Welcome back, everybody. As we kind of move into the afternoon, I'm pleased to be welcoming Pierre Brondeau, CEO and President of FMC, and Andrew Sandifer, who's EVP and CFO. You know, FMC been a long-standing participant in the conference and obviously a very fundamentally important player to the agriculture market. Thank you for coming and joining us. There's been a lot, obviously, with the business, both fundamentally and strategically, and I guess if we kind of just go through it and kick off, I wanted to ask you a little bit on the strategic side. 'Cause the company kind of said, "We're taking various paths. We're potentially for sale. We're looking at licensing agreements, asset sales. Can you help frame and structure what's, you know, currently at process as it relates to this?
Yes. Thank you. I think it's the most important question because there is some confusion around what are options, strategic options, and what is in the 2026 operational plan. There is two path: Plan A, Plan B. Plan A is the 2026 operational plan, for which decisions have been made and are being executed. There is multiple pillars to this Plan A. Number one, divesting assets to pay down debts for about $1 billion. Number two, reshaping a manufacturing footprint to bring back to competitivity our core product. Number three, implementation of the Rynaxypyr post-patent strategy. Number four, the growth of the four new active ingredients. Those are the four pillars of our 2026 strategy plan. In the $1 billion divestiture of assets, the number one is selling our business in India.
Yeah.
This is proceeding very well. We are expecting binding offers in the next two weeks. That's first step and fundamental step to the process. Number two is licensing of one of our advanced molecule with an upfront, significant upfront payment, allowing us to pay down debts. We are currently in negotiation with different parties. I would say very close to a decision. That part number two, which is licensing one of the molecule with upfront payment, and the upfront payment is just not a few dollars, it's a, it's a meaningful part of the $1 billion, is very close to happening, hopefully, Q1, beginning of Q2.
Okay.
There is a series of other activities which we are undertaking. We cannot be more precise because they are less advanced, but they are in the process of due diligence for some companies which are interested in those assets. I would say that part of that pillar, of the four pillars, is progressing very well, as expected, with the top two being very well advanced. Plan A. Plan B. When we presented Plan A to the board, they approved the plan, and their view was, it's a very solid plan, but like any plan, there is risks. If something goes wrong in this plan, what are the alternatives? Could you explore strategic options for the company beside this plan? Which could be selling the company, merging the company, or any other option. Plan A is the priority, but we are running Plan B fully.
You do not look at Plan B by just waiting for a couple of phone calls. No. We are running it like a divestiture process. We've hired two banks, Bank of America and Goldman Sachs. We're running the process. We do have a legal advisor. We have prepared the management presentation and the data, and we have actually already given management presentation to parties which are interested in the acquisition, potentially, of FMC. This process is fully in motion. Despite the fact that my priority as a CEO is Plan A and delivering on the operating plan, the other process is being fully run and completely in motion currently.
Is it fair to assume that a lot of the companies that are looking at Plan A are also in Plan B, as it relates to licensing and some of these opportunity sets, or do you find them to be separate considerations?
You could have companies which are on both sides.
If I think about a normal licensing deal, at least, the way that we kind of see them historically, it's a partnership. Say, for example, fluindapyr with Corteva, right? You had the sales, and incrementally, you collect the license or the value stream as the sales progress. When you go forward with something like a lump sum up front, is there? Like, what kind of haircut do you think you're at risk of taking by moving everything forward? Or it feels like there's more risk to the buyer conceptually, right? How does that conversation evolve? If I look at your four actives and it's $2 billion of peak sales by 2035-ish, maybe.
2.5, yeah.
Okay, $2.5. Okay. Well, that's important for me to know. What's like a realistic sum that you could get in a licensing agreement really today for some of this stuff?
We cannot divulge, of course, the prepayment.
Of course.
We do not take a haircut. There is very different type of licensing agreements. When you license fluindapyr, and fluindapyr is not the molecule we are talking about licensing today. fluindapyr is a molecule which has been registered in most of the large markets.
Yeah.
