Q3 2023 FMC Corp Earnings Call

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Good morning, and welcome to the third quarter 2023 earnings call for FMC Corporation.

This event is being recorded and all participants are in listen 90 might shoot.

Should you need assistance. Please technical conference specialist by pressing the stocky followed by is that right.

After today's prepared remarks, there will be an opportunity to ask question.

Did he placed in the Q&A queue. Please press the stocky than one at any time, if youre using a speakerphone. Please pick up your handset before pressing the key I would now like to turn the conference over to Mr. Zach Sucky director of Investor Relations for FMC Corporation. Please go ahead.

Thank you Lydia and good morning, everyone welcome to FMC Corporation's third quarter earnings call.

With me today are Mark Douglas, President and Chief Executive Officer and Andrew.

Her executive Vice President and Chief Financial Officer.

Mark will review, our third quarter performance.

Outlook for the fourth quarter and full year.

Followed by an update on Fmc's Diamide franchise Andrew.

Andrew will provide an overview of select financial results.

Following the 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.

We're looking statements and are subject to various it and uncertainties concerning specific factors, including but not limited to those factors identified in our earnings release, I don't know filings with the Securities and Exchange Commission.

Information presented represents our best judgment based on today's understanding.

Actual results May vary based upon these risks and uncertainties.

Today's discussion and the supporting 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 in today's discussion earnings means adjusted earnings and EBITDA means adjusted EBITDA.

A reconciliation and definition of these terms as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website.

With that I will now turn the call over to Mark.

Thank you Zach and good morning, everyone.

During Q3, we observed a continuation of industry wide destocking activity as the value chain resets inventory levels in response to increased security of supply and higher interest rates.

This led to significantly lower volumes versus the prior year and in the case of Latin America. The decline was much more severe than we had estimated at our last earnings call.

As a reminder, due to the timing of its growing season in Latin America is typically the strongest contributor to our Q3 results, which amplifies the region's impacts on our overall Q3 numbers.

Unknown Executive: Good morning and welcome to the third quarter 2023 earning call for FMC Corporation. This event is being recorded and all participants are in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

We had assumed that the destocking, we observed in Latin America during Q2 would be sufficient to allow for more normal order patterns to resume.

There's lots of America entities main grilling season in September.

Unclear that we underestimated the depth and duration of the Destocking to come.

Unknown Executive: After today's prepared remarks, there will be an opportunity to ask questions. To replace in the Q&A queue, please press the star key, then one at any time. If you're using a speaker phone, please pick up your handset before pressing the key.

It is our view that when the global Destocking ends in channel inventories have been reset that will not be a snapback restocking period, rather we expect the crop protection market will grow from that reset inventory base at a more historical growth rate.

Zack Zaki: I would now like to turn the conference over to Mr. Zack Zaki, Director of Investor Relations for FMC Corporation. Please go ahead. Thank you, Lydia and good morning everyone.

As a result, and as we noted in our pre release, we are taking significant actions with regards to our company's cost structure within announced restriction of our Brazilian operations as well as a review and adjustment of our total company cost base.

Unknown Executive: Welcome to the FMC Corporation's third quarter earnings calls.

Unknown Executive: Joining me today are Mark Douglas, President and Chief Executive Officer and Andrew Sandifer, Executive Vice President and Chief Financial Officer.

We are right sizing our cost base to better reflect market conditions protect our margins and position us for future success.

Mark Douglas: Mark will review a third quarter performance as well as provide an outlook for the fourth quarter and full year performance followed by an update on FMC's Dimite franchise.

We will provide more details about our restructuring programs at our Investor day.

Q3 results are detailed on slides three four and five.

Zack Zaki: Andrew will provide an overview of select financial results. Following the 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.

Q3 revenue was 29% lower than the prior year, both including and excluding FX driven primarily by lower volumes from channel Destocking and to a lesser extent dry weather conditions in some countries.

Zack Zaki: 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 a best judgment based on today's understanding. Actual results may vary based upon these risks and uncertainties.

We had price increases in North America, EMEA, and Asia, which were more than offset by price decreases in Latin America.

While our sales were down significantly versus prior year, we need to be clear that the grower application of crop protection products has been steady and even trending higher than the prior year in some key countries, such as Brazil, and the U S.

In addition sales of our new our more differentiated products, including branded Diamond Heights and play the health outperformed the overall portfolio.

Zack Zaki: Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, pre-cash flow and organic revenue growth, all of which are non-GAF financial measures. Please note that as used in today's discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA. Reconciliation and definition of these terms as well as other non-GAF financial terms to which we may refer during today's conference calls are provided on our website.

Products launched in the last five years grew 4% and represented 10% of total sales in the quarter demonstrates the robustness in the current environment.

New product launches accounted for more than 4% of totally total company sales in the quarter.

Looking at our revenue by region, North America sales were lower than the prior year by 34%.

Zack Zaki: With that, I will now turn the call over to Mark.

As anticipated Destocking activity was the main driver of lower volumes.

Mark Douglas: Thank you Zach and good morning everyone. During Q3, we observed a continuation of industry-wide destocking activity as the value chain resets inventory levels in response to increased security of supply and higher interest rates. This led to significantly lower volumes versus the prior year and in the case of Latin America, the decline was much more severe than we had estimated at our last earnings call. As a reminder, due to the timing of its growing season, Latin America is typically the strongest contributor to our Q3 results which amplifies the region's impact on our overall Q3 numbers.

Dry weather in Canada was a smaller volume headwind.

Sales in EMEA were relatively flat with the revenue decline of only 1% and 4% excluding FX.

We encountered volume pressure from channel Destocking as expected, particularly in Germany.

This was mostly offset by a combination of higher prices strong diamide sales it outperformed the overall portfolio and a modest FX tailwind.

Latin America sales were down 33%, 36%, excluding FX due to lower volumes and to a lesser degree pricing pressure.

Mark Douglas: We had assumed that the destocking we observed in Latin America during Q2 would be sufficient to allow for more normal order patterns to resume. As Latin America entered its main growing season in September, it became clear that we underestimated the debt and duration of the destocking to come. It is our view that when the global destocking ends and channel inventories have been reset, there will not be a snapback restocking period. Rather, we expect the crop protection market will grow from that reset inventory base at a more historical growth rate.

Destocking, particularly in Brazil, and Argentina was the driver of the results in the region.

At the same time, we had a very successful launch of our patent pending diamide insecticide premier stellar in Brazil.

The strength of that launch was one reason branded dialogue strongly outperformed the rest of the regions portfolio.

Shifting to Asia sales were down, 28% and 23% organically.

As expected with like the other regions volumes were negatively impacted by Destocking behavior, particularly in India.

Mark Douglas: As a result, and as we noted in our pre-release, we are taking significant actions with regards to our company's cost structure within an answering structure of our Brazilian operations, as well as a review and adjustment of our total company cost base. We are right-sizing our cost base to better reflect market conditions, protect our margins, and position us for future success. We will provide more details about our restructuring programs that are at best today.

Elevated channel inventory continues to be actively managed.

Pricing was up slightly with an FX headwind.

Products launched in the last five years grew.

Greater resilience than the rest of the portfolio and grew 16% versus the prior year driven by sales of isolates herbicide.

The outperformance of new products in most regions demonstrates how our technology differentiates FMC in the marketplace.

Mark Douglas: Our Q3 results are detailed on slides three. Q3 revenue was 29% lower than the prior year, both including and excluding FX, given primarily by lower volumes from channel D stocking, and to a lesser extent dry weather conditions in some countries. We had price increases in North America, EMEA, and Asia, which were more than offset by price decreases in Latin America. While our sales were down significantly versus prior year, we need to be clear that the grower application of crop protection products has been steady and even trend in higher than the prior year in some key countries such as Brazil and the US.

While our new product pipeline is a key contributor to our growth.

Distantly superior margins.

We reported EBITDAR of $175 million in the quarter down 33% compared to the prior year period due to the volume decline along with the smaller pricing headwinds, partially offset by lower costs.

Sales of new products included launches and sales of differentiated products, such as our branded Dialyze in biologicals positively impacted mix.

Costs were $137 million tailwind with contribution from inputs and to a lesser degree operating costs.

Put cost benefits were especially pronounced compared to the prior year period that represented the peak of inflationary headwinds.

Combined SG&A and R&D costs were favorable to prior year.

We are on track to deliver our commitment of $60 million to $70 million cost control in the second half keeping those operating costs in line with the prior year.

Shifting to our outlook slides slide six shows our latest expectations for Q4 and full year.

We are expecting revenue in Q4 to be 22% lower than the prior year driven by a high teens percentage volume decline as Destocking continues.

Mark Douglas: Looking at our revenue by region, North America sales were lower than the prior year by 34%, as anticipated destocking activity was the main driver of lower volumes. Dry weather in Canada was a smaller volume headwind. Sales in EMEA were relatively flat with a revenue decline of only 1% and 4% excluding FX. We encountered volume pressure from channel D stocking, as expected, particularly in Germany. This was mostly offset by a combination of higher prices, strong diamide sales without performing the overall portfolio and a modest FX tailwind.

Similar to Q3, we expect a low to mid single digit pricing headwind in Q4, driven by Latin America.

The impact is full tested to be minimal.

Adjusted EBITDA in Q4 is expected to be between 246% and $306 million, which is a 36% year over year decline at the midpoint, primarily due to lower volumes, we expect positive mix impact sales of new products, including launches continue to show growth.

Operating costs are expected to be in line with the prior year as cost controls remain in place.

Mark Douglas: In Latin America, sales were down 33%, 36% excluding FX due to lower volumes and to a lesser degree pricing pressure. The stocking, particularly in Brazil and Argentina, was the driver of the results in the region. At the same time, we had a very successful launch of our patent pending diamide in sancticide premier star in Brazil. The strength of that launch was one reason branded diamide strongly outperformed the rest of the region's portfolio.

I will turn the call over to Andrew who will cover cash flow and other financial topics.

Thanks, Mark I'll start this morning, with a review of some key income statement items.

FX had essentially no impact on revenue in Q3 with headwinds among amazing among Asian currencies, particularly the Pakistani rupee and the Indian rupee offset by tailwind in Latin American and European currencies, particularly the Brazilian real the Mexico, Mexican peso and the euro.

Mark Douglas: Shifting to Asia, sales were down 28% and 23% organically, as expected from like the other regions, volumes were negatively impacted by destocking behavior, particularly in India, where elevated channel inventory continues to be actively managed. Pricing was up slightly within FX headwind. Products launched in the last five years grew, showed greater resilience than the rest of the portfolio, and grew 16% versus the prior year, driven by sales of isoplex herbicide. The outperformance of new products in most regions demonstrates how our technology differentiates FMC in the marketplace, and why our new product pipeline is a key contributor to our growth and consistently superior margin.

