The paragraph introduces the Fourth Quarter 2024 Earnings Call for FMC Corporation, which includes a presentation and an opportunity for questions. Curt Brooks, the Director of Investor Relations, welcomes participants and introduces key executives: Pierre Brondeau, Chairman and CEO; Andrew Sandifer, EVP and CFO; and Ronaldo Pereira, President. The call will cover FMC's fourth quarter performance, first quarter and full-year 2025 outlook, and 2027 financial targets. The company will discuss financial results, strategy, and take questions. There will be references to non-GAAP financial measures like adjusted EPS, adjusted EBITDA, and free cash flow. The presentation will include forward-looking statements subject to risks and uncertainties.

The paragraph outlines the strategic initiatives undertaken by FMC under CEO Pierre Brondeau to enhance market visibility, predictability, and growth. The company has introduced a nuanced growth strategy, launching new products like fluindapyr and Isoflex active, while focusing on cost-cutting and restructuring their product portfolio into core and growth categories. Despite recent successes, Brondeau acknowledges a need for a more substantial reset than initially anticipated. This includes significantly reducing inventory, prioritizing strategies for Rynaxypyr and Cyazypyr, and accelerating cost-reduction efforts in manufacturing, which may negatively impact financial performance in 2025 more than expected.

The paragraph discusses the company's strategy to enhance commercial development and distribution in LATAM to boost 2025 revenue and acknowledges a challenge with evolving distribution channels. There is a focus on reducing FMC product levels and prioritizing faster product movement to the market. Manufacturing cost-reductions for Rynaxypyr and Cyazypyr are being implemented, crucial for future growth but likely leading to short-term revenue declines. Sales structures for these products include direct branded sales by FMC and cost-plus pricing contracts with partners.

The paragraph discusses the impact of decreased manufacturing costs on product pricing and sales strategies. While Cyazypyr sales are expected to grow in 2025, Rynaxypyr sales may decline due to cost-plus contracts and generic competition in various countries. The company is strategizing its diamide products, categorizing them into a core portfolio, which includes products with expired or soon-to-expire patents like Rynaxypyr, and a growth portfolio, featuring products like Cyazypyr, which have stronger patent protection and performance. The company aims to expand Rynaxypyr into new markets while leveraging Cyazypyr's unique attributes for growth.

The paragraph outlines the company's strategy to foster growth by expanding its sales organization, particularly in LATAM and EMEA, due to restructuring savings. The LATAM market faced challenges due to inventory issues and market shifts, prompting the company to explore new market routes, such as direct selling to large growers, necessitating higher selling costs. The company is confident in its product portfolio and strategy, which focuses on commercializing innovative growth platforms while maximizing core products' value. The core portfolio aims to grow at or above market rates, and significant growth is expected from new active ingredients. Rynaxypyr is highlighted for its growth potential post-2025.

The introduction of two new molecules, fluindapyr and Isoflex, is progressing well with expected sales nearing $130 million in 2024, while two other molecules, Dodhylex and rimisoxafen, hold similar sales potential but will launch later. Together, these products are projected to surpass $2 billion in combined sales at maturity, expanding market reach. The plant health platform is anticipated to grow annually by mid-20% through 2027. Despite fourth-quarter revenues of $1.22 billion falling short of expectations, there was a 7% increase from 2023, driven by volume gains in the growth portfolio, particularly in Plant Health. Pricing saw a slight decrease, while FX posed a higher-than-expected challenge. LATAM sales were below expectations due to competition and strategic decisions to avoid unfavorable terms, prioritizing EBITDA and EPS targets over unattractive opportunities.

The paragraph discusses lower-than-expected demand due to customers holding less inventory amid high interest rates, lower commodity prices, and secure supply perception. FMC reports elevated channel inventories in regions such as LATAM, Asia, Canada, and Eastern Europe. Despite these challenges, FMC achieved a fourth-quarter EBITDA of $339 million, a 33% increase from the previous year and above guidance. This was due to higher volumes and favorable costs, leading to a strong EBITDA margin of 27.7%. Full-year 2024 sales declined by 5%, offset by cost restructuring benefits. For 2025, FMC expects flat sales year-over-year, with a 3% increase excluding sales lost from the GSS sale.

