富美實 (FMC) 2011 Q4 法說會逐字稿

Good morning and welcome to the fourth-quarter 2011 earnings release conference call for FMC Corporation. All lines will be placed on a listen-only mode throughout the conference. After the speaker's presentation, there will be a question-and-answer period. (Operator Instructions). Questions will be taken in the order they are received. (Operator Instructions) Thank you.

I will now turn the conference over to Mr. Brennen Arndt. Mr. Arndt, sir, you may begin.

Thank you. And welcome, everybody, to FMC's fourth-quarter 2011 conference call and webcast. Pierre Brondeau, President, Chief Executive and Chairman, will begin our call with a review of fourth-quarter performance. Following Pierre, Mark Douglas, President, Industrial Chemicals, will provide us an in-depth review of the performance and prospects for our soda ash and peroxygens businesses. Pierre will then give us a progress report on the significant progress we made in 2011 implementing our Vision 2015 strategic plan.

Following Pierre, Kim Foster, Executive Vice President and Chief Financial Officer, will report on our financial position. Pierre will then finish our remarks by providing our outlook for the first quarter and full-year 2012, and will complete the call by taking your questions. Joining Pierre, Kim, and Mark for the Q&A session will be Milton Steele, President, Agricultural Products; and Michael Wilson, President, Specialty Chemicals Group.

Our discussion today will focus on adjusted earnings for all income statement and EPS references on our website available at FMC.com. You will find the definition of adjusted earnings and certain other non-GAAP financial terms that we may refer to during today's conference call under the heading entitled Glossary of Financial Terms; as well as we provided a reconciliation to GAAP of the non-GAAP figures we will use today. Also posted on our website, I'd like to call your attention to the current 2012 outlook statement, which provides our guidance for the full-year and first-quarter 2012.

It's now my pleasure to turn the call over to Pierre Brondeau. Pierre?

Thank you, Brennen, and good morning, everyone. Our fourth-quarter results provided a strong finish to a year of remarkable accomplishments for FMC. We achieved record financial performance in 2011 and made great progress implementing our Vision 2015 strategy plan.

Here is a brief summary of our accomplishments in 2011. Sales and EBIT both increased 13%, excluding the prior impact of exited businesses. Earnings per diluted share grew by 21%. Free cash flow of $180 million was generated. Return on invested capital increased to 23.9%. Agricultural Products delivered its eighth year of record earnings. Specialty Chemicals achieved its sixth consecutive year of record earnings, led by the seventh consecutive year of record earnings in BioPolymer. Industrial Chemicals realized robust earning growth, the highest profit growth among our segments on the strength of our soda ash business and continued shift towards specialty peroxygens.

Across our businesses, we completed four company or product acquisitions, formed two joint ventures, and established two product developments and distribution agreements, all designed to strategically broaden our capacity to serve customers and enable us to capitalize on organic market growth opportunities. And alongside these external growth initiatives, we returned $206 million to shareholders in the form of dividends and stock repurchases. 2011, indeed, was a very good year for us and we're confident that we'll deliver another record year in 2012.

Moving to our fourth-quarter 2011 results, sales of $909 million increased by 17% last year, excluding the prior-year impact of exited businesses. Adjusted earnings of $1.58 per diluted share increased 44% versus the year a quarter ago. This level of adjusted earnings is well above the $1.30 to $1.40 range in the guidance we issued last quarter, as we benefited from a lower tax rate than projected in the previous guidance. We do expect this lower tax rate to be a sustaining contributor to our highest earnings profile going forward. Kim will review the detail of this lower tax rate later in the call.

Our gross margin of $294 million increased by 11% versus last year, while on a percent basis, our present gross margin essentially equaled that of last year. SG&A spend of $115 million was level to a year ago despite the significant sales gain. Adjusted earnings before interest and taxes of $145 million increased 24% versus last year.

On a regional basis, looking at the regionals, excluding the prior-year impact of exited businesses, we have clearly demonstrated a continued success in penetrating rapidly developing economies. Asia had the highest sales growth, up 15%, as Specialty Chemicals nearly doubled. Latin America grew 30%, driven by robust growth in Ag Products and soda ash, while EMEA increased 11%.

Let's take a more detailed look at the performance of our operating segments in the quarter. First, in Agricultural Products, first-quarter sales of $409 million increased 22% versus the year-ago quarter, led by robust sales growth in Latin America. The sales gain in Latin America were driven by strong demand in key Brazilian market segments, such as cotton and sugar cane, as well as by new product introductions and sales from a new venture in Argentina. Sales in EMEA increased significantly, based on the strength of insecticide and herbicide sales in France and Italy.

In North America, sales were lower than a year ago, due to a shift in the timing of full application sales were recorded in the third quarter of this year versus the fourth quarter of last year. In Asia, sales were essentially level to a year ago, as higher insecticide volumes in China, Indonesia, and Korea were offset by lower herbicide volumes due to less favorable weather conditions in China, Pakistan, and India, which impacted the region's weak crops.

Segment earnings of $73 million increased 17% versus a year ago, driven by the higher sales partially offset by higher raw material and manufacturing costs, as well as increased spending on targeted organic and external growth initiatives.

