Operator: This call for FMC Corporation. This event is being recorded, and all participants are currently in listen-only mode. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Should you experience difficulties during today's call, please signal a conference specialist by pressing star 0. I will now hand the conference over to Mr. Curt Brooks, Director of Investor Relations for FMC Corporation. Please go ahead.
Curt Brooks: Good morning, and welcome to FMC Corporation's 2026 third quarter earnings call. Today's prepared remarks will be provided by Pierre Brondeau, Chairman, Chief Executive Officer, and President, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. After prepared comments, we will take questions. Our earnings release and today's slide presentation are available on the FMC Investor Relations website, and the prepared remarks from today's discussion will be made available after the call. Let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to those factors identified in our earnings release and in our filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's understanding. Actual results may vary based on these risks and uncertainties.
Curt Brooks: Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, free cash flow, organic revenue growth, and revenue excluding India, all of which are non-GAAP financial measures. Please note that as used in today's discussion, earnings means adjusted earnings, EBITDA means adjusted EBITDA, and sales refers to sales excluding India. A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's conference call, are provided on our website. With that, I will now turn the call over to Pierre.
Pierre Brondeau: Thank you, Curt. Today, I want to spend most of my time on the commercial actions we announced on 15 October. why we decided to take them, and what they mean for the business going forward. I will then walk through the Q3 results in more detail and a forward outlook. First, some brief context on the quarter. Our underlying performance was below our expectations before considering the impact of the commercial actions. Through the early part of September, Q3 performance was tracking broadly in line. However, during the final weeks of the quarter, channel customers in several key markets sharply reduced replenishment orders as they sought to close the season with lower inventory levels. Given the importance of September to Q3 results, the impact on sales was significant. But the underlying shortfall does not explain the magnitude of the actions we announced on 15 October.
Pierre Brondeau: Apart from weaker demand, there is a second issue which is having an outsized impact on the business. In response to high financing costs, the perception of ample supply, and demand uncertainty, channel customers are seeking to hold the lowest inventory values we have ever seen. For FMC, this creates a specific constraint for two reasons. First, the North America business model has been based on a higher gross price followed by significant rebates. As a result, the gross invoice price carried in customers' inventory can remain above the expected net price until those rebates are earned and paid. Second, some customers are holding FMC product that entered the channel at prices above current market levels. These products were sold on different cost structures, competitive conditions, and levels of patent protection. The elevated price of these products can delay their movement downstream to growers.
Pierre Brondeau: Both reasons increase the value of FMC inventory held by customers. This limits a customer's ability or willingness to place orders across the FMC portfolio. To address this issue, we are taking two actions to reduce the value of their FMC channel inventory. These actions are resulting in a Q3 EBITDA impact of $672 million. First, we are transitioning the North America business model to a framework that brings the upfront price closer to the expected net price. This change resulted in approximately a $500 million charge in Q3. This is a non-cash charge which does not change future cash obligations. This charge, related to the first commercial actions, consists of two components. The first and larger component reflects pricing and rebate adjustments associated with the transition to the new model.
Pierre Brondeau: Under the previous model, Q4 sales would have continued at a higher gross price, with high rebate paid after the end of the crop season. Since we moved to the new model on 1 October, which is the start of the North America ag season, that same gross price and rebate cycle will not continue in Q4. As a result, the remaining adjustment associated with the recently completed crop season was recognized in Q3. The second component reflects adjustment needed to bring inventory already in the North America channel from the higher gross price closer to post-rebate net price. The new model is expected to materially reduce the volatility associated with future rebate payments. It should also provide a simpler pricing structure for FMC and our customers, while allowing those customers to manage the value of FMC inventory more closely with the current market condition.
Pierre Brondeau: In addition, bringing the upfront price closer to the expected net price should make it easier for customers to position FMC products competitively against generic alternatives downstream. The second commercial action we are taking is to reduce the price of select high-priced product held by channel customers in Brazil, Argentina, the US, and Canada. These adjustments are intended to bring the value of that inventory closer to FMC's current pricing. To be clear, we are only adjusting the value of high-priced product already in the channel. Our objective is to support movement of these affected product downstream to growers and remove the constraint on future replenishment of FMC products. These actions represent the remaining approximately $175 million EBITDA impact and applies to select products sold into the channel since 2023. It is the only component of the total charge that is expected to reduce future cash collection.
