Q4 2024 FMC Corp Earnings Call and Business Update
Speaker Change: Good afternoon and welcome to the 4th quarter 2024 Inc. Call for FMC Corporation.
Speaker Change: This event is being recorded and all participants are in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: As of today's prepared remarks, there will be an opportunity to ask questions.
Speaker Change: To be placed in the Q&A queue, please press the star key, then 1 at any time. If you're using a speakerphone, please pick up your handset before pressing the keys. And I would now like to turn the conference over to Mr. Curt Brooks, Director of Investor Relations for FMC Corporation. Please go ahead.
Curt Brooks: Thanks. Good afternoon and welcome to FMC Corporation's fourth quarter earnings call.
Speaker Change: Joining me today are Pierre Brondeau, Chairman and Chief Executive Officer, Andrew Sandifer, Executive Vice President and Chief Financial Officer, and Ronaldo Pereira, President.
Speaker Change: Pierre will review our fourth quarter performance, provide an outlook for first quarter and full year 2025 performance, and share our 2027 financial targets.
Andrew Sandifer: Andrew will provide an overview of select by answer results, followed by a strategy update from Ronaldo.
After our prepared remarks, we will take questions.
Andrew Sandifer: Our earnings release and today's slide presentation are available on our website and the prepared remarks from today's discussion will be made available after the call.
Andrew Sandifer: Let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to those factors identified in our earnings release and in our filings with the Securities and Exchange Commission.
Andrew Sandifer: Information presented represents our best judgment based on today's understanding. Actual results may vary based upon these risks and uncertainties.
Andrew Sandifer: Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, free cash flow, and organic revenue growth, all of which are non-GAAP financial measures.
Andrew Sandifer: Please note that as used in today's discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA.
Andrew Sandifer: A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's conference call, are provided on our website. I'll now turn the call over to Pierre.
Thank you, Curt, and good afternoon, everyone.
Pierre Brondeau: When I returned as CEO, we started the process to improve market visibility and deliver a more predictable performance for FMC.
Pierre Brondeau: Equally important, we also focused the organization on defining and implementing the Diamides Growth Strategy and accelerating the introduction of Fundapyr and Iosoflex actives.
Thank you.
all while increasing our cost-cutting targets.
We are making good headway here.
and delivered two strong quarters with earnings above our guidance.
Pierre Brondeau: The work we have done has also led to a new way of thinking about the portfolio, with products being considered as either part of a core portfolio or growth portfolio.
Framing the product, as you can see on slide three.
Pierre Brondeau: In this way, we'll shape a lot of commentary on today's call.
Thank you.
Pierre Brondeau: Our efforts to improve market visibility and deliver more predictable performance have progressed.
Speaker Change: However, after eight months in the role, I have modified my view of what needs to be done for SMC to fully benefit from the market upturn when it happens and the quality of a portfolio.
Speaker Change: The company needs a stronger reset than what I thought initially.
Speaker Change: We learned a lot in the fourth quarter and it has become clear that we need to take more aggressive actions to reposition FNC.
Speaker Change: Above all, we need to significantly lower FMC inventory in the channel, much beyond what we were expecting.
Speaker Change: We also need to give a higher priority to the implementation of a newly developed strategy for NXAPR and CEOSAPR, including accelerating the implementation of a manufacturing cost reduction efforts.
Speaker Change: These actions will have pronounced negative impact on 2025 performance, thermosol performance, beyond what we anticipated.
Thank you so much.
We will need to provide additional resources.
Speaker Change: to strengthen the commercial development of new active ingredients, or AIs, which is critical to 2025 revenue and beyond.
Speaker Change: It also became clear to us that beyond inventory level, we missed the impact of an evolving distribution channel in LATAM.
Speaker Change: which will require us to invest to expand a sales organization to explore new routes to market in that region.
Thank you.
Speaker Change: We will go into more detail on this topic later in the presentation.
2025 is a pivotal year.
Speaker Change: Let me give some more details about the actions we are undertaking.
Speaker Change: It is highly feasible to have all of this in place in the next few months.
Speaker Change: We will greatly benefit from these actions starting in 2026, but it will penalize short-term financial performance.
first.
Speaker Change: We are committed to decreasing the level of FMC products in the channel.
Speaker Change: We will make certain that our products move from the channel to the ground faster than our sales to the channel.
This will be a high priority for the company.
Speaker Change: Critically, this means the volume growth we are forecasting will be heavily driven by new routes to market and new products where channel inventory is not an issue.
So go on.
Speaker Change: In a quarter, we are completing the first phase of significant manufacturing cost reduction of Renexa PR and Sails PR.
Speaker Change: These cost reductions are critical to delivering a future growth plan.
Speaker Change: But as I mentioned earlier, it will create some year-on-year negative comparison in revenue in 2025.
Speaker Change: It is important to remember that Renexapier and Salesapier sales have two critical components which are managed separately.
Thank you.
Speaker Change: They are branded diamide products that are sold directly to the market by FNC.
In 2024, this was about 75% of diamide sales.
Speaker Change: Then, there are powder cells, which are solar molecules, sold to competitors.
Speaker Change: A number of the most significant contracts are based on cost plus pricing.
Speaker Change: Her significant manufacturing cost decrease will impact the sales value to her partners as product prices will decrease with manufacturing cost reductions.
Speaker Change: In 2025, we expect branded sales appear sales to continue to grow.
Speaker Change: However, we are forecasting overall Ronex APS sales to be down as key partner sales are impacted by a cost plus contract and as we position branded product lines for a new market strategy.
Speaker Change: In addition, we continue to see generic versions of Renexapier sold in India and China, as well as generic offerings now in countries such as Argentina, Turkey, Mexico, Pakistan and Peru.
Speaker Change: The presence of this generic is not unexpected, but negatively impacts price and initially some volume.
Speaker Change: Third, we are preparing our dyamide product lines for the next phase of their evolution.
We view FNC's product as two parts.
the core portfolio, and the growth portfolio.
Speaker Change: The core portfolio includes products for which the base molecules used to develop new formulations are already, or about to be, without patent data protection.
Speaker Change: The growth portfolio, by contrast, includes products for which the base molecules are data or IP protected.
Speaker Change: Sayed Zephir, the four new active ingredients, Fruendapir, Isoflex, Dodilex, and Remisoxafen, and Plant Health Portfolio constitutes a growth portfolio.
Speaker Change: Green Exceptia is a part of the core portfolio along with the rest of our legacy products.
Speaker Change: As we'll explain later, the market for an XRP will transform in the next few years, expanding to new markets and offering strong growth opportunities.
Speaker Change: The other diamide product, CERS-APIR, is a differential product with longer patent and data protection, stronger performance, and a more complex manufacturing process.
CELSEP here also offers opportunities to develop higher performing formulations.
Speaker Change: Today, no generic companies are selling this molecule in any major market.