Moving now to Specialty Chemicals. Fourth-quarter revenues of $223 million increased 9% versus the prior-year quarter, driven by higher selling price across the segment and volume growth in BioPolymer, especially in Ag and food and pharmaceutical markets, as well as in downstream lead and specialties. Segment earnings of $51 million increased 11% versus the prior-year, driven by the sales gain and favorable mix, which more than offset higher raw materials and energy costs, and increased spending on targeted organic and external growth initiatives.

In BioPolymer, we realized a volumes gain in all three product lines, coupled with higher selling price in key market segments. On the demand side, microcrystalline cellulose, or MCC, continued to realize the highest growth rates. In food ingredients, we continue to see robust demand growth in dairy and beverage markets in Asia, especially in China. And in pharmaceutical excipient, a strong position service generic manufacturers in India continued to offer the higher growth.

BioPolymer earnings growth was driven by the higher sales and favorable mix, which more than offset higher raw material costs and spending on targeted growth initiatives. Pricing gains realized in the quarter more than offset higher raw material costs, principally higher wood pulp and seaweed costs.

Moving now to lithium. Sales gains were driven by higher selling prices in both primaries and specialties, and volume gain in energy storage and synthesis markets. The Asian energy storage market continued to be the highest growth driver, supplemented by steady growth in Butyllithium and other downstream products, which serve polymer and pharmaceutical into these markets.

So, in summary, a very strong finish to a record year in both agricultural product and Specialty Chemicals. To complete our look at segment performance, I'll now turn the call over to Mark Douglas, for a review of our Industrial Chemicals segment. Mark?

Thank you, Pierre, and good morning, everyone. It's a pleasure to be with you today to highlight our Industrial Chemicals segment, and review our fourth-quarter performance and provide you with our 2012 outlook.

In many respects, Industrial Chemical's strong performance in 2011 was a clear reflection of the significant steps taken in 2010 to realign and transform our businesses to deliver higher performance. Higher performance in the form of less sensitivity to economic cycles, sustained higher margins, greater earnings stability, stronger cash generation, and superior return on assets. In my view, 2011 was the first year in which you could see the true strength of our soda ash business and our increasing shift towards specialty peroxygens.

In 2011, sales of $1.04 billion increased 11%, and earnings of $155 million grew 26%, excluding the prior-year impact of exited businesses. The result in operating income margin of 14.9% continues to significantly increase, and is on track to achieve the 20% operating margin objective in our Vision 2015 plan. For comparison, the operating margin reported in 2009 was 9%, and in 2010, was 12%.

Moving to the fourth-quarter 2011 performance, sales of $277 million increased 14% from the year-ago quarter, excluding the impact of exited businesses, driven by higher selling prices for soda ash and peroxygens, and volume growth in soda ash. Earnings of $42 million increased 47% versus the year-ago quarter as a result of the broad-based sales gains; greater soda ash volume as our Granger plant came online; the absence of prior-year boiler tube repair costs; and the continued favorable mix shift towards specialty peroxygens. In soda ash, volumes remained firm throughout the fourth quarter.

Export demand through ANSAC remains strong, and we benefited from higher ANSAC prices, as tighter than anticipated market conditions for soda ash in Asia created a rising price environment. As we have commented on in prior quarters, these tight market conditions were driven primarily by increased China synthetic production costs.

Our domestic volume also held up well through the quarter, with demand constant in our major glass, chemical, and detergent markets. In peroxygens, sales and earnings growth was driven by higher selling prices in all products and regions, augmented by volume growth in European hydrogen peroxide, and in our specialty growth initiatives focused on environmental, energy, and antimicrobial markets.

With that summary of the fourth-quarter 2011 completed, I'll now shift to our 2012 outlook for Industrial Chemicals.

In a sentence, we are anticipating yet another strong year. On a full-year basis, we expect earnings to increase approximately 20%, driven by higher volumes and selling prices, and our continued portfolio shift towards specialty peroxygens.

Before commenting specifically on each business, allow me first to summarize, at the segment level, the impacts of the three major drivers of profitability for the segment -- volumes, selling prices, and input costs.

First, volume -- we are experiencing an increased demand across our businesses, particularly in soda ash export markets and in specialty peroxygens serving environmental, food, and aseptic packaging applications. Overall, across Industrial Chemicals, we expect aggregate net volumes to positively impact earnings by approximately $22 million in 2012.

Regarding pricing impacts in 2012 -- as many of you know, the significant majority of this segment's business has tended to be on an annual or semiannual contracts rather than on a spot basis. Though this will remain true for domestic soda ash and global peroxygens in 2012, our export soda ash business -- as it did last year -- will once again have a large degree of quarterly contracts, mainly in Asia. Overall, we expect aggregate net price tailwinds of approximately $38 million for this segment in 2012.

And finally, input costs -- in aggregate, raw material, energy, soda ash royalty payments, and other input costs for this segment in 2012 will result in headwinds of $30 million when compared to 2011.

The majority of this cost increase is driven by two factors. Firstly, the recent reversal of federal soda ash royalty rates now raised to 6% from the previous 2%; and secondly, the renegotiation of the long-term coal supply contract for our soda ash business, following the expiry of our previous contract.

I will now review each business in more detail, starting with soda ash.

As we begin 2012, the global soda ash market remains healthy. Global demand is expected to reach an all-time high in 2012, growing 5% over the previous high in 2011, and taking global demand up to 55 million tons. Despite this record and, as it did last year, the world will remain over-supplied with an excess of high-cost synthetic soda ash capacity, primarily based in China and Europe. In 2012, we expect the overall global capacity utilization rate to be in the low 80% range. However, given that the US is the base for the world's lowest-cost natural soda ash production, we fully expect to be running at maximum capacity rates throughout 2012.

