FMC Corporation

Good afternoon and welcome to the fourth quarter 2024 install for FMC Corporation. This event is being recorded and all participants are in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. Out of today's prepared remarks, there will be an opportunity to ask questions. 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. And I would now like to turn the conference over to Mr. Kurt Brooks, Director of Investor Relations for FMC Corporation. Please go ahead.

Thanks. Good afternoon. Welcome to FMC Corporation's fourth quarter earnings call. Joining me today are Pierre Brondeau, Chairman and Chief Executive Officer, Andrew Sandefur, Executive Vice President and Chief Financial Officer, and Reynaldo Pereira, President. Pierre will review our fourth quarter performance, provide an outlook for first quarter and full year 2025 performance, and share our 2027 financial targets. Andrew will provide an overview of select financial results, followed by a strategy update from Reynaldo. After our 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, 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. I'll now turn the call over to Pierre.

Thank you, Kurt, and good afternoon, everyone. When I returned as CEO, we started the process to improve the market visibility and deliver a more predictable performance for FMC. Equally important, we also focused the organization on defining and implementing a dynamite growth strategy and accelerating the introductions of Fundapier and Iosoflex actives. all while increasing our cost-cutting targets. We are making good headways here and delivered two strong quarters with earnings above our guidance. The work we have done has also led to a new way of thinking about the portfolio with products being considered as either part of our core portfolio or growth portfolio. Framing the products as you can see on slide three, in this way will shape a lot of our commentary on today's call. Our efforts to improve market visibility and deliver more predictable performance have progressed. However, after eight months in the role, I have modified my view of what needs to be done for FMC to fully benefit from the market upturn when it happens and the quality of a portfolio. The company needs a stronger reset than what I thought initially. We learned a lot in the fourth quarter and it has become clear that we need to take more aggressive actions to reposition FMC. Above all, we need to significantly lower FMC inventory in the channel much beyond what we were expecting. We also need to give a higher priority to the implementation of a newly developed strategy for Naxapier and CeoZapier, including accelerating the implementation of a manufacturing cost reduction efforts. These actions will have pronounced negative impact on 2025 performance, financial performance beyond what we anticipated. Additionally, we will need to provide additional resources to strengthen the commercial development of a new active ingredients, or AIs, which is critical to 2025 revenue and beyond. It also became clear to us that beyond inventory level, we missed the impact of an evolving distribution channel in LATAM, which will require us to invest to expand a sales organization to explore new routes to market in that region. We will go into more detail on this topic later in the presentation. 2025 is a pivotal year. Let me give some more details about the actions we are undertaking. It is highly feasible to have all of these in place in the next few months. We will greatly benefit from the actions starting in 2026, but it will penalize our short-term financial performance. First, we are committed to decreasing the level of FMC products in the channel. We will make certain that our products move from the channel to the ground faster than our sales to the channel. This will be a high priority for the company. Critically, this means the volume growth we are forecasting will be heavily driven by new routes to market and new products where channel inventory is not an issue. Second, the quarter we are completing the first phase of significant manufacturing cost reduction of Renex Appear and Sales Appear. These cost reductions are critical to delivering a future growth plan. But as I mentioned earlier, it will create some year-on-year negative comparison in revenue in 2025. It is important to remember that Renex Appear and Sales Appear Sales have two critical components which are managed separately. There are branded diamide products that are sold directly to the market by FNC. In 2024, this was about 75% of the diamide sales. Then there are powder sales, which are solo molecules sold to competitors. A number of the most significant contracts are based on cost plus pricing. A significant manufacturing cost decrease will impact the sales value to our partners as product prices will decrease with manufacturing cost reductions. In 2025, we expect branded sales APS sales to continue to grow. However, we are forecasting overall Ronex APS sales to be down as our key partner sales are impacted by our Cost Plus contracts and as we position branded product lines for a new market strategy. In addition, we continue to see generic versions over the next year sold in India and China, as well as generic offering now in countries such as Argentina, Turkey, Mexico, Pakistan, and Peru. The presence of this generic is not unexpected, but negatively impacts price and initially some volumes. Third, we are preparing our diamide product lines for the next phase of their evolution. We view FMC's product as two parts, a core portfolio and a growth portfolio. The core portfolio includes products for which the base molecules used to develop new formulations are already or about to be without patents and data protection. The growth portfolio, by contrast, includes products for which the base molecules are data or IP protected. Cyazepyr, the four new active ingredients, flumidapyr, isoflex, dodelex, and rimisoxafen, and plant health portfolio constitute a growth portfolio. Rinaxapyr is a part of the core portfolio, along with the rate, over legacy products. As we'll explain later, the market for Onyx Appear will transform in the next few years, expanding to new markets and offering strong growth opportunities. The other dynamite product, Sayaz Appear, is a differential product with longer patent and data protection, stronger performance, and a more complex manufacturing process. Sales up here also offers opportunities to develop higher performing formulation. Today, no generic companies are selling this molecule in any major market. Fourth, as we have delivered savings well beyond the restructuring target, we are investing in the expansion of the sales organization to support the growth of our new active ingredients, and to begin to develop new routes to market we have not explored, especially in LATAM and the MEA. As we'll discuss further in a moment, LATAM Q4 sales were disappointing. In addition to the channel inventory situation, we believe a shifting market structure is also impacting sales. The distribution channel in Brazil has gone through a strong wave of consolidation. Territories that were well covered and served are not performing as well anymore. This is one of the reasons we have decided to explore new routes to market, including a more direct approach to large growers. That will require increased investments, which will be reflecting in our selling cost this year. This is a critical part of the strategy as it generates growth without impacting our efforts to lower FMC channel inventory. With these four steps in place, we believe we are well positioned for growth in 2026 and 2027, and we have strong confidence in our products. FMC, like all technology-based ag companies, as an evolving product portfolio. Our strategy is to drive commercialization of innovative growth platforms while maximizing the value of our order of patent core