Thank you.
for
Speaker Change: As we have delivered savings well beyond the restructuring target, we are investing in the expansion of the sales organization to support the growth of our new active ingredients
Speaker Change: and to begin to develop new routes to market we have not explored, especially in LATAM and EMEA.
Speaker Change: As we'll discuss further in a moment, let them choose for sales were disappointing.
In addition to the channel inventory situation,
We believe a shifting market structure is also impacting sales.
Speaker Change: The distribution channel in Brazil has gone through a strong wave of consolidation.
Speaker Change: Territories that were well covered and served are not performing as well anymore.
Speaker Change: This is one of the reasons we have decided to explore new routes to market, including a more direct approach to large growers.
Speaker Change: that will require increased investments which will be reflecting in our selling cost this year.
Speaker Change: This is a critical part of the strategy as it generates growth without impacting a force to lower FMC channel inventory.
Speaker Change: and many more. Thank you. Thank you. Thank you. Thank you.
Speaker Change: With these four steps in place, we believe we are well positioned for growth in 2026 and 2027.
and we have strong confidence in our products.
Speaker Change: FNC, like all technology-based ag companies, has an evolving product portfolio.
Speaker Change: Our strategy is to drive commercialization of innovative growth platforms while maximizing the value over order of patent co-product through formulations and niches.
Speaker Change: We view our core and growth portfolio as well balanced, with the core portfolio able to grow at or slightly above the market, while the growth portfolio is expected to grow significantly above market.
Thank you. Thank you.
Speaker Change: Sales in the Core Portfolio will be driven by market demand, new formulation developments, and new routes to market.
Speaker Change: As you will hear later, RenexRP has high single-digit growth potential after the planned 2025 correction, with the market growing exponentially.
Speaker Change: In the growth portfolio, the four new AIs have excellent sales potential.
Speaker Change: The market introduction of the first two molecules, Fluendapi and Isoflex, is progressing as planned, with sales approaching $130 million in 2024.
Speaker Change: The other two molecules, Daudilex and Rimisoxafen, have at least an equivalent pig cells potential, but have later introduction dates.
In addition, and most importantly,
Speaker Change: All four of these new products allow us to penetrate large markets we don't participate in today.
The combined cells of these four molecules have matu-mat-maturity.
is expected to be substantially larger.
Speaker Change: There are total diamides portfolio today and potentially beyond the $2 billion we previously announced as we find more applications for this product.
Speaker Change: Regarding plant health, we expect the platform to grow at an annual rate in the mid 20% range out to 2027, with growth rate potentially exceeding that in later years as pheromones scale up.
Speaker Change: The actions we take in 2025 will allow our portfolio to deliver substantial growth in 2026 and 2027.
Thank you.
Speaker Change: I want to shift now and provide more details on the fourth quarter which are detailed in slide four through six.
Speaker Change: Twofold revenue of $1.22 billion were below our guidance range. Revenue grew 7% versus 2023 and 9% excluding sales from the divestiture of a Global Specialty Solutions or GSS.
Business in November 2024.
Speaker Change: The sales increase was heavily attributed to volume gains in a growth portfolio.
Speaker Change: Sales of these products accounted for over 75% of the growth. That includes Sales at Peer and New AI's, as well as the plant health business, which grew 33%, mainly from biological.
Speaker Change: Lower pricing of 3% was slightly better than we expected, but an FX headwind of 5% was higher than the low single digit we had forecasted.
Thank you very much.
Speaker Change: At that time, sales were the most disappointing as high competition led to prices and terms
that we were unwilling to meet.
which, in addition to credit risks,
led us to pass on some sales.
Speaker Change: As we were confident that we would meet our EBITDA and EPS targets, we had the flexibility to walk away from unattractive sales opportunities.
Speaker Change: Additionally, we saw lower-than-expected demand across most regions, as customers lowered the amount of inventory they are willing to hold versus historical levels.
Speaker Change: While we did anticipate customers withhold less inventory in an environment of higher interest rates, lower quality prices, and a perception of secure supply, we were not expecting behavior to change to such a degree.
Thank you very much. Thank you.
Given the above assumptions,
Speaker Change: and the current high levels of FNC product in the channel, we now believe we have elevated channel inventories.
Speaker Change: in some countries in LATAM, including Brazil, Asia, including India, as well as Canada and Eastern Europe.
Speaker Change: We reported fourth quarter EBITDA of $339 million, which was 33% higher than last year and $3 million higher than our guidance midpoint.
Speaker Change: Lower pricing and FX headwinds were more than offset by higher volumes as well as favorable cost including continued contribution from a restructuring program.
Speaker Change: Input costs were favorable due to lower raw material cost with much lower unabsorbed fixed cost.
that we recorded in previous quarters.
Speaker Change: The reduced cost coupled with sales growth led to a strong EBITDA margin of 27.7%, an all-time Q4 high.
Slide 7 shows the results of full year 2024.
Speaker Change: Sales declined 5% as higher volume, mainly in the second half of the year, was more than offset by lower pricing and FX headwinds.
Speaker Change: Although EBITDA declined 8%, we posted EBITDA margin of 21%, which was only a slight decline versus prior year despite the drop in sales.
Speaker Change: Part of this was due to the strong cost, including $165 million.
of cost benefits from our restructuring actions.
and many more. Thank you. Thank you.
Speaker Change: Looking at 2025, we can see a full year expectations on slide 8.
Speaker Change: We are expecting four-year sales of $4.15 billion to $4.35 billion, which is flat to prior year at the midpoint.
Speaker Change: and up 3% excluding approximately the $110 million of lost sales from the GSSB sale.
Speaker Change: We are forecasting moderate gains in volume driven by a growth portfolio as well as the expansion over a customer base.
Speaker Change: This volume growth is forecasted to be partially offset by daily bear rate actions.
we are taking to reduce channel inventory in many countries.
Speaker Change: Pressing is expected to be down, low to mid-single digit, with a vast majority of oppressing headwinds due to diamide partners.
Speaker Change: As we discussed earlier, those contract adjustments will have the most impact in the first half of the year due to the timing of those sales.
Speaker Change: We are forecasting FX to be allowed to meet single-digit headwinds for the year as the U.S. dollar is projected to remain strong.
Thank you.
Speaker Change: Despite these challenges to sell, we expect to deliver higher EBITDA versus the prior year with an expected range of $870 million to $950 million, which is up 1% at the midpoint.
Speaker Change: Excluding the GSS impacts, midpoint of GANs is up about 4%.
Speaker Change: We expect COGS to be favorable $175 million to $200 million due to lower raw materials.
favorable fixed-cost absorption and restructuring benefits.
of setting these benefits are expected to be lower price,
The $65 to $75 million FX Headwind.
and investment in sales organizations.
Speaker Change: Adjusted earnings per share is expected to be between $3.26 and $3.70.
which is flat at the midpoint to prior.
Speaker Change: As shown in our Q1 guidance on slide 9, we expect a low first quarter as we aggressively start the correction process early in the year.
