Good morning, and welcome to the Second Quarter 2025 Earnings Call for FMC Corporation. This event is being recorded. [Operator Instructions] I would like to turn the conference over to Mr. Curt Brooks, Director of Investor Relations for FMC Corporation. Please go ahead.

Good morning, everyone, and welcome to FMC Corporation's Second Quarter Earnings Call. Joining me are Pierre Brondeau, Chairman and Chief Executive Officer; Andrew Sandifer, Executive Vice President and Chief Financial Officer; and Ronaldo Pereira, President. Today, Pierre will review our second quarter performance and provide outlooks for the third quarter and fourth quarter. Andrew will provide an overview of select financial results. After our prepared remarks, we will take questions. Our earnings release and today's slide presentation are available on our website, and the prepared remarks from today's discussion will be made available after the call. Let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including, but not limited to, those factors identified in our earnings release and in our filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's understanding. Actual results may vary based on these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, free cash flow, organic revenue growth and revenue excluding India, all of which are non-GAAP financial measures. Please note that as used in today's discussion, earnings means adjusted earnings, EBITDA means adjusted EBITDA. A reconciliation and definition of these terms as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website. With that, I will now turn the call over to Pierre.

Thank you, Curt, and good morning, everyone. Our goal during the first half of the year was to take a number of actions that would favorably position the company to deliver growth starting in the second half of the year and beyond. These are listed on Slide 3. We have accomplished these critical objectives while delivering on all of our financial commitments. We believe the level of FMC products in the distribution channels has normalized in most countries which will enable the implementation of our growth strategy. We have laid out a clear strategy for Rynaxypyr with key components well underway, including lower manufacturing costs and introducing new formulations. Our additional sales route in Brazil focused on direct sales to large corn and soybean growers has a fully trained staff which -- with initial customer engagements already underway. Commercial activities have commenced and we anticipate seeing early results starting in the third quarter as Brazil's next growing season begins. The strategies for our core portfolio and growth portfolio platforms are clearly defined and Q2 results are in line with these plans. Each region, subregion and countries have actionable strategies in place unique to their geographies. Demand for our new actives, fluindapyr and Isoflex is very strong, and we have put the appropriate level of support in place to deliver on our target. Just today, we received registration for [ fluindapyr ] herbicide containing Isoflex active in Great Britain. The team is prepared for launch, and we anticipate sales beginning in August. Dodhylex active has been introduced with meaningful sales expected to begin in 2027. In fact, the first shipment was invoiced this month. Finally, Q4 of this year, we'll see the first full-scale commercial pilot of pheromones. With these objectives completed, we are focusing on additional ways to improve the…

Thanks, Pierre. Before I review the customary key financial items, I'd like to provide some additional context on the guidance and financial reporting implications of the sale of our India commercial business. We have concluded that the India sale meets the conditions to treat the assets of the business as held for sale for financial reporting purposes effective with the third quarter. However, the business is not material enough to FMC's results to be classified as a discontinued operation. As such, the results of the business will continue to be presented in the company's GAAP operating results until a transaction is completed. As Pierre described earlier, our guidance for the remainder of 2025 excludes India. Our reported revenue will continue to include the sales of India and the India commercial business. However, we will also provide revenue excluding India, as we report each quarter. Guided and reported adjusted EBITDA and adjusted EPS will exclude the results of the business. During the third quarter, we will evaluate the assets related to the sale for impairment. And if necessary, we will record the assets at the lower of their carrying value or estimated fair value less cost to sell in our third quarter financial statements. While we have not yet completed this analysis, it is possible that we will record an impairment of the business in the third quarter. With that additional context, let me proceed to the review of some key income statement items. FX was an overall 1% headwind to revenue growth in the second quarter with tailwinds from a strengthening euro more than offset by a weakening Brazilian real. Interest expense for the second quarter was $61 million, down over $2 million compared to the prior year period, primarily driven by lower debt balances. The effective tax rate on…

Thank you, Andrew. We are now at an inflection point where we are shifting our focus towards revenue and EBITDA growth for the second half of the year and 2026. The reset of the company announced at the beginning of the year is essentially done. We have met all of the objectives we set for the first half of the year. The execution of the India plant will complete the turnaround of the company. We are now positioned for strong performance going forward and our confidence in reaching our 2025 targets with our 2027 outlook intact. With that, we'll now take -- we're now ready to take your questions.

[Operator Instructions]. Our first question comes from Richard Garchitorena with Wells Fargo.

