Good morning, and welcome to the Third Quarter 2025 Earnings Call for FMC Corporation. This event is being recorded. [Operator Instructions] I would now 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 Third Quarter Earnings Call. Joining me are Pierre Brondeau, Chairman and Chief Executive Officer; and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Today, Pierre will provide an overview of our third quarter performance as well as an outlook for the 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 and 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.

Thanks, Curt, and good morning, everyone. Before we get into the details of our third quarter results, I want to acknowledge that our sales this quarter were below our expectation. Two factors led to these results. The first is constrained credit for our customers in Brazil and Argentina as a result of low liquidity. The second is pricing pressure from generics, mainly in Latin America. These issues became apparent as we neared the end of the quarter and as the planting season was getting underway in Latin America. We expect both dynamics to persist in the fourth quarter. Consequently, we're accelerating planned cost actions similar to what we did with Rynaxypyr in order to keep a less differentiated portfolio of product competitive. Our belief remains that being a pure-play agricultural sciences company is the right focus, and we have a strong pipeline of innovative technologies to support that. Slide 3 through 5 provide details on our third quarter performance. We reported third quarter GAAP net sales of $542 million, which is 49% lower than prior year. The vast majority of the year-over-year decline is attributed to significant onetime actions taken in India to better position the commercial business for sale. During our last earnings calls, I shared that we are not operating a business in India differently, following the designation of that country's commercial business as held for sale. We've also discussed elevated inventory in the India channel many times. Over the course of the third quarter, we made the decision to take back a substantial amount of channel inventory in the form of returns. To further clear inventory from the channel, we offered pricing credits to distributors, encouraging faster movement of products. These actions are intended to support the sale of our India commercial business. The process is moving…

Thanks, Pierre. Let me start with some additional details on the impact of the India held for sale business on this quarter's financial statements. As Pierre noted earlier, we reported GAAP revenue of $542 million for the third quarter. This reflects negative revenue of $419 million in our India held for sale business. The substantial channel inventory in the country was reflected in our financial statements, primarily as receivables. During the quarter, we took several onetime actions to prepare the business for sale. These included physical product returns, taking provisions for additional product returns that will be completed in the fourth quarter and granting price credits to customers on the remaining channel inventory to encourage faster clearing of that channel inventory. Each of these actions had the effect of reducing revenue as well as receivables. The net result was negative revenue for India for the quarter. This will also result in a substantial reduction in inventory held in the channel to much more normalized levels with excess inventory to be held directly on FMC India's books as FMC-owned inventory. We are doing this as we believe it is much easier for a buyer to ascribe more certain value to physical inventory being purchased in a business sale than the receivables, which are subject to collection and other risks. Further, rapidly correcting channel inventory reduces risks associated with recent changes in the application of local indirect taxation rules. We intend to manage the India business with a heightened focus on liquidation of inventory in advance of completing the sale of the business. Third quarter GAAP net loss of $569 million reflects approximately $510 million of charges and write-downs for the India held for sale business. Of this, $282 million reflects the channel inventory actions I just described. The remaining $227 million…

Thank you, Andrew. Normally, at this time of the year, we would provide some directional commentary for the upcoming year. However, as we look ahead to 2026, there are still a number of uncertainties, not at least of which are tariffs for China and India. On our February earnings call, we will be in a better position to provide formal numerical guidance for '26 as well as new multiyear outlook. Taking a step back, FMC's second half guidance is consistent with last year on a like-for-like basis, excluding India, with sales down 1% and EBITDA up 4% at the midpoints of guidance. Despite a challenging market, volume is growing in the second half as the industry recovers. And while growth is below our initial expectations, performance remains solid, and we are taking decisive actions to strengthen our position. We're adapting our strategy. We're redefining our manufacturing footprint. We're reducing cost. We're making the necessary capital allocation decisions. The growth engine of the company, new active ingredients is intact, and we are protecting our ability to invest in the innovation that differentiate us. With that, we're ready to take your questions.

[Operator Instructions] The first question comes from Duffy Fischer with the company, Goldman Sachs.

