富美實 (FMC) 2012 Q1 法說會逐字稿

Good morning and welcome to the first-quarter 2012 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). As a reminder, this conference is being recorded. Thank you.

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

Thank you, and welcome, everyone, to FMC's first-quarter 2012 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 with a 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 2012 and by taking 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 that our discussion today will focus on adjusted earnings for all income statement and EPS references. Under the heading titled Glossary of Financial Terms on our website, available at fmc.com, you will find a definition of adjusted earnings and certain other non-GAAP financial terms that we may refer to during today's conference call.

Also, on our website we've posted our current 2012 outlook statement, which provides guidance for the full-year and second-quarter 2012, as well as a reconciliation to GAAP of the non-GAAP figures we will use today. And finally, share and per-share financial data discussed today do not reflect the two-for-one stock split of FMCs common stock that is payable on May 24, 2012, to stockholders of record of its common stock as of the close of business on May 11, 2012.

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

Thank you, Brennan, and good morning, everyone. As you saw in our earnings release, our first-quarter results provided a very strong start to what we expect will be another record year for FMC.

Summarizing our first quarter 2012 performance, sales of [$951 million] increased 18% above last year's first quarter, and adjusted earnings of $1.94 per diluted share grew 30% versus year-ago quarter. Agricultural products delivered a robust performance in the quarter. Sales of $454 million increased 32%, driven by broad-based growth across Latin America, North America, and Asia. Segment earnings of $130 million increased 29% versus the year-ago quarter, driven by the sales gain, partially offset by higher spending on targeted growth initiatives.

In specialty chemicals the performance met our expectations. Sales of $216 million were up 3% as higher selling prices were achieved in all businesses, particularly in food, pharmaceuticals and lithium primary markets. Partially offsetting these pricing gains were lower volumes related to downtimes associated with capacity expansions and plant tie-ins at our Argentina lithium facility, and to a lesser degree, at BioPolymers alginates facility in Norway.

Segment earnings of $44 million were down 1%, as the sales gain were more than offset by higher weather-related operating costs in lithium, plant downtime effects, higher raw material costs, and increased spending on targeted growth initiatives in BioPolymer.

In industrial chemicals, sales of $273 million increased 12%, driven by higher selling prices, especially in soda ash and volume growth in soda ash and specialty peroxygens. Segment earnings of $48.1 million increased 19% as a result of the sales gains, favorable export mix in soda ash, and the continued favorable mix shift in peroxygens toward specialties markets.

Taking a look of total Company sales on a regional basis in the first quarter, sales in Latin America demonstrated the highest growth rate, up 38%, driven by agricultural products as a result of the strong finish to the crop season in Brazil and sales from a new market access joint venture in Argentina. We also increased soda ash exports to the region and realized healthy sales growth in BioPolymer.

Sales growth in North America was strong, up 14%. Sales in agricultural products benefited from healthy demand for pre-emergent herbicide, new product introduction, and a shift of some sales from the second quarter, due to an early start of the 2012 season. Industrial chemicals benefited from higher selling prices across all businesses in the region.

Sales in Asia were also up 14% in the quarter. Drivers of this growth were broad-based, with gains in agricultural products, soda ash exports, and in food and pharmaceuticals businesses in BioPolymer. Sales in EMEA were up 8% as greater penetration in peroxygens markets, sales gains in BioPolymers pharmaceutical business, and higher sales of herbicide and fungicide in agricultural products all contributed to the increase.

As you know, we are focusing on increasing our presence in the rapidly developing economies of the world. RDEs, as we refer to them internally. Looking at sales growth in these economies by region shows good progress being made. Sales in Latin America grew 38%. Sales in Asian RDEs grew 13%. Sales in Middle East and Africa grew 14%, and sales in Central and Eastern Europe and Turkey grew more modestly at 5%, mainly due to timing effects in the quarter.

Moving now to corporate items. Corporate expense was $14.2 million versus $16.8 million last year. Interest expense was $11.3 million as compared to $9.9 million last year. On March 31, 2011 (Sic-See Press Release), gross consolidated debt was $947 million, and debt net of cash was $876 million. For the quarter, depreciation and amortization was $32.2 million, and capital expenditures were $38.8 million.

On a GAAP basis the Company reported net income of $119 million or $1.71 per diluted share, versus net income of $94 million or $1.30 per diluted share in last year's first quarter. Net income in the current quarter included charges of $16 million after-tax, or $0.23 per diluted share, versus charges of $14 million after-tax, or $0.19 per diluted share in the prior-year quarter.

With that reconciliation, our non-GAAP earnings were $1.94 per diluted share in the current quarter, up 30% versus $1.49 per diluted share in last year's first quarter.

Now let's take a more detailed look at the performance of each of our operating segments in the quarter. Starting in agricultural products, first-quarter sales of $454 million increased 32%, driven by broad-based volume growth across Latin America, North America, and Asia, augmented by targeted price increases. Latin America delivered the highest sales gain, driven by the strong finish to the crop season in Brazil, particularly in sugar cane and cotton segments, and sales from a new market access joint venture in Argentina.

North America also delivered a significant sales gain, resulting from strong demand for pre-emergent herbicide, growth from new product introductions, and a shift in some sales from the second quarter, driven by an early start to the 2012 season due to favorable weather conditions and high crop prices.

