Conference Transcript - FMC 2026-05-14

Operator

All right, let's go on to our next session, kicking off the afternoon with FMC, of course, a very large global producer of crop chemicals, crop production chemicals, and distributors, same. We're joined today by Pierre Brandeau, the CEO, Andrew Sandiver, CFO. Gentlemen, interesting times we live in, interesting times for FMC as well. Maybe you could kick off and Pierre and Andrew give us a bit of a state of the union for FMC.

Pierre Brondeau, CEO

Sure. the company is as we say 26 is a critical year we've defined a strategic plan which is based on four peers for the company in terms of paying down debt restructuring and manufacturing footprint post pattern strategy and new technology and of course the financing of the company and while we do that at the same time the board has asked to look at strategic options including the sale of the company but not limited to the sale of the company so that's about where we are very high

Operator

focus on our 2026 strategic plan but at the same time looking at other options okay let's talk about some of the latest news so you sold the Indian business you've been trying to sell for a little while you sold it for $250 million against the billion dollars you're trying to de-leverage. Maybe give a bit of an update on that on how the working capital works in that deal.

Pierre Brondeau, CEO

Sure. Just to make sure very clear, $255 million is the number we're expecting. We're marked at $425 million today. $425 million correspond to the $255 million corresponding to the sale of the business. and the rest representing the cash collection, we will be doing in between now and the day we close on the deal, mostly selling from inventory or collecting account receivable. And if you look at the forecast we have for cash collection plus the amount we get, you get to this number of 425.

Operator

And you've really put out a plan this year of trying to deleverage by a billion dollars. We're going to get to the fundamentals in a second, but I think it's very topical. You've been looking at a plan to try to de-leverage this year by about a billion dollars. This will be $250 of the billion, correct? And maybe you can walk through your plans, some of the things you've got on the go here to maybe get close to the billion dollars.

Pierre Brondeau, CEO

Sure. And what I talked at the earnings call was right now we have line of sight for $700 million. Why do I call line of sight? It's the amount for which we are currently in negotiation. So, as you say, $265 million will be the India deal. We are getting very close to signing licensing agreements for one of the molecules with an upfront payment. That upfront payment will go to paying down debts. And then it's a commercial licensing deal. And then we'll be supplying the product to a partner who will also pay royalty. That's the bucket number two. Bucket number three, and I'm giving those in order of size. Bucket number three is real estate deals. I'm talking here nine-digit deals. Those are big deals. Very large sites, which we would sell to developers, and we would only use through a lease back the part which we are using. That takes us pretty close to the $700 million. And then to get to $700 million, we have a series of molecule or non-strategic businesses we are currently in negotiation for. That's what we negotiate. Then we have a list of other things we would be potentially selling, but those are not yet in negotiation. we started to focus on the one which had the longest lead time.

Operator

The sale and leaseback deals, so all of this that you're talking about, what would kind of be the earnings impact going forward?

Pierre Brondeau, CEO

Well, the India, we know that. We've talked about it. It's very small, very small earnings at the end. The licensing is very interesting because it increases the revenues. When you have a technology, which is a technology of quality, it's a very fragmented market. We are one of the largest crop chemical companies, and we have a 7% market share. So what you do in our business, you find companies of quality which have a complementary crop profile, and it allows you to increase the market you can reach. So licensing the molecule to a partner would be accretive to us and would increase sales and EBITDA in the future, in addition to the one-time payment. The lease back will have almost no impact because we'll sell, we'll get the revenues, and then we will lease back for part. but we will not have to do all of the maintenance of the entire site. Then the rest, the small molecules for BNES, that could have an IPDA impact, but we're talking about very few tens of millions of dollars, so very minimum.

Operator

And on the licensing, the prepayment option to the molecule, I think you're working on a deal now for one molecule, correct? Any update on that?

Pierre Brondeau, CEO

Yes. We are almost through the finish line, I think.

Operator

Do you want to announce it now?

Pierre Brondeau, CEO

No. But I would say we're a couple of weeks from signing. We have chosen the partner. We believe it's a quality partner. It's the right partner from the crop profile. We are in agreement on all of the financial terms. who are finishing to redact the, what I would call the legal terms around the contract.

