Q3 2024 FMC Corp Earnings Call
Good morning and welcome to the third quarter of 2024, earnings call for FMC Corporation. This event is being recorded in all participants are in the recent only mode.
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Speaker Change: I would now like to turn the conference over to Mr. Curt Brooks, an operator of investor relations for FMC Corporation. Please go ahead.
Curt Brooks: Good morning everyone. Welcome to FMC Corporation's third quarter earnings call.
Speaker Change: Chairman and Chief Executive Officer Andrew Sandifer, Executive Vice President and Chief Financial Officer, and we're in all the Pereira President.
Speaker Change: Following our prepared remarks, we will take questions.
Speaker Change: Our earnings release in today's slide presentation are available on our website and the prepared remarks from today's discussion will be made available after the call.
Speaker Change: Let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to those factors identified in our earnings release and in our following with the Securities and Exchange Commission.
Speaker Change: Information presented represents our best judgment based on today's understanding.
Speaker Change: Actual results may vary based upon these risks and uncertainties.
Speaker Change: Today's discussion and the supporting materials will include references to adjusted EPS, adjusted Ebitda, adjusted cash from operations, free cash flow and organic revenue growth. All of which are non-gap financial measures.
Speaker Change: Please note that is used in today's discussion earnings means adjusted earnings and EBITDA, means adjusted EBITDA.
Speaker Change: or reconciliation and definition of these terms, as well as other non-gap-fantles terms, to which you may refer during today's conference call are provided on our website.
Speaker Change: I'll now try and call over to Pierre.
Pierre: Thank you, Curt, and good morning, everyone.
Pierre: Before we get into the details of the third quarter and a forward guidance, I want to start by giving an overview of the company's performance and a review of the current market conditions.
Pierre: Overall, we report a strong third quarter with growth at the top and bottom line.
Pierre: The quarter unfolded mostly as expected in Europe and Asia.
Pierre: However, we operated in a weaker-than-expected market landscape in Latin America, which was offset by a stronger-than-anticipated performance in North America.
Pierre: Latin America faced some unanticipated challenges this quarter.
Pierre: but we still deliver growth.
Pierre: Markets in Brazil and Argentina were more challenging than expected due to the delayed rains and increased borrowing rates.
Pierre: The bankruptcy of a large customer in Brazil added specific challenges for SMC.
Pierre: Given that we believe we are only a couple of quarters away from a more normal market situation, we decided to take pressing actions to maintain a market position.
Pierre: In fact, about two-thirds of the total company price decline in the quarter came from Brazil and Argentina.
Pierre: The rest of the region performed at or above expectations.
Pierre: While conditions are improving, it is clear that Latin America has not yet emerged from the down cycle as distributors and growers continue to manage their inventories carefully.
Pierre: On the other hand, North America's performance was stronger than expected.
Pierre: More than half of the region's sales growth was due to increased order by iodamide partners.
Speaker Change: I would add a note of clarification here.
Speaker Change: While the sales to these partners are recognized in North America, the final product is not always sold by the partner in that region. This creates the potential for North America sales to appear higher at the expense of other regions.
Speaker Change: The North America region also benefited from distributors shifting purchase from Q4 into Q3 in response to lower-than-expected inventory levels in the channel.
Speaker Change: On the product line front, sales appear one of the two Diamide products reported growth in every region.
Speaker Change: and was the fastest growing molecule with 58% higher sales than the prior year.
Speaker Change: Strong branded sales appear sales and increased orders from the partners led to the DMIs outperforming the overall portfolio.
Speaker Change: As we mentioned on the Q2 earnings score, the performance of new products is critical to a second-half growth expectation.
Speaker Change: These products include new formulations of the diamides, as well as two of the four brand new active ingredients we highlighted during our Q2 earnings score.
Speaker Change: Fluentapyr-based fungicide and herbicides containing isoflax active are already receiving strong interest and demonstrating their growth potential.
Speaker Change: We expect combined sales of fluindapyr and isoflax-based products to reach over $100 million in sales in the second half of the year.
Speaker Change: The launch of FluentAppear is especially important as fungicides are a product category in which SMC has historically been underway.
Speaker Change: As I mentioned earlier,
Speaker Change: We saw more challenging markets than expected in Latin America, especially Brazil and Argentina.
Speaker Change: With expected channel inventory improvement on the horizon, we made the conscious decision to protect market share in those countries, even if it created price pressure beyond what was forecasted.
Speaker Change: This strategy is validated by North America, where price pressure was the lowest this quarter as its channel normalized.
Speaker Change: Looking ahead.
Speaker Change: Our view on the timeline of channel inventory recovery is relatively unchanged from what we communicated during our August earnings call.
