Q1 2024 FMC Corp Earnings Call

Unknown Executive: All of the information that you may have heard during today's conference call is provided on our website.

Provided on our website with that I'll turn the call over to Mark.

Unknown Executive: Thank you, Kurt. Good morning, everyone. Our Q1 results are detailed on slides 3, 4 and 5. We delivered a solid first quarter with EBITDA at the higher end of our guidance range and excellent improvement in cash generation. First quarter revenue declined 32% versus the prior year period, and volume declined by 27% in line with the magnitude we've observed in the prior three quarters.

Mark: Thank you Curt and good morning, everyone.

Mark: Our Q1 results are detailed on slides three four and five.

Mark: We delivered a solid first quarter with EBITDA at the higher end of our guidance range and excellent improvement in cash generation.

Mark: First quarter revenue declined 32% versus the prior year period volume declined by 27% in line with the magnitude we've observed in the prior three quarters.

Unknown Executive: The volume reduction was driven by continued channel destocking and is consistent with the change in grower behavior to delay purchases until closer to the timing of application. Market conditions were largely as we anticipated, and if not for some negotiated returns in Argentina, first quarter sales would have been in the lower end of our guidance range. We delivered EBITDA at the high end of our guidance range and earnings per share above the midpoint of guidance. In addition, we reported a very significant improvement in free cash flow versus the prior year period.

Mark: The volume reduction was driven by continued channel Destocking and is consistent with the changing grow behavior to delay purchases until closer to the timing of application.

Mark: Market conditions were largely as we anticipated and if not for some negotiated returns in Argentina first quarter sales would have been in the lower end of our guidance range.

Mark: We delivered EBITDA in the high end of our guidance range and earnings per share above the midpoint of guidance.

Mark: In addition, we reported a very significant improvement in free cash flow versus the prior year period.

Unknown Executive: Our earnings benefitted from restructuring actions, and we still expect to deliver the targeted savings net of inflation of $50 million to $75 million this year. Slide 4 provides detail on our sales at a regional level. North America sales declined 48% due to lower volume against a record prior year period, while price was essentially flat. New products introduced in the last five years, or NPI, showed greater resilience versus the rest of the region's portfolio, with strong growth in fungicides, including Zyway, which is based on Flutrifol, and Adastrio, which is based on our newly launched active ingredient, Fluindafir.

Mark: Our earnings benefited from restructuring actions and we still expect to deliver the targeted savings net of inflation of $50 million to $75 million. This year.

Mark: Yeah.

Mark: Slide four provides detail on our sales at a regional level.

Mark: North America sales declined 48% due to lower volume against a record prior year period.

Mark: Price was essentially flat.

Mark: Products introduced in the last five years or NPI showed greater resilience versus the rest of the regions portfolio with strong growth in fungicides, including XI away, which is based on fluid trifle and industrial which is based on our newly launched active ingredient fluent appear.

Unknown Executive: Turning to Latin America, sales were down 20%, a decline of 22% excluding FX. Volume was lower in most countries and included negotiated returns in Argentina, resulting from a change in the distribution relationship. LATAM reported the least volume decline of our four regions.

Mark: Turning to Latin America sales were down 20% a decline of 22% excluding FX volume was lower in most countries and included negotiated returns in Argentina, resulting from a change in the distribution relationship.

Mark: Latam reported the least volume decline of our four regions our differentiated products in the portfolio performed well branded <unk> grew double digits aided by the recently launched premium star insecticide and continued growth of our <unk> brands.

Unknown Executive: Our differentiated products in the portfolio performed well. Branded diamides grew double digits, aided by the recently launched Premier Star insecticide and continued growth of our Siazapyr brand. New products reported strong growth, including sales of Onsuva fungicide, which is based on fluindipyr. However, sales in Asia declined 29%, 28% lower excluding FX. Reduced volume was the primary driver, with the most significant downturn in China driven by poor weather. Channel destocking continues in India, although dry weather limited the application.

Mark: New products reported strong growth, including sales of on Suva, fungicide, which is based on fluid appear.

Mark: Sales in Asia declined, 29%, 28% lower excluding FX.

Mark: Reduced volume was the primary driver with the most significant downturn in China driven by poor weather.

Mark: India Channel Destocking continues although dry weather limited applications.

Mark: Pricing pressure was in the high single digits.

Unknown Executive: Although pricing pressure was in the high single digits, NPI sales were essentially flat to the prior year and outperformed the rest of the portfolio, including sales in Australia of the Overwatch herbicide based on ice. EMEA sales were 20% lower than the prior year period, a decline of 17%, excluding FX. Driven primarily by volume, including headwinds from registration removals and rationalization of lower margin products and poor weather in the UK and Northern Europe. We did grow volume in other parts of Europe, most notably France, Poland, Italy, and Spain. A moderate FX headwind was partially offset by a low single-digit price increase. Adjusted EBITDA declined by 56% primarily due to volume and, to a lesser degree, price.

Mark: NPI sales were essentially flat to prior year and outperformed the rest of the portfolio.

Mark: Including sales in Australia of Overwatch herbicide based on ISO.

Mark: EMEA sales were 20% lower than the prior year period, a decline of 17%, excluding FX driven primarily by volume, including headwinds from registration removals and rationalization of lower margin products and poor weather in the U K and northern Europe.

Mark: We did grow volume in other parts of Europe, most notably, France, Poland, Italy and Spain.

Mark: A moderate FX headwind was partially offset by low single digit price increases.

Mark: Adjusted EBITDA declined by 56%, primarily due to volume and to a lesser degree price.

Unknown Executive: Costs were favorable with significant contributions from our restructuring in action, and lower input costs more than offset other COGS headwinds. Slide 6 includes further detail on our Restructuring Act. We're making strong progress and will continue to transform our operating model, including how we are organized, where we operate, and the way we work. We've moved quickly to right-size our organization and remain diligent in our cost controls and reduce indirect spend. These changes have been made without sacrificing strategic investment in areas such as plant health and our R&D pipeline.

Mark: Costs were favorable with significant contributions from our restructuring actions.

Mark: And lower input costs more than offset other cogs headwinds.

Mark: Slide six includes further detail on our restructuring actions were.

Mark: We're making strong progress and we will continue to transform our operating model, including how we are organized where we operate and the way we work.

Mark: We've moved quickly to right size, our organization and remain diligent in our cost controls and reduce it in direct spend.

Mark: These changes have been made without sacrificing strategic investment in areas, such as plant health and our R&D pipeline.

Unknown Executive: Restructuring provided significant year-on-year savings in the first quarter. As the year progresses, our prior year comparisons will include cost actions taken in 2023 to limit spending. This resulted in an outsized cost saving versus Q1 of the prior year, compared to what we expect will be reflected in Q2 through Q4. We are tracking to deliver cost savings within our $50 million to $75 million dollar range in 2024, net of any inflation impacts to our operating costs.

Mark: Restructuring provided significant year on year savings in the first quarter as the year progresses.

Our year comparisons will include cost actions taken in 2023 to limit spending.

Unknown Executive: This resulted in an outsized cost saving versus Q1 in the prior year compared to what we expect will be reflected in Q2 through Q4.

Mark: We are tracking to deliver cost savings within our $50 million to $75 million range in 2024 net of any inflation impacts to our operating costs.

Unknown Executive: We continue to anticipate $150 million of run rate savings to be realized by the end of 2025. The sale of our Global Specialty Solutions business is progressing well. We're now in the second round of the robust bid process.

Unknown Executive: We continue to anticipate $150 million of run rate savings to be realized by the end of 2025.

Unknown Executive: The sale of our global specialty solutions business is progressing well.

Unknown Executive: In the second round of a robust bid process that.

Unknown Executive: There has been significant interest from a mix of both strategic buyers and financial sponsors. We expect the sale of this business to be completed towards the end of the year. Slides 7 and 8 cover FMC's Q2 and Full Year Earnings Outlook. Our Full Year Outlook remains unchanged. The fundamentals of our business are strong.

Unknown Executive: That has been significant interest from a mix of both strategic buyers and financial sponsors.

Unknown Executive: We expect the sale of this business to be completed towards the end of the year.

Unknown Executive: Slide seven and eight cover Fmc's Q2, and full year earnings outlook, our full year outlook remains unchanged.

Unknown Executive: The fundamentals of our business are strong grower incomes have come down from peak levels, but remained positive in most countries.

Unknown Executive: Grower incomes have come down from peak levels but remain positive in most countries. Generally speaking, weather has been favorable in many countries, which has led to steady application of products on the ground. Overall, we see a healthy ag industry.

Unknown Executive: Generally speaking, whether it's been favorable in many countries, which has led to steady application of products on the ground overall, we see a healthy industry.

Unknown Executive: Data from third parties, as well as input from our commercial teams, shows that the inventory reduction actions in the channel are making good progress. However, on a regional basis, the pace of destocking is varied. We see North America furthest along, with inventories at the retail and grower level back to normal, while distributors are still working to reduce their levels of inventory. EMEA is in a similar condition, except in countries hit by unfavourable weather.

Unknown Executive: Data from third parties as well as input from our commercial teams shows that the inventory reduction actions in the channel are making good progress.

Unknown Executive: On a regional basis the pace of Destocking is varied we see North America furthest along with inventories at the retail and grow our level back to normal while distributions are still working to reduce the level of inventory.

Unknown Executive: EMEA is in a similar condition accepting countries hit by unfavorable weather.

Unknown Executive: In both these geographies, our customers are now targeting to operate with inventories at lower than normal levels. In Latin America, inventories are materially lower and are expected to trend towards more normal levels as we move through the rest of the year. We expect India's de-stocking to persist well into 2025, but parts of Asia, such as ASEAN and Pakistan, have made strong progress in de-stocking in Q1. While these activities continue to run their course, we're encouraged by the first signs that customers are starting to return to historical order patterns. In North America, we continue to receive orders for products that will be used early in the current season, which indicates that our inventories of such products have now been depleted.

Unknown Executive: And both these geographies our customers are now targeting to operate with inventories at lower than normal levels.

Unknown Executive: In Latin America inventories are materially lower and are expected to trend towards more normal levels as we move through the rest of the year.

Unknown Executive: We expect India destocking to persist well into 2025, but parts of Asia, such as ASEAN in Pakistan have made strong progress in Destocking in Q1.

Unknown Executive: While these activities continue to run that course, we're encouraged by the first signs that customers are starting to return to historical order patterns and.

Unknown Executive: North America, we continue to receive orders for products that will be used early in the currencies, which indicates that the inventories of such products have now been depleted.

Unknown Executive: In Brazil, customers are now discussing next season's volumes, providing visibility that we did not have last year. Our full-year outlook assumes that the market improves as the year progresses, but customers will seek to hold lower levels of inventory. We are forecasting our second quarter results to be similar to the prior year. Sales are expected to be between $1 billion and $1.15 billion, which represents a year-on-year growth of 6% at the midpoint, driven by higher volume.

Unknown Executive: In Brazil customers are now discussing next season's volumes, providing visibility that we did not have last year.

Unknown Executive: Our full year outlook assumes that the market improves as the year progresses, but the customers will seek to hold lower levels of inventory.

