FMC

Financial Position & Financing Activities

• Completed multiple financing actions in Q2 2026: amended the existing revolving credit facility, and launched a $1.2 billion senior secured bond offering that was meaningfully oversubscribed, allowing the company to increase the offering size and reduce its interest rate
• Proceeds from the bond offering were used to redeem $500 million in senior notes maturing in October 2026 and reduce revolver borrowings; ended Q2 with gross debt of ~$4.3 billion (down $250 million quarter-over-quarter), cash on hand of $477 million (up $86 million), and net debt of ~$3.8 billion (down $339 million quarter-over-quarter)
• Remains comfortably in compliance with all debt covenants: secured debt to trailing 12-month EBITDA was 1.66x (vs 3.5x limit), minimum interest coverage was 2.78x (vs 2.0x minimum); next bond maturity is not until October 2029, with over $1.56 billion in available revolving credit capacity at quarter end
• Expects to end 2026 with net debt of ~$2.6 billion, for a net debt to trailing 12-month EBITDA ratio of roughly 4x at the midpoint of full-year EBITDA guidance

Business Model & Strategic Priorities

• Licensing and collaboration partnerships are an increasingly core part of the company's operating model, as its pipeline contains more high-quality active ingredients than it can develop independently
• Partnerships accelerate development and commercialization of new technologies while generating meaningful operating cash flow; management intends to pursue additional licensing opportunities for molecules in its portfolio and co-development arrangements for early-stage ingredients
• Ongoing operational restructuring and manufacturing network reshaping is underway, with restructuring cash spending expected to be meaningful in 2026 and 2027, then drop dramatically in 2028 and beyond to improve long-term free cash flow generation
• Working capital improvement is a top priority: significant progress on inventory reduction is expected in 2026, with receivable collection improvements targeted for 2027, especially in Brazil amid the customer mix shift
• In Brazil, management is executing a strategic shift away from distributor sales toward direct sales and sales to co-ops to improve sales stability and predictability

Second Quarter Operational Drivers

• Q2 2026 results benefited from a 2% currency tailwind, primarily from the strengthening of the Brazilian real
• Cost outperformance versus guidance came from spend discipline in non-manufacturing areas and small one-time favorable items, including an adjustment to over-reserved achievement liabilities

• Full year 2026 sales are now guided to $3.5 billion to $3.7 billion, representing a 7% decline at the midpoint, downwardly revised to reflect challenging market conditions, greater pricing pressure, and lower core legacy product volume growth than initially forecast. The exit of India operations creates a 2% headwind, while foreign exchange is expected to deliver a low single-digit tailwind for the full year.
• Full year 2026 adjusted EBITDA is guided to $620 million to $680 million, a 23% decline at the midpoint, with lower prices and FX headwinds partially offset by favorable cost performance. Adjusted EPS is guided to $1.19 to $1.49, a 55% decline at the midpoint, reflecting lower EBITDA and higher interest expense.
• Full year 2026 free cash flow is guided to $75 million to $225 million ($150 million at the midpoint), including ~$170 million in restructuring cash spending; free cash flow excluding restructuring is ~$320 million at the guidance midpoint.
• Full year 2026 interest expense is guided to $275 million to $285 million, up ~$40 million year-over-year at the midpoint; depreciation and amortization is expected to remain between $160 million and $170 million, and the adjusted effective tax rate is expected to be 16% to 18%.
• Third quarter 2026 sales are expected to be $840 million to $900 million, with a 9% decline at the midpoint, driven by a mid-to-high single-digit price headwind and lower volume from North American distributor order shifting (from Q3 to Q4) and the Brazil sales channel shift; growth portfolio sales are expected to increase in the quarter. Third quarter EBITDA is guided to $120 million to $140 million (45% decline at the midpoint), and adjusted EPS is guided to 5 cents to 30 cents (90% decline at the midpoint).
• Fourth quarter 2026 is expected to return to year-over-year growth, with sales of $1.06 billion to $1.2 billion (4% increase at the midpoint), EBITDA of $275 million to $315 million (5% growth at the midpoint), and adjusted EPS of $1.09 to $1.33 (1% increase at the midpoint). Volume growth will come half from Brazil new products and the established direct sales force, and half from new products and the Q3-to-Q4 order shift; lower raw material costs are expected to deliver strong cost tailwinds that offset price and FX headwinds.
• Management expects FMC to return to overall year-over-year growth starting in 2027.

