FMC Corp (FMC) — Q2 2021 Earnings Call Transcript

Thank you, and good morning, everyone. Welcome to FMC Corporation’s second quarter earnings call. Joining me today are Mark Douglas, President and Chief Executive Officer; Andrew Sandifer, Executive Vice President and Chief Financial Officer; and Zack Zaki, FMC’s new Director of Investor Relations. Mark will review our second quarter results, provide our outlook for 2021, and discuss our diamides business. Andrew will provide an overview of select financial items. Following their prepared remarks, we will take questions. 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. 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 SEC. Information presented represents our best judgment based on today’s understanding. Actual results may vary based upon these risks and uncertainties. Today’s discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, free cash flow, and organic revenue growth, all of which are non-GAAP financial measures. Please note that as used in today’s discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA. A reconciliation and definition of these terms as well as other non-GAAP financial terms, to which you may refer during today’s conference call, are provided on our website. With that, I will now turn the call over to Mark.

Thank you, Michael, and good morning, everyone. Our second quarter results show revenue up 8%, EBITDA up 2%, and EPS up 5% year-over-year, or slightly ahead of our guidance. These results were fundamentally driven by volume, reflecting robust demand for FMC products around the world. Innovation continues to be a catalyst for growth. New products introduced in the last 12 months contributed $30 million in sales growth in the quarter. Our plant health products, including biologicals, posted Q2 sales growth in the high teens. We continue to expect a very strong second half of 2021, driven by robust volume growth. However, we have lowered our full-year earnings guidance due to the continued acceleration of raw material, packaging, and logistics costs, which I will elaborate on later. I'd also like to provide a COVID-19 update on our business. All our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses have continued to operate throughout the pandemic, and we are resuming in-office operations where permitted by local authorities. In June, we introduced flexible work arrangements to facilitate the return of all our staff to our headquarters in Philadelphia, as well as some other locations in adherence with local guidelines. We continue to have zero transmission of the virus in our facilities. However, I want to acknowledge that we have lost employees to the pandemic, and many of our employees have lost family members. Thankfully, the affected employees are a small number. Our thoughts are with those impacted directly by COVID-19, and we are thankful for everyone who continues to work safely at FMC. Turning to our Q2 results, we reported $1.2 billion in second quarter revenue, which reflects an 8% increase on a reported basis and a 4% increase organically. Asia and Latin America posted the largest growth at 20% and 15% respectively. Our fungicides grew over 50% in the quarter driven by the Xyway launch in the US. Adjusted EBITDA was $347 million, an increase of 2% compared to the prior-year period, and $2 million above the midpoint of our guidance range. The EBITDA margin was 28%, a decrease of 150 basis points compared to the prior year, reflecting the impact of continued and accelerating cost headwinds. Adjusted earnings of $1.81 per diluted share in the quarter, an increase of 5% versus Q2 2020, and $0.03 above the midpoint of our guidance range. The year-over-year increase was primarily driven by increases in EBITDA and lower interest expense. Moving to the breakdown of revenue growth despite unfavorable weather conditions in several regions, Q2 revenue rose 8% versus the prior year. This growth was driven by a 4% volume increase and a 4% currency tailwind. Sales in Asia increased 20% and 13% organically, driven by double-digit growth in India, Australia, Indonesia, and Pakistan. Insecticide sales saw significant growth including Altacor for cotton, while herbicide sales were also strong, boosted by share gains in India for soybean and sugarcane applications and substantial sales in Australia. In Latin America, sales grew 15% year-over-year, with strong performances in Mexico and Colombia, which demonstrated double-digit growth. We also had a shift of diamide partner sales to Latin America from North America similar to what we experienced in Q1, which boosted the year-over-year growth rate. EMEA sales increased 3% year-over-year but declined 3% organically as foreign exchange was a significant tailwind in the period. Diamides performed well, and we observed strong herbicide sales for cereals and sugar beets. However, this wasn't enough to offset the late start of spring, resulting in lost applications for the FMC portfolio that will not be regained for the season. In North America, sales fell 7% year-over-year and 8% organically. Consistent with Q1, the decrease in sales was due to the shift of diamide partner sales. Excluding revenue from our global diamide partnerships, our US and Canada crop business expanded by more than 20% due to an approximate $25 million contribution