Air Liquide (AI:EPA) FY 2026 earnings call transcript

Good morning, everyone. This is Claude Rodriguez, Head of Investor Relations. Thank you very much for attending the call today. Francois Jacob and Jérôme Pelleton will present the first half 2026 performance. For the Q&A session, we will be joined by Emilie Mouren-Renoir and Adam Peters, both VP overseeing, respectively, EMEA and North America. Adam is on the phone with us from the U. S. For our next event, we look forward to welcoming you to our Digital Capital Market Day on October 6th. Let me now hand you over to Francois.

Francois Nguyen- Thank you, Aude, and good morning, everyone. It is my pleasure to share ALEK's operational highlights for the first half of 2026. the ... demonstrate its resilience, delivering sustained growth and strong financial performance.

Presently, while driving robust execution today, we continue to secure our long-term growth trajectory through a record volume of new project signings. Let's start with slide three. Our first half results clearly reaffirm the structural trends of our business model.

Comparable sales growth increased to 3.5% in the second quarter, landing above expectations, and representing a pickup compared to the 1.9% in the first quarter. This positive momentum was primarily driven by a strong underlying performance across both booming electronics and improving industrial merchants. Overall, sales growth in the second quarter reached 5.2%, excluding FX and energy, bolstered by the successful and speedy integration of DIG airgas in January. The strong top-line performance validates our proven ability to drive growth both organically and through highly disciplined acquisitions in core geographies.

At plus 110 basis points, margin progression is well on track with all levers of our transformation program contributing. Recurring net profit reached double-digit growth up 10%. Cash flow remained strong up plus 8%, both excluding currency impact. Our recurring ROCE stands at plus 11% in spite of increased investments, which demonstrates our disciplined capital allocation and improved performance. Our strong cash flow and balance sheet give us the firepower to continue to invest in the long term.

Indeed, the first half of 2026 is marked by record high signings, driven by an exceptional momentum in electronics and several major projects in large industries. This drives our backlog of signed projects under execution to another record of 6 billion euros up versus 5.5 billion euros in Q1 26. Combined with our active MNA strategy, this directly secures our future growth. Our ESG KPIs remain firmly on track with a few noticeable progresses this semester. One is a start-up of two renewable electricity sourcing contracts in Segunda in South Africa. As of now, close to 50% of these contracted sourcing has already started up, aligned with the objective to reduce the group CO2 emissions by more than 30% in one of the largest industrial gases production sites in the world by 2031.

So in summary, in the first half of 2026, despite the macroeconomic conditions, we have not only successfully delivered simultaneously on growth and profitability, but also prepare the next phase of growth. This is truly the inherent strength of AIR Liquide.

Now on slide 4. AIR Liquide remains intensely focused driving strong margin expansion across our three main levels. We reached accelerated industrial merchant pricing of plus 5.2% in Q2, successfully addressing inflation through smart pricing management. We delivered also almost 300 million euros of operational efficiencies in H1 through continuous improvement and executing, and that's very important, our structural transformation program.

We pursued active, accretive portfolio management to optimize our footprint and increase our local density. We are successfully executing our rigorous margin expansion plan, delivering, as you see, clear and measurable results.

Moving now to slide five. We are driving an exceptional momentum in electronics, signing new projects, and strengthening our number one leadership position. position. In fact, in just the first six months of 2026, our electronics project decisions reached over 1 billion euros. If you think about it, that's one and a half times of our total for all 2025.

The momentum is supported by a diverse mix of projects and geographies, almost all driven by artificial intelligence needs. Looking at the various projects on the slide, following our acquisition of GIG, Airgas in Korea, we further leverage our global relationship with key players like SK INIX with project wins both in the US and in South Korea.

In the US, we secured three large-scale projects during the first half, representing a total investment of over $480 million, all dedicated to advanced chips with leading semiconductor manufacturers. Meanwhile, in Asia, our project signings achieve outstanding momentum, totalling more than 550 million euros. These wins reinforce our global market leadership and give us strong visibility on long-term profitable growth. On slide 6, we are catching the growth in large industries with the signing of three major projects in the first half. They expand our presence in the U. S. and directly support U. S. industrial reshoring. In large industries in the U. S. , we are investing $350 million dollars under a new long-term agreement to supply air gases to Hyundai POSCO in Louisiana for their landmark low-carbon steel plants.