Unknown Executive: We are forecasting a second quarter results to be similar to the prior year.

Unknown Executive: Sales are expected to be between 1 billion and $1 one 5 billion.

Unknown Executive: Which represents a year on year growth of 6% at the midpoint driven by higher volume.

Unknown Executive: This is the first quarter during which we expect to report an improvement in year-over-year volume since the start of global de-stocking. Price is anticipated to be a headwind in the low to mid single digits, and the FX outlook is neutral. Our outlook assumes customers continue to reduce and maintain inventory levels in many countries, with a significant amount of the volume growth we're forecasting in the quarter coming from new products. These include Corrigan Evo insecticide in Argentina and the U.S., Premio Star insecticide in Brazil, Adastria fungicide in the U.S., and Jordi Fungicide in Germany.

Unknown Executive: This is the first quarter during which we expect to report an improvement in year over year volume since the start of global Destocking.

Unknown Executive: Prices are anticipated to be a headwind in the low to mid single digits and the FX outlook is neutral.

Unknown Executive: Our outlook assumes customers continue to reduce and maintain inventory levels in many countries with a significant amount of the volume growth were forecasting in the quarter coming from new products.

Unknown Executive: These include collagen iva insecticide in Argentina, and the U S.

Unknown Executive: Star insecticide in Brazil.

Unknown Executive: <unk> fungicide in the U S and jewelry fungicide in Germany.

Unknown Executive: EBITDA in the second quarter is expected to be between $170 million and $210 million, up 1% versus the prior year at the midpoint. At the EBITDA midpoint, we expect that volume growth and restructuring benefits will be offset by lower price and COGS headwinds. Adjusted earnings per share is expected to be between $0.43 and $0.72, an increase of 15% at the midpoint, due mainly to lower interest expense and DNA. Slide 8 provides our full-year financial outlook, which is unchanged from our last update.

Unknown Executive: EBITDA in the second quarter is expected to be between $170 million and $210 million up 1% versus the prior year at the midpoint.

Unknown Executive: At the EBITDA midpoint, we expect that volume growth and restructuring benefits will be offset by lower price and Cogs headwinds.

Unknown Executive: Adjusted earnings per share is expected to be between 43 and.

Unknown Executive: 72.

Unknown Executive: An increase of 15% at the midpoint due mainly to lower interest expense and DNA.

Unknown Executive: Slide eight provides our full year financial outlook, which is unchanged from our last update.

Unknown Executive: Sales are expected to be between $4.5 and $4.7 billion, an increase of 2.5% at the midpoint. Volume growth is forecasted to benefit from improving market conditions in the second half, with a substantial amount of the growth expected to come from new products. We anticipate strong growth in new products between Q2 and Q4, with the major contributions coming from porridge and evo insecticide in Argentina and the U.S., premier star insecticide in Brazil, isoflex active herbicide in Australia and Argentina, and onsuva fungicide in Brazil and Argentina. We're also excited to launch new diamide formulations in Australia, Indonesia, and other countries throughout Asia.

Unknown Executive: Sales are expected to be between $4 five from $4 7 billion, an increase of two 5% at the midpoint.

Unknown Executive: And growth is forecasted to benefit from improving market conditions in the second half with a substantial amount of the growth expected to come from new products.

Unknown Executive: We anticipate strong growth in new products between Q2, and Q4 with a major contributions coming from cards and Evo insecticide in Argentina, and the U S Premier Star insecticide in Brazil, Isa flights active herbicide in Australia, and Argentina, and on Suva fungicide in Brazil and Argentina.

Unknown Executive: We're also excited to launch new Diamide formulations in Australia, Indonesia, and other countries throughout Asia.

Unknown Executive: We expect moderate pricing pressure for the full year, with the largest impact in the first half. FX is expected to be a minor headwind. Our EBITDA outlook remains between $900 million and $1.05 billion, which is essentially flat to 2023 at the midpoint. Volume growth and restructuring benefits are forecasted to be offset by lower price and COGS headwinds. Adjusted earnings per share is expected to be $3.23 to $4.41 per share, an increase of 1% at the midpoint from lower interest expense and D&A.

Unknown Executive: We expect moderate pricing pressure for the full year with the largest impact in the first half.

Unknown Executive: FX is expected to be a minor headwind.

Unknown Executive: Our EBITDAR outlook remains between $900 million of $1.05 billion, which is essentially flat to 2023 at the midpoint.

Unknown Executive: Volume growth and restructuring benefits are forecasted to be offset by price and Cogs headwinds.

Unknown Executive: Adjusted earnings per share is expected to be $3 23 to $4 41 per share an increase of 1% at the midpoint from lower interest expense and DNA.

Andrew: Slide 9 illustrates the implied growth in sales and EBITDA in the second half to deliver the midpoint of our full year guidance. Revenue growth of 23% and EBITDA growth of 46% may appear outsized on a percentage basis, but considering the low 2023 comparison, we believe the required growth on an absolute dollar basis is achievable. The implied second half revenue and EBITDA are both in a range that we delivered in the second half of 2020 and 2021.

Unknown Executive: Slide nine illustrates the implied growth in sales and EBITDA in the second half to deliver the midpoint of our full year guidance <unk>.

Andrew: Revenue growth of 23% and EBITDA growth of 46% may appear outsized on a percentage basis, but considering the low 2023 comparison, we believe the required growth on an absolute dollar basis is achievable.

Andrew: <unk> second half revenue and EBITDA are both in a range that we have delivered in the second half of 2020 and 2021.

Andrew: We expect improving market conditions as we progress throughout the year and transition to more normal conditions in 2025. Slide 10 outlines the various factors that will impact our results within the EBITDA guidance range. The magnitude and timing of improving market conditions remain the biggest variable. Our expectation is that recovery will vary by region, but broadly speaking, we anticipate meaningful improvement in market conditions in the second half. We expect new products will continue to show greater resilience in sales, which is a trend they've demonstrated for several quarters.

Andrew: We expect improving market conditions as we progress throughout the year and transitioned to more normal conditions in 2025.

Andrew: Slide 10 outlines the various factors that will impact our results within the EBITDA guidance range.

Andrew: The magnitude and timing of improving market conditions. It remains the biggest variable.

Andrew: Our expectation is that recovery will vary by region, but broadly speaking, we anticipate meaningful improvement in market conditions in the second half.

Andrew: We expect new products will continue to show greater resilience in sales, which is a trend they've demonstrated for many for several quarters.

Andrew: We also anticipate that raw material costs will stay flat for the year and that pricing will be a modest headwind, mainly in the first half, as we shift to more favorable comps in the second half. As for what we directly control, we're confident not only in our ability to successfully launch new products but also in delivering the $50 million to $75 million of restructuring benefits in 2024. With that, I'll turn the call over to Andrew to cover details on cash flow and other items.

Andrew: We also anticipate the raw material costs stay flat for the year and that pricing will be a modest headwind mainly in the first half as we shift to more favorable comps in the second half.

Andrew: As for what we directly control, we're confident not only in our ability to successfully launch new products, but also in delivering the $50 million to $75 million of.

Andrew: <unk> benefits in 2024.

Andrew: With that I'll turn the call over to Andrew to cover details on cash flow and other items.

Andrew: Thanks Mark.

Andrew: I'll start this morning with a review of some key income statement items. FX was a minor, less than 1% headwind to revenue growth in the first quarter, with the most significant headwind coming from the Turkish Lira, offset in part by a stronger Brazilian Riai, Mexican Peso, and Euro. Looking ahead to the second quarter, we see continued minor FX headwinds, primarily from the Indian rupee and Turkish lira, offset in part by strength in the Mexican peso.

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

Andrew: FX was a minor less than 1% headwind to revenue growth in the first quarter with the most significant headwind coming from the Turkish lira offset in part by a stronger Brazilian real Mexican.

Andrew: Mexican peso and euro.

Andrew: Looking ahead to the second quarter, we see continued minor FX headwinds, primarily from the Indian rupee and Turkish lira offset in part by strength in the Mexican peso.

Andrew: Interest expense for the first quarter was $61.7 million, up $10.3 million versus the prior year period, driven by higher commercial paper borrowings and, to a lesser degree, higher interest rates. We continue to expect full-year interest expense to be in the range of $225 to $235 million, down slightly from the prior year, driven by lower debt balances as we reduce borrowings through the year, offset in part by a change in the mix of short- and long-term debt as compared to 2023. Our effective tax rate on adjusted earnings for the first quarter was 15.5 percent, in line with the midpoint of our full year expectation for a tax rate of 14 to 17 percent.

Andrew: Interest expense for the first quarter was $61 7 million.

Andrew: $10 $3 million versus the prior year period.

Andrew: Driven by higher commercial paper borrowings and to a lesser degree by higher interest rates.

Andrew: We continue to expect full year interest expense to be in the range of $225 million to $235 million down slightly to the prior year driven by lower debt balances as we reduced borrowings through the year offset in part by a change in the mix of short and long term debt as compared to 2023.

Andrew: Our effective tax rate on adjusted earnings for the first quarter was 15, 5% in line with the midpoint of our full year expectation for a tax rate of 14% to 17%.

Andrew: As a reminder, we are forecasting a one point increase in the tax rate at the midpoint versus 2023 and providing a broader guidance range to reflect uncertainty related to tax law changes associated with Pillar 2, as well as transitionary impacts related to our recently awarded Swiss tax. Moving next to the balance sheet and levers, gross debt at March 31st was approximately $4.3 billion, up $378 million from the prior quarter. Cash on hand increased by over $100 million to $418 million, resulting in net debt of approximately $3.9 billion.

Andrew: As a reminder, we are forecasting a one point increase in tax rate at the midpoint versus 2023, and providing a broader guidance range to reflect uncertainty related to tax law changes associated with pillar two as well as transition impacts related to our recently awarded Swiss tax incentives.

Andrew: Moving next to the balance sheet leverage.

Andrew: Gross debt at March 31 was approximately $4 3 billion up.

Andrew: $378 million from the prior quarter.

Andrew: Cash on hand increased over $100 million to $418 million, resulting in net debt of approximately $3 9 billion.

Andrew: Gross debt to trailing 12-month EBITDA was 5.6 times a quarter end, while net debt to EBITDA was 5.0 times a quarter end. Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator. Leverage was 5.7 times as compared to a covenant of 6.5. As a reminder, our covenant leverage limit was raised temporarily to 6.5 times through June 30th of this year. It will step down to 6.0 times on September 30th, 2024, and then again to 5.0 times on December 31st.

Andrew: Gross debt to trailing 12 month EBITDA was five six times at quarter end, while net debt to EBITDA was five point out times.

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

Andrew: As a reminder, our covenant leverage limit was raised temporarily to six five times through June 30 of this year.

Andrew: It will step down to six times at September 30 of 2024, and then again to five point out times at December 31 2024.

Andrew: We believe we have ample headroom under these limits as we progress through the year. Leverage is improving as we shift to positive year-over-year EBITDA comparisons in the second half and as we reduce debt through strong free cash flow generation and through proceeds from the anticipated divestiture of our global specialty solutions business. We expect Covenant leverage to be approximately 3.5 times by year end.

Andrew: We believe we have ample headroom under the limits as we progress through the year.

