Ladies and gentlemen, good day, and thank you for standing by. Welcome to Linde's First Quarter 2024 Earnings Call and Webcast. Please be advised that today's conference is being recorded.

Abby, thank you, and good morning, everyone. Thanks for attending our 2024 first 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 of the presentation. Sanjiv will provide some opening remarks, and then Matt will give an update on Linde's first quarter financial performance and outlook, after which we will wrap up with the Q&A. Let me now turn the call over to Sanjiv.

Thanks, Juan, and a very good morning, everyone. The Linde team delivered another solid quarter despite stagnant economic conditions across most regions. EPS of $3.75 grew 10%. ROC increased to 25.6% and operating margins reached 28.9%. These all represent record levels even though volumes declined 1%. Over the last few quarters, we have seen a series of negative base volumes, which are tracking the stagnant to declining manufacturing environment, especially in EMEA. While volumes continue to track local industrial production, we know there is more we must do to grow. So while pricing remains an important lever for us, we're also focused on other growth opportunities like small on-site applications, technology, and investments, including acquisitions, to grow our network density, even as we trim certain areas of the portfolio, like equipment hard goods, which typically suffer in economic downturns. Add to that the contracted backlog, and we have a solid growth pipeline for the next few years ahead. Let me provide you with some additional color on the trends and opportunities by key end markets, which you can find on Slide 3. I'll start with the consumer-related markets, which have proven their resiliency time after time. Health care has been quite stable year-on-year. While we continue to see sleep, respiratory, and oxygen demand growing, sales have been partially offset by some rationalization of home care equipment offerings in the Americas and EMEA, which don't meet the investment criteria. Food and beverage grew nicely at 6%. This is mostly driven by food freezing, beverage carbonation, and aquaculture. We continue to see opportunities associated with high quality and more sustainable foods. Even though we don't talk much about our food and beverage business, I'm excited to see good growth opportunities ahead. Electronics is up 1%, with two key trends that mostly offset each other. On one hand, we continue to see good growth from project startups, which have delivered fairly steady results mostly in APAC. On the other hand, this growth was offset in part by lower packaged and merchant volumes to fabs as production levels were softer. The current trend suggests that this has largely bottomed out, with expectations of recovery growing. From where I stand, I have some optimism that we'll see volumes pick up again in the second half of the year. Some of this will be driven by the growing demand for AI chips and new data centers. This is not baked into our guidance at this time. Turning to industrial end markets, Metals and Mining are flat as pricing increases are offset by volume declines. EMEA steel mills account for the majority of volume reduction due to weaker industrial activity but protected by strong contracts. At the same time, we are seeing project backlog opportunities pick up for new low-carbon electric arc furnaces or EAFs, as well as existing steel customers exploring ways to reduce their carbon footprint. Linde has recently signed a long-term agreement with H2 Green Steel to supply industrial gases for the world's first large-scale green steel production plant in Northern Sweden. In addition, Tier 1 producers in China have expanded their relationship with Linde by decaptivating their ASUs into our existing supply network for the increasing supply reliability and efficiency. We continue to work closely with our steel customers on a range of projects from supporting expansions to decarbonization. Chemicals and Energy were up 4%, driven mostly by higher on-site volumes in the Americas and APAC. U.S. Gulf Coast refining and petrochemical customers ran better this quarter when compared to the planned outages last year, helped by healthy spreads and access to low-cost natural gas. Furthermore, we continue to see growing interest around decarbonization projects. The manufacturing end market was up 1%. Most of that is pricing. Manufacturing volumes are down year-on-year. The volume decline is split between EMEA and the U.S. EMEA has experienced broad-based declines in industrial production due to geopolitical and energy challenges. In the U.S., manufacturing sales are about flat when excluding the timing of gases supplied to the aerospace sector. Elsewhere, underlying manufacturing volumes have been stable to slightly up across a variety of key sectors, including battery manufacturing, pulp and paper, and merchant scale clean energy opportunities. A good example is our recent announcement to invest in an electrolyzer to grow our merchant hydrogen network density in Brazil and help customers decarbonize. Looking ahead, our base volumes are expected to track local industrial production, including some encouraging secular growth trends such as batteries, aerospace, and clean energy. Also, resilient end markets such as food and beverage and healthcare will continue to grow mid-single digits, driven by demographics and consumer demand. Furthermore, we have a healthy backlog of approximately $5 billion which will continue to contribute to earnings for the next couple of years. However, I'm not expecting near-term improvement in industrial production, especially in certain parts of EMEA. These flat economic conditions are embedded in the guidance assumptions at the midpoint, which Matt will discuss in more detail. Overall, I remain confident that we will continue to be nimble and actively manage the balance between volume, price, and productivity to grow earnings even in the sluggish economic conditions. And when industrial production levels rebound, as they always do, Linde will be very well positioned to leverage this growth. I'll now turn the call over to Matt to walk through the financial results.