This new infrastructure directly supports the development of critical, domestic, and low-carbon materials. It also enables our customer international expansion while actively contributing to the reshoring of American industry. In Texas also, we strengthen our long-term partnership with OXEA Chemicals by expanding our production capabilities at their base city site. This strategic $200 million investment involves the construction of a new, highly efficient plant to produce low carbon thin gas and hydrogen. This project will reduce the group CO2 emissions by 64,000 tons while providing also additional capacity. This project, and that's important, underscores our technological leadership to capture profitable growth in a key US industrial basin while supporting climate objectives.

Finally, in Kazakhstan, we have entered into a new long-term agreement with Sileno to supply nitrogen to their upcoming polyethylene facility.

Through this €70 million investment, we will own and operate two state-of-the-art energy-efficient nitrogen production units. This project consolidates our presence in the strategic industrial basins, allowing us to capture strong operational synergies and also support a key regional petrochemical hub.

We have to keep in mind that these major large industries wins demonstrate our relevance and differentiation across a broad number of strategic and structural growth areas. To conclude on slide 7, air liquid performance in H1 demonstrates operational and strategic execution on all counts.

First, our results show strong growth despite the challenging context, along with great progress on our margin expansion roadmap. Also, our active M&S strategy continues. We were able to close our landmark GIG air gas transaction ahead of schedule. We look forward now to the growth this will continue to provide to the group.

Finally, backed by a record level of project signings, securing future growth, we are very well positioned to sustain our long-term growth profile. In a nutshell, I'd like to say that we are executing today and preparing for tomorrow.

I thank you for your attention. I will now turn over to Jérôme to detail the financials. Jérôme, please.

Thanks, Francois, and good morning, everyone. Turning to page nine, I will now go through our financial performance in more detail. So for the second quarter of 2026, Group Sense delivers strong comparable growth at plus 5.2%. excluding energy pass-through and currency effects, and including the scope effect from the DIG air gas acquisition net of the biogas divestiture. On the comparable basis, growth stood at plus 3.5%, landing above expectations, and representing a strong pickup over our first quarter performance at plus 1.9%. I will briefly call out engineering and technologies reaching 420 million in H1, up plus 4.6% on the current basis and plus 8.8% in Q2. This increase is explained by the finalization of several unit construction for third-party customers in engineering and construction.

So looking at the first half overall, group established sales increased by plus 0.8%. Our reported top line was impacted by currency at wins at minus 3.6%, which were only partially offset by the plus 0.1% positive energy impact. Additionally, the strategic acquisition of DLGR gas net of our biogas divestiture contributed a positive scope effect at plus 1.7% during this period. Consequently, total comparable growth for the first half of the year landed at a solid plus 2.6%.

So now moving to page 10, showing all our regions are growing. In America, health growth remained the same high levels seen in Q1, and in Asia, we deliver sequential growth led by material pickup in activity. EMEA has also seen a modest increase in growth versus last quarter. From a business line standpoint, the growth increase in Q2 was driven by strong electronic sales and an improved industrial merchant performance. healthcare continues steady contribution and the line remains mixed. We have created, as you see, a balanced portfolio across business lines and geographies that provide inherent operational resilience, proving again its value throughout every stage of market cycles. Let us now provide you with more granularity on the activity in our main geographies in Q2 2026.

I am on page 11. Indeed, we sustained high growth in the Americas, up plus 5% on a calm basis. Large industry sales in the Americas were again led by strong activity in the US. This increase was driven by contribution from new project startups and ramp ups alongside high demand across our Gulf Coast pipeline network, especially from both chemical and refining customers in reaction to the development in the Middle East. In merchants, cells were driven by an increased pricing effect at 6.7%. Volumes were slightly excluding impacts of the global helium shortage.

Solid bulk gas activity was supported by a picket in liquid argon notable for the space industry while construction benefited from ongoing momentum in data center build-outs. Healthcare growth in the Americas continued high level And finally electronics saw strong progression of advanced materials and specialty materials offset by lower equipment and installation cells cells in eMEA have grown supported by continued positive health care activity and an improved IM in large industry customer demand remained low driven by weak cogences and low activity in the Middle East partially upset by growing hydrogen cells to support robust activity in refining within merchants our pricing action increased to plus 3.1 percent demonstrating our ability to proactivity counter-growing inflationary pressures.