from two new products, Xyway Fungicide and VANTACOR insect control for specialty crops. Turning to the EBITDA bridge, our EBITDA was up 2% year-over-year due to a volume contribution of $42 million, largely offset by a $35 million cost headwind driven by increases in raw material, packaging, and logistics costs, alongside a modest reversal of some temporary cost savings from 2020, while pricing remained flat year-over-year. Looking ahead, we now expect the global crop protection market will grow in the mid-single digits on a US dollar basis, slightly higher than our previous forecast, marking the most bullish outlook we've had for the market in recent years. We now believe that the Latin American market will grow in the high-single digits, improving from a prior estimate of low single digits. Basic crop fundamentals remain strong, particularly in that region. We anticipate mid-single-digit growth in the EMEA market, low to mid-single-digit growth in Asia, and low single-digit growth in North America. Moving on to our full-year 2021 and third-quarter fourth-quarter earnings outlook, our full-year 2021 earnings are now expected in the range of $6.54 to $6.94 per diluted share, reflecting a year-over-year increase of 9% at the midpoint. This guidance is down $0.31 at the midpoint compared to our previous forecast. Consistent with past practice, we do not factor in any benefit from future potential share repurchases in our EPS guidance. Our revenue forecast remains in the range of $4.9 billion to $5.1 billion, indicated an 8% increase at the midpoint compared to 2020. We expect EBITDA to be in the range of $1.29 billion to $1.35 billion, reflecting 6% year-over-year growth at the midpoint, which is a $50 million reduction at the midpoint due to continuing cost escalation for raw materials, packaging, and logistics. This includes increased spending to procure certain raw materials and intermediates from alternate sources due to limited availability from our preferred suppliers. Despite dry and cold conditions in specific parts of Brazil during Q2, we remain optimistic for the second half in Latin America, particularly for soybeans and cotton. Currently, our channel inventories in Brazil are more normal for this point in the season following actions taken in Q1, and we have already received nearly 70% of the orders needed to fulfill our full-year forecast in Brazil. Our guidance for Q3 implies year-over-year sales growth of 8% at the midpoint on a reported basis and 7% organically, with forecasted EBITDA growth of 5% at the midpoint versus Q3 2020. EPS is anticipated to be up 7% year-over-year. In Q4, we expect year-over-year sales growth of 20% at the midpoint on a reported basis, with no foreign exchange impact anticipated. Our forecasted EBITDA growth is set at 35% at the midpoint compared to Q4 2020, and EPS is expected to rise by 46% year-over-year. It's important to note that about half of this growth will be driven by the return of business we missed in Q4 2020 due to supply chain issues in North America and weather impacts in Latin America. On a full-year basis, we expect revenue to benefit from 6% volume growth, a 1% contribution from higher prices, and a 1% benefit from foreign exchange. We still anticipate significant growth across all regions except EMEA and a notably strong second half of 2021. Our revenue forecast for products launched in the last 12 months has been increased to $130 million from $100 million, including the launches of Overwatch herbicide, Xyway fungicide, alongside Vantacor and Elevest insect controls. Our EBITDA bridge illustrates an increase of approximately $50 million in expected cost impacts compared to our May forecast. We are continuing our cost control efforts to minimize the net cost headwind. We’re also maintaining our R&D spending in line with what is necessary to keep all projects on the critical path to commercialization, with minor reductions from the previously foreseen increases in R&D spending this year. Slide 8 outlines our Q3 and Q4 drivers; for Q3, we expect a 6% contribution from volume, 1% contribution from price, and 1% benefit from foreign exchange. We have a robust outlook for revenue in Q4 driven by five main factors. First, a strong recovery for our US and Brazil businesses following weak Q4 2020 performances contributes approximately half of the total growth for the quarter. Secondly, new products such as Xyway Fungicide, new diamide formulations, and Vantacor will play a major role. Thirdly, we anticipate solid crop fundamentals driving performance in North America and Latin America. In Brazil, growers have indicated a 15% increase in cotton hectares for the upcoming season. Next, improved market access and expansion into new geographies and crops are contributing significantly in regions like India, Indonesia, Vietnam, Eastern Europe, and Russia. Finally, price increases will help mitigate the FX headwind from last year and the higher costs from raw materials this year as we hold orders for Brazil and the US at higher year-over-year prices. While we are witnessing a considerable increase in costs on a year-over-year basis in Q4, we are implementing actions to reduce SG&A and R&D to offset some portions of the raw materials supply chain costs headwinds we are currently facing. I will now turn the call over to Andrew.

