FMC Corp (FMC) — Q1 2025 Earnings Call Transcript

Thank you. Good morning, everyone, and welcome to FMC Corporation's first quarter earnings call. Joining me are Pierre Brondeau, Chairman and Chief Executive Officer, Andrew Sandifer, Executive Vice President and Chief Financial Officer, and Ronaldo Pereira, President. Today, Pierre will review our first quarter performance and provide an outlook for the second quarter. He will also comment on our full year outlook for 2025. Andrew will provide an overview of select financial results. After our prepared remarks, we will take questions. Our earnings released in 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, free cash flow, and organic revenue growth, all of which are non-GAAP financial measures. Please note that, as used in today's discussion, CTPR means Chlorantraniliprole, 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 Pierre.

Thank you, Curt, and good morning, everyone. I have stressed that 2025 will be a pivotal year for the company, highlighting four critical focus areas, including decreasing the amount of FMC products in the channel to align with customer target inventory levels, implementing a post-patent strategy for the next year, establishing an additional route to market in Brazil by selling directly to large corn and soybean growers, and ensuring that a growth portfolio consisting of Rynaxypyr, the four new active ingredients, and Plant Health has appropriate resources in place to meet their targets. I would like to start by providing a brief update on the strong progress we made in these four areas during the first quarter. Prudent selling in Q1 supported the high focus on moving a product from the channel to the ground has allowed the company to approach appropriate levels of channel inventory in all regions, excluding Asia. While this stocking is nearly complete in most countries, we will maintain the same deliberate sales strategy that we had in Q1 during Q2 for countries where we have not yet reached targeted levels. This will put us in a strong position for the second half of the year. Our Rynaxypyr strategy has been implemented and is gaining momentum. Simply put, our strategy is to offer basic solo formulations of Rynaxypyr and the trusted FMC brand names at lower prices to compete with generic, while also providing higher value versions of the molecule through new, often patented, formulations and mixtures. Regarding a new product, we have already commercialized a new mixture for Rynaxypyr and Bifenthrin for pest spectrum enhancement, as well as a high-load product for ease of use and lower cost for the grower. During the second half of this year, we will launch the large effervescent granule, a tablet for rice application. This patented and innovative technology offers a concentrated effervescent formulation that disperses upon contact with water, is lightweight, and can be applied to handheld dispensers. Sales of this new generation product are expected to reach $200 million to $250 million in 2025. In addition, we're expecting three new mixtures in 2026 that will address resistance issues and broaden the spectrum of control. It is also worth noting that a large part of FMC sales have a strong level of protection against generic products as these sales are tied to high-value crops where substitution is more difficult and riskier for growers. These include tree nuts, fruits, and vegetables, which represent about 35% of FMC's total brand. Rynaxypyr sales account for as much as 60% of branded Rynaxypyr sales in North America. Our low-cost diamide manufacturing is now fully in place. This will allow us to protect existing applications, expand solar formulation to new markets, and become competitive for all applications in a global CTPR market that we expect will grow exponentially. The end result of our strategy is that we expect sales of Rynaxypyr to grow from 2025 to 2027 as volume increases more than offset price erosion, with resulting gross profit dollars remaining flat at 2025 levels. Our company’s three-year plan is not reliant on bottom-line growth of Rynaxypyr. Moving on, let me address a progress on FMC. Let me address a progress on establishing a new route to market in Brazil. We are capitalizing on our expanded product portfolio, including recently launched active ingredients to sell directly to large corn and soybean growers that we could not supply in the past. A new sales and text service organization is in place and will be fully operational in Q2, in time for Brazil's next growing season in September. Access to this new market is expected to provide a multi-hundred million dollar growth opportunity over time. To be very clear, nothing else will change in the business model for FMC Brazil. We will maintain our other current routes to market, including selling to co-ops and retailers, as well as selling directly to large sugarcane and cotton farms, as we have done in the past. Finally, regarding our growth portfolio, the three growth platforms are well positioned to deliver their full potential. Our new active ingredients are well on track. We expect strong growth of fluindapyr and isoflex in 2025, and have recently received registration for fluindapyr in Argentina. In addition, we were recently granted a first registration globally for Dodhylex, active under the brand name Keenali in Peru. In the case of Cyazypyr, while we expect data protection and registration processes to create barriers for generics to enter some markets until 2028 or 2029, we are already implementing a strategy for these products well in advance of potential generic entries. As it relates to Plant Health, with a recent registration of Sofero for pheromone in Brazil, we have received our first orders and anticipate initial sales of this product in Q3. While our three financial targets do not include any meaningful contribution from pheromones, this product could provide substantial sales and earnings in the future. The progress we made in these four areas will put us in a much stronger position to deliver growth in the second half of 2025 and into 2026 and 2027. Before we turn to our guidance, I will make a few more detailed comments on our first quarter results. Our Q1 results are detailed on Slide 3, 4, and 5. The first quarter unfolded mostly as we expected. Overall weather conditions were favorable and application rates were strong for FMC products, which advanced our channel destocking in most countries. Consistent with Q1 guidance, retailers and growers in the U.S. were slower to place orders in response to lower commodity prices, the perception of import supply, and uncertainty as a result of recent trade dynamics. Company sales declined 14% versus the