富美實 (FMC) 2011 Q1 法說會逐字稿

Good morning, and welcome to the first-quarter 2011 earnings release conference call for FMC Corporation. Phone lines will be placed on listen-only mode throughout the conference. After the speakers' presentation, there will be a question-and-answer period. (Operator Instructions) I will now turn the conference over to Mr. Brennen Arndt. Mr. Arndt, sir, you may begin.

Thank you, Val, and welcome, everyone, to FMC's first-quarter 2011 conference call and webcast. Joining me today, are Pierre Brondeau, President, Chief Executive Officer and Chairman, and Kim Foster, Executive Vice President and Chief Financial Officer. Pierre will begin the call this morning with the review of our first-quarter performance. Kim will then report on our financial position, and Pierre will complete the call by providing our outlook for the balance of 2011. And we'll take your questions. Joining Pierre and Kim for the Q&A session will be Milton Steele, President, Agricultural Products, Michael Wilson, President, Specialty Chemicals, and Mark Douglas, President, Industrial Chemicals.

A reminder to everyone 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 2010 Form 10K, our most recent Form 10Q and other SEC filings. This information 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 non-GAAP financial terms. On the FMC website, available at fmc.com, you will find the definition of these terms under the heading entitled Glossary of Financial Terms. We have also provided our 2011 outlook statement and a reconciliation to GAAP of the non-GAAP figures we will use today. It's now my pleasure to turn the call over to Pierre Brondeau. Pierre.

Thank you, Brennen, and good morning, everyone. As you saw in our earnings release, our first-quarter results provided a strong start to what we expect will be another record year for FMC. Summarizing our first-quarter 2011 performance, sales of $795 million were 10% higher than last year's first quarter, excluding the prior-year impact of 2 businesses we exited last year. Adjusted earnings of $1.49 per diluted share also increased 10% versus the year-ago quarter. In Agricultural Products, sales of $344 million increased 13%, driven by broad-based growth across North America, Latin America, and Asia. Segment earnings of $100 million increased 8% versus the year-ago quarter, driven by the sales gain, partially offset by higher spending on target growth initiatives.

In Specialty Chemicals, sales of $210 million were up 4% despite capital limitations in both businesses, as a result of higher volumes and selling prices for lithium specialties and food ingredients, partially offset by lower lithium primary volume. Segment earnings of $45 million increased 10% as higher sales and operating cost reductions in lithium were partially offset by higher spending in growth initiatives in food ingredients and higher specialty wood pulp costs in BioPolymer.

In Industrial Chemicals, sales of $243 million were 3% lower as higher selling price across the segment and volume growth in peroxygens were more than offset by the absence of sales from the phosphate business we exited at the end of last year. However, for a better representation of top line momentum in Industrial Chemicals, sales increased 11%, excluding the prior-year impact of the phosphate and sulfur derivatives businesses we exited last year. Segment earnings of $40 million increased 17% as a result of sales gain in soda ash and peroxygens, as well as the continued favorable mixed shift towards specialties market in peroxygens. Partially offset by start-up costs related to the Granger Soda Ash Facility.

On a regional basis, in the first quarter versus the prior quarter, excluding the 2 businesses we exited last year, sales in Asia continued to demonstrate the highest growth rate, up 21%. Drivers of this growth were broad-based, with gains in Ag Products, exported soda ash, and food ingredients in BioPolymer.

Sales growth in North America was also strong, up 17%, owing to our strong performance in Ag Products. Sales in Latin America increased 14%, the result of a strong finish to the crop season in Brazil, especially in cotton and sugar cane. And as expected, sales in EMEA declined, down 14% due to the prior-year impact of essentially selling an entire season of [Carbofuran] in the first quarter of last year.

Moving now to Corporate items. Corporate expense was $16.8 million versus $12.1 million in the prior-year quarter. Interest expense net was $9.9 million, as compared to $10 million in the year-ago quarter. On March 31, 2011, gross consolidated debt was $663 million, and debt net of cash was $577 million.

