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Chart Industries Inc (NASDAQ:GTLS)
Q2 2020 Earnings Call
Jul 23, 2020, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Chart Industries Inc 2020 Second Quarter Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. The company's supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting Chart's website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday, July 30th, 2020. The replay information is contained in the company's press release.

Before we begin, the company would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company's earnings release and latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statement. I would now like to turn the conference call over to Jill Evanko, Chart Industries' CEO.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thank you, Joelle. Good morning everyone and thank you for joining us today to go through our second quarter 2020 results and business update. Joining me today is Scott Merkle, our Chief Accounting Officer. We will share recent order trends, what we are seeing globally in our new normal, including a dramatic increase in interest from governments and private industry in the transition to clean energy, and finally, provide 2020 full-year guidance as we walk through our supplemental presentation released this morning.

As you can see on Slide 3, our strategy is unchanged and the long-term fundamentals in our end markets are stronger than ever, in particular, around the global movement to renewable fuels, which includes equipment, process, and solutions from both our Energy and Chemicals business as well as our Distribution and Storage segments. We are seeing a heightened demand for our upfront engineering of these solutions and through recent cost out actions, are well positioned for profitable growth.

Let's use Slide 4 to level set on where our existing products and solutions play in this clean energy transition. I have said on numerous occasions that the destination will not rely on one specific fuel, rather, it will be a hybrid solution of all the fuel sources and storage you see on the left hand side of Slide 4. Our existing engineering and products are able to be used in all of the blue applications or letters A through J for those of you who are color blind. LNG is the most mature of these future power generation tools from a cost and infrastructure perspective. Others are gaining steam at a very rapid pace.

There are many forecasts regarding renewables' share of fueling source in the coming decades. One thing they all agree on is that it will be a significant portion of the total power generation in the coming 20 years. On the right hand side of Slide 4, you can see one example from BP that by 2040, gas and renewables are expected to comprise nearly 50% of the total. You will hear today how our products are being utilized to facilitate this transition.

COVID-19 sparked an emphasis on health and clean energy transformation, accelerating efforts and incenting governments to think through investments in renewable energy sources and storage including hydrogen, carbon capture, gas, LNG, CNG, solar, and wind. As the Prime Minister of Norway stated, the crisis we are now in hasn't made the need for transformation smaller, it has increased it. The Norwegian government will spend nearly $400 million on investments to make its economy greener. Governments have been responding on a massive scale with stimulus packages, many of which are targeted to kick-starting or further progressing this transition and to achieve their climate targets.

Slide 5 shows countries that have targets of being carbon-neutral or 100% renewable power by 2050 or sooner. These countries are just a subset of the 86 countries that have set a specific climate goal. 68 of them have announced actions in 2020 on how they plan to achieve those goals and to date, there has been over $9 trillion of stimulus measures related to the transition to clean energy and we'll discuss some of these when we chat about the hydrogen boom in a few moments.

This is not just about stimulus packages and climate commitments, but actions that drive behavior, including recent laws passed in late Q2. The German toll exemption extension of three years for natural gas vehicles will benefit us in our LNG infrastructure products ranging from LNG tanks for over the road trucks to LNG fueling stations, both of which had historical record order months and quarters in June and second quarter respectively. The United States LNG infrastructure build out got a boost on June 19th when regulations were finalized to allow for the rail shipment of LNG. We are well positioned with our Gas By Rail product offering and expect that this progress will enhance the transport of LNG in the States [Phonetic] and support small-scale projects.

The Indian government announced further measures during June to raise the share of gas in their energy mix with a target to increase to 15% by 2030. India's tax rates on both diesel and petrol were increased twice in the second quarter and city gas networks were open to all entities, not just government approved ones to build infrastructure. Also, in June, Minister Pradhan and the Petroleum and Natural Gas Regulatory Board announced that a new pipeline tariff policy would be unveiled to rationalize gas prices and a gas trading exchange was established. We continue to make progress on the first virtual pipeline in India under our MOU with ExxonMobil India LNG and IOCL including receiving third-party approval from Lloyd's and a design approval from PESO for the Chart ISO containers that are being built at our Sri City, India location.

And certainly not finally, but my last example today, on June 25th, California passed the Advanced Clean Trucks rule, which requires heavy duty pick-up trucks to be zero emission vehicles. This rule will be phased in and supports one of the sure-fire winners in this transition, hydrogen. In the past three months to six months, we have seen a significant increase in quoting and order activity for hydrogen.

On Slide 6, you can see our product and solution offering for hydrogen, which spans station fueling, storage, refining, and power generation. One of our customers, Plug Power, a leading provider of hydrogen engines and fueling solutions enabling e-mobility completed the acquisitions of United Hydrogen Group and Giner in June. These acquisitions enhance Plug Power's position in the hydrogen industry with capabilities and generation, liquefaction, and distribution. The photo on the bottom right of Slide 6 is from the United Hydrogen location and shows one of our larger tanks. As one of our colleagues at Plug Power said, the Chart 60,000 gallon tank photo bombed our acquisition announcement photo. So why is hydrogen so in vogue?

Hydrogen is an excellent clean energy store for long durations and large energy needs. The net zero carbon emissions targets you just heard across dozens of countries as well as in private industry are almost impossible to achieve without hydrogen. Certain processes are difficult or expensive to electrify due to requirements for high heat or chemical reactants. Hydrogen can be produced from zero carbon electricity and used by industry as a thermal fuel. 10 countries and the EU announced plans just this past quarter to invest in hydrogen as part of their overall green energy planning. A few worth noting: the EU launched the European Clean Hydrogen Alliance, which serves as a springboard for kick-starting the industrialization of hydrogen technologies; Australia announced a $300 million fund for hydrogen and there are over $3 billion of hydrogen projects competing for [Technical Issues]; and the United States Department of Energy announced plans to invest up to $100 million in two new DOE consortia to advance hydrogen and fuel cell technology R&D.

While not as mature as LNG in the evolution of cost and infrastructure, the increased scale and global nature of hydrogen is ramping up far faster than LNG did previously and has expanded to nearly every geography around the globe, which in turn, increases infrastructure and connectivity similar to the LNG infrastructure build out. For example, the South Korean government will secure enough hydrogen to power 50,000 hydrogen vehicles this year. Hydrogen fuel cell trains are expected to be a key part of Italy's transportation systems and I could go on and on with these examples. For Chart specifically, we are working hydrogen projects and equipment for China, Europe, India, and the United States.

These projects include and certainly are not limited to the following: a first of a kind for a new liquid hydrogen trailer design for which we have received a $1.3 million order in the second quarter; Another first of a kind for liquid hydrogen and locks pumps gid [Phonetic] for a space launch application; and multiple new marine liquid hydrogen projects and partnerships are being discussed primarily for shipboard power generation or propulsion applications. These build upon our first quarter announcement of a study with a major cruise line and follows similar applications Chart currently provides using LNG. We're currently working with eight different customers under non-disclosure agreements for hydrogen applications compared to being under four for hydrogen at the end of Q1. We also have multiple internal R&D work under way, which we are not sharing for competitive purposes, but I can share that we have included in our second half 2020 forecast the hiring of eight additional hydrogen engineers. We will also be building a hydrogen test facility at our Minnesota location. The test facility will greatly enhance industry knowledge regarding safe procedures for the design of equipment and handling of hydrogen, which can be applied at fueling station, transfill storage depots, and other hydrogen plants. Our facility will also be used to test new hydrogen related products designed and manufactured by Chart. Testing at the new facility is anticipated to begin in the fall of this year.