Andrew: Leverages, improving as we shift to positive year over year EBITDA comparisons in the second half and as we reduce debt through strong free cash flow generation and through proceeds from the anticipated divestiture of our global specialty solutions business.

Andrew: We expect covenant leverage to be approximately three five times by year end.

Mark: We remain committed to returning our leverage to levels consistent with our targeted BBB or BAA2 long-term credit ratings, or better. As I discussed at our November 2023 Investor Day, we've shifted our midterm net leverage target to approximately two times on a rolling four quarter average base. 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 should be approaching targeted leverage by the end of 2025.

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

Mark: As I discussed at our November 2023, Investor Day, we've shifted our mid term net leverage target to approximately two times on a rolling four quarter average basis.

Mark: 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 should be approach targeted leverage by the end of 2025.

Mark: Moving on to free cash flow on slide 11. Free cash flow in the first quarter improved by over $725 million versus the prior year period. This is a critical first step towards substantially improving cash flow in 2024, which is an essential part of our deleveraging. Adjusted cash from operations improved by $748 million compared to the prior year period driven by working capital release from lower inventory as well as lower accounts receivable. However, Capital Additions were lower as we continue to constrain investment to only the most critical high-return projects.

Mark: Moving on to free cash flow in slide 11.

Mark: Free cash flow in the first quarter improved over $725 million versus the prior year period.

Mark: This is a critical first step towards substantially improving cash flow in 2024, which is an essential part of our deleveraging plan.

Mark: Adjusted cash from operations improved by $748 million.

Mark: Compared to the prior year period, driven by working capital release from lower inventory as well as lower accounts receivable.

Mark: Capital additions were lower as we continued to constrain investment to only the most critical high return projects.

Mark: Legacy and transformation cash spending was up due to costs related to our restructuring program. We continue to expect free cash flow of $400 to $600 million for full year 2024, a swing of more than $1 billion from 2020 performance at the midpoint of the reign. This increase is expected to be driven by a significant cash release from rebuilding accounts payable and reducing inventory, partially offset by higher accounts receivable due to revenue growth in the second half of the year, and with modest improvement on other items such as cash. With this guidance, we continue to anticipate free cash flow conversion of 104% at the midpoint for 2020. Thank you, Andrew.

Mark: Legacy and transformation cash spending was up due to costs related to our restructuring program.

Mark: We continue to expect free cash flow of $400 million to $600 million for full year 2020 for a swing of more than $1 billion from 2020 performance at the midpoint of the range.

Mark: This increase is expected to be driven by significant cash release from rebuilding accounts payable reducing inventory, partially offset by higher accounts receivable due to the revenue growth in the second half of the year and with modest improvement on other items such as cash interest.

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

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

Mark: Andrew.

Unknown Executive: We started 2024 as we planned, serving customers with innovative technologies, improving our cost structure to deliver on our restructuring targets, as well as delivering much improved cash flow. The crop protection market has started to turn to more normal buying behavior, and we believe market conditions will continue to improve as we move for the rest of the year and into 2025. Growers are constantly looking for new technologies to combat pest resistance, and FMC is delivering these innovative new products.

Mark: We started 2020 photos, we planned serving customers with innovative technologies, improving our cost structure to deliver on our restructuring targets as well as delivering much improved cash flow.

Unknown Executive: The crop protection market has started to turn to more normal buying behavior and we believe market conditions will continue to improve as we move through the rest of the year and into 2025.

Unknown Executive: Growers are constantly looking for new technologies to combat pest resistance and FMC is delivering these innovative new products.

Unknown Executive: We expect approximately 17% of our revenue this year will come from products introduced in the last five years, a record for our company, up from 10% in 2021. This growth is despite the challenges the industry has faced over the last year and shows the value growers place on new technologies. With that, we're now ready to take your questions.

Unknown Executive: We expect approximately 17% of our revenue this year will come from products introduced in the last five years a record for our company.

Unknown Executive: Up from 10% in 2021.

Unknown Executive: This growth is despite the challenges the industry has faced over the last year and shows the value grow as place on new technologies.

Unknown Executive: With that we're now ready to take your questions.

Unknown Executive: 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. If you are using a speakerphone, please pick up your handset before pressing the keys. Please limit yourself to one question. If you have additional questions, you can jump back in the queue. To withdraw from the queue, please press star, then 2.

Speaker Change: We will now begin the question and answer session to be placed in the can you. Please press the star key them one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys. Please limit yourself to one question. If you have additional questions you can jump back in the queue to withdraw from the queue. Please press Star then two.

Unknown Executive: At this time, we will pause momentarily to assemble our roster. The first question today comes from Vincent Andrews at Morgan Stanley. Vincent, your line is open. Please go ahead.

Unknown Executive: At this time, we will pause momentarily to assemble our roster.

Unknown Executive: Last question today comes from Vincent Andrews of Morgan Stanley Vincent Your line is open. Please go ahead.

Unknown Executive: Thank you and good morning everyone. I'm wondering if you can give a bit more color on the first quarter sales. You referenced the Argentina issue, that that would have gotten you to the low end of your sales guidance. Could you just talk a little bit more about that and then help us understand what could have happened that might have gotten you to the midpoint of 1Q? It also sounds like you're expecting volume growth in 2Q to largely come from your new product initiative. What does a base business need to do in 2Q in order to hit your guidance? Yeah, thanks, Vincent. Let me, let me just expand on that.

Vincent Stephen Andrews: Thank you and good morning, everyone wondering.

Speaker Change: Wondering if you can give a bit more color on the first quarter sales.

Speaker Change: So Argentina issue.

Unknown Executive: But that would have gotten you to the low end of your sales guidance could you just talk a little bit more about that and then help us understand what what could have happened they might have gotten you to the to the mid point.

Speaker Change: <unk>. It also sounds like Youre expecting volume growth in <unk> to largely come from.

Speaker Change: Your new product initiatives. So what is the base business need to do in <unk> in order to hit your guidance.

Unknown Executive: Yeah, thanks, Vincent. Let me just expand on the Q1 comment. First of all, we highlighted, obviously, a distributor arrangement that we changed in Argentina. We talked before about being very careful how we do business in the Southern Cone and in Brazil. We've been very, extremely diligent in protecting our balance sheet.

Unknown Executive: We saw an issue with a distributor that we had in Argentina, and we decided to take material back from that distributor and end that relationship. So that's the type of activity that, yes, it slowed down the top line, but from a balance sheet perspective, it was absolutely the right thing to do. I think the second feature that impacted us in Q1 that we were not expecting was really the terrible weather in Northern Europe. For those of you that follow these things, the UK has had, I think, its wettest spring in about 200 years, and the same in Scandinavia, the same in Germany, Holland, and Belgium.

Unknown Executive: Yes, Thanks, Vincent let me, let me just expand on the Q1 comment festival.

Unknown Executive: We did highlight obviously.

Unknown Executive: Distributor arrangement that we changed in Argentina, we've talked before about being very careful how we do business in the southern cone and in Brazil, we have been very extremely diligent in protecting our balance sheet.

Unknown Executive: We saw an issue with a distributor that we had in Argentina, and we decided to take material back from that distributor and that relationship. So that's the type of activity that yes. It slowed down the top line, but from a balance sheet perspective. It was absolutely the right thing to do I think the the <unk>.

Unknown Executive: Feature that impacted us in Q1 that we were not expecting was really the terrible weather in northern Europe.

Unknown Executive: For those of you that follow these things the U K has had I think is wettest.

Unknown Executive: Spring in for about 200 units and the same in Scandinavia, the same in Germany.

Unknown Executive: Poland, Belgium that was really the other factor that brought down our revenue so over and above everything else pretty much all the regions performed as we expected.

Unknown Executive: That was really the other factor that brought down our revenue. So, over and above everything else, pretty much all the regions performed as we expected. Moving forward and looking through Q2 and then into the rest of the year, I would start by saying, first of all, the market, the fundamental market, the use of products and technologies on the ground remains robust around the world. Yes, there are pockets where weather has impacted, but generally speaking, growers are protecting their crops with the best technologies they can find.

Unknown Executive: Moving forward and looking through Q2, and then into the rest of the year.

Unknown Executive: I would start by saying first of all the market the fundamental market they use of products and technologies on the ground remains robust around the world. Yes, there are pockets, where weather has impacted but generally speaking growers are protecting crops with the best technologies. They can find.

Unknown Executive: What does that mean for us? Well, relationships with our growers are, I would say, at a different level in terms of communication and conversation about the future today than we've seen over the last year. I'll give you a couple of examples. Brazil.

Unknown Executive: What does that mean for <unk>.

Unknown Executive: Well relationships with our growers.

Unknown Executive: I would say at a different level in terms of communication and conversation about the future today than we've seen over the last year.

Unknown Executive: Our orders on hand today are significantly higher than where they were this time last year. In other words, growers have depleted much of their inventory. They are now asking distribution and retail, and hence FMC, for materials going into the next season. Acreage is expected to increase in the 24-25 season in Brazil, so they're expecting a good year. We now have those orders on hand.

Unknown Executive: I'll give a couple of examples.

Unknown Executive: Brazil.

Unknown Executive: Our orders on hand today.

Unknown Executive: Significantly higher than where they were this time last year.

Unknown Executive: In other words growers have depleted much of their inventory. They are now asking distribution in retail and hence FMC, we need materials going into the next season acreage is expected to increase in the 'twenty four 'twenty five season in Brazil, So theyre expecting a good year.

Unknown Executive: We now have those orders on hand, what does that mean for us it gives us better insights into the second half, but also it has given us confidence to now carefully start bringing back manufacturing lines that are being closed over the last year.

Unknown Executive: What does that mean for us? It gives us better insights into the second half, but it's also given us confidence to now carefully start bringing back manufacturing lines that have been closed over the last year. So, we're bringing back manufacturing on the basis of the orders that we have on hand for Brazil. That also means we're extending payables now, which is the first time we've really started to buy raw materials, I would say, in the last year. Andrew can comment on that a little later.

Unknown Executive: So we're bringing back manufacturing on the basis of the orders that we have on hand for Brazil.

Unknown Executive: That also means we're extending payables now which is the first time, we've really started to buy raw materials.

Unknown Executive: I would say over the last year drew can comment on that a little later.

Unknown Executive: In Europe, conversations with growers are now changing to be, "What do I need for the rest of the season rather than what do I need for this week or the next?", so that starts to give you the feel that there is more of a longer-term view. Yes, people have changed their inventory levels, and that's the way they're going to operate their business, but they're asking for materials. In the US, we're still selling products that are used very early in the season, even in May, which is unusual. What does that tell you? It tells you that the inventories of those products have been totally depleted.

Unknown Executive: In Europe conversations with growers are now changing to be.

Unknown Executive: What do I need for the rest of the season rather than worldwide for this week or the next week.

Unknown Executive: So that starts to give you the feel there is more of a longer term view, yes people have changed their inventory levels and that's the way they're going to operate that business, but they are asking for materials in the U S. We're still selling products that are used very early in the season, even in may which is unusual.

Unknown Executive: What does that tell you. It tells you that the inventories of those products have been totally depleted with selling for products that will be used right now.

