All right, let's go onto our next session. Kicking off the afternoon with FMC. Of course, a very large global producer of crop chemical, crop protection chemicals, and distributor of same. All right, we're joined today by Pierre Brondeau, the CEO, Andrew Sandifer, CFO. Gentlemen, it's a interesting times we live in, interesting times for FMC as well. Maybe you could kick off and Pierre and Andrew give us a bit of a state of the union for FMC.
Sure. Listen, the company's, as we say, 2026 is a critical year. We've defined a strategic plan, which is based on four pillars for the company in term of paying down debt, restructuring our manufacturing footprint, post-Pandemic asset strategy and new technology, of course, the financing of the company. While we do that, at the same time, the Board has asked to look at strategic options, including the sale of the company, but not limited to the sale of the company. That's about where we are. Very high focus on our 2026 strategic plan, but at the same time looking at other options.
Let's talk about some of the latest news. You sold the Indian business you've been trying to sell it for a little while. You sold it for $250 million against the billion- dollars you're trying to deleverage. Maybe give a bit of a update on that and how the working capital works in that deal.
Sure. Just to make sure very clear, $255 million is the number we're expecting. We're marked at $425 million today. $425 million correspond to the $255 million corresponding to the sale of the business, and the rest representing the cash collection we will be doing in between now and the day we close on the deal. Mostly selling from inventory or collecting account receivable. If you look at the forecast we have for cash collection plus the amount we get, you get to this number of $425 million.
You've really put out a plan this year of trying to deleverage by $1 billion. We're gonna get to the fundamentals in a second, but I think it's very topical. You've been looking at a plan to try to deleverage this year by about $1 billion. This will be $250 million, correct?
Correct.
Maybe you can walk through, you know, your plans, some of the things you've got on the, on the go here to maybe get close to the billion dollars.
Sure. What I talked at the earnings call was right now we have line of sight for $700 million. Why do I call line of sight? It's the amount for which we are currently in negotiation. As you say, $255 million will be the India deal. We are getting very close to signing a licensing agreement for one of the molecule with an upfront payment. That upfront payment will go to paying down debt, and then it's a commercial licensing deal, and then we'll be supplying the product to a partner who will also pay royalty. That's the bucket number two. Bucket number three. I'm giving those in order of size. Bucket number three is real estate deals. I'm talking here, nine-digit deals. Those are big deals.
Very large sites which we would sell to developers, and we would only use through a leaseback the part which we are, which we are using. That takes us pretty close to the $700 million. To get to $700 million, we have a series of molecule or non-strategic businesses we are currently in negotiation for. That's what we negotiate. We have a list of other things we would be, potentially, selling, but those are not yet in negotiation. We started to focus on the one which had the longest lead time.
The sale and leaseback deals, all of this you're talking about, what would kind of be the earnings impact going forward?
Well, the India, we know that we've talked about it.
Yeah.
Very small, very small earnings at the end. The licensing is very interesting because it increase the revenues. When you have a technology which is a technology of quality, it's a very fragmented market. We are one of the largest crop chemical company, and we have a 7% market share. What you do in our business, you find companies of quality which have a complementary crop profile, and it allows you to increase the market you can reach. Licensing the molecule to a partner would be accretive to us and would increase sales and EBITDA in the future, in addition to the one-time payment.
The leaseback will have almost no impact because we'll sell, we'll get the revenues, and then we will lease back for part, but we will not have to do all of the maintenance of the entire site. The rest, the small molecules from business, that could have an EBITDA impact, but we're talking about very few tens of millions of dollars. very minimum.
On the licensing, the prepayment option for the molecule, I think you're working on a deal now for one molecule, correct?
Correct.
Any update on that?
Yes. We are Almost through the finish line, think.
Do you want to announce it now?
No.
Yeah. Slide.
I would say we are, we're a couple of weeks from signing it. We have chosen the partner. We believe it's a quality partner, it's the right partner from the crop profile. We are in agreement on all of the financial terms. We are finishing to redact the what I would call the legal terms around the contract.
Redact, you said? Yeah, redact.
Yeah.
Okay.
