FMC Corp (FMC) — Q4 2024 Earnings Call Transcript

Thanks. Good afternoon, and welcome to FMC Corporation's Fourth Quarter Earnings Call. Joining me today are Pierre Brondeau, Chairman and Chief Executive Officer; Andrew Sandifer, Executive Vice President and Chief Financial Officer; and Ronaldo Pereira, President. Pierre will review our fourth quarter performance, provide an outlook for first quarter and full year 2025 performance, and share our 2027 financial targets. Andrew will provide an overview of select financial results, followed by a strategy update from Ronaldo. After our 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 upon these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, 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. I'll now turn the call over to Pierre.

Thank you, Curt, and good afternoon, everyone. When I returned as CEO, we began efforts to enhance market visibility and deliver more consistent performance for FMC. We also concentrated on developing and implementing a growth strategy and accelerating the introduction of fluindapyr and Isoflex, all while aiming to cut costs even further. We've made significant progress in this area and achieved two strong quarters with earnings exceeding our guidance. Our work has led to a new perspective on our portfolio, categorizing products into core or growth segments. This framing will influence much of our discussion today. Although we have advanced in improving market visibility and predictability, I have reassessed what is necessary for FMC to fully capitalize on the upcoming market upturn and the portfolio's quality. It has become clear that the company requires a more substantial reset than I initially believed. Our experiences in the fourth quarter highlighted the need for more aggressive actions to reposition FMC, primarily to significantly reduce our inventory in the channel beyond previous expectations. We must prioritize implementing a new strategy for Rynaxypyr and Cyazypyr while expediting manufacturing cost-reduction initiatives. These changes will negatively impact our financial performance in 2025 beyond what we had anticipated. Additionally, we will need to allocate more resources to bolster the commercial development of new active ingredients, crucial for revenue in 2025 and beyond. We also realized the evolving distribution channel in LATAM will necessitate investments to expand our sales organization to explore new market avenues in that region. I will share more details on this topic later in the presentation. The year 2025 is crucial. Let me outline the actions we are taking. We believe it is entirely feasible to implement these plans in the coming months, and while we expect to see benefits starting in 2026, they will impact our short-term financial performance. First, we are dedicated to lowering the inventory levels of FMC products in the channel. We will ensure that our products are moved from the channel to the market faster than what we sell into the channel, making this a top priority. This implies that the volume growth we anticipate will heavily rely on new market approaches and products not affected by channel inventory issues. Second, we are wrapping up the initial phase of significant cost-reduction efforts for Rynaxypyr and Cyazypyr this quarter. These cost-saving measures are essential for executing future growth plans, but they will lead to negative year-on-year revenue comparisons in 2025. It is important to note that Rynaxypyr and Cyazypyr sales consist of two components, managed separately: branded products sold directly by FMC and partner sales of solitary molecules to competitors, which often follow cost-plus pricing models. A significant reduction in manufacturing costs will decrease product prices for our partners, affecting sales value. In 2025, we expect growth in branded Cyazypyr sales. However, we predict a decline in overall Rynaxypyr sales due to the impact of our cost-plus contracts on key partner sales and the repositioning of our branded product lines. Moreover, generic versions of Rynaxypyr are being sold in India, China, and now in countries like Argentina, Turkey, Mexico, Pakistan, and Peru, which negatively influences pricing and initial volumes. Third, we are preparing our diamide product lines for their next evolution phase. We classify FMC's products into a core portfolio, consisting of items with expiring patent protection, and a growth portfolio featuring products under patent protection. Cyazypyr, along with four new AIs—fluindapyr, Isoflex, Dodhylex, and rimisoxafen—falls into the growth category. Rynaxypyr is part of the core portfolio, together with the remaining legacy products. As we will outline later, the Rynaxypyr market is set for transformation, with new markets and strong growth potential ahead. Cyazypyr stands out as a unique product with longer patent protection, improved performance, and complex manufacturing processes, with no generic competition in major markets today. Fourth, having exceeded our restructuring targets, we are investing in expanding our sales organization to support growth in our new active ingredients and develop new market routes, particularly in LATAM and EMEA. LATAM’s Q4 sales were disappointing, impacted by competition resulting in pricing and terms we chose not to accept, alongside credit risks leading us to forgo some sales. We are confident in meeting our EBITDA and EPS targets, giving us the flexibility to decline unattractive sales opportunities. Additionally, we observed lower-than-expected demand as customers reduced their inventory levels compared to historical norms. We anticipated some inventory reduction given the higher interest rates, lower commodity prices, and perceived secure supply. However, the extent of this behavior shift was unexpected. We now recognize elevated channel inventories in some LATAM countries, including Brazil, and in regions such as Asia, Canada, and Eastern Europe. We reported Q4 EBITDA of $339 million, marking a 33% increase from last year and exceeding our guidance mid-point by $3 million. The negative impact from pricing and FX was more than compensated by higher volumes and favorable costs, continuing the positive contributions from our restructuring program. Input costs were favorable, driven by lower raw material expenses and reduced unabsorbed fixed costs compared to previous quarters. This reduction, combined with sales growth, resulted in a record EBITDA margin of 27.7% for Q4. Turning to our full-year results for 2024, we see a sales decline of 5%, with increased volumes in the second half being offset by lower pricing and FX challenges. Although EBITDA dropped 8%, we achieved a 21% EBITDA margin, only slightly lower than the previous year, due in part to substantial cost benefits from restructuring efforts. As we look toward 2025, we project full-year sales between $4.15 billion and $4.35 billion, roughly flat at the midpoint compared to last year and up 3% excluding an estimated $110 million loss from the GSS sale. We foresee modest volume growth driven by our growth portfolio and customer base expansion, albeit partially countered by our intentional inventory reduction actions in several countries. Pricing is anticipated to decrease by low to mid-single digits, primarily due to pressures from our diamide partners. These adjustments are expected to most impact the first half of the year as per sales timing. We project FX to also be a low to mid-single-digit headwind for the year given the expected strength of the U.S. dollar. Despite these selling challenges, we anticipate achieving a higher EBITDA compared to last year, with a forecasted range of $870 million to $950 million, reflecting a 1% increase at the midpoint. Excluding the GSS impact, this midpoint is expected to rise about 4%. We foresee favorable COGS contributing between $175 million and $200 million due to lower raw materials, better fixed-cost absorption, and restructuring advantages, balanced against lower prices, an estimated $65 million to $75 million FX impact, and investments in our sales organization. Expected adjusted earnings per share will range between $3.26 and $3.70, remaining flat at the midpoint compared to last year. For Q1, we anticipate lower results as we begin our corrective actions early in the year, estimating sales between $750 million and $800 million, representing a 16% decline year-on-year due to negative price, FX, and volume effects. Excluding an estimated $24 million loss from GSS sales, the decline would be 13% at the midpoint. We expect lower volumes for two key reasons: excess FMC inventory in the channel across many countries and U.S. distribution customers replenishing their inventories early in anticipation of the growing season. Typically, retailers and growers would facilitate that volume in Q1; however, this year, due to efforts to maintain lower inventories and cautious procurement because of low commodity prices, we project a more even pull-through across the three-quarter season, delaying reorders from distributors and resulting in reduced volume in Q1. While this presents a significant challenge for our Q1 outlook, we aim to set realistic expectations reflecting our assessment of how the U.S. market may behave this year, differing greatly from historical patterns. We expect Q1 pricing to decline in the mid-to-high single digits, largely driven by price adjustments for diamide partner contracts, with FX posing a mid-single-digit headwind as well. Similar to our annual expectations, we forecast growth in our portfolio during the quarter. For Q1, we are guiding EBITDA to be in the range of $105 million to $125 million, reflecting a midpoint decline of 28%. While lower pricing and FX headwinds are anticipated, these will likely be partially mitigated by reduced COGS, including decreased raw material costs and improved fixed-cost absorption. Adjusted EPS is projected to be between $0.05 and $0.15. I'll now pass the call over to Andrew to cover some financial details and the implications of this guidance for our balance sheet.

