Good morning, and welcome to the 3rd Quarter 2019 Earnings Release Conference Call for FMC Corporation. Phone lines will be placed on listen only mode throughout the conference. After the speakers' presentation, there will be a question and answer period. I will now turn the conference over to Mr. Michael Worley, Director of Investor Relations for FMC Corporation.
Mr. Worley, you may begin.
Thank you and good morning everyone. Welcome to FMC Corporation's 3rd quarter earnings call. Joining me today are Pierre Brondeau, Chief Executive Officer and Chairman Mark Douglas, President and Chief Operating Officer and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Pierre will review FMC's 3rd quarter performance and provide the outlook for the remainder of 2019. Mark will take an in-depth look at our Latin America business, followed by Andrew, who will provide an overview of select financial results.
We will then address your questions. The slide presentation that accompanies our results, along with our earnings release and our 2019 outlook statement are available on our website, and the prepared remarks from today's discussion will be made available after the call. Finally, 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 press 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 and free cash flow, all of which are non GAAP financial measures. Please note that earnings shall mean adjusted earnings and EBITDA shall mean adjusted EBITDA for all income statement references. A reconciliation 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, Michael, and good morning, everyone. FMC continued to deliver strong financial performance in the Q3 and navigated difficult market conditions, particularly in North America and Europe. This performance is consistent with prior quarters due to our unique blend of balanced geographic exposure, strong sales in specialty crops and a technology advantage portfolio. A good example of how all these elements drive strong growth is our diamide franchise that has grown 35% since we acquired the business 2 years ago. This growth was enabled by the previously mentioned elements in addition to robust commercial approach that has led to volume demand in previously untapped markets.
We believe that our business is well positioned to consistently deliver strong growth. Turning to Slide 3. FMC reported more than $1,000,000,000 in 3rd quarter revenue, which reflects a year over year increase of 10% on a reported basis and 12% organic growth, excluding FX headwinds. This increase was mostly driven by double digit organic growth in Brazil, Argentina, Mexico, France, India, China and Pakistan as well as price increases across all regions. Adjusted company EBITDA was $219,000,000 an increase of 18% compared to recast financial from last year and $19,000,000 above the midpoint of our guidance.
Company EBITDA margins were 21.6%, up 140 basis points year over year despite $42,000,000 in combined headwinds from raw material cost and tariffs. Adjusted EPS was $0.94 in the quarter, an increase of 32% versus recast Q3 2018 and $0.14 above the midpoint of our guidance. The strong outperformance versus our guidance was driven primarily by higher volume and pricing, which led to a $0.125 beat on the EBITDA line. Moving now to 3rd quarter revenue on Slide 4. Q3 revenue growth by 10% versus prior year with volume contributing 8% growth and pricing another 4% growth.
This was offset partially by a 2% headwind from FX. This was the 3rd consecutive quarter that we posted year over year price increase in every region of the world. Our growth in Q3 was stronger than expected due to unforecasted demand opportunities. We saw no shift of demand from Q4 as the growth in the Q3 was due entirely to Q3 demand. As expected, Latin America made up 45% of the 3rd quarter revenue.
Sales in Latin America grew 21% year over year or 22% organically, continuing the trend from the first half of twenty nineteen. We posted very strong growth across the region, driven by higher volumes and price increases. Our pricing actions more than offset the impact of FX. Demand was high for applications on cotton and sugarcane in Brazil. It is important to note that we continue to monitor channel inventory levels in Brazil, which are well controlled and in line with expectations for this point in the season.
Our market access continues to improve in Argentina, which allows us to take advantage of increasing demand for a product, especially for enaxapyr insect control and authority herbicide. Growth in Mexico came from more normal weather conditions compared to earlier in the year. Year to date, our sales in Latin America grew 29% organically. In EMEA, herbicide and insecticide demand drove year over year revenue growth of 4%, despite another very hot summer and fall. Demand for a new bottled delta herbicide benefited from a stronger than predicted cereal market across Europe, led by France and Germany.
Syazapyr insect control continues to benefit from new country registrations. Price increases more than offset the 4% FX headwind. Organic growth was 8% in the quarter and stands at 10% year to date. In Asia, revenue increased 5% overall and 9% organically year over year. Following a strong Q2, India again delivered commercial outperformance driven by demand for insecticides to combat full armyworm as well as share gains in the rice granule market with their Nexapyr based Fotera insecticide.
Thiazapyr insect control was also strong on fruits and vegetables. We continue to benefit in India from a new commercial organization structure, which we put in place about a year ago. We also had significant revenue growth in Pakistan, driven by strength in diamide demand and new product introductions. Year to date, our sales in Asia grew 7% organically, excluding significant FX headwind across many currencies. In North America, revenue was down 3% year over year in a seasonally smallest quarter.
As expected, we saw reduced demand for herbicides in the Midwest and Canada as the weather issues this spring resulted in higher channel inventories of those products. This was partially offset by continued price increases and by share gains for diamides for specialty crop applications. Despite the extreme weather related challenges in this region, our year to date sales in North America are up 1%. Turning to Slide 5. 3rd quarter EBITDA was $219,000,000 a year over year increase of 18% compared to recast results from Q3 2018.
