Good morning, ladies and gentlemen, and welcome to the Air Liquide third quarter 2025 revenue conference call. All participants are currently in listen mode only until we conduct a question and answer session, and instructions will be given at that time. I will now hand over to the Air Liquide team. Please begin your meeting, and we'll 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 third quarter revenue. For the Q&A session, they will be joined by Emilie Mouren-Renouard and Adam Peters, both Group VP, overseeing respectively EAMEI and North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on February 20, 2025, for our full year 2024 results. Let me now hand you over to François.
Thank you, Aude, and good morning, everyone. It is my pleasure to be with you today to walk you through the very solid achievements of the group in the third quarter of 2025. Of course, we are still operating in the same turbulent environment that has defined the market since the start of the year. Despite these conditions, I am glad to report that Air Liquide is maintaining a very strong momentum. We are delivering consistent sales growth that demonstrates far more than just resilience. We continue to grow. Also, we are firmly confident in achieving our margin improvement target, driven by the structural transformation underway across the group. At the same time, we've had, again, significant success in business development, securing new contracts, and reaching a new record high backlog. Let's turn to slide three. The numbers speak for themselves.
Sales grew +2% on a comparable basis, maintaining the same positive trajectory in spite of everything. All the key indicators are very well positioned and reflect our strong performance again this quarter. IM pricing remained accurate, increasing above 3% in Q3. This shows a sequential increase versus Q2 2025, demonstrating effective management in a demanding environment. The momentum on efficiencies remained very positive, with more than 20% growth compared to Q3 last year. This means that over the nine months, we have already delivered 15% more efficiencies than in the whole year 2022. This performance is highly encouraging, as it clearly validates that the structural efficiencies from our major transformation program are delivering. I personally like this very much, as it allows us to positively improve the margin while accelerating our investments for the future. Cash flow remains extremely robust, growing +7%, excluding the currency impact.
Our ESG KPIs remain on track in Q3. Finally, our investment backlog reached a new record high level, approaching EUR 5 billion for the first time in our history. This is a solid, tangible indicator of future growth, which will begin to flow through as the projects under construction are going to start up. In summary, this has been a very solid quarter, perfectly aligned with the positive trend of the first half. These results provide clear evidence that we are firmly on track to deliver our commitments in terms of both current performance and future growth. You remember that last quarter, we introduced the four growth engines of the group. This is not just a concept. When we look at slide four, we see concrete wins and illustrations this quarter of how those four growth engines are in action.
First, we're talking about low CapEx growth by getting more out of our existing assets. This quarter, we signed, for example, new contracts to supply hydrogen to two of the largest U.S. refineries. This is a great example of low CapEx growth and the benefits of Air Liquide's assets. We will leverage our existing pipelines and infrastructure for new additional sales, while limiting the investment to only $15 million. We're simply integrating new compression and distribution gear. Capital intensity is around 0.5 for this project. These types of projects are clearly a reservoir of growth in a lower volume environment because it lets us boost sales without the usual capital expenditure. Our second growth engine is investing in our core activities. Our electronics leadership is a key part of this. We closed two major long-term contracts with leading semiconductor manufacturers this quarter.
The first was a EUR 250 million investment in Dresden, Germany, our largest ever electronics investment in Europe. The second was a EUR 130 million investment for two carrier gas units in Singapore. An additional illustration is in home health care, which is another growth driver of our core activities. In Q3, we signed a new large contract in Spain to provide home health care for patients with chronic respiratory conditions. We're investing in an innovative approach where we're using unique proprietary digital and AI solutions to ensure cost-effective personalized care. In the current very variable environment, we expect home health care to be a steady growth driver for the group. The third engine is the energy transition. A great example, confirming our leadership position in this market, is the EUR 500 million investment we decided this quarter for the Alligator project in the port of Rotterdam.
This massive 200 MW electrolyzer will notably supply TotalEnergies with green hydrogen through a long-term contract. Finally, our fourth growth engine is acquisitions. In Q3, we announced the agreement to acquire DIG Air Gas in South Korea. This is highly strategic because it gives us a stronger foothold in the world's fourth largest industrial gas market, which is expected to double in the next 10 years. Critically, DIG's footprint and operations are also a perfect complement to our current activities in Korea. At this stage, the closing process is going as expected. We also continued making small targeted bolt-on acquisitions to increase density in our existing operations, like the announcement yesterday of an acquisition to strengthen our footprint in India. All in all, the first three growth engines are currently fueling our EUR 5 billion backlog.
When you add the major DIG Air Gas acquisition and our bolt-on operation, that figure gets close to EUR 8 billion in total capital deployment, securing future growth. Return on investment remains, of course, a key priority for the group. In spite of the increased investment in the past three years, and thanks to the improved margins, our recurring ROCE remains at + 11% at the end of September, above the 10% threshold of the advanced target. I will conclude on slide five, showing the robustness of Air Liquide's equation in the current environment, combining very strong delivery of today's performance and steady ability to invest for the future. We proved once again in Q3 that we are on track, thanks to our proactive management of our transformation and strong position on growth opportunities.
