Good morning, ladies and gentlemen, and welcome to the Air Liquide 2023 results conference call. All participants are in listen-only mode until we conduct a question-and-answer session, and instructions will be given at that time. I would now like to hand the conference over to Air Liquide team. Please begin your meeting, and I will be standing by. Good morning, everyone. This is Aude Rodriguez, Head of Investor Relations. Thank you very much for attending the call today. François Jackow and Jérôme Pelletan will present the performance of full year 2023. For the Q&A session, they will be joined by Mike Graff and Pascal Vinet, both Executive VPs, overseeing mainly, respectively, Americas and Europe and Africa Middle East. In the agenda, our next announcement is on April 24 for our first quarter revenue. Let me now hand you over to François.
Thank you, Aude, and good morning, everyone. It is my great pleasure to be with you today to share the highlights of 2023, which was another year of strong performance for Air Liquide. Let's start first with the financial highlights of our performance on slide three. Building on the strengths of our model, all our performance KPIs are again very well-oriented, especially given the macroeconomic and geopolitical context. On the top line, sales grew 4% on a comparable basis, while our margin improved by 80 basis points, excluding energy pass-through, which is a remarkable performance in the current environment. This is now 150 basis points in the first two years of ADVANCE, almost the 160 basis points set as the ambition for the full four-year plan.
We also achieved +13% recurring net profit growth at constant exchange rate, demonstrating a strong leverage on sales. This is also reflected in the cash flow, growing +13% at constant exchange rate. And last but not least, the recurring ROCE improved again to reach 10.6%, fully aligned with the ADVANCE objective of ROCE above 10%. As you can see, we are steadfast in our commitment to deliver profitable growth regardless of the macroeconomic conditions. This is a strength of Air Liquide. Our efforts to deliver a significant margin improvement in 2023 are bearing fruit. Slide 4 highlights the reliance on two key operational levers for this achievement last year. First, IM pricing, which increased again significantly at 8% in 2023, coming on top of the +15% delivered in 2022.
This active pricing management is continuing and will continue in all regions in 2024. Second, efficiency, which reached a record level above EUR 460 million, which is 23% higher than last year. Many actions launched in 2023 will continue to deliver efficiencies in 2024, and we are actively launching new ones. Beyond these key enablers, a real delivery mindset is driving the teams worldwide, and it plays a crucial role in terms of strong execution. I would like to warmly praise our 67,800 team members for their great achievement. Turning now on slide 5. As part of the strategy, we are positioning ourselves very well to continuously secure profitable growth. Indeed, we managed to sign several major investment projects in energy transition and Electronics, which are two main growth accelerators.
In energy transition, to name a few projects under construction, the 200-megawatt electrolyzer in Normandy, in France, the carbon capture Cryocap unit added to our steam methane reformer in Rotterdam, which will be part of Porthos, Europe's largest CCS infrastructure. In Canada, the low-carbon gas production platform we mentioned already in our Q3 conference call, and not to mention the electrification of two air separation units in China. In Electronics, we also have many projects starting construction or going through startup, mainly in Asia or in the U.S. As a result, the investment backlog has grown 50% compared to 2019 and reached a record high level in 2023 at EUR 4.4 billion, a clear acceleration for the future. This is fully aligned with the EUR 16 billion of investment decision planned for the four years of ADVANCE.
While we prepare for the future, we remain very disciplined in our investment decisions to maximize value creation. Beyond our high investment decision signings and robust backlog, we are actively pursuing well-developed projects and partnerships, providing a deep pool of growth opportunities for the midterm. I am now on Slide 6. So far, 19 energy transition projects have been awarded EU funding, 7 projects eligible for sales of equipment and technology through our E&C activity, and 12 Large Industries projects, representing EUR 2.7 billion of CapEx, have been awarded. Among them, two projects have recently been signed and are now included in the backlog. One other electrolyzer has even started.... The remaining nine projects are on the move to final investment decision and represent more than EUR 2 billion of CapEx.
In particular, we signed Memorandum of Understanding with cement and lime production companies, and these projects are developing very well. We have also been very successful in the U.S., being named as partner in six out of the seven clean hydrogen hubs. We are also very actively pursuing and developing projects in Electronics, especially given the reshoring trend in the U.S. and in Europe. In ADVANCEd materials, $200 million of CapEx are being invested in new production centers in Taiwan and South Korea, close to our Asian customers. They will be ready when these markets will pick up. We are also making progress in hydrogen mobility, signing joint ventures and Memorandum of Understanding to foster the use of hydrogen for heavy duty. In Europe with TotalEnergies, in Asia with Lotte Chemical, or in the U.S. with Trillium.