Volumes were slightly up, excluding the impact of the global helium shortage. Finally, healthcare delivered sustained growth at plus 4%, supported by solid medical gases pricing and home healthcare activities. Activity in Asia now was boosted by a surge in electronics, further amplified by our DIGR gas acquisition. In large industry, the activity remained mixed with hydrogen cells growth in Korea, not fully offsetting low activity in the regions. Q2 merchant sales grow at plus 2.1% or plus 3.4% when you exclude the helium and oids.

Pricing demonstrated the positive sequential trend, improving from negative 0.4% in the first quarter to positive plus 1.4% in Q2. Notably, sales growth in China increased, and in Q2 propelled by strong demand across on-site packaged gas and bulk gases, while performance across the rest of Asia remained more mixed. In electronics, we deliver strong momentum and this performance was driven by a very strong behemoth for carrier gases and advanced materials alongside the roll-off of prior year equipment and installations compilers. Turning now to page 12, I would like to give a quick update on our early kids' operation in the Middle East. As you know, the region, of course, remains volatile.

However, our local team is safe and doing an outstanding job to supply our customers, and our assets remain fully intact and operational.

The global helium supply chain remains a point of attention. Production in Qatar has restarted a limited capacity, and we are utilizing road transport for our helium isocontainer, which helps ease global supply pressure. Of course, we are continuing to keep and adapting to a fast-changing environment. Future results have demonstrated, again, the resilience of the supply chain. We are effectively managing the situation to minimize the impact on both our customers and our financials.

As for the potential outcomes, the last few months have proven us right, and we expect the coming months to confirm these trends even more strongly. I will recommend on our Q2 activity by business line. I am on page 13. We are seeing an acceleration in merchant at plus 4%, with pricing strengthening to plus 5%.

The negative delta is volume, which were attributed to the helium shortage. excluding this impact merchant volume increase notably in construction and utility sector in the Americas bolstered by digital infrastructure and data center development, technology in Asia and pharmaceutical in Europe. In large industry record a high volume in the US are offsetting low co-jet in Europe and soft demand in the Middle East while activity in Asia remain mixed.

Turning to page 14, following the role of challenging prior year equipment and installation comp year over year growth in our electronic business has accelerated to plus 10 percent in q2 the key drivers of this performance includes of course carrier gas startup and drop-up mainly in china and taiwan alongside broad-based momentum on in advanced materials top live results were boosted by one of south korean customer pulling q3 order forward following the successful legal and it manager of the company dij airgas and air liquid korea but even normalized for this the underlying electronics course is very robust at first eight percent a truly excellent operational performance finally is care remained a consistent contributor to our growth this quarter performance in medical gazes was anchored by a premium value-based commercial model in home health care in home health care sorry sustained growth in our patient-based success really offset the impact of strategic divestiture completed in europe impacting the period Now moving on margin discussion page 15.

As Francois highlighted earlier, our transformation initiatives are yielding structural benefits on our margin improvement levels of delivery. In the first half of the year at the group level, we deliver a plus 110 basis point expansion, excluding energy pass-through, as well as the PPI impact of the IGR gas acquisition. Keeping the the PPI impact, the improvements remain very strong at plus 100 bits. Adelience by our result will remain intensely focused on cost shipping with personal costs down minus 1.6%, purchase minus 1.5%, and other expenses up plus 3% on a published basis. Depreciation was up plus 3%, reflecting the startup of our new production unit. Let us now review our ongoing margin improvement plan execution in more detail.

First, turning to pricing in merchant. Persistent inflationary pressure continue to drive our pricing action, with Q2 pricing reaching plus 5%. Our primary focus is on cost discipline and actively managing the price to cost spread to drive further margin expansion.

Second, efficiency reached a record high of €299 million, representing a plus 4% increase over the elevated baseline of last year. Those substantial gains were driven by the seamless execution of group transformation initiatives globally.

Third, we continue to pursue active portfolio management. As a reminder, closing the AIG airgas early in Q1 gives us the full year of benefits. Integration is moving fast, creating even more value than we expect. Beyond this, we are pursuing disciplined bolt-on acquisition to drive local density, while actively pruning our portfolio to ensure capital goes where it yields the highest return.