Pierre Brondeau: These pricing adjustments will be booked against accounts receivable or via pricing credits on new orders. We have managed these higher-priced products in the channel as part of our ongoing business operations, expecting to bring down their pricing incrementally over time. After assessing our Q3 results, the industry outlook, and the need to change our North America business model, it became clear at that time that more comprehensive actions were needed given the priority customers are placing on holding very low inventory values. We have spent the past several years making significant changes to the company. We have lowered cost, changed our manufacturing footprint, generated significant proceeds to support our balance sheet, and advanced new products to market. Allowing this inventory issue to continue constraining the business would limit our ability to fully realize the benefits of that work.
Pierre Brondeau: Therefore, we have decided to address the issue more comprehensively now. The faster our products move downstream to growers, the quicker we can start to realize the benefit of our current competitive pricing. Moreover, the manufacturing changes underway across our legacy portfolio are expected to further improve our cost position and our ability to compete. While the final impact of these actions is reflected in our Q3 results, implementation is just beginning. Discussions with customers are taking place now, and we expect the transition to occur over the next three quarters. Initial customer feedback has been very positive and reinforces our view that these actions address an important commercial constraint. Our priority is now on implementing them in a disciplined and structured way. With that context, let me turn to our Q3 results outlined on slide four, five, and six.
Pierre Brondeau: Q3 revenue was $106 million, including approximately $639 million of impacts from the commercial actions. Excluding the commercial actions in India, underlying sales were $745 million. This was below the low end of our original guidance due to lower-than-expected volumes. Price was a year-on-year headwind, including the effect of our strategic pricing actions for products which have recently lost IP protection. Q3 adjusted EBITDA was -$559 million, including approximately $672 million associated with the commercial action. Excluding those actions, underlying EBITDA was $113 million. This was below the low end of our original guidance, as weaker-than-expected volume were partially offset by better-than-expected cost. Adjusted earnings per share were -$4.41, which was well below our initial guidance, due mainly to the impact from the commercial actions. Turning now to slide seven for our updated Q4 outlook.
Pierre Brondeau: We expect the challenging market conditions that we observed in Q3 to continue. This includes constrained grower margins, a highly competitive market, and demand uncertainty in multiple regions, stemming from potential El Niño impact. We are guiding Q4 revenue between $1.04 billion and $1.14 billion, which is about flat versus prior year at the midpoint, as volume growth is offset by a high single-digit price decline. The pricing headwind is mostly driven by strategic pricing actions for products transitioning to the post-patent phase. Higher volumes are expected to be driven by increased direct-to-grower sales in Brazil, growth of new products, and more competitive FMC pricing. Adjusted EBITDA is expected to be between $210 million and $230 million, a decline of 22% versus the prior. Lower pricing and an FX headwind are expected to be partially offset by higher volume and favorable costs.
Pierre Brondeau: This is lower than our prior Q4 guidance, due mainly to an increase in the pricing headwind. Adjusted earnings per share is expected to be between $0.56 and $0.70. I will now turn the call over to Andrew.
Andrew Sandifer: Thanks, Pierre. I will start this morning with some income statement items. Q3 sales reflect a minor FX tailwind, with favorability from the Brazilian real partially offset by modest strengthening of several EMEA currencies. FX was a modest headwind at EBITDA due to shifts in currency values versus how we were hedged. Looking forward to the rest of the year, we expect a similar profile, a minor FX tailwind at revenue combined with a modest FX headwind at EBITDA. Q3 interest expense of $73.6 million was up $9 million versus the prior year period, with the impact of financing activity earlier in the year only partially offset by lower foreign borrowing and higher interest income.
Andrew Sandifer: We expect full year 2026 interest expense to be in the range of $270 to $280 million, up approximately $35 million versus the prior year at the midpoint, due to the impacts of the recent financing activity, partially offset by lower foreign interest expense. We continue to expect depreciation and amortization for full year 2026 to be between $160 and $170 million. There were several extraordinary charges in Q3. We took charges of $639 million against revenue and $672 million against EBITDA, stemming from the commercial actions that Pierre described a few moments ago. These charges impact both GAAP and adjusted metrics as reported. There are two additional charges that impact our GAAP earnings this quarter that are excluded from our adjusted metrics, consistent with our non-GAAP reporting policy.
