Good morning, ladies and gentlemen, and welcome to the Air Liquide Q1 2026 revenue conference call. All participants are currently in listen-only mode until we conduct a question and answer session, and instructions will be given at that time. I will now hand 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 Q1 review. For the Q&A session, they will be joined by Emilie Mouren-Renouard, Group VP for Pursuing Operations in EMEA, and by Adam Peters, Group VP, CEO of Air Liquide North America. Adam is on the phone with us from the U.S. In the agenda, our next announcement is on July 28th for our half-year 2026 results. Let me now hand you over to François Jackow.
Thank you, Aude, and good morning, everyone. It's my pleasure to share Air Liquide's highlights for the Q1 of 2026. This quarter, our performance once again demonstrates the resilience and agility of our business model and our outstanding capacity to grow within a complex global environment. Business-wise, our project backlog has reached a new record high, further securing our trajectory for profitable growth in the years to come. Let's move to the next slide. The Q1 results clearly underscore the strengths of our model. The numbers speak for themselves. Sales grew +3.4% excluding FX and energy, bolstered by the accelerated integration of DIG in South Korea in January, which was originally planned for the course of H1. This overall sales performance confirms our ability to capture growth organically and through acquisitions in key geographies and sectors.
Looking ahead, we remain firmly committed to our margin expansion ambition in spite of the environment. We see this with our operational indicators that are equally strong. IM pricing remained accretive, stepping up sequentially to 3.4% above Q4 last year. This demonstrates our continued discipline and effectiveness in managing value in a demanding macro environment. Efficiency gains. Our momentum here is excellent. We deliver +8% growth in efficiencies over Q1 last year. This significant performance, considering this comes on top of the almost 30% step change achieved in 2025. It clearly validates that our major transformation program continues to deliver. Cash flow remains remarkably robust. Up +7% excluding currency impact, providing us with the financial flexibility to fund our future ambitions.
Finally, this is remarkable, our investment backlog reached a new historic peak at EUR 5.5 billion, up from EUR 4.9 billion at the end of 2025. This provides us with exceptional visibility. These are tangible, high quality projects currently under construction that will fuel our profitable growth as they come online. In summary, it has been a very solid start of the year, characterized by resilience in our operations, acceleration in our strategic investments, hence validating our strategy. Moving to slide four. I would like, of course, to address the current geopolitical situation in the Middle East and its implications. While our direct financial exposure is limited, as the region represents approximately 1% of group sales, we are managing the situation with the utmost discipline and care. Our response to the challenges is guided by clear priorities. Safety first.
The security of our 500 employees in the region remains our absolute priority. I can confirm that they are all safe and supported. I would like to thank them very much for their outstanding commitment to continue to support our customers in the region. Seven, operational continuity. Our local assets remain intact and operational. While some are running at adjusted rates, we see once again the critical nature of our business. Supplying medical oxygen to hospitals, maintaining home healthcare services in Saudi Arabia, for example, or providing essential nitrogen for refinery safety. Regarding operational challenges, of course, there is the global helium supply chain. The temporary shutdown of helium production in Qatar affects roughly 30% of the global supply. Having 80% of our global helium volumes contracted with customers, more than any of our competitors, we had to take into account the global shortage early on.
In this context, we are operating under temporary contractual relief and managing the allocation of available volumes. Taking into account where appropriate, the criticality of specific applications, and of course, in full respect of applicable laws. Keep in mind, these are temporary measures and all contracts remain in place. Leveraging our global footprint, we are optimizing supply from our other sources and utilizing our storage assets, such as our cavern in Germany, to minimize the impact for our customers. Other challenges include, for our customers, energy and feedstock availability or the robustness of supply chains for key raw materials. Regarding inflation, while it represents an initial headwind, our proven ability to manage pricing and efficiencies allows us to protect our margins and drive long-term value creation. Overall, at this stage, we remain confident in our ability to continue to manage the impact of those challenges.
In the current context, I will not, and I cannot talk about opportunity. Let's keep in mind that we could see some positive outcomes from the structural shifts that will result from the situation. In particular, Air Liquide is uniquely positioned to capture regional shifts in industrial demand as we have a global footprint. Also, we could expect a rebound effect in the U.S., where lower energy costs and manufacturing policy are attracting global industrial production. Here, our unique position in Large Industry, Industrial Merchant, and Electronics is an advantage. Third, we can anticipate an acceleration of the reshoring trend, with strategic autonomy becoming a priority for our customers and for any states. This is particularly visible in the Electronics sectors. It should be seen also in other sectors, like what we have experienced for steel in the U.S., but also in Europe.