In Asia sales gain reflected continued strong demand across the region, particularly China, Indonesia, and Pakistan, and growth from new product introductions. In EMEA in the sales increase was driven by higher herbicide and fungicide volumes.

Segment earnings of $130 million increased 29% versus the year-ago quarter, driven by the broad-based sales growth, partially offset by higher spending on targeted growth initiatives. Agricultural products continues to deliver sustained premium performance as we successfully execute on our differential strategy.

The first elements of that strategy, innovation by continuously aggregating technologies and applying them to key focus market has been a key factor. While we continue to deliver this superior performance quarter after quarter, we are also thoughtfully investing in the future growth of agricultural products.

We have a rich pipeline of organic growth initiatives in the Group that will deliver profitable growth, not only in the near term, but well beyond our Vision 2015 timeframe. We have been carefully including spending in both R&D and in selling and technical service.

In a very short period of time, agricultural products has also established a strong track record in pursuing external growth initiatives. Last year, our first full year of implementing this initiative, the Group successfully made accretive product line and technology acquisitions, signed in licensing agreements, formed development alliances, and moved into adjacent spaces. Clearly, agricultural product is well on its way to meeting or surpassing its Vision 2015 objectives.

And now moving onto specialty chemicals, sales of $216 million were up 3%, as higher selling price were achieved across all businesses, particularly in food, pharmaceuticals, and lithium primaries markets. Lower volumes resulting from downtime as was scheduled with capacity expansion and plant tie-ins at our Argentina lithium facility, and to a lesser degree, at BioPolymers alginate facility in Norway, limited top-line growth in the quarter.

Segment earnings of $44 million declined 1%, essentially in line with our outlook given to you last quarter. The sales gain was offset by higher weather-related operating costs and plant downtime effects associated with the capacity expansion projects, higher raw material costs, and increased spending on targeted growth initiatives in BioPolymer.

Looking at each business for more detail, in BioPolymer, sales increased solidly as a result of higher sales price across the business. Sales growth in pharmaceutical boilers and the integrants was especially strong in the quarter on higher selling prices and continued steady volume growth.

In food ingredients, we benefited from higher selling prices and favorable mix. We anticipate continued premium growth in the microcrystalline cellulose product line, or MCC, serving beverage and dairy markets, especially in Asia. We are making a series of capacity expansion to serve this growth.

Last year we expanded our Cork, Ireland, facility, which increased our global capacity by 25% for food and pharmaceutical grade MCC. We are currently expanding our Newark, Delaware, facility by 25%, and expect this additional capacity to be in production by the end of the year. In addition, we are evaluating the siting of a greenfield MCC plant in Asia.

BioPolymer delivered strong earnings growth in the quarter as a result of the pricing gain and favorable mix, partially offset by lower volume and higher specialty wood pulp costs.

Moving to lithium -- sales grew modestly, driven by pricing gains, especially in lithium primaries, which were more than offset -- which more than offset lower volume resulting from production downtime associated with our capacity expansion in Argentina. The plant tie-in Argentina was completed despite heavy rain in January and February, which are seasonally very unusual for the region. The rains impacted production volumes and cost by diluting positive operation pond inventories.

Lithium earnings were lower than expected due to these adverse weather impacts. We are seeing higher processing costs and a slightly lower ramp in production volume as a result of the dilution. The impacts will be largely behind us by the end of the second quarter. Therefore, sequentially, we anticipate a significant pickup in lithium sales and earnings in the second half of this year compared to the first half.

Moving now to industrial chemicals. Revenue of $273 million increased 12%, driven by higher selling prices across the segments, particularly in soda ash, augmented by volume growth in soda ash and specialty peroxygens. Segment earnings of $48 million increased 19% as a result of the sales gain, favorable export mix in soda ash, and our continued success in shifting peroxygens mix towards specialties market.

Now let's look at drivers of performance for each of the businesses. In soda ash we realized strong sales and earnings as we benefited from higher selling prices in 2012 contracts, and volume growth from full production at our Granger facility, which came online in the middle of last year. Granger product serves export demand growth, which continues to outpace domestic growth. Export demand through transaction remained healthy. We've benefited from higher transactional price in both Latin America and Asia.

For perspective, in 2012 we expect to achieve just over 50% of our total volume to the export markets. Within the export market, about half of the volume goes to Latin America, and the other half to the rest of the world -- to Asia, and the rest of the world.

The contract nature varies by region. Nearly all North American and Latin American contracts have annual fixed-price provisions. In Asia the majority of the contract terms are 3 to 6 months in duration, so with domestic and Latin American contracts essentially fixed for the year, the only area for pricing change is in Asia.

In Asia, ANSAC's competitors outshining synthetic producers. In recent quarters Chinese producers have benefited from historically high margins despite rising input costs. We have seen Asian pricing softening as we went through the first quarter, due to lower demand and pricing for domestic Chinese soda ash, which impacted export prices from China.

In our outlook for the year, we continued a conservative and prudent view that ANSAC Asian export prices will decline modestly as competition accelerates. Nonetheless, we are very confident that the average export price for 2012 will remain marginally higher than the average in 2011.

This higher export price, coupled with higher domestic pricing, give rise to our outlook for significant profit growth from our soda ash business in 2012. As a result, we are also very confident that the industrial chemicals segment will deliver the 20% earnings growth that is in our full-year guidance.