Thanks, Sanjiv. Slide 4 provides consolidated results for the first quarter. Sales of $8.1 billion declined 1% from the prior year and 2% sequentially. When excluding the impact of cost pass-through and engineering project timing, underlying sales increased 1% over last year but remained flat sequentially. Price continues to drive underlying sales growth with a positive contribution of 2% year-over-year. As discussed in prior calls, pricing is localized for most products and thus is highly correlated to local inflation levels. And while we've seen some disinflation, including deflation in China, levels have stabilized as evidenced by the small sequential price increase. Volumes are down 1% versus the prior year and the fourth quarter. While we continue to see positive growth from the project backlog, base volumes are down primarily from negative industrial production, as mentioned by Sanjiv. In addition, we've pruned some noncore offerings in industrial and home care hard goods based on distribution economics, which is consistent with our historical approach. Despite lower volumes, operating profit of $2.3 billion increased 6% from 2023, resulting in a margin of 28.9%, or 200 basis points higher. You can see margins by segment when excluding the effects of cost pass-through, with EMEA continuing to lead due to a combination of price and cost management. EPS of $3.75 increased 10% as a lower share count and favorable tax rate were partially offset by higher net interest. CapEx is up 26% over the prior year, driven by project backlog timing. Despite this, we are taking actions to tighten overall CapEx levels and thus have lowered the 2024 full year estimate to $4 billion to $4.5 billion. Slide 5 includes more detail on capital management, including operating cash flow trends. OCF of $2 billion was slightly above last year, but 28% below the fourth quarter. There are two important points to highlight regarding this trend. First, Q1 is always our lowest seasonal quarter due to the timing of working capital and incentive payments. Second, 2024 had Good Friday as the last weekday of March, resulting in unfavorable collection timing. This appears on the cash statement as more accounts receivable outflow. But we've seen a recovery in April, which should get us back on track by the end of Q2. Despite this timing issue, free cash flow remains healthy as we continue to execute our proven capital allocation policy, including $1 billion of share repurchases in the quarter. We also issued EUR 2.3 billion of long-term debt at attractive rates, enabling us to term out more expensive U.S. dollar commercial paper. These actions continue to reinforce that Linde's strong balance sheet and steady free cash flow are invaluable, especially during times like today. I'll wrap up with guidance on Slide 6. For the second quarter, we're initiating an EPS guidance range of $3.70 to $3.80 or 5% to 7% growth when excluding a 1% assumed FX headwind. Consistent with last quarter, this assumes no economic improvement at the midpoint. For the full year, we're updating our prior guidance to a range of $15.30 to $15.60 or 9% to 11% growth excluding a 1% FX headwind. We slightly adjusted the prior range by narrowing both the top and bottom ends by $0.05, thus maintaining the midpoint, which still assumes no economic improvement. When looking at the macroeconomic and geopolitical landscape, we have not seen any catalyst to warrant a meaningful change in the guidance range at this time. We believe it's appropriate to remain cautious for the remainder of the year until we see tangible evidence of an industrial recovery. Until then, you can rest assured we'll manage the things within our control to continue driving compound shareholder value. I'll now turn the call over to Q&A.

And your first question comes from Duffy Fischer with Goldman Sachs.

First question is just around electronics. A lot of incoming calls on electronics, investors seem to be getting more and more bullish. How much leverage do you have to electronics in that we know what the revenue is, but I believe it carries a higher margin than average? So if electronics picks up, how much leverage could that give to the whole of Linde? And are you seeing signs that the electronics market is picking up for you guys going forward?

