Ladies and gentlemen, good day, and thank you for standing by. Welcome to the Linde Full Year and Fourth Quarter 2023 Earnings Teleconference and Webcast. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. And I would now like to hand the conference over to Mr. Juan Pelaez, Head of Investor Relations. Please go ahead, sir.

Thank you, Abbie. Good morning, everyone, and thank you for attending our 2023 fourth quarter earnings call and webcast. I am Juan Pelaez, Head of Investor Relations, and I'm joined this morning by Sanjiv Lamba, Chief Executive Officer; and Matt White, Chief Financial Officer. Today's presentation materials are available on our website at linde.com in the Investors section. Please read the forward-looking statement disclosure on Page 2 of the slides and note that it applies to all statements made during this teleconference. The reconciliations of the adjusted numbers are in the appendix to this presentation. Sanjiv will provide some opening remarks, and then Matt will give an update on Linde's fourth quarter financial performance and outlook, after which we will wrap up with Q&A. Let me now turn over the call to Sanjiv.

Thanks, Juan, and good morning, everyone. By all measures 2023 was another successful year, thanks to the hard work and dedication from Linde employees around the world. Despite the economic and geopolitical challenges, Linde once again delivered on its commitments with industry-leading results. As I’ve said before, this doesn’t happen by accident. It’s a daily grind across the entire organization underpinned by our disciplined operating rhythm. An important tenet of this rhythm is to maintain a results-driven culture by consistently focusing on performance metrics that drive shareholder value. Slide 3 provides an overview of critical areas I view as essential to running a leading industrial gas company. It starts with our people; we have a top-notch team who run a safe, reliable, and efficient industrial gas company. During 2023, we made meaningful progress towards our goal of a highly engaged diverse workforce and further supported the communities we operate in, all while maintaining world-class safety results. I would like to thank our employees around the world for delivering these results. Supporting the environment is more than just lip service at Linde. We’ve been working on this for decades. Last year, we reduced absolute greenhouse gas emissions while increasing our active renewable energy purchases by 1 terawatt-hour. This is a significant start towards our long-term goals, and I am pleased to see recognition of this progress. We also positioned the business for high-quality future growth. The OCI project, with CapEx of approximately $2 billion, will produce 300 million cubic feet per day of blue hydrogen, which will be sold under standard industrial gas supply contracts while partnering with ExxonMobil for CO2 sequestration. I remain confident about winning new backlog projects in the US, Europe, Middle East, and Asia Pacific worth around $8 billion to $10 billion in the next three years. Recently, there have been updates and some confusion regarding the IRA regulations. We’ve included a slide in the backup to help explain our views. I am happy to respond to any questions on it, but let me reiterate the key message: we expect future US onsite clean hydrogen projects to primarily leverage 45Q credits since we have not yet identified any large onsite green hydrogen projects that meet our investment criteria. We expect to see small to mid-size green hydrogen projects, primarily to serve merchant-type demand that likely will not meet our backlog definition. Aside from clean energy projects, we continue to position the base business, evidenced by our traditional onsite merchant and small onsite investments. Indeed, you'll see we have one of the new records. Finally, we delivered on the numbers. After all, management’s primary purpose is to be a steward of shareholder capital. We’ve listed a few key accomplishments. However, I believe the four most important financial metrics to create shareholder value can be found on the next slide. It’s easy for management to get distracted by a myriad of financial metrics through which performance can be measured. However, one cannot lose sight of the ultimate objective to increase shareholder value, which can best be represented by total shareholder return or TSR. From my perspective, the best way to deliver superior TSR is to have industry-leading results, EPS growth, operating cash flow growth, operating profit margins, and return on capital. ROC and operating margin demonstrate the quality and health of the business. While both have theoretical limits, sustaining them at leading levels while growing EPS and OCS is the best combination for compound value creation. Each chart shows the five-year trend against two members in the industry. Linde has led all of them, in some cases by a wide margin. We maintained leadership despite volatile economic and geopolitical conditions, including unprecedented global events. Linde is an investment for all seasons, and I think these charts demonstrate that. But what about the shareholders? How about metrics that impact TSR, all you can find them on the next slide. This chart shows the five-year TSR for Linde through members of our industry and the S&P 500 index. The first observation is that Linde has far exceeded all three, almost doubling the shareholder return. Equally important, Linde is one of only 12 companies in the entire S&P 500 to deliver positive outflow for five successive years and the only company in our sector to do so. During good years and bad, Linde consistently outperformed the benchmarks to reward our owners. The performance culture and corresponding compensation programs at Linde are designed to optimize these four metrics at all levels of the organization. Year after year, we’ve proven how we positively correlate to superior TSR and positive outcomes, two important ways to gauge shareholder value creation. Because of this, I remain confident in our ability to continue creating long-term shareholder value regardless of the economy. I’ll now turn the call over to Matt to walk you through our financial results.