Price increases in all regions and volume demand in Latin America, Asia and EMEA were drivers of this very strong performance. Looking ahead at the full year earnings outlook, we are raising our full year guidance for 2019. Revenue is now expected to be in the range of $4,580,000,000 to $4,620,000,000 Total company adjusted EBITDA is now expected to be in the range of $1,200,000,000 to $1,220,000,000 We are also raising our guidance for 2019 adjusted earnings to a range of $5,800,000 to $5,900,000 per diluted share. EPS estimates include the impact of $300,000,000 in share repurchases completed year to date through September 30, as well as an additional $100,000,000 in share repurchases expected in Q4 2019. 4th quarter revenue is now expected to be in the range of $1,170,000,000 to $1,210,000,000 representing 8% growth at the midpoint compared to recast Q4 2018.
Total 4th quarter company adjusted EBITDA is now forecasted to be in the range of $300,000,000 to $320,000,000 representing a 13% increase at the midpoint versus recast Q4. We expect adjusted earnings per diluted share to be in the range of 1.46 to 1.56 in the 4th quarter, representing an increase of 3% at the midpoint versus recast 2018 and assuming diluted shares outstanding of approximately 130,500,000 dollars Year over year EPS growth will be constrained by the very low tax rate in Q4 2018. Looking at the global market for the crop protection products, we continue to expect 2019 will be flat on a U. S. Dollar basis compared to 2018.
We expect the Latin America market to grow in the high single digit and the North America market to be down in the mid single digits. We expect both EMEA and Asia markets to be flat to down low single digits. Our forecast for the Asian market is slightly reduced due to the strengthening of the U. S. Tariff over the past few months.
This market forecast does not change our expectation that FMC will continue to deliver financial outperformance relative to the market. Turning now to our full year EBITDA bridge and revenue drivers on Slide 7. The main driver of the improved forecast is volume gains, which now contribute 17% year over year EBITDA growth. Pricing actions around the globe are expected to offset about 2 third of the combined cost and FX headwinds. Supply from China has improved throughout the year, but some challenges remain.
The last of strategic dollars that was impacted by the recent shutdown in China is set to restart its production in 2 weeks. I would also like to highlight the full year revenue drivers. We now expect revenue growth of 7% overall and 11% organically. Both the volume and pricing gains have been consistent throughout the year. As a reminder, this full year growth in 2019 follows organic growth of approximately 13% in 2018 on a pro form a basis.
Moving to Slide 8. We provide the key drivers for EBITDA and revenue growth in Q4. As stated earlier, we saw no shift in demand from Q4 into Q3. In fact, we raised our Q4 revenue guidance by $15,000,000 at the midpoint. However, we reduced our EBITDA guidance for the quarter by $10,000,000 at the midpoint due to higher cost and less favorable FX benefit as compared to a July guidance.
The positive combined impact over Q4 EBITDA from volume and price mix is exactly the same as we showed in our prior guidance. 4th quarter performance will be driven by strong volume growth in all regions. Included in this volume are new product launches, which are expected to deliver about $20,000,000 over total revenue growth of $90,000,000 in the quarter. These launches include Lucento Fungicide, HEPOSE Insecticide Biofungicide in North America and Thales Pure Insect Control in South Africa, Malaysia and Vietnam. Pricing actions are expected to fully offset the FX headwinds at the revenue level.
We would also like to highlight the rapid growth of cyazapyr insect control, which has become our fastest growing molecule and is now our 4th largest by revenue. Forecasted 2019 sales of Thalesapyr insect control are expected to be around $300,000,000 driven by registration in new countries and COPs. I will now turn the call over to Marc to take an in-depth look at our Latin America business.
Thank you, Pierre. Turning to Slide 9. It has been some time since we reviewed our regions in-depth. We thought it would be appropriate to start with Latin America since that is one of our key markets in the second half of the year. It is our largest region by annual revenue and has margins in line with the rest of the world.
Over the next few minutes, I'll walk you through the business and highlight our country exposure as well as crop diversity. In addition, I will review our go to market strategies and market shares as well as discuss growth drivers for the coming years. And last of all, I will explain some of the key factors that are driving much higher margins than we had 5 years ago in this region. In the Latin American North subregion, our annual revenue is approximately $130,000,000 to $140,000,000 with Mexico delivering the vast majority of that revenue. In a market that has only grown 1% over the past few years, we have increased our market share to approximately 9% as we have grown our business by double digits over the same period.
Our route to market is generally through local distribution and retail companies. We have a strong presence in the corn market and we are a market leader in several specialty crop markets where our innovative products help protect fruits and vegetables that will be exported to the U. S. And Europe. We sell the full range of crop protection in Mexico, but we have a leading market position in insecticides.
