L'Air Liquide S.A.

Aude Rodriguez – Head of Investor Relations Benoit Potier – Chairman and Chief Executive Officer Fabienne Lecorvaisier – Executive Vice President &Chief Financial Officer Mike Graff – Executive Vice President

Tom Wrigglesworth – Citi Paul Walsh – Morgan Stanley Martin Roediger – Kepler Cheuvreux Neil Tyler – Redburn Stephanie Bothwell – Bank of America Andrew Stott – UBS Markus Mayer – Baader Helvea Patrick Lambert – Raymond James Peter Mackey – Exane BNP Paribas Philippe Lanone – Natixis

Good morning everyone, this is Aude Rodriguez, Head of Investor Relations. Thank you for joining today's conference call.

Benoit Potier and Fabienne Lecorvaisier will present the first half 2017 performance, Mike Graff, Executive VP, supervising Americas and the Electronics business line is also with us and will participate in the Q&A session. As a reminder, our next announcement of third quarter revenue will be on October 26th.

Let me now hand you over to Benoit.

Thank you, Aude, good morning everyone. Thank you for being with us for this first half results conference.

It’s more than a year ago since we closed the Airgas acquisition. All I can say is that from our perspective, the processes run very well, synergies are well on track, we’ll come back on that.

The integration schedule is really fully respected when we look at the different steps we had in mind essentially three steps; one last year and two this year. Two are already behind and one is remaining.

We’ll come back on that later. And in parallel to the Airgas integration, of course, we are now executing our midterm strategic plan, NEOS.

And I'll just say a word in a minute. In terms of numbers, they are solid numbers, they still need to be explained a little bit, because we had a little bit more than one month of consolidation last year.

So we need to adjust last year numbers to really make a fair comparison and Fabienne will guide you through this analysis. I would just like to jump to Page 4 of the presentation.

And starting with Airgas first, I just mentioned three steps. We integrated the Air Liquide IM business into Airgas last year.

We had the IM bulk logistic business or numbers which were integrated into the ERP in April this year. The major and last step will be for this year when the Airgas bulk business will be fully integrated into the ERP using the Air Liquide technology called altow [indiscernible] to measure and organize the dispatching of the bulk products.In terms of synergies, Fabienne will come back on the 138 million accumulated synergies since the origin and we’re well on track.

And one interesting thing, we had the Airgas teams joining the management meeting we had for the first time this year, and it was a very interesting discussion between the division president and the Air Liquide management team.In terms of NEOS, our midterm strategic plan, each entity had its own strategic plan well-defined. The priorities are clearly growth based on customer centric approach.

The second important KPI is CapEx that we want to have selective in [indiscernible] the course of the next 3 years. The efficiency is part of the management mission and the efficiency is well on track.

We’ll have 4x 300 million as a plant which leads to 1.2 billion [indiscernible] by 2020 and Fabienne will show you where we are now. And of course, digital is also a significant part of the NEOS program.The Gas & Services focus and in particular on the portfolio has lead us to make 1 or 2 divestitures, one important one is the Welding business, which is now well on track to be divested by the end of this month.

We continue our bolt-on acquisition programs even though there were less acquisitions during the first half. And also we continue our innovation and new markets development and GMT performance shows that we are progressing well.I will just on Page 5, keep in mind 4 numbers, the sales growth 28.4% in the first half, of course, including a little less than 5 months of consolidation of Airgas.

But in that number, we have clearly IM improving in the first half including an improvement in the pricing, which is good news.Europe is back to growth. Even though Q2 had less working days, when we look at Europe on the basis of our sales per working day, it's clearly improving.

Margins are on track, even the mix that we have. And we are confident that over the full year, the margin improvement will be there.

Net profits puts us in the right direction given our guidance. It relates to net profit as such, but also to EPS.And the good news is cash flow, which is really steadily growing.

32% is a good performance and it will help strengthen the balance sheet and when we look in detail and in particular working capital to sales, we could have a faster recovery after the acquisition, which is good news for the future. So I'd like now to ask Fabienne to give you more light on the numbers.

Fabienne.

Thank you, Benoit, good morning everyone. As mentioned by Benoit, our semester is characterized by the strengthening of operating performance following the Airgas integration.

Group sales are up 28% and the recoveries concerned, in particular Industrial Merchant. With higher daily [indiscernible] sales, the operating margin and cash flow are significantly improving.

Gas & Services sales alone are up 51%, 6.9% versus 2016 adjusted as if we'd acquired Airgas January 1st and 2.8% on a comparable basis. Comparable work in Q2 was in fact had the same results and for Q1 despite a strongly negative working days impact [indiscernible] in Europe, which means that the activity has continued to improve on a third party basis.

To be noted, the energy and currency effect remains positive at 2.3% and 1.8% respectively for the semester, but they have considerably softened in Q2. Apart from Gas & Services, we still have a challenging level of activity in engineering with sales decreasing 43% in each one even if the order intake is stronger.

Conversely, global market and technology sales are up 16% supported by pursued development in biogas and ongoing contracts in aerospace. As a result, group sales are 28.4% as published and 5.7% versus 2016 adjusted.

In terms of economic indicators, we’ve seen confirmation of the Q1 trends more importantly, most of the end markets turned positive particularly in Europe and North America, with noticeable recovery for materials and energy. In this context, in each one, we saw strong growth in a number of businesses including Large Industries in the U.S.