Moving to peroxygens -- in peroxygens we also realized strong sales and earnings growth. The sales increase was driven by higher volume and selling prices in specialty peroxygens, augmented by higher selling prices in European hydrogen peroxide. Earnings benefited from the sales gain and the continued favorable shift mix towards specialties. As we have been running the specialty strategy for a couple of years now, the split between specialties and commodities in North America is almost 50%-50%, which is far more balanced than the rest of the world. We are focusing our efforts on driving globalization of the specialties business to continue on the path to achieving our Vision 2015 goal.

During the quarter we took another significant step to toward realizing one of industrial chemicals' Vision 2015. That is the building of the Environmental Solutions platform. Today we are announcing the launch of FMC Environmental Solutions, a new business that elevates and formalizes our Company's commitment to the growing pollution prevention and remediation market. This business integrates our existing portfolio of products, processes, and application that sustainably address complex pollution challenges in air, soil, and water.

We are committed to building on our already strong foundation and to expand our technology portfolio products, offerings, and people resources in this high-growth specialty market. Our expectations are to grow FMC Environmental Solutions over the next several years into a business with sales in the $100 million to $200 million range by 2015.

To ensure we bring appropriate focus and resources to air, soil, and water markets, we have structured FMC Environmental Solutions with three platforms, or business units. The first one, air pollution control -- we are targeting power utility and manufacturing industries with low cost capital solutions to help meet current and pending regulations for air quality standards. We are focused on the removal of acid gases, such as SOx and HCL via the use of Trona and sodium bicarbonates as reagents in dry sorbent injection, or DSI, through our joint venture nature mix in hydrogen peroxide for the removal of NOx, in conjunction with conventional scrubbers through our new Environmental Solutions business.

Soil and groundwater remediation. This business unit develops and markets unique, fast-acting chemistries that treat a wide range of contaminants in soil and groundwater. With the recent acquisition of the assets of Adventus Intellectual Properties, we are the global leader in chemical remediation technologies that are used underground.

Our chemistries on focused on the remediation of normal and alginated organics and metals via reduction and oxidation. Our portfolio of technologies is unique. From our personal fade-based closure products to the carbon-based products we acquired from Adventus, we can now address the full spectrum of sites' issues, namely source, plume, and groundwater.

And now, water treatment. We are utilizing a number of chemistries from our peroxygens business and municipal wastewater facilities that are more environmentally benign than traditional chlorine chemistry. This business unit will also market various proprietary green chemistries for enhancing water treatment in the oil and gas exploration field by neutralizing sulfur-reducing bacteria.

With that review of our business, I will turn the call over to Kim Foster for a review of our financial position. Kim?

Thanks, Pierre, and good morning, everyone. First, share repurchases. Recall that in November of last year we committed to repurchase $200 million of shares by the end of the first quarter of 2012. Following that commitment, we've repurchase $55 million of shares in the fourth quarter of last year, and I am pleased to report that in the first quarter we completed the $200 million program with the repurchase of approximately $145 million of shares. At the start of the second quarter, we have $245 million of repurchase capacity remaining under an existing Board authorization.

Going forward, we will continue to govern and balance the pace of execution of our share repurchases with our capital needs to drive organic growth in the investment in targeted external opportunities.

Moving to our recent announcement of a 2-for-1 stock split. Following our shareholders' approval of an amendment to increase the number of authorized shares, last week our Board of Directors declared a two-for-one stock split of our common stock. The split will be effected in the form of a distribution payable on May 24, 2012, to shareholders of record as of the close of business on May 11, 2012. Trading in the common stock will begin on a post-split adjusted basis on May 25, 2012.

I'll close by reaffirming guidance for certain financial items which we gave you during last quarter's conference call. Free cash flow for 2012 is reconfirmed at $200 million to $225 million for the year. Our capital expenditure forecast is reaffirmed at $250 million, and our tax rate for the year is reaffirmed at 27%.

With that, I'll turn the call back to you, Pierre.

Thank you, Kim. Regarding the outlook for the full-year 2012, we have raised the midpoint of our previous outlook and now expect adjusted earnings of $6.80 to $7.05 per diluted share, a 16% increase above last year at the midpoint of this range.

Our agricultural products segment expect to achieve its ninth straight year of record earnings, up 10% to 15% over last year. Sales gain is the result of volume growth in all regions, particularly in Latin America, North America, and Asia, due to strong market conditions and growth from new and acquired products, partially offset by higher spending on targeted growth initiatives.

Our specialty chemicals segment expects to achieve its seventh straight year of record earnings, led by the eighth straight year of record earnings in BioPolymer. Segment earnings are expected to be up approximately 5%, reflecting higher selling prices across the segment and volume growth in BioPolymer and lithium specialties.

Partially offsetting this growth are higher lithium operating costs in the first half of the year, higher raw material costs, and increased spending on targeted growth initiatives in BioPolymer. As mentioned earlier, in our lithium business we expect a significant sequential pickup in sales and earnings in the second half of the year compared to the first half.

In our industrial chemicals segment we expect earnings to be up 20%, driven by higher volumes and selling price in soda ash and specialty peroxygens, augmented by the continued mix shift towards specialty peroxygens.

Moving to our outlook for the second quarter of 2012. We expect adjusted earnings of $1.65 to $1.85 per diluted share, a 14% increase in the midpoint of this range. In agricultural products we expect earnings to be up about 5%, reflecting growth in all regions, partially offset by the shift of some sales in North America to the first quarter and higher spending on targeted growth initiatives.