Moving on to review our P&L in more detail, I am on page 17. non-recurring operating income and expense accounting for minus 123 million euros in the first half of 2026, mainly due to costs related to the acquisition of DIGR gas in South Korea and restructuring costs linked to our transformation plan. Net financial costs stood at 210 million euros for the first half of 2026. This includes a net debt cost of 149 million at 27% compared to the first half of 2025.

This increase is very much primarily driven by the financing structure put in place for our BG acquisition in South Korea. This impact was partially offset by a reduction of the factoring cost with almost the end of factoring program in H1. Our effective tax rates stand at 26.4%, higher than the 25% in H1 2025, mainly because of non-deductible cost linked to the DIG acquisition.

Net profit is up plus 1.2% as published and plus 6.5% when you exclude the currency impact. The recurring net profit group shares to that 1.9 billion euro up plus 4.4% as published and a very strong plus 10% on a constant currency basis. On page 18 now, our robust cash flow generation and strong balance sheet allowed us to finance dividend capex and also the DIG acquisition. our net debt is at 13.9 billion end of June 2026, marking a plus 5.5 billion increase for December 2025, following the financing of the DIJ acquisition, the payment of 2.2 billion in dividends in May, 1.8 billion of industrial investment, and the halting of the factoring programs are getting a less increase to 45% adjusted for the dividend payment seasonality effect.

It is indeed worth mentioned in that working capital recommend increased by 1.4 billion in the first half of 2026 compared to year-end 2025 but it is key to note that excluding factoring the underlying operational increase was held at just 0.4 billion bureau indeed our decision to alt factoring program in h1 for cost effectiveness naturally added one more than 1 billion euros to trade receivables next let us now turn to page 19 recurring return on capital on costs to that 11% which is quite stable compared to the first half of 2025 despite the dilutive impact of the acceleration in investment moving to page 20 we will now review our main investment API we're in at an all-time fine in industrial this industry industrial sorry investment decision in H1 2016-26 at 2.9 billion euros, up plus 26% year over year.

These decisions include above 1 billion euros of electronic carrier gases that Francois discussed earlier, as well as major large industry projects in US steel and chemicals. Our investment backlogs, which an unprecedented 6 billion euro, an increase of plus 30% year over the year, very much and well balanced across electronics and large industry, with strong regional and project diversity. While upcoming Q4 startups will naturally draw down our backlog, a strong pipeline of new deals will help to replenish it, giving us a strong and high visibility in our mid-term works. Our 12-month portfolio investment opportunity reached 4.8 billion euros, plus 17% higher year over year at the end of June 2026, despite a record 2.9 billion euro investment decision during the first half.

Data, of course, moving into the backlog. That demonstrates the strong momentum we're seeing in new project development. The pipeline remained highly diversified, comprising nearly 80 distinct projects. Electronic has now emerged as the primary driver, accounting for approximately 50% of the portfolio. the total portfolio of opportunities also including opportunities this time beyond 12 months is stable and exceeds 10 billion euros so on page 21 concluding the financial review we confirm again our guidance for 2026 and 2027 community accumulating as the press final and 60 bits margin improvement over a six-year period thank you very much for your attention and i guess we now begin the Q&A session. Thank you.

thank you very much Alex and good morning so the first question on on the helium as as you know very well I mean the Qatar source was quite a significant source of helium globally for all the industry on top of that what we have seen in Q2 is some restriction coming from Russia for the products which was going to China especially and some restrictions also coming out of China. So the market was getting more tense, I would say.

On the positive news is that the production from Qatar has restarted at a reduced rate, but we have been able to secure some volume from this source. So that's, again, very positive news. Our expectation is that this will continue and will limit basically the impact of helium on our cells for the second part of the year. We have, of course, to be extremely cautious about the outlook for this part because we see that the situation is quite fluid, even if what we see and what we hear is quite positive. As we speak I mean the helium production is still working and again should contribute That of course on top of our existing infrastructure with the cavern that we are using very successfully and also the multiple other sources that we have today and that we have activated again to limit overall the helium impact for the second part of the year.

Speaking of the impact on electronics customers, I think that was part of your question. Overall, we manage the supply of our electronics customers for Helium. As you know, we have a long-term contract, and we have the capabilities to supply their requirements. So we have committed and we have been able to deliver the volume. So it's in no means a limitation to the business we are doing with the electronics for Helium, but also for the rest of the portfolio.