Another hot renewable is bio gas and bio methane and we're seeing this gain traction in Europe as it is also a beneficiary of stimulus packages and pro renewable regulations. Slide 7 shows how our equipment from both D&S and E&C including air coolers can be used in this application, in many cases, as a full turnkey solution from CO2 removal to liquefaction to tanks installation and transport. Currently, we are working with customers on 10 potential bio gas plants across Europe and see significant growth potential in these embryonic applications as scale is achieved and plant sizes are optimized. Currently, plant sizes range from 10 tons per day to 165 tons per day. Our quoting pipeline for these applications is above $40 million and realistically, we see a few plants moving forward to order stage end of year 2020. We booked an order with Bright Biomethane in Q2 for one of our tanks, which will be installed at a bio gas production site.

Hydrogen and bio gas, bio methane are part of our overall specialty markets as are food and beverage, cannabis, space, lasers, wastewater and HLNG. You can see some of our specialty market customers on Slide 8. Each of these customers placed an order with us in the second quarter along with many more that we are unable to share publicly. The second quarter 2020 specialty market orders were 39% above the second quarter of 2019 and year-to-date, specialty market orders are 18.4% above the first six months of 2019. Year-to-date, every specialty market except space has had an increase in orders with cannabis up 69%, wastewater 29%, and hydrogen 25% and we just in early July, received a $700,000 order from the Indian Space Research Organization. Water treatment has been a sleeper surprise market for us and we are expecting a high level of related order activity in the third quarter. There are over 10 different municipalities currently looking at water treatment equipment with us in the month of July.

As we continue to expand our presence from an application market and geographic perspective, we see new customers who are becoming more familiar with the Chart name. In the second quarter, we booked orders with 132 new customers, bringing our year-to-date new customer total to 260. Six [Phonetic] of these are specialty market related and include over 50% outside of the United States. As we have said on numerous occasions, our products support our customers in achieving their ESG targets with one example shown on Slide 9.

This example from the second quarter was the installation of our doser phase separator VIP tank and inspection system at Cargill high speed production line for vegetable oil in Brazil. This packaging line uses lightweight 15 gram PET or plastic bottles operating at 36,000 bottles per hour. This is one of Cargill's measures to reduce their carbon footprint by using less plastic. Perhaps most striking about this ESG example is the annual amount of plastic that will be saved in bottles from the four Cargill filling operations taking this initiative on. That's 1.6 million pounds or close to the equivalent weight of 24 adult hump back whales or 160 elephants.

Moving to Slide 10, there is quite a bit to talk about regarding backlog and order activity both from how Q2 played out month-by-month in particular in June as well as the areas of strengthening demand. Let me start with medical oxygen COVID related demand. The safety and health of our employees is our number one priority. Throughout the COVID crisis, our team members have stepped up to every challenge across every one of our global locations and as a result of the focus on additional social distancing, remote working where applicable, and other protocols, we have been able to continue to manufacture [Technical Issues] multiple day shutdown at any location in the second quarter.

Overall, medical oxygen related orders generally for use with COVID patients increased 24% in the second quarter of 2020 compared to the first quarter. We saw a peak medical oxygen order month in April with related orders tapering to more typical levels in late May and June. In early July, orders have begun to tick back up for these applications due to round two of COVID hotspots in the United States and Latin America. We are fully prepared for any additional increase in demand and this will not disrupt our other operations.

Total Chart orders for the second quarter were $267.6 million with $125 million in the month of June. While down 12% sequentially from the first quarter and 17% down compared to the second quarter of 2019, the June rebound was significant and we expect to see continued recovery in the second half of the year. Backlog of $697 million includes $72 million for Venture Global's Calcasieu Pass project as shown on Slide 10. The top row of Slide 10 shows Q2 2020 compared to Q2 2019 and the bottom row shows Q2 2020 compared to Q1 2020. I would point out the increases in backlog for E&C Cryo excluding big LNG were up 3% versus the first quarter and up 10% compared to last year. It's worth noting that both D&S businesses backlog when using either comparison have demonstrated resiliency through this global pandemic including D&S's record backlog of $157 million at the end of the second quarter.

After a slow start to Q2 for HLNG vehicle tanks due to the shutdown of our two major customers production in Europe resulting from COVID, they both reopened earlier than we had originally anticipated. Additionally, one of our customers is responding quickly to the extension of the toll exemption for natural gas vehicles in Germany. We received a significant 18-month commitment of tanks and shipped our first HLNG tank from our new Italian production line on July 6th [Phonetic]. June was a record order month in excess of $20 million for orders for HLNG vehicle tanks.

In the East, we booked 22 LNG fueling station orders in the second quarter, the highest quarter of fueling stations in our history. This brings our first half 2020 orders for fueling stations to 36 compared to the first half of 2019's 23 station orders. While big LNG projects are pushed to the right by 12 to 18 months, we continue to be bullish on a few of the projects moving ahead to FID in 2021 in particular given that supply and demand will be tightening in the coming years driven by lack of new LNG terminals coming online as well as from the expected growth in LNG global infrastructure and trade.

We continue to execute on our deliveries of the equipment for Venture Global Calcasieu Pass project for which the first liquefaction with our cold boxes occurred this quarter. The pictures on Slide 11 show the magnitude of the scale of these boxes. We recognized $23.8 million of revenue [Phonetic] in the second quarter related to that project and expect similar revenue levels for that project in Q3 and Q4 2020 as well as Q1 2021. It is our view that Venture Global's Plaquemines project will move forward within the next 12 months in particular with FERC's June 15th approval of their request to proceed with limited site preparation.

We also believe that Cheniere's Corpus Christi Stage 3 project and Tellurian's Driftwood Phase 1 project will FID in 2021. The total Chart content of these three projects first phase only work, meaning, what would be booked at FID in 2021 is expected to be north of $500 million and this does not include the other opportunities we have in big LNG such as international projects, Jordan Cove, Magnolia LNG, and Pointe LNG and while we remain positive on certain big LNG projects moving forward to FID in the next 12 to 18 months, we also are taking advantage of the strong pipeline of small-scale facility activity, primarily for power generation.

In the second quarter, we booked a $13.3 million order for a small-scale utility project in the United States. In our quoting pipeline for small-scale projects, there are 48 that have had various stages of activity so far in 2020. These 48 total $775 million of potential orders for Chart content and are geographically broad-based with 15 in the United States, 12 in Europe, five in both Canada and Mexico, four in both Africa and South America, and three in Asia.

As mentioned earlier, LNG by rail [Technical Issues] facilitator and potential accelerator of small-scale LNG in the U.S. LNG by rail adds another solution for transporting natural gas into regions within the states that lack sufficient pipeline capacity and need peak shaving solutions. As a reminder, in Q4 2019, we received a $21 million LNG by rail order for a customer in Mexico, which shows the ongoing adoption of the small-scale model.

To conclude the discussion on order activity, in the first quarter, we told you about 15 first of kind orders received, underscoring the amount of engineering work that is happening to impact the clean energy transition. This trend continued in the second quarter with 24 first of a kind orders ranging from an order for dosing sake in aluminum cans, the two hydrogen examples given earlier, the first liquid nitrogen dosing for cannabis in containers in Pennsylvania, and three new process studies for innovative LNG concepts.