To get a better read on trend line earnings growth without the shift in some North American sales in the first quarter, the second quarter percent earnings increase would have been in the low teens. Specialty chemicals segment earnings are projected to be up 5% -- to be 5% lower, as higher selling prices across the segment and volume growth in BioPolymer are offset by higher operating costs in lithium, higher raw material costs, and increased spending on targeted growth initiatives in BioPolymer.

In industrial chemicals we expect second-quarter segment earnings to be up approximately 30%, driven by higher selling prices in soda ash and specialty peroxygens; volume growth in soda ash; the absence of Granger soda ash, affecting these startup costs incurred in the prior quarter; and the continued mix shift towards specialty peroxygens. Again, for a better read on trend line earnings growth, were Granger start up costs not incurred in last year's second quarter, the present earnings increase for the second-quarter 2012 would have been in the low teens.

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

(Operator Instructions). Frank Mitsch, Wells Fargo Securities.

Good morning, gentlemen, and thank you for providing that pull-forward on the ag side; I was wondering if you could do something similar in terms of the lithium weather impacting Q1. Obviously, specialties came in a little bit lighter than expected. Could you give us the order of magnitude of the negative impact due to weather for lithium in Q1?

Yes, Frank, this is Michael Wilson. In terms of the weather impact in Q1, I would say it was probably $1 million to $2 million of EBIT.

All right. So not too significant. And sticking with that, you saw the headlines that the Argentine government is looking to take over YPF. What concerns, if any, do you have with respect to your position in that market?

Well, right now, as you know, we do have agreements with the government in terms of how we operate in tax and cash repatriation, but clearly we are taking a pause in looking at where we are going with our expansion. I think the way the business is operating today is fine, but as you know, we are going to be very quickly even with the current expansion, again, at 100% capacity utilization.

We are studying the situation in Argentina to make a final decision in next few months about our future expansion. I think there is a lot of moving parts today in Argentina, and it is very hard for me to make a full commitment to the next step of expansion until we have a better picture of what is going on. We are talking with all authorities over there in Argentina.

All right, great. So it's something that sometime in the late summer or so forth we'll have a better idea of what FMC's plans are there?

Absolutely, Frank.

All right. And then lastly, you mentioned that you're expecting very positive growth on the soda ash business and pricing up year over year in that business, although you did mention a competitive threat to the export market. Can you talk a little bit more about that?

Yes. What we are -- if you look year on year, we're going to have very solid -- and it's part of our guidance and what we've said -- very solid year-on-year pricing. Today we have just started looking forward to be prudent, and that's why, despite the very strong first quarter, you see that we are keeping about the year number for industrial chemical in terms of earnings growth at the same level.

We are looking at a 20%, despite a stronger first quarter than we were expecting. We mentioned the fact that we had a very favorable export mix, which should reestablish and be a little bit less favorable in the second quarter.

We have seen some sign of price decrease in Asia around soda ash because of a reduction in demand versus what we're expecting. It's not big, but it's there. We just took the prudent approach to have a more conservative pricing from ANSAC in Asia. And only in Asia. The rest of the world stays about what we're expecting.

All right, great. Well, you certainly -- your results here in the first quarter certainly made your guidance for Q1 very prudent and conservative, so I guess we'll expect the same for the balance of the year. Thank you so much.

Mike Harrison, First Analysis.

I was just hoping to talk about the soda ash business a little bit. You had talked about seeing some increased royalty payments during 2012, and I was wondering if that had an impact in Q1, or maybe what the timing is? And can you remind us what the magnitude of that higher royalty impact will be?

Yes, Mike, it's Mark Douglas here. We never actually gave an order of magnitude when we talked on the fourth-quarter call in terms of what the royalties was. The rate has moved from 2% to 6% on any federal land that we mine. We don't actually break that out, but yes, it did have an impact in Q1, and it will have an impact in the rest of the year on a quarterly basis as we go forward, but we did not break that out.

The impact, compared to Q1, should be about the same as the year progresses?

It's not easy to say. It's not actually as simple as that, because as we mine we go through different leases. So it varies quarter to quarter, but we don't actually break that out in terms of quarterly analysis.

We started to move into the new royalty partially during part of last year, so it's not -- I mean, the impact was high in the first quarter, but it varies from quarter to quarter.

All right, thanks. And then in the BioPolymer business, you referred to improved mix in the food business and specifically noted dairy beverages in Asia. Are we going to continue to see within that business that your higher value products are growing faster than other areas? Can you maybe just give us a little bit more color on how much higher the margins are in something like dairy beverages versus the average for the food business?

I think the -- more than talking about dairy or other applications, I would say that we have three product lines in our BioPolymer business -- carrageenan, alginate, and MCC. By far the highest profit, fastest growth is our MCC product line and that -- if you look, that's where all of our investments are going. So I think this business will grow faster and faster when the MCC part of that business will get bigger, because that's the place which is commanding, potentially, high single digit or double digit growth rates, where the other businesses are just low single digit growth. So MCC is really -- and you're right -- MCC has application in the dairy market in Asia, very fast growth in Asia, double digit growth in Asia. It has application also in pharmaceutical, protein beverage, so it's a broad range of applications, but more specialty and more differentiated.