Unknown Executive: We're selling products that will be used right now. So if you take those three big regions alone, there is better visibility for us as we go forward. That also contributes to our view of new products and our launches of new products. I listed in the script numerous products that have been launched, from herbicides through new fungicides through insecticides. It's the new technologies that drive the value, and growers are always looking for new tools to invest in resistance breaking.

Unknown Executive: So you take those three big regions alone there is better visibility for us as we go forward.

Unknown Executive: That also contributes to our view of new products and our launches of new products are listed in the scripts numerous products that are being launched from herbicides through the new fungicides insecticides.

Unknown Executive: The new technologies that drive the value and grow is always looking for new tools to invest in resistance braking and thats. What we provide so generally speaking that's how we expect the year to flow. It's why today and May do we feel confident to leave our forecast where they are versus where we.

Unknown Executive: And that's what we provide. So, generally speaking, that's how we expect the year to flow. And that's why, today, in May, do we feel confident to leave our forecast where it is versus where we were in February? We have a better idea of where our customers are today than we did in February.

Unknown Executive: In February we have better sight of where our customers are today than we had in February.

Unknown Executive: Okay.

Unknown Executive: The next question comes from Aleksey Yefremov from Key Corp. Aleksey, your line is open. Thanks, and good morning.

Unknown Executive: The next question comes from Alex Liu from Keycorp Alexia Your line is open.

Aleksey Yefremov: Thanks, and good morning. This is Ryan on for Alexia just a quick one from me can you guys talk about the level of pricing for your brand in <unk> versus the rest of the portfolio.

Aleksey Yefremov: Any color there would be helpful. Thank you.

Unknown Executive: Yeah, we don't, we don't give pricing for our products versus other parts of our products. I think you all know that the Diamides are a very healthy franchise for FMC and will continue to be so. When I look at Q1 and I look at this year, we expect the Diamides to perform better than the overall portfolio. We did highlight in the release that our Diamides business in Brazil grew double digits in Q1, and that is against a very difficult backdrop.

Aleksey Yefremov: Yes, we don't we don't give pricing for our products versus other parts of our products. I think you all know that the <unk> are a very healthy franchise for FMC continues to be so.

Unknown Executive: When I look at Q1 and I look at this year, we expect that <unk> will perform better than the overall portfolio. We did highlight in the release that our diamide in Brazil grew double digits in Q1 and that is that is against a very difficult backdrop. The reasons. They grew is exactly what we said we would do in November at the Investor Day.

Unknown Executive: The reason it grew is exactly what we said we would do in November at Investor Day. We're producing new formulations that are differentiated, and they are being accepted by the market. Premio Star is a brand new insecticide for soybeans, and it has been well received in the marketplace. That allows us to move from the older products to the newer products and gain market share. The next question comes from Christopher Parkinson at Wolfe Research.

Christopher S. Parkinson: Nick we're producing new formulations that are differentiated and they are being accepted by the market premium star is a brand new insecticide for soybeans and it has been well attended in the marketplace that allows us to move from the older products to the newer products and gain market share and growth.

Unknown Executive: The next question comes from Christopher Parkinson at Wolf Research. Christopher, your line is open, please go ahead. Great, thank you.

Unknown Executive: Christopher, your line is open. Please go ahead.

Unknown Executive: The next question comes from Christopher Parkinson of Wolfe Research Christopher Your line is open. Please go ahead.

Unknown Executive: Okay.

Unknown Executive: Great. Thank you. This is Harris fein on for Chris.

Christopher S. Parkinson: Just a quick one for me in North America, obviously volumes were down on a tough comp pretty significantly, but you still held price flat.

Christopher S. Parkinson: Just curious what your thoughts are on potentially.

Christopher S. Parkinson: Potentially adjusting the rebate structures to get volumes flowing again is that something that you think could be necessary or that you're exploring.

Unknown Executive: Yeah.

Unknown Executive: No, you know, when we look at the portfolio, I think one of the facets that's kind of getting missed in FMC's North American business is just the sheer mix change that's going on there. Something like 25% of our revenue has come from products launched in the last five years. That's probably the highest of any region we have in the world.

Unknown Executive: No.

Christopher S. Parkinson: We look at the portfolio I think one of the assets Thats kind of getting missed in Fmc's North American business is just the sheer mix change that's going on there.

Unknown Executive: Something like 25% of our revenue has come from products launched in the last five years as probably the highest of any region. We have in the world. The North American team has done a great job and introducing new insecticides based on the Diamide introducing brand new fungicides, such as the one I mentioned <unk>.

Unknown Executive: The North American team has done a great job introducing new insecticides based on the diamides and introducing brand new fungicides such as the one I mentioned, Zyway, and Adastrio. These are new market opportunities for us. Generally speaking, when we introduce those new products, they are at a higher price point, a higher profitability point, and they're bringing new attributes to growers. So when we change that mix, obviously, we see the business start to change. So no, we're not doing anything with our rebate programs in North America.

Unknown Executive: This is new market opportunities for us generally speaking when we introduce those new products. The other at a higher price point higher profitability point that bringing new attributes to growers. So when we change that mix, obviously, we see.

Unknown Executive: The business start to change so no we're not we're not doing anything with our rebate programs in North America, we believe that our proposition to grow as is based upon technology and availability of that technology, we feel very good about where the north American businesses. I think if you looked at that on the face of that statement is it but you dropped 48% in Q1.

Unknown Executive: We believe that our proposition to growers is based on technology and the availability of that technology. We feel very good about where the North American business is headed. I think if you looked at that on the face of that statement and said, but you dropped 48% in Q1, if your business is good, why is that? Frankly speaking, Q1 2023 was a blockbuster quarter, mainly driven by Canada. There was huge pest pressure in Canada last year, and we haven't seen that same pest pressure this year.

Unknown Executive: If you're a business is good why is that frankly speaking Q1 2023 was a blockbuster quarter, mainly driven by Canada. There was huge pest pressure in Canada last year, and we haven't seen that same perspective. This year. That's normal for these AG markets, but the North America business fundamentally is in very good shape.

Unknown Executive: That's normal for these ag markets, but the North American business fundamentally is in very good shape. The next question comes from Josh Spector from UBS. Josh, your line is open, please go ahead. Yeah, hi, good morning.

Unknown Executive: Yeah.

Unknown Executive: The next question comes from Josh Spector from UBS. Josh, your line is open. Please go ahead.

Unknown Executive: The next question comes from Josh Spector from UBS.

Joshua David Spector: Your line is open. Please go ahead.

Joshua David Spector: Yeah, Hi, good morning, So I wanted to ask specifically on your second half guidance I think one of the parameters you have in there is second half pricing now flat year over year can you characterize your level of confidence in that just especially given that you are seeing mid teens down in Latin America today high single digit down in.

Joshua David Spector: <unk> Asia, what what normalizes that end.

Joshua David Spector: You flagged that at risk or not at this point.

Unknown Executive: Alexander, do you want to make a comment? Yeah. Thanks. Thanks, Josh. Look, I think, yep.

Joshua David Spector: And are you going to make a comment yes. Thanks. Thanks, Josh look I think you have to look at it.

Unknown Executive: Yeah, thanks. Thanks, Josh.

Unknown Executive: Price of where we are in the overall progression. This correction, we've had downward price movement in Q3, and Q4 of last year as well as in the first quarter of this year with more overall low single mid single digit minus three in Q3 minus five in Q4.

Unknown Executive: Look, I think you have to look at the price of where we are and the overall progression of this correction. We've had downward price movement in Q3 and Q4 of last year, as well as in the first quarter of this year, with overall low single, mid single digit, minus three in Q3, minus five in Q4, low single digit, mid single digit price ranges overall, but with a significant amount of pricing being in Latin America.

Unknown Executive: Yes, low single digit mid single digit kind of price range as overall, but with a significant amount of that pricing being in Latin America. As we finished the season, we will be going into the new season in the fall Anniversarying very significant price reductions in Latin America. So we're not anticipating that theres big shifts unless prices, we go into the new season.

Unknown Executive: As we finish the season, we will be going into the new season in the fall, anniversarying very significant price reductions in Latin America. So we're not anticipating that there will be big shifts in list prices as we go into the new season, given where we already are.

Unknown Executive: Given where we already are.

Unknown Executive: Okay.

Unknown Executive: The next question comes from Adam Samuelson from Goldman Sachs. Adam, your line is open. Please go ahead.

Unknown Executive: Next question comes from Adam Samuelson from Goldman Sachs. Adam Your line is open. Please go ahead.

Unknown Executive: Yes, thank you. Good morning, everyone. I was hoping to get a bit more color on kind of, market expectations and performance in India, so one area where I think the de-stocking kind of trend is kind of solid into high-channel inventories. Feels like that's been a pretty consistent narrative in that market for running on two years now, and I would love to get kind of what gives you kind of a line of sight to maybe that ending, if anything, and how maybe you' Thank you. Yeah, thanks.

Adam L. Samuelson: Yeah. Thank you good morning, everyone.

Speaker Change: I was hoping to.

Unknown Executive: Get a bit more color on kind of.

Unknown Executive: The market expectations and performance in India. So one area, where I think the destocking kind of trend is kind of following the high channel inventories. It feels like that's been a pretty conservative in that market firm.

Unknown Executive: Running on two years now.

Unknown Executive: And just love to get kind of what gives you kind of line of sight to maybe that that ending if anything and how you may be your disaggregated kind of channel destocking and a potential lower application rates for many.

Unknown Executive: Competitive.

Speaker Change: Somebody picks up there. Thank you.

Unknown Executive: Yeah, thanks, Adam. Yeah, India is a very important market for us and one that is facing its own individual challenges, not necessarily related to the same reasons as the rest of the world is facing channel inventories. I would say India is almost unique in the sense that the channel inventory pressure that we face there is purely due to weather and dislocated monsoons over the last few years. We're not the only market participant to comment on this. Others have also commented on it.

Speaker Change: Yeah, Thanks, Adam Yes, India is.

Unknown Executive: A very important market for us and one that is facing its own individual challenges not necessarily related to the same reasons as the rest of the world is facing.

Unknown Executive: The channel inventories.

Unknown Executive: I would say India is almost unique in the sense of the channel inventory pressure that we face there is purely due to weather and dislocated monsoons over the last few years, we're not the only market participants to comment on this others have also commented on it.

Unknown Executive: It's an industry-wide phenomena, and it's just time that takes us to get through that. The monsoon in the last season was not great. We're hoping for better weather conditions as we continue through the rest of the year. We are reducing channel inventory every quarter. Some quarters are faster than others, but it will take some time to remove what is a third degree of channel inventory.

Unknown Executive: An industry wide phenomenon and it's just a.

Unknown Executive: It's just time that takes us to get through that.

Unknown Executive: The monsoon in the less season was not great and we're hoping for better weather conditions as we continue through the rest of the year, we are reducing channel inventory every quarter, some quarters as faster than others.

Unknown Executive: It will take some time to remove what is a fair degree of channel inventory the markets themselves are good in India for where the weather is good.