prior year. Pricing was down 9%, with over half of the decline due to adjustments in certain cost-plus contracts for significant diamide partners to account for lower manufacturing costs. A strong U.S. dollar led to an FX headwind of 4%. Volume was down 1% versus the week prior year comparison, as prudent selling into the channel in many countries was mostly offset by volume growth in Latin America. Our Plant Health business outperformed the portfolio with sales up 1% versus the prior year driven by biologicals. Looking at regional results on Slide 5, North America performed as expected, with sales declining by 28%, mainly from lower volume as cautious processes from retailers and growers delayed restocking orders from distributor customers. Latin America grew 17%, excluding FX headwinds. On the surface, it appears counterintuitive that we grew volume in regions where we were actively seeking to lower channel inventory. Higher volume mostly came from increased direct sales to cotton growers in Brazil, which do not impact the channel inventory. It's also important to note that with a strong focus on grower consumption, product on the ground, or POG, as we refer to it, far outpaced our sales into the channel. Shifting to Asia, the region performed as expected, with a sales decline of 21%, excluding currency impacts, driven by intentional prudent selling and lower prices. Finally, in EMEA, we reported 7% lower sales, excluding currency impact due to lower volumes, largely from the expected loss of registration from triflusulfuron herbicide. Turning to Slide 6, our first quarter EBITDA declined 25% due to lower prices, FX headwinds, and reduced volume. Costs were a tailwind as favorability in COGS more than offset increased investment in SG&A and earnings. The increased spending in those areas helped establish the additional salesforce in Brazil and further support for our new product. Turning now to Slide 7, we provide our expectations for the second quarter. We are getting a revenue decline of 2% at the midpoint. Lower sales are expected to be driven by low to mid-single-digit declining prices and low single-digit FX headwinds. We are expecting only a limited volume increase as we intend to carry over a strategy from the first quarter of carefully managing sales into the channel in many countries while focusing on POG to set up for solid growth in the second half of the year. EBITDA is lower by 6% at the midpoint, with lower prices and an FX headwind partially offset by favorable costs and higher volume. Adjusted earnings per share is expected to be lower by 5% at the midpoint. On Slide 8, we provide our updated full-year guidance, which is unchanged from our prior record. Full-year sales are expected to be flat to the prior year at the midpoint as higher volume, mostly in the second half, offsets unfavorable prices and FX. Adjusted EBITDA is expected to grow 1% at the midpoint as favorable costs and higher volume are mostly offset by lower prices and an FX headwind. Adjusted earnings per share is expected to be flat to the prior year at the midpoint. Over the last few weeks, there has been a lot of focus on recently announced tariffs and the potential impact on our business. Slide 9 gives a brief overview of the tariffs in place or announced as of yesterday. These include the Section 301 tariffs implemented during the first Trump administration and the new tariffs announced under the International Emergency Economic Powers Act. Key to determining the magnitude of the impact of the recently announced tariffs is whether the product we import into the U.S. is eligible for exemption or duty drawback under the specific tariff in question. Exemptions allow companies like FMC to import without paying tariffs on specified materials that are not readily available from alternate sources. Duty drawback is a refund of import duties that were paid on materials that are later exported from the U.S. either in the same form or as part of a finished product. Exemptions and duty drawbacks are product-specific and not company-specific. Slide 10 lists the tariffs that are currently in place for FMC materials and whether there are opportunities for exemptions or duty drawbacks. It is important to avoid applying a blanket percentage to a total import volume as the real impact is much lower. For example, most materials falling under reciprocal tariffs are either exempt or eligible for duty drawback. After a detailed review of the materials we import into the U.S. and applying the rules currently proposed or in place, we estimate an incremental cost headwind of $15 million to $20 million. This was a rigorous bottom-up analysis, so we are confident in the estimated impact. As we conducted these calculations, applying the rules as we understand them today, which may evolve as trade negotiations between the United States and other countries progress, we will continue to monitor new developments and re-evaluate the potential impact on our business. As we understand them today, we do not expect tariffs to be a significant obstacle to reaching our full 2025 goal. We have flexibility in sourcing depending on how the situation continues to unfold. Further, we have improved cost favorability and additional volume opportunities that will offset the impact we currently anticipate for 2025. Nevertheless, as we become more certain about the longer-term tariff impact, we will adjust our pricing to cover those costs. Our guidance implies solid growth in the second half of the year. We expect revenue growth of 7% driven by higher volume from fluindapyr, isoflex, and biological, as well as by the newly established additional route to market in Brazil. With the actions we have taken in the first half of the year, we expect to enter the next growing season in Latin America without the destocking headwinds we faced over the last two seasons. However, we do expect headwinds from prices and FX. As you can see in Slide 11, we expect second half EBITDA growth of 11% as lower costs and higher volumes, primarily from new products and the new route to market in Brazil, are partially offset by lower prices and FX headwinds. Lower costs are expected to be driven by COGS favorability, including lower raw materials and improved fixed cost absorption. We are highly confident in our path to second half growth as it is driven by cost favorability, a large portion of which is already locked in, as well as sales of new products and the additional route to market, neither of which have channel inventory concerns. Additionally, we will benefit from the current selling strategy and our focus on POG in the first half. I will now turn it over to Andrew to cover details on cash flow and other items.