In Japan with ENEOS to support the development of low-carbon hydrogen all along the value chain. So as you can see, all these projects offer a very significant reservoir of growth. I should say that I am, with the team, very pleased that we achieved this very strong financial and business development performance while making very clear progress on our ADVANCEd CO2 emission roadmap. I am now on slide seven. In 2023, we hit a milestone. This was the first year that we reduced our Scope 1 and 2 CO2 emissions by 1.8 million tons, or -5%, while managing to grow our sales by +4%. This achievement gives us confidence for achieving our near-term goal of emission inflection in 2025. As you will recall, the fundamental part of our decarbonization plan focuses on three levels.
First, carbon capture, with the example of Porthos project that I already mentioned. Asset management, second, with the example of Normandy electrolyzer, a new technology to produce low-carbon hydrogen. And third, low-carbon electricity sourcing. In 2023, another 1.5 TWh of low-carbon electricity has been sourced, representing a reduction of 1.2 million tons per year of CO2 emissions when all sources will be online. The ADVANCEd zero roadmap is also about social KPIs. As an example here, we made very good progress on health care coverage for our employees, moving from 40% in 2022 to almost 80% in 2023, and we remain fully committed to be at 100% in 2025. In gender diversity, we lead the industry by far. To conclude, I want to reiterate our commitment to create value for our shareholders.
In 2023, the market recognized our strong value creation, and Air Liquide share price was up by 33%, twice as much as the CAC 40. And I believe we will continue to demonstrate that our future prospects for growth are better than ever. Additionally, we are committed continuously to reward existing shareholders. We propose to the vote of the General Assembly, a dividend per share of 3.2 EUR in 2024. It's an increase of 8.5% and provides an average DPS growth over 8% for the last 20 years. In addition, the board of directors has decided to consider a 1-for-10 free share allocation in June 2024. That will, of course, result in associated dividends for these free shares from 2025. The annual turnover...
Sorry, the annual total shareholder return over 20 years has improved now to 12.6%, showing our commitment to shareholder value over the long term, enabled by our resilient and growth business model focused on sustainable growth. Leaving here the 2023 performance, I would like to finish by turning to the upgraded ambition for ADVANCE. I am on slide 9. The first 2 years of the 4-year ADVANCE plan have fully confirmed the strategic directions. Today, we are fully confident to confirm the 3 ADVANCE targets on sales growth, ROCE, and CO2 emission trajectory. We also confirm our investment ambition for investment to be decided over the 2022-2025 period. And remember, this is +15%-50% compared to the last period. As a matter of fact, given the strength of our portfolio, we may over-deliver on this objective.
At this stage, we keep it as an upside to stay selective. Finally, regarding margin improvement, we have almost met the initial ambition halfway through the four-year strategic plan. So based on this strong performance, we are raising our ambition to 320 basis points of margin improvement over four years, excluding the energy impact. This doubles our initial ambition, which we first disclosed two years ago. This acceleration shows our strong commitment and confidence in our ability to deliver solid performance. I will stop here and ask Jérôme to drive you through our 2023 financial performance. Jérôme, please.
Thanks, François, and good morning, everyone. I will now review the details of our Q4 activity and the full year performance. For the full year, and I'm now on page 11, group sales have been very solid overall on a comparable basis, meaning excluding energy pass-through, Forex, and significant scope effects. Gas and services sales are showing a strong +4.2% increase versus last year. Turning to engineering and construction, sales have decreased by -16% compared to high third-party sales last year. On a very positive note, order intake has increased above EUR 1.5 billion at year-end.
Global Markets & Technologies are soft and -1% as a consequence of the small biogas distribution division scope effect, while organic growth is strong at +9.7%, and order intake is significantly up at close to EUR 930 million. So overall, group sales are up +3.7% on a comparable basis for the year, while published sales are down at -8% as a consequence of the energy price decrease during the year. This translates into a -8% energy LI pass-through effect, which, as you know, has no negative impact on the operating margin absolute value, plus a negative Forex effect of -4.2%, and a significant scope effect limited to +0.3%.
So specific to Q4 only, comparable growth has also been very solid at +3.7%, after Q3 at +1.5%. On page 12, we can see that what we said last October happened, meaning that after a low point in Q3, comparable gas and service sales came back to higher growth in Q4 at +4.6%. The graphs also show that we face a high comparison basis in Q1 2024, given our strong performance in Q1. From a business line standpoint, I'm now on page 13. Industrial Merchant and Healthcare drove the sales growth in 2023, while Large Industries showed a mixed performance, and Electronics must be put in perspective again with an exceptionally, exceptionally strong comparable basis last year. On a geography standpoint, despite geopolitical issues and market downturn in Electronics, all geographies posted resilient or solid growth.
