FMC Corp (FMC) — Q4 2021 Earnings Call Transcript

Thank you, Jamie, and good morning everyone. Welcome to FMC Corporation's fourth quarter earnings call. Joining me today are Mark Douglas, President and Chief Executive Officer; and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Mark will review our fourth quarter performance as well as provide an outlook for the full year 2022 and the first quarter of 2022. Andrew will provide an overview of select financial results. Following the 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 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. 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 we 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, Zack, and good morning everyone. Despite being one of the most challenging operating environments that we can remember, FMC delivered strong financial performance in the quarter. As previously indicated, we set Q4 up to be a very strong quarter by taking deliberate actions earlier in the year. In Q4, we grew our revenue by 23%, EBITDA by 30%, and EPS by 52%. And importantly, we expanded our EBITDA margins by approximately 150 basis points while confronting continued cost pressures, supply disruptions, and emerging currency headwinds. North America and Latin America contributed significantly to our growth in the quarter, regaining lost sales from the prior year period and driving above-market growth with volume and price. New product launches, continued growth of our biologicals platform, and strong pricing gains contributed to the expanded profitability in the quarter. Acreage increases in key geographies and robust soft commodity prices created a positive backdrop for growth. Rising input costs, inconsistent raw material availability, increasing logistics expenses, long lead-times for ocean freight, labor cost inflation, and fluctuating currency headwinds are some of the key challenges we faced in 2021, and we are prepared to navigate them again in 2022. Building on the positive sentiment in the agricultural market, we expect to drive growth this year through a combination of volume expansion and strong price increases across all regions. Turning to Q4 results on slide three, we reported $1.41 billion in fourth quarter revenue, a 23% increase on a reported basis and 25% organic growth. This increase was driven by strong volume growth and pricing gains across all regions as well as double-digit revenue gains in the US, Brazil, Argentina, Mexico, France, Russia, Germany, India, Australia, and Indonesia. Growth was broad-based across all of our product categories, led by herbicides and insecticides, both growing more than 15%. Adjusted company EBITDA was $377 million, an increase of 30% compared to the prior year period. Company EBITDA margins were 26.7%, up approximately 150 basis points year-over-year despite steep headwinds in the quarter from cost inflation. This margin expansion was driven by mix improvement and strong pricing gains in all regions, especially North America and Latin America. Adjusted earnings were $2.16 per diluted share in the quarter, an increase of 52% versus Q4 2020. The year-over-year gain was primarily driven by an increase in EBITDA, while a lower than projected tax rate as well as share repurchases also contributed to the results. Moving now to slide 4, North America posted an all-time record quarter for the region with 80% revenue growth versus the fourth quarter of 2020. Adjusting for lost sales in the prior year period, the region still grew over 30% driven by strength in selective herbicides, higher prices, new product launches, and continued market expansion of Rynaxypyr and Cyazypyr. Our US business has made great progress in revitalizing its portfolio with more than 20% of the quarter sales coming from products that were launched in the last five years. Revenue in Latin America increased 30% year-over-year driven by volume and price increases. Growth in the region was led by strong performance in Brazil, Argentina, and Mexico. Brazil experienced robust market conditions with acreage increasing for several crops, especially soy, cotton, and corn. We grew our business in these key crops driven by Talisman and Hero insecticides for pest control. We also saw strong growth in specialty crops, mainly coffee, and fruits and vegetables. And finally, in Latin America, diamides, herbicides, fungicides, and plant health each grew at least 25% or more in the quarter. In EMEA, our branded business grew 9% driven by diamide and herbicide volumes as well as price increases, partially offset by the weakening of the euro. Growth was driven by our diamide brands such as Coragen for corn and top fruit applications, as well as herbicides for use on cereals, potatoes, and sugar beets. Overall, EMEA sales decreased 8% year-over-year and 7% organically due to the shift of diamide global partner sales in the quarter from EMEA to Asia. In Asia, revenue was down 3% compared to the fourth quarter of 2020, primarily due to weather challenges in a number of countries, most notably China. Australia grew more than 40% in the quarter driven by the continued momentum of our launches including Vantacor insect control based on Rynaxypyr and Overwatch herbicide based on our Isoflex active. Agronomic conditions remain positive in the country and a strong start to the summer cropping season resulted in very good demand for our diamides for rice and cotton applications. India, a key pillar of our Asia business, delivered greater than 10% year-over-year revenue growth driven by demand for our portfolio in rice and pulses in the South and in sugarcane in the North. Turning to slide 5. EBITDA in the fourth quarter was up 30% driven by volume and price increases in all regions. Let me remind you that