Our portfolio is also complemented by a growing plant health business, particularly biologicals, which represents approximately 5% of our business in the country. Our Mexican organization also supports our team in Central America, where we work with distributors in all countries for sales into specialty crops such as bananas. Moving south, we come to the Andean sub region comprised of Ecuador, Colombia and Peru. This sub region is our smallest and least penetrated in Latin America with revenues of only $15,000,000 to $20,000,000 We have less than a 5% share of this market, which is mainly focused on a variety of specialty crops, including bananas, flowers, rice and avocados. Our growth is coming from new distributor relationships, which are improving our grow reach and exposure.
Turning to the South Cone sub region, where we have revenue of approximately $200,000,000 from Argentina, Chile, Paraguay, Bolivia and Uruguay. We have a market share of approximately 6%. Argentina is the most significant contributor of revenue in the sub region. And in 2019, it is expected to be FMC's 4th largest country globally. Our Argentinean business is focused on row crops with a major emphasis on soybeans, which account for about 70% of our revenue in the country.
Over the last 3 years, we've undertaken a major transformation of the business, moving from an exclusive distribution partnership to now a wholly owned subsidiary that sells to multiple distribution and retail companies. Today, our sales and technical representatives are present in all the major production areas of the country. Our authority brand pre emergent herbicides are market leading and continue to show strong growth as glyphosate resistance builds across the country. We also sell a broad range of insecticides and fungicides into these markets. Our products are also used on corn, sunflower, wheat and specialty crops such as the growing vine segment.
Chile is an important country for fruit and vegetable crops. Similar to the U. S, the key to access the Chilean market is to partner with a few large national distributors, a model we have successfully transitioned to over the past few years. Finally, Brazil, our largest country from a revenue perspective, represents about 20% to 22% of our total company sales and remains an extremely important to our long term growth plans. We have about 9% market share, which was approximately $10,500,000,000 in 2018.
We've had a direct commercial presence in Brazil for decades, covering all the major regions. Today, we have approximately 700 employees in the country, of which 300 are agronomists. These agronomists focus on demand generation, both directly with growers and by partnering with retailers to help growers find solutions for their problems. We have leading positions in the sugarcane and cotton markets and serve growers in sugar mills either directly or through alliances and cooperatives. We are also one of the top 3 players in citrus, rice, coffee and tobacco.
As we expand our market access, we have seen soybeans and corn become our fastest growing segments. We have developed multiple routes to access these large yet fragmented markets in Brazil. This access enables direct sales to the very large growers in the Cerro area, mainly Machigroso and Bahia. We also have partnerships with regional retailers throughout the country and long lasting relationships with virtually all the leading cooperatives. These co ops started in the South serving soybean, corn, coffee, wheat and sugar crops, but are also expanding into the Serrado area.
They are very important relationships for our growth. As we advance our market access initiatives, we've also paved the way for future launches of new products out of our pipeline, especially for row crops. And finally, we are also a leading player in the biological segment, particularly bio nematicides. Quarzo Bionomaticide has quickly taken substantial market share in sugarcane and most recently in coffee since it was launched for the 2018 growing season. Presence by a nematicide was launched at the same time and has grown very fast as a seed treatment on soybean and cotton.
Combined Quarksome Presence by nematocytes cover a broad range of crops and provide nematode control both in thorough applications in permanent crops and seed treatment in annual row crops, completely replacing older synthetic chemistries. We have a growing pipeline of new biological products that will allow further growth opportunities. Turning to Slide 10. You can see in the table in the upper left that FMC's Latin American business is expected to grow revenue by about $400,000,000 from $1,000,000,000 in 2017 to approximately $1,400,000,000 in 2019. The map on this page highlights the breadth of coverage we have across the region.
In addition to FMC being a much larger company in Latin America than we were a few years ago, we believe we are a market leader in the way we proactively address structural market challenges, particularly in Brazil since 2015. Our disciplined business practices are driving our outperformance and position FMC to continue to thrive in the region. As you may recall, we took 4 broad actions in the 2015 to 2016 to better position our business in Brazil and to raise profitability. First, we reduced our cost base and restricted our business to better match market conditions at the time. 2nd, we became more disciplined in our sales process, mainly with sales terms and cash collection.
3rd, we eliminated sales of low value products from our portfolio, selling only products where FMC was able to achieve acceptable financial returns. And 4th, we significantly reduced the amount of FMC products in the distribution channels. These actions dramatically improved the performance of the business beginning in 2017. When you layer in the significant benefits that came with the recent acquisition from portfolio enhancements to customer access to R and D capabilities and a deeper pipeline, you can understand why we are confident about our potential to continue to grow in this region. As you know, Latin America can be a volatile region in terms of markets and currencies.
However, we have put in place several proactive levers to ensure our business growth is sustainable. These include diligently tracking channel inventory on a monthly basis in Brazil to keep it at a low level, implementing a layered hedging program to mitigate FX risk in Brazil, borrowing in local currency where practical to reduce currency exposures, robust pricing process to quickly react to local currency volatility, building a team of credit specialists to assess creditworthiness of potential customers and to limit sales where necessary and finally, utilizing more collateral and barter arrangements to mitigate collection risk. All these factors help to create a Latin American business with earnings margins that are comparable to our margins in other regions. I'll now turn the call over to Andrew.