And then, we'll get to signatures. Andrew, a couple of weeks?
Yeah.
Is what we think.
I think that's about right.
Okay. Okay. Okay, fair enough. I wanna talk to you about, let's get into the fundamentals on the macro here. Are you seeing, is FMC seeing a little bit of weakening in generic pressures? Like, are you seeing in this current conflict, has it raised the cost of production in places like China and India that maybe would lower the pressure a bit, or is it too early to say?
Here is the way we answer this question. I'm looking at Latin America and Brazil are today the place where you get the most information about generic behaviors, because you're preparing for the big Q3, Q4. Especially for direct sales, you're getting a lot of those sales taking place in Q1, Q2. Today, I believe the pricing is leveling off. We are not seeing this constant spiral down of pricing. There is a situation, I would say, which at least is stabilizing. Maybe something more interesting for us. If you remember at the earnings call, which was two weeks ago, I said for direct sales, for the second half of the year, we have 36% of the orders in hand for the second half of the year. Surprisingly, we have 50% today.
Within two weeks we jumped from 36- 50%. I've rarely been in a situation where on May 6th we had half of the sales, direct sales we needed to make H2. The forecast we have right now seem to lead to a number of 65%-70% of sales in hand by end of June to do H2 for direct sales, and about 60% for overall sales.
Okay.
Those are very solid numbers. We have not seen those numbers in a long time. What could it be? It could be possibly the channel, which may be not as full as it used to be, but I believe it is also maybe less generic pressure and farmers looking for more security of supply today, and that's why we're receiving this demand. That's an indication.
Yeah.
I cannot make a rule out of it, but as an indication in what we see today, I would say yes to your question.
Just to build on that, to clarify, we're speaking specifically about the Brazil market.
Yeah, yeah.
Brazil. Yeah.
With the numbers, yeah.
Yes. Just those numbers are specifically for Brazil.
Is that with you, with FMC holding your price ideas, or have you raised prices in the last couple weeks?
No, we've not raised prices. Our price, we've kept the price stable. There are gonna be a place in the world where we'll be selectively increasing price for some reasons, but overall in Latin America, we've kept our price flat. What we are looking at in terms of pricing before we make any decision in impact is the impact of the Iran war. If that would be to last for a longer period of time, it would have an impact on pricing, and I think that's the time when we'll have a decision to be made to adjust pricing accordingly. I don't wanna start to do bits and pieces and some short-term action. I would rather wait to see where things are gonna go and make a decision in the third quarter.
You know, it's interesting, another interesting, you know, year for FMC has been on the loss of exclusivity as expected of CTPR, Rynaxypyr in China. What have you learned about that market post exclusivity, or did the conflict here mess up the market to where you're not exactly sure how this market's developing, if that makes any sense?
Yeah. You know, I think the market in India hasn't changed much from a demand standpoint. For Rynaxypyr, the market in India has been challenged by something which has nothing to do with the war in Iran. It's because Rynaxypyr has been used a lot because of generic coming very early, there is very significant resistance t o Rynaxypyr. That's been one of the impediments to development of growth. I believe the war has an impact on overall generic pricing, including Rynaxypyr. Rynaxypyr
Let's talk about some more of your initiatives. You talked about wanting to outsource some manufacturing of some of your non-diamide core products, and exiting some high-cost AI and formulation plans. Maybe talk about that.
Sure. Process is going as planned. I think it's a very heavy lift. It's a complex process because not only you have to exit plant, find a new home for your product, but you also have to rethink your registration. It's a process which is mapped out. We do have the definition of what we've got to do, and I'm not expecting at this stage any surprise. I'm pretty certain, if not certain, that this process will be finished by the end of Q1 2027. It's going accordingly to plan. For most of the product, we know where they will go. We know where we're gonna get the resistance. Heavy lift, highly predictable.
Anything else, no, excuse me, the crop protection market, any other things that maybe people in the market are missing? Like any observations you have this year, in terms of material cost, demand, inventories, product switching?
No, I, you know, I think if you put the, if you put the war aside.