Great. Nice quarter. Pierre, you talked about this quarter signaling an inflection points. You provided 3Q, 4Q guidance, which was in line with expectations. What should we think about in terms of where volume and pricing move into in terms of the growth phase entering 2026, and you're also talking about 2027 targets intact. So if you could just remind us what you're expecting for' '27 as well?

There is multiple year and quarters here. So I think in -- first of all, '26-'27 targets are remaining in line with what we have said at the last earnings call, leading, if I remember well, to an EBITDA of $1.2 billion in 2027. That number is not changing. From a growth in 2026 and 2027, I think it will be mostly driven by a growth portfolio. We have very strong confidence for those 2 years in our branded Cyazypyr in our 3 active ingredients fluindapyr and Isoflex like this year, but we're adding Dodhylex, as I said in my prepared comments, which has just been introduced with the first billing happening this month, and then by our plant health business, Biologicals. So still the same type of expectation with this product leading to double-digit growth. From a core portfolio, I think the fundamental difference you're going to see in '26 and '27 versus 2025, is Rynaxypyr. Today, the portfolio ex Rynaxypyr is growing under multiple sets of actions. But of course, there is a negative impact of the pricing with our diamide partner. I think we are in a place right now where Rynaxypyr strategy based on a much lower manufacturing cost competitive with generics. And I must add to that, a generic situation where there is not as much product available as there used to be in the past and certainly at increasing price, we have developed a strategy which is allowing Rynaxypyr growth year-on-year in '26 and '27 versus '25. So all of those are the pieces of the component of the growth in '26 and '27. For the second half of the year, as we said before, the growth is coming from essentially Brazil, because that's a big season for them, new route to market and direct sales and new co-op strategy. And once again, fluindapyr and Isoflex, which are seeing very, very strong demand.

Our next question comes from Josh Spector with the company UBS.

I was wondering if you could deconstruct the cost side of the basket for 2Q and kind of as we look in the second half. So you had about $69 million in savings. If you could help us think about how much of that is around the fixed cost absorption headwinds coming off 2Q, what carries into 3Q raw materials and cost savings, that would be helpful.

Josh, it's Andrew. I think the story for costs as we go through the year, the drivers are the same in each period. It's the balance among them. Certainly, lower raw material costs are a key driver, and we're the largest driver in Q2. That is both from lower purchase materials, but also from the restructuring actions we've taken to fundamentally change the cost position that we have in our Rynaxypyr business. Second to that is certainly improved fixed cost absorption as we are running the plants much more -- at a much more normal capacity than the more depressed levels of production we had in 2024. And then we do, of course, have continued benefit from the restructuring actions that we took in 2024, some of which are continuing to be implemented, particularly in the first half of '25. As we get into Q3 and Q4, it's just the balance among those levers that's different. I would say, certainly, all 3 continue to be key contributors to our cost tailwinds and those cost tailwinds are quite substantial in Q3 and Q4. The absence of fixed cost absorption challenges is a bigger tailwind in Q3 than it is in Q4. And net-net, costs are a stronger tailwind in Q3 than they are in Q4, but it is still those 3 drivers, lower raw material costs, better fixed cost absorption and the benefits of restructuring actions, not only in manufacturing costs, but also across SG&A that are contributing to the cost tailwind starting this year.

Our next question comes from Frank Mitsch with the company Fermium Research.

Nice result. Pierre, I want to follow up on the India announcement. Can you provide some of the parameters on 2024 in terms of sales EBITDA for that business so we can better tie in the new guidance versus the prior guidance. And along with that, have the bankers already been marketing this business? And if so, any comments in terms of the receptivity of, I assume, strategics that would be interested in purchasing the India commercial business.

All right. Let me start by the second part of your question, that's the easiest one. We have not officially started to market the property, but we have done all of the preparation. We're working on the marketing books. I believe we're already getting front calls, but I cannot be overly precise on that. Since we just announced that. So it seems like the use is growing fast, but can't tell more than that. To answer your first part of the question, I'm going to ask you to bear with me because I'm going to try to give you as many details as I can to help you guys. So it's going to take a minute. First, why no more information than what we gave in the earnings release. India, from an SEC standpoint, is viewed as not material to FMC. So it does not qualify as a discontinued operation. It's classified as a carve-out. Consequently, we're not going to do a recast of '23, '24, '25. But still, I can still give you some colors for you to be able to establish your model. First, let me talk about India in the second half in '24 and '25. What we did in H2 '24 for India was $140 million of sales. What we were forecasting to do in H2 in '25 was $70 million of sales. So if you look at those 2 numbers, to achieve our ex India 2025 second half target, we would need business in the second half of '25 versus the second half of '24 to grow by 9%, which is about $190 million. So if we grew by $190 million, we'll achieve our guidance ex India for H2 '25. How do we get there? First, our growth portfolio. Today, what we have in front…

Our next question comes from Vincent Andrews with the company Morgan Stanley.