For the quarter, depreciation and amortization was $30.4 million, and capital expenditures were up $30.4 million. On a GAAP basis, the Company reported net income of $94 million, or $1.30 per diluted share, versus net income of $77 million, or $1.06 per diluted share in last year's first quarter. Net income in the current quarter included charges of $14 million after tax, or $0.19 per diluted share, versus charges of $23 million after tax, or $0.30 per diluted share, in the prior-year quarter. With that reconciliation, our non-GAAP earnings were $1.49 per diluted share in the current quarter, up 10%, versus $1.36 per diluted share in the last year's first quarter. Let's now take a more detailed look at the performance of each of our operating segments in the quarter.

Let me first start with Agricultural Products. First-quarter sales of $344 million increased 13%, driven primarily by broad-based volume growth across North America, Latin America, and Asia, augmented by targeted price increases. The highest sales gain was achieved in North America, driven by strong early-season demand from pre emergence herbicide and higher sales in the soybean segment. And [saw a] shift of sales from the 2nd quarter due to favorable market conditions, crop prices and channel [optimism]. In Latin America, which is mostly Brazil, the sales increase reflected growth in planted acres and a strong finish to the 2010-2011 crop season, especially in sugarcane and cotton segments.

In Asia, sales gains were driven by strong herbicide demand and better weather conditions in Australia, and continued strong demand in China and Indonesia. As expected, sales in Europe declined as a result of ongoing re-registration process for bifenthrin, during which time the product may not be sold. Last year's first quarter met for an especially tough year-on-year comparison. Recall that last year, we reported that in Europe, we essentially sold an entire season of bifenthrin in last year's first quarter.

Segment earnings of $100 million increased 8% versus the year-ago quarter, driven by broad-based sales growth, partially offset by higher spending on targeted growth initiatives as we continue to successfully execute our different [share] strategy as well as the absence of bifenthrin sales in Europe.

Moving now to Specialty Chemicals. Revenue of $210 million was 4% higher than the prior-year quarter despite capacity constraints in both lithium and BioPolymer during the quarter. Driven by higher volumes and selling prices for Lithium Specialties in food ingredients, particularly for MCC [colloidal] products serving dairy and beverage market in Asia. Lithium Primaries volumes were lower than prior year, as we optimized mix by gradual conversion from industrial Primaries application to downstream specialties, essentially Butyllithium.

Lithium Demand for energy storage and pharmaceutical application continues to be strong, especially in Asia. Segment earnings of $45 million increased 10% as a result of the sales gain, favorable mix, and operating cost reductions in lithium, partially offset by higher spending in focused growth initiatives in food ingredients and higher specialty wood pulp costs in BioPolymer.

Now, looking at each business in more detail. In BioPolymer, sales increased as a result of volume growth and higher selling prices. Sales growth was especially strong in food ingredients. Driven by significantly higher sales of micro crystalline cellulose, or MCCs, to beverage and dairy customers in Asia, most notably in China. As we anticipate ongoing growth for MCC on a global basis, especially in rapidly evolving economies, in March we completed the expansion of our MCC plant in Cork, Ireland. The infrastructure and flexibility of our Cork site made the expansion very cost-efficient. We are now in full production, and have increased our global capacity by 25% for food and pharmaceutical-grade MCCs.

BioPolymer earnings were essentially level to last year, as the strong commercial performance was offset by spending on growth initiatives in food ingredients, focused innovation and increasing our presence in rapidly developing economies, as well as higher specialty wood pulp and energy costs. In lithium, gross sales were essentially level to last year. Earnings growth was robust. We realized higher volume and selling price in Lithium Specialities, especially Butyllithium, which is used as a re-agent in pharmaceutical and chemical synergies due to our lithium volume growth and price increases were achieved across Asia, North America, and Europe. The sales increase in Lithium Specialties was offset by the shift of some volumes to the second quarter and lower Lithium Primaries volume serving industrial applications.