In the US market, demand continues at a solid pace, though lower than other parts of the world where demand is more robust. We expect US demand in 2012 to grow by 2% to 3%, driven by flat glass, glass containers, and chemicals. As a point of reference, in the domestic market, glass in all forms makes up 47% of market demand.

Turning to pricing -- in North America, increases in soda ash prices for 2012 varied by customer, depending on contract provisions. We realized an average increase in the domestic market that was in line with our expectations and comparable to the prior year's increases.

In export markets, ANSAC expects to increase average prices in 2012, and at the same time, maintain their market share. During 2011, ANSAC demonstrated its ability to maintain its market share while increasing prices, as the cost of synthetic production increased. A very clear reflection of this was the decline of Chinese export volume in 2011 to 1.5 million tons, a low level not seen since 2004. Given the high utilization rates of US producers, Latin American customers' primary concern during the 2012 contract negotiations was security of supply. This dynamic has afforded ANSAC the ability to maintain its significant supply position into Latin America, as well as raise price.

In Asia, as expected, we achieved the highest price increases. Given the shorter contractual dynamic in Asia, we are keeping a close watch on Asia demand to ensure ANSAC maintains pricing strength while holding market share. As we have commented before, over the longer-term, we fully expect prices to continue to rise in Asia, as the cost of synthetic production from China continues to escalate, driven by higher input costs for energy, such as electricity and coal; raw materials, such as salt and ammonia; labor; and a strengthening currency.

As with prior years, the rate of price increases in the export market will be materially higher, and will result in export and domestic pricing that is almost at parity. The net result of domestic and export pricing actions is an expected $1 per ton increase in global average pricing in the low-double digits. These pricing moves will result in a global average selling price, FOB Wyoming, in the low [$1.40's] per short-term.

Given our world-class, low-cost position in natural soda ash and the projections for continuing demand growth, we restarted our Granger facility mid-last year. We are now producing at the full 500,000 tons per year rate. For comparison, we produced just over 200,000 tons from Granger in 2011. In addition, we are in the mid-stage of an engineering study to look at the feasibility and timing for bringing onstream a further 700,000 tons of soda ash capacity at our Granger facility. We will make this decision as we move through 2012.

In summary, our soda ash business will once again deliver significant earnings growth in 2012. Let me remind you, however, that we own 87.5% of the earnings stream of our soda ash business; the balance is owned by our two Japanese partners.

Moving now to peroxygens. We look for a record year in peroxygens, driven primarily by continued growth in specialty markets, such as in persulfates and peracetic acid, where we primarily compete with technology solutions different than ours. We see robust growth, particularly in environmental, food safety, electronics, and oilfield markets, where our products offer customers unique quality, performance, and technology, with an incremental benefit of being green in nature and meeting sustainability goals.

As we noted in last quarter's call, we strengthened our portfolio late last year with the acquisitions of RheinPerChemie and Adventus. Both support our drive to specialties and extend our geographic reach. Prices in 2012 are expected to be higher across peroxygens product lines, driven by mobile and supply and demand dynamics. We expect to benefit further from continued manufacturing cost reductions and realignment projects across our plant network.

Let me conclude this detailed outlook for the businesses that comprise Industrial Chemicals by summarizing our 2012 aggregate view for the segment. We expect full-year 2012 revenue to increase approximately 10%, driven by higher selling prices in soda ash and peroxygens, and volume growth in soda ash export markets. We expect full-year 2012 earnings to be up approximately 20%, driven by the sales gains and the continued mix shift towards specialty peroxygens.

And for the first quarter, we expect segment earnings to be up approximately 10% versus last year, lower than our full-year forecast for 20% year-on-year growth. This is mainly due to soda ash mix; increased soda ash royalties, based on our mining plan; and operational expenses that are occurring in the quarter. Partially offsetting these factors is the increased volume from our Granger plant. Clearly, we expect yet another strong performance from our Industrial Chemicals Group.

With that, I look forward to taking your questions during the Q&A period, and will now turn the call back to Pierre.

Thank you, Mark. I'd like to now share with you the progress we made in 2011 implementing our Vision 2015 strategy plan. Recall that is something I intend to do twice annually at the midpoint of each year and at year-end.

When we announced Vision 2015 in December 2010, we set out a plan with an overriding objective to drive top quarter our total shareholder return. Our plan included an aggressive growth target aiming to reach $4.2 billion in sales in 2015, solely through organic growth, and augmenting that growth with external growth opportunities to drive 2015 sales to $5 billion or more.

As I look at our 2011 results, we are solidly on track to meet this objective. We delivered robust organic sales growth of 13% in 2011 and more than 1.5 times the annual organic growth rate required to reach our $4.2 billion 2015 target. Further, we continue to see regional opportunities for organic growth across all of our business, which gives us the potential to accelerate ourselves to $4.5 billion to $4.7 billion in 2015.

And on the bottom-line, our 2011 results continue to demonstrate the earnings power investors should expect from the FMC portfolio. Earnings before interest and taxes grew 13% versus 2010, a rate consistent with the average annual growth rate required to deliver our Vision 2015 organic EBIT goal of $1 billion.

