Good morning and welcome to the first quarter 2022 earnings call for FMC Corporation. This event is being recorded and all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s prepared remarks, there will be an opportunity to ask questions. To be placed in the Q&A queue, please press the star key then one at any time. If you are using a speakerphone, please pick up your handset before pressing these keys. I would now like to turn the conference over to Mr. Zack Zaki, Director of Investor Relations for FMC Corporation. Please go ahead.

Thank you and good morning everyone. Welcome to FMC Corporation’s first quarter earnings call. Joining me today are Mark Douglas, President and Chief Executive Officer, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Mark will review our first quarter performance as well as provide an outlook for the second quarter and implied first half expectations. He will also provide an update to our full-year outlook and implied second half expectations. Andrew will provide an overview of select financial results. Following the prepared remarks, we will take questions. Our earnings release and today’s slide presentation are available on our website and the prepared remarks from today’s discussion will be made available after the call. Let me remind you that today’s presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to the 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, adjusted cash from operations, free cash flow, and organic revenue growth, all of which are non-GAAP financial measures. Please note that as used in today’s discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA. A reconciliation and definitions of these terms, as well as other non-GAAP financial terms to which we may refer to in today’s conference call are provided on our website. With that, I will now turn the call over to Mark.

Thank you Zack, and good morning everyone. Before I move into details on our results, I’d like to take a moment to provide an update on FMC’s position related to the war in Ukraine. In mid-April, we announced the decision to discontinue our operations in Russia and exit the country completely, making FMC the first crop input provider to exit Russia. We could not ignore increasing reports of potential war crimes, human rights abuses and other atrocities committed in Ukraine. Our values as a company do not allow FMC to operate and grow our business in Russia. Furthermore, as the war continued and new sanctions and counter-sanctions were levied, FMC’s ability to conduct business in Russia had become unsustainable. Our cross-functional team continues to navigate the extraordinary logistics and supply chain challenges in Ukraine and other parts of Eastern Europe. FMC and our employees raised nearly $300,000 for charities supporting the Ukrainian people and families in need. Our hearts and thoughts remain with all Ukrainians and especially our FMC colleagues and their families. Turning to FMC’s performance in Q1, we delivered strong results driven by robust volumes and solid pricing actions across all regions. We grew our revenue by 16% organically, EBITDA by 16%, EPS by 23%, and importantly expanded our EBITDA margins by approximately 60 basis points while confronting a variety of supply and cost challenges as well as increasing currency headwinds. With disruptions impacting several agricultural inputs, we believe some of our Q1 sales were accelerated from Q2 as customers looked to secure supply in advance. Given this context, our guidance for Q2 combined with Q1 actuals implies 11% revenue growth and 8% EBITDA growth for the first half of the year compared to the first half of 2021, which is much more front-loaded than prior years. Latin America and North America contributed greatly to our success in the quarter, supported by elevated commodity prices, acreage increases, and historically low stock-to-use ratios for several crops. Sales from products launched in the past five years increased by more than 50% in the quarter compared to the same period last year, demonstrating the strength of our technology pipeline and product portfolio. The global plant health business also continued its growth trajectory with biologicals growing 15% year-over-year. Last year, we announced our goal to achieve net zero greenhouse gas emissions by 2035. We recently achieved the first milestone towards that goal by submitting 2030 emissions reductions targets to the Science Based Targets Initiative. These targets include a 42% absolute reduction in direct emissions from FMC’s own sources and indirect emissions from purchased electricity, steam, heating and cooling, also known as Scopes 1 and 2, as well as a 25% absolute reduction in all indirect emissions that occur in the value chain, otherwise known as Scope 3 emissions. An incredible amount of rigor went into developing these targets with our sustainability team conducting an exhaustive review of all factors contributing to FMC’s greenhouse gas emissions and quantifying those emissions across the entire value chain. We will publish our 11th annual sustainability report in the coming weeks, and we look forward to speaking more on this topic in upcoming calls. Turning to Slide 3 for our Q1 results and keeping in mind my earlier comment about shifts within the first half, we reported $1.35 billion in first quarter revenue, which reflects a 13% increase on a reported basis and 16% organic growth. We had double-digit growth in all product categories with fungicide showing the greatest growth year-over-year at 20%. Biologicals grew 15%, continuing the momentum of our plant health business. Regional growth was driven by strong volume gains in North America and Latin America as well as high single-digit price increases in all four regions. FX was a headwind to top line growth in EMEA. Adjusted EBITDA was $355 million, an increase of 16% compared to the prior year period and $30 million above the midpoint of our guidance range. EBITDA margins were 26.3%, an increase of 60 basis points compared to the prior year period. Cost inflation continued to be a challenge and at a higher rate than anticipated, so we moved prices more aggressively in all regions to offset these increasing headwinds. We have also been active in managing our SG&A costs, some of which shifted from Q1 into Q2. FX was a headwind to EBITDA. Adjusted earnings were $1.88 per diluted share, an increase of 23% versus Q1 2021 and $0.18 above the midpoint of our guidance range. The year-over-year increase was primarily driven by an increase in EBITDA with the benefit from lower share counts and lower interest expenses largely offset by higher minority interest and taxes. Moving now to Slide 4, Q1 revenue increased by 13% versus prior year, driven by an 8% volume increase and an 8% pricing gain. Foreign currencies were a headwind of 3% in the quarter on the top line. In North America, strong commodity prices supported robust demand for inputs. Sales increased 30% year-over-year with broad-based growth across all indications and for a variety of crops, such as tree fruits, nuts, vines, corn, and soy. In the U.S., we grew with Rynaxypyr brands such as Vantacor and Altacor in fruits and vegetables. Xyway, our unique in-furrow fungicide, continues to gain significant momentum while providing season-long protection for corn from foliar diseases. Sales of biologicals almost doubled in the U.S., led by Ethos XB for corn and soybeans. Ethos XB is a unique combination of a synthetic insecticide for seedling insect protection with biological microorganisms that have fungicidal properties. Our Canadian business had a record quarter driven by lower channel inventory of insecticides and strength in cereal herbicides. We also successfully launched Coragen MaX, which is the new higher concentration formulation of Rynaxypyr active, targeting pests on corn, dry beans, and several other crops. Other 30% of FMC’s branded sales in North America this quarter came from products which were launched