Operator

Redact, you said? Yeah, redact.

Pierre Brondeau, CEO

And then we'll get to signatures. So, Andrew, a couple of weeks? Yeah. What would we think? Okay.

Operator

Okay, fair enough. I want to talk to you about, let's get into the fundamentals on the macro here. Are you seeing, is FMC seeing a little bit of weakening in generic pressures? Like, are you seeing in this current conflict, has it raised the cost of production in places like China and India that maybe would lower the pressure a bit? Or is it too early to say?

Pierre Brondeau, CEO

So here is the way I would answer this question. I'm looking at Latin America and Brazil today. the place where you get the most information about generic behaviors because you're preparing for the BQ3, Q4. And especially for direct sales, you're getting a lot of those sales taking place in Q1, Q2. today I believe the pricing is leveling off we are not seeing this constant spiral down of pricing so there is there is a situation I would say which at least is stabilizing now maybe something more interesting for us if you remember at the earnings call which was two weeks ago I said for direct sales for the second half of the year we had 36 percent of the orders in hand for the second half of the year surprisingly we have 50 percent today so within two weeks we jumped from 36 to 50 percent I've rarely been in a situation where on On May 6th, we had half of the direct sales we needed to make H2. The forecast we have right now seemed to lead to a number of 65 to 70% of sales in hand by end of June to do H2 for direct sales. and about 60% for overall sales. Those are very, very solid numbers. We have not seen those numbers in a long time. What could it be? It could be possibly the channel, which might be not as full as it used to be, but I believe it is also maybe less generic pressure and farmers looking for more security of supply today, and that's why we're receiving these demands. So that's an indication. I cannot make a rule out of it, but as an indication in what we see today, I would say yes to your question.

Andrew Sandifer, CFO

Just to build on that, clarify, we're speaking specifically about the Brazil market. Brazil, yeah.

Operator

With the numbers, yeah.

Andrew Sandifer, CFO

Yes, just those numbers are specifically for Brazil.

Operator

Is that with you, with FMC, holding your price ideas, or have you raised prices in the last couple of weeks?

Pierre Brondeau, CEO

No, we've not raised prices. We've kept the price stable. There are going to be a place in the world where we'll be selectively increasing price for some reasons. But overall, in Latin America, we've kept the price flat. what we are looking at in term of pricing before we make any decision in the impact is the impact of the iran war if that would be to last for a longer period of time it would have an impact on pricing and i think that's the time when we'll have a decision to be made to to adjust pricing accordingly so i don't want to start to do bits and pieces and some short-term action i would rather wait to see where all of where things are going to go and make a decision in the third quarter

Operator

and you know it's interesting another interesting you know year for fmc has been on the loss of exclusivity as expected of ctpr reacts here in in china what have you learned about that market post-exclusivity, or did the conflict here mess up the market? You're not exactly sure how this market's developing, if that makes any sense.

Pierre Brondeau, CEO

You know, I think the market in India hasn't changed much from a demand standpoint. For Alexa here, the market in India has been challenged by something which has nothing to do with the war in Iran. it's because Renexa Peer has been used a lot because of generic coming very early there is very significant resistance to Renexa Peer so that's that's been one of the impediments to development of growth I believe the war has an impact on overall generic pricing, including Renex Appear. Including Renex Appear.

Operator

Let's talk about some more of your initiatives. You talked about wanting to outsource some manufacturing of some of your non-Diamet core products and exiting some high-cost AI and formulation plans. Maybe talk about that.

Pierre Brondeau, CEO

The process is going as planned. I think it's a it's a very heavy lift. It's a complex process because not only you have to exit plants, find a new home for your product, but you also have to rethink your registration. But it's a process which is mapped out. We do have the definition of what we've got to do and I'm not expecting at this stage any surprise and I'm pretty certain if not certain that this process will be finished by the end of Q1 2027 it's going accordingly to plan for most of the product we know where they will go we know where we're going to get the resistance, highly lived, but highly predictable.

Operator

Anything else in the, if you think about the crop protection market, any other things that maybe people in the market are missing, like any observations you have this year in terms of material cost, demand inventories, product switching?