Duffy, you're right in suggesting that there is a general view on electronics that we are seeing an improvement. As you know, it's about 10% of our overall portfolio. About 30% of our backlog today is investment in electronics. All of that is playing out. Our view is that towards the back end of this year, we expect that recovery that everyone is talking about, led by AI chips or data centers, to actually gather momentum. We haven't baked anything into our guidance, as you're aware, but we do expect to see some momentum build up. We've seen a decent electronics performance in China, and we are seeing equally reasonable signs of bottoming out in the rest of Asia, which hopefully points to a recovery in the second half.

Great. And then maybe just jump to low-carbon hydrogen, blue hydrogen for you guys. You put out a couple of slides over the last 1.5 years or so, sizing that market over the last decade. Just kind of an update, how are those conversations going? What should investors expect as far as announcements again, primarily with sizable projects? And then the one you've announced with OCI, how is that progressing as far as finding partners for the CO2 sequestration and just general progress on that?

Sure. So let me start off by just giving you a broader picture of what I see around clean energy projects, and then I'll talk specifically about projects we are developing and then OCI. Overall, I'd say to you, I see momentum on clean energy projects moderating a little bit. We are seeing that there is a lot more effort now in upfront feasibility studies and field studies to ensure that there is greater diligence as projects are being taken to FID. In fact, McKinsey has done a study that shows that of the announcements that get made in this space, only 6.8%, so let's say 7% of projects make it to FID, which I think is a reflection of the high dying down and some high-quality projects then surfacing and moving forward. So the good news is we are seeing exactly that: high-quality projects that we are working on, and we have a very solid pipeline continuing to be developed and they're moving forward, albeit that they are taking a little bit longer. And we're pleased to be working on those projects; that pipeline is what we have alluded to in the past when we've said that in the next few years, we expect to see us continue to go and make investment decisions around $8 billion to $10 billion. The pipeline looks healthy enough at this point in time, and I'm not going to forecast the time with precision, but I'd say to you that the next few years, we will still see that pipeline play out into investment decisions. As far as OCI and the CO2 sequestration partnership is concerned, we have already contracted with ExxonMobil, who are our partner for sequestration. As you know, we have some of the world's best carbon capture technology. So we will deploy that. We will capture and condition the CO2 and hand it over at the OSBL or the outside battery limit to ExxonMobil, who will then take that CO2 to molecule sequester.

We will take our next question from Mike Leithead with Barclays.

Just one question for me. On the full year guide and outlook and sort of where Matt ended the prepared remarks. Obviously, a nice start to the year but you decided to narrow the range a bit instead of, I think, historically, you've raised by the better quarter. Can you just further frame out how you're thinking about the outlook? And has anything softened from your original expectations?