This highlights, again, the very strong value of our global development strategy and the resilience of our model, capitalizing on the complementarity and optimal balance among both our geographies and business lines. Let us now review the activity for each of our main geographies. I'm now on page 14. After a lower Q3, sales in the Americas have grown in all business lines to reach a +6% overall. Large Industries volumes in air gases in the U.S. have been supported by better demand in chemicals, while we saw soft steel and mixed hydrogen for refining. The activity has also been impacted by some customer turnarounds. In Merchant, sales have grown solidly, supported by high pricing effect at +5% and resilient gases volumes excluding output. Growth in Healthcare has been very strong, supported by strong pricing in proximity care in the U.S. as well as in Canada.
Medical gases and home healthcare have been very strong in the term, with positive volumes. Finally, electronic sales have improved at +12.1%, supported by very high spots in E&I. Sales in Europe now have increased by +5% compared to Q4 last year, despite a still challenging environment. In Large Industries, sales have improved versus a low last year, as demand in hydrogen has been improved for oil and gas, while air gases for steel and chemical customers are stable at low level. Note that the energy combined effect impacted negatively this quarter by around -3% due higher volume, while energy price were lower. In merchant, sales have grown significantly, supported by a still strong price effect, +8%, on top of a significant pricing effect in Q4 2022.
Volume showed resilience, growing in automotive, metal, and research. Finally, healthcare growth was very strong at +7%, indeed, sales have been supported by both home healthcare activity, notably in diabetes, sleep apnea, and by growth in medical gases, with a sustained price effect in response to inflation. After a negative quarter in Q3, Asia turned, Asia turned back to positive growth in Q4, driven by merchant. In Large Industries, sales and volume remained affected by low demand. Sales have also been impacting by customer turnaround, including an extended customer stoppage in China that lasted until the end of the year. Sales in merchant were strongly supported by a still very solid pricing effect at +5% on top of already strong pricing in 2022.
Note that China itself have been also strong, supported by volumes which have increased again, particularly in the IC packaging and automotive sector. Electronics sales have turned back to positive growth, with improved ADVANCE material and overall solid carrier gas benefiting from start-ups and ramp-ups , despite low activity in specialty materials and E&I. In Africa and Middle East, we have, again, seen growth in all business lines. In Large Industries, Large Industries, sorry, activity remains robust in air gases in Egypt and hydrogen in Saudi Arabia. Merchant growth is strong, despite the effect of divestiture in the Middle East completed in 2022, thanks to strong price pricing at +10% and increased volume in bulk and cylinder . I will now comment on our Q4 activity by business line. I'm now on page 16. In Merchant, pricing stayed at high levels, while volume remains resilient.
The very good outcome is that pricing has been strong again, at +6.1% in Q4, to address inflation, increasing on top of an already very high basis last year. The other good news is that volumes are resilient overall. Volumes in our end market, automotive, research, and IC packaging, have been positively oriented. To be noted, our good momentum for on-site signings to be confirmed, which are confirmed with 62 signings in 2022. From a Large Industries standpoint, activity also still low as stabilized. Overall by market, chemical activity has stabilized as well as metals. Hydrogen volumes for oil and gas were better oriented than in Q3. Volume of steel impacted by customer turnarounds, mainly in the Americas and in China. On the positive side, we had good contribution from start-ups and ramp-ups. Page 17.
In Electronics, Carrier Gas posted a solid growth in Q4 and sales increase in equipment and installation. Sales in India, India are turning back to positive after a low Q3, impacted by the slowdown in memory market, affecting material sales. Carrier Gas sales remain solid, supported by start-ups and ramp-ups. D&I sales are up, especially in the U.S. Finally, in Healthcare, we have had strong growth in all segments, with high pricing and volume increasing. Home Healthcare was again very robust, with notably strong sleep apnea and diabetes sales in Europe. MedGas activity has also been strong, with pricing addressing inflation in Americas and Europe, achieving positive volume. On page 18, we continue to deliver strong performance as we posted a group operating margin improvement at +80 basis points, excluding the energy pass-through impact.
Getting into the detail, we can see that purchases have been positively impacted by the decrease in energy price, contractually reinvoiced to Large Industries customer. Personnel expenses have increased in accordance with inflation. Other costs are stable, demonstrating overall tight control of cost. Depreciation increased in accordance with the impact of start-ups and partly offset by the end of the depreciation during the year. This has resulted in a very strong compared growth in operating income at +11.4% year-on-year, and a very strong leverage in the operating margin ratio at 18.4% at year-end. We also managed, as we said, to deliver another +80 basis points increase, excluding the energy pass-through impact compared to 2020.
As François said, group operating margin has improved by +150 basis points over the last two years at the midpoint of our ADVANCEd strategic plan period, showing our commitment to deliver again stronger performance year after year. As highlighted, we continue to deliver on performance through strong pricing and financial discipline. On pricing first, we continue to stay strong at +6.1% in Q4, on top of the high, very high comparison basis in 2022. I will comment more on the next page. You can see on the graph that since the end of 2020, IM prices have increased significantly to address inflation year after year. We have also significantly increased our efficiencies to reach EUR 466 million in 2023 at +23% versus last year, with a strong rebound of industrial efficiencies.