Pierre, in years past, you've been able to give us a sense looking into the third quarter at how your order book is shaping up, particularly in the Brazilian market and how much you have in hand versus yet to invoice. So I'm wondering if you could just give us an update there and particularly also just comment on where farmer economics are there and sort of how the credit situation has evolved there.

Yes. I think Brazil right now is looking good. I think I would say actual orders, I'm not talking negotiations, okay? I'm talking orders for the second half, which have been booked is about 35% to 40% of what we need for the entire second half. It's a much higher number than what we've been having in the last couple of years. So at this stage, it's very early. It's only July, but we're feeling quite good about Brazil. Farmers economics in Brazil, do you want to -- Ronaldo, maybe you want to comment?

Yes. Not dramatically different than what we're seeing in the rest of the world. Farmers had very strong harvest for corn. So I think the corn side of the row crops is more exciting than soybean at this stage. They do expect to plant another very strong season on corn. Cotton is not as high as it was a couple of years ago or even a year ago, but it's still incentivizing growers to, at a minimum, maintain their planted area, if not a slight increase, and sugarcane is stable. So all in all, I would say margins are tighter than they were 2.5 years ago, but not to a point that would drive growers to influence their decision on planted area. We do expect a full season in the coming season in Brazil.

Our next question comes from Duffy Fischer with the company Goldman Sachs.

Two questions. First is the new direct sales program in Brazil. The expectation for size this year, does that contribute this year? Or will that take a couple of years before it really contributes anything? And then the second one is the headwinds you're facing from the diamide partners price down, when does that anniversary? Is it basically a 1-year impact? Or will there be kind of 2 years of step- down as far as that being a headwind for pricing for you guys?

Yes, Duffy, first -- to your first question, we are expecting to see the impact of the new sales organization for direct sales to farmers in Brazil to be visible in the third quarter, this quarter. Certainly, we'll not get the full potential. We will grow year after year. But yes, we should see the impact immediately as our sales organization is already currently in negotiation and having some commercial activity. The way the diamide partners contract work is annual. So every year, we review manufacturing costs, and we adjust our pricing to our partners. By far, the most dramatic decrease in pricing took place from '25 -- from '24 to '25. That's where we had the very, very significant reduction in manufacturing costs, which led to the significant decrease in pricing. As we continue to decrease our cost, we will continue to decrease pricing to our partners, but the order of magnitude has got nothing to do with what we saw this year. It will be very incremental.

Our next question comes from Chris Parkinson with the company Wolfe Research.

When you take a step back and you look at your volume algo for the next few years, I mean, there are a bunch of moving parts, but it seems that the TAMs of fluindapyr and Isoflex are pretty obvious. And Ronaldo had done an in-depth look at kind of the broadening addressable market for Rynaxypyr off-patent, especially some of the, let's say, higher end or higher-value acres across the globe. Can you just give us a better sense of where your assessment of those TAMs stands now? Do you feel better about them? Do you feel the same about them just as we're approaching the second half and into that '26-'27 time period.

Yes. I think about the new product, we're feeling better. There is no doubt that the demand on Isoflex and fluindapyr is strong and stronger than we're expecting. We've signed, as you know, important contracts to supply some of our competitors or partners. When they sign contracts, they are partners. When they go against us, they are competitors. So there is no doubt that the demand on fluindapyr and Isoflex is stronger than what we're expecting. The other good news is we are launching and getting the registration in time for Dodhylex. So we do have the official launch, and that will impact 2027. So on the side of the new product, very high level of confidence. Regarding Rynaxypyr, we feel very confident. There is no fundamental change to the strategy we have discussed. The only change is we have moved to a different place. We had multiple meetings and gathering. And now we are at a place where every single country in the world or every single region or subregion do have a Rynaxypyr strategy which is in line with our market. So we moved from a broad directional global strategy to now a ready-to-implement regional, subregional or country strategy for Rynaxypyr. So it's holding true, and we have no negative view of what we're doing. The last comment I would make around Rynaxypyr is our confirmation of the cost road map, which is getting more and more attractive and making us more and more competitive with generics. So that's also a positive evolution of the Rynaxypyr strategy. Plus, I have to say, I mean, that's not by our own doing, but the generic Rynaxypyr situation has changed. There is less supply on the market of generic Rynaxypyr. You're aware of the Youdao plant explosion. Not only it limits the products in the market, but that plant was also making intermediates, which were used by other generics to make Rynaxypyr. So they are lacking intermediates to make their product. And we've seen the price increasing and some very significant announcement. There is also the fact that many of the generics who are not producing, but making a formulation were using the Youdao registration, which, of course, is not usable any longer. So at this stage, we have a way less competitive Rynaxypyr market from the generic, and we are continuing on our road map.