Sales are expected to be $750 million.
Speaker Change: and $800 million, a decline of 16% against prior year due to negative price effects and volume.
excluding an estimated 24 million dollars of loss.
GSS sales, the decline is 13% at the midpoint.
We expect lower volume for two reasons.
Speaker Change: One is excess levels of FMC inventory in the channel in many countries.
Speaker Change: which is amplified by customer prioritizing much lower than historical inventory level.
The other is specific to the United States.
Speaker Change: In the second half of 2024, distribution customers in the United States replenished their depleted inventory in advance of the growing season.
Speaker Change: Normally, retailers and growers would start pulling that volume through during Q1.
However, this year
Speaker Change: due to initiatives to keep inventory low and cautious purchasing from commodity products.
Speaker Change: From low commodity prices, we are making the assumption that pull-through by retailers and growers will occur more evenly over the three-quarter season than in prior years.
Speaker Change: This is expected to delay reorders from distributors and will result in weaker volume in Q1.
Speaker Change: While this creates a significant challenge for a Q1 outlook, we want to make sure we are setting expectations that reflect our belief of how the U.S. market will behave this year, which is much different than our historical view of this market.
Speaker Change: We expect Q1 price to be lower in the mid to high single digits, with over two-thirds of these due to the price adjustments for Diamide partner contracts.
FX is also expected to be a neat single-digit heroine.
Speaker Change: Similar to a full year expectation, we are forecasting continued expansion of a growth portfolio in the quarter.
Speaker Change: We are getting Q1 EBITDA at $105 million to $125 million dollars.
which is a decline of 28% at the midpoint.
Speaker Change: Lower pricing and FX headwinds are expected to be partially offset by reduced COGS, including lower raw material and favorable fixed cost absorption.
Adjusted EPS
is expected to be between 5 cents and 15 cents.
Speaker Change: I'll now turn the call over to Andrew to cover some financial items and how this guidance impacts our balance sheet.
Thank you very much.
Thanks, Pierre.
Speaker Change: Before I get into the normal review of key financial results, let me start this afternoon with an update on our restructuring program on slide 10.
Speaker Change: When we initially announced our restructuring program in late 2023, we targeted delivering 50 million to 75 million dollars of net savings in the 2024 P&L, with 150 million dollars in run rate savings by the end of 2025, both measured against the 2023 baseline.
Speaker Change: As we progressed through 2024, we identified a number of areas where we could move more aggressively to reduce our cost structure.
Speaker Change: Raising our targets at our second quarter earnings call, and again on our third quarter call, to $125 million to $150 million in 2024 net savings, and more than $225 million in run rate savings by the end of 2025.
Speaker Change: While there were many factors that contributed to these increased targets, the biggest factor was a major revamping of sourcing for raw materials for our diamide products.
Speaker Change: I'm pleased to report that we exceeded our increased targets, finishing 2024 with net savings delivered in the P&L of $165 million, largely in operating expenses, but with savings in cost of goods sold as well.
Speaker Change: We also now have a clear line of sight to run rate savings of more than $250 million by the end of 2025, with a very significant contribution from lower cost of goods.
Our restructuring program has impacted every part of the company.
Speaker Change: resulting in fundamental changes in our operating model, including how we are organized, where we operate, and the way we work. While we do have some remaining in-flight projects to finish delivering the full savings run rate in 2025, we've incorporated the expected year-on-year benefits of our restructuring actions in our outlook for 2025.
Speaker Change: As such, we consider our restructuring program to be essentially complete, and we will ensure delivery of the remaining savings through our normal management of delivery of our guidance.
Moving next to some key income statement items.
Speaker Change: FX was the 5% headwind to revenue growth in the fourth quarter, primarily stemming from the Brazilian REI.
Speaker Change: For full year 2024, FX was a 2% headwind at revenue, with the Brazilian Riai and the Turkish Lira the largest contributors, followed by smaller headwinds across a number of Asian currencies.
Speaker Change: For 2025, we anticipate a low to mid-single-digit headwind in revenue from FX, with the Brazilian Riai, the Turkish Lira, and the Euro being the most significant drivers.
Speaker Change: Unlike 2024, we anticipate a meaningful EBITDA headwind from FX in 2025, in the range of $65 to $75 million.
Speaker Change: In 2025, we continue our normal, systematic approach to hedging, but with the strengthening of the dollar that happened in late 2024 and into 2025, and with the current forward curves, we do not expect to see a repeat of the favorability we saw in 2024.
Speaker Change: Rather, we expect to see a more normal relationship between FX impacts at revenue and EBITDA, with our hedging program dampening, but not eliminating, the impact on EBITDA of negative FX movements.
Thank you.
Speaker Change: Interest expense for the fourth quarter was $51.8 million, down nearly $5 million compared to the prior year period, driven by lower debt balances and lower interest rates.
Speaker Change: For full year 2025, we expect interest expense to be in the range of 210 million to $230 million, down roughly $15 million year on year at the midpoint, reflecting the benefit of debt reduction in 2024 and modestly lower interest rates in 2025.
Speaker Change: We ended 2024 with a lower-than-expected effective tax rate on adjusted earnings, 10.9%.
Speaker Change: The mix of earnings by jurisdiction shifted meaningfully versus our expectations in the fourth quarter, with substantially less profit attributed to high-tax jurisdictions like Brazil.
Speaker Change: The fourth quarter effective tax rate of 7.9% reflects the true-up to the full-year rate relative to the 14% rate that had been accrued through the third quarter.
Speaker Change: With the impacts of lower effective tax rate for 2024, adjusted earnings per share for Q4 were up 72 cents or 67% versus the prior year period, a significantly higher increase than seen at EBITDA.
Speaker Change: The biggest driver of increased earnings per share remains increased EBITDA, representing $0.59 of the $0.72 increase in EPS year-over-year, while lower tax contributed $0.11.
Speaker Change: For 2025, we anticipate that our effective tax rate should be in the range of 13-15%, with the approximately 3 percentage point increase at the midpoint, driven by the expected mix of profit by jurisdiction.
and many more. Thank you. Thank you.
Speaker Change: Moving next to the Balance Sheet and Leverage on slide 11.
Speaker Change: Gross debt of December 31st was approximately 3.4 billion dollars, down nearly 600 million dollars versus the prior year.
Speaker Change: Debt reduction came both from the proceeds from the sale of our GSS business, which closed on November 1st, as well as from discretionary cash flow.
Speaker Change: Cash on hand increased $55 million to $357 million, resulting in net debt of approximately $3 billion.
Speaker Change: Gross debt to trailing 12-month EBITDA was 3.7 times at year-end, while net debt to EBITDA was 3.3 times.
Speaker Change: Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 3.7 times as compared to a covenant of 5.0 times.
Speaker Change: As we announced a short while ago, we recently amended the leveraged covenant of our credit agreement to provide additional headroom and duration of covenant release given our outlook for 2025 through 2027.