product through formulations and niches. We view our core and growth portfolio as well balanced with a core portfolio able to grow at or slightly above the market while the growth portfolio is expected to grow significantly above market. Sales in the core portfolio will be driven by market demand, new formulation developments, and new routes to market. As you will hear later, Renex appears high single-digit growth potential after the planned 2025 correction, with the market growing exponentially. In the growth portfolio, The four new AIs have excellent sales potential. The market introduction of the first two molecules, Fluendapir and Isoflex, is progressing as planned, with sales approaching $130 million in 2024. The other two molecules, Daldilex and Remisoxafen, have at least an equivalent peak sales potential, but have later introduction dates. In addition, and most importantly, All four of these new products allow us to penetrate large market we don't participate in today. The combined sales of these four molecules at maturity is expected to be substantially larger than a total diameter portfolio today and potentially beyond the $2 billion we previously announced as we find more applications for these products. Regarding plant health, we expect the platform to grow at an annual rate in the mid 20% range out to 2027, with growth rate potentially exceeding that in later years as pheromones scale up. The actions we take in 2025 will allow our portfolio to deliver substantial growth in 2026 and 2027. I want to shift now and provide more details on a fourth quarter, which are detailed in slide four through six. Q4 revenue of $1.22 billion were below our guidance range. Revenue grew 7% versus 2023 and 9% excluding sales program from the divestiture of a global specialty solutions or GSS. business in November 2024. The sales increase was heavily attributed to volume gains in our growth portfolio. Sales of these products accounted for over 75% of the growth. That includes sales up here and new AI's, as well as the plant health business, which grew 33%, mainly from biological. Lower pricing of 3% was slightly better than we expected, but an effect headwind of 5% was higher than the low single digit we had forecasted. That time sales were the most disappointing as high competition led to prices and terms that we were unwilling to meet, which in addition to credit risks, led us to pass on some sales. As we were confident that we would meet our EBITDA and EPS targets, we had the flexibility to walk away from unattractive sales opportunities. Additionally, we saw lower than expected demand across most regions as customers lowered the amount of inventory they are willing to hold versus historical level. While we did anticipate customers withhold less inventory in an environment of higher interest rate, lower quality prices, and a perception of secure supply, we were not expecting behavior to change to such a degree. Given the above assumptions and the current high levels of FNC product in the channel, we now believe we have elevated channel inventories in some countries in LATAM, including Brazil, Asia, including India, as well as Canada and Eastern Europe. We reported fourth quarter EBITDA of $339 million, which was 33% higher than last year and $3 million higher than our guidance midpoint. Lower pricing and FX headwinds were more than offset by higher volumes as well as favorable cost, including continued contribution from a restructuring program. Input costs were favorable due to lower raw material costs with much lower unabsorbed fixed costs than we recorded in previous quarters. The reduced cost coupled with sales growth led to a strong EBITDA margin of 27.7% An all time Q4 high. Slide 7 shows the return of full year 20, the results of full year 2024. Sales declined 5% as higher volume, mainly in the second half of the year, was more than offset by lower pricing and FXL wins. Although EBITDA declined 8%, we posted EBITDA margin of 21%, which was only a slight decline versus prior year, despite the drop in sales. Part of this was due to the strong cost, including $165 million of cost benefits from our restructuring actions. Looking at 2025, we can see a full year expectations on slide eight. We are expecting full year sales of $4.15 billion to $4.35 billion, which is flat to prior year at the midpoint, and up 3%, excluding approximately $110 million of lost sales from the GSSB sale. We are forecasting moderate gains in volume driven by a growth portfolio, as well as the expansion over a customer base. This volume growth is forecasted to be partially offset by deliberate actions we are taking to reduce channel inventory in many countries. Pressing is expected to be down low to meet single digit with the vast majority of the pressing headwinds due to diamide partners. As we discussed earlier, Those contract adjustments will have the most impact in the first half of the year due to the timing of those sales. We are forecasting effects to be allowed to meet single digit headwinds for the year as the US dollar is projected to remain strong. Despite these challenges to sell, we expect to deliver higher EBITDA versus the prior year with an expected range of $870 million to $950 million, which is up 1% at the midpoint. Excluding the GSS impact, midpoint of gallons is up about 4%. We expect COGS to be favorable $175 million to $200 million due to lower raw materials, favorable fixed cost absorption, and restructuring benefit. Offsetting these benefits are expected to be lower price, the $65 to $75 million FX headwind, and investment in sales organizations. Adjusted earnings per share is expected to be between $3.26 and $3.70, which is flat at the midpoint to prior. As shown in our Q1 guidance on slide 9, we expect a low first quarter as we aggressively start the correction process early in the year. Sales are expected to be $750 million and $800 million, a decline of 16% against prior year due to negative price effects and volumes. Excluding an estimated $24 million of lost GSS sales, the decline is 13% at the midpoint. We expect lower volume for two reasons. One is excess levels of FMC inventory in the channel in many countries, which is amplified by customer prioritizing much lower than historical inventory level. The other is specific to the United States. In the second half of 2024, distribution customers in the United States replenished their depolluted inventory in advance of the growing season. Normally, retailers and growers would start pulling that volume through during Q1. However, this year, due to initiatives to keep inventory low and cautious purchasing from commodity products, from low commodity prices, we are making the assumption that pull through by retailers and grower will occur more evenly over the three quarter season than in prior years. This is expected to delay reorders from distributors and will result in weaker volume in Q1. While this creates a significant challenge for a Q1 outlook, we want to make sure we are setting expectations that reflect our belief of how the U.S. market will behave this year, which is much different than our historical view of this market. We expect Q1 price to be lower in the mid to high single digits, with over two-thirds of this due to the price adjustments for Diomide partner contracts. FX is also expected to be a mid single digit headwind. Similar to a full year expectation, we are forecasting continued expansion of a growth portfolio in the quarter. We are getting Q1 EBITDA at 105 million to 125 million dollars, which is a decline of 28% at the midpoints. Lower pricing and FX headwinds are expected to be partially offset by reduced COGS, including lower raw material and favorable fixed cost absorption. Adjusted EPS is expected to be between $0.05 and $0.15. I'll now turn the call over to Andrew to cover some financial items and how this guidance impacts a balance sheet.