During 2011, we took several steps to support the continued delivery of this higher level of organic growth. We established regional universal teams in Asia, Latin America, and Central and Eastern Europe, and Turkey, to work across our businesses to drive faster growth in rapidly developing economies. We have already seen results, with more than 46% of 2011 sales coming from all these versus 40% in 2009.

We also invested in critical infrastructure, including breaking ground for Asia Innovation Center, which will house Agricultural Product BioPolymer and lithium technical and commercial teams to accelerate our growth, largely by tailoring products to local markets in the region. We expect the Center to be operational in early 2013.

We continued our organizational evolution to better capture the value of co-ownership, shifting from a highly centralized organization to balance centralized -- decentralized model to better leverage our size and scale. Particularly in disciplines that transcend businesses and regions, such as procurement, strategic planning, M&A communication, and most recently, operations. By acting as one FMC where it matters, we are realizing increased efficiency while maintaining stronger continuity in our business units.

We also made great progress in our external initiatives. Though externally derived sales growth was not a major factor in 2011, as nearly all of our initiatives closed during the fourth quarter last year and excelled above the potential for the eight transactions closed in 2011.

In our Agricultural Products Group, we acquired the Rovral and Sportak fungicide product line from Bayer CropScience. These established fungicides are highly effective ready management technologies that are used worldwide with brands well-recognized by leading agricultural customers around the world.

We entered into two exclusive agreements covering development and distribution of biological with Christian Anson for agricultural and all-metal market, and Marrone Bio Innovations for biofungicide in Latin America. We also established Ruralco, a new Argentine agricultural chemical distribution company, enabling FMC to accelerate growth in Argentina as $1.7 billion crop protection market, the second largest in Latin America.

In a specialty chemicals group we acquired South Pole Biogroup, a specialty food ingredient manufacturer based in Chile. Biogroup provides FMC an entry into the natural colors market, a rapidly growing market expected to reach more than $1 billion in size by 2015. And as Mark stated in his remarks, in our Industrial Chemical Group, we made two acquisitions and formed one joint venture.

These eight transactions represent meaningful steps for us in reaching our $5 billion 2015 sales goals. Collectively, in 2012, they are expected to add more than $90 million in sales; $15 billion in EBIT; and to be accretive to EPS by $0.07. Including the related organic growth investments to further the growth of each of these transactions, we are on track to meet our goal for external growth to contribute $800 million or more in 2015 revenues.

I will now turn the call over to Kim Foster for a report on our financial strength and its role in enabling the achievement of our Vision 2015 objectives. Kim?

Thanks, Pierre, and good morning, everyone. FMC showed strong cash generation in 2011, with free cash flow of $180 million. This is lower than our previous guidance of $200 million to $225 million, largely due to a shift in financing of Brazil's receivables from a higher-cost local financing to lower-cost US financing sources. Cumulative free cash flow over the planned period reached $436 million, on track to meet our $2 billion cumulative free cash flow goal for 2010 to 2015.

For 2012, free cash flow is projected at $225 million to $250 million. This projection is after capital expenditures of approximately $250 million to support expansion initiatives in BioPolymer, lithium, and soda ash.

As I do each quarter, let me remind you that our free cash flow projections do not include funds for acquisitions or share repurchases. Consistent with the Vision 2015 plan, cash deployment in 2011 was balanced across reinvestment in our existing businesses, external growth, and returning cash to shareholders. Capital expenditures of $190 million in 2011 was at a faster pace than originally anticipated in Vision 2015, reflecting the stronger outlook for organic growth that we now see.

We deployed just under $200 million through our external growth initiatives, which represent an 8.9 times forward multiple of 2012 EBITDA for these transactions, a lower multiple than projected in our Vision 2015 plan, and further evidence of the discipline and value-creating focus of our external growth strategy.

And, alongside these focused investments, we returned $206 million to shareholders through share repurchases and dividends in 2011. Cumulative cash returned to shareholders over the planned period reached $378 million, well ahead of the pace required to reach our target of at least $1 billion returned to shareholders cumulatively through 2015.

In December of last year, we announced a $200 million buyback with the intention of completing the repurchases by the end of the first quarter of this year. In the fourth quarter, we repurchased 55 million shares, which is included in the numbers I just gave you. We fully expect to complete the remaining 145 million by the end of the first quarter.

Return on invested capital for 2011 expanded 160 basis points to 23.9%, demonstrating clearly the earnings power of the FMC portfolio. With our rich organic growth opportunities, robust external growth pipeline, and disciplined cash deployment, we are confident we will be able to maintain our return in invested capital measurably above our mid-teens target, while delivering our Vision 2015 growth goals.

And finally, let me outline our tax rate for 2011 and provide our projection for 2012. As Pierre mentioned, we benefited in 2011 from the achievement of a 26.3% tax rate, considerably lower than our prior guidance of 29%, due to a higher component of foreign-sourced earnings, which are taxed at lower rates than the domestic earnings.

To address a recalibration question you will likely have, if we were to recalibrate our fourth-quarter adjusted earnings of $1.58 per diluted share using the prior guidance rate and associated higher duties, our adjusted earnings would have been $1.37 per diluted share. But this recalibration is largely academic, as we continue to increase our presence in rapidly developing economies, both in sourcing our products and revenues, and our overall tax rate has reduced to this new level. With our plans to continue to invest in these economies, we would expect this lower tax rate to be a sustaining contributor to our higher earnings profile. For 2012, we're projecting a 27% tax rate.

