Ladies and gentlemen, good morning, and welcome to the Fourth Quarter 2014 Earnings Release Conference Call for FMC Corporation. [Operator Instructions] I'll now turn the conference over to Ms. Alisha Bellezza, Director, Investor Relations for FMC Corporation. Ms. Bellezza, you may begin.

Thank you, John. Good morning, everybody, and welcome to FMC Corporation's fourth quarter earnings call. With me today are Pierre Brondeau, President, Chief Executive Officer and Chairman, who will review our quarter performance and business segment results and provide insights into our 2015 outlook; and Paul Graves, Executive Vice President and Chief Financial Officer, who will present select financial results. Following his comments, we will be joined by Mark Douglas, President, FMC Agricultural Solutions; Ed Flynn, President, FMC Minerals; Eric Norris, Vice President and Business Director, FMC Health and Nutrition; and Thomas Schneberger, Vice President and Global Business Director of FMC Lithium, to address your questions. Today's discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific risk factors, including but not limited to those factors identified in our release and in filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's information. Actual results may vary based upon these risks and uncertainties. Today's discussion will focus on adjusted earnings for all income statement and EPS references. A reconciliation and definition of these terms, as well as other non-GAAP financial terms that we may refer to during today's conference call, are provided on our website. I will now turn the call over to Pierre.

Thank you, Alisha, and good morning, everyone. Before I begin, I would like to take a moment to introduce Eric Norris and Tom Schneberger, both named to their positions recently. Each has held leadership positions across multiple businesses within FMC and bring a wealth of experience to these roles. We are confident, given their successful track record, that they will provide the right leadership for the Health and Nutrition and Lithium businesses. Now I would like to start with some comments on market conditions in the fourth quarter. In Agricultural markets, we saw difficult market conditions in Brazil during the fourth quarter, including weak demand in sugarcane and cotton and high channel inventories in all areas. Acres were planted much later than normal during the season and resulted in lower-than-expected demand for crop protection products, particularly for cotton. Together, this led to weaker performance in Brazil than the previous-year quarter. In other parts of Latin America, markets remained strong, especially in Mexico and Argentina. Mexico is currently benefiting from increasing demand for vegetable export and a government program to invest in agriculture. Argentina now grows the third largest soybean crop globally, and glad to say resistance continues to spread. This is leading to continuing demand growth for FMC's pre-emergent herbicide. In North America, we saw stronger demand for herbicides that address weed-resistance issues in soybeans and rice, and reduced demand for corn-focused products. This is consistent with third-party expectation that soy acres will be larger than corn acres in 2015. We expect to get more information on the extent of this trend when the USDA Prospective Planting report is issued later this month. Most Asian markets were stronger, but results were reduced by the impact of currency translation, as most regional currencies weakened against the dollar. We saw underlying demand…

Thanks, Pierre. Let me start with a review of cash flow. We finished the year with cash from operations, before all separation and M&A-related spending, of approximately $470 million, an increase of 24% compared to 2013. With CapEx and spending on discontinued operations both lower than 2013, our free cash flow, before the separation and M&A-related spending, was more than double that of 2013 at approximately $200 million. After accounting for all other demands on cash, including net M&A spending, dividends and separation and transaction-related expenses, our net debt at December 31 was $160 million lower than a year earlier. While we're pleased to have increased our cash flow in 2014, we believe we can do much better, and we continue to focus on trade working capital and capital spending as near-term drivers to improve free cash flow. Working capital consumed approximately $200 million of cash in 2014, which was about $50 million less than in 2013. This was largely due to a higher collection of prepayments for our North American Ag Solutions business compared to 2013, a good signal of 2015 demand. Despite this, our Agricultural Solutions business, and Brazil in particular, remains the primary consumer of working capital. We continue to focus on the Brazil credit environment, and we're pleased with our collections during the fourth quarter. The balance remains higher in Brazil than recent years, and we continue to take a very disciplined approach to credit extension and collections. We expect working capital to remain broadly flat across all businesses in 2015. And moving on to capital spending. Our total cash outflow on CapEx was $225 million, essentially flat to 2013, as we completed certain projects under budget and reduced our spending for other projects. For 2015, after removing the spending for Alkali, but including estimates for…