Speaker Change: We expect to end 2025 with leverage metrics essentially flat to 2024, and then to show improving metrics with rapidly accelerating EBITDA growth in 2026 and 2027.
Speaker Change: This is coupled with disciplined cash management including continuing to direct all discretionary free cash flow to debt reduction.
Speaker Change: We remain committed to returning our leverage to levels consistent with our targeted BBBAA2 long-term credit ratings.
Speaker Change: While this will take a bit longer than we previously hoped, we are confident we are on the right path to get our leverage metrics back in line as our business more fully recovers.
Speaker Change: Moving on to free cash flow in slides 12 and 13.
Speaker Change: Free cash flow for full year 2024 was $614 million, an increase of more than $1.1 billion versus the prior year.
Speaker Change: The year-on-year increase was driven by a $1.04 billion improvement in cash from operations.
Speaker Change: which benefited particularly from improved payables and inventory despite over $100 million of cash restructuring spending.
Speaker Change: Capital Additions and other investing activities were down substantially as we constrained spending to only the most critical projects.
Speaker Change: Cash flow from discontinued operations improved in part due to a one-time insurance settlement.
Speaker Change: For 2025, we expect free cash flow of $200 million to $400 million, a decrease of $314 million at the midpoint.
Speaker Change: Cash from Operations is the key driver of the decrease, with normalization of working capital after the pronounced correction in 2024.
Speaker Change: Capital additions are also expected to be up somewhat, but with continued focus on only the most essential projects, including capacity expansion to support new products.
Speaker Change: Cash flow from discontinued operations is also up slightly, but in line with our multi-year average.
Speaker Change: Pre-cash flow conversion from adjusted earnings is expected to be approximately 69% at the midpoint.
With that, I'll hand the call over to Ronaldo.
Thanks, Andrew.
Speaker Change: I want to start off by providing an update on our Diamides Strategy, which is supported by slides 14 through 21.
Speaker Change: As we look ahead, it's clear that our commercial strategy is evolving, driven primarily by the upcoming patent expirations, particularly for Rinoxapir.
Speaker Change: While this presents challenges, we see it as an opportunity to transform, compete, and advance in new ways.
Speaker Change: Like other products that transition to the post-patent phase of life, when we look back at the makeup of our diamides business years from now, it will look much different than it does today.
Speaker Change: Over the past several quarters, we have spoken to the broad strategy for these products as they shift to their post-patent life cycle.
Speaker Change: At a high level, the strategy that we've communicated, which you can see on slide 15, is that we will continue to offer the basic solo formulations under the trusted FMC brand names at lower price points to compete with generics entering the market.
Speaker Change: At the same time, we'll offer high-value versions of diamides via new, often patented, formulations and mixtures.
Speaker Change: This evening, I will share in more detail how we are enacting this strategy and share how we see the next few years unfolding for this product class.
Speaker Change: Going forward, you will hear us start talking about the two distinct products, Rinoxapir and Siazapir, rather than just simply referring to them as the diamides, as we've done in the past.
Speaker Change: Both products are very potent tools for growers to control insects.
Speaker Change: But as you can see in this slide 16, there are some key differences between the two products.
Speaker Change: Rhinoxipir has a more limited spectrum, but that spectrum is focused on controlling Lepidoptera insects or caterpillars, which is the most valuable addressable market at nearly five billion dollars.
Speaker Change: Sciatica, on the other hand, has a much broader scope in terms of types of insects it can control.
Speaker Change: Our Rhinoxipir sales have outpaced Siazapir with roughly a 70-30 split.
Speaker Change: This is part A, due to Rinoxapir's larger market share for caterpillar control and also has been by our own design due to its somewhat simpler manufacturing process and lower cost profile.
Speaker Change: The market for chloranthoniliprol, or CTPR, which is a chemical name for the active ingredient behind Rinoxapir, will undergo a series of changes over the next few years and our strategy reflects that.
Speaker Change: As Renaxapir enters the next phase of its product life, it has been included in the core portfolio along with the other legacy products that are off-patent, like Sofentazone.
Speaker Change: All composition of matter patents have expired for Renard-Sapir, and by the end of 2025, almost all process patents will also have expired.
Speaker Change: We expect generics to enter all major markets with Renoxapyr with solo formulations of CTPR by the end of 2026. As we mentioned earlier, we are already observing generic CTPR sales in some countries today.
Speaker Change: As generics enter the market, we will continue to offer solo formulations at lower price point under the trusted FMC brand to compete with the new market entrants.
Speaker Change: Based on the latest data from international shipments, we believe we are competitive on costs, with lower price generics offering the solo molecule, thanks to our recent restructuring actions, which have significantly lowered our cost of sales.
Speaker Change: Lower pricing for the soil formulation will coincide with a significant expansion of acres treated with CTPR.
Speaker Change: Slides 17 and 18 illustrate how this is likely to occur.
Speaker Change: Slide 17 shows the global foliar insecticide market which is about 22 billion dollars at the farm gate.
Speaker Change: Diamides, as a class of chemistry, are estimated to be about 9% or a little under two billion dollars of that overall market, with FMC's branded diamides making up about 55% of that share.
Speaker Change: The remaining 45% is made up of FMC partner sales, generic CTPR, and competitor products within the Diamide class that are not Rinoxapir or Siazapir.
Speaker Change: As you can see, you can see that the majority of diamond offerings
Speaker Change: There are almost no diamide products offered below $10, and FMC's diamides are virtually non-existent in this space.
Speaker Change: When generics first enter the market, we expect growers who are solely driven by price to be their key customers, which should be less impactful to FMC.
Speaker Change: The entrance of generics will certainly create competitive pressure against some existing FMC products.
Speaker Change: But as this slide 18 shows, with our lower manufacturing costs and technology roadmap, there will be substantial opportunities for Rhinoxipir and Thiazepir to take share across all points of the price curve from other insecticides such as neonicotinoids and organophosphates.
Speaker Change: The more favorable environmental profile of both Brinoxipyr and Siazipyr versus these other insecticide classes would further aid market expansion.
Speaker Change: As seen on slide 18, we expect that the diamond market will grow from $2 billion up to an estimated $5 billion over time.
Thank you. Thank you.
Speaker Change: As volume expands, we will continue to differentiate our Renaxapir products from other CTPR offerings with new formulations and mixtures.
Speaker Change: These new products, which are listed on slide 19, will deliver additional attributes.
Speaker Change: This innovation can be in the form of adding a second mode of action to combat potential resistance or adding a mixed partner to broaden the spectrum of control while expanding the addressable market.
Speaker Change: Rinoxapir is expected to continue to show sales growth, although not at the high levels we observed when the product was earlier in its lifecycle.
Speaker Change: Following the 2025 correction year, we expect overall Renaxa peer to report a growth rate in the high single digits.
Speaker Change: On slide 20, you can see the upcoming products in our RENOX Superior pipeline.