Healthcare in developing economies, Electronics in China and Taiwan and Global Market & Technologies while Industrial Merchant pursued its global recovery supported by better volumes in North America and in Europe and double-digit growth in some countries like Canada and China. As a consequence, the contribution of the base business to growth remains strong in Q2 and much better than last year at plus 1.4% while the development component at 1.3% remained modest in line with the lower number of start-ups of new units at the beginning of the year as well as fewer bolt-on acquisitions.

Let’s look now at the value of geography, please note that I will mention the H1 numbers, but most of my comments regarding the activity highlights will be focused on Q2 Americas up 95% in each one, thanks of course to the Airgas integration, comparable sales at plus 3% initial and has softened a little in Q2, mostly due to maintenance turnaround in the U.S. and Canada.

Volumes in large industry nevertheless remained high and particularly for oxygen while cogeneration activity has been affected by the lower electricity pricing in the U.S. and Canada.

In Merchant, all end markets remained well-oriented and comparable growth accelerated to plus 4% in Q2 considering [indiscernible] the global recovery. Global electronic sales are decreasing in line with lower equipment and installations, but gas sales showed a dynamic plus 7% growth while Healthcare benefited from strong [indiscernible] care and small bolt-on acquisitions in Canada and Latin America also.

In Europe, H1 growth is 2% and sales continued to improve on a daily basis even if the published number has been penalized by close [indiscernible] to 3 working days less than last year in Q2. Large Industries are flat in the region, following in particular the stoppage of the activities in Ukraine.

However, volume was solid particular with strong growth in hydrogen demand.Merchants returned [indiscernible] in Q2 in Spain, Italy and Benelux, with positive bulk and cylinder volumes and slightly better pricing. Excluding the working days effect, Healthcare growth was in line with Q1 in Europe.

Asia accelerated a little at plus 4% in Q2. We had a number of Large Industries customer undertaking major turnaround for maintenance, and that being in China.

Conversely, revenue improved significantly in Industrial Merchant with very strong growth in China at plus 17% and much better performance in Japan. Electronics was also on the rise thanks to China and Taiwan.

Excluding equipment and installations, sales were up 12% for the result. Middle East and Africa benefited from the full loading of Yanbu in Saudi in Q2 from ramp-ups in Egypt from solid Healthcare in South Africa.

No surprise was generated by business side, which [indiscernible] just reflects the same trends. Demand is strong in Large Industries even if Q2 sales were impacted by numerous maintenance turnarounds as mentioned.

However, the start-up and ramp-up contribution remained low for the first part of the year. Industrial Merchant recovery is still driving growth.

Daily sales are improving in most countries with volume growth in bulk and cylinders. The global pricing effect at 1.2% like in Q1, is now positive in all zones including Europe after 2 years of decreasing pricing in this zone.

In Q2, Healthcare was also adversely affected by the working days effect in Europe as well as by the lower number of bolt-on acquisitions. The underlying activity remains solid in particular [indiscernible] and the deployment continues in developing economies as shown by the 16% growth.

Electronics, Gases and Advanced Materials supported by start-ups in Asia remain very dynamic with a 10% global growth on equipment installation [indiscernible] all over than last year. The book-to-bill ratio, however, is improving and is now at 1.2.

The good news about Engineering that the order intake has increased again in Q2 supported by projects in the energy and chemical sector. Year-to-date, we stand at EUR 329 million Euro to be compared to only EUR 126 million last year.

Following the signing of a large contract in [indiscernible] business for the Ariane 6 launcher in Q4 of last year, Global Markets & Technologies now back to a more sustainable level of order intake, between EUR 60 million and EUR 100 million a quarter consisting of aerospace equipment, but also maritime tanks, biogas extractors and hydrogen stations. So this is for the activity, let’s move now to the performance and managers [indiscernible].

The P&L comparison to last year shows of course, a strong impact of Airgas integration for the full semester. Looking at published numbers, purchases are higher due to the distribution component of the Airgas business.

Personnel expenses are also higher as Airgas is more labor intensive than the former allocating average [indiscernible] but this is compensated by other expenses growing slower than sales. Airgas has been a lighter structure and no R&D.

Depreciation is also progressing slower than sales thanks to the larger stake of Industrial Merchant in our portfolio. Despite the slight negative leverage, operating income recurring as published shows a strong 21% increase.

If we look now at the comparison to the adjusted H1 2016 as if we had acquired Airgas January 1st, while sales is up 5 7% operating income recurring is progressing 7 3The operating margin is increasing significantly from 16.8% last year to 16.5% this year excluding the energy effect which is a 70 basis points improvement, Fully in line with our profitability objectives. The improvement in margin is partly supported by efficiencies and synergies aligned with our NEOS plan, new efficiencies for this semester reached EUR 148 million above last year.

43% of these efficiencies come from continuous improvement in our industrial and logistic processes as well as reduced energy consumption, 35% come from procurement and 22% from reorganizations. These reorganizations include adaptation plan in Engineering and Construction or trial [indiscernible] for example, but also the ongoing implementation of shared service centers in some regions.

Airgas synergies as mentioned by Benoit was well on track and $138 million since the merger, out of which $10 million are growth synergies. For H1 2017, we have delivered $93 million and we are well-aligned to deliver the total $130 million planned for the full year.

Cylinder cost synergies as well as back office synergies are nearly fully implemented, while the bulk operations, they need to benefit from the effective combination of the upstream logistic plan for Q4. The process and procurement cost synergies are progressively implemented along with the deployment of best practices and renewal of the outsourcing contracts from our competitors.

