Q4 2023 FMC Corp Earnings Call

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Speaker Change: Good morning, everyone and welcome to the fourth quarter 2023 earnings call for FMC Corporation.

Unknown Executive: Good morning, everyone, and welcome to the fourth quarter 2023 earnings call for FMC Corporation. This event is being recorded, and all participants are in a listen-only mode.

Speaker Change: This event is being recorded and all participants are in a listen only mode.

Unknown Executive: Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's prepared remarks, there will be an opportunity to ask questions. To be placed in the Q&A queue, please press the star key, then 1 at any time. If you are using a speakerphone, please pick up your headset before pressing. I would now like to turn the conference over to Mr. Zack Zaki, Director of Investor Relations for FMC Corporation. Please go ahead.

Speaker Change: Should you need assistance. Please signal a conference specialist by pressing star key followed by zero.

Speaker Change: After today's prepared remarks, there will be an opportunity to ask questions.

Speaker Change: To be placed into Q&A queue. Please press Star then one at any time, if you are using a speakerphone. Please pick up your headset before pressing the keys.

Investor Relations: I would now like to turn the conference over to Mr. <unk> <unk> director of Investor Relations for FMC Corporation. Please go ahead.

Investor Relations: Thank you Bruno and good morning, everyone.

Zack Zaki: Thank you, Bruno, and good morning, everyone. Welcome to FMC Corporation's fourth quarter earnings call. Joining me today are Mark Douglas, President and Chief Executive Officer, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Mark will review our fourth quarter performance as well as provide an outlook for first quarter and full year 2024. Andrew will then provide an overview of select financial results. Following the prepared remarks, we will take questions.

Speaker Change: Welcome to FMC Corporation's fourth quarter earnings call.

Speaker Change: Joining me today are Mark Douglas, President and Chief Executive Officer, and understand if our executive Vice President and Chief Financial Officer.

Speaker Change: Mark will review, our fourth quarter performance as well as provide an outlook for fourth quarter and full year 2024.

Speaker Change: Andrew will then provide an overview of select financial results. Following their prepared remarks, we will take questions.

Speaker Change: 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.

Zack Zaki: 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 pause. I would 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. The information presented represents our best judgment based on today's understanding. However, actual results may vary based upon these risks and uncertainties.

Speaker Change: 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.

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

Speaker Change: Actual results May vary based upon these risks and uncertainties.

Speaker Change: 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.

Zack Zaki: Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash flow operations, pre-cash flow, and organic revenue, 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, Zack, and good morning, everyone.

Speaker Change: All of which are non-GAAP financial measures.

Speaker Change: Please note that as used in today's discussion earnings means adjusted earnings and EBITDA means adjusted EBITDA.

Speaker Change: 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.

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

Mark A. Douglas: Thank you Zach and good morning, everyone.

Mark A. Douglas: Details on our fourth quarter and full year 2023 results can be found on slides three through six.

Mark A. Douglas: Details on our fourth quarter and full year 2023 results can be found on slides three through six. Market conditions and buyer behavior were pretty much as we had expected in the fourth quarter, with North America, EMEA, and Asia performing to our plan. The one exception was Latin America.

Mark A. Douglas: Market conditions in buyer behavior with pretty much as we had expected in the fourth quarter with North America, EMEA and Asia performing to our plan.

Mark Douglas: The one exception was Latin America.

Mark Douglas: In addition to the ongoing channel correction, our results were negatively impacted by drought conditions in Brazil.

Mark A. Douglas: In addition to the ongoing channel correction, our results were negatively impacted by drought conditions in Brazil. However, this was somewhat offset by stronger sales of our more differentiated products, which are showing continued resilience despite market conditions. Branded diamide sales in the quarter were up 5%, with sales essentially flat or higher in all regions. However, products launched in the last five years outperformed the overall portfolio and comprised 14% of our total revenue. The Channel Inventory Correction is running its course at varying rates across the regions, and we're expecting this to continue through the first half of 2024. However, the underlying fundamentals of our business and this industry remain solid. Based on input from third-party data and our own commercial teams, crop protection products continue to be applied at a steady rate.

Mark Douglas: This was somewhat offset by stronger sales of our more differentiated products, which are showing continued resilience despite market conditions.

Mark Douglas: Branded diamide sales in the quarter were up 5% with sales essentially flat or higher in all regions.

Mark Douglas: <unk> products launched in the last five years outperformed the overall portfolio Uncompromised comprised 14% of our total revenue.

Mark Douglas: The channel inventory correction is running its course at varying rates through the regions.

Mark Douglas: We're expecting this to continue through the first half of 2024.

Mark Douglas: However, the underlying fundamentals of our business in this industry remains solid.

Mark Douglas: Based on input from third party data and our own commercial teams crop protection products continue to be applied at steady rates.

Mark Douglas: Looking at fourth quarter sales on a regional level North America revenue was down 37% versus prior year from lower volume as expected after a record Q4 in 2022.

Mark A. Douglas: Looking at fourth quarter sales on a regional level, North America revenue was down 37% versus the prior year from lower volume, as expected after a record Q4 in 2022. In Latin America, sales were down 38%, 41% excluding FX due to lower volumes and a low double-digit pricing decline. Branded dyamides were essentially flat to the prior year, aided by the successful launch of Premio Star in

Mark Douglas: In Latin America sales were down 38%, 41%, excluding FX due to lower volumes and low double digit pricing decline.

Mark Douglas: Monday Diamonds were essentially flat to the prior year aided by the successful launch of <unk> in Brazil.

Mark A. Douglas: In addition, we have solid growth in Mexico supported by higher sales of new products. Forth quarter sales in Asia were flat compared to the prior year period, as growth in fungicides and biologicals effectively offset inventory destocking, particularly in India, where channel inventory remains elevated. Branded diamide cells in the region were in line with the prior year period. Revenue in EMEA was down 24% or 22% lower excluding FX due to lower volume, mostly in herbicides.

Mark Douglas: In addition, we had solid growth in Mexico supported by higher sales of new products.

Mark Douglas: Fourth quarter sales in Asia were flat to prior year period as growth in fungicides, and biologicals, effectively offset inventory destocking, particularly in India, where channel inventory remains elevated.

Mark Douglas: The Diamide sales in the region were in line with the prior year period.

Mark Douglas: Revenue in EMEA was down 24% or 22% lower excluding FX due to lower volume mostly in herbicides.

Mark Douglas: Price was a low to mid single digit benefit as the region continued to effectively implement price initiatives.

Mark A. Douglas: Price was a low to mid-single-digit benefit as the region continued to effectively implement price initiatives. Branded Diamide sales experienced strong growth of more than 20% driven by the launches of Verimark in Spain and Prestacor in Turkey. Shifting to EBITDA, fourth quarter results were 41% lower than the prior year period, due primarily to lower sales. However, costs were a strong tailwind, with contributions from lower input costs and diligent spending controlled in SG&A and R&D. Our full year 2023 results are listed on slide six. The EBITDA margin of nearly 22% was lower by approximately 240 basis points but remains at industry-leading levels. This was accomplished through effective spend management and by holding or raising prices in many geographies, especially in EMEA, which benefited from a price increase of lower double digits for the year.

Mark Douglas: Branded diamide sales experienced strong growth of more than 20% driven by the launches of very marked in Spain <unk> in Turkey.

Mark Douglas: Shifting to EBITDA fourth quarter results were 41% lower than the prior year period, due primarily to lower sales costs were a strong tailwind with contributions from lower input costs and diligent spending control in SG&A and R&D.

Mark Douglas: Full year 2023 results are listed on slide six.

Mark Douglas: EBITDA margin of nearly 22% was lower by approximately 240 basis points, but remains at industry leading levels.

Mark Douglas: This was accomplished through effective spend management and by holding or raising prices in many geographies, especially in EMEA, which benefited from a price increase of low double digits for the year.

Mark Douglas: We had substantial cost favorability for the year that was more than offset by the decline in sales volume.

Mark A. Douglas: We had substantial cost favorability for the year that was more than offset by the decline in sales volume. Operating cost actions we took in the second half of 2023 in response to lower demand delivered spend reductions well in excess of our 60 to 70 million dollar target. Diamide sales for the full year were $1.8 billion, a decline of about 15%.

Mark Douglas: Operating cost actions, we took in the second half of 2023 in response to lower demand deliberate spend reductions willing excess about $60 million to $70 million target.

Mark Douglas: <unk> sales for the full year were $1 8 billion a decline of about 15%. However sales of our branded dialogues outperformed and we're only down 7%.

Mark A. Douglas: However, sales of our branded diamides outperformed and were only down 7%. Across our portfolio, the new and more innovative products showed much greater resilience, even in a weak demand environment. NPI sales were down only 2% and made up a little over 13% of our total revenue, a new annual record, up from 10% in 2022. New products that drove this performance included a number of products in Brazil, such as Premio Star insecticide for soy. Boral Full and Stone Herbicides for sugarcane and soy and Onsuva Fungicide for soy based on our new active ingredient fluindipine.

Mark Douglas: Cross our portfolio, the new and more innovative products showed much greater resilience, even in a weak demand environment.

Mark Douglas: NPI sales were down only 2% and made up a little over 13% of our total revenue a new annual record up from 10% in 2022.

Mark Douglas: New products that drove this performance include a number of products in Brazil, such as premiere of star insecticide for soy.

Mark Douglas: For our full and stone herbicides for sugarcane and soy and on suite, a fungicide for soy based on our new active ingredient fluent appear.

Mark Douglas: We also benefited from sales of courage and Max insecticide for canola Ultra car, even though insecticide for fruits and vegetables, and overwatch herbicides for cereals.

Mark A. Douglas: We also benefited from sales of Corrigin Max insecticide for canola, Altecor Ivalo insecticide for fruits and vegetables, and Overwatch herbicide for cereals. Before we move the discussion to 2024, I would like to highlight some of the actions we have taken to enhance visibility into channel inventory. In Europe, we have put surveys in place in nine of our most important countries and covered hundreds of distributors and growers to gain insight into their inventory and, especially, our products. In Asia, the larger countries, including India, are utilizing proprietary digital platforms to track inventory movement in real time across the channel, as it passes from distributor to retailer and then to grower.

Speaker Change: Before we move the discussion to 2024 I would like to highlight some of the actions we have taken to enhance visibility into channel inventory.

Speaker Change: In Europe, we have put surveys in place in nine of our most important countries uncovering hundreds of distributors and growers to gain insight into their inventory and especially of our products.

Speaker Change: In Asia, the larger countries, including India are utilizing proprietary digital platforms to track inventory movement in real time across the channel as it policies from distributors to retailer and then to grow it.

Mark A. Douglas: In Mexico, we're in the final stages of integrating our systems with those of our retailers, which will also give us real-time visibility of inventory sellout. We are also piloting the same system and approach in Brazil. In Argentina, we have increased the frequency of data updates to our inventory tracking system. And finally, in the US, we are expanding our forecasting process beyond distributors to now include retailers. This expanded data set will then be incorporated into our demand forecasting process, moving to 2024 expectations. Our full year guidance and commentary is provided on slides 7 through 10. Having closed 2023 and established a starting point for 2024, we now expect revenue of $4.5 to $4.7 billion, an increase of 2.5% at the midpoint. We are anticipating the full-year global market to be flat to down by low single-digits as a softer first half is expected to be followed by the resumption of historical low single-digit percent growth in the second half. The exception to this forecast is India, where we expect the market to be down for the full year, primarily due to channel inventory that the entire industry is carrying as a result of multiple seasons of unfavorable mon

Speaker Change: In Mexico, we are in the final stages of integrating our systems with those of our retailers, which will also give us real time visibility of inventory sellouts.

Speaker Change: We are also piloting the same system and approach in Brazil.

Speaker Change: In Argentina, we have increased the frequency of data updates to our inventory tracking system.

And finally in the U S. We're expanding our forecasting process beyond distributors to now include retailers.

Speaker Change: This expanded dataset will then be incorporated into our demand forecasting processes.

Speaker Change: Moving to 2024 expectations, our full year guidance and commentary that you provided on slide seven through 10.