The big change has been the Rynaxypyr running out of patents and generic coming into it. Up to now, in the last couple of years, maybe I've seen the generic more active than I've ever seen. This is leveling off right now. It seems like we are in a period where we see more stability in the market and more predictability.
You talk about Brazil, so you're seeing ordering pick up, which is great. It's also a weird market in Brazil, right? With credit problems. Like, it must be. And you have a new sales team that's what, a year or so in place? You say predictable, but it must be difficult to predict actually.
So-
all these factors.
Yeah. I'm gonna say a few comments and ask Andrew to complement. We are very careful and specific to whom we sell in Brazil. We do not go with a broad brush. First of all, we do have a very strong focus on increasing our sales to co-ops and to direct sales to farmers. I mean, those are our two number one target. Of course, the distribution channel is very important to us. There is companies we know are in situations where financially we should not sell to them. We don't know. Andrew, if you wanna add something.
I think as Pierre sketched, I mean, there's been a couple of major changes in the distribution channels in Brazil. Certainly the rise of more direct sales is a big part of that. You know, we're able to do good credit analysis on large growers and understand their position and get comfortable with credit risk there. In the more traditional distribution retail channel, there were several attempts to roll up that market. Those have failed, two private equity backed roll-ups have essentially gone into different degrees of financial restructuring. You know, we're at a situation with them that, you know, we're managing through the leftover exposure, but we're on a, you know, basically selling only on cash terms going forward.
Not taking on any further risk with them and a few other larger distribution businesses that have similar profiles. I think that this Pierre said, I think the key is just being very disciplined about where we're extending credit and shifting the mix to customers are inherently like co-ops, just the nature of their structures legally in Brazil, they're more inherently credit worthy.
Let's talk about the pipeline a bit. You've got some new AIs, you've been pushing them out, they're growing. Talk about what's performing better than expected, maybe what's been more challenged than expected.
I think it's progressing as well as we're expecting. I mean, the critical issues when issues you would be facing when you're launching molecules like that is forecasting the timing, not because of the demand from the grower standpoint. Demand is here. The product are high quality product. There are patents. They have new mode of action. The problem is the speed at which you get the registration. Give you an example, Isoflex. We got the registration for the active at the level of the EU, but then you have to take the formulation you will be selling, and you need to get the registration in each of the country in the EU where you will be selling. We're expecting that in the first half of 2027. You know what? You miss that, and then you miss the European season.
That's where the predictability is difficult.
Yeah.
So far it's performing as we would expect.
Okay. Also in biologicals, you did a good acquisition a few years ago. That's also one of your growth engines. Maybe talk about that.
Sure. At biological we have, I would say, two portfolio. We have the regular biological portfolio, which is growing 10%-15% a year. Then we have pheromones, which is viewed more as a, more as a research. It's still negative earnings. We had our first full size sales in Brazil in the first quarter. Results were pretty good. We had yield improvement according to the farmers where we sold the product by 5%-15%. We had a decrease, and I think it was caterpillar-
by 75%. I would say the results are encouraging, but it's a very early stage still.
What gets you most excited about the pipeline? If you have to pick one product, one application.
For biological? I would say-
Anything in the pipeline.
Anything in the pipeline for me it's. Now, it's a tough question because I love our four new molecules. That's, I think we have a, here is the thing why I can't dissociate them. The four new molecules have three herbicide and one fungicide. Two of them have new mode of action. One has a dual mode of action. What is very important, not only they are new products with very high efficacy, they will change the portfolio of the company. Today, we are mostly an insecticide, we're an insecticide company. Insecticide are the most difficult to predict. In two, three, four years, we'll be a company which will be 50% herbicide, 25% fungicide, 25% insecticide.
It's a much, much better portfolio, and will have 50% of the portfolio of the company, which will be a growth portfolio. For me, if you, if you ask me what I'm the most excited about, it's those four molecules. Now, for all of this to happen, we cannot dissociate that from the work we're doing on the manufacturing footprint to get a core business back to market growth instead of the erosion we've seen in the past. Those are the two critical things which need to happen next, in the years to come.
