Q1 2021 FMC Corp Earnings Call
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Okay.
Good morning, welcome to the first quarter <unk> earnings call Index.
And so patients with.
And this is bill.
<unk> recorded and all participants are in listen only mode.
Should you need assistance.
The call and conference specialist with me from the stock followed by zero.
After todays prepared remarks, the moving and opportunity to ask questions.
Alright, and is released and and our balance 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 on this board and materials will include references to adjusted EPS adjusted EBITDA adjusted cash from operations free cash flow and organic revenue growth all of which are non-GAAP financial measures. Please note that as used and today's discussion earnings means adjusted earnings and EBITDA means adjusted EBITDA.
Ah reconciliation and definition of these terms as well as any 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 Mark.
Thank you Michael and good morning, everyone on.
First quarter results were in line with our guidance and expectations.
Revenue and and things, but down asphalt cast it on.
Things were modestly above the midpoint of our guidance.
We continue to expect a good second quarter on a strong full year.
We have two important product launches and the quarter over.
Although Walter beside based on our Isolex acted in Australia, and Zywiec fungicide and the U S.
I said flex is one of 11, new active ingredients, we plan to launch this decade.
Both launches have exceeded our expectations and have delivered approximately $50 million of Q1 sales.
And March we announced and important agreement with UPN to told manufacture and exit for insect control and India.
And to distribute products based on the active ingredient and selected markets.
And the future FMC will supplier and execute active to UPN for use and products formulations developed and marketed by UK all around the world.
This agreement is the next step and growing are important diamide franchise, and accelerates and FMC as long term plans to expand the franchise and diverse geography's and crops with differentiated formulations.
It also reaffirms the strength of our patent portfolio that protects our diamide franchise, Bobby on just the composition of matter of fact.
We returned over $135 million to shareholders and the quarter throw a recently increased dividend and share repurchases.
10% compared to the prior year period, and $2 million above the midpoint of our guidance range.
EBITDA margins were 25, 7% a decrease of 290 basis points compared to the prior year.
Adjusted earnings were $1 53 per diluted share in the quarter, a decrease of 17% versus Q1 and 2020, but also on <unk> above the midpoint of our guidance range.
The year over year decline was primarily driven by the decrease in EBITDA, partially offset by lower interest expense.
Moving now to slide four Q1 revenue decreased by 4% versus prior year, driven by a 4% volume decrease and a 1% price decline foreign currencies were a modest tailwind and the quarter on the top line.
Sales and Asia increased 18% year over year, and 13% organically driven by double digit growth and Australia, Japan, and the Philippines, Thailand and Vietnam.
We had strong overwatch herbicide sales for cereals, and sales of our diamonds were robust for fruit and vegetable and rice applications.
Insecticides also performed well and Indonesia helped by our recently expanded market access and Mac country and improve lead a health sales across the ASEAN sub region.
EMEA sales were down 4% year over year and 8% organically.
We had strong sales of <unk> and other insecticides as well as fungicides.
These were more than offset by headwinds from Brexit related UK sales in Q4 that we described a quarter ago as well as discontinued registrations.
And North America sales decreased 8% year over year on.
And our herbicide business grew double digits, partially due to the timing of some sales that shifted from Q4 to Q1 as well as the continued strength of authority edge and authority Supreme Herbicides.
We also had a strong launch of <unk> and the use of <unk> fungicide for Com and <unk> insect control for specialty crops.
These were offset primarily by a shift of Diamide fed policy partner sales from North America, and Latin America.
One of our key partners adjusted the way purchases from FMC globally.
This was simply a move of purchase and location and not so change and demand.
Excluding this shift our North America sales were up low double digits.
Moving now from Latin America sales.
Sales decreased 22% year over year, and 13% organically as a reminder, we were facing a particularly difficult comparison, and Latin America, where sales increased 26% year over year, and 38% organically in Q1 and 2020, Brazil.
Brazil's cotton business was very strong for us a year ago, which did not repeat this season as call it and hector's were down 15%.
We also proactively reduced channel inventory of FMC products as planned in Q1, improving our inventory situation in Brazil.
And our <unk> zone sub region continued the momentum from 2020 with double digit sales growth.
Turning now to the first quarter EBITDA bridge on slide five.
