FMC Corporation

Good morning and welcome to the fourth quarter 2022 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 are using a speakerphone, please pick up your handset before pressing the keys. I'd now like to turn the conference over to Mr. Zach Zecchi, Director of Investor Relations for FMC Corporation. Please go ahead.

Thank you, Emily, and good morning, everyone. Welcome to FMC Corporation's fourth quarter earnings call. Joining me today are Mark Douglas, President and Chief Executive Officer, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Mark will review our fourth quarter and full year performance, as well as provide an outlook for full year 2023 and the first quarter. 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, net debt, 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 performance in the quarter, driven by a combination of robust volume growth and strong pricing actions. Sales of new products continued to accelerate. nearly doubling year over year and representing 11% of the total sales in the quarter. We continue to make investments in expanding our market access in key geographies, including the US and Brazil. Pricing actions in the quarter more than offset headwinds from both cost and FX, resulting in EBITDA margin expansion in excess of 40 basis points. This positive gap between price gains and headwinds from cost and FX is expected to continue as we move forward through 2023. Agricultural markets remain robust, with high commodity prices, increasing acreage for crops, and positive grower sentiment, providing a solid backdrop for FMC. Our Q4 results are detailed on slides 3, 4, and 5. Revenue was up 17% organically, EBITDA up 17%, and EPS up 12%. The US and Brazil were major contributors to the quarter's results, with volume and price driving the US business, while price and FX drove Brazil's results. Adjusted earnings were $2.37 per diluted share in the quarter, 7 cents above the midpoint of our guidance range, with this outperformance driven by higher EBITDA and lower than anticipated taxes. In North America, sales increased 35% year over year, driven by strong sentiment among growers and our distribution partners in the US for the upcoming season. Selected herbicides for soybeans and other crops, as well as fungicides for corn, grew rapidly in the quarter. We have made great progress in revitalizing our North American product portfolio, with almost 20% of the quarter's branded sales coming from products launched in the last five years. We've also invested in more sales and tech service resources, enabling us to reach more retailers to promote our newest technologies and expand our market access. In Latin America, sales increased 13% year-over-year and 9% organically, led by Brazil. Pricing actions, demand for our fungicides and selective herbicides, as well as our investments in market access drove results for the region. Our market access investments contributed to about 50% of the region's growth in the quarter. FX was also benefiting the quarter, driven by the strong VRL. However, dry weather negatively impacted corn and soy in southern Brazil and Argentina. Asia was flat versus the fourth quarter last year, and up 12% organically. Insecticides and selective herbicides led the growth in the region. Overwatch herbicide, which is based on Isoflex, the first active from our pipeline, continues to gain share on cereals in Australia. Almost 20% of branded sales in Asia came from products launched in the last five years. FX was a significant headwind in the quarter, offsetting the double-digit organic growth. EMEA was up 7% versus prior year and up 20% organically. In addition to strong pricing, results were driven by broad-based demand, especially for cereal herbicides. 13% of branded sales in the quarter came from products launched in the last five years, and sales of Siazabeer-based formulations almost doubled in the quarter. In our plant health business, biologicals grew double digits in the quarter, reflecting the strength of our portfolio. Overall, adjusted EBITDA for the fourth quarter was $432 million, an increase of 17% compared to the prior year period. resulting in EBITDA margin expansion in excess of 40 basis points. Average price increases of 8% contributed $109 million in the quarter and more than offset the cost and FX headwinds. Moving to slide 6 and FMC's full year 2022 results. We reported record $5.8 billion in revenue, which reflects a 15% increase on a reported basis and 18% organic growth. This is despite exiting our Russian business earlier in the year. More than $600 million in sales came from products launched in the last five years, growth of 50% over the previous year. And about $100 million came from products launched in 2022, continuing the multi-year trend of strong growth from new technologies. Diamides grew in the mid to high single digit range for the year. Adjusted EBITDA was $1.407 billion, an increase of 7% compared to 2021, despite $463 million in cost headwinds and $74 million in FX headwinds. Exiting Russia negatively impacted our EBITDA by approximately $25 million. The benefit from pricing actions in the year was $372 million. This was necessary to overcome the most significant input cost headwinds we have ever experienced. We believe input cost headwinds peaked in the third quarter and expect them to ease going forward. 2022 adjusted earnings were $7.41 per diluted share, an increase of 8% versus 2021. This increase was driven primarily by the EBITDA increase and lower share count, offset partially by higher interest expenses and taxes. In addition to these financial results, we also had other significant achievements in the year, as detailed on slides seven and eight. FMC continues to make substantial progress on our sustainability and net zero goals. For example, we reduced scope one and two greenhouse gas emissions at our operating sites by at least 2% in the last year, while at the same time delivering record growth. The consistent progress we have made on various ESG metrics was recognized by several raters that moved us up on their rankings in 2022. FMC now stands at or above industry average across these raters. In our plant health business, we launched 17 new biological products spread across all four regions, as well as two new micronutrient products. We also acquired Bioferro in 2022. As we've said before, Bioferro is a pioneer in