FMC CORP Q1 FY2025 earnings call

• Focus areas for 2025 include channel destocking, post-patent strategy, new route to market in Brazil, and growth portfolio management.
• Q1 results: Sales declined 14% vs prior year, pricing down 9% (over half due to cost plus contract adjustments), FX headwind 4%, volume down 1% (offset by Latin America growth).
• Regional results: North America sales down 28%, Latin America up 17% (excluding FX), Asia down 21% (excluding currency), EMEA down 7% (excluding currency).
• EBITDA declined 25% due to lower price, FX headwinds, and reduced volume; COGS favorability offset increased SG&A spending.
• Progress in Brazil: New sales and tech service organization in place, operational in Q2 for next growing season, providing multi-hundred million dollar growth opportunity.

North America had a sales decline of 28%, mainly from lower volume due to cautious restocking by retailers and growers. Latin America grew 17% (excluding FX headwinds), with higher volume from increased direct sales to cotton growers in Brazil not impacting channel inventory. Asia had a sales decline of 21% (excluding currency impacts) due to prudent selling and lower prices. EMEA reported 7% lower sales (excluding currency impact) due to lower volumes, largely from the loss of triflusulfuron herbicide registration. Plant Health business outperformed the portfolio with sales up 1% versus prior year driven by biologicals. Revenue contributions: Latin America grew 17%, North America was down 28%, Asia down 21%, EMEA down 7%, and Plant Health up 1%.

• Q2 guidance: Revenue decline midpoint 2%, EBITDA lower midpoint 6%, adjusted EPS lower midpoint 5%.
• Full-year guidance: Flat to prior year sales, adjusted EBITDA growth 1% at midpoint, adjusted EPS flat. Tariff impact estimated $15-20 million headwind. Second half expected revenue growth 7% driven by new products (fluindapyr, isoflex) and new Brazil route to market.
• Second half EBITDA expected to grow 11% due to lower costs, higher volume from new products and Brazil route, partially offset by lower price and FX headwinds.

• Tariffs could impact, with an estimated incremental cost headwind of $15 million to $20 million; need to monitor trade negotiations and potential pricing adjustments if tariffs persist.
• FX headwinds and price fluctuations pose risks to financial performance.

Q: Can you describe the price trends in the crop production market outside of diamide? Has the pricing bottomed? What would you expect from price going forward this year?

A: Pierre Brondeau mentioned pricing comparisons will ease as the year goes on, especially in the second half, with more stability and better comps vs 2024.

Q: You gave guidance on strong growth in the second half. Can you break down why you have confidence in costs in the second half?

A: Pierre Brondeau cited factors like new product demand, new Brazil route to market, healthy channel situation, low comp vs 2024, and $50 million automatic EBITDA growth from 2023 volume variance.

Q: What exactly are you doing to offset the tariff headwind of $15 million to $20 million?

A: Pierre Brondeau stated cost savings are already on the favorable side, and volume shifts are not specifically due to tariffs but part of normal strategy.

Q: You talked about reducing channel inventories. Does that involve giving significant rebates or discounts to customers?

A: Pierre Brondeau explained they shift sales organization to work with end users (growers), creating demand from retailers, with no need for rebates/discounts as transactions are between grower and retailer.

Q: Can you talk a little bit more about the diamide strategy and updates?

A: Pierre Brondeau mentioned lower pricing vs last year is in place, cost structure is being reduced to parity with generic manufacturers, and new Rynaxypyr products are driving volume growth.

Q: How could we think about alternative sourcing for raw materials impacted by tariffs?

A: Andrew Sandifer said they have supply chain flexibility with multiple sources for critical raw materials, and will continue to manage sources and pricing as tariffs evolve.

Q: Can you share more about customer order patterns?

A: Pierre Brondeau said customer order speed was slower in Q1 but picking up in Q2, with examples like Europe having 51% of orders for the quarter in one month.

Q: Can you compare and contrast selling directly to the farmer and selling through the channel?

A: Ronaldo Pereira said net contribution is very similar, with SG&A for dedicated sales force, and terms are similar to traditional model.

Q: Can you help us understand the second half EBITDA bridge?

A: Andrew Sandifer explained they don't guide quarters, but pricing headwind is lower in second half and FX drop-through to EBITDA is higher than historical.

Q: How much did the new route to market in Brazil negatively impact first quarter and when does it flip positive?

A: Ronaldo Pereira said new route is in place, organization trained, and expected to become positive in Q3 with sales to soybean and corn growers in later Q2 and Q3.