The conditions we are seeing in the agricultural markets today do not change our excitement about the prospects for our business. Agricultural Solutions will continue its focus on innovation and technology and its ongoing investment in market access initiatives. The acquisition of Cheminova enhances our business, provides greater balance to our portfolio, broadens our geographic reach and accelerates our innovation efforts. Our Health and Nutrition business continues to demonstrate the strength of our franchise with high margin and predictable growth. We expect our manufacturing excellence programs will deliver additional upside, reinforcing our confidence in the prospects for this business. In Lithium, underlying demand patterns remain attractive, and market dynamics suggest we will see increased pricing opportunities in the coming years. We will continue to manage our assets in order to maximize returns from the downstream market, where we have a leading position, and we will continue to drive operational excellence as a tool to help offset cost inflation in our Argentina operations. Today, we are demonstrating progress toward a portfolio focused on agricultural, health and nutrition end markets. The attractive price we achieved in the Alkali sale will allow us to pay down Cheminova acquisition debt more quickly. And the benefits we will deliver from revenue and cost synergies from Cheminova will ensure our earnings growth outperforms the broad ag market. Across all of our businesses, 2015 will be an important year for FMC. Although we recognize that near-term visibility is muted, we remain very excited about our prospects through 2015 and beyond. I look forward to seeing you in April to provide more detail on the plans that we are putting in place and to provide more guidance on both near-term performance and the long-range vision we have for FMC. Now I will turn the call over to the operator for questions. Operator, please?

[Operator Instructions] Our first question's from the line of John McNulty with Crédit Suisse.

This is Rob Betz in for John. So on your ag earnings guidance for 2015, can you parse out what you expect earnings growth to be from your core business versus the growth from acquisitions, assuming 10 months of Cheminova that you guys are expecting currently?

Yes. So for the -- if you look at for the overall business, including the acquisition, we gave a pretty broad range of 15% to 30%. And as Paul said in his message, it is mostly due to the timing of closing and also due to the calendarization. And what we mean by calendarization, you know that Cheminova is much larger in Europe than FMC is. And Europe is a first-quarter, beginning-of-second-quarter, market. So you could have a very large amount of sales shifting in between February, March and April. And today, we don't really know where they are. Antitrust rules forbid us to look at what Cheminova is doing. So we have no visibility how their sales are unfolding within those 3 months. And if they are big in February, they will most likely be lower in March, or they could all be in March and April. So that creates a very large range for us. The underlying business, as we see it today, if we think about operating within a flattish or low-single-digit market globally, we would see our business in the low-single-digit positive growth. That's where we would be seeing the core underlying business. The 2%, 3% range will be something which we would expect to see.

Okay, great. And then just following up, what are the major swing factors in the ag business that would cause you to come in on the low end of the range versus the high end? Is it all the timing of Cheminova, or is there a possibility that the core business could do better than what you guys have laid out for this year?

For us, I would say the highest uncertainty and what is an additional swing factor to the timing for Cheminova is Brazil. We are quite confident right now in the way things are shaping in Europe, quite confident around the market share gain and position in Asia. North America looks pretty good, and we start to have a good sense on the fourth quarter. Latin America, South and North, Argentina, Brazil -- Argentina and Mexico are looking pretty good right now. We have the right products for the right type of resistance. The question mark is Brazil and the level of stock in the channel. That is the big question mark for us. Together also with questions around how much sugarcane, for example, will be recovering depending upon weather and government stimulus. So if I put a place of uncertainty, that will be Brazil.

Your next question comes from Kevin McCarthy from Bank of America Merrill Lynch.

My question relates to your capital budget. If we look back about 6 months ago, I think you were planning to spend $270 million to $300 million. If I heard you right, you came in at $225 million and expect a further decrease to $150 million to $175 million for 2015, so quite a dramatic change there. And I was wondering if you could talk through how you're thinking about capital deployment, what the key decrements might be in those changes. And if possible, what do you think the future would look like over the medium to long term on capital spend? Does it go flat from these levels or trend otherwise?

