FMC Corporation

Good morning and welcome to the first quarter 2025 earnings call for the FMC Corporation. This event is being recorded. All participants are in a listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's prepared remarks, there will be an opportunity to ask questions. To be placed in a Q&A queue, please press the star key then one at any time. If you are using a speakerphone, please pick up the headset before pressing the keys. I would now like to turn the conference over to Mr. Kirk Brooks, Director of Investor Relations for FMC Corporation. Please go ahead.

Thank you. Good morning, everyone, and welcome to FMC Corporation's first quarter earnings call. Joining me are Pierre Brondeau, Chairman and Chief Executive Officer, Andrew Sandefur, Executive Vice President and Chief Financial Officer, and Reynaldo Pereira, President. Today, Pierre will review our first quarter performance and provide an outlook for the second quarter. He will also comment on our full year outlook for 2025. Andrew will provide an overview of select financial results. 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 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 on 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, CTPR means Clarence and Raylaprol, earnings means adjusted earnings, and EBITDA means adjusted EBITDA. A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's conference call, are provided on our website. With that, I will now turn the call over to Pierre.

Thank you, Kurt, and good morning, everyone. I have stressed that 2025 will be a pivotal year for the company, highlighting four critical focus areas, including decreasing the amount of FMC product in the channel to align with customer target inventory levels. Implementing a post-pattern strategy for the next year. Establishing an additional route to market in Brazil by selling directly to large corn and soybean growers and ensuring that our growth portfolio consisting of sales up here, the four new active ingredients and plant health has appropriate resources in place to meet our targets. I would like to start by providing a brief update on the strong progress we made in these four areas during our first quarter. Prudent selling in Q1 supported the high focus on moving a product from the channel to the ground has allowed the company to approach appropriate levels of channel inventory in all regions, excluding Asia. While this stocking is nearly complete in most countries, we will maintain the same deliberate sales strategy that we had in Q1 during Q2 for countries where we have not yet reached targeted level. This will put us in a strong position for the second half of the year. Our RENEX APR strategy has been implemented and is gaining momentum. Simply put, our strategy is to offer basic solo formulations of RENEX APR. under trusted FMC brand names at lower prices to compete with generic, while also providing higher value versions of the molecule through new, often patented formulations and mixtures. Regarding a new product, we have already commercialized a new mixture for Anaxapyr and Bifenthrin for pest spectrum enhancement. as well as a high-load product for ease of use and lower cost for the grower. During the second half of this year, we will launch the Large Effervescent Granule, a tablet for rice application. This patented and innovative technology offers a concentrated effervescent formulation that disperses upon contact with water, is lightweight, and can be applied through handheld dispensers. Sales of these new generation products are expected to reach $200 million to $250 million in 2025. In addition, we're expecting three new mixtures in 2026 that will address resistance issues and broaden the spectrum of control. It is also worth noting that a large part of FNC cells have a strong level of protection against generic products as these cells are tied to high-value crops where substitution is more difficult and riskier for growers. These include tree nuts, fruits, and vegetables, which represent about 35% of FNC's total brand. Renex APS sales, and as much as 60% of branded Renex APS sales in North America. Low-cost, they are made manufacturing is now full in place. This will allow us to protect existing applications, expand our solar formulation to new market, and become competitive for all applications in a global CTPR market that we expect will grow exponentials. The end result of our strategy is that we expect sales over the next year to grow from 2025 to 2027 as volume increases more than offset price erosion, with resulting gross profit dollars remaining flat in 2025 level, at 2025 level. A company three-year plan is not reliant on bottom line growth of RENAC Sapir. Moving on, let me address a progress on establishing a new route to market to Brazil. We are capitalizing on our extended product portfolio, including recently launched active ingredients to sell directly to large corn and soybean growers that we could not supply in the past. A new sales and tech service organization is in place and will be fully operational in Q2 in time for Brazil's next growing season in September. Access to this new market is expected to provide a multi-hundred million dollars growth opportunity over time. To be very clear, Nothing else will change in our business model for FMC Brazil. We will maintain our other current routes to market, including selling to co-ops and retailers, as well as selling directly to large sugarcane and cotton farms, as we have done in the past. Finally, regarding our growth portfolio, the three growth platforms, are well positioned to deliver their full potential. Our new active ingredients are well on track. We expect strong growth of Fluendapyr and Isoflex in 2025 and have recently received registration for Fluendapyr in Argentina. In addition, we were recently granted a first registration globally for Dodilex active under the brand name Kenali in Peru. In the case of South Apia, while we expect data protection and registration processes to create barriers for generic to enter some markets until 28 or 29, we are already implementing a strategy for these products well in advance of potential generic entry. As it relates to plant health, with a recent registration of Sophero for pheromone in Brazil, we have received our first orders and anticipate initial sales of this product in Q3. While our three-year financial target do not include any meaningful contribution from pheromones, these products could provide substantial sales and earnings in the future. The progress we made in these four areas will put us in a much stronger position to deliver growth in the second half of 2025 and into 26 and 27. Before we turn to our guidance, I'll make a few more detailed comments on our first quarter results. Our Q1 results are detailed on slide three, four, and five. The first quarter unfolded mostly as we expected. Overall weather conditions were favorable and application rates were strong for FMC products, which