Slide 12 shows the demand trends we are seeing in D&S as we head into Q3. The bold italicized font indicates the changes from what we were seeing in April when we talked to you last. The changes in this segment have been substantially positive. I already touched on the order records for HLNG vehicle tanks and LNG fueling stations. Heightened demand for both is expected to continue well into 2021.

Additionally, food and beverage recovered ahead of expectations in the month of June with the month beverage tank unit orders the highest since February. Customers such as Chipotle and Yum Brands have reiterated their 2020 plans [Phonetic] for new builds. Overall, industrial gas inclusive of specialty markets has had a strong start to July. The majority of our customers quoting and order activity in the first few weeks of July has been at or above June levels.

Critical care demand for COVID related oxygen has moved into the consistent category, as I described previously and finally, China and India each have softened for different reasons. First, India short-term orders have been impacted by the country's shut down. While we are able to continue to manufacture, some customers have not been able to. We continue to see medium and long-term demand for our LNG products in that region and out of the gate in July in India, we booked the $700,000 space order I mentioned as well as a $1.7 million order for trailers.

In China, the second quarter sales of $30.4 million were the highest since Q4 2014 and operating income as a percent of sales was 7.2%, the highest since 2013. China orders are trending to more consistent levels as we head into the third quarter from heightened levels in the second quarter.

As you can see on Slide 13, we have not seen any meaningful change in the areas of demand in our E&C businesses over the past two months. Repair work and Sumitomo related work have been helping offset some of the softness in nat gas processing. You may recall that at the end of Q1 2020, one of our four global brazed aluminum heat exchanger competitors had their Japanese certification permanently revoked. As a result of this revocation, year-to-date, we have received $9.1 million of orders from customers that would have previously used this competitors equipment with the majority of this in the second quarter. We view this as a long-term opportunity to continue to expand our brazed into industrial gas applications globally.

June was the highest order month of the second quarter for FinFans. Within the FinFans segment, fans continued to perform as expected. Demand for air cooled heat exchangers is weak although quoting activity has not softened dramatically. We are seeing opportunities on the process side for air coolers related to petrochem and LNG projects. Additionally, both midstream and upstream customers are working on international projects much more so right now than in North America. For example, we are quoting air coolers for Indian, Middle Eastern, and Southeast Asian regas, bio gas, and compression work, which we think will be the new trend for many of our customers in these markets.

One key element to our strategy has been to expand our long-term agreements to more customers, include parts repair and service in the agreements, and target longer durations. Historically, we had few long-term agreements in place and none had a repair and service component. As you can see on Slide 14, in the second quarter, we executed agreements with meaningful industrial gas customers such as Matheson and Praxair. We have added an extensive parts repair and service agreement with a major and in June, we completed our first ever service agreement in Europe with Gasum for parts service, remote monitoring and calibration for all Gasum's LNG/LCNG stations supplied by Chart to the Nordic countries.

Our long-term agreements now touch a broader set of products our lever [Phonetic] in our medium-term target of over 20% of total revenue in aftermarket repair and service. Our aftermarket repair and service revenue for the second quarter is over 13.5% of our total revenue. This is an increase from both the first quarter of 2020 which was 13% and from the full-year of 2019, which was 12.2%. In 2019, no individual quarter was more than 12.8% of aftermarket repair and service. I'm going to turn it over to Merkle, sorry, I was on a roll there.

Scott W. Merkle -- Vice President and Chief Accounting Officer

Year-to-date through June 2020, we have taken out a projected $61.2 million of cost across the business units, which is a reduction of 25% of our workforce since the beginning of the year. The breakdown of savings and costs by segment is shown on Slide 15. Approximately 62% is from cost of goods sold and 38% from SG&A, which is consistent across the segments while corporate SG&A [Phonetic]. In early July, we executed on a further reduction in force in the midstream and upstream air cooler business within FinFans to size the business to the weak demand. This equates to $3 million of anticipated annualized savings.

Also in the third quarter, we expect additional restructuring charges related to consolidating our Tulsa, Oklahoma air cooler facility into our Beasley, Texas location at which we own 260 acres of land. Annualized cost savings resulting from the reduction of this rooftop is expected to be $12 million and we expect the project to be completed in approximately nine months. We will maintain a small office location in Tulsa for the engineering and sales teams and we are pleased to share that we have been able to offer all of our remaining Tulsa-based team members, the opportunity to relocate to Beasley, Texas. There is a more detailed slide in the appendix and table in the press release that provides specific information by segment on cost reductions.

Sales of $310.4 million for the quarter resulted in reported earnings per diluted share of $0.57 as shown on Slide 16. Adjusted EPS was $0.63. Severance cost of $4.3 million were associated with our second quarter reductions in force. On row one of the table, you see the impact of an $0.18 add back for restructuring and transaction related costs. This was partially offset by the completion of the sale of our former Chinese manufacturing location in the second quarter, resulting in a gain on sale of $2.6 million or $0.07 of EPS as shown on row two. On row five, we reduced adjusted EPS for the benefit of our mark-to-market on our minority investments of $0.02 and the tax effect of these adjustments on row six.

Our year-to-date EPS of $1.19 is a 12.3% increase year-over-year 2019 [Phonetic]. This reflects partial savings from our cost out action and as Jill commented previously, we expect gross margin as a percent of sales to expand throughout the remainder of 2020. Second quarter gross margin as a percent of sales was 29.8% on a GAAP basis and when adjusted for severance was 30.3%, a 210 [Phonetic] basis point improvement over the normalized second quarter of 2019. Normalized SG&A of $43 million in the second quarter was in line with our expectations and while there are puts and takes, we expect this to continue in the $43 million to $44 million range for the remaining two quarters of 2020.

As shown on Slide 17, we had $54.8 million in net cash provided by operating activities during the second quarter, which equates to $44 million of operational free cash flow after spending $11 million of capex. Working capital management continues to drive positive cash generation and flipping to Slide 18, you can see our continued improvement of collections from data from our JD Edwards locations. In addition to DSO of 40 days, we also have 25% of our supply base that have accepted our extended payment terms. As a result of a strong quarter, our net leverage ratio is now 2.97, down from 3.12 at the end of the first quarter.

Jillian C. Evanko -- President and Chief Executive Officer and Director

At this point, we have enough visibility to provide 2020 full-year guidance shown on Slide 19. Full-year sales are expected to be $1.3 billion to $1.4 billion and includes $46 million of Venture Global's Calcasieu Pass revenue in the second half of the year. We anticipate full-year diluted adjusted earnings per share to be in the range of $3.00 to $3.50 on 35.3 million weighted average shares outstanding. Our assumed effective tax rate is 19%.

Our capital expenditure guidance has increased to $30 million to $35 million from our prior guide of $25 million to $30 million. The increase is driven by our decision to proceed with the parts, repair and service greenfield site in the Eastern United States as a result of the positive reception to our long-term agreements with our industrial gas customer base. The yard will be tank ready by the end of the third quarter and the greenfield building is expected to take approximately nine months to complete. The total cost of this project is $7 million and we have included $5 million of it in this 2020 capex guidance.

Additionally, there was approximately $3.5 million of capex required for our building expansion to house air cooled heat exchanger product lines that will be consolidated into our Texas facility. We have included half of this in our second half 2020 guidance. With that, I'll now turn it over to Joelle to open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from James West with Evercore ISI. Your line is now open.