In this context, we are, of course, very confident in achieving 100% of the cost synergy before the end of 2018. Looking now at the bottom of the P&L, you see that the balance of non- recurring income and expense is negligible, restructuring expenses and gas integration expenses are lower than last year and are compensated by provision reversals.

We should have, however, more negative balance in H2. As a result operating income is up 29% in line with sales and our cost of debt is of course impacted by the financing of the Airgas acquisition.

At the book level the cost of debt is 3.1% on average; much lower than the 3.5% of last year reflecting the very good conditions obtained for the Airgas refinancing. Effective tax rate is increasing and is now close to 28% due once again to the Airgas impact.

Net profit from discontinued operation shows a $30 million loss as we are fully provisioned the impact of the divestiture of our welding activities, we should be close July 31st. Therefore, net profit is up 14.5% in line with consensus excluding the welding provision, and we also have a solid accretive effect as earnings per share are up 4.3% after taking into account the impact of the equity issue last October.

If you would, on the balance sheet and investments, we ended up with a net debt at EUR 16.6 billion Euro at the end of June, an increase to December 31st as we paid all of our yearly dividends in May. Cash flow after working capital requirements valuation is going quicker than sales at 31% CapEx are well under control at 11 3% of sales or 1.16 billion including EUR 86 million of acquisition.

Gross industrial CapEx alone are only 5% up to last year despite the Airgas integration. Dividends are increasing following the 2016 rights issue and we have also repurchased EUR 168 million shares in order to compensate for the year’s stock option exercise.

As a consequence, that is slightly increasing by giving adjusted further dividends and nicely remains stable. In terms of investment, the 12-month portfolio is stable at 2.1 billion and is well diversified.

We have decided $1.1 billion of new industrial investment across all business lines including large industry contracts in Belgium and Oman and new contracts in Electronics in China. We have also signed close to $100 million of small acquisition in Industrial Merchant and Healthcare.

Due to relatively small numbers of start-up in the first part of the year, the contribution of start-up and ramp-up of new units at EUR 71 million is on the low side as expected. For the full year we expect a total contribution between EUR 170 million and EUR 190 million with more start-ups expected in Q3 and Q4.

However, the commissioning and testing period of the Chinese projects scheduled in September will be extended until the beginning of next year. In Q1 and Q2, 2018, we have a number of major start-ups planned, and the 2018 contribution of the start-ups and ramp-ups would therefore be much higher; between EUR 350 million and EUR 400 million.

The backlog is pretty stable [indiscernible] with new projects signed compensating for the start-ups, and the expected additional sales remain at EUR 800 million. To conclude this presentation I would like to insist again on the alignment of the company and the teams on executing the newest plan.

The Airgas integration is mostly behind us and we can focus on our performance on future developments. H1 has been solid in terms of sales and margins.

Efficiencies and synergies are well on track and the profitability has significantly increased which will continue along the year. Therefore, we confirm our outlook which is to deliver net profit growth in 2017.

Thank you, Fabienne. We can now start the Q&A part of our presentation and I will answer the first question, please.

Fabienne thank you very much for your presentation, two questions if I may, the first on the 70 basis point margin improvement, could you help me understand the Americas kind of development in that 70 basis points specifically in relation to the U.S. Industrial Merchant business?

That’s my first question. And a second question again focusing on U.S.

Industrial Merchants, of the IP rates in the quarter moved up to about 2% if I take out the price effects your volumes are up 1.6% in the – that’s for the half. Do you think you’re capturing the growth commensurate with the IP now?

Are there lag effects there that give you confidence you know and what’s your outlook for the second half in that U.S. merchant, what should we assume as kind of 3% growth rate continues [indiscernible] or are you assuming that will accelerate further?

Thank you

Okay. Thank you very much.

Fabienne is going to take the first one and Mike to take the second one. Fabienne.

So of course if you look at the published number you see the margin of America is decreasing due to the integration of Airgas. You know that before the acquisition Airgas margin in average was much lower than ours, however adjusted.

If we look at Merchant alone the margin is improving significantly along with our plan supported of course by the better sales but also by the timely delivery of the synergies.

Mike the second the second question.

Thanks Benoit, and good morning everyone. As we mentioned at the end of the first quarter we were sensing an uptick in activity levels and we started to see that actually evolve in the month of March and we saw that definitely continue into the second quarter.

Basically, if we look across all the markets in the U.S. from a merchant perspective they're all up on a year-over-year basis and continued that accelerated growth throughout the second quarter.

So as we sit today that contribution is solid across not only all the markets but looking at gas and now growing in the hard goods area as well. So the question is obviously for the second half of the year, the continued evolution.

Clearly, we continue to see strength in terms of the markets themselves. We continue to see the announcements in terms of new build, in terms of plants and facilities throughout the U.S.

which will continue to proliferate and reinforce the strength in those markets. We don't know what happens with infrastructure spend as we see that begin to evolve.

We probably don't see much of that in the second half of the year but a little likely if that conversation begins, at least there will be a positive view and continued activity along with that. So in general we saw strength I would say in the first half strengthening into the second quarter and we see that stabilized at the moment with the potential to go ahead and continue.

So just to clarify the exit rate from the quarter is higher than the entrance rate in Q2?

Yes, that's correct.

Okay. Thank you very much.

Yes, and it leads me just to an additional comment about the second half. It's clear that it's not easy to predict accurately what the IEP is going to be and how it's going to translate.