Unknown Executive: The markets themselves are good in India, where the weather is good. Generally speaking, Indian growers do like to use the latest technologies and the more advanced technologies. It's one of the only markets in the world right now where we have online spray services with drones. It just shows you that some markets like India that appear highly fragmented really do adopt technology very quickly. So we're drone spraying. I think we're on over 5,000 acres right now. That number is growing. That's a differentiated approach because it allows us to take our brand new products and apply them in a way that is very beneficial to small farmers in India.

Unknown Executive: Generally speaking the Indian growers do like to use the latest technologies and the more advanced technologies.

Unknown Executive: It's one of the only markets in the World right now, where we have online spray services with drones it.

Unknown Executive: It just shows you that some markets like India. The appear highly fragmented really do adopt technology very quickly. So we're drone spring I think run over 5000 acres right now that number is growing that's a differentiated approach because it allows us to take our brand new products and apply them in a way that is very beneficial to the small fund holders and <unk>.

Unknown Executive: Yeah.

Unknown Executive: The next question comes from Kevin McCarthy at Vertical Research Partners. Kevin, your line is open, please go ahead.

Kevin W. McCarthy: The next question comes from Kevin Mccarthy Vertical Research partners. Kevin. Your line is open. Please go ahead.

Unknown Executive: Yes, thank you, and good morning. There's a lot of talk about de-stocking, but I had a question about your own internal inventory. It looks like that came down $324 million on a year over year basis, if my math is correct. Can you frame out where you are now versus where you would like inventories to be? I was thinking about, you know, Mark, I think you made a comment about bringing some manufacturing back online as it relates to Brazil inventories and other parts of the world, maybe a little bit higher. So maybe you could just kind of put that internal effort of rationalization into context for us and, you know, any related thoughts on operating leverage would be appreciated.

Kevin W. McCarthy: Yes, Thank you and good morning.

Unknown Executive: A lot of talk about Destocking, but I had a question on your own internal inventory it looks like that came down $324 million on a year over year basis. If my math is correct.

Unknown Executive: Can you frame out where you are now versus where you would like inventories to be seeking about mark I think you made a comment bringing some manufacturing back online as it relates to Brazil.

Unknown Executive: Inventories and other parts of the world, maybe a little bit higher so maybe you could just kind of put.

Unknown Executive: That internal effort of rationalization into context for us and any related thoughts on operating leverage would be appreciated.

Unknown Executive: Yeah, absolutely, Kevin. Thanks for the question. I'll make an overarching comment, Andrew, if you want to jump in with some different views.

Speaker Change: Yes, absolutely Kevin Thanks for the question I'll make an overarching comment and then Andrew if you want to jump in with some different views.

Unknown Executive: Yeah, we peaked inventory basically round about August last year internally. And we've been obviously on a track since we first came into this Channel D stocking to really remove inventory as fast as we could. We're getting close to the point, but we're not quite there yet.

Andrew: Yes, we peaked inventory base.

Andrew: Basically round about August last year internally.

Unknown Executive: And we've been obviously on attracts since we first came into this channel destocking to really remove inventory as fast as we could.

Unknown Executive: We're getting close to the point, we're not quite there yet.

Unknown Executive: We're getting close to the point where, at the macro level, for our inventory, we're going to be pretty much where we want to be. We do have pockets, however, where our inventory levels are lower than they should be. And hence, we're now bringing back manufacturing. That's normal.

Unknown Executive: We're getting close to the point, where at the macro level for our inventory.

Unknown Executive: Going to be pretty much where we want to be we do have pockets, however, where our inventory levels are lower than they should be and hence we're now bringing backup manufacturing.

Unknown Executive: Normal not everything moves at the same pace, but I would say by the time, we get through Q2 and into Q3.

Unknown Executive: Not everything moves at the same pace, but I would say by the time we get through Q2 and into Q3, we're going to be in pretty good shape in terms of where our revenue has reset this year versus where the inventory needs to be. It's important to notice that we really took some hard steps here. I mean, we really did stop manufacturing in the sense of stock manufacturing. That's painful to do in an organization like ours, but we're now coming through the other side of that. And we will rebuild specific inventories as we see that demand come forward. Andrew, do you want to make any other comments?

Andrew: Are going to be in pretty good shape in terms of where our revenue is reset this year versus where the inventory needs to be.

Andrew: It is important too.

Andrew: To note is that we really took some hard steps I mean, we really did crush manufacturing in the sense of stop manufacturing.

Andrew: It's painful to do it in an organization like ours.

Unknown Executive: But we're now coming through the other side of that and we will rebuild specific inventories as we see that demand come forward. Andrew do you want to make any other comments and certainly that Kevin I think we're certainly mid innings on the journey and getting our inventory in our own inventory in the right place as Mark pointed to we are reported inventory at June 30 was about.

Andrew: I think we're certainly in the mid-innings in the journey of getting our own inventory in the right place. As Mark pointed out, our reported inventory at June 30th was about $2.1 billion. We're down to just under $1.6 billion this quarter. We have another couple hundred million to go.

Andrew: $2 1 billion were down to just under $1 6 billion. This quarter. We have another couple hundred million to go it won't be a one big step it'll be very it will be a bit by bit because I think there is a very delicate balancing of ramping up production as mark mentioned, particularly for products, where we're already in short supply.

Andrew: It won't be one big step. It'll be bit by bit because I think there's a very delicate balancing act of ramping up production, as Mark mentioned, particularly for products where we're already in short supply, and balancing it with the inventory we have on hand and its sell-through. This is a part of the algorithm for generating free cash flow this year. As we ramp up that production, build up our payables back to more historically normal levels, but maintain inventories that are more in line with our current sales level.

Andrew: And balancing it with the inventory we have on hand in itself through.

Andrew: This is a part of the algorithm for generating free cash flow. This year as we ramp up that production buildup, our payables back to more historically normal levels.

Andrew: Maintain inventories that are more in line with our current sales level. So.

Andrew: There will be it won't be one big step, but through the rest of the year you should expect another couple hundred million dollars of inventory to come out of our balance sheet.

Andrew: It won't be one big step, but through the rest of the year, you should expect another couple hundred million in inventory to come out of our balance sheet. That will translate into a contribution to free cash flow generation for the year. Yeah, Andrew just had that one comment, Kevin.

Andrew: That will translate to contribution to free cash flow generation for the year, yes.

Unknown Executive: Yeah, Andrew just, I'll just add one comment, Kevin. Andrew mentioned here that it's what he called a fine balance. I call it a fine balance, a fine dance.

Andrew: Yes, Andrew.

Andrew: I had one comment Kevin Andrew mentioned here that is equal to find balance I call. It a fine balance fine dense.

Unknown Executive: Remember, we have to go to our raw material suppliers and ask for products to feed this pipeline, and many of them are in the same position that we are. In other words, they have their manufacturing shut down. I think you know that this is a very, very complicated supply chain and quite long. So this whole notion of how products flow from our suppliers to us to the customers is not easy, and starting this up is going to be interesting because as we have run down our inventories over the last year, our customers have got used to us holding their inventory.

Speaker Change: Remember, we have to go through our raw material suppliers and ask for products to feed this pipeline.

Unknown Executive: <unk> of them are in the same position that we are in other words they have their manufacturing shut down I think you know that this is a very very complicated supply chain and quite long. So this whole notion of how product flows from our suppliers to us to the customers.

Unknown Executive: It's not easy and starting this up is again is going to be interesting because.

Unknown Executive: As we run down our inventories over the last year, our customers have got used to us holding their inventory.

Unknown Executive: That is not going to happen in some places in the world with some product lines. So I think this whole notion of the distribution and retail folks running at very low inventory levels compared to historical levels, we've never done that. So it's going to be interesting to see how this plays out for the value chain and how we manage inventory going forward as growth starts to come back.

Unknown Executive: That is not going to be a carrying in some places in the world with some product lines.

Unknown Executive: So I think this whole notion of the distribution and retail folks running at very low inventory levels compared to historical we've never done that.

Unknown Executive: So it's.

Unknown Executive: It's going to be interested to see how this plays out for the for the value chain and how we manage inventory going forward as growth starts to come back.

Speaker Change: Thanks very much.

Speaker Change: Thank you.

Unknown Executive: The next question comes from Joel Jackson from BMO Capital Markets. Joel, your line is open. Please go ahead.

Unknown Executive: The next question comes from Joel Jackson from BMO Capital markets. Joe. Your line is open. Please go ahead.

Unknown Executive: Hi, good morning, everyone. I'm gonna ask you two questions in one. Just you reset, I think, senior management in Brazil, maybe you could first talk about, you know, what's changed there, maybe what, you know, what you're seeing there, maybe what you've learned with your new eyes looking at it.

Joel Jackson: Hi, good morning, everyone.

Joel Jackson: Questions and one just you've reset I think senior management in Brazil, maybe you could first talk about what's changed there or maybe what.

Unknown Executive: What youre seeing there, maybe what you've learned with new eyes looking at it.

Unknown Executive: Second of all just to reconcile a couple of things you said on this call. This morning. So I think you said that.

Unknown Executive: Youre seeing customers now put out giving your order visibility that later than they weren't actually hand them out.

Unknown Executive: You also said that customers are going to be running with lower inventories than they normally have I got that wrong, but can you reconcile those two comments if I got that right.

Unknown Executive: Second of all, just to reconcile a couple things you said on this call this morning. So I think you said that, you know, you're seeing customers now put orders out, giving you order visibility a bit later than they were to hand them out. But I think you also said that customers are going to be running with lower inventories than they normally have. I may have got that wrong. But can you reconcile those two comments if I got that right? Yeah, thanks, Joel.

Unknown Executive: Yeah, thanks, Joel. Yeah, new management in Brazil. This is the first time that FMC in a very long time has brought somebody in to be the president of the region from outside the company. We have a very robust human capital process inside the company where we develop talent and move them around the world. We felt now was a good time to bring in talent from the outside, and we brought in a very experienced industry veteran who has both a crop protection background and also a retail and distribution background. So we're getting the best of both worlds there.

Speaker Change: Yes, Thanks, Joe.

Unknown Executive: Yes, new management in Brazil.

Unknown Executive: It's the first time that FMC in a very long time has brought somebody in to be the president of the region from outside the company, we have a very robust.

Unknown Executive: Human capital process inside the company, where we develop talent and move them around the world.

Unknown Executive: We felt now was a good time to bring in talent from the outside and we brought in a very experienced industry veteran who has both crop protection background, but also retail and distribution background. So we're getting the best of both wells. The what are we learning we're learning that we can expand our customer presence in.

Unknown Executive: What are we learning? We're learning that we can expand our customer presence in the sense of where the market's pockets are that we can go into. So that's a good sign from the market growth perspective. Also, bringing that retail and distribution mentality allows us to think about how we build our offers into that part of the channel to make FMC's overall portfolio very attractive. I think from the order of visibility and lower levels of inventory, Joel, I would say that both are caring.

Unknown Executive: The sense of where the market's pocket. So that we can go and expand into so that's a good size market growth perspective, also bringing that retail and distribution mentality and allows us to think about how we build our offers into that part of the channel to make to make fmc's overall portfolio very attractive.

Unknown Executive: I think from the order visibility and lower levels of inventory Joel I would say that both are Kerry.