James West -- Evercore ISI -- Analyst

Hey, good morning, Jill. Merk.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Hey, James.

Scott W. Merkle -- Vice President and Chief Accounting Officer

Good morning.

James West -- Evercore ISI -- Analyst

Jill, for the aftermarket, increased [Phonetic] revenues to 20% of the total from I think the original guide couple of years ago was 17%, nice 300 basis point jump there. What's the road map to getting there? Is there a difference in the way contracts -- orders are being structured now. Is it a sales force incentive? What are you seeing that gives you comfort that you can move that. There's relatively a big boost to margins overall?

Jillian C. Evanko -- President and Chief Executive Officer and Director

The primary movement for us on the parts, repair and service side has been this additional increase in the long-term agreements that we have and we really had zero commitment on the PRS side in any of the long-term agreements that existed previously and without going into specifics on which agreements have what in some of these, we do have a go-forward volume commitment and in some cases, durations of these agreements are five years versus previously two years plus one. So that is a big piece of this movement from the 13.5% where we are today to over 20%.

We also, to your comment, we have changed some incentives with our sales force and there's a lot of activity that's been generated from multiple different customers in different regions. We've implemented various different repair service and refurbishment products. So previously, we didn't do many repairs on our air-cooled products and we're seeing a lot of activity around that given some of the decrement in the market fundamentals for original equipment and so that's benefiting us as well. And certainly to the last part of your question, margins are better across the board on both the D&S side as well E&S [Phonetic] side for these types of products.

James West -- Evercore ISI -- Analyst

Got it. Okay, thanks. Thanks, Jill. Maybe a follow-up from a -- an unrelated follow-up. Hydrogen getting a lot of -- making a lot of noise right now. You guys have the equipment and products and services to focus on that market. I guess two-part question. One, what kind of percentage of normalized earnings do you think hydrogen could be and then two, are there any adjustments to your products suite you need to make in order to capture this market versus say typical more typical LNG [Indecipherable].

Jillian C. Evanko -- President and Chief Executive Officer and Director

In the current environment, hydrogen is a small piece of our total earnings per share, but that's certainly gaining a lot of momentum as described by some of the order activity and the NDAs that we're under in this particular space. We're very well positioned with our current products and solutions and I think the biggest differentiator for us in hydrogen is our upfront engineering capabilities. So we're able to do first of a kind projects that other companies aren't able to say, OK, I have this piece of equipment, but I'm able to offer solution and the design of what that could look like and then we'll figure out how we fill in the supply chain around it.

But to be very specific, there are some areas that we are developing internally. Certainly there is not a lot of hydrogen businesses for sale out there. There is a few, but many of these are early stage starts up. So we really feel like organic development given our engineering capability is going to be the primary way we get additional capability and I'll be completely transparent, a liquid hydrogen pump is going to be a huge differentiator for us and that's the number one priority that our engineering team is working on in this space. We're also working on some liquid storage, which will help for a longer haul transportation in both Class A trucking as well as passenger vehicles.

James West -- Evercore ISI -- Analyst

Got it. Thanks, Jill.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, James. Appreciate it.

Operator

Thank you. Our next question comes from Martin Malloy with Johnson Rice. Your line is now open.

Martin W. Malloy -- Johnson Rice & Company, LLC -- Analyst

Good morning, congratulations on the quarter.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Marty.

Martin W. Malloy -- Johnson Rice & Company, LLC -- Analyst

I just want -- I wanted to follow-up on the hydrogen area and are there maybe a few of those product categories that you could identify as being the most impactful to Chart over the next 12 to 18 months. And then on the liquefaction, in particular, does that involve brazed aluminum heat exchangers and are you working on a technology process similar to the IPSMR?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So the most impactful in the short-term are going to be the transportation as well as the fueling areas and that really goes to what you hear about almost daily in the news of the development of fueling stations as well as some of these various different transportation and trucking companies that are looking for hydrogen vehicles as a longer haul solution. So we're well positioned with the customers on the fueling station as well as the transportation side of things. Overall, I'm not going to answer the second part of your question because there's some competitive dynamics there that I don't want to give away on the liquefaction, but the short answer is yes. The longer answer would put us into more competitive dynamics that we have a very strong head start on.

Martin W. Malloy -- Johnson Rice & Company, LLC -- Analyst

Okay, understood. Second question is on the Gas By Rail. Is it -- obviously positive to see the June announcement from the government regarding bulk transportation and there have been a couple of high-profile pipelines that run into permitting difficulty. Can you maybe just speak to the activity and the potential in that market.

Jillian C. Evanko -- President and Chief Executive Officer and Director

That was a big win for LNG by rail to have that regulation passed especially given some of the states that had been challenging it over the past 12 months. It's definitely an enabler for the continued infrastructure build-out of LNG in particular on the small-scale side and we've had numerous different discussions with customers that are looking at how do they utilize rail systems that are near their locations whether it's a small-scale terminal location or a traditional railway customer.

We do anticipate that there's probably handily kind of $75 million of potential order activity on the horizon for us in the very short-term meaning in the six to 12-month period of time and that's really with customers that are looking to utilize existing rail systems that are physically available and to transport at a cheaper and in some cases safer way to do that.

Martin W. Malloy -- Johnson Rice & Company, LLC -- Analyst

Thank you. I'll turn it back.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Marty.

Operator

Thank you. Our next question comes from Eric Stine with Craig-Hallum. Your line is now open.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Hi, Jill, Hi Scott.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Hey, Eric.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Hey, so great to see the order bounce back in June. I'm just curious, I mean how much of that do you think is a catch up given that April and May obviously were pretty weak for obvious reasons. And then just, I know you talked about specific areas of strength [Phonetic], but just to be clear, I mean it sounds to me like you are expecting that that June run rate is a good way to think about the months going into the third quarter.

Jillian C. Evanko -- President and Chief Executive Officer and Director

The way that I'm thinking about it is, I think June is 125 [Phonetic] and I removed the $13.3 million for the small-scale terminals and I take out about 18 [Phonetic] of what I would consider bounce back whether it was related to HLNG vehicle tanks or other aspects of the business. So I'm kind of looking at that $90 million a month run rate on the order side of things heading into third quarter and the full second half of the year and the way I think about the revenue guide is we've got about 450 [Phonetic] plus of our total backlog that will ship in 2020. The rest of it is in 2020 and beyond and then, I fill that in with some of that 40% book and ship level from the order activity of June normalized for those two items I just mentioned.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Got it. Very helpful and maybe second one for me, just on big LNG. I mean clearly, it seems to me you are more confident. I mean you were confident on Plaquemines, but more confident on some of the other projects that while they still push to the right that they are pretty good order opportunities for 2021. So just curious, given that the market spot price of LNG. I mean a lot of the things there have not changed. Just some reasons for that confidence?

Jillian C. Evanko -- President and Chief Executive Officer and Director

There is certainly a lot of customer discussions that has happened in the last six weeks around what does that look like and what that timing is. So you can hear the public domain guys talk on their own, but the confidence level is around how they're thinking about doing Phase 1 versus the total project. So if we had been having this conversation a year ago -- the number I quoted today of north of $500 million for Phase 1 would have been north of $1 billion, if they were doing the full extent of the projects. So I think there has been a calibration around the size of the starting point for construction, which I think is appropriate given what's happening in the market and then back to the comments around, there is a point where demand continues to grow and the supply doesn't catch up, which is secondary to my first comment that I think these projects are closer to being able to start a Phase 1 than trying to go for the big bang right out of the gate.