Supply remains tight in Primaries, so we chose to optimize mix by increasing conversion toward Specialties. Supply of primaries will increase in the second half of the year, benefiting from improved output and conversions. Pricing levels in Lithium Primaries were equal to last year. Lithium earnings growth was robust in the quarter, driven by favorable mix and operating cost reductions.

Let's take a look now at Industrial Chemicals. In the first quarter, our Industrial Chemicals segment began to realize the benefit of the significant steps taken last year to realign and transform its business to deliver higher performance going forward. Higher performance in the form of less sensitivity to economic cycles, sustained higher margin, greater earnings ability, stronger cash generation and superior return on assets.

First-quarter revenue of $243 million increased 11%, excluding the prior-year impact of the exited phosphate and sulfur derivative business, driven by higher selling price across the segment, particularly in soda ash and volume growth in peroxygens. Segment earnings of $40 million increased 17% as a result of the sales gain and the continued favorable mix shift toward specialties market in peroxygens, partially offset by start-up costs related to our Granger Soda Ash Facility. Our industrial chemicals segment now has 3 realigned businesses. alkali Chemicals, or our soda ash business, which represents about 70% of segment sales; Global Peroxygens, which is composed of hydrogen peroxide and several specialty peroxygens product lines, which represents approximately 25% of segment sales. And, the small, focused Silicate and Zeolite businesses, which represent about 5% of segment sales.

Looking at the drivers of segment performance in the quarter. In soda ash, the year is shaping up as we expected. In the first quarter, sales and earnings growth benefited from higher selling price in 2011 contracts. Volume growth was capacity-constrained in the quarter in advance of the Granger facility coming online. The Granger re-start is on schedule for a July start-up, with planned production ramp-up to a rate of 500,000 tons per year by the fourth quarter. During the first quarter, our export organization, ANSAC, took advantage of Chinese exported cost pressures in addition to price export business above delivered cash costs.

These market conditions resulted when China imposed energy restrictions in the fourth quarter of last year, which caused short-term supply shortages that allowed significant price hikes in country and for exports. We do expect Chinese exporting to return to pricing strategies, driven more by over-supply conditions in their country. Chinese domestic prices are now moving downward toward cash costs, though at a slower rate than expected. Chinese export pricing continues to exceed their cash costs, but is decreasing since the fourth-quarter spike. In our outlook for the balance of the year, we are taking the conservative and prudent view that ANSAC export pricing will continue to decline off its fourth-quarter peak as competition accelerates.

Nonetheless, we are confident that the average export price for 2011 will be materially higher than the average in 2010. This higher export price, combined with higher domestic pricing and operating cost reductions, give rise to our outlook for significant profit growth for our soda ash business in 2011. Moving to Global Peroxygens. In Global Peroxygens, we realized double-digit sales and earnings growth. The sales increase was driven by higher selling price across all product lines and volume increases in its 2 major products, hydrogen peroxide and glyphosate. Earnings benefited from the sales gain, but continued favorable mix shift to our specialty and lower energy and other operating costs.

In hydrogen peroxide, even growth in Europe was especially strong versus last year. We anticipate continued volume growth and the potential for price increases in the region across the balance of the year. In [glyphosphates], one of the specialty products, volume growth in oil and gas and soil remediation applications drove sales and earnings higher. In [pyrethroid] (inaudible), another specialty product, sales growth was robust, driven by its balanced portfolio of applications serving poultry, oil, and gas [acidic] packaging in waste water treatment markets. 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. Kim?

Thanks, Pierre, and good morning, everyone.

Free cash flow for 2011 is reconfirmed at $300 million. As I mentioned on the fourth-quarter call in February, this projection includes $40 million to $50 million in cash spending for restructuring of the Phosphate businesses we exited at the end of last year. Net debt at the end of the first quarter was $577 million, compared to $476 million at the end of 2010. The increase is driven primarily by the normal seasonal working capital build in our Agricultural Products business. Prior to each earnings call, we release an outlook statement on our website that summarizes our quarterly and annual guidance that we will discuss today. It also provides guidance for several cash flow and income statement items that can be used in your financial models.

