FMC outlines $250M new active ingredient sales target as cost actions accelerate amid ongoing generic pressure

Earnings Call Insights: FMC Corporation (FMC) Q3 2025

MANAGEMENT VIEW

* CEO Pierre Brondeau stated that "our sales this quarter were below our expectation," attributing the shortfall to "constrained credit for our customers in Brazil and Argentina as a result of low liquidity" and "pricing pressure from generics, mainly in Latin America." Brondeau emphasized, "We're accelerating planned cost actions similar to what we did with Rynaxypyr in order to keep a less differentiated portfolio of product competitive."
* Management reported third quarter GAAP net sales of $542 million, noting that "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."
* Excluding India, third quarter revenue was $961 million, down 4% year-on-year on a like-for-like basis, with a 6% price decline and volume growth of 2%.
* The company highlighted strong demand for its new active ingredients, with sales nearly doubling versus prior year, and reaffirmed its target of $250 million in new active ingredient sales by year-end.
* Brondeau indicated that "our decision to invest in an additional route to market in Brazil to serve large soybean and corn growers is proving to be worthwhile," with over 300 new customers invoiced to date.
* Adjusted EBITDA was $236 million with an EBITDA margin of approximately 25%. Adjusted EPS was $0.89.
* Brondeau announced, "We have initiated a strategic review of our manufacturing footprint. Our intent is to exit active ingredients and formulation plants as well as other sources that are too expensive to operate and transition that production to lower-cost sources."
* CFO Andrew Sandifer stated, "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."
* Sandifer also announced, "Our Board of Directors has changed the company's dividend policy to establish a new quarterly dividend payout of $0.08 per share effective with the pending declaration of our next dividend payable in January of 2026. This is an over 85% reduction in quarterly dividend."

OUTLOOK

* Management expects fourth quarter sales, excluding India, to be in the range of $1.12 billion to $1.22 billion, representing a 2% increase at the midpoint after adjusting for India.
* Fourth quarter adjusted EBITDA is forecasted at $265 million to $305 million, with adjusted EPS between $1.14 and $1.36.
* Full year revenue guidance was updated to $3.92 billion to $4.02 billion, with adjusted EBITDA of $830 million to $870 million and adjusted EPS of $2.92 to $3.14.
* Free cash flow guidance was lowered to a range of negative $200 million to $0, reflecting "the increased pricing pressure we are facing in our core portfolio."
* Brondeau stated, "By 2028, we expect to have 4 new active ingredients in commercialization alongside a growing family of biological products."

FINANCIAL RESULTS

* FMC reported third quarter GAAP net sales of $542 million, with adjusted EBITDA of $236 million and adjusted EPS of $0.89.
* GAAP net loss for the quarter was $569 million, including $510 million of charges and write-downs for the India held for sale business.
* Free cash flow in the third quarter was negative $233 million. Year-to-date free cash flow was negative $789 million.
* Gross debt ended the quarter at approximately $4.5 billion, with net debt of approximately $4.0 billion.
* The company cited strong EBITDA performance due to cost control and margin-focused pricing, offset by lower price and FX headwinds.

