Good morning and welcome to the Fourth Quarter 2017 Earnings Release Conference Call for FMC Corporation. Phone lines will be placed on listen-only mode throughout the conference. After the speakers' presentation, there will be a question-and-answer period. I will now turn the conference over to Mr. Michael Wherley, Director, Investor Relations for FMC Corporation. Mr. Wherley, you may now begin.

Thank you and good morning everyone. Welcome to FMC Corporation's fourth quarter earnings call. Joining me today are Pierre Brondeau, President and Chief Executive Officer and Chairman; and Paul Graves, Executive Vice President and Chief Financial Officer. Pierre will review FMC's fourth quarter performance and provide the outlook for 2018 and the first quarter. Paul will provide an overview of select financial results. The slide presentation that accompanies our results, along with our earnings release and 2018 outlook statement, are available on our website and the prepared remarks from today's discussion will be made available after the call. Mark Douglas, President, FMC Agricultural Solutions; and Tom Schneberger, Vice President and Global Business Director FMC Lithium, will then join to address questions. Before we begin, let me remind you that today's 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 release and in our 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 to which we may refer during today's conference call are provided on our website. With that, I'll now turn the call over to Pierre.

Thank you, Michael and good morning everyone. Before outlining our fourth quarter results, I wanted to first state that 2017 was a pivotal year for FMC and we are excited about the opportunities ahead of us 2018. The integration of the acquired DuPont Ag business is progressing very well as is the process of separating the Lithium business into a public company. As we prepare for listing in the second half of this year, we will continue to expand both our lithium hydroxide and our lithium carbonate capacity to capitalize on the significant demand expected in the coming decade. Turning to slide three, FMC reported fourth quarter revenue of $918 million, which was 42% year-over-year -- up 42% year-over-year. Adjusted EPS was $1.10 in the quarter, an increase of 67% versus the same period a year ago. Adjusted EPS was $0.02 above the top end of our guidance, driven by strong operating result in each of our two segments. We are very pleased with the fourth quarter results. In Ag Solutions, our business performed very well and earnings came in above the high end of our guidance range. The integration of the acquisition into FMC is meeting all our expectations. In Lithium, we delivered our first full quarter of commercial production at our new lithium hydroxide facilities in China and finalized an important agreement with the Argentinian government, paving the way for expansion in that country and for the separation of the Lithium business into a standalone company. Moving on to slide four in Ag Solutions, revenue grew 40% year-over-year. Performance of FMC's legacy Agricultural Solution business was very strong, growing 9% year-over-year, driven by double-digit revenue growth in North America, Asia, and Europe. Acquisition revenue of $193 million accounted for the remainder of the growth. We do not have…

Thank you, Pierre. 2017 saw a solid cash flow performance, driven by a significant improvement in cash collection in Brazil. One important metric that we track is, of course, past due receivables in Brazil, which have declined by almost 30% compared to the end of 2016. While we do not expect past dues to completely disappear, we believe that 2018 should see us move back to levels consistent with historical performance. For the full year, we saw adjusted cash from operations slightly below 2016. However, this was entirely due to a cash outflow in the final two months from the acquired business as we started to build trade receivables. As you recall, we did not acquire any of the receivables with the business, creating this one-off cash flow in the quarter. Net debt finished the year at just under $3 billion, reflecting the $1.2 billion payment to DuPont made in the fourth quarter. One important area that is getting a lot of attention today is the tax rate. We finished 2017 exactly where we expected with an effective tax rate of approximately 15%. This rate reflects the fact that the majority of our income is generated in lower tax jurisdictions, reflecting the nature of our supply chain and our revenue mix. Looking forward to 2018 and beyond; recently enacted tax reform in the U.S. impacts us in three main ways. First of all, we will have a transition tax payable over the next eight years of approximately $200 million, reflecting tax on overseas retained income. This will impact cash flows in the coming years but will not impact our effective tax rate. Second, we see a one-off charge to GAAP earnings, reflecting the revaluation of certain assets, most notably deferred tax assets of around $160 million. Again, this will not…

Thank you, Paul. In summary, we feel very good about where FMC is today. Our Ag Solutions business delivered a strong Q4, and we are set to deliver an exceptional 2018, with revenue growth significantly above the market growth rate. The integration of the acquired business is progressing very well. We are in the early stages of understanding the growth synergies, and we will communicate further regarding scale of these synergies on future calls. Lithium had a very strong quarter to finish the year and is on track to deliver another exceptional year in 2018. With that, I will now turn the call back to the operator for questions. Thank you for your attention.