We are highly confident in our ability to navigate the evolving global landscape and continue delivering value to our shareholders. Thank you very much for your attention. I now ask Jérôme to present the details of the Q3 performance.
Thanks, François, and good morning, everyone. I will now review our numbers in more detail. Coming back to Q3, I'm now on slide seven. Group sales have been resilient overall, with a growth of +1.9% on the comparable basis, excluding energy pass-through and forex. There is no significant external scope effect in Q3 2025. Published sales are down -2.4%, widely due to the negative forex effect of -4.2%, mainly due to USD and the nearly neutral energy pass-through effect of -0.1%. Gas and services sales achieve a +1.9% increase year- on- year, and engineering and technology external sales increase +1.7%, while resources are still mostly dedicated to building the many internal projects in the backlog for large industries and electronics. I am now on slide eight. Growth in Q3 for gas and services has been driven by the Americas, while EMEA and Asia were broadly flat.
On a business line standpoint, we can see that healthcare and industrial merchants drove growth in Q3, and electronics is also a strong growth driver if you exclude the sales of equipment and installation. This, once again, highlights the value of our diversified development strategy, capitalizing on the complementarity and right balance among our different business lines and geographies. This resilience, coupled with existing capacity, strong growth drivers, and increasing performance, as explained earlier by François, positions Air Liquide very well for the future. Let us now review more specifically the activity of each of our main geographies in Q3 2025. I am now on slide nine. Driving growth, sales in the Americas delivered a strong +5% on the comparable basis. Large industries posted strong growth despite a high comparison basis in Q3 2024.
The business line benefited from the continued ramp-up in air gases from a major air separation unit started in February 2024, solid startup contribution, as well as lower turnarounds during the period, which more than offset lower base business, especially hydrogen, with less import of heavy fuels. As a side note, you may expect a few more turnarounds in Q3. In merchant sales, we were driven by a positive pricing effect of +4.5% year- on- year, which improved sequentially from Q2. Pricing was driven especially in North America by adjustment on cylinder rental in some regions at Air Gas. Gas volumes were flat, and outputs showing improvement were less negative. Bolt-on acquisitions also contributed to growth. Strong growth in healthcare was achieved through higher pricing in the U.S. and LatAm, coupled with the growing buzz of home healthcare patients.
This growth was further supported by the development of the Intelli-Ox differentiated solution. It offers a digital gauge that provides caregivers with a direct reading of the remaining oxygen time, an excellent example of value creation through innovation. Finally, electronic sales posted normalizing ENI sales versus a record high level last year, offsetting strong growth in advanced materials and specialty materials. Carrier gases were resilient. Sales in EMEA were resilient, with continued solid growth in healthcare. Large industries posted a slight drop. Hydrogen sales were down in Germany, as were cogeneration in Benelux. However, positive air gases overall and robust hydrogen in the Middle East provided a partial offset. In merchants, sales were flat, with still a solid +1.5% pricing despite lower energy indexation in bulk. Volumes were driven down by liquid CO2 and helium, as anticipated. Bulk volumes showed resilience, as did packaged gas.
To be noted, excluding the negative impacts of helium, merchant sales in Europe were up +1%. Finally, healthcare's steady +4% growth was supported by an increasing number of patients in home healthcare, which serves diabetes, sleep apnea, and community care needs in Germany. MedGas sales remain steady, Asian sales were resilient. In large industries, there was a continued contribution from startup ramp-up in China and South Korea, but offset by low-based business and a high comparison basis in Q3 2024. Sales in merchants were down -1%, or up slightly, excluding the impact from helium. The regions saw improving pricing at -0.5% versus -1% in the second quarter of this year. China posted a positive +2% sales growth and above +4%, excluding helium, with the growth mainly driven by bulk and onsite. Pricing remains weak in China, hampered by helium and the deflationary environment, as anticipated.
Activity in the rest of Asia was more mixed. Electronic sales were flat overall, but were above +6%, excluding ENI, which is normalizing after a record year. Carrier gases maintained a double-digit sales growth, and advanced materials showed growth, while specialty materials were soft. I will now turn to slide 10, where I will comment on our Q3 activity by business line. In merchants, we saw an increase in pricing to +3.1% compared to +2.7% in the second quarter. Overall, volume in gases was slightly up, including bolt-on acquisition, and output volumes were less negative, improving sequentially. The main end markets posted volume growth were secondary electronics and packaging globally, materials and utilities in the U.S., and automotive in Asia. In large industries, startup and ramp-up contribution offset lower demand. Major ramp-up indeed has positively contributed in the U.S. and Asia, offsetting lower demand, mainly in EMEA and Asia, while the base business was more resilient in the Americas.
Slide 11, electronics, where we continue to build our leadership position, continues to grow at +6%, excluding ENI. Carrier gases delivered indeed strong growth, with eight main startups year to date, mainly in China, Taiwan, and Japan. Carrier gases and solid advanced materials in China and U.S. almost fully offset, normalizing ENI sales, which are more cyclical and compared to a record high in 2024. Electronic specialty materials were flat overall. Finally, healthcare continues strong growth, again, sorry, high comparable rates last year. Growth mainly comes from home healthcare, notably in Europe and South America, from medical gases in the Americas, and from specialty ingredients.