Thanks, Mark. Let me start this morning with a few specific income statement items. Interest expense for the quarter was $5,500,000 higher than implied by our prior full year guidance, primarily due to higher than anticipated foreign borrowings, additional interest resulting from the refinancing completed in September as well as slightly higher than anticipated commercial paper balances and rates. Interest expense for the full year is now expected to be in the range of $153,000,000 to $157,000,000 We revised our expected adjusted effective tax rate for the full year to 14% to 15%, reflecting our updated expectations for earnings by jurisdiction. With this change in full year expectations, the resulting adjusted effective tax rate for the 3rd quarter was 12.6%.
Weighted average diluted shares outstanding for the 3rd quarter was 131,600,000, down nearly 5,000,000 shares versus the prior year period, reflecting the benefit of the $500,000,000 in share repurchases we've made over the past 4 quarters. EPS growth was particularly robust in the 3rd quarter. Lower share count, taxes and minority interest more than offset higher interest expense to expand EPS growth to 32% versus the 18% growth in EBITDA. As Pierre outlined earlier, we are expecting very strong financial performance in the 4th quarter, with revenue growing 8% and EBITDA growing 13% at the midpoint of our guidance ranges. Expected EPS growth of 3% is muted by a very low tax rate in the prior year period, which resulted from a year end true up of the full year tax rate last year.
Moving on to the balance sheet and debt. In September, FMC raised $1,500,000,000 of new debt, equally weighted across 7, 10 30 year maturities. We use the maturity of the proceeds to immediately reduce both term loan debt and commercial paper balances. We will use the remaining proceeds to redeem $300,000,000 in senior notes maturing in the 4th quarter. As all proceeds are being used to pay off other debt, this offering will be leverage neutral.
However, we successfully extended the maturity profile of our debt at attractive rates. Further, the offering was 4.5 times oversubscribed, which as the company had not been to the bond markets in some time was a strong endorsement of S and C's strength in the eyes of fixed income investors. Gross debt as of September 30 was $3,600,000,000 up roughly $300,000,000 in remaining proceeds from the September debt offering that are held aside for the retirement of our 2019 senior notes in the 4th quarter, gross debt to trailing 12 month EBITDA at quarter end was 2.8x. This is above our targeted leverage of 2.5x due to some shifts in working capital across quarters versus our initial forecast and the timing of share repurchases. We continue to expect to see leverage drop to 2.5 times or lower at year end, a level at which we would expect to remain at or below on average through 2020 beyond.
Turning to Slide 11. Adjusted cash from operations was $301,000,000 for the 3rd quarter. Despite strong earnings in collections, cash from operations was somewhat lower than expected due to payables. Payables were negatively impacted in the quarter by purchases made from alternate suppliers to limit the impact of disruptions from Chinese suppliers. Payable terms with our Chinese suppliers are generally longer than the temporary terms with these alternate suppliers.
This situation will naturally reverse in the 4th quarter as we rebuild payables with Chinese suppliers and enter into longer term arrangements with alternate suppliers. Capital spending accelerated in the quarter as expected, while legacy and transformation spending was largely in line with expectations, resulting in free cash flow before dividends and repurchases of $198,000,000 We are maintaining our full year guidance for free cash flow of $375,000,000 to $475,000,000 This implies very strong cash from operations in the 4th quarter given our cash generation year to date and our expectations for capital spending and legacy and transformation costs. Cash from operations will be driven by robust profitability and working capital release, including the expected improvement in payables. We continue to explore a smaller product line acquisition and may accelerate the start of certain capital investments to support the rapid growth of our We have repurchased 3.7 We have repurchased 3,700,000 FMC shares year to date at an average price of $80.95 for a total of approximately $300,000,000 including 1,100,000 shares purchased in the 3rd quarter. We intend to be a regular purchaser of FMC shares.
Although we have not purchased any shares since quarter end, we intend to purchase an additional $100,000,000 of shares during Q4, bringing the full year total to $400,000,000 Our full year EPS guidance reflects the benefit of anticipated repurchases in the 4th quarter, though this benefit is modest given the limited remaining time in the year. Before turning the call back to Pierre, let me also give a quick update on progress in implementing our new SAP S4HANA ERP system. After a successful go live in Brazil in July, the Q3 was the Q1 in which we closed with roughly 20% of the company on the new system. The close was uneventful and our Brazil team is excited about the many new tools and capabilities of S4HANA. We expect to exit the TSAs in February when we will go live with S4HANA across the acquired business.
The remainder of the company will migrate to S4HANA later in the year 2020. The new system will thoroughly modernize our business process environment, delivering meaningful near term benefits and providing us a platform for driving further improvement in the future. And with that, I'll turn the call back over to Pierre.