EBITDA in the quarter was down $50 million year over year due to a very strong Q1 and 2020 comparison.
Volume headwinds in Latin America, and EMEA were partially offset by new product launches in Asia and North America.
And Latin America, we focused on reducing channel inventory to set ourselves up for a much stronger pricing environment and the second half of 2021.
Cost headwinds was slightly higher than expected, while FX headwinds will fall lower than in the prior four quarters.
Turning now to our view of the overall market conditions for 2021.
We continue to expect the global crop protection market will be up low single digits on a us dollar basis.
Relative to this time last year commodity prices from any of the major crops are higher and stock to use ratios on much improved.
All regions to see and some benefit from better crop commodity prices, while the negative impact from COVID-19 on crop demand appear to be modest.
The only change to our original forecast is that we now forecast mid single digit growth and the EMEA market.
And as low single digit growth before.
This improved view is due to the strengthening of currencies and that region relative to the U S. Dollar.
Market growth and Asia is still expected to be and the low to mid single digits, driven by India, Australia, and ASEAN countries, while growth in the North American and Latin American markets is still projected to be and the low single digits.
Basic fundamentals remains strong however, our overall forecast for the total crop protection market remains low single digit growth due to signs of supply chain constraints and the industry as well as modest channel inventory overhang in certain countries.
Although Brazil, and India are facing significant increases of COVID-19 cases, we are not seeing signs that this is impacted and their respective agricultural markets. At this time. This is however, something we are continuing to watch closely.
Turning to slide six and the review of FMC full year, 2021, and Q2 earnings outlook.
FMC full year 2021 earnings and now expect it to be in the range of $6 70 to.
And to $7 40 per diluted share of <unk>.
Year over year increase of 14% at the midpoint.
Places.
<unk> is now forecast it to have no impact on the top line.
And we continue to expect broad growth across all regions and a very strong second half of 2021.
New products like Overwatch herbicide Zywiec fungicide atlantico insect control are already making meaningful contributions.
We're also planning to launch flow and appear fungicide and the us for non crop applications later this year.
We expect new products to contribute $400 million and revenue this year.
This includes all products launched since 2018.
We are forecasting strong growth and each of our product categories and the year.
In addition to the continued growth over and exit there and sigh as I put and set controls.
We expect growth from other key insecticide brands and our portfolio included Avatar hero and Talisman.
Our herbicide portfolio is also expected to grow led by brands included and authority gamut spotlight plus and Overwatch.
As I always expected to lead growth of our fungicide portfolio building on the successful launch of essential fungicide, a couple of years ago.
Our EBITDA guidance reflect significant volume and pricing benefits offset partially by increases and R&D spending the reversal of some temporary cost savings from 2020, as well as increase and raw material and logistics costs.
As we stated and February we are forecasting and increase and R&D to bring this to a level of funding that keeps all projects on the critical path to commercialization.
Taking cost control actions to limit the net cost headwind too and incremental $10 million versus what we showed in February.
We also intend to offset and the higher raw material costs, and an additional $10 million and price increases, which will come primarily and the second half of the year.
Moving to slide eight way you can see the queue to drivers on the revenue line, we're expecting positive contributions from all categories volume, 4% pricing, 1% and ethics, 1%.
They are expecting solid sales growth and Asia, EMEA, and Latin America and.
Growth is expected to be broad based across the region, we particular strength and India, Australia and China.
Growth and EMEA will be driven by improve crop conditions for serials and sugar beets.
Latin America growth should be supported by improve conditions, and both Brazil, and Mexico, and the continuation of strong growth and the empty and zone.
We see good conditions, and North America for row crops, and a positive outlook from new products.
Regarding EBITDA drivers positive contributions from volume price and effects more than offset the increased costs, which we previously discussed.
And announced slide nine.
With the guidance for Q2 of the full year on record we would like to also show the implied forecast for the second half.
We have a very strong outlook the age too and let me outline the drivers for that growth.
We forecast year over year over year revenue growth and 15% and the second half driven by five main elements.
First our expectations of strong for the U S and Brazil. Following a week Q4 of 2020 performance and those countries.
Second price increases, primarily and Brazil with contributions from numerous other countries will help offset the FX headwind from last year and the higher costs from raw materials. This year.
Thirdly, new products will continue to be a major factor.