in the last five years. Moving now to Latin America, sales increased 31% year-over-year led by Brazil and Argentina, driven by volume and price increases as well as a 6% FX tailwind driven by the Brazilian real. Colombia, Peru, and Ecuador also grew double digits in the quarter. In Brazil, we grew our herbicide brands, Aurora and Gamit on soy, corn, sugarcane, and coffee. We also grew our insecticide brands, Talisman, Hero, and Coragen on soy, corn, and cotton. FMC continues to reap the benefits of a strategy to improve market access and increase penetration of our technologies in the Brazilian soybean market. Sales in EMEA grew 11% versus the prior year, excluding currency headwinds. Results were driven by strong price increases across the region as well as demand for Rynaxypyr-based brands, Coragen and Altacor for corn, and herbicide brands, Express and Pointer for sunflowers. Registration losses and product rationalizations were largely offset by new product launches in the quarter. Over 10% of branded sales in the quarter came from products launched in the last five years. FX was a significant headwind in the quarter, resulting in flat year-over-year revenue growth. Sales in Asia were up 2% versus the first quarter last year and up 5% organically. The increase was driven by pricing actions and strong performance in Australia and ASEAN countries, offset mainly by a reduction in Indian rice acres. Approximately 15% of branded sales in the quarter came from products launched in the last five years. Turning now to first quarter EBITDA on Slide 5, EBITDA was up 16% year-over-year driven by pricing and volume gains which were partially offset by cost and FX headwinds. Price was up $94 million in the quarter with high single-digit increases implemented in all four regions. It is important to note that our pricing actions were taken to offset the sustained cost inflation we’re experiencing across our supply chain. Raw material, energy, logistics, packaging, and labor costs remained elevated and contributed to the $62 million cost headwind in the quarter. FX was a $16 million headwind in the quarter with weakening European currencies. Overall, EBITDA margins expanded 60 basis points in the quarter. Before I review FMC’s full-year 2022 and Q2 earnings outlook, let me share our view of the overall market conditions. We continue to expect the global crop protection market will be up low to mid-single digit percent on a U.S. dollar basis. Breaking this down by region, we expect Latin America, North America, and Asia to be up mid-single digits while EMEA is now expected to be down low single digits. The war in Ukraine may further reduce market growth in the EMEA region. Commodity prices for many of the major crops remain elevated and stock-to-use ratios are near historic lows, creating a favorable backdrop for crop protection products. FX is projected to be a headwind for EMEA and Asia markets on a U.S. dollar basis. Turning to Slide 6 and the review of FMC’s full-year 2022 and Q2 earnings outlook, despite the volatile supply and geopolitical environment, we remain confident in our ability to deliver solid growth in 2022. FMC’s full-year revenue is forecasted to be in the range of $5.25 billion to $5.55 billion, representing an increase of 7% at the midpoint versus 2021 driven by volume and price growth in all regions, partially offset by currency headwinds. Full-year adjusted EBITDA is expected to be in the range of $1.32 billion to $1.48 billion, representing 6% year-over-year growth at the midpoint. This will be achieved through pricing actions and strong volumes; however, rising costs and supply disruptions will continue to be significant headwinds to EBITDA. 2022 adjusted earnings per share are expected to be in the range of $6.70 to $8 per diluted share, representing an increase of 6% year-over-year at the midpoint. Consistent with past practice, we do not factor in any benefit from future share repurchases in our EPS guidance. Discontinuing our Russia business does not change our full-year earnings expectation at this time and it will take some time for us to assess the full financial implications of our exit. For reference, however, our Russian operations made up approximately 1.5% of global sales in 2021. Guidance for Q2 takes into account the shift of some sales from Q2 into Q1 as customers across many countries placed orders in advance to secure supplies during these uncertain times. Given the current industry dynamics, it is possible we will see the same phenomena occur with future orders moving into Q2. Q2 guidance implies sales growth of 9% at the midpoint, EBITDA growth of 1% at the midpoint, and EPS growth of 2% at the midpoint year-over-year. Turning to Slide 7 and the updated range of 2022 EBITDA outcomes, the market backdrop is supportive with FX limiting crop protection growth to low to mid-single digits. Pricing actions and strong market demand have offset quickly rising costs so far; however, volatility persists due to renewed COVID-related shutdowns in China, energy cost inflation in Europe, and ongoing disruption of global supply chains and logistics. FMC continues to deliver products to our customers in a timely manner despite these disruptions, but reliable supply is coming at an increased cost. We do not expect to see any cost relief through the remainder of 2022. EMEA and Asia have experienced FX headwinds only partially offset by the positive currency impact in Brazil. In addition, our decision to exit the Russian market and the impact of the war in Ukraine are new considerations. Turning to Slide 8 and full-year revenue and EBITDA drivers, strong volume expansion and price increases across all regions will drive revenue growth. FX volatility is expected to be a negative factor on our full-year revenue outlook. In terms of crop mix, we expect roughly half our sales to come from specialty crops such as fruits and vegetables, sugar, rice, and cotton. Almost 40% of our sales are expected to come from corn, soy, and cereals such as wheat. FMC’s crop diversity is a long-term competitive advantage since we’re not over-indexed to any single commodity. Our EBITDA guidance reflects strong demand for our existing portfolio and new products as well as mid-single-digit price increases. These benefits to EBITDA are partially offset by substantial cost headwinds as well as investments in SG&A and R&D. Moving to Slide 9 and Q2 drivers, on the revenue line, volume growth is expected to continue along with price increases in all regions that will start to lap some of the increases taken last year. We are anticipating FX headwinds to continue principally from European and Asian currencies. We also expect to see impacts from our decision to exit Russia beginning in the second quarter. For EBITDA, positive drivers include volume, especially for new products and pricing actions. The benefit from these drivers will be largely offset by elevated raw material, packaging, and logistics costs, as well as some SG&A costs that shifted from Q1 into Q2. FX-related headwinds are also expected to persist, especially in EMEA. Turning to Slide 10, with the guidance for Q2 and the full year on record, we would like to also show the implied forecast for the two halves. Revenue forecast for the first half of 2022 indicates 11% growth over the first half of ’21. Implied revenue forecast for the second half of 2022 indicates 4% growth over the prior year period. This is consistent with the stronger pricing actions and significant volume gains achieved in the second half of last year, especially in the fourth quarter of 2021. EBITDA forecast for the first half of 2022 indicates 8% growth over the prior year period, driven by strong demand and pricing actions, offset by cost and FX headwinds. Our guidance also implies 4% year-over-year EBITDA growth in the second half of the year. This results in a more front-weighted outlook for EBITDA growth compared to last year. I’ll now turn the call over to Andrew.