Usually, those license are done pretty quickly, with a licensing agreement and payment by the licensee as we go. Here, we are talking about more advanced molecule, very often which do not have registration or all of the registration. It's a longer process, which require more due diligence to understand the molecule, its capacity, the probability will be registered. All of this is behind us, has been done. You're acquiring a molecule much earlier in the process.
Okay.
You don't take a haircut, but it's different type of licensing. Also, this type of licensing very often comes with an exclusivity on some territories and some crops, which you would not have in a simple licensing agreement.
Okay
For somebody to sell a molecule. Those are deeper, broader licensing agreement. Why are they beneficial to us? It's because w e would do this type of licensing agreement regardless of not, of the situation we are in. When you have a molecule of quality, you want to be able to reach the largest possible market. The ag industry is a very, very fragmented market. We are one of the largest crop chemical company in the world, and we have 7% market share.
If you want to reach a broader market with this molecule, you need to find partners which have complementary crop profile and complementary geographical profile, because then you reach a bigger market. You give to these companies a commercial license. What does it mean? You sell them, We keep the manufacturing of the molecule. We sell them the molecule at a cost plus, then they pay a royalty, and then they create mixtures.
Yeah
For the crop they want to treat. That's the way it works, a very different type of. For us, the benefit is reaching a larger market. It's also financially, if you think about it, by selling the molecule at a cost plus royalty, knowing that we do not have the selling tax service expense. From an EBITDA margin, you might have a lower gross margin, but you will have an equivalent EBITDA margin on the product.
Understood.
A net present value of a molecule which is licensed to the right partner is higher than the same molecule you try to keep for yourself.
Would something like Dodhylex be open for this, or is it even further out type of, I mean, like?
It will be one of the three molecule, Dodhylex, Rimisoxafen, or Isoflex. Obviously, when you talk about this kind of molecule, what I've said, you tend to think more Dodhylex and Rimisoxafen, which have less registration and are a bit further away from commercialization.
Okay. 'Cause if I think about product efficacy and breadth, it felt like to us, Dodhylex probably has a You know, when I look at applicable market, that's one where I feel like it could actually go really broad.
I think the two molecule, if I look at the four molecules we are putting on the market today, the two molecules which have the most unique technical capabilities and market breadth are Dodhylex and Rimisoxafen.
Yeah. Okay.
Two molecule with new modes of action, each of them, and Rimisoxafen with a dual mode of action.
Along the same lines and, maybe a little bit different, but would you look to sell any product lines down? Like, would you just sell the entire Isoflex, right? Would you sell the whole Isoflex suite, AI production, active ingredient production to sales and just divest that AI segment to somebody? Cyazypyr. Could you carve out Cyazypyr, the footprint up and down the scale and say, "This is yours now, if you want?
very different question about sales up here and one of the new molecule sales up here. I've not even given any thought about potentially selling sales up here. Selling one of the new molecule, there would be two reasons for which we would do it. One would be an absolutely insane price or us being completely desperate. I don't think we're gonna be facing any of those two situation. Today, selling one of the molecule is not in the cards. We would rather sign good licensing agreements. Think about FMC. 2026 is a difficult year, we know it. The operating plan is not a walk in the park. If we get successfully through 2026, 2027 is looking really good.
Yeah.
Our core business will be in great shape, we'll have four molecule taking off with very fast growth, reaching $1 billion very quickly, $2.5 billion in potential, very unique molecule, rebalancing our portfolio from an insecticide company to much more balance between herbicide, fungicide, biology, biological, and an insecticide.
No, look, this is all very helpful context because I think when we In the days following, we had a lot of conversations like, "Well, if they're just gonna sell or, you know, remove the economics of the, you know, primary growth engines, like, what's left?
Yeah.
Like that's not really on the table, which I think is helpful as it relates to creating a story that's ownable and capitalizable beyond just, this is what the cycle's gonna do.
Well, you're absolutely right. I mean, for us, priority number one is Plan A, which include retaining the four new molecules.
