- I have to say that our team in Europe is doing a wonderful job. The results that they have produced last quarter considering what's going on there is very, very good. They have their act together, they keep pushing the pricing and they are doing a very good job. But if COVID goes away, there is significant upside there, yes, absolutely.

And we'll take our next question from David Begleiter with Deutsche Bank.

Good morning, Seifi. How are you?

Hey, David. How are you? Other than being buried until -- under 32 inches of snow, I'm perfectly fine.

Are you? I'm doing well, thank you. Seifi, just on Jazan. How soon after the issue is resolved and the deals are completed, the contract is signed can the project come online and start-up?

The day that we do the financial close, we are online. Whether the refinery is online or not, our theory is a fixed tier seating as you now like other the deals. So, the day that we do the financial closing, the next day we will see the benefit of the EPS on our bottom line.

Understood.

So you need to look for the announcement about the financial close. Yes?

Okay. And just on potential new green hydrogen projects, I know you're working on them. Is there potential for another announcements this year on green hydrogen?

David, I'm not going to go there. I have no idea. I mean, we are working on other projects and all of that. But for me to be that specific would be -- would not be responsible and those things are very big projects. We are working on other projects, but to be that specific, I can't do that, you need to give me a pass on that too.

Understood. Thank you.

Thank you, David.

And we'll take our next question from Mike Sison with Wells Fargo.

Hey, Seifi. I'm buried in snow as well in Cleveland, but in terms of…

Hi, Mike.

In -- how are you doing? In terms of EPS growth, you did a nice job in 2020. Can you still generate some EPS growth in '21? I know you can't give any specifics, but the model seems to be built to be able to do that on an annualized basis. So, then has the growth algorithm changed at all longer-term in terms of what you think you could do in terms of EPS growth?

No. We still believe that on the average in the next five or six years, we will deliver about 10%, the same way that we had done in the last six years. My view hasn't changed on that. That is our goal and we will make that happen, and we'll do our best to make it happen.

Great.

fundamental structural reason that -- yes, go ahead.

Yes. Just any comments on '21 in terms of your ability to grow?

Well, in '21, if -- quite frankly if COIVD subsides, Lu'An starts and we close on Jazan at a reasonable time, then the 10% increase should not be too much of a problem. It depends.

Got it.

We are not giving any guidance, not only because of COVID, but also because of these -- these two big things can have an effect. So, we just need to be a little bit patient to see how everything works out. But we obviously, and I'm very optimistic about the future of Air Products, for sure, that's why I bought a lot of shares in December as you know. So, I'm -- personally, I'm very optimistic, but we have to give you a balanced picture here.

Got it. Thank you.

Thank you.

And we'll take our next question from Steve Byrne with Bank of America.

Yes, thank you. Seifi, you mentioned that your hydrogen pipeline on the US Gulf has slowed, but in California, it remains firm. I was just curious, whether that is potentially a bit of an end market difference, you have some of the refineries in California converting their hydrotreaters and hydrocrackers over to renewable diesel and just wanted to hear your view on whether there is a potential longer-term opportunity here to Air Products if there is a kind of an expansion of that renewable diesel opportunity globe -- or nationwide rather than just California, whether the net use of hydrogen per unit of diesel versus per unit of renewable diesel is meaningfully different?

Steve, you have a very good insight. That's a very good observation. We don't want to talk about it too much because that is really not our business. But fundamentally, what you are saying -- all of the things that you're saying are correct and that can actually be an upside for us. Yes. I agree with all of your statements.

Okay. And Seifi, I remember a couple of years back, you made a comment about the number of gasification projects that were being considered and, I believe I was just trying to -- and the number, if I recall correctly, was more than 50. I just wonder, whether -- a lot of those may have been kind of idled or reconsidered over this past year, given much lower crude and whether or not you're seeing any pickup in that activity and those discussions going forward now that we've seen a recovery in crude?

There are significant number of coal gasification projects under consideration, not only in China, but also in India and Indonesia. Those are the places that we see the most activity. And we expected -- I think with COVID, everybody pulled back as you know very well in terms of capital expenditure and so on. But as time goes by, we do -- we are optimistic about gasification. We have a very, very strong position there. Quite frankly, we are by far the market leader. And if there is another gasification project in the world, I would bet you 90% of their products we will get that. So, I think that we continue to be optimistic about that.