EBITDA margin in the quarter was down 120 basis points versus the prior year period.

While favorable input costs and positive mix led to a gross margin percent that was over 400 basis points higher than the prior year period.

Severity of the volume decline resulted in a decline in EBITDA margin.

EBITDA margins in Q4 are expected to be meaningfully below prior year and prior guidance.

Gross margin is anticipated to be challenged by pricing pressures in Latin America, and Asia due to current market conditions.

Despite continued operating cost discipline, we expect a decline in volume is anticipated to further pressure EBITDA margin as SG&A and R&D expenses are supported by a lower revenue base.

Mark Douglas: Stations, We reported EBITDA of $175 million in the quarter, down 33% compared to the prior year period, due to the volume decline, along with a smaller pricing headwind, partially offset by lower costs. Input cost benefits were especially pronounced compared to the prior year period, that represented the peak of inflationary headwinds. Combined SGNA and R&D costs were favourable to prior year, and we are on track to deliver our commitment of $60 to $70 million cost control in the second half, keeping those operating costs in line with the prior year.

Interest expense for Q3 was $65 million up $23 million from the prior year period.

The significant increase in U S interest rates year over year with the main driver.

Higher overall debt levels also contributed to increased interest expense as working capital remains elevated.

Relative to guidance elevated interest expense was entirely attributable to higher debt balances.

We now expect full year interest expense to be in the range of $240 million to $245 million with the increase versus prior guidance due to elevated working capital levels, resulting in higher debt balances.

Our effective tax rate on adjusted earnings for Q3 was 15% in line with the midpoint of our full year expectation for a tax rate of 14% to 16%.

Mark Douglas: Shift into our outlook, slide 6 shows our latest expectations for Q4 in full year. We are expecting revenue in Q4 to be 22% lower than the prior year, driven by a high teens percentage volume decline as the stocking continues. Similar to Q3, we expect a low to mid-single digit pricing headwind in Q4, driven by Latin America. FX impact is forecasted to be minimal. Adjusted EBITDA in Q4 is expected to be between $246 and $306 million, which is the 36% year over year decline at the midpoint, primarily due to lower volumes. We expect positive mix impact, the sales of new products, including launches, continue to show growth. Operating costs are expected to be in line with the prior year as cost controls remain in place.

Moving next to the balance sheet and liquidity.

As of September 30th gross debt to EBITDA was three six times, while net debt to EBITDA was three three times.

<unk> the sudden deceleration of our earnings beginning in Q2 and elevated debt levels due to higher working capital, resulting from this deceleration.

The covenants of our revolving credit facility evaluate our leverage using a metric that includes adjustments to both EBITDA and debt as reported.

With these adjustments covenant leverage was three eight times as of September 30th.

Relative to a maximum allowable a four point out times.

We do not view this as an acceptable leverage leverage level relative to our covenants.

In light of this and the reduced outlook for Q4. We are currently in advanced discussions with our bank group to further amend our covenants to provide additional headroom for the company as we adjust our cost structure and debt levels to current market realities.

Andrew Sandifer: I'll now turn the call over to Andrew, who will tell the cash flow under the financial topics. Thanks, Mark. I'll start this morning with a review of some key income statement IELTS. FX had essentially no impact on revenue in Q3, with headwinds among Asian currencies, particularly the Pakistani Ruby and the Indian Ruby, offset by tailwinds in Latin America and European currencies, particularly the Brazilian Riai, the Mexican Peso and the Euro. EBITDA margin in the quarter was down 120 basis points versus the prior year period.

Our bank group continues to be highly supportive of the company and recognizes the transitory nature of the current industry wide channel inventory correction.

We expect to complete this amendment in the next seven to 10 days and we will provide further update at that time.

Moving on to cash flow generation and deployment on slide seven.

FMC generated free cash flow of $32 million in Q3 down from $360 million in the prior year period.

Andrew Sandifer: While favorable input costs and positive mix led to a gross margin percent that was over 400 basis points higher than the prior year period, the severity of the volume declined, resulted in a decline in EBITDA margin. EBITDA margins in Q4 are expected to be meaningfully below prior year and prior guidance. Gross margin is anticipated to be challenged by pricing pressures in Latin America and Asia due to current market conditions. Despite continued operating costs discipline, the expected decline in volume is anticipated to further pressure EBITDA margin, as SG&A and R&D expenses are supported by a lower revenue base.

Cash from operations declined $316 million with lower EBITDA and substantially lower payables as we adjust our operations to match current demand.

Capital additions in other investing activities were slightly lower than the prior year period, while legacy spending increased $14 million due to timing of expenses.

Year to date cash flow through September 30th was negative $790 million.

$651 million lower than the prior year period.

Nearly all of the reduction stems from lower cash from operations, which was down substantially due to lower EBITDA and lower payables.

We returned $73 million to shareholders in the quarter via dividends there were no share repurchases in Q3.

Andrew Sandifer: Interest expense for Q3 was $65 million, of $23 million from the prior year period. The significant increase in U.S, interest rates year over year was the main driver. Higher overall debt levels also contributed to increase interest expense, as working capital remains elevated. Relative to guidance, elevated interest expense was entirely attributable to higher debt- and Valences. We now expect full-year interest expense to be on the range of $240 to $245 million, with the increased versus prior guidance due to elevated working capital levels resulting in higher debt balances. Our effective tax rate on adjusted earnings for Q3 was 15%, and lying with the midpoint of our full-year expectation for a tax rate of 14 to 16%.

We expect full year weighted average diluted shares outstanding to be $125 7 million.

We've reduced our free cash flow guidance for 2023 to negative $750 million at the midpoint down from breakeven in our previous guidance.

The reduction in full year cash flow outlook as a direct result of lower than expected second half EBITDA and the impacts of reduced volumes on working capital.

Compared to prior year the decline in free cash flow is almost entirely due to lower EBITDA and payables.

With lower use of cash for inventory largely offsetting other items, including higher cash interest cash taxes and capital investments.

Adjusted cash from operations is now expected to be between negative 635 of negative $435 million down substantially from prior guidance.

Andrew Sandifer: Moving next, the balance sheet and liquidity. As of September 30th, gross debt to Yvita was 3.6 times, while net debt to Yvita was 3.3 times, reflecting the sudden deceleration of earnings beginning in Q2, and elevated debt levels due to higher working capital resulting from this deceleration. The covenants are a revolving credit facility, evaluate our leverage using a metric that includes adjustments to both Yvita and debt as reported. With these adjustments, covenant leverage was 3.8 times as of September 30th. Relative to a maximum allowable of 4.0 times.

Capital additions are expected to be between 135, and $145 million, including spending to support new product introductions, which is our most recent results illustrate drive high value for our business even in challenging industry conditions.

Legacy and transformation cash spending of $70 million to $80 million is expected to remain essentially flat at the midpoint after adjusting for the benefit from the disposal of an inactive site in 2022.

This guidance implies a rolling three year average free cash flow conversion of 21% substantially below our targeted 70 plus percent.

Andrew Sandifer: We do not view this as an acceptable leverage level relative to our covenant. In light of this and the reduced outlook for Q4, we are currently in advance discussions with our bank group to further amend our covenants to provide additional headroom for the company as we adjust our cost structure and debt levels to current market realities. Our bank group continues to be highly supportive of the company and recognizes the transitory nature of the current industry-wide channel and midpoint, inventory correction.

This is due entirely to the cash flow impacts from the inventory reset in 2023.

I'll read our Mark's earlier point and end market demand for our products is solid.

Alrighty of our receivables is solid with good performance on collections and key countries, including Brazil.

And that industry wide channel inventory reset is finished and more normal order patterns resume we expect a significant rebound in cash flow as EBITDA improves.

Andrew Sandifer: We expect to complete this amendment in the next 7 to 10 days and will provide further updates at that time.

Inventory is converted to receivables, which were subsequently collected and critically as we rebuild payables ramping backup production.

Andrew Sandifer: Moving on to cash flow generation and deployment on slide 7. FNC generated free cash flow of $32 million in Q3, down from $360 million in the prior year period. Cash from operations declined $316 million with lower Yvita and substantially lower payables as we adjust our operations to match current demand.

Our near term cash deployment priorities have not changed with the dividend debt reduction and debt reduction, including the redemption in Q4 of the $400 million notes due in 2024 still the top priorities.

Share repurchases will remain suspended until leverage returns sustainably to targeted level.

Andrew Sandifer: Capital additions and other investing activities were slightly lower than the prior year period, while legacy spending increased $14 million due to timing of expenses. Year-to-date cash flow through September 30th was negative $790 million, $651 million lower than the prior year period. Nearly all of the reduction stems from lower cash from operations, which was down substantially due to lower Yvita and lower payables. We return $73 million to shareholders in the quarter via dividends. There were no share repurchases in Q3. We expect full-year weighted average diluted shares outstanding to be $125.7 million.

And with that I'll hand, the call back tomorrow.

Thanks, Andrew.

I mentioned earlier that our more differentiated products, we're showing resilience in the current market environment.

This includes the <unk>, a very successful product franchise, which has received renewed attention over the last couple of months.

Today I'll give you an update on the progress of our Diamide growth strategy. This will be supplemented by a forward looking view of the robust growth plans, we have for the Dialyze at our Investor day.

We have owned the Diamide for the past six years over this timeframe. We have delivered on every target we've set including growing the size of the business expanding our partner base accelerating registrations, expanding our geographic footprint.

Andrew Sandifer: We produced our free cash flow guidance for 2023 to negative $750 million at the midpoint, down from break even in our previous guidance. The reduction in full-year cash flow outlook is a direct result of lower than expected second half Yvita and the impact of reduced volumes on working capital. Compared to prior year, the decline in free cash flow has almost entirely due to lower Yvita and payables. With lower use of cash or inventory, largely offsetting other items including higher cash interest to cash taxes and capital investment.

Finally, introducing brand new patented formulations that allow us to explore and expand the new market segments.

All of these results should provide confidence that we can continue to profitably grow the franchise into the future.

Turning to slide nine for some basic data on the insecticides market, which was valued at over $20 billion in 2022.

Insecticides have grown at roughly 5% per year over that timeframe.

Andrew Sandifer: Adjusted cash from operations is now expected to be between negative $635 and negative $435 million, down substantially from prior guys. Capital editions are expected to be between 135 and 145 million dollars, including spending to support new product introductions, which is our most recent results illustrate, drive high value for our business, even in challenging industry conditions. Legacy and transformation cash spending of $70 to $80 million is expected to remain essentially flat at the midpoint, after adjusting for the benefit from the disposal of an active site in 2022.

Fmc's Diamide square <unk> make up more than 80% of the entire <unk> plus which includes a few of the smaller active ingredients.

Fmc's diamide have grown about 12%.

It'll insecticide market.

And as you can see <unk> has outperformed every other leading chemistry class in the insecticide market by growing at 11% compound annual growth rate in <unk>.

