Of the Jefferies Industrial Conference. This is Laurence Alexander with the Jefferies Chemicals team. To start off today, I'd like to introduce the team from FMC . Today we have Pierre Brondeau, who's the CEO, Andrew Sandifer, the CFO, and Ronaldo Pereira, who's the President. Thank you very much for joining us today. I think just to get started, Pierre, would you mind just laying out kind of your current views on demand trends around the world, what that might mean for how you're thinking about Q3 and the setup for Q4?
Sure. Thanks, Laurence. I would characterize the market as, I would say, normalized in a sense that it's a very different feeling from where we were a year ago, which means there is more control level of inventory in the channel. We're not in a place where predictability is harder. That being said, I would not consider us in a high demand period. We're in a period with farm income, geopolitical situation where the demand is more on the softer side, but much more predictable, much more normal, like what we've done before. What does it mean for our third quarter looking into the fourth quarter? Maybe the simplest way for me to answer the question is that if I would have to do a guidance right now, as we did at the earnings call, I would do the exact same guidance I did at the earnings call.
The first couple of months of the quarter were exactly as we were expecting. The fourth quarter is still looking as we are expecting, and we understand those are two very big quarters for FMC compared to the first two quarters, and they're critical to make the year. At this stage, the quarter is unfolding as we're expecting. Always difficult to make a statement like that for Q3, knowing that September is always the biggest month of the quarter. That's the beginning of the Latin America season. That's when things start to really take off. To some extent, also preparing for the season in North America. Europe, that's the back end of their season. Q2 is the big quarter. All in all, I would say much more predictable and much more in line on a monthly basis to what we're expecting to see.
Let's carry that forward into 2026, because when we get to the earnings call, I'm willing to bet that half of us are going to ask you about next year anyway. How much visibility will you have on 2026 in November?
I think in November, right now it's a bit early. Before you talk about 2026, you always need to see how the North American season and the Latin America seasons are going to go. By the time we get to earnings call, end of October, 30th of October, we'll be one month into the fourth quarter. We'll have the third quarter behind us. Yes, we should have pretty good visibility on 2026. The key thing being that what we sense today, as I said before, is more predictability. Short of an event, weather or things of that kind in the big regions like North America or Latin America, the visibility on the market is better than it's be`en for the last couple of years.
When you think about the 2027 framework, the components that you expect to have from the new actives, Biologicals,Cyazypyr and Rynaxypr, which pieces do you have confidence in and which pieces do you either need to still make a decision on or need to see how the market responds before you know that piece is locked in?
I think, you know, we developed a portfolio in what we call core, which is all of the products which are made from molecules which are in the public domain, and we have growth, which is all of the formulations which are made from products which are new active ingredients, which are either patented or under data protection. First, if I talk about the growth part of our portfolio, the highest confidence in the 2026-2027 numbers are with the new active ingredients. I think fluindapyr and Isoflex are in very, very strong demand to a point where customers are themselves intervening with the registration authorities to move faster the registration of some other product. We're seeing that in Europe right now. We just got it in the U.K. for Isoflex. The same is taking place for fluindapyr. We just launched Dodhylex in some countries.
There is absolutely no doubt that the growth of those products is solely limited by the speed at which we're getting the registration, not by the technical performance of the product. Should we get the registration faster, we'll get the numbers even bigger than what we have. Very high level of confidence. The next one is Cyazypyr because it's a large molecule. It's $0.5 billion. We know it very well. It's data protected. It's a very, very good insecticide. It's a very good partner for formulation with a very broad spectrum. We know the molecule or a sales-oriented molecule would be its number two in terms of level of confidence. Then we go to number three, Biologicals. We're increasing the number of products. We're not planning at this stage.
We're doing a full scale, commercial scale with pheromones, but we're not including any of that in 2026-2027 until we see how it works. Biological with pheromones. If I talk about the core product, our core business, we know how to make new with old. We know how to make formulation. We know how to grow this business at the speed of the market. The most challenging, of course, but we feel we are well ready for it, is Rynaxypyr because we're entering a new period where generics are going to be allowed to sell starting the 1st of January 2026 everywhere in the world. We believe we're well prepared for that. The manufacturing cost is well aligned with what we need, and we have local strategy in place. Right now, everything looks like we were expecting, but I would say that's the newest part of the core portfolio.
Because the question keeps coming up, can you just touch directly on why what happened in India with Rynaxpyr is not the template for the rest of the world? What do you need to see from the competitors? Is it a matter of competitor behavior? Is it regulatory dynamics, market structure? Can you give a sense for what's different or what the risks are?