So I'm going to let Matt talk a little bit about the guidance itself. Mike, what I might do is just maybe walk you guys around the world because really I think it's important to just share with you what we are seeing around the world, and I think it sets the tone for how we think about the guidance. So I'll start just very quickly and give you a brief on the Americas. Let's start with the U.S. market, obviously, the most important one here. As you know, I've said in the past, it's been remarkably resilient. And we've seen many of those end markets at pretty high levels. Now in Q1, we saw base volumes in the U.S. largely flat to slightly negative. Manufacturing declined about mid-single-digit year-on-year. Chemicals and Energy, on the other hand, was up mid-single digit year-on-year, largely because they had planned outages last year, so the comps were a little bit easier. U.S. packaged gases were down year-on-year, largely due to softer demand from electronics, but also the timing of supply to the aerospace industry. Hard goods, on the other hand, were down mid-single digits year-on-year, mainly on lower equipment sales. It is important to note, however, that both gases and hardgoods sequentially were flat. Latin America was slightly positive in Q1 as well. Looking ahead, Americas largely flat to slightly positive in the second quarter. The good news is hydrogen demand continues to be extremely strong in the U.S. Gulf Coast. We're really happy to see that pick up in refiners and pet chem customers running largely at record levels. So we feel good about where that stands. As far as EMEA is concerned, the trend over the last few quarters has been largely unchanged. And in Q1, we saw a little bit of a pickup in on-site and package volumes, but merchant continued to lag and was negative year-on-year. We expect industrial customer volumes to flatten as we see developments there. So going forward, comps might look a little bit easier. If they hold volumes to these levels, we'd actually see comps no longer being negative year-on-year for EMEA. However, no catalyst that would suggest a significant change in this trend just yet. I know there's a lot of interest in APAC, so let me just give you China first, and then we'll talk about the rest of Asia. Well, as far as China is concerned, in Q1, we were watching very carefully. Chemicals output was up just under 10%, I'd say, but full year expectations have moderated down to probably a range of 4% to 5%. Crude steel output was negative, which was not unexpected. We've been talking about this for a while. Exports for steel were up almost 30%, but obviously, most of that, if not all of that, was offset by lower pricing. So really, the overall industry didn't really get a major impact out of that. The good news, however, is that there is a shakeout in the industry, and Tier 1 players, who we tend to serve, continue to benefit from that shakeout. Manufacturing is largely flat; traditional manufacturing sectors were negative. However, there were some select sectors within manufacturing that are up. Automotive shipments were up 5%, EV output was up 30%. You've heard the story; you read about it. Battery solar is up about 20%. So again, these sectors are likely to sustain for the rest of the year, while traditional manufacturing sectors are expected to remain soft. Electronics, as I said earlier, saw some decent growth in Q1. I see outputs were up above 40%, which is pretty good. Semi sales were up about 28%. But we expect, overall, this market will be mid-single to high-single-digit growth. Our expectation is that a push for self-sufficiency and the third round of big fund will probably support electronics in China for the moment. As a reminder, China is about 7% of our sales. As we've said before, about 75% of our business is what we call defensive, i.e., it's locked in with Tier 1 on-site customer contracts with fixed fees and, of course, resilient end markets supporting that as well. So that's the story of China. Rest of Asia saw volumes up slightly, with backlogs contributing to growth, particularly around chemicals. As expected, India saw a little bit of a slowdown in the quarter due to the ongoing elections, but I expect that we will see that get back in line with our expectations for the rest of the year. You want to talk a little bit about guidance and taking what we're seeing in the marketplace into the guidance, Matt?

Sure. So I think, Mike, I'll start with how we approach the guide, which is really no different than how we've been approaching it for the last four to five years. And to clarify, when we say no improvement in the economy, it really means from what we're seeing now. So when you go back in the last couple of months, I'd say, as we mentioned in the prepared remarks, it's been stagnant to even declining in some regions. So we've updated for that and held that for the remainder of the year. Even though, like Sanjiv just mentioned, the year-over-year comps in the second half will get easier from the 2023 baseline. Even though that may demonstrate positive numbers just given a softer baseline, that's not how we're thinking about it. We're thinking about it from the current status and how it moves forward more sequentially. So that's how we applied it. Just based on what we were seeing now, we just embedded that in, ran it out, and then just saw no catalyst, as we mentioned, to change it at this time. Now obviously, if things improve, then we'll see that benefit. But since we were seeing some erosion from our prior view a couple of months ago, we've taken actions to mitigate that. And that is why we've been able to hold the midpoint, and that’s something we will continue to do, is take actions if things do deteriorate. So time will ultimately tell. Obviously, we will give another update in July when we see how things play out. But we feel in this environment it's better to be cautious right now than to be overly aggressive.

We will take our next question from Peter Clark with Bernstein.

I don't think it'll be a surprise to my question. The EMEA margin is comfortably ahead of the Americas now. You did get it ahead in Q3 last year, but there were some fluctuations in the Americas, I think, then with the power surge, et cetera. So just your view on it going forward because I think structurally, the EMEA could be the higher-margin region anyway. And then following on that, on the pricing in the EMEA, sequentially, it was up 2%. Year-on-year, it was up 3%, a very strong performance. I'm not sure if you had much in terms of energy surcharges coming off in the bulk gases like some of your peers. But just your view on the pricing situation, particularly in Europe.