Thanks, Pierre. Before I get into the normal review of key financial results, let me start this afternoon with an update on our restructuring program on slide 10. When we initially announced our restructuring program in late 2023, we targeted delivering $50 million to $75 million of net savings in the 2024 P&L, with $150 million in run rate savings by the end of 2025, both measured against the 2023 baseline. As we progress through 2024, we identified a number of areas where we could move more aggressively to reduce our cost structure, raising our targets at our second quarter earnings call and again on our third quarter call to $125 million to $150 million in 2024 net savings and more than $225 million in run rate savings by the end of 2025. While there were many factors that contributed to these increased targets, the biggest factor was a major revamping of sourcing for raw materials for our dynamite products. I'm pleased to report that we exceeded our increased targets, finishing 2024 with net savings delivered in the P&L of $165 million, largely in operating expenses, but with savings in cost of goods sold as well. We also now have a clear line of sight to run rate savings of more than $250 million by the end of 2025, with a very significant contribution from lower cost of goods. Our restructuring program has impacted every part of the company. resulting in fundamental changes in our operating model, including how we are organized, where we operate, and the way we work. While we do have some remaining in-flight projects to finish delivering the full savings run rate in 2025, we've incorporated the expected year-on-year benefits of our restructuring actions in our outlook for 2025. As such, we consider our restructuring program to be essentially complete, and we will ensure delivery of the remaining savings through our normal management of delivery of our guidance. Moving next to some key income statement items. FX was a 5% headwind to revenue growth in the fourth quarter, primarily stemming from the Brazilian REI. For full year 2024, FX was a 2% headwind at revenue, with the Brazilian REI and the Turkish lira the largest contributors, followed by smaller headwinds across a number of Asian currencies. For 2025, we anticipate a low to mid single-digit headwind at revenue from FX, with the Brazilian RIAI, the Turkish lira, and the euro being the most significant drivers. Unlike 2024, we anticipate a meaningful EBITDA headwind from FX in 2025, in the range of $65 to $75 million. 2024 EBITDA benefited from the timing of currency movements during the year that created favorability against the hedges we had in place. In 2025, we continue our normal, systematic approach to hedging, But with the strengthening of the dollar that happened in late 2024 and into 2025, and with the current forward curves, we do not expect to see a repeat of the favorability we saw in 2024. Rather, we expect to see a more normal relationship between FX impacts at revenue and EBITDA, with our hedging program dampening, but not eliminating, the impact on EBITDA of negative FX movements. Interest expense for the fourth quarter was $51.8 million, down nearly $5 million compared to the prior year period, driven by lower debt balances and lower interest rates. For full year 2025, we expect interest expense to be in the range of $210 million to $230 million, down roughly $15 million year-on-year at the midpoint, reflecting the benefit of debt reduction in 2024 and modestly lower interest rates in 2025. We ended 2024 with a lower than expected effective tax rate on adjusted earnings, 10.9%. The mix of earnings by jurisdiction shifted meaningfully versus our expectations in the fourth quarter, with substantially less profit attributed to high tax jurisdictions like Brazil. The fourth quarter effective tax rate of 7.9% reflects the true up to the full year rate relative to the 14% rate that had been accrued through the third quarter. With the impacts of lower effective tax rate for 2024, adjusted earnings per share for Q4 were up 72 cents or 67% versus the prior year period, a significantly higher increase than seen at EBITDA. The biggest driver of increased earnings per share remains increased EBITDA, representing 59 cents of the 72 cent increase in EPS year over year, while lower tax contributed 11 cents. For 2025, we anticipate that our effective tax rate should be in the range of 13 to 15%, with the approximately 3 percentage point increase at the midpoint, driven by the expected mix of profit by jurisdiction. Moving next to the balance sheet and leverage on slide 11. Gross debt of December 31st was approximately $3.4 billion, down nearly $600 million versus the prior year. Debt reduction came both from the proceeds from the sale of our GSS business, which closed on November 1st, as well as from discretionary cash flow. Cash on hand increased $55 million to $357 million, resulting in net debt of approximately $3 billion. Gross debt to trailing 12-month EBITDA was 3.7 times at year end, while net debt to EBITDA was 3.3 times. Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 3.7 times as compared to a covenant of 5.0 times. As we announced a short while ago, we recently amended the leverage covenant of our credit agreement to provide additional headroom and duration of covenant relief given our outlook for 2025 through 2027. We expect to end 2025 with leverage metrics essentially flat to 2024. and then to show improving metrics with rapidly accelerating EBITDA growth in 2026 and 2027. This is coupled with disciplined cash management, including continuing to direct all discretionary free cash flow to debt reduction. We remain committed to returning our leverage to levels consistent with our targeted BBBAA2 long-term credit ratings. While this will take a bit longer than we previously hoped, we're confident we're on the right path to get our leverage metrics back in line as our business more fully recovers. Moving on to free cash flow in slides 12 and 13. Free cash flow for full year 2024 was $614 million, an increase of more than $1.1 billion versus the prior year. The year-on-year increase was driven by a $1.04 billion improvement in cash from operations, which benefited particularly from improved payables and inventory. despite over $100 million of cash restructuring spending. Capital additions and other investing activities were down substantially as we constrained spending to only the most critical projects. Cash flow from discontinued operations improved, in part due to a one-time insurance settlement. For 2025, we expect free cash flow of $200 million to $400 million, a decrease of $314 million at the midpoint. Cash from operations is the key driver of the decrease, with normalization of working capital after the pronounced correction in 2024. Capital additions are also expected to be up somewhat, but with continued focus on only the most essential projects, including capacity expansion to support new products. Cash flow from discontinued operations is bumped up slightly, but in line with our multiplier average. Free cash flow conversion from adjusted earnings is expected to be approximately 69% at the midpoint. With that, I'll hand the call over to Rinaldo.