Thank you. [Operator Instructions] Your first question comes from the line of Steve Byrne with Bank of America. Please go ahead.

Yes, thank you. How proprietary and/or differentiated would you assess your hydroxide conversion capacity to be relative to the capacity that's out there in the industry? And do you have any Chinese partners for your operations in China?

Hi Steve, this is Tom. I didn't quite hear the second part of your question, so let me answer the first one first and then maybe you can restate that. In terms of differentiation of our hydroxide product, really, what it comes down to is how that product performs. There's not a spec out there that is specified where somebody could produce a product, measure against that spec, and then know exactly how that's going to perform in the cathode material. So, our assets as well as our production processes are geared around detailed processes to produce specific products that then we test and we understand the performance characteristics of that product. And that's how it's going to continue going forward. Can you restate the second part of that question?

Yes, sure, Tom. It's kind of an extension on that and that is, do you have Chinese partners for your capacity in China and therefore, the risk to ultimately losing that technological edge?

Yes. Partners is a good way to say it. And what we did was we began a partnership with a long-standing partnership of our Ag business. We invest in the assets, we manage the technology, and we keep tight control over the sensitivity of that technology.

One comment I would add to what Tom is saying is the -- we have a very thorough process to protect our process technology. I believe there might not be more than two people within all of FMC and our partners who have a full understanding of this process. So, we have a way to protect the process technology by segregating part of the process, and nobody has a complete visibility onto the process and how the parameters of the process impact the performance of the products.

[technical difficulty] forecast, is that consistent with what your expectations were prior to acquiring this business? And do you see any longer term acceleration in that by either expanding those -- the Rynaxypyr, Cyazypyr into new markets and/or recruiting new formulations?

I think for some reason, we have a little bit of a connection problem. We couldn't hear the beginning of the question. But in a few words, what we believe is that Rynaxypyr, Cyazypyr and overall the acquired market is performing at least at the level of our expectations from where we do have markets and applications today. There is definitely a process and you can see it through our comments, for example, what we said about Asia, India, Southeast Asia where we do have increased penetration of new crops, new registration, new formulations for product, which are allowing to grow faster. Needless to say that in the coming years, FMC will also be looking at developing new products from those base chemistry. The last point we have not touched here and we are gathering a lot of data is around growth synergies. We do believe there is significant growth synergies to be seen in the years to come between the FMC and the acquired portfolio, allowing additional growth to what we have talked about. So, I would say, all in all, everything we are seeing and we're operating is it's very positive for us. And I don't believe we are capturing all of the potential today of -- in the numbers we are presenting.

Thank you. And as a reminder, please limit yourself to one question and then reenter the queue; we’ll take follow-up questions as permitted. Our next question comes from the line of Frank Mitsch with Wells Fargo. Please go ahead.

Yes, good morning and congrats on a nice end to the year. Pierre, you were talking about Brazil for full year 2017 of being able to generate 15% growth, whereas the market was down 10%. I was curious as to what percent of that preferential performance was due to some prior actions you took on your channel inventories versus market growth and how we should think about your ability to continue to outperform in that part of the world.

I think I would say when you look at a plus 15% in the market shrinking 10%, there is two reasons to the performance. One is the fact that we are one of the very few companies, compared to others, which are operating with almost, I would call, a normal level of inventory in the channel. So, we are not in a growth penalized by products which were in the channel, lowering our ability to sell into the channel, allowing us to have growth rate which are closer to product on the ground utilization. Now, the number is, of course, increased by the fact that as we've been taking measures over last two years and moving away from some low profitability-generated products, you are comparing to -- for us, to sales which were understated because of the actions we are taking. So, those are the two reasons for which we are outperforming so much. Do we expect to outperform the market next year? Yes, we do. Do we expect to outperform the market by the same extent? Certainly not because we had -- we're going to have a tougher comparison when comparing to 2017 performance.

Thank you. And our next question comes from the line of Chris Parkinson with Credit Suisse. Please go ahead.

Thank you. Apologies for being a little shortsighted, but your 1Q EPS guidance is particularly strong, which appears to be driven mainly by the Ag segment. Can you just kindly comment on your expectation for your legacy Ag asset growth as well as the seasonal cadence for the DuPont assets and whether or not you'd expect any considerable FX tailwind? And also are there any key trends within product mix which should further benefit margins? Thank you.