Andrew Sandifer: We recorded non-cash adjustments of approximately $809 million to deferred tax assets in the United States and Switzerland, as well as a non-cash impairment charge against our indefinite lives intangible assets related to our Rynaxypyr business of $288 million. These charges reflect revised expectations regarding future operating results and cash flows that reduce the book value of these assets. As a result of the commercial charges and expected negative reported earnings before tax for full year 2026, we now expect a full year effective tax rate on adjusted earnings of 12% to 14%. The effective tax rate on adjusted earnings through Q3 is now 13%, the midpoint of this range. Moving next to free cash flow on slide 8. Free cash flow in Q3 was -$18 million, $214 million better than the prior year period.
Andrew Sandifer: Significantly lower EBITDA, in part due to the commercial action charges, was more than offset by working capital improvement. Free cash flow before restructuring was modestly positive after considering the $23 million in cash restructuring spending in the quarter. In light of year-to-date performance and the conditions that led to our taking the commercial actions discussed, we have updated our outlook for free cash flow for 2026. We now expect full year 2026 free cash flow to be in the range of -$350 million to -$150 million. This change in outlook for free cash flow is driven by several factors, including lower than previously expected Q3 results, lower than previously expected Q4 EBITDA outlook, lower collections in Q4, and somewhat higher restructuring spending. We traditionally receive large advance payments from customers, particularly in the United States, during Q4.
Andrew Sandifer: Our free cash flow forecast assumes similar levels of customer prepayments as in 2025. Further, our full year free cash flow guidance includes an expected $180 million in restructuring spending. Therefore, free cash flow before restructuring is expected to be -$170 million to +$30 million. Moving next to the balance sheet, leverage, and liquidity. We ended Q3 with gross debt of approximately $4.2 billion, up $103 million from year-end 2025. Cash on hand increased $259 million to $736 million. This resulted in net debt of approximately $3.4 billion, $48 million lower than at year-end 2025. Cash and net debt this quarter reflect the $403 million equity investment by Tessenderlo Group that closed on 23 September. With this investment, Tessenderlo Group now owns approximately 20% of FMC's outstanding common stock.
Andrew Sandifer: We were in compliance with all covenants at 30 September. Covenant EBITDA is calculated differently from reported adjusted EBITDA, and the definition allows charges like the commercial action charges taken in Q3 to be added back for covenant purposes. Secured debt to Covenant EBITDA was 1.4x, well below the 3.5x covenant limit. Interest coverage was 2.3x, above the minimum 2.0x. While total debt to Covenant EBITDA is not formally measured for Q3, this metric would have been 6.1x as compared to the 6.75x covenant limit that will be reinstated at 31 December 2026. We continue to make good progress on the two transactions we expect to close in Q4, both of which will generate additional cash proceeds.
Andrew Sandifer: The sale of our India business remains on track for a planned 1 December close, and the sale leaseback of our Delaware site is also expected to close by year-end. Cash and debt at 30 September reflect the proceeds from the rimisoxafen licensing deal and the Tessenderlo Group equity investment. Assuming the India and Delaware transactions close in Q4 as expected, and considering our updated outlook for free cash flow, we expect to end 2026 with net debt of approximately $3.1 billion, with no outstanding revolver balance. At this level of debt and guided EBITDA, we expect to remain in compliance with all covenants at year-end. Further, we expect to remain in compliance with all covenants through 2027. We have a solid liquidity position supported by meaningful cash on hand and available borrowing capacity under our facilities.
Andrew Sandifer: We are confident this position is well to meet the needs of the business. While the commercial actions take effect, we will prioritize liquidity, and as such, we intend to largely self-finance the seasonal working capital build in H1 2027. With that, I will hand the call back to Pierre.