But the trend that's been better in Q2 and Fabienne just highlighted for Europe that the number of working days being significantly lower. When we look at the sales per working day they were really better in the second quarter.

The last point I would like to add for the second half is that in particular in the U.S. the second half of last year was rather down.

So we'll have a favorable comparison effect on the second half we should normally help. So all in all I think we end this first half with a good momentum and we are confident that this momentum might actually go on in the second half everything being say normal and that we are not expecting big decisions.

But if the environment is comparable we should benefit from the economy in the second half. Next question.

Benoit, Fabienne, Aude and few questions around organic growth please. Benoit, you just mentioned sales per working day.

What was the Gas & Services organic growth on a per day basis in Q2? And when I look at the pricing momentum in Large Industries, do you expect that to be more in the second half or comparable to the first half?

In the Electronics business you mentioned 10% organic growth excluding the headwind in the Equipment and Installation business. Obviously, that drops away in the second half of the year.

Are we to take that to mean that you can get up to high double- digit organic growth rates in Electronics in [indiscernible] from Q3 onwards, please? Thank you.

Okay. Thank you Just a word about large industry, and then I'll ask Fabienne to go back on the organic growth for Gas & Service.

I think Large Industry was slightly affected by turnarounds in the first half and we made the analysis of how much did it effect growth in the second quarter and it was unusually high. So if we try to put it back under normal situation I think the underlying large industry is satisfactory in the second quarter.

Now, let's look at the future. Fabienne just showed you on the slide where the new start-ups and ramp-ups are located.

They're actually concentrated more in the end of '17 beginning of '18 which means that we should benefit from higher growth in Large Industry. And honestly, Large Industry should not be looked at on a quarterly basis because the events, the start-ups in particular, are not necessarily in our hands; it depends on customers most of the time.

The good news for us is that in particular for the Fujian project we have been technically starting the plant. It still needs further adjustment.

But the technical start-up has been a success. It's a very significant investment.

And even though the customer is delaying its own start-up a little bit the whole project for allocating this so far is a success, and in particular technically it's working very well. So let's look at Large Industry more on a mid-term basis rather than on a monthly or quarterly basis.

On the organic growth I'd like to hand over to Fabienne and Mike will take the Electronics question.

Okay. So for the working days impact you need to remember that it only has a real impact on Industrial Merchant and in a lesser extent on medical gases on a part of the [indiscernible] business.

If you look at Q2 we had 1.8% less working days so it impacts our merchant. Maybe for this number it's very difficult to calculate organic growth excluding the working days.

What we have evaluated is that it is costing us nearly 5% on the merchant growth in Europe; this 3 working business in Europe it's like close to 5% on the merchant growth in Europe. So it is significant.

At the group level, it's probably less significant. For this semester we have minus 4.8% working days so it's probably less significant at the group level but very significant on Industrial Merchant.

And Fabienne, just coming back from what Benoit said on the outages did you calculate what that impacted organic growth by in Large industries?

Oh, the outages, sorry I have difficulty to hear you. The outages in Large Industry, yes, it's costing us close to 2% on the Large Industry growth in Q2.

2% in Q2.

Q2 only

Just to be clear would you classify that because every year we have a plant maintenance, but you're saying that a usual year versus this year that delta was 2%?

Well, the 2% is the delta to last year and it's not the absolute effect, because you are right we always have turned around from time to time.

Okay. And just on Electronics please?

So in terms of Electronics clearly in the first half of the year we saw the negative pressure in terms of E&I. And in the first half of 2016 there was significant E&I revenue associated with projects in Asia as well as in the U.S.

That's further well mitigated as we get into the second half of the year. In terms of carrier gases and advanced materials both of those areas were very, very strong.

In the first half we expect to see that continued strength in the second half. As a matter of fact if you look at the market today for both semiconductors and the flat panel displays we see strengthening as we move through the first quarter into the second quarter.

The first quarter already saw utilization rates in both sectors in the '90s and the first quarter is always the lowest of the year. So we expect to see that continue.

Whether you end up with strengthening into double-digits, we'll wait to see what happens there. We're not going to forecast that, but definitely there's strengthening there.

And just to be clear that means from Q3 you're going to see a significant jump up in organic growth in Electronics?

We will not see the negative overhang that we saw previously from a E&I.

Okay. Thanks I Just one last short question.

The 70 basis point improvement in margin in the first half would you expect a bigger improvement year-on-year in the second half?

Well as I said in my comment the margin will continue to improve along the year.

Okay. Thanks Fabienne.

Thank you, next question.

Thank you very much. 2 questions from my side.

First on Asia-Pacific especially on China where you mentioned17% growth in the Chinese cylinders and bulk business can you make more comments on that and explain where does this come from? And the second question is on the pricing trends in Industrial Merchant.

We've seen Asia pricing slow in the second quarter, can you talk about where does this come from? Is it primarily China where the headwind is now easing or is it also coming from other Asian countries?

And thirdly, a clarification question on the book gains or book loss in that case, the minus 30 million in the discontinued earnings that is solely because of the Aqua Lung business you have disposed. What is with the Welding business where you expected closing by end of July?

Is there still a book loss or a book gain to happen in the second half or should I also understand that you have booked provisions for the sale of the Welding business already in the first half's discontinued earnings level?

Okay. I'll take the first one, the China and the question about Asia-Pacific.

What we see presently is a very strong volume demand in China, and it's essentially the fact that China is trying to upgrade its industries generally speaking. This is a normal trend if you just take a view on a few years.

