Good morning, and welcome to the Fourth Quarter 2019 Earnings 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 would now like to turn the conference over to Mr. Michael Wherley, Director of Investor Relations for FMC Corporation. 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, Chairman and Chief Executive Officer; Mark Douglas, President and CEO-Elect; and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Pierre will review FMC's fourth quarter and full-year performance, then Andrew will provide an overview of select financial results and then Mark will discuss the Company's 2020 outlook. We will then address your questions. The slide presentation that accompanies our results, along with our earnings release in our 2020 outlook statement are available on our website, and the prepared remarks from today's discussion will be made available after the call. Finally, 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 SEC. Information presented represents our best judgment based on today's understanding. Actual results may vary based upon these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations and free cash flow, all of which are non-GAAP financial measures. Please note that earnings shall mean adjusted earnings, and EBITDA shall mean adjusted EBITDA for all income statement 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 will now turn the call over to Pierre.

Thank you, Michael, and good morning, everyone. FMC's strong financial performance continued in the fourth quarter, capping an excellent year for the company. Our performance was marked by volume growth across all regions and once again highlighted the benefit of a balanced geographic exposure, the strength of our portfolio and the impact of new product launches. Turning to Slide 3. FMC reported $1.2 billion in fourth quarter revenue, which reflect the year-over-year increase of 9% on a reported basis and 11% organic growth, excluding FX headwinds. This increase was driven by double-digit organic growth in Argentina, Canada, France, Russia, India, China, Indonesia and Pakistan as well as price increases across all regions except North America. Adjusted company EBITDA was $320 million, an increase of 17% compared to the prior year period and at the top-end of our guidance. Company EBITDA margins were about 27%, up 180 basis points year-over-year, despite $28 million in combined headwinds from raw material costs, tariffs, and FX in the quarter. Adjusted EPS was $1.76 in the quarter, an increase of 21% versus recast Q4 2018. The year-over-year performance was driven largely by a $0.34 increase on the EBITDA line and the benefit of reduced share count, partially offset by higher interest expenses. Compared to a most recent guidance, adjusted EPS was also much higher due to very strong operational performance as higher volume and solid cost control drove $0.07 outperformance versus guidance, while much lower-than-forecasted tax rate in the quarter resulted in $0.21 of the beat versus guidance. Moving now to Slide 4. Q4 revenue grew by 7% versus prior year with volume contributing 11% growth, offset partially by a 2% headwind from FX. Overall price was flat as increased rebates in North America offset strong pricing in the other three regions. Given the start…

Thanks, Pierre. I'll start this morning with a few highlights from the income statement, then move to the balance sheet, cash flow, and share count. I'll also give a quick update on progress in implementing our new SAP S/4HANA system. Interest expense for full-year 2019 was $158.5 million, $3.5 million above our most recent guidance, primarily due to higher-than-forecasted foreign debt and commercial paper balances. For 2020, we anticipate interest expense between $160 million and $170 million with the increase largely attributable to higher foreign debt balances, particularly where we utilized local borrowings to reduce currency exposures. Our effective tax rate on adjusted earnings for the full-year 2019 was 11.6%, 290 basis points lower-than-anticipated. FMC's corporate structure, particularly the principal operating companies that were created as part of the DuPont transaction in 2017, provide FMC with a structurally low tax rate. With this structure, profit outside the United States is taxed at lower statutory or negotiated tax rates than profit in the U.S., resulting in a weighted-average tax rate well below the U.S. statutory rate. To be clear, even at this lower overall rate, FMC does incur a significant amount of U.S. tax on these non-U.S. profits under the Global Intangible Low-taxed Income or GILTI provision. The structural elements to drive our low overall effective tax rate are highly sustainable and we expect a low rate for many years to come. However, the effective tax rate in any period is sensitive to swings and profitability between geographies, most notably the amount of profit earned in the U.S. The significant contributors to our lower-than-expected tax rate in 2019 were lower than forecasted earnings in the U.S. due to the factors in our North America business Pierre mentioned earlier, combined with stronger than forecasted earnings that flowed through our principal operating companies…

