FMC Corporation Q3 FY2025 earnings call

Before getting into third quarter results, sales were below expectation due to constrained credit for customers in Brazil and Argentina and pricing pressure from generics in Latin America, which were expected to persist in the fourth quarter. Accelerating planned cost actions to keep the product portfolio competitive. The India commercial business was designated as held for sale, with actions like taking back channel inventory and offering pricing credits to prepare for sale, which was progressing smoothly. Excluding India, other regions generally performed in line with expectations with Latin America affected by credit and generic pressures, while North America and EMEA saw volume growth. Adjusted EBITDA was strong due to disciplined cost control, focused pricing, volume growth, and favorable product mix, though offset by lower price and FX headwind.

Third quarter GAAP net sales were $542 million, which was 49% lower than the prior year. The majority of the year-over-year decline was due to one-time actions taken in India. Excluding India, third quarter revenue was $961 million, down 4% year-on-year on a like-for-like basis. Price declined 6% while volume grew 2%. Adjusted EBITDA was $236 million with an EBITDA margin of approximately 25%. Adjusted EBITDA was 17% higher than the prior year on an as-reported basis and 23% higher on a like-for-like basis adjusting for India.

Anticipates conditions observed in the third quarter to continue in the fourth quarter. Excluding India, fourth quarter sales expected to be in the range of $1.12 billion to $1.22 billion, with a 2% midpoint increase on a like-for-like basis driven by the growth portfolio. Price expected to be a mid- to high single-digit headwind due to competitive pricing and cost-plus contracts to diamide partners, with FX a low single-digit tailwind. Fourth quarter adjusted EBITDA expected to be in the range of $265 million to $305 million, a 16% midpoint decline on an as-reported basis and 7% decline on a like-for-like basis. Full year revenue now expected between $3.92 billion and $4.02 billion, full year adjusted EBITDA $830 million to $870 million, adjusted EPS $2.92 to $3.14. Free cash flow guidance lowered to a range of negative $200 million to $0 due to lower cash from operations.

Constrained credit for customers in Brazil and Argentina leading to lower sales. Pricing pressure from generics, especially in Latin America, Asia, etc. FX fluctuations impacting financial performance. Uncertainties related to the sale of the India business including inventory, tax, and collection risks.

Q: On the free cash flow guide, at the midpoint, you're down $400 million versus what you expected last quarter. Can you just talk about the buckets of what's eating up that cash flow? I know some of it is working capital. And then do you think you get a onetime release of that back next year? Or is this going to be a new going forward higher commitment of cash needed for your EBITDA delivery?

A: Thanks, it's Andrew. I'll take this question. Look, in terms of changes got from last guidance to current guidance on free cash flow for '25, look, it starts with a $60 million reduction in full year EBITDA guidance, right? So let's be clear, we've taken down sales by over $200 million and EBITDA by $60 million since our prior guidance. And that has an impact on collections, which bluntly collections are predominance of the move in guidance between the 2 calls. Lower sales in Q3 and Q4 means less that will be collected. Not all would be collected in those quarters by any means, but we would have collected some of those sales. We're also because of liquidity conditions seeing fewer cash sales. There's a portion of our mix that is sold. It's basically immediate payment as cash sales. Liquidity constraints are limiting that part of the collections mix in Q3 and Q4. And we are seeing competitive pressure that's pushing for longer terms. So the biggest part of the bridge between past guidance and current guidance is collections. There are a couple of other factors. There are certainly some noise around our India exit. There were certain amounts of cash that were built into our guidance being collected in the second half into our prior guidance for India. As we've made adjustments and decisions on how we want to operate that business to better prepare for sale, there is some friction there. And we are seeing some higher cash spending than we had previously anticipated. And this is things like higher tariffs. The India tariffs that are currently in place were not a part of our thinking when we last gave cash guidance. We've taken some additional restructuring actions. As Pierre mentioned, we shut down a manufacturing line that has cash cost for the shutdown of that manufacturing line. And we are seeing higher cash interest expense as we're higher -- carrying higher commercial paper balances or higher working capital. But that bridge, again, the primary piece is collections. So as we look ahead to '26, certainly, we would expect to see delayed collections from the cotton crop in Brazil to be caught up in the early part of '26. But we do anticipate continued competitive pressure on terms. So we're still working through as we think through budget for '26, how we see those dynamics playing out. There's also considerable uncertainty around tariffs. And just as a reminder, we pay tariffs upfront. It takes a long time for that to flow through our P&L to be recognized as revenue and profit through the long supply chain that we have, but those tariffs are paid very early in that process. And then we will have further restructuring expenses in 2026 as we reconfigure our manufacturing network and streamline our Asia operations. So I would expect that we'll have meaningful free cash flow, particularly with the lower funding need for the dividend in '26 to allow for significant debt reduction. But bluntly, at this point, it's just too early to give too strong of an indication for 2026 cash flow.

Q: Could you give us maybe a little bit of an indication what you expect the sale price for that India business might be and more color on the buyer interest?

A: So right now, as you could see in the way we are presenting the results, the number of the value -- for the value of that business is about $450 million as a total value. The interest level is very high, and I would say, higher than what we were expecting. The number of inbound request is higher than we're expecting. Vast majority of local companies, but still some international companies and sponsors looking into the business. So the business is -- the process is proceeding quite well. Just to note that we did write down the business to its fair market value of $450 million. That reflects the value of the business, which includes substantial value for the brands as well as the existing business infrastructure that would be transferred to a buyer. It also reflects the value of the working capital that is invested in that business.