Speaker Change: The U.S. and most countries in Europe are normalizing the fastest
Speaker Change: And Latin America is expected to be much improved in the second quarter of 2025.
Speaker Change: Asia markets are still expected to be challenging in 2025, with no recovery expected until 2026 as India continues to work through excess channel inventory.
Speaker Change: on a coastal basis.
Speaker Change: We are accelerating the delivery of savings and increasing our targets.
Speaker Change: We are now targeting cost benefits.
Speaker Change: from a structuring of 125 million barrels.
Speaker Change: to 150 million dollars.
Speaker Change: to be reflected in the PNL in 2024 with greater than $225 million of gross run rate in 2025.
Speaker Change: To accomplish this,
Speaker Change: We're accelerating restructuring.
Speaker Change: taking new critical initiatives to realign a manufacturing footprint and using attrition as a key tool to drive further savings.
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!
Speaker Change: We are confirming a four-year guidance adjusted for the sale of the global specialty solutions business.
Speaker Change: which we are now expecting to be sold in early November.
Speaker Change: This translates to fourth quarter sales growth of 19% at the guidance midpoint.
Speaker Change: Despite continued channel inventory issues in India,
Speaker Change: and less than optimal early season conditions in Brazil and Argentina. We are confident in our ability to deliver on our guidance based on the strength of our new products, as well as cost benefits.
Speaker Change: from Restructuring Actions while Market Conditions Improve.
Speaker Change: With that, let's review the company's third quarter performance in more detail.
Speaker Change: Slide 3 through slide 5 provides an overview of the third quarter results.
Speaker Change: Sales growth of 9% was above the midpoint of a gallon's range, with organic sales growth of 12%.
Speaker Change: Voting grew by 17% led by Brazil and the U.S.
Speaker Change: In addition, sales to our diamide partners grew strongly in North America.
Speaker Change: Pricing was lowered by 5% with approximately two-thirds of the decline attributed to Brazil and Argentina.
Speaker Change: due to the challenging conditions I mentioned earlier.
Speaker Change: on a regional basis.
Speaker Change: North America sales increased 48% because of strong volume growth.
Speaker Change: Infecticide delivers significantly higher sales due to increased order from Diamide's partner and gains in branded sales of their products.
Speaker Change: with 15% growth excluding currency.
Speaker Change: Sales were higher across all product categories due to volume growth versus the prior year period, mainly in Brazil, more than offset, lower pricing and FX headwinds.
Speaker Change: New products were a key factor to growth, most notably from the fluindapyr-based onzuma fungicide now commercialized in Brazil, Argentina, and Paraguay.
Speaker Change: We also saw increases in the new diamide formulation, Corregent Evo in Argentina, and the Sulfentrazone-based herbicide Borofluor in Brazil.
Speaker Change: The robust sales of new products in a challenging market environment reflect the strength of FMC R&D pipeline.
Speaker Change: in Asia.
Speaker Change: The 10% sales decline was mostly due to lower sales in India.
Speaker Change: This talking in that country's channel is making good progress aided by favorable weather.
Speaker Change: Finally, in the NEA, sales declined 7% driven by lower volume from expected registration losses.
Speaker Change: Branded diamides showed very strong growth, especially in Germany.
Speaker Change: Excessive wet weather in Central Europe acted as a moderate headwind, especially in herbicides.
Speaker Change: Turning to slide 5. Adjusted EBITDA grew 15% year-over-year above the high-end over a gallon's range.
Speaker Change: Increased sales volume, FX tailwinds, and above-target cost savings from restructuring more than offset lower pricing and unabsorbed fixed costs from prior periods.
Speaker Change: Slide 6 provides an update on these restructuring actions.
Speaker Change: We are pleased to report continued solid progress on this front.
Speaker Change: As I stated in my opening,
Speaker Change: We now expect cost savings.
Speaker Change: Over $125 million to $150 million delivered to the PNL in 2024, with gross run rate savings greater than $225 million in 2025.
Speaker Change: Earlier this year, we announced our agreement with NGU
Speaker Change: to divest a global specialty solutions business for $315 million.
Speaker Change: We expect this deal to close in early November.
Speaker Change: As such, we are confirming a full year's gain, less the foregone revenue and earnings from this business after the sale closes.
Speaker Change: This equates to an impact of $20 million in revenue and $10 million in EBITDA.
Speaker Change: These adjustments for GSS
Speaker Change: has been made to the full year outlook on slide 7.
Speaker Change: Other Learning Suggestions
Speaker Change: The outlook for the full year remains unchanged.
Speaker Change: We expect revenue to decline 2% as volume growth is more than offset by lower price and effects.
Speaker Change: Heavy winds!
