The paragraph introduces the Third Quarter 2024 Earnings Call for FMC Corporation, facilitated by Curt Brooks, the Director of Investor Relations. Key participants include Pierre Brondeau, the CEO, Andrew Sandifer, the CFO, and Ronaldo Pereira, the President. The session will involve prepared remarks followed by a Q&A segment. The earnings release and slide presentation are accessible on their website, and the discussion will include forward-looking statements with potential risks and uncertainties. They will also discuss non-GAAP financial measures such as adjusted EPS and EBITDA, with definitions and reconciliations available on their site. The call is then handed over to Pierre Brondeau.

In the third quarter, the company experienced strong overall growth, with expected performance in Europe and Asia, and a weaker-than-expected market in Latin America due to challenges like delayed rains and increased borrowing rates, particularly in Brazil and Argentina. Despite this, growth was still delivered, with pricing actions taken to maintain market position. North America outperformed expectations, largely due to increased orders by diamide partners, although noted that sales could appear inflated as final products are not always sold in the region. Additionally, North America's sales benefited from distributors purchasing earlier than anticipated due to low inventory levels.

The paragraph discusses FMC's product line performance, highlighting significant sales growth from their diamide products, especially in branded sales and orders from partners. New product formulations, including fluindapyr-based fungicides and Isoflex herbicides, are projected to generate over $100 million in sales in the second half of the year. Despite challenging markets in Latin America, FMC is focused on maintaining market share, which led to price pressures. The company anticipates improvements in channel inventory, with the U.S. and Europe normalizing quickly, Latin America expected to improve by the second quarter of 2025, and Asia facing challenges until 2026.

The company is accelerating its cost-saving initiatives through restructuring, targeting savings of $125-$150 million in 2024 and over $225 million in 2025. They plan to realign manufacturing and use attrition to achieve these goals. Despite challenges like inventory issues in India and poor early season conditions in Brazil and Argentina, the company maintains its full-year sales growth guidance, predicting a 19% increase in Q4. Their confidence stems from strong third-quarter performance, new products, and restructuring benefits. Q3 sales grew 9%, exceeding expectations, driven by a 17% increase in volume, especially in Brazil and the U.S. North America saw a 48% sales increase due to strong insecticide sales, while Latin America experienced 8% growth, with significant volume increases offsetting price and currency challenges.

The paragraph discusses FMC's growth driven by new products, such as the Sura fungicide in South America and other formulations in the region. Despite challenges like a sales decline in Asia and Europe, FMC achieved a 15% year-over-year adjusted EBITDA growth due to increased sales volume and cost-saving measures. The company expects significant cost savings in the coming years and has announced the divestment of its Global Specialty Solutions business, which will impact revenue and earnings. Despite this sale, FMC's full-year guidance remains largely unchanged, with adjustments only for the divested business.

The company anticipates a 2% decline in revenue due to lower pricing and foreign exchange challenges, resulting in an 8% decrease in EBITDA and a 12% drop in EPS at the midpoint. However, for the fourth quarter, the company revised its expectations due to adjustments from the GSS sale and overperformance in Q3, projecting a 19% revenue growth driven by increased volume across all regions. New product sales, especially in formulations of diamides and fungicides, are expected to significantly contribute to this growth. The quarter's EBITDA is projected to increase by 32% due to higher sales, outweighing the negative impact of costs. EPS growth for the quarter is estimated at 54% at the midpoint, primarily due to increased earnings. The paragraph concludes with the introduction of Andrew, who will discuss financial details like cash performance and outlook.

In the third quarter, foreign exchange (FX) had a 3% negative impact on revenue growth, mainly due to the Brazilian real, with similar low single-digit FX headwinds expected for 2024. Interest expense decreased by nearly $6 million compared to the previous year due to reduced debt balances, and it is projected to remain stable at $235-$240 million for 2025. The effective tax rate outlook for 2024 is lowered to 13-15%, with the third quarter rate at 11.8%, aligning with the 14% midpoint. Gross debt was $4.1 billion as of September 30, down $110 million, with cash at $417 million, resulting in net debt of $3.7 billion. The gross debt-to-EBITDA ratio was 5.0x, and net debt to EBITDA was 4.5x. The leverage covenant was 5.0x, compared to a 6.0x limit, which will decrease to 5.0x by December 31, 2024. The company anticipates reducing covenant leverage to approximately 4x by year-end, aided by EBITDA growth and proceeds from the imminent sale of its Global Specialty Solutions business.

The company is focused on reducing leverage to achieve targeted credit ratings by growing EBITDA and managing cash effectively, with all free cash flow going towards debt reduction. In Q3, free cash flow was $132 million, a $100 million improvement from the previous year, due to better cash operations and lower capital expenses. Year-to-date free cash flow has increased by over $1 billion compared to the previous year. They expect $400 million to $500 million in free cash flow for 2024, driven by changes in accounts payable, inventory, and receivables. Despite regional differences in the crop protection industry's recovery, the company met its Q3 targets and anticipates strong Q4 growth through new product sales and cost improvements, setting the stage for earnings growth in 2025. Pierre Brondeau highlights upcoming topics for their earnings call.

In the paragraph, the company discusses its future growth strategy, specifically focusing on introducing four new active ingredients and developing a defense strategy for diamides. They anticipate a 6% revenue growth for the next year, primarily driven by volume growth with potential price stability or slight contraction. They have also identified $150 million to $200 million in cost savings and acknowledge a decrease in EBITDA due to the sale of GSS. Although pricing conditions and currency exchange effects remain uncertain, the company is confident about achieving closer to the higher end of its cost savings range.