So on the free cash flow guide, at the midpoint, you're down $400 million versus what you expected last quarter. Can you just talk about the buckets of what's eating up that cash flow? I know some of it is working capital. And then do you think you get a onetime release of that back next year? Or is this going to be a new going forward higher commitment of cash needed for your EBITDA delivery?

Thanks, it's Andrew. I'll take this question. Look, in terms of changes got from last guidance to current guidance on free cash flow for '25, look, it starts with a $60 million reduction in full year EBITDA guidance, right? So let's be clear, we've taken down sales by over $200 million and EBITDA by $60 million since our prior guidance. And that has an impact on collections, which bluntly collections are predominance of the move in guidance between the 2 calls. Lower sales in Q3 and Q4 means less that will be collected. Not all would be collected in those quarters by any means, but we would have collected some of those sales. We're also because of liquidity conditions seeing fewer cash sales. There's a portion of our mix that is sold. It's basically immediate payment as cash sales. Liquidity constraints are limiting that part of the collections mix in Q3 and Q4. And we are seeing competitive pressure that's pushing for longer terms. So the biggest part of the bridge between past guidance and current guidance is collections. There are a couple of other factors. There are certainly some noise around our India exit. There were certain amounts of cash that were built into our guidance being collected in the second half into our prior guidance for India. As we've made adjustments and decisions on how we want to operate that business to better prepare for sale, there is some friction there. And we are seeing some higher cash spending than we had previously anticipated. And this is things like higher tariffs. The India tariffs that are currently in place were not a part of our thinking when we last gave cash guidance. We've taken some additional restructuring actions. As Pierre mentioned, we shut down a manufacturing line that…

Next question comes from Ben Theurer with the company, Barclays.

Could you give us maybe a little bit of an indication what you expect the sale price for that India business might be and more color on the buyer interest, that would be appreciated.

So right now, as you could see in the way we are presenting the results, the number of the value -- for the value of that business is about $450 million as a total value. The interest level is very high, and I would say, higher than what we were expecting. The number of inbound request is higher than we're expecting. Vast majority of local companies, but still some international companies and sponsors looking into the business. So the business is -- the process is proceeding quite well. Anything, Andrew, you want to add on the value of the business?

Just to note that we did write down the business to its fair market value of $450 million. That reflects the value of the business, which includes substantial value for the brands as well as the existing business infrastructure that would be transferred to a buyer. It also reflects the value of the working capital that is invested in that business.

The next question comes from Matthew DeYoe with the company, Bank of America.

I appreciate there's a lot of uncertainty in the outlook. And I know there's some patent issues, obviously approaching. But just as we think about the credit position and the expectation for working capital headwinds, tailwinds next year, do you remain committed to the IG rating? And like how do you think about backstopping that? Is equity issuance to protect IG on the table or not? Maybe that's too early to talk about. I just wanted to get a sense.

Yes. Thanks, Matt. It's Andrew again. I think it's a bit early to talk about all the potential actions. I think certainly, we've done a number of things that we were taking with the specific intention of supporting the investment-grade rating. We did the hybrid subordinated offering in May. We've just announced a very significant cut in the dividend. I think at this point, we recognize that our metrics are not currently in line with an investment-grade rating. The agencies have been supportive of working with us as we continue to work through our transformation. We've started discussions with them, but it's a bit of a work in progress at this point. So look, I think we're focused on making sure we're doing the right things for the business and the long-term health and returning over a period of time to investment-grade ratings. How the agencies view that, we influence but don't control. But we're going to do the right things in terms of reducing the use of cash to fund the dividend. So it will allow us time to pay down debt and also to support the restructuring costs that we need to get the manufacturing footprint in its right place. So at this point, I think we expect to end the year, if you take the midpoint of our guidance range for EBITDA and for free cash flow and the implied debt that implies net debt at year-end at about 4x net debt. At that point, it will take a couple of years to get that back into more in line with investment-grade ratings. So we're going to continue to do everything we can to manage cash conservatively, effectively, direct all the available cash to debt redeployment and debt reduction, and we'll keep working with the agencies to show them the path that we see to returning to healthier metrics.