Speaker Change: Having closed 2023 and established a starting point for 2024, we now expect revenue of $4 five to $4 7 billion, an increase of two 5% at the midpoint.

Speaker Change: We are anticipating full year global market to be flat to down low single digits as a softer first half is expected to be followed by the resumption of historical low single digit percent growth in the second half.

Speaker Change: The exception to this forecast is India, where we expect the market to be down for the full year, primarily due to channel inventory.

Speaker Change: Entire industry is carrying as a result of multiple seasons of unfavorable monsoons.

Speaker Change: Revenue growth for FMC in 2024 centers on volume growth led by NPI.

Mark A. Douglas: Revenue growth for FMC in 2024 centers on volume growth led by NPI, which after posting sales of $590 million in 2023, we expect to grow by approximately $200 million in 2024. Almost half of the NPI growth is expected to come from products launched in 2024. Major products driving higher MPI sales include Corrigen Evo Insecticide in Argentina and the US, Premio Star Insecticide in Brazil, Overwatch Herbicide in Australia, as well as Onsuva Fungicide in Brazil and Argentina.

Which after posting sales of $590 million in 2023, we expect to grow by approximately $200 million in 2020 full.

Speaker Change: Almost half of the NPI growth is expected to come from products launched in 2024.

Speaker Change: Major products driving higher NPI sales include courage, and Evo insecticides in Argentina, and the U S.

Speaker Change: <unk> insecticide in Brazil.

Speaker Change: Overwatch herbicide in Australia, as well as on Suva, fungicide in Brazil, and Argentina.

Speaker Change: We expect moderate pricing pressure in the year with the largest impact in the first half.

Mark A. Douglas: We expect moderate pricing pressure in the year with the largest impact in the first half. FX is also expected to be a minor headwind for the year. Ividar's revenue is expected to be between $900 million and $1.05 billion, flat to 2023 at the mid-price.

Speaker Change: FX is also expected to be a minor headwind for the year.

Speaker Change: EBITDA is expected to be between $900 million and 1.05 billion flat to 2023 at the midpoint.

Speaker Change: Growth of new products and benefits from our restructuring are expected to be offset by higher cost of inventory carried forward from the prior year lower fixed cost absorption and modest pricing pressure.

Mark A. Douglas: Growth of new products and benefits from our restructuring are expected to be offset by higher costs of inventory carried forward from the prior year, lower fixed cost absorption, and modest pricing pressure. The updated sales range is $150 million lower at the midpoint than our preliminary outlook presented in November. This range now reflects our actual 2023 results. The EBITDA range midpoint is $100 million lower than the preliminary outlook, mainly due to the reduced revenue expectation for 2024 and minor additional headwinds to gross margin. Adjusted earnings per share is expected to be between $3.23 and $4.41 per share, an increase of 1% at the midpoint from lower interest expense and D&A.

Speaker Change: The updated sales range is $150 million lower at the midpoint than our preliminary outlook presented in November.

Speaker Change: This range now reflects our actual 2023 results.

Speaker Change: The EBITDA range midpoint is $100 million lower than the preliminary outlook, mainly due to the reduced revenue expectations for 2024 and minor additional headwinds to gross margin.

Speaker Change: Adjusted earnings per share is expected to be between $3 23.

Speaker Change: $4 41 per share an increase of 1% at the midpoint from lower interest expense and DNA.

Speaker Change: I don't November Investor Day, we acknowledged that although FMC had responded aggressively to market challenges in the second half of 2023 broader actions where needed to better align our business operations with the current realities in the marketplace.

Mark A. Douglas: At our November Investor Day, we acknowledged that although FMC had responded aggressively to market challenges in the second half of 2023, broader actions were needed to better align our business operations with the current realities in the marketplace. We are moving quickly on a global restructuring plan that will fundamentally transform our operating model. This is a multi-pronged approach that focuses on shorter-term expenses and longer-term structural costs as we restructure the operating model. These structural changes will position us for success as we move beyond 2024 and toward our 2026 goal. Slide 9 provides some additional detail on the actions we're taking. The Global Restructuring Programme is currently underway and will largely be completed in Brazil by the end of Q1. The Global Restructuring Programme is currently underway and will largely be completed in Brazil by the end of Q1.

We are moving quickly on a global restructuring plan that will fundamentally transform our operating model.

Speaker Change: Including how we're organized where we operate and the way we work.

Speaker Change: This is a multi pronged approach that focuses on shorter term expenses and longer term structural costs as we restructured the operating model.

Speaker Change: These structural changes will position us for success as we move beyond 2024 and towards our 2026 goals.

Speaker Change: Slide nine provides some additional detail on the actions we're taking.

Speaker Change: The global restructuring program is currently underway will largely be completed in Brazil by the end of Q1.

Mark A. Douglas: We have also made strong progress through a voluntary separation program in the U.S., with preparations for additional workforce reductions company-wide. Combined, approximately 8% of our workforce will be impacted as we begin to consolidate roles and adjust team structures. Reducing indirect spend is another place where we've accelerated our actions in many critical areas, including non-essential spend and implementing a new strategic sourcing strategy. We have already announced plans to sell our non-cropped global specialty solutions business.

Speaker Change: We have also made strong progress through a voluntary separation program in the U S with preparations for additional workforce reductions companywide.

Speaker Change: Combined approximately 8% of our workforce will be impacted as we begin to consolidate roles and adjust team structures.

Speaker Change: Reducing indirect spend is another place where we've accelerated our actions on many critical areas, including none in nonessential spend and implementing a new strategic sourcing strategy.

Speaker Change: We already announced plans to sell our non crop global specialty solutions business, we have been preparing for this over the last two months.

Mark A. Douglas: We have been preparing for this over the last two months, and we are now ready to begin marketing. And lastly, we are examining the company's global and regional footprint. Our location strategy is a critical pillar in FMC's overall transformation, and we've made good progress in our analysis so far. This includes examining office locations, manufacturing sites, and research centers.

Speaker Change: We're now ready to begin marketing.

Speaker Change: And lastly, we are examining the company's global and regional footprint.

Speaker Change: Our location strategy is a critical pillar in Fmc's overall transformation and we've made good progress in our analysis so far this.

Speaker Change: This includes examining office locations manufacturing sites and research centers.

Mark A. Douglas: Although this is a longer-term work stream, there will be milestones that we will announce throughout this year. As a reminder, we expect this restructuring plan to result in $50 to $75 million of cost savings in 2024. It's important to note that these savings are net of inflationary and other cost headwinds that we're forecasting for the year. We expect $150 million of run rate savings by the end of 2025.

Speaker Change: Though this is a longer term work stream there will be milestones that we will announce throughout this year.

Speaker Change: As a reminder, we expect this restructuring plan to result in $50 million to $75 million of cost savings in 2024.

Speaker Change: It is important to note that these savings are net of inflationary and other cost headwinds that were forecasting for the year.

Speaker Change: We expect $150 million of run rate savings by the end of 2025.

Mark A. Douglas: We plan to complete this restructuring and deliver lower costs while continuing to prioritize investments in critical growth areas, such as our plant health business, further engagement with growers, and R&D, including new product innovation. Slide 10 lists some of the factors that would lead to varying EBITDA outcomes in our guidance. The pace of recovering the market is still the largest determinant factor. Our base assumption is that by mid-year, every region will have had one full growing season to manage inventory to desired levels, aided by steady application rates by growers.

Speaker Change: We plan to complete this restructuring and deliver lower cost while continuing to prioritize investments in critical growth areas, such as our plant health business further engagement with growers.

R&D, including new product innovation.

Speaker Change: Slide 10 lists some of the factors that would lead to Varian EBITDAR outcomes in our guidance range.

Speaker Change: The pace of recovery in the market is still the largest determinant factor.

Speaker Change: This assumption is that by mid year every region. We will have had one full growing season to manage inventory to desired levels aided by steady application rates by growers.

Speaker Change: Recovery may vary by region, but we expect to see overall market growth in the second half of the year.

Mark A. Douglas: Recovery may vary by region, but we expect to see overall market growth in the second half of the year. Slide 11 provides our outlook for the first quarter. The expected revenue of $925 million to $1.075 billion is lower than the prior year by 26% at the midpoint, which is consistent with the revenue declines of the last three quarters. Volume is expected to be the primary driver of lower sales, with pricing pressure in Latin America and Asia a smaller secondary headwind.

Speaker Change: Slide 11 provides our outlook for the first quarter.

<unk> revenue of 925 million to 107 5 billion is lower than the prior year by 26% at the midpoint, which is consistent with the revenue declines in the last three quarters.

Speaker Change: Volume is expected to be the primary driver of lower sales with pricing pressure in Latin America or in Asia, our smallest secondary headwind.

Speaker Change: EBITDA guidance for the quarters between $135 million and $165 million with the decline versus prior year, primarily driven by lower sales as well as higher cost inventory carried forward from 2023.

Mark A. Douglas: EBITDA guidance for the quarter is between $135M and $165M, with the decline versus the prior year primarily driven by lower sales, as well as higher cost inventory carried forward from 2020. Taking into account the first quarter guidance that is lower than the prior year period, slide 12 provides a bridge for how we plan to achieve our full year guidance over the remaining quarters. The largest component of e-commerce growth over the second to fourth quarter period was higher sales volume of new products.

Speaker Change: Taking into account the first quarter guidance that is lower than the prior year period.

Speaker Change: Slide 12 provides a bridge for how we plan to achieve our full year guidance over the remaining quarters.

Speaker Change: The largest component of EBITDA growth over the second to fourth quarter period is highest sales volume of new products.

Speaker Change: Not only do these products have a strong track record of delivering sales and difficult market conditions, but they also contribute higher margins, which will positively impact mix.

Andrew D. Sandifer: Not only do these products have a strong track record of delivering sales in difficult market conditions, but they also contribute higher margins, which will positively impact mix. We expect NPI sales to grow by over $200 million in 2024, with the majority of the growth occurring after Q1. Market recovery in the second half will also contribute to EBITDA growth, as will benefits from our restructuring program, which will build through the year as initiatives are implemented. As you can see, we have built a plan primarily based on elements we control and are not reliant on an outsized market recovery to achieve our guidance. With that, I'll now turn the call over to Andrew. Thanks, Mark.

Speaker Change: We expect NPI sales to grow by over $200 million in 2024, but the majority of the growth occurring after Q1.

Speaker Change: Market recovery in the second half will also contribute to EBITDA growth.

Speaker Change: As we will benefit from our restructuring program, which will build through the year as initiatives are implemented.

Speaker Change: As you can see we have built a plan primarily based upon elements, we control and are not reliant on an outsized market recovery to achieve our guidance.

Speaker Change: With that I'll now turn the call over to Andrew.

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

Andrew D. Sandifer: I'll start this morning with a review of some key income statement items. FX was a 1% tailwind of revenue growth in the fourth quarter, with the strengthening of the Brazilian Rei, the Mexican Peso, and the Euro only partially offset by the weakening of the Turkish Lira. For full year 2023, FX was a 1% headwind overall, with the most significant headwinds coming from Asian and European currencies, offset in part by the strong Brazilian Rea and Mexican Peso.

Andrew: FX was a 1% tailwind to revenue growth in the fourth quarter with the strengthening of the Brazilian Reais Mexican peso and euro only partially offset by weakening of the Turkish lira.

Andrew: For full year 2023, FX was a 1% headwind overall, where the most significant headwinds coming from Asian, and European currencies offset in part by strong Brazilian real and Mexican peso.

Andrew: Looking ahead to 2024, we see continued minor FX headwinds on the horizon for.

Andrew D. Sandifer: Looking ahead to 2024, we see continued minor FX headwinds on the horizon. For the first quarter of 2024, these headwinds stem primarily from the Turkish lira and Pakistani rupee, offset in part by a strengthening euro. Interest expense for the fourth quarter was $56.7 million, up $11.9 million versus the prior year period, driven by both higher interest rates and a higher debt balance. Interest expense for full year 2023 was $237.2 million, an increase of $85.4 million versus the prior year. Substantially higher U.S. interest rates were by far the largest driver of higher interest expense for the year, with a higher balance as a secondary factor.

