FMC Corporation

Good morning and welcome to the third quarter 2021 earnings call for FMC Corporation. This event is being recorded and all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's prepared remarks, there will be an opportunity to ask questions. To be placed in the Q&A queue, please press the star key then one at any time. If you're using a speakerphone, please pick up your handset before pressing the keys. I would now like to turn the conference over to Mr. Zach Zaki, Director of Investor Relations for FMC Corporation. Please go ahead.

Thank you, Chad, and good morning, everyone. Welcome to FMC Corporation's Third Quarter Earnings Call. Joining me today are Mark Douglas, President and Chief Executive Officer, and Andrew Sandefur, Executive Vice President and Chief Financial Officer. Mark will review our third quarter performance and provide an outlook for the rest of the year, as well as an initial view of 2022. Andrew will provide an overview of select financial results. Following the prepared remarks, we will take questions. Our earnings release and today's slide presentation are available on our website, and the prepared remarks from today's discussion will be made available after the call. 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 earnings release and in our filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's understanding. 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, free cash flow, and organic revenue growth. all of which are non-GAAP financial measures. Please note that as used in today's discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA. A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's conference call, are provided on our website. With that, I will now turn the call over to Mark.

Thank you, Zach, and good morning, everyone. FMC delivered record third quarter results. We grew our revenue by 10%, EBITDA by 12%, EPS by 17%, and importantly, expanded our EBITDA margins despite continuing cost pressures. Performance in the quarter was driven by broad-based volume growth and price increases. New products introduced in the last 12 months continue to gain momentum, and we are now forecasting sales from these products to account for more than one-third of our revenue growth this year. In addition, FMC's plant health business had an excellent quarter, with 40% year-over-year growth led by biologicals. Looking ahead, we continue to expect a strong finish to the year driven by high margin volume gains and accelerated pricing actions, as well as a robust global market backdrop. I'd like to take a moment to acknowledge our operations and procurement teams for their contribution to our third quarter performance. The supply chain and logistics challenges highlighted in our last earnings call continue to disrupt ag chem and other industries around the world. FMC was able to meet the strong grower demand for our products in a timely manner, thanks to the work of these teams. Let me also briefly comment on COVID-19's impact on FMC. All our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses continue to be fully active, and we have resumed in-office operations in many parts of the world. FMC continues to follow all guidance given by local authorities. Turning to our Q3 results on slide 3, we reported $1.2 billion in third quarter revenue, which reflects a 10% increase on a reported basis and a 9% increase organically. Growth. was board-based with 11 of our top 20 countries posting double-digit growth in the quarter. We had strong growth in all product categories, led by greater than 20% growth in herbicides. This was partially offset by registration losses in EMEA and Latin America. Adjusted EBITDA was $293 million, an increase of 12% compared to the prior year period, and $18 million above the midpoint of our guidance range. EBITDA margins were 24.6%, an increase of 40 basis points compared to the prior year, driven by mix improvement as well as operational discipline and price increases in all regions. Adjusted earnings were $1.43 per diluted share in the quarter, an increase of 17% versus Q3 2020. The year-over-year increase was primarily driven by an increase in EBITDA, with the benefit of share repurchases and lower interest expenses largely offset by other factors. Relative to our Q3 guidance, the 12-cent beat was driven almost entirely by EBITDA. Moving now to slide four. Sales in Asia increased 20% year-over-year and 19% organically, driven by strong diamide sales across the region, as well as pricing actions. In Australia, we had a successful launch of Banticore Insect Control, which is the new higher-concentration formulation of Ranaxapyr active Fanticor is applied to specialty crops, such as chickpeas. The Australian market also benefited from positive grower sentiment, favorable weather conditions, and strong insect pressure. India had another growth quarter, despite an erratic monsoon, which resulted in dry spells in parts of the country. India's growth was driven by diamide sales in rice, as well as continued expansion of the rest of our portfolio, leveraging our strong market presence. In Latin America, sales increased 11% year-over-year and 9% organically, driven by double-digit growth of insecticides in Brazil and Argentina, as well as pricing actions across the region. Corn, soy, and cotton were the key crops driving growth in the quarter. This is a direct result of our strategy to improve market access and increase penetration of our technologies, particularly in the Brazilian soybean market. Chile is another good example of this, as sales nearly doubled compared to this time last year as we leveraged our enhanced market presence. Plant health products grew approximately 50% in the region, led by biologicals and seed