Thank you, Andrew. In December 2018, we shared our 5 year plan with annual sales growth of 5% to 7%, EBITDA growth of 7% to 9% and EPS growth above 10% per year. Based on our guidance for Q4, we expect to deliver at the high end of the range in the 1st year and expect to meet our objectives in the remaining 4 years of the plan. We continue our focus on driving strong growth through technology. In 2019, we expect about $60,000,000 of a total revenue growth of $315,000,000 will come from new product.
Our discovery and new product pipeline are advancing as expected. 2 new molecules have moved from discovery to development in 2019, including an insecticide in January and an herbicide in October. These are significant steps in advancing products towards commercial launch. We are pleased with the performance of the company. We delivered another strong quarter and are expecting a strong year.
Our technology advantage portfolio, geographical balance, crop exposure and diversified product sourcing continue to drive our financial outperformance. I will now turn the call back to the operator for questions. Thank you very much for your attention.
And your first question comes from the line of P. J. Juvekar with Citi. Please go ahead.
Yes. Good morning. Mark, very helpful overview on Latin America. If I look at your Latin American market share, it's all less than 10%. So that seems like a big opportunity in the future.
How do these market shares compare to other mature markets? And what's what how would you characterize the opportunity there?
Yes, P. J, I think you're right. When we look at Latin America, we do see continued opportunity to grow and take market share. I think obviously we're strong in Brazil in certain segments as I highlighted. But frankly, as we introduce our pipeline across the region, we see growth opportunities outside of Brazil that will raise our market share, in particular places like Argentina, where frankly, we didn't have great market access.
But now we have and we're seeing that accelerated growth, not only on the big soy business as I talked about, but on some of the more specialty crops as well. I think those margins sorry, those market shares in some of the other regions outside of Brazil are lower than some of our more established markets to be expected given our market access. So yes, I mean, I said it in the script that Latin America will be a major driver of our growth growing over this 5 year plan and beyond. We see no reason that that won't continue to accelerate given where we think our portfolio fits and more importantly, the market access that we continue to build across the region.
Thank you.
Your next question comes from Chris Parkinson with Credit Suisse. Please go ahead.
Thank you. You highlighted a few implied 4Q cash flow drivers on Slide 11 of your presentation and FLAG is strong collections presumably in LatAm as well as some inventory discipline. Just can you highlight on what degree of confidence or general line of sight do you already have into these improvements And how we as investors should be thinking about these better conversion into next year as well as into 2021, just the key puts and takes? Thank you.
Thanks, Chris. It's Andrew. Let me just give you some quick comments on the cash flow for Q4. Certainly, collections are expected to be robust in Q4, actually be driven more out of Europe and Asia in terms of the seasonal build of receivables. So you see a build of receivables in LatAm and Q4 with the entry into the new season.
So yes, in terms of line of sight there, we feel very confident in the collection forecast for Europe and Asia. North America, there's some collections, there's also prepays and rebates some puts and takes in the quarter there. I think when we look at inventories, we've been very, very focused on managing our inventories this year. It is a place where we have opportunity as we get better systems and better visibility with our new SAP system to drive further efficiencies, but we feel confident in our inventory forecast for the full year. I think the payable situation, we mentioned in the prepared comments, just some short term impacts, from having to use alternate suppliers with shorter payment terms during the middle of the year.
That will reverse as we go into the end of the year. We can see that as we're building payables with our more traditional suppliers and then longer terms. So all in all, I think, yes, it is a large release of working capital in Q4, but we think we have very good visibility there.
That's great color. Thank you. Your next question is from the line of Mark Connelly with Stephens. Please go ahead.
Thanks. I think the biggest question that we're getting from investors now is on the legacy and transformation costs, which are such a huge drag on free cash. Can you help us understand how those begin to roll off across 2020 2021?
Sure. Hey, it's Andrew again, Mark. Certainly understand the questions there. And I think it's a key part of our long term cash conversion improvement story is managing these legacy and transformation costs. For this year, we've guided legacy and transformation costs of $200,000,000 to $250,000,000 Of that, about $100,000,000 of it is true legacy costs, which are some of these environmental and other liabilities that are part of our long heritage as a previously very diversified conglomerate.
Those are very those are pretty stable, pretty predictable, but they're not going away. That next 150, which is really the transformation spending is a combination of finishing the integration, the DuPont acquisition and the work we're doing around the company to implement the SAP S4HANA system. That's the additional $100,000,000 $150,000,000 that you see this year. That spending should step down materially in 2020, but will not go away. And then in 2021, I would expect that spending to go to a very low level as we move to a different phase of more steady state operation.
So when you think about our cash conversion and the way we've spoken about it as a $150,000,000 in transformation spending relative to the roughly $770,000,000 in net income we're forecasting for this year, that alone would be a 15% increase in cash conversion for the company. So you'll see some benefit in 2020, but the most substantial benefit you'll see in 2021. We'll also continue working on working capital improvements and just the growth of the underlying operating cash flow to drive up that cash generation.
Very helpful, Andrew. Thank you.
Your next question is from Adam Samuelson with Goldman Sachs. Please go ahead.