Our next question comes from Jeff Zekauskas with the company, JPMorgan.

There are different structural changes going on in the crop chemical industry. Your competitor, Corteva is going to plans to split into a seed business and a crop chemical business. As you think of competing against them, do you think it will be easier to compete against an entity that's a pure crop chemical company? Or do you think that it will be harder? They'll lack the seed component. Do the seeds make any difference in selling crop chemicals?

Of course, it's a question we've been asking ourselves and which is difficult to answer. My initial reaction and once again, until we are in the situation, it will be difficult to say, but it might not change how difficult it is to compete against the crop chemical company as a stand-alone. It might have a benefit for us, and I'm highly speculating here, is that it might open more for us in the future, the Corteva seed hectares to sell our crop chemical products. So not expecting much of a change. I think Corteva crop chemical will be as good in the future as they are today. Could we be in a situation where we have more opportunities on the seed front of Corteva with their crop chemicals being maybe less captive. That is a possibility.

The next question comes from Edlain Rodriguez with the company Mizuho.

My quick question, Pierre. Like how much of what's going on right now do you think is FMC specific versus how much is like industry issues? And related to that, like when do you think you'll have a good sense of what's really going on with the portfolio? Because it seems like you play in a game of whack-a-mole. Problems keeps resurfing and then you have to put the fire out. Like when do you think you have a better sense of what's going on with the portfolio? And is it like company-specific versus industry specific?

All right. I'm going to try to answer it. It's an important question. We are obviously looking at. First, let me talk about what is, I would say, industries -- let's face it. We still are in a slow market. The market is not worsening. I think we're at the bottom of the cycle, but the market is not improving. So we are facing a situation where the demand is soft and there is ample capacity mostly due to generics increasing their capacity. So there is -- and especially in places where it's easy for generics to get registration like Asia or Latin America, there is an intensified competition on the non-IP protected product with generic and especially for direct sales to customers. So it's a broader industry statement. Now what is more FMC specific? I think there is a positive FMC portfolio. This is our new technologies. Our new technologies are growing very fast, and there is a very strong demand. Unfortunately, it's not growing fast enough because registration in our industry takes time. So as important as those products are and as important as our growth portfolio is, it is not today large enough to impact significantly the performance of the companies. On the negative front, there is 2 events which are happening. Rynaxypyr, and we talked about it. We don't view that as a growth molecule, and it's a molecule for which we have developed a strategy to protect earnings, but not to grow earnings. Now comes the last point we talked about in our remarks. We were hoping about a year ago to see a market ramping up and being able to defend better a non-IP protected product using branding, using service, using mixtures, IP-protected mixtures. It is a fact that we knew that we had a manufacturing cost, which was not very competitive for part of our portfolio. We believe for the next 2, 3 years, we could live with that. It is not happening. I think with the market remaining soft, we are seeing generics being more and more aggressive, and we are forced to do maybe a bit earlier in a more aggressive way, a complete rethinking of our manufacturing portfolio. So I would say there is a part which is industry linked and then on the FMC side, there is a lot of positive, but '26, '27 are a bit early to see those products influencing strongly. And specifically to FMC is the Rynaxypyr situation we've discussed and our manufacturing costs, which need to be addressed.

Our next question comes from Laurence Alexander with the company Jefferies.

How much of your portfolio is now in the category of reassessing the production costs and likely bringing prices down in '26 and '27? And then related to that, does the season in Brazil and the generic pressure, is that also leading you to rethink how much of a diamide reset you might have in '26 and '27?

