FMC Corporation

we are seeing customers waiting to order insecticides and fungicides until they observed pests in the field. In Latin America, sales were up 14%, mainly from volume growth in Brazil. The region also showed strong gains in new products, including Coragenivo and premium star-diamide insecticides, borrowed food, and Stoner B-Sides and Onsuva, a newly-launched Fluendapyr-based fungicide. Lower price was driven by three factors I mentioned earlier, competition in the market, strategic pricing on less differential products, and one-time price adjustment. Air sales were down 28%, and that was largely driven by volume in India. Channel volume in India remains high, especially in insecticide, which has built up over successive poor monsoon seasons. Sales of generic renexapyr are acting as a smaller secondary headwind while we pursue litigation for process pattern infringement. Ronaldo will speak more to the diamides in a few minutes. we do not see the India Channel inventory resolving until at least 2025. In other areas of Asia, Asian countries reported the strongest growth while China declined. Sales in the MEA were down 3%. Excluding sales to a diameter powder, the region reported overall sales growth in the low 10% driven by volume. the region delivered strong growth in branded diamides and fungicide. Looking at the EBIDA bridge on slide five, we delivered EBIDA of $202 million, which is at the highest end of our guidance range. The increase of 8% versus the prior year was due to volume growth cost benefits from a restructuring actions, and FX tailwinds. These three factors more than offset lower pricing and COGZ wind related to the sale through of higher cost inventory. Slide six provides an update on the progress in a restructuring actions. We are making excellent progress and have already realized considerable cost benefits through June. We now expect between $75 million to $100 million of cost benefits in 2024, net of inflation, and are on pace to achieve over $150 million of gross run rate savings by 2025. On July 11th, we announced that we entered into an agreement to sell a global specialty solution business for $350 million to Enview. We're expecting the transaction to be completed by the end of the year. We will continue to include the results of this business in our reported figures until the deal has closed, as it does not meet the criteria to be moved into discontinued operations. Her guidance for the second half includes earnings and cash flow from this business. Looking ahead to the rest of the year, we have updated our full-year revenue guidance to a range of $4.3 billion to $4.5 billion, which is 2% lower than prior year at the midpoint. This is 200 million barrels reduction between the midpoint of our new and prior gallons, and about half of that attributed to lower first half sales that we do not expect to make up this year. The remaining reduction must be the result of a slower than expected demand recovery. Although demand recovery is slower than originally anticipated, we do not see improvement in most geographies. Sorry, we do see improvement in most geographies with the exception of India. A revised EBITDA guidance of $880 million to $940 million reflect the lower revenue outlook and is a 7% reduction at the midpoint against prior guidance and prior year. We expect Third quarter revenue to be between $1 billion and $1.09 billion, which is 6% higher at the midpoint versus prior year. Volume is the key driver with pricing expected to be down low single digits. Year-over-year pricing headwinds are lower compared to the second quarter as we do not plan to continue one-time incentives now that much of the high-cost inventory in the channel has been reduced. Overall, pricing levels in the third quarter are expected to be similar to the second quarter. Third quarter EBITDA is expected to be between $165 million and $195 million, representing 3% growth at the midpoint. EBITDA margin midpoint of 17% reflects the outsized impact over $40 million COGS headwind we expect during the quarter. The headwind is mostly attributed to unabsorbed fixed costs related to reduced manufacturing during the second half of 2023. Absence of this headwind would put our implied third quarter midpoint EBITDA margin in line the historical Q3 average. Fourth quarter revenue is expected to be between $1.34 billion and $1.45 billion, which is 22% higher at the midpoint. Volume is expected to be the key driver of sales supported by new products, improving demand, and growing market share. Price and effects are both expected to be low single digit headwinds. Fourth quarter EBITDA is expected to be between $353 million and $383 million, up 45% at the midpoint, almost entirely attributed to higher sales. Costs are expected to be favorable from restructuring benefits. The quarterly pace of results this year is forecasted to be different from what we reported in the past. Typically, the third quarter is the lowest revenue quarter in the year. This year, it is expected to be higher than the first and second quarters due to the timing of the demand recovery. Her second half revenue split between Q3 and Q4 has historically been about 46% third quarter and 54% fourth quarter. This year, we are getting to a quarterly revenue split in the second half of 43% third quarter and 57% fourth quarter. The higher than usual sales in Q4 are due to the shape of the demand recovery. To achieve the midpoints over a four-year guidance, we expect to grow in the second half by 15% revenue and 28% EBITDA with a strong fourth quarter. There are four reasons we are highly confident in those numbers. One, there are signs that demand is recovering. Our second quarter volume is evidence of that. What we're seeing in our second half order books also reflects that improvement. For example, in Brazil, we have about a third of the orders in our book that we'll need to reach that country's second half targets. At this time last year, it was almost zero. Early indications after one month of second half operation show that the regions are on track to reach their targets. Two, a large portion of the sales growth we expect in the second half is coming from product launched in the last five years. We see solid demand for these products due to their differentiation from older technologies. Some examples include Onsova fungicide and Coragen Evo insecticide in Latin America. Overwatch herbicide in Asia based on the new active ingredient isoflex and new diamides formulation in North America like Elevest and Altacor Evo. Three, improve orders from a diamide partners. Similar to FNC, partners have been attempting to work down high level of inventories. Levels are now reaching a point that are supporting higher purchases. And four, cost management. We have shown the ability to effectively control cost and deliver on a restructuring savings commitment. That will continue in the second half. I will now hand the call over to Andrew to cover some financial items, including a cash performance and outlook.