Thank you, Andrew. Moving to Slide 10 and the review of our full-year 2020 and Q1 earnings outlook. We expect full-year adjusted earnings of $6.45 to $6.70 per diluted share, representing an 8% increase at the midpoint. This outlook for EPS does not include the impact of share repurchases in 2020. Revenue is expected to be in the range of $4.8 billion to $4.95 billion, representing 6% growth at the midpoint and 7% organic growth compared to 2019. Total company adjusted EBITDA is forecasted to be in the range of $1.3 billion to $1.34 billion, reflecting 8% year-over-year growth at the midpoint. Looking at the first quarter, we expect adjusted earnings per diluted share to be in the range of $1.76 to $1.86, representing an increase of 5% at the midpoint versus Q1 2019 and assuming a share count of approximately $131 million. We forecast Q1 revenue to be in the range of $1.23 billion to $1.27 billion, representing 5% growth at the midpoint compared to the first quarter of 2019. Adjusted EBITDA is forecasted to be in the range of $346 million to $366 million, representing a 4% increase at the midpoint versus the prior year period. Turning now to our 2020 EBITDA bridge on Slide 11. Our EBITDA growth is expected to be driven by volume gains and continued price increases. We should note that we are also expecting to invest about $40 million more on R&D in 2020. This increase is driven by our continued success in moving molecules into development from discovery in 2019. Total R&D spend should be approximately 7% of sales versus 6.5% of sales in 2019 as we continue to expand and progress 22 new active ingredients and eight new biologicals towards commercialization. Tariffs will be higher in 2020 while raw material costs…

Thank you, Mark. Our Company's outperformance in 2019 was the result of a very flexible and agile supply chain, limiting the impact of raw material shortages in the delivery of market-driven technologies that offer exceptional value to growers around the world. We strongly believe that our investments in discovery and development pipeline will continue to fuel long-term growth for the company. In 2020, we will continue to effectively navigate through unexpected challenges that arise such as weather or macroeconomic developments, and we will deliver on the financial targets we set out for you today. We believe 2020 will mark the third year in a row that FMC significantly outperforms the crop protection market in term of revenue growth and EBITDA margins. We expect our outperformance will be driven by broad-based geographic growth, launches of new products and technologies and the continued expansion of diamide franchise as we gain more registration and labels as well as grow via commercial partnerships. I will now turn the call back to the operator for questions. Thank you very much for your attention.

[Operator Instructions] And our first question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.

Hi, good morning. How are you?

Good morning.

Hi. I was hoping to maybe to dig into the guidance details a little bit and just think through the cost side and you gave some color in the prepared remarks about investments in R&D and raw materials, but maybe just a little bit more color around the moving pieces there?

Sure, Adam. I think if you look at the full-year guidance, we see it many ways, the pattern similar to what we saw last year, but with a less pronounced headwind from costs and FX. On the cost side, you're exactly right. We are – we have called out. We're increasing our investment in R&D about $40 million year-on-year. So of that $61 million that you see in cost increase for the full-year on our bridge on Slide 11, about $40 million of that is cost increase from R&D spending. If you remove that, we really do have – we start to see the benefit of the pricing actions we've taken over the past five quarters, where prices and mix ends up covering more than the cost and FX headwinds. I do think we did see continued higher raw material costs in tight conditions going into the second half of last year that as you know – as they flow through our inventory in the first half of this year, will continue to be a bit of a headwind, and the U.S. dollar continues to strengthen against the number of our key currencies. So we do still have some FX headwinds. I will note that those headwinds are particularly heavy in the first half. As we start looking towards the second half, we start seeing much more favorable comparisons on costs and lessening FX impacts.

On the volume front, to talk about growth, I'll jump in. But roughly three big buckets I would say are diamides. We do believe it's going to be broad-based, geographical growth and it's going to be in the low-teens. Think about the rest of our portfolio, non-diamide as in 2019 growing at about 5% and as in 2019, we believe the product we will be launching in 2020 will also bring about 2% growth rate.