Thanks, Pierre. I'll start this morning with a review of some key income statement items. FX was a 4% headwind to revenue growth in the first quarter, largely driven by the Brazilian real and various European currencies, most significantly the Euro. For full year 2025, we continue to expect a low to mid-single-digit FX headwind to revenue, again driven primarily by the Brazilian real and various European currencies. Interest expense for the first quarter was $50.1 million, down over $11 million compared to the prior year period, driven by lower debt balances. For full year 2025, we continue to expect interest expense to be in the range of $210 million to $230 million, down roughly $15 million year-on-year at the midpoint, reflecting the benefit of debt reduction in 2024 and modestly lower interest rates in 2025. The effective tax rate on adjusted earnings was 14% in the first quarter, in line with our continued expectation of a full year effective tax rate of 13% to 15%. Moving next to the balance sheet and leverage, gross debt at March 31st was approximately $4 billion, up roughly $640 million from the prior quarter due to a normal seasonal working capital bill. Cash on hand decreased $42 million to $315 million, resulting in net debt of approximately $3.7 billion. Gross debt to trailing 12-month EBITDA was 4.6 times at the quarter end, while net debt to EBITDA was 4.3 times. Relative to our leverage covenant, which includes adjustments to both the numerator and denominator, leverage was 4.77 times as compared to a covenant limit of 5.25 times. As a reminder, our covenant leverage limit will remain at 5.25 times through September 30th and then step down to 5.0 times at year-end. We expect covenant leverage to return to approximately 3.7 times by year-end, essentially flat to the prior year. Moving on to free cash flow in Slide 11. Free cash flow in the first quarter was negative $596 million, $408 million lower than the prior year period. Cash from operations was down significantly, primarily due to lower inventory reduction compared to the prior year, while capital additions were somewhat higher, as anticipated. The negative cash from operations in the first quarter reflects a return to a more normal cadence of working capital, with a large build in the first part of the year, followed by a release in the second half. We continue to expect free cash flow of $200 million to $400 million for 2025, a decrease of $313 million at the midpoint. Cash from operations is the key driver of the decrease, with the normalization of working capital after the pronounced correction in 2024. Capital additions are also expected to be up somewhat, with a continued focus on only the most essential projects and capacity expansion for new products. Cash used by discontinued operations is also up slightly, but in line with our multiyear average. And with that, I'll hand the call back to Pierre.