Speaker Change: Many of these products, these new products, will offer additional value to growers.
Speaker Change: This can be in the form of reduced labor for application by offering rice growers a much lighter weight tablet formulation, or it can be through new mixtures with pheromones and insecticides from other groups that combat resistance and strengthen performance in existing segments.
Speaker Change: Finally, we plan to introduce seed treatment products, which is an unexplored segment of the market for our branded offerings, as well as a mixture with a Bionimat side.
Speaker Change: While the core portfolio grows at or above the market, we expect Scienzapyr and the rest of our growth portfolio to grow at multiples of the market.
Speaker Change: For Sazipir, we have process patents in place in major markets through 2025, with Brazil not expiring until the middle of 2026.
Speaker Change: Depending on the country, this can extend the protection granted to the regional molecule. Data protection creates an additional and costly hurdle for generics to register products even after process patents have expired.
Speaker Change: Slide 21 shows some of the products in our cyazepyr pipeline, including mixtures with insecticides from other groups that will broaden the spectrum of control, as well as slow down resistance.
Speaker Change: Our high load formulations are not only easier to handle for growers, they also improve our cost position.
Speaker Change: To serve growers in the fruits and vegetables space, we'll be offering a fruit fly bait that is a unique and sustainable solution that leaves no residues and has no restrictions for export.
Speaker Change: Compared to Rinoxapir, Cyazapir has a more complex and more expensive manufacturing process. These factors may cause fewer generics to enter the market compared to Rinoxapir.
Speaker Change: Siazapyr has a broad spectrum of pests it can strongly control, including whitefly, fruit fly, leaf miner, and psyllids.
given the broader spectrum in our reduced manufacturing costs.
Speaker Change: We believe we have a sizable opportunity to expand the market for this product.
Speaker Change: Similar to Rinoxipir, we are actively promoting and developing new formulations and mixtures to position ourselves well when all path and protection has expired and generics enter the market.
Speaker Change: Following the 2025 correction year, we expect sales of the size to grow in the low to mid-teens.
Speaker Change: The most exciting parts of the growth portfolio are the new AIs that we're launching and expanding over the next few years. We have mentioned before our high expectations for the contributions of these molecules and we now share more details about what these expectations are and what supports them.
Speaker Change: Let me start with the two products already in commercialization. The first one is Flint Appear.
Speaker Change: It is one of the newest active ingredients of the SDHI fungicides, a class of very active products with a strong commercial success. Together, SDHI fungicides.
Speaker Change: represent 15% of the global fungicide market with around $3 billion in combined sales in 2023.
Speaker Change: SDHI fungicides are known for being very effective when used to prevent crop disease.
Speaker Change: This is also the case for flint appear. However, what sets it apart from the other active ingredients is the especially broad spectrum of control that covers many diseases of economic importance.
Speaker Change: such as Asian soybean rust, corn tar spots, coffee rust, and damping off in young cotton plants.
Speaker Change: The wind up here also protects crops for an extended period, lowering the need to respray.
Speaker Change: These technical attributes are enough to support our confidence in the success of FluentAppear.
Speaker Change: has given us access to some large market segments that we have never served before.
Speaker Change: In aggregate, we believe that its addressable market exceeds $2 billion.
Speaker Change: So carbon rust in Brazil alone is a 3.5 billion dollar market, just to mention one example.
Speaker Change: In many of these market segments, FluentAppear will be the first technology that we will sell.
Speaker Change: Going into these new segments with a product that is patent-protected, technically differentiated, and biologically strong will open access to sales of other FMC products.
Speaker Change: As shown on slide 22, FLINTAP is already registered in Brazil, Argentina, the United States, and Paraguay, with some other important countries pending registration in the next three years.
The second product is Isoflex Active.
Speaker Change: A herbicide based on Bixlozon that offers a new mode of action in cereals such as wheat and barley.
Speaker Change: It's most effective at controlling difficult grasses as well as some key broadleaf weeds.
Speaker Change: We have been selling this product in Australia with strong results.
Speaker Change: Given the size of Syria's market in the EU, Isoflex sales in those countries will provide a substantial boost to the product's global sales.
Speaker Change: Isoflex sales are expected to be about $100 million in 2025, with sales approaching $250 million by 2027.
Speaker Change: We expect sales to continue strong growth beyond 2027 as the product becomes more widely used.
Speaker Change: In our Q2 fall, we described it as a patented rice herbicide. I want to correct that statement.
Dodelec is a novel, patented, and versatile herbicide.
Speaker Change: While its development in rice is more advanced, our confidence that it will be sold on other crops in the future keeps growing every day.
Speaker Change: Suffice to say that it can be safely applied on several broadleaf crops, such as soybean, sunflower, and others, and we believe there are meaningful opportunities to expand the product to these crops beyond 2027.
But for today's discussion, let's just stay with rice.
Speaker Change: Because of cultural reasons, the vast majority of the countries currently have strict regulations that prevent the introduction of genetically modified rice varieties.
Speaker Change: As a result, decades of weed control with herbicides with similar modes of action have led to a substantial increase in weed resistance, probably more so than in any other major crop.
Speaker Change: Although it's hard to estimate the size of global rice area infested with resistant weeds, in the U.S. alone, some universities estimate that resistant weeds are present in more than half of all the rice fields.
Speaker Change: Weeds like barnyard grass and spring on top are present in virtually every rice field.
Speaker Change: and in many of them they have become resistant to existing herbicides.
Speaker Change: direct seeded versus transplanted, variety types, irrigated versus rain fed, different irrigation methods, etc.
Speaker Change: Today, all these variables result in limitations on which herbicide can be used.
Speaker Change: A product that can be safely used on transplanted rice can be harmful to the crop when used on direct seeded fields.
Speaker Change: Dodilax is highly safe on rice plants independently of the agronomic practices.
Once we launch it,
Speaker Change: almost all the rice growers will be able to use it without being forced to choose between their herbicide and their preferred agronomic practices.
Speaker Change: These are the key reasons behind our high expectations on Dodilac's commercial performance in the next few years. Looking forward into the future, we continue to believe that our new active ingredients can achieve or surpass $2 billion in revenue at maturity.
Speaker Change: Beyond our new synthetic pipeline, our plant health business is expected to grow at a rate in the mid 20% range out to 2027, led by biologicals, with a smaller contribution from pheromones.
Thank you.
Speaker Change: We still believe there is an excellent opportunity for outsized growth or pheromones, but meaningful growth is not likely to occur until after 2027.
Speaker Change: There is enormous potential for expanded sales from our growth portfolio when you consider the new active ingredients and the potential for sales appear to broaden its market reach. In addition, we also have a growing portfolio of biological products, including pheromones, that are positioned to provide even further growth.
Speaker Change: With our four portfolios providing a solid foundation for sales and earnings in a market that is in the midst of recovery,
Speaker Change: The differentiated nature of our growth portfolio puts us in a strong position to outgrow the market over the coming years.