Okay, thank you.

Thank you.

And we'll take our next question from John McNulty with BMO Capital Markets.

Yes. Thanks for taking my question. So, I guess, the first one would just be on Jazan. It sounds like when you -- at least based on your discussion of kind of what the sticking points are, it sounds like as soon as this thing does get to the finish line that the overall profitability that you were expecting is pretty much on line with your original expectations. Is that fair or has anything else changed when you think about the terms or anything like that?

First of all, good morning, John. Hope you're well. And secondly, your statement is totally accurate. That means that as soon as this thing is done, we will see the impact on our bottom line, kind of in line with what you would expect.

Got it. Perfect. And then, I guess, with regard to the Americas, I guess, admittedly, we were a little bit confused on the volume weakness, where you're kind of seeing the same declines as you saw kind of at the heat of COVID kind of in the June quarter. So, I guess, why haven't things gotten better? Like when we look at the macro, it looks like it has improved. So, I guess, is it just a function of the seasonality of refining and maybe that's kind of, whatever maybe that, that's the part of the reason to blame? I guess, I don't quite understand why the Americas isn't getting -- at least from quarter-to-quarter-to-quarter getting better at this point?

John, I'll provide you an answer and then I would like Scott to comment on that if he wants. But the biggest impacts are maintenance costs. The second significant impact is lower helium volumes. And the third impact is that that the refineries have slowed down a bit. Those are -- and the fourth one is that the US economy is still struggling, my friend. I mean, everybody is talking about these great rosy things, but on the ground, we don't see that yet. So, those are the four reasons. Scott, you want to make any further comments?

No, I agree with that. And just to also point out, like I said in the prepared remarks that there is some seasonality on a sequential basis. But as you mentioned, Seifi, there's the underlying economy, there's the COVID helium situation. So, I just agree with what you said.

Thanks very much for the color.

All the different businesses will act differently, but when -- as there is improvement in the economy, COVID and otherwise, we expect to see a lumpy, as things restart and so forth as opposed to a steady increase.

Got it. Fair enough, thanks a lot guys.

Yes.

Thank you, John.

And we'll take our next question from Chris Parkinson with Credit Suisse.

Good morning, Seifi. It's great to hear you're doing all well. I just have two brief ones. Just first as it pertains to the carbon capture opportunities, do you just have a brief update on your perspective addressable market, any internal projects and also just anything on how you could potentially work with third parties given your tech expertise?

Well, first of all, good morning, Chris. Hope you're well. Chris, the carbon capture opportunities are being driven, the things look even rosier than before because one thing is capturing carbon to help environment and all of that, but there is a significant push right now. As I talked to the investors in the last year and a half last, last two years, that the transition to the hydrogen economy will be grey hydrogen, then blue hydrogen and then green hydrogen. There is a significant demand now for so-called blue hydrogen that people are thinking about making ammonia where you capture the CO2 that is generated, then you make the hydrogen. And, therefore, the ammonia is called blue and then especially Japan wants to take that ammonia and blow it directly into their boilers for their power plants. And that is how they are going to decarbonize. So, there is significant demand, a lot of conversations about so-called blue ammonia and blue hydrogen and all of that. We are working on carbon capture. We continue to work on carbon capture. And as I said, we will in time announce appropriate projects of meaningful size to show you that we are making progress on this thing. This is something I've been talking to you about for three, four years. It takes -- just like in NEOM, it takes five or six years to develop these projects. So, we are working on them and hopefully we will have some news for you in the years to come.

We'll certainly look forward to that. And the second very brief question, just in the second half, a lot of local media in India and Indonesia are reporting that you're actively bidding on a lot of projects, and on the latter of which we've obviously already heard some constructive news. Can you just possibly speak to just the magnitude of those opportunities and the rough timeline, given it seems like you've already bid? Is that something we could potentially expect in fiscal year '21 or should we still be kind of more methodical and more balanced with our expectations on those fronts? Thank you very much.