Thanks, Pierre. Before I get into the normal review of key financial results, let me start this afternoon with an update on our restructuring program on slide 10. When we initially announced our restructuring program in late 2023, we targeted delivering $50 million to $75 million of net savings in the 2024 P&L with $150 million in run-rate savings by the end of 2025, both measured against the 2023 baseline. As we progress through 2024, we identified a number of areas where we could move more aggressively to reduce our cost structure, raising our targets at our second-quarter earnings call and again on our third-quarter call to $125 million to $150 million in 2024 net savings and more than $225 million in run-rate savings by the end of 2025. While there were many factors that contributed to these increased targets, the biggest factor was a major revamping of sourcing for raw materials for our diamide products. I'm pleased to report that we exceeded our increased targets, finishing 2024 with net savings delivered in the P&L of $165 million, largely in operating expenses, but with savings in cost of goods sold as well. We also now have a clear line-of-sight to run-rate savings of more than $250 million by the end of 2025 with a very significant contribution from lower costs of goods. Our restructuring program has impacted every part of the company, resulting in fundamental changes in our operating model, including how we are organized, where we operate, and the way we work. While we do have some remaining in-flight projects to finish delivering the full savings run-rate in 2025, we've incorporated the expected year-on-year benefits of our restructuring actions in our outlook for 2025. As such, we consider our restructuring program to be essentially complete and we will ensure delivery of the remaining savings through our normal management of delivery of our guidance. Moving next to some key income statement items. FX was a 5% headwind to revenue growth in the fourth quarter, primarily stemming from the Brazilian real. For full-year 2024, FX was a 2% headwind at revenue with the Brazilian real and the Turkish lira being the largest contributors, followed by smaller headwinds across a number of Asian currencies. For 2025, we anticipate a low to mid-single-digit headwind in revenue from FX with the Brazilian real, the Turkish lira, and the euro being the most significant drivers. Unlike 2024, we anticipate a meaningful EBITDA headwind from FX in 2025, and the range of $65 million to $75 million. 2024 EBITDA benefited from the timing of currency movements during the year that created favorability against the hedges we had in place. In 2025, we continue our normal systematic approach to hedging, but with the strengthening of the dollar that happened in late 2024, and into 2025, and with the current forward curves, we do not expect to see a repeat of the favorability we saw in 2024. Rather, we expect to see a more normal relationship between FX impacts at revenue and EBITDA with our hedging program dampening, but not eliminating the impact on EBITDA and negative FX movements. Interest expense for the fourth quarter was $51.8 million, down nearly $5 million compared to the prior year period, driven by lower debt balances and lower interest rates. For full year 2025, we expect interest expense to be in the range of $210 million to $230 million, down roughly $15 million year-on-year at the mid-point, reflecting the benefit of debt reduction in 2024 and modestly lower interest rates in 2025. We ended 2024 with a lower-than-expected effective tax rate on adjusted earnings of 10.9%. The mix of earnings by jurisdiction shifted meaningfully versus our expectations in the fourth quarter with substantially less profit attributed to high-tax jurisdictions like Brazil. The fourth-quarter effective tax rate of 7.9% reflects the true-up to the full-year rate relative to the 14% rate that has been accrued through the third quarter. With the impacts of lower effective tax rate for 2024, adjusted earnings per share for Q4 were up $0.72 or 67% versus the prior year period, a significantly higher increase seen at EBITDA. The biggest driver of increased earnings per share remains increased EBITDA, representing $0.59 of the $0.72 increase in EPS year-over-year, while lower tax contributed $0.11. For 2025, we anticipate that our effective tax rate should be in the range of 13% to 15% with approximately a 3 percentage point increase at the mid-point, driven by the expected mix of profit by jurisdiction. Moving next to the balance sheet and leverage on slide 11. Gross debt at December 31st was approximately $3.4 billion, down nearly $600 million versus the prior year. Debt reduction came both from the proceeds from the sale of our GSS business, which closed on November 1st, as well as from discretionary cash flow. Cash-on-hand increased $55 million to $357 million, resulting in net debt of approximately $3 billion. Gross debt to trailing 12-month EBITDA was 3.7 times at year end, while net debt to EBITDA was 3.3 times. Relative to our covenant, which measures leverage with a number of adjustments to both the numerator and denominator, leverage was 3.7 times compared to a covenant of 5.0 times. As we announced a short while ago, we recently amended the leverage covenant of our credit agreement to provide additional headroom and duration of covenant relief given our outlook for 2025 through 2027. We expect to end 2025 with leverage metrics essentially flat to 2024 and then to show improving metrics with rapidly accelerating EBITDA growth in 2026 and 2027. This is coupled with disciplined cash management, including continuing to direct all discretionary free cash flow to debt reduction. We remain committed to returning our leverage to levels consistent with our targeted BBB/Baa2 long-term credit ratings. While this will take a bit longer than we previously hoped, we are confident we're on the right path to get our leverage metrics back in line as our business more fully recovers. Moving on to free cash flow in slides 12 and 13. Free cash flow for full-year 2024 was $614 million, an increase of more than $1.1 billion versus the prior year. The year-on-year increase was driven by a $1.04 billion improvement in cash from operations, which benefited particularly from improved payables, and inventory despite over $100 million of cash restructuring spending. Capital additions and other investing activities were down substantially as we constrained spending to only the most critical projects. Cash flow from discontinued operations improved in part due to a one-time insurance element. For 2025, we expect free cash flow of $200 million to $400 million, a decrease of $314 million at the mid-point. Cash from operations is the key driver of the decrease with normalization of working capital after the pronounced correction in 2024. Capital additions are also expected to be up somewhat, but with a continued focus on only the most essential projects, including capacity expansion to support new products. Cash flow from discontinued operations is also up slightly, but in line with our multi-year average. Free cash flow conversion from adjusted earnings is expected to be approximately 69% at the mid-point. With that, I'll hand the call over to Ronaldo.