Speaker Change: Pierre will now discuss specifically what our expectations are for the next three years and provide some closing remarks.
Speaker Change: Thank you, Ronaldo. Our 2027 targets are laid out on slide 23.
Speaker Change: We are focusing here on the growth of the company post-2025, which we believe will act as a correction year to reposition our portfolio. The growth rates post-2025
are more representative of the future growth of FMC.
Speaker Change: The sales of a core portfolio from 24 to 27 are expected to grow at 2% per year.
Speaker Change: Following the 2025 correction year, we expect total and acceptable growth in the high single digit.
Speaker Change: The rest of the core portfolio is forecasted to grow at the market rate of about 3% every year.
Speaker Change: A growth portfolio is expected to grow at an annual rate of about 24% from 2024 to 2027.
Speaker Change: Following the 25th correction year, sales appear growth is projected to be in the low to mid-teens with growth of both branded and partner sales.
Speaker Change: The new active ingredients are expected to reach $600 million by 2027.
coming from FluentApp here and ISOFlex.
Speaker Change: From 24 to 27, the growth portfolio contribution to total company sales is expected to grow from 19% of total company to 30%.
Looking beyond 2027, the ramp-up.
Speaker Change: of Dodilex and the addition of new products such as expanded biological offerings, the pheromones and the new dual mode of action herbicide Rimisoxafen will all contribute to further growth for the company.
Combining the core and growth portfolio
leads to expected 2027 sales of about 5.2 billion dollars.
Speaker Change: EBITDA is expected to be about $1.2 billion, equating to a 23% EBITDA margin, which is at the higher end of our industry.
Speaker Change: This is a revenue annual growth of 7% from 2024 to 2027, with EBITDA growth at 10%.
Speaker Change: We are highly confident in the growth path of the company.
Speaker Change: These confidence come from the already strong performance of a growth portfolio.
I believe FNC has the strongest pipeline in its history.
but we are also conscious
Speaker Change: that taking full advantage of it requires a repositioning of the company in 2025.
Speaker Change: That is why we will realign our inventory level, implement the newly developed AMI strategy, and invest in our sales organization to support a growth portfolio and develop new routes to market.
Thank you for watching. Visit www.cctexas.com
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 touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: Please limit yourself to one question. Again, please limit yourself to one question. If you have additional questions, you can jump back into the queue. To withdraw from the queue, please press star, then two. At this time, we will pause momentarily to assemble our roster.
The first question comes from Vincent Andrews with Morgan Stanley.
You may proceed.
Vincent Andrews: Thank you and good afternoon, everyone. Pierre, could you help us understand how you expect Renaxapur to work?
Speaker Change: from the 2026 and beyond to evolve. You're talking about high single-digit sales growth, but could you maybe help us think about the shape of volume and price over the coming years? And within that, could you let us know your view of price gaps and how you expect to manage them as the generics proliferate? Thank you very much.
Sure, from a pricing standpoint...
We believe we are in place right now.
Speaker Change: So, there is two aspects of it. There is the aspect of the market.
where we will sell the solar molecule.
Speaker Change: And there, we will have to make a decision of how deep we go into this market to go further into hectares, which are lower cost.
Speaker Change: using lower cost product and to decide where we go and how much of this market we decide to take versus today where we do not have any of this market.
Speaker Change: So that's what a lower manufacturing cost and new pricing will allow us to do to expand the market we will reach.
Speaker Change: in terms of hectares by going after different type of pesticide.
Speaker Change: Then there is the high-end, as you've seen on the slide presented by Ronaldo. We are actively working on new mixtures.
Speaker Change: of products which are increasing the efficacy of the product, fighting the resistance.
and those products will allow us to differentiate ourselves.
from the solo molecule, which will have way less efficacy.
Speaker Change: which will be beneficial from a cost standpoint for us and growers. We talk about high concentrate and pallets. So, it's a mixture of moving a product
Speaker Change: in two directions. One is to the higher end with high-level formulation which are significantly increasing the efficacy of the product.
Speaker Change: together with having the capability to expand to lower end market because we will have a much lower price allowing us to go into those markets.
Josh Spector: The next question comes from Josh Spector with UBS. You may proceed.
Josh Spector: So, a lot of the prepared remarks talk about weakness at the end of the year, more channel inventory you're dealing with in first quarter, and that's clear in your 1Q guidance. But if our math is correct, it looks like you're expecting volume growth of something like high single digits for 2025 as a year. Previously, you talked about that as 5%, something in that range.
Speaker Change: So, it just seems really odd to us that you're increasing confidence in volumes when the near-term outlook looks a lot worse than you previously anticipated. So, can you help us out there, please?
Very appropriate question.
Speaker Change: We are, one of the very key decisions we made is to lower the inventory of SMC products in the channel.
Speaker Change: So all of the core product we have, or the product part of the core portfolio, we're going to make sure that we're selling more on the ground than we are selling into the channel.
Speaker Change: but it is a strategy we have developed during the fourth quarter when we understood better the market we were facing.
Speaker Change: If you think about when we talked about 6%, we are thinking more out of a general growth of the demand from the market, which would have recovered.
Seventy-five percent of that
He's coming.
Speaker Change: from Growth Portfolio. And it is, it is coming from, mostly from the new molecules, the UAIs, and also from the
from the biological product.
the rest
Speaker Change: the plant health portfolio. So there is very little growth in the $250 to $350 million.
Speaker Change: growth, which is coming from the core portfolio. So it's a very different profile. It's a very different approach.
Speaker Change: to develop a new sales organization to go after the growth in the U-Routes, which is more direct sales to loud growers, but it's a very different growth profile than what we're expecting and where we intend to grow.
Speaker Change: The 250 to 350 do not touch places where we have high inventory level.
Speaker Change: The combination of new products and new customers, that is really where the growth comes from. It is not from traditional products and traditional customers. As we just stated, our focus there is actually to decrease existing inventory.
Speaker Change: So it's new products to new customers, driving the volume growth.
Thank you. Thank you.
Speaker Change: The next question comes from Chris Parkinson with Wolf Research. You may proceed.
Speaker Change: And we all understand there's a lot going on with Brazilian credit
Speaker Change: with India Americas, Wholesale Retail, Holding Less Inventory. But just, can you help us just, given even Latin America is a smaller portion of the first calendar quarter, just what's your confidence, you know, 2Q onwards, that, you know, you're doing everything in FMC's power.
Speaker Change: to ensure that you can ultimately hit that annual guide, if not exceed it, once all the dust settles. Thank you.
Thank you. Thank you.
Speaker Change: and many more. Thank you for watching. See you next time.
I think, Chris, the...
Thank you.
Speaker Change: to lower the level of F&T product in the channel. So certainly our numbers for the first quarter are showing that we're gonna have a very, very prudent approach to the market with a high focus on preparing the F&T products.