The paragraph discusses a financial forecast, predicting moderate volume gains driven by a growth portfolio and customer base expansion, though these will be partially offset by efforts to reduce channel inventory. Prices are expected to decline slightly, primarily due to contract adjustments with diamide partners, affecting the first half of the year. Currency exchange is anticipated to be a minor challenge due to a strong U.S. dollar. Despite these issues, the company expects to increase EBITDA to between $870 million and $950 million. Cost of goods sold (COGS) is projected to decrease by $175 million to $200 million due to cheaper raw materials and restructuring benefits. This will be offset by price reductions and a $65 million to $75 million FX headwind. Adjusted earnings per share are forecasted to be between $3.26 and $3.70. The first quarter is expected to be weak, with sales forecasted to decline by 16% due to adverse pricing, FX, and volume issues, mainly due to excess inventory and customer trends in the U.S.

The paragraph discusses the outlook for the U.S. market in the second half of 2024, where distribution customers are expected to replenish inventory more evenly over the season, leading to weaker volume in Q1. Lower prices and foreign exchange headwinds are anticipated, impacting financial results. The company forecasts Q1 EBITDA to be between $105 million and $125 million, a 28% decline at the midpoint, offset by reduced costs. Adjusted EPS is expected between $0.05 and $0.15. Andrew Sandifer will provide further financial details and updates on a restructuring program.

In late 2023, the company announced a restructuring program aiming for $50-$75 million net savings in 2024 and $150 million run-rate savings by 2025. As 2024 progressed, the targets were increased to $125-$150 million in net savings for 2024 and more than $225 million in run-rate savings by end of 2025, primarily due to a revamp in raw material sourcing for diamide products. By the end of 2024, the company exceeded these targets with $165 million in net savings and anticipated over $250 million in run-rate savings by 2025. The restructuring led to fundamental changes across the organization and is considered nearly complete, with remaining savings expected through standard management. However, a 5% revenue growth headwind was noted, influenced by the Brazilian real.

The paragraph discusses the financial impacts of foreign exchange (FX) and other factors on the company for 2024 and 2025. In 2024, FX created a 2% revenue headwind, primarily due to the Brazilian real and Turkish lira. In 2025, further headwinds are expected, compounded by the euro's impact, affecting both revenue and EBITDA negatively. The company's hedging strategy mitigated some effects in 2024 but is not expected to be as favorable in 2025 because of the stronger dollar. Interest expense decreased in Q4 2024 compared to the previous year, with further declines projected for 2025 due to debt reduction and lower interest rates. The effective tax rate for 2024 was lower than expected at 10.9%, influenced by a shift in earnings away from high-tax jurisdictions, particularly Brazil, leading to a Q4 effective tax rate of 7.9%.

The paragraph discusses financial performance and projections, highlighting a significant increase in adjusted earnings per share (EPS) for Q4 2024, largely driven by increased EBITDA and a lower effective tax rate. For 2025, the effective tax rate is expected to rise slightly due to profit distribution changes. Debt has been reduced by $600 million through the sale of a business unit and discretionary cash flow, lowering gross debt to $3.4 billion and net debt to $3 billion. Debt leverage ratios improved compared to past covenants, and an amended credit agreement provides more flexibility. The company plans to maintain flat leverage metrics in 2025 and improve them in 2026 and 2027 through EBITDA growth and disciplined cash management, aiming to return to their target credit ratings.

The paragraph discusses the company's financial performance and projections. For the full year of 2024, the company reported a $614 million free cash flow, an increase of over $1.1 billion from the previous year, driven by improved operations and reduced capital spending. A significant one-time insurance benefit also contributed. For 2025, the company expects free cash flow to decrease to $200 million to $400 million due to a normalization of working capital and increased capital expenditures focused on critical projects. Free cash flow conversion from adjusted earnings is projected to be around 69%. The paragraph concludes with Ronaldo Pereira discussing their evolving commercial strategy in response to upcoming patent expirations, seeing them as opportunities for transformation and competition.