Okay. That's very helpful color. And then just quickly on the cash flow conversion guidance, the 55%. Apart from the continued investments in ERP and transformation, I mean, what else would it take to get to that medium term target of 70% as we think 2020 versus 2021 and 2022?

Yes. Let’s do one thing. Let me just take a bit the trend from 2018 all the way through 2021 at a high level, and then maybe Andrew, you can go into more detail into the 2019, 2020 number. If you look back at 2018, we had a conversion rate of 18%. In 2019, we generated $300 million of free cash flow, which represent a conversion rate of 37%. Now the $300 million normalized should have been $400 million. We had $100 million miss, purely execution. Got our eyes off the ball on a couple of issues, but the normalized number would have been around $400 million, which is about 50% conversion rate. Looking into 2020. 2020, I would characterize as a year of bit along the same line as 2019. We believe we're going to benefit from higher EBITDA, about 8% growth. But from the cost standpoint, we were expecting about a year-ago to be able to finish SAP implementation in the first quarter of 2020. But there is no way around it. It's a three-year program. It's going to cost $250 million. So we're going to have to go all the way to the end of 2020 with SAP implementation cost. So we're going to have the same transformational cost as we did in 2019. So we believe 2020 will be a conversion rate of about 55%. Now moving to 2021 and that's when you still see, if we go along the line of a five-year plan, another 8% EBITDA increase. But that's when the SAP implementation transformation costs start to significantly lower and that's when, just through this effect, we expect to be around 70% cash conversion from adjusted earnings. So that's directionally how we're going to go from 37% in 2019 to about 70% in 2021. Maybe Andrew, you want to talk a bit more about 2019 and 2020?

Sure. Let me talk – get a little more specific on that bridge from 2019 to 2020. I think as Pierre referenced, we have about $300 million in free cash flow in 2019. We're guiding an increase in EBITDA of about $100 million, but we'll also be increasing the spending on CapEx, about $10 million year-on-year. And our legacy and transformation costs increased about $20 million year-on-year. So the combination of those factors are – leave you at about $370 million. The net impact of the reversal of the two factors we called out in the cash flow shortfall this quarter and the impact of change in working capital in 2020 are the rest of the difference to the rest of our guidance range. It gets you up in that $425 million to $575 million. So it's important in that 2020 walk, as Pierre mentioned, we do not see a step down. We actually see a slight increase in legacy and transformation year-on-year, with about a $100 million to $125 million of that being really transformation activity and the remainder being legacy expenses that – basically transformation being flat to slightly down to prior year in total with legacy going up slightly. So again, that next real big step in cash conversion, we get to a more normalized level this year for how we're operating on a working capital. And then in 2021, we see the step down from the end of the SAP program in the end of the transformation spend.

[Operator Instructions] The next question comes from the line of P.J. Juvekar with Citi. Your line is open.

Rebates in North America. Is that mostly rebates to retailers based on volume, like a volume rebate or is that more of a competitive action? And in what products is that occurring? Thank you.

Yes, P.J., it just a normal – it's a normal process which happens. Every year we do the same thing. We have rebates, which are indexed on volume and that's a normal process. There was no specific change in the rates or anything of that kind. It was just a normal year. The only difference looking at the weather condition and the pattern in North America, we ended up a bit stronger in the fourth quarter than we’re expecting. So when we had to look at all of the reserves and rebates, we would have to pay. We ended up having higher rebate to be paid to our customers for the full-year and to be done in the fourth quarter. So it’s just – we got a little bit surprised by the strength of the market in the fourth quarter versus what we're expecting and that’s because it's purely proportional to volume created a step up in rebates we're not expecting.

The next question comes from the line of Christopher Parkinson with Credit Suisse. Your line is open.