Okay. That's what I wanna start talking about is, you know, we've seen core, contract a bit for different reasons. We've seen the growth part of the portfolio be kind of flattish. You know, in each part core, what's the main thing you gotta see happen to be able to get to at least flat? For growth, what's the main thing you gotta see happen to be able to get into growth?
So-
Did I say it right? Yes. Okay.
I think the core portfolio, if we talk about the non-diamide portfolio, because we've talked about our next Rynaxypyr .
Yeah.
The non-diamide core portfolio. We have one core competencies which we always had from the early days of FMC, is formulation technologies. The problem we have is we are not capable of deploying a formulation technology because the active ingredients we're using for that are too expensive. Overall, we're manufacturing at a cost which is not competitive on the market and prevent us to have this core competency in place. I am convinced that by the middle of 2027, once we have a core portfolio competitive with generics on cost, and then we're able to deploy our formulations technology, we will grow faster than the market. I mean, if the market grow 2%-3%, we should be able to expect 3%-4% growth for this part. That's very critical because you can do whatever you want.
When half of your company is going down 4% or 5 % a year, doesn't work. We need to get that back to a 4 % growth rate, and I believe we're going to start to see that in 2027.
Do you think you're traversing your trough, your FMC trough this year, or might it bleed into 2027?
No, this year.
This year.
This year is the year where we need to execute on the four pillars of our strategy and reset the financing of the company. I believe if we execute all of this, we'll be in a position in 2027 to see growth.
I think you talked about the resetting the financing. Maybe you could give an update. I think you said that. You can give an update on the credit amendments you made the other month.
Sure. Yeah. I think certainly on the financing side, we did update our revolving credit agreement in April. A bit of a logical continuation of an amendment we made in December, as we shifted to non-investment grade rated borrowing, putting up collateral against the revolving credit agreement. In December, we've had an IP-based collateral structure that was meant to be temporary. We have a pretty complex international tax structure. It took a while to get all of the legal documentation in place to put more traditional collateral in place. Now with this April amendment, we have $6 billion of collateral in terms of direct liens and another $3 billion in terms of pledges of subsidiary assets, et cetera, that back our $2 billion revolving credit facility.
It just literally the legal work it took to get that collateral packaging in place took us well into the beginning of April. We'll use that same collateral package to support, you know, an anticipated bond offering here in the second quarter, where we do expect to go to the market with a secured high yield bond to both address the maturity that we have of $500 million in notes that mature in October. Also to the extent, you know, we're able to place it, we would like to term out some of the revolver debt and bring down short-term borrowings through that offering.
Okay, Pierre, you're and Andrew, you're doing a lot of thinking about what FMC is and what it's gonna be in the future and what do you need to partner with and sell off and shore up the balance sheet, and then think about what happens after that. I think you're doing a process also to figure out, you know, should, as part of your review, should FMC still be a standalone company, right? That's fair?
That's correct.
What You're a few months into this, what are sort of your initial observations?
For the company employees, we are all highly focusing on a 2026 operational plan we discussed. With the Board, we decided to also look at strategic options, including the sale of the company. This process started in February. We had over 20 companies who we are talking with. That has been decreasing. We had a few propositions, diverse proposition. There were a range of options which made it to our board. We had a Board meeting two weeks ago, just before the earnings call. We've looked at those options, took a position on each of them with our Board, gave that back to the banks who went back to the companies, the discussions are ongoing. Here is what I think. That's my point of view, okay?
It's only me thinking, but my view is that by June, July, certainly no later than the earnings call for Q2, which will be the end of July, we should have a decision to go one way or the other. Meaning to either go with a strategic option with a partner, selling, merging, whatever it is, or carry on with the strategic plan as we have defined. I think we are advanced enough in the discussion, we will not need more than a couple of months to make decisions. Plus, I believe for an organization, five, six months with the uncertainty is as much as an organization can take s tay focused on the operating plan.
That's the target. The board is completely involved. We are involved as a management team. I think we'll get with a very clear answer, at least at the earnings call for Q2 at the end of July, and move on from this point.
Status quo is pretty clear. Selling the company's pretty clear. You talk about a middle, which was like some sort of partnerships. Can you conceptually talk about what you're talking about?
