Good morning, and welcome to the start of the Jefferies Industrials Conference. I'm Lawrence Alexander with the Jefferies Chemicals Team. Up first is FMC Corporation, and today joining us, returning to the conference is CEO Pierre Brondeau and CFO Andrew Sandifer. Gentlemen, thank you very much for starting off so early in the morning. Just to start off, let's start with FMC's competitive position and how you think it has changed since before COVID. Actually, as most of you know, I actually left just during the COVID period. It was a good timing for me to let my successor deal with that issue. The industry, I would say now that I'm back, that now COVID is behind us, hasn't much changed. It's about the same. FMC itself, I would say the company is different, but as strong as it was. I think, if I look today at FMC, we do have a different portfolio. First of all, I think, coming back, it is the first time I see FMC launching that many new products. We have four new molecule coming onto the market, with a couple of them having a different mode of actions, so those are very important molecules, each of them about $500 million of market potential. So that's for the new product. We do have a broader portfolio. As most of you know, we've moved into pheromones. We have a growing biological business. So all in all, a broader portfolio, new technologies coming to the market. On the other side, of course, we have our diamides business, which is getting closer to the end of IP protection. By 2026, 2027, pretty much all of the patents will be gone. And that's a time when we are switching toward a formulation strategy rather than a solo molecule strategy. So all in all, it's a different story. We are not relying on the solo molecule diamide as much and moving that toward a formulation strategy. But we do have four very important new molecule coming to the market, in between 2023 was the first one till end 2026, and we do have a broader portfolio. And can you just give an update on the state of the industry? Any significant shifts in order outlooks or patterns, or inventory levels, particularly for Latin America since the second quarter call? Yeah, I would say that if right now I would be doing the second quarter call, I would be saying the same thing. What we saw when we had the call at the end of July, we see about the same thing. The seasons are going as we were predicting. So in summary, we see Europe and North America situation normalizing. We believe by the end of the year, we will be closer to a normal channel situation. I think for Latin America and most importantly, Brazil for us, things are going well. I know there is question about drought, there is question about fire, but all in all, what we see is what we were predicting with a situation in the inventory, which will be maybe a bit later than Europe and North America, maybe call it toward the end of the first quarter, when the second part of the season of Brazil will happen. So by the end of the first quarter, 2025 will be normalized situation. I think the wild card for us remains Asia. Asia had all of the issues other regions of the world had, plus a situation in India with three very bad monsoons in a row. So, I would say Asia, to get back to a normalized situation for us, it will take 2025. So that's the place where we have the least certainty around the recovery on the market. 2023 seemed to be a particularly tough year because of increased generic competition. Now that we're getting into a more normalized environment, there's a volume lift. It sounds like it's 2025, the problem could just be more the majors fighting for share as volumes improve. Is that fair? I would characterize 2023 a bit differently. I think the year was difficult by far because of the channel situation, not because of the specificity of the generics. Generic was a sub issue, but the channel was loaded with product. It came from a post-COVID situation when we had supply chain issues, and through this long and complicated channel, there were way too much ordering of product, creating too much inventory in the channel. I would characterize the generic situation a bit differently. What happened in the 2022 post-COVID, beginning of 2023 period and 2022, generic companies saw opportunities with the difficulties some of the ag suppliers were having to supply product. So they came and you saw new generic. Take the case of Brazil, for example- Mm-hmm. You saw new generic coming and flooding the market with generic product. First of all, it was an issue mostly for the other generic company, the company which were on this market, than company like us. This company don't have a long-term presence in the region, and in 2023, they did not see their inventory moving as they were expecting. So they took advantage of an opportunity, didn't happen the way they were expecting, so they had to take spot action to try to to turn this inventory into cash, which has been putting pressure on the pricing. But I see that more as a short-term action. Generic and generic, of course, it impacts us in some of the less differentiated product, but it was really a channel situation much more than generic. When you think about sort of demand normalizing over the next two years, are you gonna see any quirks in your price