富美實 (FMC) 2007 Q4 法說會逐字稿

Good morning and welcome to the fourth quarter 2007 earnings conference call for FMC Corporation. (OPERATOR INSTRUCTIONS) Thank you. I will now like to turn the conference over to Mr. Brennen Arndt. You may begin your conference.

Thank you and welcome everyone to FMC's fourth quarter, 2007 conference call and web cast. Bill Walter, Chairman, President and Chief Executive Officer will begin the call with a review of our fourth quarter performance. Bill will then turn the call over to Michael Wilson, Vice President and General Manager of industrial chemicals who will review the segment's recent performance and provide our 2008 outlook for the industrial chemicals segment. Following Michael, Kim Foster, our Senior Vice President and Chief Financial Officer will report on our financial position. Bill will then complete the call with a discussion of our overall company's outlook for 2008 and we'll then take your questions. A reminder today that our discussion will include certain statements that are forward looking and subject to various risks and uncertainties concerning specific factors that are summarized in FMC's 2006 form 10-K, our most recent 10-Q and other SEC filings. This representation represents our best judgment based on today's information. Actual results may vary based on these risks and uncertainties. During the conference call we will refer to certain nonGAAP financial terms. On the FMC website available at fmc.com, you will find these terms under the heading entitled glossary of financial terms. We have also provided a reconciliation to GAAP of the nonGAAP figures we will use on today's call and we have also provided our 2008 outlook statement.

So it's now my pleasure to turn the call over to Bill Walter.

Thanks, Brennen. And good morning, everyone. As you saw in our earnings release, we had an outstanding quarter with exceptionally strong operating results across all three of our business segments. Our fourth quarter performance completed another record year for the company. Summarizing our fourth quarter results, sales of $674 million increased 15% versus the fourth quarter of 2006. Segment earnings of $95 million s increased 40% versus the same quarter a year ago. Two noncash items, a higher book tax rate and lower LIFO income negatively impacted the quarter's results by $0.28 per share when compared to the fourth quarter of 2006. Kim is going to review these with you in detail later in the call. Finally, earnings before restructuring and other income charges was $0.59 per diluted share, versus $0.61 per diluted share in last year's fourth quarter. As I said, strong performance was realized in all three operating segments, specifically Ag products earnings of almost $32 million increased 44% versus a year ago, driven by higher sales in Asia and Latin America, and strong global supply chain performance.

Specialty chemicals earnings of $34 million increased 39% versus the year ago quarter as a result of strong commercial performance in BioPolymer, higher volume and selling prices for primary lithium compounds and continued manufacturing productivity improvements, offset in part by higher raw material costs. Industrial chemicals earnings of $29 million were 36% higher than a year ago, driven by higher selling prices in soda ash, volume growth across the segment and improved power market conditions in Spain. Energy and raw materials were higher than a year ago across the company. Versus the prior year energy and raw materials unfavorably impacted earnings by $0.06 per share in the quarter. Currency translation on the other hand had no material effect on our earnings during the quarter. On a GAAP basis, we reported net income of $40.9 million or $0.53 per diluted share. GAAP earnings for the quarter included a $0.06 per share net charge related to discontinued operations, restructuring and other charges including tax effects and adjustments. With that reconciliation, our nonGAAP earnings were $0.59 per diluted share versus $0.61 a year ago.

Let me now take a more detailed look at the performance of each of our businesses in the quarter. Moving on first Ag products. Sales of $229 million increased 18% as gains were realized in Asia and Latin America. In Asia, the sales increase was broad based, driven by a robust cotton season in Pakistan and more favorable growing conditions in Indonesia, India and Australia. In Latin America, sales growth in Brazil was particularly strong. As we benefited from the buoyant agricultural economy, higher crop prices and increased planted acres in key crops. Ag products earnings of $31.9 million as I said, were 44% higher than a year ago quarter, reflecting the broad-based sales gain and continued supply chain improvements.

Moving on to specialty chemicals, revenue of $161 million increased 10% over the prior year's quarter, and earnings increase 39%. Both lithium and BioPolymer delivered strong results. Biopolymer's strong commercial performance in the pharmaceutical and food ingredients markets were only partially offset by higher specialty wood pulp prices. In pharmaceuticals, we benefited from the continued strong global demand for oral tablet drugs. Sales in India, China, and two generic drug manufacturers across all regions were particularly strong in the quarter.

Our food ingredients segment also performed well, driven by volume growth in Asia and Latin America, primarily in the dairy segment, as well as a favorable product mix. In lithium, earnings growth was a result of higher prices for primary lithium compounds and higher volumes and pricing in downstream specialty products. As we commented upon in last quarter's call, although pricing in most markets continues to be driven by tight global supply and demand balance. New capacity and excess inventory has led to some softening of prices in China late in the quarter.

Moving to the corporate items, corporate expense was $12.8 million as compared to $12.4 million a year ago. Interest expense net was $7.9 million versus $7.8 million in the prior year period. On December 31, 2007, gross consolidated debt was $545 million and debt net of cash was $470 million . For the quarter, depreciation amortization was $33 million and capital expenditures were $38.9 million. That's Ag products, specialty chemicals in corporate.

Now, for a discussion on industrial chemicals, I'll turn the call over to Michael Wilson.

