Good morning, and welcome to Air Products and Chemicals second quarter earnings release call. Today's call is being recorded at the request of Air Products. Please note that this presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Beginning today's call is Mr. Simon Moore, Vice President of Investor Relations.

Thank you, Leanne. Good morning, everyone. Welcome to Air Products' Second Quarter 2020 Earnings Results Teleconference. This is Simon Moore, Vice President of Investor Relations. I'm pleased to be joined today by Seifi Ghasemi, our Chairman, President and CEO; Scott Crocco, our Executive Vice President and Chief Financial Officer; and Sean Major, our Executive Vice President, General Counsel and Secretary. After our comments, we'll be pleased to take your questions. Our earnings release and the slides for this call are available on our website at airproducts.com. This discussion contains forward-looking statements. Please refer to the forward-looking statement disclosure that can be found in our earnings release and on Slide #2. In addition, throughout today's discussion, we will refer to various financial measures. Unless we specifically state otherwise, when we refer to earnings per share, EBITDA, EBITDA margin and ROCE, both on a company-wide and segment basis, we are referring to our adjusted non-GAAP financial measures: adjusted earnings per share, adjusted EBITDA, adjusted EBITDA margin and return on capital employed. Reconciliations can be found on our website in the relevant earnings release section. With the significant social and economic challenges the world is currently facing from the COVID-19 pandemic, we have restructured our call today to focus on the key information we believe is most important to our investors. You can find our Q2 segment slides in the backup section, but we won't go through them in detail on the call today. Also, given the significant uncertainty that remains regarding the duration of the crisis, the pace of recovery and the negative impact on the global economy, Air Products is not providing Q3 FY '20 EPS guidance. In addition, we believe it is prudent to withdraw our FY '20 EPS and capital expenditure guidance and therefore we advise our investors that such guidance should no longer be relied upon. We are not providing new FY '20 guidance at this time. And like all of you, we are conducting this call remotely. So during the Q&A, we will intentionally pause to help with any time delay and avoid 2 people speaking over each other. We appreciate if you would do the same, and we also appreciate your patience. Now I'll turn the call over to Seifi.

Thank you, Simon, and good morning, everyone. Particularly during these challenging times, we thank you for taking time from your busy schedule to be on our call today. Before we talk about the quarter, I wanted to share some thoughts on the current situation. Please turn to Slide #3. The true character and leadership of individuals and companies is revealed during times of crisis. We are certainly going through a crisis, something that none of us has experienced in our lifetime. But I am delighted to report to you that the people of Air Products are demonstrating our culture and character to the world. They are responding to the crisis with caring for our fellow employees and our fellow citizens around the world. They are responding with passion to keep our plants operating, so that we can provide our customers with the vital products that they need, as they are responding with their commitment and dedication to move Air Products forward, no matter what the challenges. We have always been a leader committed to safety as our #1 priority. In managing through this crisis, we have provided the right protective equipment and procedures to protect our people on the front lines. We were quick to act to limit travel and transition many employees to work-from-home mode to minimize risk. We are also committed to providing financial security for our people. During this crisis, we have not laid off any of our employees or cut their salaries. We will work to maintain this approach as we navigate through this crisis together. We have a strong financial position necessary to carry our people and their families through these unusual times. Air Products is looking after our customers. Our customers expect us to provide them with the products they need on time with…

Thank you, Seifi. As Seifi stated earlier, our company's financial position is very strong. Our cash flow generation is very stable, supported by our industry-leading on-site business, which represents more than half of our sales. Additionally, our cash on hand and limited debt provide an ability to access additional funding as needed. We are confident that we have sufficient resources to meet all our capital deployment opportunities. As you can see in Slide 11, we have over $2 billion of cash on hand. We also have an undrawn $2.3 billion committed revolving credit facility available. However, I don't anticipate any need to access these funds. Meanwhile, our company's leverage is very low. Net debt is about $1 billion, and our net debt-to-EBITDA ratio is a low 0.3x. This allows us to increase debt considerably while still maintaining our targeted A/A2 debt rating. Our dividend and capital investment plans remain unchanged. We are committed to rewarding our investors by increasing the dividend and growing the company. As shown in Slide 12, Air Products has delivered 38 consecutive years of dividend increase through many periods of challenging economic conditions, and we continue to believe that investing in high-return projects will create more shareholder value over the long term than buying back shares. We remain optimistic about our ability to deploy significant capital into our exciting growth opportunities, including recent opportunities like the PBF asset acquisitions. We also have about $1 billion of debt maturing by the end of 2021, so we continue to evaluate the best time to access the debt markets. Now please turn to Slide 13 for our second quarter results. Our sales and profits grew despite the unprecedented disruption due to COVID-19, demonstrating the stability of our on-site contracts and the geographic diversity of our merchant businesses. Overall, COVID-19…