Four, over the medium term, this conflict reinforces the role of hydrogen in energy sovereignty and resilience. As hydrogen was losing momentum when only considering decarbonization, we already see a renewed interest in Europe, in the Middle East, and in Asia to consider hydrogen as a fundamental pillar of energy independence and resilience, complementary to electrification. Lastly, the long-term value of being able to provide resilient supply will be probably better appreciated by our customers, enabling us to leverage our strong operating reliability. Moving to slide five. In today's volatile environment, our core strengths allow us to continue preparing for the future. Our performance is anchored by structural competitive advantages. Extensive diversification. Our business model is naturally hedged across geographies, diverse industrial and healthcare sectors, and an extensive customer base. Local and global agility. Despite our global presence, we maintain a decentralized organizational structure.
This allows us to remain agile enough to capture regional growth opportunities while leveraging the scale of the group to drive global efficiencies. Intrinsic resilience. This is the hallmark of our model. It allows us to protect our margins and sustain performance in an adverse economic environment. Innovation DNA. Our technological leadership and our ability to listen to our customers remain key differentiators. This allows us to navigate the present environment and continue to proactively build our future. In Q1, there are clear signs of this. We successfully closed the DIG Airgas acquisition ahead of schedule, allowing us to capture the full year contribution of this strategic asset throughout 2026. As mentioned, our project backlog has reached a historic height of EUR 5.5 billion. It is a significant reservoir of growth that will translate into revenue and earnings.
We are pursuing the group transformation to improve the margin, enhance our cash flow, and return to our shareholders. In short, we are leveraging our strength to navigate the current environment while resolutely preparing the Air Liquide of tomorrow. Moving to slide six. I would like to highlight two major project wins this quarter. On the left, we are expanding our presence in the U.S. Gulf Coast through a partnership with Hyundai Steel and POSCO. Air Liquide will invest over $350 million to build a world-class air separation unit and extend our local pipeline infrastructure in Louisiana. This project is a perfect illustration of the industrial reshoring trend currently revitalizing the U.S. market.
By connecting this new low carbon steel complex to our existing network, we are not only supporting Hyundai Steel joint venture, but also increasing our network density and scale effect. This allows us, for example, to meet also the growing needs of Koch Methanol, an existing customer on the same pipeline. It is a clear example of how our integrated infrastructure creates a multiplier effect for profitable growth while offering the best competitive solutions to our customers. On the right, we have secured a major electronics project in Hiroshima, Japan. We will invest EUR 200 million to build two ultra-high purity carrier gas units for a global leader in semiconductors. This project is critical for the manufacturing of the next generation chips and reinforces Air Liquide's global leadership in electronics. Our position in Japan is unique, being the only global industrial gas supplier in the national growing market.
We have an extensive local footprint with 78 dedicated electronics units and our Electronics Tokyo Innovation Campus. This long-standing presence over 40 years in electronics allows us to partner with our customers and key tool makers on their most advanced technological roadmaps. These two successes are some contributors to our record EUR 5.5 billion backlog. Stay tuned because there's more to come. Turning now to slide seven. In a global environment that remains complex, the resilience of our business model and the agility of our teams allow us to look ahead with confidence. Based on our selling start of the year and the strength of our strategic initiatives, we confirm our guidance for 2026 and margin ambition for 2027. Thank you very much for your attention. I will now hand over to Jérôme to provide a deeper dive into our Q1 financial performance.
Thanks, François, and good morning, everyone. I will now review our numbers in more detail. Turning to page nine for Q1 2026. When you exclude FX and Energy, Air Liquide delivered a +3.4% top-line growth, which include the significant scope contribution of DIG Airgas. As a reminder, the closing of DIG Airgas was accelerated and now benefits Air Liquide for the full year. On a comparable basis, we again deliver sustained resilient +1.9% sales growth despite the challenging macro and geopolitical environment. Established sales were down -3.5% due to unfavorable FX effect of -5.9% and -1% of energy pass-through impact. Turning to slide 10, strong mid-single-digit growth in the Americas was a driver of comparable growth, sales growth of +2%.
Including contribution from DIG, Asia was up +8% in an otherwise contrasting market, while EMEA remained stable. Looking now at the business line, Healthcare uncorrelated to the macro industrial environment, continued steady climb at +4%. Electronics and Industrial Merchant were again growth driver, contributing +3% growth each. Large Industry remain contrasted, as I will describe over the next few slides. Let's now move to slide 11, where I will review the Q1 activity for each of our main geographies. The Americas broad growth engine provided a +5% increase on a comparable basis. At +8%, large industry sales were strong once again. Driven by the U.S., we experienced very high demand on the Gulf Coast pipeline network for both air gases and hydrogen, partially, sorry, due to the Middle East conflict.