Thanks, Andrew. I want to start off by providing an update on our diamide strategy, which is supported by slides 14 through 21. As we look ahead, it's clear that our commercial strategy is evolving, driven primarily by the upcoming patent expirations, particularly for Rynaxypyr. While this presents challenges, we see it as an opportunity to transform, compete, and advance in new ways. Like other products that transition to the post-patent phase of life, when we look back at the makeup of our diamides business years from now, it will look much different than it does today. Over the past several quarters, we have spoken to the broad strategy for these products as they shift to their post-patent lifecycle. At a high level, the strategy that we've communicated, which you can see on slide 15, is that we will continue to offer the basic solo formulations under the trusted FMC brand names at lower price points to compete with generics entering the market. At the same time, we will offer high-value versions of diamides via new often patented formulations and mixtures. This evening, I'll share in more detail how we're enacting this strategy, and share how we see the next few years unfolding for this product class. Going forward, you will hear us start talking about the two distinct products, Rynaxypyr and Cyazypyr, rather than just simply referring to them as the lead diamides as we've done in the past. Both products are very potent tools for growers to control insects. But as you can see in slide 16, there are some key differences between the two products. Rynaxypyr has a more limited spectrum, but that spectrum is focused on controlling lepidopteran insects or caterpillars, which is the most valuable addressable market at nearly $5 billion. Cyazypyr, on the other hand, has a much broader scope in terms of types of insects it can control. Our Rynaxypyr sales have outpaced Cyazypyr with roughly a 70-30 split. This is partly due to Rynaxypyr's larger market share for caterpillar control and also has been by our own design due to its somewhat simpler manufacturing process and lower cost profile. The market for Chlorantraniliprole or CTPR, which is a chemical name for the active ingredient behind Rynaxypyr, will undergo a series of changes over the next few years, and our strategy reflects that. As Rynaxypyr enters the next phase of its product life, it has been included in the core portfolio along with the other legacy products that are off-patent, like Sulfentrazone. All composition-of-matter patents have expired for Rynaxypyr, and by the end of 2025, almost all process patents will also have expired. We expect generics to enter all major markets with Rynaxypyr with solo formulations of CTPR by the end of 2026. As we mentioned earlier, we are already observing generic CTPR sales in some countries today. As generics enter the market, we will continue to offer solo formulations at lower price points under the trusted FMC brand to compete with the new market entrants. Based on the latest data from international shipments, we believe we are competitive on costs with lower price generics offering the solo molecule, thanks to our recent restructuring actions, which have significantly lowered our cost of sales. Lower pricing for the solo formulation will coincide with a significant expansion of acres treated with CTPR. Slide 17 and 18 illustrate how this is likely to occur. Slide 17 shows the global foliar insecticide market, which is about $22 billion at the farm gate. Diamides as a class of chemistry are estimated to be about 9% or a little under $2 billion of that overall market, with FMC's branded diamides making up about 55% of that share. The remaining 45% is made up of FMC partner sales, generic CTPR, and competitor products within the diamide classes that are not Rynaxypyr or Cyazypyr. As you can see that the majority of diamide offerings are on the higher end of the treatment per acre price curve, with prices ranging from $20 to over $40 per acre. There are almost no diamide products offered below $10, and FMC's diamides are virtually non-existent in this space. When generics first enter the market, we expect growers who are solely driven by price to be their key customers, which should be less impactful to FMC. The entrance of generics will certainly create competitive pressure against some existing FMC products, but as slide 18 shows, with our lower manufacturing costs and technology roadmap, there will be substantial opportunities for Rynaxypyr and Cyazypyr to take share across all points of the price curve from other insecticides such as Neonicotinoids and organophosphates. The more favorable environmental profile of both Rynaxypyr and Cyazypyr versus these other insecticide classes would further aid market expansion. As seen on slide 18, we expect that the diamide market will grow from $2 billion up to an estimated $5 billion over time. As volume expands, we will continue to differentiate our Rynaxypyr products from other CTPR offerings with new formulations and mixes. These new products, which are listed on slide 19, will deliver additional attributes. This innovation can be in the form of adding a second mode of action to combat potential resistance or adding a mixed partner to broaden the spectrum of control while expanding the addressable market. Rynaxypyr is expected to continue to show sales growth, although not at the high levels we observed when the product was earlier in its life cycle. Following the 2025 correction year, we expect overall Rynaxypyr to report a growth rate in the high single digits. On slide 20, you can see the upcoming products in our Rynaxypyr pipeline. Many of these products will offer additional value to growers. This can be in the form of reduced labor for application by offering rice growers a much lighter weight tablet formulation or it can be through new mixtures with pheromones and insecticide from other groups that combat resistance and strengthen performance in existing segments. Finally, we plan to introduce seed treatment products, which is an unexplored segment of the market for our branded offerings, as well as a mixture with a Bionematicide. While the core portfolio grows at or above the market, we expect Cyazypyr and the rest of our growth portfolio to grow at multiples of the market. For Cyazypyr, we have process patents in place in major markets through 2025, with Brazil not expiring until the middle of 2026. In addition to the process patents, we also have a key formulation patent for Cyazypyr through 2027 in key markets, and data protection in place in major regions such as Brazil, the U.S., and Europe. Depending on the country, this can extend the protection granted to the regional molecule. Data protection creates an additional and costly hurdle for generics to register products even after process patents have expired. Slide 21 shows some of the products in our Cyazypyr pipeline, including mixtures with insecticides from other groups that will broaden the spectrum of control as well as slow down resistance. Our high-load formulations are not only easier to handle for growers, they also improve our cost position. To serve growers in the fruits and vegetables space, we'll be offering a fruit flight bait that is a unique and sustainable solution that leaves no residues and has no restrictions for export. Compared to Rynaxypyr, Cyazypyr