Oh, what I mean partnership, it was You know, when you look at strategic options.
Yeah
it goes from equity injecting the company to a merger with company to selling the company. What I call partnership would be.
Okay
more of a merger.
Okay.
It's because there is always a full range-
Got it.
of strategic option.
Okay. Now, you see the kind of landscape out there like I do, right? You see, you see Corteva separating into a CP and seed spinco s or pure plays. You see BASF splitting off crop science, I think second half of 2027. You see maybe Bayer Crop Science splitting off in the next 2 years. The whole landscape's gonna change. I don't know what that means fundamentally exactly, but when you think of that landscape, regardless of what you do, FMC does, that landscape's gonna be different in three years. Fair?
Correct.
How do you think about all that when you think about your two or three options here?
Well, here is what I think. If we carry on with a strategic plan and we do not have one of the options which is in front of us, happening, I would not be surprised when you would have multiple companies, standalone, independent crop protection to see again some merger and acquisition taking place. I think the industry most likely will be prone for acquisition. Size matter. Size matter, especially for technology companies. If things don't happen now, they will happen in two or three years, I believe, when all of what you described is in place.
You're one of a couple peers that has that view that consolidation has to, has to in quotes happen in CP. Can you elaborate sort of why it has to happen? You talked about size matters. Any other thing you wanna add to that? Why, like, what's going on in the industry right now? You've kind of described some of it today. What is so specific to the industry now that is leading to consolidation, that should lead to consolidation?
I think it's quite basic. If you're a technology company, you need to be able to manufacture a generic pricing while being able to support all the marketing and research spending for new technology. The smaller you are, the more difficult. To bring one molecule to market costs $300 million and about 12 years. Usually, what you like to do is a new molecule every year or other year. There is a significant technology spending if you want to bring the type of technology growers need. At the same time, you need to have a manufacturing network allowing you to compete with the lowest cost producer. That's, that's what I believe, size matters.
Pierre, would you agree in your career the best deal you ever did was being able to buy the diamides and the R&D lab from DuPont? Would you agree that was your best deal?
Definitely.
That deal came because when DowDuPont ag chems mergers, I believe, and you can change my words if you want, but the regulators said, "Ooh, I don't want to lose an innovator. I don't I want to have multiple players that are doing stuff." If this is true and we could see deals, do you get worried that EU, U.S. regulators, governments don't wanna lose innovators, don't wanna lose players?
Yes. It's definitely a possibility. That being said, I think there is more and more of a realization that technology is expensive, and the value of what we call technology company will diminish if those company are too small. If you really wanna bring innovation, you need to have a minimum size to spend multi $100 million in R&D. You're correct, it could be a position some legislative bodies would take, but I think things will be changing and there will be more receptivity to merger in the future of companies.
Deals have to be constructed, I guess, knowing that landscape. Does that make sense?
Definitely.
Where you'd have to keep, yeah, innovation. Make sure there's not some consolidation in innovation. It's hard to explain, but yeah.
Well, what you have to be able to demonstrate.
is that a merger will create more innovation capability than not doing it. If you cannot demonstrate that, if you do it for cost synergy purely, they will not work.
In mergers and in the merger scenario, do you see FMC as being the main innovator leader in that merger? Would you be, what's the right word? Secondary.
I can't answer that because I don't know if we will be part of those mergers. I don't know when it will be happening.
Yeah.
I don't know what will be the status of our technology roadmap at that time. I think we do have, especially for a size, a very rich new technology portfolio.
Totally, yeah.
in molecule we are putting on the market today, as well as what we have in our development pipeline. How will that impact the role we might or might not play years from now when the industry will possibly change? It's very hard to say.
Do you think some value would come if FMC was partnered or merged with, like a seed player?
Well, I don't know.
sales
My friend Chuck just broke up the companies.
All that.
If he's right, I should not, and I respect him.
Yeah, 10, but 10 years ago.
I could be-
10 years ago everybody was bundling and now they're not.
Yeah.
You know.
Yeah, I, listen, I'm just gonna say Chuck is a good friend.
I wasn't asking about Corteva.