After just building capacities for a while for past 5, 10 years now China is trying to upgrade its industries and it requires slightly more sophisticated processes. And this is why we have now rather strong growth in bulk in particular.

You remember that we have started up a new research and technology center, and it fits very well with this trend in China for more added value to products. So when you combine the 2 you have a rather strong liquid growth in China.

In the pricing question IM is definitely back to growth in terms of pricing. The strongest growth is in America, but the good news is that Europe is slightly positive as Fabienne said, and when we compare what we had in the second quarter with the first quarter of last year it's clearly an improvement.

Asia is slightly positive as well, and I think that combined with the increase in volume, the – this pricing situation is really helping not only the growth of the IM business, but also a margin improvement generally speaking as a result of pricing improvement. The question was a little bit more specific about situation in China and is pricing improving in China?

I think what you have to understand about China is China is still driven by capacities. In the past the overcapacities in some regions actually put pressure, a lot of pressure, on pricing, but as the volumes are growing, loading is increasing, and when loading is increasing pricing is improving.

That's the normal cycle in IM and that's exactly what we see as we speak in China. So if the discipline in the market stays what it is today we should see an improvement in not only volume but also pricing overall in China.

The question about Air Liquide Welding and the specific discontinued operation loss I'll let Fabienne answer that question Fabienne?

So what you see on this slide, "Profits from discontinued operation," is inside the balance of the first closing [indiscernible] adjustment for the Diving which are positive 2 million and a provision we have recorded for the divestiture of the Welding which will happen on Monday to be clear which is minus 42 million. So everything is provisioned so we shouldn't have any impact on the rest of the year on this line.

And a couple for me please and sticking with the topic of pricing and Industrial Merchant to start with please. Two questions there and could you give us an indication of the net price versus cost inflation impact in the first half of the year before achieving the NEOS savings?

So is the pricing over recovering the cost inflation as you see it in across the group? And then – or across the IM business?

And then secondly, specifically just to clarify your previous answer on IM pricing in the Asia-Pacific region. Is my interpretation therefore correct that the positive inflection that you mentioned is principally China rather than Japan or anywhere else in Asia-Pacific?

And then my second question is regarding the start of a ramp up contribution that you referred to on Slide 25 cloud you talk a little bit about the profit drop through, because obviously the projects contain very different characteristics in terms of their profit contribution and so how we should think about that project drop through particularly given the large number of these projects are large industries and projects therefore will have quite a cost associated with it. So if you could help us understand some of the profit drops that would be helpful?

Okay. Thank you.

Fabienne is going to take the first one and I'll take the second one. Fabienne.

Okay. Regarding the gap between price and the inflation on cost we actually on the, part of the business so excluding gas because it's a very different mechanic.

We've a quite good pass-through which means we have been able to retain nearly 60% of efficiencies using only 50% of them to make the gap between price – price to the customers cost inflation. In terms of pricing in Asia it's true that we are in more solid pricing impact in China between 2% and 3% depending on Q2 or Q1.

We also – recovery after a very difficult market situation last year so volumes are now really very strong, but the pricing is better you right Japan remains slightly negative.

The question about start-ups and ramp up contribution. If we just look at the Slide, Page 25, it's always difficult to tell you accurately how much volumes customers are going to consume when they start-up the plants, because it may take few months.

There's 1 or 2 comments, I'd like to make. The Chinese project that would be started up has been signed with I would say normal return, so there's no surprise to expect from those projects.

And normally, the start-up curve is well respected. So as you know at the beginning mechanically, we have a full capital employed and not the full sales.

So the margin ratio in the capital on return and the capital employed the beginning of the life of a project is on the low side, but nobody after 18 months to 2 years we reach sort of a minimum level of profitability. Two comments about Sasol project and OCI.

The Sasol project is there to replace old and inefficient plants, but the demand for gasification of coal to produce liquids and [indiscernible] is there. So I am expecting at this stage, rather rapid ramp up once we have started the plant normally this plant should be loaded rather quickly because it will replace an old and inefficient plant.

So customer would be happy to make all the savings and efficiency is linked to this new contract. Now OCI do we have any information about how it will start-up?

Yes, the OCI investment in project is associated with a mega methanol plant that will start-up early next year, on the Gulf Coast. And so that's the really key learning technology make methanol facility.

So we expect that to ramp fairly quickly. If you look back to the press release that's 2,400 ton per day metric ton per day facility on our behalf.

So that's we expect that to ramp really quickly as that evolves.

A couple of quick questions on the U.S. industrial margin business please.

And going back to your comments earlier on the second half of the year, I want to your peers talk yesterday by their relatively cautious for you on the second half in North America, particularly, with regards to the metals and markets. And can you perhaps give us a little bit more of a sense on how you see trends particularly in the metals markets evolving into the rest of the year, especially given [indiscernible] the relatively large exposure there?

And the second question was again on U.S. industrial margin and can you perhaps split for us the underlying growth rates in the U.S.

business of the package gas versus just trying to get a sense in terms of whether you had a significant negative impact from mix in the first half of the year, it's indeed [indiscernible] business is growing as faster than other packaged gases? Thank you.

Mike, I think you're well placed to take the 2 questions.

Okay [Indiscernible]. I will take that.

So first of all in terms of the markets in the second half. Clearly we're always cautious is to were things will be?

In general we've – we've seen a general ramp in many of the markets and I think that whether that's in construction, whether that's in the energy markets, whether that's in metal. So I think we've – we've seen continued growth in that regard.