Thanks, Sanjiv. Slide 6 provides a summary of fourth quarter results. Sales of $8.3 billion grew 5% over prior year and 2% sequentially. Versus prior year, the sales declined 3% from contractual cost pass-through due to lower energy prices in EMEA and the Americas, which has no effect on profit. Foreign currency translation was a 2% tailwind from a weaker US dollar. Acquisitions improved 1% from the nexAir natural gas purchase, and engineering increased 1% from project backlog execution. Excluding these items, underlying sales increased 4% from higher prices, which continue to track with globally weighted inflation. Year-over-year volumes were flat, as contribution from the project backlog was offset by softer base volumes, primarily in EMEA. Versus the third quarter, sales grew 2% from engineering project timing. Underlying sales were sequentially flat as higher prices offset seasonally lower volumes. Overall, economic conditions have been stagnant as the estimated industrial production growth for our weighted countries was close to 0% for the fourth quarter. Operating profit of $2.3 billion was 14% above last year and resulted in a 27.4% operating margin. Excluding cost pass-through, operating margins expanded 130 basis points from last year but declined 80 basis points sequentially, driven by EMEA and engineering. The EMEA trend mostly relates to seasonality; however, engineering margins are returning to the normal run rate of low to mid-teens percent as we begin to lap the impact from sanctioned projects. However, I still expect global operating margins to expand in the future, including 2024. I would also like to point out a one-time unfavorable impact embedded in this quarter’s results related to the Argentine peso, which devalued over 50%. As a hyperinflationary country, we recorded a charge of $10 million to the Americas operating profit and another $20 million to the interest line or about $0.05 of total EPS. This impact is not reflected in the sales FX translation summary, as it only impacts other operating income and net interest. We fully expect to recover this over time as our pricing aligns with subsequent local inflation. EPS at $3.59 was 14% above last year as pricing net of cost inflation, backlog contribution, and a lower share count more than offset lower base volumes. The 1% sequential decline was primarily driven by seasonal factors and the devaluation of the Argentine peso. Disciplined capital management is a hallmark of Linde’s stewardship, and 2023 was no exception. Return on capital finished over 25% against the backdrop of healthy operating cash flow. Slide 7 provides further details on full-year capital allocation performance. Operating cash flow of $9.3 billion grew 5% over the prior year despite significant working capital outflows related to the wind down of engineering projects. Most of this is past, which has enabled a future OCF to EBITDA ratio in the low to mid-80% range. On the right, you can see uses of cash, which is consistent with our longstanding capital allocation policy of an underlying mandate to maintain a single A rating, while growing the dividend, a priority to invest in projects that meet our criteria, and the opportunity to sweep all remaining capital toward share repurchases. With that approach, we returned $6.4 billion to shareholders in the form of dividends and share repurchases while investing $4.7 billion back into the business. But investing in the business is much more than just a dollar number. One of the most important responsibilities of management is to ensure capital is invested for an appropriate risk-weighted return. Across Linde, we understand this concept and have integrated it into the culture, so our owners can sleep well at night. I’ll wrap up with guidance on Slide 8. We are initiating 2024 full year EPS guidance at $15.25 to $15.65 or 8% to 11% growth when excluding an assumed 1% FX headwind. Consistent with prior approach, this assumes no economic improvement at the midpoint. Therefore, if the economy grows, there would be upside and if there is a recession, we’ll take actions to maintain this range. For the first quarter, this translates to a range of $3.58 to $3.68 or a 6% to 9% EPS growth excluding FX. While the economic assumption is similar to the full year, the first quarter is traditionally our lightest due to seasonal factors. Heroes aren’t made in February. So we believe it’s appropriate to remain cautious that it’s early in the year. However, regardless of what 2024 brings, investors can rest assured that we will manage what matters most to create shareholder value. I’ll now turn the call over to Q&A.