I know you've said in the past that EMEA margins should be the highest. So we've finally gotten there as you can see. Now as Matt stated in his prepared remarks, EMEA margins are a combination of a number of factors that we've taken into account: price, cost management, managing the spread, right? And I have to say credit to the team, they do a good job of managing that pricing to inflation, identifying opportunities to manage both fixed and variable costs on an ongoing basis. We do a lot of work, including using AI around our power management, which, as you know, is a big part of our cost structure. But there is no one driver; there's no silver bullet that kind of gets us where we've gotten to. It's a combination of many different factors that come together and all the effort that gets put in. So I see these margins as sustainable. I see that now we offer EMEA as the target for the other segments to strive to. And you’ll recall this, Peter, that when we first merged, there were lots of questions around EMEA margins and whether they would ever reach the Americas. They've obviously overtaken the Americas now, and now the Americas is chasing EMEA. So I'm pleased to see how the team has really come together to deliver on that result. And I can assure you, there's been a lot of work that's gone in to get us to this point. And obviously, that momentum I expect to see continue. As far as pricing is concerned, they've done a fantastic job around pricing, being consistent in laying that out for you guys. I see the whole concept of pricing at Linde as being different from what you may hear from others. In our view, it's all about product pricing. We don't believe necessarily in just having surcharges over time; surcharges get translated into product pricing. And that's where sustainable pricing actions really have an impact. For us, that's what I expect to see, and that's what I would expect going forward as well.

We will take our next question from Jeffrey Zekauskas with JPMorgan.

Your volumes year-on-year were down 1%. And I think one of the things that Linde says is that new projects add about 2% growth. So should we think of the volume growth or the base volume growth as really negative 3%? Or is the amount that you expect from new projects smaller? And then secondly, your average EBITDA margin is around 37%. When you look at your helium business, is your helium business meaningfully above that margin, below that margin, or at that level?

Let me start off by just addressing the base volume piece. So I'd say the new projects add about 1 percentage point on growth, and base volumes are down about 2%, which reflects our globally weighted industrial production. I've also said before that we are not happy with where that number is, and that growth is a key priority and focus for us, and we're pushing on many of those growth levers across the world. So I believe we have a number of actions in play at the moment to support base volume as we move forward. As far as helium is concerned, as you know, and we've stated this a number of times, it is a very small, low single-digit part of our sales. So it doesn't really have any significant impact on us. I know there's been a lot of noise around helium recently. It's an attractive business for us, and given its size, the overall impact on the EBITDA margin is really not consequential.

And we will take our next question from David Begleiter of Deutsche Bank.

Question on CapEx. Given the lack of volume growth the last few quarters, why are you not increasing CapEx as opposed to now lowering it here?

David, you know how we think about our business, right? For us, as we are seeing the industrial environment around us, we are actually ensuring that we are taking productivity actions across the board, right? And CapEx is no different. So the CapEx reduction is really driven by CapEx optimization, both in our backlog and the base CapEx as well. The teams around the world have scrubbed their CapEx numbers and they are consistent with the weak industrial activity that we're seeing. Now I said before that we are very open to pushing on several growth actions that we are taking. As a result of that, if we find a pickup in small on-site projects, then CapEx for applications development will increase, and this will get factored into our base CapEx. As things stand now, just because CapEx sits on the balance sheet does not mean we ignore it. We are giving it our full attention, and we are looking at productivity in that CapEx number itself. But we are not constrained. If we have high-quality projects come through, small or big, we will ensure that we are investing in them, and thus the CapEx spend will reflect that.

We will take our next question from Vincent Andrews with Morgan Stanley.

This is Steve Haynes on for Vincent. Just wanted to maybe come back to the Americas performance in the quarter and two of the bigger pieces of your pie there, manufacturing and healthcare, were down. It sounds like maybe you walked away from some volume and also had some onetime issues in aerospace. So I would be interested if you could quantify the collective impact of those two items and what you're assuming for the balance of the year, or just generally how we should be thinking about that.

Yes. As I mentioned earlier, regarding the Americas, we observed a decline in hard goods, which are related to manufacturing, down mid-single digits. We have closely examined our equipment portfolio and made adjustments where necessary, which is reflected in the numbers. In healthcare, we continued to see demand in areas like sleep, oxygen, and respiratory, but it was balanced out by the rationalization of some of our DME portfolio that did not meet our business criteria. These were deliberate actions aimed at improving the quality of our business. Manufacturing, as noted, also experienced a mid-single digit decline. In the packaged gas segment, there was a timing difference. Concerning aerospace, it's inherently variable. The volume of launches and the need for propulsion gases for satellites have impacted this quarter. However, I expect aerospace volumes to be strong and recover in the next three quarters, especially given the number of launches that our customers have announced.

We will take our next question from John Roberts with Mizuho.

We're seeing project cost inflation across a lot of our industries, not just gases, but chemicals broadly. Does that drive any shift between sale of gas and sale of plant as you have new project discussions with customers? Or does that not affect that decision?