Refineries are now running at full capacity, and we see increases in chemicals. Merchant posted a strong +5.3%, driven by robust pricing and resilient volume. Gas volumes were slightly positive, and outboard showed improvement, albeit still soft. Liquid argon improved, driven by construction and metal. The shutdown of the QatarEnergy helium sourcing starting in March had limited impact in Q1. Growth in Healthcare showed continuous trend at +6.66%, driven by sustained high pricing, especially in the U.S., along with the deployment of the value offer, INTELLI-OX in proximity care. LATAM further increased the number of home healthcare patients and also benefited from solid pricing. In Electronics, the very strong growth in carrier gas from new project startup and ramp-up was offset by high Q1 2025 base in Equipment & Installation. This latter negative comparison will diminish starting in Q2.
Overall sales in EMEA now were flat, but we continued solid growth in Healthcare. Large Industry was soft with low hydrogen and cogen. Air gases were net stable with high activity in South Africa compensating for low Europe. In Merchant, overall sales were stable, excluding exceptional sales of rare gases in Q1 2025. Pricing increased to +1.7%, an acceleration from Q4. Finally, Healthcare growth was robust at +4.3%, supported by an increased number of patients in home healthcare and solid activity in medical gases, which more than offset small divestiture. Finally, mixed Asia Pacific in Q1. The accelerated closing of DIG Airgas in Q1 contributing meaningfully to growth in Asia, where we have delivered +8% in total. On a comparable basis, growth was relatively stable.
In Large Industry, underlying demand was contrasted with growth in Korea and Japan, but lower volume in Singapore and China following customer turnarounds. Sales in Merchant were low with headwinds from helium and soft, but slightly improving pricing. China was slightly positive, excluding helium, with some bolt-on contribution and less negative pricing. Bright spots remain mainly in bulk and on-site. Finally, Electronics sales improved by +5.3%. Strong growth in carrier gases driven by startup and ramp-up, as well as steady high advanced material. I will now comment on our Q1 activity by business line on page 12. In Merchant, we saw increased pricing at +3.4% with price management above the cost curve, representing a slight acceleration from Q4. Overall gas volume were resilient and output showed improvement but still soft activity in the U.S.
Large Industry was down slightly with strong activity in the U.S., nearly offsetting low activity overall in EMEA and contrasted Asia. Moving to page 13. There was again a strong underlying momentum in Electronics at above +5% excluding E&I. Sales benefiting from a strong growth engine of carrier gases with startup and ramp up, in particular in Asia and the U.S., as well as solid advanced material performance in Asia. This growth was somewhat offset, as E&I sales compared to high Q1 2025. This E&I comparison, however, should moderate in Q2. Finally, Healthcare saw balanced growth with strong contribution from increased pricing in medical gases, supported by value offers and an increased number of patients in home healthcare. This sales growth more than offset the small divestiture we had in Europe and Japan.
Now on page 14, we remain extremely focused on our execution and on delivering our margin improvement ambition, which is based on three pillars. First, Industrial Merchant pricing continue to be dynamic and in fact slightly accelerate to +3.4% as we adapt to inflationary measures and focus on price management above the cost curve. Second, to reiterate François's comments earlier, momentum in efficiency gains were excellent. Building off a record in 2025 with a +27% increase, we continue to deliver. At EUR 142 million, we delivered +8% growth in efficiency over Q1 last year. The dedication of our teams and execution of our transformation program is clearly delivering very strong results.
Third, we're active in portfolio management, which closed a very exciting strategic acquisition of DIG Airgas in South Korea, as well as three bolt-ons in the U.S. and China. In addition, we executed two divestitures. We continue to examine the portfolio with a focus on profitable and margin accretive opportunities. On slide 15 now, showing our investment KPIs. It was a great start of the year with Q1 investment decision reaching the high level of EUR 1.5 billion, and this excluding the financial decision related to the acquisition of DIG Airgas in Korea. Industrially, the decision reached an all-time high with several successes in electronics carrier gases project and a major large industry project in the U.S., as François highlighted with the two examples earlier. Therefore, investment backlog reached a new record high at EUR 5.5 billion.
This backlog is very well diversified, including nearly 75 projects across all geographies and well balanced between Large Industry and Electronics. Finally, our 12 months portfolio of opportunities at a high EUR 4.5 billion. The current 12 months portfolio consists of around 40% projects in Electronics and a third in energy transition. On top of that, the portfolio beyond 12 months remains dynamic and totals above EUR 10 billion. On page 16 now, as mentioned earlier by François Jackow, for 2026, we remain aligned with our ambition to improve operating margin by +100 basis points, excluding energy, and confident in our ability to deliver recurring net profit growth at constant exchange rate. We also confirm our further expansion of higher margin improvement in 2027 to reach +560 basis points of cumulative improvement over six years, 2022-2027.