FMC's definition of volume driver includes quantity growth, mix improvement, and the financial benefit from new launches. Volume was up $184 million in the quarter driven by selective herbicides in the US, insecticides for fruit and vegetables in Mexico, and insecticide sales for corn and soy applications in Brazil. Price increased by $47 million with pricing actions in all regions. The biggest pricing gains were from the US and Latin American countries with mid-single-digit increases. We expect similar pricing actions in other geographies as we approach the new seasons. Raw material, logistics, and packaging costs remain elevated, contributing to the $112 million in cost headwinds. FX was a $32 million negative factor in the quarter, primarily in Latin America. Moving to full year results on slide 6. We reported $5.05 billion in revenue, which reflects a 9% increase on a reported basis and 8% organic growth. Approximately $400 million in sales came from products launched in the last five years. Adjusted EBITDA was $1.324 billion, an increase of 6% compared to 2020, even with over $180 million in cost headwinds. We continue to deliver industry-leading EBITDA margins of 26.2%. 2021 adjusted earnings was $6.93 per diluted share, an increase of 12% versus 2020. This increase was driven primarily by the EBITDA increase, as well as lower interest expense, improved tax rate, and a lower share count, offset partially by higher depreciation and amortization. As Andrew will detail in his remarks, we delivered record cash flow of $713 million in 2021, an increase of 31% over the prior year period. And our cash conversion of 80% for the year was also an all-time record. I have mentioned the excellent growth of our Plant Health business a number of times. So before moving on to 2021 and Q1 earnings outlook, let me quickly share more details on this business, which includes FMC's biologicals platform. Moving to slide 7. FMC's Plant Health business is approximately $220 million of revenue today and consists of our biologicals, crop nutrition, and seed treatment technologies. Biologicals can be used to improve nutrient uptake, while providing insect control, disease protection, and improving yields. At the same time, these technologies generally have reduced residue and more favorable environmental profiles when compared to synthetic alternatives. These characteristics make the Plant Health business an integral part of FMC's commitment to sustainable innovation. Regulatory pressures around the world, resistance management challenges, as well as evolving food chain requirements are some of the factors driving double-digit market growth for biologicals. FMC's Plant Health business has demonstrated margin-accretive growth at approximately 1.5 times to market over the last five years. We entered the biological space in 2013 with a small acquisition and a strategic alliance with Christian Hansen. In 2016, we established the headquarters for Plant Health at our European Innovation Center in Denmark and most recently entered into a collaboration with Novozymes to research, develop, and commercialize enzyme-based crop protection products. We've also made early investments in emerging technologies such as pheromones with Bio-Thera and peptides with MicroPet through FMC Ventures. We utilize a tenant business model for Plant Health with a dedicated R&D center in Copenhagen, specialized contract manufacturers, and an integrated downstream commercial organization that leverages our synthetic crop protection market access throughout the world. All four regions are actively growing the FMC biologicals portfolio with Asia and Latin America making up two-thirds of the current business. Our Plant Health business is targeting a goal of $500 million in sales by 2025, driven by our internal pipeline, external partnerships, as well as strategic M&A. Moving to Slide 8 and FMC's growth outlook. We are projecting 7% top-line growth in 2022 with gains across all four regions, leveraging the full breadth of our synthetic and biological portfolios as well as price increases. New product growth is anticipated to accelerate in 2022, with approximately $600 million in sales coming from products launched in the last five years. This would represent more than 11% of our total projected sales, as well as a 50% increase from the category versus 2021. Our North American business will drive the growth of recently launched products such as Zawar fungicide for corn and Vantacor insect control targeting pests in a range of crops including soy, corn, and cotton. Biologicals and other plant health products are expected to grow double digits due to new registrations. We currently announced in-season price increases in the US and expect pricing momentum to help offset cost headwinds. In Latin America, we expect growth across the whole region driven by a range of insecticides, including diamides, as well as selective herbicides and biologicals. We anticipate acreage to remain supportive in our key crops of soy, corn, cotton, sugarcane, as well as specialty crops. Significant market expansion opportunities still exist for Colombia, Peru, Paraguay, and other Latin American countries in which we remain underrepresented. Our diamide product line is particularly suitable for specialty crops in these countries. Pricing will be a key lever in the region to help offset cost and FX headwinds. We are also launching Onsuva fungicide based on our Fluindapyr active in Argentina and Paraguay this year. Onsuva is an innovative broad-spectrum fungicide targeting diseases in soy and peanut crops. Our Asia business is expected to grow across several countries driven by diamides, new products, and biologicals. India will continue to be an important market for our