Andrew: For the first quarter of 2020 for these headwinds stemmed primarily from the Turkish lira and Pakistani rupee offset in part by a strengthening Europe.

Andrew: Interest expense for the fourth quarter was $56 7 million up $11 $9 million versus the prior year period, driven by both higher interest rates and higher debt balances.

Andrew: Interest expense for full year, 2023 was $237 $2 million up $85 $4 million versus the prior year.

Andrew: Substantially higher U S interest rates were by far the largest driver of higher interest expense for the year with higher balances a secondary factor.

Andrew: Looking ahead to 2024, we expect full year interest expense to be in the range of $225 million to $235 million down slightly to the prior year driven by both the expected interest rate reductions and lower borrowings as we reduced leverage through the year.

Andrew D. Sandifer: Looking ahead to 2024, we expect full-year interest expense to be in the range of $225 to $235 million, down slightly from the prior year driven by both expected interest rate reductions and lower borrowings as we reduce leverage through the year. Our effective tax rate on adjusted earnings for full year 2023 came in slightly better than anticipated, at 14.5%, given a somewhat more favorable mix of earnings across principal operating companies than expected. The fourth quarter effective tax rate of 13.3% reflects the true up to the full year rate relative to the 15% rate accrued through the third quarter.

Our effective tax rate on adjusted earnings for full year 2023 came in slightly better than anticipated at 14, 5%.

Andrew: By a somewhat more favorable mix of earnings across principal operating companies than expected.

Andrew: The fourth quarter effective tax rate of 13, 3% reflects the true up to the full year rate relative to the 15% rate accrued through the third quarter.

Andrew: As you May have noted from our earnings release schedules. There were two extraordinary events that impacted our GAAP provision for income taxes in the fourth quarter.

Andrew D. Sandifer: As you may have noted from our earnings release schedule, there were two extraordinary events that impacted our GAAP provision for income taxes in the fourth quarter. First, our Swiss subsidiaries were granted new OECD Pillar 2 compliant taxes. As a result, we recorded deferred tax benefit assets of approximately $830 million net evaluation allowances to reflect the estimated future reductions in tax associated with these incentives. These incentives will allow FMC to maintain our advantaged tax structure for at least 10 additional years, despite the implementation of Pillar 2. Second, changes in Brazilian tax law allowed us to release a long-standing valuation allowance position in Brazil, generating a tax benefit of approximately $220 million. Along with other items, this resulted in a gap income tax benefit of roughly $1.2 billion.

Andrew: First our Swiss subsidiaries were granted new OECD pillar two compliant tax incentives.

Andrew: As a result, we recorded deferred tax benefit assets of approximately $830 million net of valuation allowances to reflect the estimated future reductions in tax associated with these incentives.

Andrew: These incentives will allow FMC to maintain our advantaged tax structure for at least 10 additional years. Despite the implementation of pillar two.

Andrew: Second changes in Brazilian tax law allowed us to release, a longstanding valuation allowance position in Brazil, generating a tax benefit of approximately $220 million.

Andrew: Along with other items. This resulted in a GAAP income tax benefit of roughly $1 2 billion.

Andrew D. Sandifer: For 2024, we estimate that our tax rate should be in the range of 14 to 17%, up one percentage point versus the prior year at the midpoint. The increase in the midpoint and broader guidance range reflect uncertainty associated with changes in tax laws related to the implementation of Pillar 2 and transitionary impacts related to the new Swiss tax incentive. Moving next to the balance sheet and lever, gross debt at year-end was approximately $4 billion, down $158 million from the prior quarter.

Andrew: Our 2024, we estimate that our tax rate should be in the range of 14% to 17%.

Andrew: Up one percentage point versus the prior year at the midpoint.

Andrew: The increase in midpoint and broader guidance range reflect uncertainty associated with changes in tax laws related to the implementation of pillar two and transition impacts related to the new Swiss tax incentives.

Andrew: Moving next to the balance sheet and leverage.

Gross debt at year end was approximately $4 billion.

Andrew: Down $158 million from the prior quarter.

Andrew D. Sandifer: Gross debt to trailing 12-month EBITDA was 4.0 times at year-end, while net debt to EBITDA was 3.7 times. On a full-year average basis, gross debt to EBITDA was 3.6 times, while net debt to EBITDA was 3.2 times. Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 4.17 times as compared to a covenant of 6.5. As a reminder, our covered leverage limit was temporarily raised to 6.5 times through June 30th. It will step down to 6.0 times on September 30th and again to 5.0 times on December 31st. We expect to have ample headroom under these limits as we progress through the year, with improving leverage as we shift to positive year-on-year EBITDA comparisons mid-year and as we reduce debt through free cash flow generation and through proceeds from the anticipated divestiture of our global specialty solutions business. We expect Covenant leverage to be below 3.5 times by year end.

Andrew: Gross debt to trailing 12 month EBITDA was 4.0 times at year end.

Net debt to EBITDA was three seven times.

Andrew: On a full year average basis gross debt to EBITDA was three six times, while net debt to EBITDA was three two times.

Andrew: Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator leverage was $4 one seven times as compared to a covenant of six five times.

As a reminder, our covenant leverage limit was raised temporarily to six five times through June 30, yes.

Andrew: It will step down to six point out times at September 30, and again to five one times at December 31.

Andrew: We expect to have ample headroom under these limits as we progressed through the year with improving leverage as we shift to positive year on year EBITDA comparisons mid year and as we reduce debt through free cash flow generation and through proceeds from the anticipated divestiture of our global specialty solutions business.

We expect covenant leverage to be below three five times by year end.

Andrew: We remain committed to returning our leverage to levels consistent with our targeted triple B <unk>, two long term credit ratings or better.

Andrew D. Sandifer: We remain committed to returning our leverage to levels consistent with our targeted BBB-BAA2 long-term credit ratings or better. As I discussed at our November Investor Day, our midterm leverage target is now approximately two times net on a rolling four-quarter average basis. While we will still be meaningfully above this level at the end of 2024, we are confident that with EBITDA growth and disciplined cash management, we will reach our targeted leverage in 2025. Moving on to free cash flow on slide 13. Free cash flow is negative 525 million dollars for 2023. Adjusted cash from operations was down $960 million compared to the prior year, driven by significantly lower payables in EBITDA, offset in part by lower cash used by receivables in M&A.

Andrew: As I discussed at our November Investor Day, our midterm leverage target is now approximately two times net on a rolling four quarter average basis.

Andrew: While we will still be meaningfully above this level at the end of 2024, we're confident that with EBITDA growth and disciplined cash management and we will reach our targeted leverage in 2025.

Andrew: Moving on to free cash flow on slide 13.

Andrew: Free cash flow was negative $525 $524 million for 2023.

Andrew: Adjusted cash from operations was down $960 million compared to the prior year, driven by significantly lower payables and EBITDA offset in part by lower cash use by receivables and inventory.

Andrew D. Sandifer: Cashed interest and taxes were also headwinds to cash from operations. Capital additions and other investing activities of $144 million were up $25 million compared with the prior year, with continued spending on capacity expansion to support new active ingredient entry options. Legacy and transformation spending was essentially flat for the third year in a row after excluding one-time proceeds from the divestiture of an inactive site in 2022. Compared to our November guidance midpoint, free cash flow improved by more than $225 million, with this improvement nearly entirely due to better than anticipated net receivables. [inaudible] We are forecasting free cash flow of $400 to $600 million in 2024, a swing of more than $1 billion from 2023 performance at the midpoint of this range.

Andrew: Cash interest and taxes were also headwinds to cash from operations.

Andrew: Capital additions in other investing activities of $144 million were up $25 million compared with the prior year with continued spending on capacity expansion to support new active ingredient interaction.

Andrew: Legacy and transformation spending was essentially flat for the third year in a row. After excluding one time proceeds from the divestiture of an inactive site in 2022.

Andrew: Compared to our November guidance midpoint free cash flow improved by more than $225 million with this improvement nearly entirely due to better than anticipated net receivables performance.

Andrew: Looking ahead now to free cash flow generation and deployment for 2024 on slide 14.

Andrew: We are forecasting free cash flow of $400 million to $600 million in 2020 for a swing of more than $1 billion from 2023 performance at the midpoint of this range.

Andrew: Underlying this forecast is our expectation of adjusted cash from operations of $670 to $850 million up over $1 billion at the midpoint with the increase driven by a significant cash release from rebuilding our accounts payable and reducing inventory.

Andrew D. Sandifer: Underlying this forecast is our expectation of adjusted cash from operations of $670 to $850 million, up over $1 billion at the midpoint, with the increase driven by a significant cash release from rebuilding accounts payable and reducing inventory, partially offset by higher accounts receivables due to revenue growth and with modest improvement on other items such as cash. Capital additions of $95 to $105 million are down roughly $45 million at the midpoint as we tightly manage capital investment in light of our current leverage. That said, we continue to fund needed capacity expansion to support the introduction of new active ingredients over the next several years. Legacy and Transformation Cash Spending is expected to be between $155 and $165 million, with underlying legacy spending generally in line with prior years and with spending of approximately $75 million for our restructuring program. With this guidance, we anticipate free cash flow conversion of 104% at the midpoint for 2024. In terms of cash deployment, we expect to pay $290 million in dividends at the current rate in 2024. The remainder of free cash flow, as well as any proceeds from divestments or disposals, will be used to pay down debt.

Andrew: We offset by higher accounts receivables due to revenue growth and with modest improvement on other items such as cash interest.

Andrew: Capital additions of $95 million to $105 million of down roughly $45 million at the midpoint as we tightly managed capital investment in light of our current leverage that said, we continue to fund needed capacity expansion to support introduction of new active ingredients over the next several years.

Andrew: Legacy and transformation cash spending is expected to be between 155 and $165 million with underlying legacy spending generally in line with prior years and with spending of approximately $75 million for our restructuring program.

Andrew: With this guidance, we anticipate free cash flow conversion of 104% at the midpoint for 2024.

Andrew: In terms of cash deployment, we expect to pay $290 million in dividends at the current rate in 2024.

Andrew: The remainder of free cash flow as well as any proceeds from divestments or disposals will be used to pay down debt.

Andrew: And with that I'll hand, the call back to Mark.

Mark A. Douglas: Thanks, Andrew.

Mark A. Douglas: First quarter guidance reflects the trend of volume declines and related impacts to EBITDA that we've seen over the last three quarters the <unk>.

Mark A. Douglas: Stocking trend is expected to level off and start inflicting after the first quarter.

Mark A. Douglas: Looking more broadly at 2024, we have a plan that is based largely on elements that we control.

Mark A. Douglas: And with that, I'll hand the call back to Mark. Thanks, Andrew. Our first quarter guidance reflects the trend of volume declines and related impacts to EBITDA that we've seen over the last three quarters. The de-stocking trend is expected to level off and start increasing after the first quarter. Looking more broadly at 2024, we have a plan that is based largely on elements that we control. First, NPI sales are expected to drive revenue growth this year after already showing resilience in the prior years. We have demonstrated a history of growing this high-margin segment of our portfolio over the past several years. Hence, we are not counting solely on market growth in 2024. And second, the restructuring program we initiated last year is well underway, and this is another area in which FMC has demonstrated strong execution in the past.

Mark A. Douglas: First NPI sales are expected to drive revenue growth this year after already showing resilience in the prior years.

Mark A. Douglas: We have demonstrated a history of growing this high margin segment of our portfolio over the past several years, we have enough accounting solely on market growth in 2024.

Mark A. Douglas: And second the restructuring program, we initiated last year is well underway and this is another area in which FMC has demonstrated strong execution in the past.

Mark A. Douglas: We're also taking actions to increase visibility into inventories in the channel as well as grow our levels through a combination of system implementations and strengthening our relationship with the grower.

Mark A. Douglas: This is going to be a transition year for the crop chemicals market and we are taking the actions necessary to position ourselves to achieve our medium and longer term goals.