Overwatch and Australia.
<unk> way and Diamide formulations, Ella best and Vansickel and flow and appear from non Crump applications and the U S and authority and X T herbicide and India.
Both improved fundamentals continent, Brazil as the most obvious to us as growth of indicated a 15% increase and hector's for next season and.
And we also expect a strong two four and North America, and Latin America, driven by good fundamentals for soybeans and call.
And finally fifth improve market access and expansions into new geographies and crops. This is having a significant impact and Asia with recent initiatives and India, Indonesia, Philippines, and Vietnam, all forecast to drive high growth rates.
On guidance also implies a 30% year over year EBITDA growth and the second half of the year.
Much of that will come directly from the volume and pricing growth I've. Just described but we also expect to limit the raw material and supply chain cost headwinds with sustained cost disciplined and other areas.
I will now turn on the call over to lenders.
Thanks, Mark let.
Let me start this morning with a few highlights from the income statement.
FX of and modest tailwind for revenue growth and Q1 at 1% versus our expectations and the 2% headlines as the U S. Dollar weakened against many currencies with the notable exception of the per day and her out.
Interest expense for the first quarter was $32 $4 million down eight $4 million from the prior year period.
With the benefit of lower LIBOR, it as well as lower foreign debt and lower term loan balances, partially offset by higher average commercial paper balance.
We continue to anticipate interest expense between 130 and $140 million for the full year.
Are effective tax rate on adjusted earnings for the first quarter was $13, 5% is anticipated and and line with our continued expectation for a whole year tax rate between $12 five and 14, one 5%.
Moving next to the balance sheet and liquidity.
First at at the end of the quarter was three $6 billion up over $300 million from the prior quarter with the expected seasonal bill working capital.
Growth that the trail and 12 month EBITDA with three point O times at the end of the first quarter, while net debt to EBITDA was two seven times.
Both metrics from above are targeted full year average levels due to this and seasonality of working capital.
We expect that and this will improve throughout the year and we will return to target levels by year and.
Moving on to slide 10, and cash flow and cash deployment.
Free cash flow from the first quarter with negative $354 million.
Adjusted cash from operations with similar to the prior year period with improve working capital offset by changes and non working capital items and lower EBITDA.
Apple editions were somewhat higher as we ramped up spending calling deferral products last year day to COVID-19.
Legacy and transformation spending with substantially lower with the completion of our Ffbe program.
We continue to expect to generate full year free cash flow within a range of $530 million to $620 million with the vast majority of those cash flow coming and the second half of the year.
We returned $137 million to shareholders and the quarter via $62 million and dividends and $75 million a share repurchases.
Buying back 696000 shares and the quarter and an average price of $107 and 73 per share.
We continue to anticipate paying dividends approach and $250 million and repurchasing $400 million to $500 million of FMC shares this year.
And with that on hand to call back to Mark.
Thank you Andrew.
Q1 financial performance was in line with our expectations. We are now focused on delivering against our affiliate forecast.
19 continues to be affected to watch from a closely monitoring raw materials and supply chain costs.
We remain confident and a full year forecast that builds upon the new technologies and improve market access that are driving our growth.
The market demand from most recent product launches as important as it confirms the strength and value that are innovative RMB pipeline delivers to grow as we.
We expect this momentum to continue to accelerate over the coming years with launches of new active ingredients and products as well as outcomes from technology partnerships, we've established and the past year.
Finally, we remain committed to our cash deployment pen.
We are on track to deliver more than $700 million to shareholders. The <expletive> building on a trend since 2018 of improving cash generation and returning excess cash to shareholders I will now turn on the call back to the operator for questions.
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And first question comes from I can send him.
From Colton key from the heat.
Yeah. Thanks, good morning, everyone.
Okay.
Alright, So I was hoping and it may be taken a little bit on on price and cost and.
Made some modest adjustments.
To the full year outlook and it kind of netted to unchanged, but I'm trying to think about kind of what you're seeing maybe on a gross level and each of those bucket.
Seems like both raw material inflation, and and accelerating pretty meaningfully logistics with a.
Challenge for from any across the industry and and some of your peers do seem to be taking some more aggressive price action and what's implied and your guidance and so I'm trying to.
Reconcile all those pieces and week take on how that leaves you competitively.