To answer your first question, I want to be careful because we are just starting this work. And changing manufacturing in our world is not only a matter of changing manufacturing. You also have to take into account new sources and registration. So it's a very involved process. I would say, for sure, we will retain in our manufacturing portfolio, Rynaxypyr, Cyazypyr, the 4 new active ingredients. And there is also 2 important molecule today, which are multi-hundred million barrels, which are produced in some of our low-cost plants, which will stay with us. All of the rest in the analysis is candidates for being moved to a different manufacturing location or different sourcing. Regarding diamides, at this stage, we do not believe what we are talking about is changing our strategy or make us believe we should go further in terms of pricing. That dynamic around Rynaxypyr, especially was very much in place, was already happening. There is nothing changing here. So at this stage, we do not believe it will have an impact. That being said, we've developed a strategy. We are starting implementation, and we will be adjusting as we need between cost to take share over other type of insecticide or lower-end market and high-end mixtures to reinforce our position on the high-end market for Rynaxypyr. So we will adjust, but there is nothing jumping at us right now requiring a change in our strategy.

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

Pierre, you're describing a lot going on obviously at the company. You're talking about redoing maybe how you manufacture for a larger portfolio, you're exiting at India. You've got things with [ Maxstar ] going on next year. You made some management changes recently. As you go through all this, are you starting to think about in any fragmented industry in crop chems, does FMC have the right structure? Should it be acquisitive? Should you start looking at if you should partner with others? I mean, tell me about how deep your thoughts are going here into all the scenarios that could happen.

Yes. I think -- we believe we have a clear path on where the company is going. It's evolving in terms of the speed at which we should do it, but we have a clear path. We do believe if we project ourselves by 2028, we have a very high level of comfort in the way the company should be operating because at that time, between biological, the 4 new active ingredients and sales up here, we will have a very significant growth portfolio, which will be generating strong growth and profit. With all of the work we are doing and it's very heavy lifting in 2026, we would be able to protect our core portfolio, including Rynaxypyr to grow at market speed. And I think at that time, by this time in 2028, when our growth portfolio is significant enough, we will be in a position to be a company which will be looking much more like the company we were in 2018, and the model is showing it. The very positive thing is we know how to change the manufacturing process and structure, and we have a very solid demand on the new technologies which are coming at us, including the one which are not commercialized yet, where we have demand from customers to get accelerated registration from authorities. So I think that is fairly straightforward. I have to be completely honest, the difficult period for us is 2026, while we are readjusting the companies to be able to get to the point I just described. Partnership, I think partnership will be more and more. And also on the technology front will be more and more part of the way we do business. We could see, for example, the discussion and partnership we had on fluindapyr with Corteva. This is working very well. And I think it's going to be the name of the game for crop chemical company in the future.

The next question comes from Patrick Cunningham with the company, Citigroup.

What are the cost reduction initiatives you have in Asia following the India sale? And would exiting more countries in the region potentially be on the table for you or perhaps other regions as well?

I didn't get the first part, [ dear ]. I can answer the second part. Right now, India is an isolated case and is the only country for which we intend to take the type of action we are taking. Other countries in Asia or even for that matter, in Latin America are for historical reasons, not performing as well as we would like, but all of them are fixable, and we have a plan for them. So to the second part of your question, India is an isolated case and the only one for which we are intending to have a sale process. First part of the question?

What are some of the cost actions in Asia?

Cost action in Asia. It's quite simple. I mean think about a region where India reached multi-hundred peak sales with quite a large infrastructure to support India, to support manufacturing there to support research and development and was a very significant part of the region. We have not fundamentally changed the way that region is structured with way significant sales. You do not need the same R&D as before. You do not need the same marketing. You do not need the same sales structure, and you don't need the same administration. So we need to resize the region to something which is much smaller than what it used to be.

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

Pierre, there's still a lot of things in terms of your R&D pipeline that have significant value. And obviously, we're seeing good things out of Isoflex, fluindapyr. There are a lot of things in '26, '27, I believe, in the pheromones, nematodes. I mean there's a lot of things that are still there that the market perhaps is overlooking. What is your willingness or aversion to potentially try to monetize or partner with some of the value that's there just to alleviate some of the pressures that the company is currently facing. Is that at all on the table? Or is that something that's just not a consideration?

Interesting question, Chris. As you can guess, this is something we talk about. It always depends where the products stand in its development, and it could generate a different type of partnership. At this stage, we are excluding selling any of the active ingredients, which are the closest to commercialization, and you name the 4 of them as well as some which are in the pipeline getting closer to commercialization. But we very much consider partnership with other companies, we had multiple inbounds in terms of interest for those molecules, and it is something we would not ignore. I could not tell what will be the structure of those partnerships, but it's absolutely something which is on the table, but not selling the molecule and us not participating in the growth of those molecules, which represent the future of FMC.