Thanks Mark. I’ll start this morning with a review of some key income statement items. FX was a headwind to revenue growth in the first quarter, as expected, driven by weakness in European currencies, particularly the Turkish lira and euro. The Brazilian real was a tailwind in the quarter offsetting modest weakness in several Asian currencies. We continue to anticipate FX headwinds for the remainder of ’22 as the U.S. dollar is expected to appreciate against many currencies of importance to FMC. Interest expense for the first quarter was $29.9 million, down $2.5 million versus the prior year period primarily due to the refinancing activity completed in the fourth quarter of last year. For full year 2022, we now expect interest expense to be in the range of $125 million to $145 million, an increase of $10 million at the midpoint compared to our prior guidance, driven by more rapid increases in U.S. interest rates than previously anticipated. Our effective tax rate on adjusted earnings for the first quarter was 14%, in line with our continued expectation for a full year tax rate in the range of 13% to 15%. Moving next to the balance sheet and liquidity, gross debt at quarter end was $3.8 billion, up roughly $600 million from year end. Gross debt to trailing 12-month EBITDA was 2.7 times at the end of the first quarter, while net debt to EBITDA was 2.5 times. Both metrics are slightly above our targeted full year average leverage levels as expected, given the seasonal build of our working capital. We continue to expect to maintain full year average leverage in our targeted 2.4 to 2.5 times gross, or 2.3 to 2.4 times net ranges. Moving onto cash flow on Slide 11, first quarter free cash flow of negative $664 million was in line with our expectations for this point in the year and reflects the strong seasonality of our working capital. Adjusted cash from operations was down more than $300 million compared to the prior year, driven by higher working capital partially offset by improvements in non-working capital items. Strong sales growth, higher application of customer prepayments, and lower payables were key drivers in increased cash consumption from working capital. Capital additions and other investing activities of $55 million were up $16 million compared to the prior year as we continue to increase spending to catch up on deferred projects and to invest in our growth. Legacy and transformation spending was down primarily due to the absence of spending on our SAP program, which was completed last year. For full year 2022, we continue to forecast free cash flow of $515 million to $735 million. Adjusted cash from operations is flat to the prior year at the high end of our guidance range, limited by working capital growth. Capacity increases especially to support our new products that are seeing rapid growth will drive higher capital additions. We continue to expect legacy and transformation to be a tailwind with somewhat lower legacy spending and minimal transformation expense expected in 2022. With this guidance, we anticipate free cash flow conversion from earnings of 67% at the midpoint. Our capital allocation priorities remain: first, fully funding organic growth and pursuing inorganic growth through technology and market access M&A, then returning excess cash to shareholders through our growing dividend and share repurchases. We continue to anticipate strongly rewarding shareholders in 2022 with dividends of around $270 million and share repurchases of $500 million to $600 million. We paid dividends of $67 million during the quarter. Given our cash flow and leverage, we did not repurchase any shares in the first quarter. With that, I’ll hand the call back to Mark.