Speaker Change: EBITDA is expected to be lower by 8% and growth in the last nine months of the year is not expected to fully offset the lower results from the first quarter.
Speaker Change: EPS is guaranteed to be lower by 12% at the midpoint from lower EBITDA.
Speaker Change: Slide 8 provides our expectations for the fourth quarter, which has been revised from the preliminaries to adjust for the GSS sale and the overdelivery in Q3.
Speaker Change: At the midpoint, we expect revenue growth of 19% driven by higher volume in all regions.
Speaker Change: Price is expected to be a big single-digit headwind as challenging market conditions persist mostly in Asia and Latin America.
Speaker Change: FX is expected to be a low single-digit headwind.
Speaker Change: New products are expected to be a key contributor to growth, including
Speaker Change: across the region, such as Curitiba in Argentina.
Speaker Change: fundicides such as Onsuma in Brazil and Saewoo in the U.S.
Speaker Change: and Azugro in Brazil, the herbicide-based anisoflaxacine.
Speaker Change: New product sales are expected to contribute about half of the sales growth for Q4.
Speaker Change: They are key to overall growth as they were in the Q3 performance despite sub-optimal market conditions.
Speaker Change: EBITDA in the quarter is expected to grow by 32% at the midpoint due mainly to higher sales as volume more than offsets lower price and affects headwinds.
Speaker Change: The Unabsorbed Fixed Cost
Speaker Change: and sell-through of higher-cost inventory that have acted as COGS headwinds for most of the year are expected to have a much smaller impact in Q4 and will be more than offset by lower raw materials and restructuring benefits.
Speaker Change: I will now hand the call over to Andrew.
Andrew Sandifer: to cover some financial items, including a cash performance, and I would look.
Andrew Sandifer: Thanks, Pierre.
Andrew Sandifer: I'll start this morning with a review of some key income statement items.
Andrew Sandifer: FX was a 3% headwind to revenue growth in the third quarter, largely stemming from the Brazilian Rio.
Andrew Sandifer: For the remainder of 2024, we anticipate continued low single-digit FX headwinds in revenue, again, driven primarily by the Brazilian REI.
Andrew Sandifer: Interest expense for the third quarter was $58.7 million, down nearly $6 million compared to the prior year period, driven by lower debt balances.
Andrew Sandifer: For full year 2025, we continue to expect interest expense to be in the range of 235 to 240 million dollars, essentially flat year-on-year at the midpoint, with the impact of higher rates on domestic debt offset by lower overall borrowings.
Andrew Sandifer: We've lowered our outlook for effective tax rate on adjusted earnings for full year 2024 to a range of 13 to 15 percent, reflecting improved clarity on the impacts of recent tax law changes on FMC's 2024 tax rate.
Andrew Sandifer: In light of this, our effective tax rate for the third quarter was 11.8%, bringing our year-to-date accrual for income taxes in line with the 14% midpoint of this range.
Andrew Sandifer: Moving next to the Balance Sheet and Leverage.
Andrew Sandifer: Gross debt at September 30th was approximately $4.1 billion, down $110 million from the prior quarter.
Andrew Sandifer: Cash on hand decreased $55 million to $417 million, resulting in net debt of approximately $3.7 billion.
Andrew Sandifer: Gross debt to trailing 12-month EBITDA was 5.0 times at quarter end, while net debt to EBITDA was 4.5 times.
Andrew Sandifer: Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 5.0 times as compared to a covenant of 6.0 times.
Andrew Sandifer: As a reminder, our Covenant Leverage Limit will step down to 5.0x at December 31, 2024.
Andrew Sandifer: We expect Covenant leverage to be approximately four times by year-end, reflecting both year-on-year EBITDA growth in the second half, as well as the receipt of proceeds from the sale of our global specialty solutions business, which, as Pierre noted earlier, is expected to close in early November.
Andrew Sandifer: We remain committed to returning our leverage to levels consistent with our targeted BBB-BAA2 long-term credit ratings.
Andrew Sandifer: We will do this through EBITDA growth and disciplined cash management with all discretionary free cash flow directed towards debt reduction until we return to our targeted metrics.
Andrew Sandifer: Moving on to free cash flow on slide nine.
Andrew Sandifer: Free cash flow in the third quarter was $132 million, an improvement of $100 million versus the prior year period.
Andrew Sandifer: Improved cash from operations and lower capital additions more than offset somewhat higher legacy and transformation spending resulting from our ongoing restructuring program.
Andrew Sandifer: Here to date free cash flow of 225 million dollars is an increase of over 1 billion dollars compared to the prior year period.
Andrew Sandifer: Cash provided by improved accounts payable and inventory more than offset increased cash used by receivables, lower EBITDA, and restructuring spending.