<unk>, 5% market share as a result.

High value technologies, such as the <unk> continues to take share from older insecticides, some of them being phased out by regulators.

Turning to slide 10, we show the breakdown of our $2 $1 billion of dialogue sales in 2022.

Andrew Sandifer: This guidance implies a rolling three or average free cash flow of conversion of 21%, substantially below our targeted 70 plus percent. This is due entirely to the cash flow and books impacts from the inventory reset in 2023.

So as it has grown more rapidly than <unk> since our acquisition of the assets that made up more than 20% of total sales. This year. We estimate that this trend will continue with <unk>, making up roughly 22% of total dialogue sales.

Andrew Sandifer: I'll read our marks earlier point, an in-market demand for our products is solid. The quality of our receivables is solid, with good performance on collections in key countries including Brazil. Once this industry-wide channel inventory reset is finished and more normal order patterns resume, we expect a significant rebound in cash flow, as EBITON proofs, inventory is converted to receivables which are subsequently collected, and critically as we rebuild payables, ramping back up production.

Partner sales are a key element of our lifecycle management strategy FMC.

<unk> sells either technical active ingredient or formulated products to our partners under these arrangements we.

We have long term supply agreements with five key global companies and over 60 local agreements in various countries with the potential to add more partners in the future.

But if these agreements go through the end of the decade.

Andrew Sandifer: Our dear term cash deployment priorities have not changed, with the dividend debt reduction and debt reduction, including the Redemption and Q4 of the $400 million in notes due in 2024, still the top priorities. Share repurchases will remain suspended until leverage returns sustainably to targeted level.

The partnership model has helped to expand the market for our <unk> since our partners have access to customers' crops in segments that we do not currently serve.

Moreover, partner sales and not margin dilutive of these sales made up roughly one third of our Diamide revenue in 2022.

While the remaining two thirds came from our own commercial activities, which we refer to as branded sales.

Mark Douglas: And with that I'll hand the call back to Mark. Thanks Andrew. I mentioned earlier that our more differentiated products were showing resilience in the current market environment. This includes the diamides, the very successful product franchise, which has received renewed attention over the last couple of months. Today I'll give you an update on the progress of our diamide growth strategy. This will be supplemented by a forward-looking view of the robust growth plans we have for the diamides at our investor day.

In 2023, we've seen our partners actively manage their inventories, resulting in lower sales branded sales have continued to outperform the overall company.

We've also shown the geographic breakdown of our branded sales as of 2022.

Asia made up more than 40% of our branded sales followed by Latin America, 28% EMEA at 17% in North America at 12%.

Mark Douglas: We have owned the diamides for the past six years. Over this timeframe we have delivered on every target we've set, including growing the size of business, expanding our partner base, accelerating registrations, expanding our geographic footprint. And finally, introducing brand new patented formulations that allow us to explore and expand the new market segments. All of these results should provide confidence that we can continue to profitably grow the franchise into the future.

This year, we expect branded sales to outperform total sales in Latin America, driven by new product introductions.

Branded dialogues in the other regions are expected to perform in line with all better than respective regional sales.

On the right is a breakdown of our overall <unk> revenue, which includes branded and partner sales.

The diversity of crops reflects the broad market potential as well as market access required to sell these products.

This is an important fact to note as we have numerous products selling in more than 90 countries across dozens of crops.

Mark Douglas: Starting to slide nine for some basic dates on the insecticides market, which was valued at over $20 billion in 2022, insecticides have grown at roughly 5% per year over the current timeframe. FMC's diamides, where an acts of currency as a pair, make up more than 80% of the entire diamides class, which includes a few other smaller active ingredients. FMC's diamides have grown about 12% of the total insecticide market. And as you can see, diamides outperformed every other leading chemistry class in the insecticide market by growing at 11% compound annual growth rate and gain 5% market share as a result.

Our dialogue with not a single monolithic products and as such a defendable through various mechanisms, including most importantly, newly patented formulations branding value selling agronomic support and grow our education our.

Precision AG offering from intelligence now help support and defend over $700 million of revenue from our branded dialogues are unique and powerful tool in <unk> growth strategy.

Turning to slide 11, you can see that managing the Diamide lifecycle has multiple strategic components.

Mark Douglas: High value technologies such as the diamides continue to take share from older insecticides, some of them being phased out by regulators. Turning to slide 10, we showed the breakdown and about $2.1 billion of diamides sales in 2022. Siasa Perth has grown more rapidly than Renaxa Perth since our acquisition of the assets and made up more than 20% of total sales. This year, we estimate that this trend will continue with Siasa Per making up roughly 22% of total diamond sales.

We will provide more color on these pillars at Investor day in November, but I want you to start framing the innovation and IP pillars today.

Turning to slide 12, FMC has continued to significantly grow the diamide to innovation since acquiring them in late 2017.

That acquisition sales were already segmented across dozens of formulations and brands spread across more than 80 countries.

Since acquisition to FMC has increased the segmentation by developing new partner sales launching new patented formulations and brands offsetting new registrations and expanding existing labels, which have resulted in a diverse portfolio.

Mark Douglas: Partner sales are a key element of our life cycle management strategy. FMC sells either technical active ingredient or formulated products to our partners under these arrangements. We have long term supply agreements with five key global companies and over 60 local agreements in various countries with the potential to add more partners in the future. Many of these agreements go through the end of the decade. The partnership model has helped to expand the market for our diamonds since our partners have access to customers, crocs and segments that we do not currently serve.

This diverse to minimize reliance on any single formulation and instead relies on innovation to drive future growth.

We have already started to see the benefits of recent innovation in dialogues. This is evident from the increase in total sales of branded Dialyzed from 'twenty, one to 'twenty two even though some of the core <unk> products declined modestly in the same timeframe.

Courage and Max insecticides powered by <unk> is one example of innovation that did not exist when we acquired the diamonds.

Mark Douglas: Moreover, partner sales are not margin diluted and these sales made up roughly one-third of our diamond revenue in 2022. While the remaining two-thirds came from our own commercial activities, which we refer to as branded sales. In 2023, we've seen our partners actively manage their inventories resulting in lower sales. Branded sales have continued to outperform the overall company. We've also shown the geographic breakdown of our branded sales as of 2022. Asia made up more than 40% of our branded sales, followed by Latin America at 28%, EMEA at 17%, and North America at 12%.

<unk> is a patent pending higher concentration formulation of courage and that provides targeted insect control and canola pulses and cereals.

Premier stellar is another example of new technology that was developed primarily for applications on Brazilian soy corn, and citrus crops and receive priority approval from Brazilian authorities.

The patent pending combination of our <unk> provides a differentiated formulation with extremely high performance for chewing sucking insects.

Premier has a dual mode of action its broad spectrum with both immediate and extended control.

Mark Douglas: This year, we expect branded sales to outperform total sales in Latin America driven by new product introductions. Branded diamonds in the other regions are expected to perform in line with or better than respective regional sales. On the right is the prop breakdown of our overall diamond revenue, which includes branded and partner sales. The diversity of crocs reflects the broad market potential as well as market access required to sell these products. This is an important factor note as we have numerous products selling in more than 90 countries across dozens of crocs.

FMC has developed and launched four new patented or patent pending formulations across 10 countries in the past few years.

These new technologies are expected to make up 17% of branded Diamide sales in 2023.

Contributions from new products will further accelerates over the next few years, moving fmc's portfolio away from older and less differentiated products.

Slides 13, and 14 show an updated view of our patents and regulatory timelines.

<unk> has apparently state of over 1000 granted and pending patents filed and over 75 countries for the Diamide.

Mark Douglas: Our diamonds are not a single monolithic product and are such a defendable through various mechanisms, including most importantly newly patented formulations, branding, value selling, agronomic support, and grow education. Our precision ag offer in arc farm intelligence now helps support and defend over $700 million of revenue from our branded diamonds, a unique and powerful tool in our Diamond's growth strategy.

While we have not changed our overall outlook. We have included additional commentary to reflect developments since we last shared these timelines.

One addition from a less version of this slide is the inclusion of patented mixtures and patent pending formulations that can extend patent coverage once granted to 2000 2040 and beyond in some cases.

Patents are regulated by the different government entities, the ones that issue crop protection registrations.

Mark Douglas: Turning to slide 11, you can see that managing the diamond life cycle has multiple strategic components. We will provide more color on these pillars that invested in November, but I wanted to start framing the innovation in IP pillars today. Turning to slide 12, FMC has continued to significantly grow the diamonds to innovations since acquiring them in late 2017. At acquisition, sales were already segmented across dozens of formulations and brands spread across more than 80 countries.

<unk> registrations does not have any bearing on patent validity.

Generally speaking legal actions must be initiated by the patent holder can only start after registration is received and a generic product sentences into commercialization.

Moreover, patent judgments in one country do not change Fmc's patent rights in other countries noted these judgments give companies the freedom to operate in other countries with valid patents in place.

Mark Douglas: Since acquisition, FMC has increased the segmentation by developing new partner sales launching new panted formulations and brands, obtaining new registrations and expanding existing labels, which have resulted in a diverse portfolio. This diversity minimized reliance on any single formulation and instead relies on innovation to drive future growth. We have already started to see the benefits of recent innovation in diamides. This is evident from the increase in total sales of branded diamides from 21 to 22, even though some of the core in Axisville products declined modestly in the same timeframe.

FMC will continue to enforce our patents, we view any infringing party as a seller of illegal product.

In addition to our legal strategy. We also have a regulatory advocacy strategy that includes enforcement of our data protection rights and notifying regulators about companies that do not have permission to produce all have unknown or different impurities in that products or otherwise do not comply with applicable regulatory law.

This has been and continues to be a successful strategy.

Regulatory authorities have declined to approve registrations from such companies and other instances companies have voluntarily canceled or withdrawn applications as a result of our efforts.

Hopefully this overview has provided a more comprehensive understanding of the current state of Fmc's Diamide at.

At our Investor Day, we will provide a view of the next phase of growth for this franchise driven by innovation and other strategic leaders.

Finally, let me wrap up by saying that 2023 is clearly not turned out how we all of the broader industry thought it would.

However, we firmly believe the current channel Destocking will run its course and I believe we've taken the right actions to reflect what is happening from a channel demand standpoint.

Our new products plant health products branded <unk>, all continue to outperform the rest of the portfolio, which shows the benefit of our technology investments.

Mark Douglas: Premier Star has a dual mode of action, its broad spectrum, with both immediate and extended control. FMC has developed and launched four new patent or patent pending formulations across 10 countries in the past few years. These new technologies are expected to make up 17% of branded diamide sales in 2023. Contributions from new products will further accelerate over the next few years, moving FMC's portfolio away from older and less differentiated products.

We look forward to see many of you at our Investor Day, where we will lay out our new strategic plan and provide an outlook for fmc's growth.