Competitive nutrition this year and there's.
Either more pricing opportunity or carryover cost inflation and the next year just thinking relative agreement.
Yeah, and thank you I'll I'll start off and then it'll that Andrew talk a little bit more about some of the cost sections and items that we got on the agenda in front of us listen you're right I mean supply chain costs raw material costs and it's not it's not just the cost element is actually availability that is causing some of that inflation that we'll see.
We are raising prices and we have raised price last year, we're raising price. This year most of it will come and the second half because of the way. It is falling although we did we did raise price and and North America and Q1, and we we didn't get as much prices. We thought we would get in Latin America, we will.
Clear that we were focused on drawing down inventory and we very successfully done that we continue to do that as we enter queue too, but I feel very good where the inventory levels that is boding well for our ability to move price and the second half and as you just alluded to the industry itself is moving because certainly FMC is not the only.
One facing these pressures everybody is so Andrew do you want to talk a little bit about some of the cost elements and how is flowing through the P&L sure certainly thank God and as you noted.
<unk> adjustment in terms of what net hits, the and the EBITDA bridge for cost and.
And increased to $100 million headwind for cost and on the full year versus 90 may and when we gave initial guidance on February the increase and raw materials and logistic cost, it's substantially more than that $10 million.
We are taking additional cost control actions.
Across all of our spending whether it be and and plant level of spending and Cogs or on SG&A and R&D really continuing the strongest of on we've had throughout the pandemic to partially offset some of that increase and.
And raw materials and logistics inflation, so certainly the underlying increase and raw materials and adjusted costs as much more than than the $10 million.
But again will be taken from a very aggressive actions to continue maintaining cautious one offset that.
Net net and we look at that $100 million increase year or a year and.
Directionally speaking about $40 million to $50 million and that is really raw material and logistics cost increases. Another 30 to 40 million of it is a return on more normal R&D, let and spending level. Some variability there based on how we do the exact execution of certain project expensive and that range and the remainder is increases and SG&A and.
Again against and artificially low 2020, when we were on a very extreme controls.
COVID-19 pandemic.
And.
Question comes from from.
From.
Uh-huh.
Good morning, all and knock.
No like I've done a question on and.
And the U P and agreements and what it means for the earnings Conjecturing and I think back when you did the technology day, you refrain from talking about.
And then she'll performance plus 2023, and I was wondering now with these agreements and and on the other agreement and <unk> been able to do other day, yes, and you can and more confident that you can avoid and ending pressure from the day and night, Okay and.
And that the 20th and thank you.
Yeah, Thanks Laurel yeah.
Yes, fundamentally I mean, we we made a statement and February the and properly and the oldest call we're going to do a deep dive the oldest call us when we generally deep dive on one aspect of the business we.
We are going to do another deep dive on the Diamide and the impact of all the programs we've put in place whether it's.
Defense from a legal perspective, where we've been very successful over the last year and and litigating.
Litigating against people, who are thinking about all trying to to move around our patents and India and China.
To the the whole third party relationships and and I.
I'm sure I'm going to get a questions all headed off on the third party relationships, we have five global relationships now and <unk>. The latest one and we have 41 42 now local.
Relationships, we have 12 mall that were and discussions with that will probably be put in place sometime this year. So we continue that expansion and and August we'll talk about the scale of this how we see growing.
Is obviously very successful because we've been working on this since 2017, when we acquired the assets.
It's been put in place, it's being driven regionally and globally. So we'll put in place a program will will show you how big it is how it's growing the bottom line is I do believe that and 2023, we will probably be at the very high and if not above the high end of our expectations for dialogue.
Yeah.
And the next question comes from Mark.
Please go ahead.
HM.
Thanks.
Mark as you launch these new products and they become and increasingly important part of the growth over the next couple of years and I was hoping you could give us a sense of of how well those launches a performer and get into your expectations, whether you see and need to adjust you go to market strategy and on what you're learning and along with that can you tell us more about the the market acts.
This initiative because some of those countries that you listed are pretty challenging places for U S companies to do business, but really attractive CP markets.
Yeah, Thanks for offices and it's a very good question and one that we have.
We've been working on a lot over the last couple of years, which is obviously the new technologies the new the new products. Let me give you some numbers to sort of put this in perspective for you I just said that $400 million of this year's revenue growth is coming from products that we've introduced and 2018 and.