So again, strong resilience of the group in spite of the adverse condition that we do expect to improve. For the electronics itself, you have seen that clearly there was an acceleration in the second quarter. This is a result of two things. The first one is we see less and less the impact of the very high ENI equipment and installation cells that we had in the previous quarters, which was to some extent masking the organic growth of electronics. That's one. The second part is the fact that electronics is picking up. And it's picking up because of the contribution of the investment that we have done previously for carrier gases.

And it's clearly, I mean, delivering. And also, and that's very positive news, the very strong sales that we have been enjoying for the advanced material, You know, the procreatory molecules of a liquid, which is clearly picking up in the second quarter. So we see that some customers are catching up a little bit with advanced purchase. So there may be a little bit of this effect on the advanced material. But all in all, we do expect electronics to remain in the range of 8%, maybe 9% for the rest of the year. So again, very strong electronics. It's good news. And I think it's a good sign also that the investment and the position of the group is delivering.

Thank you. Thank you.

um which are your expectations for the for the full year in terms of net debt and the evolution of net there in the in the second half of the year please thank you hello good morning and thank you very much for your two questions jérôme please can you answer the two of course thank you very much and also we'll go through uh your two questions of course so as related to the to the efficiency in your right the efficiency has been very strong in in q in h1 and to nearly 300 million it's plus four percent versus last year basically you know this whole transformation is multi multiple you know we are continuing our transformation you know of the company as we have been doing in the last years and when you look at the different buckets you know there is basically three different buckets that explain this acceleration of those efficiencies first there is an operational efficiencies you know we are accelerating on the transformation of of the industrial operation, the creation of the group, the industrial operation direction is helping accelerating into the process and to the global utilization.

We have multiple projects ongoing using more and more artificial intelligence to make our assets more effective. So we are doing that and we are entertaining a very good return as for now. And this, of course, will continue because we are very much at the right time doing and accelerating on that. The second bucket is, of course, procurement.

Procurement is delivering and it's continuing. You know, we have a global procurement organization which has totally shifted in terms of gear, in terms of accelerating all those products, with a strong acceleration in the deliveries. And the last point is the cost-structuring impact and the PEX efficiencies. that also part of this of these of these efficiencies I would say this continued to we continue to precipitate in the second part of the year now to come back on the factoring so you're right there is a factoring in fact which explain one believe it more than 1 billion slightly less than 1.1 billion in the net depth I would say the next evolution during the first half year This factoring program comes from a long time at the period of the air gas acquisition nearly 10 years ago.

It was an optimization program at that time, but it's not anymore. You know, when we saw the impact of the data cost that we pay for factoring the receivables compared to our net debt cost, which is today at close to 3%, clearly did not make sense to continue. It was a lack of optimization. And when you see already the impact during the first part of the year, you see that the cost of the debt has decreased by minus 7%. When you exclude, of course, the one-off impact of the Ergas integration, the one-off cost that we have. But when you exclude that and compare to last year, we have a minus 7% of decrease in cost of financing, which is purely the impact of moving and to get out of this factoring program.

So this is very good and very strong optimization that our balance sheet can permit. So we have decided to do that with purely making sense on the cost effectiveness standpoint. Now, the impact on H2 is quite easy. We are in the first part of the year, I would say, start those programs. So you will have also the impact in the second part of the year. But the major part has been there. We're just finalizing maybe a few hundreds of factoring remaining. But the biggest part has been already accounted for in the balance sheet in the first part of the year.

That's it. Thank you very much, Jérôme. Thank you.

Thank you very much, Jen, for those very good questions.

Margin, Jerome, and then we talk about the electronics project.

Thank you very much, Jen, again, for your questions. So margin in America has increased significantly. You're right, plus 200 bits versus H125. It's really energy. So basically, we have two or three big items.

First, merchant, large industry, and healthcare activity contributed to the margin improvement through efficiencies and price increase, particularly in IM. And also efficiency also generated in electronics and the large industry benefited also some specific items that helped. So that explains very much the bulk of these increases. as you said, is very significant in the Americas.

Thank you very much. So, John, you're asking how do we feel about the electronics project? I would say very good, very, very good, actually, because we have a very strong position, a very strong footprint, and an offer which is recognized, trusted by the leading customers. so we had in fact signed 1.5 times all what we signed in 2025 for electronics already in the first part of the year so very good momentum you are asking region by region maybe we will start with the US and I will ask Adam to say a few comments on what he sees in the US on electronics projects and I'll come back to the rest of the world.

