FMC Corporation

please signal a conference specialist by pressing the star key followed by zero. After today's prepared remarks, there will be an opportunity to ask questions. To be placed in the Q&A queue, please press the star key, then one at any time. If you are using a speakerphone, please pick up your headset before pressing the keys. I would like to turn the conference over to Mr. Kirk Brooks, Director of Investor Relations for FNC Corporation. Please go ahead.

Good morning, everyone, and welcome to FMC Corporation's second 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 second quarter performance and provide outlooks for the third quarter and fourth quarter. 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 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 on these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, free cash flow, organic revenue growth, and revenue excluding India, all of which are non-GAAP financial measures. Please note that as used in today's discussion, earnings means adjusted earnings, 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. Our goal during the first half of the year was to take a number of actions that would favorably position the company to deliver growth starting in the second half of the year and beyond. These are listed on slide three. We have accomplished these critical objectives while delivering on all of our financial commitments. We believe the level of FMC products in the distribution channels has normalized in most countries, which will enable the implementation of a growth strategy. We have laid out a clear strategy for next year with key components well underway, including lower manufacturing costs and introducing new formulations. Our additional sales route in Brazil focused on direct sales to large corn and soybean growers as a fully trained staff with initial customer engagement already underway. Commercial activities have commenced and we anticipate seeing early results starting in the third quarter as Brazil's next growing season begins. The strategies for a core portfolio and growth portfolio platforms are clearly defined, and Q2 results are in line with these plans. Each region, sub-region, and country has actionable strategies in place unique to their geographies. Demand for new actives, Fluent Appear and Isoflex, is very strong and we have put the appropriate level of support in place to deliver on our target. Just today, we received registration for Fundatis herbicide containing Isoflex active in Great Britain. The team is prepared for launch and we anticipate sales beginning in August. Dodilex Active has been introduced with meaningful sales expected to begin 2027. In fact, the first shipment was invoiced this month. Finally, Q4 of this year will see the first full-scale commercial pilot of pheromones. With these objectives completed, we are focusing on additional ways to improve the business Starting with addressing the challenges that we face in India. I will speak to the actions we are taking regarding a commercial business in that country in more detail in a moment. But first I will walk through some highlights from her from her second quarter. Her second quarter results are detailed on slide four, five and six. Results overall were at the higher end over expectations with EBITDA and EPS slightly exceeding the high end over guidance. Second quarter sales were 1% higher than prior, driven by volume growth of 6%. We've used channeled destocking for our products as completed in most countries as we believe customers have reached their targeted levels of inventory. In the first half of the year, our active management of FMC product sales into the channel, combined with strong use of product on the ground, laid a solid foundation for growth in the second half. Price in the second quarter was down 3% with over half of the decline due to pricing adjustment made to dynamite partners on cost plus contract to account for lower manufacturing costs. FX was a mild headwind of 1%. A growth portfolio was the driver of higher sales with a core portfolio essentially flat. The growth portfolio's high single digit increase confirms the strong expectation we have for the new active ingredients. Her second quarter adjusted EBITDA of $207 million was 2% higher than prior. As shown on slide 5, gains were driven by lower costs attributed to COGS tailwinds from lower raw materials, better fixed cost absorption, and restructuring actions. Cost favorability more than offset price and effects headwinds, as well as modestly unfavorable product mix within the core portfolio. Our second quarter adjusted earnings per share of 69 cents was 10 cents higher than prior, driven mainly by EBITDA growth and lower interest expense. On the regional basis, strongest growth came from the EMEA, driven by higher volume of herbicides, diamide partner cells, and branded cells appear. This was not surprising, as many countries in the EMEA were the first to reach targeted inventory levels in the channel. Latin America revenues increased slightly versus prior, as the region wrapped up the 2024-2025 growing season. North America sales declined 5% due to expected destocking in Canada. In the US, there was a solid volume growth of branded product following