FMC Corporation 2026 Q3 Earnings Call

Please go ahead. Good morning, and welcome to FMC Corporation's 2026 third quarter earnings call.

Today's prepared remarks will be provided by Pierre Brondeau, Chairman, Chief Executive Officer, and President, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. After prepared comments, we will take questions. Our earnings release and today's slide presentation are available on the FMC Investor Relations website, and the prepared remarks from today's discussion will be made available after the call. 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 earnings 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 on these risks and uncertainties.

Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, free cash flow, organic revenue growth, and revenue excluding India, all of which are non-GAAP financial measures. Please note that as used in today's discussion, earnings means adjusted earnings, EBITDA means adjusted EBITDA, and sales refers to sales excluding India. A reconciliation and 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, Curt. Today, I want to spend most of my time on the commercial actions we announced on October 15th, why we decided to take them, and what they mean for the business going forward. I'll then walk through our third quarter results in more detail and our forward outlook. First, some brief context on the quarter. Our underlying performance was below our expectations before considering the impact of the commercial actions. Through the early part of September, third quarter performance was tracking broadly in line. However, during the final weeks of the quarter, channel customers in several key markets sharply reduced replenishment orders as they sought to close the season with lower inventory levels. Given the importance of September to Q3 results, the impact on sales was significant. But the underlying shortfall does not explain the magnitude of the actions we announced on October 15th.

Apart from weaker demand, there is a second issue which is having an outsized impact on the business. In response to high financing costs, the perception of ample supply, and demand uncertainty, channel customers are seeking to hold the lowest inventory values we have ever seen. For FMC, this creates a specific constraint for two reasons. First, the North America business model has been based on a higher gross price followed by significant rebates. As a result, the gross invoice price carried in customers' inventory can remain above the expected net price until those rebates are earned and paid. Second, some customers are holding FMC product that entered the channel at prices above current market levels. These products were sold on different cost structures, competitive conditions, and levels of patent protection. The elevated price of these products can delay their movement downstream to growers.

Both reasons increase the value of FMC inventory held by customers. This limits a customer's ability or willingness to place orders across the FMC portfolio. To address this issue, we are taking two actions to reduce the value of their FMC channel inventory. These actions are resulting in a third quarter EBITDA impact of $672 million. First, we are transitioning the North America business model to a framework that brings the upfront price closer to the expected net price. This change resulted in approximately $500 million charge in the third quarter. This is a non-cash charge, which does not change future cash obligations. This charge, related to the first commercial actions, consists of two components. The first and larger component reflects pricing and rebate adjustments associated with the transition to the new model.

Under the previous model, fourth-quarter sales would have continued at a higher gross price, with high rebate paid after the end of the crop season. Since we moved to the new model on October 1st, which is the start of the North America ag season, that same gross price and rebate cycle will not continue in the fourth quarter. As a result, the remaining adjustment associated with the recently completed crop season was recognized in the third quarter. The second component reflects adjustment needed to bring inventory already in the North America channel from the higher gross price closer to post-rebate net price. The new model is expected to materially reduce the volatility associated with future rebate payments. It should also provide a simpler pricing structure for FMC and our customers, while allowing those customers to manage the value of the FMC inventory more closely with the current market condition.

In addition, bringing the upfront price closer to the expected net price should make it easier for customers to position FMC products competitively against generic alternatives downstream. The second commercial action we are taking is to reduce the price of select high-priced product held by channel customers in Brazil, Argentina, the U.S., and Canada. These adjustments are intended to bring the value of that inventory closer to FMC's current pricing. To be clear, we are only adjusting the value of high-priced product already in the channel. Our objective is to support movement of these affected product downstream to growers and remove a constraint on future replenishment of FMC products. These actions represent the remaining approximately $175 million EBITDA impact and applies to select products sold into the channel since 2023. It is the only component of the total charge that is expected to reduce future cash collection.

These pricing adjustments will be booked against accounts receivable or via pricing credits on new orders. We have managed these higher-priced products in the channel as part of our ongoing business operations, expecting to bring down their pricing incrementally over time. After assessing our third-quarter results, the industry outlook, and the need to change our North America business model, it became clear at that time that more comprehensive actions were needed given the priority customers are placing on holding very low inventory values. We have spent the past several years making significant changes to the company. We have lowered cost, changed our manufacturing footprint, generated significant proceeds to support our balance sheet, and advanced new products to market. Allowing this inventory issue to continue constraining the business would limit our ability to fully realize the benefits of that work. Therefore, we have decided to address the issue more comprehensively now.

The faster our products move downstream to growers, the quicker we can start to realize the benefit of our current competitive pricing. Moreover, the manufacturing changes underway across our legacy portfolio are expected to further improve our cost position and our ability to compete. While the final impact of these actions is reflected in our third-quarter results, implementation is just beginning. Discussions with customers are taking place now, and we expect the transition to occur over the next three quarters. Initial customer feedback has been very positive and reinforces our view that these actions address an important commercial constraint. Our priority is now on implementing them in a disciplined and structured way. With that context, let me turn to our third quarter results I outlined on slide 4, 5, and 6. Third quarter revenue was $106 million, including approximately $639 million of impact from the commercial actions.

Excluding the commercial actions in India, underlying sales were $745 million. This was below the low end of our original guidance due to lower-than-expected volumes. Price was a year-on-year headwind, including the effect of our strategic pricing actions for products which have recently lost IP protection. Third quarter adjusted EBITDA was negative $559 million, including approximately $672 million associated with the commercial action. Excluding those actions, underlying EBITDA was $113 million. This was below the low end of our original guidance, as weaker-than-expected volume were partially offset by better-than-expected cost. Adjusted earnings per share were negative $4.41, which was well below our initial guidance, due mainly to the impact from the commercial actions. Turning now to slide 7 for our updated fourth quarter outlook. We expect the challenging market conditions that we observed in the third quarter to continue.

This includes constrained grower margins, a highly competitive market, and demand uncertainty in multiple regions, stemming from potential El Niño impact. We are guiding fourth quarter revenue between $1.04 billion and $1.14 billion, which is about flat versus prior year at the midpoint, as volume growth is offset by a high single-digit price decline. The pricing headwind is mostly driven by strategic pricing actions, products transitioning to the post-patent phase. Higher volumes are expected to be driven by increased direct-to-grower sales in Brazil, growth of new products, and more competitive FMC pricing. Adjusted EBITDA is expected to be between $210 million and $230 million, a decline of 22% versus the prior. Lower pricing and an FX headwind are expected to be partially offset by higher volume and favorable costs. This is lower than our prior Q4 guidance, due mainly to an increase in the pricing headwind.

Adjusted earnings per share is expected to be between $0.56 and $0.70. I will now turn the call over to Andrew.