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Got it. Very helpful. Thanks a lot.

Jillian C. Evanko -- President and Chief Executive Officer and Director

All right, thanks, Eric.

Operator

Thank you. Our next question comes from Rob Brown with Lake Street Capital. Your line is now open.

Robert Brown -- Lake Street Capital Markets, LLC -- Analyst

Good morning.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Good morning, Rob.

Robert Brown -- Lake Street Capital Markets, LLC -- Analyst

First on the LNG station activity, you received a number of orders. Where are you seeing the activity there? Is it Europe and China both or where are you seeing the activity?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yeah, it's both Europe and China. I would say the majority is in Europe, but China has been a surprise in terms of how many have come about in the first half of the year compared to what our expectation was and we continue to see that accelerate. I don't think that's going to slow down in the coming 18 months.

Robert Brown -- Lake Street Capital Markets, LLC -- Analyst

Okay, great. And then I think you mentioned India and China saw some near-term softening. What's your sense there? When do you think that kind of recovers or is the visibility still not good there?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So India is tougher to answer that question. We've built in continued softness throughout the second half of the year into the full-year guide. It could bounce back a little bit faster than that, but it really depends on what happens with the coronavirus situation, although I would caveat that answer with the statement that we're seeing these medium to longer-term orders still coming in. So the $700,000 for the space application and then the $1.7 million for trailers both of those are kind of medium-term types of applications, which further supports the continued infrastructure build out that we expect to see rebound once things open back up fairly quickly.

On the China side, it wasn't a surprise to us and we had planned this, this way, more tempering I would say versus a dramatic drop-off and we have seen such a quick rebound once things reopened in February in terms of orders in China particular for industrial gas and we do not expect that to continue through Q3 and we're seeing that kind of happening right on par with what our expectations were. The one thing that has the potential to slow China a little bit more is the flooding that's been happening in certain regions and that could push some of the commissioning out to the right on certain install [Phonetic] projects, but that's de minimis impact to the Chart business.

Robert Brown -- Lake Street Capital Markets, LLC -- Analyst

Okay, thank you. I'll turn it over.

Operator

Thank you. Our next question comes from John Walsh with Credit Suisse. Your line is now open.

John Walsh -- Credit Suisse -- Analyst

Hi, good morning.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Hey, good morning, John.

John Walsh -- Credit Suisse -- Analyst

I guess a question first on the capex and how to think about it going forward. Obviously, you're funding some very attractive opportunities here on the aftermarket in service and productivity. Are there more of these? You talked about this one facility I think in the Eastern U.S. Should we think that there is a larger build out as you continue to grow that mix on the aftermarket side?

Jillian C. Evanko -- President and Chief Executive Officer and Director

The Southeast United States was the last U.S. geography that we needed a footprint in. So, there will not be any additional greenfields in the United States. The only other region that we are building out repair and service as well as rental capabilities is in Europe, but our locations that currently do original equipment also have the certifications to be able to do repair and service there. So this is really the last that we needed to do to have the complete coverage of the installation base that further goes into the long-term agreement discussion that we had earlier.

I would expect that though to tail into 2021. So if I were thinking of the 2021 capex guide, I would be similar to [Phonetic] $30 million to $35 million range, but there are more productivity projects that are well under way. Our emerging and executive leaders that are in the program have all been able to participate in identifying what those types of projects look like and I think on average, you're looking at $2 million to $3 million a year for productivity projects that return in less than one year.

John Walsh -- Credit Suisse -- Analyst

Got you. Thank you. And then you have -- in the release, you talked about the gross profit margin expansion that you expect throughout the balance of the year. One, I think that mix is kind of driven -- maybe you can give a little more color on that if that's kind of the specialty in the aftermarket or if there is something else there and then how to kind of balance as we think next year's gross profit margin expansion with maybe some of these variable costs that aren't fact [Phonetic] related coming back next year.

Jillian C. Evanko -- President and Chief Executive Officer and Director

So there is three components to the gross margin expansion. The first is that we'll have the entirety of the $61 million of cost out that we took at various points in the first half of the year will be reflected in the second half in full. So we had some staggered based on the times and the dates that we did those reductions throughout the first half.

The second piece is the continued growth in the repair, service, and aftermarket. As I commented to James's question, those certainly are margin on both sides of the house. The differential between the traditional gross margin of original equipment on D&S to aftermarket service and repair is smaller than it is on the E&C side, the E&C side just given the quick turn around quick shifts and installation needs, we tend to be able to command a slightly bigger differential on the gross margin to the traditional segment margin.

And then third, we have this year and you've seen this in the first half of the year, had a nice bump from having the additional volume in our E&C Cryo business from having the big LNG project running through that shop. So I would look at 2021 as what our run rate coming out of Q4 is, I do believe we can sustain that heading into 2021 and there's some productivity that can give us additional increases and I see the biggest opportunities in 2021 being in our D&S East segment and our E&C FinFans segment. So I would expect the low-30s to be as a percent of sales for gross margin to be very viable figures in 2021.

John Walsh -- Credit Suisse -- Analyst

Great, thank you.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thank you.

Operator

Thank you. Our next question comes from Tom Hayes with Northcoast Research. Your line is now open.

Tom Hayes -- Northcoast Research -- Analyst

Thank you. Good morning, Jill.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Hey, good morning, Tom.

Tom Hayes -- Northcoast Research -- Analyst

Hey, I was just wondering, regarding the order wins at new customers. So, congratulations on that. I was just wondering is that business that did exist previously or are you taking share from someone?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yeah, thanks for the congratulations. It really goes to our commercial team and these guys have done just a Yeoman's job of finding the available customers and also finding customers that we're able to take share from. I would say it's about 30% taking share and 70% new customers for us that would be addressable market that previously we either didn't have the products for or we didn't look at the full solution of being able to take our D&S and E&C products and put them together and get in there. And some examples of that would be like on the marine LNG side of things. We've been able to get into applications that previously we didn't have. So again, a great shout out to the commercial team for their efforts.

Tom Hayes -- Northcoast Research -- Analyst

Great. Appreciate the color. And then maybe secondly, circling back to hydrogen a bit. Certainly, it sounds like the pace of growth is certainly very strong. I was just wondering, does that mask what you kind of expected to see as we entered FY '20 and have you thought about resizing the market opportunity that you provided for us at the Investor Day?

Jillian C. Evanko -- President and Chief Executive Officer and Director

It's been above expectations in the first half of 2020. I definitely thought it was going to continue to march along and it had been picking up some pace heading into the end of 2019, but man, the level of activity in hydrogen quoting right now is beyond my expectations. I would not change the size of the addressable market in the current state right now from what we shared in November, but from a more medium-term perspective, meaning kind of four to six years out from now, it definitely is bigger than what you see there just given the adoption and the infrastructure build out, but it needs to get a little more mature on the cost side of things and there needs to be some connectivity on the infrastructure before I'd expand that addressable market size, but I would bet whatever the expression is dollars to donuts that, that addressable market size is significantly higher than what we showed within half of the decade.

Tom Hayes -- Northcoast Research -- Analyst

Thanks. Appreciate the color.

Operator

Thank you. Our next question comes from Greg Lewis with BTIG. Your line is now open.

Gregory Lewis -- BTIG -- Analyst

Hey, thank you and good morning.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Hey, good morning, Greg.