Thank you Andrew. Our first quarter performance in combination with the guidance for Q2 reflects FMC’s ability to mitigate cost increases through pricing actions and to fulfill robust demand and the challenging supply conditions. Our new product introductions continue to gain momentum with over 30% of expected full year revenue growth coming from products introduced in the last five years. Our global plant health business continues its impressive growth trajectory led by biologicals. 2022 is proving to be one of the most challenging years, even considering all we’ve had to manage since 2019. Our continued success stems from our strong customer focus, the way FMC’s cross-functional teams are overcoming headwinds, and finally the strength of our robust technology and new product pipeline. All these attributes will serve us well through the remainder of the year. I’ll now turn the call back to the operator for questions.

Our first question today is from Vincent Andrews at Morgan Stanley. Please go ahead, Vincent.

Thank you very much. Mark and Andrew, the 8% pricing in the quarter in all regions was extremely strong - it was almost twice what we’d been anticipating, and I think it compares versus 4% in the fourth quarter. What did you do differently in this quarter, if anything, to get that strong pricing achievement so quickly, and if you could also comment whether there’s any mix in that 8% number or just what mix would be in general.

Yes, Vincent, thank you. Our pricing reflects actual market invoices based on volume. We've clearly communicated our strategy throughout the latter half of last year. We began implementing price increases in North America in Q2, and rolled them out in other regions as the year progressed. This is evident in our results, showing a continuous uptick in pricing. In Q4, we realized that our costs would exceed our initial forecasts for 2022. We decided to raise prices not just in markets where we were active, but to prepare for other regions as well. Our approach was comprehensive, with FMC pushing price increases in almost every country in anticipation of rising costs, which was reflected in the quarter where our pricing outpaced costs. However, this may not be the case in every quarter moving forward. We previously indicated that we expect our pricing to counterbalance the impact of inflation and availability on costs throughout the year, and we still stand by that statement. Our results indicate that our pricing has exceeded our expectations due to ongoing supply disruptions and general cost increases. We recognize the necessity of addressing costs, and our commercial teams are actively engaged in the market. If cost disruptions persist, we will continue adjusting our prices accordingly. This is crucial for FMC and the industry as a whole. The situation does not appear to be improving. I believe we have not yet fully felt the repercussions of COVID in China, especially with the ongoing lockdowns. The supply chain challenges in China are significant, perhaps worsening again. What concerns me further is the logistics from China, as substantial freight remains stuck at key ports. The number of ships stranded outside of China indicates that further challenges are forthcoming, so we are proactively preparing for that. We believe that focusing on pricing is the right approach. Furthermore, we are also actively managing our internal costs, which we referenced during the call. We have successfully reduced SG&A through various measures, some of which will carry over into Q2. Looking at the first half, it has been very strong overall.

Thank you so much.

Our next question comes from Laurent Favre from BNP Paribas. Please go ahead, Laurent.

Hi, good morning, and thanks for taking my question. Mark, it’s really related to your market assessment, and I was wondering if you could talk a little bit about, I guess, volumes including mix, so really intensity of use. Are there reasons why you would not expect a higher intensity of use, more spraying, but also can you talk maybe about the risk of downgrading with farmers being so squeezed on all sorts of input costs, including fertilizers. Thank you.

Thank you, Laurent. When we assess the current market, we see a favorable environment. Soft commodity prices are elevated, and stock-to-use ratios are very low, reaching near 10-year lows in some cases. As many regions enter their planting seasons, we anticipate they will plant as much as possible. To achieve optimal yield, the best products should be used. It's often misunderstood that pricing is not necessarily indicative of value. Generics compete on price, while we focus on value, meaning the use of our products leads to greater productivity and yield improvements compared to alternatives, which has held true across multiple cycles. Reflecting on 2008 and 2009, the agricultural sector thrived because growers aimed for maximum yields and opted for superior technologies. This trend is evident in the demand for our products. Our forecast includes $600 million in revenue this year from products introduced within the last five years, indicating that these newer products are the most effective for achieving yield. Currently, we do not see a reduction in spraying; we expect applications to proceed as usual. If there is insect pressure, farmers face a critical choice: eliminate the insects or risk losing their crop. This decision greatly influences product usage. The market conditions are favorable, and we believe this trend will persist at least through this year and likely into the next. We do not foresee any changes that would affect this outlook, so our focus is on delivering high-quality new technologies to the market in a timely manner, considering the ongoing disruptions.

Thank you. As a follow-up on pricing, you mentioned you’re lapping some increases from last year in the quarter, but last year in Q2 I think your pricing at the group level was flat as it was in Q1 last year, so I was wondering maybe you could talk about specific areas, either geographically or in terms of product categories, where we should expect this slowdown in pricing into Q2?