has a more complex and more expensive manufacturing process. These factors may cause fewer generics to enter the market compared to Rynaxypyr. Cyazypyr has a broader spectrum of pests it can strongly control, including whitefly, fruit fly, leaf miner, and psyllid. Given the broader spectrum and our reduced manufacturing costs, we believe we have a sizable opportunity to expand the market for this product. Similar to Rynaxypyr, we are actively promoting and developing new formulations and mixtures to position ourselves well when all patent protection has expired and generics enter the market. Following the 2025 production year, we expect sales of Cyazypyr to grow in the low-to-mid teens. The most exciting parts of the growth portfolio are the new AIs that we're launching and expanding over the next few years. We have mentioned before our high expectations for the contributions of these molecules, and we've not shared more details about what these expectations are and what supports them. Let me start with the two products already in commercialization. The first one is fluindapyr. It is one of the newest active ingredients of the SDHI fungicides, a class of very active products with strong commercial success. Together, SDHI fungicides represent 15% of the global fungicides market with around $3 billion in combined sales in 2023. SDHI fungicides are known for being very effective when used to prevent crop disease. This is also the case for fluindapyr; however, what sets it apart from the other active ingredients is the especially broad spectrum of control that covers many diseases of economic importance, such as Asian soybean rust, corn tar spot, coffee rust, and damping-off in young cotton plants. Fluindapyr also protects crops for an extended period, lowering the need to respray. These technical attributes are enough to support our confidence in the success of Fluindapyr. But there is another aspect that is equally important. Fluindapyr has given us access to some large market segments that we have never served before. In aggregate, we believe that its addressable market exceeds $2 billion. Soybean rust in Brazil alone is a $3.5 billion market, just to mention one example. In many of these market segments, fluindapyr will be the first technology that we will sell. Going into these new segments with a product that is patent-protected, technically differentiated, and biologically strong, we open access to sales of other FMC products. As shown on slide 22, fluindapyr is already registered in Brazil, Argentina, the United States, and Paraguay, with some other important countries pending registration in the next three years. Sales are expected to be more than $150 million in 2025, exceeding $300 million by 2027. The second product is Isoflex Active, a herbicide based on bixlozone that offers a new mode of action in cereals such as wheat and barley. It's most effective at controlling difficult grasses as well as some key broadleaf weeds. We have been selling this product in Australia with strong results. With recently approved registrations, it has expanded to Brazil, Argentina, India, and the UK. European Union registrations have been submitted, and we expect to begin selling there during 2027. Given the size of the cereals market in the EU, Isoflex sales in those countries will provide a substantial boost to the product's global sales. We estimate that the addressable market for cereals in Europe to be about $5 billion. Isoflex sales are expected to be about $100 million in 2025, with sales approaching $250 million by 2027. We expect sales to continue strong growth beyond 2027 as the product becomes more widely used. Our third product is Dodhylex, the first herbicide to be introduced in the market with a new mode of action in over 30 years. In our Q2 call, we described it as a patented rice herbicide. I want to correct that statement. Dodhylex is a novel patented and versatile herbicide. While its development in rice is more advanced, our confidence that it will be sold on other crops in the future keeps growing every day. Suffice to say that it can be safely applied on several broad-leaf crops such as soybean, sunflower, and others. And we believe there are meaningful opportunities to expand the product to these crops beyond 2027. But for today's discussion, let's just stay with rice. There are 165 million hectares of rice planted globally. To put this in perspective, this is 25% more land than soybeans and not so far from corn. Because of cultural reasons, the vast majority of the countries currently have strict regulations that prevent the introduction of genetically modified rice varieties. As a result, decades of weed control with herbicides with similar modes of action have led to a substantial increase in weed resistance, probably more so than in any other major crop. Although it's hard to estimate the size of global rice area infested with resistant weeds, in the U.S. alone, some universities estimate that resistant weeds are present in more than half of all the rice fields. Weeds like barnyard grass and sprangletop are present in virtually every rice field. And in many of them, they have become resistant to existing herbicides. Differently from other crops, there are many agronomic variations on how rice is planted from country to country. Direct seeded versus transplanted, variety types, irrigated versus rainfed, different irrigation methods, etc. Today, all these variables result in limitations on which herbicides can be used. A product that can be safely used on transplanted rice can be harmful to the crop when used on direct-seeded fields. Dodhylex is highly safe on rice plants independently of the agronomic practices. Once we launch it, almost all the rice growers will be able to use it without being forced to choose between their herbicides and their preferred agronomic practices. High versatility, strong performance on resistant weeds, unparalleled crop safety on a crop that is planted on all continents, and potential to expand even further in traditional crops. These are the key reasons behind our high expectations on Dodhylex's commercial performance in the next few years. Looking forward into the future, we continue to believe that our new active ingredients can achieve or surpass $2 billion in revenue at maturity. Beyond our new synthetic pipeline, our plant health business is expected to grow at a rate in the mid-20% range out to 2027, led by biologicals with a smaller contribution from pheromones. We still believe there is an excellent opportunity for outsized growth for pheromones, but meaningful growth is not likely to occur until after 2027. In summary, there is enormous potential for expanded sales from our growth portfolio when you consider the new active ingredients and the potential for Cyazypyr to broaden its market reach. In addition, we also have a growing portfolio of biological products, including pheromones that are positioned to provide even further growth. With our core portfolio providing a solid foundation for sales and earnings in a market that is in the midst of recovery, the differentiated nature of our growth portfolio puts us in a strong position to outgrow the market over the coming years. Pierre will now discuss specifically what our expectations are for the next three years and provide some closing remarks. Thank you.