Thank you. So you've done a solid job of evolving the portfolio for both the geographic and crop perspective, which I guess is kind of the key to enabling you to outgrow CPC markets. However, you're still underweight fungicides and kind of overweight insecticides. It seems like you're entering a lot of agreements regarding texturing and the diamides over the long-term, but how should we think about your total portfolio evolution as it pertains to further establishing your presence in fungicides? And is it a coincidence that you mentioned product line acquisition discussions in M&A? Thank you.

Yes, Chris, you're absolutely right. We are heavyweight in insecticides. I believe, we're the world's leader in insecticide. So we're not disappointed with that profile at all. However, you're right. We do want to increase our participation in fungicides. And really we're doing that in three ways. First of all is our current portfolio, which is limited, but with very, very interesting products. We launched a new product this year or 2019, Lucento in North America. It's going extremely well. To be frank, I think if we'd have had more capacity, we'd have been able to sell more. So there is the notion of selling what we have today. Second to that is what we have in our pipeline, when you think about our discovery and development pipeline. We currently have today five new fungicides in our pipeline, three of which have brand new modes of action not seen before. So we know we have the long-term view, which is very strong from the fungicide perspective. Closer to home, we will be launching in 2021 a brand new fungicide called Fluindapyr. We'll be launching that around the world. That will also add to the growth rate as we go through sort of the second half of our plan. And then third is how we acquire technologies or access to products around the world. We are under active discussions and in fact some of the agreements that we have in place today for the diamides allow us access to various fungicides in different markets. So we pursue in pretty much every avenue we know to really grow that fungicides as fast as possible. But it is a target for us.

Your next question comes from the line of Mark Connelly with Stephens Inc. Your line is open.

Thanks. So Pierre, last quarter you talked about Cyazypyr and the pickup we saw there. Cyazypyr has been a sort of a slow and steady success since the DuPont days. Are you seeing that continue? And if it is, what does that say about the acceleration in demand coming this late into growth cycle?

Yes. Mark, you're right. Cyazypyr was launched later than Rynaxypyr. I would say it is somewhat more of a difficult sell. As we've got our hands around the products. We understand that it has some attributes when it comes to the performance that also has plant health benefits in terms of how a plant responds to Cyazypyr and how Cyazypyr removes the pests. We’ve talked about the size of our business in diamides over 2019. It's about $1.6 billion business. Cyazypyr is growing rapidly, much faster than Rynaxypyr and is in the $350 million to $400 million range going forward. So it's already become a significant molecule. We don't believe at this point that its growth profile is slowing down, certainly not in the near-term. So you can expect us to talk more about Cyazypyr and especially the growth rates as we go forward.

Your next question comes from the line of Frank Mitsch from Fermium Research. Your line is open.

Good morning and congratulations Mark on being named CEO-elect.

Thank you.

And likewise Pierre, Executive Chair. And I assume taking a little bit more time off, but congratulations to you both. Pierre, you mentioned that over the past six months you've been signing multiple new partnerships. And I'm just curious if you could kind of describe them in a little more detail. I mean, what products are these covering? Are these just covering the diamides geographic? Any more color that you could expand upon this? And then perhaps just give us a sense as to what size of your total revenues you think this may grow to over the next couple of years?

Yes, I'll ask Mark to jump in. The only thing, Frank, I want to say before Mark talk a little bit is, with most of these agreements, we do have secrecy agreement. So we are very limited to what we can say around volume, especially being in an early stage, it would be quite easy to understand who is doing what. And as we said in the script four are global agreement and 41 are local agreements, all of them are diamides agreements. Mark, you want to say a few things that they cover?

Yes. Frank, they cover both Rynaxypyr and Cyazypyr. As Pierre said, we are under pretty tight confidentiality rules here, but suffice to say 11 different countries so far, all major crops and more importantly some crops and markets that we are not active in today with the diamides. So think of it in terms of growth from a market access perspective in various countries around the world. And these are not products that are just straight Rynaxypyr or Cyazypyr. They are mixtures and sophisticated formulations with active ingredients that we don't have access to. So the fundamental purpose here is not only to defend our franchise and grow it over the next decade, but also to expand the pool of where we operate. Think about it this way. The insecticide market is about a $15 billion market. A lot of the older chemistries are going away. And we have about $1.6 billion worth of business with the diamides. We have plenty of room to grow here over the long haul and that is the purpose of what we're doing.

