“When considering the record $8.1 billion sale-of-gas backlog, continued roll-up acquisition targets and project pipeline opportunities, we expect this number to remain a significant use of capital for the foreseeable future.”

In context

“Matthew J. White (Chief Financial Officer): Thanks, Sanjiv. Please turn to Slide 4 for the consolidated results. Sales of $9.3 billion rose 9 percent from prior year and 6 percent sequentially. Versus prior year, FX was a 2 percent tailwind while acquisitions and engineering each contributed 1 percent. Cost pass-through rose 1 percent on higher power in all segments but was partially offset by lower natural gas for U.S. hydrogen. Excluding these items, underlying sales rose 4 percent, split between higher volume and price. Almost half of the volume increase relates to project startups in APAC and the Americas. The remaining is driven by organic growth in the U.S., China, Korea, India, and the advanced materials business. While aerospace and electronics continue to lead, industrial end markets are improving in select geographies, especially the U.S. Price increase of 2 percent was broad-based across all geographies and generally tracked with local inflation. Sequentially, underlying sales increased 4 percent, from 3 percent volume and 1 percent pricing. More than half of the volume increase relates to seasonal factors with the remainder being organic. Operating margins of 29.5% decreased 60 basis points from prior year, or 30 basis points when excluding the impact of cost pass-through. As Sanjiv mentioned, the U.S. homecare business negatively impacted the Americas. Excluding this, margins would have increased. But regardless, actions are underway to improve. Separately, U.S. hardgoods sales are up double-digit percent from prior year. And while this mix is dilutive to margins, it could bode well for U.S. manufacturing recovery. Finally, the APAC erosion is mostly due to lower-margin equipment sales for electronics customers. Overall, we expect many of these margin headwinds to be temporary and thus recover in the coming quarter. Operating profit rolled down to an EPS of $4.50 or 10 percent over prior year, from a combination of net income and lower share count. Slide 5 provides an overview of capital management. The operating cash flow trend shows moderate year-over-year growth, as higher earnings are partially offset by unfavorable timing in the engineering business. Recall that the first half results are seasonally lower so we expect the second half to step up like prior years. Available cash flow, which we define as operating cash flow less base CAPEX, remains at healthy levels, enabling significant excess cash for secured growth and shareholder distributions, which can be seen in the pie chart. Year to date, we have deployed $6 billion of capital, split evenly between business investments and shareholder returns. $1.9 billion of secured growth represents capital deployed for acquisitions and the project backlog. When considering the record $8.1 billion sale-of-gas backlog, continued roll-up acquisition targets and project pipeline opportunities, we expect this number to remain a significant use of capital for the foreseeable future. I will wrap up with guidance on Slide 6. Third quarter guidance range is $4.45 to $4.55, or 6 percent to 8 percent growth. This assumes no currency impact from prior year but does assume a 1 percent FX headwind sequentially. Consistent with prior approach, range assumes no economic improvement at the midpoint. The updated full year range is $17.70 to $17.90, or 8 percent to 9 percent growth excluding a 1 percent FX tailwind assumption. This range raises the prior bottom end by $0.10 but leaves the top unchanged. While base volumes showed some recovery in the second quarter, we would like a few more quarters under our belt before incorporating this trend into future guides. Therefore, we are leaving the back half guidance assumption the same as before. The Q2 to Q3 sequential EPS trend is projected to increase $0.05 at the midpoint when excluding FX, which reflects some of the actions being undertaken. Of course, this is merely a guide. How we perform is what matters most. We know our owners expect more, and the organization is committed to delivering on those expectations. I will now turn the call over to Q&A. To ask a question, please press *1 on your telephone keypad to raise your hand and join the queue.”