Thank you, Ronaldo. Our 2027 targets are laid out on slide 23. We are focusing here on the growth of the company post-2025, which we believe will act as a correction year to reposition our portfolio. The growth rates post-2025 are more representative of the future growth of FMC. The sales of our core portfolio from '24 to '27 are expected to grow at 2% per year. Following the 2025 correction year, we expect total Rynaxypyr growth in the high-single-digit. The rest of the core portfolio is forecasted to grow at the market rate of about 3% every year. Our growth portfolio is expected to grow at an annual rate of about 24% from '24 to '27. Following the '25 correction year, Cyazypyr growth is projected to be in the low to mid-teens with growth of both branded and partner sales. The new active ingredients are expected to reach $600 million by 2027. The growth will mostly come from fluindapyr and Isoflex, with a small contribution of Dodhylex based on the launch calendar. The plant health growth rate is expected to be in the mid-20% range with a potentially high-growth pheromones product expected to meaningfully accelerate growth of plant health after 2027. From '24 to '27, the growth portfolio contribution to total company sales is expected to grow from 19% of total company to 30%. Looking beyond 2027, the ramp-up of Dodhylex and the addition of new products such as expanded biological offerings, the pheromones, and the new dual-mode of action herbicide rimisoxafen will all contribute to further growth for the company. Combining the core and growth portfolio leads to expected 2027 sales of about $5.2 billion. EBITDA is expected to be about $1.2 billion, equating to a 23% EBITDA margin, which is at the higher end of our industry. This is a revenue annual growth of 7% from '24 to '27 with EBITDA growth at 10%. From '25 to '27, revenue grows at an annual rate of 11%, with EBITDA growing at a 15% rate. We are highly confident in the growth path of the company. This confidence comes from the already strong performance of our growth portfolio. I believe FMC has the strongest pipeline in its history. But we are also conscious that taking full advantage of it requires a repositioning of the company in 2025. That is why we will realign our inventory levels, implement the newly developed diamide strategy, and invest in our sales organization to support the growth portfolio and develop new routes to market. We can now open the line for questions.