Thanks, Andrew. I want to start off by providing an update on our diameter strategy, which is supported by slides 14 through 21. As we look ahead, it's clear that our commercial strategy is evolving, driven primarily by the upcoming patent expirations, particularly for Rinoxapyr. While this presents challenges, we see it as an opportunity to transform, compete, and advance in new ways. Like other products that transition to the post-patent phase of life, when we look back at the makeup of our diamides business years from now, it will look much different than it does today. Over the past several quarters, we have spoken to the broad strategy for these products as they shift to their post-patent life cycle. At a high level, the strategy that we've communicated, which you can see on slide 15, is that we will continue to offer the basic solo formulations under the trusted FMC brand names at lower price points to compete with generics entering the market. At the same time, we'll offer high-value versions of diamides via new, often patented, formulations and mixtures. This evening, I'll share in more detail how we're enacting this strategy and share how we see the next few years unfolding for this product class. Going forward, you will hear us start talking about the two distinct products, Rinoxapyr and Cyazapyr, rather than just simply referring to them as the diomides, as we've done in the past. Both products are very potent tools for growers to control insects. But as you can see in slide 16, there are some key differences between the two products. Rhinoxipyr has a more limited spectrum, but that spectrum is focused on controlling Lepidoptera insects, or caterpillars, which is the most valuable addressable market at nearly $5 billion. Cyanopyr, on the other hand, has a much broader scope in terms of types of insects it can control. Our Rhinoxapyr sales have outpaced Cyazapyr with roughly a 70-30 split. This is partly due to Rhinoxapyr's larger market share for caterpillar control and also has been by our own design due to its somewhat simpler manufacturing process and lower cost profile. The market for Cloranthonyliprol or CTPR which is a chemical name for the active ingredient behind Rinoxapyr, will undergo a series of changes over the next few years, and our strategy reflects that. As Rinoxapyr enters the next phase of its product life, it has been included in the core portfolio along with the other legacy products that are off-patent, like sofentazone. All composition of matter patents have expired for Rinoxapyr, And by the end of 2025, almost all process patents will also have expired. We expect generics to enter all major markets with renoxapyr with solo formulations of CTPR by the end of 2026. As we mentioned earlier, we are already observing generic CTPR sales in some countries today. As generics enter the market, We will continue to offer solo formulations at lower price point under the trusted FMC brand to compete with the new market entrants. Based on the latest data from international shipments, we believe we are competitive on costs with lower price generics offering the solo molecule thanks to our recent restructuring actions, which have significantly lowered our cost of sales. Lower pricing for the soil formulation will coincide with a significant expansion of acres treated with CTPR. Slides 17 and 18 illustrate how this is likely to occur. Slide 17 shows the global foliar insecticide market, which is about $22 billion at the farm gate. Diamides, as a class of chemistry, are estimated to be about 9% or a little under $2 billion of that overall market, with FMC's branded diamides making up about 55% of that share. The remaining 45% is made up of FMC partner sales, generic CTPR, and competitor products within the diamide class that are not rinoxapyr or cyazapyr. As you can see, You can see that the majority of diamide offerings are on the higher end of the treatment per acre price curve, with prices ranging from $20 to over $40 per acre. There are almost no diamide products offered below $10, and FMC's diamides are virtually nonexistent in this space. When generics first enter the market, we expect growers who are solely driven by price to be their key customers, which should be less impactful to FMC. The entrance of generics will certainly create competitive pressure against some existing FMC products, but as slide 18 shows, with our lower manufacturing costs and technology roadmaps, there will be substantial opportunities for renoxipyr and cyazopyr to take share across all points of the price curve from other insecticides, such as neonicotinoids and organophosphates. The more favorable environmental profile of both renoxipyr and cyazopyr versus these other insecticide classes would further aid market expansion. As seen on slide 18, We expect that the diamide market will grow from $2 billion up to an estimated $5 billion over time. As volume expands, we'll continue to differentiate our renoxapyr products from other CTPR offerings with new formulations and mixtures. These new products, which are listed on slide 19, will deliver additional attributes. This innovation can be in the form of adding a second mode of action to combat potential resistance or adding a mixed partner to broaden the spectrum of control while expanding the addressable market. Rinoxapyr is expected to continue to show sales growth, although not at the high levels we observed when the product was earlier in its lifecycle. Following the 2025 correction year, we expect overall Rhinoxapyr to report a growth rate in the high single digits. On slide 20, you can see the upcoming products in our Rhinoxapyr pipeline. Many of these new products will offer additional value to growers. This can be in the form of reduced labor for application by offering rice growers a much lighter weight tablet formulation or It can be through new mixtures with pheromones and insecticides from other groups that combat resistance and strengthens performance in existing segments. Finally, we plan to introduce seed treatment products, which is an unexplored segment of the market for our branded offerings, as well as a mixture with a binomicide. While the core portfolio grows at or above the market, we expect Siazepir and the rest of our growth portfolio to grow at multiples of the market. For Siazepir, we have process patents in place in major markets through 2025, with Brazil not expiring until the middle of 2026. In addition to the process patents, we also have a key formulation patent for Siazepir through 2027 in key markets, and data protection in place in major regions such as Brazil, the U.S., and Europe. Depending on the country, this can extend the protection granted to the regional molecule. Data protection creates an additional and costly hurdle for generics to register products even after process patents have expired. Slide 21. shows some of the products in our sciatica pipeline, including mixtures with insecticides from other groups that will broaden the spectrum of control, as well as slow down resistance. Our high load formulations are not only easier to handle for growers, they also improve our cost position. To serve growers in the fruits and vegetables space, we'll be offering a fruit fly bait that is a unique and sustainable solution that leaves no residues and has no restrictions for export. Compared to Rhinoxopyr, Cyazopyr has a more complex and more expensive manufacturing process. These factors may cause fewer generics to enter the market compared to Rhinoxopyr. Cyazopyr has a broad spectrum of pests it can strongly control, including whitefly, fruit fly, leaf miner, and psyllids. Given the broader spectrum and our reduced manufacturing costs, we believe we have a sizable opportunity to expand the market for this product. Similar to Rinoxapyr, we are actively promoting and developing new formulations and mixtures to position ourselves well when all patent protection has expired and generics enter the market. Following the 2025 production year, we expect sales of the size of the period to grow in the low to mid teens. The most exciting parts of the growth portfolio are the new AIs that we're launching and expanding over the next few years. We have mentioned before our high expectations for the contributions of these molecules, and we now share more details about what these expectations are and what supports them. Let me start with the two products already in commercialization. The first one is Flanipyr. It is one of the newest active ingredients of the SDHI fungicides, a class of very active products with a strong commercial success. Together, SDHI fungicides represent 15% of the global fungicide market with around $3 billion in combined sales in 2023. SDHI fungicides are known for being very effective when used to prevent crop disease. This is also the case for Florinda pear. However, what sets it apart from the other active ingredients is the especially broad spectrum of control that covers many diseases of economic importance, such as Asian soybean rust, corn tar spot, coffee rust, and damping off in young cotton plants. Florinda pear also protects crops for an extended period, lowering the need to respray. These technical attributes are enough to support our confidence in the success of Fluinda Peer. But there is another aspect that is equally important. Fluinda Peer has given us access to some large market segments that we have never served before. In aggregate, We believe that its addressable market exceeds $2 billion. Farming rust in Brazil alone is a $3.5 billion market, just to mention one example. In many of these market segments, Fluent Appear will be the first technology that we will sell. Going into these new segments with a product that is patent protected, technically differentiated, and biologically strong, will open access to sales of other FMC products. As shown on the slide 22, FluentAP is already registered in Brazil, Argentina, the United States, and Paraguay, with some other important countries pending registration in the next three years. Sales are expected to be more than $150 million in 2025, exceeding $300 million by 2027. The second product is Isoflex Active, a herbicide based on Bixlozon that offers a new mode of action in cereals such as wheat and barley. It's most effective at controlling difficult grasses as well as some key broadleaf weeds. We have been selling this product in Australia with strong results. With recently approved registration, it has expanded to Brazil, Argentina, India, and the UK. European Union registrations have been submitted, and we expect to begin selling there during 2027. Given the size of cereals market in the EU, isoflex sales in those countries will provide a substantial boost to the product's global sales. We estimate that the addressable market for cereals in Europe should be about $5 billion. Isoflex sales are expected to be about $100 million in 2025, with sales approaching $250 million by 2027. We expect sales to continue strong growth beyond 2027 as the product becomes more widely used. Our third product is Dodilex, the first herbicide to be introduced in the market with a new mode of action in over 30 years. In our Q2 fall, we described it as a patented rice herbicide. I want to correct that statement. Dodelex is a novel patented and versatile herbicide. While its development in rice is more advanced, our confidence that it will be sold on other crops in the future keeps growing every day. Suffice to say that it can be safely applied on several broadleaf crops. such as soybean, sunflower, and others. And we believe there are meaningful opportunities to expand the product to these crops beyond 2027. But for today's discussion, let's just stay with rice. There are 165 million hectares of rice planted globally. To put this in perspective, this is 25% more land than soybean. and not too far from corn. Because of cultural reasons, the vast majority of the countries currently have strict regulations that prevent the introduction of genetically modified rice varieties. As a result, decades of weed control with herbicides with similar modes of action have led to a substantial increase in weed resistance, probably more so than in any other major crop. Although it's hard to estimate the size of global rice area infested with resistant weeds, in U.S. alone, some universities estimate that resistant weeds are present in more than half of all the rice fields. Weeds like barnyard grass and sprinkled top are present in virtually every rice field. And in many of them, they have become resistant to existing herbicides. Differently from other crops, There are many agronomic variations on how rice is planted from country to country. Direct seeded versus transplanted, variety types, irrigated versus rainfed, different irrigation methods, et cetera. Today, all these variables result in limitations on which herbicide can be used. A product that can be safely used on transplanted rice can be harmful to the crop when used on direct seeded fields. Dodelax is highly safe on rice plants independently of the agronomic practices. Once we launch it, almost all the rice growers will be able to use it without being forced to choose between their herbicide and their preferred agronomic practices. High versatility, strong performance on resistant weeds, unparalleled crop safety on a crop that is planted in all continents, and potential to expand even further into additional crops. These are the key reasons behind our high expectations on Dodelex commercial performance in the next few years. Looking forward into the future, we continue to believe that our new active ingredients can achieve or surpass $2 billion in revenue at maturity. Beyond our new synthetic pipeline, Our plant health business is expected to grow at a rate in the mid 20% range out to 2027, led by biologicals, with a smaller contribution from pheromones. We still believe there is an excellent opportunity for outsized growth for pheromones, but meaningful growth is not likely to occur until after 2027. In summary, There is enormous potential for expanded sales from our growth portfolio when you consider the new active ingredients and the potential for sales appear to broaden its market reach. In addition, we also have a growing portfolio of biological products, including pheromones, that are positioned to provide even further growth. With our forward portfolio providing a solid foundation for sales and earnings, in a market that is in the midst of recovery, the differentiated nature of our growth portfolio puts us in a strong position to outgrow the market over the coming years. Pierre will now discuss specifically what our expectations are for the next three years and provide some closing remarks.