Yes. First, if you look at the reduction from $220 million to $150 million, $170 million, so reduction '15 and going forward versus '14, there is a few reasons for that. First of all, Alkali tend to be a business which is slightly more capital intensive than the other businesses. So it will not be part of the portfolio, where you know we tend to operate ag on an asset-light business. So there is a capital intensity which is different between those 2 businesses. Also with the completion of the MCC plant, we have way less capital to spend even if we make it more flexible with the pharmaceutical line than the $100 million we've spent over the last 2 years. So you're going to have a -- at this point, the way we look at Health and Nutrition, we have capacity. It's a matter of rationalization and optimization of our footprint, but we have capacity. So you bring together the fact that we have -- we are -- we have the capacity that we need in Health and Nutrition; we have an asset-light business model, even with the acquisition of Cheminova; and we have less of an intensity with Alkali leading the portfolio, that will reduce the capital utilization for the next -- for the years to come. So I would say the number you have in front of us for 2015 is going to be a pretty typical number we're going to be facing for the years to come. The reduction versus where we were in term of forecast and where we are today, it's purely controlling capital spending in light of our -- in light of the economical situation in the ag business. I think we -- like any company in that space, when you face a slowdown in the business, you just control your capital. We are certainly seeing way less growth in 2015 and '16 in that business than we saw 2 or 3 years ago. So certainly, a reduction in capital spending. So we've just been managing very, very carefully capital over the last 4, 5 months, when it became clear that 2015 would be a challenging year for companies in the ag world.

The second question, maybe also related to cash flow. On the trade working capital side, I know you've been increasingly focused on this area. And yet, if we look at the December 31 balance sheet, it looks like receivables were up about 18% year-over-year versus sales growth of 4%. So I'm wondering what your view is on the trend on receivables, specifically for 2015. And are you today restricting more credit to your customers in Brazil? And is that in any way related to your outlook?

Let me answer that in reverse order. We certainly are as disciplined as we've ever been with regard to extending credit in Brazil. And it's certainly factored into our outlook. Our views on what the credit environment is and where we extend credit is absolutely factored in there. When I look at our receivables balance today, as we say, it really is almost entirely driven by Brazil. There is no doubt that the comments Pierre made with regard to inventory levels being elevated in Brazil will have an impact on collection rates through 2015. And so while we don't expect the working capital balance to increase during the year, we'll ultimately expect the receivables balance to make a shift back down to historical levels within the space of a single season. It's likely to take a little bit more than just 2015 to take it back down to historical levels.

And then just to add something on balance sheet. We -- additionally, to be stable, we are working very, very hard on the inventory side of the balance sheet. We've made some significant progress in ag. I think we are conscious of the situation. We are conscious also that even if there is not a lot of risk, it's going to be very hard to decrease the receivable piece. So if you can look at the balance sheet we've made, we made and will continue to make strong progress on the inventory side of the balance sheet.

Your next question comes from Mike Harrison from First Analysis.

On the ag side, can you talk a little bit about your marketing and development initiatives? Were they higher or lower -- the spending there, higher or lower year-on-year in Q4? And then for 2015, it sounds like you expect to accelerate some of that spending in order to take advantage of some opportunities that you see in this challenging market. Can you give a little bit more color on why that strategy makes sense rather than pulling back in a challenging market?

Yes, Mike, it's Mark. Yes, you're right. In 2014, our expenses for R&D certainly were up on prior year. Part of that is given the fact that we've invested in a long-term pipeline, as well as our short-term developments. And you saw some of that with the announcement of the new herbicide we're looking at from Kumiai over the last couple weeks. In 2015, we see that continuing in terms of spend on R&D. We considered a central platform, and I'll be talking more about that in April when we're together. We are offsetting that, though, by controls in other areas in our business in terms of SG&A spend. Obviously, we're seeing a challenging environment just like everybody else in the space, and we're taking the prudent steps to make sure that we can afford to spend -- expense on R&D appropriately, yet pull back in other areas that in times that are more difficult, makes sense for us. So yes, overall, R&D will be up again in 2015, but it is core to where we're taking the business.

And Mike, in terms of cost control in ag, I would say today, if I look starting in, hopefully, in March, we have tremendous opportunities to reduce our cost through the Cheminova integration. So that will be our first focus. When you run an R&D portfolio, and we think we have a very strong R&D portfolio, a big part of the spending is external to your organization. It's all of the regulatory aspect and toxicology aspect of R&D. It is very dangerous to start that spending in the middle of a project for cost control. So we're going to be careful on how we do it. But I would rather -- if I have to take any actions which would be on the -- on pushing cost saving, I will try to do it more on the SG&A and more on the overall cost synergies than today on R&D, which is the future of this business.