We will take our first question from Duffy Fischer with Goldman Sachs. Your line is open.

Yes, good morning, guys. Question just around China, both on industrial and also electronics, and we seem to be getting different cost trends from different companies as they report on what the outlook is. Could you share with us what you view as kind of the first path outlook for both industrial production, your end-markets there, and electronics?

Sure, Duffy. Let me just start off with a quick reminder that China is about 7% of our total sales and profits just as a baseline and that, of course, is spread across various customers in every possible end-market that we have. You would recall we spoke about China weakness and slow recovery over there, I think all of last year in fact. Now, this shouldn't really come as a surprise. We’ve been seeing China being a little bit softer and we’ve tracked that for at least 6 to 9 months. We’ve also, as a result of that, taken some actions in the country already, as you would expect us to. So all of that’s already in place. Now let’s talk about the outlook for 2024. As far as industrials go, we’ve seen a lack of momentum. We talked about it last year. We see the same carrying through into 2024 for the most part. I’ll walk you through some end-markets just to give you a sense of what’s going on. Some are a little bit stronger than others, but broadly, I think we don’t quite see China recovering at a pace at which we would have expected it to. In end-markets, let me just kind of mention chemicals to start over. They did have a solid Q4; however, it is weighed down by the fact that construction is a little bit slower. But overall, the market was in reasonable shape, and we expect maybe a mild recovery towards the first half of this year and then maybe a pickup towards the second half. Steel, which is the other major market we’ve been talking about, has been shrinking for a while. In fact, crude steel in Q4 shrank about 4%. Some of that was administrative control because it wanted to hold on to their annual capacities. Don’t expect anything to happen on steel; it is really driven around the property market, and the property market recovery is not foreseen in 2024. So we expect steel to just muddle along for the most part of this year. Manufacturing generally has been a bit lackluster, but there are some bright spots within that. The automobile sector, for instance, has shown some good growth in Q4, up about 17%; EV a large part of that. Batteries are up a little bit as well, and solar cells are also showing some growth. Other than this, I’d say manufacturing has been largely flat beyond that. As for electronics, electronics saw a little bit of a recovery in Q4. Again, remember, the thing to watch out in electronics is less about what is happening on capacities and more about the escalation in geopolitical risk that comes with electronics in China, in particular at this point in time. Our view is that you will see continued mild recovery probably through the first half of the year, and then in the second half, we’ll have to just watch and see what happens.

Great. Thank you, guys.

And we’ll take our next question from the line.

You should expect us to continue to see pricing actions that we take. We talk about pricing as being a management action; it's something that we do every day, and that process and discipline that follows I think is what makes the pricing mechanism so strong and robust for us. You should expect to see that continue through in 2024, and you should see that reflected in margins, which should continue to see some improvement as we go into 2024.

Thank you.

And we will take our next question from Jeff Zekauskas with JPMorgan. Your line is open.

Thanks very much. In terms of your outlook for 2024, is global industrial production roughly flat? And you have new projects coming on stream? Should your base case volume be up 2% or 3%? And can you comment on whether Russia is now producing more helium than before?