Thank you, Ronaldo. Our 2027 targets are laid out on slide 23. We are focusing here on the growth of the company post 2025, which we believe will act as a correction year to reposition our portfolio. The growth rates post 2025 are more representative of the future growth of FMC. The sales of a core portfolio from 24 to 27 are expected to grow at 2% per year. Following the 2025 correction year, we expect total and accepted growth in the high single digit. The rest of the core portfolio is forecasted to grow at the market rate of about 3% every year. A growth portfolio is expected to grow at an annual rate of about 24% from 24 to 27. Following the 25 correction year, Sales Appear growth is projected to be in the low to mid-teens, with growth of both branded and partner sales. The new active ingredients are expected to reach $600 million by 2027. The growth will mostly be coming from Fluent Appear and Isoflex, with a small contribution of Daudilex based on the launch calendar. The plant health growth rate is expected to be in the mid 20% range with a potentially high growth pheromones product expected to meaningfully accelerate growth of plant health after 2027. From 24 to 27, the growth portfolio contribution to total company sales is expected to grow from 19% of total company to 30%. Looking beyond 2027, The ramp-up of Dodilex and the addition of new products such as expanded biological offerings, the pheromones, and the new dual mode of action herbicide remisoxafen will all contribute to further growth for the company. Combining the core and growth portfolio leads to expected 2027 sales of about $5.2 billion. EBITDA is expected to be about $1.2 billion equating to a 23% EBITDA margin, which is at the higher end of our industry. This is a revenue annual growth of 7% from 24 to 27 with EBITDA growth at 10%. From 25 to 27, Revenue grows at an annual rate of 11%, with EBITDA growing at 15% rate. We are highly confident in the growth path of the company. This confidence comes from the already strong performance of our growth portfolio. I believe FNC has the strongest pipeline in its history, but we are also conscious that taking full advantage of it requires a repositioning of the company in 2025. That is why we will realign our inventory level, implement the newly developed diameter strategy, and invest in our sales organization to support a growth portfolio and develop new routes to market. We can now open the line for questions.