Thank you, Bill, and good morning, everyone. It's a pleasure to be with you today to highlight our industrial chemical segment, review our fourth quarter and full year 2007 performance and provide you with our 2008 outlook. Our segment is comprised of three businesses, our alkali chemicals division, our soda ash business, North American peroxygens, which is comprised predominantly of hydrogen peroxide but also includes several specialty peroxygens and Foret, our wholly owned Spanish subsidiary which manufactures peroxygens and phosphates. As most of you on the call are already familiar with our businesses, I'm going to go separate to the results for our fourth quarter and full year, 2007 performance, and then to the 2008 outlook for the segment. Along the way, I'll touch on the key issues and opportunities that each of the three businesses have before them.

For the fourth quarter 2007 revenue in industrial chemicals was $285 million, an increase of 15% from the prior year quarter, driven by higher selling prices in soda ash, volume growth across the segment and favorable currency translation, primarily the euro. Segment earnings of $29 million Increased 36% as a result of higher sales and improved power market conditions in Spain. Partially offset by higher energy and raw material cost across the segment. With this fourth quarter performance, the industrial chemicals segment has regained strong operating momentum that we will carry through 2008. For the full year 2007, revenue in industrial chemical grew to over $1 billion and finished it at $1.87 billion. An increase of 10%, versus 2006. The soda ash business accounted for the majority of the increase due to higher selling prices and export volume growth. The segment also benefited from good volume growth in Foret and favorable currency translation, primarily on the strength of the euro. Segment earnings of $92.5 million declined 4% as expected as higher energy and raw material costs across the segment and lower electricity selling prices in the first three quarters of the year in Spain more than offset higher selling prices for soda ash, and the volume growth achieved in the business.

Let me now shift to our 2008 outlook. Similar to 2007, the biggest leverage in profitability for industrial chemical segment would be selling prices and input cost. As many of you know, the vast majority our business tends to be on an annual contract rather than spot basis. At this juncture, contract negotiations for the majority of our business, particularly for soda ash and peroxygens have been concluded. As a result, we expect to realize strong price improvement in 2008 in both our domestic and export soda ash businesses while contract prices in our other businesses were also generally favorable. Overall, we expect aggregate volume and net price benefits to contribute approximately $100 million to improved earnings for the segment in 2008. Though not all of it will flow to the bottom line. Raw material costs, energy and price driven soda ash royalty payments in total are expected to be approximately $50 million higher with phosphate rock prices and Foret being the primary driver.

Let me review each business in more detail, starting with soda ash. As we begin 2008, the North American soda ash industry remains in a sold-out position with all U.S producers operating in full capacity. Favorable supply demand conditions continue due to strong export demand growth in the absence of significant capacity divisions. We believe the favorable market dynamics are sustainable for a number of reasons. First, sustained growth and export demand. U.S. producers will continue to benefit from the globally low cost position. Second, the returns have improved for all producers with the price increased in the last few years, cost pressures for energy, raw materials and transportation continue to favor a rising price environment. And finally we expect no significant changes in U.S. supply.

Our Granger, Wyoming plant represents the lowest cost and most capital -- the facility is now running at a rate of 500,000 tons leaving us holding 800,000 tons of idol capacity at Granger. We have initiated steps to bring on the next capacity in 2009. While we have not yet taken a final decision as to the size of the increments to bring on stream, we anticipate it will be in the range of 250,000 to 500,000 tons, again, depending on the market outlook. We remain fortunate to have operational flexibility with the Granger capacity. Our current long-range plan anticipates full recommissioning of the Granger facility by 2012. North America, soda ash price increases varied by customer depending upon contract provisions, timing and the amount of increase previously accepted. In some cases our opportunity was limited by competitive caps. Nevertheless, we realized an average increase that was in line with our expectations.

In addition, we continue to structure our longer term contracts to preserve the price and volume gains of the last few years, while providing for potential additional upside for 2009 and beyond. All of our multiyear contracts now allow for freight and energy surcharge pass through. In the export markets, Wyoming producers serve Asian and Latin American markets through ANSAC. In Asia, ANSAC's primary competitor is the exporting Chinese producers and to a lesser degree, Indian and African producers. In our view, the long term outlook for ANSAC in Asia remains favorable due to a number of factors. First, ANSAC is valued by its customers for its multi supplier network and superb logistics. Second , in mid-2007, Chinese exporters lost a 13% export VAT rebate that had historically received. And third, Chinese soda ash producers face a variety of issues that could impact their competitiveness going-forward, including energy inflation, increasing environmental pressures, tightening credit and lending practices, and the continuing re-evaluation of the yuan. With sustained demand growth in China and attracted domestic market for the major Chinese producers. We expect 2008 Chinese exports will remain essentially level to 2007. Down slightly from 2005 and 2006 levels.