Thank you, Andrew. The first quarter unfolded as expected, with all objectives reached. The first step of a company reset went as well as possible. We will need to do the same now in Q2. While the midpoint of our Q2 gains does not show overall growth, the financial targets are stronger than the first quarter, and we expect to see some volume improvement in the quarter. However, during the second quarter, we will continue to carefully manage sales into the channel, particularly in countries where FMC channel inventory remains elevated. By the end of the first half, we will have completed the most critical step of a reset, which will allow us to enter the second half of the year in a strong position. We expect to see significant momentum building during Q3 at the financial, operational, and strategic level, with the new FMC organization fully up and running. We expect to reach a financial objective this year with growth in the second half built on a strong foundation. We plan to be in a position at the Q3 earnings call to give an outlook for 2026 as a strategic and operational reset should be well advanced and provide us with greater clarity on next year's potential. With that, we are now ready to take your questions.

Good morning. Thank you, Pierre. Can you describe the price trends in the crop production market outside of diamide? Has the pricing bottomed? What would you expect from price going forward this year?

Yes, thanks, Aleksey. In terms of pricing, let me make two comments. One, specific to FMC pricing in Q1 and the way we see pricing going through the year. When we made our forecast pricing, we were forecasting a mid to high single-digit. We ended up in the high single digit. What we had in the forecast was the pricing to diamide partners we knew would be lower, and we also knew there would be a tough comparison to Q1 2024 where price was still very high. What was not in the forecast for us was stronger sales in Brazil, which we know is always a more competitive market. If I think about pricing for the year, pricing comparisons are going to ease as the year goes, and especially in the second half. For a very simple reason, if you remember, and especially true for FMC, we did the vast majority of price correction in the second half of Q2 and through Q3 and Q4. If you think about Q1 this year, besides the country mix, it is not that we took very specific pricing actions sequentially. It is just a year-on-year comparison, which is unfavorable, where we see more stability going into the rest of the year, especially in H2, with much better or much easier comparison versus 2024.

Hi. Good morning. You gave a bit of guidance about why you expect to have really strong growth in the second half of the year to make your numbers this year. It has historically been an extremely back-end-loaded second half. Can you maybe break down a bit more about why you have the confidence in your costs in the second half of the year? I know you have lags and you see things coming, and your new strategy in Brazil, and other initiatives you have. Just maybe give some more confidence to the street about why you can get this second half done.

Certainly. I think I would qualify the level of confidence in H2 as very high. Let me talk first about what you just said regarding revenues. The growth is mostly coming from new products, and new products demand we already know is very high, if anything. If we do not reach the number we are forecasting, it is because we are going to exceed it. There is a bias toward the higher end of our forecast. There is very solid demand already for Q2 for the new technology fluindapyr and isoflex. Secondly, we do have a new route to market which did not exist before. It is a brand-new market for us. The sales organization is in place. The contacts are being established. All lights are green. So, this new opportunity seems to be highly feasible. So, on the revenue front, because we are not forecasting growth due to market growth but more to specific FMC actions, we have quite a high level of confidence. On the price side, why do we believe we will be in a less challenging situation? There are two critical reasons. One is we will be operating following the actions we have taken in Q1, which were very robust around channel inventory, and we aim to continue those in Q2. We will be in a very healthy channel situation starting in Q3, which is positive for pricing. Secondly, we will face a very low comp versus 2024 by H2 because we achieved much of the price correction already. On the cost front, we have discussed our cost restructuring, but let me remind you of something which is already booked. It is mathematical. We have $50 million of absence of negative impact we had in 2024 coming from 2023 volume variance. This is an automatic $50 million growth at the EBITDA level in H2 2025. When you combine all of these factors, I think the probability of missing our targets is quite low because most of those factors are within our control.