We will now begin the question and answer session. To be placed in the queue, please press the star key, then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. Please limit yourself to one question. Again, please limit yourself to one question. If you have additional questions, you can jump back into the queue. To withdraw from the queue, please press star, then two.

at this time we will pause momentarily to assemble our roster the first question comes from vincent andrews with morgan stanley you may proceed thank you and good afternoon everyone um pierre could you help us understand how you expect uh renax appear from a 2026 and beyond uh to evolve You're talking about high single-digit sales growth, but could you maybe help us think about the shape of volume and price, you know, over the coming years? And within that, could you let us know your view of price gaps and how you expect to manage them as the generics proliferate? Thank you very much.

Sure. From a pricing standpoint, we believe we are at a place right now where we can compete with generics at the price we understand at the price which are being practiced by generic company as reported in the latest import data we have. So there is two aspects of it. There is the aspect of the market where we will sell a solo molecule. And there we will have to make a decision of how deep we go into this market to go further into hectares which are lower cost using lower cost product and to decide where we go and how much of this market we decide to take versus today where we do not have any of this market. So that's what a lower manufacturing cost and new pricing will allow us to do to expand the market we will reach in terms of hectares by going after different types of pesticides. Then there is the high end. As you've seen on the slide presented by Ronaldo, we are actively working on new mixtures of products which are increasing the efficacy of the product, fighting the resistance, And those products will allow us to differentiate ourselves from the solo molecule, which will have way less efficacy, and do that at a price premium. And finally, we're going to be developing products which will be beneficial from a cost standpoint for us and growers. We talk about high concentrate and pallets. So it's a mixture of moving our products in two directions. One is to the higher end, with the high-level formulation, which are significantly increasing the efficacy of the product, together with having the capability to expand to lower-end market because we will have a much lower price allowing us to go into those markets.

The next question comes from Josh Spector with UBS. You may proceed.

Yeah, hi. I had a question on your volume guidance for 2025. So a lot of the prepared remarks talk about, you know, weakness at the end of the year, more channel inventory you're dealing with in first quarter, and that's clear in your 1Q guidance. But if our math is correct, it looks like you're expecting volume growth of something like high single digits for 2025 as a year. Previously, you know, you talked about that as 5%, something in that range. So it just seems really odd to us that you're increasing confidence in volumes when the near-term outlook looks a lot worse than you previously anticipated. So can you help us out there, please?

Yes, absolutely. It's a very appropriate question. We are one of the very key decision we made is to lower the inventory of FMC products in the channel. So all of the core product we have or the product part of the core portfolio, we're going to make sure that we're selling more on the ground than we are selling into the channel. Initially, when we gave some directional numbers, we talked about a volume growth in the 6% range. Today, we are at a higher number. But it is a strategy we have developed during the fourth quarter when we understood better the market we were facing. If you think about when we talked about 6%, we are thinking more of a general growth of the demand from the market, which would have recovered. Here, we are excluding that part of the growth. And if you think about the range of growth, it is something like $250 to $350 million. That's the kind of range we talk about today in terms of volume growth. 75% of that is coming from a growth portfolio. and it is coming mostly from the new molecules, the new AIs, and also from the biological product. The rest is coming, and the vast majority of the remaining growth is coming from the plant health portfolio. So there is very little growth in the $250 to $350 million growth, which is coming from the core portfolio. So it's a very different profile. It's a very different approach. There is a downside to it. Let's face it. It requires investment in the first quarter to develop a new sales organization to go after the growth in the new routes. which is more direct sales to loud growers, but it's a very different growth profile than what we're expecting and where we intend to grow. The 250 to 350 do not touch places where we have high inventory level.

If I may add to that Pierre, Josh, we are investing in expanding and exploring new routes to market. The combination of new products and new customers, that is really where the growth comes from. It is not from traditional products in traditional customers. As we just stated that our focus there is actually to decrease the existing inventory. So it's new products to new customers driving the volume growth.

The next question comes from Chris Parkinson with Wolf Research. You may proceed.

Hey guys, uh, I was just hoping you could help me triangulate a few things. It just seems like, you know, the one Q guide is the vast majority of the Delta of what the street was increasingly kind of factoring in for your 25 guidance. Um, and we all understand there's a lot going on with Brazilian credit and increasing competition, not only across the big six, but also generics, you know, within the Americas, wholesale retail, holding less inventory, but just, can you help us just given even Latin America is a smaller portion of the first calendar quarter. Just what's your confidence, you know, 2Q onwards that, you know, you're doing everything in FMC's power to ensure that you can ultimately hit that annual guide, if not exceeded, once all the debt settles? Thank you.

I think, Chris, the, I would say the first quarter number are showing that we are taking very significant market approach to lower the level of FMT product in the channel. So certainly our numbers for the first quarter are showing that we're going to have a very, very prudent approach to the market with a high focus on preparing The following the following quarters. The second half of the year will also benefit a lot of the new product. The new route to market for the new product because lots of the registration except the US are coming from countries in Latin America where you will have the growing season. And the new routes to market with the new growers we are targeting are also in Latin America. So the two actions structuring ourselves for growth in the second half. Plus the. Plus the. The actions we are taking in the first half of the year should make us successful to deliver what we are planning in the second half of the year. Do you want to add something, Andrew?

Yeah, Chris, I'd just add as well, as Pierre commented, We do have some major timing shifts in the U.S. business happening this year as well that cause for some shifts of sales we would normally expect to make in Q1 to happen later in the year. So I think that's a part of this low Q1 and stronger Q2 through Q4 that you're pointing to in your question. It is that combination of both the back-end weighted new product growth that Pierre mentioned, the actions we're taking earlier in the year, broadly speaking, to reduce channel inventories, And then finally, the bit of the change in sequence during the year of sales in the U.S. market with later replenishment by growers and retailers pulling from distribution.