Against this backdrop, ANSAC's pricing actions in Asia, during the 2008 contract season were very successful. Their favorable results are attributable to the tightening supply and demand conditions in Asia, resulting from the China situation I just described and a limited market effect from the 300,000 metric tons in new capacity that came online at Magadi in Kenya. In Latin America, ANSAC continues to hold the favorable cash position and achieved similar pricing success. Only partially mitigating ANSAC's favorable pricing trends in Asia and Latin America is the impact of rising ocean freight costs. Even though ANSAC's freight costs have escalated ocean freight rates, ANSAC remains competitively advantaged as a result of its scale, dedicated vessels and the portfolio of multiyear contracts. ANSAC's success will significantly narrow the price differential between domestic and ANSAC pricing in 2008. Over both domestic and export volumes, we expect to realize an average net soda ash price increase in the mid (inaudible) per ton.

In summary, higher selling prices and export volume growth in our soda ash business will be the major driver to the business' fourth consecutive year of substantial earnings growth. As I do each year, I want to remind you that we own 87.5% of the earnings of our soda ash business, the balance is owned by our two Japanese partners. Moving now to North American peroxygens. During 2007, North America demand for hydrogen peroxide grew by approximately 2% to 3%. Our expectations for 2008 is for somewhat slower demand growth of 1% to 2%. Growth will continue to be driven by pulp demand and the trend toward higher brightness papers, supplemented by growth for new applications and antimicrobial environmental markets. Supply conditions are expected to remain at 2007 levels with effective capacity utilization at 90% with some seasonal fluctuations. Energy and energy related costs of the typical North American producers of hydrogen peroxide were slightly in excess of 50% of the cost of sales. These inputs will be marginally higher in 2008 while hydrogen peroxide pricing is expected to be level to or slightly up from 2007.

On a relative basis, we expect to realize more significant price and volume growth in our specialty peroxygens lines which constitute 25% of North American peroxygens revenues. Though small today, we're excited about the potential of emerging opportunities for our specialty peroxygens in environmental and [sterile work] applications. Overall, North American peroxygen earnings are forecast to be modestly higher versus 2007, with price and volume gains more than offsetting higher input costs.

Turning to our European hydrogen peroxide business in Foret. In Western Europe, hydrogen peroxide demand grew approximately 1% in 2007. Down from the 4% average growth experience in the prior three years. The slower pace in demand growth was largely attributable to weaker European pulp production due to fiber shortages early in 2007 and the impact of the stronger euro on pulp exports. With slower than expected market growth, a number of minor hydrogen peroxide capacity conditions has resulted in industry operating rates dropping to the 88, 89% level. Results in competitive rivalry among the market leaders has marginally pressured pricing. As a result, European hydrogen peroxide profitability in 2008 will likely be leveled to 2007 with volume growth offsetting price impacts.

Foret's phosphorus chemicals products, its other major business are used in a wide range of applications including detergent, feed and industrial uses. Demand growth for phosphorus chemicals in these applications tends to mirror GDP. The major product in phosphorus chemicals is sodium tripolyphosphates or STPP. Historically, Chinese producers have been key competitors and the industry's price setters. China increased its exports of STPP in 2007 by approximately 5%. Though export growth dropped markedly in the second half of the year.

As for Chinese soda ash, Chinese importers of STPP lost their export rebate status mid last year, similar to soda ash, Chinese exporters raised STPP prices in the second half of 2007 to recoup the lost margins. There is now speculations that China plans to take a further step by instituting an export tax on STPP and other phosphorus chemicals as part of its effort to regulate exports of natural resource based high energy content products. The exact timing and magnitude of this potential tax is not known. A major factor affecting phosphorus products in 2008 will be raw material costs, particularly for phosphate rock, where prices have increased dramatically versus 2007. The escalation and phosphate rock prices have been driven by tight supply conditions due to strong global demand for fertilizers and the rock and government's resolve to get higher value for a key natural resource which they control 50% of global exports.

In the current environment, phosphate rock suppliers are refusing to commit to pricing beyond the quarterly basis. Appropriately, Foret has moved to largely quarterly price commitments with its customers for 2008, a departure from its historical annual contracting approach. Foret intends to recover raw material cost increases in the form of higher prices. These higher prices are included in my earlier statement of the segment and total achieving aggregate price and volume benefits of approximately $100 million. A key factor to Foret success in phosphates as the year progresses will be the behavior of the Chinese exporters, due to rising costs, the depreciation of the yuan against the U.S. dollar and the loss of export incentives, we expect to see more significant price increases from Chinese exporters going-forward. If not, however supply conditions remain sufficiently tight that the impact of potentially higher Chinese exports will be mitigated.

Finally ,a comment on the improved power market conditions in Spain. As Bill communicated in our last quarterly call, we saw a recovery in electricity selling prices beginning in September of last year, when our cogeneration plants began to benefit from the new regulations enacted by the Spanish government. We'll realize a favorable impact of these changes during the first eight months of the year. In summary, Foret earnings will improved significantly in 2008 in the combination of higher selling prices, volume growth and improved cogen activities more than offset higher raw material and energy costs.

With that outlook for the primary leverage of group profitability, let me summarize our overall view for the industrial chemicals segment for 2008. We expect full year 2008 earnings to be up 55 to 60% versus 2007 driven by higher sales across the segment and more favorable power market conditions in Spain. Partially offset by higher raw material and other costs. First quarter 2008 segment earnings are expected to essentially double versus the prior year quarter, driven by the same factors I just mentioned. The segment has indeed regained its operating momentum.

With that I look forward to taking your questions during the Q & A period and would like to turn the call over to Kim Foster.