Thank you, Scott. We have now seen how Air Products performed during the months of January, February and March of 2020. I would like to add that we did have a good month of March despite the evolving crisis in Europe and Americas. But I am sure our investors want to know what we are seeing as of today in the month of April. This is what I can share with you. First of all, as I speak to you now, just about all of our 750 plants around the globe are operating and supplying essential products to our customers. The 52% of our sales, and I'll repeat, 52% of our sales that is our on-site business around the world is doing well, and we expect this to continue. In Asia, our merchant volumes have returned to pre-crisis levels, and some product lines are actually higher than last year. In Europe, our merchant volumes are down about 25% in the month of April, although this seems to have improved slightly in the past week. The main impact in our volumes in Europe is in our packaged gases business. In Americas, our merchant volumes are down about 15% in April and seemed to be stable over the last week. Please note that we do not have a packaged gases business in the United States. Although it is encouraging to see some improvement in the number of COVID-19 cases and a flattening of the curve in certain areas around the world, but we all need to realize that significant uncertainty still exists regarding the duration of this crisis, the pace of recovery and the negative impact on the global economy. Given this uncertainty, Air Products is not providing fiscal third quarter EPS guidance, and we believe it is prudent to withdraw our…

[Operator Instructions] And we will take our first question from David Begleiter with Deutsche Bank.

Seifi, on Jazan, assuming it closes on October, how should we think about the earnings contribution in 2021?

Well, obviously, we have given you a guidance about the fact that for every dollar that we invest you should expect approximately $0.10 of operating profit. So you can convert that to EPS impact very easily. At this point, I think that's the guidance I want to give you, but once we actually close, then we will be a little bit more specific.

Very good. And just last thing on your on-site business, what's your exposure as refineries reduce their operating rates? You highlighted the stability of your on-site business, but is there not some downside risk as we do see lower crude runs by refineries?

No. Our on-site business, as we have always said, we get a fixed monthly fee for running our plants and providing product to our customers. Whether they are operating at 100%, 90% or 80% doesn't make much of a difference. And you have seen that fully demonstrated during the second quarter where there was obviously a lot of pressure on everybody around the world and in China and all of that. So that doesn't affect us that much.

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

So two questions on the backlog. I guess the first would be you have a lot of business coming in on the merchant front that you've listed in your backlog for 2021. I guess, can you give us some color as to your confidence in that demand or that business coming on and what the impact might be in terms of how we should be thinking about the earnings contribution in 2021?

With all due respect, John, I would like to disagree with you in terms of the fact that most of those investments in our backlog are in merchant. They really are not. Most of them are in our on-site model. So as a result, I don't expect much of an issue with that as they come in. I think they are mostly on-site business with fixed BFCs.

Got it. Yes. At that part -- I mean I see the big on-site ones. I guess I was curious because you do have 4 projects listed that are merchant. I was curious what the likelihood of those coming on and the impact might be.

So they did come on and they are very small in terms of the context of the thing, and some of them actually replaces some older plants. So I don't expect that to be material at all, John.

Got it. Got it. Okay. And then for the second question, the macro obviously is going to be a lot slower in the short term, and that may have some impact on the ability for new projects to get bid upon and things like that. At the same time, you just won the big PBF project or business. I guess I'm wondering how you're thinking about the on-site opportunities out there and if we should be thinking about the project backlog expanding as we kind of go throughout the year or kind of staying level to maybe going down a bit. How should we be thinking about that?

I think you should be thinking on that part of our business that it's business normal. And actually, the current crisis might actually create opportunities that some of the people who were reluctant to sell some of their kind of industrial gas plants that they own, that they might be thinking about maybe divesting of those and generating some cash. So I actually think that our -- the pace of what we have been doing will continue and maybe actually accelerate.

And we'll take our next question from Kevin McCarthy with Vertical Research Partners.

Seifi, in listening to your comments, it sounds like your business in Asia is recovering nicely. If that is the case, would you expect earnings to improve sequentially in the fiscal third quarter in Asia relative to what you just posted in the second quarter?