No, I’ll just quickly comment on Russia very briefly to tell you that we’ve come out of our contracts that are more – that were previously in place, and therefore we aren’t in a position to comment on what happens in Russia with helium production. There is a lot of speculation around, but, Jeff, as you know, I think at this point in time, I’ll probably reserve comment on that. As for the outlook, I might just want to take you back to our guidance. As you know, we’ve said in our guidance that we see at the midpoint of the guidance zero help from the economy, and we kind of maintain that. Your point on backlog contribution, again as a reminder on EPS growth that we see, our backlog contribution ranges from 1% to 2% for 2024. I see that at the top end of that range. You know the other levers well, but I’ll reiterate them just quickly as well as a recap. We see share buybacks and share count obviously help us at the EPS growth level by about two percentage points. The rest is all about management action as far as pricing, productivity, and total cost management is concerned. That's what brings up the rest to take us to a midpoint of 10 plus percent EPS growth for 2024.

Great. Thank you so much.

And we will take our next question from Tony Jones with Redburn Atlantic. Your line is open.

Hi guys. Thanks for taking my question. In your prepared remarks, you sort of highlighted that large green hydrogen projects are not where you are likely to be at least for the foreseeable future. Could you just explain why it's sort of price; you focused on price and long-term take or pay contracts; the criteria is not quite as tight? That will be very helpful.

Sure. Tony, so what we’ve said very clearly is our belief that the electrolyzer technology that ensures that green hydrogen is produced requires a couple of things to happen for it to reach a point where we will see large onsite green hydrogen projects. Right, the distinction I am making here is large onsite green hydrogen projects. I’ll talk a bit about the small and medium-sized in a minute. So two things need to happen on the electrolyzer technology. One is that it needs to improve in terms of its reliability and the ability to operate 24/7 if you are going to have a large green onsite project to serve a large demand pool if needed. The other piece is that capital efficiency on electrolyzers needs to improve dramatically to make sure that we are at a point where that becomes cost-effective. Ultimately, economics will drive those investments. My view is that electrolyzer technology, particularly PAM, isn't quite at a point where economics work out in favor of a large-scale inflection to green hydrogen. I believe that’s probably a five to seven-year window for electrolyzer technology to scale up, both from a technology and a capital point of view, such that we get the reliability and cost-effective basis on which you’ll see large-scale inflection happening. So, that’s kind of the one reason why we think it doesn’t quite make it and doesn’t quite meet the criteria. I do expect, however, we are in the interim, the five to seven years that I referenced, small and medium-sized electrolyzer complexes to be built, and they will largely serve what we call merchant-type demand, where you have a bit of flexibility in terms of how much product is available, how much product is provided, and reliability, and so on and so forth. We also see the development of liquid hydrogen as an important component, and again, we are excited about this. We are scaling up our technology around liquid hydrogen to make sure that it’s ready to support small to medium-scale green hydrogen development that we think will happen in this interim period.

Great. That’s really helpful.

And we will take our next question from David Begleiter with Deutsche Bank. Your line is open.

Good morning and thank you. Thank you for Matt. Your return on capital is very, very strong, mid-20s. In contrast – flat to less I think for five quarters. Is there an option to expect some lower return but still value-creating opportunities to drive top-line growth going forward?

David, I am going to let Matt answer this as this is one of his favorite topics. We have a lot of discussion around this. I just mentioned very briefly as a headline, we always look at our investments on an IRR basis to make sure that we don’t kind of get caught up in the ROC element, but, hey Matt when do you discover that up?

Yeah. Thanks, Sanjiv. Exactly, to start off, IRR is the primary criterion for incremental investment decisions, and ROC, as you know is basically the accounting metric on the back end. When considering where ROC has been, as Sanjiv mentioned in the prepared remarks, we believe that maintaining an industry-leading and healthy ROC and operating margin while growing EPS and OCF is the best combination for shareholder value creation and ultimately, relative TSR outperformance. While they are, of course, at theoretical limits, 25% we think is a healthy number. Obviously, pricing has helped; the non-capital intensity of our growth has helped. We are embarking on a more capital-intensive growth as we look out on some of the energy transformation and we see that as good growth. It meets our investment criteria. So therefore, I would see the ROC number, yes, plateauing now as it is, maybe even declining a little bit; but we view that as okay as long as we continue to make the right decisions on IRR which we feel very confident about. For us, it’s more about maintaining healthy levels and maintaining leading levels while growing the organization. But we are not going to let those metrics, either operating margin or ROC, inhibit our decisions for good growth projects; they never will.