Unknown Executive: The fact that people are holding lower levels of inventory is one thing, but it's where it is in that chain that you have to think about. It may be that distribution wants to hold lower levels of inventory, but retail might not because they have to service the customer from what they have. So don't think of the two pieces as being opposed to each other. They actually do work hand in hand.

Unknown Executive: The fact that people are holding lower levels of inventory as one thing.

Unknown Executive: But it's where it is in that chain that you have to think about it may be the distribution wants to hold lower levels of inventory, but retail might not because they have to service the customer from what they have so don't think of the two pieces has been opposed to each other they actually do work hand in hand.

Unknown Executive: The next question comes from Steve Dunn from Bank of America. Steve, your line is open, please go ahead.

Unknown Executive: The next question comes from Steve Byrne from Bank of America, Steve. Your line is open. Please go ahead.

Unknown Executive: Yes, thank you. When we look at your volume trends over the last five years, there's a fairly meaningful difference between the first half and the second half. And perhaps that's a reflection of the second half being nearly half driven by lap time. But when we look at your volumes in this first quarter, there are. They're lower than the two to five years of volume growth. So something really led to a sharp contraction in the first quarter of volume, but yet your second half volumes, presumably that's LATAM, look like they're gonna get back to 2022 levels, just reverse 2023.

Mike Harrison: Yeah. Thank you when we look at your volume trends over the last five years. It was a fairly meaningful difference between first half second half and perhaps thats a reflection of second half.

Unknown Executive: Nearly half driven by lower town, but when we look at like your volumes in this first quarter.

Unknown Executive: There.

Unknown Executive: They are lower than the Q2 five years of volume growth. So.

Unknown Executive: <unk> really led to the sharp contraction in.

Unknown Executive: In the first quarter in volume, but yet your second half volumes, presumably you've got cloud Tam.

Unknown Executive: It looks like Theyre going to get back to 2022 levels, just reversing 2023, so I guess im trying to understand your.

Unknown Executive: So I guess I'm trying to understand why the difference is between the first and second half of your outlook. And is that second half? potentially driven by just robust demand for insecticides, or are there some additional insect pressures in South America these days?

Unknown Executive: Why the difference between first and second half in your in your outlook.

Unknown Executive: And is that second half.

Unknown Executive: Potentially driven by robust demand for insecticides or there are some additional insect pressures in South America. These days.

Andrew: Hey Steve, it's Andrew. Thanks for the question. First, just to put some of this in context, I think Q1 of 24 here is the last quarter where we're comparing to a pre-channel inventory disruption world. All right, as Mark mentioned earlier, Q1 of 23 was a record quarter for us. Our North America region was up 41% in Q1 of 23 year on year, to put it in perspective.

Unknown Executive: Do you want to make some comments, yeah, Hey, Steve It's Andrew Thanks, Thanks for the question.

Andrew: Just to put some of this in context, I think Q4 Q1 excuse me in Q1 of 'twenty. Four here is the last quarter, where we're comparing to a pre channel inventory disruption world right as Mark mentioned.

Andrew: <unk> earlier Q1 of 'twenty three was a record quarter for us our north Americas.

Andrew: Region was up 41% in Q1 of 'twenty three year on year perspective, right. So we're dealing with a big swing from up from peak to more correction kind of zone and the volume performance in Q Q1 of 'twenty four very much in line with what we've seen with all four quarters of this.

Andrew: So we're dealing with a big swing from a peak to more of a correction kind of zone. And, you know, the volume performance in Q1 of 24 is very much in line with what we've seen with all four quarters of this channel correction. I mean, Q2 of 23, we dropped 23, excuse me, 31 percent. Q3 of 23, we dropped 27 percent in volume. In Q4, we dropped 25 percent of volume. This is, you know, the Q1 performance, I would say, just put in context, is just a continuation of the channel correction that we've always said was going to take at least a year to clear up. You had to get through an anniversary, this change, before you would start seeing any kind of volume return. So I'd put Q1 in that context.

Andrew: Channel correction I mean Q2 of 'twenty three we dropped 23 excuse me, 31% Q3 of 'twenty three we dropped 27% by Q4, we dropped 25% volume. This is the Q1 performance I would say just put in context is just a continuation of the channel correction that we've always said was going to take at least a year to clear out that you had to get through.

Andrew: Anniversary. This change before you would start seeing any kind of volume returns.

Andrew: Q1 in that context, but the second part of your questions I think an interesting one in terms of the size of the growth in the second half and look if you look at percentages in the slide in the presentation and a 23% topline 46% bottom line growth in the second half.

Andrew: But to the second part of your question, which I think is an interesting one in terms of, you know, the size and growth in the second half. And look, if you look at the percentages on the slide that's in the presentation, you know, 23 percent top line, 46 percent bottom line growth in the second half. Those feel like very large numbers. I understand that.

Andrew: Feel like very large numbers I get it but.

Andrew: But when you look at our historical size of business, revenue dollars in the second half that we're implying are similar to what we did in 2021 well before the overbuying, EVIDA dollars are actually lower than 21, sort of between our performance in the second half of 2020 and 2021. So we're not counting on, you know, a massive correction. We're not counting on recouping 2022 type positions where we acknowledge there was overbuying.

Andrew: But when you look at our historical size of business revenue dollars in the second half that we're implying are similar to what we did in 2021, well before they over buying a 2022.

Andrew: EBITDA dollars are actually lower than 'twenty, one sort of between our performance in the second half of 2020 in 2021. So we're not counting on massive correction, we're not on recouping 2022 type positions.

Andrew: We acknowledge there was over by what we have here is a return to more normalcy.

Andrew: What we have here is a return to more normalcy. You know, and given that Latham in particular, if you think about what drives our second half, certainly Latham's a big chunk of it, and the U.S. market and the pre-stocking Q4, big chunks of it. Both of those businesses took big corrections in 2023 and have taken big corrections through the remainder of the season. As Mark described, we're finishing up the current season in Latin America with much lower inventories, particularly at the grower and retail levels.

Andrew: And given that Latam in particular, if you think about what drives our second half certainly Latam is a big chunk of it.

Andrew: In the U S market and pre stocking in Q4 Big Big chunks of it both of those business took big corrections in 'twenty, three and have taken big corrections through the remainder of the season and as Mark described we finished we're finishing up the sea currencies in Latin America with much lower inventories, particularly at grower and retail level. So we're going into a market that.

Andrew: So we're going into a market that is, you know, not normal but is improving. And I think that's the key, the improving market conditions. So net-net, you know, we think that the size of the absolute dollar business we're forecasting doing in the second half is reasonable given, you know, that we are past the worst of these year-on-year comparisons and we're growing from, certainly growing from a smaller base. So again, just be careful. Don't get overwhelmed by the percentage change here. The absolute dollar size of the business, again, compares pretty much to what we were doing in 2020 or 2020.

Andrew: Not normal.

Andrew: But improving and I think thats the key to improving market conditions. So net net we think that the size of the absolute dollar of business. We're forecasting doing in the second half is reasonable given that we are past the worst of easier on year comparisons and we're growing from a certainly growing from a smaller base. So again just be careful don't get get all over.

Andrew: Well by the percentage change here the absolute dollar size of the business again compares pretty much to what we were doing in 2020 or 2021.

Unknown Executive: The next question comes from Andrew Keches from Barclays. Andrew, your line is open, please go ahead.

Andrew: The next question comes from Andrew <unk> from Barclays. Andrew Your line is open. Please go ahead.

Andrew: Thanks, good morning. Andrew, I have a question on the cash flow discussion that you hit on a couple questions ago. So you've said, or at least you've indicated that cash flow will be more back half weighted in 2024. But I also heard Mark talk about starting to rebuild some of those payables already in Brazil.

Andrew Michael Keches: Thanks, Good morning.

Andrew Michael Keches: Andrew I have a question on the cash flow discussion that you hit on a couple of questions ago.

Andrew: So you've said or at least you've indicated that cash flow would be more back half weighted in 2024.

Andrew: But also I heard Mark talk about starting to rebuild some of those payables already in Brazil. So can you give us a sense just for the cadence of cash flow from here. The second quarter is typically a source of free cash flow basis, but just any sort of a relative sense in how back end weighted should we expect it.

Andrew: And then if I can sneak in a tiny follow up you did mentioned continued deleveraging in 2025. This year appears to be mostly cash inflows and debt repayment driving that is next year going to include debt repayment as well or is that more about EBITDA growth. Thanks.

Andrew: So can you give us a sense just for the cadence of cash flow from here? The second quarter is typically a source on a free cash flow basis, but just any sort of relative sense, and how back-end weighted should we expect it? And then, if I can sneak in a tiny follow-up, you did mention continued deleveraging in 2025, but this year appears to be mostly cash inflows and debt repayment driving that. Is next year going to include debt repayment as well, or is that more about EBITDA growth?

Andrew: Certainly thanks, Thanks, Ed I appreciate the question look I think on that one.

Andrew: A cash flow basis, the free cash flow is very heavily weighted to the second half of this year.

Unknown Executive: Thanks.

Andrew: Negative free cash flow in the first quarter as is normal but significantly less than the prior year quarter right and that's a big inflection and marks the change in inventory levels for us where we would traditionally have a working capital build in Q1 with growing inventory Q2, I would expect still probably to be breakeven to negative cash flow.

Andrew: Certainly, thanks, thanks, I appreciate the question. Look, I think on a dollars of cash flow basis, the free cash flow is very heavily weighted to the second half. We were negative free cash flow in the first quarter, as is normal, but significantly less so than the prior year quarter, right? And that's a big inflection and marks the change in inventory levels for us, where we would traditionally have a working capital building Q1 with growing inventory. Q2, I would expect it still probably to be break-even to a negative cash flow, and we're not going to guide it precisely; there's just too many moving variables.

Andrew: No we're not going to guide it precisely there's just too many moving variables.

Andrew: But I would tell you that essentially all of the positive free cash flow for the year is going to come in the second half. And again, the key drivers for the full year in free cash flow are reduced inventory and the rebuilding of payables. And this dance, this balance that Mark and I have been talking about this morning, we are starting to spool up and restart manufacturing. It will pull through. That will, you know, add in, you know, create some work in process and finished goods inventory that flows into the inventory, and then we sell through it.

Andrew: But I would tell you that all essentially all of the positive free cash flow for years to come in the second half and again the key drivers for the full year on free cash flow, it's reduced inventory.

Andrew: And its rebuilding of payables in this dance this balance that Mark and I have been talking about this morning.

Andrew: We are starting to spool up and restart manufacturing lines that will pull through purchases that will add to and create some work in process and finished goods inventory flows and inventory and then we sell through what we are carefully balancing is continuing to bring down our absolute level of inventory, while selling through at a higher rate we're.

Andrew: What we are carefully balancing is continuing to bring down our absolute level of inventory while selling through at the higher rate we're expecting to sell in the second half, new production. So it will be a gradual step as we go through the rest of the year to bring payables back up to a more reasonable level and to get inventory again, you know, a couple hundred million less than where we are today. So that'll be the combination of those two.

Andrew: Acting as sell in the second half.

Andrew: New production.

Andrew: So it will be.