Andrew Sandifer: We continue to expect free cash flow of $400 to $500 million for full year 2024, driven by 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.
Speaker Change: I'll now hand the call back over to Pierre for some closing comments.
Pierre: Thank you, Andrew. The crop protection industry is in the process of recovering although at different paces depending upon the region.
Pierre: In this context, we delivered on a Q3 target and had a positive momentum heading into Q4.
Pierre: The growth embedded in the guidance we put forward for the fourth quarter is sizable.
Pierre: But it is centered largely...
Pierre: around sales of new product.
Pierre: and Improved Costs.
Pierre: both of which are real and under our control.
Pierre: This should pave the way into 2025, where we continue to expect solid earning growth driven by cost favorability along with moderate top-line growth as demand continues to recover.
Pierre: Before we open up for Q&A, I want to provide a brief look forward to our earning score and two key areas we will cover.
Pierre: I mentioned on our August call that we're introducing four new active ingredients.
Pierre: and developing a postpartum defense strategy for their mice.
Pierre: At our next call, we will focus on these two pillars of growth and how they will contribute to the new three-year target, which will demonstrate the strong revenue and earning growth potential for the company.
Pierre: With that, we are now ready to take your questions.
Speaker Change: We will now begin the question and answer session. To be placed in the queue, please press the star key, then 1. On your touchtone phone, if you are using a speakerphone, please pick up your headset 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.
Speaker Change: Please press star and then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Joel Jackson with BMO Capital Markets. You may proceed.
Joel Jackson: Good morning.
Joel Jackson: Pierre, Andrew, you were very gracious a few months ago to give some building blocks for what the bridge for 25 to look like. I was hoping that maybe you could give an update on that. So I think you talked about
Joel Jackson: targeting 6% revenue growth.
Joel Jackson: Next year, which would be volume growth with maybe some price contraction on flash pricing talk about 150 200 million dollars of
Joel Jackson: Cost favorability, talked about $35 million of lower EBITDA, of course, in the sales of GSS. Are you able to update those numbers or reiterate today?
Joel Jackson: Your address is no longer available to the public.
Speaker Change: Thank you, Joelle. Yes, we pretty much have the same...
Speaker Change: Thank you for 20-25, but let me maybe give you some more detail around their latest thoughts.
Speaker Change: So yes, we are, we believe in a
Speaker Change: in a growth of around 6%, 6% range next year. This being said, when we say 6%
Speaker Change: We made no assumption on pricing, which was pretty much pricing flat, and didn't make any assumption on FX.
Speaker Change: At this stage,
Speaker Change: Could we be facing more challenging pricing? Possible, but frankly we do not know yet. We have not been able to go deeper into those considerations.
Speaker Change: On the other hand, on the positive front, I think with the progress we have made on the cost front,
Speaker Change: We are heading more to the higher end of the range we gave at the last earnings call, so closer to the $200 million than the lower end. CL6% range.
Speaker Change: Undefined pricing situation at this stage. We're not able to make assumptions. We need to see how Q4 is going to be unfolding and maybe a stronger savings than we were expecting and toward the higher end of the range.
Speaker Change: and many more. Thank you. Thank you. Thank you. Thank you.
Speaker Change: and many more. Thank you. Thank you.
Speaker Change: The next question is from the line of Alex Key, E-Fremov, with KeyBank Capital Market. You may proceed.
Alex Key: Thanks and good morning everyone. Pierre, you stated that Latin America was worse than expected than Q3. Is it getting any better in the fourth quarter? And also if you could just describe why Q3 was worse.
Alex Key: Specifically, was it more weather issues, was the drought in Brazil, or was it just fundamentally the market is weak due to low crop prices?
Speaker Change: Yeah, I think Q3 was a bit more...
Speaker Change: more difficult than we were expecting.
Speaker Change: for multiple reasons. First of all, I think that the weather did not help the beginning of the quarter with delayed rain. Rain came in and it's actually right now.
Speaker Change: in a pretty good situation, but in 2, 3 and beginning of the quarter, it was delayed.
Speaker Change: I think overall
Speaker Change: The region is still with a challenging inventory situation which needs a couple of quarters.
Speaker Change: before going to normal. I also think that it was a bit more difficult for...
Speaker Change: for FMC than some of the competitors for multiple reasons.
Speaker Change: This is where I was when I gave the first call, just a couple of months coming back.
Speaker Change: I am more and more convinced that FNC was...
Speaker Change: Later.
Speaker Change: than some of the other competitors in adjusting pricing. So I believe we've lost market share.
Speaker Change: More to other sum of appeals, like the Bayer BSF or Syngenta of this world. There is pressure from generics, but I don't see a big change versus the past. But the lack of adjusting the pricing is forcing us to...