Adam Yes, thank you, Francois. And, John, thanks for the question. So we've had a very productive quarter in the U. S. in terms of new project signings across the board, but particularly in electronics. As you've noted, we've signed three big new contracts for carrier gases, and we see that momentum continuing. So we have very active, ongoing discussions with all of the major players in terms of expansions or new projects going on in the U. S. And I feel like we're continuing to win our fair share of those projects. And we see that continuing as the AI trends continue to go forward and expansions are continuing in the same way. The last point I would make is in terms of gas intensity.

You're right. The gas intensity is higher when you look at these new fabs that are supporting advanced chips for high bandwidth memory or for the logic needed for AI. and this is just a benefit, I would say, from the technology portfolio that we have, the efficient nitrogen generators that we have, and across the entire fleet of what we do for carrier gas supply.

Thank you very much, Adam.

For the rest of the world, it's mostly Asia, where we are also very well positioned. So if we go through some of the key countries, we see, again, a very strong momentum. I would say Japan is waking up to some extent. We see that there is a very strong support from the government and the key players, investment there. We are the only global international gas company to be there. We had some successful signing there, and there may be more to come. Taiwan is, of course, extremely dynamic, concentrating a lot of investment for the most advanced chips, especially.

And there again, we are well positioned. Korea, of course, thanks to the DIG acquisition, now we are well positioned to meet the needs of the leading memory players, especially. You have seen tremendous, tremendous announcement by the key players with several new campuses, mega campuses being announced. You have seen that we have been successful in securing some of the existing business. And there is an acceleration in the requirements, really a race for speed in this area. And finally, China, where we have a number one position also for the electronics, which is very, very dynamic in terms of needs for the semiconductor industry with a good development. So when we combine all that, we see that there's a lot of green lights in this.

Thanks to our business model and what our customers are telling us, we are quite confident that this will continue for some time. Again, meeting the needs of the digital world in general, and more specifically, the needs of AI clearly. So good momentum and very good position of the group. Thank you. That's very helpful. Thank you.

Thank you very much, Shetan. So maybe we'll talk about the pricing first. and I will ask Adam to speak about what we see in the U. S. and, Emily, what we see in Europe in terms of pricing. And then I'll come back to your interesting question on electronics, for sure.

Adam. Yes, thank you, Francois. And thanks, Chetan. So when you look at pricing, and we've talked about this in other quarters, I really believe that what we have in early key is a very strong methodology, tools, systems, incentives in place to drive pricing in the right way. And what we want to do is take, obviously, into consideration the inflationary impacts that we see and make sure that what we are able to do is accretive to our margins. And I believe that this is across the board. This is not just a U. S. approach. It's really a group-wide approach that Ehrlich Heed has systematically put in place. And so, obviously, the impacts of tariffs and the like, inflation can be somewhat regional in nature, and I think that also drives a difference in terms of the price impacts that exist one region to the next.

So definitely have a strong momentum in pricing in industrial merchant and in healthcare as well in the U. S. , and I think it really just speaks to those tools and processes in place to continue that going forward, and I would expect that to continue in the same way in the future.

Thank you, Adam. And of course, it relates also to the inflation level and the cost increase, which maybe is higher in the US than in Europe.

Emilia, what do you think? Yes, absolutely. Good morning, everyone. Pricing in Europe, I would say, in merchants and magas is strong and has stepped up sequentially. So we've been proactive in increasing prices in anticipation of any cost increase due to the Middle East crisis and due to inflation and inflationary pressure in general. And overall, pricing was ahead of the cost curve, leading to a good path-through, which is what we want.

So we've accelerated in Q2 in pricing in Europe. We have all the right formulas in bulk to reflect the energy piece. We know they are effective in PG. also we know the drill. We reacted fast, increasing the pricing to face the inflation, and it's different from one geography to the next. So overall, say for Europe, we continue to have a very good dynamic in pricing management.

Thank you very much. So to come back to your question, Shetan, on why don't we see in the last quarter the growth of the electronics business similar to the growth of the CapEx in electronics being 25%. I think the main reason is we are not talking about the same thing at the same time.