diamides, as well as the broader portfolio, especially in sugarcane, rice, and specialty crops such as pulses. Australia is expected to continue its growth trajectory with recent launches including Overwatch herbicide, which targets annual ryegrass and select broadleaf weeds on cereals and canola, and new registrations in Asia will drive double-digit growth for our plant health products. We expect to continue expanding market access in countries such as India, Indonesia, the Philippines, Vietnam, and Malaysia. And FX volatility will be important to watch, especially in India and Pakistan. Finally, the EMEA business is projecting volume growth across the region led by Spain, Germany, the UK, and Middle East and African countries. Cyazypyr brands such as Benevia, Berrima, and XRL will continue growing volumes on vegetables, top fruit, olives, and citrus. The Mexico brands such as Coragen are projected to grow in cotton and corn. Herbicides including Spotlights Plus, which is used for desiccation in potatoes, are expected to grow in the UK and other countries in the region. Biologicals and other plant health products will also maintain their growth trajectory. In terms of new launches, we are introducing a herbicide for grass weed control in wheat and barley in new countries in the region. Registration losses will be a headwind similar to the magnitude of previous years. And FX volatility is projected to be a headwind with the Euro, Turkish Lira, and other currencies weakening against the US dollar. Turning to slide nine and FMC's cost outlook. With respect to the cost of goods sold, we continue to see elevated costs across our supply chain. Higher input costs are driven by inflationary pressures as well as the lack of availability. Logistics remain tight with ocean, air, and ground transportation costs at elevated levels. Packaging costs also remain high and availability remains tight. However, we are seeing initial signs of price alleviation. Overall, we expect supply chain-related challenges to persist through 2022. We have better visibility into costs for the first half of the year and we'll have a clearer view of the second half once we move through the second quarter. Increased SG&A investments are anticipated to be driven by commercial expansion activities, especially in support of recently launched products and market access opportunities, as well as labor cost inflation. R&D spend will grow as we continue to advance our discovery and development pipelines. Overall, SG&A and R&D spend will be maintained in line with historical ratios and managed closely. Turning to slide 10 and the review of our full year 2022 and Q1 financial outlook. We expect full year revenue in the range of $5.25 billion to $5.55 billion, representing 7% growth at the midpoint compared to 2021. Adjusted EBITDA is forecasted to be in the range of $1.32 billion to $1.48 billion, reflecting 6% year-over-year growth at the midpoint. We expect adjusted earnings of $6.80 to $8.10 per diluted share, representing an 8% increase at the midpoint. This assumes a share count of approximately 127 million and does not factor in the benefit of any potential share repurchases in the year. Looking at the first quarter, we forecast revenue to be in the range of $1.22 billion to $1.34 billion, representing 7% growth at the midpoint compared to the first quarter of 2021. Adjusted EBITDA is forecasted to be in the range of $300 million to $350 million, representing a 6% increase at the midpoint versus the prior year period. We expect adjusted earnings per diluted share to be in the range of $1.50 to $1.90, representing an increase of 11% at the midpoint versus Q1 2021 and assuming a share count of approximately 127 million. Moving to slide 7. I want to highlight some of the potential factors that could drive our results to either end of the guidance range. For the midpoint of our adjusted EBITDA guidance, we are assuming input costs remain elevated and any further inflation is mitigated. If cost inflation becomes more severe and cannot be mitigated through further price increases or internal efficiencies in the calendar year, our results would trend towards the lower end of the guidance. Alternatively, realizing mid to high single-digit price increases and/or easing of FX headwinds would drive our results toward the high end of the range. Weather events and supply disruptions are variables which would also influence the final outcome. Turning to slide 12 and full year revenue and EBITDA drivers. Again in 2022, strong volume expansion and price increases across all regions will drive revenue growth. FX volatility is expected to be a negative factor in our outlook. Our EBITDA guidance reflects the benefits of high incremental margin volumes and price increases, partially offset by cost and FX headwinds. Moving to slide 13 and the Q1 drivers. On the revenue line, volume growth is expected to continue, especially in North America and Latin America, where momentum is strong. As noted earlier, we've already announced in-season price increases in the us. Price increases in all regions will be an important driver for the quarter. We're anticipating FX headwinds principally from European currencies. Regarding EBITDA drivers, long supply chains in the agricultural chemical industry provide us some visibility into costs. And so far inflationary pressures have not subsided and remain at elevated levels. The higher costs driven by raw materials that we saw in the second half of 2021 will continue in the quarter, as well as growing FX headwinds that will partially offset the EBITDA benefit from high-margin volumes and price increases. Overall, we are forecasting year-over-year EBITDA growth of 6% in the quarter. I'll now turn the call over to Andrew.