And we usually take a five year look at this but 2017 was a very strange year for us because we made a major acquisition so for that and.
And the clock at 2018.
Of that $400 million and $180 million is growth with a coming from products that will launched and 2018. So it's real growth. This year year on year of the 180 100 is coming from products that will launch this year such as them to call such is XI.
Such as Overwatch. So you can see that think about it this year, we're projecting and 8% growth rate, 4%. So almost half of the overall growth is coming from new products and that's exactly the trajectory we want to see and we expect that to continue as these major launches start together state so the <unk>.
We've launched this year will obviously at the next year and continue for five years under this metric I think I think it's a very important aspect that people are overlooking I mean, we obviously focus on the dime eyes and they continue to grow very well for us will in the future as we bring on more partners, but you've got to remember, we're introducing brand new products and to stay.
This is that we've never participated before for instance XI way.
It is a systemic fungicide for corn and the U S. We've.
Never had a fungicide for call and in the U S. It's a large market and it's one that we can now go and exploit because the technology is so different that's the growth algorithm that were running to.
Your second point Mark on market access we have invested over the last couple of years and more basic salespeople boots on the ground and the field and places like Indonesia and.
And India Vietnam. The Philippines. These are all as you just said very very attractive markets, but they're very local markets you have hundreds and.
Thousands of small retailers and distributors that need to be promoted to you only do that by having more people on the ground. So we continue to invest in that and you've heard me talk over the last few quarters about how important the growth and Asia is well, it's coming not just from the portfolio, it's coming from our market access X.
Pensions, which will not slowing down even as we go through the COVID-19 pandemic. So it is a very good picture from Ah New products introduction standpoint, and don't forget overall, new products generally speaking have a higher margin and products that are discontinued out at the portfolio. So is Andrew talks about many times and our five year plan.
And we have a 300 basis improvement and EBITDA margin not only is not related to the investment and sappy and how we run the company. It is also related to the new products were introduction, introducing and how that mix changes over time.
Super helpful. Thank you.
Okay.
And the next question comes from tongue rabbits from you be and please go ahead on it.
Mark you indicated that you didn't think COVID-19, and India, and Brazil would affect customers there, but you had a supplier issue and the fourth quarter related to COVID-19 and India. So huge actor producer and they've got actually a large global producer there as well do you think there'll be production issues that will be disruptive to the industry.
And that might affect maybe this next quarter.
Yeah John.
John I'm not so sure. It's the next quarter, it's it's been that for awhile and I just alluded to the fact that it's not just the cost at his availability.
These things come and go as places get hit we've not had our own facilities go down, but our procurement and supply chain groups and working hard behind the scenes to source alternate raw materials was somebody goes down because of of COVID-19 impact so they're they're very real it's not just India China.
Is also had issues not necessarily related to COVID-19, but but other.
Other areas of manufacturing so yeah, it's something that we're very focused on the.
The supply chain groups and procurement groups work closely together.
Not something that you can predict so the key is to make sure that you are on demand forecasts or solid as they possibly can be so that you can procure forward as much as possible and don't forget.
And the supply chains are long and nature from the moment on active ingredient is manufactured to it getting through to a distributor all to a retailer into a growth access six to eight months supply chain. So.
It is a very very complex area that takes a lot of managing.
And you.
<unk>.
Thank you and the next question comes from think needs from from your mistakes.
Go ahead.
Hi, good morning folks.
Mark I'm trying to understand and a little bit of arithmetic with respect to the shift and and and Diamide third party.
Partner shifting from buying out of North America to Latin America, I believe you said that North American sales.
We're down 8% year over year. However, if that shift had not occurred it would've been up it would've been up double digits. So then the expectation is that Latin America would have seen that sort of level of increase and.
Obviously, you were doing some.
Pruning and your and your inventories there and so forth but.
And what was the net impact and Latin America, or maybe it's a seasonal shift and you can you enlighten us a little bit there.
Yeah, It's about 30 million Frank you can do the math and.
And the numbers are out there I might as well say what it is it's about a $30 million swing from.
North America to Latin America. It occurs in the quarter, it's recognized and the courses so it's not something that.