Thanks, Michael and good morning, everyone. Let me open my comments by addressing two noncash corporate items which unfavorably impacted earnings in the quarter. Book tax rates and LIFO charges. In recent years, our domestic sourced profits have been growing faster than our foreign sourced profits, the result is a higher book tax rate. At the beginning of 2007 we projected a full-year tax rate of 28.5% compared to a 25.4% rate in 2006. Each quarter we reestimate the full year tax rate as long as the full-year estimate is unchanged, we book the full year rate in the quarter. We booked 28.5% tax rate in the first three quarters of 2007. However, when the year concluded and the final tax calculations were completed, the full-year tax rate was 30.1%. Consequently we booked a 36.3% tax rate in the fourth quarter in order to achieve the 30.1% full-year rate.

Last year a similar situation happened, except with the opposite effect. For the first three quarters of 2006, we were projecting a full-year tax rate of 27%. But the full-year rate ended up at 25.4% causing us to record a 19.5% tax rate in the fourth quarter. When you calculate earnings per share impact of the tax rate change on a year-over-year basis, the result is an unfavorable comparison of $0.16 per share. During 2008, you see the trend to more domestic source income continuing. Consequently, we are projecting our tax rate to increase to 32% for 2008. Let me remind you, however, that we pay minimal U.S. taxes due to our net operating loss carry forwards and consequently the higher tax rates have essentially no impact on free cash flow. In fact, we do not expect to be a U.S. federal taxpayer for several more years.

Let me now shift my comments to LIFO. Over the past few years, we have realized LIFO income in the fourth quarter of each year. LIFO income or expense is reported in other income or expense in our segment reporting format. This LIFO benefit was a result of our successful efforts to optimize our global supply chain. The beginning of 2007, we indicated that our optimization efforts were reaching their full potential and as our businesses continued to grow, the LIFO income should disappear. I also discussed this outlook in our third quarter conference call. In the fourth quarter of 2007, we in fact had no LIFO charge, either income or expense. In the fourth quarter of 2006, however, we reported $15 million in LIFO income. Therefore, on a period over period basis, the lower LIFO income resulted in an unfavorable comparison of $0.12 per share.

For 2008, we anticipate a modest LIFO expense. Combining the effect of the higher book tax rate and the lower LIFO income, unfavorably impacted earnings before restructuring and other income and charges by $0.28 per share on a quarter-over-quarter basis. Moving to free cash flow our free cash flow guidance in last quarter's conference call was $140 million for the full year 2007. The actual free cash flow for the year was $150 million. For 2008, we are projecting free cash flow of $250 million , the cash flow is improving over 2007, primarily due to higher profits, the reversal of one time inventory build in Ag to support the Baltimore phase out. And the absence of the SOLUTIA payment. Not included in our 2008 free cash flow forecast is it the previously disclosed Princeton land sale. We continue to believe that the sale should occur late in the first quarter or early in the second quarter. Proceeds from the sale are estimated at approximately $60 million.

Regarding our share repurchase program. We repurchased approximately 560,000 shares in the quarter at a cost of $30 million. For the year we repurchased approximately 2.5 million shares at a cost of $110 million , cash dividends for the year totaled approximately $30 million. In total, then, we returned approximately $140 million in cash to shareholders during 2007. As a reminder, our stock buy back program does not include a specific timetable and may be suspended or terminated at any time. However we expect that the current program authorized in April of 2007 will be accomplished over a two-year period. Also let me remind you that our earnings guidance does not assume that we repurchase any shares in the share repurchase program in future quarters. We remain very confident of FMC's free cash flow generating capabilities and as we have said over the past year, we continue to balance the cash requirements of our growth initiatives with the alternative of returning cash to shareholders.

With that, I am now going to turn the call back to

Thanks, Kim. Looking ahead, we're confident of delivering another year of record performance. Regarding our outlook for the full-year 2008, we expect earnings before restructuring and other income and charges of $3.80 to $4.00 per diluted share, which at the mid point of this range represents a 26% increase above 2007. In Ag products, full-year revenue is expected to be up 5% to 10% as a result of the healthy global economy. New product introductions and continued increased demand for biofuels. Full-year segments in Ag are expected to increase 10% to 15% driven by the sales growth and further supply chain productivity improvements, partially offset by higher raw material costs. In specialty chemicals, we expect full year revenue growth in the mid single digits as a result of continued volume growth across the segment and higher selling prices in BioPolymer. Full year segment earnings growth in a low single digits is expected.

As strong commercial performance in BioPolymer and the benefit of continued productivity improvements are mitigated by lower selling prices for lithium compounds and higher export taxes in Argentina. And as Michael's review just reviewed for you, in industrial chemicals we expect revenue growth of 5% to 10% driven by higher volumes and selling prices across businesses, but particularly in soda ash, and full-year segment earnings up 55% to 60% as the aggregate price and volume benefits and improved power market conditions in Spain more than offset the higher raw material costs Michael described. Moving to our outlook for the first quarter, for the first quarter we expect earnings before restructuring and other income and charges of $1.15 to $1.20 per diluted share driven by double-digit earnings growth in all of our operating segments, partially offset by higher raw material costs. In Ag products, first quarter segment earnings were expected to increase 10% to 15% due to the continued growth in Brazil and Asia, and the benefit of further supply chain improvements.