Pierre Brondeau: Thank you, Andrew. Before I close, and following Andrew's comments on the Tessenderlo Group investments, I want to formally welcome Luc Tack, CEO of Tessenderlo Group, to our board of directors. We look forward to working with him. The commercial actions we discussed earlier are directly connected to our four operational priorities, but do not represent a change in our strategy. Instead, they enable their implementation and form the basis for how we are thinking about performance in 2027 and 2028. With that as a backdrop, let me provide some preliminary perspective on these two years. We will provide formal 2027 guidance and additional perspective in 2028 in February. At that point, planning will be complete, and we will have had the time to assess how quickly our commercial actions are taking effect. For today, I want to share the preliminary ranges reflected in our current planning.
Pierre Brondeau: We expect 2027 to mark the beginning of a financial inflection for FMC. Sales of the new active ingredients are expected to increase, led mainly by fluindapyr, where we have new registration pending in six new countries, along with continued expansion in existing markets. Potential derogations for Isoflex in Spain, France, and Belgium will also contribute to growth of new actives. In addition, differentiated Rynaxypyr formulation and mixture are also expected to support the branded portfolio. The benefits of the commercial action should build over the year as FMC products move more quickly through the channel. These actions will lower our cost by reducing product return and rework. In addition, we expect partial year benefits from our ongoing manufacturing changes, weighted toward the H2 of the year. Together, these actions are expected to support improved competitiveness and growth across the portfolio.
Pierre Brondeau: As part of our manufacturing footprint redesign, sales at PR manufacturing will move to one of our low-cost manufacturing sites. While this will negatively impact 2027 partner sales as cost reduction flow through cost-plus arrangements, the much larger branded business will benefit from the lower cost base. Based on our preliminary planning, we currently see 2027 adjusted EBITDA of at least $650 million and as much as $730 million. We recognize this is a broad range. Where we will land within it will depend on how quickly the commercial actions we discuss today improve the flow of our products through the channel to growers. Looking ahead to 2028, we expect a greater contribution from the same drivers described for 2027.
Pierre Brondeau: The transition associated with the commercial actions is expected to be largely complete, and the new manufacturing footprint should be delivering a broader cost benefit across the core portfolio for the full year. Growth from new active ingredients is expected to accelerate further through the continued expansion of fluindapyr, with increased contribution from Isoflex and Dodhylex. Isoflex is expected to gain key registration in Europe, and Dodhylex in Brazil and Asia during 2028. We also expect the first launch of rimisoxafen. The headwind from diamide partner contract is expected to be much smaller. As shown on slide 10, these factors are expected to support a strong growth and earning profile for FMC. Based on our preliminary planning, we currently expect 2028 adjusted EBITDA of approximately $760 million to $840 million.
Pierre Brondeau: We also expect 2028 to be a year with much stronger cash generation, helped by greatly reduced cash restructuring spending. We recognize that confidence in FMC can only be rebuilt through execution and results. Our priorities are clear. Complete the commercial actions, protect liquidity, lower the cost of our core portfolio, and continue growing our new technologies. With that, we are ready to take your questions.
Operator: We will now begin the question-and-answer session. Please limit yourself to one question. Should you have additional questions, you can re-enter the queue. To ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Vincent Andrews with Morgan Stanley. Vincent, please go ahead.
Vincent Andrews: Thank you, and good morning, everyone. Wanted to try to get a sense of what cash flow will look like for 2027, and I guess a couple of things. Andrew, I think you made a comment about what you thought prepayments would be in Q4, but I wasn't clear whether you thought they'd be the same as last year, or you thought they'd be a lot lower than last year. If you could also talk to the $175 million from the Q3 actions. The future cash effect of that, is that you will have to forego cash collection in 2027 or beyond to provide that $175 back to your customers, or some of that just a write-down of receivables?
Vincent Andrews: Any other bridge items for cash flow next year as well would be helpful, and any sort of sense of how positive it could be would be helpful. Thank you.
Andrew Sandifer: Sure. That's a lot there. I'll try to see if we can knock that out in various pieces. To start with a simple one, our free cash flow guidance for 2026 assumes flat prepays to the prior year, so the same level of customer prepays that we received in 2025. As we look ahead to 2027, obviously EBITDA growth will be a big contributor to the free cash flow prospects. We do have some relatively fixed pieces of our walk from EBITDA to free cash flow, particularly when we look at interest expense, cash taxes, legacy expenses, et cetera. We're continuing to work through the budget for 2025, so we're not prepared to give formal guidance on free cash flow today. I would suggest certainly that there is a continued high level of restructuring spending in 2027, though at a lower level than what we're experiencing in 2026.