Clearly, I would say that the energy markets really helped drive some of that growth for us in the in the first half and it appears that may continue into the second half as well. On the metals piece it was more moderate in terms of the level of growth for us in the overall portfolio.

So we see it as moderate as we – as we look to the second half. We did not see that is the core driver of all that we saw in terms of growth in the first half in our results.

If we look at the underlying split, we first saw the growth in Airgas as we went through March going into April and then as we went through the second quarter we started to see the hardgoods begin to ramp as well. So you begin to see kind of a balance in terms of growth between the two as you near the end of the second quarter.

Okay that very helpful And perhaps just one quick follow-up question on the synergy target. Do you still have 37 million [Indiscernible] over the course of 2017.

Can you give us a split in terms of what are the cost synergies and what are the growth synergies out of that 37 million? And then just a quick confirmation point that all of the synergies that you realized year-to-date has been booked within the America business?

Thanks.

So I guess the first part to that is I answer it is that when we announced whatever synergies we've captured, those are synergies that have been captured and they've – they have flown through the P&L. It's not something that's been planned and will evolve in the future.

So the 93 million has also flowed through the P&L. The majority of that has been in the cost related synergies in the first half and as the first half of evolved, we started to see some level of ramp of the value added synergies certainly in a smaller proportion that we saw on the cost and we're also beginning to see the ramp of synergies as we integrate the Airgas the former Airgas Mexico businesses into the early keyed business in Mexico and similarly with Airgas Canada into early key Canada.

So we would expect is as we go through the second half of the year, the majority of what we deliver will still be cost, but we will begin to see the ramp of those value added synergies and then that will begin to evolve further as we get into 2018. But as we sit today has been I mentioned.

We're in the final stages as we go through 2017 of all the efforts and all the primary work we need to do to capture the majority of the cost synergies going forward.

Okay thank you very much.

Thanks for taking the questions. I got a couple.

Can I start with the operational caring. The 6% sales growth 7% EPS growth – excuse EBIT growth.

If I look at it another way you had 93 million which just talked about on the synergies, which should 90 basis points before you start, before you start thinking our organic growth from a year-on-year perspective. So you delivered 70 basis points of improvement.

What are the headwinds, because I haven't heard much about the headwinds today. So what is that's prevented you from getting more leverage on the business and maybe and answering question, if I look at your slide on the P&L, you have quite a significant increase in cost of goods sold relative to sales.

So I just wondered if you could explain that? That's the first question.

The second question was more straightforward and in you mentioned – excuse me other operating income being more negative in the second half. I just wondered if you could put a rough number around that and explain why?

Thank you.

Yes, Fabienne I think you can start with most of the explanations.

Okay. So on the margin is true that we are benefiting from the efficiency in synergies on another and there is of course need to I thanked with the merchant activities ramping up, that merchant profitable and large industry for example.

So given the weight of merchant on the recovery merchant. We are a in immediate effect which is a mostly responsible way together with the a number of turnaround of the [Indiscernible].

As we said that we always have a lower margin in H1 and in H2 and this margin level will continue to improve further. In terms of cost of goods, it's clearly the impact that you can see there with a much larger number of external purchases including the gas purchase from our competitors that we will progressively repeat of the [Indiscernible] as well as the hardgood purchase and that's why it's increasing the cost of goods Conversely you usually have more labor expenses [Indiscernible] conversely.

We have less general expenses than before as a percentage of sales. So it’s mostly the impact of [Indiscernible] integration and the new business mix of the group.

The exhibition expense are balanced in H1 because we had some provision reversal. In H2 we continue [Indiscernible] which was showing expense of course as we continue to extract the [Indiscernible] synergies.

And as we continue to reorganize some of the [Indiscernible] activity, so we expect a negated balance between let’s say EUR 10 million and a EUR 16 million negligible.

Okay. Thank you very much.

Yes, good morning. Three question [Indiscernible] A clarification question on the base business effect on the gross [Indiscernible] Is this excluding the [Indiscernible] effect was including what is basically the clean effect?

Secondly again on pricing, the healthcare pricing [Indiscernible] and presentation. [Indiscernible] are you going to say some work on this kind of price effect and also the price [Indiscernible] or in last quarter.

And then lastly [Indiscernible] fee business the book-to- bill ratio is 1.1, what is the book-to-bill ratio [Indiscernible]. Thanks.

Okay.

I am sorry we [Indiscernible] catch precisely your first question, it’s about the evolution of the business but what exactly was the question please?

The question was [Indiscernible] that shown Slide 12, is this excluding or including the [Indiscernible] effect and what would be the adjusted number?

No, it doesn’t exclude the business that effect. It’s a published number for comparable groups excluding [Indiscernible] and Bolton acquisition that you would see in the development column.

So it does not take into account in [Indiscernible] date and working date effects so it’s real numbers.

And if you would adjust this for [Indiscernible] what kind of number you would most likely come to?

Well, as I said earlier we are responding to a previous question, we don’t do at the group level, we look at the merchant and you know it’s like a continuous [Indiscernible] and as I said in [Indiscernible] 5% on the merchant growth in Europe for Q2. It is very difficult to give you a number.

Yes, that would correct. And if I may the accuracy of such a calculation will probably be a little bit misleading.

So we try to avoid making too detail calculation about effects in particular working days by the way, because if you just consider that a 20 working days in a month, if you lose one working day it’s worth 5% and we never see a 5% impact if we lose one working day or if we have an additional working day. So the accuracy of the start of calculation is a little bit at stake and this is why we remain cautious in how we expose our numbers.

