FMC Corporation

Ladies and gentlemen, today's FMC Corporation conference call is scheduled to begin momentarily. If you should experience difficulties during today's call, please press star, then zero, and an operator will assist you. Thank you for your patience. Your lines will be placed back on music hold until the conference begins. Music Ladies and gentlemen, good morning and welcome to the second quarter 2019 earnings release conference call for FMC Corporation. Phone lines will be placed on a listen-only mode throughout the conference. After the speaker's presentation, there will be a question and answer period. As a reminder, this conference is being recorded. I will now turn the conference over to Mr. Michael Worley, Director of Investor Relations for FMC Corporation. Mr. Worley, you may begin.

Thank you and good morning, everyone. Welcome to FMC Corporation's second quarter earnings call. Joining me today are Pierre Brondeau, Chief Executive Officer and Chairman, Mark Douglas, President and Chief Operating Officer, and Andrew Sandefur, Executive Vice President and Chief Financial Officer. Pierre will review FMC's second quarter performance and provide the outlook for the rest of 2019. Andrew will provide an overview of select financial results. Mark will then address the long-term sustainable growth for RENAC's firms as per insect controls. We will then address your questions. The slide presentation that accompanies our results along with our earnings release and 2019 outlook statement are available on our website, and the prepared remarks from today's discussion will be made available after the call. Finally, let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors including but not limited to those factors identified in our press release and in our filings with the SEC. Information presented represents our best judgment based on today's information. Actual results may vary based upon these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, and free cash flow, all of which are non-GAAP financial measures. Please note that earnings shall mean adjusted earnings, and EBITDA shall mean adjusted EBITDA for all income state references. A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's call, are provided on our website. With that, I'll now turn the call over to Pierre.

Thank you, Michael, and good morning, everyone. As you saw in our earnings release, FMC continued to outperform the market as we have for the past seven quarters. We delivered results in line with the forecast and adjusted to specific global conditions in the quarter. Turning to slide three, FMC reported $1.2 billion in second quarter revenue, which reflects a year-over-year increase of 4.5% on the reported basis and 9% organic growth excluding FX headwinds. This increase was mostly driven by strength in Brazil, India, and the MEA. Adjusted company EBITDA was $330 million, an increase of 6% compared to recast financials from last year, and $3 million above the midpoint over guidance. Company EBITDA margins were 28%, up year-over-year despite $64 million in combined headwinds from raw material costs and foreign currencies. Adjusted EPS was $1.66 in the quarter, an increase of 11% versus recast Q2 2018 and 1 cent above the midpoint over guidance. The strong year-over-year EPS growth was driven by price increase higher volume, and a lower share count. Moving now to second quarter revenue on slide four. Q2 revenue grew 4.5% versus prior year, with volume contributing 5% growth and price mix another 3% growth. This was offset partially by a 4% headwind from FX. Although Q2 is a seasonally smaller quarter of the year in Latin America, sales in that region grew 29% year-over-year or 34% organically, continuing the trend from Q1. Drivers include strong revenue growth in Brazil across the portfolio, with high demand for applications on cotton and sugar cane, and price increases that more than offset the impact of FX on both revenue and earnings. Following such a strong first half in Latin America, it is important to note that we continue to monitor channel inventory levels of FMC products very closely in Brazil. They are at an all-time low for these points in the season. In EMEA, improved market conditions in Russia and Ukraine, good demand in Southwest Europe, and new country registrations for sales up here in tech control drove year-over-year revenue growth of 4%. Organic growth was 10%. In Asia, Revenue was down 2% overall, but increased 4% organically year over year. We were especially pleased with the strong performance in India, where our sales grew over 20%, driven by growth in herbicides for sugarcane and the benefits of our new commercial organization structure, which we put in place about a year ago. In North America, Revenue was down 2% year-over-year as the well-understood weather issues in the quarter caused a reduction in demand from raw crop customers. This low demand was offset in part by strong sales of Ranaxapyr insect control, especially in niche crops in California, and a new fungicide, Lucento. Turning to slide five, second quarter EBITDA was $338 million. Price increases in all regions and strong volume demand everywhere but North America combined to more than offset the headwinds from raw material costs and effects, leading to 6% growth versus recast results from Q2 2018. Moving to a 2019 outlook on slide six. We are maintaining our guidance for 2019 revenue and EBITDA. We expect full-year 2019 revenue to grow 6% at the midpoint or 9% organic growth, excluding a forecasted 3% FX and win. We expect total company EBITDA to grow 8%. we are increasing our 2019 EPS guidance to a range of $5.68 to $5.88, which represents a gain of 10% at the midpoint over recast 2018. Our EPS guidance now reflects the $200 million of buybacks completed in the first half of 2019, as well as an additional $200 million of buyback anticipated in the second half. We continue to plan to make $400 to $500 million in total share repurchase in 2019, but our EPS guidance reflects the lower end of this range. For the third quarter, we expect revenue to be in the range of 960 to 990 million dollars, which represents year-over-year growth of 6% at the midpoint. We are also forecasting EBITDA of 190 million to 210 million in Q3, which would be an increase of 7% year-over-year at the midpoint. As expected, The impact from FX will be more muted in the second half of the year. We expect third quarter EPS to be in the range of 75 cents to 85 cents, up 13% at the midpoint versus recast results from Q3 2018. The third quarter is a seasonally smallest quarter for FNC. which is in line with the quarterly pattern from 2018, as Q3 is not a high season in any of our regions. The healthy growth with forecast is in line with the full year growth expectation, and the Q3 guidance is essentially in line with the prior year period as a percent of annual sales, annual EBITDA, and annual EPS. Guidance for Q4 implies a very strong quarter with sales growth of 7%, EBITDA growth of 17%, and EPS growth of 10%, all at the midpoint of the ranges versus recast Q4 2018 results. Q4 performance will be driven by Latin America. In Brazil, similar to last year, we have already received nearly 70% of the orders needed to deliver our second half forecast. This is giving us a very strong confidence in our ability to deliver our financial target for the second half. However, we are carefully monitoring the North America market and channel inventories. For 2019, we now expect the overall global crop protection market will be flat on a U.S. dollar basis, down slightly from a previous outlook. We expect Latin America to grow faster in the high single digits and North America to be weaker down mid-single digits. This adjustment in market forecast does not change our overall outlook for FMC's financial outperformance related to the market. Turning now to a full year EBITDA bridge and revenue drivers on slide seven. A full year cost headwind is higher than our prior forecast, mainly due to increased tariffs in the U.S., and a delayed reopening of a key tolling partner in China. However, strong pricing is now expected to offset over 70% of the $220 million in combined headwinds from cost and effects. Moving to slide eight, we provide the key drivers for EBITDA and revenue growth in Q3 and Q4. Volume growth and price increases are expected to be consistent drivers of revenue and earnings performance. I will now turn the call over to Andrew.