Andrew Sandifer: We have guided to $180 million roughly of cash spending on restructuring in 2026. It will be lower than that in 2027, but still a meaningful drag on cash flow. At this point in our budgeting process, we believe it's possible to get to a free cash flow before restructuring that's break-even, but it would not. At this point, it's going to be premature to give too much of a guidance. To your specific question around the commercial actions, I'll give a brief answer here. The $175, which is really adjusting the value of inventory held by customers that was sold under very different market conditions and at much higher prices, that will be executed through credit notes or pricing credits against future orders. Credit notes would reduce the value of accounts receivable that's not yet been collected.
Andrew Sandifer: That is, theoretically at least, a reduction in future cash flows. The timing, it may in fact actually accelerate collection in places where that product may not have moved as quickly, may allow us to bring cash forward more than what it might have without taking those incentives. In other places where that inventory has been paid for by customers, it would be a pricing credit against future sales. It just reduces the amount of cash we would receive from customers on those future sales. Over a four to six-quarter period, that probably is a cash headwind for the company. But again, there may be some offsets there in terms of collections that would have either been further delayed or potential bad debt write-offs or other issues if that product were not repriced and enabled to move through the channel more quickly.
Andrew Sandifer: I don't personally view that as a 100% cash headwind over the long-term horizon.
Operator: Your next question comes from the line of Salvator Tiano with KeyBanc. Salvatore, please go ahead.
Salvator Tiano: Yes, thank you very much. Just want to continue a little bit on the free cash flow. As you said, the $175 million is pretty much forgoing receivables. $500 million, if I understood correctly, is the timing. Theoretically, you are going to give these rebates, I believe, correct me if I'm wrong, they are accrued already in your liabilities, it's just that you're giving them earlier. Can you tell us, in your updated 2026 guidance for free cash flow, how much of that $175 million do you assume essentially you're not getting back this year versus the next few quarters that you said, four to six? Out of the $500 million as well, how much do you think this will hit this year versus next year as it's brought forward versus when it was originally supposed to affect your cash flow?
Andrew Sandifer: Why don't we take that in reverse order, and Pierre, certainly jump in anywhere here. On the $500 million, there is no impact to 2026 cash flow. The rebates that we have to pay, cash rebates that we will pay in December in the US, are earned on sales that our customers made to their customers in the market year from 1 October 2025 to 30 September 2026. The payment of those rebates has always been in our free cash outlook for 2026. There is no change from that action and what we expect to have as cash outflows in 2026. In 2027, we will be selling at a lower gross price, but we will also be paying substantially lower rebates, as that difference between the gross price and the net price is much lower.
Andrew Sandifer: We don't believe there is any impact on our cash flow from that change in rebates over the crop year. There may be some timing impacts where historically in North America, we would sell in particularly Q4, Q1. We would sell at a high gross price historically. We would collect those sales in the second and third quarters, and then we would pay a very large rebate in the fourth quarter. This year, we will sell in a similar kind of timing, but we will sell at a lower gross price, so we will collect a lower amount in Q2 and Q3, but we will pay out a substantially lower rebate in Q4. Such that by the time we get to Q4 of 2027, we don't believe there is really a net impact from that $500 million in rebate charges to the cash of the company.
Andrew Sandifer: It does change between quarter to quarter, but not over the crop season. I think that is an important thing to understand about the changes in the pricing structure and the rebate in North America.
Pierre Brondeau: I think let me add a comment around how much of the 125 cash leakage could be expected in 2026. It is still a number we are looking at. It is not a large part of the $175 million because, as you can understand, we are at the end of October, and we are starting to implement our commercial actions now. We are right now putting in place the plan for the next two weeks to be discussed with the customers. Some of those actions will lead to issuance of credit notes during maybe the second half of November and December to get this process started. But it is not a very significant amount of the $175 million we are overall expecting to generate as credit notes.
Operator: Your next question comes from the line of Matthew DeYoe with Bank of America. Matthew, please go ahead.