Our next question comes from Kevin McCarthy with the company VRP.

Maybe two quick ones from my side. Pierre, just to follow up on the prior comments that you made. If we take into account Rynaxypyr dynamics as well as your diamide partner agreement renegotiations, would it be reasonable to expect the pricing function overall for the company to stabilize and perhaps turn positive in the first half of 2026? My second question would be for Andrew. Just if you could walk through maybe the working capital and other key cash flow assumptions that you've embedded within your $200 million to $400 million range for free cash flow.

The Rynaxypyr strategy. There is two parts to it. One is with the partners and one is the branded product. I think for the partners, there is some sort of stabilization in the sense that most of the -- the vast majority of the price decrease having taken place, the adjustment we're going to have going forward are going to be pretty minor. So we do expect more of a stabilization of the pricing at this level. For branded Rynaxypyr, we are still expecting a price decrease because the competition with generics is going to be more open. That being said, we are still developing higher tech formulation, which could be commanding a different pricing and a changing competitive situation. So the price increase may not be as dramatic as what we might have expected at some point. But we still believe that we have to cast a strategy within the context of a branded Rynaxypyr pricing going down in '26 versus '25, where most countries which are protected by process pattern today will not be protected. But we are ready for it. The strategy is in place. Manufacturing cost is in place. And we still believe that we can protect earnings in '26 versus '25 for Rynaxypyr. Andrew?

Yes. Some quick comments on working capital and cash flow. Certainly, seasonality of our cash flow is very, very heavily tilted to the second half and in particular, Q4. I think you're seeing that trend in our actual performance through Q2 and what we're signaling for the rest of the year. When we think about the key drivers here, certainly, operating cash flow is the big driver in free cash flow this year, and it's really working capital, right? Our guidance EBITDA is relatively flat, just slightly up for the year. So it really is around working capital is a key driver. From a balance sheet perspective, I think if you think about the 3 key elements. Certainly, payables were continuing to work to rebuild payable levels as we get operations to more stable, steady-state operation. We do still have some noise year-on-year from timing of purchases that is making them at a bit noisy, but you should see improvement in payables. Inventory, I think we'll end up the year probably pretty flattish on the balance sheet. I think the inventory level we're at is appropriate for the sales we have planned for the second half and going into what we expect to be growth in 2026. And then the area we're going to continue to push on and is always a challenge in the ag chem business is receivables. And certainly, with sales growth in the second half, we've got a lot of work to do to and make sure we collect. I think collections have been very solid through year-to-date. We've had good success with normal collections, but also with certain -- providing certain incentive or collections in certain markets as well. So that is the challenge with the growth in the second half is to keep receivables to a manageable level. I think when you factor all of those in with very modest capital expense growth and a very modest increase in discontinued ops spending, operating cash flow, and those 3 factors would get us pretty comfortably in that $200 million to $400 million. But it's going to depend on how we execute in the second half of the year. Unfortunately, it is the nature of the seasonality of our cash flow. So we'll continue to drive that and watch that very closely.

Our next question comes from Aleksey Yefremov with the company KeyBanc.

Could you talk about diamide pricing outside of partner agreements this year? So your branded Rynaxypyr, how is it doing this year pricing-wise and Cyazypyr as well?

Yes. We we're not breaking it precisely, but Cyazypyr is in a very different situation. Cyazypyr is data protected, so we do not have all the same competitive situation in Cyazypyr. Rynaxypyr pricing even for the brand one is...

It's been -- pricing in Q2 for Rynaxypyr -- branded Rynaxypyr was relatively flat. The real pricing headwinds in Rynaxypyr are the partner contracts in the current period.

Rynaxypyr this year, except in India, China, Turkey, Argentina, a few countries, is still protected by process patent. So there is not yet the penetration outside of those countries of generics.

Our next question comes from Mike Harrison with the company Seaport Research Partners.