Both the near and long term, we can now open the line for questions.

Thank you.

Now begin the question and answer session.

Can you. Please press the Star then one on your touch time. Thanks.

Speakerphone, please pick up your handset before question Nicky.

Mark Douglas: Slides 13 and ports ensured an updated view of our patent and regulatory timelines. FMC has a patent estate of over 1,000 granted and pending patents filed in over 75 countries for the diamides. While we have not changed our overall outlook, we have included additional commentary to reflect development since we last shared these timelines. One addition from our last version of this slide is the inclusion of patented mixtures and patent pending formulations that can extend patent coverage once granted to 2040 and beyond in some cases.

Withdraw from the peak.

At this time, we'll pause momentarily to assemble our roster.

Our first question today comes from Joel Jackson of BMO. Your line is open. Please go ahead.

Hey, good morning, everyone.

A lot of questions in FMC, obviously, the last weeks last month on the near term outlook and then of course, the midterm outlook with a dime even other products, maybe if you could start with next year I realize it's early but it's a.

Mark Douglas: Patents are regulated by different government entities than the ones that issue crop protection registrations. Approvals or registrations does not have any bearing on patent validity. Generally speaking, legal actions must be initiated by the patent holder and can only start after registrations received an generic product enters into commercialization. Moreover, patent judgments in one country do not change FMC's patent rights in other countries, nor do these judgments give companies the freedom to operate in other countries with valid patents in place.

A key question, we have been a lot of volatility around the different numbers. When you think about 2024 can you help anchor us on what it might look like I don't know if you want to use your 7%, 9% EBITDA placeholder targeted as a starting point.

And as granular as possible around volume cost price, where do you think earnings can shake out next year, what do you have to do to get the inventory out of the system do you have to lower prices whatever you can do to help us kind of interim look on 'twenty, one will be appreciated.

Yes, Thanks, Joel listen you're right. It is a little early to be giving specific details and we will talk more about this at our Investor day as you can imagine.

Mark Douglas: FMC will continue to enforce our patents and we view any infringing parties as seller of illegal products. In addition to our legal strategy, we also have a regulatory advocacy strategy that includes enforcement of our data protection rights and notifying regulators of our companies that do not have permission to produce or have unknown or different impurities in their products or otherwise do not comply with applicable regulatory law. This has been and continues to be a successful strategy. You must regulate the authorities of decline to approve registrations from such companies. In other instances, companies have voluntarily cancelled or withdrawn applications as a result of our efforts.

But let me try and frame 24 in the context of where we are today give you some idea of how we're thinking.

We have gone through obviously since sort of mid year, a very significant inventory reset and I'll keep reiterating the point that we see this as destocking inventory reset whatever you want to call. It. It does not reflect on the growing demand we see strong on the ground demand pretty much everywhere in the world, which is the backdrop.

For how that how the business really recovers and comes out of this period.

The resetting is occurring now obviously, we started in Q2, we ended Q3 and here we are in Q4 and it is still ongoing.

Mark Douglas: Hopefully this overview has provided a more comprehensive understanding of the current state of FMC's diet, at Our Investor Day, will provide a view of the next phase of growth for this franchise, driven by innovation and other strategic leaders. We need to outperform the rest of the portfolio, which shows the benefit of our technology investments. We look forward to seeing many of you at Our Investor Day, where we will lay out our new strategic plan, and provide an outlook for FMC's growth over both and near and long term.

Would say.

Next year.

Q1 is going to be more difficult because the inventory you had not reset. So Q1 2023 was a pretty good quarter kind of flattish to 2022, that's not going to be the case, we're going to see that inventory.

Reset continue in Latin America likely in Europe, as well and maybe even a little bit in the U S. We will see how we go through Q4.

I think things will start to change in Q2, as we start to lap the industry reset and then I expect the industry to move forward in the second half of the year.

Some people will say, it's going to be a first half second half story.

It is just because of the way the the seasons are moving in the inventories resetting.

From our perspective.

Revenue growth next year for FMC.

Unknown Executive: We can now open the line for questions. Thank you. We will now begin the question and answer session. To be placed in the queue, please press the star key then one on your touch phone. If you're using a speaker phone, please pick up your handsets before pressing the keys. To withdraw from the queue, please press star then two. At this time, we'll pause momentarily to assemble our roster.

Higher than revenue.

EBITDA growth and revenue for next year.

Why do I say that I think the second half of next year is going to be much better I think the industry will be in a much more balanced shape as I've said, we're not expecting a snapback I just don't see with the current economic environment, where I see supply where I see interest rates I don't see people going and building a significant inventory gain.

Joel Jackson: Our first question today comes from Joel Jackson of the MO. Your line is open, please go ahead. Good morning, everyone. There are a lot of questions, FMC, obviously the last week, last month, on the near-term outlook, and then of course the mid-term outlook of the dime meets and other products. Maybe we could start with next year. I realize it's early, but it's a key question. We had a lot of volatility on the different numbers.

That's not necessarily a bad thing the industry typically grows at three plus percent a year I expect you're going to see something like that number in the second half of the year.

For us new products continue to be a major driver. One reason why we're very excited about next year as we have more products coming and right now when you look at our what we call our NPI data, we're having something like $630 million this year of new business.

Joel Jackson: When you think about 2024, can you help anchor us on what it might look like? I don't know if you want to use your seven to nine percent EBITDA placeholder target as a starting point. As granular as possible around volume costs, price. Where do you think earnings road can shake out next year? What do you have to do to get the inventory out of the system? Do you have the little prices?

Those products launched in the last five years I expect that number to be higher next year, adding more revenue to the company.

So we see the new product is paying off as we go over the next few years.

From a cost perspective, I'll, let Andrew comment a little bit on costs. We do have a couple of elements flowing through the P&L and balance sheet right now not only do we have cost savings, but we have unabsorbed variances coming out of our manufacturing plants as we think about the length of time that those manufacturing plants are either shut our idled.

Joel Jackson: Whatever you can do to help us, can ever look on 24 be appreciated? Yeah, thanks Joel. Listen, you're right. It is a little early to be giving specific details. And we will talk more about this at our investors, as you can imagine. But let me try and frame 24 in the context of where we are today. Give you some idea of how we're thinking. You know, we have gone through obviously since sort of mid-year a very significant inventory reset.

And until they come back so you got to factor that in as we go next year, having said that we are putting in place significant restructuring plans that will benefit EBITDA next year as well as the product mix benefits EBITDAR on gross margin Andrew do you want to say anything on the cost side.

Joel Jackson: And I'll keep reiterating the point that we see this as the stocking inventory reset, whatever you want to call it. It does not reflect on the ground demand. We see strong on the ground demand pretty much everywhere in the world, which is the backdrop for how the business really recovers and comes out of this period. The resetting is occurring now. Obviously we started in Q2. We entered Q3 and here we are in Q4 and it's still ongoing.

Echo a comment you made mark I think as we look forward to input costs for next year.

<unk>.

What limited buying were doing right now, but the cost of things that we're buying are.

Been a positive comparison to prior year, we do expect that input costs will be a modest tailwind next year.

Joel Jackson: I would say next year Q1 is going to be more difficult because the inventory had not reset. So Q1 2023 was a pretty good quarter, kind of flatish to 2022. That's not going to be the case. We're going to see that inventory reset continuing Latin America, likely in Europe as well. And maybe even a little bit in the US will see how we go through Q4. I think things will start to change in Q2 as we start to lap the industry reset.

<unk>, Unfortunately that carryforward of Unabsorbed fixed costs from reduced production in the latter part of this year and into early next year. So gross margin, we're not expecting a lot of help either way from at the gross margin line from input cost would be.

Offset again by Unabsorbed fixed cost it really would be the impact of the cost savings programs, where we're in the process of launching that will impact every line of the P&L from Cogs to SG&A and R&D will detail. This more additional detail at our Investor day in a few weeks, but that'll be a big part of driving profit growth next year. So Joel.

Joel Jackson: And then I expect the industry to move forward in the second half of the year. I know some people will say it's going to be a first half, second half story. It is just because of the way the seasons are moving and the inventory is reset, from our perspective, I see revenue growth next year for FMC and I see higher than revenue, EBITDA growth and revenue for next year. Why do I say that?

To wrap up for you expect to see revenue growth expect to see EBITDA growth above revenue growth next year from FMC.

Okay.

And then.

You reiterated a lot of your.

Plan to defend the die needs across the decade.

Joel Jackson: I think the second half of next year is going to be much better. I think the industry will be in a much more balanced shape. As I said, we're not expecting a snapback. I just don't see with a current economic environment where I see supply and where I see interest rates. I don't see people going and building significant inventory again. That's not necessarily a bad thing. The industry typically grows at 3 plus percent a year.

<unk> started doing some of these moves can you talk about what's going well, what's not going as well as you thought and some of these strategies and how you're thinking about changing them and if you can be as granular as possible.

Working and not working in the different countries like India, Brazil warehouse wherever else it would be helpful.

Yes sure.

First of all our main strategy I think it's on slide 12, which shows the sediment chart you can see on that slide how we're altering the profile of the portfolio of the dialogues.

Joel Jackson: I expect you're going to see something like that number in the second half of the year. For us, new products continue to be a major driver. One reason why we're very excited about next year is we have more products coming. And right now when you look at our what we call our NPI data, we're having something like $630 million this year of new business from those products launched in the last five years.

The new products are growing rapidly, but one we mentioned in the script freemium star in Brazil.

That has already contributed in Q3 tens of millions of dollars of new growth and we expect to see the same in Q4 and as we go forward in the rest of the season.

That's the type of activity that changes the face of the dialogues festival. They give you tremendous patent extension because these are very sophisticated formulations, whether it's the blend of different active ingredients or something like courage, and Max which is a very high concentration formulation. It means you can use.

Joel Jackson: I expect that number to be higher next year, adding more revenue to the company. So we see the new products paying off as we go over the next few years. From a cost perspective, I'll let Andrew comment a little bit on costs. We do have a couple of elements flowing through the PNL and balance sheet right now. Not only do we have cost savings, but we have unabsorbed variance is coming out of our manufacturing plants as we think in the future.

Les it means youre carrying less water less packaging so from a sustainability perspective, it's a great product and it also has superb efficacy. So it's those types of innovations not only change what we sell it moves us away from any generic products that will come into the market either legally or illegally in different countries.

Joel Jackson: The length of time that those manufacturing plants are either shut or idled and until they come back. So you got a fact of that in as we go next year. Having said that, we are putting in place significant restructuring plans. That will benefit EBITDA next year as well as the product mix benefits EBITDA and gross margin. Andrew, do you want to say anything on the cost side? No, the echo comment you made Mark, I think is we look forward to input costs for next year.