All right. Thank you. Those are some questions. Let me talk about the cadence. I'll ask Mark to comment about legacy products growth. We announced our legacy business will grow in the 2% to 4%, which is above market we're expecting. So, Mark will comment about that, and maybe Paul will say a couple of words around FX. The cadence, as you can see, we do have a first quarter which is stronger as a percentage of the overall business than we used to have. And it's something which is important, very good for us with the acquired business. If you think about FMC legacy business, we would have slightly above 60%, 6-0, 60% of the business in the back end of the year, mostly driven by the size of our business in Brazil and Latin America. So, it's 60% in the back end, 40% in the front end. If you look at the acquired business, it is reversed. It's slightly above 60% in the first half and 40% in the second half of the year. And this is driven by the size of the business for the acquired business in Europe and North America with a very strong underlying business in Asia and smaller business in Latin America and Brazil. So, what it does to us, it rebalances across all of the quarters, and as we wanted, decrease our exposure to Brazil and Latin America. Mark, do you want to talk about the growth of the legacy business?

Yes. Of course, as Pierre mentioned, we're expecting a range of about 2% to 4% growth for the full year. That's going to be pretty evenly spread across the four quarters. We're already seeing Q1 well into the business in North America where the retail is getting ready for the season in the Midwest. I would say the market in California or in the West has kicked off a little earlier than normal, so that's going to help in Q1. Around the rest of the world, in Europe, we're seeing growth, as we said, from our business, particularly in France. This is our first year of direct market access. So, we're out in the market now selling and that's going very well. So, I think that 2% to 4% range is roughly what you should expect per quarter as we go through the year.

Yes, the FX question, I think pretty straightforward. The euro is the only exchange rate that really had a meaningful difference on a budget basis, think about how we hedge forward compared to what we saw in 2017. A few small changes in other currencies. The net impact of this is actually relatively small across the entire business. We do have a small tailwind, very low single-digits percent increase in revenue and a very small tailwind to operating profit as well as a result of the forecast FX rates, but really not meaningful numbers.

Thank you. And the last -- next question comes from Aleksey Yefremov with Nomura. Please go ahead.

Good morning. Thank you. In your Lithium business, you earned about $48 million EBITDA in the fourth quarter and you're guiding to $44 million to $48 million in Q1 2018 and sort of similar level for the rest of 2018, if I just average your annual guidance. Can you help us build the bridge between your fourth quarter result and average cadence in 2018? And I mean, the bridge if you look at sequential price changes and also volume.

I think the operation for Lithium in the first quarter are about the same. I mean, there is no fundamental change in the business in the first quarter versus the fourth quarter. It is the sequential comparison between Q4 and Q1. If you look back at historical performance, it's the same. The fourth quarter is historically a quarter which is a strong quarter. Sales are high and the products out of Argentina, because of the seasonality of our production, are very high. So, it is just a normal sequential. And you will most likely see when you look at -- on a quarterly basis for this year, you'll most likely see a stronger fourth quarter than you will see first quarter. You will see earnings ramping up and being at the highest level in the fourth quarter. First quarter -- there is a good thing about the first quarter. If you look at the sales to earnings, it's a high profit quarter because the mix is favorable. So, there is nothing fundamentally different. It's mostly driven by Q4 performance by production -- seasonal production in Argentina and first quarter margin by product mix.

Thank you. The next question comes from Joel Jackson with BMO Capital Markets. Please go ahead.

Hi, good morning. Maybe, Paul, on Lithium. It seems like there'll be short carbonate in 2019. Is that true? And then how will that work out? Will you maybe run hydroxide a little bit lower? Will you go into the market and purchase carbonate? What will margins look like? It seems like the Nemaska project being on finance will probably not be able to offer your carbonate for at least a couple of years, so maybe you could just elaborate on that.

Yes, hi Joel, this is Tom. Yes, I mean, it's a little bit early to be forecasting 2019, but I'll give you an indication of where things are. The debottlenecking will come in over the course of 2018 and there's potential upside there. This is a number of different projects that have different characteristics on yield and some incremental capability of equipment that we may see additional there. We do expect Nemaska volume to begin in 2019 and we still need to see, to your point, how much of that volume will be there, but there are commitments and penalties to that end. And we continue, I would say, a multipronged effort on the acquisition of carbonate elsewhere. So, as you know, in 2018, we'll continue to be long carbonate and we have the ability to shift LCEs toward hydroxide to continue to grow. We have potential for more debottlenecking and we have the potential of more LCEs from the outside as well.

Thank you. And our next question comes from Dmitry Silversteyn with Longbow. Please go ahead.

Good morning. Thanks for taking my question. Just looking at the timeline of the Lithium spinoff, I think you talked about as recently as the third quarter conference call of doing this midyear 2018, but now it looks like the initials move is going to be made in the second half of the year and then the full spinoff in the first quarter of 2019. Am I just misremembering or making too much of the changes in timing? Or is there something going on that you pushed back the timing?