Mark A. Douglas: We're also taking actions to increase visibility into inventories in the channel, as well as grower levels, through a combination of system implementations and strengthening our relationship with the grower. This is going to be a transition year for the crop chemicals market, and we are taking the actions necessary to position ourselves to achieve our medium and longer-term goals. Despite the updated guidance for 2024, our outlook for 2026 has not changed.

Mark A. Douglas: Despite the updated guidance for 2020 for our outlook for 2026 has not changed while it may take well into 2024 to start to rebound from the global channel inventory reset the.

Mark A. Douglas: The drivers for our industry and business remained strong and many of the challenges we are facing this year such as working through high cost inventory are temporary.

Mark A. Douglas: The anticipated return to more normal market conditions in 'twenty, five and 'twenty six.

Mark A. Douglas: While it may take well into 2024 for the industry to start to rebound from the global channel inventory reset, the drivers for our industry and business remain strong, and many of the challenges we are facing this year, such as working through high-cost inventory, are temporary. With the anticipated return to more normal market conditions in 2025 and 2026, along with our portfolio and deep pipeline of innovative products, we see strong growth ahead. With that, we can now open the line to questions. Ladies and gentlemen, we will now begin the question and answer session. To be placed in the queue, please press the star key, then 1 on your touch-tone phone.

Mark A. Douglas: Along with our portfolio and deep pipeline of innovative products, we see strong growth ahead.

Speaker Change: With that we can now open the line for questions.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Two we placed in the queue. Please press Star then one on your Touchtone phone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing any keys.

Speaker Change: Please limit yourself to one question and one follow up if you have any additional questions you can jump back into queue.

Speaker Change: Do we dropped from the queue. Please press Star then two and at this time, we will pause momentarily to gather any questions.

Speaker Change: Okay. Our first question comes from Alex <unk> from off from Keycorp.

Alex: Your line is now open.

Speaker Change: Right.

Alex: Thanks, and good morning, everyone. Mark can you discuss your Diamide business Youre talking about policy sale singing a branded <unk>.

Unknown Executive: If you're using a speakerphone, please pick up your headset before pressing any key. Please limit yourself to one question and one follow-up. If you have any additional questions, you can jump back in the queue. To withdraw from the queue, please press star then 2.

Alex: Can you also provide update on non branded what is the situation they are in.

What is the outlook.

Unknown Executive: At this time, we will pause momentarily to gather any questions. Our first question comes from Elfky Yefremov from Key Corp. Elfky, your line is now open. Thanks, and good morning, everyone.

Mark A. Douglas: Yes, sure listen we do that deliberately because there are two very different businesses. Obviously when we've discussed this multiple times in the past our branded business continues in a very strong fashion as we talked about in November we're launching new products on a constant basis.

Aleksey Yefremov: Mark, can you discuss your dynamite business? You're talking about healthy sales and your branded dynamites. Can you also provide an update on the non-branded business? What is the situation there?

Mark A. Douglas: Especially the latest one which is perennial star in Brazil, which has done extremely well in its first quarter of launch.

Mark A. Douglas: And what is the outlook? Yeah, sure. I mean, listen, we do that deliberately because there are two very different businesses, obviously. And we've discussed this multiple times in the past. Our branded business continues in a very strong fashion, as we talked about in November, and we're launching new products on a constant basis. And especially the latest one, which is Premier Star in Brazil, which has done extremely well in its first quarter of launch. Those are the products that are really, Transcription by https://otter.ai. Thank you. And just to follow up on that, do you have visibility into the consumption of your partner's versions of diamides? Is that healthy?

Mark A. Douglas: Those are the products that are really expanding the diamide franchise. Our partners are doing exactly what we and the rest of the industry are doing which is drawing down their inventories. They did this in 2003 and the current forecast show further declines as they draw their inventories down at some point that will come to an end and we will move forward.

Mark A. Douglas: <unk> 24 from our view of where our partner revenues are look very similar to what happened in 2003, which is basically just drawing down inventories.

Speaker Change: Thank you and just a follow up on that do you have.

Speaker Change: This ability into consumption.

Speaker Change: Partners versions of <unk> is that healthy and also about pricing.

Mark A. Douglas: And also about pricing for those partner sales? Yeah, listen, it's impossible for us to talk about what they're doing with their revenue growth targets or where they're growing. We don't have insight into that. All we do is provide them either finished formulations in some cases, or, more importantly, actual technical active ingredients.

Speaker Change: Of those partner sales.

Speaker Change: Yeah listen it's impossible for us to talk about what theyre doing with their revenue growth targets, so where they're growing we don't have insight into that all we do is provide them either finished formulations in some cases or more importantly, actual technical active ingredient.

Mark A. Douglas: And don't forget, you know, a lot of our partners use these products for seed treatment applications, which is a very, very different market from us. So treat it as a separate market. We don't, we don't get involved in it.

Speaker Change: And don't forget a lot of our partners use these products for seed treatment applications, which is a very very different market from us so treat it as a separate market. We don't we don't get involved in it we provided the raw materials, that's how we think of it.

Mark A. Douglas: We provide the raw materials. That's how we think of it. Thanks, folks. Thank you.

Speaker Change: Thanks Mark.

Thank you.

Kevin W. McCarthy: Our next question comes from Kevin Mccarthy from VIP, Kevin You May proceed with your question.

Kevin W. McCarthy: The next question comes from Kevin McCarthy from VRP. Kevin, you may proceed with your question. Yes, thank you, and good morning.

Kevin W. McCarthy: Yes, Thank you and good morning, Marc in your prepared remarks, I think you mentioned that you anticipate a moderate headwind from pricing in 2024 can you kind of talk through your expectations in terms of where you're more optimistic less optimistic on <unk>.

Kevin W. McCarthy: Mark, in your prepared remarks, you mentioned that you anticipate a moderate headwind from pricing in 2024. Can you kind of talk through your expectations in terms of where you're more optimistic or less optimistic on pricing by region? And with regard to the first quarter in particular, do you think that prices will be any better or worse than the minus 5% that you posted in the fourth. Yes, certainly, Kevin.

Kevin W. McCarthy: Rising.

Kevin W. McCarthy: By region, and then with regards to the first quarter. In particular do you think that price will be any better or worse than the minus 5% that you posted in the fourth quarter.

Marc: Yes, certainly Kevin I mean first of all the dynamic this year is going to be pretty much. The reverse of last year, where we had very very strong pricing as we went through the first half of 2023, obviously as we go through this year, we're going to start to lap those price increases so the differential gets a little different.

Mark A. Douglas: I mean, first of all, the dynamic this year is going to be pretty much the reverse of last year, where we had very, very strong pricing as we went through the first half of 2023. Obviously, as we go through this year, we're going to start to lap those price increases, so the differential gets a little different. I would say, obviously, we've highlighted EMEA as a highlight for us.

Marc: I would say obviously we've highlighted.

Mark A. Douglas: It was in 2023 and will continue to be that way in 2024. North America is looking good, as well, in terms of managing price. I would say the place where we expect the most headwinds will be, no surprise to anybody, Latin America, and that's mainly in Q1. We expect that to abate as we go through the year, mainly because of that lapping of prices, as I just talked about. So, think of it as Latin America, with really Brazil as being the main area there.

Marc: EMEA as I.

Slight for US it was in 2003 continues to be that way in 2024.

Marc: North America is looking good as well in terms of managing price I would say the place where we expect.

Marc: The most headwind is no surprise to anybody who would be Latin America.

Marc: And that's mainly in Q1.

Marc: We expect that to abate as we go through the year, mainly because of that lapping at prices. We just as I just talked about so think of it as Latin America with really Brazil as being the main the main area that with regards to Q1, we talked about the pricing headwind. It is a small number in terms of percent. So I would I would say.

Mark A. Douglas: With regard to Q1, we talked about a pricing headwind. It is a small number in terms of percent, so I would suggest less than the 5% that you just mentioned. We already see that in Brazil, so that's part of what we have forecast for Q1. Okay, thank you for that.

Speaker Change: Yes, less than the 5% that you just mentioned.

Speaker Change: We already see that in Brazil. So that's part of what we are we have forecast for Q1.

Speaker Change: Okay. Thank you for that and then secondly, perhaps for Andrew can you talk about the.

Kevin W. McCarthy: And then secondly, perhaps for Andrew, can you talk about the amount of working capital that you think you can extract in 2024, including inventory. And, you know, as you draw down inventory... What impact do you think or do you expect that that will have on your earnings, if any? I imagine it creates, you know, a fixed cost absorption challenge. Is that true? And, you know, what would your guide be?

Andrew: The amount of working capital that you think you can extract in 2024, including inventory.

Andrew: And as you draw down inventory.

Andrew: What impact.

Andrew: Do you think or do you expect that that will have on your earnings.

Andrew: If any I imagine it creates.

Andrew: Fixed cost absorption challenge is that true and.

Andrew: How would you guide be be different if you werent drawing down inventory if that makes sense.

Andrew D. Sandifer: Yeah, thanks, Kevin. Sure. I think certainly, as we're looking to predict cash flow for 24, working capital, particularly accounts payable, and to a lesser degree inventory, are really the big drivers of cash release in 2024. And that's in part because of, you know, an expectation as we go through the year that we start rebalancing production and inventory. We have been intentionally throttling back pretty severely manufacturing over the past two quarters and well into Q1. We would expect to see some ramping back up in manufacturing activity as we go through Q2 and through Q4. That will help with bringing up accounts payable.

Speaker Change: Yes, Thanks, Kevin sure certainly as we're looking to free cash flow for 'twenty four.

Speaker Change: Working capital, particularly accounts payable until a lesser degree inventory are really the big drivers of cash release in 2024.

Speaker Change: And that's in part because of an expectation as we go through the year that we start rebalancing and production and inventory we have been intentionally.

Speaker Change: Idling back pretty severely manufacturing over the past two quarters and well into Q1, we would expect to see some ramping back up and manufacturing activity. As we go through Q2 through Q4 that will help with bringing up accounts payable at the same time, we're selling down from that higher levels of inventory, we have right now which include some.

Andrew D. Sandifer: At the same time, we're selling down from the higher levels of inventory we have right now, which includes some higher-cost carryover inventory from prior years. So, you know, if you look at the big contributors, it's about two-thirds accounts payable and one-thirds inventory that are the benefit from a cash flow perspective. From a P&L perspective, Q1 in particular is impacted by the carryover of higher-cost inventory from last year.

Speaker Change: Higher cost carryover inventory from prior years.

Speaker Change: So if you look at the big contributors, it's about two thirds accounts payable one thirds inventory that had the benefit from a cash flow perspective from.

Speaker Change: From a P&L perspective Q1 in particular is impacted by the carryover of higher cost inventory.

Speaker Change: From last year.

Andrew D. Sandifer: You know, as we get further into the year, we have been buying at lower costs; there are lower cost materials in inventory that we'll get to as we work it down. And then as we rebuild production, we expect that to be at or better cost than what we have in inventory right now. So this is a part of that, unfortunately, the pronounced quarterly cadence this quarter as well. Yeah, as we and I think certainly as you finish the year, you know, we'll have rebuilt reestablished a balance and a more normal balance between inventory and payables. And the inventory we will have will be at a more normalized cost base compared to current market costs. So that's, you know, the absence of that headwind going into 2025 should be a powerful tailwind as we look ahead. Got it. Thank you both.

Speaker Change: As we get further into the year, we have been buying at a lower cost there are lower cost materials and inventory that will get to as we work it down and then as we rebuild production, we expect that to be at or better cost than what we have in inventory right. Now. So this is a part of that.

Speaker Change: Ultimately that the pronounced quarterly cadence this quarter as well.

Speaker Change: And I think certainly as you finished the year, we will have rebuilt reestablished a balanced and a more normal balance between inventory and payables and the inventory. We will have we'll be at a more normalized cost base to current market costs.

Speaker Change: Yes that absence of that headwind going into 2025 should be a powerful tailwind as we look ahead.

Speaker Change: Got it thank you both.