Speaker Change: To keep a market share, and we're making the intentional decision to keep a market share, we had to accelerate pricing adjustment.
Speaker Change: On top of that, we had to do it in the face of
Speaker Change: We are seeing a very large customer, you know about the bankruptcy of a large distributor.
Speaker Change: to lose that volume, so we had to go get that volume elsewhere.
Speaker Change: And, you know, there is always a price to pay when you have to.
Speaker Change: to go to find two other, uh, two other, uh,
Speaker Change: customers, what you lost from one. So all in all, the situation was not helping. We increased rates, weather, delayed rain, the loss of a large customer for us.
Speaker Change: and the deliberate decisions we have made to stay where, to keep our market share position and maybe get back more to where the market share we had pre-downturn than where we are today.
Speaker Change: The next question is from the line of Kevin McCarthy from VRP. You may proceed.
Kevin Mccarthy: Thank you and good morning. Pierre, can you elaborate on the forward price trajectory? Maybe you can comment on your experience in diamonds versus non-diamonds.
Kevin Mccarthy: What is behind the competitive intensity that you alluded to and what does the path to zero price look like in your crystal ball as we progress into 2025?
Speaker Change: Certainly, yes, I think the.
Speaker Change: The way we look at it, we believe that the number one correlation to pricing
Speaker Change: is the state of the channel.
Speaker Change: Certainly, farm income has an impact, but by far, when you are in a shrinking market,
Speaker Change: and all of us suppliers of products trying to retain market share, you create a competitive situation which has a negative impact on pricing.
Speaker Change: That's why we want to stand our ground in Latin America, because we do believe.
Speaker Change: that price seeing the strongest correlation is with the state of the market.
Speaker Change: and that's why we saw maybe the lightest pressure on price in North America while Latin America and Asia were the place where we had the the highest pressure.
Speaker Change: Diamides, there is no more pressure on pricing diamides except maybe in places.
Speaker Change: where we are
Speaker Change: in countries where there is not the same consideration for patent protection.
Speaker Change: and I'm mostly talking about India and China. In other places, the pricing situation is not worse for Diamant than it is for other products.
Speaker Change: It's even better in the countries where there is a stronger respect for patent protection.
Speaker Change: Going back to zero, I think it's going to highly depend upon the recovery of the market. I do believe that the price pressure will be
Speaker Change: way less when we get to a more normalized cycle and
Speaker Change: Right now, crystal ball, I would see price pressure lighter potentially in the second half of 2015.
Speaker Change: That is when we should be in a situation where most of the regions, maybe beside Asia, will be in a more normal situation from a channel inventory standpoint.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question is from Milan of Stephen V. Byrne with the Bank of America, Maryland. You may proceed.
Milan Byrne: Yes, thank you. With respect to your volume gain in North America, can you split that into three buckets? How much of that increase was to your dyemide partners?
Milan Byrne: And then for the balance that's targeting, you know, the North American market, what fraction do you sell to wholesalers versus retailers that sell directly to growers?
Speaker Change: The growth to Day and Night's partners, I think,
Speaker Change: is
Speaker Change: It's going to be more than half of the growth of the diamides. In terms of the selling, I would say 100% of the sales are going toward the wholesalers.
Speaker Change: Then from this point, it goes into the channel toward the growers, but all sellers represent our customer base.
Speaker Change: Thank you very much. Bye.
Speaker Change: Thank you.
Speaker Change: Thank you for watching. Have a good one. Bye-bye.
Speaker Change: The next question is from the line of Lawrence Fave with BNP Parapas. You may proceed.
Lawrence Fave: Yes, good morning. Pierre, my question is around R&D, and I think of the cost reduction plan, there's about 15 million I think this year that will come from lower R&D.
Lawrence Fave: I was wondering if you could talk about the approach that you're taking there, whether the reduction is temporary or whether you're actually structurally being more selective in the areas where you're investing. Thank you.
Speaker Change: Yeah, thank you. I think it's more of a...
Speaker Change: It's more of a sustainable
Speaker Change: Cost saving, we might decide at some point in the future to increase because of specific reasons, but let me talk to you about how and why we are reducing our R&D spending. First of all,
Speaker Change: Just to make sure we are very clear on this one, there is absolutely no impact.
Speaker Change: on the launch of the four product new molecules Ronaldo described at the last earnings call.
Speaker Change: Second of all, a large part of the saving is coming from the discovery part of our process.
Speaker Change: We have now a process where we are much more strict on the decision.
Speaker Change: to hold in the pipeline in discovery low probability products. We had a tendency maybe to keep them longer and usually it comes with significant expenses.