Hi Dmitry, it's Paul. No, we've always had really Q3 lined up. It's largely driven, frankly, by requirements for listing a public company, SEC filing, the need for audited financials, the need for quarterly financials. It's -- we are really exactly where we always said we wanted to be, internally at least, when we first announced this almost -- some -- almost a year ago. So, no. If we've made statements that implied the summer for an actual listing, then that's probably incorrect because in the past, there's always been an expectation of a Q3 listing.

Thank you. And our next question comes from Mike Sison with KeyBanc. Please go ahead.

Hey guys, nice quarter.

Thank you.

You seem pretty positive or bullish on lithium demand through 2020 and 2025. If you think about what the Lithium business could earn in EBITDA by 2020 and 2025, any thoughts on the earnings power there? And how much capital cost to sort of get to that potential?

If it was early for Tom to forecast 2019, then forecasting 2025 is asking a lot, Mike. I think a couple of comments I'd just make. I think the capital commitment we've laid out there for the expansion in here is pretty straightforward. We took about $250 million to $300 million for a 20,000 ton expansion. As we expand further in Argentina, we would expect a similar kind of cost, maybe a little less for the next phase, although we're still working on that, so I wouldn't want to stick a pin in it yet. On the hydroxide side, again, it really sort of depends on where we put the units. So, there is a meaningful difference between the capital cost in different parts of the world, but you also get a -- in return for that, typically an inverse correlation between operating costs. So, we will go through that and work out where is the best place to put these units based on demand, based upon supply of carbonate, et cetera, but it's a much, much lower capital commitment that comes through there. Now, this business today operates at an EBITDA margin of about 45% or so. And I think we've been pretty clear that we -- where we view pricing to be into the future and I think we have a pretty clear view to how many LCEs we'll be producing. I think you guys can probably knock out pretty easily a headline view of what you think the earnings power of the business might be under those scenarios.

Thank you. And our next question comes from Don Carson with Susquehanna. Please go ahead.

Yes. I want to go back to the cost synergy outlook for Ag Solutions. In the past, you've talked about $40 million to $80 million, and I know your cost synergies are different because it's a question of what costs you bring in. So, as you've had a chance to run the new business and as the DuPont TSA rolls off, what's your current view on cost synergies for Ag?

So, I mean, you said it, Don. There is no cost synergies per se. We always talk about that as a tool to try to model EPS for 2018 based on the negotiation we made when we acquired the business. So, where we are today is we have structured an organization which can run a $4 billion-plus business with a TSA supporting the acquired business. We spend about $50 million per year on that TSA and that TSA runs until end of 2019. Today, we have not been able -- we're not separating the functional organization and we just have an organization which supports the entire business. So, the way we look at it is what we have today is a structure which supports, as I said, a $4 billion-plus business with minimum -- what we believe as being minimum EBITDA margin for this year on an average of 27%. Then new projects [Indiscernible] toward the end of 2019, what will be happening then is we will have implemented and we started the process a month ago now, we will have implemented a brand-new SAP system, S/4HANA and we will be rolling out -- rolling off the TSA. Now, we have not yet done a calculation of what potential savings. But to think about three digits in million dollars by the time we're rolling off the TSA and having a new SAP is not a stretch. So, what we are thinking is we're operating today with a 27% EBITDA margin. Could we -- could it get better? Yes, it could. We are adding very carefully resources to operate our business. And then you project yourself two years down the road and you can eliminate $100 million of costs.

Thank you. The next question comes from Daniel Jester with Citi. Please go ahead.

Good morning everyone. A couple more on Lithium. Sorry if I missed this, but did you comment on the hydroxide operating rate in the quarter? I think, previously, you had said that you were running above the nameplate capacity. So, I was wondering if you're able to sustain that. And then just secondly, you commented earlier about having conversations for 2019, 2020 sales in the Lithium business. Would it be fair to say that you would lock in some contracts before you would build your further hydroxide expansion? Thanks.

Yes, we are demonstrating our ability. Initially, we believe the two units for lithium hydroxide in China should be able to produce 8,000 tons per year, and we are operating and have been able to operate throughout the quarter above the number. So, yes, expectation that will be at or north of 9,000 tons of lithium hydroxide potential with these two units is being confirmed. We are planning to add another unit in China of lithium hydroxide and then another two -- couple of units, most likely in North America for at least one of them. And we will have the exact same process, which we move the securing contract before the French [Indiscernible]. But with what we see of the demand today, discussion we have with customers, as it was the case for the first unit, we believe the unit will be sold out before we start operation.