Pierre Brondeau, CEO

You know, I think if you put the if you put the war aside, there is the big change has been the Ramex Appir running out of patterns and generic coming into it. And up to now, in the last couple of years, maybe I've seen the generic more active than I've ever seen. But this is leveling off right now. So it seems like we are in a period where we see more stability in the market and more predictability.

Operator

And you're talking about Brazil.

Pierre Brondeau, CEO

So you're seeing ordering pickup which is great it's also a weird market in Brazil right with credit problems like it must be a very even you have a new sales team it's what a year or so in place it must be you say predictable but it must be difficult to predict actually all these factors yeah I'm gonna say if you comments and others can do to to complement but we are very very careful and specific to to whom we sell in Brazil we we do not go with a broad brush first of all we do have a very strong focus on increasing our sales to co-ops and to direct sales to farmers I mean those are two number one target then of course the distribution channel is very important to us but there is companies we know are in situations where financially we should not sell to them and and we don't know Andrew I think it's pure sketched I mean there's been a couple of major changes in the distribution channels in Brazil certainly the rise of more direct sales is a big part of that and you know we're able to do good credit analysis on large growers and understand their position and get comfortable with credit risk there and the more traditional distribution

Andrew Sandifer, CFO

retail channel there were several attempts to roll up that that market those have failed to private equity backs roll-ups have essentially gone into financial different degrees of financial restructuring you know we're the situation with them that you know we're managing through the the leftover exposure but we're on a you know basically selling only on cash terms going forward so not not taking on any further risk with them and a few other few other larger distribution businesses that have similar profiles so I think that this peer said I think the key is just being very disciplined about where we're extending credit and shifting the mix to customers are inherently like co-ops just the nature of their structures legally in Brazil and more

Operator

hair inherently credit credit worthy I'll say about the pipeline a bit so you've got some new AIs you've been pushing them out they're growing about about what's performing better than expected, maybe what's been more challenged than expected?

Pierre Brondeau, CEO

I think it's progressing as well as we're expecting. I mean, the critical issues you would be facing when you're launching molecules like that is forecasting the timing, not because of the demand from the grower's standpoint. Demand is here. The product, a high-quality product, there are patents, there are new mode of action. The problem is the speed at which you get the registration. I'll give you an example, Isoflex. We got the registration for the active at the level of the EU. But then you have to take the formulation you will be selling, and you need to get the registration in each of the countries in the EU where you will be selling. We're expecting that in the first half of 2027. But you know what? You miss that, and then you miss the European season. So that's where the predictability is difficult. But so far, it's performing as we would expect.

Operator

Okay. And then also in biologicals, you did a good acquisition a few years ago. That's also one of your growth engines. Maybe talk about that.

Pierre Brondeau, CEO

Sure. At biological, we have, I would say, two portfolios. We have the regular biological portfolio, which is growing 10% to 15% a year and then we have pheromones which is viewed more as a more as a research it's still negative earnings we had the first full size sales in Brazil in the first quarter results were pretty good we had yield improvement according to the farmers where we sold the product by 5% to 15%. And we had a decrease, and I think it was Caterpillar, by 75%. So I would say the results are encouraging, but it's a very early stage still.

Operator

What gets you most excited about the pipeline? You have to pick one product, one application.