Yes. Thank you. Good morning.
I was hoping you could provide
a little bit of color just on cost trends as we go into 4Q and kind of what that implies into 2020? How raw material costs have been tracking, kind of the impacts of the supply disruptions in China and potentially moving past that and kind of where cost inflation is just at an aggregate level is for 4Q into the first half of the year?
Yes, certainly. I think the general comment I would make around cost is it has been continuing into the second half of the year, maybe beyond what we were expecting at the beginning of the year. As you see on our guidance for EBITDA, we'll have adverse cost in the Q4 of $40,000,000 with about the same number for the Q3 EBITDA, dollars 39,000,000 So all in all, the 2 together close to $80,000,000 where we had about $100,000,000 in the first half. So we had a continuation of the cost mostly due to the channel disruption and some of the tollers being shut down. As we said in our prepared remarks, we expect the last strategic toller to be back on stream in a couple of weeks.
So most of the major partners and suppliers will be back on track. So if I take those comments now and extrapolate to 2020, And maybe I'll use that to give you color on 2020. 2020, we believe, will be a year of directionally at the global level, a bit equivalent to 2019, but with some differences. I think in 2019, we had Latin America growing very fast in the high single digits. So difficult to expect another year at this level.
So we could see Latin America slightly lower in growth than in 2019. On the other hand, we could see North America seeing better condition, and we have a negative mid single digit for 2019. So we could expect 2020 to be stronger. So all in all, maybe slightly slower in Latin America, faster in North America balancing out and directionally same thing for Europe and Asia. If you look at what we talked about cost, cost in 2020 will be a tailwind.
They will be favorable versus 2019. That being said, they will not be favorable to the extent we were thinking at the beginning of the year because we saw a continuation of those costs into the second half of 2019, and that will impact the cost of our product into 20 20. FX, a bit too early for us to look at where it's going to go next year. If I put all that together, our Fabio plan, revenue growth in the 5% to 7%, EBITDA growth in the 7% to 9% and EPS growth over 10% seems to be quite achievable and for the 2020 year.
I really appreciate all that color. Thank you.
Thank you.
Your next question is from Vincent Andrews with Morgan Stanley. Please go ahead.
Thank you. The comments on the Asian market decelerating versus expectations due to foreign exchange, Is that a function of actual decline in takeaway at the end user or grower level or is that just sort of management of working capital by the intermediaries in the supply chain?
Yes, Vincent, it's Mark. A bit of both actually. Asia is such a big part of the world that you have different conditions around Asia. I'll give you a quick run around as I see it today. Australia, very, very difficult market, extremely dry, not in good shape at all.
Indonesia in much better position, somewhat elevated channel inventories, but not everywhere. Monsoons were pretty good in India. We had we have a very good business in India, Channel inventory is at normal levels. China, difficult market in China, a lot going on, a lot of movement going on in terms of companies repositioning themselves. Channel inventory is okay, some areas slightly high, rest of Southeast Asia, very good, Pakistan, very good for us, very good season.
So I think that decline generally is part of what Pierre said is the currency impact that we've seen over the last few months. But part is some of the actions in some countries to make sure that everybody is on top of their business.
Thanks very much.
Your next question is from the line of Laurent Favre with Exane. Please go ahead.
Yes. Good morning. A bit of a mid term question from me, please, on insecticides. We're hearing a bit more on phase out risk of some organophosphates. And I'm just wondering for you guys, do you see it as an opportunity to grow share in dainite?
Or do you think that those phase outs are more likely to switch over to cheaper alternatives than diamides?
Yes, Laurent. Some of the products you're talking about, the diamides actually, particularly cyazapyr, would have a fit in that market, but it is a more of a low value market than where the diamides traditionally would fit. So yes, there could be an upside, but whether we would want to take it or not, I don't know at this point. We do have other chemistries though in our portfolio where we're very strong, such as the pyrethroids, which fit very well. So we do see those organophosphates that are going away, the marketing and commercial teams do see it as a potential upside for us in the coming years.
Thank you.
Your next question is from Frank Mitsch with Fermium Research. Please go ahead.
Hey, good morning and congrats on a nice quarter. I was intrigued by the comment that the access the market access to Argentina has been improved. Can you talk about how specifically and what are the implications for 2020 growth and beyond?
Yes. Thanks, Frank. I'll let Mark add any addition. But it's quite a simple situation from a market access for us. We use a couple of years ago, we used to operate through an exclusive arrangement with a distribution company in which we had an equity participation.
So we were not fully running market access and we are very dependent upon a distributor. We broke that relationship and do have an organization today, which is in direct relation with the market in Argentina. So we've changed our structure to a structure which is much more similar to what we have in other parts of Latin America like Brazil or other countries in the world, which is a direct FMC market access with a larger and maybe more traditional organization. Mark, if you want to add anything on this?
Yes. In addition to what Pierre said, Frank, we had that traditional relationship. Then we bought ChemiNova, which gave us some market access as well. And then the DuPont assets came along, and we had further market access. So we had a very complex situation where we essentially had 3 organizations that we had to bring together.