Andrew: Stagger step as we go through the rest of the year.

Andrew: To bring payables back up to a more reasonable level and they get inventory again, a couple of hundred million less than where we are today. So there'll be the combination of those two and it really will take through the full second half to get the cash benefit from those actions.

Andrew: And it really will take through the full second half to get the cash benefit from those. You know, as we think about the second part of your question and think about leverage, certainly, we've been very clear, you know, the priority for all available cash after paying the dividend this year is paying down debt. So, proceeds from divestiture, from pre-cash flow, we generate organically.

Andrew: As we think about the second part of your question in thinking about leverage certainly we've been very clear that the priority for all available cash after paying the dividend. This year is paying down debt. So proceeds from divestiture from free cash flow, we generate organically in 2025, we still have a significant way to go to get the leverage to the right place.

Andrew: In 2025, we still have a significant way to go to get the leverage to the right place. We will continue to see leverage improvement, but it will be driven by two factors instead of just debt repayment. It will be driven by growth in EBITDA. We absolutely are expecting to have growth in EBITDA that will help us to bring leverage back to more of a normal level for this business and well within the kind of covenant range we should be at.

Andrew: We'll continue to see leverage improvement, but it will be driven by two factors instead of just debt repayment. It will be driven by growth in EBITDA. We absolutely are expecting to have growth in EBITDA that will help us to bring leverage back to more of a normal level level for this business and well within the covenant range, we should be at.

Andrew: But we will also continue to prioritize free cash use for debt repayment until we get the balance sheet into the right place. All right, so I think it will be that combination of the two levers; it will be growth in EBITDA in 2025, as well as still a commitment to utilizing free cash flow to get leverage into the right place. As we go through 2025, it gets us to that, you know, where we think will be right about the targeted levels by the time we get to the end. The next question comes from Adlaine Rodriguez from Mooseyhoe.

Andrew: But we will also continue to prioritize free cash use for debt repayment until we get the balance sheet and to the right place right. So I think it will be that combination of the two levers there will be growth in EBITDA in 2025, as well as still a commitment to utilizing free cash flow to get leverage to the right place as we go through 2025, it gets us to.

Andrew: Where we think we'll be right about the targeted levels by the time, we get to the end of 2025.

Unknown Executive: The next question comes from Adelaine Rodriguez from Mooseyhoe. Adelaine, your line is open. Please go ahead.

Unknown Attendee: The next question comes from Lane Rodrigo from Mizuho. Your line is open. Please go ahead.

Unknown Executive: Adlaine, your line is open, please go ahead. Thank you. Good morning, everyone.

Unknown Executive: Yeah.

Unknown Attendee: Thank you and good morning, everyone.

Unknown Attendee: Just a quick follow up on markets normalize.

Unknown Attendee: Normalized normalizing.

Unknown Attendee: Inventory destocking to come soon and and as you get into 2025, how do you see volume growth for the portfolio in 2025 and 2026.

Unknown Executive: Yeah, listen, as we go through 25, I think we've said that we expect what we would consider a more normal type of growth for the marketplace. Acres continue to grow in certainly Latin America and Brazil. So we expect that to be a driver. And don't forget, at that point, people will then be resetting from a lower level of inventory.

Unknown Attendee: Yes listen as we go through 25, I think we've said that we expect to what we would consider a more normal type of growth for the marketplace.

Unknown Executive: Acres continue to grow in certainly in Latin America and Brazil.

Unknown Executive: So we expect that to be a driver and don't forget at that point people will be then resetting from a lower level of inventory. So you would expect more of a normal market growth.

Unknown Executive: Typical market like this grows at anywhere from 2% to 3% per annum, and we generally speaking without different differentiated portfolio outgrow the market in the long haul. So I think it's more of a normalized market demand on the ground as we said even in these conditions is very good we expect that to come.

Unknown Executive: So you'd expect more of a normal market growth. A normal market like this grows at anywhere from 2% to 3% per annum, and we, generally speaking, without a different differentiated portfolio, outgrow the market in the long haul. So I think it's more about a normalized market.

Unknown Executive: Demand on the ground, as we said, even in these conditions is very good, and we expect that to continue. Test pressure continues to change.

Unknown Executive: <unk>.

Unknown Executive: Russia continues to change.

Unknown Executive: So we see that market piece as being pretty robust. Obviously, our MPIs are growing rapidly. So we would expect 25 and 26 to be actually faster than the growth we see in 24. And then the other piece of which is not really market driven but just a view of 25. We have a lot of cost headwinds flowing against us right now that are obviously depressing our EBITDA and our EBITDA margin. But those will turn into tailwinds as we go into next year.

Unknown Executive: So we see that market piece has been pretty robust.

Unknown Executive: Obviously, our NPI is growing rapidly. So we would expect 25% in 2006 to be actually faster than the growth we see in 'twenty four.

Unknown Executive: And then the other piece of which is not really market driven but just a view of 2005, we have a lot of cost headwinds flowing against US right now that are obviously depressing, our EBITDA and our EBITDA margin those turn into a tailwind as we go into next year and I think it's an important facet as we walk through the next couple of earnings calls.

Unknown Executive: And I think it's an important facet as we walk through the next couple of earnings calls, as we build out the picture of what 25 is going to look like. You certainly have got a more stable, more robust external market. But we also have some pretty significant tailwinds in the sense of how we think about our P&L. Andrew, do you want to comment on that? Yeah, I think Mark, you know, as we do

Andrew: As we build out the picture of what 25 is going to look like.

Unknown Executive: Certainly have got a more stable more robust external market, but we also have some pretty significant tailwind in the sense of how we think about our P&L Andrew do you want to comment on that.

Andrew: Yeah, I think Mark, you know, as we looked at 25, obviously, one of the headwinds we're dealing with this year is unabsorbed fixed costs from low manufacturing activity. You know, as we go through this delicate dance we've been describing this morning and get back to more normal operating rates. By the time we get to the end of this year, we anticipate being past that, to where the relatively significant headwinds we've had this year from unabsorbed fixed costs are no longer there.

Andrew: Yes, I think mark as we'd looked at 25, obviously one of the headwinds that we're dealing with this year as unabsorbed fixed costs from lower manufacturing activity.

Andrew: Yes.

Andrew: As we go through this delicate dance, we've been describing this morning and get back to more normal operating rates by the time, we get to the end of this year, we anticipate being passed that.

Andrew: <unk>.

Andrew: Relatively significant wins, we've had this year from unabsorbed fixed costs.

Andrew: Are no longer there. So if you think about the absence of the headwind going into 'twenty five.

Andrew: So if you think about the absence of a headwind going into 25, itself being a bit of a tailwind or a stronger base for performance in 25, I think certainly that will be a key element of our outlook. Now, we've got to see how the rest of the year develops. But I think based on how we see things today and the way we're planning to wrap up production, I do expect that volume variance piece, that, you know, unabsorbed fixed costs, to really ease by the time we get through the end of this year.

Andrew: <unk> being a bit of a tailwind or a stronger base for performance and 25%.

Andrew: Certainly that will be a key element of our outlook now we got to see how the rest of the year develops but I think based on how we see things today and the way we're planning to wrap up production do you expect that that volume variance piece that unabsorbed fixed costs.

Andrew: Really eased by the time, we get through the end of this year.

Andrew: The next question comes from Mike Harrison at Seaport Research Partners. Mike, your line is open. Please go ahead.

Andrew: The next question comes from Mike Harrison with Seaport Research Partners. Mike. Your line is open. Please go ahead.

Unknown Executive: Hi, good morning. I was hoping that maybe you could give a little bit of additional color on the recent new product launches and how they're performing relative to expectations. And then you mentioned just now that you would expect some acceleration in 2025 and 2026. Maybe help us understand how you see grower adoption evolve and those adoption rates change from the launch year into the second and third year post-launch for those new products. Yeah, thanks.

Mike Harrison: Hi, good morning.

Mike Harrison: Was hoping maybe you could give a little bit of additional color on the recent new product launches and how they're performing relative to expectations. And then you mentioned just now that you would expect some acceleration in 'twenty five and 26, maybe help us understand how you.

Unknown Executive: C grower adoption.

Unknown Executive: Evolve.

Unknown Executive: As adoption rates change from the launch year into the second and third year post launch.

Unknown Executive: Those new products.

Unknown Executive: Yeah, thanks, Mike. If you look at what we've been talking about today in terms of how we think about what we call MPI products launched in the last five years, we've gone from back in 2020, 2021, about 10 percent of our portfolio is made up of those new MPIs. In 23, it was about 13 percent. We're expected to be about 17 percent this year. You can see that it takes a number of years for those numbers to start to creep up. The reason is that you never get to peak sales in year one. It's impossible in this market,

Speaker Change: Yes, Thanks, Mike.

Unknown Executive: If you look at what we've been talking about today in terms of how we think about the what we call NPI products launched in the last five years.

Unknown Executive: We've gone from back in 2000, 22021 about 10% of our portfolio from those new Ntis in 2003 was about 13% where you expect it to be about 17%. This year you can see that it takes a number of years for those numbers to start to creep up in the <unk>.

Speaker Change: <unk> you.

Unknown Executive: We'll never get to peak sales in year, one I mean, it's impossible in this market peak sales can be anything from five.

Unknown Executive: Peak sales can be anything from five years through to 10 years. We still have some active ingredients that are 10 plus years old that continue to grow as we find new applications for them. We've talked about fungicides. North America is doing a very good job, especially with the fluindipia-based fungicides. They've now been launched in Brazil and Argentina, and they'll be launched in other parts of the world as we go through 2025.

Unknown Executive: Five years 10 years I mean, we still have some active ingredients that are 10 plus years old continue to grow as we can find new applications for them.

Unknown Executive: We've talked about.

Unknown Executive: The fungicides.

Unknown Executive: North America doing a very good job, especially with the fluid in the peer base fungicides, they've now been launched in Brazil, and in Argentina, and there'll be launched in other parts of the world as we go through 'twenty. Five so you should expect us to talk about the flow into peer fung Besides growing nicely in 'twenty five 'twenty six.

Unknown Executive: You should expect us to talk about the fluindipia fungicides growing nicely in 2025, 2026, and easily through 27. The diomides continue their track of new introductions. The premier star insecticide that we talked about has grown rapidly. We launched it in Q4.

Unknown Executive: Through 2007.

Unknown Executive: The <unk> continue that track of new introductions the premiere of Star insecticides that we talked about has grown rapidly we launched it in Q4. It grew very well in Q1, we expect the 'twenty four 'twenty five season to be very interesting and continued growth pest pressure is not going away in Brazil.

Unknown Executive: It grew very well in Q1. We expect the 24-25 season to be very interesting and continued growth. Pest pressure is not going away in Brazil.

Unknown Executive: And we have by far the most robust portfolio of insecticides in the world. So that's a market that we do expect to continue to grow. On top of that, we have isoflex, which is the grass herbicide that we released in Australia and that is now being put into Argentina.

Unknown Executive: And.

Unknown Executive: We have by far the most robust portfolio of insecticides in the world. So that's a market that we do expect to continue to grow on top of that we.

Unknown Executive: We have Isa flex, which is.