Thank you, and good morning, everyone. Pierre, you have talked about the tariff impact of $15 million to $20 million headwind. So what exactly are you doing to offset that headwind? You said you will be able to do that, and the cost savings actions you have taken to offset some of that, would you have taken them regardless of the tariff impact you will see this year?

So, it is not actions we are taking because of tariffs. We always give a range in terms of how our cost-saving plans will unfold, and we are going to end up on the higher end of the cost savings. So, those cost savings are coming at the top end of what we are expecting. They are not anything special or additional we are doing to offset the current tariffs, but we were on the favorable side. Volume is similarly evolving. We believe that we have shifted somewhat from previous years in the way we look at the market. I think in previous years, there was a very, very high focus of the organization on selling into the channel and to retailers. We have directed a lot of our energy to get demand from the growers rather than the channel. By creating that demand and promoting a product to the growers, they then buy from the retailers, which creates more space in the channel for our product. This strategy might not be as strong in the quarters to come when most of the destocking is done, but it is still something we plan to keep in place as we organize our sales efforts. This approach allows us to create room for new products. So, that is why we are seeing some positive expectations for the second half, including new technologies for which we see increasing demand. So, nothing specific we are doing to address tariffs; those measures would have been in place regardless of the tariffs, but they will help offset the tariff impact.

Hi, this is Daniel Rizzo on for Laurence. Thanks for taking my question. I was just wondering, you mentioned reducing channel inventories. Does that involve giving significant rebates or discounting to customers? And do you have to sort of write off any of your own inventory?

Sorry, could you repeat the question, please? You broke up a little.

Sure. You talked about reducing channel inventories. I was wondering if that includes having to give significant rebates or discounts to customers or for future orders? What steps do you take to reduce the inventories in the channel?

Yes. So, it is very important you are asking me to clarify that. What we did is shift our sales organization’s activity to work with the end users of a product, the growers. By doing this, we promote our product, explain our product, and demonstrate the capability of our portfolio, thus creating demand from the growers for the retailers. We do not need to act on price or provide rebates because we do not intervene in this process. Instead, we create demand from the growers, pooling the product from retailers, but the sale, the financial transaction is between the grower and the retailer. Our focus is on promoting a product at the grower level, which creates more product availability on the ground. We have been replenishing those products very carefully to avoid rebuilding inventory.

Great. Thank you so much for the question. Can you talk a little bit more about the diamide strategy and any updates you may have there? And I would specifically like to focus on your confidence on the growth run rate coming off patent, especially with some of the charts that you shared with us last quarter, as well as your ability to further reduce your cost structure and your openness to manufacturing with any of their partners. Thank you so much.

Let me start with the back end of your question in terms of pricing. Our pricing right now is lower compared to last year and is firmly in place, and we are continuing to lower costs. I do believe that by the end of this year, if not before, we will achieve cost parity with the high-end generic manufacturers. At this point, this allows us to develop a strategy to protect and grow our unique molecule because this market will grow exponentially with Rynaxypyr taking over other insecticides. This piece to reduce manufacturing costs is in place, improving, and will place us at parity with generic manufacturers. The solo strategy in terms of growth will benefit from this cost reduction, and we will lower our prices and compensate that by much higher volumes. At the same time, the new products we are introducing for ease of use, broader spectrum, or resistance, which is becoming a more significant issue, are being developed, and some are already on the market. To give you a sense of how quickly our high-end growers are willing to switch to the three products I mentioned, out of the $600 million of branded Rynaxypyr we expect to sell this year, we anticipate that $200 million to $250 million will be from new Rynaxypyr mixtures, with the high-load and the tablets being a small portion as they will be introduced towards the year-end. That reflects the speed at which we can replace older technology with new technology. There is nothing in front of us indicating that the Rynaxypyr strategy we outlined to grow volume, offset lower prices with reduced manufacturing costs, and introduce new products will not work. I want to emphasize that our three-year plan does not expect growth in earnings from Rynaxypyr.

Only the velocity of adoption of Rynaxypyr that we're seeing with the new formulations, as you highlighted, is increasing in some markets as we evolve on our strategy. It's becoming very clear that there is a lot of elasticity there. As we adjust our prices, we're seeing that volume adoption, especially among customers who did not use Chlorantraniliprole before.