On slide 12 now, as a reminder, our margin improvement objective is supported by a structured plan leveraging our unique strengths and based on three pillars. First, IM pricing continues to be solid despite a high comparable basis, as you see on the graph. To be noted, we have an uptick in pricing from Q2 to Q3, despite the lower index in bulks in EMEA, and we continue to focus on price management and pass-through price versus cost dynamics. Regarding efficiencies, as François mentioned, the strong performance of a +23% increase demonstrates that the structural initiatives from our major transformation program are delivering and strongly supplementing our ongoing efficiency program. This impact is, of course, positive on our margin, as it helps to compensate for some headwind, such as unfavorable currency impact. Lastly, we have continued to actively manage and optimize our portfolio.
We have indeed closed eight bolt-on acquisitions year to date, as well as announced our agreement to acquire DIG Air Gas in South Korea, as François mentioned. Meanwhile, we executed three divestitures. Air Liquide continues to focus on strategic, profitable, and margin accurate opportunities. On slide 13 now, the 12-month portfolio of opportunities remains stable at a high level of EUR 4.1 billion. Our total industrial and financial decisions for the quarter were also high at EUR 924 million. This including the FID for the ELYgator electrolyzer project in the Netherlands, the electrification of a net separation unit in China, and a large carrier gas project for a leading electronic customer in Germany. Finally, our investment backlog reached a new record level of EUR 4.9 billion, with investment decisions entering the backlog more than offsetting medium-sized startups leaving the backlog.
Projects in electronics represent one-third of our total backlog, in line with our growing leadership in the segment. We achieved EUR 233 million of sales contribution for startup and ramp-up year to date, and we remain confident to deliver at least EUR 310 million by year end. To conclude, in spite of the current turbulent environment, thanks to the ongoing demonstrated resilience of our business model and our disciplined self-help actions, we confirmed our guidance. Thank you for your attention. We can now open the Q&A session. Back to you, François.
Thank you very much, Jérôme. Let's start the Q&A session. Thanks.
Thank you so much. Dear participants, as you're aware, if you wish to ask a question, please press star one one on the top right keypad and wait for your name to be announced. To withdraw a question, please press star one one again. Ms. Campbell will compile the Q&A queue. This will take a few moments. Now we're going to take our first question. It comes from the line of John Campbell from Bank of America. Your line is open. Please ask your question.
Thank you. Good morning, everyone. Thanks for taking my questions, too, if I can quickly. I wanted to get a sense for the feeling you maybe have on the activity levels in the fourth quarter. It looks to me like organic growth in the third quarter was slightly stronger, perhaps, than some had expected. It looks like in several areas, such as large industries or healthcare, the year-on-year comparison basis gets sequentially noticeably easier in the fourth quarter relative to the third quarter. Any comments you could perhaps give on the fourth quarter and even looking further ahead, perhaps into 2026 for the electronics segment, where organic growth has been perhaps slightly sullied by normalizing equipment sales? That's the first question. The second one, if I can, relates to any of the latest details you can give us on amendments related to the corporate tax rate in France. I noticed there were some potential revisions in an amendment yesterday evening. Thank you.
Thank you very much, John, and good morning. Regarding the trend, I think overall we are in the same kind of environment. What we have seen in Q3 is, to some extent, an acceleration of the growth in some segments at the end of Q3. To some extent, Q3 was better than what was maybe expected at the beginning of Q3. That's positive news for sure. We do expect Q4 to be above Q3. Again, in the current environment, we have to be cautious. I mean, there's so much variation in the end market and so many things happening from one week to another one, I would say. Overall, the trend should be positive. We do expect momentum to continue in the Americas overall, and also some comparison effect being positive in Europe overall. Regarding the key markets, indeed, as we mentioned, large industries should see some pickup.
We do expect the same probably for industrial merchants, mostly driven by the U.S., as we have seen in the past quarter. Electronics overall is probably likely to be flat. Let's keep in mind what Jérôme has mentioned about the comparison effect, which is still quite strong. Healthcare is remaining very strong and should continue its progression. All in all, Q4 should see continuous momentum and improvement. Again, in the current environment, let's be careful. You know very well that our strategy has been very clear that in the current environment, and regardless of the environment, we are determined to improve the margin with many actions, which are self-help actions. The transformation program that we are doing is contributing clearly. That should give us a good visibility and good confidence for Q4, regardless of the environment. Jérôme, comments on the French corporate tax?
Thank you very much, John, for this important question. I would say for the question you raise on what's happening right now, it's a bit difficult to comment. It's a discussion. We have potentially amendments, but nothing has been voted yet. I will not comment on the impact of 2026. What I can tell you at least for 2025 and something we already mentioned, the effective tax rate that we can expect for the year 2025 should be around 26%, which is something which is coming mainly from the impact of the ROAT finance for 2025. For 2026, it's a bit early. Of course, we'll come back later when we have more certainty on the topic. Thank you.