Yes, in the U.S. we started to raise prices last year in Q2, so it should be a little more muted as we go through Q2 and then certainly into Q3 and into Q4. Latin America is not really an impact in Q2, a small amount, but you’ll see that much more in Q3, certainly in Q4. Really, I would focus on North America in Q2 on price; everywhere else will be catching up as we lap ourselves in Q3 and Q4.

Thank you.

Our next question comes from the line of Josh Spector from UBS. Josh, please go ahead.

Yes, thanks for taking my question. Just on the comments about China and the logistics and supply risk, wondering how you’re thinking about the potential risk this time versus a couple of years ago and perhaps what’s changed to maybe limit the volume impact on your side or mitigate some of the cost pressure.

Yes, thanks Josh. Listen, the playbook is pretty similar for us. Procurement and supply chain work hand-in-hand basically on a daily basis to understand the flow of goods, and you have to remember, you obviously read about the major lockdown in Shanghai, but I believe something like 330 million people are in lockdown all over the country and that’s changing day to day, so we’re navigating day to day movement of goods from one facility to another or movement of goods to ports and out of the country. That’s not dissimilar to what we’ve been doing over the last two to three years in China. We are seeing more congestion at the ports given just the amount of lockdowns, so it’s a case of not just manufacturing the products in China or getting the mediates or fine chemicals, but then getting the product out of China. That’s where we’re keeping a very close eye on what is happening with logistics. We’re using different ports to traditional ports that we would use. We are using more air freight to get product out in time. I don’t think it’s anything what I would call different to what we’ve managed over the last two or three years, but the intensity is certainly higher than it has been as we have gone through Q4 and into Q1.

Okay, thank you.

Our next question is from PJ Juvekar from Citi. PJ, please go ahead.

Hi, this is Patrick coming in for PJ, and I appreciate the opportunity to ask my question. I have a question regarding diamides.

PJ, please confirm your line is not muted.

Hello, can you hear me?

Unfortunately we can’t hear anything from your line, so we will have to move to the next question. The next question comes from Joel Jackson from BMO Capital Markets. Joel, please go ahead.

Hi, good morning. Mark, I don’t want to put words in your mouth, but last quarter we talked about Slide 7, which is your upside and downside scenarios and would you think that you’re leaning more to the upside or the downside. I think you said leaning more to the upside. What I see now on the upside is to get to the upside scenario at $1.4 billion, you need to have higher price increases than what you would have thought a few months ago. Can you maybe talk about that a little bit?

Yes, sure Joel. Listen, we’re anchored on $1.4 billion of EBITDA for a reason - it is the highest probability we see for the results for this year. It is a range that we’ve put in place and it’s there deliberately. The world is not simple right now and I think everybody knows that, but certainly when we were together on the February call, we had this view and we haven’t really changed it. In fact, if anything, with the Ukraine war situation, it has probably got worse from that perspective, plus the COVID-19 lockdowns in China are worse than they were before, so you can see rationally why we kept the range wide. It doesn’t mean to say that we’re still not anchored on the $1.4 billion - we are. You’re right - if things were to move to the upper end of this range, we would have to see a better mix, even more pricing than we’ve got today, and costs perhaps mitigating themselves with less FX impact. That’s a lower probability than where we are at $1.4 billion. Also equally is a lower probability of the $1.32 billion at the low end of the range, and we have to believe that things would get so severe that we couldn’t offset that by a price or that the market demand weakens because of significant weather issues in regions. I think the upper end is a low probability but so is the low end - that’s why we’re anchored on that $1.4 billion at the middle. When you see what we put there around the market growth, the strong demand, they’re all relevant. We are getting the mid-single digit price increases. Costs are elevated - we see that, but we are mitigating that. FX is a headwind, but once again we’re mitigating that with volume, which we have said we always would do, and then we’re trying to manage those supply disruptions. The only new one there is Russia and Ukraine and we’re managing that, so you can see why we still kept the range wide, but there is a lower probability at each end of that range and a much higher probability in the middle.

When I examine your margin guidance, it appears you experienced some margin expansion in Q1, but you're projecting a significant margin contraction in Q2, resulting in some of the lowest margins in a long time. For Q3 and Q4, you're anticipating modest margin contraction. Could you explain this situation? Specifically, how do you go from expansion in Q1 year-over-year to a considerable contraction in Q2 and then modest contraction in the second half of the year?

Yes Joel, it’s Andrew. Let me address that. As Mark mentioned earlier, we made significant price increases in Q1 due to ongoing cost inflation. While we had a favorable comparison of price and overall costs, including not just COGS, in the first quarter, this trend will not sustain throughout the year. It's important to note that Q1 of '21 was relatively weak for us, with a decline in revenue that, together with our fixed costs in SG&A and R&D, resulted in a lower margin comparison. Although we are pleased to see a positive EBITDA margin comparison for Q1 '22 versus Q1 '21, the scale of price increases needed to counterbalance cost hikes implies a substantial reduction in percentage margins. Simply put, if we fully offset cost increases with price rises, our percentage margins will decrease. This effect will become more pronounced later in the year as we continue to experience high cost increases while implementing strong price increases. Unfortunately, this combination leads to dilutive percentage margins. The trend we are seeing is expected. We anticipate tougher comparisons for EBITDA margin percentages in the second half of the year, but I believe this is a positive sign for our long-term future. Eventually, costs will stabilize. While it is premature to declare a turning point, as Mark highlighted, there are still many uncertainties, particularly regarding logistics and ocean freight from China, indicating we haven't yet reached that point. However, when it does arrive, the inherent pricing strength in our industry could result in an opportunity for percentage margins to recover and expand. For the remainder of this year, our approach is clear: we will continue to price aggressively to counter COGS inflation, leverage volume and product mix to manage FX effects, and support our investments in SG&A and R&D growth, all while aiming for a strong full-year performance in these challenging times.