Thanks, Mark. Let me start this morning with a review of some key income statement items. FX was an unexpected headwind to revenue growth in the fourth quarter, principally driven by late quarter volatility in the Brazilian real and, to a lesser extent, by the euro. For the full year 2021, FX remained a modest tailwind overall, with the late-year currency volatility more than offset by tailwinds in major European and Asian currencies. Looking ahead to 2022, we see increasing FX headwinds. A significant shift in our expectations as compared to the initial outlook for 2022, which we provided on the November call. For the first quarter of 2022, the headwinds are primarily in Europe, driven by the euro and the Turkish lira. For the full year 2022, we anticipate broad-based FX headwinds, as the US dollar is now expected to appreciate against nearly all currencies of importance to FMC. Interest expense for the fourth quarter was $33 million, down $1.2 million versus the prior year period. Interest expense for full year 2021 was $131.1 million, down $20.1 million versus the prior year due to lower US interest rates and lower foreign debt balances. In 2022, we expect full year interest expense to be in the range of $115 million to $135 million, with higher short-term interest rates in the US offset by the benefits of the refinancing completed in the fourth quarter of 2021. Our effective tax rate on adjusted earnings for full year 2021 was better than anticipated at 12.7%, driven by a more favorable mix of earnings in the fourth quarter across our principal operating companies. The fourth quarter effective tax rate of 10.8% reflects the true-up to the full year rate relative to the 13.5% rate accrued through the third quarter. For 2022, we estimate that our tax rate should be in the range of 13% to 15%, with the increase driven by certain provisions in the Tax Cuts and Jobs Act of 2017 that are effective beginning in 2022. Moving next to the balance sheet and liquidity. Gross debt at year-end was $3.2 billion, down roughly $200 million from the prior quarter. Gross debt to trailing 12-month EBITDA was 2.4 times at year-end, while net debt-to-EBITDA was 2.0 times. Both metrics are below our targeted full year average leverage levels, as intended given our higher leverage earlier in the year. We expect to maintain full year average leverage in our targeted 2.4 times to 2.5 times gross or 2.3 times to 2.4 times net ranges in 2022. As I briefly mentioned a moment ago, we refinanced the $700 million outstanding balance on our 2017 term loan, as well as $300 million in senior notes that matured this month, with a new $1 billion term loan in November. The new term loan has improved pricing, which will reduce our interest expense by approximately $8 million in 2022 compared to 2021. We continue to believe pre-payable debt like the new term loan provides valuable flexibility in our capital structure. Moving on to cash flow on Slide 14. FMC delivered record free cash flow of $713 million in 2021, up more than 30% versus the prior year. Adjusted cash from operations was up more than $100 million compared to the prior year. Significant improvement in working capital and higher EBITDA were only partially offset by growth in cash used by non-working capital items. Receivables, net of rebates, vendor financing, and advanced payments, was the primary driver of improved working capital, supported by improved accounts payable. I note that advanced payments from customers were very strong in North America, as were collections around the world in the fourth quarter. Higher inventories were a headwind to operating cash flow, driven by our choice to build inventory to help manage continued supply chain volatility in preparation to fulfill strong demand in early 2022, as well as reflecting higher input costs. Capital additions and other investing activities of $114 million were up $26 million compared with the prior year as we continue to ramp up spending following deferral of products in 2020 and to support continued growth. Capital additions came in meaningfully lower than anticipated, as we were unable to spend at our targeted levels in the fourth quarter due to changes in project timing and in the availability of materials and contractors. Legacy and transformation spending was down substantially, due entirely to the completion of our SAP program. Overall, free cash flow conversion from adjusted earnings was 80%, an all-time high for FMC. This strong cash flow supported equally strong cash return to shareholders of nearly $650 million in 2021. We repurchased 3.95 million shares in 2021, over 3% of shares outstanding at the beginning of the year, at an average price of $101.14. We also paid $247 million in dividends. Looking ahead now to free cash flow for 2022 on slide 15, we are forecasting free cash flow of $115 million to $735 million in 2021, a range reflecting not only the range of potential EBITDA outcomes Mark discussed earlier, but also uncertainty around a few critical assumptions. Underlying this forecast is our expectation of adjusted cash from operations of $750 million to $910 million, flat to 2021 at the high end of the range. Growth in working capital is anticipated to more than offset EBITDA growth with a modest tailwind from non-working capital items. Working capital growth reflects our current expectations of a return to more normal advanced payment levels in North America, among other factors negatively impacting net receivables in 2022. We expect to further continue to ramp up capital additions as we expand capacity to meet growing demand, especially for our new products that are seeing rapid gains. Legacy and transformation, however, is expected to be a tailwind with somewhat lower legacy spending and essentially no transformation expense expected in 2022. With this guidance, we anticipate free cash flow conversion of 66% at the midpoint. To put our 2022 free cash flow guidance in perspective, let's move forward to slide 16. The left side of this slide shows free cash flow trends since 2018. As you can see, FMC has made tremendous progress in both the absolute dollars of free cash flow generated as well as the conversion of earnings to cash flow. As we've said before, the definition of free cash flow we use is very comprehensive. It's essentially the cash that is left to pay dividends, buy back stock, or make inorganic growth investments. As such, there are a number of factors in cash flow from year to year. The crop protection industry is working capital-intensive, so year-to-year swings in working capital drivers like advanced payments can move our cash flow from one year to the next. Additionally, other cash items like taxes, environmental payments, etc., can be lumpy. So as we get to a more sustained level of cash conversion, we believe it's important to look at trends over several years rather than focus exclusively on a single year's results. If you look at the three-year rolling average trend for cash conversion, you can see FMC's performance has stepped up nicely and is maintained at above our targeted 70% through 2022 at the midpoint of our guidance. As discussed, there are some specific drivers that could depress free cash flow conversion somewhat in 2022. But we fully expect free cash flow conversion to be above 70% in 2023 and that we should sustain 70% to 80% free cash conversion on a rolling three-year basis over the long-term. Equally as important as improving our free cash flow is the discipline with which we deploy cash. The chart on the right side of this slide shows our cash deployment for 2019 through 2021, with essentially 100% of our free cash flow having been returned to shareholders through dividends and buyback. As you saw in our earnings release last night, FMC's Board of Directors has authorized a new $1 billion share repurchase program, confirming confidence in our ability to sustainably generate strong cash flow in 2022 and beyond, and reiterating our commitment to return excess cash to shareholders. In 2022, we anticipate continuing to strongly reward shareholders with dividends of around $270 million and share repurchases of $500 million to $600 million, a return of more than 100% of our free cash flow in the year at the midpoint of our guidance range. And with that, I'll hand the call back to Mark.