Thank you.

And we will take our next question from Vincent Andrews with Morgan Stanley. Your line is open.

Hey, this is Vincent. I noticed that your consumer gas backlog increased a bit over 10% compared to last quarter, and from what I see in the slide deck, it seems that the manufacturing share of that backlog is at its highest point in a while. Could you share your thoughts on how you expect the backlog to trend in the upcoming quarters and how it might be distributed across different end-markets? Thank you.

Sure, Vince. So, consumer gas backlog is today driven by a couple of factors, right? We kind of split that into traditional onsite, which is what you are referencing as an example for manufacturing metals, chemicals, energy, etc., and then the decarbonization portion of our backlog, which is growing, and my expectation is that it will continue to grow as we move forward. We are seeing some overlap in that. There are chemical companies, obviously, looking at decarbonization. We are developing several projects alongside them, and we will see that play into the backlog, and of course, that will boost the chemical side of things. What I’d say is we are winning more than our fair share of projects at the moment in countries like India, which represent the traditional end of the market. That’s where you’re seeing manufacturing, metals, chemicals growth, and refining growth actually pick up a little bit more. We are obviously seeing the decarbonization projects around both chemicals, as I referenced earlier, but also some developments around metals that might follow in due course. So that’s kind of what you should expect to see in terms of momentum, and that momentum will translate into projects that are currently in the pipeline, getting signed up in the next few years, as I’ve mentioned, about $8 billion to $10 billion of that, and then translating into the backlogs.

Okay. Thank you.

And we will take our next question from an unidentified speaker. Your line is open.

Good morning. And sorry if my question has already been asked, and my line dropped a few times. I am just wondering one quick one on CapEx. What is driving your 2024 CapEx for $4.525 billion? Is it guarantees related to the recent award you announced, or does this indicate an acceleration of growth for 2025 and 2026? Thank you.

Matt, do you want to talk to this?

Sure. As I mentioned earlier, a lot of the energy transformation we are seeing is a little more capital-intensive. The ROCI project, for one, is our largest project that we have won. We are in the early stages of ordering equipment, and that will drive the CapEx. We are also on the final projects that will be coming onstream into the back end of this year and into next year. So that’s also driving a higher component. When you think about our CapEx in general and break it down, we tend to have about $2 billion plus towards what we call our base CapEx, which is a little over half for growth projects, but growth projects that do not meet our disciplined backlog definition. The remainder, in this case, would be roughly another two plus billion for our project backlogs. That is contractually committed, has defined returns, and contract terms to ensure we get our return like things; they have certain FX fees. Therefore, the higher CapEx, we feel quite good about. We feel good about our execution that we are undertaking. So it’s really just a function of the wins we've had causing that increase.

And we will take our next question from Josh Spector with UBS. Your line is open.

Yeah, hi, good morning. I had a question around EMEA. So, margins were down sequentially, but sales were roughly flat, and when you talk about the variant, you talk about the lower onsite volumes, which I think about lower margin relative to the mix, and pricing was up. I am just curious if you could explain the driver of the margins in the quarter? And then also just your outlook for next year: margins up, flat sequentially, what are you expecting there? Thanks.

Josh, as you know, EMEA hasn’t seen a lot of growth. So one of the things they’ve done tremendously well, and I give the team credit, is that they’ve been a profit growth story over the last three to four years despite having negative volume trends in that same period. So, let’s go to the fourth quarter, which is what your question is, and I think basically the point I want to make over there is there are some one-time costs alongside the volume decline that we’ve seen over that actually impact that volume for the fourth quarter. My expectation is in terms of outlook; in the first quarter, we will be back with the three-handle on that volume. I think the momentum that the EMEA team has built around managing profit growth will continue to see margin improvement in 2024 as well.

We will take our next question from Stephen Richardson with Evercore ISI. Your line is open.