Thanks Mark. Let me start this morning with a few highlights from the income statement. Foreign exchange was a greater than expected tailwind to revenue growth in the quarter at 4% versus our expectations of a 1% tailwind, as the US dollar weakened against all major currencies relevant to FMC. Interest expense for the quarter was $32.6 million, down $8.1 million from the prior period, driven by lower LIBOR rates and foreign debt balances. With continued low-interest rates, we now foresee interest expense to be between $130 million and $135 million for the full year. Our effective tax rate on adjusted earnings for the second quarter was 13.5%, as anticipated and in line with our expectations for the full year's tax rate. Transitioning to the balance sheet and liquidity, gross debt at quarter-end was $3.8 billion, up roughly $200 million from the prior quarter. Gross debt at trailing-12-month EBITDA stood at 3.2 times at the end of the second quarter, while net-debt-to-EBITDA was 2.6 times. The disparity between gross and net debt metrics is larger than usual this quarter, as we had significant cash that we were unable to return to the United States prior to the quarter's end. We are exploring options for repatriating this cash in the third quarter. Both leverage metrics were above our targeted full-year average levels due to seasonality of working capital, so we anticipate this will improve through the remainder of the year. Regarding cash flow and deployment, free cash flow for the second quarter was $204 million, nearly flat compared to the prior year. Adjusted cash from operations was lower than the previous year's period, largely due to timing changes of certain tax payments. Inventory levels were higher, reflecting the rising cost of raw materials, as well as more inventory particularly of diamides as we prepare for a very strong second half. However, this inventory growth was countered by increased payables. Capital additions were somewhat higher as we ramp up spending after deferring projects last year due to COVID-19. Legacy and transformation spending declined significantly due to the completion of our SAP program. With the reduced outlook for full-year EBITDA, we are adjusting our expectations for free cash flow to a range of $480 million to $570 million, with most of this cash flow coming in the fourth quarter. Our adjusted cash from operations outlook has weakened further due to higher-than-anticipated working capital resulting from shifts in sales timing to the latter half of the year, which will push some collections into the next year, along with increased inventory driven partly by heightened raw material costs. We have slightly improved our outlook for capital additions and legacy spending. We returned $87 million to shareholders during the quarter via $62 million in dividends and $25 million in share repurchases, acquiring 212,000 shares at an average price of $118.10 per share. Year-to-date, $224 million has been returned to shareholders through dividends and repurchases. For the full year, we anticipate paying roughly $250 million in dividends and now expect to repurchase $350 million to $450 million of shares this year, with the outlook for repurchases slightly down in light of lower EBITDA guidance.