Changes the shape and adds more value to the company. So I think from a product innovation standpoint, that's one aspect that we've been heavily focused on the second piece is the continued geographic expansion registration label expansion you can see by the chart that we showed were diamide sit in the whole spectrum of insight.

Joel Jackson: The cost of what limited buying we're doing right now, but the cost of things that we're buying are in a positive comparison in the prior year. We do expect that input costs will be modest tailwind next year. The challenge is, unfortunately, that carried forward of unabsorbed fixed costs from reduced production in a latter part of this year and into early next year. So like gross margin, we're not expecting a lot of help either way at the gross margin line from input costs being offset again by unabsorbed fixed costs.

Two sides. There are some very old chemistries out there that are going to be removed over the next 10 years. Our target is those older Chemistries. So we need to make sure we have the products and the right registrations in the right geographies on those crops to take away those older Chemistries. So for me it's innovation, it's geographic expanse.

<unk> and the innovation is really driving the next generation of patent support that we have for these products. So we feel very good about where we are we'll give you more details on November the 16th about that growth profile, but think of it in terms of innovation and geographic expansion.

Joel Jackson: It really would be the impact of the cost savings programs we're in the process of launching that will impact every line of the PNL from COGS to SCNA and R&D. We'll detail this more additional detail at our investor day in a few weeks, but that'll be a big part of driving profit growth next year. So Joel, to wrap up for you, expect to see revenue growth, expect to see EBITDA growth above revenue growth next year from FNC.

Thank you our.

Our next question today comes from Lauren Slabaugh of BNP Paribas. Your line is open.

Thank you good morning, guys.

Joel Jackson: Okay, that's helpful. And then, you know, you reiterated a lot of your plan to defend the dye needs across the decade. As you've started doing some of these moves, can you talk about what's going well, what's not going as well as you've thought in some of the strategies and how you're picking about changing them. And if you can be as granular as possible. What's working and not working in the different countries like India, Brazil, where else, wherever else would be helped.

Next question.

He is back roughly to the size.

2019 or 2020.

The working capital does that thank you.

In planning for the end of this year was about $1 5 billion higher than it was back then.

And I guess my question related to the framework that you've given us how much of that billion billion. Then how do you think you can get back. So just next year, but also maybe in the following years should we assume that the working capital release significant key high announced strikes me compared to what it was what it has been over the last few years.

Joel Jackson: Yeah, sure. I mean, first of all, our main strategy, I think it's on slide 12, which shows the sediment chart. You can see on that slide how we're altering the profile of the portfolio of the diamides. The new products are growing rapidly. The one we mentioned in the script, Premier Starr and Brazil. That has already contributed in Q3, tens of millions of dollars of new growth. And we expect to see the same in Q4.

Yes.

I'll, let Andrew give you some details on the working capital side. My view is when we think about restructuring the company, we're not only talking about our cost base, but we are absolutely talking about the other metrics that we look at the performance of the company working capital will be one of them.

Joel Jackson: And as we go forward in the rest of the season, that's the type of activity that changes the face of the diamides. First of all, they give you tremendous pattern extension because these are very sophisticated formulations, whether it's the blend of different active ingredients or something like courage and max, which is a very high concentration formulation. It means you can use less. It means you're carrying less water less packaging. So from a sustainability perspective, it's a great product.

The different elements of working capital move at different speeds, obviously payables is a lot lower than it should be given the fact that we're.

We're not manufacturing a lot right now so therefore, we're not buying a law that will change inventory, we are working our way through inventory right now obviously selling out of inventory reduces inventory and then we will collect the receivables at the normal rate I expect the metrics to get back in line through 'twenty, four and 'twenty five in terms of as a percent of revs.

<unk>, how much working capital do we carry but Andrew if you want to give any more details on that and certainly I think you're onto the right theme, which is we do expect normalization of working capital over the next 12 months to 18 months. How do you think it is important to remember that in the AG input space at working capital cycle is different than other chemical or materials businesses now.

Joel Jackson: And it also has super efficacy. So it's those types of innovations, not only change what we sell, it moves us away from any generic products that will come into the market either legally or illegally in different countries. It changes the shape and it adds more value to the company. So I think from a product innovation standpoint, that's one aspect that we've been heavily focused on. The second piece is the continued geographic expansion, registration, label expansion.

We buy on reasonable terms in industrial terms from our suppliers.

We hold manufactured product holding inventory for to meet seasonal demand.

Joel Jackson: You can see by the chart that we should where diamides sit in the whole spectrum of insecticides. There are some very old chemistries out there that are going to be removed over the next 10 years. Our target is those older chemistries. So we need to make sure we have the products in the right registrations and the right geographies on those crops to take away those older chemistries. So for me, it's innovation, it's geographic expansion and the innovation is really driving the next generation of patent support that we have for these products. So we feel very good about where we are. We'll give you more details on November the 16th about that growth profile, but think of it in terms of innovation and geographic expansion. Thank you.

And have inventory ready when needed when pest pressure shows up and then we sell off and on crop terms are longer term certainly than what we pay for materials. We purchase so it's a bit of a long cash cycle that become elongated, particularly as inventory levels have have gotten out of line with that the go forward sales pace.

So I think right now the focus is really on as I mentioned in my in my prepared comments on taking inventory converting it to sales.

Any into receivables and then collecting it but yes, there can be a good six to 12 month lag in that process due to the seasonal nature of the business to be able to really clear through that inventory.

Turn it took into receivable and collect it.

So certainly yes.

Good reference point looking back a couple of years, where.

Trade working capital in 2021 at 930 was about $700 million lighter than where we are today.

Laurence Fava: And next question today comes from Lorraine Fava of the NB Paraba. Your line is open. Thank you. Good morning, guys. First question. The business is back roughly to the size of 2019 or 2020, but the working capital that I think you're, you know, implying for the end of this year is about one and a half billion higher than it was back then. So I guess my question related to the framework that you've given us Mark, how much of that billion billion and a half you think you can get back not just next year, but also maybe in the following years should we assume that the working capital is significantly higher now, structurally compared to what it was or what it has been over the last few years.

That's not a bad dimension and certainly we would think that those working capital metrics would come back in line at a more historical norms. It's just going to take 12 to 18 months to really adjust to all of the whiplash we've had in the supply chain with both the rapid rapid growth in 2022 and now the rapid deceleration in 2023.

But I think my fundamental message to you is yes, we are.

Fully anticipate.

Working capital release in 2024.

Bleeding into 2025.

Thank you.

And then second question I think.

Sharp normalization of pricing in Latam and what makes you think that prices I'm not going to be sharp you down.

Laurence Fava: Yeah, Laurent, I'll let Andrew give you some details on the working capital side. My view is when we think about restructuring the company, we're not only talking about our cost space, but we're absolutely talking about the other metrics that we look at the performance of the company working capital be one of them. The different elements of working capital move at different speeds obviously payables is a lot lower than it should be given the fact that we're we're not manufacturing a lot right now, so therefore we're not buying a lot that will change inventory.

Northern Hemisphere, when you founded 24 season.

Yes, I wouldnt describe what we've seen in Latin America with Shaw.

And I'll also Lora is not broad pricing, it's more a reflection of how we account for.

Customer inventory.

We're managing price with customer inventory going forward. It shows up in price obviously, our cost of some of our customers are holding higher cost inventory, we're working that through as we go through this season.

Laurence Fava: We are working our way through inventory right now, obviously selling out of inventory reduces inventory and then we'll collect the receivables at the normal rate. I expect the metrics to get back in line through 24 and 25 in terms of as a percent of revenue, how much working capital do we carry, but Andrew, if you want to give any more details on that. Certainly, Laurent, I think you're on to the right theme, which is we do expect normalization of working capital over the next 12 days.

So it's not broad based price pressure and as we as we indicated in the other three regions of the world, We actually had price increases over the over the period. We will continue to look at price increases next year.

People should not forget there is still inflationary pressures moving through many economies and certainly companies like us we have labor cost increases as many companies do so we will not be shy from raising prices as we go through the next 12 months cycle.

Laurence Fava: 18 months. I do think it's important to remember that in the ag input space, that working capital cycle is different than other chemical or materials businesses. Now, we buy on reasonable terms and industrial terms from our suppliers. Then we hold, you know, manufacturer product holding inventory for to meet seasonal demand, then have inventory ready when needed when pest pressure shows up. Then we sell often on crop terms or longer terms, certainly then what we pay for materials we purchase.

Okay, great. Thank you.

Thank you.

Our next question today comes from Alexia <unk> from <unk>.

Please go ahead.

Hi, Thanks, Good morning, continuing on the working capital could you give us some idea how your working capital.

What trends in the next few quarters I mean, typically you have a building in Q1, but given the current situation would you expect.

Laurence Fava: So it's a bit of a long cash cycle that becoming elongated, particularly as inventory levels have gotten out of line with the go forward sales pace. So I think right now, the focus is really on the mention of my for paracumns on taking inventory, converting it to sales and converting it to receivables and collecting it. But, you know, there can be a good six to 12 month lag in that process due to the seasonal nature of the business to be able to really create a clear through that inventory and turn it to a good to receivable and collect it.

No build and release of working capital in the first quarter were or something else perhaps.

Sure.

I'll take this is Andrew look I think the traditional working capital ability to see in Q1 should be significantly lower from an inventory perspective, we're already sitting on a substantial inventory so our traditional.

<unk> ended the year beginning of your inventory builds in advance of that.

And northern Hemisphere seasons will be much less subdued if at all.

Laurence Fava: So certainly, you know, you know, a good reference point looking back a couple years. We're, you know, trade working capital in 2021 at 930 was about $700 million lighter than where we are today. You know, that's not a bad dimension. And certainly, you know, we would think that those working capital metrics would come back in line, that the more historical norms, it's just going to take 12 to 18 months, the really adjust to all of the whiplash we've had in the supply chain with both the rapid rapid growth in 2022.

I think from a receivables perspective.

We do have significant advance payments in Q4 against sales in Q1.

You don't see as much.

We won't see as much relief on the receivable side.

In Q1, and then the question Mark is going to be how rapidly we start ramping back up production and we significantly reduced production levels.

Stepped down in Q3 and further step down in Q4, so our payables are quite depressed.

Laurence Fava: And now the rapid deceleration in 2023. But I think my fundamental message to you is, yes, we fully anticipate a record work in cap of release in 2024 and leading into 2025. Thank you. And the second question, I think seen sharp normalization of pricing in that time. What makes you think that prices are not going to be sharply down in the northern hemisphere when you found the 24 season? Yeah, I wouldn't describe what we've seen in Latin America sharp.

Quickly we rebuild those payables in the first half of next year, we'll have a lot of impact on it but.

But certainly I would say the biggest factor that should limit.

The traditional big working capital pumped in Q1 is there is no need to build up a significant pool of inventory going into that into the new year.

Thanks, Andrew and sticking it was working capital your inventories on absolute dollar basis declining sequentially, but given.