Speaker Change: and we have a process which allows us to go faster in making those decisions.
Speaker Change: We also have developed better screening tools, and I think, I wasn't there, but I think they were presented at the investor day. But those are also allowing us to make faster and better decisions in early stage research.
Speaker Change: The last point is we've changed the governance process.
Speaker Change: for R&D. You know that if you take the spending in R&D, about half goes to central R&D and half spending goes to regional R&D.
Speaker Change: We are increasing the coordination between the Regional Research Center and the Central Research Center.
Speaker Change: in order to make sure we do not have duplication and we create synergy. So we are just changing the way we work to make those savings.
Speaker Change: The next question is from Alon of Josh Spector with the UPS. You may proceed.
Speaker Change: Yeah, hi, good morning. I wanted to ask a couple things about volumes. So 3Q came in better than expected. You talked a little bit about pull forward, but your fourth volume guidance is still kind of the same ballpark, you know, mid-20s-ish plus year-on-year growth.
Speaker Change: So, one, you know, what happened there, is there any increased confidence, I guess, in fourth quarter? And then related to that is with the diamides selling in North America, is that a headwind we need to worry about next year? Or is that not at the magnitude where that's a risk? Thanks.
Speaker Change: Um,
Speaker Change: I think regarding sales, we pretty much took our full-year forecast we gave in Q2 and removed the sales, which we knew
Speaker Change: were expected to be delivered in Q4. So we just took the overselling in North America.
Speaker Change: and remove that from a full year target in order to to stay at the same level we were initially planning of course.
Speaker Change: adding the correction for the GSS business.
Speaker Change: Regarding dynamite in 2025, I must confess that
Speaker Change: We have not yet.
Speaker Change: done a 2025 precise budget. We are in this process right now.
Speaker Change: We are going through it.
Speaker Change: It's complex because we have to look at all of the branded diamides.
Speaker Change: and the sales with the partners. All of those negotiations are taking place right now.
Speaker Change: I cannot answer specifically on the growth of diameter 25 versus 24 at this stage.
Speaker Change: I almost have one certainty, it's that Sao Zatia will be doing very well in 2025. It's a product, it's a good product.
Speaker Change: They're a very, very strong demand. There is very little competition. There is no generic. But the overall diamide, Ronex Appear plus Sails Appear, it's a bit early for me to comment until we've moved, we're more advanced in terms of a contract with our partners.
Speaker Change: Okay, thank you.
Speaker Change: The next question is from the mom of Chris Parkinson with Wolf Research. You may proceed.
Speaker Change: Microsoft Office Word Microsoft, Inc. Title Microsoft, Office Word Document MSWordDoc Word.Document.8
Speaker Change: Do you view your competitors' registration losses or likely registration losses over the next two years as more of a potential tailwind for your new products? Thank you.
Speaker Change: I think those are two separate events. We have the Registration Lots, which are mostly happening in Europe, where we know it's been there for many years.
Speaker Change: So it's going to be part of the forecast going into next year, and then there is the new product. New products usually more than cover on a global basis.
Speaker Change: will be a little impacted by the channel situation. Those products are not in the channel. They are new.
Speaker Change: So pretty much we believe that will be required, will be sold. So on balance, 2025 is going to rely, the growth is going to rely a lot on new products. We do not believe...
Speaker Change: It's hard for us to think about.
Speaker Change: about taking into account potential weather is how to do but but that's one of the part which will be the most certain parts of a forecast will be the product.
Speaker Change: Registration loss, we usually know them pretty well in advance.
Speaker Change: especially for Europe so we're expecting the balance of the two to be to be a significant positive. The more question we have looking to next year is how fast the channel will recover?
Speaker Change: and the overall growth of the portfolio, as I said.
Speaker Change: We are not excluding a big bump in H2 2025. We just can't can't predict it.
Speaker Change: Hello Ronaldo, do you have any other comments around new products?
Speaker Change: You asked, Cruz, about whether or not we benefit from those. The overall market in Europe has been flat despite of the registrations. So I think the short answer is yes for the products that remain in the market.
Speaker Change: There is an increased opportunity because of the lack of options driven by those registration losses across the entire industry. Same way that sometimes it hits our products, it also benefits us.
Speaker Change: throughout the quarters.
Speaker Change: We, for next year, we expect Fluindapir to continue to grow and I think the number one geography for that product will continue to be LATAM followed by U.S.
Speaker Change: that means that most of that growth
Speaker Change: should come in the second half of the year just because of seasonality in LATAM. The U.S. portion of that will come probably between the second and third quarter of 2025 in the U.S. We also expect to launch
Speaker Change: The first launches in Europe for Isoflex, but that is more on the UK side, the broader Europe registration we expect in a couple of years, so not for 2025.