Thank you, Andrew. I will now provide an update on the progress of our diamide growth strategy. Since we launched FMC as a pure-play agricultural science company, diamide has been a core part of our business. Our diamides now account for almost 40% of FMC sales. Moving to slide 11, we present some basic data on the insecticides market, which has grown by 83% from 2007 to 2019 and has a total estimated value of around $17 billion today. Following the decline of the broad crop protection market in 2015, insecticides have seen a growth of about 2% annually. We expect this growth rate to accelerate to approximately 3.3% compound annual growth rate over the next decade, driven by newer, higher-value technologies taking market share from older insecticides phased out by regulators. By 2030, we forecast the insecticide market to expand by about $7 billion versus 2019, leading to a total market value of $24 billion. On slide 12, we show year-by-year revenue of major insecticide active ingredient classes from 2014 to 2019, alongside the respective share gains and losses. FMC diamides account for over 80% of the entire diamides class, which includes a few smaller active ingredients. Our diamides comprise about 10% to 11% of the total insecticide market, with the total diamides class gaining 2% share from 2017 to 2019, now representing 13% of the total insecticide market. Meanwhile, organophosphates and neonicotinoids have lost market share. By slide 13, we provide a geographic breakdown of our $1.8 billion in diamide sales in 2020, which includes FMC's sales of branded products and sales to our partners. Asia contributes nearly 40% of our diamides business, with North America slightly above 25%, and both EMEA and Latin America representing between 15% to 20% each. Since our acquisition of these products in 2017, FMC diamides have outperformed the market across all regions. On slide 14, we outline our commercial strategy for diamides, which we have discussed multiple times over the past two years. We have established long-term supply agreements with five key multinational companies, including the UPL deal announced in March of this year. Additionally, we have 50 local agreements in various countries and 15 potential agreements being discussed, significantly bolstering our market reach for diamides. The $1.8 billion in diamide revenue in 2020 was sourced roughly 60% from our own commercial activities, labeled as FMC branded on our charts, and 40% through our global and local partners. Since acquiring these products, our diamide growth has been evenly split between FMC branded business and sales through partners, demonstrating the synergy of these two routes to market. Our partner strategy has proven effective, as evidenced by the 100 basis point expansion of company EBITDA margins from 2018 to 2020, even amidst substantial partner growth, confirming that this strategy is not margin dilutive. Additionally, sales through partners contribute $700 million to our annual revenue, yet this adds volatility to demand timing. Hence, we structured contracts with partners to ensure extended durations; many agreements extend through the end of this decade and beyond. Transitioning to slide 15, we highlight several growth drivers for the FMC branded portion of our diamide sales, which will be fueled by new formulations, registrations, label extensions, and enhanced market access aiding growth for both diamides and all FMC active ingredients. Earlier this year, we launched a novel, patent-pending Vantacor formulation in the US, which has already exceeded our original forecasts. Vantacor features a much higher concentration than previous formulations, improving mixing, requiring less packaging, and enhancing sustainability. We foresee substantial opportunities across various crops and intend to introduce Vantacor worldwide, including in Australia where we have received regulatory approval. Furthermore, we continue to introduce additional innovative formulations across all regions, with 11 more launches expected by 2026. Additionally, we are enhancing our Precision Agriculture Platform with more services for growers and dealers through Arc Farm Intelligence. On slide 16, we provide an update on our registrations and label extension strategy for our FMC-branded diamides. As you know, product registration from regulators is necessary in each country before we can sell, and every crop must also be approved by specific country regulators. Every product use approved by regulators represents a new segment of addressable market. Currently, we have approximately 2,700 approved uses across all products based on Rynaxypyr and 1,100 across all products based on Cyazypyr. We have around 600 regulatory submissions under review and another 230 planned from 2021 to 2025, anticipating nearly 600 of these to achieve regulatory approval in the next five years. Moving to slide 17 and the diamide patent situation, Rynaxypyr is protected by 21 patent families encompassing a total of 639 granted and pending patents. Together with Cyazypyr-related patents, we possess over 30 patent families and nearly 1,000 granted and pending patents across 76 countries worldwide. Both Rynaxypyr and Cyazypyr are complex molecules to manufacture. We hold patents on many of the production processes, and several of these intermediate process patents extend well beyond the expiration of the active ingredient composition patents. A legitimate competitor's fastest way to enter the generic markets for Rynaxypyr or Cyazypyr involves relying on our product data, which necessitates demonstrating identical profiles to FMC’s Rynaxypyr or Cyazypyr. To meet stringent regulatory criteria for producing these complex compounds, competitors will have to replicate our production methods, which is safeguarded by our FMC process patents. Our patent portfolio covers critical intermediate chemicals, commercial, and alternative manufacturing processes, thus providing substantial protection against generic competition. In slides 18 and 19, we detail the patent timelines for our top five markets. Based on our patents and regulatory requirements, we do not expect legitimate generic competitors to commence sales based on our Rynaxypyr product data before 2026 in Europe, Brazil, India, and China, and 2027 for the US. For Cyazypyr, slide 19 indicates that we do not expect competitive sales until 2026 for Brazil, China, and India, 2027 for Europe, and 2028 for the US. It is crucial to emphasize that the process and intermediate patents are fundamental, as producing these compounds without such intermediates poses significant challenges. Moving to slide 20, we are confident that our patent portfolio is enforceable. This has been evidenced by a recent favorable injunction against NATCO in India, barring them from manufacturing or selling any Rynaxypyr products. Notably, the court also ordered NATCO not to utilize our patented processes to produce Rynaxypyr. We anticipate this to be the first of many successful enforcements of our diamide process patents. To date, we have enforced our patents and obtained preliminary injunctions or settlements against six infringers in India, and commenced litigation against four infringers in China. Beyond our patent enforcement efforts, we have also implemented comprehensive regulatory advocacy strategies, alerting regulators about entities operating without authorization to produce. Consequently, numerous nations have determined to reject applications for registering Rynaxypyr products until the active ingredient's patent expires, while others have mandated additional data and proof of legitimate manufacturing rights in the source country as a part of the application process. In summary, the insecticide market is continuing to expand, and our diamides will continue to gain market share. Our partner strategy is accelerating the growth of diamides while balancing our transition to a post-patent business later this decade. Our partner base remains robust and will continue to contribute positively for years to come. We are diligently enforcing our patents and are committed to safeguarding our intellectual property. I am confident that diamides will continue to significantly contribute to FMC's growth throughout this decade and beyond. Despite the ongoing challenges from costs, we are successfully delivering impressive volume growth worldwide, fueled by the substantial success of our new product introductions and a strengthening market. Our long-term growth narrative is firmly anchored in the strength of our current portfolio, the diamide expansion outlined earlier, and the significant growth anticipated from our upcoming product pipeline over the next decade. As stated in our press release earlier this morning, we have set a target to achieve net zero greenhouse gas emissions by 2035, a bold milestone for our company reflecting our strong commitment to sustainability. I also want to take this opportunity to thank Michael Wherley for his dedication to FMC over the past eight years and wish him success in his future endeavors. I will now turn the call back to the operator for questions.