Matthew DeYoe: Good morning. Pierre, we get a lot of questions around go-forward revenues and the cost structure of the company. This may be somewhat of a hard forum for it. Clearly, as sales have come under pressure, some of your overhead costs have ballooned a bit as a percent of revenue, right? Maybe not so much on an absolute dollar basis. If you think about the cost structure of FMC, you shifted from mid-teens SG&A to sales to over 20%. What can you do to address that cost structure from an overhead perspective? I know you are obviously very focused on the operational side of the business, but from an overhead, what can you do there?
Matthew DeYoe: Can FMC still support the same amount of overall R&D spend that it has, or is that something that you also have to take some measures on to be more efficient?
Pierre Brondeau: Yes. The percentage of SG&A increase versus sales comes more from the decline in sales than increase in SG&A. If you look over the last few years, our SG&A cost has remained in dollar number roughly flattish, which means we have been more than absorbing all of the inflation, which has been significant. We had a cost restructuring in 2024, 2025 to eliminate $300 million of SG&A cost. We then had the manufacturing footprint where we have eliminated about 1,000 positions, shut down 3 plants. We had another restructuring in September where we have eliminated another 50 position, and we have just made a move where we have been eliminating among the top 100 position about 20 to 25 high compensation. We are getting to a place where we will not save the performance of the company through future cost saving.
Pierre Brondeau: It is absolutely vital, and that is center to what we do now. FMC will return to high performance only depending upon our ability to grow, and that is where, if you look at our strategic pillars and the commercial actions we are taking, that is where all of our focus will be. We certainly intend to maintain flat SG&A spend, which means absorbing inflation going forward. That being said, the focus has to be to return to growth in 2027 and 2028. We do believe very strongly, and only the next few quarters will prove that the actions we are taking are absolutely vital in terms of returning back to growth. We have a portfolio with a new manufacturing cost which will be cost-competitive. We do have new technologies for which we are getting more and more registration. By 2028, we will have three of those products fully commercial.
Pierre Brondeau: We are going to see the benefit in 2027 and 2028 thanks to the commercial actions of less return, less rework, less of an impact of credit notes. We have a pretty strong certainty that we are heading in 2027 and 2028 back to growth. That will obviously result in a decrease of SG&A as a percent of sales. But where I am focused right now, after all of the restructuring we have done over the last three years, is getting the corporation back to growth. And that is why this last action we took, and I tell you, it has been in my mind for the last month. I just needed a point where I felt there was no other way to move forward to bring back growth to the company, that we took those actions, and they will be vital to go back to growth.
Pierre Brondeau: That is where the focus is. I think we have done a lot in cost structure. Obviously, if we do not succeed in growing the top line, then we are facing another problem. And then you are right, we are going to have to look at our infrastructure cost for the company. But right now, almost solely focused with the actions we are taking on top-line growth, which we believe is very achievable with the last set of actions we have taken, which are very critical. And by the way, to make a comment, I can tell you I was myself with customers over the last few days. We are meeting with all of our customers. We are preparing plan per customer. It is very, very well received. On the point, the last point you made around R&D. At this stage, R&D is a very solid contributor to growth.
Pierre Brondeau: We do have four new active we are bringing on the market. We have multiple products in the pipeline which are very interesting, and we need to keep on accelerating formulation research in the region. I would like to hold our R&D spending where it is today. Now, I am not excluding the fact that we might have to think in the future, and maybe the very near future, about R&D with a different model, which is all based on partnership. That is what is more critical today, which is developing single molecule new active by yourself as a company, might be a story of the past. And in the future, I believe we are going to have to join force with partners on specific projects to increase the speed of development and reduce the cost.
Operator: Your next question comes from the line of Duffy Fischer with Goldman Sachs. Duffy, please go ahead.
Duffy Fischer: Yeah. Good morning, guys. Can we just go back to the $500 million charge, that part of it? Roughly, what is the split between the transition to new pricing model and adjusting the gross price, would be question one. Then two, for each of those transactions, can you walk through the double-entry accounting? Basically, what happened in Q3, through the P&L balance sheet cash flow statement, and then what happens with those going forward?