Thank you very much, Jérôme. Thank you, John. Next question, please.
Thank you. Just give us a moment, now we're going to take our next question. It comes to the line of Alejandro Bello from Santander. Your line is open. Please ask your question.
Yes. Hello. Thank you for taking my questions. The first one is about the investment backlog you highlighted in 2025. The contribution of this backlog is about EUR 300 million, EUR 340 million. If you can give us some guidance or some outlook about next year, your expectations of the contribution from the new projects, from the startups. The second question is about the self-help programs you mentioned about efficiencies. We have seen this acceleration of more than 20% year to date. If you can elaborate about which are the sources of these additional efficiencies and the outlook for next year as well, if you can continue to generate these efficiencies. Thank you.
[Merhaba], good morning. Thank you very much for those two questions. Jérôme, do you want to take the two questions, actually?
Yes, François, I can take it. As related to the backlog, you're right. The backlog is a record high, nearly EUR 5 billion. It's a historical backlog. Of course, just to remind you, it's made by projects that are signed so that we deliver growth in the coming years. We are pretty clear, you know, that for this year, the impact would be at least EUR 310 million. That's where we stand right now for the contribution. As you see, it starts to be a significant contribution on the top line. As related to efficiencies, you're right. Also, we're very happy with the trend on the efficiency and +23% versus last year. As François said, we're at a number that represented the full-year impact of 2022. Just have in mind that these efficiencies are rising. They are multiple.
You know, that's the result of the transformation program that we are, you know, that we're executing right now, that we're already commenting many times. There are different folders. There is, of course, an acceleration in industrial efficiencies. You know that we have created the Group Industrial Efficiency, the Group Industrial Direction. This is accelerating, and we're very happy with the trend coming. We have also an acceleration in procurement as well, which is also delivering. We have also a contribution for all the restructuring measures that we are setting, which are also delivering. All in all, plus 23% is a strong number, and it's much better than what we're able to do in the past. We can be very happy with, of course, the impact on the margin that we're translating into.
Thank you very much, Jérôme. Next question, please.
Yes, of course. Now we're going to proceed to our next question, and it comes to the line of Thomas Wrigglesworth from Morgan Stanley. Your line is open.
Thanks very much for the opportunity to ask questions. If I may, firstly, on the large industries Europe, you call out hydrogen in Germany. Is that purely the force majeure, or are you seeing other impacts weighing on that market? Secondly, kind of more of a longer-term question. Obviously, CBAM is coming in next year. Do you think that will drive an acceleration in the investment opportunities set that you see? Do you think people are going to start to react now to CBAM, and there's been a wait and see? Alternatively, do you think people will now start to look to shift capacity out of Europe into other geographies because of CBAM and the fact that it's actually more efficient to do more environmental/green/renewable projects in the Middle East and the U.S.? Any comments there would be very helpful. Thank you.
Thank you very much, Tom. I will ask Emilie to speak about the hydrogen in Germany, and I will comment on the CBAM.
Yes. Thank you, François. Good morning, everyone. On the hydrogen in Germany, it's mostly related to events at our customers indeed. We shouldn't read too much into that. Overall, in Germany, the business and the activity was resilient, which given the current context is already good news. You've seen some good level also of project development. You've seen recently the ELBE announcement where we are investing EUR 250 million in Germany in the semiconductor industry. You see the economy, despite the headwinds, is resilient. We also hope that the infrastructure fund driven by the German government will deliver results and positive impact on us. We shouldn't read too much into this hydrogen in Germany, mostly due to customers.
Thank you very much, Emilie. Regarding CBAM, you're absolutely right, Tom. This is coming into force in Europe. It's going to create a new environment. It's a little bit early to say exactly what's going to happen in the industry. If I step back and I look at the impact for Air Liquide, I think overall it's going to be a positive trend because at the end of the day, it's really putting value on carbon and low-carbon products. Today we see industries which are getting organized in Europe to drive decarbonization, for sure. What we see also, and I had many discussions with customers in different geographies, is that they are starting to decarbonize their own processes to be able to import to Europe. This is the case, for sure, in China, which is driving decarbonization opportunities in China, but also in the Middle East and in the U.S.
As you know, we are clearly a leader in terms of solutions to decarbonize the manufacturing processes. We will capture the opportunities being in Europe or being in the other countries. All in all, I think it's a very positive signal towards the decarbonization of the industry.
Thanks very much, both.
Thank you.
Thank you.
Now we're going to take our next question. The question comes to the line of Tony Jones from Rothschild & Co. Your line is open. Please ask your question.
Thank you. Good morning, everybody. I've got two questions, if I may, too. On comparable growth, good results at 2%, but I just wanted to break it down into the growth factors. If I weigh price from merchants, that gets me to about 1.3%, 1.4% of the group. New projects just over 1%. That implies underlying volumes are down around 1%. I think, firstly, is that correct? Secondly, is that the right sort of run rate we should be thinking as we go into the early part of 2026? My question is on uses of cash. Air Liquide's not got a lot of debt, and your choices are either cash return or CapEx. Instead, we've seen more acquisitions. Could you talk a little bit about the selection criteria for that? When you're making your acquisitions, is this about accessing new growth or a clear margin expansion? Thank you.