Thanks. Good morning. Sanjiv and Matt, just one of you could talk – dig in a little bit on the drivers of TSR that you talked about in the script. Clearly, the business is showing a huge amount of stability, and I appreciate that the dividend has been growing at a healthy clip year-over-year for the last couple of years. Can you just talk about, if you think about the two levers there, is the buyback agnostic to the value of the stock? Do you think about that in terms of the buyback amount? What I am getting at is your dividend coverage ratio is very healthy and has continued to improve. So, is there not a place where you could consider kind of rebasing the dividend higher just considering the stability of the business? Thanks.

I’ll just address the buyback piece, and then Matt can give you a more complete response there, Steve. But essentially, the share buyback piece we see as being an intrinsic part of our capital allocation. We think it’s an important part of how we deploy and return capital back to our investors, and I think it has been and continues to be a very important part of the capital allocation philosophy that we’ve deployed in the business. This is reflected in the EPS growth targets that we’ve set for ourselves as well, which is 10 plus percent EPS growth, as I said earlier. I feel confident about pushing forward on that despite all the challenges, etc. that people talk about, because we know that we have the levers in place to make sure that we are done. Matt, do you want to cover the other TSR drivers?

Sure. Yeah, and obviously, both the buybacks and dividends are important. We have shareholders that value both. On the dividend, we commit to growing it every year, and to your point, we have very healthy ratios that enable us to continue to grow that. But one thing I will never promise is the dividend yield; absolutely not, that makes no sense. If we do our job well every year, we grow the dividend with a healthy clip. But we also grow the capital base of the stock. Therefore, we will never commit to a dividend yield. On the buyback side, this is because we have such excess cash in the organization, and we see a very attractive opportunity to continue buying our stock back. I can tell you I’ve been asked many times about intrinsic valuation, and $180, $280, $380. That’s not exactly how we think about it. We look at the long-term prospects just like we do any other use of capital. It’s very important to understand that. We treat our capital the same whether it’s for buybacks or projects because it’s one homogeneous pool of capital, and we have to find the best use of it for our owners. So when we look at the long-term repurchases of stock, that has been a good continued use of excess capital, which instills discipline in the organization. If we don’t meet our investment criteria on projects, we have an alternate use of capital. The one thing about this industry is if you invest poorly in a project, it can create problems for you for two decades. For us, it’s an important element of our overall capital allocation process, and this is something we are going to continue to do. But dividend growth and buybacks are both important for our capital allocation and will continue to be.

Thanks so much.

We will take our next question from Patrick Cunningham with Citi. Your line is open.

Hi, good morning. I just had a follow-up on EMEA. Clearly, it’s been a strong performer tightening productivity in the face of weaker onsite volumes. I am curious about your thinking of the region longer-term in the face of potential deindustrialization. Did you see any risk to holding these margin levels if we see continued deindustrialization and weakness going forward?

Patrick, as I mentioned earlier, EMEA hasn’t quite been the industrial growth story, other than maybe a couple of countries. Broadly, our growth capital has largely been deployed in the Americas and APAC, which is where we saw most of the growth come through. Now having said that, EMEA has, as I mentioned earlier, been a very strong profit growth story for us. We manage that whole process right through the negative volume trend.

As I look ahead, I see two trends. First, a very resilient base business. Look, there was a view that if volumes in EMEA would crash two years ago, when we saw the energy crisis, that didn’t happen. We have seen a steady decline. I’m looking at the January numbers as we speak, and I am seeing that flattened out a little bit. My expectation is that the resilience of that base business—which is also driven by the contract structures that we have, with fixed fees and rentals, and so on—actually remains a very important part of that portfolio. The second piece I think is encouraging is that we are seeing large project opportunities led largely by decarbonization. The European Union has very complex rules, as you know well. However, it has a steady and stable intent to move forward with decarbonization and push industries in that direction. We see that spurring growing momentum around projects; you should expect that there will be projects that will develop and be announced even from a Linde point of view in the next one, two, or three years, and again, that will underpin the long-term trend we see holding there. I will end by just saying that I expect the EMEA market to continue to be an important industrial gas market for us. I don’t think that will ever change, and they will have a strong contribution to the mix of the EPS growth that we look at.