The next question comes from the line of Richard Garcia-Toreno with Wells Fargo. You may proceed.

Great. Thanks. Good afternoon, everybody. I just wanted to touch on the pricing outlook, and it looks like in the fourth quarter, you saw pricing decline across basically most of the segments, most of the regions with the exception of UMEA. In terms of the outlook, you talk about cost plus contract adjustments. Was that in a specific region? How is pricing currently in Latin America, which has been the weakest, I guess, that you had been seeing? And then, you know, when you look at the 2027 revenue guide, is expectations that these contracts are reset in 25 and then they're going to be slapped to potentially higher as we move forward over the next couple of years? Thank you.

So to answer your last question about the contract, there is for some of the very critical contracts, a indexation of the pricing to customers to a manufacturing cost. The biggest jump in term of lowering manufacturing cost is taking place now from 24 to 25. After 25, we're going to have incremental evolution of our cost, which will go lower and beyond where we will be in 25, but not at all to the same extent. So there will be less of an impact of the price adjustment to the technical sales in 26 and 27 versus 25, as most of the hits will be taken in 2025. From a pricing standpoint, I think the guidance we are giving, and Andrew, correct me if I'm wrong, but I think the guidance we are giving for 2025 is 3% with about two thirds of that coming from those manufacturing contracts or the sales contract to our partners. Now Q4, you mentioned about Q4 and the 3% decline, which was slightly better than what we were expecting And that's related to the comment I made initially. We had good line of sight in the fourth quarter to deliver the EBITDA and the EPS. We decided to walk away from sales when there was too much of a demand for price or term. We did not want to get into a situation where we would be competing at any cost to go as high as we could on the selling front and just rather stayed below the number we gave as our expectation from a price decrease, knowing that we could deliver earnings without doing it.

The next question is from Aaron Viswanathan with RBC. You may proceed.

Great, thanks for the question. Understanding that you guys have done a lot of work to get inside the channel a little bit more, it sounds like you will be continuing to increase your visibility there. But maybe you can just highlight, Pierre, some of the learnings that you have found there Um, you know, it sounds like that was an area of particular interest, but now you're also shifting your strategy as well. And, um, you know, further, uh, solidifying the growth versus core strategy, but, uh, what else are you doing on the inventory side to get a better handle on the channel? And will all of those issues, um, you know, be made mainly addressed through your Q1 actions. Thanks.

Yeah, thank you. I would say that most of our inventory actions are going to take place in the first half. I think that's that it will take more than one quarter. We're going to be very aggressive in the first quarter. Will will carry that on on the on the second quarter, I think. There is two issues I did not personally appreciate in the first couple of months I was here. I focused a lot on the overall inventory, but there is clearly some places for different reasons where we would have higher than the average inventory level, higher FMC inventory level. So we have now identified, and it's a country per country set of action, and it's going to be India, it's going to be Brazil, It's Eastern Europe, it's Asian. So we have a series of six or seven countries where we went in depth to tackle the inventory issue. And the way we truly realized that was going through studying the selling process and why things were not happening the way we were expecting. There is also the fact we spent a lot of time talking to our customers that were dealing with the moving targets. inventory target at the end of the season, we believe is not the same today as it was in the past. I think people are... I mean, there is some region, I'll give you an example, there is some regions where people were comfortable ending the season in the 30-35% range of a full year or full season inventory At the end of the season, all those people now are targeting the 20-25% range. So it's a moving target. So we have to deal with those two issues, the moving target in terms of what our customers want, plus the identified places, maybe six or seven countries, but including some large countries like India and Brazil, where there is specifically high level of FMC inventory.

The next question comes from Ben Thur with Barclays. You may proceed.

Yeah, good afternoon, and thanks for taking my question. I just wanted to kind of get a little bit more of the medium perm picture. And as you think about the rollout and the cadence for 25, then into 26, obviously, with the backdrop of what you've just guided for Q1. So if things moved the way you suspect right now, and as you would have to anticipate maybe a little bit of that step in between versus what is this year's outlook and the 27 path to it, how should we think about the cadence into 2026, just given the rollout of products and your ability to gain back some market share and to gain some back from customers that seem to be lost for now?

Yeah, I think the. It is not. If I look at the three year plan, it's not a back back end loaded three year plan. Excuse me, you will. You will see a significant improvement of the number starting in 2020 26. The new product, you've seen the numbers shown by Ronaldo going to $600 million. It's going to be a pretty even growth you're going to see over the three-year period. The new routes to market, we hope to be ready to have that in place in the second quarter to start to be very active in the third quarter. and be even more implanted in 2026. So certainly, there is an acceleration of the growth from 2026 to 2027. But there will be a significant step up coming from a correction year. By 2026, we will benefit from a market growth of the core business. and the full growth of our growth business. So it is not a back-end type of three-year plan.

The next question is from the line of Steve Byron with Bank of America. You may proceed.

Yes, thank you. For Renexa Peer Volumes in 2025, What are you expecting the percent decline to be? And what was the change in your outlook for the global Renac superior market versus your prior expectations? Was this primarily due to just greater than expected capacity expansions in China? Is that what was the primary change? And if so, why do you think you could get back to high single digit growths in 2026?

Yes. I think we want to be careful in not talking about specific percentage for product. In next year, we do expect Renex Appear to be down, both branded Renex Appear and Renex Appear sold to our partners. We do expect sales at the sales to be up. Going forward, I think first the different thinking we have about the Renex APR business is twofold. First, we believe that we can expand with a new manufacturing cost. The market we can address with the Ronac Sapir as a solo molecule formulations. Like I talked about, we talked about tablets or we talked about the high concentration or the mixtures with mixture partners. So we do believe that we can expand the number of acres where we can be competitive And we can also improve the efficacy of this product allowing us to go to market which will be beneficial from a usage standpoint to growers. So we do believe to play in a much larger market starting this year and mostly in 2026 than we've done before without moving away from staying in the high end with the specific formulation. which are giving benefits to growers. To your questions around the change in the landscape, what I believe is, like it is very often the case, when you have a patent protection, which is a composition of matter that is very solid across the world, when you have a patent protection which is process-based, not all jurisdictions or countries do have the same attitude toward those patents. And I believe that with India and China starting to sell products, even if we are taking legal actions, and even if there is a high probability we will win those legal actions, there is no injunction competitors are not stopped by court. And that gave the example and the courage to those companies to expand that behavior into other countries. And that's why we saw them coming into Argentina, for example, into Turkey. So I think there is an expansion when you are just one year away from the end of your process patent protection, where people are less worried about the legal action