Thanks, Pierre. I'll start this morning with a review of some key income statement items. FX was a 2% headwind to revenue growth in the second quarter, with the most significant headwinds coming from the Indian rupee, Brazilian riai, and Turkish lira. For the remainder of 2024, we anticipate continued low single-digit FX headwinds, driven primarily by the Brazilian riai. Interest expense for the second quarter was $63.6 million, down slightly versus the prior year period. but lower foreign interest expense offsetting higher domestic interest expense. For full year 2024, we expect interest expense to be in the range of $235 million to $240 million, essentially flat year-on-year at the midpoint, with the impact of higher rates on domestic debt offset by lower foreign borrowings. Our effective tax rate on adjusted earnings for the second quarter was 15.5%. in line with the midpoint of our continued expectation for a full-year tax rate of 14% to 17%. Our gap provision for income taxes in the second quarter benefited from the transfer of intangible assets to our Swiss subsidiaries, where we recently were awarded OECD Pillar 2 compliant tax incentives. This asset transfer will allow us to take further advantage of these new incentives and will help ensure FNC maintains a structurally advantaged tax rate for at least the next decade. Moving next to the balance sheet and leverage. Gross debt at June 30th was approximately $4.2 billion, down $157 million from the prior quarter. Cash on hand increased $54 million to $472 million, resulting in net debt of approximately $3.7 billion. Gross debt to trailing 12-month EBITDA was 5.3 times at quarter end, while net debt to EBITDA was 4.7 times. Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 5.4 times as compared to a covenant of 6.5 times. As a reminder, our covenant leverage limit was raised temporarily to 6.5 times through June 30th of this year. It will step down to six times in September 30th and then again to five times at December 31st. We expect covenant leverage approaching four times by year-end, reflecting both year-on-year EVA dug growth in the second half as well as receipt of proceeds from the recently announced sale of our global specialty solutions business to Enview. We remain committed to returning our leverage to levels consistent with our targeted BBAA2 long-term credit ratings or better. While we will still be meaningfully above this level at the end of 2024, we are confident that with EBITDA growth and disciplined cash management, we can reach leverage metrics consistent with our target credit rating in 2025. Moving on to free cash flow in slide 11. Free cash flow in the second quarter was $280 million, an improvement of over $187 million versus the prior year period. Nearly all of this improvement came from adjusted cash from operations, which improved by $184 million from a reduction in inventory as well as a build of payables. Collections continued to be strong and ahead of our internal forecasts. Capital additions were lower as we continued to constrain investment to only the most critical high-return projects. Legacy and transformation cash spending was up due to costs related to our restructuring program. Through the first half of 2024, free cash flow is up $915 million versus the prior year. We now expect free cash flow of $400 million to $500 million for full year 2024, a positive swing of nearly $1 billion from the 2023 performance at the midpoint of the range. This year-on-year increase is expected to be driven by significant cash release from rebuilding accounts payable and reducing inventory, partially offset by higher accounts receivable due to revenue growth in the second half of the year. Relative to our prior guidance, this free cash flow outlook reflects the updated EBITDA guidance provided today, as well as a modest reduction in anticipated capital investment. With that, I'll hand the call over to Rinaldo.