Thanks, Andrew. FMC's performance in 2021 was the result of strong volume and pricing gains as well as an overall favorable market backdrop. Our operations and procurement teams worked hard to overcome persistent supply chain and logistics challenges that continue to disrupt the global economy. We expect 2022 will be another year of volatility. From a cost standpoint, second half input costs are somewhat unclear at this time. We are closely monitoring any potential COVID-related impacts, particularly in China, as well as potential logistics issues around the world. However, it's important to recognize that these 2022 challenges are set against the backdrop of solid agricultural market fundamentals and strong demand for our industry-leading products and technologies. We remain confident in our 2022 guidance and another year of healthy growth, driven by pricing, new and recently launched products from our synthetic and biological portfolios, appropriate cost controls, and continued investments to expand market access and broaden our technology platforms. I will now turn the call back to the operator for questions. Thank you.

Yes. Good morning all. Compared to the early look three months ago, it looks like your view on fundamentals is slightly more positive, but the view on the supply chain offsets that and then you have currency on top to bring the overall number down. Is that the right interpretation? Have you seen anything on the ground that would limit your ability to have further pricing if you had further incremental inflation? Thank you.

Yeah. Thanks, Laurent. Fundamentally, no, nothing more broad-based than FX has changed since we communicated in early November. If you think about the markets themselves, the markets are pretty healthy. Soft commodity prices are high. You've got soybeans in the 15 range. You've got corn at six-plus, cotton is high, sugar is high. So the backdrop is generally positive. The only change we see is really FX. And that is something that occurred late in the quarter and our latest view is, obviously, to be a headwind as we go through this year. The rest of the projections that we have, whether it be volume growth or pricing trends, are pretty robust. I mean, the way we're thinking about our model for this year is that our pricing increases will more than offset our cost increases through the year and that our volume increases will more than offset any FX, as well as investments in SG&A and R&D, and that's how we get to the midpoint where we are. But Lauren really the only thing is FX that’s different. Andrew, do you want to comment on FX at all?

Sure. I think, look, as mentioned in the prepared comments, it really was a spike towards the end of the quarter and the BRL. And just adjusted expectations when we looked at, like everyone else, the third-party sources on forward-looking expectations for currencies, where we are seeing anticipated weakening of a number of currencies against the US dollar, particularly BRL, RMB, euro, and Indian rupee, which are probably the four most impactful currencies for FMC. So certainly like all these things, this could change during the year. But based on what our forward curves are right now and our expectations, we do expect a meaningful headwind from FX in 2022.

Thank you. And if I can have a follow-up on Plant Health. It looks like you've got a pretty bullish 2025 target of more than doubling sales in four years. How much of that target relies on M&A as opposed to market growth and product launches?

Yes, we anticipate some mergers and acquisitions contributing to the $500 million target from our current position in 2021 at 220. When we discuss double-digit growth, we mean substantial double-digit growth. In recent years, we have introduced numerous products globally. Our biological pipeline is strong, with four or five new products expected to emerge from it. The market is now more receptive to biologicals compared to five or seven years ago when we began this journey. Traveling worldwide and conversing with growers, I observe that Asia and Latin America, especially Brazil and Mexico, are leading in the adoption of biologicals and crop nutrients. We receive many inquiries about upcoming biologicals, their usage, their differences, resistance benefits, and their role in the food chain, all of which are driving our biological platform. I believe the $500 million target is achievable given the organic growth fundamentals. However, we are also increasing our investments, particularly in research and development for this segment, more than we do for our synthetic businesses, primarily due to higher costs but growing revenue. More importantly, we need to educate our team and growers on selling and using these products. While they are different, they certainly have a place in the market and will enhance our portfolio without cannibalizing our synthetic business.

Thank you.

Hi. Thanks, good morning, everyone.

Good morning.

So, I guess my first question just thinking about kind of the underlying kind of market outlook, and you gave kind of a framing that the market outlook hasn't fundamentally changed at least on the volume side from where you would have been a few months ago. I guess, I'm just trying to think about where you think channel inventories kind of ended the year and the headwind tailwind that that might present to the volume opportunity. Certainly, seems like a pretty constructive crop price and farm income environment. Certainly, good momentum on the new product side that seems to be accelerating. And so I guess, I'm just trying to calibrate if we should the scope for volume upside over the course of the year? And if so where do you think kind of, which regions kind of would be outperforming and underperforming at the corporate level?