And then the last question I had is just maybe to elaborate a little further on lithium and the downtime. It sounds to me like your downtime, because of the adverse weather you saw, the downtime and the startup of the capacity expansion is maybe taking a little bit longer than you had initially anticipated.

You talked at first about 6 weeks of downtime during the first quarter. Is that more or less where you are, or maybe a little more color there?

The downtime itself, in terms of time, was about the same. It was more difficult; we had issues in bringing some of the equipment we needed because of the weather and the road. But the length of the downtime was about the same.

The problem is the downtime combined with the weather created some issues to operate the plant, even the part which was working, when it was working at full capacity. We also had dilutions, very significant dilutions of the pumps, which is forcing us to work with brine, which is more diluted.

So we had -- it's much more a combination of two negative effects together, which have created a situation where the first quarter, but performance was low compared to -- significantly below what we had a year ago. We will still see that effect in the second quarter, because even if the tie-ins of the plants are done, we're going to be having diluted ponds, so we're going to be operating with the brine, which is less concentrated, which will create less product from the plant at a high operating cost.

Things are starting to get better in the third quarter, so third quarter you will see sequential and year-on-year improvement in the EBIT, not yet at full capacity. I think we will have fully recovered from all of that, and the lithium business will be at full performance in the fourth quarter. So you will see sequential improvement from first quarter to the fourth quarter with the start of the ramp-up -- the most visible start of the ramp-up being in the third quarter.

All right. Thanks very much.

Kevin McCarthy, Bank of America Merrill Lynch.

Pierre, if you ultimately elect not to proceed with a follow-on expansion of lithium capacity in Argentina, can you give us a sense of the other potential options available to you? For example, does FMC today have access to any reserves outside of Argentina, elsewhere in Latin America or North America, for example?

Today, the places where we would be -- first of all, let me say that we are pausing, and observing, and negotiating, but we still believe Argentina is our number one option for expansion, so we cannot make a decision today because of the political situation. But it still remains our number one opportunity.

If it is not a place where we would increase, the options we have are clearly -- you know that Chile is a place today which is opening up to companies. Now, we would have a to start a grassroot plant, so we would not any longer be talking about major expansion in 2014. I would most likely push that to 2016 plus.

We also have possibilities in Australia and possibilities in China. So we are right now looking at all of our options we might be able to use. But Argentina remains our priority. Argentina by far is the cheapest and the fastest way to bring additional capacity.

Okay. And then if I may switch gears to soda ash -- can you give us an update on how you would assess prospects for restart of the remaining idle capacity that you have at Granger? And then, second question on mix. I think you alluded to favorable mix. Is that essentially more tons flowing into Latin America versus Asia? Would you expect the geographic mix to be different this year relative to last year in that regard?

First, let me talk about the expansion. I would say that the probability that we will expand Granger is very high. The question is only the timing.

As you know, we do have 3 major projects to be undertaken. We will be building a large MCC plant in Asia. We do have the doubling of the capacity in Argentina, potentially, for lithium, and we do have the Granger 2 expansion.

So we have to prioritize and decide what is the best timing for all of these. I would say that we will be, as Frank said before, maybe by end of the summer or fall, we will have a better idea of where we're going with the lithium timing. And I would say that by the end of the year, we'll have a better idea of where we are going with the Granger Timing. So all of those are most likely to happen. It is just a timing of one versus the other. I would say the one which is the most likely to take off first and be quickly undertaken in the MCC plant in Asia.

Regarding the mix, we believe the mix is going to be -- the export mix -- going to be the same here on year. The only difference is more of the quarter. We had less shipment towards Russia, or Eastern Europe, or some of the countries which are more difficult and less favorable from a mix standpoint, but we're going to shift more towards those in the second quarter. So it's more of a quarter balance than it is a over a year balance.

Very good; thanks very much.

John McNulty, Credit Suisse.

Just a couple of quick questions. In ag, in the North American pull-forward that you saw, where you took from a little bit maybe of the second quarter earnings and pulled it into the first, can you discuss how we should think about the margins on that business compared to the rest of your core business in ag?

Margins are about the same. What we believe is -- we believe that we pull forward about $5 million to $8 million of EBIT into the first quarter. That's about the number we are estimating. Those are speculation.

It's sometimes very hard to know. We could stay strong or be a bit more, but we are expecting that -- North America tends to have higher margins than places like Brazil, but there is not a very large difference, and assuming about the same level of margin, we pull forward $5 million to $8 million of EBIT.

Okay, great. And then for the Environmental Solutions opportunity, and I guess the segment that you going to be carving out going forward, is this more of a management direction kind of change in terms of how you resource it with management, or should we be thinking about M&A and capital projects that are incremental to what we've been looking for in some of these businesses in the past?

That's a good question. Couple of things -- first of all, there is a management change, which means that we wanted to create an organization where people would wake up in the morning thinking solely about that business, and would be capable of leveraging the resources we have a bit spread around that business, around the Company. We wanted a much more focused, accountable management for that space, and bringing together the technologies, allowing better innovation.

I do not foresee, beyond what we have announced, any significant capital spending, but I do foresee potential M&A activity.

Okay. And then just a last question somewhat tied to that, with the venture that you have on some of the Trona opportunities, can you discuss what you've been seeing so far since you've started that venture, and when we might be seeing some sort of a growth pickup there?

Yes, John, this is Mark. I assume you're referring to Natronx, our DSI joint venture.