You asked a second question about healthcare pricing. It's slightly negative in the 1st quarter and 2nd quarter which means in practice that the pressure from [Indiscernible] governments and health care players is still there.

It's particularly true in the home health care when we have renewals. We have I would say seen such a pressure for the past 2 to 3 years it seems to be stabilizing more or less likely negative.

But we don't expect very significant pricing effect in the health care. With the present environment but it's still slightly negative in the less than half a point by the way overall in the first half of the year.

the book-to-bill Fabian.

Well what you can [indiscernible] that our equipment and installation still are not [indiscernible] it is equipment contract that we sign with our customer when they build a new facility so yearly contract to a quick the whole facility we [indiscernible] gas coming that sort of thing. So we add an order book for equipment and installation [indiscernible] for example so why I am talking about the book-to-bill in equipment and installation in electronics, I am looking at the order book compared to the sales of the previous period.

The book-to-bill ratio [indiscernible] regarding the order book at ENI what would be this [indiscernible]

It’s 1.1 which means we are striking better orders than the sales of the previous period.

Okay, thanks so much.

Okay.

Hai, good morning congrats for each one. A few question on my side.

First I think more looking at CapEx and backlog, if I look at the backlog itself, and the number of [indiscernible] you are going to have by the end of the year and beginning of next year. How do you see the current environment in terms of replacing for start-ups and where do you see the backlog in 12 months from now looking at activities in the market and linked to that, what’s your view on What's your view on CapEx, this year, next year in line of what you said at the new Capital Markets Day where you see large industry CapEx as a percentage of sales going down over the next few years.

That’s the first question relating CapEx with growth opportunities in large industry. Second question on electronics again the 20% growth [indiscernible] H1 growth how much was start-ups in that 10% and do you expect any of further start-up electronics in H2 this year.

And the third question engineering, very simple engineering, what could we expect on margins for next year. when I look at the orders picking up a bit, if you could help us focus the profitability of engineering in H2?

Right, so I will take the first question, Mike the second about electronics and [indiscernible] the third one. I think CapEx is of course much more important for us in our business than margin ratios because margins are quite different from one business line to the other.

So it’s also a matter of mix and on top of that as you know, there is an energy effect and may fluctuate up or down. So when we look at CapEx , if you look at the first half and in particular the bridge in debt, you can see that the CapEx, that is a 1.1 billion for the first half was on the low side, which of course helps to recover the return of capital employed and as we said earlier we made the acquisition we have a return on capital employed objective by 20 something meaning 5, 6 years from the starting point and this is why we are more selective in terms of CapEx, and it’s visible already now.

CapEx is also growth so we need CapEx, we need new signing and the good news short term is all those start-ups and ramp ups end of a 2017, beginning of a 2018. The backlog is actually a reflect of all the projects that are there and will start-up.

We expected to be slightly lower in the near future, the backlog will decrease slightly, but we are highly focused on new opportunities. We are today in discussions with very large customers for new projects.

Those projects if they are discussed now they would be decided in the course of the next 12 months, maybe 18 months and they will start-up after 2020. Now the good news for the large industry business is that the projects are coming back progressively.

We have opportunities in U.S., we have opportunities in Asia, but also some of them in Europe so the portfolio is increasing again and it will translate midterm into new business. The present CapEx to sales in large industry has decreased, but it's normal, it’s actually the result for the past 3, 4 years.

This is not concerning at al. The real KBI we have in mind in terms of CapEx and large industry in particular is new signing.

Now my comments were mostly related to LI, to Large Industry. What we see in electronics is actually much better and I like to Mike to cover the CapEx question on electronics as well Mike.

Thanks Benoit. So the first part of your question to do the sales growth in H1 especially associated with carrier gas is a good part of that clearly comes from the start- ups and ramp ups of a number of facilities.

And a number of facilities were started up and ramping up in both Singapore, in China from start-ups last year. So we continue to see the ramp up in that regard.

We also saw the continuation of growth in our Advanced Materials business both in terms of the growth associated with existing facilities and a continued expansion of some of the facilities we have to produce those advanced materials. If you look at 2017 just in the second quarter we had three new facilities start-up in Asia and we continue to see that ramp as we go through the year in 2018.

The activity levels as I mentioned earlier very strong in electronics. From a CapEx standpoint we continue to see new projects and we’ve got new signings in Asia as well and we continue to see that grow.

So I think we'll see both the appetite both the appetite for carrier gases and Advanced Materials continue to grow. We have start-ups that we saw in 2016, additional start-ups in 2017 as well as the build out our Advanced Materials capability to go ahead and support the more advanced labs or I should say fabs as we look at both semiconductors and memory chips.

So and to you give you the magic number you're looking for the contribution of start-up and ramp up in electronics in H1 is 1.7% out of 7% organic and 10% for Q2 the organic growth full H1 is more 7%.

You said 1.7%.

1.7% contribution to growth yes sir in electronics, in electronics start-ups, in electronics only. And contribution to the growth of electronics of course, not to the total growth.

In terms of engineering construction margin you see that for the semester we’re minus EUR 6 million. We should come back to zero plus in the second part of the year and given the improvement in the other intake we expect in 2018 to come back to let’s say the lower part of our target range.

Our target range is between 5% and 10% so you should, we should come back in the range, but probably on the low side.