The changes any other part of the year and unless it's something I'm going to talk a lot more about as we go forward and August.
And as our dialogue business gets much bigger and our third party relationships getting bigger and we don't control that demand. So it is going to move on his at times and this is just one example, it doesn't mean to say that the overall company has has lost any business and fact is all good growth is just move from one region to another.
Because I'm a third party companies procure at different points and different regions. So it's really as simple as that it's not complicated adult.
Got you suggest just to be clear so the Latin American revenues of $203 million would have been 170 absent this shift.
Yeah give or take yes.
Thank you.
And next question comes from to be Fine from Bank of America. Please go ahead and.
And Mark your competitor yesterday highlighted a couple of and insecticides that the.
And do on production and I don't know whether that has any opportunity benefit for you on your and insecticide.
Platform and and maybe a more general comment about your outlook for for new product development. When you when you look at.
Regulators and ruin the world or discontinue registrations.
Is there a particular vertical that it looks like there could be cool and increasing void and.
Active ingredients and and this.
Is your a pipeline reflect that longer term and opportunity, perhaps more so with your biologicals.
Yeah. Thanks, Dave.
With regards to the first part of the question, Yes, there are some opportunities ours to replace the products as being removed.
Dialyse would potentially take some of that market share.
All depends on what price point, and what particular crop that is on but yeah. The team is looking at what upside there is I think from a general regulatory perspective.
Either it's a fungicide I had decided already insecticides, they're all and the regulatory scrutiny as they always have been.
We just did a recent study where we looked at the insecticide overall market.
And when we think about the classes of chemistry that are out there I do think there are some of the older chemistry is that going to come under pressure.
And that's going to give great opportunity for things like the Diamide, especially diamide and mixtures for a different tests and that's where I think we're going to see significant growth with some of our competitors in terms of how we supply and products to the partners and our day will grow.
So I'm not really I'm, not really focused on whether it's on a beside her as insecticide. We know the regulatory environment is getting more stringent and as I've said before for a basic R&D producer, that's not necessarily a bad thing because with a robust pipeline like we have we're bringing the latest technologies to marketplace.
Which generally speaking because of the environmental regulations that we have today are better chemistry, and more targeted their software and nature that leads itself to the second part which is the biological and you know biological program is really have is heavily focused around fungus sides.
Secondary is the insecticide area.
We don't really have anything yet and the heavy side space, but we do see that growth and an hour biologicals business.
Biological business is now just north of $100 million and revenue it.
It is growing and the in the very high double digits and it's EBITDA margins are strong and we have good products coming and in the near future from the pipeline. So you will see us talk more on invest more and the biological space going forward.
Thank you.
And next question comes from my Couch and from here.
Okay and can can you go ahead.
Hi, good morning.
You mentioned that Europe was the only region, where you we're increasing your expectations of your your market outlook.
My understanding and if there is a drought going on and France.
How much exposure you have and France, maybe talk about your expectations for the weather intact and.
And Q2, and the rest of the year and broader it'd be as a region. Thanks.
Yeah, Mike and the reason we increased it is mainly because of that it's just a U S. Dollar translation you are absolutely right.
Is not necessarily a dry and it's been very cold and northern Europe.
Season is probably delayed about three weeks maybe.
And maybe even amongst and that's a lot of the beginning of the season.
We're watching it very carefully the south doesn't tend to be so impacted so the whole specialty crop area through Spain, Italy, all the way across Greece, and and into Turkey, but certainly, France, and Germany were watching very closely at this point UK as well.
It is it's not what we predicted so it's something that we saw last year actually the drought occurred at the same time last year.
It's just part of the the climate change that we're seeing and the very short term that patents are moving on and the good news is and our European business. We do have a very diversified portfolio and we have been growing and many of the smaller countries and I've mentioned, Romania, before and I've mentioned Grease, I've mentioned, Turkey, which is becoming a much bigger.
Market for us So I think having a distributed model across many countries helps but yeah. It is delayed and it's something we're watching.
And it looks question comes from Telecheck and from BMO capital market. Please go ahead.
And good morning.
And we're seeing a lot of food high and you'll see a lot of food and food ingredient companies charged to explore the idea around and sustainability.
And farming and look at you know whether it will start grading the green and the ingredients cramps and day by on.