We evaluate each project based on its merits. As we have mentioned before, we have the unique ability to choose between selling gas and selling plants. We assess the fundamental economics of the project and its risk profile before making a decision. Market trends in project costs or capital cost inflation are not significant factors in our considerations. Instead, we focus on the risk-return profile; if a project meets our investment criteria, we are pleased to include it in our gas sale backlog, which is currently under $5 billion. This flexibility is a significant competitive advantage when we approach the market for these types of projects.

And we will take our next question from Josh Spector with UBS.

I had a question on two of your kind of recent announcements here. So when you talked about decaptivating some assets from a metals customer in Asia, is that hitting the books now? Or is that something that's to benefit more a quarter or two from now? And also, with your electrolyzer investments in Latin America, just curious if you could frame around the environment down there. I think we're talking more about investments in North America and Europe and particularly around support or subsidy schemes, so how does that differ from those regions versus Latin America and why invest there?

Sure, let's start off with the decaptivation. So you're right, we've decaptivated a plant from one of the large steel customers, as I said earlier in my prepared remarks. Customers see the benefit of bringing those assets into our network; it enhances reliability and efficiency. Clearly, Linde is the preferred option when it comes to operating plants like this. So when we think about decaptivation for us, it has to meet the same investment criteria that we would set for our own investments. We are happy to purchase these assets where those conditions are met, where the quality of the asset and the quality of the customer are good. Typically, in a year, we would see, I don't know, maybe a dozen or so decaptivation opportunities; we would probably go ahead on two or three of those. So the one that you're referencing with Bao is one that we decided to go forward with and feel really good about how that fits well with our network, providing that optimization and improving our network density in that area as well. So again, I think we are seeing movement around that, and we are happy to be able to be selective around decap projects as they happen. As far as Brazil is concerned, this was a really good opportunity for us, and I was happy that we were able to put a clean energy asset on the ground in Brazil to improve hydrogen network density and help decarbonize the customers who were looking for that. There are a couple of factors that are different, right? You'll remember that Brazil has a high renewable energy mix available in its grid and it's very competitively priced. So renewable energy, obviously, is one of the constraints in the development of what I called renewable hydrogen or electrolysis hydrogen. In Brazil, it's really competitive in price; thus, it actually makes the economics work well. The other piece that works well is that the comparisons to natural gas pricing, which is quite high, actually makes the green hydrogen that comes out of electrolysis reasonably competitive and therefore attractive for customers to want to use it to decarbonize. So those factors came together to provide a great opportunity for us to increase our network density, put an electrolyzer on the ground, and we're very happy with that. Just briefly on decap. I know you had asked a question, and I probably didn't respond to it in terms of timing. Typically, decap timing starts now. And yes, in some cases where you've got a new plant coming on, there is a little bit of a ramp, but typically, the timing is here and now.

We will take our next question from Patrick Cunningham with Citi.

This is Eric Zhang on for Patrick. Can you elaborate on the productivity initiatives in the Americas and EMEA? Have those initiatives changed or been adjusted to account for any changes in your macro outlook?

We've said this in the past; I'm going to now just reiterate the point that there is no silver bullet around productivity. We run about 13,000 to 14,000 projects a year. A significant portion of those projects happen both in the Americas and in EMEA. So there is a track record of taking those productivity projects and driving them hard to make sure those benefits come through. The EMEA margins are reflecting that. There has been a lot of action around managing total cash fixed costs with rigor and ensuring that productivity actions are happening and projects are being developed. The Americas, across the board from the U.S. to Canada to Latin America, have a great organizational rigor around productivity projects, and we are seeing them ramp up given the economic conditions. I think Matt made the point earlier that when we see economic conditions as we are at the moment, we are obviously very focused on managing costs and taking mitigation actions to hold the guidance where we have at the midpoint, as you know, and we have a track record of being able to do that. I feel good about where those productivity actions stand today, both in the Americas and EMEA. We are constantly pushing to achieve more beyond just what the targets are.

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

So I wanted to address the price versus cost kind of environment in APAC. I think we've seen the pricing moderate a little bit or at least decelerate. But I think, Matt, in your comments, you spoke to a deflationary environment from a cost perspective. So I guess, can you help us to think about that balance and how to think about maybe pricing in the region as we push forward?