I was hoping, Pierre, that you could give a little bit more detail on the pheromones offering. It sounds like there's a pilot that's going to be going into action later this year. Curious, are you expecting to see a meaningful commercial contribution in 2026, and where do you think you are on the path to $1 billion in revenue in 2030. Is that still a realistic outlook longer term?

It's -- the answer, if it's realistic or not, will highly depend upon the results of what we are doing this quarter. I think these 2 quarters are very important. The first full-scale commercial operation we have with pheromones. So it's the first time we're going to learn how pheromones perform versus a regular product and will tell us if the $1 billion forecast or plan was based on pheromones operating as expected and well. So I think we're going to have to wait to answer your question. It will be a much better answer based on fact at the end of the year once this campaign is over, and we have the first full-scale results. We don't have it right now, we're shipping the product. We're starting. It's an H2 event in Brazil, and we're not close to having the first result.

Our next question comes from Arun Viswanathan with the company RBC Capital Markets.

I guess just looking at the second half, it looks like the implied guide for Q4 is $354 million. So I guess maybe you can just talk to kind of some of the building blocks there. If you could maybe break it up into maybe new revenue from new products or maybe the Brazil route to market as well. Yes, that would be helpful.

I think the reasoning for Q4 and Q3, and maybe Ronaldo,, you'll add, but is the same. For Q4, it's going to be driven by the growth portfolio. Fluindapyr is going to be very critical in the fourth half. And most of the growth is going to come from a growth portfolio. And mostly from fluindapyr and Isoflex. Then the new route to market will allow to grow the core part of that market. But certainly, it will be -- the impact will be decreased by the reduction in Rynaxypyr due to partner pricing. So a very high growth driven by new products and of course, the new route to market as well as the co-op, we tend to forget that, but we've put in place a very different system with co-ops to increase sales. And those are the drivers for Brazil. Now let's not forget when we talk about Q4, North America is very important. Last year, it was a very big part of the growth we had. This is when we load the wholesaler with the products before they supply in Q1, the retailers. So it's not only Brazil, but it's also North America with about the same drivers.

Our last question comes from Joel Jackson with the company BMO Capital Markets.

Pierre, I wanted to ask you a question. So in the decision that you made to show India the way you're showing, I know the investor base really wants to understand the visibility of your company. And obviously, there's a lot of moving parts and why visibility may be hard this year and next year. But I want to know why you did decide to add a little bit of complexity to this year's numbers by doing this. And as part of that, why didn't you do this when you sold GSS last year? Why didn't you exclude GSS earnings ahead of the ultimate sale closing?

GSS, the decision was made before I was the CEO. I came in, the decision was made. So maybe, Andrew, you can add more detail.

Joe, I think we came to the conclusion on held for sale with the GSS business later in the process. And because of the way GSS was organized, GSS was a collection of product lines across multiple geographies. It was not a discrete business unit. It was not as simple to be able to carve out and/or to identify all the pieces as we were moving through. So that certainly is one difference between the 2 situations. In both cases, the business is being sold qualified for held for sale at certain points, but did not meet the conditions of discontinued ops. So there's no ability to recast. So we can provide color in both cases, but we're not able to do a recast. I think the second piece with the India business and certainly looking at why we think carve-out is appropriate here, operating the India business while we're preparing it for sale is different from operating it if we were going to continue to own it, right? There are decisions we might make that would make it more attractive or easier for a buyer to integrate the business that would might not be in the best interest of our results if we were to operate the business over a longer-term horizon. Because of that, it makes it very difficult for us to forecast the performance of the India business for the next several periods. So we thought it would be more important to be able to give guidance numbers that we can stand behind and deliver upon. And importantly, that represent the future operations of the company, right, what the value driver of this business is going forward. We've made that decision. The Board has made the decision to exit this commercial business. It is not a part of FMC's future in its current configuration. With through supply agreements and partnerships, there will certainly be some ongoing economic benefit. But we do feel that the presentation of excluding the India business from adjusted EBITDA and EPS helps investors see more clearly what the go-forward earnings base of the company is. So that's the reason for the presentation.

And in terms of the complexity to try to simplify, what we are doing in the second half of the year, we are removing from sales, the $70 million we are forecasting for India. And India was at about breakeven on EBITDA. So we are not changing our EBITDA and EPS target. That's all we are doing. So when you look at the numbers for 2025, they're essentially the same. We are not moving on earnings, and we are just removing the contribution to sales of India, which was about $70 million. Besides that, everything else is the same.

This concludes the FMC Corporation conference call. Thank you for attending. You may now disconnect.