Yes, good morning. Thank you very much for taking my question. I just wanted to follow up a little bit on some of the outlook pieces in terms of your strategy as it relates to the tariffs. And by the way, thank you very much for all the clarification you've already given and some of the estimates here. Can you help us understand a little bit more as to the alternatives, considering that this could be a longer-lasting issue? How could we think about alternative sourcing for some of the raw materials that are significantly impacted? You quantified it already at close to $20 million for this year, but if we were to move into 2026, is there any opportunity to find alternative sources for some of these raw materials, and what would the cost of that be?

Benjamin, it's Andrew. I'll take this one. It's a great question. Certainly, part of how we're limiting the impact in 2025 and will continue to limit it in 2026 is that we have built a great deal of flexibility into our supply chain with multiple sources for all our critical raw materials. This is something that we learned before COVID and perfected during COVID, including doing a lot of heavy lifting to include those sources in our registrations in all our key markets to allow us to switch sources of production. Certainly, when we think about the tariff impact, while we focus a lot on China, tariffs also affect sourcing from the United Kingdom, Mexico, India, and others, but we have the ability to shift some production around to help limit the impacts of tariffs as they become more certain. I think we have high confidence in our outlook for 2025, in part because, sitting here on May 1st, we turn inventory about twice a year, so we purchased the material that will cover us largely well into the fourth quarter. We have high visibility into the costs we have and the tariff impacts that are sitting in our inventory or will sit in inventory during that time period. As we look to 2026, we will continue to evaluate the balance of different sources and will keep an eye on how tariffs evolve. The government has indicated that they intend to negotiate trade deals with various countries. Our hope is that these negotiations result in more clarity and lower than currently published tariff rates for many of those countries, which will help reduce those tariff headwinds. Finally, beyond sourcing, we will closely monitor how these tariffs develop, and as they become more certain, we will have to adjust prices to offset tariffs. We did that with the earlier Trump administration tariffs, which became part of our ongoing cost structure. We need more certainty on trade deals to implement that pricing at the right moments, and while we have cost savings and some extra volume within the ranges we initially guided, we will need to adjust pricing to absorb tariff headwinds in 2026.

Good morning. This is indiscernible filling in for Patrick. Can you provide more insights into what you're hearing from customers regarding order patterns? It appears that North American volumes were significantly affected by cautious customer behavior, so I would like to know what your expectations are for the full year. Thank you.

You broke up a little. I think you asked... Could you repeat your question? Because we couldn't hear you.

Can you share more about the customer order patterns? 1Q North American volumes were impacted pretty heavily by the cautious customer behavior, as you called it, so curious to see for a full year.

It depends on the regions. Generally speaking, customers today tend to buy a bit closer to planting time. The movement from wholesalers to retailers to growers in the U.S doesn't mean that the total number by the end of the season will not be the same, but the speed at which it's happening has slowed in Q1. In Q2, things seem to be picking up. I think demand is present. As I said, Q2 is a prudent estimate. We are still highly focused on our inventory, but there is a much more positive dynamic. For example, in Europe, today, one month into the quarter, we already have 51% of the orders we need for the quarter, which indicates a much faster purchasing pace than we've seen in a long time and compared to the first quarter. So the order patterns are cautious, but let’s not forget that we committed to getting back to a normal inventory situation in the middle of the year, which is very specific to FMC. However, yes, things were slow from speed, not quantity, and it seems to be picking up speed in Q2.

Thank you, and good morning, everyone. I'm wondering if you can just help us understand or maybe compare and contrast the difference between selling directly to the farmer and selling through the channel. I guess I'm trying to think through the line items: Are the ASPs different? Obviously, the COGs are the same, but maybe SG&A is higher or lower. I don't know if you'd want to pay the channel. And do the terms in terms of cash conversion, are they better? Are they worse? Are they about the same? Just maybe help us understand how that's going to play out.

I'll let Andrew add more comments. First, cash conversion is more tied to the regions of the world where you operate rather than the customer to whom you are selling. From a fundamental EBIT margin on the product, it's about the same if you sell direct or if you sell through the retail system. There is not a significant difference in the profit you will get. Those are parallel channels, but the economics are similar. Andrew or Ronaldo, do you want to add to that?