Thank you and good afternoon, everyone. Pierre, could you help us understand how you expect Rynaxypyr to evolve from 2026 and beyond? You're talking about high-single-digit sales growth, but could you maybe help us think about the shape of volume and price over the coming years? And within that, could you let us know your view of price gaps and how you expect to manage them as the generics proliferate? Thank you very much.

Sure. From a pricing standpoint, we believe we are in place right now, where we can compete with generics at the price points which are being practiced by generic companies as reported in the latest import data we have. So, there are two aspects of it. There is the aspect of the market where we will sell a solo molecule. And there, we will have to make a decision of how deep we go into this market to go further into hectares using lower-cost products and decide where we go and how much of this market we decide to take versus today where we do not have any of this market. So that's what a lower manufacturing cost and new pricing will allow us to do to expand the market we will reach in terms of hectares by going after different types of pesticides. Then there is the high-end, as you've seen on the slides presented by Ronaldo, we are actively working on new mixtures of products, which are increasing the efficacy of the product, fighting the resistance, and those products will allow us to differentiate ourselves from the solo molecule, which will have a way less efficacy and do that at a price premium. And finally, we're going to be developing products that will be beneficial from a cost standpoint for us and growers. We talk about high concentration and pallets. So it's a mixture of moving products in two directions. One is to the higher-end with high-level formulations, which are significantly increasing the efficacy of the product, together with having the capability to expand to the lower-end market because we will have a much lower price allowing us to go into those markets.

Yes, hi. I had a question on your volume guidance for 2025. So, a lot of the prepared remarks talk about weakness at the end of the year, more channel inventory you're dealing with in the first quarter, and that's clear in your Q1 guidance. But if our math is correct, it looks like you're expecting volume growth of something like high single digits for 2025 as a year. Previously, you talked about that as 5%, something in that range. So it just seems really odd to us that you're increasing confidence in volumes when the near-term outlook looks a lot worse than you previously anticipated. So can you help us out there, please?

Yes, that's a great question. One of the key decisions we've made is to reduce the inventory of FMC products in the channel. We want to ensure that we sell more directly on the ground than we sell into the channel. Initially, we projected a volume growth around 6%, but we are currently seeing a higher number. This strategy was developed in the fourth quarter as we gained a better understanding of the market conditions. When we mentioned the 6% growth, it was based on a general expectation of market demand recovery, which we are now excluding. Our current volume growth range is approximately $250 million to $350 million, with 75% of that coming from our growth portfolio, primarily driven by new molecules, new AIs, and biological products. Most of the remaining growth is from the plant health portfolio, leaving very little from the core portfolio. This represents a distinct growth profile and a different approach. While it does require investment in the first quarter to create a new sales organization focused on direct sales to large growers, it reflects a strategy that anticipates growth in areas with lower inventory levels.

If I may add to that, Pierre, Josh, we are investing in expanding and exploring new routes to market. The combination of new products and new customers, that is really where the growth comes from. It is not from traditional products and traditional customers. As we just stated, our focus there is actually to decrease existing inventory. So, it's new products to new customers driving the volume growth.

Hey guys. I was just hoping you could help me triangulate a few things. It just seems like the Q1 guide is the vast majority of the delta of what the Street was increasingly factoring in for your '25 guidance. And we all understand there's a lot going on with Brazilian credit and increasing competition not only across the big six, but also generics within the Americas, wholesale-retail holding less inventory. But just can you help us just given even Latin America is a smaller portion of the first calendar quarter, just what's your confidence 2Q onwards that you're doing everything in FMC's power to ensure that you can ultimately hit that annual guide, if not exceed it once all the dust settles? Thank you.

I think Chris, I would say the first quarter numbers are showing that we are taking a very significant market approach to a lower level of FMC products in the channel. So, certainly our numbers for the first quarter show that we're going to have a very, very prudent approach to the market with a high focus on preparing the following quarters. The second half of the year will also benefit a lot from the new products, the new routes to market for the new product, because lots of the registration except the U.S. are coming from countries in Latin America where you will have the growing season and the new routes-to-market with the new growers we are targeting are also in Latin America. So the two actions: structuring our sales for growth in the second half plus the actions we are taking in the first half of the year should make us successful to deliver what we are planning in the second half of the year. Do you want to add something, Andrew?