We've got through all of that now. And in fact, Pierre and I were down in Argentina about 3 weeks ago. And I have to say, the growth we're seeing today, frankly, I think it will continue to accelerate as we go over the next 3 to 5 year period. The team is really uncovering a lot of growth opportunities and the portfolio fits very well in Argentina. So it's a highlight for us.
It's a country that we're focused on. We're investing in more resources. So expect to hear more about it from us.
I think when you think about the question from PG at the beginning around market share, clearly Argentina for us, when you look at the blend of change in market access together with portfolio, that is going to be a place where we do have great opportunities in the future.
Terrific. Thank you.
Thank you.
Your next question is from Joel Jackson with BMO Capital Markets. Please go ahead.
Hi, good morning. Maybe you can give a little more color on some of the where you've got progress right now on possibly expanding diamine production over the next little while? And also, do you have any progress on possibly locking in some customers or competitors on some longer term agreements to produce for anaxpira and Sazipyr for them? Thanks.
So Joel, just you cut out a little bit. Did you say the diamide capacity? Can you
repeat the beginning of your question? Yes, sorry.
So diamine production, you talked about possibly expanding more. You have
to get a little bit
of color on this call. Maybe give a little bit more into what will decide the timing? And then longer term, have you guys made any progress on locking in some arrangements or some terms that you may lock into for producing renaxpirantazipyr for customers and competitors? Thanks.
Got it. Yes, diamides. Well, we spent the last 2 years basically debottlenecking what we acquired. And I have to say, the supply chain group of manufacturing have done an excellent job in feeding us more diamides and allowing us to continue that growth trajectory over the last couple of years. We are looking now at what excess capacity do we need to build for our next phase of growth.
So that is not something that's hitting right now, but it is certainly something as we alluded to on the capital front that we're looking at. The I think the other aspect to this is what you were alluding to where we talked last time about the relationships that we're building. We are progressing those relationships. And I obviously can't speak to them in detail given the confidentiality nature. But suffice to say that they're moving forward and we're very pleased with where we are with the breadth of those diamide potential relationships and actual relationships.
One thing I would like to add around the growth of the diamides, some of you will remember back in 2018, I talked about part of the aspect of the growth that we were seeing was the fact that we had about 200 registrations and label expansions that we were looking at that would allow us to increase our market space and allow the growth to continue. Where we are today, out of that 200, about 100 of those registrations and label expansions are now in place. So hence you see when we talk about places like Vietnam, like Malaysia, like Stazepyr in the Philippines, we now have registrations that we didn't have before. So that naturally opens up new markets for us and accelerates the growth. Something that we've put in place over the last 18 months is not only the fact that we originally had 200 and 100 of those are now real.
We now have another 240 registration and label expansions on top of what we had at the beginning of 2018. So if you think about it in terms of how we see our market expansion, different crops, different pests, different geographies, that growth will continue to go for the next 5, 10 plus years easily given what we see from a registration and label expansion.
And that comment made by Mark relates very well to the comment in the prepared remarks around cyazapyr being now the 4th largest molecule, really the fastest growing molecule and close to $300,000,000 Great growth potential here.
Thank you.
Your next question is from Steve Byrne with Bank of America Merrill Lynch. Please go ahead.
Yes. The 2 big seed companies have recently rolled out some bundles in the U. S. Market where they're bundling their seed position with farmers to also drive crop chemical sales. And I just wondered if you're seeing any evidence of that at the distributor or retail level where there could be a shift over to those chemistries.
You mentioned lower pre emergent herbicide sales in the U. S. In the Q3. I would assume that's not demand for pounds on the ground product, but channel refilling and whether there's anything going on there with respect to the dynamics in the market?
Yes, Steve, it's a good question. First of all, there are programs being rolled out, but nobody knows all the details of them yet. So it's a bit of a premature question to say how will it impact. There are some high level views of what those programs look like. Let's be clear, I mean, we have very, very strong relationships with major distributors in the U.
S. Those major distributors continue to show very strong partnerships with us given the growth rates that we have, especially around our new technologies. We also have very strong programs in place. The FMC Freedom Pass program in the U. S.
Has many different aspects to it that allow us to reward both retailers and growers for using our products on various different acres and crops. The advantage that we have, we're not tied to anybody's seeds. You can use whoever seeds you want and we will provide the best chemistry. So certainly, we have seen no impact on those programs this year. And I can tell you, given where the commercial groups are next year with regards to growth of new products and especially on the specialty crops, we don't think that's going to have an impact at all in our business in the U.
S.
I just would like to reinforce what Mark said. Mark and I, we spend a large amount of time with our customers in the U. S. And the big retailers. I can tell you with no doubt, the retail world in the U.
S. Welcome a crop chemical company, which is focused on those product, biologicals and chemicals with no seed and which is agnostic to the seed and doesn't bundle product. It's been repeated to us over and over. If anything today, I would say it's one of the strengths, the fact that we do not have seeds and one of the driver of growth.