mix and incremental margins? Or is it gonna be pretty predictable, like as volume recovers, it just drops straight through? I think... Do you wanna address that or Sure, I can jump in a little bit for a moment here. I think, Lawrence, historically, we've had volume drop through about 50% the EBITDA. You know, the dynamics in next year are, there's certainly some, and we talked about this on our earnings call. We've got some strong raw material cost tailwinds, as well as improved fixed cost, you know, fixed cost absorption, elimination of volume variances, and additional benefits from our restructuring. So we do expect pretty strong cost tailwinds going into twenty twenty-five. Yeah, I think at this point, you know, from a price perspective, you know, certainly we're not too early to really anticipate too far ahead to next season. We're not seeing major pricing trends one way or the other. And then, you know, continuation of mix improvement. I think as Pierre mentioned, you know, significant emphasis in our portfolio on new products. And bringing, you know, four new synthetic active ingredients, bringing the Pheromone platform to market. You know, and through 2025, you'll see particularly Fluindapyr and Isoflex contributing to growth, two of the new synthetic active ingredients we've been introducing across the market. And that will help with continuing to improve mix. So, you know, I think that combination of things suggests pretty strong drop-through there in 2025, and then more normalization as things continue to settle out in 2026 and 2027. And then I guess on the technology, you alluded to it, at the beginning. Can you just give a sense for the new APIs that you're launching, what are the key timeframes or data points to watch over the next, say, three years, that where we will know that you're on track, that these really are gonna be on track to be billion-dollar platforms? Yes, I think, you know, when you come back after being away from the company three to two to four years, you look at what has changed, and is worse, and what has changed and is better. I think if there is a place where I feel pretty satisfied right now is with the new technology on multiple front. I think we're still very active on the formulation side. We call that new product. They are very often patented. Mm-hmm. The new formulation based on diamide, we get protection until the 2040s, and we have formulation, diamide formulation, non-diamide formulation, with a shift right now because our patent's expiring in 2026, 2027, to working more toward diamide protection. I could name... It would be boring to everybody, but I could name about 10 to 12 products of new diamide or non-diamide formulation we're launching on the market between 2024 and 2026, we're expecting are gonna be providing significant growth and helping us fighting the post-patent period. We have four molecules we are launching on the market, including one with a new mode of action, three herbicides, one fungicide. Those product, you, you've heard the name Fluindapyr, Isoflex, Dodhylex, and Rimsulfuron. Those products combine new mode of action for some, combine allowing us to penetrate some market we were not participating in, like Fluindapyr, which is a fungicide for soybean. We were not in this market, so they are completely additional to what we used to do. Those four platforms are coming onto market between 2023 and 2026. That's where you see the growth. Right now, we would see for each of those products by the early thirties a $500 million potential for each of them. Mm-hmm. It's about a $2 billion with those four product platform we are contemplating right now. Additionally, we're launching the biological product, which are two main grouping, the pheromones and the biological, each of them being about $1 billion. Our target is to get those product. It's a potential of $4 billion. Mm-hmm. $4 billion new product. And what I like about the situation is some have registration, some have registration which is ongoing. IP is there, and sales are starting. So it is not something, product we're gonna put to the market in the thirties with an impact in the forties. No. Those are being launched right now and are participating. Fluindapyr is a key seller already in Q3 and Q4 this year. This product is taking off very fast. Mm-hmm. From a new technology standpoint, I think it's a place where the company is as well positioned as it could be at a time when diamides will not have the same IP protection we had in the past. Mm-hmm. And then on the biologicals and pheromones, can you talk a little bit about your competitive position, the degree to which either you're differentiated in terms of your R&D approach, the types of modes of action you're pursuing, how you blend into formulations, you know, you cross-sell? Can you just give a sense, because there's been quite a lot of consolidation in that market, and vertical integration, so can you just characterize how you're approaching it? Yes. Still early. I mean, it's still a good business, growing fast, $200 million for us, so it's a real business. It's growing. Still early to say exactly how the chemical crop protection, pheromones, and biologicals, when those markets are gonna get to the billions- Mm-hmm ... are gonna be