2027. Following our February announcement, I am pleased to confirm that we'll host our Capital Market Days on October 1st. We are eager to use this time to share the next chapter for our strategy. Thank you very much for your attention. We can now start the Q&A session.
Thank you. As a reminder, to ask a question, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. We are now going to proceed with our first question. The question comes from the line of Alex Paterson from Barclays. Please ask your question.
Yeah. Hi. Good morning, all. Thanks for taking the question. Two from me, please. The first one, on Large Industry, I guess, you know, Middle East disruptions, obviously tightening global energy and logistics flows. In that backdrop, do you see European industrial customers becoming relatively more competitive versus Asia? And if so, could higher utilization in Europe as well as North America more than offset any softness that you're expecting to see from Asian customers? I guess, put more simply, you know, can we expect Large Industry comp growth to improve over the balance of the year from Q1? That'd be the first one. The second one, just on Electronics.
Obviously, a good mid-single digit growth rate excluding E&I. Those comps ease from Q2. Should we expect that kind of reported Electronics growth to step up to the mid-single digit level mechanically, or is there anything we should consider from an underlying volume perspective, as we think about growth in Electronics going forward? Thank you.
Thank you very much, Alex, and good morning. We'll ask Emilie to comment on Europe, and probably Adam will also comment on the Large Industry momentum that we see in the U.S., and then we come to Electronics. Emilie, please.
Thank you, François. Good morning, Alex. Good morning, everyone. On the Large Industry in Europe, I would say overall, the activity remains stable and resilient, but it's contrasted depending on the different markets. If I go a little bit more into details to answer your question. On the chemical side, volumes were rather a bit better than Q4. Here, it's not a one-size-fits-all story. It really depends on the customers, the places, and the feedstock they have access to. We still see some, you know, some bubbles or pockets of opportunities where companies benefit from better feedstock or if they can be flexible to run on different feedstock. That flexibility definitely gives them an advantage to run as opposed to maybe in other places overseas.
In refining, doing well in Q1 with upward volumes, and we expect large players in refining to continue to run at a relatively high load in Q2. On the metal markets, we see good momentum in volumes in Europe, driven by the CBAM and also import quotas to incentivize reshoring and production in Europe as opposed to imports from overseas. These protective measures definitely have a positive impact, and that should continue over the remainder of the year.
Thank you very much, Emilie. Adam, news from the U.S.
Yes, absolutely. Thanks, François. Alex, thanks for the question. Large Industry is certainly a bright spot in the U.S., since the start of the year. Maybe a little bit of context for everybody. If you look at our positions in Texas and Louisiana in particular, we have a very extensive pipeline network in both of those states. Along the U.S. Gulf Coast, extremely strong position serving the chemical industry and refining in particular, but also a bit on the steel side. We've seen that network fill out quite well. If you look at what's happening in the Middle East crisis at the moment, the U.S. remains very strong in terms of having advantageous feedstocks for the chemical industry.
The natural gas pricing remains favorable, and this is really resulting in chemical company outputs that are increasing. We've seen that, we've benefited from that, and we continue to see that going into Q2. I think the timing of this will all depend on how long it takes things to stabilize in the Middle East, but it's a very strong story there. We are the leader in serving the chemical industry with air gases, but we also have a very strong position in hydrogen serving refiners. Refiners are also running at max rates. Basically what we see is the opportunity to really ramp up production in accordance with what's happening.
You can see that in our results for the Q1 with 8% growth in Large Industry in Q1. A good outlook, good position, leveraging our infrastructure that we have, and our historic positions and strength in this market.
Thank you very much, Adam and Alex. This is true for many of the comments, of course, in the current environment, we have to be a little bit cautious. Just to also put things in perspective, in March, we have seen record volume on oxygen, nitrogen pipeline, but also on our hydrogen pipeline in the U.S. Yes, indeed, we are benefiting. We'll see how long it lasts, but I think that's a great position to be in in the U.S. for sure. Regarding the Electronics, 2026, indeed, we see a positive momentum clearly and good trend. We are trending towards the single-digit growth for the Electronics business.
Probably more visible towards the second part of the year because there are still a little bit of the comparison effect with the E&I. The underlying growth is very strong. Carrier gas is in the range of 6%-9%, depending on the region, or 10% even. When we listen to our customers, clearly they are providing a positive feedback. Today, for many of them, the operating rate is in the range of 90% for their fab, and the forecast for 2026 and 2027 is to be above the 90%. Of course, very strong momentum in the most advanced node logic fabs and the memory where Air Liquide is very strong.