I'd like to comment specifically on one of the Corporate and Other Financial Items section of our outlook statement, namely Other Income and Expense. Our current guidance for this item is $25 million in expense for 2011. Approximately 75% of the 2011 total can be explained by 3 items. First, long-term incentives for managers in the operating segments. Second, LIFO inventory expense. And lastly, capitalized interest related to capital projects that are not completed at the end of any quarter. For segment reporting, we do not charge these items to the businesses. However, for GAAP income statement purposes, we account for the first item as an SG&A expense, and the latter 2 items as components of cost of goods sold.

As these items can vary yearly, we have elected to provide specific guidance on them in our outlook statement. During Pierre's comments about the first quarter, he mentioned production capacity constraints in certain businesses. And, as I mentioned on the last earnings call, we are projecting to spend approximately $60 million in capital on capacity expansion projects in 2011, primarily in BioPolymer, lithium, and soda ash, which should address our near-term supply requirements. As we continually reassess the organic growth potential of our businesses, we see more near-term opportunity. As a result, we are considering accelerating certain capacity expansion projects that were originally just outside the planning horizon of Vision 2015.

We are currently reviewing plans to accelerate a lithium expansion, an expansion in our soda ash capacity and several BioPolymer expansion projects. In total, this could increase capital spending within the Vision 2015 planning horizon by $200 million to $400 million. These expansions will add to the organic growth rate of our businesses later in the Vision 2015 planning horizon. And, will provide returns comfortably in excess of our return on invested capital goal of 15% for the Company. We will be in a position to provide more specifics on these capital projections later in 2011. As we mentioned at our December Investor Day in New York, we intend to complement our organic growth initiatives with a focused, disciplined approach to external growth, including Company, product, and technology acquisitions.

We continue to target $800 million to $900 million in sales by 2015 from external growth, with margins after synergies that support our EBIT margin target of 20% for the Company by 2015, and that maintain our return on invested capital above 15%. I should reaffirm that our external growth strategy does not contemplate making large-scale complex or transformational acquisitions, or adding another business platform to our portfolio. We believe that these external growth opportunities could consume capital of $1.5 billion to $2 billion through 2015. Given the nature of external growth, it's difficult to forecast the timing of these investments. However, we are actively working on several targets at the current time. Our strategy of returning cash to shareholders has not changed.

We will continue to balance our prudent financial policy with the competing demands of investments to support organic growth, and capital requirement to support external investment opportunities. As we evaluated these factors in the first quarter, along with the seasonal working capital build to support our Ag business, we decided not to buy back FMC stock in the quarter. However, we remain fully committed to the broad outline we discussed during the December Investor Day, and expect to return significant cash to shareholders in the form of cash dividends and stock buyback. With that, I will now turn the call back to you, Pierre.

Thank you, Kim. Regarding the outlook for the full-year 2011, we have raised our outlook for adjusted earnings to $5.50 to $5.80 per diluted share, a 14% increase above our 2010 adjusted earnings of $4.95 per diluted share at the midpoint of the range. Our Ag Product segment expects to achieve its eighth straight year of record earnings, up approximately 10% versus a year ago, driven by expected strong market conditions and growth in new and recently-introduced products, while increasing spending on growth initiatives and absorbing higher raw material costs.

In Specialty Chemicals, segment earnings are projected to also increase about 10%, reflecting higher sales and operating cost reductions across the segment, partially offset by higher raw material and energy costs.

In our Industrial Chemicals segment, we expect earnings to be up about 30%, driven by higher selling prices and volume growth across the segment, augmented by the benefit of cost reduction initiatives.