The paragraph discusses the strategy for FMC's diamides business as it transitions to the post-patent phase. The company plans to offer basic formulations at lower prices to compete with generic products while also introducing high-value versions through new patented formulations. The focus will shift to two products, Rynaxypyr and Cyazypyr, each targeting different insect control needs. Rynaxypyr, which targets lepidoptera insects like caterpillars, has a larger market share than Cyazypyr, partly due to its simpler manufacturing process. The market dynamics for Rynaxypyr's active ingredient, Chlorantraniliprole, are expected to change in the coming years, and the company’s strategy is aligned with these anticipated shifts.

As Rynaxypyr enters a new phase with the expiration of its patents, it joins other off-patent legacy products in FMC's core portfolio. By the end of 2026, generic versions of Rynaxypyr are expected to enter major markets with solo formulations, and FMC plans to compete by offering its own lower-priced solo formulations. Despite the generics entering the market, FMC believes it remains competitive on costs due to recent restructuring. While the global foliar insecticide market is valued at around $22 billion, with diamides making up 9%, FMC's branded diamides hold about 55% of that share. FMC expects that price-sensitive growers will initially favor generic products, which may have a limited impact on FMC's market share, as their diamides are typically priced higher per acre.

The introduction of generic products will increase competition for certain FMC products, yet Rynaxypyr and Cyazypyr are well-positioned to capture market share due to their lower manufacturing costs, technological advantages, and better environmental profiles compared to other insecticides. The diamide market is anticipated to grow significantly, and FMC plans to differentiate Rynaxypyr with new formulations and mixtures to address potential resistance issues and expand market reach. Post-2025, Rynaxypyr is expected to grow at a high single-digit rate. Future product innovations, such as lighter formulations for reduced labor and new mixtures, aim to enhance value for growers. Additionally, FMC plans to enter the seed treatment market and introduce a product combined with a Bionematicide.

The paragraph outlines the growth strategy for Cyazypyr, a product expected to expand significantly, with process patents ensured in major markets until 2025-2026 and a formulation patent through 2027 in key regions. Data protection extends its market exclusivity, posing challenges for generics post-patent expiry. The company plans to introduce new formulations and mixtures to widen pest control scope and counter resistance, positioning Cyazypyr effectively for future competition. Despite its complex manufacturing, Cyazypyr offers strong pest control and cost advantages, targeting opportunities in fruits and vegetables with innovative solutions. Sales growth is anticipated in the low-to-mid-teens post-2025.

The paragraph discusses the promising growth potential of fluindapyr, a new active ingredient among SDHI fungicides, which are highly effective in preventing crop diseases. Fluindapyr stands out due to its broad-spectrum control over diseases like Asian soybean rust and corn tar spot, and its long-lasting protection reduces the need for frequent applications. Its market potential is significant, projected at over $2 billion, with key market segments such as Brazil’s soybean rust market worth $3.5 billion. Fluindapyr also allows access to new market segments and boosts sales of other company products. It is registered in several countries, with additional registrations pending.

The paragraph discusses the sales projections and expansion plans for two agricultural products: Isoflex Active and Dodhylex. Isoflex Active, a herbicide for cereals, is anticipated to reach over $150 million in sales by 2025 and $300 million by 2027, with expectations of further growth beyond 2027 as it becomes more widely used. The company has expanded its market to Brazil, Argentina, India, and the UK, with plans to enter the EU market by 2027, targeting a $5 billion cereal market. Dodhylex, described as a novel and versatile herbicide with a new mode of action, has initially been developed for rice but has potential applications for other crops like soybeans and sunflower. Rice, with 165 million hectares planted globally, presents a significant opportunity for Dodhylex.

The paragraph discusses the challenges faced by rice growers due to weed resistance, exacerbated by strict regulations against genetically modified rice varieties. It highlights the variability in rice cultivation methods, such as direct seeding versus transplanting, which limit the herbicides that can be used. Dodhylex is introduced as a versatile herbicide effective against resistant weeds and safe for all rice cultivation practices, which could make it widely adaptable globally. The company anticipates that Dodhylex will perform well commercially and projects potential revenues of over $2 billion upon reaching maturity.