Yes. From a volume perspective, in the last quarter, we grew over 20%. There is clearly strong demand in the market. Regarding channel inventories, I have minimal concerns at FMC. Although there are some issues in India due to last year's uneven monsoon, they are not significant. In Brazil, we have no concerns, and similarly, there are no issues in North America regarding channel inventories. My worry is more about the lack of available material. In Europe, there aren’t any problems either. Internally, we haven’t discussed channel inventories much lately; instead, demand has increased significantly. We believe we may have missed some sales in the quarter, though we also gained sales from others facing issues, making the market very dynamic. Given the high prices for soft commodities, there is a scarcity of some key raw materials and intermediates, leading to solid market demand, which we have capitalized on where possible. We anticipate a 7% growth in the top line, likely double the market growth in 2022. We are optimistic about our broad-based growth coming from all regions, especially our herbicide and fungicide portfolios in the US, including the new Xyway systemic fungicide for corn applications. Overall, our situation looks strong, with a well-functioning pipeline and solid investments for FMC's future.

That's really helpful information. If I could just follow up on pricing, I'm wondering if there are any challenges related to pricing in North America, particularly in Latin America. Are there any products or regions where it might be more difficult to implement pricing changes? Are you observing any areas where the market is less receptive to pricing actions?

Not overall, Adam, we have adjusted pricing in all regions on an as-needed basis, which is quite different from how this market typically operates. When discussing in-season pricing, we are implementing changes in various parts of the world. We mentioned the US, but it's not limited to that market. You should expect us to adjust prices throughout the year as we gain more clarity on raw material conditions and availability. There isn’t anywhere globally where we aren’t adjusting prices, although the extent varies based on the portfolio and the value we offer. However, we have limited options in this situation. The price increases from our suppliers and intermediaries have significantly impacted costs in the fourth quarter and in 2021, and those need to be addressed. We certainly aim to adjust prices, and we are actively doing so worldwide.

That's really helpful color. I’ll pass it on. Thank you.

Thank you very much. Mark you sound pretty good this morning. I just want to ask a pretty simple question. I mean what's with the width of the guidance range particularly reconciling some of the constructive global commentary the outlook as well as your scenario analysis on page 11 of the PowerPoint?

Yes. Thank Chris. I'm glad it sounds good. Actually after the quarter that we have, we should sound good. Listen the range is wide for a reason. I've been in the chemical industry for 35 years, and I have never seen an operating environment like this. It's not as if it's one pocket of a raw material. It is across the board whether it's commodities, whether it's specialties, whether it's fine chemicals, it is logistical challenges. They're all there all together. Obviously, when we look at the world, we start to think about what could the ultimate upside be and what could the ultimate downside be? It does not mean that on that slide that we think 1,320 at the bottom end of that range is something that we're planning for. We're absolutely not. We're planning for 1,400, and we're planning to deliver more than 1,400 if we can. Now, some things will have to go our way. We'll have to achieve more pricing, the volume side will have to accelerate. FX will perhaps moderate. But those are the types of decisions we make. So, people shouldn't be surprised that we've put out a wide range. I mean you can look at some companies in our space and in the general chemical space. They haven't even guided. That tells you the challenge out there for companies like ourselves where we're very broad-based in terms of what we buy and what we move around the world. Don't read into that broad range that we have concerns that the 1,400 is not achievable. That's the number we're aiming for. That's what the organization is built to deliver.

All right. So, you're telling me Pierre had it easy. Fair enough. Real quick 2022 when you're breaking everything down and you had some great commentary on new products, the biological portfolio, even some stuff on the diamides. When I look at that 7% and think about the midpoint in terms of the incremental year-on-year absolute dollar contributions, can you just give us some additional color on the diamides as well as the new product penetration as well as some of the launches, some of those things that are kind of rolling out of your the R&D portfolio? So, just how should we be thinking about that growth contribution from FMC-specific sources versus your presumption of natural market contributions? Thank you.

Yes. So, I think we commented in the script that products launched in the last five years will contribute $600 million of revenue in the year. That's versus $400 million in 2021. So, you can see that acceleration of the portfolio. I think what is most pleasing for us is we see the diamides continuing to grow in that mid to high single digits depending on the year, that keeps rolling through. We see that year in year out since we acquired the products. I think what's most important for listeners is the rest of the portfolio and the new products that we're bringing in are also growing in that mid to high single-digit number. So, you can see that the portfolio is getting more balanced. When I think of products that we launched in 2021 within 2021, I think it was about $120 million of revenue in the year. So, that's very healthy. This year is somewhat less than that just because of the mix of types of products we're introducing. I think we're in the $50 million to $100 million range, but again very healthy. So, you should expect to see that number continue to climb, especially as we go through the 2023-2024 period. We have some big active ingredients that start to get launched then. You will see that number accelerate as we go through the end of the decade. And if you remember, we've talked about the development pipeline delivering something north of $2 billion by 2030 of new sales, that's still very much on track for us.