No, but-
I was ask-
He's a smart man, and I have to say if he does that, there is a good reason. I'm not gonna plan to go the other way and make a mistake.
I was actually asking in general. I'm just wondering if, you're talking about mergers, so I'm trying to figure out sort of like, you know, some of the different arrangements that have been pitched to you.
You know-
Is it a merging of you and seeds or you and fertilizer? I'm being silly now, but you know what I mean?
No, no, it's not being silly. In all seriousness.
Yeah
If, to answer your question seriously, when I talk merger, we take merger within the same market segment.
Yeah, yeah.
I would talk about crop protection company merging with crop protection company. I think that create more synergies in term of technology capability rather than the seed merging with a crop chemical where you have way less of a technology synergy.
'Cause the synergy gonna be in the back, are gonna be on the back end, right?
Exactly
platform, yeah.
Manufacturing and technology roadmap, that's where you have the benefit. I think seeds company might merge with seeds company, crop chemical company might merge with crop chemical company. I see that much more than I would see an expansion on the, on the product line.
In the case that, you know, you hopefully stay or standalone, you know, talk about sort of how do you, as you traverse the trough this year and move into your pipeline and get past the, you know, Rynaxypyr coming off exclusivity and redo the manufacturing base. Talk about how you would see the company, you know, think of company culture and sort of, and optimization and moving ahead to back to growth. Like, how would you see that playing out?
I think the company's poised for growth. I, you know, I think a lot of what we are facing, there is of course the market, but there are things we've done to ourselves we could have avoided to do. This company culturally is more a growth company than a cost-watching company. I think even if we know how to decrease our cost, we know how to do cost synergies, I think we are poised for growth. That's what people want. They can't wait. They understand the importance of 2026 and what we have to do, but everybody, I can tell you when I talk to my employees, they are all looking 2027, 2028, 2029 when we are back to do what we know how to do best.
Is there a case then that if that's what you can do, you can improve things, start getting growth, going status quo, waiting a few years, next administration, no conflict in Iran? You're talking about you want a path by July, right? Or August at the latest. Is there a reason to maybe defer status quo, try and improve the business, and try and then maybe the goal of going back to the market in three years when you're better? Does that make sense?
Yeah. Question makes sense, but really, I think that for the three, four, five years we have what we need to grow, flourish, be profitable with what we have in our pipeline structure. There is absolutely no urgency. If as you said, we pass the month of August, it would not be to position ourselves for selling the company two years down the road. Could happen, you know, anything could happen, but it would be to carry on because the roadmap we have could create a very, very attractive company which could be very capable to keep on growing by itself in 2030 and past 2030.
It'd be more like you're not getting the value you want this summer, or the spring or summer. The path to status quo is the way to go. Maybe that's, you just stay there forever or maybe, you know, there's always possibly you know, look for a deal in three years. That's all I'm saying, you know?
That's.
Right?
That's fair.
The value's not there in this year. I'm making this up. I have no idea, right? Yeah.
Yep. That's the case.
Okay. In the two minutes we have left, Pierre, Andrew, what do you think investors are missing the most about FMC these days?
You know, the problem FMC has is, to say the least, our last three or four years results were not spectacular. When you're a situation like this one, the normal reaction of investors, and I would do exactly the same thing, is to look at what will this company do in the next six to 12 month.
We've got to prove what we say we're gonna do. Maybe what investors are missing because of that situation is the potential I described before. If we succeed with our delivery of a 2026 plan as designed, start back to growth in 2027, past 2027, we are gonna have an incredible portfolio. I mean, very balanced, new technology, more than 50% of the portfolio of the company will be growth. By 2035, patented molecule with new mode of action. I mean, it's gonna be a company which will be much better than what the company was in 2018, 2019, post the DuPont acquisition because of the breadth of the product. The problem is, until we have proven in 2026 that we can do what we say we would do, people will have a hard time looking beyond that.
First, let's regain the credibility. Let's do what we say we're gonna do, and then we'll move on to the next step, and maybe people will have more time and belief to look into the future of this company.
Thanks a lot, guys. Appreciate it.
Thank you.
Thanks, John.