In specialty chemicals, first quarter segment earnings are also expected to be up 10% to 15%, driven by strong commercial performance in both BioPolymer and lithium and the benefit of continued productivity improvements. And finally, in industrial chemicals, we expect first quarter segment earnings to double the level of last year's first quarter as aggregate price and volume benefits and higher electricity selling prices in Spain more than offset higher raw material costs. Our strong fourth quarter results, I think reflect the fundamental strengths of the company. Our global footprint, the noncyclical nature of our end use markets in the absence of any significant petrochemical exposure, these have permitted us to grow at strong double-digit rates for the last four years, and as reflected in our outlook for 2008, bode well for the future as well.

With that, let me thank you for your time and attention, and I'll now be happy to take your questions. Operator?

Thank you, Mr. Walter. (OPERATOR INSTRUCTIONS)

Boy, were we that good?

And at this time, there are no questions.

Operator, are you confident that the system is working? It's shocking that we would have no questions.

Okay, and we do have a question. From Kevin McCarthy with Banc of America.

Good morning, Bill. A couple of questions, I guess maybe on soda ash, and maybe Michael can help with this, as well. It sounds like you have very strong realizations for '08. Can you talk a little bit about domestic realizations versus international and then what were gross prices up internationally, and where do you see net backs given ocean freight costs and so forth?

Kevin, I am going to ask Michael to answer your question.

This is Michael. As I indicated in my prepared comments, the overall price increase that we saw in soda ash was in the mid teens across domestic and export as a whole pricing. And I really don't want to get much more specific in that in terms of the breakdown between domestic and export. Just for a market sensitivities and competitive reasons, but what I did indicate is that there's a substantial narrowing of the price differential between domestic and export pricing, so that implies to you that we did realize significantly higher increases in the export market than we did in the domestic market.

Okay. And as a follow-up, we've seen two of your competitors acquired or at least announcements of deals over the last 6 to 8 weeks. Can you comment on any changes you expect as a consequences of those transactions, in terms of industry structure, participation in ANSAC and those sorts of things?

Yeah, Kevin at this point I don't have any direct knowledge that would indicate there's going to be any structural changes. With the most recent announcement I've talked about in general, we're moving from a private equity owner to a strategic owner, we think as -- and this is speculation, Tata has valued that business, that one of the things they are valuing is the ANSAC participation for all the reasons that we think ANSAC benefits our customers, the superb logistics and multisupplier network. I don't have any direct knowledge of it. I believe Tata is probably excited to acquire a company part of ANSAC. As you know, Searles Valley was bought by Nirma, another Indian company. But at this case, Searles Valley has not been a member of ANSAC for the past few years. Perhaps with TATA, perhaps being a member of ANSAC going-forward. There may be a greater likelihood that Nirma would rejoin ANSAC as well.

That's helpful, and finally on Foret. You alluded to higher costs for phosphate rock. How much of an increase do you anticipate thereon, and perhaps you could also comment on where you see prices trending in STPP?

Yeah, without getting too specific in terms of actual costs for rock and pricing for STPP. You know, the words that I use, that there was a dramatic increase, but if you went out and looked at market prices for phosphates, whether it's in the form of rock, whether its in the form of P205 or MAP and DAP, the precursors for some of the fertilizers, you who find essentially a tripling of costs over the past year, so it's a big portion of the overall cost increases we're seeing across the segment.

Okay. Thank you very much.

And our next question comes from Bob Goldberg. Your line is open.

Yes, hi. Good morning.

You're on, Bob.

Great, thanks. I had a question for Kim on the balance sheet and net debt to capital at year end is roughly 30%. What is -- where does the company feel comfortable in terms of its net debt to cap, it sounds like you're going to be generating $300 million in excess cash with the Princeton proceeds. How do you see the interplay there between acquisition and growth opportunities and returning more cash to shareholders.

Hi, Bob. This is a question, of course, that we've been addressing for the last few years, in fact in the 4th quarter conference call of last year, I got asked the same question. And I'll answer it the same way today as I did then. At that point in time, when we looked at what our debt levels were, we said that we were comfortable with those debt levels, and while we recognize the ratios that you just have articulated, our strategy is to grow the business as the opportunities avail themselves to us, and to the extent that is they don't, we would return excess cash to shareholders and in fact as I mentioned in my remarks, that of our free cashflow of $150 million, we essentially returned all of it to shareholders this year, because we did not have any of those acquisition opportunities. And consequently, we ended the year with essentially the same net debt that we began the year. The same operating principles are in place going-forward. We hope very much to find those financial and strategic growth opportunities that will add value to our shareholders and to the extent that we can't. We'll continue to return cash to shareholders in a similar manner.

Can you remind me how much is left under the current authorization for share buyback?

The authorization was $250 million. And we have bought back this year about 110.

Okay. Great, and I also had a question on agriculture. Just curious what is incorporated in the guidance for growth in terms of the different regions, is most of the growth coming from South America or are you still seeing growth elsewhere in the world?