Yes, thanks for asking that because it's an important question. India is not a template for what is going to happen in other countries. It is not the Rynaxypyr issue in India. It's a decision we have made to play in the Indian market a different way. I know very few of our colleagues, large international companies, who love how we have to operate in India. It's a very, very complex market with a very large number of layers in the distribution channel, five, six, seven, to reach stores and then reach tens of millions of farmers. Packaging size may be bigger than that. That's not the kind of way we operate. That's what you sell to people who have half an acre farms. It's a market for which you need to be structured, and we were not.
It's also a market which is we're betting the farm at FMC today on new technologies. We believe, and we've been told even by competitors, if I look at the next five years, we have the best portfolio of new products we introduced on the market. Nobody else has the number of new active, patented, data protected, new mode of actions. The next five years for us, we're betting the farm on growth with new technology. India is late in new technology adoption because the number of layers you have to convince to get to the farmer that those are the new products you need to substitute is very complex. You get to the end to very small farmers, and they're not very often inclined to take those products. It's expensive. It's complicated. It's a very large organization for the size of this business with thousands of salespeople.
We made the decision to try to operate in this market more in a B2B way than a B2C. Our intent is to stay part of this market, to sell the business to most likely somebody local. We have a lot of inquiries today, a lot of interest, and then use this partner to commercialize under specific agreement on new technologies.
When you say betting the farm on the new product pipeline, that can be taken a few different ways. Can you unpack that? Specifically, do you have the right operating culture, metrics, rhythm, structure to place that bet?
When I say betting the farm on new technology, it is because today we do have a solid core portfolio. With Rynaxypr getting out of patents, it is not a clear advantage over competition. We are competitive. We have the right product. We know how to make formulations. We can compete in this market, but I think we'll grow at market speed. Where we will be highly differentiated from our competitors is on new technology. I have never seen FMC, including all of my first 11 years as CEO, with so many products to be launched and products which are under very high demand by customers because they saw the differentiation. Think about the fact we have two new herbicides with new mode of action. No herbicide has been introduced in this market for 30 years. Think about the resistance on herbicide.
Our customers can't wait to have access to those products. Four new active ingredients, a rich biological portfolio, and Cyazypyr . That is very rich. On the positive, we've reorganized the region. We've reorganized the leadership of the region. We believe we have the strongest leadership organization we ever had. Now, what is not the downside, but the challenge when you are in a situation like that is selling new technology to growers is not easy, especially when you're selling new products in a space where no new product has been introduced for decades, herbicide. Growers are always challenging to convince. You need to have hundreds and hundreds of sales organizations trained and ready to promote those products. If there is a place where we still have a little bit of a way to go, that's where it is.
I always say I like the portfolio today better than past acquisition of DuPont business because DuPont business, we had Cyzaypyr, Rynaxypr, full stop. Those run out of patents. There is nothing behind. Today, the number of products we have, which are growing and for which we are getting registration, is very high. Training a sales force on two insecticides, especially Rynaxypr, which has a very narrow mode of action, is not that hard. Today, we have four new active ingredients, and I don't know how many new biologicals were on the market, but a significant number of.
Five big ones.
Five big biologicals. Think about that. That's nine new products. We are attempting to introduce pheromones where now it's very different. You're not killing, but you are preventing the event to happen. I would say it requires marketing investments where we have to focus right now. Are we ready? Not 100%. Hang on. We're a bit limited in the speed by the time we need to get the registration, which will allow us to do it, but that's a remaining challenge for us.
There are a few different regulatory cross-currents. I think the first is, in the EU, there's been this long project to get rid of the older chemistries. Is there anything in the crosshairs for the next four or five years that would make a structural change for FMC?
Not that we know on the regulatory side. What happens in the EU is more and more growers are going back to the government and the regulators and saying, "We are running out of tools." That creates an environment for the regulators to give what they call derogations or emergency use for either existing active ingredients or new active ingredients. They are more likely to take a look at new active ingredients because it's just a matter of speeding up something. They don't want to go back to something that they phased out, they banned, and say, "There's one last time. You're allowed to use this." We see that. We see the EU discussing a new regulation for biologicals. They're still treating biologicals the same way they treat synthetic chemicals, and they're not offering growers the tools they need to change, to migrate, and continue to grow their crops.
Those are the two key areas that we see happening in the EU. I'm not aware of any specific regulation that's going to change the trend that we are seeing today.