In the paragraph, Aleksey Yefremov asks Pierre Brondeau about the challenges faced in Latin America during Q3 and whether there is any improvement in Q4. Pierre explains that Q3 was difficult due to delayed rains and challenging pricing conditions, with the region facing inventory issues that could take several quarters to normalize. FMC faced more challenges than competitors like Bayer, BASF, and Syngenta due to a delay in adjusting prices, leading to a loss in market share. Additionally, FMC was affected by the bankruptcy of a large distributor, further impacting their volume. The company is now making efforts to adjust pricing to retain market share.

The paragraph discusses the company's efforts to maintain market share amidst various challenges, including increased rates, bad weather, and losing a significant customer. They aim to regain their pre-downturn market share. The discussion shifts to pricing dynamics, noting that market conditions heavily influence pricing. There's a competitive pressure in a shrinking market, affecting prices, particularly in North America. However, diamides face less pricing pressure except in countries like India and China, where patent protection is less stringent. The speaker notes pricing conditions are better for diamides in regions with strong patent enforcement.

The paragraph discusses a business update from Pierre Brondeau, addressing a question on sales distribution and R&D cost reductions. Brondeau explains that over half of the sales growth in diamide products results from diamide partners, with 100% of sales going to wholesalers before reaching growers. In response to an inquiry about a $50 million cost reduction, he clarifies that the R&D spending cuts are sustainable and primarily affect the discovery phase. These reductions do not impact the launch of new products, as the company is now more selective in pursuing low-probability projects.

The paragraph discusses improvements in research and development processes, such as better screening tools and enhanced governance to reduce costs without compromising innovation. It also mentions increased coordination between regional and central R&D centers to avoid duplication. During a Q&A, Josh Spector from UBS asks about volume expectations and potential headwinds related to diamide sales in North America. In response, Pierre Brondeau explains adjustments to the full year sales forecast and notes that they have not yet developed a detailed budget for 2025.

The paragraph discusses the current complex negotiations involving branded diamides and partnerships, making it difficult to predict year-on-year growth for 2025. However, there's confidence that diamide sales will perform well due to high demand and little competition. The conversation then shifts to new product introductions and their potential impact on growth, as well as competitor registration losses, particularly in Europe. Pierre Brondeau mentions that new products like fluindapyr and Isoflex are expected to compensate for any registration losses globally, though they may encounter initial channel challenges.

The paragraph discusses the anticipated growth and product developments for 2025. The focus will be on new products, with registrations being significant, especially in Europe. Despite a flat market in Europe, there are opportunities due to registration losses affecting the industry. Growth is expected mainly in Latin America and the U.S., especially in the later half of the year, due to seasonal factors. Isoflex is anticipated to launch in the U.K. in 2025, while broader European launches are expected in the subsequent years.

In the paragraph, Vincent Andrews from Morgan Stanley asks about the expected savings and new product sales for the fourth quarter. Pierre Brondeau responds, explaining that they forecast $50 million in savings for the second half of the year. For the third quarter, they achieved $30 million in savings, leaving $20 million anticipated for the fourth quarter. Andrew Sandifer confirms Brondeau’s calculations. Ronaldo adds that in Brazil, 40% of the anticipated orders for the quarter have been received, which is an improvement from last year but not as strong as peak years, aligning with the market's gradual recovery.

In the discussion, Jeff Zekauskas from JPMorgan questions the sharp drop in the prices of CTPR active ingredient in China, from $350,000 to $30,000 per ton over the past two years, and the significant increase in product registrations. Pierre Brondeau and Ronaldo Pereira respond by acknowledging the price reductions in China and India, emphasizing that these prices are often lower than production costs, suggesting a possible dumping of inventory rather than stable market prices. They clarify that the quoted prices are per kilo, not ton, and note that China is not a major market for their diamide business in terms of size.

Pierre Brondeau discussed the company's strategy regarding diamide, indicating a deep evaluation and future plans to expand the market, which will be elaborated on in February. He expressed optimism despite pricing challenges in India and China due to excess inventory from legal issues in other countries. The company is developing a cost-efficient manufacturing strategy to compete effectively once their patents expire. Brondeau acknowledged the unusual market conditions, with illegal sales below production costs occurring in some Asian markets, but noted overall growth in demand for diamides, especially in certain segments. Jeff Zekauskas sought quantitative insights into the situation in Asia.

The paragraph discusses the current state of the diamide portfolio, specifically Rynaxypyr, noting its negative growth in the low single digits globally, driven mainly by Asia. Despite this, the overall market for diamides has grown by 10%, with some sales increasing by 50% to 60%. In response to a question about production capacity, Pierre Brondeau assures that the company is well-positioned to meet demand and manage inventory restocking due to sufficient capacity and secured raw material supply. Regarding pricing challenges in Latin America, Brondeau indicates that forecasts for the fourth quarter account for a mid-single-digit price decrease compared to the previous year.

The paragraph discusses the ongoing challenges and expected relief in pricing pressure by the end of the first quarter in 2025, linked to market competitiveness and FMC's efforts to regain market share lost during a downturn. Ronaldo Pereira highlights the stability of FMC's market share for certain traditional products in Brazil and Argentina, such as sulfentrazone in sugarcane and cotton, and efforts to regain pre-downturn shares. Pierre Brondeau clarifies that generic competition is constant and not a major factor influencing their pricing strategies.

The paragraph discusses the need for the company to adjust its pricing strategy due to losing market share to competitors with more aggressive pricing. The speaker suggests repositioning prices to regain volume. The paragraph concludes the FMC Corporation conference call.

This summary was generated with AI and may contain some inaccuracies.