Okay. Thank you so much.

We will take our final question from John McNulty with BMO Capital Markets. Your line is open.

Yeah, good morning. Thanks for taking my question. Sanjiv, on the – you spoke on the IRA bill and kind of your views on the green hydrogen opportunity. Can you help us consider the types of customers that you are seeing for the liquid green hydrogen? And also the types of premiums that they are willing to pay?

Sure. That’s a good question, John, because the distinction I want to make is I want to just talk about carbon intensity and blue hydrogen to begin with the transition to green. Large onsite customers recognize the benefits that come from low technical risk, established references in and around blue hydrogen development. Blue hydrogen is all about using existing natural gas and converting that into hydrogen, capturing the CO2, and sequestering it to enable a low carbon intensity hydrogen to be developed. We’ve given the example that we are doing it already at an existing facility, and with the OCI project, we will do that as we start that project up in a couple of years. So, there is an example of a large onsite customer looking for reliable options with low technology risk that they can then sustain over a 15, 20-year period. We are – that’s kind of the baseline against which I’m now going to reference what’s happening with green hydrogen. As for green hydrogen, people are increasingly recognizing that the electrolyzer technology is fairly improved but hasn’t attained the same level of reliability and cost-effectiveness, which I think is deterring long-term offtake agreements that will enable green hydrogen to establish those off-take agreements, modernizing green hydrogen technology. So there are small green hydrogen customers, and that’s largely built around mobility where you’ll expect small volumes and you are starting to build an infrastructure and want to have small volumes to feed that infrastructure as it transitions into kind of larger broad-scale infrastructure. I think that’s where you will see most of the green hydrogen. There are some small mandates that companies can impose in terms of green hydrogen being utilized in some of the chemical processes, fertilizers, etc. But again, these are really small scale. The last point I want to make is that while people talk about gigawatts as far as hydrogen is concerned, the reality is the facility that we are setting up for OCI, as an example, the facility that we set up in Sweeny for Phillips 66, are both traditional hydrogen with carbon capture sequestration producing blue hydrogen—they are both a gigawatt and plus. Building a gigawatt facility for electrolyzers just hasn’t happened yet. You are building 20, 30, or 40 megawatts, which is minuscule in terms of the volume requirements that a large typical onsite customer would typically have. So that scale is what deters large onsite development. Currently, that scale of 20, 30 megawatts only allows for some developments around mobility and smaller end-users.

Got it. Thanks very much for the color.

And we will take our next question from Steven Byrne with Bank of America. Your line is open.

Yes, thank you. So in the last two years, your sale of plant and your sale of gas backlog have both roughly increased 50%. Do you expect the latter, the sale of gas, to increase at maybe a faster pace either by your preference, and that you do have benefits in the rest of your business from that, or from the clean energy opportunities presumably would be more in sale of gas? And then just one more— for that $8 billion to $10 billion that you highlighted as your pipeline for clean energy, how much of that would be associated with existing customers where you could either retrofit or expand the existing facilities, which could generate an even higher IRR?

Steve, let me provide the headlines first, and then I will dive a little bit deeper. The headline is you should expect our sale of gas backlog to continue to grow, and you are absolutely right that the $8 billion to $10 billion I referenced earlier will see those projects translate into the backlog. That $8 billion to $10 billion is probably weighted toward existing customers. So, clearly, we understand that many of those projects will move forward, although some may not, and that’s where the opportunity pipeline, which is rich with over 200 projects that I referenced a few times in the past, is a good feeder into that $8 billion to $10 billion number. So, we should see that sale of gas backlog reflect those projects moving from an opportunity pipeline into contracts and then being reflected in the backlog number. Your question on incumbency and new projects as a default, I’d say to you that that mix is a little bit opportunistic. We made a commitment, as you might recall, for sustainability; we expect to invest about $3 billion in retrofitting and repurposing our existing assets with carbon capture facilities to ensure we capture as much CO2 as possible and be able to sequester it, ultimately leading to blue hydrogen. That’s where most of the retrofit is likely to happen, and you might recall when we said that $3 billion number, it was in the context of a pipeline we expected over a decade of $30 billion of investments in the US. So, that’s a good ratio I think to point in that direction of where we believe the retrofits will occur and where the conversions are likely to happen, along with new markets opening up such as blue ammonia, etc.