Thank you, and I look forward to taking your questions, and will now turn the call back to you, Pierre.

Thanks, Kim. As you've seen, 2011 was a year of major progress toward the achievement of our Vision 2015 objectives. I am increasingly confident in our ability to meet or exceed long-term targets we set for ourselves back in December 2010 -- $5 billion or more in sales; $1.2 billion in EBIT, with return on capital sustained above the mid-teens, while maintaining a strong investment-grade balance sheet and discipline cash deployments. We believe then, as we do now, that our Vision 2015 plan was the right plan to deliver these objectives.

Moving to our outlook for 2012, we plan to deliver another record year with full-year adjusted earnings of $6.70 to $7.05 per diluted share, a 15% increase versus 2011 at the midpoint of the range.

Our Agricultural Products segment expects to achieve its ninth straight year of record earnings, up approximately 10% versus the prior-year, driven by expected strong market conditions, and growth in new and recently introduced products, while increasing spending on growth initiatives.

Our Specialty Chemicals segment plans to deliver its seventh straight year of record earnings, up approximately 10% versus last year, reflecting higher sales across all businesses.

In Industrial Chemicals, we expect earnings to increase approximately 20%, driven by higher volume and selling price across the segment, and the continued mix shift towards specialty peroxygens.

Moving to our outlook for the first quarter of 2012 -- we expect adjusted earnings of $1.70 to $1.90 per diluted share, a 21% increase versus last year at the midpoint of this range. In Agricultural Products, we look for first-quarter earnings to be up approximately 20%, reflecting robust early season demand in North America, coupled with the expected shift to some sales in the region from the second quarter; a strong finish to the crop season in Brazil, and volume gains in Asia and EMEA.

In Specialty Chemicals, we expect first-quarter earnings to be leveled to a year ago, as higher selling prices in all BioPolymer and lithium product lines are offset by higher raw material and energy costs, and one-time operating costs related to capacity expansion projects. In lithium, we will incur about six weeks of downtime across our brine and lithium carbide plants in Argentina, as we complete the tie-in, enabling the 30% capacity expansion.

As previously communicated, products from the expansion is planned to enter the market by mid-year. Meanwhile, in BioPolymer, we will take a planned outage associated with the alginates capacity expansion at our facility in Norway. This expansion is largely in support of our pharmaceutical business. The additional capacity will be brought on later in the first quarter.

The impact of the lithium and BioPolymer outages will be contained to the first quarter. In the absence of these impacts, segment earnings would have increased 10% to 13%, consistent with the segment trends line performance. And as Mark mentioned, in Industrial Chemicals, earnings are expected to be up approximately 10%, driven by higher selling prices in soda ash and peroxygens, the benefit of volume growth in soda ash export market, and the continued shift towards specialty peroxygens.

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

(Operator Instructions). Laurence Alexander, Jefferies.

This is Rob Walker on for Lawrence. I guess first question was, just curious to get a little more detail around the CapEx plans, I guess particularly around soda ash and lithium, or if you could roughly size that $250 million around your segments?

Certainly. Kim, do you have the breakdown of the capital spends?

So, without going into too much detail, there are -- there's about $100 million of expansion capital in that $250 million in capital that we're guiding for 2012. Three projects, the beginning of the Granger expansion in Green River; the beginning of the lithium expansion in Argentina; and some expansion capital in our BioPolymer business, make up about 90% of that expansion work -- roughly, roughly equally distributed.

Great. That's very helpful. And then could you just give us a rough sense of your expectation in Ag, in terms of how much sales in Q2 are going to be pulled forward into Q1?

Milton, go ahead -- sales in Q2 being pulled forward into Q1.

Yes. Rob, I would imagine if you want to talk in terms of EBIT impact somewhere over $5 million to $8 million.

Okay, great. And then just quickly, I'm kind of trying to get a sense for what your guidance implies for share buybacks next year. It looks like around, like, 1.3 million, 1.5 million shares?

When -- this is Kim. When you look at the guidance, I wanted to remind you how the shares work in the diluted share calculation, which is not just outstanding shares and not outstanding shares at a point in time, but a year average. And then there is an adjustment for the treasury method for the diluted share calculation.

So what happens during 2011 is the shares came down continuously through the year as a result of the share buyback that we did. So when you look at the average shares for 2011 -- that's the average for the year, not the year-end numbers. So when you continue the share buyback, as I outlined in my remarks, and finish that about 145 million buyback in the first quarter, the average shares that we're projecting assumes no further share buyback beyond that point.

Great. Thank you very much.

Frank Mitsch, Wells Fargo.

This is Sabina Chatterjee in for Frank Mitsch. Just going to your outlook on Specialty Chemicals, it looks like you're calling for flat margin in 2012, and I think you explained that partly by capacity expansion costs. But can you just help us understand maybe the selling price for raw materials situation? Like, have you been able to offset raws through price? Or are you still playing catch-up in some areas?

I think in BioPolymers, the price increase has been covering the raw material cost increase. I think there is really one -- I may call it an issue, it's not really an issue -- is we do have two expansions for which we need to stop our current plans, which will not be operating in the lithium plant; will be off for six weeks to do the tie-in for the expansion. And that is the only reasons for which there is a slowdown of growth in the first quarter. It's pretty much level to the previous year and the full -- the impact on margin.

But everything else is pretty much balanced. We're still expecting very strong growth in MCC, and we are still expecting to recover, as we've done in 2011, raw material increases with price increases.