Thank you very much.

Thank you. Could you just give a little more color on what your FX assumptions are at the midpoint for the first quarter and the full year? And if you just want to tell us what you think the headwind is or what rates you're assuming? And I recall that you generally have some at least modest amount of hedging going on to try to smooth things out. But if you could just give us some guideposts so that as we can as the year progresses and the rates move around we have a better sense of whether it's trending for or against you.

Yes, it's Andrew. In the first quarter, European currencies are facing challenges. The euro presents the largest headwind, and while the volatility of the Turkish lira is significant, Turkey is not a major market for us. However, the extent of the fluctuations has been considerable. We do hedge currencies systematically, but not to the full extent, as that wouldn't be economically viable. Thus, a portion remains fully exposed, and the impact does vary based on the movements in rates. Unfortunately, I can’t provide a specific anchor for those rates. I suggest looking at year-on-year comparisons for rates to gauge the relative impact, especially if currencies improve in our favor throughout the year. Looking at the full year ahead, all forecasts and forward curves indicate a general strengthening of the US dollar. The first quarter primarily concerns European currencies, but as we move through the year, we expect headwinds from all major currencies significant to FMC. It's just the beginning of February, and we will see how the year unfolds. For reference, focusing on the year-on-year changes will offer the best insight into potential improvements for FMC.

Okay. And then I think Mark, you mentioned on the supply side one of the risks would be China, and obviously with the zero COVID policy there they've so far largely managed to avoid Omicron. But can you remind us how much exposure you have to Chinese suppliers on the raw material side of the equation and sort of what flexibility you have in place if they do have a disruption?

Yeah. So we've talked about this in the past. If you think about going back past 2015, we were probably 95% dependent on China. We had a strategy that was linked to China low cost for manufacturing. Obviously, through the acquisitions we've made over the last seven years, we've become a very different company in terms of manufacturing our own active ingredients and reliance on China. I would say today, we're probably in the 40% range in terms of dependency on China. It's very difficult to totally remove China from the equation and you simply wouldn't want to do that anyway. There is a balance that you often need. We spent a lot of time over the last few years re-registering products around the world so that we have two or three sources of manufacturing, whether it be India, parts of Europe, or even parts of Central America now with Mexico thinking about manufacturing there. So we're much more balanced in terms of our sourcing of manufacturing. I think the whole lockdown process in China is something we're watching very, very closely, mainly because it can be extremely short-term disruptive, i.e., from one day to the next it can impact you. So having that balanced network has allowed us to serve our customers very well over the last, I would say, 18 months.

Thank you very much.

Yes. Thank you. Mark, you mentioned you thought inventory levels in the US were low, but you had really strong sales. I was just wondering whether the shortness of glyphosate in the last couple of quarters might have pulled some sales from the first quarter into the fourth. Was there any of that just almost with the channel being almost hysterical about not having access to products. Was there any of that going on? And can you comment about your pre-emergent platform in light of concerns out there about whether or not diamide might be available for use over the top? Is that beneficial to you?

I think if you look at our growth numbers projected in Q1, we're around 7%. That's a very healthy figure. Customers, whether in distribution or retail globally, especially in the US, are obviously concerned about supply. It's unavoidable in this industry to have those concerns. However, as we navigated through the quarter, our focus remains on all four quarters of the year. The volume is appropriate, and I don't see it as excessive, particularly in North America. We have noticed shifts in our pre-emergent portfolio and possess some leading products in the market that effectively address glyphosate or dicamba resistance. We have gained some business there, but it's not just those herbicides; we've seen other herbicides globally gaining traction due to the glyphosate shortage or price increase. While I don't believe this will fundamentally change FMC's profile, it's a positive business opportunity as prices rise for these products. Regarding our growth in 2022, being at 7% doesn't indicate significant pull forward, and we don't observe it to that extent at this moment. The business remains very strong.

Thank you. You mentioned the need to educate growers and I'm sure that is a challenge for a new mode of action or even a concept like a biologic. Is there anything that you're doing that has helped you accelerate growth of new products, where it's not just educating they have to try it. Do you need to put out lots of field trials? Do you have to give growers a couple of years of free access just to try this new stuff? Anything that's particularly effective for you on this?

Yeah. I think, listen you raised a very good point, Steve. I mean, we have 24 different research stations around the world, and the biologicals are consuming a significant amount of trial time. We do take growers to the farms around the world. We're also spending more on social media in terms of allowing growers live access to those trials, so that they can see without traveling. I think that's been a major boon for us in helping people understand, look, these products do work. They do work under extreme conditions. They do improve yield and productivity. I would say, the social media aspect of communication for our agronomists and our technical sales force has certainly helped. And you're right. We've been trialing these products for many years. People want to see two, three years of data before they'll start to try them on their farms. And we're coming through some of that early work now and we're starting to see the benefits with that high double-digit growth.