The paragraph outlines the growth expectations for a company's plant health business, emphasizing the potential of their new synthetic pipeline, biological products, and pheromones. The business is projected to grow at a mid-20% rate through 2027, with pheromones expected to see significant growth after that period. The core portfolio sales are forecasted to grow at 2% annually from 2024 to 2027, with Rynaxypyr experiencing high-single-digit growth post-2025. The growth portfolio is anticipated to expand at about 24% annually, driven by new active ingredients and Cyazypyr, projected to grow in the low to mid-teens post-2025, aiming to reach $600 million by 2027.

The paragraph discusses anticipated growth in the company driven by products including fluindapyr and Isoflex, with a minor contribution from Dodhylex. Plant health is projected to grow in the mid-20% range, and a high-growth pheromones product is expected to significantly boost growth after 2027. Between 2024 and 2027, the contribution of the growth portfolio to total company sales is expected to rise from 19% to 30%. After 2027, further growth is expected from Dodhylex, expanded biological offerings, pheromones, and a new herbicide, rimisoxafen. Sales in 2027 are projected to reach approximately $5.2 billion with an EBITDA margin of 23%. Revenue is expected to grow at an annual rate of 7% from 2024 to 2027 and 11% from 2025 to 2027, with EBITDA growing at 10% and 15% respectively. The company is confident about its growth trajectory due to a strong portfolio, but acknowledges a need to reposition in 2025 through inventory realignment, a new diamide strategy, and investments in the sales organization. The session is opened for questions, with the first coming from Vincent Andrews at Morgan Stanley regarding the future evolution of Rynaxypyr starting 2026.

The paragraph discusses the company's strategy for managing sales growth amidst competition from generics. Pierre Brondeau explains that they can compete with generics based on current pricing data. The company plans to expand into lower-cost markets by reducing manufacturing costs and offering products at competitive prices. They also aim to differentiate themselves by developing high-end products with enhanced efficacy, allowing for a price premium. Additionally, the company is focusing on cost-effective, high-concentration products that benefit both them and growers. Overall, the strategy involves targeting both high-end and lower-end markets by offering a range of innovative and cost-efficient products.

In the paragraph, Josh Spector from UBS questions the company's unexpected increase in their volume growth projection for 2025, which appears higher than previously stated, despite acknowledging current market weaknesses and inventory challenges. Pierre Brondeau explains that the company has adopted a new strategy to reduce inventory of FMC products in the distribution channel and focus on direct sales. This strategic shift, developed in the fourth quarter upon better market insights, has led to an increase in their volume growth projection to high single digits, with a substantial portion driven by new products, including new molecules, active ingredients (AIs), biological products, and the plant health portfolio.

The paragraph discusses the growth strategy of a company, focusing on generating growth from new products and customers rather than traditional ones. The company is investing in developing new sales routes and expanding its market, which requires initial investment, particularly in the first quarter. The aim is to reduce existing inventory levels in the core portfolio, with expected growth ranging between $250 million to $350 million. During an earnings call, Andrew Sandifer highlights that this growth approach differs from the traditional model. Chris Parkinson from Wolfe Research questions the company's confidence in achieving its annual guidance, particularly given challenges such as Brazilian credit issues, competition, and lower inventory levels in the Americas. He seeks assurance that the company is doing everything possible to meet or exceed its targets.

In the paragraph, Pierre Brondeau discusses FMC's strategic approach in the first quarter of the year, focusing on reducing channel inventories and preparing for future growth. He highlights the company's cautious market approach, emphasizing the introduction of new products and exploring new routes to market in Latin America, where FMC expects significant growth in the second half of the year. Andrew Sandifer adds that there are timing shifts in the U.S. business affecting sales, with some expected Q1 sales shifting to later in the year. This adjustment is part of the strategy to achieve stronger performance from Q2 through Q4, combining new product growth and reduced inventory levels. Richard Garchitorena from Wells Fargo then asks about the pricing outlook.

In the fourth quarter, pricing declined across most segments and regions, except for EMEA. The outlook involves cost-plus contract adjustments, primarily affecting critical contracts that index pricing to manufacturing costs. Significant reductions in manufacturing costs are expected between 2024 and 2025, with more moderate cost reductions afterward. The 2025 guidance anticipates a 3% pricing impact, mostly due to these contracts. The 3% price drop in Q4 was slightly better than expected, as the company chose to forego sales when pricing or terms were unfavorable, prioritizing EBITDA and EPS goals.