We finally continue to deliver on our active portfolio management strategy with 14 acquisitions and 2 divestitures. As said by François earlier, we keep a very strong focus on margin improvement, working on all possible levels. As you can see on page 20, our IM pricing action continued to deliver, as pricing remains strong in every geography to reach +6.1% overall in Q4. Let us now review quickly the bottom of the P&L. I'm now on page 21. Non-recurring operating income and expense that amount for the year at -EUR 190 million, have been impacted mainly by the following exceptional items. First, exceptional non-recurring operating gain at EUR 242 million, that mainly include the gain made on the sale of our stake in Hydrogenics in H1, which is a cash item.
The other non-recurring expense, with mostly no cash impact, include the depreciation of assets following a strategic review and assets held for sale, as well as restructuring costs in several countries and activities. Financial costs are quite stable due to the early repayment of U.S. loans, and net debt decreasing despite an interest rate increase. Average cost of debt is slightly up, 3.4% versus last year. As a reminder, 93% of our gross debt is at fixed rate. On an effective tax rate standpoint, our ratio has reduced to 23.4% due to low taxation of non-recurring items. As a result, our net profit as published is up at +12%, while our recurring net profit, excluding effects, is significantly up at +13%, excluding major exceptional item, items, sorry, that have no impact on the operating income recurring. Page 22.
As mentioned before, cash flow has been very strong, up 13% after working capital, excluding effects. Our cash model has worked very well and allowed us to first more than offset our increasing CapEx at EUR 3.4 billion, together with our dividend payment at EUR 1.6 billion euro, and finally, reduce our net debt by -EUR 1 billion. As a consequence, group net debt is reduced compared to last year at EUR 9.2 billion, and our gearing is now standing at 37%. In 2023, group recurring return on capital employed, based on recurring net profit, meaning excluding significant non-recurring items, has continued to improve by 30 basis points compared to 2022, and is now at 10.6%, in line with our ADVANCE commitment to stay above 10% during the plan.
Page 24. Our twelve-month portfolio of opportunities already at a very high level, has increased to EUR 3.4 billion, supported by Energy Transition projects, which are above 40% of the portfolio. And in addition, our portfolio of opportunities beyond twelve months remains very high. Our industry and our financial decision have reached a record level this year at EUR 4.3 billion, as you can see. In Large Industries, significant projects in Energy Transition have been indeed awarded. Finally, our investment backlog has also reached a record level at EUR 4.4 billion, with a balanced breakdown between Large Industries projects located in our main geographies and Electronics, mainly in Asia and in the U.S. Energy Transition weighting has increased. I'm now on page 25.
As you can see, we're about close to EUR 270 million of sales contribution in 2023. For 2024, we expect a higher contribution of starter than others, to be in the range of EUR 270 million-EUR 290 million. To conclude, on the basis of our excellent performance in 2023, we are very confident in our ability to continue to develop and improve our performance, whatever the environment has affected in our guidance for the year. I will now hand it back to François for the 2023 takeaways. François?
Thank you very much, Jérôme. To summarize the key takeaways on slide 27, three factors underpin our strong performance again in 2023. First, resilience coming from the mix of our activities, our wide geographical presence, the diversity of the sectors we serve, as well as our high number of customers and patients, and the strength of our long-term contracts. Second, growth. We enjoy the growing business with healthcare and IM, sustained growth driver with low capital intensity and two growth accelerators, energy transition being mainly LI projects and Electronics, driven by growing needs and sovereignty. Third, performance. Having already almost met our initial ambition on margin improvement, we accelerate the performance improvement by doubling our initial ambition. Last but not least, I strongly believe innovation is a key enabler.
It is part of our mindset, and it's embedded in all our business offerings to our customers and patients. And of course, all this will not be possible without our outstanding teams, fully committed to create meaningful value. Thank you very much for your attention. We will now be pleased to answer your questions.
Thank you. As a reminder, to ask a question, please press * 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press * 1 and 1 again. Once again, please press * 1 and 1 if you have any question or comment, and wait for your name to be announced. To withdraw your question, please press * 1 and 1 again. Thank you. We are now going to proceed with our first question. The questions come from the line of Gunther Zechmann from Bernstein Autonomous. Please ask a question. Your line is opened.
Thank you. Good morning, all. Gunther Zechmann from Bernstein. I, I'll start with two, please. Firstly, you have a business that generates more cash than it needs. The balance sheet is strong. You don't really need it to further strengthen that it seems, and you're already increasing the dividend, high single digit plus the bonus share. So, there's nothing big you can really acquire. So, how should we think about the use of cash from here, please? Because you're already ramping CapEx to invest in the energy transition. So, point one around capital allocation, please. And then secondly, on your new margin targets, what risks do you see as you ramp investments, particularly in hydrogen, which is lower margin, albeit same return on capital employed, of course, from a mix perspective?