Thank you.

Our next question is from Christopher Parkinson with Mizuho Securities. Please go ahead.

Great, thank you so much. When investors take the time to actually parse out the growth rate for the diamides and biologicals perhaps at a lower base, and then subtract just the annual registration losses, what’s your current assessment of the remainder of the portfolio, so kind of the other core products as well as some new launch products, and what are you most excited about for 2024? Perhaps an alternative way of asking that is just how do you generally characterize your aggregate growth contribution from more environmentally conscious formulations versus the past few years? Thank you.

Yes, thanks Chris. The diamides are growing pretty much as we’ve said they would grow - they’re in the high single digits. We saw that in Q1, and we’ll see that through the rest of the year. When you look at our overall growth rates for the year, you can see that the rest of the portfolio is also growing strongly. Plant health, we talk about a lot because the biological investment there is going really, really well. I would say that when I think about on average of, what, somewhere around 7% revenue growth, the rest of the portfolio is growing in that mid-single digits-plus, and the new products that we’re introducing are growing much faster than that. We have about a 1.5% drag on the portfolio just because of registration losses. It’s been a little lower in the first half of this year; it might be a little lower than that full year, in maybe the 1% range, but it’s about the right place to be. You can see that the portfolio overall is performing very well. I talked about the $600 million of revenue from the products in the last five years, but I think it’s the growth rate of that that’s occurring. It was $400 million last year, it’s $600 million this year - that means we got $200 million of brand-new growth, so that’s what we should be focused on and that is coming from not only the big products that we launch, whether it’s a fluindapyr fungicide or an Isoflex herbicide, those are the bigger products that are in the multi-hundred million dollars range when they reach their peak size. What often gets overlooked is the amount of work we do on brand-new formulations that come to market every year. Last year, I think we had something like $170 million, $180 million of products introduced within the year. It’s slightly less than that this year, but it’s still substantial. Don’t underestimate the value that that brings. Those products are new, they are coming to market at higher margins so you’re improving the mix, so it’s all three things for us. It’s the core, it’s the local formulations that we do in our research facilities around the world, it’s the very large pipeline products that come through, and obviously the diamides continue in that high single-digit range.

Got it, and just a very quick follow-up. Mark, before everything that’s happening with the war, the EU was actually evaluating a host of chemistries, and there were one or two of them that are in terms of environmentally, let’s say friendliness or lack thereof, and two of them and one in particular is a direct competitor of the DiaMark portfolio. How is your team assessing the potential opportunity for the diamides based on the potential for further regulatory actions? It seems like it’s already benefited, it has been benefiting you over the last several years and potentially will benefit you, but what are your updated thoughts on that and how that could potentially further contribute to that portfolio’s growth? Thank you.

Yes, look - as we think further forward on the diamides, not only are we growing ourselves, but our new partner sales are growing nicely as well, roughly at the same rate that we are internally to FMC. Obviously we’re taking new products into new markets with new registrations, and our partners are doing the same, but we are taking market share in insecticides with the diamides. When you look at some of the older chemistries, whether it be the neonicotinoids or whether it be the carbamates, and now some of the other chemistries also coming under pressure - in fact, some of our own chemistries are coming under pressure, we’re losing registrations of Indoxacarb in Europe this year, which is a great molecule but doesn’t fit the profile for the EU. That churn is happening in the industry and we are taking advantage of that. We expect that to continue. It is one of the growth drivers for the diamides as we look forward for the next 10 years. That will not slow down; in fact, you could argue the replacement of older technologies will accelerate as we go through time, especially in jurisdictions like Europe, so it is a positive for us. We see it that way and we have taken advantage of it, and we’ll continue to do so.

Our next question is from Tony Jones at Redburn. Tony, please go ahead.

Thanks everybody, thanks for taking my question. You talked about cost inflation should be peaking and reversing at some point, but when we look at the industry, in the past we’ve seen some companies give back price. What’s your expectation from an FMC perspective, because the portfolio today is very different than last time we were in a period of cost inflation, so any thoughts on that would be really helpful. Thank you.

Thanks Tony. Listen, you heard me comment earlier about the fact that we sell value, and that’s something that we have always done and will continue to do. When you look at some of the chemistries in this space, they are very commoditized and almost index-linked - you can think of the non-selective herbicides, which move up very quickly and they move down very quickly. Our portfolio historically has never done that, and you could argue that with the portfolio as it is today, it is even less likely to move quickly. It’s taken us a while to get to this point. We didn’t recover all the costs last year. Our intent is that when we come out of this cycle, our margins will have in fact improved because of all the efforts that we’ve put in place with regards to SAP, etc. Our plan over the long haul is to make sure that these prices are sticky by selling the value aspect of the portfolio. We don’t have the non-selective herbicides, and we don’t have that large generic portfolio, so we do not expect to have that large swing in prices when we come through the other side of this.