Well, Chris, thank you very much for the question. Chris, one of the things that one does in life is that you learn from your past experience, right. We have gotten a lot of hot because we announced Jazan before it was a done deal and now you see every quarter we have to explain. So, in Indonesia, we are obviously talking about gasification projects in Indonesia. We have been telling you we have been doing that for the past 3.5 years. I met the ministers there four years ago. But we haven't done anything that is announce-able yet. We have talked to people, we have talked about projects and all of that, and we don't want to do anything, again, like Jazan to come and say, oh, we have signed a memorandum of understanding and all of that and then every quarter have to explain why it didn't become a project. These projects are very complex. It depends on the actions of a lot of government agencies. It changes the course of some of the countries. There are significant impacts on people who import product, who now are not going to be importing product. It's very complex and we just don't want to get ahead of ourselves. I have read all of those reports, I've seen all of those reports, but we just want to be responsible and we will announce something when we think it's going to be a real project rather than just the discussions. And I hope you have some patience with us, Chris.

I certainly will. Thank you very much for the color.

Thank you. Thank you, sir.

And we'll take our next question from Jonas Oxgaard with Bernstein.

Good morning, guys.

Good morning. How are you?

Living the dream every day. I was going to pick a little bit -- of course. I was going to pick a little bit more at the Lu'An scab here. So, you mentioned that you have high confidence that it's going to restart, but what happens if it doesn't? Is that part of your negotiations? And is there a signed agreement with the new management there?

Well, if we never -- so, you're talking about what if the plant never starts?

Yes.

We have agreed with a reduced fee. We will wait another -- as long as it takes for a few quarters to see whether they restart or not. But if they come and say, we are never going to start this plant, then we have a contract, we will go to court and enforce our contract. Our contract is very clear about what happens if customer shuts down. It is very clear, it is very defendable and we are very confident about the outcome of that. But we didn't want to go to court and start enforcing that because we don't know what -- the customer has never told us that they are shutting this thing down permanently. And we didn't want to prematurely destroy our relationship with the customer. So, it's a matter of being patient and working with your customer. I mean, it is -- next year at this time, and they haven't even started yet and they send us a letter that they are going to mothball the plant, then we go to court and enforce our contract.

Okay, thank you.

Okay, Jon?

Second question, if you don't mind, on hydrogen. Your competitors and even companies who, I guess, aren't really considered competitors are approaching hydrogen much more tentatively, right. Your -- one of your competitors inaugurated their first 20 megawatt electrolyzer last -- or this week, but you're going from, well, I wouldn't say, zero, but close to zero to 1.3 gigs in one fell swoop. Can you talk about what, like, the reason why you're so confident that you can do this mega project without baby step first and how are you different from the rest?

Well, the way we are different is the same thing with gasification and everything, Jonas. But the main reason that we are doing what we are doing is that we want to be competitive and put our customers in a competitive position to use green hydrogen. You cannot do that at small scale. The scale up that we are doing is that as if -- it's not as if you are taking a technological risk, we are not. I mean, what are we doing at NEOM? We are building, yes, 4 gigawatts, 3.5, 4 gigawatts of wind and solar. That's known technology, it's no big deal. Then we are building 650 ton a day electrolyzers. And everybody says, oh my god, yes, but how are we doing that, we are going to take 30 of those 20 megawatt things that you said and put them together. So, there is no risk in there. And then the ammonia plant we are building a 1 million ton ammonia plants all over the place. So, we are not taking any technological risks, what we are doing is that we are creating a mega project, so that we get the benefit of the economy of scale. That's number one. And then the second thing is that out of these people who are announcing these different plans, the source of electricity is not green and we are creating a green source of electricity. But the main thing is we are doing mega projects because that is how you, number one, make it economically feasible. And number two, unless somebody like us makes a commitment to make a big project, people are not going to convert. I mean, if you own buses in San Francisco, you are not going to go and convert them to fuel…

Thank you. Absolutely.

Sure. Thank you very much. Appreciate that.

And there are currently no other questions in the queue at this time. I would like to turn the call back over to Seifi for any additional remarks.

Well, once again, I would like to thank everybody for being on our call. Thanks for listening to our presentation, and thanks for your good questions. We appreciate your interest, and we look forward to discussing our results with you again next quarter. As I said earlier, please stay safe and healthy. And all the best to all of you and your families. Thank you, again.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.