No, the net contribution is very similar. Those growers are larger than average growers, and they tend to buy at a discounted rate compared to the average of the market. If you consider that, our net price to them is comparable to the net price that we have on average in those countries. So it's not a meaningful difference. It does require, as we mentioned in prior quarters, dedicated people. So there is an SG&A component there, but it's not dissimilar to the SG&A we would need to serve additional customers in the traditional model. The terms are similar. They are mostly crop-based terms, so there's no disconnection.

Good morning. This is Lucas Beaumont on for Josh. I just wanted to ask about the second half EBITDA Bridge on Slide 11. There's a $100 million headwind on there from price and FX. It looks like it's likely down $40 million to $50 million on sales in the second half with a similar impact to EBITDA. FX looks like it's probably going to be flat now on sales with 3Q down and 4Q potentially positive where the current rates are. So could you please help us understand where that other $50 million from the headwind is coming from in the second half? Does that imply that your price assumption is more like down $100 million, or is there hedging in place on the FX side that's offsetting that? I'd just like to understand your assumptions there, please. Thanks.

Hey, Lucas, this is Andrew. I'll try to help you here. We're intentionally not guiding quarters for the second half. It's too early for that. The reason we showed price and FX together is because, in many markets, there's an interconnection between FX movements and local prices. We see that a lot, particularly in European markets. Certainly, we've guided for the full year that we expect a low to mid-single-digit headwind at revenue from price, and a similar kind of headwind in Q2. We had a higher headwind in the first quarter. Basic math would suggest a little less headwind in the second half than that low to mid-single-digit guidance. On the FX side historically, the FX drop from revenue headwind to EBITDA has been about 50% for us. With the way currencies are currently moving and what forward rates indicate, that drop-through is expected to be a bit heavier this year. So, you should view the drop-through on FX being somewhat higher. While I can't provide precise figures, I think it is reasonable to assume that pricing in the second half will represent slightly less than a low to mid-single-digit headwind.

Thank you for saving the best for last. I really appreciate the confidence on the second half EBITDA uplift. The conversation about the new products seems relatively straightforward and seems like you have a good line of sight there. I wanted to focus on the new route to market in Brazil. A couple of things. One is how much did that negatively impact the first quarter results, and what are your expectations in terms of that being a drain? When do you think that flips to being a positive? Pierre, you sounded upbeat about the ability this year, so the second half of 2025, to really penetrate the large corn and soybean farmers. If you could give any more color on that, that would be very helpful since this is, as you indicated, a new route to market. Thank you.

Sure. I'm going to let Ronaldo address this question more precisely. The negative impact in Q1 this year was mostly due to S&R costs, because we've been hiring a significant number of people to do two things in Brazil. First, to accelerate sales into co-ops by increasing product on the ground with our final growers. Secondly, to create a sales force for this new market that we have finally gained the capacity to penetrate after decades of not being able to or entitled to penetrate. The organization is ready. The people have been hired. The people have been trained. The contacts are being taken. I'll let Ronaldo talk about the confidence of realizing those new sales when the season starts in Brazil.

Very high, Frank. As Pierre just pointed out, the organization is already in place. They've been trained, and they have already been assigned territories and specific customers to cover. As you may remember, we said in that earnings call that what enabled us to do this now is the new technologies we're bringing to the market. That combination of more people, more presence, and new technologies for which we have very high confidence is what brings us optimism. You asked when it turns positive? We will begin invoicing for soybean and corn in the later part of Q2 and into Q3, primarily in Q3. So that is when we expect this to become positive, and honestly, I have no doubt that it will be positive in 2025.

Yes. I want to reiterate my very high confidence in H2. I know the numbers seem large compared to Q1 and Q2, but it's a deliberate strategy. I am pleased with how Q1 unfolded. We met all our objectives. We will carry that momentum forward, perhaps to a smaller extent in Q2 since we accomplished much of the work in Q1. We will start Q3 with a very clean channel. We have identified two sources of revenue growth with minimal market expectations, but with us making strides. The pricing will be soft in comparison to last year’s performance. The EBITDA growth I mentioned is also backed by a substantial portion that is already accounted for, so while those numbers seem substantial, it is not as big of a stretch as they might appear.