Pierre Brondeau, CEO

For biological? I would say... Anything in the pipeline. anything in the pipeline for me it's now it's a tough question because I love our four new molecules that's that's I think we have a here is the thing why why I can't dissociate them the four new molecules have three or beside and one from this side two of them have new mode of action one as a dual mode of action but what is very important not only they are new products with very high efficacy. They will change the portfolio of the company today. We are mostly an insecticide and we're an insecticide company. Insecticide are the most difficult to predict. In two, three, four years, we'll be a company which will be 50% herbicide, 25% fungicide, 25% insecticide. It's a much, much better portfolio. And we'll have 50% of the portfolio of the company which will be a growth portfolio. So for me, if you ask me what I'm the most excited about, it's those four molecules. Now, for all of this to happen, we cannot dissociate that from the work we're doing on the manufacturing footprint to get a core business back to market growth instead of the erosion we've seen in the past. So those are the two critical things which need to happen next in the years to come okay so that's I want to start talking about is you know we've seen core contract a bit for different reasons we've seen the growth part of the portfolio be kind of flattish what you know in each part core what's the main thing you got to see happen to be able to get to at least flat and for growth what's the main thing you got to see happen to be able to get into growth so I say right yes okay I think The core portfolio, if we talk about the non-diamide core portfolio, because we've talked about our next up here, but the non-diamide core portfolio, we have one core competency, which we always had from the early days of FMC, it's formulation technology. The problem we have is we are not capable of deploying a formulation technology because the active ingredients we are using for that are too expensive. Overall, we are manufacturing at a cost which is not competitive on the market and prevent us to have this core competency in place. I am convinced that by the middle of 2027, once we have a core portfolio competitive with generics on cost, and then we're able to deploy our formulation technology, we will grow faster than the market. I mean, if the market goes 2-3%, we should be able to expect 3%, 4% growth for this part. And that's very critical because you can do whatever you want when half of your company is going down four or five percent a year doesn't work we need to get that back to to a four percent growth rate and I believe we're gonna start to see that in 27 do you think you're traversing your trough your FMC trough this year or might it bleed into 27 no this year this year is the year where we need to execute on the four pillars of a strategy and reset the financing of the company and I believe if we execute all of these will be the position in 27 to see growth and I think

Andrew Sandifer, CFO

you talk about the resetting the financing maybe you could give an update I think you said that you can get update on the credit amendments credit amendments you made the other month yeah I think certainly on the financing side we did update our revolving credit agreement in April a bit of a logical continuation of an amendment we made in December whereas as we shifted to non-investment grade rated borrowing putting up collateral against the revolving credit agreement in December we've had an IP based collateral structure that was meant to be temporary we have a pretty complex international tax structure it took a while to get all of the legal documentation in place to but more traditional collateral in place. So now with this April amendment, we have $6 billion of collateral in terms of direct liens and another $3 billion in terms of pledges of subsidiary assets, et cetera, that back our $2 billion revolving credit facility. It just literally, the legal work it took to get that collateral package took us well into the beginning of April. We'll use that same collateral package to support an anticipated bond offering here in the second quarter, where we do expect to go to the market with a secured high-yield bond to both address the maturity that we have of $500 million in notes that mature in October, but also to the extent we're able to place it. We would like to term out some of the revolver debt and bring down short-term borrowings through that offering.

Operator

Okay, Pierce. So you're, Andrew, you're doing a lot of thinking about what FMC is and what it's going to be in the future and what do you need to partner with and sell off and show up the balance sheet and then think about what happens after that i think you're doing a process also to figure out you know should as part of your review should fmc still be a standalone company right that's fair it's correct what what you're a few months into this what are sort of your initial observations so for the company employees we are all highly focusing on a 2026 operational plant we discussed.

Pierre Brondeau, CEO

Now, with the board, we decided to also look at strategic options, including the sale of the company. This process started in February. We had over 20 companies who we are talking with. That has been decreasing. We had a few propositions, diverse propositions. So there were a range of options which made it to our board. We had a board meeting two weeks ago, just before the earnings call. We've looked at those options, took a position on each of them with our board, gave that back to the banks who went back to the companies, and the discussions are ongoing. now here is what I think that's that's my point of view okay it's only me thinking but my view is that by June July certainly no later that the earnings call for Q2 which would be the end of July we should have a decision to go one way or the other, which means to either go with a strategic option with a partner, selling, merging, whatever it is, or carry on with the strategic plan as we have defined. I think we are advanced enough in the discussion. We will not need more than a couple of months to make decisions. Plus, I believe for an organization five, six months with the uncertainty is as much as an organization can take and stay focused and operating plan. So that's the target. The board is completely involved. We are involved as a management team and I think we'll get with a very clear answer at least at the earnings call for Q2 at the end of July and we'll move on from this point.

Operator

Status quo is pretty clear. Selling the company is pretty clear. You talk about a middle, which was like some sort of partnerships. Can you conceptually talk about what you're talking about?