So seaweed and wood pulp, those are all being offset?

That's right.

Okay. And then just on Ag Products, can you remind us what your optimal breakdown is between insecticides, fungicides, herbicides? And maybe how your margins generally compare across those products?

It's Sabina, right? I think.

Yes.

We don't give you margins by the breakup between herbicides, fungicides, and insecticides. And you asked for the optimal -- I guess the optimal would be a footprint that agrees with the average in the world. We are predominantly herbicide and insecticide today. Insecticides are around 48%, herbicides about 43; and then a growing fungicide business of around 9% or 10%.

So what we're focusing on is building positions and products, expanding our products in each of these segments. Obviously, we're significantly under-represented in the fungicide market, and hence, this recent acquisition of the two fungicides from Bayer CropScience is our effort to increase our footprint there. And it's going to depend on our success in expanding our product lines in each of these categories, which we are trying to do at the moment. I mean, I think that's the best way I can answer you.

All right. Appreciated. Thank you.

Mike Sison, KeyBanc.

Nice end to the year. In terms of 2012, can you give us a feel here what gets you to the top end or the low end of your range?

Yes. I think, as always, the place where -- there is a couple of places where we do have some possibilities to see numbers going higher. Mark talked about pricing in soda ash. You know on the export market, we do have shorter contracts, which always could imply an upside -- could play a downside, depending upon the export activity of others, but it could also imply an upside.

And we always have, and it's hard to predict at this stage in the game, the possibility of a more robust year-end performance in Ag, especially in Latin America. So those [two] I guess would be accounting for the majority of the upside we would have in the business plan.

Okay. And on soda ash, Mark, you mentioned the potential of adding more capacity. Will you be -- when will you run out? You just started up Granger. As I recall, it sold out. So, will you need capacity at a certain point over the next 12 to 24 months?

Mike, we are full. So we are, as you know, we've been expanding our capacity by 500,000 tons and we are selling on the export market every time we are producing. So the question for us now is -- it was a very easy decision, if I may say, to increase by [$500,000], because the capital spend was very low for the volume we are bringing to the market.

We are now looking at the timing -- more than a question whether or not we will do it, we are looking at the timing when it will be more appropriate to do the next phase, which will be a higher capital spending to bring another 700,000 tons on the market.

Okay. And the last question on lithium, I saw another competitor adding capacity. You're adding capacity. Can you update us on what you think the growth rate for that business can be over the next several years?

Yes, Mike, this is Michael Wilson. We see the trendline growth rate that we've been on continuing for the next couple of years. So real demand is growing 8% to 10% a year. We see that continuing through 2015. And then in the latter half of the decade, we expect that to kick up. So I would say in the periods between now and 2020, overall, probably 11% trend line growth.

That 8% to 10% is higher than what you had at your Analyst Day. Is there any area that has gotten better?

I think really the only thing that we've taken a look at is the battery penetration into not only light duty vehicles, but other types of vehicles -- two-wheeled vehicles, municipal buses, airport vehicles -- those kinds of things. And we're seeing the penetration rate on that increasing a little faster than we thought.

Great. Thank you.

Peter Butler, Glen Hill Investments.

I think you might be hiding your light under a basket here with the -- you casually mentioned your Bayer Ag Chemical acquisition, but I think there is a heck of a story there in how this acquisition fits your model. Maybe you should flesh out your view here with a few numbers and discuss some of the synergies to back up the rationale for acquiring it.

Yes, thanks, Peter. I could not agree more in terms of the value of such an acquisition for us. But you know, it goes along the line of this Bayer acquisition and these two products we have acquired -- it goes along the line of all of the Ag transactions we are doing.

And what we have been doing is re-proving that our approach to acquire potentially growing companies or additional product lines, or new product lines, new segments for us in a wide space at low price, low multiple, giving us opportunity to grow -- deny the need for any type of medium or large acquisition. I think we're going to get to this $800 million of externally originated growth, as we have in 2015 with this type of move now.

The Bayer move is excellent to us. It's a very good multiple. It is -- when I say good, I mean low. It is accretive on the first year. It increases our participation in the fungicide market, which we are trying to do. And certainly, Bayer is a great company for which we do have a lot of respect. It's a great partner. But I have to say that we tend to have maybe a stronger focus on this type of product, and formulation capability, and we do expect -- we should be able to take the growth rate of this product beyond what Bayer was doing with our participation in different geographies.

So all in all, it's an acquisition which will grow our portfolio very nicely. But I would expect more like that. I think that the story we would like to show in the future for all of us at FMC is, eight transactions this year and maybe an equal number or -- I don't know if we're going to do four, five, or eight -- but small transactions like that, which are contributing to the growth of the Company without a lot of spending.

The second thing, I think earlier, there was some discussion about Mark Douglas being your new Cost Czar, and supposedly had an interesting cost reduction program that he had been studying. But you didn't mention this in your conference call. Did anything occur on this front during the year?

Yes, I think maybe the place where we've talked in terms of numbers, we said a few things without citing -- but we are very much on track in places where we have structured ourselves to do cost savings. And we were expecting to be in the $20 million run rate by the end of this year approximate -- and by the end of 2011, sorry, on procurement as the run rate. That's where we are. We were targeting an $18 million by 2015. That's where we are and certainly we do have opportunities beyond that. So we are very much on target with the cost reduction plan we've put in place.