The paragraph discusses the company's approach to managing inventory and pricing strategy to maintain earnings without aggressive selling. Pierre Brondeau explains that most inventory actions will occur in the first half of the year, focusing on the first and second quarters. Upon discovering unexpected inventory levels in certain countries like India, Brazil, Eastern Europe, and parts of Asia, the company plans targeted actions in these regions. This realization came from studying the selling process to understand discrepancies in performance expectations.

The paragraph discusses the shifting inventory targets for the end of the season, noting that customers now aim for a lower range (20-25% of full-year inventory) compared to the past (30-35%). This situation is described as a moving target, adding complexity to customer interactions, especially in regions like India and Brazil with high FMC inventory levels. In response to a question from Ben Theurer, Pierre Brondeau elaborates on the company's three-year plan, emphasizing that improvements are expected to begin in 2026, with new products anticipated to generate steady growth, reaching $600 million, rather than being concentrated in the latter part of the period.

The paragraph discusses the anticipated market developments and projections for Rynaxypyr and Cyazypyr volume sales. The company expects a decline in Rynaxypyr sales in 2025, attributed to increased capacity expansions in China, while Cyazypyr sales are expected to rise. For 2026, the company is optimistic about returning to growth, focusing on expanding market reach through new manufacturing costs and improving product efficacy. The strategy includes leveraging Rynaxypyr in solo and mixture formulations to enhance competitiveness and appeal to more growers.

The paragraph discusses a company's strategy to expand into a larger market by 2026 while maintaining a high-end product line with unique formulations benefiting growers. The speaker notes that variations in patent protections worldwide can affect competition, particularly when process-based patents are involved. Companies in India and China, which aren't easily stopped by legal action due to lack of court injunctions, are beginning to sell products in other countries like Argentina and Turkey as they near the end of their patent protection. The speaker anticipates a faster spread of this behavior than expected. The paragraph concludes with a question from Frank Mitsch regarding anticipated price declines, attributed mainly to manufacturing contracts with diamide partners, and inquires if improvements in manufacturing processes are being shared with those partners.

The paragraph explains that the company has varying contractual agreements with its diamide partners regarding pricing structures. For some partners, prices are indexed to the company's manufacturing costs, which is a strategic decision to ensure long-term competitiveness and secure long-term contracts. This arrangement can involve lower prices for partners even if the company invests in improvements that reduce costs. In cases where there is no such cost-plus agreement, pricing is negotiated periodically. Longer-term contracts are also secured by ensuring competitive pricing, indicating a balance between investment in manufacturing and maintaining partner relationships.

The paragraph discusses the competitive market dynamics and changes in distribution channels in Latin America, particularly in Brazil. It highlights how some consolidators have acquired smaller, family-owned retail businesses, leading to expanded and diverse distribution networks. However, the market share of these consolidators with the company's products has decreased due to evolving market conditions, different compliance needs, and varying credit requirements. The company is adjusting its approach by possibly investing in new market access routes to adapt to these changes.

The paragraph discusses a shift in strategy where companies are now establishing direct relationships with large soybean and corn growers, bypassing retailers, because they now have the necessary technology to meet growers' specific needs. This change is facilitated by advancements such as fluindapyr for soybean rust control and updated versions of their diamides. The organization has also restructured and invested in hiring skilled personnel focused on soybeans and corn, which were previously underserved segments. This new strategy requires different skills and connections, and it's only possible now due to the availability of appropriate technology.

In the conference call, Pierre Brondeau explains the factors contributing to flat adjusted EBITDA despite favorable changes in COGS. The key headwinds include a $130 million price impact related to partnerships, a $70 million foreign exchange loss, and a $25 million investment to establish a new sales organization, totaling $200 million to $250 million in headwinds. Andrew Sandifer confirms these are the largest factors, also noting a $25 million loss from not repeating prior profits in the GSS business. These factors cumulatively exceed $250 million. The call concludes shortly thereafter.

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