Segment-level financial data was not broken out in the provided transcript. The company reported aggregate second quarter 2026 EBITDA of $153 million, which was 2% above the high end of management's guidance range, driven by better-than-expected cost performance from non-manufacturing spend discipline and one-time favorable quarter-specific items. Aggregate adjusted earnings per share came in at 26 cents, 62% lower year-over-year due to reduced EBITDA and higher interest expense, but still at the high end of the guided EBITDA range. Second quarter free cash flow was $357 million, $318 million higher than the prior year period, boosted by a $200 million prepayment from Corteva for the Rimasoxifan licensing agreement, strong receivable collections, and lower cash taxes. Second quarter interest expense was $71.3 million, up $10 million year-over-year.

• Ongoing challenging market conditions, including mid-to-high single-digit price declines for core products that are expected to persist through 2026
• Uncertainty around the duration of the Iran conflict and potential new US trade actions, creating uncertainty around Iran-related cost pressures
• Weak grower profitability and elevated market uncertainty in North America leading to cost-cutting, shifts from branded to generic products, and lower application volumes; Q2 2026 North America sales were significantly down driven by low rice production (a key FMC market), very low insect pressure, and generic erosion of a licensed product
• The transition to direct and co-op sales in Brazil creates near-term sales volatility as the company balances growth in new channels against declines in traditional distribution
• Generic erosion of the core diamide product Ronexapier following the loss of IP protection, with major generic launches expected in the second half of 2026 in North America and Latin America; the product is not expected to contribute to long-term earnings growth, though management aims to stabilize its earnings contribution
• Elevated leverage: current net debt to EBITDA is 5.1x, and projected year-end 2026 net debt to EBITDA of ~4x remains above the company's long-term target leverage level
• The company's pipeline of active ingredients is larger than it can independently fund and develop in a timely manner

Q: The large sequential sales and margin ramp from Q3 to Q4 midpoints is notable. What are the key drivers of this increase, and how certain can investors be in this outlook?

A: There are three main positive buckets driving the ~$260 million sequential increase. First, non-diamide core growth, including expanded direct sales in Brazil, will contribute about $150 million, largely from normal Q3-to-Q4 seasonality plus the impact of the North American distributor order shift from Q3 to Q4. Second, new active ingredients will add roughly $70 million, led by Fluenupyr in North America and Isoflex in Australia. Third, other products including branded lines in Latin America will add ~$40 million. The outlook is based on historical seasonality and confirmed operational shifts, rather than uncommitted orders.

Q: What is your medium-term outlook for a return to growth after 2026's challenging transition? What are the core drivers of 2027 growth?

A: Management believes the worst of the post-IP loss headwinds for Ronexapier are behind us, and expects 2027 to be the first year of returning to overall growth. Three quantifiable growth buckets add up to $300 million to $350 million in incremental 2027 sales: the $2.1 billion non-diamide core business, down ~5% in 2026, will return to low single-digit growth after manufacturing restructuring, adding $120 million to $150 million; new active ingredients growth will accelerate to 50-70%, adding $150 million to $200 million; and branded products will continue mid-single-digit growth, adding ~$20 million. The unquantified benefit of Brazil's channel shift will add incremental growth on top of this, and remaining diamide partner headwinds will be much smaller in 2027.

Q: North America sales declined significantly in Q2. What is driving this weakness, and how sustainable is it?

A: North America Q2 weakness was overwhelmingly volume-driven, with multiple factors all aligning negatively. First, rice production, a key FMC specialty crop market, is at its lowest level since 1987, paired with very low insect pressure that cut into insecticide sales. Second, low grower margins and broad market uncertainty are leading growers to cut costs, shift from branded products to generics, and reduce pesticide applications in some cases. Third, the licensed product Pyroxia Sulfone lost IP protection in North America, leading to significant pricing and volume erosion for FMC. All these factors contributed to the sharp Q2 decline.

Q: Could you provide an update on your diamide strategy and long-term market outlook for the category amid new generic entry?

A: The big test of the current diamide strategy will come in H2 2026, when major generic entry hits North America and Latin America. Early indicators are positive: the portfolio mix is shifting as expected to high-end premium products, with 35% growth in new mixtures (like Bifenthrin and Ronexapyr) and high concentration formulations that command price premiums. Early signs in Brazil show FMC gaining share from lower-end competitor insecticides, though volume is still small at this stage. Ronexapier is not expected to be a long-term earnings growth driver, but all current indicators point to stabilizing its earnings contribution in 2027 as cost cuts position FMC to compete effectively with generics.