Okay. Thank you very much for your help.

Kevin McCarthy, Bank of America Merrill Lynch.

Pierre, I noticed recently that the Chilean government launched a tender process to open lithium production to new entrants in that country. And I'm wondering how you view that in terms of the competitive landscape generally, and whether or not Chile might be attractive to FMC at some point, in terms of future expansions? I realize you just completed 30%, but looking down the road, would that make any sense for FMC?

Yes, good morning, Kevin. We certainly are looking at any opportunity to diversify our source of lithium. And of course, Chile is an opportunity now. A couple of comments -- I think SQM and Rockwood are well-established in Chile. Chile will be opening the door for another supplier; but as you can guess, it's going to be a process which will most likely be difficult and expensive. We do not expect the Chilean government to give the opportunity to a company for free.

And it's going to be an economical balance for us and between keep on expanding in Argentina, as you said, we just expanded 30%, but we do plan to go one step beyond. I think we want to add in the midterm maybe 10,000 tons, maybe another 10,000 tons in the future. The question is we do have facilities, people, and structure in Argentina and we are very well-established there. And what would be -- how much would we have to pay to go to Chile to diversify our source.

So yes, we will look at it. Would the priority for us to go to Chile instead of keep on growing in Argentina be high? No, it is not. I would put that on the very low side.

Okay. And than as a follow-up if I can shift gears to soda ash -- Mark, would you comment on the price realizations by region? You know, US as well as some of the ANSAC realizations, and Asia and LatAm?

And then second, related to that, it seems that the average contract durations continue to shorten. What is driving that? Is that a conscious decision on the part of ANSAC or counterparties, or both? Maybe you could just provide a little bit more color on where your contracts are in places like LatAm, quarterly annual mix, things like that?

Yes. Morning, Kevin. I'll take the pricing piece first. Basically, what I said was we had the pricing in the low-double digits, dollars per ton. Obviously, that indicates a spread -- the lowest amount of increase was in the domestic market. And I would say that was in the single digits mid to high.

And then in ANSAC, the highest increases were in Asia, significant double-digit increases, followed by Latin America. So quite a spread, actually, depending on local conditions. And as you know, both Latin America and Asia are important for ANSAC and very important for FMC.

On the contract side, there has not been significant changes in terms of contract length. Obviously, domestic in North America we have most, if not nearly all, on year or multi-year contracts. Latin America is predominantly year or multi-year contracts. And Asia has anywhere from 30% to 50% on quarterly contracts. And that really hasn't changed much. So if that came across in the script, it was given the wrong impression. So, Asia, more quarterly; and the rest of the world that we deal with, especially Latin America and domestic, more annual and multi-year.

Okay. That's helpful. Thank you.

Eugene Fedotoff, Longbow Research.

A couple of questions on Industrial Chemicals. Mark, can you talk about peroxygens mix shift or its specialty peroxygens? You're moving into food and environmental markets. What percentage of your total capacity in those markets right now? And what the goal is for 2012? Can you provide a little bit more color on that? And also, if you can mention the difference in margins for low margin business versus high margin business?

Sure. I'll take the mix shift first. If you think back to what we presented at our Investor Day, way back in 2010, we had a North American business that was essentially 75%, what we would call commodity business, which is pulp and paper and mining; and 25% specialty, which is all our persulfates and our peracetic acids, and hydrogen peroxide into other specialty applications, such as electronics.

Since that time, we've actually globalized the business. And if you look back in 2011 on a global basis, it was probably close to that 75/25 range on a global basis rather than just North America. But I would say in 2012 going forward, we're much more likely to be closer to a 60/40 mix. So 60% commodity and 40% specialty.

I would also like to point out that we value both of these businesses. We need the commodity business to run our plants; we need the volume through the plants to get our operating rates. But our focus is clearly on aseptic packaging, our environmental applications, the electronics business.

From a margin perspective, they are fundamentally different in terms of margin production. Commodity businesses are very low double digits in terms of gross margins, and then the specialty side is anywhere from 45% to 75% gross margin, depending on the application. So you can tell, the mix shift plays an important part for us and we're driving that hard.

We're not only driving the mix shift hard, we're driving the geographic expansion hard. We've recently put people into China for aseptic packaging. And with our RheinPerChemie acquisition in Germany, that affords us opportunities to improve our environmental business into Central and Eastern Europe. I hope that helps.

Yes, definitely. Thanks a lot for the color. Could you also remind us of what the current capacity, hydrogen peroxide capacity is right now? And what kind of utilization rates your plans are riding at?

Utilization rates are pretty high in the US, pretty optimal for us. And also for us in Europe, I would say in the mid-80% range.

Great, thanks. And a couple of questions on soda ash. I guess, first, do you plan to move the longwall in 2012? Or is it going to be a 2013 event?

Yes, we move the longwall about every 15 months. And last year, it occurred in July; this year, it will occur in September. So there will be no quarter-to-quarter change; it occurs within the same sequential quarter.

Same third quarter, right?

Yes.

Okay. And could you also comment on any changes if you see any in behavior of Chinese soda ash producers?

No, I think, in my script, I explained that their export volume was down. Obviously, they have demand in their own country that has slowed a little bit as we entered out of last year, but fundamentally, they're focused on their domestic market with a declining export volume. So I haven't really seen any change.

Okay. Thanks a lot.

Bill Young, ChemSpeak.