Moving to our outlook for the second quarter of 2011, we expect adjusted earnings of $1.40 to $1.55 per diluted share. Agricultural Products segment earnings are expected to be up 10%, driven by growth in North America, Europe, and Asia, partially offset by higher spending on growth initiatives.

Specialty Chemicals segment earnings are expected to be up in the high single-digits, driven by higher volumes in selling prices in BioPolymer and medium specialties, partially offset by higher spending on growth initiatives in food ingredients in BioPolymer.

In Industrial Chemicals, we expect segment earnings to increase in the high teens, driven by higher selling prices across the segment, partially offset by Granger start-up costs.

With that, I thank you for your time and attention. I would be happy to take your questions. Operator, please?

Thank you. (Operator Instructions) Your first question comes from the line of Mike Harrison from First Analysis.

A question first for Michael. I was wondering if you could comment a little bit further on what's going on with the lithium primaries volumes. I used to think of your business mix in lithium as 50% primaries and roughly 50% specialties. What did that mix look like in Q1?

We intentionally shifted t he mix a little bit more from the primaries to the specialties, basically because the capacity constraints that we have, we looked at the lower margin primary products. These would be outside the battery support area. And instead used the lithium molecules that we had to make downstream products, products like Butyllithium, which provided greater profitability. So, not huge on an overall basis, but an intentional mix shift toward the specialties in the first quarter.

And would you expect that to shift back toward the 50/50 split as you bring that additional capacity onstream?

Yes. I think we will definitely see faster growth, as you think longer term, in some of the [primary] products like carbonate and hydroxide, because those are really being driven by the battery applications in energy storage. So, once we have the additional capacity and we can fully serve that market, I would expect a mix shift back in that direction.

All right. And a couple of questions for Milt. In terms of the pre-buying that you saw in the first quarter, can you give us any sense of what the magnitude of that was? And maybe a little bit more color on exactly what's driving that activity?

Mike, we will not give you a number on what we think the pre-buying was. It was robust. I think what it's driving at though are 2 things. One, very good commodity prices, and 2, if we go back to 2008, when we had last commodity price spike, there was a shortage of product. I'm pretty sure that distribution did not want to get caught short on a shortage of product. So, I think that's the main driver.

Let me add a little thing to what Milton said. We had a very robust first quarter, which would tend to have us believing that we do have shift from Q2 into Q1 Specialty North America. By the same token, we are still contemplating a very strong second quarter. So, it's overall looking like a strong first half. It's quite difficult to understand what is the normal growth of the business versus what is the potential shift from 1 quarter to another. That's why it's hard for us to quantify. I think we believe it's the case, but overall, maybe most important, we are contemplating this from [both sides.]

In terms of the impact that you're seeing in the Ag business from some of the flooding that we've had in parts of the Midwest, as well as it seems like parts of North America are off to a later planting season than usual, what is your outlook given those issues?

Mike, no question that planting is quite delayed. The real issue will be, if it gets delayed beyond a certain date, then farmers will start to switch to soybeans instead of corn. Given our current portfolio, that's not a bad thing for us. So, I guess my way of answering to this, yes there is a delay in planting. But either way, I think we will be okay.

Thank you. Your next question will come from the line of Frank Mitsch from BB&T Capital Markets.

It's Sabina in for Frank this morning. Just a quick question on the Industrial segment. Looking at the high teens earnings guidance for Q2 actually suggests a sequential decline. Can you just remind us what the magnitude of start-up costs could be for Granger and how seasonality is likely to play out in the segment this year?

I think we've qualified the start-up of Granger in the mid-single-digit million dollars. That's about the number we are contemplating, with most of it being incurred in the second quarter while we are ramping up the sales and decreasing the start-up spending, of course, in the second half of the year.

Okay. And just seasonality, should we start to see a pickup in -- I thought soda ash demand would pick up in Q2, Q3. So, you're basically suggesting that Granger would offset the improvement in seasonality?