Andrew Sandifer: Hey, Duffy. It is Andrew. Let me take a crack at some of this. Certainly, the $500 million charge in the quarter, that splits about 60/40 between the change in the pricing structure, the mechanics itself, versus the change in the gross to net price on historic inventory. In terms of the flow-through of those items from the income statement to the balance statement, a big chunk of it goes against accrued rebates. Next biggest piece goes against trade receivables, and then there is some minor adjustments to advanced payments and current liabilities. But when we publish the more detailed balance sheet and accompanying notes with 10-Q later today, that will be a little more transparent. But really, those are the three lines on the balance sheet that are most directly impacted from these charges in Q3. Again, from a Q3 perspective, there is really no cash impact. These are non-cash charges.
Andrew Sandifer: The only time that there is a cash impact is in the future periods, and it is really not related to the $500 million rebate pricing structure change in North America that we just described a few questions ago. It is much more related to where we are giving credit notes and pricing adjustments for channel inventory held by customers that was sold at much higher prices and is held in inventory value by our customers at much higher prices.
Operator: Your next question comes from the line of Kevin McCarthy with Vertical Research Partners. Kevin, please go ahead.
Kevin McCarthy: Yes. Thank you for taking my question, and good morning. Andrew, maybe a couple for you. With regard to the pending divestiture of your India business, are you still expecting to extract $200 million of working capital in addition to the $252 million transaction value? Secondly, I would welcome your thoughts on what you are baking into your guidance for any foreign exchange-related impacts, given the volatility in the BRL post-election.
Andrew Sandifer: Yeah. Great questions. We will start with India. Look, we are currently updating our carrying value for the India held for sale business to a fair value of $260 million at the 30 September print date. You will see this in the 10-Q that we file later today. We started the year with a carrying value of about 450, with the gross proceeds that we expect, the terms of the initial signing of the deal, about $250 million. Cash collected of about, we are expecting to collect about $130 million this year before closing. We have collected $115 million in cash year-to-date from the India business. The remaining difference is deal fees, FX, some other frictions that come with executing the transaction. But essentially, we have been around a 400 number for the value of that transaction from the beginning, and the headline price plus the cash received.
Andrew Sandifer: Obviously, there are always frictions with executing a transaction, but we are still in that same ballpark. So we are very pleased with progress. Like I said, we are on track for the 1 December close. We think we have a very good partner in Crystal Crop in terms of as a route to market for our new technology going forward in India. So we think they are going to be a very good partner to work with over the long term, in addition to just this initial transaction. So we are very, very excited about that.
Operator: Your next question.
Andrew Sandifer: The BRL, the trickier. Sorry, I paused there. The trickier part of your question, obviously, is last weekend's election in Brazil has caused a bit of a market upset with the BRL. I think, from our viewpoint, it's basically reversed a strengthening of the Brazil with the expectations by polls that the election might go the other way. For a lot of our planning purposes for 2026 and the rest of 2026, 2027, we were planning at levels pre that run-up. Not a specific headwind that I would point to in our Q4 outlook related to the BRL. And certainly, the current rates factor in very much in the way we're thinking about 2027.
Operator: Your next question comes from the line of Lucas Beaumont with UBS. Lucas, please go ahead. Lucas, a reminder just to unmute locally. Your next question comes from the line of Laurent Favre with BNP Paribas. Laurent.
Laurent Favre: Yeah, good morning.
Operator: Please go ahead.
Laurent Favre: Yes, hi, good morning. I would like to go back to, I guess, the 2027 early look that you provided, and more thinking about the industry backdrop. So wondering how you have been sort of penciling in price against variable costs. I understand you will have benefits on manufacturing costs, but I would have assumed that the disruptions related to the Middle East would start to sort of show up into the variable cost inflation side. Are you assuming you get pricing back into positive territories in 2027?
Pierre Brondeau: Let me take this opportunity, Laurent, to give you an overall view of how we think about 2027. Just to break it down along the line of the way we describe the companies. We believe core business should be back to growth, even at a low level, because we will not yet be benefiting for the full year from the manufacturing cost. We are not today. There is some level of inflation of raw materials, but for some reason, it is not a number which is dramatically impacting manufacturing cost. It is to some extent, but it is not a big driver. So, when we look at our business, the core business will be growing in the low single digit, mostly driven for us by a normalized channel with the commercial actions we are taking, and we continue to grow our direct sales in Brazil.