As we will discuss probably later on, there are, of course, some question about the midterm regarding the supply of some critical material, including helium. So far, for our customer, this has not been a bottleneck. Let's keep in mind finally that the investment momentum is super strong, and we have been very successful. In Q1 2026 alone, we have already decided more than 90% of all the Electronics investment of last year.
Just to put things in perspective, very strong momentum in investment and quite successful track record for us. This clearly confirms that Electronics remains a strong internal growth driver for Air Liquide, and that's what we see. Thank you.
Thank you.
We are now going to proceed with the next question. The question comes from the line of Alejandro Vigil from Santander. Please ask your question.
Hello. Alejandro Vigil from Santander. Thank you for taking my questions. The first one is related as well about the organic growth outlook for the year. I think market expectations was some acceleration of the growth during the next quarters, but now we have this Middle East crisis. If you can give us some color about how you see organic growth performing in the coming quarters from this about 2% this quarter. The second question is about the transformation plan. We see this acceleration in cost cutting and the guidance for 2026 and 2027. Basically my comment is this is a conservative guidance or you see more and more upside in these numbers as you are delivering the current plans. Thank you.
Alejandro, good morning, and thank you for your two questions. If we talk about the outlook, as of today, our assumption is that Q2 will be more or less similar to Q1 in terms of growth. We clearly continue to see some positive trends either globally, Healthcare, for example, semiconductor, I just mentioned about that, but also defense and aerospace. Regionally also we see some positive trends still in Europe, as mentioned by Emilie, U.S. refining, petrochemical also, but U.S. manufacturing overall and industrial construction. Of course, there are great uncertainties regarding the outcome of the Middle East conflict. There are many potential impacts, headwinds, but also, and we have to recognize that tailwinds.
As the new order is unfolding, we stay the course, being resilient, able to leverage the challenges into growth opportunities. This is why overall we remain confident for our growth and margin objective for 2026 and 2027. That's overall the outlook for the rest of the year. Transformation. Jérôme?
Yeah, the transformation. Thank you, Alejandro. You know, this is going very much aligned with our expectation, and we are moving on this transformation. We are basically not at all at the end of the journey. You saw the very good track record we had during the last years in terms of acceleration of efficiency and margin. We are still moving on, very clear, and we have a very strong contribution from efficiencies during the Q1 .
We are at +8% versus last year. This is, you know, I would say on top of, you know, what we have done last year, which was very significant, +EUR 600 million of efficiencies. You know there are basically four pillars. You know, we explained that many times. We are streamlining the organization. We are working on industry initiatives, on commercial initiatives, and we're also leveraging on business service center. We are moving on and that is clear. When we look at today the operational efficiency is very much aligned with what we do. You know, if we try to display by lever, about 40%-50% of the efficiencies in Q1 are coming from operations. You know, industrial initiatives are paying off, streamlining of the organization.
We have a significant acceleration on procurement, which will grow roughly a quarter of this. And finally, you know, we are also having the impact of the tax decrease coming from what we prepared last year in terms of post-structuring. You see the cash flow is going up +7%. There is a strong, you know, leverage coming from top line to cash flow. Everything is moving as expected. As I said, François, during his introduction, and I reinforce, we are very much aligned with our +100 basis points improvement for the year and the +560 for the period 2020- 2027. We are moving on as expected.
Merci.
Thank you.
We are now going to proceed with the next question. The question comes from the line of Thomas Wrigglesworth from Morgan Stanley. Please ask your question.
Thanks very much for the opportunity. two questions, if I may. Firstly, just looking at the merchant pricing, the 3.4%, what's required for the rest of the year for you to fully pass through the higher energy costs that you'll suffer there? The second question, if I may, you spoke to large industries in Europe and the picture there kind of heading into 2Q. What's the picture in Asia as well? We hear obviously very mixed signals across the various end markets from Southeast Asia being softer in, on, in chemicals to China, you know, seeing lower run rates.
Be very keen to hear how you're thinking about your Asian Large Industry business, you know, and the impacts from the Middle East in 2Q. Thank you.
Thank you very much, Tom, and good morning. I will ask Emilie and Adam to talk about pricing in the two regions, and then we'll come back to the Large Industry piece. Emilie, do you want to start with Europe, please?
Sure. Pricing in Europe. We've been really proactive in increasing prices.
In anticipation of any cost increase due to the Middle East crisis and to any inflationary pressure. Pricing is ahead of the cost curve, leading to a good pass-through. Actually, Q1 this year is a bit higher than Q4. We're seeing this acceleration already, and we'll continue to see that over the next quarter. We've learned from the previous crisis. For sure, we are now fast. We have the tools. We have teams well-equipped and well-incentivized to increase prices at a very rapid pace. We've put the right formulas in bulk to reflect our energy piece as well. We know they're effective. Overall, I would say very good dynamics in Europe in pricing management should continue for the rest of the year.