Speaker Change: The new route to market for the new product, because lots of the registration, except the U.S., are coming from countries in Latin America where you will have the growing season.
Speaker Change: and the new routes to market with the new growers we are targeting are also in Latin America. So the two actions.
Structuring ourselves for growth in the second half.
plus the
Speaker Change: half of the year should make us successful to deliver what we are planning in the second half of the year.
Do you want to add something, Andrew? Yeah.
It is that combination of...
both the back-end-weighted new product growth that Pierre mentioned
Speaker Change: The actions we're taking earlier in the year, broadly speaking, to reduce channel inventories. And then finally, the bit of the change in sequence during the year of sales in the U.S. market, with later replenishment by growers and retailers pulling from distribution.
Thank you. Thank you. Thank you.
Speaker Change: The next question comes from the line of Richard Garcia-Torreno with Wells Fargo. You may proceed.
Price and decline across
Speaker Change: basically most of the segments, most of the regions, with the exception of EMEA. In terms of the outlook, you talk about cost plus contract adjustments. Was that in a specific region? How is pricing currently in Latin America, which has been the weakest, I guess, that you had been seeing? And then, you know, when you look at the 2027
Speaker Change: Revenue Guide is expectations that these contracts are reset in 25 and then they're going to be slapped to potentially higher as we move forward over the next couple years.
Thank you.
So, to answer your last question about the contract,
Speaker Change: There is, for some of the very critical contracts, an indexation of the pricing to customers to a manufacturing cost.
The biggest jump
Speaker Change: in terms of lowering manufacturing costs is taking place now from 24 to 25. After 25, we're going to have incremental.
Speaker Change: evolution of our cost which will go lower and beyond where we will be in 25 but not at all to the same extent. So there will be less of an impact of the price adjustment
Speaker Change: to the technical selves in 26 and 27 versus 25, as most of the hits will be taken in 2025.
Speaker Change: From a pricing standpoint, I think the Gannons we are giving, Andrew correct me if I'm wrong, but I think the Gannons we are giving for 2025 is 3%, with about two-thirds of that coming from those manufacturing contracts or the sales contracts to our partners.
Speaker Change: Now in Q4, you made a comment about Q4 and the 3% decline, which was slightly better.
Speaker Change: than what we were expecting. And that's related to the comment I made initially. We had good line of sight in the fourth quarter to deliver the EBITDA and the EPS.
Speaker Change: We decided to walk away from sales when there was too much of a demand for price or term. We did not want to get into a situation where we would be competing at any cost to go as high as we could on the selling front and just...
Speaker Change: rather stayed below the number we gave as our expectation from the price decrease, knowing that we could deliver earnings without doing it.
and many more. Thank you. Thank you.
Speaker Change: The next question is from Aaron Viswanathan with RBC. You may proceed.
Great, thanks for the question.
Speaker Change: You know, get inside the channel a little bit more. It sounds like...
Thank you.
Thank you very much.
Speaker Change: Thank you. I would say that most of our inventory actions are going to take place in the first half.
I think that's...
Speaker Change: There is two issues I did not personally appreciate in the first couple of months I was here. I focused a lot on the overall inventory.
Speaker Change: but there is clearly some places for different reasons where we would have higher than the average inventory level, higher FNC inventory level.
Speaker Change: So, we have now identified, and it's a country-per-country set of actions.
Speaker Change: to tackle the inventory issue. And the way we truly realized that was going through.
Speaker Change: through studying the selling process and why things were not happening the way we were expecting. There is also the fact we spent a lot of time talking to our customers that we're dealing with a moving target.
Speaker Change: Inventory target at the end of the season, we believe is not the same today as it was in the past. I think people are
Speaker Change: Well, I mean, there is some region, I'll give you an example, there is some regions
Speaker Change: So, it's a moving target, so we have to deal with those two issues, the moving target in terms of what our customers want, plus the identified places, maybe six or seven countries, but including some large countries, like India and Brazil, where there is specifically high level of FMC inventory.
Speaker Change: The next question comes from Ben Thurr with Barclays. You may proceed.
Ben Thurr: Good afternoon and thanks for taking my question. I just wanted to kind of get a little bit more of the like the medium term picture and as you think about the rollout and the cadence for 25 then into 26 obviously with the backdrop of what you've just guided for Q1. So if things
Ben Thurr: you suspect right now, and as you would have to anticipate,
Ben Thurr: after it, how should we think about the cadence into 2026, just given the rollout of products and your ability to
Ben Thurr: to gain back some market share and to gain back some customers that seem to be lost for now.
Yeah, I think the...
Ben Thurr: It is not, if I look at the three-year plan, it's not a back, back-end loaded three-year plan.
Ben Thurr: You will see a significant improvement of the number starting in 2026.
Ben Thurr: The new product, you've seen the numbers shown by Ronaldo going to $600 million. It's going to be a pretty even growth you're going to see over the three-year period.
Ben Thurr: The new route to market, we hope to be ready to have that in place.
Ben Thurr: in the second quarter to start to be very active in the third quarter and be even more implanted in 2026.
Ben Thurr: Certainly there is an acceleration of the growth from 26 to 27 but you will there will be a significant step up coming from a correctional year but by 20 by 26 we will benefit from a market growth of the other core business.
Ben Thurr: and the full growth of our growth business. So it is not a backhand type of a three-year plan.
Thank you.
Speaker Change: The next question is from the line of Steve Byrne with Bank of America. You may proceed.
Speaker Change: Yes, thank you. For Renaxapir volumes in 2025, what are you expecting the percent declining to be?
Speaker Change: primarily due to just greater-than-expected capacity expansions in China? Is that what was the primary change? And if so, why do you think you could get back to high single-digit growth in 2026?
Yes.
Speaker Change: I think we want to be careful in not talking about specific percentage.
for product. Next year we do expect
Speaker Change: Renexapier to be down, both branded Renexapier and Renexapier sold to our partners.
Speaker Change: We do expect Sayos Appia Sales, Brennan Sayos Appia Sales, to be up.
Speaker Change: Going forward, I think, first, the different thinking we have about the Renex API business is twofold. First, we believe that
We can expand with a new manufacturing cost.
Speaker Change: The market we can address with the RONAX-LP or other solo-molecule formulations. Like I talked about, we talked about TELEX, or we talked about the...
the high concentration or.
the Nick Schurz with Nick Schurz Partners.
Speaker Change: So, we do believe that we can expand the number of acres where we can be competitive, and we can also improve the efficacy of this product, allowing us
Speaker Change: to go to market, which will be beneficial from a usage standpoint to growers. So, we do believe to play in a much larger market.
Speaker Change: starting this year and mostly in 2026 than we've done before without moving away from staying in the high end with the specific formulation which are giving benefits to growers.
to your questions around the change in the landscape.
Speaker Change: What I believe is, like it is very often the case,
When you have a patent protection...
which is a composition of matter.