destocking action and delayed purchases during the first quarter. Asia was down due to lower pricing as well as lower volumes driven by ongoing destocking in India. You have heard me talking about challenges in India since I have been back. I believe that for FNC, there is a much stronger way to operate in this country. India has always been a difficult market to operate in. It is characterized by a fragmented distribution channel serving tens of millions of growers, intense generic competition, and a complex regulatory environment. This market requires a high level of working capital in a challenging price environment. Between 21 and 23, we anticipated strong growth of Renac Sapir as we expected continued process patent protection post the expiration of the composition of matter patents. However, generics penetrated much faster than expected when, unlike in almost all other countries, we were unable to enforce our process patents. This prevented us from executing a strategy and significantly increased an already high level of working capital while slowing down the movement of the product through the distribution channel. Given that India generates very limited EBITDA and has substantial working capital, we have made the decision to change how we operate in this market. After a thorough process that considered multiple options, management and the board made the decision to initiate the divestment of a commercial business in India. Following the sale of the business, we expect to quickly regain commercial momentum in India via a business-to-business model. As soon as the transaction is closed, we expect to supply for the short and mid-term the eventual buyer products requiring FMC-owned registration, as well as products where FMC has favorable manufacturing Most importantly, we expect to provide the buyer access to our IP-protected products, including four new active ingredients and advanced diamide formulation. With a partner, Better Structure for Growth in India, we expect molecules like Dordurex, which have a strong potential in the country, to gain strong growth as soon as we get the registration. In addition, we retain our active ingredients, global manufacturing and global research in India. We believe that the decision will enable faster resolution of the current challenges, reduce risk and volatility in future periods, free up cash for debt repayment, result in a stronger balance sheet, and allow us to more readily deploy resources to other growth areas. Over time, it will also permit us to shift our India portfolio toward differentiated technologies with less working capital exposure. Turning to slide seven, our four-year guidance. As Andrew will explain further in a moment, a reported revenue will include India. However, we are excluding India from revenue guidance given that uncertainty of managing that business while selling it. India will be excluded from adjusted EBITDA and EPS. Revenue excluding India is gathered to be down 2% versus prior reported results as a mid single digit price decline and a flat to low single digit FX and wind are anticipated to be offset by volume growth mainly in the second half. Adjusted EBITDA is expected to be 1% higher at the midpoint as lower cost and volume growth are mostly offset by price and FX headwinds. Adjusted earnings per share are expected to be flat to prior year at the midpoint. In summary, the only change to our guidance is to remove Second half sales from India. Other than this, we are maintaining guidance across all metrics. Sales, EBITDA, EPS, and free cash flow. Turning to slide eight. In Q3, we expect revenue excluding India to be down 1% versus reported prior results. We anticipate healthy growth, volume growth, and a minor tailwind from FX. Price is expected to be down mid-single digit, including adjustment to Diomide partner contract. The India exclusion is a 6% reduction. For branded products, price headwinds are amplified by the fact that volume growth in LATAM is increasing the numbers of customers qualifying for rebates versus last year. it is not a like-for-like price decrease. Adjusted EBITDA is expected to grow substantially, up 14% at the midpoint, has significant cost favorability and volume growth, more than offset pricing and FX headwinds. Lower costs are expected from COGS tailwinds, including lower raw materials, better fixed cost absorption and restructuring actions. Adjusted EPS is expected to be 28% higher than prior at the midpoint driven by higher EBITDA. Slide 9 shows our guidance for the fourth quarter. We anticipate revenue excluding India to be 5% higher at the midpoint as strong volume growth and a minor FX tailwind are partially offset by a low single digit price decline and a negative 6% impact from the India exclusion. Volume growth is estimated to come mostly from the growth portfolio. Adjusted EBITDA is expected to be 4% higher at the midpoint as lower costs more than offset lower pricing. Costs are expected to be favorable, but not to the same magnitude that we're expecting in the third quarter. Adjusted EPS is expected to be 3% lower than prior, as the EBITDA increase is more than offset by higher taxes and interest expense. I will now turn it over to Andrew to cover details on cash flow and other items.