Yes, thank you. I want to acknowledge Mike for all the assistance over the years. Mark, I'd like to delve deeper into the outlook for diamides. I appreciate the thorough update on the intellectual property strategy and partnership. However, I would like to hear your thoughts on the competitive landscape. What are the main products by region or crop that diamides are currently competing against? The reason for my inquiry is that neonics represent the largest segment, and the two leading products in that category have been banned in Europe. I'm curious if you think this might extend to other regions. In our next significant segment, we have organophosphates, with the leading product potentially facing an EPA ban in the next two weeks. I'd like to know if you think that could also expand. More importantly, what do these actions imply for the competitive landscape concerning your diamides?

Yes, Steve. Thanks for the question. I think you’re hitting on a key point that I touched on in the script. The future growth of diamides is tied to changes in the insecticide landscape. Neonics are under increasing pressure; organophosphates and some pyrethroids are as well. We believe that the current formulations of diamides will capture market share from all three classes, but importantly, our innovative formulations will accelerate our market share growth against these classes of products. Additionally, there are other older chemistries facing similar challenges, which could also work in our favor. The regulatory landscape is growing stricter, which bodes well for the future success of diamides. Overall, we expect strong growth to continue, especially as competition from older technologies dwindles.

So I was hoping to maybe dig a little bit on the revised outlook and maybe provide more color on the sources of some cost headwinds you're seeing, and the potential risk that they might influence 2022 as well. Additionally, I'd like to ask about the pricing actions you're taking. It seems your net pricing response is more modest than anticipated a few months back, considering the previous two years where price, FX, and cost have remained negative for FMC on a multi-year basis. Please help us to frame this on a go-forward basis and how perhaps your approach to pricing, especially in regards to cost and FX, might need to evolve beyond 2021.