Speaker Change: That is very solid across the world. When you have a patent protection which is process-based, not all jurisdictions or countries do have the same attitude toward those patents.
Speaker Change: and I believe that with India and China starting to sell products even if we are taking legal actions and even if there is a high probability we will win those legal actions there is no injunction
competitors are not stopped by court.
Speaker Change: and that gave the example and the courage to those companies to expand that behavior into other countries and that's why we saw them coming into Argentina, for example, into Turkey. So I think there is an expansion when you are just one year away from the end of your process patent protection.
where people are less worried.
Speaker Change: about the legal action we could be taking. And it's happening maybe faster than what we're expecting.
Frank Bitts: The next question comes from the line of Frank Bitts with Fermium Research. You may proceed.
Thank you.
Frank Bitts: Thank you and good afternoon. I want to come back to the price question, Pierre, you indicated that two-thirds of the price decline you're anticipating to come from the manufacturing contracts with your Diamide partners. So if you could talk a little bit about the other third where you're seeing the price declines in that area. But coming back to the Diamide partners,
Frank Bitts: Am I to understand that as you improve your manufacturing process,
that you are giving that back.
Frank Bitts: to the Diamide Partners. So as you spend money to improve your manufacturing for the restructuring costs, et cetera, that that is flowing through.
Frank Bitts: in a lower price to the Diamide Partners. I mean I certainly can understand
Frank Bitts: if raw material costs come down and so forth, that that would flow through to your to your partners. But I was just struck that it sounded like it was also if you're making improvements and spending money to do so, that you're giving some of that up. So any color there would be very helpful. Thank you.
Frank Bitts: Absolutely. So yes, the contract we have with those Diamide partners are the fact that
Frank Bitts: And once again, it's not all of them. There is some of our Diamide partners where we have a very different cost structure, but important Diamide partners to have what we call the cost plus.
Frank Bitts: which is which is not the exact terminology that's the fact we the way we called it but the pricing is indexed
on Manufacturing Costs.
and it is a commercial decision we have taken.
You know, we knew that over time.
Those partners would have the choice.
Frank Bitts: and working with people who potentially would come with price which would be more competitive. So, when you sign a mid-term, long-term contract with those partners, they're willing to stay with you, but they also have to be sure that their source of product will remain competitive.
So, in some cases, there is no cost plus.
contract.
Frank Bitts: But then, you know, what you end up doing is having a commercial negotiation every year or every other year when the contract has to be renewed. With some other partners, we do have longer-term contracts. And one of the benefits they get is they give us longer-term contracts and we give us a guarantee that we will optimize the price, even if we are the one.
Frank Bitts: Spending money to lower the cost. It's just a commercial practice. We have to secure some large contracts with important partners over a longer period of time.
Regarding the remaining...
Speaker Change: completely recovered and and the fact that in Asia we still are in a very very competitive situation where where the especially India where the channel is very full so I would say
Speaker Change: It's not as simple as two-thirds technical, what we call technical product sales to a partner and one-third of Asia, but it's not far from being the truth.
Speaker Change: Next question comes from Mike Harrison with Ford Research Partners. You may proceed.
Speaker Change: that you're seeing in the Latin America distribution channel. I know that your restructuring plan included some right sizing of the organization in Brazil, and now it sounds like you're seeing a need to invest in new routes to markets or a different way to access that market.
Speaker Change: So, can you help us understand what has changed in the market and also what has changed about your approach to the market in Latin America and your organization? Thank you.
Speaker Change: And some of the Consolidators started acquiring some retailers that were family-owned businesses, very traditional, and small, covering small territories. And these platforms became...
Speaker Change: became large and very diverse in terms of geographic expansion and also the making of their so-called network, for lack of a better name.
Speaker Change: because the market is evolving, the compliance need is different, the credit requirements are different.
Speaker Change: And as a result of that, there are more and more growers.
Speaker Change: going directly to companies or we could put in reverse as well, more and more companies going direct to growers.
Speaker Change: in approaching them directly and establishing that direct relationship between manufacturers and large growers.
Speaker Change: you may ask well and why didn't you you follow that wave before or you adjusted before and and the answer is actually pretty simple
Speaker Change: to go, I'm talking about soybean and corn, and to go and approach growers directly, you need the technology that is specifically important to those growers. We now have it.
Speaker Change: I talked about Fluenapyr and I talked about that product being a key tool in in controlling azure soybean rust.
Speaker Change: There are new or renewed brands and versions of our Diamines. We are now approaching those growers with some new technology to show them.
Speaker Change: When we right-sized the organization, we right-sized it to the total size of the market.
Now, the type of investments that we're making
Speaker Change: The people that are joining the company are people that are more skilled on soybean and corn.
Speaker Change: segments that we didn't serve before and especially approaching directly growers not focusing a hundred percent on retailers.
In other words,
Speaker Change: Though the skills are not the same, and the fact that we let go of people before and now we are adding, it's not the same type of people. It's just different skills, different networks, and different connections that are required to implement this new stage of the strategy. But I do want to stress, we can only do that now because we have the right technologies to do so.
Speaker Change: The last question comes from Kevin McCarthy with ZRP. You may proceed.
Speaker Change: either side of flat. And that is the case, notwithstanding what looks to be 175 to 200 million of favorability on COGS. I think you have additional restructuring benefits flowing through as well.
Kevin Mccarthy: So, my question would be, can you speak to some of the headwinds that would cause the flat EBITDA? I do see the foreign exchange that you quantified.
Kevin Mccarthy: But perhaps you could speak to the level of the incremental investments that you're making in SG&A to go direct in Latin America and other cost headwinds that would complete the bridge so to speak.
and many more. Thank you. Thank you.
Kevin Mccarthy: Sure. I think I would say there is multiple ways to look at it, but there is three key headwinds. One is price.
Kevin Mccarthy: with what we explained around the price we have to give back to our to some of our partners on Diamide.
Kevin Mccarthy: So price is overall $130 million, I think, in the range of $130 million of headwind.
Kevin Mccarthy: Secondly, we do have FX, which is much beyond what we would have thought a few months ago, in the range of about $70 million.
Kevin Mccarthy: And we believe we're going to be investing in the first quarter about $25 million to create a new sales organization. So you have here about $200 to $250 million of headwind.
for the three main ones.
Kevin Mccarthy: Hello Andrew, have I missed any or those are the three biggest ones? Yeah, that's the base one and obviously, you know, we did forego about 25 million dollars in the profit we've made in the GSS business in the prior year that obviously we won't have this year to finish out the break. Correct, that's the fourth and we... The smaller piece. So those together go beyond 250 million dollars.
Kevin Mccarthy: This concludes the FMC Corporation Conference Call. Thank you for attending. You may now disconnect.
Speaker Change: and many more. I'm sure you'll be able to find them in the video description. Thank you for watching. I hope you enjoyed this video. If you did, please leave a like and subscribe to my channel. I'll see you in the next video.