I think what Mark said is, at the end is very important. We do believe those partnerships are going to help us expanding the market penetration of Cyazypyr and Rynaxypyr. Those two molecules are big, but we believe they are far from being at the end of their market penetration. So that's one of the way to do it to complainant all of the marketing and commercial activity FMC has directed.

And your next question comes from the line of Laurent Favre with Exane. Please go ahead.

Yes. Good morning, all. I've got a question on the step up in R&D from 6.5% to 7% of sales. I was wondering if you could tell us a little bit more about what's driving the increase? Is it the underline cost inflation against the existing plan? Is it spending more on discovery, I guess new actives? Is it changing scope on the formulations or is it just a bit of everything? Thank you.

Yes. Laurent, really the $40 million is targeted at two new active ingredients that we moved into development from discovery in 2019. So we now have that run rate cost of spending more money on what is really the most expensive part of the whole R&D cycle, which is development. That's where we spend a lot of money on toxicology, et cetera. So those products are now moving into a phase where for the next three, four, or five years, spending will be increased. 7% of revenue is not something that we see as a problem for us. We actually have phased our R&D so that we should be in that 7% range on an ongoing basis. You should expect to see that number change as we go through the years and the business continues to grow. We will be spending more on R&D as we continue to expand, not only the pipeline of synthetics, but biologicals as well.

Your next question comes from the line of Steve Byrne from Bank of America. Your line is open.

Yes. I was hoping you could comment on whether or not you're seeing any indications of some competitive pricing from any one of the following buckets. One being the inventory, the channel inventory levels Mark that you mentioned in North America being higher than normal, another potential one would be the big seed companies are increasingly bundling crop chems with their seed platforms, another one being increased ecommerce offerings, anything that you're seeing there that – if you could comment on those please?

Thank you. Listen, first of all, we should know it's a highly competitive market. There is lots of companies in this market who are competing, but at the end of the day, it is a market we are offering in technology matter. So yes, there is competitive actions, but at the end of the day, if you price right the right technology, you can protect your margin. Maybe Mark, let's start the comments about seeds and the bundling and maybe talk about the meeting you and I we had last week with our customers.

Yes, sure. So let's put it in perspective. You're talking about seed bundling. You're really talking about major row crops in the Midwest of the U.S. And frankly, when you look at that as an overall component of our business, it's not the majority of our business by a long way. And even in the U.S., we have tremendous exposure outside of the Midwest. We don't see the bundling aspect as a competitive threat to us. The meeting Pierre was referencing, Pierre and I and the whole of the North America commercial team, we were with 250 retailers and distribution companies in the U.S. last week. And we spent three or four days talking about the market. Where are we? What's our competitive offering? And I can tell you at no time did we hear that the combination of seeds and chemicals is a detriment to our growth. In fact, we had the opposite. We had the fact that our offerings are offering technology on anybody seeds. It doesn't matter who seeds you buy. Can be an independent, can be one of the big two or three. So for us, we see this as an extreme positive and so do our retailers and so do our distribution partners. So in that sense, no, I don't see the seeds. Combination has been an issue for us. On the last bucket that you had Steve, on e-commerce, we actually see e-commerce is having a place in the marketplace. But frankly, we see it at the low end of the market. It's easy to sell a generic on price. It's not easy to sell a very sophisticated pre-emergent herbicide or a very sophisticated diamide insecticide online. We don't participate in those forums. We will not participate in those forums. Our customers are the people that are offering the service levels down on the ground with the growers. So for us, we're not seeing anything impacting our overall North America business through e-commerce.