The next question comes from Aleksey Yefremov with the company KeyCorp.

Pierre, in light of this shifting environment, you had a goal of keeping Rynaxypyr earnings flat next year. What are your latest thoughts on that?

At this stage, we believe it is still a valid strategy. We've been starting the implementation of a strategy at the end of the third quarter not because we are seeing a major change in the way generics are penetrating new territories because we are still patent protected. But we see customers rightfully so putting their purchase of Rynaxypyr on hold until they see what will be happening early '26 when generics will be coming. So for us, it's a prelude to what we will be facing in 2026. Hence, we put in place -- started to put in place our strategic plan for Rynaxypyr. And if you look at the third quarter number, it's demonstrating that what we do and the way we think about it is valid. Sales are flat. Volumes are up and price is down, which is the fundamental of what we want to do when we implement that strategy in 2026. So at this stage, we are staying with the same plan. We have no indication that we should change it. But as I said before, we shall adapt depending upon this is unfolding.

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

Andrew, could I ask you on the $2.3 billion of non-India receivables. Is there a way you can help us understand what percentage of those have already been consumed by a grower and you're waiting for them to monetize the crop to be paid versus what percentage is maybe still in the supply chain and hasn't been sold yet and could still be subject to some type of price rebate if market prices have moved negatively versus what that inventory is originally sold for?

Interesting question, not something I can directly answer today, Vincent. I think certainly, as we look at where we are with working capital right now, we're building working capital as we sell into the new seasons in Latin America, in particular. We are seeing an increase like-for-like, excluding India, in receivables year-on-year. So we are watching that closely with what's going on with competitive pressure on terms, et cetera. But I'm not able to characterize the receivables in the way that you're asking today. I think just some general proportions, certainly, in this part of the year and as we get to year-end, you should expect that 40% to 50% of our receivables are in Latin America, which is seasonally appropriate as we are growing. We have seen some delays in collection in Latin America, particularly around the monetization of the cotton crop, as we've talked about. That's led to a modest uptick in past dues, but past dues of short duration in that 30- to 60-day window as we're waiting for farmers to get paid by the commodity houses for their crop. So that's a little bit of color there on working capital, but just I certainly would reinforce working capital receivable is something to get an incredible amount of focus from the management team as we navigate what's going on with market dynamics today.

Final question comes from Josh Spector with the company, UBS.

Two quick ones. One kind of related to the past one slightly, just around fourth quarter cash from ops. I mean, basically, you need about a $700 million uplift, it looks like to hit your guidance. I mean, is that all net working capital reduction and collections? And do you have visibility towards that with high confidence? And then second, kind of related more around inventory dynamics with weaker demand and more generics pressure, are you taking inventory action that's impacting fourth quarter EBITDA? And is there any carryover risk of that into 2026?

So look, Q4 is always a profoundly positive cash flow quarter for us with the seasonality of working capital, including significant prepayments in the U.S. business. So the proportions you're pointing to, yes, I mean, you're looking at a circa $700 million free cash flow fourth quarter. That is in no ways unprecedented and very much our normal seasonality. Certainly, we are watching closely the pressures on terms and particularly the mix of our sales that are sold sort of on a cash basis collected within the quarter that can impact that. To your second question around inventory, we do expect to end the year with a bit more inventory now than what we had originally contemplated because of lower sales. We have a very long supply chain. So a lot of the active ingredient for those sales was already procured and is in inventory. It may not be all the way into formulated product, but we have that material on hand. And that does impact the way we are thinking about the working capital build that's traditional in the first half of the year for us in terms of what production we need to have materials available to meet the sales plan for the first half of next year. So too early to be too specific on that. But certainly, what's happening with inventory right now will influence our production plans is that for product needed in the first half and will impact what the magnitude of the working capital build in the first half will be next year.

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