Yes. Chris, I'd just add as well, just that as Pierre commented, we do have some major timing shifts in the U.S. business happening this year as well that calls for some shift of sales we would normally expect to make in Q1 to happen later in the year. So, I think that's a part of this low Q1 and stronger Q2 through Q4 that you're pointing to in your question. It is that combination of both the back-end weighted new product growth that Pierre mentioned, the actions we're taking earlier in the year, broadly speaking to reduce channel inventories. And then finally, the bit of the change in sequence during the year of sales in the U.S. market with later replenishment by growers and retailers pulling from distribution.

Good afternoon, everyone. I wanted to discuss the pricing outlook. It seems that in the fourth quarter, there was a pricing decline across most segments and regions, except for EMEA. Regarding the outlook, you mentioned cost-plus contract adjustments. Were these specific to a certain region? How is pricing currently in Latin America, which has shown the weakest performance? Additionally, looking at the revenue forecast for 2027, are the expectations that these contracts will reset in 2025, and will they remain flat or potentially increase in the coming years? Thank you.

So, to answer your last question about the contract, there is for some of the very critical contracts, an indexation of the pricing to customers to manufacturing cost. The biggest jump in terms of lowering our manufacturing cost is taking place now from '24 to '25. After '25, we're going to have incremental evolution of our cost, which will go lower and beyond where we will be in '25 but not at all to the same extent. So there will be less of an impact of the price adjustment to the technical sales in '26 and '27 versus '25 as most of the hit will be taken in 2025. From a pricing standpoint, I think the guidance we are giving, and Andrew, correct me if I'm wrong, but I think the guidance we're giving for 2025 is 3% with about two-thirds of that coming from those manufacturing contract or those sales contracts to our partners. Now, Q4, about Q4 and the 3% decline, which was slightly better than what we were expecting. And that's related to the comment I made initially, we had good line of sight in the fourth quarter to deliver the EBITDA and the EPS. We decided to walk away from sales when there was too much demand for price or term. We did not want to get into a situation where we would be competing at any cost to go as high as we could on the selling front and just rather stayed below the number we gave as our expectation from a price decrease knowing that we could deliver earnings without doing it.

Great, thanks for taking my question. Understanding that you guys have done a lot of work to get inside the channel a little bit more, it sounds like you will be continuing to increase your visibility there. But maybe you can just highlight, Pierre, some of the learnings that you have found there. It sounds like that was an area of particular interest, but now you're also shifting your strategy as well and further solidifying the growth versus core strategy. But what else are you doing on the inventory side to get a better handle on the channel? And will all of those issues, be mainly addressed through your Q1 actions? Thanks.

Thank you. Most of our inventory actions will occur in the first half of the year, and I believe it will take more than one quarter. We intend to be very proactive in the first quarter and continue that into the second quarter. Upon my arrival here, I didn't fully recognize some issues in the first couple of months. I focused mainly on the overall inventory, but there are certain areas where we have higher inventory levels for various reasons, particularly higher FMC inventory. We have now pinpointed specific actions for each country, including India, Brazil, Eastern Europe, and Asia. We have identified a total of six or seven countries where we need to address the inventory concerns. Our understanding of the issues came from analyzing the selling process and investigating why outcomes were not aligning with our expectations. We also invested significant time in discussions with our customers, who highlighted that our inventory targets are continually changing. Currently, the inventory target at the end of the season differs from what it used to be. An example is that some regions were previously comfortable ending the season with 30% to 35% of a full year's inventory, while now most aim for the 20% to 25% range. Therefore, we need to address these two challenges: the shifting target regarding our customers' needs and the specific countries—like India and Brazil—where we are seeing elevated FMC inventory levels.

Good afternoon, and thank you for taking my question. I would like to gain a clearer understanding of the medium-term outlook. As you consider the rollout and timing for 2025 and into 2026, especially in light of your guidance for the first quarter, how do you anticipate things unfolding? If your expectations are met, how should we view the progression into 2026, taking into account the product rollout and your ability to reclaim some market share and customers that you have currently lost?

I believe that if I examine the three-year plan, it is not weighted towards the later years. You will observe a significant improvement in the numbers starting in 2026. The new products are projected to reach $600 million, and we expect consistent growth throughout the three-year period. We aim to implement new routes-to-market by the second quarter, becoming more active in the third quarter, with further developments in 2026. There will be an acceleration of growth from 2026 to 2027, and we will see a noteworthy increase following a correction year. By 2026, we will benefit from market growth in our core business and the full expansion of our growth initiatives. Thus, this is not a back-end focused three-year plan.

Yes, thank you. For Rynaxypyr volumes in 2025, what are you expecting the percent decline to be? And what was the change in your outlook for the global market versus your prior expectations? Was this primarily due to just greater-than-expected capacity expansions in China? Is that what was the primary change? And if so, why do you think you could get back to high single digit growth in 2026?