Yeah. Look, I think FMC over time has always had a successful platform, in part just because of breadth of products and applications, right? It's not just row crops. You've had a pretty broad spectrum of markets, it feels like pressure at the same time is pretty uniform across this core portfolio.
Yeah.
Maybe, maybe that's not the case. Are there specific portions that are just being hit particularly hard that you can address? Or is this, that core business is all kind of unilaterally under pressure across all of their, your modes of action and products?
The latter. I think what's been happening is, over the last three years, because of the prolonged downturn, the low demand, price have been going down constantly. generics have been very active in pushing price down. I must admit something. I realized maybe a few quarters too late, that our portfolio, our core portfolio, was getting uncompetitive from a price standpoint because our cost was too high. Half of it is produced in high-cost plants, and even the one we are producing we are producing or procuring in low-cost region could be done at lower cost. We have redefined a process to relook at our footprint and bring back a manufacturing cost in a place where, with a straight molecule or with formulation, we can compete with any generics around the world. Now, there is locations where those products are being more impacted.
Yeah.
That's the place where the generics are more active. Latin America, and especially Brazil, being one. Asia being another one. After that, North America, and last would be Europe, which is the most stable market we have. Overall, it's an issue of a manufacturing cost of a core molecule that we need to fix across the board.
You kind of touched on two things that I wanna parlay into. First is, as you look at where you're priced, have you basically priced back on top of market? If, if I were to see, if we were to diligence and commodity crop chemical prices rise 5%, will your core portfolio also be up 5% now? Are you kind of on top of market prices and competing where the market is now?
We try to be where the market is. The problem is in a deflationary market, when price is going down, if you look at our results over the last few quarters, what we have lost is volume. There were cases where price were going down to a place where it didn't make sense for us to stay with the market price.
Okay.
Most of the time, when you look at volume loss at FMC, it's on core products. If you look in 2026, that is the number one driver of a lower EBITDA versus 2025, it's same thing. We're not gonna be able to go after all of the business on the core because of a manufacturing cost.
If volumes 'cause I think it feels like the next two, three years does set up more favorably for crop production, right? Farmer profitability may be aside. The business feels like we're putting in a bit of a floor. Volumetrically, I think we should grow. You know, I had Chuck up here earlier, and I think he would articulate a similar expectation around volumes can grow from here. Reentering some of these markets as demand came back and then volume growth, if we saw prices higher? Like, how should I receive you contribute then or play as the cycle recovers?
We've not moved away from any market.
Okay.
We just lost business and specific customers.
Okay.
That's more the situation where a customer would be able to get a price from a generic, and we could not follow. That's where we lost volume, but we moved away from no market. The way we look at it, and we tend to agree with Chuck, that we should see volume growth, 2026, 2027, 2028. Our view is, if we put ourselves in a place where we are competitive at the bottom of the cycle, we'll be even more competitive when the market grows, and we'll be capable of taking full advantage of that of that growth. The last thing we wanna do is wait for the market to grow for us to be back to competitiveness. We just want a lower price to be able to be competitive regardless of where we are in the cycle. We have not moved away from any markets.
Okay.
We are still with the same molecule, but we've lost business and specific customers where we couldn't follow competition.
You talked about operating costs associated with $1 billion in revenue being down 35%, I think is the target. How do you get there? What actions are you taking? I mean, is this, like, $300 million in savings? Is that kind of the rough number we're looking at?
Not exactly. It's saving 35% of the manufacturing cost.
Yeah.
billion is the selling price, if manufacturing cost is 50%, it's 35% of 50%.
Okay.
It's $150 million, $170 million. There are two aspects to it. One of the cost reduction is going to be made by moving out of manufacturing of active ingredients in Europe and North America, and move all of these to lower-cost countries, India and China. Either in our India and China plants or with our toll manufacturing partners, very often exclusive or through contract suppliers with generics who are working with us. That's the way we're going to do it. We're going to limit our operations in Europe to more formulations than manufacturing of active ingredients and refocus all of the manufacturing to India and China.
Do you have to be a manufacturer of active ingredients, though? Can you just 'cause it feels like the capital investment and requirement for active ingredient manufacturing might not be worth it anymore if you can just be a formulator, right?