I want to repeat what Mark said because that is very critical and it is a strategic decision of FMC. We will not get into the seed business. We do not need to be in the seed business. When Mark talked about 200 customers, it is true. It was 200 to 250 customers. We spent most of the week. I can tell you that to a person, they told us that it's very critical to have a chemical and biological supplier who is agnostic to the type of seed and somebody has the right technology they can use with any type of seed. Our customers are not big fans of bundling or being pushed to use a specific seed with a specific chemical. They need the freedom to choose and we provide that to them. So it is not something we are concerned about. We do believe – I would even go one step beyond. I think it's a competitive advantage for us to not be in seeds.

Your next question comes from the line of Mike Sison with Wells Fargo. Your line is open.

Hey, guys. Nice end to the year and congrats to you both.

Thank you, Mike.

I think you mentioned the non-diamide business is expected to be up mid-single digits in 2020. Can you maybe give us a little bit of color where the growth coming from, new molecules, geographies, new registrations? I'm sure it's a little bit of all of the above, but just a little bit of help there. Thanks.

Yes. Mike, it is a little bit of all of the above. As Pierre indicated, our legacy portfolio we believe is growing in roughly the mid-single digits. I would say across the board, we're seeing the highest growth rates with the fungicide portfolio that we have, spent a lot of time on growing that around the world, mainly in North America. Certainly the legacy insecticide portfolio is doing extremely well, especially in Latin America where we have some very, very good products that are going into the soy complex. And then we would come to the herbicides, where we see growth in both the U.S. with some pretty sophisticated pre-emergent formulations like Authority Edge that are replacing current technologies that are out there. We see growth in Argentina on pre-emergence, and we also see significant continued growth with herbicides in sugarcane in Brazil. Moving over to Asia. India is a big market for us now and we're offering brand new herbicide formulations that have not been seen before in India, especially for sugarcane. We continue to grow our rice herbicide business in China. So all those pieces that come together, you can see, it's quite easy for us to get into that mid single-digit range.

Your next question comes from the line of Don Carson with Susquehanna Financial. Your line is open.

Thank you. I want to go back to raw material costs, and your outlook for the year. Pierre, you mentioned that that higher cost last year will flow through inventory in the first half, but once you get through that as you get into the second half, do you see raw material costs coming down? And I know you've recast your supply chain, but is availability out of China a problem now that's perhaps grown with some of the recent shutdowns? Could that have a second half effect on the industry?

Yes. So first of all, let you start with the cost as we are forecasting in our guidance. You are correct. The cost is turning into the second half of the year into positive, which means that most of the adverse costs in our P&L is happening in the first half of the year with a disproportionate amount in the first quarter and then in the second quarter. And then when we get into the second half that's when these costs are improving. From an availability standpoint, where are we today? As you can guess, the issues we had last year, which were due to environmental issues and industrial parks shutting down, those issues are over. I think we are not suffering from any issues there. The thing we're watching, of course, is the impact of Coronavirus. There is no impact of Coronavirus on demand today, as we see it. It is much more an impact on logistics because of parts of the country, which are being isolated or roads which are being blocked or air freight. Today, we have not seen any negative impact on our ability to pay rate so far. We had some issues where we had to find options to get raw materials from a different location, but all-in-all the issues we have been facing, we have been able to resolve them and operate normally. That being said, as you can guess, it's a very dynamic situation. So we do have a team fully focused on that and only doing this day after day, which is watching the flux of raw materials from a place to another to make sure we do have what we need for our growth plan. But yes, it is something we are aware of and carefully watching, but so far so good.

Next question comes from the line of Mike Harrison with Seaport Global. Your line is open.

Hi, good morning.

Good morning.

Looking at the one slide you have in there, 13% growth in the Latin American crop protection market in 2019 that seems like a lot. Were there really that many more planted acres or did we see increases in the number of applications? Was this trade benefits? Just wondering if you can help us understand the drivers of that very strong growth in the market itself and maybe get us more comfortable that we weren't just seeing a lot of inventory getting stuffed into the channel?

