FMC Corporation

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, Lydia, 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, as well as provide an outlook for the fourth quarter and full year performance, followed by an update on FMC's Diamide franchise. 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, pre-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. During Q3, we observed a continuation of industry-wide destocking activity as the value chain resets inventory levels in response to increased security of supply and higher interest rates. This led to significantly lower volumes versus the prior year, and in the case of Latin America, the decline was much more severe than we had estimated at our last earnings call. As a reminder, due to the timing of its growing season, Latin America is typically the strongest contributor to our Q3 results, which amplifies the region's impact on our overall Q3 numbers. We had assumed that the destocking we observed in Latin America during Q2 would be sufficient to allow for more normal order patterns to resume. As Latin America entered its main growing season in September, it became clear that we underestimated the depth and duration of the destocking to come. It is our view that when the global destocking ends and channel inventories have been reset, there will not be a snapback restocking period. Rather, we expect the crop protection market will grow from that reset inventory base at a more historical growth rate. As a result, and as we noted in our pre-release, We are taking significant actions with regards to our company's cost structure, with an announced restructuring of our Brazilian operations, as well as a review and adjustment of our total company cost base. We are right-sizing our cost base to better reflect market conditions, protect our margins, and position us for future success. We will provide more details about our restructuring programs at our invest today. Our Q3 results are detailed on slides three, four, and five. Q3 revenue was 29% lower than the prior year, both including and excluding FX, driven primarily by lower volumes from Channel D stocking and, to a lesser extent, dry weather conditions in some countries. We had price increases in North America, EMEA, and Asia, which were more than offset by price decreases in Latin America. While our sales were down significantly versus prior year, we need to be clear that the grower application of crop protection products has been steady and even trending higher than the prior year in some key countries such as Brazil and the US. In addition, sales of our newer and more differentiated products, including branded Diomides and Plant Health, outperformed the overall portfolio. Products launched in the last five years grew 4% and represented 10% of total sales in the quarter. demonstrating robustness in the current environment. New product launches accounted for more than 4% of total company sales in the quarter. Looking at our revenue by region, North America's sales were lower than the prior year by 34%, as anticipated destocking activity was the main driver of lower volumes. Dry weather in Canada was a smaller volume headwind. Sales in EMEA were relatively flat, with a revenue decline of only 1% and 4% excluding FX. We encountered volume pressure from channel D stocking, as expected, particularly in Germany. This was mostly offset by a combination of higher prices, strong diamide sales that outperformed the overall portfolio, and a modest FX tailwind. In Latin America, sales were down 33%, 36% excluding FX, due to lower volumes and, to a lesser degree, pricing pressure. These stocking, particularly in Brazil and Argentina, was the driver of the results in the region. At the same time, we had a very successful launch of our patent-pending diamide insecticide, Premier Star, in Brazil. The strength of that launch was one reason branded diamide strongly outperformed the rest of the region's portfolio. Shifting to Asia, sales were down 28% and 23% organically. As expected, unlike the other regions, volumes were negatively impacted by destocking behavior, particularly in India, where elevated channel inventory continues to be actively managed. Pricing was up slightly with an FX headwind. Products launched in the last five years showed greater resilience than the rest of the portfolio and grew 16% versus the prior year, driven by sales of Isoflex herbicide. The outperformance of new products in most regions demonstrates how our technology differentiates FMC in the marketplace and why our new product pipeline is a key contributor to our growth at consistently superior margins. We reported EBITDA of $175 million in the quarter, down 33% compared to the prior year period due to the volume decline, along with a smaller pricing headwind, partially offset by lower costs. Sales of new products, including launches and sales of differentiated products, such as our branded diamides and biologicals, positively impacted MIX. Costs were $137 million tailwind, with contribution from inputs and, to a lesser degree, operating costs. Input cost benefits were especially pronounced compared to the prior year period that represented the peak of inflationary headwinds. Combined SG&A and R&D costs were favorable to prior year, And we are on track to deliver our commitment of $60 to $70 million cost control in the second half, keeping those operating costs in line with the prior year. Shifting to our outlook, slide 6 shows our latest expectations for Q4 and full year. We are expecting revenue in Q4 to be 22% lower than the prior year, driven by a high teens percentage volume decline as destocking continues. Similar to Q3, we expect a low to mid-single-digit pricing headwind in Q4, driven by Latin America. FX impact is forecasted to be minimal. Adjusted EBITDA in Q4 is expected to be between $246 and $306 million, which is a 36% year-over-year decline at the midpoint, primarily due to lower volumes. We expect positive mix impact as sales of new products, including launches, continue to show growth. Operating costs are expected to be in line with the prior year as cost controls remain in place. I'll now turn the call over to Andrew, who will cover cash flow and other financial topics.