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.