Thank you, that’s really helpful. Just a really quick follow-up, can you indicate the rough additional SG&A costs, maybe absolute terms moving from Q1 to Q2, just so we can make it accurate in the model? Thanks.

Andrew, do we have that absolute number? I don’t think we do, do we?

We don’t. Look Tony, I would say that I think our SG&A as a percentage of sales was probably a bit light in Q1 relative to what you should expect in Q2.

Thank you. Thanks guys.

Our next question comes from Michael Piken from Cleveland Research. Michael, please go ahead.

Yes, good morning. I have a question about the costs of the active ingredients themselves. I completely understand the logistical aspects.

Michael, we’re unable to hear you. Can you please check your line’s not on mute?

Yes, can you hear me now? Hello, can you hear me?

Unfortunately, we can’t hear anything from Michael’s line, so we’ll move onto the next question. Your next question is from Arun Viswanathan from RBC Capital Markets. Arun, please go ahead.

Great, thanks. If I look at the EBITDA growth in ’22, it looks like if we use the $1.32 billion that you did last year, you’re about.

Arun, your line is now open for your question, please proceed.

Yes, I’m speaking. You can’t hear me? Can you hear me now? I’m here. Hello?

Yes, we can hear you now. Please go ahead.

Okay, great. It looks like you’re guiding to about 6% EBITDA growth at the midpoint in ’22, and understandably there’s a lot of challenges that you guys have detailed on costs and so on and uncertainty. But when you look out into ’23 and ’24, do you expect to get back into a 7% to 9% EBITDA growth rate, and potentially even at the upper end of that just given some of the replacement that has to go on for lost production out of Ukraine? How should we think about the new outlook for FMC, should it be within the range that you provided in the past back in your ’18 investor day?

Yes, thanks Arun. Listen, next year is the last year of our five-year plan. We’re tracking well on revenue, right in the middle of the range. We are slightly below on EBITDA, but as Andrew and I were discussing the other day, since ’18 through ’21, we’ve had over $600 million of costs and FX headwinds and we’re only just slightly below the lower end of the range. Look, I’m not going to guide ’23 - it is way too early to guide ’23, but there’s no reason to believe that if the situation starts to normalize, that we wouldn’t be in that 7% to 9% range. We’re obviously not going to cover the gap that we’ve had over the last couple of years, so we will likely end up somewhere at the low end of that range at the end of the five-year plan - commendable results, to say the least, given everything that we’ve had, and frankly this year’s cost and FX are higher than we’ve seen at any point of the last five years in terms of this plan, so we’re swimming against a very strong tide and right at the edge of our range. We do feel that the company has performed well since 2018 on both metrics. After 2023, we are going to be putting together a new long-range plan. Whatever timeline that takes, we will make that decision. We would expect to come out with a new long-range plan towards the end of 2023, where we’ll be public with where the company is going over what time frame, but for now we’re just sticking with where we are and obviously that 7% to 9% EBITDA range is what we’d be aiming for for next year.

If I could ask a follow-up to that, is there any discrete items, whether it be the deals that you guys have signed for partnerships or maybe some fungicide M&A, or anything like that that you could point to that could help us understand and frame the longer-term growth possibilities?

I think from a portfolio perspective, I think you’ve got all the pieces of information that we’ve given out in terms of the pipeline growth, the diamides longer-term view, the portfolio itself, the core portfolio. At this point in time, obviously we’re always looking at M&A from a technology perspective. They tend to play out over the long haul, it wouldn’t impact the near term, but we are looking at a number of items on the technology side of M&A. I don’t think there’s anything there that we have that you don’t have in terms of trying to model where the future growth of the company is. I think obviously as we go through this planning cycle, we’ll have a much better view at the end of ’23 around where the company will be going over the next decade.

Thanks.

Our next question comes from Adam Samuelson from Goldman Sachs. Adam, please go ahead.

Yes, thanks. Good morning everyone.

Morning Adam.

Morning. I guess some of this might be tricky because of where you are in the season, but I would just love to get your thoughts on channel inventories. It does seem like there was a good amount of pre-buying in a lot of different regions ahead of maybe an expectation of additional price increases, concerns around supply chain, and just if you could just take a tour around the world about where you think channel inventories sit as you’re going into certainly the northern hemisphere growing season and Brazil, where you’re more off-season, just how you think activity levels and restocking sits there.