Joel Jackson: Thank you. Our next question comes from Joel Jackson from BMO Capital Markets. Joel, your lines now. Hi, good morning, everyone.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Our next question comes from Joel Jackson from BMO Capital markets. Joe Your line is now open.

Joel Jackson: Hi, Good morning, everyone I wanted to ask a little more about the cadence of the year given Q1, you've given the full year.

Joel Jackson: There was a comment earlier in this call that you expect EBITDA contraction to turn to growth mid year.

Joel Jackson: Um, I want to ask a little more about the cadence of the year. You gave Q1, you gave the full year. There was a comment earlier on this call that you expect, you know, EBITDA contraction to turn to growth midyear. If we just take, it would seem like you would need about 30% plus growth. Transcribed by https://otter.ai. Yeah, sure, Joel. Andrew, do you want to take this one?

Joel Jackson: If we just take it would seem like you would need about 30% plus growth in the last three quarters EBITDA growth to get to your 975 midpoint I assume Q2 is going to be interesting quarter. When do you when you're exactly like what does Q2 look like still contraction.

Joel Jackson: End of the quarter, starting getting growth anything you can help to help US bridge, how we go from contraction it's back to growth would be really helpful.

Speaker Change: Yes, sure Julien Andrew do you want to take that one sure.

Andrew D. Sandifer: Sure. Look, I would put it this way. We've long said that we think that this channel inventory correction takes a full year in every market to reach sort of a bottom. We have not gotten to that full year yet. This phenomenon really started in the latter part of Q2 of 2020. Thus, Q1 revenue dropped pretty much in line with the previous three quarters where we've been going through this channeled stocking trend. So I think as we think about the trajectory for 2024, Q2 is the real transition. We expect a shift to growth in Q2. It may not be significant growth, but we do expect growth as we anniversary the initial drop that started this phenomenon. And as you pointed out, I mean, certainly in that last Q2 through Q4, our guidance implies about 16% top line growth, excuse me, 15% top line growth, and about 30, 32% bottom line growth. That starts in Q1 and Q2, where you have this inflection, and then accelerates in the second half.

Speaker Change: I would put it this way we've long said that we think that this channel inventory correction takes a full year in every market to reach sort of a bottom we have not gotten to that full year. Yet. This phenomenon really started in the latter part of Q2 of 2023, thus the strong Q1 revenue drop pretty much in line.

Speaker Change: With the previous three quarters, where we've been going through this channel Destocking trends. So I think as we think about trajectory for 2020 for Q2 is the real transition.

Speaker Change: We expect to shift to growth in 2010 in Q2.

Speaker Change: May not be significant growth, but we do expect to growth as we anniversary. The initial drop that started this phenomenon.

Speaker Change: And as you pointed out I mean, certainly in that that last week.

Speaker Change: Q2 through Q4, our guidance implies about 16% top line growth are.

Speaker Change: Excuse me, 15% topline growth and about 30%, 32% bottom line growth.

Speaker Change: That starts in Q1, and Q2, where you have this inflection and then accelerate in the second half and as Mark commented on his prepared comments, it's really driven by new product introductions, alright, and I can't emphasize enough when $200 million a year on year growth of new product introduction in a year when we're only forecasting a $115 million ish a toe.

Andrew D. Sandifer: And as Mark commented in his prepared comments, that's really driven by new product introduction. Right. And I can't emphasize enough when, you know, 200 million dollars a year on your growth in new product introduction in a year where we're only forecasting 115 million ish total revenue growth at the midpoint. It's a significant mixed benefit, and it's very much tilted in the second half.

Speaker Change: <unk> revenue growth at the midpoint, it's a significant mix benefit and it's very much tilted in the second half.

Mark A. Douglas: So I do understand it's a bit of a back-end loaded profile, but I think there is clear logic to it. In Q1, we're finishing out the first year of this channel inventory correction, getting past the anniversary of it. We have this hangover from high-cost inventory from the prior year. In Q2, we see a transition back to positive comparisons and then an acceleration in the second half driven by new product. You had a really comprehensive investor day about three months ago, and you laid out the targets of, you know, 1.3 to 1.5 billion EBITDA in 2026. I mean, you're obviously maintaining those targets right now, and I don't expect you to make major changes three months later. If it's a marathon, you know, and you're now...

Speaker Change: I do understand it's a bit of a.

Speaker Change: A very backend loaded.

Speaker Change: Profile, but I think there is a clear logic to at Q1, we're finishing out.

Speaker Change: That first.

Speaker Change: First year of this channel inventory correction getting past the anniversarying of it we have this hangover from high cost inventory from the prior year Q2, we see a transition back to positive comparisons and then an acceleration in the second half driven by new product introduction.

Speaker Change: You had a really comprehensive investor day about three months ago, and you laid out the targets of $100 112 to $1 5 billion EBITDA in 2026, I mean, youre, obviously, maintaining those targets right now.

Speaker Change: I don't expect any major changes three months later.

Speaker Change: It's a marathon and Youre now.

Mark A. Douglas: Laying 24 out there, a third of the way through the marathon, you're now at a slower pace than you would have thought. Can you talk about how you can catch up in 25 and 26 to finish the marathon and catch up at the pace you thought you would? Yeah, Joel, you know, listen. I think for us, as I said, 24 is a bit of a transition year. Yes, we did lower the full year of 24. But that's fundamentally on one thing. We finished 23 lower than we expected. It is as simple as that.

Speaker Change: <unk> 24 out there a third of the way for Merrell Marathon Youre now at a slower pace than you would've thought can you talk about how you can catch up in 'twenty five 'twenty six.

To hit the marathon a caf at the pace you thought you would.

Speaker Change: Yes.

Speaker Change: Listen I mean, I think for us as I said 20 bit of a transition year, yes, we did lower the full year of 24, but that's fundamentally on one thing.

Speaker Change: We finished 23 lower than we expected it is as simple as that the numbers just flow from the we were not going to hold the number that we felt was unrealistic just because we said it in November but we don't think thats the right way to run this business now when you look at 25 and 26, particularly 'twenty five Andrew just commented on something that's very important and I mentioned it.

Mark A. Douglas: The numbers just flow from there. We were not gonna hold a number that we thought was unrealistic just because we said it in November. We don't think that's the right way to run this business.

Mark A. Douglas: Now, when you look at 25 and 26, particularly 25, Andrew just commented on something that's very important, and I mentioned it. We have a lot of headwinds that are temporary right now that are impacting us in 2024. They will go away.

Speaker Change: We have a lot of headwinds that are temporary right now that are impacting us in 2024. They will go away first of all the high cost inventory. The biggest impact of that is Q1 gets less in Q2, and then as we go into the second half it dissipates.

Mark A. Douglas: First of all, the high cost inventory, the biggest impact of that is in Q1, gets less in Q2, and then as we go into the second half, it dissipates. We also have the benefit of the mix impact from all the new products we're selling. You know, the 200 million dollars of MPI is at above average margins for us, so that changes the mix as we go through the year.

Speaker Change: We also have the benefit of the mix impacts from all the new products, we're selling.

The $200 million of NPI is at above average margins for us so that.

Speaker Change: And changes in mix as we go through the year.

Mark A. Douglas: So you take those pieces, and then you take the restructuring plan, which is also now underway and building. We intend to have that at a $150 million run rate by the end of 25. So you take those pieces, they all build as we go through this year, that allows you to make that catch-up period as you go through 25 and 26. And then, obviously, the market itself has been unbelievably depressed over the last nine months and going into the first part of this year. That will not stay like that.

Speaker Change: So you take those pieces and then you take the restructuring plan, which is also now underway in building, we intend to have that at a $150 million run rate by the end of 'twenty five so you take those pieces. They all build as we go through this year that allows you to make that catch up period as you go through 'twenty five 'twenty six and then obviously the <unk>.

Speaker Change: Market itself market has been unbelievably depressed over the last.

Speaker Change: Nine months and going into the first part of this year that will not stay like that.

Mark A. Douglas: The market will come back. It'll grow at its normal low single-digit growth rates. Once we get into that period, we have a great tailwind going into 25. So I think we can catch up. That's why we haven't changed it.

Speaker Change: The market will come back it will grow at its normal low single digit growth rates.

Speaker Change: Once we get into that period, we have a great tailwind going into 25. So I think we catch up that's why we haven't changed it we have a view we know what we're going to be launching that as an important view for us So think of it as those elements will make up the $25 26 period.

Andrew D. Sandifer: We have a view. We know what we're going to be launching. That's an important view for us. So think of it as those elements that will make up the 25, 26 period. Joel and Andrew, I'd just add one additional comment there.

Joe It's Andrew I would just add one additional comment there we set up those goals in November we highlighted 6% to 9% revenue CAGR and a 9% to 14% EBITDA CAGR of 26 horizon.

Andrew D. Sandifer: When we set up those goals in November, we highlighted a 6% to 9% revenue CAGR and a 9% to 14% EBITDA CAGR over the 26 horizon. With the adjustment for the lower results in 2023 and the slower start in 2024, you're really only talking about increasing that by one percentage point. As we've shown in the updated slides today, a 7% to 10% top-line CAGR and a 10% to 15% bottom-line CAGR. So it's not a fundamental shift by any means in the amount of growth we were targeting and the logic this market outlined here of how we think we can deliver that. [inaudible] Vincent, your line is now open. Thank you and good morning. There was one more piece to all this that I think was just the fixed cost absorption, right? That's obviously hurting you now.

Andrew: The adjustment to the lower results in 2023, and the slower start in 2024, you're really only talking about increasing that by one percentage point.

Speaker Change: And as we've shown in the updated slides today, a 7% to 10% top line in CAC on a 10% to 15% bottom line CAGR. So it's not a fundamental shift by any means and the amount of growth we were targeting and the logic. This market outlined here of how we think we can deliver that.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Vincent Andrews from Morgan Stanley.

Vincent Stephen Andrews: Your line is now open.

Vincent Stephen Andrews: Thank you and good morning.

Vincent Stephen Andrews: One more piece to all of that I think.

With just the fixed cost absorption rates. It's obviously hurting you know when do you think youll get your plant rates back up to a level, where you'll get that.

Vincent Stephen Andrews: When do you think you'll get your plant rates back up to a level where you'll get that better fixed cost absorption, and do you have a way of quantifying that for us? Yeah, I'll take it at a high level. Vincent and Andrew, you can make a few comments. We have numerous manufacturing facilities that are built up of individual production lines or synthesis units. Those synthesis units are going up and down constantly. I would say as we enter Q2, we start to see more of those lines coming back. We already have cases today where we're out of inventory.

Vincent Stephen Andrews: Better fixed cost absorption and do you have a way of quantifying that for us.

Speaker Change: Yeah I'll take that.

Speaker Change: I'll take it at a high level. Then so then under you can make a few comments.

Speaker Change: We have numerous manufacturing facilities that a buildup of individual production lines or synthesis units those synthesis units that are coming up and down constantly.

Speaker Change: I would say as we enter Q2, we start to see more of those lines coming back we already have places today where out of inventory.

Mark A. Douglas: So we've been pushing inventory down dramatically over the last six to seven months, and you can see that in our inventory numbers. That will continue. You always have some dislocation between what sales are selling and what the demand forecast says. So we see that tension now, and that's a change for us. We haven't seen that in the last six to seven months.

Speaker Change: So we've been pushing inventory down dramatically over the last six to seven months and you can see that in our inventory numbers that will continue.

Speaker Change: You always have some dislocation between what sales is selling and what the demand forecast space. So we see that pension now and Thats a change for US we haven't seen that in the last six to seven months. So we're starting to see the signs of our inventory levels in certain key areas coming down to a point, where we know we're going to have to fire up some of those units again I expect that to happen.

Mark A. Douglas: So we're starting to see the signs of our inventory levels in certain key areas coming down to a point where we know we're gonna have to fire up some of those units again. I expect that to happen in the Q2 period. So Andrew, do you wanna talk about what impact that has as we go forward? Yeah, I think that certainly when we think about the cost impact from last year, part of that is the carryover of volume variances of fixed cost absorption. And that really hits most significantly in Q1, to a lesser degree in Q2.

