• Sales Growth: 9% overall growth, with organic sales growth of 12%.

• Volume Growth: 17% increase, led by Brazil and the US.

• North America Sales Increase: 48% due to strong volume growth.

• Latin America Sales Growth: 8% with 15% growth excluding currency impacts.

• Asia Sales Decline: 10% decrease, primarily due to lower sales in India.

• Adjusted EBITDA Growth: 15% year-over-year increase.

• Cost Savings Target: $125 million to $150 million in 2024, with a gross run rate of over $225 million in 2025.

• Interest Expense: $58.7 million for the third quarter, down nearly $6 million from the prior year.

• Effective Tax Rate: 11.8% for the third quarter, with a full-year range of 13% to 15%.

• Gross Debt: Approximately $4.1 billion as of September 30, down $110 million from the prior quarter.

• Free Cash Flow: $132 million in the third quarter, an improvement of $100 million from the prior year period.

• Full Year Free Cash Flow Expectation: $400 million to $500 million for 2024.

• Warning! GuruFocus has detected 7 Warning Signs with FMC.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FMC Corp (NYSE:FMC) reported strong third-quarter sales growth of 9%, with organic sales growth of 12%, driven by volume increases in Brazil and the US.

• North America outperformed expectations, with a 48% increase in sales due to strong volume growth and increased orders from diamide partners.

• New products, including fluindapyr and Isoflex, are showing strong growth potential, with expected combined sales of over $100 million in the second half of the year.

• The company is accelerating cost savings initiatives, targeting $125 million to $150 million in savings for 2024, with a gross run rate of over $225 million in 2025.

• FMC Corp (NYSE:FMC) confirmed its full-year guidance, expecting fourth-quarter sales growth of 19% at the guidance midpoint, driven by new product introductions and cost benefits from restructuring.

Negative Points

• Latin America faced unexpected challenges, particularly in Brazil and Argentina, due to delayed rains, increased borrowing rates, and the bankruptcy of a large customer.

• Pricing pressures were significant, with about two-thirds of the total company price decline attributed to Brazil and Argentina.

• Asia experienced a 10% sales decline, primarily due to lower sales in India as the country continues to work through excess channel inventory.

• FMC Corp (NYSE:FMC) anticipates continued FX headwinds, particularly from the Brazilian real, impacting revenue growth.

• The company expects a mid-single-digit price headwind in the fourth quarter due to ongoing challenging market conditions, especially in Asia and Latin America.

Q & A Highlights

Q: Can you provide an update on the 2025 revenue growth outlook and cost favorability? A: Pierre Brondeau, CEO, stated that FMC is targeting around 6% revenue growth for 2025, assuming flat pricing and no FX impact. The company anticipates stronger cost savings, leaning towards the higher end of the $150 million to $200 million range previously discussed.

Q: How is the situation in Latin America, and what factors contributed to the weaker-than-expected performance in Q3? A: Pierre Brondeau explained that Latin America’s challenges were due to delayed rains, increased borrowing rates, and the bankruptcy of a large customer in Brazil. FMC is focusing on maintaining market share, which has led to pricing adjustments.

Q: Can you elaborate on the pricing trajectory for diamides and non-diamides? A: Pierre Brondeau noted that pricing pressure is linked to market conditions, with the strongest correlation being the state of the channel. Diamides face less pricing pressure in regions with strong patent protection, and FMC expects price pressure to ease as markets normalize, potentially by the second half of 2026.

Q: What is the status of FMC’s R&D cost reduction, and is it sustainable? A: Pierre Brondeau stated that the R&D cost reduction is sustainable, achieved through improved decision-making processes, better screening tools, and increased coordination between central and regional R&D to avoid duplication and create synergies.

Q: How is FMC positioned in terms of production capacity to meet potential demand increases? A: Pierre Brondeau confirmed that FMC has sufficient production capacity and raw material supply to meet demand increases, and the company is not concerned about capacity constraints as the market recovers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.