Unknown Executive: The graph besides that we released in Australia that is now being put into Argentina. It will go into other parts of Asia as we go through the 25 season, and then probably more exciting than all of those trust me Theyre pretty exciting molecules, we have the brand new rice herbicide that comes in 2000.

Unknown Executive: It will go into other parts of Asia as we go through the 25th season. And then, probably more exciting than all of those, and trust me, they're pretty exciting molecules. We have the brand new rice herbicide that comes in 2026. And that really is a game changer because rice is a grass, and killing grass in rice is not easy.

Unknown Executive: 2006, and that really is a game changer rices.

Unknown Executive: <unk> is a grass and killing draws in rice is not easy we have the first new mode of action in 30 years. So Asia is a major target for us in 2026, and then outside of that.

Unknown Executive: We have the first new mode of action in 30 years. So Asia is a major target for us in 2026. And then, outside of that, on the biological and pheromone side, we will have our first soft launch of our first pheromone in Brazil in 25. And that means it will build in 26 and 27 and beyond through the next decade.

Unknown Executive: The biological and pheromone side.

Unknown Executive: We'll have our soft launch of our first ceremony in Brazil in 'twenty, five and that means it will build in 2006 and 2007 and beyond through the next decade, that's really the first launch of that whole new platform that we've built we're making excellent progress in terms of R&D, we have our manufacturing.

Unknown Executive: That's really the first launch of that whole new platform that we've built. We're making excellent progress in terms of R&D. We have our manufacturing and supply chain coming together very well. We're producing our first real amounts of these pheromones through our new process. So you can tell that over the next few years, the robustness of that portfolio is really, really strong.

Unknown Executive: Supply chain coming together very well, we're producing our first real amounts of these pheromones through our new process. So you can tell that over the next few years, the robustness of that portfolio, it's really really strong.

Unknown Executive: Okay.

Unknown Executive: The next question comes from Arun Viswanathan from RBC Capital. Arun, your line is now open, please go ahead.

Unknown Executive: The next question comes from Aaron Vishwanathan from RBC capital.

Unknown Executive: Great, thanks for taking my question. Congratulations on a good Q1 here. So I guess I just wanted to ask about the second half.

Arun Viswanathan: Your line is now away from please go ahead.

Andrew: Andrew, you provided some very useful comments, I guess, noting that on a dollar basis, it looks like your second half looks like you should be at 2020 or 2021 levels, and you will be exiting, according to your guidance, at least at the midpoint, at, say, $1.25 billion or so on an annualized basis. If you were to annualize that second half guidance, so is that kind of how you're thinking about twenty five and maybe, you know, informing your comments?

Arun Viswanathan: Great. Thanks for taking my question congrats on.

Andrew: The Q1 here.

Speaker Change: So I guess I just wanted to ask about the second half Andrew you provided some.

Andrew: Very useful comments I guess.

Andrew: Noting that on a dollar basis it looks like your second half looks like.

Andrew: You should be at 2020 or 2021 levels.

Andrew: And you will be exiting according your guidance at least at the midpoint at say 1.25 billion or so on an annualized basis.

Andrew: If you were to annualize that second half guidance. So is that kind of how youre thinking about.

Andrew: 25, and maybe informing you in your comments I think in 2020, you did that one five and 2021 you did one three to one.

Andrew: I think in twenty twenty, you did that one, two, five and twenty twenty-one. You did one, three, two of a billion of EBITDA. I know it's still a ways away, but just kind of wondering if you think that the second half guidance really encapsulates that normalization. Thanks.

Andrew: EBITDA.

Andrew: I know, it's still a ways away, but just kind of thinking if you think that the second half guidance really encapsulates that normalization.

Andrew: Thanks.

Andrew: Yeah, thanks, Arun. Certainly, look, always be cautious when trying to annualize a very seasonal business, right? And obviously, different dynamics in each quarter of regional mix and product mix, etc. But I think your bigger point, right, returning up to sales levels that are, you know, not necessarily 2022 by any means, but that sales and EBITDA levels that look more like where the business was a few years ago, not an unreasonable assumption going into 2025. It's too early to get too granular here.

Speaker Change: Yeah. Thanks, Jerry I think certainly like always cautious when trying to annualize a very seasonal business right and obviously a different dynamics in each quarter of the regional mix and product mix etcetera, but I think youre bigger point right returned to sales levels that are not necessarily 2022 by any means but the sales and EBITDA levels that look more.

Andrew: More like where the business was a few years ago, not an unreasonable assumption going into 2025.

Andrew: It's too early to get too granular here.

Andrew: But I do think.

Andrew: But you know, I do think, a combination from the top line, we're in a situation right now where inventories downstream of us are really getting more and more light, and people are targeting levels of inventory that we would argue are not sustainable over a multi-year period downstream of us. You know that at some point, there has to be some rebalancing. That's not going to happen quickly. But over time, there could be some rebalancing and just getting back into the more normal flow. Look, the one thing we've pointed out, and we're very comfortable and confident in: grower use of crop protection chemistry has been steady and increasing throughout this disruption.

Andrew: Combination from top line and we are in a situation right now where inventories downstream of us our firm are really getting more and more light.

Andrew: People are targeting levels of inventory that we would argue are not sustainable over a multi year period downstream of us yes.

Andrew: That at some point there has to be some rebalancing that's not going to happen quickly, but over time, there could be some rebalancing and just getting back into the more normal flow like the one thing we pointed to and we're very comfortable and confident with <unk>.

Andrew: Grower use of crop protection chemistry has been steady and increasing throughout this disruption.

Andrew: We had an overbuying in the channel in 2022 that built up excess channel inventory. We've had an overcorrection and are rapidly drawing that down in 2023 and into 2024. As those draw down, manufacturing supply has to get back more in balance and in sync with underlying consumption by growers. That will drive healthier top-line demand in 2025 than we've seen in 2024. When you look down to EBITDA, right, we've talked a little bit about, you know, what's going on with our manufacturing operations.

Andrew: We had an over buying in the channel in 2022 that built up excess channel inventory, we had an overcorrection and rapidly drawing that down in 2023 and enter 2020 for that as those drawdown manufacturing supply has they would get back more in balance and in sync with underlying consumption by growers that will drive healthier.

Andrew: Topline demand and 2025 than we've seen in 2024.

Andrew: When you look down to EBITDA right, we've talked a little bit about whats going on with our manufacturing operations and through the second half when we start ramping up production.

Andrew: And through the second half, we start ramping up production and getting back to, you know, more normal capacity utilization. Thus, there will be cost tailwinds, or the absence of headwinds from unabsorbed fixed costs as we go into 2025. So that top line growth, you know, with better manufacturing costs or with mixed benefits from new product introductions and some of the exciting things Mark was just talking about in terms of growth drivers for us long term with new products, you know, that should drop more of that growth to the bottom.

Andrew: Getting back to more normal capacity utilizations, there will be cost tailwind or are the absence of headwinds from unabsorbed fixed costs. As we go into 2025, so that top line growth with with better manufacturing costs or with mixed benefits from new product introduction and some of that.

Andrew: Exciting things Mark was just talking about in terms of growth drivers for us long term with new products.

Andrew: That should drop more of that growth to the bottom line. So again too early to give firm outlook for 'twenty five but I do think we feel pretty strongly that there's a positive outlook out there.

Andrew: So, you know, again, too early to get a firm outlook for 25, but I do think we feel pretty strongly that there's a positive outlook out there. We have, you know, a couple more quarters to really get through here. Q2 is a big inflection point with a return to volume growth, and then the second half, you know, getting back into, you know, much improved market conditions from what we saw in 2020. Mark, I don't know if I said that. No, but a good review Andrew.

Andrew: We have a couple more quarters to really get through here Q2 is a big inflection where.

Andrew: With a return to volume growth and then the second half and getting back into it.

Andrew: Much improved market conditions from what we saw in 2023.

Mark: Now, good review, Andrew. Our final question today comes from Laurence Alexander from Jeffreys. Laurence, your line is open, please go ahead.

Speaker Change: Good review Andrew.

Mark: Our final question today comes from Laurence Alexander from Jefferies. Laurence Your line is open. Please go ahead.

Unknown Executive: Good morning, this is Dan Rizzo on for Lawrence. Thanks for squeezing me in.

Speaker Change: Good morning. This is Dan Rizzo on for Laurence. Thanks for squeezing me in you talked a lot about about getting inventories down and payables and working with those I'm. Just wondering what's in terms of receivables if youre comfortable where they are or if that's something that has to be worked on as well.

Unknown Executive: Sure. Thanks. Thanks for the question.

Speaker Change: Sure. Thanks. Thanks for the question I think yes, I think we're comfortable with the receivables is always opportunity to continue to be more efficient. This is a working capital intensive business, we get it.

Andrew: I think, yeah, I think we're comfortable with receivables. There are always opportunities to continue to be more efficient. This is a working capital-intensive business. We understand that.

Daniel Rizzo: There will be some use of cash in the second half as we returned to growth and that actually bring some growth in receivables, but we have been very carefully our balance sheet and I think if you look at our how we've chosen to manage through this correction period as opposed to some of our peers and we have been disciplined about.

Andrew: There will be some use of cash in the second half as we, you know, return to growth, and that naturally brings some growth in receivables. But we have been very careful with our balance sheet. And I think if you look at our, you know, how we've chosen to manage through this correction period, as opposed to some of our peers, you know, we have been disciplined about pricing and about not chasing volume that wasn't there.

Andrew: About pricing and about not chasing volume that wasn't there so as not to build up receivables and longer term collection risk.

Andrew: So it's not to build up receivables and longer-term collection risk. You know, I think we're in a position now where there's always collection risk, but we are in a very, very good position. We understand where our risks are. We understand, you know, we've taken some lumps by not again pursuing extra volume when there really wasn't volume in the market to be had. And instead, you know, working through this so that we can come into what will be an upturn here in the second half and into 2025 with a strong balance sheet with healthy receivables. So again, there is always room and opportunity to continue to look for ways to improve our working capital efficiency. But in terms of the quality of our balance sheet, we feel very confident.

Andrew: I think we're in a position now where.

Andrew: Theres always collection risk, but we are at a very very good position, we understand where our risks are we understand and we've taken some lumps by not again not pursuing extra volume when there really wasn't volume in the market to be had.

Andrew: And instead working through this so that we can comment to what will be an upturn here.

Andrew: Second half and then to get into 2025 with a strong balance sheet with healthy receivables.

Andrew: Again always room and opportunity to continue to look for ways to improve our working capital efficiency, but in terms of the quality of our balance sheet, we feel very confident.

Andrew: Okay.

Unknown Executive: We've now concluded our Q&A session, so I'll hand the call back to Kurt.

Speaker Change: We will now conclude our Q&A session. So I'll hand, the group back to Cup.

Unknown Executive: Thanks, everyone. Have a good day.

Kurt: Thanks, everyone have a good day.

Unknown Executive: This concludes the FMC Corporation Conference Call. Thank you for attending. You may now disconnect.

Kurt: This concludes the FMC Corporation conference call. Thank you for attending you may now disconnect.

Unknown Executive: [music].

Unknown Executive: Okay.

Unknown Executive: Yeah.