And the sustainably practices that those funds follow and maybe even down the road and we're early.
And lower or higher premiums.
Nice and bright day.
Can you talk about are you, having some discussions now as a crop and the producer about some of the different crop protection products and a and things that you offer.
And how that might.
Factor and sustainability score and the farmers and planes and this whole knee.
<unk> since dynamic.
Yeah. Thanks, Joe.
And the food chain is something that obviously, we pay close attention to our global marketing group and our sustainability group have various relationships throughout that food chain I would say in the future. We told as many times about our sustainability index that we use for our research programs I think are tools such as that as we go forward.
It is going to be important to show the environmental impact that we have on the food chain in terms of the types of products with selling whether it be from a walter usage and manufacture all residual levels and use those are all important elements and they're not necessarily at this point in time driving forces for revenue.
But I wouldn't disagree with you that they won't become more important discussions as we go forward and for US and we're happy to have that conversation because because of the strength of the pipeline and the way we're developing those products. We believe there are advantages to have those discussions around the most.
Efficacious products that have the lowest residues and especially and the biological space, because that's where I can see biologicals, playing a very important role.
And for Ya.
Christian.
Thank you and the next question comes from Michael picking from Tpg's. Please go ahead and.
Yeah. Good morning, I know that you kind of hold your guidance blue kinda low single digit.
Cause then and volume growth and yet we're looking at you know pop economics for a lot of row crop farmers and other farmers around the world getting a lot stronger and at what point do you think we might see and trajectory of the growth rate to the industry go up and and what time for his need to come into play for industry that may be going on sense to range over the next.
Couple of years. Thanks.
Yeah. Thanks, Mike.
Yeah, we are projecting that growth rate and.
And the low to mid single digits, that's higher than we've we've projected over the last few years and we were we were reasonably spot on with our projections in terms of and a flat flattened markets over the last couple of years.
And I, obviously think that over the longer haul if commodity prices stay where they are and then yes, we should fundamentally see some uplift and the marketplace going forward I think this year.
Obviously, it's come and.
We see.
I think the supply chain side and the raw materials side is what's weighing on our our view of the world I think grow as as you say, obviously and a much better place and I'm more concerned about the ability to supply Prada.
Products that are needed at certain times and the marketplace.
I think it brought it prices stay like this into the next year and we start to get through the COVID-19 crisis and.
Manufacturing frees up and supply chains free up a little non logistics become for you then yes, I think maybe next year, we might see FMC, giving you a guidance that slightly higher than where we are today.
Thank you.
Christian comes from standard.
And that's it from Keybanc. Please go ahead and.
Thank you good morning, everyone on Mark you mentioned that supply concentrate and supply chain from screens is something that Lois industry growth. This year do you think and follows that maybe the market is philip under supply versus demand and and that could impact growth and 2000 and.
22 positively.
No I don't I don't fundamentally think so I think the supply change will be writing themselves as we go through this year. So I'm not concerned about significant supply constraints across the broad industry do I think there'll be pockets of constraints, yes more than likely but that's what we have today and we're working through.
It so I would hope that next year, it becomes a little easier on the supply chain and procurement groups for all the companies involved.
Thank you and the next question comes from Kim and the coffee from thank you <unk>.
<unk>. Please go ahead.
Good morning.
Mark I was wondering if you could comment on inventory levels, and Brazil, as well as the expected price and inflection that you anticipate from the back half of the year and and your degree of confidence.
And and moving prices higher and that market and then secondly on on Brazil.
How much more volume might you anticipate with soybeans and the teens versus single digits. If you look at history is there any sort of rule of thumb or or experience on on that cross price elasticity.
Yeah Thanksgiving listen on the inventory side I can certainly tell you from Fmc's perspective, where and where and very good shape with all the activities that we put in place so.
I think the industry is generally getting better as well, we'll we'll see as we exit Q2 and think about Q3 and Q for as we enter the the 21 22 season, but.
Yeah from FMC wearing weren't very good shape very happy with what and it seems done and I know it's been painful.
For everybody involved but it was the right thing to do from.
I'm a from a growth for our perspective on market share on soy is reasonably low and and Brazil. So when I talk about the second half of the year and I said expectations and the U S and Brazil, not only from a week Q for that we had but generally speaking from good crop fundamentals and Ah.