Thank you, Emilie. Adam?
Yes. Well, Emilie, I think you did a great job of answering that. I think it's not different in the Americas. If I look at it, pricing remains a very strong lever for us. I think our coverage across all 50 states in the U.S., our density that we have in our merchant business is very, very solid. And the tools that we have in place, the incentive systems and the like, make sure that we have put in place very strong proactive pricing to stay ahead of the cost curve in the U.S., and in the other parts of the Americas as well.
I think the situation remains very much the same as what Emilie mentioned for Europe, and a very good lever for us going forward. That's really built into the DNA of our company.
Thank you very much. So coming back to the Large Industry in Asia overall, the growth has been lower, maybe than what was expected overall, but it's quite contrasted between the region. You see that we still had a good momentum in Korea and in Japan, for example. Mostly down was China and Singapore. When we look at the reason for that, most of the reasons are related to customer-specific activities and especially a turnaround, maybe some expanded turnaround given the overall market condition, but that's what we have seen for Q1. Now, looking ahead, I think we have a mixed signal or things that could impact.
There are talks about potential curtailment of either energy supply, natural gas or naphtha feedstock for some of the customers in the region. So far, we have not seen a customer being impacted, not our customers, at least. This is something to clearly watch for the region. At the same time, for us, we do expect, I mean, the plants we have been in turndown to restart, and we have also some new startup coming up for the rest of the year. We do expect, I mean, a much better momentum for Asia, but we have to watch that.
Can I just ask.
When you look at the country mix, let's also keep in mind that when you are looking at the country mix where we operate, compared to what is being said and maybe others, we are not really positioned in Large Industry in some of the countries which are the most impacted with the energy crisis. When you talk about Philippines, Vietnam, Malaysia, for example, those countries are highly dependent on supply, and there's a very significant impact. This is the same in India also, where overall our merchant and Large Industry business, which is mostly air gases, is quite resilient. That's the picture, again, for Asia Large Industry. It should come up, but again, in the current environment, we need to be cautious.
François, if I can just sneak in a just a follow-up. It feels like merchant pricing is gonna be better. Electronics is now moving out of the base, you know, effects on equipment and installation going back to, you know, more normal growth rates. You know, Large Industries looks like it's lapping at low levels with mixed picture. I therefore struggle with your 2Q comparable growth. Looks like 1Q comparable growth. That seems very conservative in the light of, you know, the picture you're painting from those, you know, from Large Industries, from Electronics and other components.
You're talking globally. You are not talking about Asia, Thomas.
Yeah. Yeah. Now I'm talking globally. I'm just talking about the comment you made to the answer to the previous question.
I think overall in the current environment, I mean, you have to be a little bit cautious in looking at the market ahead of us. Again, we have a very strong basis. We think that there are some positive trends, but again, as the things are unfolding almost by the hours, you have to look and to anticipate some of the ripple effects. That's probably, I mean, what is driving the outlook overall for the world in general. Again, we have strong basis, very strong resilience. I have outlined quite a bit of positive trends. Let's see.
Thank you so much. Very much appreciated.
Thank you.
We are now going to proceed with the next question. The question comes from the line of Martin Roediger from Kepler Cheuvreux. Please ask your question.
Yes. Good morning. I have two, please. Your facilities in Middle East, what happens if they get damaged or destroyed? I think about your Yanbu facility. Are you fully covered by insurance? And if you are covered, and in case you receive any insurance payment, will that be booked in operating recurring income or as an exceptional item? And secondly, you talked in your handout about the increasing role of hydrogen in energy sovereignty, and you mentioned renewed interest in, for example, Europe and in Asia. My question is, do you have feedback from governments or companies that there is a concrete action plan to implement more, especially green hydrogen? Thank you.
Thank you very much, Martin. I will let Emilie answer about the specific question on the Middle East assets.
Well, overall in the Middle East. As a reminder, we operate in five countries. We have about 500 employees, like François mentioned. All our employees are safe and sound, and this is really the priority. The safety of our employees, of course, comes first and foremost. In terms of assets, of course, asset integrity is also a priority of ours. All our customers continue their operations, except in Kuwait, and all our plants are running to serve them. None of our plants have been hit or damaged. Again, except in Kuwait, all our plants are running to serve our customers, our patients. Our largest presence is in Saudi Arabia. It's on the West Coast, so it's where we supply some key customers in the Yanbu area, as you know.
This area is along the Red Sea, so less impacted for sure by the Middle East conflict and by the closure of the Hormuz Straits. Overall, the protection of our assets is, of course, a key priority for the group.