Thank you, Andrew. Before I begin, I want to take a moment to describe the four components that drive our portfolio's growth. The first is innovative formulations of our non-diamide products, some of which are patented. The second is our diamide franchise. Growth of the diamides is supported by existing IP protection and our actions to transition to unique patented formulations. This is enabled by our extensive knowledge of the diamides and their target insect populations. Third is bringing to market four new active ingredients with two having a new mode of action and a new family of products, the pheromones. Finally, our expanding platform of biological products. Today I'll focus my discussion on diamides and the new active ingredients and what gives us confidence in our ability to keep growing. Diamides have been a core part of our business since we launched FMC as a peer-play agricultural sciences company in 2018. In these almost seven years, we have grown our partner base and expanded our geographic footprint. Through new product registrations, we have introduced brand new patented formulations that allow us to enter new market and crop segments. From the time we purchased the diamides, there have been concerns regarding a perceived cliff on revenue. This is absolutely not how we see it. Rather, we expect the diamides to be a growth platform for FNC well into the future. Discussions about the strength and resilience of aridiamides usually start with the composition of matter patents for the active ingredients. These have largely expired for rinoxapyr and cyazapyr active ingredients. But there are many other factors that support the strength of aridiamides. One such factor is other patents, which includes manufacturing processes and specific intermediates. These patents provide protection that continues through mid-2026, varying by product and geography. In countries like India and China, these patents have been harder to enforce, which is not the case in most other geographies. This is evidenced by recent legal victories and the lack of generic players attempting to sell in these other geographies. Another factor is data protection. Providing studies for necessary registration can be time consuming and costly for competitors. If a generic player wants to reference our proprietary data to save costs and time in registering their own products, they will need to wait until the data is no longer protected, which can be as long as 10 years from the original registration. We sell our diamides in nearly 100 countries. Each country has its own regulatory agencies, and the time to register a generic can vary from one year in some countries to more than five years in others. As such, in many countries, competing companies are prevented from registering a generic version of our Siazepine active because FMC's data protection has not expired. After all composition of matter, process and intermediate patents and data protection expire, we know that generics will come to the market, most with solo-diamide products that mimic our original products. What they will find is that FMC has not been standing still. We have been actively working to advance our diamide technologies through new formulations. First, through the development of new and in many cases patented solo-enhanced formulations. Solo formulations are rinoxapyr or cyazopyr molecules formulated to be convenient to farmers, more sustainable, and more cost-effective, allowing FMC diamide products to be more competitive while remaining highly profitable. These new enhanced solo formulations that we are now introducing in the market are often patented and include high concentration, and solid formulations such as the large effervescent granule product we showcased at our November Investor Day. The second and most important advancement stems from our innovation in developing mixture formulations, which combine diamides with complementary active ingredients. These mixture formulations not only mark a substantial leap forward in performance for growers, but also play a crucial role in preemptively addressing potential insect resistance. At FMC, our proactive approach involves extensive monitoring of insect populations through molecular biology, allowing us to anticipate and mitigate resistance issues. Our expertise in this domain informs the development of superior products tailored to meet the specific needs of each key market. Because we own these products, we have more knowledge about the diamides than any other company and we are using this knowledge to create superior products. This work is highly tailored to each key country which, again, significantly diminishes the likelihood of any sudden widespread impact on sales. Simply put, We are confident that there is no impending revenue cliff for these key assets. There are layers of protection for both Rhinoxapyr and Cyroxapyr-based products, making them an important growth platform for FMC for years to come. We have talked about the diamines many times over the last year. To recap the key points, our current patent state is strong and will remain in place for some time. We are successfully defending our patents and will continue to enforce our IP. We are extending and further protecting the life cycle of diamines through new formulations to ensure our portfolio remains convenient to growers, highly cost competitive, and performance differentiated. Today, we're developing and launching products that will be needed to help fight insect resistance now and in the future. FMC is best positioned to do that because we have consistently used advanced techniques to monitor insect populations for years. These are the reasons why we believe that diamides will continue to be a meaningful contributor to FMC's growth throughout this decade and beyond. In addition to the diamides, the continued introduction of new molecules and new formulations will support our long-term growth. This includes the launch of four new active ingredients, which we spoke about during our 2023 Investor Day. Fluindapair, a patented fungicide that we have recently launched in the U.S., Paraguay, Argentina, and Brazil, with future registrations expected for Mexico and India. This product gives us access to the large corn and soybean fungicide segments, where we played only marginally until recently. Isoflex, the herbicide we launched in Australia and Argentina. Isoflex will also be launched in Brazil later this year and continue to expand into other crops throughout 2025. In India, we just received product registration this week and plan to launch soon. In Great Britain, we have received the active registration and anticipate product registration shortly. Dodelex, a patented rice herbicide and the first herbicide with a new mode of action in over 30 years. We have submitted regulatory registration in seven countries in which these make up close to 30% of the global rice market. Commercial launches are expected in 2026. Dodelex is a big innovation in rice, and as we advance its development, we continue to find new opportunities on additional crops. Remesoxifen. Still in its earlier stages, remesoxifen is an exciting herbicide, effective against resistant weeds like palmer amaranth in corn and soybean markets. It's another unique product with a new dual mode of action. Finally, pheromones. A platform of products that can potentially change the way growers manage and protect their crops from insects. We have already applied to register the first pheromone product for row crops in Brazil, Mexico, U.S., and Philippines. We estimate this product platform will contribute about $1 billion in revenue by 2033. Years from now, when solo-diamide products are fully exposed to the market, in the market, we expect that FMC will be well beyond those original products with patented new formulations and innovative diamide mixtures. Regarding the five new products I have just mentioned, two have launched, two are awaiting registrations, and one is pending regulatory submission. Combined, these products will give us access to segments we do not play in today, significantly expanding our addressable market in the future. Our growth story is one of innovation. It is strongly rooted in the strength of our current portfolio and the significant growth we anticipate from our new products. These are sales that will be in addition to our legacy portfolio, including the diamides. I will now turn it back over to Pierre.