All right. And then on the Lithium side, the numbers for the Volt, the Leaf and even Tesla, are not very encouraging right now in terms of electric vehicle adoption. Have you guys moderated your outlook for battery demand given the dynamics with lower gasoline prices?

No. We've always been among the -- if you take the range of what people are expecting from an adoption rate, we've always been on the lowest end of the range. And we believe our range is still valid. I think we've always said there is a little bit too much exuberance in this market. But I have to say that we are a critical supplier of lithium hydroxide to that industry, and that part of the product line has a very healthy growth right now. So we are staying with the same forecast we've been having, knowing that we've been on the lower end at some of our competitors, and we feel our numbers are still looking pretty good. But I must say it's -- the business, the lithium hydroxide business today is a very bright spot in our Lithium business. There is not -- I mean, you can have some short-term reaction of people to gas price, but gas price is not the driver when you decide to buy a Tesla. So it is part of the decision, but it's not the main driver. And lots of people who are interested in this kind of cars have other reason to make the decision, and very often, look beyond 1 year gas price.

Your next question is from the Sandy Klugman with Vertical Research Partners.

I was hoping you could provide an update on your strategic alliance with Christian Hansen. How meaningful do you expect biologicals to be, and over what time frame? And in particular, how do you see the European market for biologicals evolving? Do you expect greater acceptance than what has been seen for GMO? Because it would seem that Cheminova's direct market access would help to accelerate FMC's penetration in the region.

Yes, Sandy, this is Mark. Talking about the alliance. The alliance has been in place just over a year now. It is actually producing extremely good results. We have about 7 products that we have been testing around the world in various trials, ranging from bio stimulants, the first of which will be launched later this year in North America; and then we're looking at high-value fungicides and seed treatment applications for biologicals. So as far as we're concerned, the alliance is working very well. We've got both products coming from the Christian Hansen library and products coming from the acquisition that we made of CAEB. We expect -- I think you made a comment about Christian Hansen's market access, it's actually FMC's market access that drives the markets and the sales application. Christian Hansen bring true value to the alliance through their manufacturing scale and species analysis. You'll get a lot more detail of this when we get together in April for the Investor Day. It is a major part of what we're doing in terms of R&D. It's very different. We believe we have a world-class library, some very special skills with what we call smart selection, and we will certainly update you. But we're very much on track with our initial plans. First product to be launched later this year, and then other products following in '16, '17 and '18.

What I was actually asking as it regards Europe and whether or not these products see greater traction than what's been seen for GMO, is whether or not the Cheminova acquisition will accelerate your penetration in the region, because I know they have a direct sales force in Europe.

Yes, okay. Sorry about that. Yes. Yes, it will. I mean, obviously, as you just said, one of the reasons we're buying Cheminova is to get direct market access in Europe. Europe is a very challenging regulatory environment. Everybody knows that in the ag space. Having a suite of products that are different, have different modes of action, tend to be softer chemistries, will certainly help. And for sure, we will be training and building the biological space in Europe through Cheminova.

Your next question is from Mike Sison with KeyBanc Capital Markets.

Pierre, back in September, you talked about Cheminova EBIT for '15 around $145 million, synergies at $35 million and sort of $180 million in '15. I know it's difficult, given you haven't been able to peek into '15. But given your guidance, how does that compare to what you're thinking now in terms of timing and such?

So Mike, yes, we haven't -- I mean, the numbers we looked at and when we discussed the information we had when we did the due diligence is still around the numbers you are talking about. I feel today fairly comfortable with the numbers they should be producing for 2015, knowing that if they have the same dynamic as we have, the biggest uncertainty should be Brazil, and Brazil is not as big of an exposure to them than it is to us. And Europe is looking pretty stable, as well as does India, which are very big regions for them. So I would tend to believe that the numbers we discussed for Cheminova should still be very valid. But once again, we are not entitled to look at them. So no reason to discount those numbers, but I don't have more proof than the already existing [ph]. Which will mean, even if those numbers are still valid, the calendarization is something which could vary very much year-on-year. If you look at historical data for Cheminova, they would make their numbers for Europe some time from early February to April, May, but it could happen any time, any month, you could have a big sale. So that is the question we have today. We could be very much in line overall for 12 months, but remember, maximum we'll get 10 months. And those 10 months could vary very much depending upon where those numbers fall in Europe between February, March and April.