Yes, I do. Our business in Asia is doing fine right now. And as I said in my comments, some of the product lines are actually higher than last year. So I do expect an improvement in our Asia segment next quarter.

Okay. That's helpful. And then, Seifi...

Barring -- yes. Go ahead.

Sorry to interrupt. As a second question, I was wondering if you could elaborate on the decision to discontinue your capital expenditure guidance as distinct from the earnings guidance. It looks like the year is half done. I imagine a lot of these projects are already underway. Are there particular sources of uncertainty that have emerged now that might call into question the fate of individual projects? Or what is the rationale there?

Kevin, that is driven by just one project, which is Jazan. As I said, we expect that project to close in October. Now if it closes on September 28, the capital expenditure, which is significant, will be in our 2020 numbers. If it closes on October 2, it will be in 2020, '21. That is why we didn't want to -- since we don't know exactly when the project is going to close, that is why we withdrew that guidance so that we don't create an issue of having said something and it becomes a few -- 1 week or 2 weeks back and forth, and it would significantly change that. That investment is not $200 million, it's billions of dollars. So as a result, that is why we wanted to shy away from confirming the capital expenditure, Kevin. That's the only one actually.

And we'll take our next question from Vincent Andrews with Morgan Stanley.

First, if you could just clarify, Seifi, at the end of your comments about how April was going and you talked about if merchant volumes were down 25%, was that -- it'd be a 3% to 4% hit to EPS or a $0.34 hit to EPS?

Sure. Number one, what I said is that if the industrial production drops 25%, and as a result of that both Europe and Americas drop 25%. That is not the case as we see. As I said, European volumes, as we see it in April, down 25%, but in the U.S., it's only 15%. But I just wanted to give you some guidance that if both of those things dropped 25% for the quarter, then the impact for the quarter will be about 30% to 35% -- $0.30 to $0.35, which is 3% to 4% of our total EPS approximately for the year. So the effect will be $0.30 to $0.35 for that quarter, assuming that everything goes down 25%.

Yes. Okay. That's very helpful. And then if I could just ask on the merchant gases side of the equation. There have been some reports in the U.S. and in Europe about shortages of CO2 in the U.S. as a function of corn ethanol plants not having co-product production. Is that something that you're seeing and that the company is going to be able to be a solution provider for that missing CO2?

What -- just to put it in context, CO2 -- first of all, your statement is absolutely correct. But in terms of Air Products, CO2 is 1% of our sales in the U.S. and 5% of our sales in Europe. Europe doesn't have a problem now. So in the U.S., it is a very, very small part of our business. So it's not going to have any kind of a material impact on our business, and we are not going to be able to do something to help the situation because it's such a small part for us there.

And we'll take our next question from Mike Harrison with Seaport Global Securities.

Wanted to -- maybe continuing on the question related to CO2 shortages, just talking more broadly about your business, can you talk about any supply chain or logistical issues that you may have encountered as a result of COVID? Any additional costs associated with shortages or availability or needing to move product around at higher cost or in less efficient ways than normal?

Look, related to CO2, as I said, for us, it's such a small business. We haven't seen much of an impact on our business, and we haven't had to do anything significantly unusual.

I mean, more broadly speaking, though, when it comes to LOX/LIN or argon or anything else.

No. On LOX/LIN, argon and all of that, thanks to the outstanding efforts of our people, they get up in the morning, they go to work, they obviously wear the proper protective equipment, but we have kept all of our plants running, all of our supply chain. And we haven't had any issues of not delivering to a customer or not being able to meet customer demand. So I'm very proud of that. And we have kept our company running, and we have supplied products to all of our customers with no shortages and no disruption.

All right. And then I wanted to also ask about the impact of lower planned maintenance. You mentioned that a couple of times. That's customer maintenance and planned downtime. But what does that mean to you guys in terms of your own maintenance costs? And are these discretionary maintenance projects? Or why is there a decline?

When we have a plant like a hydrogen plant that is supplying a refinery, we obviously can only take our plant down for maintenance when they take their refinery down. Because if we take our plant for maintenance and refinery is operating, then we will create a disruption for the refinery. So we coordinate our downtimes very, very closely with the refinery. So what we are saying is that some of the refineries might decide to move their maintenance to another quarter, and as a result of that we would not take our plant down. As a result of that, we would not have to do the maintenance and therefore that might be a favorable impact on our bottom line.