Yes. If you look at the targeted earnings growth we do have for the full year for Industrial Chemicals of about 30%, you will see a significant year-on-year increase in sales and earnings, but also sequential increase in the second half versus the first half of the year for industry overall.

Then on Specialty, it looks like you took expectations across the board except for Specialty earnings for the year. Can you discuss some of the headwinds that you are seeing unfold there that maybe you had not factored in before, if it's higher raws or the tight lithium supply situation?

I think in terms of the earnings outlook for the year, the guidance is for earnings to be up roughly 10% on a full-year basis on sales that are up mid-single-digits. Clearly, the headwinds are higher raw materials, particularly in the BioPolymer business for pulp that goes into the MCC business. However, we will more than fully offset that with higher prices in that same business. So, we'll be offsetting that. Clearly, the capacity constraints that we have in both business, but particularly in the lithium business, are significant. Again, if you want to look at overall the segment, we're guiding mid-single-digits revenue growth for the year. I would say without those capacity constraints, that segment growth would be 4 to 5 percentage points higher. So, that gives you some idea of the significance there.

Sabina, I do not believe there is anything today which is nothing we have seen. I mean, the raw material increase is a bit higher (inaudible) than we were expecting, but the Organization is compensating with higher prices. We are a little bit tighter on lithium than we thought, but we knew it would be tight. I think maybe 1 of the big surprises -- not a big surprise, but what is a good surprise -- is that we are experiencing very strong growth on our MCC product line, especially for dairy product in China. We knew it would be a growth platform for the food business for the next 4 or 5 years, and it's really confirmed here. And, that's where most of the capital investment increase for volume and sales increase will go.

Originally, the full year was looking to be up in the low teens, and now you're saying up 10%. That's my discrepancy. But we can discuss it off-line.

Thank you. Our next question will come from the line of John McNulty from Credit Suisse.

Just a few questions. With both your lithium and soda ash expansions coming on later this year, and I guess either late or early next year on the lithium side. Based on what you're seeing in terms of demand out there, can you walk us through how we should be thinking about pricing going out with these new -- or capacity expansions coming on over the next few quarters?

The capacity expansion for both businesses, lithium and soda ash, do not have today a direct impact on pricing. I think we are in a situation today, which the volumes we are bringing in will not materially change the supply/demand situation. I think soda ash, our volume clearly will be absorbed and taken in their export market. What will be guiding pricing is much more linked to the price at which the Chinese will be willing to export that product to maintain or protect market share outside of China. That is what will guide the price much more than the additional capacity. Same in lithium, we're at 100%, we are increasing our capacity by about 25%. It will not have an impact on the overall pricing looking at the demand growth.

Thanks for the color. And in the Ag business down in Brazil where we've seen these huge commodity prices, now that we're toward the end of the season, do you have any color as to how your customers are thinking about expanding their overall platforms with regard to acreage? And how we should think about that and how that parlays into growth for you next year?

Yes. We think, John, that the commodity prices are going to hold. That there will be an increase in cotton, sugarcane and potentially soybeans and corn. So, as these commodity prices hold, we are quite bullish about increases in acreage in all the key crops.

Great, thanks for the color.

Our next question will come from the line of Eugene Fedotoff from Longbow Insurance.

Congratulations on a good quarter. Just have a couple of questions. First, can you provide a little bit more color on raw material trends in BioPolymers? If you are seeing any stabilization or they continue to increase at the same rates?

This is Michael Wilson. I think with regard to the pulp supply, I would say what we saw in the first quarter was very consistent with what [we] projected, maybe a bit higher. But we see it consistent throughout the 4 quarters of 2011. I think that we will probably see some additional pressures as we move into 2012, but that's something that we're positioning the market for in terms of higher prices. On the seaweed side of BioPolymer, we've seen very stable raw material input costs.

Thanks. The second question, on soda ash volumes, both domestic and international, can you provide a little bit more color, particularly on the international markets where you see growth?