On the China question, how much -- how do you think the chances are for further expansions in soda ash capacity, synthetic capacity there in China? And what's the outlook for growth in capacity in Turkey and other places in the eastern hemisphere?

Hi, Bill, it's Mark. I think in China, as we went through the end of last year, there was about 2 million tons of new capacity came onstream in the fourth quarter in China, mainly in domestic demand.

If you look at the projected numbers that are out there, there is something like another 3 million tons of capacity to come onstream throughout 2012. And you know, when you're in a market that has something like 29 million tons of capacity, that's a fair amount; it's roughly 10%. Whether all that comes onstream or not, we really don't know. Some of it may do, some of it may not, depending on what the economic conditions are like.

In Turkey, I really don't know at this point. I've seen so many different conflicting numbers about what they're doing. Clearly, Turkey is expanding -- but to what degree, we don't have a good handle on that right now.

Okay, great, thank you.

Mike Harrison, First Analysis.

Thanks for taking my questions. Was hoping that you could comment maybe in a little more detail on what kind of pricing traction you're getting on the lithium front, on the primary site and the specialty side, particularly after we turned over the new calendar year and some of your contracts rolled over?

Mike, this is Michael Wilson. We did get significant price increasing in lithium really across the portfolio of products. To put it in a relative perspective, we saw the highest increases on the lithium salts, which are in the primaries area; and somewhat to a lesser degree on the downstream organics, like Butyllithium. As you may recall, however, we had announced more significant increases on the primaries and on Butyllithium.

And have you guys had any impact from adverse weather in Argentina that may have pushed out your lithium expansion timeline?

Nothing really significant. We had talked mid-last year about some operational issues we had related to weather. We did see high precipitation at the end of 2011, late in December, early January, but nothing of significance that's affecting the expansion timeline.

And can we get an update on the potash processing capability at your lithium operation? Is that something that's up and running yet? Or is that something that's part of the outage that's going to happen in the first-half?

Actually, the potash project will be completed later in 2012. It will be completed sometime in the second half of the year, probably in the third quarter. And we will begin production beginning of fourth quarter, would be the current timeframe.

All right. And a quick one for Kim, just on the tax rate. Should we assume that you're also seeing lower cash taxes in addition to lower book rate?

Mike, this is Kim. The answer is yes, and we think it will be sustained.

All right. Thanks very much.

John McNulty, Credit Suisse.

Most of my questions have been answered, but I've got one in Ag. When I look at the margins, both on your long-term target and how things have moved, the margins came in maybe a little bit lighter than what we were looking for in 2011, and below your longer-term target.

Now you highlighted a lot of investment expenses, but I guess it seems like a lot of the investment is acquisition of licenses and small companies, which shouldn't, I don't think, go through the P&L. So I guess can you walk us through what expenses tied to growth in that segment are actually running through your P&L and help us to understand that?

Yes. A couple of things, John. First of all, Ag had a -- saw an increase in raw materials and we are increasing our pricing. I think we can say in BioPolymers that we covered the raw material increase with price in Ag. We do have a one or two quarter lag. So there is a lag in between our price increase in the contract we have and the raw material cost increase we've been seeing, which has been impacting slightly our gross profit.

The number two reasons for EBIT margin decrease are below-the-line costs. We keep on -- we have increased our spending even this quarter, and so over the year in R&D and in the technical field in general. And also we had this quarter expenses which were linked to the acquisition we took. We had to mobilize resources to go through due diligence process and go through the acquisition, which had an impact.

So it's external growth, acquisitions; it's technical investment in R&D; and it's the lag on the raw material. We should see that getting back to in-line with the target very quickly.

Okay, great. Thanks for the color.

Robert Reitzes, BroadArch Capital.

Thanks for taking the call. I just have two kind of pedestrian questions. One, based on your numbers that you're forecasting, you guys should generate, in this coming year, 2012, about -- it looks like over $300 million, around $300 million of free cash after dividends and CapEx. Is that fair?

This is Kim. We guided, as you know, in the call about $200 million to $225 million, and below what you may see if you were thinking of capital spending being largely in line with DD&A. But our capital spending is going to be about $100 million to $125 million above our D&A. And that's what would give us this slightly lower free cash flow number. I don't know how you calculated your (multiple speakers) --

Okay. Well, I just took -- anyway, the second question is just a point of clarification. What did you say your EBIT target was for 2015?

For 2015, organic plus external, we have a target of $1.2 billion in EBIT. Of this $1.2 billion, $1 billion is the target through organic growth.

You have a $1.2 billion -- that's almost double where you are now. Is that correct?

That's correct.

Okay. That's it. Those are my two. Thanks.

All right. Thanks, Bob.

Mr. Brondeau, please continue.

All right. Well, I want to thank you very much for your time. We had what I view as a very strong 2011. We have very high confidence that we're going to deliver another very strong 2012, with earnings in between $6.7 per share and $7.05 per share, a 15% increase. And we are intending to demonstrate that we're going to start with a very strong first quarter.

We're going to keep on doing that, not forgetting that we want to strengthen our portfolio with external growth and do that -- small acquisition, but smart and highly strategic acquisition to continue our journey to deliver target growth for 2015.

I want to thank you again for your attention and we'll be in touch. Thank you.

Thank you. This concludes the FMC Corporation fourth-quarter 2011 earnings release conference call. Thank you for using AT&T. You may now disconnect.