Or do you have enough buffer from pricing, cost measures, and portfolio management, even after doubling of the margin expansion target? Thanks.
Thank you, very much, Gunther. Good morning. I will answer the first question, and we ask probably, Pascal, to give some color on the second one, since there are quite a bit of investment in Europe. So, we have, as you mentioned, a very strong financial performance. We have a strong cash generation, improving, by the way, and a strong balance sheet with a gearing which has decreased. I think all that is very good at a time where we see more investment opportunities than ever. And we know that in all the sector of the manufacturing, energy transition is going to require massive injection of capital to be able to transform the industrial setup.
This is combined also with growth related to reshoring, to sovereignty overall, and still growth in the demand. We do believe that we have a strong model, a strong business model, and we want to have the opportunity to invest in those opportunities. You mentioned M&A, and indeed, as I mentioned before, this is not part of our plan. However, we do still consider that there could be some opportunities in our businesses, either regional consolidation, local ones, sometime of a significant size, but also opportunities to extend our activity in some of our business lines.
So, we want to have this ability to seize the opportunity, which are strategic opportunities in the field. So, I think here we have a very strong story, again, to invest in our core business and to allocate, the cash and the increased cash that we will be, generating. Now, of course, I mean, we are, looking at, all the options, and, in due time, if we think that there are other options, to maximize the value for shareholders, we will and we may consider that, of course, but for the time being, we see a very strong, opportunities in our core business. For the second one, Pascal, do you want to, say a few words on this?
Yes, thank you. Good morning. Good morning, Gunther. Thank you for your question on margins. If we look at our energy transition portfolio, in fact, we have a very balanced portfolio of projects. We have hydrogen, hydrogen in a classical way, hydrogen with electrolyzers, but we also have carbon capture projects. We have oxygen, large oxygen projects. We have a CO2 terminal. So, we do not expect a dilution coming from H2. We will have oil-like contracts. Typical oil-like contracts will maintain our return on capital employed, and we should again maintain our margin, thanks to that balanced portfolio. Don't see energy transition just as hydrogen only. It's a lot more than that, and it's a very balanced portfolio we have.
Thank you very much, Pascal. Next question, please.
Thank you. We are now going to proceed with our next question. The question comes from the line of Alex Jones from Bank of America. Please ask your question.
Good morning. Thanks for taking my questions. The first one, just on the margin target again. I'd be interested to hear what gives you the confidence that that improvement will even accelerate over the next two years. You know, you've done 75 basis points on average over the past two, you're now suggesting 85. So, what's sort of the delta there would be helpful? And then second, on the investment decision target, you sort of hinted that you may be able to over-deliver on the EUR 16 billion, but you want to stay selective. Is there anything in your investment opportunities you're seeing that makes you think customers might delay, or that the returns on those projects might be lower, such that you need to be selective? Or are you just being conservative in not raising that target at this stage? Thank you.
Thank you very much, Alexander. I will ask Jérôme to speak about the first one, and I will take the second one.
Yeah. Thank you very much, Alexander. So, as you said perfectly, you know, we have raised our operating margin ambition from 160 basis points in four years to 320. We've already, I would say, completed 150, so objectives to deliver 170 basis points over the next two years, but we have not given and will not give a guidance on a yearly basis. However, you know, we have, we, we'll have some projects that will contribute to accelerate the margin, but it's a two-year objective.
Okay. Thank you, Jérôme. I think for the investment, decision, clearly, I mean, we see a very strong portfolio, of, projects. You have seen the, the 12-month portfolio of projects clearly identified. We have, as a matter of fact, probably, three times, this number of projects which are already identified, that probably will materialize in a, a little bit more, more time. So, it's extremely solid. As mentioned by Pascal, it's extremely diversified. It's not only energy transition, it's not only one region of the world. So, I think that give us, very strong confidence. This being said, we know that those projects which are becoming, more, complex, larger, which require sometimes regulation, sometimes subsidies, sometimes an ecosystem, takes some time to, to develop.
We see still a very strong momentum in all the region of the world regarding feasibility study, engineering studies. But we want to be, I would say, prudent regarding the assumptions for the signing in the next two years because there could be some delays. We know, I mean, this year is also a year with elections in major part of the world that could also develop kind of a little bit, a wait and see type of behavior from customers. So, again, very confident in the numbers, very confident in the portfolio, and we do consider this as being an upside for the group overall.
Thank you.
Next question, please.
Thank you. We're now going to proceed with our next question, and the question's come from the line of Martin Roediger from Kepler Cheuvreux. Please ask your question.