Thank you very much, Emilie. Speaking about the role of hydrogen and the renewed interest, yes, this is something that we are clearly hearing from major stakeholders. Myself, I was in the European Commission even last week, meeting two of the main commissioners on these very specific topics. As you know, I mean, the European Commission is looking at plans to increase the energy resilience in Europe. I would say hydrogen is on the list because of the very diversified ways to produce hydrogen. The fact that you can rely on international supply chain, but you can also produce locally hydrogen.
You can use hydrogen in a lot of different energy and different forms to complement electrification of industry and mobility. I think that's a clear example of the resilience of hydrogen in the energy mix. If you just take the Normandy projects that we are going to start up later this year, this is a clear example where we used to produce hydrogen with imported natural gas. With this facility, we will be producing hydrogen using renewable electricity and low carbon electricity being produced locally. Not only it reduce the carbon footprint of our customers, but it clearly reinforce the sovereignty and in the current pricing, also the cost competitiveness of the solution. I think there is more than an interest.
There are working groups and working teams on that. I mentioned the European Commission, but there were also in Japan a few weeks ago, same kind of discussion, and again, for the mobility and the industry. Maybe just a last example, I think, there are some countries which are already stepping up, the requirement for RFNBO hydrogen in Europe. I know that Belgium is looking at that, and Germany has just passed a plan to increase significantly the percent of low carbon hydrogen in the RFNBO mandate, which is going exactly in the same direction. Finally, on the mobility, there is a regained interest in all mobility, of course, because it's clear that electric vehicles and especially heavy duty will not be enough.
Also a lot of discussion about aviation fuel, especially in the current context. Again, a very concrete discussion. Action plan, I believe are being put in place. Here we are talking with government and stakeholders. I mean, it will take probably a few weeks and few months to unfold, but clearly a renewed interest in the current context.
Can I get the follow-up question or answer from Emilie about the insurance coverage for your facilities in Middle East and how that will be booked?
I would suggest that we take that offline because we have still quite a list of questions. For fairness for all the interveners, let's take that offline. The answer in short is yes, we are covered. Okay. Thank you.
Thanks.
We are now going to proceed with the next question. The question come from the line of Tony Jones from Rothschild & Co. Please ask your question.
Good morning, everybody. Tony Jones from Rothschild. Thank you for taking my questions. I have two. On helium, can you talk about the pricing ranges that you're realizing now as we go into Q2 for the non-contracted business? I suppose that's like a spot market. How you expect that to translate to contracted pricing over the next few quarters. Separately, on the Middle East and highlighting North American strength, I'm very interested in customer feedback. Are you picking up any renewed interest in new capacity for industries like petrochemicals, potentially refining in North America, given the low costs and supply integrity? It's been a long time since we've had a lot of new capacity added. Thank you.
Thank you very much, Tony. Maybe on helium, and I would like to give a little bit of context because I know there has been a lot of question on this topic. Just to put again, things in perspective, the helium sales are around 3% of Air Liquide total sales. It's of course a by-product of the natural gas extraction. As you know very well, there are different sources, U.S., Qatar and Russia, were accounting for probably 85% of the total sources. There are many applications.
That's where, I mean, the question on the pricing is coming for maybe 20% the medical application and the growing application, which is also around 20%, which is the Electronics, but many other things in metal fab, in space, in fiber optics and so on. Most of the contractual volume for us are in the Electronics and the Large Industry, Industrial Merchant customers. With the LNG in Qatar stopping, we basically had -30% of the helium sourcing being unavailable. That's why, I mean, I would say, responsible, and given the inertia in the supply chain, we have anticipated the disruption in the supply chain and we were anticipating a globally short market.
By the way, maybe some of you are not yet fully aware of that, the market is getting shorter with the announcement last week that there has been an export control from Russia. Overall, this is not the first time that this market is facing an unbalanced situation between the supply and the demand. Given the potential magnitude, we have requested indeed a temporary relief from our supply contracts in order to allocate volumes based on application criticality and of course local regulation. Let's keep in mind that again these are temporary measures and the contracts are still in place. Which means that for all those customers we are working with them to find the best solution to continue to supply their critical needs.
For the rest of our customers, we are delivering as much as we can. We are not the only supplier, by the way, in this situation. In the past few weeks and days, several of the global helium suppliers have also put in place allocation. Our pricing policy is to make sure that we pass through the additional cost of logistics, re-liquefaction of the helium from the cavern, for example, to make sure that we cover those additional costs. Overall, I would say that we are working with all our customers to minimize the impact. Again, we are relying on the diverse sourcing. It's not only Qatar.