That's right.

With the cross-state air pollution rules being stayed from April of this year until early next year, obviously we've seen customers being very cautious in terms of what they're looking at for trials, etc. But for us, it's very much a case of not if the rules are in place but when, and we fully expect that to occur early next year, so our plant expansion that we have underway in Wyoming is scheduled to be on stream at the end of this year, and that is on track.

So we're very bullish on this market. We recognize there's been a delay from April of this year to early next year, but it's very much a market that we expect to grow. So you should be looking for some impacts as they go through next year.

Great. Thanks very much for the color.

Rosemarie Morbelli, Gabelli & Company.

Going back to the soda ash for a second, is your -- the delay of your decision, Pierre, on adding additional capacity at Granger linked to the higher competitive environment in Asia and lower prices? You feel that you'll have more time in front of you before you decide what to do, depending on what happens there?

No, not at all. We have a very positive outlook. If you look at -- an expansion in Granger would bring about 700,000 tons of product in the market, which is 45 million, 50 million tons a year, where you have growth which is in the mid-single digits. And if you add to that, the low manufacturing cost we have, it would not be an issue at all to push this product into the market without even creating more price pressure on the world.

The decision is not due to market concerns. We feel very strong about the market today and where we're going for this year and next year. It is more a prioritization within the Company in term of resources. Those 3 projects represent significant capital investment which could dimension in the order of $500 million, and they all require -- if not more, actually -- and they all require significant engineering resources.

I just want to make sure that we are resourcing all of those projects in an appropriate way to successfully deliver on each of them. That's why we have to, maybe, stagger the start of each of those projects and not undertake everything at the same time.

Okay, that is helpful. Thank you. At the end of the fourth quarter, you mentioned, if I am remembering correctly, that they 8 transactions that you did in 2011 were going to -- would add about $90 million to 2012 revenues and $15 million of EBIT, or $0.07 per share. Are you on track to get those particular increments, or are you ahead or behind? Could you give us a better feel for what -- bring us up to date as to how they are performing?

Absolutely on track. Some maybe positive news, if I look beyond 2012 on some of the product line we have acquired, which are showing greater opportunity, I am thinking, for about ag, for example, but yes, for 2012, completely on track.

And we will be -- as you know, we give -- every other quarter we're going to give an update on 2015, and that will be part of our monitoring. So will talk more about that when we do that. But we are on track.

Okay, and if I may ask one last question on lithium. The stated goal is that there will be 1 million EV vehicles on the road by 2015, but we are beginning to read that, actually, if we have 200,000, that will be good. Is that -- if this is the case, would that change the growth rate you're anticipating, and therefore there is not as much of a rush or pressure in order to add additional lithium in order to supply a market that may grow slower than previously anticipated?

No. If you look at the way we are building the capacity, as well as what has been announced by the sum of our peer companies in this market, that kind of capacity increase we are planning to add in the 2014, 2015 timeframe will be absorbed by the market outside of the EV market, so it is not a big decision.

We will be building the capacities that have all the full capacity in two different tranches. Now if EV is slower than what we are seeing, that could impact the timing at which we have tranche II of the capacity expansion, but right now, where most of the industry is in capacity and the growth of the market outside of EV -- or let's say of the car industry, outside of the car transportation industry -- we have no issue in the first step of the expansion.

Same way as being -- say, for our competitors. I think the question will come for the next step in the 2016, 2017.

Okay, thank you.

Mike Sison, KeyBanc.

Nice start to the year. In terms of your outlook for industrial chemicals, I thought you had noted initially that Granger would be running full out. Will it still be pretty much running full out for this year?

Correct. It's running full out.

Okay. And just when you talked about some of the pricing in soda ash slipping a little bit, is that -- just to clarify, is that more supply driven, or was it really more demand driven?

I think -- we believe -- what we understand -- and once again, it's not like we have 6 months of price decrease behind us, but the signs we are reading is that there has been capacity buildup in the end of last year in China, and a market growing a little bit slower than we're expecting, which has been pushing some of the Chinese competitors to push product outside of China into their export market, and those product came head to head against ours, and that has created a little slow down in the price increase.

Now, pricing are still robustly above where they were last year. Don't get me wrong; it's not a decrease versus last year price. The price are still going up. The problem is what we see today is the ramp up of the price in Asia might not be as steep as what we're expecting, and we are slowing down a bit the curve, but still contemplating year-on-year price increase.

Got it. And sounds like demand is still pretty solid over there; it's not deteriorating too quickly?

No, demand is solid, and we are at full capacity on the 500,000 ton expansion, and it's all soda.

Great. And last question, the Bayer acquisition, the fungicide business that you bought from Bayer, the exciting potential -- potentially, sorry. Can you give us an update there, how that business did in the first quarter, and what your outlook for that business could be for the next couple of years?

The business actually is doing quite well. We are still in the integration process. You know, it's quite a complex process to bring all of the Bayer product registration and all of the supply chain issues.

So we are still in the integration phase, but I have to say that we are very pleased with that acquisition. We are very pleased with our cooperation with Bayer, which is extremely positive, and we do see more and more opportunities. We just had a review, for example, in Latin America. We do see great opportunities beyond what we're expecting.

When I answered the question before, we were on track, and said maybe beyond 2012 we have some good surprise there, that's one of the one which is going to grow faster than we were expecting.

Great. Thank you.