Yes, sure. Thank you. Generally speaking, we are not concerned about channel inventories. There are a couple pockets in the world, one we alluded to, which is India - in Q4, weather patterns were not great and there is a reduction in rice acres in India, and you saw some of the comments about strong growth in ASEAN and Australia offset by India. We’re taking the opportunity to reduce our channel inventories in India at the beginning of the year. We expect that to normalize pretty quickly as we go through the first half here. Outside of that, northern hemisphere, I don’t think we’re carrying excess inventories as we’re going into the channel, into the season. Recommendations from our group are that we expect normal pest pressures for the year going forward in Europe and in the U.S. here, so we’re not seeing anything that we would say is concerning at all. They seem pretty normal to us. In Latin America for us, normal. Argentina, Brazil, Mexico, we’re where we should be at this point in the season. Demand has been very good for us. Our growth rates are in line with how we’re penetrating the market. You’ll recall on the call here, I just talked about the fact that we’ve been spending a lot of time and effort improving our market access into the soy complex in Brazil, and that’s where our growth is coming from, whether it be with insecticides or some of the newer herbicides that we have in place. We’re not worried about where our inventory levels at all in Brazil or Argentina.

Okay, and then just a quick follow-up on the decision to cease operations or sales in Russia. It implies about $75 million of business there last year. Is that something, as we’re modeling that going away? I presume there’s a tail to winding down activities, so it doesn’t just fall to zero immediately. I guess the corollary question would be in Ukraine, what’s the size of business in Ukraine and what’s the expectation on volumes there, just given a lot of the planting disruptions and logistical issues of getting product into the country?

Sure. I’ll let Andrew comment on the actual numbers. We are working through what the financial impacts will be both from a P&L and a balance sheet impact. We do believe that we have opportunities to offset maybe not all of that impact but certainly the vast majority of it, so we’re working through that right now. I would say that Ukraine, we’re expecting very low planted acres, especially obviously in the east. Our groups are active, our salespeople are out, growers are planting; it’s just under very, very difficult conditions. Getting material into the country, we are doing that. It’s once you’re in-country, it’s working through distribution, etc. It’s not, as you can imagine, particularly easy, so I would expect acreage to be down significantly in Ukraine but we will obviously do everything that we can to get material into that country and make sure they can plant every acre they can. Andrew, do you just want to comment on the rough impact?

Sure. Just some dimensions for you on Russia and Ukraine, between the two countries there’s about $100 million in revenue in 2021, about 70% Russia, 30% Ukraine. The Russian business, we did operate in the first quarter. What was built into our budgets for the remaining three quarters of the year was about $20 million to $25 million of EBITDA contribution from the Russian business, so that’s the headwind we’ve got to address with either redirecting the material that is no longer being sent to that market to other markets or finding other opportunities. That’s certainly a part of our upside-downside discussion that Mark went through in his prepared comments about the guidance for this year. Regarding Ukraine, as Mark mentioned, we are operating. We do not expect to hit our initial expectations for the year, but the business is operating and we’re continuing to ship, and we will continue to support Ukrainian farmers to the best we can. I do think you should expect that we will take a restructuring charge in the second quarter for the exit of the Russia business. We are not in a position right now to finalize that number given that we’re still in the process of finalizing the exact pieces of our exit there, but there will be a largely non-cash restructuring charge in the second quarter to reflect the exit of the Russia business.

All right, that’s all really helpful. I appreciate it, thank you.

Our final question on the call today comes from Michael Sison from Wells Fargo. Michael, please go ahead.

Hey guys. You sort of noted that you felt there could be growth in 2023 in terms of the ag markets. Any thoughts on extending the cycle for another year or so?

We have experienced a period of very low growth in the agriculture sector over the past three to four years. It's important to take a moment to consider the current state of soft commodity prices and what factors would influence them now. The ongoing situation between Russia and Ukraine is certainly impacting cereal prices, and there have been weather-related issues in Latin America, particularly in southern Brazil and northern Argentina, affecting last season. We are closely monitoring global weather patterns, as there are always weather events that can disrupt the market. It’s reasonable to expect that soft commodity prices will remain high, which is generally favorable for us as providers of crop protection inputs. Looking ahead to 2023, even though it's still very early in May, we see it as a continuation of 2022. We believe this creates a positive environment, and we don't anticipate any major negative changes that would alter this outlook, suggesting that 2023 should be a good year.

Got it. Then I think you are looking, or you’re trying to reduce some of your manufacturing footprint in China and move it to other parts of the world. Where are you in that endeavor, and have you made any meaningful progress?

Yes Mike, we’ve talked about this subject before. I always allude back to the 2015 time frame when we bought Cheminova - prior to that, we were about 95% to 90% dependent on China for pretty much all the raw materials, intermediates, fine and specialty chemicals. We’ve been working and we’ve had a program to really ensure that we have a balanced supply chain of manufacturing footprint around the world, not only with the Cheminova acquisition but with the Dupont acquisitions as well, and today we’re probably in that 43%, 45% range dependent upon China. Our aim is to get that to sub-40% within the next year or so. We’ve done a very good job of setting up manufacturing with the assets, whether it be in India or Europe. We’ve shifted some toll manufacturing into Europe and Mexico, as an example, to feed Brazil. We will continue to do that. It is something that, frankly, is never-ending. I would like to get it into the 30% range. I don’t know whether my manufacturing and procurement people would agree with that, but I think if we could get China dependency on 30%-plus would be almost ideal for us, with a good balance between India and Europe and the U.S. being the rest. I think we’d be in great shape by then.

Got it, thank you.

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

This concludes the FMC Corporation conference call. Thank you for attending. You may now disconnect.