We have other sources, and we have, of course, the cavern, which has been in operation for 10 years now. The last point I'd like to make on the situation, because again, there's a lot of question, and people are following very closely what is happening globally. You should note that an immediate relief would be the restart of the LNG plant in Ras Laffan, much more than the opening of the Hormuz Strait. Because we are in fact, and we have done that in the past and we are still doing it, able to export ISO container from Ras Laffan by road. So that's why this is the critical element, much more than the reopening of the Hormuz Strait.
Finally, I would say that we are working well with our customer at this stage and manage overall the impact for the group.
Thanks. That's very helpful.
Let's maybe ask Adam to comment on the U.S. and what you see and what your customers are telling us.
Yes, absolutely, François. Thank you, Tony, for the question. Maybe one bit of context here. If you look at the opportunity slate that we have in the U.S. in particular, it's actually it remains very robust. When it shifted, I would say over the past 12-18 months, more towards traditional industries for industrial gases, steel, petrochem, refining, but also very much towards Electronics, as was previously mentioned by François and Jérôme. We absolutely see an increase in terms of conversations from customers in the refining space. A little bit less so on the petchem side so far, but we still see some opportunities there as well. It remains a very dynamic and positive area for investment for the group in the U.S., and I think leveraging our strong position on the Gulf Coast in particular.
Very active discussions going on across the spectrum in traditional industries, like we've seen also from the recent signing that we had with Hyundai Steel in Louisiana. It's pretty exciting time for development in this market.
Thank you very much, Adam. Let's move to the next question, please.
Sure. We are now going to proceed with the next question. The question comes from the line of Jean-Luc Romain from CIC Market Solutions. Please ask the question.
Good morning. I have two questions. The first relates to your EUR 5.5 billion backlog. Could you remind us more or less how much time we should expect between the backlog and the start of all of these projects, and how much time for these projects to be at more or less 100% of their design turnover? That's the first question. Second question relates to the recently announced discovery of native hydrogen in France. Do you think Air Liquide might have a role in case this is economic to develop in terms of logistics or whatever for these new resources?
Thank you very much, Jean-Luc. I will be short because I know that we have quite some question, and maybe we have only time for one additional question. First question on the backlog. Typically, those projects which are becoming larger projects, even if it's quite diversified, are taking 3-4 years to be completed between the FID and the first startup. Depending on the project, it could take 2-3 years to ramp up to the full capacity. Regarding the question on native hydrogen, what is called sometimes the white hydrogen, there's a lot of discussion about that. Of course, we are following the topic. Right now, it's quite far away in terms of opportunity from feasibility.
If it happens that some hydrogen is available, of course, given our position, Air Liquide will organize, I mean, the logistics and the valuation of this natural resource. This is a little bit far on the road. Thank you very much, Jean-Luc. We have a last question.
Sure. We are now going to proceed with one last question. The question comes from the line of Sebastian Bray from Berenberg. Please ask your question.
Hello, good morning, and thank you for taking my questions. The Large Industry in Europe seems to still have a relatively soft volume development in Q1 2026. My understanding is that the refineries in Europe were probably less badly affected by the Middle East than their Asian counterparts. What was the primary driver of this? Was it the chemicals industry? Was it refining, or was it something else? Quickly, if I might add one on CapEx. The backlog at Air Liquide is up by about EUR 1.5 billion in the space of 18-24 months. The consensus CapEx is barely changed. What do you think is a reasonable level of CapEx to anchor around for 2027? Could it be EUR 4.5 billion or higher? Thank you.
All right. Emilie?
Yes. On the Large Industry in Europe, so we still see a relatively stable activity like I explained before. In terms of the Middle East impact, like I said on the refining, probably less impacted or at least we see upward volumes. What we see also on the refining side of things is renewed interest for low carbon hydrogen. RNG and SAF are low carbon. We see that in all the basins we operate in Europe. We are extremely well positioned to supply those customers with low carbon hydrogen, and we are planning to leverage our key position to continue on this journey, of course.
Thank you very much. Sebastian, for the question on the CapEx. So we have probably a CapEx for industrial investment around EUR 4 billion for the year 2026. Keep in mind that on top of that, you have DIG, fourteen point eight billion also. There is a delay, I would say, between the backlog and the decision and the CapEx, as you know very well. That's just due about the investment curve. With those projects being quite intense in engineering study, the CapEx tends to come a little bit later than on traditional standard projects. All right. Thank you very much. I think this concludes our session. Thank you for your attention, of course, and for your many questions.
Our results this quarter confirm the robustness and resilience of our business model. I think that you have seen that, and of course, the success of our proactive management and cost discipline. Clearly, we stay the course, and with a record investment backlog, we are building significant momentum for the future. I wish all of you a very good day. Thanks a lot.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a good rest of your day.