And we'll take our next question from Steve Byrne with Bank of America.

You're still getting 2% to 3% overall price in each of the regions, which is driven by merchant, or less than half of your revenue. Given that in a couple of the regions now you're seeing a contraction, are any of those merchant customers asking you to renegotiate price or pushing back on that? So just a general question about your outlook for pricing in this slowdown.

Excellent question. Let me just be very specific. You're right, the numbers that we publish is for all of our business. But I can give you, and we have been open about this thing before, in terms of price increases for our merchant business, year-over-year, Americas was up 6%, Europe was up 5% and Asia was up 6%. So those are the facts in terms of the second quarter. Now what is going to happen in the future, we have a policy of not to comment on prices for the future because of the nature of our industry. So -- I'm sure you understand that well why I wouldn't do that because it's not appropriate. But those are the facts in terms of what we have seen up to now.

And Scott, you mentioned that -- about this available capital deployment capacity that's $18 billion. You've committed, I think you said 2/3 of it. That is a 5-year window that is fixed, and you're now halfway through that 5-year window. At what point do you kind of put that on a rolling 5-year forward basis because your future contribution of that is shrinking? And is this lower oil environment doing anything to your outlook for gasification of coal?

Yes. I will answer that question, Steve. You're right, we have committed 2/3. We have another almost 2.5 years to go to commit the other 1/3. In terms of giving you a rolling 5-year, yes, we will do that, but we will not do that now. We will do that probably next year to give you a view for the next 5 years after 2022. With respect to the nature of the projects or any slowdown, quite frankly, we don't see any reason for the slowing down of those mega projects that we are very much attached to as a result of the virus thing, at least at this stage. So we continue to remain very optimistic about the robust nature of our fundamental strategy as we go forward in terms of focusing on gasification, carbon capture and hydrogen full mobility.

And our next question will come from Jeffrey Zekauskas with JPMorgan.

So as I understand your products, whether Air Products' on-site volumes grow or they contract, that piece of the business is irrelevant to year-over-year EBITDA changes, excluding currency and acquisition. The real lever is in merchant volumes and merchant prices. So in a world in which merchant volumes really move down, can you flex your cost structure down in order to cushion the effects to Air Products? Or it's difficult to flex your cost structure?

Well, Jeff, first of all, you understand our business very, very well. Secondly, you're asking an excellent question. My response to that is that if -- the driver for growth of Air Products, which we are committed to 10% a year EPS growth, is not the merchant volumes going up and down, is the investment in new opportunities and new projects coming down the stream. That is what has been driven our business. If you look at our past 5 years, we have the level accumulative average growth rate of 13% on EPS. That is driven -- it was driven some by the cost structure that we took out and made ourselves more efficient. And we are done with that. As we go forward, the main driver is going to be the new projects that we are bringing on stream, and they are going to be significantly accretive. And that is why no matter what happens to our merchant business, I'm still very optimistic that we will be able to grow our EPS 10% a year as we move forward on the long term.

In gasification projects in China, people gasify in order to produce ammonia, methanol and fuels. And in the world that we live in today, I don't know if people need more ammonia, methanol and fuels, maybe they do if you want to be more independent than China. So in a world in which oil prices are now, say, within a range of $25 to $40 a barrel, to be conservative, is it the case that those projects in China still make sense? And when you look at your -- say, Lu'An, for example, how is that client faring in a world where energy prices are down sharply?

Well, Jeff, this is the general discussion we have always had is that these projects are not driven by financials, they're driven by national security. Oil might be $2 -- at $10 or $20. But coal, 3% softwood coal, which is sitting in the ground, is worth 0. So when you take that and convert that to chemicals, it still pays to do that. That is why we believe that these projects will still continue. And then the other thing is that in terms of our gasification, please remember, and I know you know this very well that you're not just talking about coal gasification, you're talking about gasification of pet coke. People are not going to be able to burn pet coke. 6% pet coke is not going to be something that people are going to consume. You have to convert that to something else, and the only way to do that is gasification. At the bottom of the barrel in the refinery is 6%, and you cannot sell it to ships because of IMO 2020. Then you have to gasify it. So the gasification is not just coal. Right now, the biggest gasification project that we are doing is the [ $2.5 billion ] project in Jazan. That has nothing to do with the coal, it is the gasification of the bottom of the barrel of the refinery. So when we talk about gasification, it's a combination of all of these things. And that's why we continue to remain optimistic, whether oil is $25 or $40 or $60.