One of the things which is interesting in Europe, and that was there not long ago, some of the countries had to back away from decisions they made to ban some of the products because there were no replacement solutions. That's the kind of situation that we want to be in. I went to Europe and met with about 50 or 60 farmers, big growers and distributors. We took them to an experimental farm where we have been testing Isoflex, the new herbicide for cereals. I can tell you, anybody in this room would look at those fields and will tell you, "Isoflex, no Isoflex, Isoflex." There have been so very few products which have been introduced in this market that you look at a field of cereals, there is as much weed on the field that there is cereals.
You see a situation as Ronaldo was talking about where our customers right now, in the case of Isoflex, we should get a regulatory approval early 2027. Right now, it is not us. It is the growers and the distributors who are asking to the EU to give them an exemption to be allowed to purchase the product in 2026. There is a pressure, a grassroots pressure right now in Europe to be a little bit less rigid and accelerate the regulatory aspect of the product. They're running out of tools.
Switching over to the U.S., you have the MAHA movement. What I find interesting about it is this focus on root cause analysis, which is it can lead to odd outcomes. When you think about crop protection chemicals, which have been a suspect in popular culture for several decades, I guess 50, 60 years now, how do you see the risk profile for the industry? How do you see FMC position relative to the industry? Not in terms of what scientifically acts, but what could happen in terms of branding.
I think, frankly, what we've seen with our customers, with growers, with the regulatory side, we depend upon the EPA. Be careful the way I say it, but MAHA has zero influence on what is happening today in the ag industry. There has been no reaction to any comment. There has been no change. It's a critical part of the economy which needs those products, which is separated from a regulatory standpoint from MAHA. We see very little risk in North America for MAHA to have any concrete impact on the industry beside noise and comments. They're very different from what you could see on vaccines or places like that where they have authority. The rest is kind of a noise in the background. I don't know, Ronaldo, you've talked to customers.
I have. It's very hard to go to a grower that is the ninth generation planted on the same farm and say that that is not sustainable or it's dangerous when every generation is uplifting the prior generation, right? There's something that doesn't fit well in that assessment. I think the growers are doing a very good effort to actually get closer to the administration and say, "Come see what we do and help us, but get to know our place so we can at least have established a dialogue." Two aspects I think that are important for FMC, two aspects. The first one, there are some products that are more exposed than others, and we don't sell those products. We don't have them in our portfolio. We don't have them in the U.S. We don't have them anywhere else.
The other aspect is every challenge on the regulatory side will always favor innovation. We think we are in a very unique position from an innovation standpoint. That said, we continue to stand behind science as a way to make decisions, especially on the regulatory front. The U.S. has set the standards for a scientific-based approach of regulations that, as an industry, we want to protect.
I would like to add that the U.S. is very far from being a place where it's the most difficult to get regulatory approval. There has even been a decision that was made three or four months ago to add a significant number of engineers and scientists in the regulatory part of the EPA to speed up approval. I think it was 200 or 300 people who were added to accelerate the approval process because they believed they had too much of a long tail of products which were waiting for approval.
I guess another regulatory shift is on gene editing. It's very easy for us on the outside to go back to the 1990s and 2000s, look at the shock that happened to the crop chemical industry from GMO. Can you just unpack what's different and to what extent can FMC either partner with the seed companies to help gene editing products, or how do you see the risk-reward with those regulatory changes?
I think scientifically, very different from what happened with GMO. When GMO came, there was a false view that the entire industry would be shifting to GMO. Crop rotation would disappear. It's not the case anymore. I mean, you talk to the seed company. We're in partnership with the seed company. Everybody sees gene editing as a normal evolution of GMO technology. It is not viewed as an abrupt change which is going to be turning around the ag industry, but as a normal technology innovation which makes GMO evolve into gene editing, but not changing the fundamental rules by which that industry is operating. It's part of the process. It's part of the evolution, not at all the same approach where everybody believed there was a shift in the way this industry was going to operate.
Can we also talk about, you know, we touched on this last year, Precision Ag drone- spray technologies? How has your thinking evolved about the opportunity set created by that?
I think Precision Ag is fundamental to the way all of us are operating. I think that too often the confusion is that people, when they think about Precision Ag, they think about seed and spray. Precision ag is much broader than seed and spray. First of all, seed and spray is an important technology, but what is seed and spray? It is a process which is addressing weeds with non-selective herbicide, which is a narrow segment of the anti-herbicide technology. Our product, the FMC portfolio, for example, we are very little into non-selective. Selective herbicides are not touched by seed and spray. That's what we sell. There is also a very large part of herbicides which are pre-emergent herbicides, which is a category of product we do have a big part of our portfolio. Pre-emergent means you don't see anything, so you cannot use seed and spray.