Okay. And then, given the slight delay in closing, is there any risk in the $35 million in synergy? Or is that something you still can get within this timeframe?

So if you look at the delay, we are still in the range, going to push some -- it's going to push some. I think, as you can guess, the most difficult synergies are always the revenue synergies for which you need all of the time. It's always easier to accelerate cost synergies than revenue synergies, where you need to convince customers, understand better the product line. So it puts a little bit of a stress on those numbers. Now, if we close end of February, early March, we are okay. If it gets pushed, the more it gets pushed, the more difficult it is. So if -- as we have all the reasons in the world to expect a close in the first quarter, we'll be within the $35-million range.

Okay. And then last one, when you think about '16, a lot more synergy pops in for Cheminova. And in terms of the growth for that business, in this current environment that you described this morning, is the growth that you hoped for back in September still doable in Cheminova x the synergies?

Once again, I'm really sorry to talk like that. That's why I'm pretty anxious to get to the mid-April discussion, where we can really talk with knowledge about Cheminova. Once again, the way that we're looking at their growth rate until we close by September might be slightly impacted by some of the market trends, which seems to be a bit more muted than what we were thinking at that time. But by September, we really started to have a good idea. So I don't see much of a change from what their plans were and their growth. I think we have -- I can tell you the thing which is the most exciting for me is the growth synergy opportunities. I think we've only scratched the surface of that. So I'm still exactly in the same place around Cheminova. But frankly, I'm going to give you the full story, and Mark will tell you exactly where we are at the mid-April. It will be much more -- talking in a much more intelligent way once we've seen the data. But right now, I have no reason to change.

Your next question is from Frank Mitsch with Wells Fargo.

Look, I just wanted to say, congratulations on the big price tag for soda ash.

Thank you.

You made Ed's job a lot more difficult because he's stepping into a situation where he's got to deliver on much higher expectations now.

Yes. Ed is very, very good, so he's afraid of nothing.

I know that to be true. With that higher price tag, at least as expected, you guys had initially laid out back in September a $0.52 negative interest cost from Cheminova and -- but a $0.26 offset, so a negative $0.26 on the interest line. And Paul just mentioned that you're anticipating 2015 negative interest to be about $0.06. So materially better than the expectations back then. Can you talk about some of the factors behind that?

The numbers you just threw out don't sound familiar to me in terms of historical statement. But just to back into where we are today. Clearly, we have -- we were typically using net proceeds in most of our analysis. It was a couple of $100 million at least lower than what we actually achieved, so that's clearly a benefit to us. And in terms of the cost of incremental debt, we -- I think we talked about this in the last quarter as well. We put a facility in place that is in the region of just below 1.5% to 2% cost of debt. So we have a delta between the net proceeds for alkali and the proceeds that we'll be paying at the door of Cheminova of something in the region of about $600 million to $700 million, and that increment is going to be financed in that 1.5% to 2% range. So the math's actually pretty simple.

Great. And then, Pierre, you mentioned that a European customer is moving away from butylithium. Can you talk about that application and how concerned folks should be that perhaps that could be more widespread?

No. It's a single customer who had a very specific formulation in the agricultural industry, which was not required to deal with new formulations. So it was -- I mean, it was good for us. It was a very large product. But frankly, that product has been reformulated without lithium. It was a unique product. No other competitors would be using it to that extent. So it's not a market trend. It's a single event. Unfortunate, but not completely surprising.

Your next question is from Laurence Alexander with Jefferies.

Three quick ones. In your outlook, are you including any drag to earnings for the reduction of working capital or the working capital discipline you flagged? And just to confirm that the FX is included in that range. And secondly, with the Roundup Plus extend program, is there a -- your Authority herbicides are being benchmarked as about a $3-per-acre discount or incentive. Are you paying that incentive, or does that get paid by Monsanto?

Let me do the first part and then Mark can do the second one. The impact of working capital credit extension, et cetera, as well as all FX assumptions, are all included in the segment guidance that we've given for you. So our assumptions are all included in that guidance.