And we'll take our next question from John Roberts with UBS.

European merchant is down 25% in April. How much more than the 25% decline is packaged gas down? And how much less than the 25% decline is bulk liquid down?

Approximately, packaged gases is down about 40% and liquid is down about 16%, approximately.

And do you have any hydrogen customers operating below their contracted requirements? And do you anticipate any of your hydrogen customer suspending operations temporarily?

We do not. I mean I'm sure some of our hydrogen customers might be operating below capacity, but we haven't seen a drop in -- we have not seen a drop on hydrogen volumes from our pipeline. But I don't know in the future that might be the case, but it doesn't affect us, as we have discussed before.

And we'll take our next question from Bob Koort with Goldman Sachs.

Seifi, you've only talked about maybe doing asset acquisitions, and it seems like some of the JVs include a component of that, but this PBF was the first meaningful one that was solely assets and not a gas supply and rolling in your project work. But what does the pipeline look of other asset acquisition opportunities? And if you were handicapping, would you suggest your next big capital project will be an asset acquisition or a new gasification project?

Probably an asset acquisition.

And can you give us an update on YK? Is there any progress there? At some point, will you need to formalize a delay in your expectations of when that project will come on stream?

Yes. The thing is that, unfortunately, as I mentioned, I think, on our January call, we were supposed to have a big meeting on that thing in the month of February in China, but obviously, that didn't happen. The issue with that project has not changed. It's still the issue of coal allocation, and we are going to kind of put a target for ourselves that by the time that we announce our results at the end of October, we would give you a definitive answer about whether that project is a go or no go. We are still optimistic that, that is going to be a real project. But I do promise you that by the end of October we will give you a definite answer on that, rather than just keeping it kind of in suspense.

And our next question will come from PJ Juvekar with Citigroup.

Seifi, is all your on-site business on facility fees? Or is there some business, maybe some old business, that was stuck at a certain operating rate below which take-or-pay begins to kick in? So I guess what I'm asking is, is there any cyclicality in your on-site business?

No. No material cyclicality. No, there isn't. As you have seen during 2008, and as we have demonstrated in the last few months, it's a pretty robust business, the way we have it structured, PJ.

Okay. And then when I look at your volume growth, what was the same-store volume growth for Air Products overall? And particularly in Asia, you gave COVID impact, but can you take out the impact of new project start-ups? And so just trying to get the same-store sales.

It's obviously the growth is related to new projects, but we usually do not quantify that because then we will be giving away too much information. But obviously, during January, February and March, merchant volumes in China were down, just like they are going to be down in this coming quarter in Europe and the U.S. But we did have new projects coming on stream. And as a result, it made up for it. That is what I was saying in answering the other question that the main growth driver for Air Products is all of the work we have done in the past 6 years with new projects that are beginning to come on stream, and you're going to see a lot of that coming on stream in 2021, '22, '23, which would put us in an excellent position.

Right. No, I agree. But it was just in times like this it would be helpful.

And we'll take our next question from Chris Parkinson with Crédit Suisse.

So just a quick question on the recent PBF deal. It appears it obviously came together fairly quickly. But can you just address on how long you've been -- that you're targeting these assets? And then, also, just how should we think about the long-term optionality or potential optionality in terms of carbon capture in California as well as the potential to leverage your pipeline network?

Chris, first of all, with PBF, we have known these people very well. They are an excellent company, and we have a very good relationship with them. We have been supplying them hydrogen for a long time. So the subject of acquiring their hydrogen plants has been discussed in the last 2 or 3 years. But it became -- we made a specific offer to them -- I can tell you historically, we made a specific offer to them in October. At that time, they didn't want to -- they took their time to take a look at it. And then finally, in March, we made a very -- even more a specific offer, which they were interested in taking a look at it. But their requirement was that if we can do the transaction in a speedy way, which we said we can, and as a result, we did it during the time that we did. In terms of the other question that you have with respect to carbon capture opportunities, obviously, in California, there are significant incentives for if you can capture carbon, and obviously we have a lot of steam methane reformers, and now we have even more steam reformers in California that do generate CO2. And therefore, it makes sense for us to take a look at whether we can capture the CO2 from these things and do something with it, whether it is enhanced oil recovery or sequestration or whatever, to capture some of that value. So yes, we are looking at that.