Yes. Mike, listen, I think it's a very good observation. I think most people – when we talk about 13% growth rate, most people put that straight towards Brazil. I think you've got to parcel it out somewhat in the sense that the other regions are growing. Mexico grew in the North and then obviously Argentina has been growing certainly for us, but the market was relatively, I would say, mid-single digits. If you look at Brazil, surface area was planted, it was probably about a 3% increase overall with soy leading the way. We had a very good season on cotton, strong infestation, which obviously helped us, but also the market was up because of that. Cotton is a high usage of pesticides. I would say though that overall I think the market has more channel inventory in Brazil than the market would take. So I think some of that 13% is setting warehouses right now. I'm going to be very frank and tell you that, we talk about this constantly on every call and our inventories are exactly where we want them to be, normal levels across Brazil for the rest of this season and then heading into the new season that comes in at the end of this year. But I do start to watch the channel inventories in Brazil. I think they are higher than normal.

And to compliment what Mark said, and the level of inventory in the channel of FMC products, just to remind what we said in the script, growth was not driven in the fourth quarter for FMC by Brazil. It was other parts of Latin America and a big driver was Argentina. So that is part of the process we have in place to make sure that in Brazil we control channel inventory.

Your next question comes from the line of Kevin McCarthy with Vertical Research Partners. Your line is open.

Good morning. Thank you for taking my question. Mark, a question for you on insecticides as it relates to some of the regulatory dynamics. With regard to chlorpyrifos, we understand that that chemistry is being phased out in California and Europe. And so my question is whether FMC foresees any opportunity to gain share via substitute chemistry, such as pyrethroids or otherwise? And then second, you mentioned the carbofuran exit. Just wondering if you could address that in terms of opportunity to backfill there, what options you may have in the portfolio? Thank you.

Yes. Thanks Kevin. Yes, chlorpyrifos is a molecule that is, as you said being removed in California. We have very limited sales of chlorpyrifos around the world and we have exited basically all of that business. So for us, we see it as more of an opportunity and you're right. Pyrethroids, especially our bifenthrin mixtures will be targeting those markets. So we'll be looking to grow that. And then on carbofuran – yes, we do see opportunities for our portfolio to replace what we already have. And obviously if we were planning to exit, we had plans to replace and those plans will be rolled out in Mexico and parts of Asia, Indonesia in particular where we will be replacing our own products with some of the newer technologies.

Your last question comes from the line of Joel Jackson from BMO Capital. Your line is open.

Hi, good morning. You did a good job of bridging free cash flow conversion in major buckets in the next couple of years. I just wanted to focus on the 2019 versus 2020 free cash flow conversion. If looking at the roughly $100 million or 12% conversion that is expected in 2020 instead of 2019, it looks like normalized everything, 2020 free cash flow conversion is actually less than 2019 conversion. Is that right? And maybe you could just specifically walk through some of this, but specifically walk through exactly the difference between 2019 and 2020, if that's true. Thanks.

Yes. Joel, I think the free cash flow conversion on a like-for-like is pretty consistent between the two years. What you've got are some puts and takes. We have higher capital additions and higher legacy and transformation spending in 2020 than we did in 2019 to the tune of about $30 million combined. We do see increased cash from operations. Part of that is the recapture of the delayed collections that we saw at the end of Q4. And we also have to acknowledge we're growing the topline, roughly $300 million, $350 million at the guidance point and generating $100 million of EBITDA. It does take some working capital to continue to grow the business. When you think through that walk again, if we take $300 million in free cash flow in 2019, $100 million growth in EBITDA, $30 million headwind from higher legacy and transformation and capital spending, that gets you within $100 million of our guidance point. That $100 million is the rebound – the reversal of the Q4 factors we've talked about and a very minimal change in working capital beyond that – very minimal use of working capital beyond that. So it does imply continuing improvements and working capital efficiency. And that's a part of our continued drive to derive and not just waiting for the step down, the transformation spending, but to continue to drive down the working capital use in the business.

That's all the time we have for the call today. Thank you and have a good day.

And this concludes the FMC Corporation conference call. Thank you.