Yes, John, sure. This is Matt. So you're absolutely right. We always think about it in terms of a spread because there's different inflationary environments everywhere. Our model is very local. So managing the spread is very important. When you think about APAC, clearly, China does make up a large portion of that segment. As I mentioned, in China, you are seeing some deflationary conditions, which is the primary reason why we talked about taking cost actions out several quarters ago, which we've been undertaking. The dynamic we're seeing in China, while volumes are flattish, as Sanjiv said, pricing is also flattish, and costs are actually coming down, while that spread is still positive in that regard. When looking at places like India or Australia, they're following the model closely. In a place like South Korea, you tend to have a little bit more electronics exposure, so there will be a bit of an effect there, helium more than other locations for us given that, and helium is more of a globalized product. As Sanjiv mentioned, at a consolidated level, helium is low single-digit for us. But South Korea will be disproportionately impacted by that given the larger electronics portfolio. So that's how I'd think about that. And hence, why APAC is a little lower, but also the costs are a little lower. That’s why the margins you notice are still expanding in APAC. To me, that's really the key; it's our margin because you can see inflation, hyperinflation, disinflation, and deflation. The question is how we as management are managing that. In APAC, right now, it's being managed, and the margin is still expanding.

We will take our next question from Steve Byrne with Bank of America.

I was just curious about your pipeline of targeted acquisitions; potentially increase your density even greater for your merchant and packaged gases businesses. Do you have more opportunities? And can you comment on geographically where that might exist without regulatory pushback?

See, we are very committed to tuck-in acquisitions anywhere in the world. To your point, network density guides that decision for us to bring a tuck-in acquisition, enhance our network density, and move that business forward is how we see a good growth opportunity. As you know, in the U.S., we have a record of doing many of these. The last one that we did, which was large enough, I would argue, is nexAir; it has proven to be tremendously successful, looking really good as we integrate that business into Southeast U.S., a very attractive market in which to do that. Again, a good example where I think that acquisition has worked well for us. We look at that across the board, so we are obviously pursuing such opportunities in the U.S. They are tuck-in acquisitions. We recognize that a very large acquisition is not doable for regulatory reasons, etc., that you've mentioned. But we're also looking for a similar model elsewhere in the world, and we will explore it in Asia, Australia, China, large parts of Eastern Europe, the Middle East, and even in Western Europe to find tuck-in acquisition opportunities.

And we will take our next question from Michael Sison with Wells Fargo.

This is Avi on for Mike. So just in terms of your project intake, that's obviously down a bit year-over-year and quarter-over-quarter. I was wondering if you're going to attribute that to your focus on only taking on higher quality projects or if there are other factors at play.

I'll just go back and tell you that when we think about our backlog today and look at order intake, the backlog we've got is about $8.3 billion currently under execution. We have a healthy order intake pipeline; engineering does about $0.5 billion of order intake a quarter. That looks pretty much on track. Yes, we do take high-quality projects; there's no question on that. But we have a unique position in the fact that Linde's engineering business is one of the leading engineering entities in gas processing in our space; we are well sought after today by customers who would like to build on relationships that we've maintained with them over the past. I feel good about where we stand with the project intake as things stand. If you look at the sale of gas backlog, I'll do the math for you. The sale of gas backlog at the moment is about just under $5 billion. Over the next year, we'll start up about $1.5 billion to $2 billion of projects, reducing that backlog between that amount. My expectation is, over the course of the next few months, we will add back into that backlog to end the year around that $5 billion mark. This shows that there will be order intake coming in, solved by the engineering team, as well as through the sale of gas backlog. Overall, we feel pretty good about where we stand.

Okay, so you're anticipating a higher order intake later on in the year, is what I'm hearing versus earlier in the year?

So on the sale of gas backlog, as I said, we develop projects over a period of time, and we will start up about $1.5 billion to $2 billion of projects that are already being executed, and we expect to add back into the sale of gas backlog and thus the order intake for engineering around the same level to try and get very close to the $5 billion mark by the end of the year. Does that clarify?

We will take our next question from Laurent Favre with BNP.

I just have one question left. On the H2 green steel side, I noticed it was just the ASU contract. I was wondering if there was any reason why you haven't been involved in the hydrogen supply in the first place? Is it by choice or I guess by accident? When we think about further green steel announcements, particularly in Europe, should we be assuming that you may have bigger exposure to those units?