Thank you very much. For the first question, Jérôme, do you want to comment on that? I will make some comments on the strategy for the acquisitions.
On the comparable sales, you know, we are basically having, I can break it down rapidly by subsegment. That would be helpful. In merchants, we have +2.7% growth, with pricing at +3.1%, with improved volume. In large industries, we have basically startup contributions that offset low demand. Electronics, we have growth, but you know it's negative because we have a strong ENI comparable last year. In healthcare, it's growth, you know, coming from volume and price. As regards to volume coming in the months to come, it's a bit difficult to say. You know, we're quite cautious. Overall, we see better, I would say, better volume, especially in our goods. We're still negative orange in the U.S., for example, but it's much lower than last year. All in all, we can see that the trend in Q3 was better than before. Now, maybe you want me to talk about the cash?
We'll talk about the more, I mean, the strategy for the acquisition. The first thing is that thanks to all the improvements in the profitability, as you mentioned, the cash flow of the group has increased significantly. We have basically the means to deliver and to execute our strategy. The first priority is to invest our core business. You see, and Jérôme mentioned it, we are deciding on new investment. We have a very strong backlog, and we can afford basically to take the opportunity and to seize the opportunities in our core markets and core opportunities. That's number one. Number two, clearly, we have also the means to make acquisitions. When we are making acquisitions, there are different types of acquisitions. There are the bolt-on acquisitions, which are mostly present in IM and in home healthcare.
The purpose is to increase the density, to take position, to consolidate some key markets, or sometimes to enter into new areas which can complement what we have. Typically, what we have done in India is the illustration of that, a very good complementarity to our existing footprint, allowing to cover better some key markets. At the same time, there are some strategic opportunities, whether we see the opportunity to take position in key markets. The one that we have done in South Korea is exactly this. It's positioning us for the future and for the growth. As I mentioned, and Jérôme mentioned that previously, of course, when we look at the acquisition, there is a strategic fit and the opportunity to grow. Our acquisitions are there to grow the business and to develop the business.
Of course, we are looking at the positive contribution of those acquisitions, either because those are existing businesses with good profitability or because we see synergies and integration. Typically, the bolt-on acquisitions, for example, the one that we are doing in the U.S. or in China, are in this category. We can improve the profitability because of the integration in a much larger and more efficient organization. Once again, this is part of the capital allocation of the group, targeting growth, but of course, contributing positively to the net profit improvement of the group.
Thank you. That's really helpful. Appreciate it.
Thank you very much. Let's take the next question, please.
Yes, of course. Just give us a moment. The next question comes to the line of Chetan Uttashy from JP Morgan. Your line is open. Please ask your question.
Yeah. Hi. Thanks for taking my question. I had a couple of questions. First is on your pricing in merchant in the U.S. You're noting some of that is because of the higher cylinder rentals. I'm just curious whether this is more a pass-through of higher running costs because I suppose you also have to pay more for sourcing these cylinders, or is this real incremental sort of, you know, benefit for Air Liquide from higher pricing in the U.S.? The second one was in your Large Industries business. I'm a bit surprised that Asia underlying is weak because, you know, especially in chemicals, when we look at the production of chemicals in China, it's been growing very, very strongly at the expense of, of course, Europe. I was surprised that Asia is actually not up in terms of onsite. Any indication on dynamics in Asia? Thank you.
Thank you very much, Chetan, and good morning. Adam, can you speak a little bit about what we see in the merchant in the U.S. and the good momentum overall?
Yes, absolutely, François. Chetan, thanks for the question. Looking at the IM business in the U.S. in particular, I'll speak to the pricing point as well. I think we've seen, obviously, a resilience in the gas side, which has been great, and that's maintaining well. We've seen sort of an inflection point on the hard goods piece. This is a positive piece that we've seen, particularly towards the end of the quarter. It's a little bit early to say that there's a trend in terms of volumes on the hard goods side, but certainly a nice inflection towards the end of the quarter, which is great. On the pricing in particular, we always try to stay ahead of the cost curve. What we do is we monitor very closely, as you know, price pass-through and making sure that what we do from a pricing standpoint contributes positively to margins.
This is very well ingrained into our normal operating model for all of our associates across the U.S. in terms of our pricing campaigns, our pricing tools, and the like. We maintain a good momentum in that regard. Even when we think forward about cost increases related to inflation and the like, our goal is to stay ahead of the cost curve and make sure that what we do from a pricing standpoint is accretive to our margins.
Thank you very much, Adam. Regarding the large industry in Asia, I think, Chetan, what you should look at is clearly the different impacts. We have seen a positive contribution of startups of the business, but clearly, there has been significant turnaround in some key facilities impacting us. I think what you should read there is mostly the impact of the outage and the maintenance at some key customers, especially on the AECO business, but also Air Gas in some cases, especially in China. That is probably the reason for the uncorrelated performance of large industry in Asia compared to what we see from the demand side. Again, it's mostly related to specific maintenance and turnaround at customer sites.