Gregory Lewis -- BTIG -- Analyst

Hey, Jill, kind of curious, I guess last week that the EU kind of moved forward with a couple of trillion dollars stimulus package and there was some stuff that seems really kind of geared to some of the things you guys are doing. At this point, have you guys had a chance to kind of go through that and see really what the opportunity in natural gas and hydrogen is for Chart from that package?

Jillian C. Evanko -- President and Chief Executive Officer and Director

We have and we've gone about it probably a little bit differently than direct dollars in spend, it's been more around the application customers that we already know are going to get some of that funding. We've done the same on the U.S. side where the -- about $65 million of the DOE for the hydrogen has been allocated and if you look at the U.S., we've got access to -- right out of the gate already existing relationships with about 60% of that $65 million of the DOE spend on hydrogen. And then on the EU side, we have direct access on applications and/or customers to about 75% of where that spend is going to go.

Now, obviously you can't just take 75% of the total package because it depends on what piece of content we would have whether we had a full solution or just traditional equipment components that go into those types of applications, but significant opportunities for the Chart business as a result of those packages.

Gregory Lewis -- BTIG -- Analyst

Okay, great. And then just as we think about this and clearly, you guys are excited about the opportunity in the medium, longer-term. As you look around the world and it seems like local content is clearly going to be an issue at least in some areas. Is there anywhere where maybe Chart needs to beef up its footprint or kind of as you think about it, where you guys stand from a global standpoint, are you comfortable?

Jillian C. Evanko -- President and Chief Executive Officer and Director

I'm very comfortable and I wouldn't have been able to say that years ago and the reason being that through the VRV acquisition, we've been able to have a broader footprint in Europe and from the foresight of the VRV founders and owners, they were really well positioned in India for the Make in India activities. We also were able to get another Indian location in Hyderabad through our Air-X-Changers acquisition last year, which has allowed us to build out over 50 engineers in that location and multiple other capabilities. So we've not only been able to maintain cost competitiveness globally, but also have that local presence and we've seen that truly benefit us in particular in the Asian regions.

Gregory Lewis -- BTIG -- Analyst

Okay, perfect. Hey, great, thanks for the time and have a great day.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Greg.

Operator

Thank you. Our next question comes from Conner Lynagh with Morgan Stanley. Your line is now open.

Conner Lynagh -- Morgan Stanley -- Analyst

Yes, thanks. I was wondering if you could talk a little bit about the full-year guidance. Obviously, the revenue range relatively wide and I guess implies some pretty significant improvement versus the second quarter. So I was wondering if you could characterize which segments are the biggest contributors and how much improvement versus say June or early July levels is this baking in versus what we can't see in the sort of V-shape within the quarter?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Sure, so first of all, the wide range, we haggled about that internally and we could [Technical Issues] lot more precise, but given this first time back on guiding and there is still some uncertainty out there in the world. So we thought we'd give a guide to kind of get into the stadium versus getting into the seat itself that we have very direct line of sight on how much backlog we'll ship in the second half of the year. So, a piece of the answer to the step-up from the first half to the second half is backlog. So existing orders in the book.

And then the second is around the book and ship activity and the D&S side of the business is really where that comes from. We've guided pretty conservatively on the E&Cs both the Cryo and the FinFans. I have been pleasantly surprised on the Cryo side of the business with the repair work and some of these additional orders from the competitor that lost it's certification, but the biggest opportunity for us in the book and ship arena is on the industrial gas piece of the D&S businesses.

Conner Lynagh -- Morgan Stanley -- Analyst

Okay, that's fair. Maybe just within that range, what are the big swing factors that would drive you to be more in the $1.3 billion to $1.4 billion. What are the big variables I guess that you are considering in making that range?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yes, so on the D&S side of the business, if -- there is a couple of fueling station orders that we would expect to get in the East and if they come in a certain time frame, we'll be able to recognize revenue on them in the fourth quarter. So that would be one of [Technical Issues] that move you up for the full-year closer to the higher-end of the range. Also, there is a handful of industrial gas opportunities in the West that similarly, if we're able to close them between now and the middle of August, we're going to be able to recognize some of that revenue sooner rather than later.

And those types of opportunities frankly are not win or lose opportunities, it's really timing. So we feel very confident that they are ours for the taking. We've been notified that they are ours, but they are just not at the point of having the PO and terms of conditions completely sorted out. On the E&C side of the business, for Cryo, the swing factor there would be if we got another small-scale LNG terminal. Those tend to allow us to recognize a piece of the revenue in the shorter-term and then across a 12 or 16-month period, the full revenue. An example like that would be if we received notice to proceed on Eagle's Jacksonville LNG facility. That would help drive toward the higher-end of the range.

And then on the E&C FinFans side, what we're hearing in the market and from our customers is everybody is kind of expecting the weakness to continue for -- at least for six months and many are saying for 12 months, but what we'd see on any type of rebound there would be in the fourth quarter, if there's some of the shut-ins being brought online, that would be where the equipment would go versus new builds, but we have built none of that into the 1.4 [Phonetic]. So that's just color for you. The E&C FinFans is left at the current weak demand levels.

Conner Lynagh -- Morgan Stanley -- Analyst

Okay, that's helpful. Thanks very much.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Conner.

Operator

Thank you. Our next question comes from J.B. Lowe with Citi. Your line is now open.

J.B. Lowe -- Citigroup -- Analyst

Have given some numbers at your Investor Day around free cash flow expectations for this year. I'm just wondering if you could give any update. What are you guys thinking in terms of free cash in 2020 and then longer-term, do you guys have a target for any sort of free cash flow metrics in terms of, let's say, free cash flow conversion from EBITDA or anything like that would be helpful?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Sure, so we generally look at free cash flow as a percent of revenue and we've historically said our target is to run at 10% of revenue, but that's going to increase from a medium-term perspective, that should be in the low-teens easily as an ongoing metric in particular given a lot of the activities we've done around the working capital components and how we approach the market with inventory as well as some of the back office activities.

In terms of the 2020 outlook, you can take the second quarter as a pretty good proxy for what we expect in Q3 and Q4. There's some upside to that just based on some activity that we are aware of on the supply base as well continuing to rationalize inventory that we had to increase at the end of the first quarter around ensuring that we had appropriate medical oxygen related tanks available. And that increase at the end of the first quarter was -- specifically to medical oxygen, it was about $13 million, but across the total business from a safety stock perspective totaled about $20 million. So you can kind of use that to walk yourself through the next two quarters.

J.B. Lowe -- Citigroup -- Analyst

Okay, thanks. And then another question just on the R&M facility that you're building out in the Southeast. Any ideas on or any color on what the payback is for that investment and I know you said that there aren't any other greenfield R&M opportunities, but are there any other like similarly sized investments be it expansion somewhere across some of your other facilities and what could be the potential payback targets for those?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So the on paper payback for the Southeast U.S. repair facility is just about 20 months and I expect that to be shorter given the last couple of weeks of long-term agreement discussions and the extremely positive response we've gotten from our major customers that were looking for an alternative to their current repair provider in the Southeast. In terms of other similarly sized investments, there's an opportunity for us to expand our India location in Sri City. So, we own the land that's adjacent to our current building and what we're finding is that there is a lot of addressable market available to us if we can make in India and so we've started to dip our toe in the water around that on certain tanks, also on certain air coolers and we're evaluating some of the other products -- existing products that we would want to take from North America to be able to make there, which gives us more cost competitiveness for projects in that region, but also a ton of access to projects in India that the government itself really wants to have foreign investment, but they want to also have the ability to have Indian nationals be able to be employed locally. So we're really well positioned for that and that would be like a $5 million investment and we'll make that decision heading into 2021. So that would be 2021 capex.