Speaker Change: but for the near-term future.
Speaker Change: Thank you for the color.
Speaker Change: and many more. Thank you. Thank you.
Speaker Change: The next question is from the line of Zimson Andrew with Morgan Stanley. You may proceed.
Speaker Change: Maybe I'll take the saving and Ronaldo, you'll take the orders in hand. I'm going to do. All right, I'm going to do a high level map under the under the console of my CFO here. So you correct me, Andrew, if I'm not on the.
Speaker Change: If I'm not correct, off the top of my head, we saved $50 million of savings in H2.
Andrew Sandifer: Think about it that way, roughly.
Speaker Change: We beat Q3 by $20 million.
Speaker Change: Ibida.
Speaker Change: cells which were higher than expected.
Speaker Change: and we also faced about a $20 million
Speaker Change: price decline. That leaves you lead to about a 30 million dollars saving.
Speaker Change: So your 20 million dollar bid is plus sales in 10, plus 30 in saving, minus 20 in price.
Speaker Change: The break I would see for the overall $50 million additional savings.
Speaker Change: Andrew is not reacting so it must be about right.
Speaker Change: So, as for the orders, we track that more closely in Brazil, as you know. The other countries, we tend to get the orders and start shipping right away. In Brazil today, we have about 40% of the orders that we forecast for the quarter. This is better than we had last year.
Speaker Change: And it's lower than we had in the best years in the region. So it's more or less in between, which is in line with our view that that market is still recovering.
Speaker Change: Once again, about 40% of the orders that we need for the quarter.
Speaker Change: Okay, thanks for all the detail, very helpful.
Speaker Change: And that question is from the line of Jeb Zekakis with JP Morgan. You may proceed.
Speaker Change: Thanks very much.
Speaker Change: We think that prices, or it may be the case that prices of technical grade CTPR, the active ingredient in your diamides, in China
Speaker Change: have fallen from maybe, I don't know, $350,000 a ton to...
Speaker Change: $30,000 a ton over the past two years.
Speaker Change: And it may be that.
Speaker Change: New product registrations have, I don't know, tripled or quadrupled over that time.
Speaker Change: What do you see, if you think that's true, what do you see as the analytical significance of
Speaker Change: CTPR prices coming down so sharply in China and if you can remind us how big is your diamide business in China roughly and what's happening to it in terms of prices and volumes?
Speaker Change: I'll have Ronaldo helping with that question around the pricing.
Speaker Change: The He
Speaker Change: The size of the China market for us in terms of the AMI is small. It is not a major, major market for us, but Ronaldo, around the pricing, do you want to make your comments? We have seen different references for pricing.
Ronaldo: Way more references that we have seen products flowing around the world, so it's still unclear in terms of capacity and how much of those prices are real or not. What we have seen is in the two markets that they are commercializing.
Speaker Change: China, and India. As you pointed out, the prices have come down. I'll just make a correction for the price that you mentioned. It's for the kilo of technical product, not for the ton of technical product.
Speaker Change: We do believe, though...
Speaker Change: That's some of the prices that we have seen in references.
Speaker Change: are lower than the production cost of even the low quality providers.
Speaker Change: which would suggest more of a dumping of existing inventories in the market. We back calculate how low it can be and some of those products are being offered, not necessarily sold, but offered at costs that are lower, prices that are lower than the production cost.
Speaker Change: So I think that that gives you a sense of where how we think about this going forward we do not believe those are the
Speaker Change: stable prices of the diamond.
Speaker Change: I think I want to and I hate to to do that but
Speaker Change: We are truly doing a deep dive in our Diamide strategy. We intend to be very open at our February call on what future we see for Diamide. We're actually pretty optimistic.
Speaker Change: But we're going to have to explain how we see a way to defend this market attack.
Speaker Change: I am not right now too much concerned by the kind of pricing we see in India or China. As Ronaldo said, a lot of inventory was built.
Speaker Change: which could not be sold because we won multiple litigation in other countries, creating
Speaker Change: seem to be incredibly low versus even a low manufacturing cost.
Speaker Change: As part of the Diamide Strategy, we do have a, we're working on a very aggressive
Speaker Change: Manufacturing Coast Roadmap.
Speaker Change: Allowing us to compete in a different way.
Speaker Change: All of that is being put in place right now. We do have time because besides China and India, we do not have to worry about this kind of pricing, which do not seem to be to be sustainable and be the pricing, the pricing will be facing when we are off patterns.
Speaker Change: in the future in the regions where we are competing. So, I'll hand that to you. I think it's a very valid question, but I want to come with a more complete and solid answer on diamide at the February call.