Pierre Brondeau: That include pricing into the equation, but not expecting a major cost increase from raw material. Then we are looking at the growth platform. I think it is going to be up in the mid-teens, and that is driven by new active ingredients, which we believe will be growing 50%, mostly driven by fluindapyr. Then when you look at cost, much more important than inflation cost on raw material, we are expecting a very significant decrease of cost because of the fact we would have cleaned up the channel inventory. We are going to be way less return of products, which we have been getting over the last few years, which impact top line. We will be getting obviously less rework to do when we receive those products. Of course, with the actions we have taken, way less impact of credit notes.
Pierre Brondeau: If you think about cost of the corporation, that is going to have a much cost and even top line, a much greater impact than the inflation we are seeing today with the Strait of Hormuz situation.
Operator: Your next question comes.
Pierre Brondeau: Just finish one single comment, maybe to guide you toward the EBITDA. If you take the three comments I made around core, around growth, and the improvement linked to the change of the channel and the lower cost, we have applied to those three, and we have quantified each of those three and applied EBITDA in the 18% to 19%, and that is what is driving us to the kind of range we are giving for 2027.
Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Lawrence, please go ahead.
Laurence Alexander: Good morning. Just to clarify one of the comments about the core business. When you say it is back to growth, is your intention for 2027 and 2028 that both volume and price will be net positive, or will it be back to growth in the sense of volumes are positive, but net price is probably negative or negative relative to inflation, and you are making up for that elsewhere in the portfolio?
Pierre Brondeau: The first one, we are expecting that the price volume will be a net positive for us, and even greater in 2028, where we will have a full year impact of the new manufacturing footprint.
Operator: Your next question comes from the line of Lucas Beaumont with UBS. Lucas, please go ahead.
Lucas Beaumont: Hi, thanks. Can you hear me now? Sorry about that.
Andrew Sandifer: Yeah, we can hear you.
Lucas Beaumont: Cool, thanks. I just wanted to follow up on the free cash flow. So, in the year, you said you have sort of reduced the outlook by $400 million there. It seems like maybe $70 million of that is kind of associated with the cut to the H2 EBITDA. Can you kind of just walk us through the buckets of what the rest is sort of baked in there, please? Thanks.
Andrew Sandifer: Yeah, so if we look at the full-year cash flow outlook versus our prior guide, certainly it starts with the reduction in EBITDA, right? We underperformed the midpoint of our prior guidance for Q3 by about $17 million. We have reduced the outlook for Q4 by $75 million, so it is nearly a $100 million reduction in the EBITDA outlook for the full year on an underlying basis. Second thing I would point to is sales also lagged in Q3, and it compounds lower sales that we experienced earlier in the year to where the collections that we will collect from sales made earlier in the year, particularly from the under-delivery of sales in Q3, and say things we sold in Q3 that a portion of which we would have collected in Q4 are lower than what we had previously expected.
Andrew Sandifer: For sales that we make in Q4 that we collect in Q4, which is a non-trivial portion of our US business, because of the shift in gross pricing, we could sell the same number of units, collect a lower amount of gross sales in Q4, and certainly from forecast to forecast, that is a reduction in collections in Q4. Now, the natural offset to that is in Q4 2027, we will be paying significantly lower rebates. That is my earlier comment about over the cycle, those rebate changes in North America really should be cash flow neutral. Then finally, there is some amount of credit notes that will be applied in Q4. As Pierre Brondeau described earlier, that is a very active discussion. We have an estimate in there.
Andrew Sandifer: It could be higher and lower based on how timing and of how agreements are reached with customers, but that does factor in as well. So, those combination of four factors are essentially how we shift from the prior free cash guidance to our current guidance.
Pierre Brondeau: Just one comment about the USD 175 million, the last comment Andrew made, and the more we use is not always bad news because that would mean that we are reaching agreement with customers. So, there would be some level of payment, but there would be some significant level of increased revenues from those transactions. So, we have made some assumption, but going beyond what we have is not at all bad news from a potential growth in Q4 above what we have in the plan, should those contract be reached with customers faster than what we have in the plan.
Operator: This concludes the FMC Corporation earnings call. Thank you for attending. You may now disconnect.
Operator: This event has now concluded. Access the FMC Corporation IR website for more information. This line will now disconnect.