Pierre Brondeau, CEO

Well, I mean partnership. You know, when you look at strategic options, it goes from equity injecting the company to merger with company to selling the company. What I call partnership would be more of a merger. So those are because there is always a full range of strategic options.

Operator

Okay, now, you see the competitive landscape out there like I do, right? You see Corteva separating into a CP and seed spincos or pure plays. You see BASF splitting off crop science, I think, second half of 27. You see maybe Bayer Crop Science splitting off the next couple years. So the whole landscape is going to change. I don't know what that means fundamentally exactly, But when you think of that landscape, regardless of what you do, what FMC does, that landscape is going to be different in three years. How do you think about all that when you think about your two or three options here?

Pierre Brondeau, CEO

Well, here is what I think. If we carry on with a strategic plan and we do not have one of the options which is in front of us happening, I would not be surprised when you would have multiple companies, stand-alone, independent crop protection to see again some merger and acquisition taking place. I think the industry most likely will be prone for acquisition. Size matters. Size matters, especially for technology companies. So if things don't happen now, they will happen in two or three years, I believe, when all of what you described is in place.

Operator

Amy, you're one of a couple of peers that has that view that consolidation has to, in quotes, happen in CP. Can you elaborate sort of why it has to happen? You talked about size matter. Any other thing you want to add to that? What's going on in the industry right now? You've kind of described some of it today. What is so specific in the industry now that is leading to consolidation, that should lead to consolidation?

Pierre Brondeau, CEO

I think it's quite basic. If you're a technology company, you need to be able to manufacture a generic pricing while being able to support all the marketing and research spending for new technology. The smaller you are, the more difficult. To bring one molecule to market costs $300 million in about 12 years. And usually what you like to do is a new molecule every year or other year. So there is a significant technology spending if you want to bring the type of technology growers need. At the same time, you need to have a manufacturing network allowing you to compete with the lowest-cost producer. So that's what I believe size matters.

Operator

Pierre, would you agree in your career, the best deal you ever did was being able to buy the Diomedes and the R&D lab from DuPont? Would you agree that was your best deal? And that deal came because when down to all the AgCem's mergers, I believe, and you can change my words if you want, but the regulators said, ooh, I don't want to lose an innovator. I want to have multiple players that are doing stuff. So if this is true and you could see deals, do you get worried that EU, U.S. regulators, governments don't want to lose innovators, don't want to lose players?

Pierre Brondeau, CEO

Yes, it's definitely a possibility. That being said, I think there is more and more of a realization that technology is expensive. And the value of what we call technology company will diminish if those companies are too small. And if you really want to bring innovation, you need to have a minimum size to spend multi-hundred million dollars in R&D so you're correct it could be a position some legislative bodies would take but I think things will be changing and there will be more receptivity to merger in the future of companies. Deals will have to be constructed I guess knowing that landscape does that make sense definitely where you'd have to keep yeah innovation make sure there's not some consolidation innovation it's hard to explain but yeah what you have to be able to demonstrate is that a merger will create more innovation capability and not doing it if you cannot demonstrate that. If you do it for cost synergy purely, they will not work.

Operator

In the merger scenario, do you see FMC as being the main innovator leader in that merger, or would you be, what's the right word, secondary?

Pierre Brondeau, CEO

I can't answer that because I don't know if we will be part of those mergers. I don't know when it will be happening. I don't know what will be the status of our technology roadmap at that time. I think we do have, especially for a size, a very rich new technology portfolio. Totally, yeah. In Molecule we are putting on the market today, as well as what we have in our development pipeline. how will that impact the role we might or might not play years from now when the industry will possibly change it's very hard to say do you think some value would come if fmc was partnered or merged with um like a seed player or was that sales i don't know my friend chuck just broke up the company so if he's right i should not and i respect him so i have a 10 but 10 years ago that could be years ago everybody was bundling and now they're not so you know yeah i listen

Operator

i'm just going to say chuck is a good friend i wasn't asking about corteva i wasn't even i was a smart man and i have to say if he does that there is a good reason so i'm not going to plan to do the to go the other way and i was asking i was i had no under i was actually asking in general i'm just wondering if you're talking about mergers so i'm trying to figure out sort of like you know some of the different arrangements that have been pitched to you you know merging of you and seeds or you and fertilizer. I'm being silly now, but you know what I mean?