Speaker Change: In the Q2 period, so Andrew do you want to talk about what impact that has as we go forward I think thats. It certainly when we think about the cost impact from last year part of that is the carryover of volume variances of fixed cost absorption and that really hits most significantly in Q1 until a lesser degree in Q2 as Mark described as we start ramping up production.

Andrew D. Sandifer: As Mark described, as we start ramping up production more broadly through the first half of the year and definitely into the second half, we'll get past that unabsorbed fixed cost headwind. But it's certainly a contributing factor to why EBITDA in Q1 is depressed more than the sales drop.

Speaker Change: More broadly through the first half of the year and definitely into the second half, we'll get past that unabsorbed fixed cost headwind, but it is certainly a contributory factor until why the EBITDA in Q1 as depressed more than the sales drop.

Speaker Change: Okay, and then if I could just ask on the raw materials.

Vincent Stephen Andrews: And then if I could just ask about the raw materials, it sounds like your comments for the year that they're going to be flat, but that seems to be a function of carrying the higher cost inventory. And I believe, Andrew, you referenced that you're currently invoicing raw materials below what you're expensing them at. So I don't know how you want to quantify it or give us a sense of it, but if raw material prices, where they are today, stayed flat as we move from this year into next year, what type of deflation benefit might be available to you once things are kind of back to fully up and running from a production perspective?

Speaker Change: It sounds like your comments for the year that theyre going to be flat, but that seems to be a function of carrying the higher cost inventory and I believe Andrew you referenced that you currently invoicing raw materials below what youre expensing them at so I don't know, how you want to quantify or give us a sense of it but if raw material prices, where they are today.

Speaker Change: Jade.

Speaker Change: Stayed flat as we move through this year into next year, what type of deflation benefit might be available to you. Once once things are coming back to fully up and running from a production perspective.

Speaker Change: Like that that I think that trend is clear and real I don't think were prepared to quantify that today.

Andrew D. Sandifer: Like Vincent, I think that trend is clear and real. I don't think we're prepared to quantify that today, because obviously it's going to depend a bit on how the rest of the year plays out. But you're absolutely correct.

Speaker Change: Obviously, it's going to depend a bit on how the rest of the year plays out, but youre absolutely correct, what we said and what we're saying we are for the materials, we're buying we're buying them at or at or below cost of what we have in inventory now so it will be a tailwind as we go through the year and will improve as we get through the year, we'll have to see how the rest of the year plays out to see what the actual.

Vincent Stephen Andrews: You know what we said and what we're saying about the materials we're buying; we are buying them at or at or below costs of what we have in it. So it will be a tailwind as we go through the year and will improve as we get through the year. We'll have to see how the rest of the year plays out to see what the actual magnitude of that tailwind is going into 25. Fair enough. Thank you very much. [inaudible] Our next question comes from Mike Harrison from Seaport Research Park. Mike, your lines now. Hi, good morning.

Speaker Change: Magnitude of that tailwind is going into 'twenty five.

Speaker Change: Okay fair enough. Thank you very much.

Speaker Change: Thanks Vincent.

Speaker Change: Our next question comes from Mike Harrison from Seaport Research Partners, Mike. Your line is now open.

Speaker Change: Yeah.

Hi, good morning.

Mike Harrison: Good morning, I was hoping that maybe you.

Mike Harrison: I was hoping that maybe you could give a little bit more color on what you're seeing with new products, maybe talk a little bit about the commercial traction that you're getting on some of the products that you introduced over the last couple of years, and maybe just remind us what new launches you're expecting in 2020. Yeah, sure, Mike. You know, we talk about this a lot because, obviously, it's a big driver of our growth. And also from our profitability standpoint. I think what we've been doing over the last few years is really a mixture of what we call product extensions, which you can see in the Diamides area. I mean, we keep talking about Premier or Star, but we need to put that in context.

Mike Harrison: Could give a little bit more color on what youre seeing with new products, maybe talk a little bit about the commercial traction that youre getting on some of the products that you introduced over the last couple of years.

Mike Harrison: And maybe just remind us what new launches you're expecting in 2024.

Speaker Change: Yes, sure Mike we talked about this a lot because obviously, it's a big driver of our growth and also from a profitability standpoint.

Speaker Change: I think what we've been doing over the last few years is really a mixture of what we call product extensions, which you've seen in the <unk> area. I mean, we keep talking about <unk>, we need to put that in context.

Mark A. Douglas: I'm not going to give you the exact number because, obviously, we have a lot of competitors listening in on the call. But in Q4 alone, we had 10s of millions of dollars of brand new business. So that's expanding the diamide franchise in key crops in Brazil, like soy.

Mike Harrison: Im not going to give you the exact number because obviously, we have a lot of competitors listening in on the call, but in Q4 alone we had tens of millions of dollars of brand new business.

Mike Harrison: So that's extending the diamide franchise in key crops in Brazil like soy.

Mark A. Douglas: So those are the types of products that are really driving the growth. When you look at the roughly $2 hundred million of New Growth in 2024, about 100 million of that is products that are launched within the year. Now, $100 million in reference, it's usually anywhere from 100 to $150 million on an annual basis.

Mike Harrison: So those are the types of products that are really driving the growth when you.

Mike Harrison: When you look at the the roughly $200 million.

Mike Harrison: Of new growth in 2020 for about $100 million of that is products that are launched within the year.

Mike Harrison: Now $100 million in restaurants, it's usually anywhere from $100 million to $150 million on an annual basis. That's what we've been tracking at so our expectations for the brand new product launches are not out of line with what we've done historically, despite how difficult the market places. So we know we can sell those new technologies, we know grows.

Mark A. Douglas: That's what we've been tracking. So our expectations for the brand new product launches are not out of line with what we've done historically, despite how difficult the market place is. So we know we can sell those new technologies; we know growers are always looking for new alternatives to combat pests. It's split pretty much across all the regions, led by Asia, and then Latin America and Europe and North America are all pretty much similar.

Mike Harrison: We're always looking for new alternatives to combat pests.

It's split pretty much across all the regions.

Mike Harrison: Led by Asia, and then Latin America, and Europe, and North America were all pretty much similar so the good news there is it's in different geographies on different crops. So we're not banking on the growth of the new products by one big hit with one molecule. That's the good news and Thats, how we like to play this.

Mark A. Douglas: So the good news is that it's in different geographies on different crops. So we're not banking on the growth of new products by one big hit with one molecule. That's the good news. And that's how we like to play this. The other one is our new fungicide, fluindipir.

Mike Harrison: The other one is really our new fungicide fluent appear that is gaining traction we launched in Brazil, we launched in Argentina, we expect that to grow considerably as we grow through this year. This is our first real entree into a market. This cold Asia soybean rust in Brazil.

Mark A. Douglas: That is gaining traction. We launched it in Brazil. We launched it in Argentina.

Mark A. Douglas: We expect that to grow considerably as we grow through this year. This is our first real entry into a market called Asia Soybean Rust in Brazil. It's a $2 billion market, give or take, and we have very little revenue there today. So that's another example of us taking a brand new product, driving it into geography and market space. All right, that's very helpful. Thank you.

Mike Harrison: $2 billion market give or take and we have very little revenue that today. So that's another example of us taking a brand new products driving it into a geography and market space.

Speaker Change: Alright, Thats very helpful. Thank you and then maybe just a little bit more detail on what youre seeing with channel inventories in India.

Mike Harrison: And then maybe just a little bit more detail on what you're seeing with channel inventories in India. Sounds like that was an issue in the fourth quarter, but also expected to kind of remain an issue as we go through 2024. Any more detail you can provide there?

Speaker Change: It sounds like that was an issue in the fourth quarter.

Speaker Change: But also expected to kind of remain an issue as we go through 2020 for any.

Speaker Change: More detail you can provide there.

Speaker Change: Yes listen channel inventories are high we are carrying high channel inventories, we are not the only ones.

Mark A. Douglas: Yeah, listen, channel inventories are high. We are carrying high channel inventories, but we are not the only ones.

Mark A. Douglas: Other people on earnings calls have highlighted India. You've had at least three years of bad monsoons, as well as low pest pressure. So there is a lot of inventory that needs to be worked through there. We'll take all of 24 and probably into 25 to work that down, depending on what the weather patterns look like. If they look good, then we may get some acceleration. If not, it's going to take a while. So you're probably going to hear us talk about India pretty much every quarter as we go through this year and certainly into early next year. I doubt we'll be the only ones talking about that either.

Speaker Change: Other people on earnings calls of highlighted India, you've had at least three years of bad monsoons as well as low pest pressure. So there is a lot of inventory that needs to be worked through that.

We will take all of 'twenty, four and probably into 'twenty five to work that down depending on what the weather patterns look like if they look good then we may get some acceleration if not it's going to take a while so you're probably going to hear us talk about India pretty much every quarter as we go through this year and certainly into early next year.

Speaker Change: We'll be the only ones talking about that either.

Mike Harrison: All right, thanks very much. Thanks, Mike. Our next question comes from Adam Samuelson from Goldman Sachs. Adam, you're live.

Speaker Change: Alright, Thank you very much.

Thanks, Mike.

Speaker Change: Our next question comes from Adam Samuelson from Goldman Sachs. Adam Your line is now open.

Speaker Change: Okay.

Adam L. Samuelson: Yes, thank you. Maybe just a bit of clarification on the assumptions for the full year on price, maybe distinguish a little bit by region because it seems like the pricing is more severe in.................. America.

Adam Samuelson: Yes. Thank you maybe just a bit of a clarification just on the assumptions for the full year on price and maybe distinguish a little bit by region because it seems like the pricing competition, it's more severe in.

Adam Samuelson: Latin America, and maybe maybe in India.

Adam L. Samuelson: Transcribed by https://otter.ai, If you think about that inflection and profitability and, kind of. Unknown Speaker How would you frame the risk if pricing didn't start? Part of that price-cost balance doesn't start. Clip

Adam Samuelson: Just how do we think about the total price cost balance.

Adam Samuelson: For this year in aggregate.

Adam Samuelson: And.

Adam Samuelson: As we think about that inflection in profitability and into 25 kind of.

Adam Samuelson: How would you frame the risk if pricing doesn't start to.

Adam Samuelson: Part of that price cost balance doesn't start to flip flip.

Adam Samuelson: Flip flip more favorably again.

Mark A. Douglas: Yeah, let me just start by giving you an overview of how we think about price volume makes around the world. And Andrew, then you can comment on the price cost element. You know, in these environments... One thing we are determined not to do is go and chase volleys, and you can see that in our margin.

Speaker Change: Yes, let me let me just start by giving you an overview of how we think about that price volume mix.

Speaker Change: Around the World and Andrew then you can comment on the price cost element.

Andrew: In these environments. One thing we are determined not to do is don't chase volume and.

Andrew: And you can see that in our margins.

Mark A. Douglas: Our margins are at roughly 22% as we finish the year. They're at industry-level highs. But you can't say that for every company out there.

Speaker Change: Margins are roughly 22% as we finish the year, they're at industry level highs.

Speaker Change: You can't say that for every company out there and.

Mark A. Douglas: And the important thing is that we're managing price very carefully, not chasing volume where there is no volume, and also managing the balance sheet. So you have to take all that into consideration when you think about FMC's strategy on price. We do take prices where we can, and we've proven that in Europe and other parts of the world. And then there are other parts, like Brazil, where it is a price-competitive market.

Speaker Change: The important thing is that we're managing price very carefully not chasing volume where there is no volume.

Speaker Change: And also managing the balance sheet.

Speaker Change: So you'll have to take all that into consideration about how do you think about FMC strategy on price.

Speaker Change: We do take price, where we can and we've proven that in Europe and other parts of the World and then there are other parts like Brazil, where it is a price competitive market now remember when we talk about our price reductions in Brazil, roughly half of that is activities. We put in place to help our customers with that high priced inventory.

Mark A. Douglas: Now, remember, when we talk about our price reductions in Brazil, roughly half of that is activities we've put in place to help our customers with their high-priced inventory. So all that price is not necessarily a price drop for the list sheets that you see. So please keep that in mind.