interacting with each other. But the way we look at it is, they are allowing a broader protection. We are looking at them as complementary to our chemicals- Mm-hmm ... which mean we're gonna use them in connection to chemicals, and they're also going to play a very important role in in decreasing the resistance we are seeing today to some of the chemical product. So that's the way we are positioning all of those, family of products. I guess on the third front, EU, Canada, and China appear to be leading a global shift to accept gene-edited row crops. That industry can't help, but they always talk about their ability to go after disease resistance, insect resistance in new areas, you know, rice, wheat, and canola, that traditionally haven't had the solutions. Can you talk about how FMC is positioned to either, you know, react to that, or benefit or complement? How should we think about the implications? I'm gonna make an answer, Lawrence, and I'm not making light of the question at all, and I never make light of new technology, because that's the way... But you know, since I've been back, I've got that question a few times, and it's taking me back twenty years ago when people were talking to me about GMO- Mm-hmm ... and the fact that crop chemical products were about to disappear because of GMO. Here we are, gene editing, it's a bit different from GMO. Okay, in one case you bring a gene in, in the other one you modify the gene. But those technology are very important to the ag industry. They're gonna allow the seed industry to progress, to have more product. But exactly the same way we've seen it with GMO, you're gonna have the same resistance. So you're broadening what your seeds can do, and you're having the same need, which will be requested after a while, two years, three year later, because new disease appear or resistance is existing. So the way we are looking at it, it's more of a variation of GMO- Mm-hmm ... than it is a change in technology, which is changing the way we should look at crop protection. And then I think another one where, you know, it seems to be, it comes in and out as a fad, but it's persistent, is precision ag. Particularly lately, kind of the intersection of drones as a way to apply precision ag more efficiently. I've even heard some of your peers say that, you know, drones are now competitive on CapEx and OpEx compared to the traditional, you know, application technology. What does this mean for FMC, and are there opportunities to sell into niche markets there or change your formulations for the, you know, to target that? We like the growth of the usage of drones to spray. I think it's a very important tool. It's important, especially in places like Asia, where you have small farms in India, you know, less than one acre farms. Let's face it, for the farmers, it's a safer tool. Mm-hmm. 'Cause there is still places where they do manual spraying, and it's just not as safe as drones. It allows to reach parcels which were not reachable with traditional equipment. So we are very supportive of this technology. We believe they are good for crop protection companies in general, FMC and others. It's a good tool. I think we should not always think that drone spraying translate in less crop chemical product being used. I think it's the same thing, it's just a different mode of action. I think precision ag could impact some market when you look at the See & Spray technology, for example. Mm-hmm. But that is more for product like non-selective herbicide. Doesn't concern us. More threatening for some other companies. That being said, it's still a very expensive technology and still a way to go. So those are different. See & Spray, we look at that more than as a drone. We look more as a better way to spray product. Precision ag is a different story, impacting non-selective herbicide, which is a way to go and which is expensive. So this brings me to two related higher-level questions. First, are there internal growth investments FMC should be doing now to make sure it is better positioned in the twenty-thirties within the crop protection chemical market? Whether it's a higher rate of R&D, kind of building out kind of certain regions, building out the channels. And just give a sense for, is the level of investment the company has been doing in the last couple of years, is that calibrated properly? I think we are. I mean, if you look at the number of product, the portfolio we have, I'm feeling pretty satisfied. You would ask that question to our VP of Technology, I'm sure he will tell you that he needs 20% more than what he's got. But I'm feeling pretty good about where we are in terms of spending in R&D. You know, the way I look at an R&D for a crop chemical company, generally speaking, and that comment is not specific to FMC, is how you use those research dollars you have. Because the ag industry is a blend of global industry, where you develop molecules, which then you adapt to the region and regional research. It's very much a balance of making sure you don't shift. The temptation for short-term benefit would be to shift a lot of your research toward the region and do less on the early-stage research. That's a difficulty all of the crop chemical company have. From a spending standpoint today, we've