J.B. Lowe -- Citigroup -- Analyst

Great, thanks, Jill. That's it for me. Talk to you guys soon.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks.

Operator

Thank you. And our next question comes from Patrick Baumann with J.P. Morgan. Your line is now open.

Patrick Baumann -- J.P. Morgan -- Analyst

Oh, good morning, Jill. Thanks for taking my questions.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Good morning, Patrick.

Patrick Baumann -- J.P. Morgan -- Analyst

On big LNG. Just had a question. So this year the guidance includes a $100 million from I think Calcasieu Pass it says in the slides, I think that's what it's from, but what do you see as the contribution to earnings for the year. And then for next year, you mentioned $500 million of orders that you could see for some FIDs. Do you see these potentially contributing to earnings at all in 2021?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So in 2020, the Calcasieu Pass gives us around $0.80 to $0.90 of EPS in total for the year. In 2021, it would really depend on the timing around when those projects move to FID. I think I would say the highest confidence I have in terms of the earliest one would be Plaquemines and if we get that in the first half of 2020, that will contribute revenue and earnings to 2021 and coupling that with the remaining first quarter Calcasieu Pass revenue and earnings, it would look extremely similar to 2020.

Patrick Baumann -- J.P. Morgan -- Analyst

What's -- so Calcasieu Pass still has some revenue left next year, what's that amount?

Jillian C. Evanko -- President and Chief Executive Officer and Director

That's about $24 million in the first quarter of next year.

Patrick Baumann -- J.P. Morgan -- Analyst

Okay. Got it. That's helpful and then did you rank order the ones you are more confident in, in terms of projects going to FID. You might have said it earlier in the call. I'm not sure I caught it.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yeah, no, I'm confident in Plaquemines Stage 3, for Cheniere Phase 1 and also Tellurian Driftwood Phase 1 project. In terms of the timing, I think Plaquemines goes first, but related to Cheniere and Tellurian and what they want to discuss publicly on their projects and the timing related to that.

Patrick Baumann -- J.P. Morgan -- Analyst

Understood. And then last question from me is just on free cash flow. Sorry if I missed this, but did you provide updated guidance on free cash flow for the year?

Jillian C. Evanko -- President and Chief Executive Officer and Director

We did not provide specific updated guidance on it, but you can take the second quarter as a good proxy for Q3 and Q4 and tack on a little bit more just as we drive down inventory.

Patrick Baumann -- J.P. Morgan -- Analyst

Okay, great. Thanks, I appreciate it.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thank you.

Operator

Thank you. Our next question comes from Ben Nolan with Stifel. Your line is now open.

Ben Nolan -- Stifel -- Analyst

Thanks, I appreciate the time guys and good quarter. Congratulations to the team. My first question goes a little bit and Jill, you talked to sort of how you're thinking about the potential margins for 2021. I know that in the Investor Day you'd sort of given, I don't know, preliminary guidance or something that you'd hoped to get to $1.7 billion of revenue in 2021. Obviously, without specific guidance, just it was curious how comfortable you are that whether or not, I guess you think you -- that can be attainable based on what you're seeing at the moment?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So without big LNG in 2021, we won't get to $1.7 billion. I would say from our initial look at 2021 again without [Technical Issues] here, we do see kind of the mid-single digit organic growth for us and that's fairly widespread with the exception of the FinFans, we continue to see that depressed heading into next year, but we will be at or above what we originally said from a margin perspective as a percent of sales, both gross margin and operating income. So, I'm pleased with the progress on that regardless of the top line not being able to get to that $1.7 billion.

Ben Nolan -- Stifel -- Analyst

Okay. Very helpful. And then as my follow-up. I was going to maybe dig in a little bit more on some of the LNG station stuff. Obviously, China, Europe, India, you guys have been pretty successful in those regions. From what we're seeing is a lot of other development in places like Brazil and Indonesia, some other places. Curious if you can maybe draw the landscape and also the competitive environment, where do you guys sit with respect to everybody else that's trying to correct the knot?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So for the LNG fueling stations, the first half of the year, 12 of them were in China. We had six in India and rest were in Europe. So that's to kind of give you a sense of that. That's a fairly typical spread in terms of the geographies that we're seeing activity in. We are heavily involved in quoting multiple LNG stations in particular in Brazil and other Central, South and Latin American locations. We, in terms of the competitive positioning, I'm going to answer your question, hopefully, I answer it with what you're actually trying to ask, but if not, feel free to ask again.

We are certainly I would say a leader on the LNG fueling station side in terms of the equipment content, but also in terms of the ability to kind of go from design to equipment to fully installation -- fully installing these designs and you saw that in Gibraltar when we worked closely with Shell on that project and we're starting to see many more of those types of opportunities that it's not just an equipment sale, but a full solution. And I do think, to your comment that places like Indonesia, places like Vietnam, as they start to build out their LNG infrastructure, these are the next geographic opportunities and regions for us.

Ben Nolan -- Stifel -- Analyst

Okay. No, that did answer my question. Appreciate it. Thanks, Jill.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thank you.

Operator

Thank you. Our next question comes from Walter Liptak with Seaport. Your line is now open.

Walter Liptak -- Seaport -- Analyst

Hi, thanks. Good morning, Jill. And great quarter. I wanted to ask about hydrogen go back to that and I wonder with the market doing better than you expected, what your appetite is at this point for M&A and I think M&A in general, at what point do you think you might start looking for deals again?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So we're always looking for deals [Phonetic]. What we've been doing is really targeting a very disciplined approach to where these opportunities might be. Certain aspects of hydrogen are very appealing to us, yet as I commented earlier to someone else's question, there are very few available opportunities and so we are actively working with some of our customers, with joint venture opportunities, joint technology development opportunities and so that's really where I think the opportunity on the hydrogen side exists, investments type of thing.

We also have not strayed from our desire to purchase a cryogenic pump company and there is very few pure-plays in the world of that and we're in discussions regarding the potential purchase of one of them, which wouldn't close for a long period of time and we're in preliminary discussions on that, but those are really the areas that we would focus in on. We're not looking for tacking on scale. We're really looking for these very targeted technologies and products that continue to expand our addressable market by rounding out E&C and D&S.

Walter Liptak -- Seaport -- Analyst

Great, thank you.

Operator

Thank you. Our next question comes from Craig Shere with Tuohy Brothers. Your line is now open.

Craig Shere -- Tuohy Brothers -- Analyst

Good morning, thanks for taking the questions.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Craig.

Craig Shere -- Tuohy Brothers -- Analyst

Jill, to start with, I wonder if you can opine on a couple industry data points we've noticed. First is NFE's plans to shift from custom built LNG import terminals to using I guess mass open sea ISO container filling that can be delivered and offloaded at ports with normal cargo ships and equipment handling. And the second data point that we noticed was large-scale LNG quality control issues. Apparently, Gorgon's Train 2 is having a delayed restart due to thousands of heat exchanger cracks. What do you think of these things in terms of the opportunities that they present for Chart?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So I would start with the NFE example and say that it is definitely a trend in the industry is to move toward more modularization and standardization and NFE has always been a front-runner in their space in terms of moving toward these types of applications. So we are working very closely with our partners and our customers around continuing to shorten the duration of construction on whether it's small-scale or whether it's storage as you described.