Thank you. The next question comes from Mike Harrison with Seaport Global. Please go ahead.

Hi, good morning.

Good morning.

The -- in the Ag business, your Latin America sales you mentioned for the full year were up 15%, but they were lighter than that in the legacy business, looked like only 3% this quarter. Is that just a matter of lapping some tougher comps? Or can you maybe give a little bit more color on kind of how the underlying market looked in Latin America and how it's been trending?

Yes, Mike. Taking Latin America overall, I think Pierre alluded to earlier that we think the Brazilian market is probably down 9% to 10% full year. When you look at our business in Brazil, we're up significantly. As you said, we were -- we had about a 3% growth in the fourth quarter. I think one of the things that you have to recognize is that's exactly how we planned it. If you remember, Q3 was a very large quarter for us. We knew that was the cadence that was going to happen, so we fully forecasted that type of growth rate. I think going around the rest of the region, Mexico is very good for us. Good growth in niche crops. Obviously, the newly acquired portfolio helps us there tremendously as well. In Argentina, market was very tough weather-wise. We see continued expansion of the pre-emergent herbicides with our Authority brand. So, Argentina was good for us in the second half of the year, expect that to continue as well. So, overall, Latin America performed very well for us.

Thank you. The next question comes from Laurence Alexander with Jefferies. Please go ahead.

Hi, this is Dan Rizzo on for Laurence. How are you?

Good morning.

Could you comment on what you're seeing in terms of pest pressures and channel inventories in North America just given the weather we've had in North America over the past couple of months? Has anything changed in terms of outlook for that?

Dan, no, not really. I mean, it obviously is very early to tell whether what the pest pressure is going to be like. I can tell you, though, from a herbicide perspective, our sales already for pre-emergent Authority for soy is very, very strong. So, clearly, retail and distribution are gearing up for a very strong soy season, which will benefit us. With channel inventories, I think different companies have different channel inventories. We've said it in the past for us; we think in-soil insecticides is a high for us. They will come down over the next season. But from a herbicide perspective, we're exactly where we want to be.

Thank you. And our next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.

Great. Thanks. Just wanted to get a question in on Lithium here. Maybe you can just comment on your outlook for pricing given that effective capacity, on your slide, looks like it could be above demand through 2020. Thanks.

Yes, this is Tom. First, let me comment on the effective capacity being above demand. If you look at 2017, effective capacity results were above demand. It doesn't mean that the right products are getting to the customers. We saw 2017 demand limited by supply, and we saw prices up substantially in 2017. So, the same could occur even though effective capacity is above demand. Looking at what we see 2017 to 2018, we've gotten price increases across all of our products. If you take the midpoint of the revenue and the LCEs, you can come pretty close to see that we got a revenue per LCE that is well above the market and that is driven by a mid-teens increase in our lithium hydroxide product line.

Thank you. The next question will come from Mark Connelly with Stephens Inc. Please go ahead.

When we look at your Ag business and all the markets you're expanding into, how much work do you have left to do in terms of capital, people or partners to really build out the distribution you need to take full advantage of that? I'm talking India and all the other new stuff.

I think the integration is moving forward quite well. The supply chain between the two businesses are being integrated. And we do have capacity without manufacturers, which is well in place. If I would say we have work to do and Mark's organization is doing a lot of work, I believe once the synergies are going to be in place that we do have upside to any numbers we are now seeing. So, what -- where we do have work to do today is finding capacity increase in our own acquired business manufacturing network. That's where we want to add capacity as fast as we can because we have, as you can see, extreme synergies, we have a 6% to 10% growth, and we see that being the case for the future. So, that's where we are working at forecasting for the future. Mark, do you have any additional comments?

Yes, the only thing I would add to that is from the legacy FMC pipeline that's coming out of research, we now have products that are getting close enough that we're thinking about brand-new capacity for those new active ingredients. So, that's part of that overall capacity view of our supply chain. So, we would expect to be making those investments outside the next 12-month period, but it's coming quickly.

And it is more a, I would say, a normal course of business planning in a situation where we believe we're going to have very interesting growth rate for this business versus the market than an integration challenge.

Thank you. And we have no further questions in queue. Mr. Wherley, please continue with closing remarks.

Thank you. That's all the time we have for the call today. As always, I'm available following the call to address any additional questions you may have. Thank you and have a good day.

Thank you. And that's all the time we have for today. This concludes the FMC Corporation fourth quarter 2017 earnings release conference call. You may now disconnect.