It's not very high. Those are not big plants. I mean, our capital spending every year is $100 million.
Yeah.
It's not a very high capital spend. Our plant could be expanded without building new plant. There is something which is fundamental for us. We have the four new active ingredients I've talked to you about. We have two new fungicide coming out of the development in research. We wanna be able to manufacture those products.
Okay.
Those products need to be manufactured in-house. We're a manufacturing company, we're not moving out of manufacturing actives.
How do you choose? I mean, India and China, like, under a traditional sense, obviously makes a lot of sense. How do you navigate just tariff uncertainty, considering the ebb and flow of headlines, the risks around U.S., China trade tensions? Is there just no ability to put this in somewhere like Vietnam or? Like, what is ultimately the draw that gets you back to China and India?
Well, China and India, first of all, are the place where we have already facilities, where there is most of the raw materials coming from, where there is the people, the knowledge. Second of all, I think people have to remember that for a company like FMC, the U.S. is not the world. The U.S. is only 20% of our market.
Yeah.
Manufacturing in India and China put us in a very beneficial position for 80% of our business. Yes, we have an issue with tariffs, but it's for North America. It's for the U.S., not even North America. It's U.S., Canada is pretty big for us. It's for the U.S., and the U.S. is not even 20% of the world market. Second of all, there is such a difference in manufacturing cost, that manufacturing in India or China, plus the tariff, is lower than manufacturing in one of our plant in Europe or in North America.
Understood. Andrew, to bring you in on this. The restructuring work this year is consuming cash. Next year, if we return to growth, you know, typically that's a working capital headwind. How do we chart if the company's gonna grow 15% in 2026 and 15% in 2027? How do we chart the cash flow progress?
Yeah.
from here?
Yeah, that's an excellent question, Mac. I think if you look, starting in 2026, you know, we've guided to a midpoint of essentially break-even free cash flow. Now, embedded in that is about $130 million of cash restructuring spend for both the manufacturing footprint changes Pierre was just talking about, as well as for some final costs that go over the next couple of years from a large take-or-pay supply agreement in our Rynaxypyr business that we walked away from two years ago. That is one of the big headwinds on free cash flow in 2026. There will be a step down in restructuring spending from 2026 to 2027, but it's still pretty meaningful.
It'll take through the first quarter of 2027 to make all the manufacturing changes we're talking about, and we still have another year of material take-or-pay payments from the old Rynaxypyr supply contract that comes in, that needs to be paid in 2027. What I think you'll see is, you'll start seeing pretty healthy EBITDA growth after the repositioning in 2026. You know, we've said openly mid, you know, mid-teens, fifteen percent.
Yeah
Kind of range in 2026 into 2027 and 2027 into 2028. As you get that higher level of EBITDA, more of that will flow down to free cash flow. By 2028, certainly there's a much less drag from restructuring expenses. There'll be a pretty significant step down from 2027 to 2028 with restructuring expenses. We do have, you know, we do have some legacy expenses and some other semi-fixed expenses, and we pay about $135 million a year in cash for legacy environmental costs that are both in our a mixture of discontinued ops, continuing operations, obviously, interest expense, taxes, those kinds of things.
Getting that top part of the EBITDA to free cash flow flow back to higher number leads to a lot more drop through. The last piece I'd put, you know, Pierre pointed this point before, you know, we spend about $100 million a year on CapEx. We're not particularly fixed asset intensive, but with growth, there is working capital growth. We are doing, you know, a lot of things to both improve efficiency on all dimensions of working capital. We're working on ways to bring that cash conversion cycle back to more historical norms.
It's been stretched over the past three years as we've been in recovery mode, coming out of the big post-COVID correction. As we've had some pretty big shifts in mix in our business, you know, less B2B business on shorter terms, more business in long-term markets like Brazil and Turkey. I think you will see an improvement in working capital productivity as we go in through 2026, 2027, 2028 as well, that'll reduce the amount of working capital dollars growth that's needed to support that top line growth.