And just also, just -- could you just very quickly just hit on just in terms of end markets, do you see any variance in terms of merchant volumes thus far? I understand it's linked to IP, but just any end markets worth highlighting? Just also a quick update possibly on just your health care business and also nonmedical helium demand would be appreciated.

Sure. In terms of the market sectors, obviously, the oxygen demand for hospitals, the demand has gone up. We do not have a huge business on that in the U.S. but we do have a very big business for hospitals in Spain and Italy and in some other parts of Europe. So the demand for oxygen is obviously up because of the situation. Full freezing demand has relatively kept up pretty well. Obviously, the areas where you see reduction in demand is basic industries and especially smaller industries that use for oxy-fuel burners and all of that for all of the manufacturer. And in terms of helium, the helium, most of the helium goes with MRI machines and that hasn't slowed down.

And we'll take our next question from Duffy Fischer with Barclays.

First question is just, can you help break out the decremental margin differential between the European business and the U.S. business just because there you have package, here you don't? So if we're putting different declines in revenue based on IP from those 2 regions, how should we think about either like on an EBITDA percent basis or an EBIT percent basis differential in decremental margins?

You're asking me to give you a lot more detailed information than we usually give to people. But overall, if you want to do the kind of calculation that you want to do, there isn't a huge amount of difference between the margins. Americas is higher than Europe but it is not as if one is 10%, another one is 40% there. They are not too different, let me put it that way.

Okay. Fair enough. And then just the last one, in the working capital line this quarter, it seemed like you ate about $200 million more in cash than you have historically in the second quarter. What happened there? And is that something we should think about repeating? Or is that kind of a one-time thing that will end up going away?

Well, on that one, on that question, I would like to turn it over to Scott, who knows more about it than I do to answer that. Scott, would you like to take that question, please?

Sure, happy to. Duffy, first of all, it's not systemic. There's nothing in there related to the COVID-19. What it is, is just some larger -- timing on some larger payments, particularly in our sales equipment business on some of those contracts. So nothing large and not something we expect to continue.

What Scott is saying is that it has nothing to do with actually physical inventory and so on. It's just some of the accounts payable, accounts receivable kind of thing. Okay. Are there any other questions?

There are. And we'll take our next question from Mike Sison with Wells Fargo.

Seifi, I think you noted that Asia merchant recovered in -- or was down for 6 weeks and then sounds like maybe in week 7, week 8, things recovered. Can you maybe walk us through kind of what happened when you talk to customers that allowed the merchant business to recover in kind of 7 to 8 weeks? And if those events sort of transpire here in Europe and the U.S., do you think we could recover in that sort of similar time period?

Well, I think on that, what I can say is that obviously China did a great job in terms of dealing with the virus. I mean, they had a hard shutdown, which affected volumes and all of that significantly. But they took the pain and they contained the virus. And then when they opened the society back up in a normal way, then the volumes came back. So if in Europe and in the U.S., we act responsibly, the way they did, and have a hard shutdown and then open up our society responsibly, things will come back. But I just hope that we do the same thing that they did in China. The Chinese did a great job in containing this virus. It started there, but you know the statistics in terms of the number of cases they have. And right now, the Chinese society is functioning normally, and that is why our volumes are up. And actually, there are people who argue that actually the Chinese economy might benefit from what is going on because if Europe and the U.S. have issues to deal with, and industrial production and so on is down, then China has to make up for that and also for their own demand. So the Chinese economy might actually become better than it was before. But -- I mean, it all depends in terms of how we end up handling the situation in the U.S. and in Europe and how we come back from that.

Got it. And then just a follow up -- and just a quick follow up. When you think about the volume, merchant declines in Europe and Americas, how much of that is driven by actual plant shutdowns? Meaning, if those shutdowns kind of revert, auto and aerospace and other areas, is -- how quickly does that come back? Is that the bulk of the decline?

So that is obviously the bulk of the decline. And also the consumer is not consuming the stuff and people are not producing that. But I'd just like to add that we feel can obligate -- as you know, we never, during our calls, comment on the current month. We don't comment on things in the middle of the quarter. But we decided to do that because of the focus that everybody has and we gave you the numbers as we see them in April. We are not projecting that those numbers will continue. We are not projecting that Europe will go down 25% the next month. We just told you what we see at this moment because we don't know how it's going to proceed. Next month, if Europe decides to open up some of the areas because they feel more confident, that 25% might become 10%. So the main reason that we didn't give you guidance is because we just don't know and we don't want to get ahead of ourselves. But please take what we said in the context of what we are seeing. We are not projecting for you, we are not projecting that the U.S. merchant volumes will be down 25%. We just gave you an example of that. I've told you exactly what we see as of right now.