<unk> somewhere where we're growing.
With growing on insecticides for stink bug control and that's not with Diamide, that's with other insecticides and our portfolio a couple of the brands that I mentioned here on talisman their major growth products for us So I.
I do believe and and fundamentally I think most people would agree that with higher crop prices, many grows and willing to invest and the best technologies to protect those crops on.
And that's one of the premises we're taking forward as we think about soy and.
And the next season coming up and 21 22, I also think that.
There is an opportunity on fungicides, we're gaining access to a new fungicide and Brazil that will be used on soybeans and that will help us.
As we gain more broader footprint and on the side piece around brasilia share market access.
We're thinking some deals as we speak getting ready for the next season going forward with major distributors. We're we're increasing our market access to those distributors to sell the products. So a backdrop to your question is do we think we can do more with higher crop prices and installing and Brazil. The answer is yes, and it is one of those drivers.
And for our strong second up.
Thank you.
[laughter].
Thank you.
Question comes from and things and Andrew from move and clean and keep going.
<unk>.
Thank you and good morning, everyone and I'm wondering if you could talk a little bit about in North America, what you're seeing you know and the horseshoe and specialty crops, you know against against the fourth quarter, and and <unk> to search and how you're expecting that to develop over the balance on a year.
Yeah, we are seeing and developing well actually and and all of our growth is being very good, especially with the diamide and some of the new fungicide.
Applications that we put in the I think and watch out that I would say and the team is made this vocal to me is labor constraints.
Especially in the California areas getting getting people into the fields into the packing stations, it's something with watching it's not being a disruptor, yet, but we're always trying to look around the corner, but fundamental growth is good I have to say that generally speaking with a specialty crops on fruit and vegetables around the world we have seen.
And it's very good growth, especially in Asia.
Many of the countries and Asia are improving their inputs into many of the specialty crops, whether it's chilly zone pulses in India.
Mexico is doing well a lot of exports from Mexico. So the Mexican specialty crop business is doing well and I'll make spending a little bit outside of North America on the on the <unk>.
<unk>, but the reality is the markets are intertwined in terms of demand.
So generally speaking, yes, very good but one watch out would be labor and the U S.
And can the next question comes from the ninth.
Please go ahead.
Hi, guys and this is Dennis and one from Orange. Thanks for taking my question I'm, sorry could you just hold.
Color on on labor labor shortage and.
And that was running about mothers' day is affecting you guys and and to what extent.
Yeah, it's not it's not really affecting us it's more of the grower level.
Many of the crops are picked by hand, the packaging stations that are on the farms are.
Heavily labor intensive and many cases, it's just a case of getting the labor into into the into the facilities COVID-19, obviously had a major impact on that hopefully we're coming towards the end of that but it is something that we're very cognizant, although not watching.
Okay.
Thank you and final question comes from Ikea and different out from I B C capital market keeps going ahead and.
Great. Thanks for taking my question and.
And just curious on Brazil, and Latin America, you know you called out and you know some some challenges and and cotton and.
How do you see that market kind of evolving over the next couple of quarters is it really dependent on kind of a full reopening and and better textile environment and we're kind of hearing that that's already going on and and then also maybe you can also comment on some of the customers issues, you faced and Argentina, and you know if that's necessarily run.
Solved and X.
Yeah, I'll take the last piece first yes, the the issues and Argentina as I said, it and the last call, we will change and some of our supply chain.
Manufacturing formulating routes those are in place. So yeah. That's that's behind US at this point when it comes to cotton two things are happening festival.
We're thinking forward to the 21 22 season.
And we're already seeing raised prices for the next season, and that's something that will drive and it gives us a lot of confidence as to the previous question on price and Latin America, So not only on prices moving but and more importantly, hector's are increasing.
20 to 21, carton caught and actors and Brazil were down about 15%, maybe a little bit law, we're actually seeing that rebound now on the back of better cotton prices Lowestoft to use ratios around the world and frankly more people buying clothes as we come out of the pandemic and the demand for cotton going up so.
So this year, it's been a tough year for us on cotton, hence the Q1 that we've had but we're very very confident that as we go into too far and Q1.
Later, this year and 2022 that will see that rebound and the signs are already that for us.
Thank you that is all the time and we have for the call today have a good day.
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