Okay, I appreciate that. I wanted to talk a little bit. You know, we've been layering in the discussion on AI. It's hard for us from the outside to gauge progress at some of the companies. You know, by and large, we've spoken about seed and crop chems, and ag in general has been kind of an early adopter here. As you look at improvements and iterations of AI, like, how are you thinking about deployment as the CEO of FMC? Is it R&D? Is it broad? We've heard Chuck talk about regulatory paperwork, filing. Like, what's your top-down view on this, and how pervasive and transformational or not, you know, could it be for FMC?
I think we're at the very early stage, at least at FMC. We just actually had brought all of our leadership team to spend a day looking at AI options. Every function is trying to develop a plan for how AI could help. Certainly, for R&D, it's definitely a place. R&D and regulatory is definitely a place where it will have a big impact. I think there is multiple places where I would say it's a very broad approach right now.
Yeah.
We've not been limited to any sector. We believe from a cost standpoint, from an efficacy standpoint, it's going to be important. To tell you that today we do have a definitive plan on how to do it and how it will help, we don't. Maybe you want to say a word, Andrew?
I think certainly any place that's document intensive, whether that's regulatory, R&D, legal, there's lots of opportunity for very simple approaches. I think our approach at this point is pretty conservative. It's go for low-hanging fruit. There's a lot of base hits that can be made here.
Yeah
With some simple automation enabled by AI, whether that's in back office processing or whether that's in handling large volumes of written information, right? I think we will be a company that takes it one step at a time. I think there's some interesting things on the research side that are beyond my capabilities.
Me too.
Certainly from a business process side, there's a tremendous opportunity that doesn't need to be moonshots, that can be low-hanging fruit on very simple automation and use of algorithms and an artificial intelligence to help improve efficiency.
I think it's a bit the approach we are taking as a company, which is broad but low-hanging fruit. There is plenty we can do. Documentation is one.
Yep
Where there is easy things to do, but which could be very beneficial. To go one step beyond, we're not there yet.
Okay. No, it's fair enough. I appreciate the honesty. So much is not trying to do too much or be too much right now. I get that. I would like to open it, you know, with a few minutes if there are any questions. I know sometimes people get shy. Perhaps there's. Okay.
I think there is one question.
Oh, Sal, sure.
Yeah. Hi. I was just wondering, you know, being the end of February, just what you're seeing so far, you know, in the, in the season, and also something that did come up last night, you know, in the guidance, I guess you're talking a lot about the value-add formulations and the significant growth there. How are things faring so much, or how do you expect things to trend during the year on value-add formulations over Rynaxypyr?
How much was it?
The combo products.
The market.
Product.
How are things progressing? I mean, we are two-thirds of the way through the quarter, I guess, was kind of an update on anything there, and then as it relates to some of the value add, Are you talking about on Rynaxypyr, sir?
Yeah.
Yeah.
The market itself, there is nothing special. I think North America, we know we've seen what's happening in Northeast. It's cold, it's a bit delayed, but nothing major. I don't think there is anything. There is place, I know Australia was very dry.
Dry.
There is specific weather events, but there is nothing fundamental in term of demand, which would be negative or positive, so pretty much normal season. For us, Rynaxypyr and deployment of the strategy, as we discussed, the first quarter is very much of a Europe quarter, where there is less generics and less of a need to implement the Rynaxypyr strategy. Maybe less of the way to test the strategy. I believe what we are seeing already is a movement of our share or advanced Rynaxypyr technology growing versus the straight molecule. I believe we'll have a portfolio which will be richer and bigger on the most advanced side of Rynaxypyr than we will have on, we will have on the single molecule.
That being said, now that we have a manufacturing cost which is significantly below where it used to be, we should be able to compete in the lower-end market against generics, with quality product and a brand which has a value at a premium on the low-end market. We'll see a shift, and we're already seeing it to high-concentration product, to Bifenthrin, Fluroxypyr, Rynaxypyr blend. We are expecting blends like blends with indoxacarb to face some resistance, so all of those are coming. We're getting the registration. That's going to be an important part of the strategy.