Pierre Brondeau, CEO

No, no, it's not being silly. In all seriousness, to answer your question seriously, when I talk merger, I would take merger within the same market segment. I would talk about crop protection company merging with crop protection company. I think that creates more synergies in terms of technology capability rather than the seed merging with a crop chemical where you have way less of a technology synergy.

Operator

Because the synergy are going to be on the back end, right?

Pierre Brondeau, CEO

It's going to be the manufacturing and- Manufacturing and technology roadmap, that's where you have the benefits. So I think seed company might merge with seed company, crop chemical company might merge with crop chemical company. I see that much more than I would see an expansion of the product line.

Operator

And in the case that you hopefully stay with standalone, You know, talk about sort of how do you, as you traverse the trough this year and move into your pipeline and get past the, you know, the Ranax peer coming out of exclusivity and redo the manufacturing base. Talk about how you would see the company, you know, think of company culture and sort of optimization and moving ahead to back to growth. Like, how would you see that playing out?

Pierre Brondeau, CEO

I think the company is poised for growth. You know, I think a lot of what we are facing, there is, of course, the market. But there are things we've done to ourselves we could have avoided to do. But this company culturally is more a growth company than a cost-watching company. And I think even if we know how to decrease our costs, we know how to do cost synergies, I think we are poised for growth. That's what people want. They can't wait. They can't wait to – they understand the importance of 26 and what we have to do. But everybody, I can tell you, when I talk to my employees, they are all looking 27, 28, 29, when we are back to do what we know how to do best.

Operator

Is there a case then that if that's what you can do, you can improve things, start getting growth, maybe going status quo, waiting a few years, next administration, no conflict in Iran? You're talking about you want a path by July or by August at the latest. Is there a reason to maybe defer status quo, try to improve the business, and then maybe the goal of going back to the market in three years when you're better? Does that make sense?

Pierre Brondeau, CEO

Yeah, the question makes sense, but really, I think that for the three, four, five years, we have what we need to grow, flourish, be profitable with what we have in our pipeline and our structure. So there is absolutely no urgency if, as you say, we pass the month of August. It would not be to position ourselves for selling the company two years down the road. It could happen. Anything could happen. But it would be to carry on because the roadmap we have could create a very, very attractive company which could be very capable to keep on growing by itself in 30 and past 30.

Operator

It would be more like you're not getting the value you want this summer, the spring or summer, so the path to status quo is the way to go. And maybe you just stay there forever, Or maybe, you know, there's always a possibility you look for a deal in three years. That's all I'm saying, you know?

Pierre Brondeau, CEO

That's right. The value's not there.

Operator

In this year, I'm making this up. I have no idea, right?

Pierre Brondeau, CEO

But that's the case.

Operator

In the two minutes we have left, Pierre, Andrew, what do you think investors are missing the most about FMC these days?

Pierre Brondeau, CEO

You know, the problem FMC has is, to say the least, our last three or four years' results were not spectacular. Consequently, when you're in a situation like this one, the normal reaction of investors, and I would do exactly the same thing, is to look at what will this company do in the next six to 12 months? Because we've got to prove what we say we're gonna do. So maybe what investors are missing because of that situation is the potential So I described before, if we succeed with our delivery of a 2026 plan as designed, start back to growth in 27, past 27, we are going to have an incredible portfolio. I mean, very balanced, new technology, more than 50% of the portfolio of the company will be growth. By 2035, patent and molecule with new mode of action. I mean, it's going to be a company which will be much, much better than what the company was in 18, 19 post-Duport acquisition because of the breadth of the product. The problem is, until we have proven in 26 that we can do what we say we would do, people will have a hard time looking beyond that. So first, let's regain the credibility. Let's do what we say we're going to do. and then we'll move on to the next step and maybe people will have more time and belief to look into the future of these companies thanks a lot guys thank you