Are these turnarounds in chemicals, I suppose? Because AECO.
Yes. Those are mostly chemicals. The AECO, it's mostly the gas supply, and the Air Gas also is mostly for the chemical. That's why you see this impact.
Understood. Thank you.
All right. Thank you very much. Next question, please.
Yes, of course. We are going to take our next question. It comes to the line of Jean-Luc Romain from CIC Market Solutions. Your line is open. Please ask your question.
Yes. Good morning. I would like to have a little more information about your project.
Jean-Luc, sorry, can you speak up? It's difficult to hear you.
I would like to have a little more details about your acquisition project in India. How does it compare to the acquisition project in South Korea? I think it's smaller, but I would love to have an idea of the relative size between both companies. My understanding is that the company you're buying in India is a kind of a subsidiary of, or was the subsidiary of a Chinese industrial gases company.
Thank you very much, Jean-Luc. I will ask Emilie to speak about this nice acquisition in India.
Good morning, Jean-Luc. Yes, we've announced that we are in the process of acquiring Novair, this industrial gases company in India. It's a small acquisition. It's below EUR 100 million. It's a small scope. It's really very different, obviously, from the acquisition we are doing in South Korea. It's a bolt-on acquisition, like we said. It's to both densify and extend our presence in India, like François explained. Remember, we are present, or we've been present in India since 1992, both in the gas and service business, as well as engineering and construction. We have a department there which is growing, several manufacturing entities in India, and we just inaugurated our global capacity center there in Pune. Overall, this will expand our presence in India, which we consider to be really an area for growth. It's really well aligned with our growth ambition in this country.
Jean-Luc, I think if I heard correctly, you are mentioning, is that a subsidiary of a Chinese company? It's a private equity fund, PAG, who is the owner. That's why maybe you thought that. It was a private equity fund who owned that company before.
Okay.
Thank you very much. We have a next question, please.
Yes, of course. We're going to take the next question. It comes to the line of Laura Farfret from BNP. Your line is open. Please ask your question.
Yes. Thank you and good morning. Two questions, please. The first one is on helium. It seems to be getting worse to the point where Gazprom is reported to delay the second stage of their expansion. You're now talking about pressure in Europe as well. Can you help us understand the magnitude of the worsening for you? Also, how do you see the risk of a spillover also coming to the U.S.? I understand there are sanctions, but it seems that the sanctions are not really having any impact, certainly on your European business. The second question for Jérôme on the EUR 100 million positive impact from the accelerated cash depreciation in the U.S. Is it 100% of the potential for you at this stage, or is there more to come? Also, can you talk about the magnitude of the equivalent measures in Germany? I think that's also something that they are working on from next year.
Good morning, Laurent. Thank you very much. For the helium overall, let's keep in mind that helium represents 3%- 4% of the turnover of Air Liquide. In terms of impact on the sales, it's quite limited overall. We have seen the market being clearly disturbed by, as you mentioned, from the sourcing piece, Russia and Gazprom, with some products flowing in some regions of the world which are not following the sanction on this. Also, from the demand side, we have seen lower demand in some key markets. As far as Air Liquide is concerned, we are managing this business very tightly. The impact on the negative in terms of volume and what we see in some markets on spot pricing is very limited. Keep in mind that we have worked a lot on the supply chain by diversifying our sources of helium.
We are not taking any product from Gazprom, of course, but also having the cavern, which is for us a great way to manage the fluctuation between the market demand and the production side. Also, and it's very important in the current timing, we have developed, I would say, an original marketing approach in the past few years where we have converted many of our contracts to medium-term to long-term contracts. Probably 70%- 80% of our volumes are under those types of contracts, which is giving us very good stability and visibility in terms of market. This is true for the IM market, but also for the electronics market, which is growing. All in all, yes, there are some disruptions in this market today, but I think we are managing that very well overall as far as we are concerned. For the Jérôme.
Yes, of course. Thank you very much, Jérôme. Good to hear you. You're right. The recent adoption of the OBB legislation, bonus tax depreciation, allows for 100% tax for fiscal depreciation on new projects, which is a significant increase because we have 60% in 2024 and 40% in 2021. The impact in Q3, we are benefiting from a one-off positive cash impact of $100 million. Q1, Q2, Q3 figures, and that's where we are today. We will continue to benefit from this increase in the fiscal depreciation because, you know, we'll continue to invest in the U.S., as you know. Definitely, it's a very good thing for the cash flow. As related for Germany, you know, there are discussions on corporate tax, I know, but it's a bit early to say. Of course, we'll come back to you when we have more clarity on that regard, if I may say so long. Thank you very much, Jérôme. We have another question, please.
Yes, of course. We are going to take our next question. It comes to the line of Geoffrey Robert Haire from UBS. Your line is open. Please ask your question.