Yes, thanks. Good morning. I have three questions. First, on China-
... One of your U.S. competitors was rather bearish about demand in China, but you had a quite good performance in China, in Industrial Merchant, where volumes were up strongly. How comes? Do you gain market share in Industrial Merchant China, or is that, the case that you mentioned, IC packaging as a key driver, is that a unique business for you? That's question number one. Question number two is about the special items of roughly EUR 500 million negative, and this is a combination of EUR 242 million special gains, partly from the Hydrogenics disposal, and minus EUR 739 million adverse items. You mentioned three buckets, impairments of assets, impairments of assets held for sale, and restructuring costs. Can you provide a split of these three buckets?
The final question, what is the annual relief for depreciation and amortization going forward, given your impairments you did in 2023? Thank you.
Thank you very much. Good morning, Martin. So I will take the first one on China, and Jérôme will answer the second one. So regarding China, as you mentioned, we have seen a very solid growth in 2023. I would say, in spite of the environment and what is being said sometime in the press, we do believe that we should expect the same momentum in 2024, at least for our own activity. So why are we doing better and maybe better than other players? I think there are probably three reasons. The first one is the high quality of our customers, and this is true in Large Industries, in Electronics, but also in Industrial Merchant.
The second one is the mix of the businesses, and for 2024, we see probably a moderate growth in Large Industries, but we see continuous growth in Electronics, especially in the carrier gases, but not only in the carrier gases, and very strong growth, high single digits, sometimes double digits, in the Industrial Merchant, both in term of bulk, but also very strong in packaged gas.
And I think that comes to the third point, why do we see, I mean, in spite, again, of what is being said, I mean, strong business and development in China. I think it's due to our strategy and especially our industrial merchant strategy, where we have focused very much in the past few years on local density, focusing on key basins and making acquisition, but also growing organically. And I think this combination allows us to clearly, I mean, gain market share in those key areas, and we do expect this to continue. So that's for China. Jérôme?
Yeah. So as you said, we had some, Martin, some specific one-off item. First, the first one was, you know, the proceeds from the sales. The main impact was the sale of stake in Hydrogenics, plus EUR 173 million and post-tax, plus EUR 159 million. The second bucket is, you know, we decided to make a review of strategic assets. You know, we are at ADVANCEd midpoint, so we have depreciated some assets held for sale and other assets identified in a strategic review. Post-tax effect is about -EUR 346 million, and we have also set up a cost for restructuring of home healthcare activity in France for about EUR 56 million impact post-tax. That's basically the three buckets.
And you had a question basically on the impact of what's coming next, right? So it has a slightly positive impact on the margin improvement effect.
No, my question was more-
Okay, and-
When you do an impairment-
Right
... then you have lower assets, and that has an impact on your depreciation charges going forward.
It does. When you make some depreciation, of course, you have some certain reason relief in depreciation. Of course, you are fully right.
But all in all, I think it's, I would say a normal and disciplined management of the business. It's not material in the performance achievement. It's something that we must do and that we are doing very systematically.
Again, no cash.
All right. Next question, please.
Thank you. We are now going to proceed with our next question, and it comes from the line of Chetan Udeshi from J.P. Morgan. Please ask your question.
Yeah, thanks. Let me start with the first question, and we can take maybe if I can squeeze a couple of more. But I was just curious, why is the startup revenue not much more stronger, given your backlog has been going up consistently now for the last 3 years? But it doesn't seem like that's, there is any evidence of that resulting in much incremental startup revenue in 2024. So maybe if you can just shed some light on what's happening. Are the projects moving to the right? Are people delaying the startup of the projects? Maybe something there will be useful. The related question was, if I look at your industrial CapEx in 2023, again, it's hardly up. It's, like, up 4%.
If I remember at the Capital Markets Day in 2022, you were talking about average investment of about EUR 3.8 billion-EUR 3.9 billion per year, and you've only done EUR 3.3 billion for the last two years, it suggests that your average CapEx for 2024 and 2025 probably needs to be like close to EUR 4.3 billion per year to get to the, cumulative, CapEx number you had in mind at that point. Is that still relevant? I'm just curious, you know, on one hand, you're talking about these, you know, exciting opportunities, but then your CapEx doesn't seem to be, going up as much. So I'm just curious, why is there that, that big delta? Thank you.
Thank you very much, Chetan. You will see it's coming, but I'm going to ask Jérôme to make a complete answer. Jérôme, please.
Yeah, thank you, Chetan. So, so you're right, we have about EUR 270 million of contribution of startup and ramp this year, and next year we'll accelerate between EUR 270 million-EUR 290 million. So what you have to take into account is that the first thing to consider is that the average size of the project, you know, it's larger than it used to be. And as you know, you know, with the number of energy transition that we have, yeah, not only in the backlog but also in term of energy, of portfolio of opportunities, those are typically larger, larger and take a little bit more time to build up.