This is Mark. On the international markets for exports, we indicated last quarter that we would see growth in the 3% to 5% range. Obviously, with our capacity constraint, we're maxing out in terms of exports, but, I would expect you to look at those demand numbers overall. We have seen Chinese exports pick up in the first quarter from an average of about 1.6 million tons last year to about 1.8 million tons in the first quarter of this year. So, obviously, demand in Asia and demand in Latin America is pretty robust at the moment.

Any changes in domestic demand?

Domestic demand, no, it's rolling along at about the 3% range, which is what we indicated. So, no real change there for the rest of the year.

Our next question will come from the line of Andrew Dunn KeyBanc Capital Markets.

Just 1 last question on soda ash, if I may. You suggested that maybe there was a I guess 200,000-ton pickup in the Chinese export of soda ash. I know they have been talking about China narrowing this gap between the Chinese production cost and the domestic production cost. You're telling us that you are really confident you are going to be able to put all of the Granger demand into the market. As you're thinking about the timing of this cost gap narrowing, what kind of timeline do you have in mind? Is it pushed off way down into 2012? How should we think about that going forward?

This is Mark. Andrew, are you talking about the gap between the domestic China price or their export price?

Yes.

What we're seeing now, and we've talked about this, is the fact that the Chinese are exporting above their cash costs and have been since December. That number is declining. It was around about $30 a ton in December. It's round about $15 a ton at the end of Q1. As we've talked about a declining price, we have that trending down towards the end of this year in the fall quarter to be equal to their cash costs. That's the kind of trend line we see.

Okay, great. And just shifting gears to the Ag segment, it looked like margins were down a little bit on the year. I know you had some lower margins related to growth expenses. As we look at that going forward, is that going to be fairly stable in terms of you pursuing further growth in that market throughout the rest of the year? That might be maybe 100 basis points impact on the margins going forward. Or, is that not a good way to think about it?

I believe it's a good way to think about it. You always have an original mix, product mix. You also have spending on growth initiatives. But all in all, we will close the year for Ag at margins which will be very much in line with the 2010 margins. So, we are not expecting any shift of margin up or down within the overall segments, when you remove all of the variation you can see across the year. So, our objective, as we say, for the next 4 years, is to maintain margins in the Ag business, and that's where we expect to be [tooling] our forecast for the year.

Great. Thanks for clarifying that for me. I appreciate it.

Thank you. Your next question will come the line of Peter Butler with Glen Hill Investments.

We've got another quarter with FMC studying acquisitions and meanwhile, asset values have risen. And this obviously reduces the incentive to acquire assets. So, I'm wondering if you are starting to consider an option B, either to pay up or to possibly just give up, and return the cash to shareholders.

Peter, I think right now I would have to say that our strategy to balance the cash we are generating between external growth or acquisitions, returning cash to shareholders and capital investments is at the same place as we were in December of 2010. If anything, I'm feeling even stronger because the business is doing very well. As you saw, we did better than expectations in the quarter. The year looks strong. Cash generation is strong. So, I do not have any concern around the type of commitment we made. And, if you look at the mergers and acquisitions -- I do believe today -- and that's where we are prudent in commitment in terms of timing. I do believe today that the pipeline in terms of mergers and acquisitions is getting better. We are, of course, very careful.

We will not do anything which would not be appropriate or not completely in line with the strategy. We will not do any transformational acquisitions. But, we do have some very interesting targets. We are working with -- and we do have a pipeline which is getting better and better. So if anything, I'm more confident in our M&A strategy. But, that will not prevent us to do the right capital investment for organic growth with our recent projects and return money to shareholders, as we save. The timing, what do we do more in Q2? More shareholders money return or more acquisitions? I think we're going to have to decide. But if you look at the overall year, we're going to be exactly on the track, as we discussed in December.