biologically produced pheromone technology with a patented fermentation platform that enables significantly lower cost production compared to current standards. In Precision Ag, we continue to advance our ARC farm intelligence platform, FMC's proprietary mobile solution that helps farmers manage pest pressure through predictive modeling. ARC is now deployed across 20 million acres spanning over 20 countries, and we have found that growers who use ARC are tending to buy a broader range of products from FMC. Finally, our venture capital arm, FMC Ventures, continued to build its portfolio in 2022 with new collaborations and strategic investments in startups and early-stage companies working on new or disruptive technologies. These engagements, which support or augment our internal capabilities, span several technology segments, including robotics, drone technology, ag fintech, pathology detection, soil health, peptides and pheromones. As an example, in 2022, FMC Ventures increased its investment in MicroPep, a startup developing short natural peptide molecules that target and regulate plant genes and proteins. In addition to our equity investment, we entered into a strategic collaboration with MicroPep late last year to develop solutions to control herbicide-resistant weeds. FMC Ventures also invested in Trave, an ag fintech startup addressing working capital needs of growers in Brazil. Turning to slide 9, which provides the key market and cost dynamics underpinning our 2023 outlook. We expect crop commodity prices to remain robust and that growers around the world will continue to rely on our advanced technologies to deliver high yields while they combat erratic weather patterns. We expect the North American market to grow in the low single-digit range with an assumption of normal weather conditions. The Latin American market is believed to have grown significantly in 2022, primarily due to rapidly price increases in non-selective herbicides, a product segment in which FMC does not participate. In 2023, we expect the Latin American market to contract by mid-single digits, as some of those gains in non-selective herbicides reverse. Asian markets are expected to be flat to last year, And EMEA is expected to be up high single digits with improvements driven by increasing acres for cereals. Taking into account these regional market projections and in light of the very strong market growth in 2022, we expect the overall crop protection market will grow this year in the low single digit range on a US dollar basis. FMC's continued pricing actions, strong demand for our product portfolio, particularly our newest technologies, as well as farther market access gains are expected to provide solid support for FMC's top line to grow above the market rate. Costs are anticipated to remain a year-over-year headwind throughout the year. However, we are seeing deceleration of input cost inflation, and these costs are expected to become a year-over-year tailwind in the second half. We will continue to invest in R&D and SG&A to expand market access, grow our plant health business, deploy new technologies through precision ag, and develop new synthetic and biological products. Overall, we expect price increases to more than offset cost and FX headwinds, resulting in margin expansion in the second half of the year. Turning to slide 10 for our full year 2023 outlook, we expect the full year revenue in the range of $6.08 billion to $6.22 billion, representing a 6% growth at the midpoint compared to 2022. New launches and market access initiatives will drive volume growth with mid-single digit pricing expected for the full year. FX is expected to be a moderate headwind to top line results. Adjusted EBITDA is forecasted to be in the range of $1.48 billion to $1.56 billion, reflecting 8% year-over-year growth at the midpoint. Price is anticipated to be the primary driver of EBITDA growth in the year. with cost headwinds expected to be significantly lower than those experienced last year. Increases in the input cost portion of cost headwinds are anticipated to decelerate as the year progresses and become a year-over-year tailwind in the second half. We expect adjusted earnings of $7.20 to $8 per diluted share, representing a 3% increase at the midpoint, with EPS growth limited by higher interest and tax rates. This assumes a share count of approximately 126.5 million and does not factor in the benefit of any potential share repurchases in the year. Looking at the first quarter outlook on slide 10, we forecast revenue to be in the range of $1.41 billion to $1.45 billion, representing 6% growth at the midpoint compared to the first quarter of 2022. We are targeting mid to high single digit price increases of which much has already been implemented. Price is expected to be the primary driver of revenue growth in the quarter. FX is anticipated to be a headwind in the quarter. Adjusted EBITDA is forecasted to be in the range of $345 million to $365 million, flat versus the prior year period at the midpoint, mainly due to pricing gains being offset by expected cost headwinds. Volume gains are expected to be offset by FX-related headwinds. We expect adjusted earnings per diluted share to be in the range of $1.63 to $1.83, representing a decrease of 8% at the midpoint due to higher interest rates and taxes. This assumes a share count of approximately 126.5 million. Moving now to slide 12, I want to highlight some of the potential factors that could drive our results to either end of the guidance range. For the midpoint of our adjusted EBITDA guidance, we are assuming market growth in the low single-digit range and FMC achieving mid-single-digit price increases. Input costs headwinds are expected to continue decelerating and become a tailwind as the year progresses, while FX is expected to be a headwind throughout the year. With the resilience we've built into our supply chain, our base case assumes any minor disruptions are mitigated. Alternatively, if cost headwinds ease more rapidly If the market grows at a higher rate than forecasted and if we are able to realize high single-digit prices or FX has a lower impact, we could deliver results at the high end of our guidance range. Major supply disruptions of critical inputs or services are examples of factors that would drive results below the midpoint of the guidance range. With that, I'll now turn the call over to Andrew.