In fact, especially there is a significant engineering phase that, you know, takes a little bit of time, of that, to set up. So that's why, you know, you have this kind of, I would say, a little bit timeline difference. But as said by François, you know, no worry, you will find in startup and on top all the good investment decision that we have been able to deploy in the last year, and that will continue to you.
For the next year, CapEx guidance, we are not typically commenting on that, but I should believe that we should be close to four billion roughly, compared to the acceleration of what of the investment decision that we have to, well, that we have done in the last two years. That's basically what we have in mind. Thank you.
Thanks.
All right. Thank you, Jérôme. So indeed, it's a change in the shape of the curve, given the complexity and the size of those projects with more upfront engineering, probably that what we have seen on the typical air separation units in the past. Thank you very much, Chetan. Next question, please.
Thank you. We are now going to proceed with our next question. And the questions come from the line of Tony Jones from Redburn Atlantic. Please ask your question. I think this question has just been withdrawn. We are now going to proceed with our next question. And the questions come from the line of Peter Clark from Societe Generale. Please ask your question.
Yes, good morning, everyone. I, I just want to follow back on the efficiency story, because obviously a big step up in the fourth quarter, and I think, I think I just heard that you said it would be a, a slightly positive impact going forward. I thought the efficiencies were going to be much more important. And then following on from that, in the Americas, where the margin wasn't really moving till the second half of last year, and then it, then it, then it jumped over 100 basis points. Within that, I know pricing is the key driver, but the efficiencies there seemed to step up and there was talk about supplier chain optimization. I presume you've got a mix effect as well, because Hardgoods was volume down.
But just wondering on that story of efficiencies, the importance going forward now that pricing inflation certainly slows. And then in the Americas, the step up in margin and the confidence about maintaining that on the 170 basis point improvement from here. Thank you.
Thank you very much, Peter. I will make some comment on the efficiencies and probably ask Mike to give some color on the Americas. Regarding the efficiency, as you have seen, I mean, strong delivery of the efficiency in 2023. We do expect this to continue. As mentioned by Jérôme, it's a mix of industrial efficiencies. Bottom up, we have a portfolio of more than 1,300 projects which are contributing to these efficiencies, but also procurement, as mentioned by Jérôme, in spite of the inflationary context, but also a structural transformation. And structural transformation are starting to contribute, but will contribute more.
Speaking about procurement, I mean, we are moving towards a much more effective global procurement, where we can leverage the scale of the group, which is absolutely key. But also, as you mentioned, in industrial operation, we see, I mean, the benefits of the use of data, artificial intelligence, and centralized organization in the bulk logistics, for example, now. We have in the Americas, one center, which is fully operational, but this is not the case in other parts of the world, so we do expect this to contribute. So efficiency will remain clearly, I mean, a key leverage as we may see that the pricing is going down in some region of the world. Absolutely, you're right.
We do expect, I mean, the structural efficiencies and all the initiatives that we are launching to contribute in 2024 and 2025 for sure. Mike, do you want to give some color on Americas?
François, thanks, and good morning, Peter. Yeah, I'll just add a few points. I think overall for efficiencies and margins as well, in the Americas, we've continued to drive price. We were very successful at that before we got into the significant inflationary trend, and that effort has continued throughout with a very scientific approach to the way we approach pricing in all of our markets. To François's point on industrial efficiencies, we've continued to drive the digitalization and management of such, not just in our large industries business, but very significantly, especially in Airgas... as we have really started to institute the digitalization of key components of logistics and centralizing a lot of the functions that make sense in terms of industrial operation.
Procurement has continued to be stalwart in terms of its benefits, both to control inflationary pricing and also to drive further benefit. And then finally, we have gone through continued portfolio management. And you mentioned Hardgoods as an example. And I've mentioned this before, but we've taken a really hard look at our Hardgoods offer. And clearly on the industrial side, for filler metals and capital equipment and where we need to, the clear safety items, we are very strong in those elements. But we've really looked to de-emphasize the very, very low margin safety items that are available in other places. So, I think the combination of all those things have continued to improve overall efficiencies and margins.
Thank you very much, Mike. Thank you. Understood. Next question, please.
Thank you. We are now going to proceed with our next question. The question's come from the line of Laurent Favre from BNP. Please ask your question.
Yes, good morning, all. Three quick questions, please. The first one on margins. I think when you announced the initial target, you were assuming about 2%, industrial production, let's say 2% base business volume growth. And of course, this has been, you know, zero to negative. I'm wondering in the plan now for the next couple of years, I guess, how much are you relying on, operating leverage to contribute to margins going forward? That's the first question. The second one is on Slide 6, where you talk about over EUR 2 billion of CapEx in projects that are on the move to decision. Can you give us a hint on how much of that is in the U.S. versus Europe? And the third question is on helium.