You've shut down many of your production lines maybe.

Laurence Fava: And also, Laurent, it's not broad pricing. It's more a reflection of how we account for customer inventory and how we're managing price with customer inventory going forward. It shows up in price. Obviously, our customers are holding higher cost inventory. We're working that through as we go through this season. So it's not broad-based price pressure. And as we as we indicated in the other three regions of the world, we actually had price increases over the period.

And maybe would have expected the big drop could you just talk about that.

Wrong here.

What's going on there was inventory and when would you expect that number to come down more sharply in Q4 and Q1.

Yes, So let me just make a comment upfront and then Andrew can give you some of the details.

You've got to think carefully about how the inventory is where it is we have a lot of work in progress from the moment, we place an order with either toll manufacturers are our own facilities. It can take six months for those products to hit the warehouses to sell to customers. So once you start slowing that engine down.

Laurence Fava: We will continue to look at price increases next year. People should not forget there is still inflationary pressures moving through many economies. And certainly companies like us, we have labor cost increases as many companies do. So we will not be shy from raising prices as we go through the next 12 months cycle. Great.

Unknown Executive: Thank you.

It takes a while for that to actually stop that we're out of that period. Now. So we do expect that inventories in Q4 will come down considerably, but Andrew do you want to make any comment yes I think.

Building on that in Q3 look.

Sales were $250 million lower than what we had expected in the quarter.

Unknown Executive: Our next question today comes from Alexia from up of people. Please go ahead. Thanks, and good morning, continuing on the working capital team. Could you give us some idea how you're working capital would trend in the next few quarters? I mean, typically you'll have a build in Taiwan, but get in the current situation. Would you expect maybe no build and release of working capital in the first quarter or something else? Sure.

Thats directly a big chunk of inventory reduction that we would've expected to achieve in Q3.

I think as Mark has commented yet you can't stop Vascepa tanker and once in one quarter. It does take time to slow things down you should expect to see a more substantial drop in inventory from $9 30 to 12 31 23.

Thanks, a lot.

Our next question comes from Kevin Mccarthy of <unk>.

Cool Research partners. Please go ahead.

Yes, good morning, Andrew It sounds like you've had at least some preliminary discussions with banks regarding your covenants can you walk us through the path of deleveraging that you would foresee over the next several quarters and maybe talk through some of the more salient.

Unknown Executive: Hey, I'll take this as Andrew. Look, I think the traditional work and capital ability to see in Q1 should be significantly lower. From an inventory perspective, we're already sitting on a substantial inventory, so our traditional end of year, beginning of year inventory bills and advances of the northern hemisphere seasons will be much less of due, if at all. I think from a receivables perspective, because we do have significant advance payments in Q4 against sales in Q1, you don't see as much, we won't see as much relief on the receivable side in Q1.

<unk>.

Cost to amend those will be the first part of the question and then Lee.

Longer term I think you've been running the balance sheet with the goal of about two five times leverage are you attempted to reduce that goal on a structural basis, given the volatility that we've seen in the market.

Unknown Executive: And then the question mark is going to be how rapidly we start ramping back up production. We significantly reduce production levels, step down in Q3 and further step down in Q4, so our payables are quite depressed. How quickly we rebuild those payables, and the first half of next year will have a lot of impact on it. But certainly I would say the biggest factor that should limit the traditional, big working capital prompt in Q1 is there is no need to build up the significant pool of inventory going into the new year.

Okay.

Thanks, Kevin look I think the covenant discussions are well underway.

Going very positively we would expect to have something more concrete to disclose next week.

So some more to come there.

Our most recent Covenant Amendment, we did with 100% supportive Bank group and at no cost. This covenant amendment may cost a little bit, but it won't be a material expense.

So.

<unk> comment until we have completed discussions, but discussions are well advanced we have gotten very positive feedback from the bank group and just to reiterate yes, they see the need for us to.

Unknown Executive: Thanks, Andrew. Sticking was working capital. You're just, I mean, they declined sequentially, but given that you shout down, you know, many of your production lines, and maybe would have expected a bigger drop, could you just talk about that? Am I wrong here? And what's going on with inventory? What would you expect that number, which has come down more sharply in Q4 and Q1?

To adjust and go through this period of resetting our size of our business with this industry wide channel reset really as a transitory business condition.

The banks have been very supportive of the company.

We will again.

Adjusted the covenant to give ourselves room as we're both reducing debt.

Mark Douglas: Yeah, I like to let me just make a comment out front of that. Andrew can give you some of the details. You know, you've got to think carefully about how the inventory is a problem where it is. We have a lot of work in progress. From the moment we place an order with either our tall manufacturers or our own facilities, it can take six months for those products to hit the warehouses to sell to customers.

And allowing the trailing 12 month EBITDA different color.

Mark pointed to certainly Q4 guidance. We have today is challenging Q1, not likely to improve in Q2, we would expect to see an inflection point and start to see trailing 12 month EBITDA began to recover that will help with leverage and then certainly any of the cash that we generate.

Mark Douglas: So, you know, once you start slowing that engine down, it takes a while for that to actually stop dead. We're out of that period now. So we do expect that inventory in Q4 will come down considerably. But Andrew, do you think in the government? Yeah, I think just building on that in Q3, look, sales are 250 million lower than what we'd expected in the quarter. And that's directly a big chunk of inventory reduction that we would have expected to achieve in Q3.

Beyond paying the dividend at its current level all of that cash flow will go to reducing debt.

Net.

And including I'm going to be very clear because there have been some questions about this we have $400 million in senior notes that are due in February of 2024, we will be redeeming. Those notes. This quarter. So we will have no near term maturities to address and that's a part of the whole conversation with the bank group on the covenants. So we will have some further information.

Mark Douglas: And I think as Mark has commented, you know, you can't stop the super tanker in one quarter. It does take time to slow things down. You should expect to see a more substantial drop in inventory from 9.30 to 12.31. 23. Thanks a lot.

For you in the next week on the covenants in terms of longer term financial policy I'm going to reserve comment there to our Investor day, I will state that that two five.

Target leverage on average has been our long standing policy, we've run north of that on average for the past several years. So that's something that we've had some very active discussion mark myself along with the board. So we'll bring some further comments on that in two weeks at the Investor day.

Kevin Mccarthy: Next question comes from Kevin McCarty of fiscal research partners. Please go ahead. That's good morning. Andrew, it sounds like you've had at least some preliminary discussions with the banks regarding your covenants. Can you walk us through the path of de-leveraging that you would foresee over the next several quarters and maybe talk through some of the more salient covenants and costs to amend those? It would be the first part of the question.

That's helpful. And then secondly, mark to follow up on your prior comments regarding pricing.

And also the sales outlook for 2024 would you expect price to trend flat up or down next year versus 2023.

Little early to tell Kevin, we really thinking through the volume price mix.

Kevin Mccarthy: And then, you know, longer term, I think you've been running the balance sheet with a goal of about two and a half times leverage. Are you tempted to reduce that goal on a structural basis given the volatility that we've seen in the markets? Thank you. Thanks, Kevin. Look, I think the covenant discussions are well underway, going very positively. We'd expect to have something more concrete to disclose next week. So some more to come there.

Just yet.

Generally speaking price tends to be sticky for FMC over the years, we've seen that.

We do tend to raise prices every year, even if it's only 1% to cover some form of inflation in different parts of the world.

Kevin Mccarthy: You know, our most recent covenant amendment we did with 100% support of the bank group and at no cost. You know, this covenant amendment may cost a little bit, but it won't be a material expense. So, you know, a reserve comment until we have completed discussions. But discussions are well advanced. We have gotten very positive feedback from the bank group and just to reiterate, you know, they see the need for us to, to adjust and go through this period of resetting our size of our business with this, you know, we industry-wide channel reset really is a transitory business condition.

So a little early to say I'll give you more details on November the 16th when we talk about 2014.

The volumes that Erinn I will you.

Sorry, Kevin just to finish that conversation I would say just our new product introductions come through on volume for us not price. So.

That growth in new products would show up in volume expansion.

I see thank you Mark.

Yes.

Our next question comes from.

Laurence Alexander of Jefferies.

Good morning.

Just two.

Two questions about framing what is if you think about the loss sales this year.

Kevin Mccarthy: So the banks have been very supportive of the company. We will, again, you know, adjust the covenant to give ourselves room as we're both reducing debt. Yes, and allowing the trailing 12 month eva dot to recover. So as Mark pointed to, certainly Q4, the guidance we have today is challenging, Q1 not likely to improve. And a Q2, we would expect to see an inflection point and start to see 12 trailing 12 month eva dot begin to recover.

Can you give us a rough split between how much you think is order timing moved into the first half of next year.

How much is permanently lost in how much you think you would recover by I don't know $25 26.

It's Lawrence there is no push of sales into next year. This is all real inventory that's being held in distribution retail and has been removed.

Kevin Mccarthy: That will help with leverage. And then certainly any of the cash that we generate, you know, beyond paying the dividend at his current level, all of that cash flow will go to reducing debt. And, you know, including, I want to be very clear, because it's been some questions about this, we have 400 million dollars and senior notes that are due in February of 2024. We will be redeeming those notes this quarter, so we'll have no near term maturities to address. And that's a part of the whole conversation with the bank group on the covenant. So we'll have some further information for you in the next week on the covenants.

Don't get pushed so I would say the zero going into next year.

It truly is a reset of bringing those inventories around the world down and then growing from that new point onwards.

Okay.

And secondly on <unk> just for context can you give a sense for how many re formulations, you're introducing I don't know either annually or over the next three five years and how that compares with the cadence across the rest of your portfolio.

Andrew Sandifer: In terms of longer term financial policy, I'm going to reserve comment there to our investor day. I will state that, you know, that two and a half target leverage on average has been our longstanding policy. We've run north of that on average for the past several years. So that's something that we've had some very active discussions. Mark myself along with the board.

And then also just for context.

There have been other large chemistry classes that have gone off patent.

It has been the typical growth trajectory for those over 510 years. After they went off patent.

Yes, I am going to give you those details on November the 16th because we have a section on the <unk> and the overall growth of the portfolio. So we will put it all in context for you suffice to say that the number of formulations accelerates as we go over the next five to 10 years on those products are already in our pipeline that we'll talk about.

Andrew Sandifer: So we'll bring some further comments in that in two weeks of the investor day. That's helpful.

Mark Douglas: And then secondly, mark to follow up on your prior comments regarding pricing and also this sales outlook for 2024. Would you expect price to trans flat up or down next year versus 2023? Little early to tell Kevin, we really not thinking through the volume price mix just yet. Generally speaking, price tends to be sticky for FNC over the years. We've seen that we do tend to raise prices every year, even if it's only 1% to cover some form of inflation in different parts of the world.

Well documented in terms of what happens to molecules when they go off patent.