Right. So on H2 Green Steel, the agreed scope that we wanted to do was the air separation, and we are very happy with having that opportunity to supply them. They are going to be probably one of the larger green steel projects starting up in Europe earlier than most others. There are other projects that we are also pursuing. The scope depends on the agreement we have with the customer. We are very mindful about how we see electrolysis development; obviously, renewable energy availability guides a lot of that, as does reliability and the capital intensity around those projects. So we tend to pick and choose based on that. There are projects that we are currently developing in Europe around steel that include the supply of hydrogen, and in others, we stick to the industrial gas portion, which is air separation.

And a follow-up for Matt. On the cut-off date for Q1 cash flow and working capital, can you maybe size the impact for us? Is it most of the $0.5 billion outflow you had in Q1?

Yes. I'm sorry, could you repeat that? It was the outflow in Q1 related to what?

Yes. On the cutoff date, on Good Friday, I was just wondering if we should assume that most of the working capital outflow year-on-year is related to that timing, and we should see that $0.5 billion come back in the second quarter?

Yes. To your exact point, when you look at the cash flow, the AR year-on-year is unfavorable, about $250 million. The majority of that was associated with some of this timing impact. As you can imagine, Good Friday was a bank holiday in most jurisdictions, even Holy Thursday in some areas in Latin America. That created a timing dynamic on the receivables. But when we monitored the first few weeks of April, we've definitely seen a rebound on that timing. So I would expect to get that back in Q2 as we mentioned and should get back on track. So really, the AR was the only thing that stood out, and it was a function of this timing component because, as you know, these are all contractual customers. These are contractual terms, and they need to pay to continue to get supply.

And we will take our final question from Laurence Alexander with Jefferies.

Could you unpack two comments? So one, with respect to the difference in pricing philosophy, particularly in merchants, are you seeing that translate into share gains relative to competitors? Or just kind of what's the practical impact of the difference in philosophy? And then the second is with respect to the comment about the number of elections this year. Do you get a sense from your customers that there is a pent-up project list where, once there is political clarity, we should see project flow through to your backlog fairly quickly? Or is the disruptions longer reaching because people aren't even in planning mode given the uncertainty around what longer-term policy directions will be? Just wondering where you see the nervousness translating into how projects flow through to your backlog over the next, say, 6 to 8 quarters?

Let's start with the project pipeline. It's a reflection on the backlog, Laurence. I'll distinguish this between traditional projects and clean energy projects. On the traditional projects, we see a lot of project activity continue. I would say that elections aren't having a dramatic impact on timing. People are just being very intentional about the projects that they wish to pursue. I have said that in India we saw a little bit of a slowdown in business just due to ongoing elections, but that's just around logistics and day-to-day business as opposed to decisions being made from a long-term perspective. We don't see any significant impact on the traditional side of our business related to elections or otherwise. I think the natural trend over there is continuing. The pipeline is healthy; we're looking at conversions. I mentioned earlier that I expect we will get our backlog back up to very close to $5 billion by the end of the year, which means that between now and then, there’s between $1.5 billion to $2 billion of new projects to be won. That only happens when there is a strong pipeline that you’ve been developing over a period of time. So I feel it's pretty much there. Clean Energy, I also said I see momentum moderating; I see some of the highs going away. Again, less to do with elections. There is currently some clarity being sought on clean energy projects, particularly regarding IRA and 45V and so on. As you know, there is a very complex incentives and penalty structure in Europe. People are ensuring that they try to understand and get a good handle on those before they make large investment decisions. That’s the factor that’s more at play than elections. As far as your question on pricing was concerned, I'm not sure I fully got it, but here is how I think about pricing. We've said many times, pricing is a great proxy for globally weighted inflation. We track to that. It's a correlation built over a couple of decades with high correlation, and we're seeing that play out. Matt made comments around what happens in disinflation versus deflation environments. In each of those cases, our philosophy is around tracking global inflation and executing pricing actions consistent with what we call inflation. That gives us an advantage in sustaining price increases and pushing it through into the future. You can see that through the consistent pricing actions and the performance we've given.

Abby, thank you, and thank you, everyone else for participating in today's call. I hope you have a productive day. Stay safe. Bye.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.