FMC Corporation
CEO : Mr. Mark A. Douglas
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 14.7% YoY | 35.9% | 41.8% | 2023-02-08 |
Andrew Sandifer says,
FX Headwinds
- FX was a 2% headwind to revenue in Q4 2022, with weakness in Asian and European currencies, partially offset by strength of the Brazilian real.
- For full year 2022, FX was a 3% headwind overall, with the most significant headwinds coming from the euro, Turkish lira, and Indian rupee, offset in part by a strong Brazilian real.
- Looking ahead to 2023, continued modest FX headwinds are expected on the horizon, with the most significant headwinds across a range of Asian and European currencies.
Interest Expenses
- Interest expense for Q4 2022 was $44.8 million, up $11.8 million versus the prior year period.
- Interest expense for full year 2022 was $151.8 million, up $20.7 million versus the prior year, driven primarily by higher U.S. interest rates.
- For 2023, FMC estimates that full-year interest expense should be in the range of $200 million to $210 million, an increase of more than $50 million at the midpoint versus 2022, driven primarily by higher U.S. interest rates.
Tax Rate
- For full year 2022, FMC’s effective tax rate on adjusted earnings came in slightly better than anticipated at 13.7%, driven by a modest shift in mix of earnings across principal operating companies.
- For 2023, FMC estimates that its tax rate should be in the range of 14% to 16%, with the increase driven by anticipated higher foreign earnings subject to U.S. GILTI tax versus 2022.
Cash Flow Generation and Deployment
- FMC generated free cash flow of $514 million in 2022, down 28% versus the prior year.
- FMC is forecasting free cash flow of $530 million to $720 million in 2023, up more than 20% year-on-year at the midpoint.
- Free cash flow conversion from adjusted earnings for 2022 was 55%, with rolling 3-year average free cash flow conversion at 67%, slightly below FMC’s long-term goal for 3-year average cash conversion of 70% or more due to the inflationary impacts on working capital.
- For 2023, FMC anticipates a significant improvement in free cash flow conversion of 65% at the midpoint.
- The remainder of cash deployed in 2022 was used to acquire BioPhero and to make equity investments through FMC Ventures.
Share Repurchases
- FMC intends to repurchase, at a minimum, enough FMC shares to offset any dilution from share-based compensation in Q1 2023.
- Given the seasonal nature of FMC’s cash flow, any share repurchases will be weighted more heavily to the latter part of the year.
Mark Douglas says,
Cost Reductions and Margin Expansion
- Costs are expected to recede in the second half of the year, leading to margin expansion.
- A modest amount of cost reduction has been built into the midpoint of the guidance.
- Costs are expected to become a meaningful tailwind for the company by early 2024.
Investments in SG&A and R&D
- Investments in SG&A and R&D are seeing profitable growth, particularly in Brazil and other parts of Asia.
- R&D investments are increasing, with the addition of a new molecule and a full year run rate of BioPhero investment.
- SG&A is expected to grow at roughly 6% along with the top line, while R&D will grow above that.
Input Costs and Pricing Actions
- Input costs are high in the first half of the year, but will abate as the year progresses.
- About 50% of the price target for this year is a rollover from last year’s pricing.
- The company is less sure about the cost side, but confident in their pricing actions.
Prudent Guidance
- The company is being prudent in their guidance, given the volatile nature of the world.
- Improvements are expected, but the exact level is uncertain.
- The make call will provide a better view on raw materials.
Q & A sessions,
Pricing and Market Growth
- Price increases already in effect in US, Canada, and Europe; planning increases for Latin America market
- Inflationary environment supports price increases, especially for specialty products
- Latin American market growth impacted by nonselective herbicides
Supply and Channel Inventories
- China supply not impacted by COVID, opening up is a neutral event for FMC
- Biologicals growing rapidly, with new products and synergies with synthetics
- Channel inventories elevated in Brazil, Argentina, India, and parts of Indonesia
Arc Technology and Portfolio Mix
- Arc technology provides value and sustainability by precisely timing product application
- SG&A expense, but adds value by improving portfolio mix and defending business
Cost Structure and Spending
- Input costs remain a headwind in H1 2023 but are expected to become a tailwind in H2
- SG&A and R&D spending expected to grow, with the latter growing faster to support growth and invest in Plant Health platform
- Continued focus on maintaining competitive cost structure with SG&A more than 500 basis points lower than nearest competitor
No bad stock 