Speaker Change: All of that price is not necessarily a price drop for the list sheets that you see.

Speaker Change: So please keep that in mind when you think about FMC you look at the volume you look at the price and look at the margin. That's how we're managing the company and what we think that will serve us well when we come through this period as we get into the second half of the year and certainly as we accelerate through 2025, having a base for margins that are.

Mark A. Douglas: When you think about FMC, you look at the volume, you look at the price, and you look at the margin. That's how we manage the company. And you know what?

Mark A. Douglas: We think that'll serve as well when we come through this period, as we get into the second half of the year. And certainly as we accelerate through 2025, having a base for margins that are based around a solid price, and then when volume comes back, our products will grow into that volume space. We believe that's the best strategy to tackle this.

Speaker Change: Based around a solid price and then when volume comes back our products will grow into that volume space. We believe that's the best strategy to tackle this Andrew do you want to comment on the cost price piece for the year sure I think certainly on the price dynamics first quarter low to mid single digit price headwind.

Andrew D. Sandifer: Andrew, do you want to comment on the cost price piece for the year? Sure, I think certainly on the price dynamics, first quarter low to mid single-digit price headwind, heavily anchored in LATAM, a little bit in Asia. For the remainder of the year, prices are actually pretty flat. We'll be anniversary anniversary, you know, some price reductions in Q3 and Q4, as Mark described. Much of that is rebated incentives, not necessarily list price changes.

Andrew: Heavily anchored in Latam, a little bit in Asia for the remainder of the year prices are actually pretty flat.

Andrew: We will be Anniversarying, some price reduction in Q3 and Q4 as Mark described much of that is rebated incentives not necessarily less price changes.

Adam L. Samuelson: So it's the absence of headwinds as well in the second half of the year, as we see stabilizing market conditions. So for the full year, you end up with a low single-digit price headwind. Certainly, relative to cost, cost is gonna be a strong tailwind this year as we get through the full year. In Q1, no, but as we get through the full year, you know, input costs will start to turn into a tailwind as we get past the high cost of inventory. And then certainly with all the restructuring actions that we're taking, you know, that will help generate a further tailwind this year. So the net price cost relationship for the year is positive. All right, that's a really helpful caller. Thank you. Our next question comes from Steve Byrne from Bank of America. So, eat your lunch now. Yes, good morning. This is Salvator Tiano filling in for Steve.

Andrew: It's the absence of headwind as well in the second half of the year as we see stabilizing market conditions.

Andrew: For the full year, you end up with a low single digit price headwind.

Andrew: Certainly relative to cost cost going to be a strong tailwind this year as we get through the full year and the tier one no, but as we get through the full year.

Andrew: <unk> costs will start to turn to a tailwind as we get past.

Andrew: The high cost of inventory and then certainly with all the restructuring actions that we're taking that will help generate a further tailwind this year.

Andrew: The net price cost relationship for the year is positive.

Speaker Change: Alright, Thats really helpful color I'll pass it on thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Steve Byrne from Bank of America, Steve Your line is now.

Tiano: Yes. Good morning, this solid start tiano filling in for Steve.

Stephen Byrne: So firstly, I wanted to touch base again on kind of the Q2 to Q4 assumption. So, as you said before, you're kind of assuming a 15% increase in revenue after Q1 of your year. And even if we think about the Flatish Prize you just mentioned and most of the NPI benefits coming there, it still looks to me that you're assuming a double-digit volume increase on the legacy business. Is that correct? Are there any other components I'm missing?

Tiano: So firstly I wanted to touch base again on kind of a Q2 to Q4 assumptions.

Tiano: So as you said before you're kind of assuming a 15% increase in revenue.

Tiano: <unk> Q1 year over year, and even if we think about the flattish surprises you would just mentioned that most of the NPI benefits coming there.

Tiano: Looks to me that you're assuming probably double digit.

Tiano: Volume increase on the legacy on the legacy business.

Tiano: Is that correct or are there any components on leasing and what would drive such a strong growth versus I guess your expectations for for the market being down a little bit overall, how would you outgrow the market, excluding the NPI, which is the type of organization.

Stephen Byrne: And what would drive such strong growth versus, I guess, your expectations for the market being down a little bit overall? How would you outgrow the market, excluding the NPIs, which I took out of the equation? Andrew, do you want to take it?

Tiano: Andrew do you want to take it sure look I think.

Andrew D. Sandifer: Sure. Look, as Sal and I have talked about, we're expecting pretty strong growth for new products in the second half. The first half is down across the board, so that growth from Q2 to Q4 is stronger than full year growth. So there is growth in the core portfolio, absolutely, but probably more like high single digits rather than mid-teens.

Andrew: So as we've talked about we're expecting pretty strong growth from new products in the second half.

Andrew: The first half is down across the board so that growth from Q2 to Q4 is stronger than the full year growth.

Andrew: So there is growth in the core portfolio, absolutely probably more like high single digits, rather than mid teens.

Andrew D. Sandifer: A little stronger growth from new products in that Q2 to Q4 time horizon. I think we have to be a little bit careful with the percentages here. We had a major market reset in 2023, and as the channel starts to settle out and normalize on inventory, the dollar amounts we're talking about in terms of incremental growth are not egregious by any means. But when you think about the dollar growth that that would imply for our core portfolio, and a core portfolio that's performed pretty strongly historically. So I think we think that's a pretty reasonable balance. But again, that strong base and that strong driving in the new products is what really helps reinforce the acceleration and the leverage to the bottom line in Q2 to Q4. Okay, perfect.

Andrew: Stronger growth from new products in that Q2 to Q4 time horizon I think we have to be a little bit careful with percentages here, we've had a major market reset in 2023 and as the channel starts to settle out normalize on inventory. The dollar amounts we're talking about in terms of incremental growth.

Andrew: Our not egregious by any means when you think about the dollar growth that would imply for our core portfolio.

Andrew: In our core portfolio that has performed pretty strongly historically so.

Andrew: I think we think that's a pretty reasonable balance, but again that strong.

Andrew: Based on that strong driving in the new products is about really helps reinforce the acceleration and the leverage to the bottom line in Q2 through Q4.

Andrew: Yeah.

Speaker Change: Okay, perfect and I wanted also to check on.

Stephen Byrne: And I wanted also to check on what you mentioned before about the non-brand diamides. I'm just wondering, so the idea of having partners was to kind of extend the, you sign agreements, and you extend kind of your protections here as you prevent them from competing with you directly at some point. But you mentioned that it's a separate business; you have no visibility into what they do. I'm not really sure why wouldn't you try to, from the start, have an idea of what they sell through or how much they sell on the market? And do you have any plans to start understanding them better or request from them more information so you can figure out what's the overall dynamite consumption in the channel? Yeah, I mean, listen; it's a very valid question.

Speaker Change: On what you mentioned before about the non branded dynamite.

Speaker Change: I'm just wondering so the idea of having partners was to kind of expand there you signed agreements and you expand kind of your protection heroes you can prevent them from competing with you directly at some point.

Speaker Change: But you mentioned, but it's a separate business you have no visibility into what they do.

Speaker Change: I'm not really sure.

Why wouldn't you try to from the start have an idea of what their sell through or how much.

Speaker Change: We sell in the market and do you have any plans to start understanding better or request from them more information. So you can figure it out.

Speaker Change: What's kind of the overall diamide consumption.

Speaker Change: In the channel.

Speaker Change: Yes.

Speaker Change: It's a very valid question, you've got to remember that they are selling products still into the marketplace from their inventory when not replenishing their inventory because they are not buying it.

Mark A. Douglas: You've got to remember that they're selling products still into the marketplace from their inventory. We're not replenishing their inventory because they're not buying. It's exactly what we do with our suppliers and what our customers are doing to us. A big piece of their market is C-tree. Do not underestimate how much volume of the diamides goes into treating seeds around the world. It's a large volume. They also operate in markets that we don't necessarily have access to, whether it's on a geographic basis or a crop basis.

Speaker Change: Exactly what we're doing with our supply is and what our customers are doing to us.

Speaker Change: A big piece of the market is C treatment.

Speaker Change: Do not underestimate how much volume of the dialogues goes into treating seats around the world. It's a large volume.

Speaker Change: They also operate in markets that we don't necessarily have access to whether it's on a geographic basis or a crop basis. So once again. This is a 70 plus billion dollar market for pesticides that is highly fragmented. It is not unusual for us not to know where those products are going however, what we do know is.

Mark A. Douglas: So, once again, this is a 70-plus billion dollar market for pesticides that is highly fragmented. It is not unusual for us not to know where those products are going. However, what we do know is that where they see a utility for diomides, they're using FMC's technology. And that's what's important to us. So we think about it in that way.

Speaker Change: Where they see a utility for Diamide theyre using fmc's technology, and that's what's important to us. So we think about it in that way.

Speaker Change: I think the other thing you've got to remember is we're talking about where the forecast currently sit.

Mark A. Douglas: I think the other thing you've got to remember is we're talking about where the forecasts currently sit. Forecasts can change and frequently do, as they did last year.

Speaker Change: Forecast can change and frequently do they did last year.

Mark A. Douglas: The forecasts that the partners put in place in January are very different to what it looked like in September. We could well see a difference in their September forecasts or their August forecasts than what it is today. So we'll see. For us, the partners are very valuable. They've worked extremely well since we bought the assets way back in 2017, and they will continue to work well. They are just going through the same phenomena that we are. Thank you very much.

Speaker Change: The forecasts the partners put in place in January was very different to what it looked like in September we could well see a difference in their September forecasts. Although this forecast of what it is today. So we will see for us the partners.

Speaker Change: Very valuable they've worked extremely well since we bought the assets way back in 2017, and they will continue to work well. They are just going through the same phenomena that we have.

Speaker Change: Thank you very much.

Brian Michael Wright: Thank you. Our next question comes from Brian Wright from RothEck MKM. Brian, your line is now. Thanks. Good morning.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Brian Wright from Roth.

Stephen Byrne: Brian Your line is now open.

Stephen Byrne: Alright. Thanks, Good morning could you give us a little bit of an update on the <unk> outlook.

Mark A. Douglas: Could you give us a little bit of an update on the planned health outlook and as far as that reflects for 2024? Yeah, absolutely. Plant Health was down in 2023, mainly because of the segments that we're in. We have a big exposure to one particular segment in Brazil that was down. We have had growth in other parts of the world. We see Plant Health coming back to its more normal growth rates in 2024. And those growth rates are high teens, low 20s, and with the biological component, somewhat higher than that.

Stephen Byrne: As far as that reflects for 2024.

Yes, absolutely.

Stephen Byrne: Plant health was down in 2023, mainly because of the segments that we're in we have a big exposure to one particular segment in Brazil that was down.

Speaker Change: Had growth in other parts of the World, We see plant health coming back towards more normal growth rates in 2024, and those growth rates are high teens, low <unk> and with the biologicals component.

Speaker Change: Higher than that so you should expect the see the plant health business back to its normal cadence.

Mark A. Douglas: So you should expect to see the Plant Health business back to its normal cadence. We're also doing what we said we would do on Investor Day. We're investing in new business models for this business. And despite all the changes we're making, we have carved out the ability to create a new business model in Brazil for the Plant Health business.

Speaker Change: We're also doing what we said we would do in an.

Speaker Change: In our Investor day, we're investing in new business models for this business. Despite all the changes we're making we have carved out the ability to create a new business model in Brazil for the plant health business. So we're going to be very interested in seeing how they.

Mark A. Douglas: So we're going to be very interested in seeing how a purely dedicated Plant Health business starts to perform once it gets its breadth of portfolio, which it does today. So expect very good growth in 2024 for Plant Health. Our next question comes from Lawrence Alexander from Jeff. Lawrence, your line is now open. Good morning.

Speaker Change: <unk> dedicated plant health business starts to perform once it gets its breadth of portfolio, which is doing today. So I expect it to be very good growth in 2020 for plant health.

Speaker Change: Our next question comes from Laurence Alexander from Jefferies. Laurence Your line is now open.