So typically a small-scale terminal will take 16 months, 18 months and we've had a request from customers, can you get that down to nine months, 10 months and that comes through the standardization as well as the offering of a full package, which offers us a great opportunity to step in to more of these types of applications. So we're excited about that movement. We're well positioned and you'll hear us talk over and in particular around like Venture Global's projects where we're making -- we make the 18 cold boxes and their standard, we get better every time we make it and we're able to pass that cost savings through to our customer and that's really going to continue to fuel the industry.

On the big LNG or the large-scale in particular Gorgon, let me start by saying, those are not our heat exchangers. So I'm pleased to be able to say that, but quality is the number one most important aspect in particular on brazed aluminum heat exchangers and you've heard us talk over the last couple of years around innovations that we've put in place on ours including smart layer technology which detects atmospheric leaks ahead of the actual leak itself happening and not only around the Sumitomo situation where they've lost their certification, there's -- these are critical to the safety of the people at these sites and so there's a good opportunity for us to be able to step in and help not only with the repair, but also with the replacements and for us being able to have a ready package to go into these types of replacements will accelerate that for the customers.

Craig Shere -- Tuohy Brothers -- Analyst

Great and I guess maybe some of this dovetails -- the first question really related to some LNG opportunities, but can you speak to the ability of both hydrogen and LNG to co-exist and grow?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yes. So it goes back to my comment around there -- the ultimate answer in this is not one single fueling source. This is going to be a hybrid and as a result of these various different infrastructures being built, they will be forced to co-exist, but just the elements alone are able to work together and you'll see that in storage, you see that even just in the short version of how LNG works in typical peak shaving for coal applications. Those don't necessarily co-exist together, but they are in the same infrastructure and in the same grid and we're seeing more and more of that.

A great example is one utility company that recently stated that they're going to do hydrogen storage combined with solar and wind at their location. I think it was in California or something like that. So these elements don't have to be singular on their own and I think you'll start to see a lot more hybrid solutions coming into play and that's really what you see in biogas, biomethane. I could have called it micro-scale LNG. So these things go together well and you're seeing a lot of innovation around the compounding of them together.

Craig Shere -- Tuohy Brothers -- Analyst

I guess what I was trying to get at is as renewables and hydrogen pick up over three to five years, do you still see the LNG market overall continuing to grow?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yes, absolutely. I mean [Technical Issues] changed on that and I continue to see it being a critical part of the future.

Craig Shere -- Tuohy Brothers -- Analyst

Great, thank you.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Craig.

Operator

Thank you. Our next question comes from Pavel Molchanov with Raymond James. Your line is now open.

Pavel Molchanov -- Raymond James -- Analyst

Thanks for taking the question. You mentioned India as one of the most locked down disrupted markets. Right now, of course, it is South America where the pandemic is the most visible and the lockdowns are generally the most severe. What has been the impact from your kind of Latin American customer perspective on some of the end markets you talked about like bio gas?

Jillian C. Evanko -- President and Chief Executive Officer and Director

So we've been able to leverage the medical oxygen side of the business and so our South American customers have actually been placing quite a bit of orders related to oxygen, which has allowed consistency in the order intake side of things, but with respect to bio gas and LNG fueling stations and things like that, we have definitely seen where there were projects that were supposed to come at the end of June, early July, those being pushed out and what we are hearing is that's really kind of a six to eight week push out, but that will depend on how things roll out with COVID and what timing relates to the reopening of the countries.

Pavel Molchanov -- Raymond James -- Analyst

Okay, that's helpful. In Q1, if I recall, all of the directly COVID related products were 6% of revenue. What was that number in Q2 and where would you expect that in the second half of the year?

Jillian C. Evanko -- President and Chief Executive Officer and Director

Yes. So in Q2, it was about 8% or so, 8%, 9%. So it was significantly higher if you look at just the total mix. In the second half of the year if I'm looking at July. July is looking very similar to June, if not a little bit higher. So I would expect that the second half looks more similar to the second quarter than it does to the first quarter. So still a higher percent of the total.

Pavel Molchanov -- Raymond James -- Analyst

Okay. Thanks very much.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Pavel.

Operator

Thank you. Our next question comes from Barry Haimes with Sage Asset Management. Your line is now open.

Barry Haimes -- Sage Asset Management -- Analyst

Thanks very much and congrats on a great quarter. Had a question on big LNG and Jill, you mentioned the three projects that you thought had the best shot for FID next year and the question is, we all know we need them in the medium to long run but in the short run, the market is still very soft. So what do you think it is that needs to change to get those projects over the hump to get the offtakers to commit. What is it that makes you think we will actually have FIDs in '21? Thanks.

Jillian C. Evanko -- President and Chief Executive Officer and Director

I think you're continuing to see a shift to a more open market spot related pricing on LNG in particular with respect to contracts. So I think that is well under way on the creative side versus traditional offtaking and that's going to continue to drive those movements toward FID. So this is less around, OK. I need specific offtake, but now you're seeing this open exchange happening globally and also regionally as I mentioned on India with the first gas trading exchange that they had.

Additionally, as infrastructure continues to be built in these smaller geographies or more localized geographies, you can't have infrastructure without having gas. So that's something that we'll continue to drive that, which really goes to the supply/demand differential and as the demand for LNG grows and less supply is available, that will help facilitate this. So whether it's six months, nine months, 12 months, what we're hearing from our customers is that these projects are continuing to tick forward in conversations with end users are progressing even if virtually.

Barry Haimes -- Sage Asset Management -- Analyst

Great. Appreciate the color. Thanks, Jill.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Barry.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Jill Evanko for closing remarks.

Jillian C. Evanko -- President and Chief Executive Officer and Director

Thanks, Joelle. I'm able to share our strong results for Q2 and outlook with you for the remainder of the year only because of the great Chart team. I would like to conclude it by thanking all of our 3,800 Chart team members for their efforts. On the final slide of the presentation, we show a photo of our team in La Crosse, Wisconsin where we just this week raised our 10,000th core. Finally, here we go into the third quarter, get selling Aaron, Mike, Bill and team. Thanks everybody for joining us today. Goodbye.

Operator

[Operator Closing Remarks]

Duration: 79 minutes

Call participants:

Jillian C. Evanko -- President and Chief Executive Officer and Director

Scott W. Merkle -- Vice President and Chief Accounting Officer

James West -- Evercore ISI -- Analyst

Martin W. Malloy -- Johnson Rice & Company, LLC -- Analyst

Eric Stine -- Craig-Hallum Capital Group LLC -- Analyst

Robert Brown -- Lake Street Capital Markets, LLC -- Analyst

John Walsh -- Credit Suisse -- Analyst

Tom Hayes -- Northcoast Research -- Analyst

Gregory Lewis -- BTIG -- Analyst

Conner Lynagh -- Morgan Stanley -- Analyst

J.B. Lowe -- Citigroup -- Analyst

Patrick Baumann -- J.P. Morgan -- Analyst

Ben Nolan -- Stifel -- Analyst

Walter Liptak -- Seaport -- Analyst

Craig Shere -- Tuohy Brothers -- Analyst

Pavel Molchanov -- Raymond James -- Analyst

Barry Haimes -- Sage Asset Management -- Analyst

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