And any comments on the pre emergent oversight sales in the Q3?
No, it's pretty much what we expected actually. We knew we had channel inventory there. It's still too early to say how the next season will go. We're not even in discussions yet around what will happen in Q4 and Q1 for that business. I think you know we have class leading chemistry with our authority brands.
And what's more important, out of those authority brands, the very high end of those brands, the ones that have the highest technology, they're the ones that are the fastest growing. So not all pre emergent and they're equal and we do participate across the whole spectrum, but have a lot of products at the very high end.
Okay. Thank you. Your next question is from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead.
Great. Thanks. Good morning, guys. Congrats on the great quarter. Just wanted to ask about the price mix and the cost bridge.
So in 'nineteen, it looks like you got like $156,000,000 on price mix. That's your expectation for the full year and negative $185,000,000 on costs. Maybe you can just help us and provide a little bit more detail next year. You know, you know some of the $150,000,000 from TSA and SAP would roll off. I'm curious on the RAS side, how much of that you would get potentially get back?
I know you said it would be less, but how much of that would you get back? And then price mix, if you're not getting back as much, do you expect a little bit better performance out of price mix? Thanks.
Yes. Thank you. I appreciate the question because it's an important question. But it's a bit too early for us to really state the raw material impact next year. Clearly, the adverse impact, it's going to be we believe it's going to be a tailwind compared to the number we had this year in terms of the $180,000,000 cost we were facing, but it's a bit early.
We are still digging through the numbers, looking at the impact of our major solar restarting in a couple of weeks. We will have lots of detail in the forecast at the February call, but difficult to assess that number. We will adjust, as we always do, pricing strategy to the currency situation and to the cost we are seeing. But we need another few weeks to be able to see through those numbers.
Okay. Then just as a quick follow-up, Latin America now 31% of your revenue or so this year. Would that kind of ebb and flow? And do you still expect kind of a 25% makeup across your regions for each in the ensuing years? Or will Latin America continue to be your largest region?
Thanks.
Yes, I think we often talk about that geographic balance. I think this year, obviously, Latin America has had an accelerated year. So it's as you said, I think it's 30%, 31%. I would expect over time, it stays in that range. It is one of the largest markets in the world, one of the fastest growing.
It's one of the only places on earth where you have more land that can be turned to agriculture, mainly from converting pasture land to agriculture in Brazil. So you're obviously going to have that impact. I would say that longer term, Asia will also continue to grow rapidly, especially for us given our excellent North America and Europe, I expect pretty much steady as it goes in those sort of ratios.
At any point, any year, you could have one region going faster and taking a stronger position. I think this balances out in over the years. North America, we don't expect the year next year to be as bad as this year. I mean, everything could happen, but really it was a very negative year in North America and very favorable situation in Latin America. That could reverse next year at any point.
So all in all, it should balance. As Mark said, Asia, we should not underestimate the potential we have in India. India is a very large country with us. The portfolio and the new commercial structure we have in place is going to create significant growth opportunities in the future. So all of these to say that this 25% per region over the year should remain in this kind of a range.
Your last question comes from the line of Chris Kapsch with Loop Capital.
You did address my question about the dynamics in North America and headed into the 2020 season your sanguine view about prospects. Just I guess one nuance on that though is I understand the strong relationships with the channel partners that you referenced. Is it just also just a function of your sort of de minimis relative to the broader market exposure to the row crops and addressing the horseshoe part of the North American market and just visibility of the competitive dynamic based on channel inventories going into 2020? Any comments on that?
Yes. It's pretty much as you said, Chris. When you think about it, soybean is obviously important to us, but we're not on every acre of soybean. Where you have you have strong weed resistance, you're going to see our authority products. Certainly, as you said, in the Horseshoe, California all the way around the south of the East Coast, where you have specialty crops, we have a superb portfolio that fits there and continue to grow.
So you're going to have that different type of mix from FMC, which is different to, as you said, some of the other companies that have a very large row crop exposure. That's advantageous to our distribution partners and retail partners. We offer them products that are very different and for us with a lot of growth opportunities.
Thanks for that. And then just one follow-up on Latin America and Argentina specifically. You had pretty bullish comments about gaining share over time there, given better access. Can you just talk about the obviously this recent election that the result was signaled a couple of months ago when the peso was devalued on the preliminary results. Just any influence that has on your operations, your ability to execute a growth plan in that country?
Thanks.
Hey, it's Andrew, Chris. I think good question. I think with Argentina, the market is for our products is U. S. Dollar denominated.
There are some delays in collections that can create a little bit of FX exposure. But while there will certainly be challenges with likely future devaluation in Argentina, we think it's quite manageable. It is the issues around capital controls, etcetera, are also quite manageable for us in terms of bringing in pretty necessary crop inputs. So it's something we watch very closely, but not something we're overly concerned about at this point.
All right. That's all the time we have for the call today. Thank you and have a good day.
Ladies and gentlemen, this concludes the FMC Corporation conference call. Thank you.