Mark Douglas: So a little early to say I'll give you more details on November the 16th when we talk about $20.00. But volume. Sorry Kevin, just to finish that conversation, I would say just our new product introductions come through on volume for us, not price. So, you know, that growth in new products would show up in volume. I see. Thank you, Mark. Thank you.

Generally the market expands pricing alleviates, but volume goes up and the net net is you have an expansion of the market itself plus an expansion and overall dollars of profitability.

I think the <unk> will be any different.

The difference may be the fact that they are so fragmented and different types of patents in different parts of the world.

You may see that coming off in different regions, and we kind of showed that in the slides that we that.

We put forward.

We have our own example, so venture zones <unk> that have been off patent for many years. They continue to grow they remain profitable we don't see any difference for those diamonds, but we'll put all that in context for you on the <unk>.

Yeah.

So your biases that are in line or better than average as opposed to worse than average.

You mean in terms of growth.

Laurence Alexander: And next question comes from Laurence Alexander of Jeffries. Good morning. Just two two questions about framing.

Yeah in terms of what happened in terms of that sort of typical trajectory.

For example, do you think they're kind of at least in line with the copper.

Laurence Alexander: What is, if you think about the loss failed this year, can you give us rust splet between how much you think is order timing moved into the first half of next year? How much is permanently lost and how much you think you would recover by, I don't know, 25, 26? It's Laurence. There is no push of sales into next year. This is all real inventory that's been held in distribution retail and is being removed. It does not get pushed. So I would say it's zero going into next year. It truly is a reset of bringing those inventories around the world down and then growing from that new point onwards.

Yes, I would say that <unk> will be higher than the average just because of the attributes that they have.

Okay. Thank you very much thank.

Thank you.

Unknown Executive: Okay.

Our next question today comes from Mike Harrison of Seaport Research partners. Please.

Please go ahead your line is open.

Hi, good morning, all.

Just sticking with the Diamide discussion you guys have worked pretty hard to enable potential competitors to work with you on licensing and other commercial arrangements you gave some details in the slides there but.

How should we think about potential competitors.

You mentioned there were five large ones that more than 60 smaller ones, who are taken that Avenue and are working with you and they are now customers versus potential competitors out there who are looking to grow at a low to create a generic version of your diamide without working with you and I guess, how do you see.

Unknown Executive: And secondly, on dime, I just for context, can you give a sense for how many reformulations you're introducing? I don't know either annually or over the next three, five years and how that compares with the cadence across the rest of your portfolio. And then also just for context, there have been other large chemistry classes that have gone off patent. What has been the typical growth trajectory for those over five, 10 years after they went off patent?

That kind of evolving over the next several years.

Yes.

We'll obviously happened as patents.

Rolled off and jurisdictions change generic.

Products will come I mean, that's normal in this industry, we see it every molecule that has ever existed.

Unknown Executive: Yeah, I'm going to give you those details on November the 16th because we have a section on dime and the overall growth of the portfolio. So we'll put it all in context for you. Suffice to say that the number of formulations accelerates as we go over the next five to 10 years and those products are already in our pipeline that we'll talk about. Well documented in terms of what happens to molecules when they go off patents.

What we're doing about that.

Changing the formulations, bringing new technologies into the <unk> as we just talked about.

Expanding that geographic base those are the things that we're doing the branding of our products. We have extremely strong branding around the world. The brands that we sell are some of the best known brands in the pesticide industry that is a very powerful tool in places like India in places like Brazil.

Unknown Executive: Generally the market expands pricing alleviates but volume goes up and the net net is you have an expansion of the market itself plus an expansion in overall dollars of profitability. I don't think the dime is will be any different. They may the difference may be the fact that they are so fragmented and different types of patents in different parts of the world. You may see that coming off in different regions and we kind of showed that in the slides that we that we put forward. We have our own examples of venture zones, chromosome that have been off patent for many years. They continue to grow. They remain profitable.

<unk> masses quality assurance of performance. So all you bring all those things together and we will talk about that on the <unk>. Those are the types of activities that allow you to continue to grow your market share in an expanding market.

Okay.

Alright, Thank you and then in terms of where you.

Channel inventories today.

And your visibility normalizing order patterns could you maybe walk us around the world and talk about where you see those channel inventory levels I got sorry, the challenges right now mostly focused on Latin America or visibility is still pretty limited in other regions as well.

Unknown Executive: We don't see any difference for those demise but we'll put all that in context for you on the 16th. So your biases there in line or better than average as opposed to worse than average. You mean in terms of growth? Yeah in terms of what happens in terms of that sort of typical trajectory. For example, do you think they're kind of at least in line with the. Yes, I would say the demise will be higher than the average just because of the attributes that they have. Thank you very much.

Yes, it's not it's not great right now, Mike it's very difficult to.

To walk around the World you can tell by the types of results that FMC is putting out there as well as our competitors that everybody is having the same issues in judging what the market is I think the focus is on Latin America, because Latin America is now at the beginning of the season, while we've had time in the northern hemisphere to walk through some of this in.

In U S, Canada, obviously Europe.

Mike Harrison: And let's question today comes from Mike Harrison of T-Port Research Partners. Please go ahead, your line is open. Hi, good morning. Just thinking with the dynamite discussion, you guys have worked pretty hard to enable potential competitors to work with you on licensing and other commercial arrangements. You gave some details in the slides there, but how should we think about potential competitors? You mentioned there were five large ones and more than 60 smaller ones who have taken that avenue and are working with you and they're now customers, versus potential competitors out there who are looking to go with a load and create generic versions of your dynamite without working with you.

So I think Latin America is all the focus now just because it's late to the game in terms of where it season is that does not mean to say that there is not channel inventory elsewhere in the world. Hence my comments I see this working through Q1, possibly into Q2 and then if we go so I think that first half is as well we're really.

On to make sure that we understand as we come out of that period, exactly where are we and how is volume flowing.

Understood. Thanks, very much thanks.

Thanks, Mike.

Our next question comes from Vincent Andrews of Morgan Stanley. Your line is open.

Thank you and good morning, everyone.

Mark I wanted to try to square some of your preliminary comments on 2024.

Mike Harrison: And I guess how do you see that kind of evolving over the next several years? Yeah, I mean, that will obviously happen as patents roll off and jurisdictions change generic products will come. I mean, that's normal in this industry. We see it every molecule that has ever existed. What we're doing about that, changing the formulations, bringing new technologies into the dynamite as we just talked about, expanding that geographic base. Those are the things that we're doing, the branding of our products, we have extremely strong branding around the world.

They are at a high level.

I understand raw material costs can be down next year I understand that you're going to have some restructuring cost savings and that's going to help EBITDA grow year over year, where I would appreciate some more color just on the top line. I think you said you expected FMC that sales growth next year and I'm just thinking through like if once you have to lap, but we have seen.

In <unk>, <unk>, 23, which is kind of like.

Mid to high 20 sales decline and I think he only had volume down about 3%, 3% and $102 23 and <unk>.

My model I, just sort of assumed that the headwind from lapping things and <unk> 23 on the top line. It was kind of too much to overcome in the balance of the year to get to get growth, particularly if we assume that once the destocking is over it's just sort of a reset of sales levels and when we go back to the industry growing.

Mike Harrison: The brands that we sell are some of the best known brands in the pesticide industry. That is a very powerful tool in places like India, in places like Brazil, brand matters, quality, assurance of performance. So all you bring all those things together and we'll talk about that on the 16.

Mark Douglas: Those are the types of activities that allow you to continue to grow your market share in an expanding market.

3% and perhaps you guys doing a bit better than that so is there something I'm not thinking about right that helps you get to the idea that you can overcome the <unk> and potentially even a little bit of a <unk> topline headwind to get full year sales growth next year.

Mark Douglas: All right, thank you. And then in terms of the where you see channel inventories today and your visibility normalizing order patterns, maybe walk us around the world and talk about where you see those channel inventory levels. I guess are the challenges right now, mostly focused on Latin America, or is visibility still pretty limited in other regions as well? Yes, it's not it's not great right now, Mike. It's very difficult to walk around the world.

Yes, I think there are I'm not going to go into those details today, because I actually we're preparing for all of that as we go into our Investor day.

<unk> got to understand that the NPI growth of the new products is accelerating so that gives you a tailwind.

You do have a full season of Latam in the second half of the year, which is also a positive tailwind.

You take take those big pieces together, we believe we will have positive growth next year.

Mark Douglas: You could tell by the types of results that FMC is putting out there as well as our competitors that everybody is having the same issues in judging what the market is. I think the focus is on Latin America because Latin America is now the beginning of its season where we've had time in the northern hemisphere to work through some of this in US, Canada, obviously Europe. So I think Latin America has all the focus now just because it's late to the game in terms of where its season is.

Okay, well I look forward to the detail on that in a couple of weeks and maybe just as a follow up just trying to understand.

The inventory drawdown that we're seeing through the supply chain, obviously the numbers are quite incredible.

What.

Where would you have guessed a year ago or so that those levels were.

<unk>.

And is it really just a function of the sort of twin effective overstocked a bit during the supply chain challenges and then we've got in the interest rate shock, which is sort of swung the pendulum.

Mark Douglas: That does not mean to say that there is not channel inventory elsewhere in the world. Hence my comments, I see this working through Q1, possibly into Q2 and then off we go. So I think that first half is where we're really focused on to make sure that we understand as we come out of that period exactly where are we and how is volume flowing?

Unknown Executive: Thank you.

<unk> percent and the other in the other direction I'm just trying to understand how the channel was managing to hold.

Vincent Andrews: Understood. Thanks very much.

Incentivize them to hold all this inventory this whole time.

Yes, I think listen I think the lesser premise is absolutely right in 2021 and 2022 clearly there was a lot of uncertainty around supply. There was a lot of price increases I think the thing that caught the industry is that growers around the world who are holding inventory.

Vincent Andrews: Thais, Mike.

Vincent Andrews: Our next question comes from Vincent Andrews of Morgan Stanley. Your line is open. Thank you.

Vincent Andrews: Good morning, everyone. Mark, I want to try to square some of your preliminary comments on 2024, you know, I recognize there at a high level. I understand raw material cost can be down next year. I understand that you're going to have some restructuring cost savings and that's going to help EBITDA grow year over year, where I would appreciate some more color. It's just on the top line. I think you said you expected FMC that sales growth next year.

I don't think that was factored into People's calculations that has obviously been much more than anybody thought and that's one of the big catalyst that we saw starting to unwind in Q2.

Here, we are today, so I think it's not only don't just focus on distribution and retail the grow of component. It was much bigger than I think anybody thought.

Okay. Thanks, and look forward to seeing everybody in a couple of weeks yes.