Yeah, Bob, as you know, the Ag industry has had some pretty favorable tail winds for the last 18 months. We expect those tail winds to continue in 2008, but probably not as strong as what we have experienced. Specifically, by region, the greatest tail winds are going to be in Latin America, more specifically, Brazil, followed by Asia. Followed by North America, followed by Europe. All of which then results in the guidance we gave of top line growth somewhere in the range of 5 to 10% year over year.

And Bill, how much do you have in the guidance or what can you say about the new licensed products? Maybe they're not new any more, but the licensed products that you brought in. How much of a contribution do you expect to see from new products?

I think as Milton has been saying for a couple years, we expected those to contribute 50 to 60 million dollars in incremental sales, and I think we have fully -- by the time 2008 completes itself, we should have fully realized the full value of those.

And anything else in the pipeline or new technologies or --

Oh, yes. Milton and his team have got a number of technology and product developments that are underway. They include largely in 2008 a label expansion and premixes, but as we look beyond 2008, there are several very very interesting technologies, probably a little premature to talk about the potential of those, but as we work further through them, we get fairly excited.

I'm just wondering, if you look out in the medium term -- the next three to 5 years, could we see a much more substantial operating performance from the bigger top line, and -- I'm just wondering, the question is, will it continue to grow with these type of rates to the foreseeable future? Assuming the Ag economy remains healthy?

Yes, I -- probably difficult, Bob, for me to believe that Ag can continue to grow at the rates that it has over the last two years. Again, my comment about tail winds, the -- our view of the global Ag economy for the next 3 to 5 years remains strong. But the velocity of those tail winds is going to decrease. How that translates specifically into top line growth, I'm just not prepared to go there. But I would expect that because of a combination of the economy -- Ag economy and the technology and product development work we're doing that we'll continue to see good top line growth and should be able to leverage that on the bottom line. And that leverage is manifested in the guidance that we gave for 2008. If you work through the numbers, Ag should see another 100 basis points expansion in their EBITDA margin in '08 over '07 which was up 300 basis points '07 to '06.

And with the full benefit of Baltimore being felt next year, I would think you'd see further improvement in 2009?

I would expect,so.

Great, thanks, I appreciate it.

Our next question comes from Richard O'Reilly with Standard and Poor's.

Bill, could you elaborate on the comments for specialty chemicals for '08, especially the comments about lower lithium prices and the export taxes? And some place --[Oxygenia]?

Sure, I'd be happy to, Rich. We foreshadowed in the 3rd quarter conference call, some uncertainty and risk with respect to primary lithium compound pricing in china as a result of some new Chinese capacity coming online as well as some excess inventories, [vitamin-based], lithium carbonates. We began to see the effect of that late in the 4th quarter, in China, not just in carbonate but in lithium hydroxide and chloride as well. The guidance we have provided for 2008 assumes that the pressure on pricing as a result of those two phenomenon will continue. But believe it will be confined to those three molecules and confined to a pretty narrow geographic area.

In terms of the export tax, the Argentina government midway through the 4th quarter unexpectedly announced the 5% tax on all mineral exports from the country. We believe it was intended to address metal exports particularly copper, but the way the legislation was written and applied to all mineral exports including lithium. That's going to have a -- if sustained, it's going to have a $3 to $5 million negative or unfavorable impact on our lithium operations year over year. Sizable.

Okay. That's it, thank you, gentleman.

Our next question comes from Mike Judd with Greenwich Consultants.

Thanks for taking my question. You guys have been very very patient on the acquisition side and I think over the last few years, in your specialty chemical business you only made a -- pretty small acquisition in Europe and that was quite sometime ago. I was just wondering if you could talk a little bit about how -- what kind of opportunities you see out there now with the private equity guidance kind of out of the way. Realizing, of course, that it's somewhat challenging these days to get financing. But, you know, how do you look at the opportunities? Are they better than they have been in a while? Is that an area of opportunity or are you guys more likely to be conservative here and wait and see how things shake out?

Mike, first of all, the universe of opportunities in the specialty space is pretty limited, particularly given the number of properties there that did change hands here over the last 2 to 3 years, so you start -- we -- to answer your question, I start in that standpoint,there's not a lot there. Private equity, fortunately, at least for now seems to have disappeared from the scene. Whether they will come back and when they come back, and what they're going to be able to pay for properties going-forward is yet to be seen. I happen to believe that there may be, however one or more BioPolymer related properties that were acquired in the last two to three years could come back on the market this year. To the extent they do, we will be there. We will be bidding on them, but we will continue to be conservative and ensure that we can get a reasonable return on any acquisition price we would pay. So I -- Mike, I guess when you -- all of that down, I would not assign a particularly high probability to our being able to complete a transaction in specialty chemicals in 2008, although we're going to continue to try.

Okay, great, and separately, if you exclude the energy situation in Spain. I know you guys have a rolling hedge in terms of your -- some of your energy exposure, how should we think about 2008 versus 2007?

Yeah, Mike, energy costs across the corporation are going to be slightly higher than they were in 2007. Slightly less than $5 million.

Great. Thanks a lot for the help.

Our next question comes from Dmitry Silversteyn with Longbow Research.

Good morning, gentlemen. A couple questions mainly having to do with industrial business, you talked about making a decision on Granger as far as recommissioning 250 to 500,000 metric ton portions of plant. When should we expect that decision, you expect to have it ready up and running by mid summer or will you be doing doing this earlier in the summer, given the strong export demand and lack of export growth out of China?