Laurence Alexander: Good morning.

Laurence Alexander: Just given the controversy around dye mines, can you characterize how dye mine margins are performing compared to the overall business? And secondly, in the rebound in the back half of the year, do you expect a new product, including diamides, to rebound faster or slower than the average business? And then lastly, I just can't help it because you mentioned C-treatment. How large is C-treatment roughly as a percentage of global diamide volume

Laurence Alexander: Just given the controversy around the Rmi can you characterize how <unk> margins are performing compared to the overall business.

Laurence Alexander: And secondly in the rebound in the back half of the year or do you expect the new products.

Laurence Alexander: Including diamide to rebound faster or slower than the average business.

Laurence Alexander: And then lastly, I just can't help it because you mentioned the seed treatment. How large is the treatment roughly as a percentage of global Diamide volume is it like 10% to 20%.

Mark A. Douglas: Is it like 10 to 20 percent? Yeah, we don't, that last bit we don't break out Lawrence. I don't know what controversy you're talking about about the diamides.

Yes, we don't we don't.

Speaker Change: But we don't breakout Laurence.

Speaker Change: I don't know what controversy you're talking about about the dialogues we love the business.

Mark A. Douglas: We love the business. Higher margins than normal, in general, have been since we bought the business and will continue to be so. Margin profile is very strong.

Speaker Change: Higher margins than normal in general.

Speaker Change: Have been since we bought the business continue to be so margin profile very strong I would expect so I think it was the middle part of your question that as the Diamide continue we will see what happens with our India business as we go through all the channel inventory work that may be a drag.

Mark A. Douglas: I would expect, I think it was the middle part of your question, that as the diamides continue, we'll see what happens with our India business as we go through all the channel inventory work. That may be a drag. Partners, we've already said, are going to be lower. The rest of the branded we'll see as we accelerate through the year.

Speaker Change: Partners. We've already said he is going to be lower the rest of the branded we'll see as we accelerate through the year, the new product introductions will definitely be faster growth than the rest.

Mark A. Douglas: The new product introductions will definitely be faster growth than the rest. That's how we see the business. It's a strong franchise, has been since we've owned it, and it continues to be. Our next question comes from Arun Viswanathan from RBC Capital. Arun, your line is now open.

Speaker Change: That's how we see the business. It's a strong franchise has been since we've owned it and it continues to be.

Speaker Change: Our next question comes from Aaron <unk> from RBC capital.

Aaron: Your line is now open.

Arun Viswanathan: Great, thanks for taking my question. Apologies if I missed this. But maybe I'll just ask the question on the longer term outlook. So you did reiterate the rolling three-year forward view, which, you know, maybe you can just kind of flesh out how you're thinking about 25 as well. So is it, you know, kind of 975 or so for 24 growing to about 1.2 billion of EBITDA in 25. And then that gets you to the 1.4 midpoint in 26.

Aaron: Great. Thanks for taking my question I apologize if I missed this but maybe I'll just ask a question on the longer term outlook. So.

You did reiterate the rolling three year forward.

Aaron: You.

Aaron: Which you know maybe you can just kind of flesh out how you are thinking about 25 as well so is it.

Aaron: You know kind of 975 or so for for 24 growing to about $1 2 million of EBITDA and 25, and then that gets you to the one four midpoint in 'twenty six.

Mark A. Douglas: And is that 25% growth really that $150 million of run rate savings and then, you know, maybe exiting the year in a more normal environment in Brazil? How are you thinking about kind of that, that longer medium and longer term outlook at this point? Thanks. Yeah, Arun, listen. I'm not going to guide 25% in February.

Aaron: And is that 25 growth really that $150 million run rate savings and then you know maybe exiting the year in a more normal environment in Brazil.

Speaker Change: How are you thinking about kind of that that longer medium and longer term outlook at this point. Thanks.

Speaker Change: Yeah, listen I'm, not going to guide 25%.

Speaker Change: In February.

Mark A. Douglas: I can tell you that the growth that we see is related to new product introductions, and more normal market growth on the top line. We will then see the benefit of our restructuring program hit the bottom line and the absence of all the headwinds that we're seeing today. Those will reverse and will obviously contribute to the growth in EBITDA next year. Andrew, do you want to give any more color?

Speaker Change: I can tell you that the growth that we see is related to new product introductions more normal market growth of the top line.

Speaker Change: We will then see the benefit of our restructuring program hit the Bottomline.

Speaker Change: The absence of all the headwinds that we're seeing today those will reverse and will obviously contribute to the growth in EBITDA next year, Andrew do you want to give any more color. Yeah look I think March right. It's a little early to guide 25, specifically, but in terms of shape of the curve.

Andrew D. Sandifer: Yeah, look, I think Mark's right. It's a little early to guide 25 specifically, but in terms of the shape of the curve, you know, we've always expected 25 to be a big acceleration. You pointed to some of the factors that compound that in terms of the restructuring benefits, as well as, you know, coming out from under the higher-cost inventory that we have right now and in our inventory, but with then still continuing very strong growth in 2026. So that's how I describe the general shape of the curve at this point. You know, a pretty big step up in 25 and continued strong growth in 26. Our next question comes from Andrew Keches from Barclays. Andrew, your line is now open.

Andrew: We expect the 25 was a big acceleration.

Andrew: Wanted to some of the factors that compound that in terms of the restructuring benefits as well as coming out from under the higher cost inventory that we have right now.

Andrew: And our inventory, but then still continued very strong growth in 2026.

Andrew: So that's how I'd describe the general shape of the curve at this point pretty big step up in 'twenty, five and continued strong growth in 2006.

Our next question comes from Andrew <unk> from Barclays. Andrew Your line is now open.

Andrew Michael Keches: Yeah, thank you. Andrew, can you just talk about the seasonality of cash flow, particularly in the early part of the year? Typically, that's a pretty large seasonal draw. So any high-level thoughts on the magnitude of that relative to historical patterns? And then, the follow-up would just be, can you clarify? I think you said that the covenant leverage would end this year below three and a half. It stood out to me because Covenant Leverage is typically above the simple net debt to EBITDA, so does that include already the assumption about a divestiture of GSP? Great. Thanks, Andrew. Sure. Let me let me hit those questions.

Andrew: Yes. Thank you.

Andrew: Andrew can you just talk about the seasonality of cash flow, particularly in the early part of the year typically thats, a pretty large seasonal draw so.

Andrew: Any high level thoughts on the magnitude of that relative to historical patterns and then.

Andrew: The follow up would just be can you clarify I think you said that the covenant leverage would end this year below three and a half which stood out to me because covenant leverage is typically above the simple net debt to EBITDA. So does that include already the assumption about a divestiture of GSS.

Speaker Change: Great. Thanks, sure. Let me, let me hit those questions I think in terms of seasonality of cash flow. This year, we expect a very different profile for cash flow seasonally this year, we would normally have a large working capital build in Q1 driven by inventory build.

Andrew D. Sandifer: I think in terms of seasonality of cash flow this year, we expect a very different profile for cash flow seasonally this year. We would normally have a large working capital build in Q1 driven by inventory build. As you're painfully aware, we have plenty of inventory at the moment.

Speaker Change: We are painfully aware, we have plenty of inventory at the moment.

Andrew D. Sandifer: So we would expect a much more limited working capital build in Q1. Hence a much more limited negative free cash flow in Q1, which is a big part of helping us move forward on deleveraging quickly. I think through the rest of the year you're going to see a little more acceleration as we go through the year. We are typically free cash flow heavy in the second half and Q4 in particular, but certainly the historic large outflow in Q1 should not be repeated this year. In terms of your question on covenant leverage, yes, we are assuming covenant leverage of less than 3.5 times.

Speaker Change: So we would expect a much more limited working capital build in Q1, so a much more limited negative free cash flow in Q1, which is a big part of helping US move forward on deleveraging quickly I think through the rest of the year youre going to see it a little more.

Speaker Change: The acceleration as we go through the year, we are typically free cash flow heading in the second half in Q4 in particular, but certainly the historic large outflow in Q1 should not be repeated this year.

Speaker Change: To your question on Covenant leverage yes, we are and we are assuming that covenant leverage at less than three five times that is assuming that we close our divestiture of the GSS business at some point in the second half.

Andrew D. Sandifer: That is assuming that we close a divestiture of the GSS business at some point in the second half. You know, that process is just getting launched. As Mark noted, we've finished preparations. We're getting prepared to go to market formally with that property. We had a lot of expressions of interest in it. So we'll run through that process and continue to update as we move forward. But, yes, to get under the 3.5 covenant leverage, we do need to have proceeds from the GSS divestiture.

Speaker Change: That process is just getting launched as Mark as Mark noted. We finished preparations are getting prepared to go to market, formerly with that with that property. We had a lot of expression of interest in it. So we'll run through that process and continue to update as we move forward, but yes to get under to three and a half covenant leverage we do need to have proceeds from that GSS debt.

Speaker Change: Divestiture.

Speaker Change: Our next question comes from Richard <unk> from Wells Fargo. Richard You May proceed with your question.

Andrew D. Sandifer: Our next question comes from Richard Garchitorena from Wells Fargo. Richard, please proceed with your question. Great, thank you.

Speaker Change: Okay.

Richard: Great. Thank you.

Just wanted to touch on the new measures that you've implemented.

Richard Garchitorena: Just wanted to touch on the new measures that you implemented. I was just wondering if you've gotten some early lessons from that so far, are you seeing any change in how distributors manage their own inventories? And have you had any thoughts in terms of how you manage your own inventories and then your own supply chain going forward? Yeah, thanks, Richard.

Richard: To increase the visibility into the channel inventories.

Richard: I was just wondering if you're causing some early lessons from that so far.

Richard: Are you seeing any change in how distributors manage their own inventories and and have you had any.

Richard: In terms of how you manage your own inventories and then your own supply chain going forward. Thank you.

Speaker Change: Yes, Thanks, Richard Yes, we have seen already some insights into how distribution is thinking of managing its own supply chain and clearly distribution is lowering its inventory levels.

Mark A. Douglas: Yes, we have already seen some insights into how distribution is thinking of managing its own supply chain. And clearly, distribution is lowering its inventory levels. You would expect that to happen.

Speaker Change: You would expect that to happen. The good news is some of the insights we already have and in certain parts of the world like the U S, which we think is probably the furthest advanced at the grower level and at the retailer level inventory is probably at or maybe even below normal levels. So it's going to be interesting as we really rolling to the U S season studying.

Mark A. Douglas: The good news is some of the insights we already have in, in, certain parts of the world, like the US, which we think is probably the furthest advanced at the grower level. And at the retailer level, inventory is probably at or maybe even below normal levels. So it's going to be interesting as we really roll into the US season starting in a month or so's time, how that really unfolds. The rest of the pieces have been put in place. I do expect Europe to have a much better view. The survey we've put in place is pretty comprehensive. And we're really entering the European seasons; Q1 and Q2 are the big growth areas for Europe. So I'm very interested once we get through to the end of Q2. What does that survey tell us when we get to the end of the season? As I said, it's very comprehensive. It includes hundreds of different retailers and, more importantly, growers throughout Europe.

Speaker Change: In a month or so as Todd how that really unfolds.

Speaker Change: The rest of the pieces have been put in place.

Speaker Change: I do expect Europe to have a much better view. The survey we've put in place is pretty comprehensive and we are really entering the European seasons, Q1, and Q2 of the big growth areas for Europe. So I'm very interested once we get through to the end of Q2, what does that survey tell us when we get to the end of the season.

Speaker Change: As I said, it's very comprehensive it's hundreds of different retailers and more importantly grow as throughout Europe. So we'll get a good view of that.

Mark A. Douglas: So we'll get a good view there. We currently have no further questions, and that concludes today's FMC Corporation conference call. Ladies and gentlemen, thank you for joining us. You may now disconnect your line. Thank you, www.microsoft.com.ca

Speaker Change: We currently have no further questions and that concludes today's FMC Corporation conference call, Ladies and gentlemen, Thank you for joining you may now disconnect your lines.

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