Laurence, it's Mark. For any of the programs that go with Monsanto in North America, we're obviously accountable for all the financial affairs. So if there are any discounts that are paid as part of the promotional programs, we're accountable for those.

Your next question is from Dmitry Silversteyn with Longbow Research.

I'd like to switch gears a little bit and talk about the Health and Nutrition business. You mentioned a couple of items. The issues with the alginates as far as a shortage of seaweed in the product and higher price of raw material. Typically, you've been able to pass those higher pricing through fairly quickly. So why is in the first half of the year expectations for Health and Nutrition so much weaker on that issue?

I think I'll ask Eric to complement the discussion. But one of the key issue we are facing in Health and Nutrition, which would reduce earnings in the first half or first quarter, is must be the lack availability of seaweed for our North Sea seaweed for our plant in Norway. We just had terrible weather, which has been preventing the collection and the full utilization of our assets. So we are ramping up right now. We are able now to get the product. But the biggest -- one of the biggest issue we've been facing is our ability to supply the market because of a lack of product. Eric, do you want to add some color to that?

No. I would say that in terms of alginate, there's not much more to add there. I mean, the high seas prevent ships from being on the water in a safe manner. So that has resulted in, from the latter part of December through a good part of January, the inability to harvest seaweed. And it is a short supply chain from the North Sea to our site in Norway. And as a result, there's an immediate impact on the availability of the product. We believe in the balance of the year, we'll be able to make that up. We've had a lot of productivity-based improvements in that plant that we expect going forward. But the caution is being able to make it up quickly in the first half of the year, Dmitry.

Okay. Okay, that's helpful. So it's a shortfall of supply, not so much the pressure on the cost from the higher pricing?

That's correct.

Okay. Secondly, you mentioned that the dairy market in China or dairy beverage market in China is getting a little bit better versus the issues you've had earlier in the year, but still not expected to be back to the same levels it was prior to the issues. Have you be able to identify what those issues were? Why the demand dropped all of a sudden and why is it coming back? And what gives you some level of confidence to expect or not to expect improvements as the year unfolds over 2015 or '16?

Yes. I think we understand better and better the situation. There is multiple factors which are coming at play, and it's why the recovery is on the slower side. First, there was all of this issue we talked about before on protein prices, which have been really decreasing the overall consumption in Asia, China or Indonesia for the peanut milk or some of the dairy-based product. So it has been, first, a slowdown in the market, which led many of our customers to have too much inventory and not needing to buy from us. That was one aspect, and we believe it was more of the main reason for the slowdown. But there is another market dynamic which is taking place and forcing us to look to adjust our portfolio. It's always the same. It's always a challenge, but it's also an opportunity. What we are seeing is there is different type of protein milk now, which are growing in this market following the success of peanut milk. So the usage of MCC, which was for us -- we are one of the pioneer in this application with our MCC product line to develop this market with our customers. The success has created now a new product, which are requiring different formulation, different applications for us. So there is an adjustment on the type of product, and we are in the middle of developing the product to participate in the growth of those new beverage. Those new product will also be supplied -- they are the same chemistry as the one we have for peanut milk. They will also be supplied from our current plant, and in the future, from a plant in Asia. But there is a shift in the market which could lead to new opportunities and new challenges. So all of that, the shifting elements, are creating a slow recovery for us, but it's not like we are back to a single beverage with the inventory down at the customers and we are growing back. So a bit more complex from a consumer standpoint.

Ladies and gentlemen, that will conclude the Q&A session. Mr. Brondeau, I'll turn it back to you for closing comments.

Thank you very much. Thank you, everybody, for your time. We feel here, with our team, that this quarter are the final steps of our transformation. I want to recognize the value of and the strength of our management team for Alkali, and wish great luck to each of them and to Tronox, which really has acquired a tremendous business. But for us looking forward, those are the final steps in becoming a company with a more focused portfolio. 2015 will be a very important year to shape the new FMC, and I really look forward to tell you our story at our Investor Day in April. So thank you for your time.

Thank you. And ladies and gentlemen, this concludes the FMC Corporation Fourth Quarter 2014 Earnings Release Conference Call. You may now disconnect.