Yeah. Hi, Geoffery Haire . Good morning. I just wanted to ask quickly about the backlog, obviously going up to $4.9 billion. Could you just give some explanation as to what growth you've seen? With the DIG Air Gas acquisition, what do you expect that to add to the backlog when we get into 2026 when the deal is completed?
Thank you very much, Geoff. Maybe let's comment a little bit by geography, what we see in the backlog, and what we see in terms of business development opportunities. Adam, do you want to comment on quickly what you have in the backlog and what you see in terms of business development opportunities, both, I guess, in AI and electronics? Same for Emilie, maybe in the key region?
Yes, absolutely, François. Starting with the Americas, and Geoff, thanks for the question. The backlog remains strong. I think one of the comments that François made was around the four growth engines that we have. If we look at existing assets and how to leverage those, that certainly plays into our backlog. It's a low-capital intensity growth that we see happening in the near term, which is great. We don't have to wait for full construction on those assets to deliver on those hydrogen opportunities that we see right around the corner. This is one that we see contributing to growth in the near term, being 2026, 2027. When we look at other opportunities, we see we have a number of projects which are under execution today in the electronics space in North America, as well as in the typical large industry space across the U.S. and a little bit in Canada.
The development piece continues to be extremely robust for us in North America. This is one where we're looking at not only the development on the energy transition side, where we continue to follow that very, very closely, including projects like ExxonMobil, which continue to be developing well. We also see it in other areas on the traditional side of industrial gases, around the steel sector, around refining, and the like, and certainly on the electronics space. The backlog continues to be strong in North America, and the development activity continues to be very strong as well. Maybe I'll stop there and turn it over to Emilie.
Thank you very much, Adam. Emilie.
Thank you, François and Adam. In Europe, I would say the business development is still very active. Two things. On the backlog first, we still have a good backlog. The projects that are in our backlog are strong. They are with long-term contracts, with solid customers. They progress as planned, and they will deliver results. We've had two additional projects like you've seen, ALBE in the semiconductor industry in Germany and ELYgator electrolyzer in the Netherlands for a 200 MW electrolyzer. Backlog, again, is strong and solid. For what is being developed right now, we continue to see a good pipeline of opportunities and active project development, I would say both in energy transition as well as in other activities, core activities. Two other sectors where we see maybe the most drive are RFNBO hydrogen. There's still room here for good projects with strong customers, and we have solid uptakers.
Second, in the cement industry, cement players are continuing on their journey for decarbonization. We are here to support them, and we have active discussions with them. Overall, I would say momentum is still here. You've heard the recent wins and really major ones in Europe. Air Liquide continues to be in a leading position in energy transition and overall broadly in the industry in Europe. We are well positioned to seize any opportunities whenever and wherever they happen.
Thank you very much, Emilie. Maybe I will conclude with Asia. I know because Emilie is very positive about Europe, and she's right, actually, because we see quite a bit of opportunities for sure. I will conclude with Asia and close the loop on your question, Geoff. We see a sustained pipeline of opportunities in Asia for sure. There are two main drivers as far as we see currently. The first one is electronics, clearly, where we see again and again a strong pipeline of projects, which, by the way, give us the opportunity to be quite selective in terms of strategy and in terms of profitability for the project. As we are number one globally and number one in Asia, I think clearly we see this as a strong potential.
We continue to see projects being developed around decarbonization, either around carbon capture or conversion of some units to limit the carbon footprint, which, by the way, closes the loop to what we mentioned before about the CBAM. A great illustration of that is the momentum that we see in China, still very strong, both in terms of electronics along all the types of demand in the electronics industry, but also decarbonization, mostly conversion of some projects using steam from coal towards electricity, with a very significant carbon footprint reduction. Extremely positive for the planet, but also for us as we are able to secure long-term contracts. There's probably more to come soon on that topic. In other countries, we see also, depending on the country momentum, you had a specific question about Korea and DIG. Of course, we still need to wait for the closing to happen.
As I mentioned before, everything is well online. We have a very solid portfolio of projects. We have more than 20 projects which are under execution within DIG. We do expect this to contribute. This is not taking into account what should come, which is the next wave of major electronics investment in Korea, driven mostly by AI, with some of the key players who have announced the project but not yet launched the start of the project. All in all, very strong pipeline of projects in Asia. I do believe we have maybe two more questions before we stop. The first one, please.
Yes, of course. The question comes to the line of Georgina Fraser from Goldman Sachs. Your line is open. Please ask your question.
Thank you so much. Good morning, everyone. I've got two questions. The first one, if we can just really zoom out, how do you explain the lack of growth in large Industries over the last four years and what's needed to resolve that situation? The second question is, the super strong backlog, it does seem like despite all of our fears, the energy transition is still a big part of the driver of the backlog. Can you talk about how the capital intensity of the backlog is evolving? Thank you.