Dmitry, this is Michael and you're right, as I said, we have initiated steps to bring back the next increment of capacity. But I don't anticipate additional tons being available until 2009. And again, we haven't decided on what the ultimate increment will be that will bring back, we'll continue to monitor conditions, but if you pick one of those numbers, either the 250 or 500, I suspect even in 2009, the actual capacity that we bring back would be something less than that, as we would be bringing it on during the course of the year and ramping it up.

Thank you, Michael. But I guess the follow-up question is, why do you expect to take that long to bring the capacity on given the strong export demand? I know that North American markets may be weaker, but from everything I'm reading and learning, it -- the export market should be strong enough to realize some volume growth, where is the volume going to come from if it's not going to come from the Green River Valley players.

I think you're right. I think we are supply constrained at the moment. There are volume opportunities but as we look at opportunity, we think there's a lot more earnings leverage and a dollar of price than there is in a ton of capacity. As we go into 2009, we're going to want to evaluate that dynamic about the next round of contracts and we also have considerable work to get done in order to bring that capacity back up. We have a number of options as I said, we're blessed with having the flexibility that we can do this on the incremental basis and really dial it in to where we think the need. But because of that, we've been evaluating a number of options and will continue to do so.

Okay. Michael, thank you. Second question on natural gas, I just want to make sure I understood what Bill was saying. In 2007 your Delta, natural gas was higher versus 2006 even though the price of gas was lower. My expectations would have been that as you layered in this lower price gas in 2007 that your Delta would be positive in 2008. But did I hear Bill right, is that thing that will be moderately negative still?

It did Dmitri, and it's largely in Europe. Our U.S. operations gas costs are probably flat to down slightly year over year.

Okay. And Europe, being I guess a phosphorus business as well as the hydrogen peroxide business that's being affected by high energy costs?

Correct.

Thank you. And then on the lithium comment that you made, you know, we did expect to see some down pricing as you pointed out. Because of the Chinese capacity, I guess your two bigger competitors are bringing on capacity in 2008 as well. To the extent that you are a purchaser of some more commodity lithium as well as a seller of downstream products, can you give us a little more flavor, a little bit more detail on how the relative price expectations are going to impact your business? Are you going to see any relief on the raw material front but you expect your pricing, your downstream pricing to come down even further or how does that work?

Dmitri, we do buy -- I don't know exactly, a million or two million pounds of lithium carbonate, minuscule amount. So, whatever pricing pressure that there is on carbonate, has essentially no benefit to us as a purchaser, so it's all on the down side to us.

Okay. Okay. I got you. Do you -- is there any concern that as the integrated players bring on their capacity this year, that pricing of some downstream products which have been holding up so far, may start trending down as well as that of a risk we should be looking for?

I don't think so. I mean, the value added -- put it differently, the commodity value that is in these downstream products is very very small in relationship to the total cost and the value of downstream products.

Okay, and you don't see anything as far as market growth is concerned to make you -- to kind of raise any kind of red flags for 2008?

No, we continue to see strong 6 to 8% growth despite the uncertain global economy. There may actually be a little upside with that.

Okay. All right. Thank you very much.

And our next question comes from the line of Dennis Delafield with Delafield Asset Management.

Bill, I just punched in so you knew somebody was listening, I thought it was very good.

Thanks, Dennis.

And our next question comes from Jay Harris with Goldsmith and Harris.

Good morning, Bill. My questions have been answered and I sort of also punched in for the same reason Dennis did.

I appreciate it, Jay. Thanks. Are there any more questions out there, operator?

You do have a question from the line of [Gary Ballas] with [Ballas Investments.]

I have a lithium related question, that is, with all the interest at the Detroit auto show and the announcement last week that JCI staff is opening their first lithium battery production facility, can you -- I know you don't comment on individual customers, but can you comment on the various grades of lithium that FMC is producing and how that fits in with the grades of lithium that are being required for these new EV vehicles?

Yeah, Gary, we sell lithium carbonate, lithium hydroxide and lithium metal foil directly into the battery industry. Our carbonate is probably indistinguishable from anybody else's carbonate in terms of the battery manufacturers, that is not true of lithium hydroxide given -- you have a much higher purity level to ours that accrues to us through the process that we employ to make lithium hydroxide, which is unique to the industry. And gives us a preferential position of preferential pricing. That follows through into battery metal as well with our low sodium chloride that we're able to produce down in our Argentinian operations. So all in all, I suspect we are advantaged vis-a-vis any other lithium producer. And that advantage will largely accrue back to us in the form of higher pricing and probably share at the high end of the battery market.

I don't remember last call, the prior call, but you were thinking that it was still -- I think I have it correct. Quite a few years off before there was any kind of significant sales or earnings potential from the EB business, have you changed your thoughts on that at all. Or are things picking up in terms of technologically, where the industry is able to be closer to producing these things in mass?

Probably not Gary, I don't think there's any change in our view. What we have said is it's 2 to 5 years out before, lithium manufacturers are going to see any significant impact of electric vehicles or hybrid electric vehicles, I think it's still out there. I think what you're seeing is a lot of spin. And -- well, I'll just leave it at that. It's still several years out there.