So what is being captured with the capex of the electronics in the semiconductor industry is investment in Newfav. As a matter of fact, our growth in terms of investment for the Newfav is not 25%, it's 146% for the first semester. Because that's really what we invest more for this business. So we are much ahead of the industry. And that's also showing how successful we are in gaining market share and how well we are positioned.

So that's what we see today. And what we need to look at is how much we invest. Today, 40% of our backlog is electronics. Almost 50% of our portfolio of projects in the next project that we can sign in the next three months is electronics. So that's really what we see. What we report in the quarter are the current sales, which reflect basically the production of the current fab. So it's normal. It's following the trend. It's growing, but at the pace of the new investment. So the new investment that we are doing here will contribute in two, three, four years, depending on the size. So be a little bit patient. You will see this, I mean, exponentially growing as the capex that we are putting on the ground is delivering product for the customer.

I hope it's clear. It's just a lag between when your projects are signed and when you actually start to commence delivery. Yeah, again, I maybe repeat what I say. Here you are talking about investment of the customer. Our investment is much higher. So, of course, you need to see the plant online to see the sales. You'll get more about this on the CMD. So maybe we'll do one more time over that.

Thank you.

Good morning, Jean-Luc. Thank you very much for your question. I think Emilie, who is a specialist of the European regulation on cytogen, can probably give you some answer. Emilie, please.

Okay, well, good morning, Jean-Luc. So, in terms of the need for green hydrogen in Europe, we continue to see a good momentum. So, you mentioned our electrolyzer in Normandy. So, in terms of what is in the backlog, in terms of electrolyzers, it's a project under execution and everything is going as per the plan. Remember, our electrolyzer in Normandy will start up this year and it's fully loaded. So in terms of regulation, things are moving. You know, RET3 regulation in Europe is being transposed step by step in all the different countries. Of course, this is key as the mandates defined by the regulation being transposed in the different countries is what triggers such an interest for green hydrogen from our refiners and our customers.

And overall, I would say, again, going as per the plan, we have several in-execution. and we are really clearly the number one player in green hydrogen in Europe with also our strong technological partnership with Siemens Energy to manufacture those pen electrolyzers.

Thank you very much, Emily. And overall, we see that the regulation is going in the right direction. There are more refineries on site being converted to low-carbon hydrogen. So again, I think the leadership position that we have taken in Europe is paying off. So thank you very much, Emily.

James, good morning, and thank you very much for your two good questions. Regarding the backlog, I think, as you pointed out, I mean, the project come and So there are some significant projects that will come out in Q3 and Q4, so that will decrease the backlog. But all in all, given the pace of the new project, we do expect this to remain more or less flat. We have to be careful with the backlog from one quarter to another one, which is very important, is to look at the pipeline of the project. I think the key message is very, very strong today, probably the highest in the history of the group. So we are not worried about, I would say, quarter by quarter variation of the backlog.

Again, very strong trend and good pipeline of projects to design soon. Beginning what you mentioned about the electronic, I think it's a very good point. You see that in what we showed, there are several projects which are what we would call today mid-size, large-size project. It's not the extra large projects.

First, we like it very much in terms of the diversification of the opportunities and the risk, the global footprint, the synergy we can find, the selectivity we can use on those different projects, and the fact that we can also support our customers wherever they are. So we like the portfolio of projects.

Again, I think in the current environment, it's probably making a project more resilient and probably to some extent also more profitable. This being said, we see that there is an acceleration of the very, very large projects. So we may in the future position ourselves on some of those very large projects. Again, if they make sense, if they are strategic for us, if we can find the right profitability. One thing that I did not mention, of course, is that in this environment, this gives us the opportunity to pick what we consider the best project where we can create most of the value for the group and for reality. So we do expect some larger projects even to come online, and maybe we will pick up some of those.

Thank you. Thank you very much. Thank you.

Thank you. All right. Thank you very much. I think this concludes our session today. Thank you very much for all your questions. I would like maybe to wrap up with some words. we, I believe, clearly delivered another very strong performance in this first half, while, and I think it's very important, positioning ourselves for future growth through key project wins. In spite of the environment, we clearly stayed the course.

Thank you again for your attention. I look forward to seeing all of you at our Virtual Capital Markets Day on October 5th. In the meantime, I wish all of you an enjoyable summer break, if you take one. Thank you very much. Please take care.