Thanks, Adam. That's a complex question, but I'll address a few angles. If you look at the cost side, in our February guidance, we had about $90 million of negative cost and we're now in the $150 million range. This has been driven by rising costs and availability issues for many of our raw materials due to global events like the Texas freeze, which has now spread to intermediates and fine chemicals. We felt it was prudent to revise our forecast in light of this. For the second half, we anticipate a headwind of approximately $96 million to $100 million. However, it’s worth noting that we have also increased our volume expectations due to strong demand across most markets. We have made a strategic decision to prioritize volume growth, accompanied by a modest $37 million to $40 million pricing advantage in the second half. This strategy aligns with the robust demand for our high-margin products. Regarding 2022 expectations, costs will likely remain similar compared to the first half, but if the trends continue, we could see costs decrease in the second half of next year. However, it's still early, and we will have clarity once we get deeper into our budget process.

Thank you, and good morning, all. Mark, I've got a question, I have 10 questions on but just for one. On slide 13 and 14, I was wondering if you could talk about how you guys think about the focus areas for FMC branded diamides and how you prioritize areas for incremental growth. Are there specific geographies or crops where you can drive growth more effectively than your partners and vice versa? Could you elaborate on that?

Certainly. Regarding Rynaxypyr and Cyazypyr, the chart on slide 13 shows the breakdown of diamide sales by crop. Cyazypyr, which is almost entirely in the fruit and vegetables sector, continues to grow significantly, especially in regions like Asia and Mexico. We believe we have much potential in this area. Additionally, a growing segment of our business is neither entirely dependent on new formulations nor solely on active ingredients; our partners are exploring more advanced formulations that allow us to penetrate new pest spectrums. For instance, our Elevest formulation combines Rynaxypyr with bifenthrin to enhance its effectiveness. Our growth strategy isn't just geographical but spans the types of crops and pests we address. There’s much room for growth in Asia, Latin America, and Eastern Europe for our diamides, particularly in fruit and vegetables.

Thanks, Mark. Following on Steve's question about the long-range forecast, are we rational to expect consistent market share gains on diamides by 1% through the end of the decade? If you could give some clarity on that, it would be appreciated. I understand the linear nature of growth but...

You're right; it won’t be linear. That said, I believe we should anticipate adding between 300 to 400 basis points of market share over the next decade, factoring in overall market growth. Our growth trajectory certainly reflects our positive outlook. We're confident that our partners see robust opportunities as well, which is signifying their investments to capitalize on these upcoming trends.

Thank you. Mark, you sound very bullish on Latin America despite the disappointments seen in the last year. While Latin America includes more than just Brazil corn and soy, can you provide clarity on how the pieces are fitting together this year and where the risks might be if the weather remains poor? How does this year compare to last year for FMC's portfolio?

Thank you, Mark. While Brazil often gets the spotlight, we have strong growth in Mexico with the fruit and vegetable sector seeing significant acceleration, alongside corn. We're also seeing solid performance in Argentina, reaching above $200 million in revenue driven by our insecticides and herbicides for soy. Key growth is expected in regions like Argentina and the Andean countries. For Brazil, we have over 70% of the orders needed to hit our full-year forecast, showing improved confidence among growers. Weather appears to be stabilizing, with predictions suggesting a more normalized pattern than last year, and we are optimistic about overall performance.

Hi. Thank you. I'm trying to connect the discussion on volume and pricing as well as the new product sales of $30 million. Are there specific geographies driving that growth? Is it widespread, and are those sales impacting the decision to focus more on volume than on price? If so, how does that affect pricing decisions on the Heritage portfolio?

There's a couple of elements in that question, Vincent. New product sales are classified under volume, and they are mixed across regions without specific distinctions. North America shows particularly strong growth driven by those new products, while Asia and Europe contribute as well. These new products did not influence our decision to prioritize volume; our volume requests span across the entire portfolio. With our product portfolio generally having high incremental value, we are inclined to prioritize volume growth rather than just pricing.

Hey, good morning guys, and good luck to you, Mike. Mark, I wanted to revisit 2022. I know it's early to give specific guidance, but it seems like the outlook has reduced by $0.30. Are we to assume we can't just add that amount back when approaching 2022? What's the best way to gauge the growth algorithm as we head into next year without simply adding back that $0.31? What would you recommend?