Thank you.

This is Patrick Cunningham on behalf of P.J. Good morning everyone. We've discussed biologicals quite a bit, but I noticed a mention of Precision Ag in the presentation. Do you have an update on your progress in that area? I know you launched your mobile farm intelligence platform. Are there other investments you're considering? Which aspects of the value chain do you aim to engage with in Precision Ag? Thank you.

Yeah. Thanks, Patrick. Yes, our Arc farm intelligence is gathering a lot of steam. Last year was particularly good for us in terms of how we launched in many countries. We're in 21 different countries now. I think we have 13 different spectrums that we forecast for growers. That is – it is a growth platform for us. We are the world's leader of insecticides. So this is a steep growth for us. We will continue to roll out farm Arc intelligence around the world for a myriad of crops, lots of specialty crops, but also now starting to look at some of the bigger row crops, especially in Latin America. Through our Ventures group, we are actually investing in other areas of interest to us, whether its drone applications, whether it's automated spraying or CN spray type applications. So FMC Ventures is becoming a very important platform for linking not only to R&D but linking to the Precision Ag. We have also – when we think about our own portfolio, we have a very unique system that's patented called 3RIVE 3D, which is an in-ground application, reduces the amount of water used significantly. It's doing very, very well in the US, mainly for corn applications, but we're now looking to take that to Latin America, in particular Brazil and Argentina. I would say, the fundamental premise that we have for Precision Agriculture is whatever you do has to meet an unmet need of the grower. If the grower doesn't have that need, it doesn't matter what your technology is or how it looks on an application, the grower will not use it. And I think being focused like we are without trying to be all things really has an advantage for us and linking that to our portfolio of new technologies really works.

Great. Thank you.

Thank you.

Hi. Good morning. Looking at slide 11 in the sensitivity analysis, how do you perceive the percentages of the bull case compared to the bear case? I'm asking because the bear case seems like it would present a significant challenge. In a shrinking market, there are very limited opportunities for price increases, and inflation can outpace what you can adjust prices to. Therefore, it appears tough for the bear case to materialize. Is it reasonable to suggest that the bull case appears more likely than the bear case?

Yes, that's a good question, and we had a lot of discussion about this slide before sharing it. I believe it's important for context. I agree that reaching the lower end of that downside scenario would require a significant collapse. However, I see potential in pricing opportunities. On the other hand, as I mentioned, costs are uncertain as we move into the second half of the year, so we'll need to monitor how that develops. As Andrew noted, foreign exchange rates are currently unstable; they could either stabilize or continue to fluctuate. I'm cautious about projecting numbers beyond the midpoint; it represents our highest probability estimate at this time. I understand your point that the upside is possible and may be more likely than the downside, but that's about as far as I'm willing to go.

Okay. Thank you for that. And then on slide 12, I don't know what we call the Chevron of the arrows just showing the drivers being mixed volume price currency on 2022. 7% revenue growth so price mid single-digit you're showing the Chevron of the arrows being larger for volume mix and launches versus price or being similar if you net out FX. But that would seem to then lead to better than 7% revenue growth. So can you help me understand covering the Chevron there?

Sure. Let me explain how we view things currently. Instead of focusing on the Chevrons, consider the following. We expect low to mid-single-digit market growth along with mid-single-digit pricing. Volume growth is likely to be slightly above mid-single digits. There is a negative impact from foreign exchange, likely in the low single-digit range. We usually see a low single-digit rationalization, generally between 1% to 2%. Additionally, there are some price increases already factored into the market growth. It's important to remember that these elements are interrelated, which contributes to the market growing in that low to mid-single-digit range, potentially reaching 7%. This is our current perspective. Thanks.

Good morning, folks. Mark you did a nice job of outlining how FMC will be outpacing the industry. I was just wondering if we might be able to level set? And if you could offer I guess on slide 8, your outlook for the industry overall in 2022 in terms of industry growth in each region?

Yes. Thanks, Frank. Generally speaking I think we're a little lower than we were in November when we talked about sort of mid-single-digit. We're probably in the low to mid single-digit. Now the only reason for that is how we're viewing FX because we think of the market on a dollar basis, obviously FX around the world impacts us. When I think about the regions I would say the regions that I see with the most growth are likely to be North America with a mid-single-digit growth. I also think Asia will be good, sort of in that mid single area. And then I would say just thinking about Europe probably low single-digit mainly because of the FX impact there. And then Latin America, sort of, low to mid single digits. That's how we sort of view the world today.

Fantastic. And speaking of Europe in terms of your own business you flagged some registration losses that obviously continue. I was wondering if you might be able to discuss the expected year-over-year impact in terms of the products coming off registration and being discontinued 2022 versus 2021?

Yes. It's just slightly over 1%, Frank.

Terrific. Thanks so much.

Yes. It's mainly Europe and a little bit of Latin America.

All right. Jamie.