And the next question will come from Jim Sheehan with SunTrust.

So you noted that you have the top priority still of increasing your dividends. And over the past many years, you've increased it at a 10% annual rate or compound rate. Would you expect your dividend increase this year to be similar to prior years? Or would you change the amount of dividend increase, given the uncertainty of the current environment?

Well, the decision of how we've increased the dividend and how much we'd increase it by is obviously the decision by our Board of Directors. And the Board considers all of the different circumstances before they make that recommendation. But the one thing that I can tell you for sure is that we definitely are not decreasing the dividend. And my intent is to recommend to the Board to increase the dividend. The issue is by what percentage, and that I cannot kind of give you a number for that. We will see how it is. But you see our historical performance and we definitely are not going to decrease the dividend. And the amount of increase, we would like to increase it, I would like to increase it, and the amount of increase will be something that our Board will decide in January, as we usually do.

Our next question comes from Jonas Oxgaard with Bernstein.

Two questions, if you don't mind. The first one is on Jazan. So my understanding from your last call was that you expect the gasifiers to be up and running shortly and the ASUs are obviously already running. So how -- what happens to the project when the -- when everything is actually running but ownership is still with Aramco? Does the earnings that come in just pay off corporate debt? Or how should we think about that?

Well, first of all, I don't want to speak for Aramco but the gasifiers are not running yet. But the very odd deal is, again, like any other deal, is that when we close the transaction, whether the gasifiers are running or not or whether the refinery is running or not, then Aramco owes us the monthly fee. That's the way it works. So the -- upon the close of the transaction, whatever is the state of the refinery, we will get our monthly fee, and therefore it will impact our EPS. Is that okay?

Yes, that's -- but the ASUs are running already, right? And they are owned by you, still, aren't they?

The ASUs are still owned by us, and they are -- when you say running, they are being commissioned. We are not yet supplying oxygen for production to the refinery yet. But they are -- but the important thing is that we are getting the BFC per our contract with Aramco, or the ASU, which we own 25%.

Okay. Perfect. Then a separate question. So you referenced helium demand being strong, but since we're now reducing oil and gas production, and we're already in what looks like a global helium shortage, how do you see the helium supply/demand evolving over the next year if crude price stays where it is?

Well, first of all, helium demand, there are 2 main drivers for helium demand. One main driver is obviously the MRI machines. And unfortunately, those things are in more demand than they had before. Then the other thing -- the other for helium is balloons, birthday parties and all of that. That is a flexible demand. And depending on the price that business goes up and down. So in terms of helium demand, we have not seen a significant reduction on the demand. And as you said, the supply is still tight. But I would like to be excused from making too many comments about helium because it's obviously a very sensitive subject, considering the market and all of that, and I don't want to get ahead of ourselves in making too many comments about that.

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

Okay. Well, then very quickly, carbon sequestration. Do you have the skill set to do the sequestration component yourselves? Or is that something you need to do a JV on?

I'm sorry, you cut out in the middle of your questions. Would you please repeat that?

Sure. So on carbon sequestration is -- just very quickly, on carbon sequestration, you mentioned earlier projects, the pipeline. Do you have this -- does Air Products have the skill set to do the sequestration steps themselves? Or is that something that would need to be outsourced or JV-ed?

Well, if you're talking about -- we obviously know how to capture the carbon and clean it up and all of that. Then the question becomes if -- just -- if you are doing EOR, we just put it in a pipeline and it goes for EOR. If it is a question of sequestering it, the know-how for the sequestration obviously belongs to some of the companies like Schlumberger, they can use all of that. And obviously, in those kind of situations, we will be either using them as subcontractors or something like that. I mean, I don't want to get too much into the details of that. But you know the system very well on how it works, yes? Okay. With that, since that was the final question, I would like to thank everybody for being on our call. Thanks for listening to our presentation. We appreciate your interest and look forward to discussing our results with you next quarter. And as I said earlier, please stay safe, stay healthy, and all the best to all of you. And thank you again.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.