advanced a channel destocking in most countries. Consistent with the Q1 games, retailers and growers in the US were slower to place orders in response to lower commodity price, the perception of impulse supply, and uncertainty as a result of recent trade dynamics. Company sales declined 14% versus the prior year. Pricing was down 9% with over half of the decline due to adjustments in certain cost plus contracts for significant dynamite partners to account for lower manufacturing costs. A strong U.S. dollar led to an FX headwind of 4%. Volume was down 1% versus a week prior comparison as prudent selling into the channel in many countries was mostly offset by volume growth in Latin America. A plant health business outperformed the portfolio with sales up 1% versus prior driven by biologicals. Looking at regional results on slide five, North America performed as expected with sales decline of 28%, mainly from lower volume as cautious purchases from retailers and growers delayed restocking orders from distributor customers. Latin America grew 17%, excluding FX headwinds. On the surface, it appears counterintuitive that we grew volume in regions where we were actively seeking to lower channel inventory. Higher volume mostly came from increased direct sales to cotton growers in Brazil, which do not impact the channel inventory. It's also important to note that with a strong focus on grower consumption, product on the ground, or POG, as we refer to it, far outpaced our sales into the channel. Shifting to Asia, the region performed as expected with a sales decline of 21% excluding currency impacts driven by intentional prudent selling and lower price. Finally, in EMEA, we reported 7% lower sales excluding currency impact due to lower volumes, largely from the expected loss of registration from tryphosophon herbicide. Turning to slide six, first quarter EBITDA declined 25% due to lower price and affected wind and reduced volume. Costs were a tailwind as favorably in COGS more than offset increased investment in SG&A and Orange. The increased spending in those areas helped establish the additional sales force in Brazil and further support for our own new product. Turning now to slide 7. We provide our expectations for the second quarter. we are guiding a revenue decline of 2% at the midpoint. Lower sales are expected to be driven by a low to mid single digit decline in price and low single digit FX Edwin. We're expecting only a limited volume increase as we intend to carry over a strategy from the first quarter of carefully managing sales into the channel in many countries while focusing on POG to set up for solid growth in the second half of the year. EBITDA is expected to be lower by 6% at the midpoint with lower price and an FX headwind partially offset by favorable cost and higher volume. Adjusted earnings per share is expected to be lower by 5% at the midpoint. On slide 8, we provide our updated full year guidance, which is unchanged from a February call. Full year sales are expected to be flat to prior at the midpoint as higher volume, mostly in the second half, offsets unfavorable price and efficiency. Adjusted EBITDA is expected to grow 1% at the midpoint as favorable costs and higher volume are mostly offset by lower price and an FX and win. Adjusted earning per share is expected to be flat to prior year at the midpoint. Over the last few weeks, there has been a lot of focus on recently announced tariffs and the potential impact to our business. Slide nine. gives a brief overview of the tariffs in place or announced as of yesterday. These include the Section 301 tariffs implemented during the first Trump administration and the new tariffs announced under the International Emergency Economic Powers Act. Key to determining the magnitude of the impact of the recently announced tariffs is whether the product we import into the US are eligible for exemption or duty drawback under the specific tariff in question. Exemptions allow companies like FMC to import without paying tariffs specified material that are not readily available from alternate sources. Duty drawback is a refund of import duties that were paid on materials that are later exported from the US, either in the same form or as part of a finished product. Exemptions and duty drawbacks are product specific and not company specific. Slide 10 lists the tariffs that are currently in place for FMC materials and whether there are opportunities for exemptions or duty drawback. It is important to avoid applying a blanket percentage to a total imported volume as the real impact is much lower. For example, most materials fall under reciprocal tariffs are either exempt or eligible for the EVROVA. After a detailed review of the materials we import into the US and applying the rules currently proposed or in place, we estimate an incremental cost headwind of $15 million to $20 million. This was a rigorous bottoms-up analysis, so we are confident in the estimated impact. As we did these calculations, applying the rules as we understand them today, and which may evolve as trade negotiations between the United States and other countries progress. We will continue to monitor new developments and reevaluate the potential impact on our business. As we understand them today, we do not expect tariffs to be a significant obstacle to reaching a full 2025 goals. We have flexibility in sourcing depending on how the situation continues to unfold. Further, we have improved cost favorability and additional volume opportunities that will offset the impact we currently anticipate for 2025. Nevertheless, as we become more certain on the longer-term tariff impact, we will adjust our pricing to Calibre's cost. Our guidance implies solid growth in the second half of the year. We expect revenue growth of 7%, driven by higher volume from Fluent Appear, Isoflex, and Biological, as well as by the newly established additional route to market in Brazil. With these actions we have taken in the first half of the year, we expect to enter the next growing season in Latin America without the destocking headwinds we faced over the last two seasons. However, we do expect headwinds from price and effects. As you can see in slide 11, we expect second-half EBITDA growth of 11% as lower cost and higher volume, primarily from new products and the new route to market in Brazil, are partially offset by lower price and affected winds. Lower costs are expected to be driven by COGS favorability, including lower raw materials and improved fixed cost absorption. We are highly confident in our path to second half growth as it is driven by cost variability, a large portion of which is already locked in, as well as sales of new products and the additional route to market, neither of which have channel inventory concerns. Additionally, we will benefit from a prudent selling strategy and our focus on POG in the first half. I will now turn it over to Andrew to cover details on cash flow and other items.