There is also multiple herbicides and selective herbicides which leave what we call residual. Their spectrum residual allows to treat future weeds post the spraying. All of those are not touched by seed and spray. Seed and spray is a technology which addresses one very specific part of the herbicide market for non-selective. It does not impact us because that's not a segment we're in. It impacts companies which are in this segment. The rest is using data and science to improve what you do. We have a very large organization today on precision ag.
A lot of the work we do today is to anticipate potential activity on the field of bugs, of weeds, mostly bugs for us, because we're big on pesticides, where you try with straps to understand what is the potential infestation, which bugs, when it will happen, to make sure you and the farmer are ready with the right product at the right time, rather than coming with a very broad type of options or intervening too late. That is a big part of what we do. We do have, we do use this process. We do sell this process. It's part of what we do. Precision ag is big, and that's usage of data much beyond seed and spray. No matter what.
We are also adjusting our labels for drone application. I think we were one of the first companies to start doing that on a global basis to make sure that the farmers that use FMC products are covered by the right labels to use their drones and to use their new equipment, satellite images to help them make decisions. In a broader sense, we play in precision agriculture because we see that it's not that we offer new technologies related to that, but we use that as a way to inform farmers on how to best use our products.
I want to close with two longer-term questions. One, I'm not usually kind of a fan of blue-sky scenarios, but just curious as you think about the next five, seven years, how you think about the next wave of active ingredients. How often do you think you can add a new active ingredient to the pipeline? How do you think about when you've initially sketched the opportunity set for the new products? Is that kind of, you know, Syngenta used to talk about the first application and then the extensions. If we use that kind of analogy for you, how large could the extensions be relative to the first applications that you're targeting?
Thank you. To answer that and ask Ronaldo to go in more detail, I think there is, when you talk about new products, we always look at two things which are very critical when you look on a four, five, six-year basis. There is the product you're introducing and what is the field of application. I'll give you an example. Dodhylex. Dodhylex is going to be a very important grass herbicide. This product initially was developed to be a rice herbicide. That's when we talked about this $500 million potential. That was a rice herbicide. We are uncovering it's an herbicide. We had the test being run in Brazil on sugarcane. Excellent herbicide. There is the initial field of application, and then there is how does this product expand into new crops. You always have that part.
You bring a new product and then you expand in the years to come on different crops. Plus, there is behind this product all of the new actives which are in the development pipeline and then the actives which are in the discovery phase. All of this is part of the process. Ronaldo will add a word, but maybe one of the things we don't do enough at FMC is to update the potential of a product to the size as we uncover new applications for an active ingredient. I think we start, we're introducing four molecules. We knew which kind of crops they would be addressing. We define a market for that. As we go within two years, you've doubled the numbers of crops this product could address, and that tremendously increases the size of your potential market.
That's something we're seeing with the new active ingredients we're developing right now.
On the R&D side, we screen a few hundred thousand compounds every year. We're always advancing something into our pipeline. That very early stage success rate is very low, almost by design. Our goal is to select at least one development candidate every year or every other year. We have enough to make that decision in our pipeline. We talk about the four new active ingredients because we don't want to talk past 2030. If you say, "What do you have between 2030 and 2035?" we'll come up with another five products that are already in development or they're getting into development in our pipeline. That is continuous. As for the expansion of the use and applications of those active ingredients, it never ends. Three or four years ago, we launched a product in the U.S. called Xyway. It's a fungicide, a soil-applied fungicide for corn.
It's based on a molecule that was discovered decades ago, but that use is brand new. The reason we are only introducing, or we only introduced a few years ago, is because there is now a target that needs that type of application. 20 years ago, there was no foliar fungicide application in corn in the U.S. As the crops evolve, the target, the problems evolve, we continuously look at our existing products and we manage the way we offer them in terms of formulation, application methods, labels, and things like that. It never ends, really. It's a continuum.
One word, Ronaldo said, any of a peer company like us, we would be very proud if on a constant basis we bring a new patented active ingredient every year or every other year. That would be a very good rhythm. Hence, why we are so excited about today is I've never seen that we have four new introduced and five biological. You have nine products in a given period to secure your growth for the next 10 years is extremely rare. Present challenges, but it's extremely rare. It is not a rhythm we believe we're going to sustain for the next 30 years, but right now, I can tell you we're enjoying the potential.
Okay, I think that's a good point to close. Thank you very much for the discussion today.
Thank you.
Thank you, everybody, for starting off so early.