Laurence Alexander, Jeffries.

Good morning. This is Lucy Watson on for Laurence today. You have mentioned that BioPolymer sales were up solidly with a good contribution from price. Were you able to achieve the full targeted 15% price increase that you announced in December? And what is your current overall MCC utilization rate?

Yes, in terms of the price increases, we had very successful price increases across BioPolymer. Unlike some of the other businesses, BioPolymer increases prices more on a customer-by-customer basis as opposed to across the market, so it really varied across the product line.

But then in terms of the volume -- we did add capacity last year. We filled out a great deal of that capacity, and as Pierre mentioned, we have another expansion of MCC coming on in the fourth quarter of this year. So we think it's going to be well timed to bring that on, given the market growth that we're seeing.

Okay, thank you. And also in your prepared remarks on regional trends, you mentioned some timing impacts on sales in Central and Eastern Europe and in Turkey. Could you expand on that?

Yes. Those are small volume, some small sales. It's part, also, of what I discussed around the -- it had a positive impact in terms of the mix for soda ash, where we saw more sales going to non-Eastern Europe, Russia countries, and more toward Western, to more of the Latin America or Asia, which was a positive mix. But it's -- we are pretty small over there, so it's not a -- it had a positive impact on earnings, but it's not a big volume contributor.

Okay, and just one more. Is it possible to split the agricultural product sales increase by product, or maybe to provide what level of growth you saw in herbicides versus fungicides?

No, we don't usually break down herbicide-fungicide, or product line in terms of growth.

Dmitry Silverstein, Longbow Research.

Congratulations on getting the year off to a great start. Couple of questions, if I may. To follow up on the last question, and not focusing specifically to the question that Mike asked, not focusing specifically on the business you bought or the product you bought from Bayer, but if you take a look over the past year, you've made several product acquisitions. If you look at them in aggregate, could you give us an idea of what the contribution on an annual basis to revenues is in the ag business from these new products?

I would say that those product will be in the range of $50 million.

50? Five zero?

Five zero, 50, or slightly more.

Okay, okay. That's pretty significant. Great.

Yes, it is. Yes.

Secondly, when you are bringing on -- you talked about the lithium problems that you're continuing to have as far as weather is concerned, and the rains, and the dilution, but as far as the cost of bringing on or starting the ramp up of production in the third quarter, should we expect that to be dilutive to margins until you ramp up fully, and then see the full benefit in the fourth quarter? Is it the right way to think about it?

Lithium -- yes. The way you have to look at lithium is up to the fourth quarter, we will not be at the full sales and earnings potential of the business, so you will see an improvement in the second quarter versus the first quarter.

But still, it's a long way from the potential as we recover. Third quarter should start to feel better, but we are still operating at higher cost, but it's improving through the third quarter, and on the third quarter and the fourth quarter is what we know and believe we will be at the full operations of the business, which means we'll be operating at a lower cost, with margins more in line with our expectations and historical margin -- and higher volumes, because we'll benefit fully from the expansion.

So the full impact, if you will, when we look to -- is really in 2013 when you're going to have all four quarters of higher volume and better margin business?

You're absolutely correct.

Okay.

I think we're going to see a very different performance of the lithium business in 2013, which will be a continuation of the performance with the same ratio in sales that we're going to have in the fourth quarter.

Got it. Got it. To stay with the specialty business, the investing that you talked about doing in the BioPolymers area -- can you talk about the magnitude of the investments that you are making, and where is it going? Is a personnel? Is it marketing? Is it product line expansions or capacity expansions? And then talk a little bit about the timing of all these initiatives, and what's the payoff? And when is the payoff?

The capital spending for a plant like that -- we're still at the pre-engineering phase, so it's going to be plus or minus a few million dollars, but I would say in the range of $100 million. We would be moving into full-mode detail engineering before the end of the year. We believe a start up before the end of 2014, Michael, correct?

Yes.

Before the end of 2014. The Harrmian barriers is capital spend. We do have an organization today which is ready to bring to market -- I mean, we still have to add, I'm sure, a few salespeople. But overall, we do have an organization which is in place, with technical and sales structure to sell the product which will come out of this plant.

I don't know if you've seen, but we have opened up a lab in Singapore this quarter, in the first quarter, where we had about 50 customers that was there. We do -- have expanded the lab and offices in Istanbul. We have a new lab, also, in India. So we have an organization -- plus, as you know, we have a new innovation center in Shanghai. So from a front end of the Company -- sales, marketing, tech service, we are pretty much ready to sell more. We are at 100% capacity, and by 2014 we'll bring that to the market.

Okay. So the extra investments that you talked about that's impacting the margins of the BioPolymers business -- that largely had to do with labs that you opened, more so than the CapEx for the MCC expansion, right?

Correct. That's correct.

Okay. Thank you very much; that's all the questions I had. Oh. Yes, that's all. That's all the questions I had, thank you.

Peter Butler, Glen Hill Investment.

I'm wondering if -- could Mark Douglas give us an update on his -- or your cost reduction programs?

Hi, Peter, it's Mark here. Yes, sure. If you remember back to the Investor Day and consequent calls, we said we would have run rate savings by the end of 2011 of $25 million, an additional $25 million on top of that by the end of 2012, going towards an $8 million run rate of savings by 2015.