Can you talk a little bit about, I guess, how you are assessing supply and demand, what you are seeing in volumes and pricing, and are you seeing more pressure from products coming out of Russia? Thank you.
Thank you very much, Laurent. I will answer the first and the third question and ask Jérôme to talk about the second one. On the margin, clearly, in the current environment, it's very difficult to predict, I mean, the volume growth. And we have some assumptions, which I do believe are quite conservative. Probably, I mean, stronger second part of the year than the first one, with recovery probably coming and starting from the US. Also seeing some recovery in the Electronics, which is going to favor Asia, and probably Europe being more or less flat on the volume. This being said, our plan, our ambition, and our commitment does not depend on the volume assumption.
We are extremely, I would say, strong and disciplined to make sure that we have the different levers in place to deliver the margin improvement regardless of the volume. Of course, I mean, if we have some volume, we will enjoy that, but we cannot rely, and the plan does not rely, and the ambition does not rely on volume assumptions that may or may not happen. Second point on the CapEx. So, Jérôme? Yeah, I will, in order for your, for your modeling, Laurent, I get what you are more interested in to is more the backlog, in fact, per, per geography. So I would say it's relatively balanced so far. You know, we have about 30%, which is already to, from, for Europe.
Same, a little bit higher for Asia, but also Americas, which is going up. So it's quite balanced among all those geographies, you know, with Asia that was, you know, supported by Electronics that we signed years ago, but also Europe, a strong energy transition energy transition footprint, and Americas, which is also growing up. So I would say it's relatively balanced in terms of backlog. So speaking about helium, so helium has attracted a lot of attention recently. But I would like maybe first to put things in perspective. I think for Air Liquide at least, maybe it's not the same for others, but for us, given its size and how we have structured the activity, helium is clearly not a material lever to achieve our ambition.
Why I do say that, because helium overall, it's a fantastic molecule, but again, keep in mind that, it's only 3%-4% of good sales. it's a global market, with a very strategic application in medical, in Electronics, in space, and in some of the defense industry and manufacturing overall. But where there are limited number of sources, which make this product quite volatile, and this is true that during global shortage, we have seen in the past that helium spot prices could potentially double. To mitigate this volatility, Air Liquide has maybe a different strategy than others, huh? We have been very active in signing midterm contracts with our customers and of course, with our suppliers.
Today, more than two-thirds of our total sales are related to midterm contracts. So that's a way clearly to limit the volatility on the sales side, but also on the supply, we have multiple sources of helium, and we diversify our sources. We have also a helium cavern to be able to cope with the variation in the supply and in the demand. So I think, all in all, we see for 2024, pricing probably being stable at a relatively high level for helium. Volume probably decreasing to some extent in H1 and potentially picking up in the second part of the year, mostly driven by the Electronics industry.
And maybe just to finish up on, on Russia, because I think you mentioned, Russia. This is one of the sources that we have, but let's keep in mind, again, in 2023, helium sources, coming from, Russia, was less than 1% of the total sourcing of helium for the group. So it's not material at the scale of the group. I think we are reaching the, last question, please.
Sure. We are now going to take our next question. The question comes from the line of Geoff Haire from UBS. Please ask your question.
Yeah, good morning, and thank you very much for the presentation. I just want to ask about Electronics in Q4. It seemed to be a little bit better than you had indicated back in October, and I was just wondering if there was any specific reasons for that and what we should be thinking about organic growth Electronics in the first half of 2023. I may have missed it in the presentation if you did comment on it.
Good morning. Thank you very much. I think overall for the Electronics, the year 2023 was clearly a low year. We have seen that. For us, we were kind of protected because of the carrier gases, which is more than 40% and which has a take-or-pay. This is true that we have seen a little bit of uptake in the last quarter of the year. I think we need still to be cautious and to wait to see the first few months of the year. What we are hearing from customer, I would say, are more positive news. We see signals which are still weak signals for a pickup in the second part of the year, especially in the memory market.
So that's a good sign. Another good sign is a strong commitment of our customer for a new expansion and new fabs. We have seen announcement in Asia, but also in the U.S. and even recently. So I think all that is positive, but I would say, let's be careful for the year. We do expect a recovery in second part of the year, but at this stage, it's maybe a little bit early. Let's keep in mind that the midterm trends are extremely positive, there is a very strong demand and a need, both in terms of needs for a new application, and artificial intelligence is driving a lot of that, but also for sovereignty with reshoring of significant capacities in different parts of the world.
So let's wait to see the first half for Electronics, but again, later in the year and midterm trends very strong. Thank you very much. I think we will stop the call here this morning. Appreciate very much your attention and your question, and I wish all of you a very good day. Thanks a lot.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you and have a good day.