Vincent Andrews: And I'm just thinking through like if one queue has to lap what we've seen in 2 queue through 4 queue 23, which is kind of like a mid to high 20s sales decline. And I think you only have volume down about 3%, yeah, 3% in 1 queue 23. You know, in my model, I just sort of assumed that the headwind from lapping things in 1 queue 23 on the top line, you know, it's kind of too much to overcome in the balance of the year to get to get growth, particularly if we assume that once the destocking is over, it's just sort of a reset of sales levels.

Yes, we will do.

Thank you our.

Our next question comes from Aaron <unk> of RBC. Please go ahead.

Great. Thanks for taking my question.

Good morning, So I guess, you've addressed a lot of the issues around diamide franchise, but just just so we're completely clear.

Two questions around this so.

It sounded like.

The EBITDA contribution from the Diamide is relatively high north of 40% of company EBITDA.

Vincent Andrews: And we go back to the industry growing, you know, 3% and perhaps you guys doing a bit better than that. So is there something I'm not thinking about right that helps you get to the idea that that you can overcome the 1 queue and potentially even a little bit of a 2 queue top line headwind to get for your sales growth next year. Yeah, I think there are.

Or maybe around $5 million to $600 million annually.

Are you, saying that you don't necessarily see risk to that.

Generally speaking you would you would maintain at that level.

Contribution EBITDA contribution from that franchise.

Mark Douglas: I'm not going to go into those details today because I actually were preparing for all of that as we go into our investor day. You've got to understand that the NPI, the growth of the new product is accelerating, so that gives you a tailwind. You do have a full season of Latin in the second half of the year, which is also a positive tailwind. You take those big pieces together. We believe we'll have positive growth next year.

And if you do see any deterioration.

That the new product growth and maybe some of the other stores you've added such as Biologicals wood.

Would fill that gap. So there really isn't really any any risk to losing large chunks of of profitability within the company.

Yes, absolutely we don't see that at all in.

In November the 16th I'm going to paint the picture for you is how we grow over the next 36 months and what we look like 10 years out you'll see that there are a number of components that aid that growth.

Mark Douglas: Okay, well, I look forward to the detail on that in a couple of weeks and maybe just as a follow up, just trying to understand, you know, the inventory drawdown that we're seeing through the supply chain. Obviously, the numbers are quite incredible. You know, where would you have guessed, you know, a year ago or so that those levels were. And is it really just a function of the sort of twin effect of they overstocked a bit during the supply chain challenges.

We are absolutely committed to continue to grow the value of the <unk> in terms of its contribution to the company now you will see there are other parts that we're introducing that are growing much faster than the dialogues. So don't think of FMC has been the Diamide story.

The dialogues are incredibly important to us it's a fantastic franchise any anybody would give that right arms at this franchise. What we're telling you is we have other things that are actually growing faster and will become more important to the company over the next three to 10 years. So I think thats. The story that people are missing you are assuming we are going to drop.

Mark Douglas: And then we've gotten the interest rate shock, which is sort of swung the pendulum 100% in the in the other and the other direction. I'm just trying to understand how the channel was managing to hold what incentivize them to hold all this inventory this whole time. Yeah, I think listen, I think that your last premise is absolutely right in 2021 and 2022. Clearly, there was a lot of uncertainty around supply. There was a lot of pricing increases.

EBITDAR and <unk> that is not the case EBITDA is going to grow with the <unk>. You also have the additive of all the new products of the new platforms that we're building. That's the total story and I think thats getting missed today.

Mark Douglas: I think the thing that caught the industry out is that growers around the world were holding inventory. And I don't think that was factored into people's calculations. That has obviously been much more than anybody thought. And that's one of the big catalysts that we saw starting to unwind in Q2. And here we are today. So I think it's not only don't just focus on distribution and retail. The grow a component here was much bigger than I think anybody thought.

Alright, Thanks for that clarification, and then just on the supply chain itself.

What are some of the steps that you can take to get better intelligence of inventory levels, whether it be at the distributor level or even.

As maybe as happened in the last year at the farmer level.

Is there further.

Intelligence, you can get through your grower network and distributor network.

Unknown Executive: Thanks and look forward to seeing everybody in a couple of weeks. Yeah, we'll do. Thank you.

And do you feel like there is accurate.

Communication about those inventory levels. Some also different around this time that the magnitude of Destocking is this.

Arun Viswanathan: Our next question comes from Aaron Viswanathan of RBC. Please go ahead. Great. Thanks for taking my question. Morning. So I guess you know you've addressed a lot of the issues around the dynamite's franchise, but just just so we're. We're completely clear. Two questions around this. So, you know, it sounded like the dot contributions of the dynamite's is relatively high, north of 40% of company EBITDA, or you know, maybe around five or 600 million annually.

So much more pronounced.

Yes.

It's a very very fragmented.

Structure in this in this industry.

It is very difficult at the grower level to understand what people are holding when you have millions of farmers around the world.

We obviously talked to a big distribution partners around the world and they will call. It out by this so I think the industry has a lot to learn in terms of how much inventory is set out that we are going to be doing some things internally ourselves I don't want to say, what they are to try and aid our demand forecast accuracy and understanding what inventory is out there.

Arun Viswanathan: Are you saying that you don't necessarily see risk to that generally speaking, you would, you would maintain that level of. Contribution, EBITDA contribution from that franchise. And if you do see any deterioration that the new product growth and maybe some of the other tools you've added, such as biologicals would, would fill that gap so there really isn't really any any risk to losing large chunks of profitability within the company. Yeah, absolutely. We don't see that at all.

But I think we have to recognize it's never going to be 100% accurate. It is just too fragmented, but there are things that we've learned over the last 12 months that we can apply to our thinking, especially as we are planning our supply chain activities.

Yes, there are learnings some of them I want to keep for ourselves, but generally speaking I think the industry does have to do a better job of communicating where inventory sits at any point of that value chain.

Thanks.

Mark Douglas: November the 16th, I'm going to paint the picture for you as how we grow over the next 36 months and what we look like 10 years out, you'll see that there are a number of components that aid that growth. We are absolutely committed to continue to grow the value of the dynamite in terms of its contributions to the company. Now you will see there are other parts that we're introducing that are growing much faster than the dynamite.

Thank you.

Our final question today comes from Adam Samuelson of Goldman Sachs. Please.

Please go ahead.

Hi, yes. Thank you good morning, everyone.

Good morning.

Good morning.

I know that theres going to be a lot more detail on some of these topics.

At the Investor day.

Mark Douglas: So don't think of FMC has been a dynamite story. Yes, the dynamites are incredibly important to us. It's a fantastic franchise. Anybody would give their right arms to have this franchise. What we're telling you is we have other things that are actually growing faster and will become more important to the company over the next three to 10 years. So I think that's the story that people are missing. You're assuming we're going to drop EBITDA in dynamite.

Was hoping to maybe step back and I.

Understand there's a lot of channel intelligence.

Refresh that's going to happen on your end as well as Youre thinking about 2024.

Do you think it's 2000 22021 kind of shipments that are more appropriate baseline for future growth or kind of cumulatively, where do you think the inventory build.

Mark Douglas: That is not the case. EBITDA is going to grow with the dynamite. You also have the additive of all the new products and the new platforms that we're building. That's the total story. And I think that's getting missed today. All right.

And your distribution channel.

The farm customers actually built up so we can.

About <unk>.

Proper base off which to grow longer term.

I think for US as we just talked about I think we've reset as we go through Q4 Q1.

Mark Douglas: Thanks for that clarification. And then just on the supply chain itself, what are some of the steps that you can take to get better intelligence of inventory levels, whether it be at the distributor level or even. And as maybe it has happened in the last year at the farmer level, is there further intelligence you can get through your grower network, distributor network. And do you feel like there's accurate communication about those inventory levels and what's so different around this time that the magnitude of destocking is just so much more pronounced.

Much more balanced in Q2, Thats why you grow from industry typically grows at 3% ish can.

It can be zero can.

Can be a little more think of that as sort of the second half move youre getting more normal growth patterns. You also have to remember that inventory doesn't still at any one point of this value chain. It can move from grow up back to retail and retail back to distribution. So any one point in time inventory looks different.

Another complicating factor, having said all of that we expect this to reset as we go through the first half of next year predominantly Q1 second half of the year will be much should be much more normal in terms of growth and inventory management, that's how we see it.

Mark Douglas: Thanks. Yeah, listen, it's a very, very fragmented structure in this industry. It is very difficult at the grower level to understand what people are holding when you have millions of farmers around the world. You know, we obviously talked to our big distributes and partners around the world and they were caught out by this. So I think the industry has a lot to learn in terms of how much inventory is set out there.

Yes, alright, Adam I'm, sorry, we don't have time for a follow up I do appreciate the questions. Thank you. That's all the time, we have for the call.

Yes.

This concludes today's call. Thank you for joining you may now disconnect your lines.

[music].

Mark Douglas: We are going to be doing some things internally ourselves. I don't want to say what they are to try and aid our demand forecast accuracy and understanding what inventory is out there. But I think we have to recognize it's never going to be 100% accurate. It is just too fragmented. But there are things that we've learned over the last 12 months that we can apply to our thinking, especially as we're planning our supply chain activities.

Sure.

Paul.

Okay.

[music].

Mark Douglas: So yes, there are learnings. Some of them I want to keep for ourselves. But generally speaking, I think the industry does have to do a better job of communicating where inventory sits at any point of that value chain. Thanks.

Unknown Executive: Thank you.

Adam Samuelson: I'll find a question today comes from Adam Samusen of Goldman Sachs. Please go ahead. Yes, thank you.

Unknown Executive: Good morning, everyone. Good morning. It's a lot of ground time today. I know that there's going to be a lot more detail on some of these topics at the investor day. But it's open maybe to step back and I understand there's a lot of channel intelligence refresh that's going to happen on your end as well. Well, as you're thinking about 2024, should you think it's 2020, 2021 kind of shipments that are more appropriate baseline for future growth or kind of significantly where do you think the inventory build both in your distribution channel and at the farm customers actually built up so that we can think about a proper base off which to grow longer.

Unknown Executive: Yeah, you know, I think I think for us, as we just talked about, I think we reset as we go through Q4, Q1, much more balancing Q2. That's where you grow from industry typically grows a 3% ish can be zero can be a little more. Think of that as sort of the second half move you're getting more normal growth patterns. You also have to remember that inventory doesn't sit still at any one point of this value chain.

Unknown Executive: It can move from grow back to retail and retail back to distribution. So at any one point in time, inventory looks different. That's another complicating factor. Having said all of that, we expect this to reset as we go through the first half of next year for dominantly Q1, second half of the year will be much should be much more normal in terms of growth and inventory management. That's how we see it. Yeah, all right. I'm sorry. We don't have time for a follow up. I do appreciate the questions. Thank you.

Unknown Executive: That's all the time we have for the call. This concludes today's call. Thank you for joining.

Unknown Executive: You may now disconnect your line.

Unknown Executive: Thank you.