Regarding returning cash to shareholders, I note that several years ago, Syngenta had a rather unique dividend policy. They raised the dividend in year 2, in line with the percentage earnings gain in year 1. This played out really well with investors, and boosted the price earnings ratio because investors could count on the dividend increase. So the question to you, Pierre, is do you have enough confidence in FMC's growth story to adopt a similar policy, a similar shareholder-friendly dividend policy?

Peter, I think that if I would adopt that policy, you would not be very happy. You are one of the guys who told me increasing the dividend by 20% of not much is not much. So I do believe that we would have to increase dividends maybe a bit faster than our earnings growth. We have to look at where we should be from a dividend standpoint for a Company with the kind of performance we have, and how to balance returning shareholder between stock buyback and dividend. I really do not want to say that we are going to apply a strategy, especially at our level of payment of dividend, which will be just aligning dividend payments to earnings increase. I'm not even sure it would work for where we are. You can count on us to strongly return cash to shareholders. It will be done in the form of dividend increase and stock buyback. We have not yet decided the exact pro rata of each of those. But, we cannot define the rule as the one you are defining. I'm not sure it would be appropriate for us.

Thanks for the guidance.

Your next question comes from the line of Kevin McCarthy with BofA Merrill Lynch.

It's Chris [Porella] filling in for Kevin. Could you break out the growth initiatives that you devoted capital to during the quarter and for the year?

This is Kim. I think what you're referring to is the $60 million in expansion capital that I mentioned in the call that we're going to spend in 2011. And that expansion capital is directed towards the Granger start-up. We mentioned that that capital would be mostly in the first half of the year. In fact, mostly in the second quarter. And as Pierre mentioned, that would be around mid-single-digits in millions. Pierre also mentioned that we just closed or finished a MCC expansion which should add capacity both to our pharmaceutical as well as our food colloidal projects. We've mentioned in the past that that capital is going to be around $25 million. We're also finishing up the expansion on our lithium business, which should be done by the end of the year. That expansion should also be on the order of magnitude of $20 million to $25 million.

Is the alginates expansion still on track for year-end 2011?

The alginate expansion was something we finished up last year.

How much of the $60 million has already been spent for those capital projects so far this year?

I'm sorry, I don't have that number off the top of my head. But given the timing of what I mentioned as far as the expansions go, I would say it's probably 50%, somewhere around there, spent.

In capital, generally speaking, think about a year like this year, it's always easier to think in terms of the year rather than thinking in terms of quarters because of plants which are being built. But, think about half of the capital going in a year like this one when we have expansion, half of the capital going to Industrial, about 40% of the capital going to Specialty, and about 10% going to Ag.

One more question. On the Ag, have you seen pricing, or have gotten pricing in Ag this year? And how is that compared to what you're targeting?

Chris, it's Milton here. Yes, we have had some price increases and we are continuing to push for those across the board. We've had some increases in Latin America, small increases in North America, and in Asia and Europe, also small increases. It's in line with what we forecast. And we'll see what happens for the rest of the year. We continue to look for opportunities to put prices through, especially if we start to see significant cost increases.

Chris, this is Kim. I'd like to correct something I mentioned. You asked about alginates. That will spill over into 2011.

Okay. So, you're still working on the capacity expansion this year?

Yes.

Okay.

(Operator Instructions) I will now turn the call back to Mr. Brondeau for closing remarks.

Thank you very much for your time today. As you can see, we had a very strong first quarter, and we do have strong expectations for the second quarter and the rest of the year. I would say that the signal we do have today is that our Vision 2015 is intact. The cash deployment strategy remains, The M&A strategy remains. And, maybe on the positive side, we are seeing maybe stronger organic growth than what we were expecting, which of course, will have to be supported by capital. But overall, intact with a stronger organic growth for the future. So, the quarter was good. The next quarter feels good. The year feels good. And, I believe we are on the track to deliver what we are promising in our Vision 2015. Thank you very much for your call, and I'm sure we'll be talking soon. Goodbye.

Thank you. This concludes the FMC Corporation first-quarter 2011 earnings release conference call.