Thank you very much, Georgina, and good morning. Good to hear you. The first one on the large industry, clearly, we have mixed trends in this segment. We have seen projects, and we are investing on projects mostly driven by the energy transition. At the same time, we have seen the declining base or declining volumes in many of the industrial locations. Those are the two effects. Taking into account that it's quite stabilized today in terms of decrease in the volume in most of the region of the world, the most impacted one has been Europe, clearly. If you look at the operating rate of the large industry assets in Europe, it's lower than usual for sure. For the U.S., it has been stabilizing overall.
When we talk about the new project and the contribution of the new project, you have seen quite a bit of investment, as we discussed before. We have to take into account that only a small portion of the new investment in large industries is already startup and contributing. Keep in mind that many of those projects, they take three to four years to build, especially the one in the energy transition, which are a little bit longer. You don't see the full benefits of the new investment in large industries, which means that all in all, the new startup and the small contribution of the new investment barely compensate the decline in the volume. Again, this is a segment where we have clearly a reservoir of growth. The contract that we signed in the U.S. is a clear illustration of that.
With only a small investment, we were able to leverage our existing pipeline and existing assets, which were not fully loaded, and get new sales at a very low capital intensity. What is needed is basically a demand, underlying demand. Whenever it will happen, we are in a very well-positioned to capture this growth with no or minimum CapEx in large industries. Regarding the backlog and the capital intensity in the backlog, I think overall, the capital intensity is a little bit more difficult to read than previously for different reasons, as I explained before to some of you. Clearly, we see that the capital intensity, which is the ratio between how much capital you invest and how much sales you get, is directly impacted by the cost and the price of energy. Today, we see that the price of energy is very different from one region to another one.
This means that the capital intensity of the backlog is highly dependent on the geographical split of the project within that backlog. That's one element. The second element is that we see that in the energy transition, there are more projects where, for example, the customer is supplying the renewable electricity. That's the case for TotalEnergies in Normandy. We basically sell to them, I mean, the hydrogen, which means that at the end of the day, the capital intensity of this part of the project is higher than a classical project, which means that all in all, it's very difficult to predict. It's a little bit higher probably than a few years ago when the energy overall was quite low in terms of price because on average, the energy is higher.
That's what I can say for this capital intensity, which leads me to another point, which is the fact that in the future, it's going to be more and more difficult to use the capital intensity the same way, ratio of sales versus the investment. What you should be looking at is the return of the capital implied and employed, and then looking at how much profit or EBITDA is generated by the investment, which I think would be a much better way to see the contribution to the growth of the investment that we are doing. I hope that was clear, Georgina.
Very much. Thank you, François.
All right. Have a good day. Thanks.
Thank you. We are going to take our last question for today. Just give us a moment. The question comes to the line of James Hooper from Bernstein. Your line is open. Please ask your question.
Good morning, everyone. Thank you very much for taking my questions. I've got two final ones, please. Firstly, on electronics, on the slides that you showed, it was plus 6%, excluding ENI. Can you give us some indication of when you expect ENI to get more positive? Thinking about the component parts of the growth, how do you expect this to evolve in the coming quarters and years? Secondly, about China and the Asia business. The plan was last week, and the initial details of the five-year plan have come out for China. How do you think that, going forward, this will affect your Chinese business? What do you think it means for demand in the rest of the region? Thank you.
Thank you very much, James. For the first one, Jérôme, do you want to comment on the electronics, and I will comment on China?
Thank you very much, James. You're right to underline the fact that the growth on the electronics is very solid on carrier gas. You know, carrier gas has gone double digits, which is, again, very, very strong. We expect this growth to continue in the years to come because that very much reflects our leadership in this side. For ENI, it's a bit difficult because, you know, by definition, it's more volatile. We expect this to be more normalized during the current course of the next year, maybe around Q2 probably. Again, don't pay too much attention on this because, by definition, it's a more volatile market. Thank you.
Thank you very much, Jérôme. On China, as you mentioned, last week, there was the big meeting to set basically the course for the next few years. It is a little bit too early to conclude on exactly what's going to be the contribution. Overall, what we can take already out of the discussion and some of the communication is clearly that there is a strong focus on industry and manufacturing to make sure that it stays a key pillar in the economic development of the country. At the same time, the decarbonization is still, of course, on the agenda. I think those are very important for us overall, given our footprint and our offering to the market. I see that as being positive and potentially very positive for the growth opportunity in China.
I think one of the effects clearly which is needed is to continue to build the confidence of the end market, taking into account that this is one of the key factors to increase also the local spending in China, which is something which is important for the state of the economy. All in all, clearly, we can see that already as a sign for more quality growth in China, in the industry. Again, given our footprint, we will be able to seize those opportunities, being in the industrial merchant overall, in the electronics, or in the large industry. Thank you very much. We will conclude this session. Thanks again for all your questions. I would like to just quickly summarize some key takeaways. In Q3, we once again deliver continuous growth and, as you have seen, a strong operational performance. All this while, and we discussed quite a bit, successfully.
Projects for the future. Combining our four growth engines with our ongoing transformation, we are, with all the management team, fully confident in our ability to navigate these turbulent times. We will continue to deliver both on performance targets and growth, creating value for our shareholders. Thank you very much for your attention, and we wish all of you a very good day. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.