If we
It's already happening.
If I was. The blend, like, the premium blend is an interesting thing, right? Because, you mentioned, Bifenthrin. If I were to think about Rynaxypyr being incredibly effective at caterpillars and Cyazypyr being very good at, like, everything else, are you like, you, are you implicitly creating a competitor to Cyazypyr? If I mix Rynaxypyr plus Bifenthrin, am I introducing a competitive product to Cyazypyr in that regard? Do you have to be careful with how you price these? If you, if Rynaxypyr plus Bifenthrin is too low, does that cannibalize Cyazypyr? How do, how does that interchange work?
Uh
Maybe I'm just wrong. I don't, you know, but.
No, it's a valid question. What we do is we develop formulations, which do not compete with Cyazypyr. If Cyazypyr does the job we want to do, that's enough. It's, for example, to target some specific spectrum for which Cyazypyr would be too broad and not deep enough.
Okay.
That's where we develop a specific formulation. We could develop a formulation, for example, which would be. We've talked about Rynaxypyr and indoxacarb. That is to make Rynaxypyr much more, much higher efficacy and address the resistance issue. It depends what you want to do with the product. You have a variety of performance you can reach, but we're not going to try to make Rynaxypyr what Cyazypyr is.
That's helpful. Is there a, is there a defense that you can have? 'Cause, like, Bifenthrin is a off-patent product, right? If I'm looking at Rynaxypyr plus Bifenthrin, creating a new solution or a better solution for my buyers, how much shelter do you think will be there if somebody else can make a similar product, right? If it's UPL or whoever, and they can make Bifenthrin plus Rynaxypyr now. Like, is that brand? Because the FMC brand still carries a lot of weight in markets. Is there, is there brand power there? Is there market access? Because UPL maybe can't compete in various markets that you can. How, how do you protect that?
It's mostly two things: brand, but it's also patents.
Okay.
Depending upon the time when you did it, when you get the data, when you get the registration, and your ability to patent, you can patent formulation.
Okay.
It doesn't have to be two new active ingredients to create a patent. We have plenty of formulations which are patented, which are made in our core business, which are made with core molecule. Patent and brand are the two way to protect.
What you're going to do is move quickly to patent protect the formulations.
Every time we can.
Okay.
Every time we can, yeah.
Okay. That would make sense. All right, good idea.
Now?
Okay, perfect. Sure.
Thanks, guys. This is specifically for Andrew, I guess. Just anything you could talk about the balance sheet? I know there was some buzz about potentially doing a high-yield deal, and then, you know, you secured the revolver. Just any commentary you could talk about, you know, maybe why you decided to not come to market, and piggyback on that, with upcoming maturity, if.
Sure.
You plan to use intended approach.
Quick updates on the balance sheet. I think as you heard Pierre describe the operational priorities for 2026, you know, it all starts with paying down debt. You know, we have an imbalance between current earnings and our debt levels, right? First step is to reduce that debt load by $1 billion through asset disposals through this year. We also have a maturity in October, $500 million notes are due. We have adequate liquidity to deal with that in a couple different ways. Our preferred way is to go to market and do a financing here in the first half. Just the timing of things is such that the window to go to market with a bond offering is pretty narrow in the first quarter.
We can't go until after our K is filed later this week, then the window will close on the 15th of March. Not sure that that window will work, but, you know, we are looking at doing a high-yield bond, likely secured. We are continuing to look at the way our revolver and credit facility, which is an investment-grade facility, we are no longer investment-grade rated, may evolve over time, when the most recent amendment has some springing security involved in it.
You know, there's some further flexibility that might be desirable if we went to a more traditional secured borrowing kind of approach. That's more TBD at this point. I would say, you know, in the worst case, we have adequate liquidity to be able to handle the maturity of the October bonds no matter what. Our preferred path would be to go to market here sometime in the first half.
I might end it there. I think we're basically out of time anyway, thank you. Please, everyone, join me in thanking Pierre and Andrew. I appreciate it. Thank you.