Yes, we want to be cautious about discussing specific percentages for our products. Next year, we anticipate a decline in both branded Rynaxypyr and Rynaxypyr sold to our partners. However, we expect an increase in branded Cyazypyr sales. Looking ahead, our perspective on the Rynaxypyr business is twofold. First, we believe we can grow with new manufacturing costs. The market potential for Rynaxypyr as a standalone molecule formulation can be expanded, including applications like Dodhylex or high concentration mixtures with partners. We are confident that we can increase the acreage where we can compete and enhance the product's efficacy, enabling us to reach markets that will provide benefits for growers. We aim to tap into a much larger market starting this year and continuing predominantly in 2026, while still focusing on high-end formulations that offer advantages to growers. Regarding the changing landscape, it’s often the case that when patent protection is based on composition of matter, it remains strong globally. However, process-based patent protections may not be uniformly upheld across jurisdictions. With India and China beginning to sell products, even though we may take legal action and have a strong chance of winning, there are currently no injunctions in place. This lack of legal enforcement has emboldened competitors to expand their activities into other countries, as seen with their entry into Argentina and Turkey. It appears that as we approach the end of our process patent protection, companies are increasingly less concerned about potential legal repercussions, leading to a pace of expansion that is perhaps quicker than we anticipated.

Thank you and good afternoon. I want to come back to the price question. Pierre, you indicated that two-thirds of the price decline you're anticipating comes from the manufacturing contracts with your diamide partners. So if you could talk a little bit about the other third where you're seeing price declines in that area. But coming back to the diamide partners, am I to understand that as you improve your manufacturing process, that you are giving that back to the diamide partners? So as you spend money to improve your manufacturing for the restructuring costs, etc., that is flowing through in a lower price to the diamide partners? I mean, I certainly can understand if raw material costs come down and so forth that that would flow-through to your partners. But I was just struck that it sounded like it was also if you're making improvements and spending money to do so that you're giving some of that up. So any color there would be very helpful. Thank you.

Absolutely. The contract we have with our diamide partners varies, as not all of them follow the same cost structure. However, key diamide partners operate on a cost-plus model, which is indexed to our manufacturing costs. This is a commercial decision we've made, acknowledging that over time, these partners might choose between us and others who may offer more competitive prices. When discussing mid-term or long-term contracts with these partners, it's essential that they know their product source will remain competitive. In some instances, we don’t have a cost-plus contract, leading to annual or bi-annual commercial negotiations when renewing agreements with certain partners. We do have longer-term contracts in place as well. One advantage of these long-term contracts is that while partners provide us with extended agreements, we commit to optimizing prices, even if it involves us investing money to reduce costs. This is standard commercial practice to secure significant contracts with crucial partners over extended periods. In terms of the remaining price reduction, we believe it's largely due to normal market competitiveness, especially in Asia, where the competitive landscape is quite intense, particularly in India. So, it's not a straightforward two-thirds technical product sales to partners and one-third from Asia, but it's close to that.

Hi, good evening. I was hoping, Ronaldo, given your experience in Latin America, maybe you can give us a little bit more detail on the changes that you're seeing in the Latin America distribution channel. I know that your restructuring plan included some rightsizing of the organization in Brazil. And now it sounds like you're seeing a need to invest in new routes to markets or different ways to access that market. So can you help us understand what has changed in the market and also what has changed about your approach to the market in Latin America and your organization? Thank you.

Sure, Michael. A few years back, the retail distribution system underwent significant consolidation. Some consolidators began acquiring family-owned retailers, which were traditional and small-scale, covering limited areas. These platforms grew large and diversified geographically, expanding their networks. We've observed that the market share held by those original businesses with our products is different now under the consolidators. The market is changing, compliance requirements have shifted, and credit criteria are evolving. Consequently, more growers are now reaching out directly to companies, and conversely, companies are engaging directly with growers to establish those relationships. You might wonder why we didn't adapt to this trend earlier. The answer is straightforward; to engage directly with growers in the soybean and corn sectors, we needed specific technology tailored to their needs. We have that technology now. I mentioned fluindapyr as a key tool against Asia's soybean rust, and we also have revamped brands and new versions of our diamides. We are reaching out to growers with this new technology. The difference between our past efforts and our current investments lies in our organizational rightsizing to match market size. The new investments and hires are skilled in soybean and corn segments we previously did not target, focusing directly on growers rather than solely on retailers. Although our workforce has changed, with some employees let go and new ones brought in, the required skills, networks, and connections have evolved to support this new strategic phase. Importantly, we are now positioned to pursue this approach because we have the right technologies available.

Yes, thank you and good evening. Pierre, if I look at slide number eight, you're guiding to adjusted EBITDA that's either side of flat, and that is the case, notwithstanding what looks to be $175 million to $200 million of favorability on COGS. I think you have additional restructuring benefits flowing through as well? So my question would be, can you speak to some of the headwinds that would cause the flat EBITDA? I do see the foreign exchange that you quantified, or perhaps you could speak to the level of the incremental investments that you're making in SG&A to go direct in Latin America and other cost headwinds that would complete the bridge, so to speak.

Sure. I think I would say there are multiple ways to look at it, but there are three key headwinds. One is price with what we explained around the price we have to give back to our partners on diamide. So, price is overall $130 million, I think in the range of $130 million of headwind. And secondly, we do have FX, which is much beyond what we would have thought a few months ago, in the range of about $70 million. And we believe we're going to be investing in the first quarter about $25 million to create a new sales organization. So, you have here about $200 million to $250 million of headwind for the three main ones. Andrew, have I missed any, or those are the three biggest ones?

Yes, that's the biggest one. And obviously, we did forgo about $25 million in the profit we've made in the GSS business in the prior year that obviously we won't have this year.

That's a full thing.