I can tell you that we beat our $25 million at the end of 2011 by a couple of million dollars, and we are on track to deliver the next $25 million by the end of this year, so things are on track, where we expected to be. We've built out the organization as I said we would. We are very much focused on adding value to the Company by a very professional procurement organization.

Good. Sounds good. Thanks. Could I ask, please, Pierre, about -- you've mentioned several times the extra spend on growth initiatives -- some in ag, some in BioPolymers. I'm wondering, is this just normal growth initiatives, or is this extra expenditures because maybe your earnings and cash flow are coming along better than you thought, and you could spend more?

Yes, Peter, that's an important question. We believe today -- we truly believe today that we have the capability to deliver significant top-line growth and double-digit EPS growth every quarter, but at the same time, take advantage of all of the opportunities we have for future growth.

We believed after looking into our portfolio of technology pipeline that we were limited not by the ideas, not by the portfolio of what we could bring to the market, just by the resource and money. And seeing the growth potential of the Company, the earnings potential of Company, we have decided that we can deliver beyond expectations, but still invest more in the future of the Company than in the past.

So what we call growth initiatives are mostly strengthening our research globally, by more resourcing in North America, but also in other places like Asia or Latin America. More sales, more tech service, in order to bring more work on registrations in ag. So more spending to bring new technology to the market faster.

We've been thinking about should we do that for a couple of years when I joined, but I believe for a while we're going to want to take opportunities of what we have in front of us, because we do have lots of positive things which are happening in the Company which will allow us growth for many years.

Okay. On a slightly different -- you mentioned three, or four, or five different nonrecurring temporary negatives that have impacted your short-term earnings. I know you're not going to want to go through each one of them and give us a number, but could you sort of aggregate and tell us how much this cost you in the second quarter, and what might show up on the bottom line a year from now in the second quarter, due to the amelioration of some of these negatives that you had itemized?

Yes. If you look in the big scheme of things, there is only one negative today. It's the performance of our lithium business. Frankly, if you look at all of the businesses, they're all performing very, very strongly currently, and they are going to perform very strongly for the next three quarters for the year and beyond.

The major limitation we have in our earnings growth, despite that -- and despite that, we delivered a 30% year-on-year EPS growth, is our lithium business. It is multi-million dollars, more than single digits, which we're going to see to the bottom line between the first quarter and the fourth quarter this year, in terms of the amelioration of the financial performance of that business.

What we really have to focus on today is keep on operating all of our businesses as strongly as they have been performing, and turn around the lithium business. And we know exactly where the issues are, so you will start to see some improvement in Q2, some in Q3, and you will see the full earning potential of that business in Q4.

The rest, yes, there is some issues right and left, but there is some positive. They pretty much offset each other, and they do not impact measurably the performance of the Company.

Well, I was thinking, whatever this number is, it's a pretty sizable number in the first half, and sort of builds in a very nice earnings gain year-to-year that should show up next year in the first half.

Yes. If you look -- I think we delivered -- I'm pretty pleased with the quarter we delivered. It's a great thing to be able to talk about a Company delivering quarter-on-quarter performance 30% up in term of earnings.

Looking at a year, we're going to have -- I think the midpoint of our guidance is around 16% EPS growth, which is a strong performance. And when you know that we are delivering that, with four business out of five performing, and we have one with strong earnings growth potential, and when you -- you have to believe that those five businesses will be operating at full potential in the fourth quarter, that tells you the magnitude of the improvement. We can still demonstrate into (technical difficulty).

Sounds good, Pierre. Thank you.

I will now turn the call back to Mr. Brondeau for closing remarks.

Thank you very much to all for your time, your attentions, and your questions. I hope that during today's call we have demonstrated again our ability to deliver strong performance quarter after quarter, while at the same time continue to make well-placed organic and excellent investments to ensure our future profitable growth. We delivered two superb years in 2010 and 2011, and are off to a strong start in 2012. We are confident that we will continue to realize the earnings our investors should expect from the FMC portfolio.

A year and a half ago we shared with you a plan with the overriding objective to drive top-quartile total shareholder vision. It has an aggressive organic growth component, which would be augmented by a focused, external growth component. As we said, we want to realize this aggressive growth. We have made targeted increases in our builder line costs. We have increased research and development spending, especially in agricultural products and BioPolymer. We are increasing selling and technical services expenses, and we have invested in critical infrastructure to deliver this growth where it is needed.

The vast majority of this stance is out in the business and regions, where it should be -- close to our customers. We are fortunate that today we have a rich organic growth pipeline that will leverage our strong new product and technical innovation expertise. Equally, we have rich external pipeline that offers us the opportunity to make focused, accretive acquisitions.

Our success here is evidence. In 2012 we will derive $90 million in sales and $15 million in EBIT, and EPS of $0.07 from the 8 transactions we completed in 2011, including the related organic growth investments to further 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.

So in summary, I can say that now more than ever we are confident that 2012 will be another record year for FMC; that we are solidly on track to achieve our Vision 2015 objective; and equally importantly, that we are building a Company that will deliver premium growth and value well beyond 2015. I look forward to providing you an update on our Vision 2015 progress during next quarter's call, and I look forward to presenting an in-depth review of our Vision 2015 strategy at an Investor Day to be held on Tuesday, December 11, 2012, in New York City. Details will be forthcoming. Thanks again for your time and attention, this completes our call.

Thank you. This concludes the FMC Corp. first-quarter 2012 earnings release conference call.