I appreciate your perspective, Mike. We are progressing well with our five-year plan, demonstrating growth of 5% to 7% annually, despite persistent headwinds since 2018. I would suggest modeling around a 5% to 7% growth in revenue for next year. Many moving parts could influence the outlook, particularly around EBITDA, but we'll provide clearer guidance as we approach the end of this year. Any new pricing strategies will be implemented in reference to current market trends.

Hey, Mr. Olympian, great working with you. All the best to you, Mike. I was curious, Andrew, if you wanted to discuss the buyback program. It looks a little light in Q2. What should investors anticipate here?

Thank you, Frank. As you noted, our balance sheet shows a high cash level at the quarter's end. However, we couldn't repatriate a considerable amount of cash from overseas before the quarter concluded, which impacted our buyback capabilities. Thus, we expect our buybacks this year to be more heavily weighted towards Q4 compared to earlier estimates. The anticipated $350 million to $450 million total for buybacks this year remains achievable.

Hey. Good morning. Just to revisit your 7% to 9% growth algorithm five-year plan, Mark, I appreciate your insights so far, but in light of current comments, do you feel you have less confidence in your EBITDA growth targets now versus in the past? What is your internal process for reassessing your mid- and long-term EBITDA growth targets?

I can say without hesitation that I remain confident in our targets for both revenue and EBITDA. Our latest guidance suggests a 6% EBITDA growth this year despite facing $150 million in unexpected headwinds since last year. Our growth is demonstrably strong, thanks to our expanding portfolio and numerous new products, and I firmly believe in our projections of 7% to 9% for EBITDA growth in the future.

Thank you. Good morning, everyone. Mark, in your chart, you demonstrated that FMC’s diamide products represent about 80% of the class. How do your products compare to the 20% that your competitors sell? How do you see competition evolving between those two segments as the overall class grows?

I think it’s instructive that with our diamides accounting for over 80% of the class, we are positioned well due to our strong growth. These products do exhibit differences; for instance, Rynaxypyr showcases exceptional residual activity, providing us with a competitive advantage. We are hopeful that our growth rates will surpass those of our competitors, thereby increasing our share in that 80% market segment.

Thank you. During the quarter, the diamide partners’ geographic shift reduced US sales. Did it benefit ex-US by a corresponding amount? If so, could you provide ex-US figures excluding the partners?

Indeed, it did have a positive impact, John. The figures show an increase of roughly $50 million to $60 million in sales for ex-US regions, whereas the growth rate in Latin America without the shift would have been high single digits instead of 15%. Therefore, this shift will be reflected primarily in Latin America and a slight impact in other regions.

Hi. Good morning. I wanted to address the situation in Europe. First and foremost, you highlighted weather issues and a slower start this year. Given the weather reports, do you believe the situation can worsen as the year progresses? Also, concerning deregistration impacts, is this pace of volume headwind more typical for you, or is it worse than you've seen in the past?

Regarding deregistrations, it’s about the same as in prior years, representing a drag of approximately 150 basis points of revenue. We usually encounter about 1.5% drag on revenue from this issue, while it can extend to 3% in certain cases. As for weather conditions, the year started cold, impacting our performance. However, with increasing pest pressure from this current weather pattern, we are hopeful that conditions will improve. The fall will be key, particularly for herbicides for cereals. If conditions are favorable, we anticipate a recovery in Q4, but as it stands, Europe isn't expected to drive much growth this year.

Yes. Just a question regarding the diamide business. With respect to the sales you make to your partners, is it fair to assume that those sales are at competitive margins? I know you've shown margin improvements as those partner sales have risen, but can you provide insight into how you compare selling through these partnerships versus selling directly to customers?

From our perspective, the contracts are structured to be beneficial for both parties; the partners need to turn a profit while ensuring it’s not dilutive for us. Thus, the EBITDA margins on these partner products match those of our branded sales. Therefore, this collaboration remains financially advantageous for both FMC and our partners, providing us both with the growth potential we seek.

That is all the time that we have for the call today. Thank you, and have a good day.