Thank you.

And we will take our next question from Mike Sison with Wells Fargo. Your line is open.

Hey, cheers. Nice quarter and outlook. I am just curious when you mentioned that at the midpoint you are looking for much economic growth in 2024. I get to look at your global end-market trends you have sort of for greens and yellow, so, you are sort of run rating above that midpoint and I mean, are you seeing more growth now than maybe the midpoint in terms of economic growth?

Hey, Mike, this is Matt. So a couple of things: first, referencing that end-market to your point. As you know, that includes the backlog, price, and base volume. All three of those will influence the growth. As Sanjiv mentioned earlier, the backlog we expect 1% to 2% based on the cadence, and that we feel very confident on given our contractual terms and conditions. Pricing, I’ll hold off separately, right; we say it’s based on globally weighted inflation, and so whatever your assumptions are there we should be able to deliver on it. The remaining being base volumes, and that base volume is where we are taking an overall kind of assumption in this guidance, the way we are structuring it. Very similar to how we’ve approached the last nearly four to five years. So we will see how it plays out, but right now that is the kind of underpinnings of what this zero growth assumption means, and it’s really around the base volumes as they correlate to an industrial production-type metric.

Got it. Thank you.

And we will take our next question from Laurence Alexander with Jefferies. Your line is open.

Good morning. I’m stepping in for Laurence. Thank you for taking my question. I noticed you mentioned that China is a relatively small part of your business, but I didn't hear any mention of opportunities in India. Could you discuss how India presents a greater growth opportunity compared to the usual focus on China?

Well, India is an important market for us. We’ve been in the market for about 90 years; we are well-positioned. We lead with strong network density, all of that provides us in many ways a unique position to win more than our fair share of the opportunities that we see. India will be an important opportunity for our industry and for Linde in particular. Again, the scale at which China is in terms of the deployed assets on the ground and the capacities that have been built up there—it’s a market that will continue to be important, as well. We will be looking to win more than our fair share in India, which we’ve been doing in ’23 as well, and we look forward to doing that moving forward. But we also continue to track what happened in China and make sure that we are getting our fair share there too.

Thank you very much.

We will now take our final question from John Roberts with Mizuho. Your line is open.

Thank you. Slide 16 shows food and beverage up 9% year-over-year. Almost all processed food companies are showing down volume. But could you parse the volume and price in the food and beverage market? And in CO2, are you seeing any price impact from the 45Q?

The CO2 market really drives that food and beverage market. In particular, I think the food and beverage as you can imagine has broken up into food freezing and beverage carbonation. CO2 pricing is obviously helping and supporting that. There has been a lot of innovation around food freezing, and Linde leads the end-market there. We won more than our fair share, and again, some of that benefit comes through in the growth we see in that line and in the sales line that you see over there for food and beverage. So, I’d say to you, again, strong performance across food. My expectation is it is a secular growth trend; we call it a resilient market for a reason. My expectation remains that we will see continued strong growth in that space. Innovation around application development and the use of gases for food freezing, in particular, are continuing to be a very important part of that growth story. Beverage carbonation and CO2 pricing, obviously, are beneficial as well. I think that we don’t see at the moment any linkage between 45Q and CO2 pricing. Longer term, you could add pieces around that, but for now, there is no apparent linkage.

And I would now like to turn the call back to Mr. Juan Pelaez for any additional or closing remarks.

Thanks guys for all your questions. Thank you everyone, for participating in today's call. Have a great rest of the day. Stay safe.

And ladies and gentlemen, that will conclude today's conference call. We thank you for your participation, and you may now disconnect.