I read you, thank you.

And our next question comes from the line of Caroline Chiodio with Wells Capital Management.

This is John Evans for Caroline. Can you talk a little bit on pricing from the standpoint of what you saw coming out of Brazil from the standpoint on the Ag side. And were you guys able to push price or was the industry able to push price?

It's -- John, I -- if the industry got a price increase in Brazil in '07, it's difficult for us to see or to measure. Having said that, they're increasing reports from our Brazilian team that everybody is trying to move prices forwards here in '08 season. Whether or not they and whether or not we're going to be successful in that effort is yet to be seen, but it does seem to be a different environment today than what we've seen for the last few years down there.

Got you. So basically, you're saying you didn't see really any pricing in Q4, but if the industry's successful, you may see pricing next fiscal year, is that fair?

That's correct.

Okay. And then the other thing I was curious to talk to you about or understand better, soda ash, I guess you've talked about your contracts. Do you have more contracts that come up throughout the year? If you do, can you give us a sense of what you have maybe left to contract? And then how much business you plan on being in the spot market, because it sounds like the spot market is increasingly tight.

John, this is Michael Wilson, and pretty much all of our business is on an annual contract basis and that's true both for FMC. It's also true for our exports through ANSAC. I think it's particularly true this year because of the tight market conditions, there's going to be even less product available for anybody to purchase on a spot basis.

Okay. And can you just -- and maybe this isn't the right form, you don't want to take it, can you just help me understand better what you were talking about relative to your phosphoric rock, and is there a potential that you guys get squeezed for phosphoric rock, prices going up actually good for you because other competitors don't have it?

Well, I think, in part, phosphate rocks supply conditions are very tight. And in some cases buyers are being limited in terms of their quantity, so I think to some degree the fact that we've been in the industry a long time, we're a long-term buyer, we buy a specific grade of rock, we do have an advantage there from the supply standpoint. And we've secured our supply for the year. I think that there could have been a situation where we could have gotten squeezed, had supply not been so tight, but the phosphorus demand is very high, and what's driving is the demand for agriculture. And for the fertilizers, and when you look at all the phosphate rock that's produced on a global basis, I mean, 92% of that's going into fertilizers, that's what's driving the demand and driving the price, and because of that, what we have found thus far is that we're having a great deal of success in passing through the higher costs that we're seeing on a raw material basis. So I guess in short, I don't expect -- I don't anticipate the squeeze that you reference which could have been a possibility.

Okay. Because basically, you've contracted your supply at a certain price for the year.

We have gotten commitments for our supply for the year as I indicated, phosphate rock suppliers are generally only giving pricing on a quarterly basis and that applies to us as well. And as a result of that, we have moved away from annual contracting with our customers to also pricing on a quarterly basis.

Okay. Got you.. And then the last question I guess, can you just talk a little bit about what you're seeing in soda ash coming out of China from the standpoint that -- because of this 50 year storm, they've had a lot of problems with their infrastructure, et cetera. Has that brought down exports and has that tightened up the soda ash market at all?

Well, that's near term and short term effect. Clearly there's been logistical issues over the past couple weeks, but looking at it from a broader standpoint, we don't see exports of soda ash from China increasing in 2008. We believe they're going to be flat with 2007. And that's in part due to the supply and demand balance that exists in China and the attractiveness of the Chinese domestic market for those Chinese producers.

If you're wrong and it -- and they don't -- it's not even flat, it's less than flat, that just is positive for you, because it will exacerbate the market and make it tighter, right?

It will certainly make it tighter, drive up prices and we'll wish we had even more product to supply.

Okay. Thank you.

One last question, operator.

And our last question is a follow-up question from Dmitry Silversteyn with Longbow Research.

Thanks for taking my call. I just wanted to get a little more detail perhaps on the ANSAC business, you talked about freight going up, but you also made a reference to, I guess you own some ships or barges, can you talk about what your fleet is and what the dynamic is, how does the higher freight costs filter in through your business and whether it's a positive or a negative net net.

Dmitri, first of all, the pricing information that I gave out to you is on a net basis, that's after any freight impacts, but there's no question that ANSAC like all other shippers saw higher export or higher freight costs as we went from 2007 to 2008 but that's factored out of the numbers that I'm giving knew terms of what they realize.

Okay, but I guess my question is, is there an opportunity for you if you do own your -- or part of your fleet, that does the hauling for you, to take advantage of higher prices in shipping or is it strictly dedicated fleet for hauling soda ash?

No, I mean, I think that's -- ANSAC situations benefited them in terms of their net realization of price, and the reality is that ANSAC approaches multiyear contracts on the freight side and locks in freight. So, for example, if you looked at their portfolio business and shipments for 2008, 95% of that is already secured. If you went out to next year, they've got something like 2/3 to 70% that's locked in, 50% 2 years out. So it's a laddered portfolio of freight agreements. In some cases they are dedicated vessels that they have contracted and in other cases, it's simply freight contracts.

Okay. I understand, thank you.

Well, thank you, operator. And I thank all of you for your continued interest in FMC.

This does conclude today's 4th quarter 2007 earnings release conference call. You may now disconnect.