we we could be taking and it's it's happening it's happening maybe faster than what we're expecting the next question comes from the line of frank bitts with fermium research you may perceive uh thank you good afternoon um i want to come back to the to the price question uh pierre you indicated that two-thirds of the price decline you're anticipating to come from the, uh, uh, from the manufacturing contracts with your dynamite partner. So if you could talk a little bit about the other third where, where you're seeing the price declines, uh, in that area, but, but coming back to the dynamite partners, am I to understand that, um, as you improve your manufacturing process, uh, that you are giving that back to the dynamite partners. So as you spend money, uh, to improve your manufacturing for the restructuring costs, et cetera, that that is flowing through in a lower price to the Di-Amide partners? I mean, I certainly can understand if raw material costs come down and so forth, that that would flow through to your partners. But I was just struck that it sounded like it was also if you're making improvements and spending money to do so, that you're giving some of that up. So any color there would be very helpful. Thank you.

Absolutely. So, yes, the contract we have with those diamide partners are the fact that – and once again, it's not all of them. There is some of our diamide partners where we have a very different cost structure. But important diamide partners to have what we call a cost plus contract which is not the exact terminology, that's a fact, the way we called it, but the pricing is indexed on a manufacturing cost. And it is a commercial decision we have taken. You know, we knew that over time, those partners would have the choice between working with us and working with people who potentially would come with price which would be more competitive. When you say mid-term, long-term contract with those partners, they're willing to stay with you, but they also have to be sure that their source of product will remain competitive. So in some cases, there is no cost-plus contract, but then what you end up doing is having a commercial negotiation every year or every other year when the contract has to be renewed. With some other partners, we do have longer-term contracts, and one of the benefits they get is they give us longer-term contracts, and we give us a guarantee that we will optimize the price, even if we are the one spending money to lower the cost. It's just a commercial practice. We have to secure some large contracts with important partners over a longer period of time. Regarding the remaining one-third of the price decrease, it is actually, we believe, some of the normal market competitiveness which will still exist for the time being until the market has completely recovered, and the fact that in Asia, we still are in a very, very competitive situation where the, and especially India, where the channel is very full. So I would say it's not as simple as two-thirds technical, what we call technical product sales to a partner and one-third of Asia, but it's not far from being the truth.

Next question comes from Mike Harrison with Florida Research Partners. You may proceed.

Hi, good evening. I was hoping, Rinaldo, given your experience in Latin America, maybe you can give us a little bit more detail on the changes that you're seeing in the Latin America distribution channel. I know that your restructuring plan included some right-sizing of the organization in Brazil. And now it sounds like you're seeing a need to invest in new routes to markets or different ways to access that market. So can you help us understand what has changed in the market and also what has changed about your approach to the market in Latin America and your organization? Thank you.

Sure, Michael. A few years ago, the retail distribution system went through a consolidation wave of consolidation and and some of the consolidators um started acquiring some retailers that were family-owned businesses very traditional in small covering small territories and and and these platforms became became large and um and very diverse in terms of geographic expansion and also the making of of their alcohol network, for lack of a better name. What we have seen is that the market share that some of those original businesses had with our products is not the same that we are seeing with the consolidators today, because the market is evolving. the compliance need is different, the credit requirements are different. And as a result of that, there are more and more growers going directly to companies, or we could put in reverse as well, more and more companies going direct to growers and approaching them directly and establishing that direct relationship between manufacturers, and large growers. You may ask, well, and why didn't you follow that wave before or you adjusted before? And the answer is actually pretty simple. I'm talking about soybean and corn. And to go and approach growers directly, you need a technology that is specifically important to those growers. We now have it. I talked about Fluindapyr, and I talked about that product being a key tool in controlling Asia's soybean rust. There are new or renewed brands and versions of our Diamize. We are now approaching those growers with some new technology to show them. So the difference between where we were before, before optimizing, And now that we're making investments is, one, when we right-size the organization, we right-size it to the total size of the market. Now, the type of investments that we're making, the people that are joining the company are people that are more skilled on soybean and corn, segments that we didn't serve before, and especially approaching directly growers not focusing 100% on retailers. In other words, the skills are not the same. And the fact that we let go people before and now we are adding, it's not the same type of people. It's just different skills, different networks, and different connections that are required to implement this new stage of the strategy. But I do want to stress We can only do that now because we have the right technologies to do so.

The last question comes from Kevin McCarthy with VRP. You may proceed.

Yes, thank you, and good evening. Pierre, if I look at slide number eight, you're guiding to adjusted EBITDA that's either side of flat. David Wiltshire- Is the case, notwithstanding what looks to be 175 to 200 million of favorability on cogs I think you have additional restructuring benefits flowing through as well. David Wiltshire- So my question would be, can you speak to some of the headwinds that that would cause the flatty but I do see the foreign exchange that you quantified but perhaps you could speak to the level. of the incremental investments that you're making in SG&A to go direct in Latin America and other cost headwinds that would complete the bridge, so to speak?

Sure. I think I would say there is multiple ways to look at it, but there is three key headwinds. One is price. with what we explained around the price we have to give back to some of our partners on diamides. So price is overall $130 million, I think, in the range of $130 million of headwind. Secondly, we do have FX, which is much beyond what we would have thought a few months ago, in the range of about $70 million. And we believe we're going to be investing in the first quarter about $25 million to create a new sales organization. So you have here about $200 to $250 million of headwinds for the three main ones. I don't know, Andrew, have I missed any or those are the three biggest ones?

Yeah, that's the biggest one. And obviously, you know, we did forego about $25 million and $25. profit we've made in the GSS business in the prior year that obviously we won't have this year to finish out the break.

That's the fourth thing.

The smaller piece.

So those together go beyond 250 million dollars.

This concludes the FMC Corporation conference call. Thank you for attending.