Speaker Change: Well, if I could follow up, just in terms of descriptively, what's happening to your business?
Speaker Change: You know, in Asia, what's happening to your diamide volumes and prices?
Speaker Change: quantitatively.
Speaker Change: Roughly.
Speaker Change: So right now, what is happening to a market
Speaker Change: to a diamond market right now, okay? And it's difficult because we're combining a situation where we have two countries which are accepting illegal sales of products.
Speaker Change: Bureau of Production and Cost in the middle of a downturn. So it's not a very normal situation. But today, overall, our diamides are growing, driven by a very strong demand of sales at PR. I think when we talk diamides, we have to...
Speaker Change: separate cells appear.
Speaker Change: from Renaix-Sapir.
Speaker Change: is growing very fast, Ronax Appear is because, and mostly because of Asia, has a negative growth in the low single digits globally, driven by Asia. So think about it, overall growing positively.
Speaker Change: But at the same time, I think the overall market for diamides globally is changing.
Speaker Change: is up 10 percent. It's driven by sales up here being up in the 50 to 60 percent.
Speaker Change: and Ronax Tapia down in mid-single digits driven by Asia. That's what is happening today to the overall diamide portfolio.
Speaker Change: Thank you.
Speaker Change: Thank you very much. I hope that answers your question.
Speaker Change: Yeah, thank you.
Speaker Change: The next question is from the mom of Lawrence Alexander with Jeffrey you may proceed
Speaker Change: for the signals you're getting from the distribution channel. That is, do you have any product areas where capacity is down and you won't be able to ramp up fast enough to meet what distributors are saying they may need this winter? Or do you think you're appropriately positioned to get the full operating benefit and the leverage that would come with a restock cycle?
Speaker Change: No, I think we're good. We do have capacity. Now, that being said, we are much more...
Speaker Change: I would say manufacturing is much busier than it was a year ago. Most of the lines are actually operating, but we do have capacity.
Speaker Change: to face the demand to come and the increase.
Speaker Change: we are facing. So we're not concerned about.
Speaker Change: about capacity from a raw material supply. We are also in a good shape.
Speaker Change: We are securing the product we need as we as we said before it's going to be a tailwind going into into next year, but
Speaker Change: This is our council at this stage.
Speaker Change: Thank you.
Speaker Change: , , , , , , , , , , , , , ,
Speaker Change: Thank you. The final question comes from Patrick Cunningham with Citigroup. You may proceed.
Patrick Cunningham: Hi, good morning. Thanks for taking my question. And just on the pricing challenges in Latin America, how should we think about, you know, additional incremental incentives to gain or maintain share in the fourth quarter and perhaps, you know, any into 2025?
Speaker Change: Yeah, so, so, um, the, uh,
Speaker Change: The forecast we've made for.
Speaker Change: for this
Speaker Change: The fourth quarter includes a mid-single-digit price decrease year-on-year for the fourth quarter. We still believe we are in a challenging situation. We still believe there's going to be price pressure.
Speaker Change: I would say until the end of the second quarter of the season, which is the end of the first quarter in 2015.
Speaker Change: I believe the pricing pressure
Speaker Change: is going to start to relieve significantly as we move into 2025.
Speaker Change: the market.
Speaker Change: Plus, plus, as I said before, it is very much also an FMC situation where we decided to reposition a market share where it was pre-downturn and we had to
Speaker Change: to do what we had to do to get to this position. So, Ronaldo, maybe you want to comment on anything else specific on pricing in Latin America? Particularly in Brazil and Argentina, what I can share is there are some products that we have been
Speaker Change: very stable in terms of market share traditionally can talk about so Fentazone and sugarcane, malathion on cotton.
Speaker Change: Those are products that are very traditional products from FMC.
Speaker Change: And those are the products that we priced at a point that we allowed growers to make a decision on replacement.
Speaker Change: and we are now fighting back for share, getting back to the share that we had before the downturn on those products.
Speaker Change: So our pricing actions are specific to some products. They are primarily very traditional products in our portfolio.
Speaker Change: And it takes us back, those actions take us back to the share that we used to hold before the downturn of the industry.
Speaker Change: And I will just add something I've already said and it's been because there has been many comments. Generic are not the drivers of what we do.
Speaker Change: Generic pressure is here, it's always here, but there is nothing which has fundamentally changed the last couple of quarters versus where it was before.
Speaker Change: It is truly positioning pricing against peers, competitors, also technology-based, where we think we've lost ground from a volume standpoint because of a more aggressive pricing strategy we need to reset.
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Speaker Change: and many more. Thank you. Thank you.
Speaker Change: Thank you. This concludes the FMC Corporation conference call. Thank you all for attending and you may now disconnect.