Just an additional comment when we took about electronics. I think we are very well placed to take a significant part of the market, because we have technologies today that has been proven they’re in Asia particular lot of customers are coming to us because the new technologies in carries gas in particular are very energy efficient and highly reliable.

So we can say we’ve taken the lions share in electronic new projects in carrier gas project in particular in the past 2 or 3 years and I think it will continue and that’s good news for the growth of electronics business.

Good morning everybody. Thanks very much.

A few questions please firstly, on Asia I think we saw a record margin in the first half of the year your script talks about ramping the volumes in merchant and presumably the phase down or lower E&I activity in electronics. And is that a sustainable level of margin, just shy of 20% from here is that the sort of number that you could see ongoing for the rest of the year and beyond?

And secondly, I just wonder if you could talk a little bit more about what’s going on in health care? Your comments imply that the pricing environment slightly negative both in Q1 and Q2 and I think parts of the business Fabienne you said is affected by working days although at the first quarter call you did to an extent downplay the working day effect in health care.

And so why the two percentage points slower organic growth rate in the second quarter than the first? Is it simply part of that may have been comps, but I wonder if you could say if there is any other issues we should be aware of that there?

And then just two little clarification questions please, Benoit I think you hinted or pointed in your introductory comments to not only net profit growth, but also earnings per share growth and you were careful to avoid commitment I think earlier in the year given the rights issue dilution and consensus is got earnings per share growth, but I wonder if you are willing to stand by that? And finally, the tax rate the first half was rather lower I think the most we’ve been expecting given the exposure at Airgas to U.S.

tax rates and is that a not a reasonable pointer for the second half please?

Right. So Fabienne you take the…

Margin in Asia in particular the margin China that’s right we benefitted from the very good loading in China. We benefitted also from we have a good mix in electronics with much more Advance Materials and therefore much higher margin.

So I would yes, we believe this level of margin is sustainable bearing the base of the start-ups when we will have a big project starting up it could lower the margin forward, but on the log run it is clearly sustainable. And on heath care if you get hearth care in Q1 and Q2 we have the same growth Home Healthcare so no issue on that side, the difference comes from choosing first medical days which are impacted by working days so we had much better performance in Q1 with more working days in Europe than in Q2 and we also had in Q2 is slowdown of our Hygiene activities but this a punctual issue on apart from that we’re very confident in the long-term growth of our health care activities.

Yes, thank you. And could you just remind me, my apologies I don’t have this off my head, but the split of health care between Home, Medical and Hygiene?

Now Home Healthcare is may be half of total, is half of the total let’s say. Medical is a one third and the rest would be Hygiene and Specialty Ingredients.

Thank you.

I’m sorry, the third question was related to net profit growth and EPS. We have to manage two things in parallel one the guidance of the year which is clearly on net earnings and we’ve never given anything else recently at the net profit growth and we abide by the guidance, because we repeated at this stage in the year.

The EPS mention was more done in the course of the acquisition Airgas, because of the objective after the acquisition was to have an accretive acquisition and accretive means that after capital increase you have to have an increase in EPS. And so I am a little bit dancing between those two perspectives one is the normal one which is guidance, of course and the second is just to say that we still keep in mind what we said when we made the acquisition and we were accretive last year, but on a limited timing for the impact of the capital increase this year will have a major part of the capital increase in terms of number of shares so the guidance of the year in net earnings, but we don’t forget that we made a sort of indication we gave when we made the acquisition.

So we follow up very carefully EPS, because we want accretive in the end of the day. I hope it’s clarifying.

If it is not that the maximum I can stay.

Understood. And Fabianne, just on the tax rate?

Yes, tax rate. Fabienne?

Well, on the tax rate I think our recurring tax rate will now normalize between 28% and 30% at constant tax regulation of course though there is a mix of lower tax rate in certain countries of the increase of the U.S. part and there is always a mix impact so it very difficult be more precise on that, but on the long run it will be between 28% and 30%.

Thanks very much.

Next and probably last question.

Good morning everybody. One final question most of my question have been answered actually, but I noticed that the price effect in Americas is actually bit slowing in Q2 which is kind of discrepancy with the comments that the business environment is improving.

So why it’s so and shouldn’t we expect some more significant price increase going forward in H2?

I’m that the control of mike the numbers for the U.S. are more or less equivalent between Q1 and Q2.

So there is no major change between the two quarters. On the country if you look at Canada it significantly improved in the second quarter.

So all in all I would say that the pricing is well under control and improving. That’s the comment, been in details U.S.

was nearly equal between the first and second quarter and Canada was really better.

This slight decrease [indiscernible] due the level of inflation in Argentina which has slowed down a little bit, but it’s not due to North America.

Okay, thank you.

Okay.

Right. So I think we’ve covered most of the topics that we would like to cover.

Thank you very much for your questions. Again a very solid set of numbers we’re focused on growth, but also managing selectively the CapEx we had questions related to that.

Synergies well on track, efficiency is well on track, managing the two in parallel to get the best out of the operations. The digital transformation is also well progressing.

And we expect short-term end of the year beginning next year some start-ups and ramp ups in Large Industry which will help feed the growth. IM is improving which is good news and we were just expecting that for now significant number of months.

The underlying Electronics business is doing well. I would like to insist on that, because it’s really you have to look behind the numbers and just get rid of the E&I effect.

And the health care over in steady growth. So we’re confident for the second half of this year and that’s why assuming comparable environment we are shooting for net profit growth for the full year.

Thank you very much and have a good day.