Q&A

* Patrick Fischer, Goldman Sachs: Asked about the $400 million reduction in free cash flow guidance. Sandifer responded that "the primary piece is collections" and highlighted liquidity constraints and competitive pressure on terms as key factors.
* Benjamin Theurer, Barclays: Inquired about the India business sale price. Brondeau replied, "the value of that business is about $450 million as a total value," with high buyer interest.
* Matthew DeYoe, BofA Securities: Questioned commitment to investment-grade credit rating and potential for equity issuance. Sandifer said, "we recognize that our metrics are not currently in line with an investment-grade rating" and are focused on "reducing the use of cash to fund the dividend" and debt reduction.
* Jeffrey Zekauskas, JPMorgan: Asked about industry structural changes and competition. Brondeau suggested that a competitor's split "might open more for us in the future, the Corteva seed hectares to sell our crop chemical products."
* Edlain Rodriguez, Mizuho: Queried whether challenges were FMC-specific or industry-wide. Brondeau noted both industry softness and FMC-specific issues, including the need to address manufacturing costs.
* Laurence Alexander, Jefferies: Asked about portfolio reassessment and possible price reductions. Brondeau said, "All of the rest in the analysis is candidates for being moved to a different manufacturing location or different sourcing."
* Joel Jackson, BMO: Asked about company structure and partnerships. Brondeau indicated, "Partnership will be more and more...part of the way we do business."
* Patrick Cunningham, Citi: Inquired about cost reductions in Asia. Brondeau explained, "We need to resize the region to something which is much smaller than what it used to be."
* Christopher Parkinson, Wolfe Research: Asked about monetizing the R&D pipeline. Brondeau responded, "We very much consider partnership with other companies...but not selling the molecule and us not participating in the growth."
* Aleksey Yefremov, KeyBanc: Questioned Rynaxypyr earnings outlook. Brondeau said, "At this stage, we believe it is still a valid strategy."
* Vincent Andrews, Morgan Stanley: Asked about receivables. Sandifer could not provide precise breakdowns but said receivables are a focus.
* Joshua Spector, UBS: Queried about Q4 cash flow uplift and inventory. Sandifer noted Q4 is "always a profoundly positive cash flow quarter" and acknowledged higher year-end inventory due to lower sales.

SENTIMENT ANALYSIS

* Analysts expressed skepticism and concern, especially regarding free cash flow, working capital, India divestiture, and the ability to maintain investment-grade ratings. Questions were pressing and probed for clarity on the company's strategy and the path forward.
* Management maintained a defensive and pragmatic tone, often emphasizing ongoing actions and the need to adapt to persistent market pressures. Brondeau acknowledged challenges but reiterated confidence in the growth pipeline, stating, "We remain confident in reaching our target of $250 million of new active ingredient sales by the end of the year."
* Compared to the previous quarter, both analysts and management displayed more caution. Analysts were more direct in probing risks, while management's responses reflected a heightened sense of urgency amid cost and liquidity pressures.

QUARTER-OVER-QUARTER COMPARISON

* Guidance was adjusted downward, with free cash flow expectations moving from a positive range in Q2 to negative in Q3 and dividend policy significantly reduced.
* Strategic focus shifted toward aggressive cost reduction, manufacturing footprint overhaul, and divestment of the India business.
* Analysts' concerns evolved from implementation of India divestiture and growth plans to acute questions about liquidity, debt, and working capital.
* Management's tone moved from confident execution to a more defensive, adaptive stance, repeatedly emphasizing the need to realign cost structure and maintain focus on IP-protected growth products.
* Key metrics, such as free cash flow and net debt, deteriorated quarter over quarter, while sales and EBITDA showed resilience when excluding India.

RISKS AND CONCERNS

* Management identified persistent pricing pressure from generics, particularly in Latin America, and constrained credit in key markets.
* The India sale process introduces execution risk, with inventory normalization actions impacting revenue and working capital.
* Liquidity and leverage risks are heightened, as highlighted by the negative free cash flow outlook and the need to amend credit facility covenants.
* Analysts raised concerns about the long-term ability to sustain investment-grade ratings, the effectiveness of cost actions, and the pace of working capital improvements.
* Management is pursuing cost reductions, manufacturing restructuring, and dividend cuts as mitigation strategies.

FINAL TAKEAWAY

FMC's third quarter call highlighted a challenging operating environment marked by generics pressure and liquidity constraints in key markets, leading to lower sales and a negative free cash flow outlook. Management responded with accelerated cost actions, a major reduction in dividend policy, and a strategic review of manufacturing aimed at restoring competitiveness. While the India divestiture and manufacturing overhaul bring near-term uncertainty, FMC reaffirmed its commitment to innovation, targeting $250 million in new active ingredient sales by year-end and retaining confidence in its long-term growth portfolio as the primary driver for future recovery and value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fmc/earnings/transcripts]

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