been protecting that spending, and I think we are at about the right level. And then secondly, what can FMC do to reduce its working capital burden or and improve free cash flow conversion ROIC longer term? What levers are under your control? So I'll jump in on that one, Lawrence. Thanks. Look, I think the story on free cash conversion for FMC is we're an agricultural inputs provider, not a traditional chemical company, although we procure as if we were a chemical company, and we collect as if we're an ag inputs company. So that does give some imbalance in the working capital cycle. You know, when we are growing, we use cash to grow receivables. It's just the nature of the business. You know, we work very aggressively to use a number of different financial tools to help share credit risk and help improve the efficiency of provision of credit in agricultural markets. But that is something that, you know, is a part of the structure of our industry and of our business. The counter to that, however, is on the fixed asset side. You know, the kind of synthesis, chemical synthesis we do is pretty boutique and pretty small. This is not pet chem. This is not big, heavy assets. We're gonna spend less than $100 million in CapEx this year on $4.5 billion in sales. I mean, that's it. It's not a capital-intensive business. So when we look at the overall dynamics, you know, from a cash flow perspective, certainly working capital is a piece of it, receivables in particular, and we work all the levers across working capital, you know, working with our suppliers and payables. We've done a lot to bring down inventory in the last year with the market correction. I'd say the second factor and one that has unfortunately you know a higher impact right now in the moment as our earnings are a bit depressed is legacy liabilities. You know, FMC is the stub of an old conglomerate, and we have legacy liabilities from businesses that FMC hasn't been in in decades. They're relatively fixed. They're not fundamentally growing, but it's a load of both environmental, asbestos-type legacy expenses that aren't going away. So the best answer for improving you know% cash conversion in that dimension is to dilute them by growing the earnings. We were on a very good trajectory of that through 2022. That will, as we recover out of this correction, that will return. So I think from a free cash flow perspective, and it's being very careful in the way we manage working capital, but acknowledging and recognizing that how you grow in this industry is investment in, particularly in receivables. Balancing with the, you know, the growth of earnings to help dilute on the impact of the legacy liabilities. At a ROIC or, you know, another kind of return on capital metric, those factors flow through. I would observe this, you know, we still put up a pretty positive ROIC last year, meaningful premium to our weighted average cost of capital in a very poor performing year for the company. You know, we'd expect to see that spread, you know, expand again as we continue to grow the earnings base of the business. Again, this is where the fixed asset base being relatively light for the business, and despite the working capital needs, does have the recipe for mid-teens ROIC. You know, it can be a very, very strong return on capital generating business. I guess just lastly, I'll just ask one question about operating culture. It's been a few years now since the integration of the acquisition from DuPont. There was a lot of concern at the time about the differences in cultures between the two firms. Where do you see FMC is at in terms of how successfully has the integration gone, or is there still things you need to work on? What challenges remain? You know, I think it's been a good integration. You would not be able today to go to FMC and see what part of the organization is Legacy DuPont, and what part is FMC or even what part is Cheminova. You know, I think two factors: FMC was very fast-acting, flexible company. We could adapt to multiple situation. DuPont was bringing more structure and process, and I think the beauty of this integration is that it was an acquisition without being an acquisition, in a sense that DuPont employees knew they were being separated from the company. It was not a hostile takeover, and they were neighbors. They were next door. So for them, FMC was the best possible option in term of a home. So you know, when there is two companies where all the employees are excited and happy to join forces, it is not like a hostile takeover. It makes for an integration process which is much smoother and much easier. The only painful part we had in this process, but it's way behind us now, is when we made the decision to use that acquisition to go back with a brand-new SAP platform, and we completely changed our SAP platform, and that was a painful year-and-a-half process. But at the end, it finalized the integration. We have great system in place. But I can tell you, I will retire before having to do that again, because that was painful. But if not, integration is... We're in a very, very good place. Okay, great. Well, that's the time we have, so thank you very much for starting off the morning, and thank you for your time. Thank you. Thank you, everybody.