treatment. Latin America was impacted partially by registration cancellations and rationalizations of products in the quarter. EMEA grew revenue 12% and 10% organically, driven by strong demand for our herbicides and diamides across the whole region, despite headwinds from registration cancellations. Among others, Russia, France, Germany and the UK grew double digits in the quarter. Demand was especially strong for herbicide applications in cereals and oilseed rape. South Africa doubled its sales in the period compared to the previous year, driven by the continued penetration of diamides, mainly on citrus and top fruits, This is a great demonstration of the untapped potential in new markets for our diamides. Our US and Canada branded business grew greater than 20%, driven by strong demand for our diamides and fall herbicide applications, as well as pricing actions. AvantiCor had a successful introduction in the US, where it is used to target worm pests in a range of crops, including soybean, corn, and cotton. The banter call launch was timely and welcomed by growers who were battling extended fall armyworm pressure from the southern markets up through the middle of the country. Overall, North America sales decreased 6% year-over-year and 6% organically due to the continued shift of Diomide global partner sales in the quarter from North America to other regions, as we have described in previous calls. Moving to slide five, despite continuing supply issues across the industry, FMC's Third quarter revenue increased by 10% versus prior year, driven by a 9% contribution from volume. Gross prices increased 1% in the quarter as our most recent pricing actions went into effect. EBITDA in the third quarter was up 12% year-over-year, primarily due to broad-based volume gains. We also had a $12 million contribution in the quarter from price increases as invoiced to customers. The benefit of our pricing action was masked in the quarter by some favorable rebate and other adjustments in the prior year period that did not repeat this quarter. Costs continued to be a headwind. However, the total amount incurred in the third quarter was less pronounced than previously projected, mainly due to timing. We still expect second half costs to be consistent with previous guidance. And FX was a $10 million tailwind in the quarter. Turning to slide six. Before I review FMC's full year 2021 and Q4 earnings outlook, let me share our view of the overall market conditions. We continue to expect the global crop protection market will be up mid-single digits this year on a US dollar basis. Breaking this down by region, we continue to anticipate high single-digit growth in the Latin American market, mid-single-digit growth in the EMEA market, low to mid-single-digit growth in the Asian market, and low single-digit growth in the North American market. We are raising FMC's full-year 2021 earnings guidance to the range of $6.59 to $6.99 per diluted share, a year-over-year increase of 10% at the midpoint, reflecting the impact of share repurchases completed year-to-date. Our 2021 revenue forecast remains in the range of $4.9 billion to $5.1 billion, an increase of 8% at the midpoint versus 2020. EBITDA remains in the range of $1.29 billion to $1.35 billion, representing 6% year-over-year growth at the midpoint. Guidance for Q4 implies year-over-year revenue growth of 19% at the midpoint on a reported basis, with no FX impact anticipated. We forecast EBITDA growth of 29% at the midpoint versus Q4 2020, and EPS is forecasted to be up 41% year-over-year. Approximately three-quarters of the EBITDA growth is driven by the return of business missed in Q4 2020 due to supply chain disruptions in North America and weather impact in Latin America. Turning to slide seven, and full-year EBITDA and revenue drivers. Revenue is expected to benefit from 6% volume growth, a 1% price contribution from higher prices, and a 1% benefit from FX. We anticipate continued strong volume growth led by Latin America, North America and Asia. We have increased our forecast again for revenue from products launched in 2021. These sales are now expected to contribute $140 million in year-over-year growth, up from our last forecast of $130 million and our initial view of $100 million. Pricing actions in Q3 will continue to accelerate in Q4. We will continue to raise prices across all regions going into next year. Despite the shift of costs from Q3 to Q4, estimates for full-year cost headwinds have not changed since our detailed comments in the last call. This is why our full-year outlook remains unchanged. Moving to slide eight and our four-quarter drivers. revenue is expected to benefit from strong volume gains. In Brazil, the strength of soft commodity prices, projected increases in planted areas, as well as good weather conditions are all leading to a good cadence of incoming orders and give us confidence in our expectations for a strong fourth quarter. In the U.S., channel inventories are normal for this time of year, our new product launches are gaining significant traction, and market sentiment supports our expectations for a robust fourth quarter. As I noted earlier, we have also moved on price increases, with higher prices already in effect in the Brazilian and U.S. markets. Similar actions are underway in other countries across the globe, such as Australia, Russia, France, Mexico, and Argentina, and you should expect us to continue raising prices through the year end and well into next year. Cost increases are consistent with our guidance for the second half. We continue to pursue cost improvement opportunities and remain vigilant with our cost controls. all without impacting our R&D pipeline or growth trajectory. I'll now turn the call over to Andrew.