富美實 (FMC) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the fourth-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)

I will now turn the conference over to the Mr. Andrew Sandifer, Vice President Strategic Development and Investor Relations for FMC Corporation. Mr. Sandifer, please go ahead.

Great. Thank you, John. Good morning. Welcome, everyone to FMC's fourth-quarter 2012 conference call and webcast. Joining me today are Pierre Brondeau, President, Chief Executive Officer, and Chairman; and Paul Graves, Executive Vice President, and Chief Financial Officer.

Our agenda this morning is as follows. Pierre will begin the call with a review of our fourth-quarter and full-year performance. Paul will provide an update on the Company's financial position. Pierre will then provide our outlook for the first quarter and full year 2013. We will then complete the call by taking your questions.

Joining Pierre and Paul for the Q&A session will be Mark Douglas, President, Agricultural Products Group; Michael Wilson, President, Specialty Chemicals Group; and Ed Flynn, President, Industrial Chemicals Group.

Let me remind everyone that our discussion today will include certain statements that are forward-looking and subject to various risks and uncertainties concerning specific factors that are summarized in FMC's 2011 Form 10-K, our most recent Form 10-Q, and other SEC filings. This information represents our best judgment based upon today's information. Actual results may vary based upon these risks and uncertainties.

Our discussion today will focus on adjusted earnings for all income statement and EPS references. Under the heading entitled Glossary of Financial Terms on our website that is 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.

Also on our website we have posted our current 2013 outlook statement which provides our guidance for the full year and first quarter 2013, reconciliation to GAAP of the non-GAAP figures we will use today, as well as an additional exhibit describing changes we are making for 2013 to the way we present segment results in our financial statements. Finally, share and per share financial data discussed today reflect the 2-for-1 split of FMC's common stock completed on May 24, 2012.

With that it is now my pleasure to turn the call over to Pierre Brondeau. Pierre?

Thank you, Andrew, and good morning, everyone. As you saw in our earnings release last night, FMC continues to deliver strong operating performance and closed a successful 2012 with fourth-quarter adjusted operating profit up 19% versus the prior-year period. With this performance we are fully on track to meet or exceed all of our Vision 2015 goals.

Let me begin with summarize for the full year. Full-year 2012 sales of $3.7 billion were up 11% with adjusted operating profit up 16%. Earnings per share grew 16% to $3.48 per diluted share. Return on invested capital continued to be very high at 22.9% for the year.

Underlying this performance was Agricultural Products ninth consecutive year of record earnings supported by solid earnings growth in Industrial Chemicals, but offset in part by disappointing performance in Specialty Chemicals. Increased exposure to rapidly developing economies continue to be a key driver with 49% growth in 2012 sales through these faster growing parts of the world as compared to 46% in 2011.

Across the Company we completed seven external growth transactions, two company acquisitions, one joint venture, one global licensing and IP agreement, and three joint development and commercialization agreements. All of which complement and reinforce our organic growth efforts with technology, products, and market access. We rewarded shareholders as well, returning $193 million through share repurchases and dividends. 2012 was truly a strong year for FMC.

Let me now move to results in the fourth quarter. Total company sales of $1 billion increased $91 million, or 10%, versus last year. It was led by continued growth performance in our Agricultural Products segment.

Originally sales grew more rapidly in Asia, up 23%; followed by Latin America, up 10%; and North America, up 9%. Sales in Europe, Middle East, and Africa were flat reflecting the continued weak economic conditions there.

Gross margin of $341 million increased by $47 million, or 16%, versus last year with higher volumes and selling prices partially offset by increased operating costs. Gross margin percent improved by 171 basis points over last year to 34%.

SG&A and R&D of $165 million increased $20 million, or 14%, largely due to increased spending on targeted growth initiatives. Adjusted operating profit of $172 million increased $10 million, or 19%, compared to last year.

We delivered adjusted earnings of $0.81 per diluted share, an increase of 2% versus the year-ago quarter. Earnings per share growth in the quarter was dampened by a higher-than-expected tax rate of 30.5%, especially as compared to the prior-year period, a typically low rate of 17.3%.

Let's now take a more detailed look at the performance of each of our operating segments in the quarter.

First, in Agricultural Products. Fourth-quarter sales of $492 million increased 20% versus the prior-year quarter with growth in all regions, but driven by continued strength in Latin America and successful new product introductions around the world.

In Latin America our higher sales reflect strong market conditions, successful new product introductions, and increased planted area for soybeans in Brazil augmented by increased sales via our market access joint venture in Argentina. Sales growth was partially offset by lower sales in cotton due to the reduction in acres planted.

North America saw strong early seasonal demand, particularly for product directed at resistance management in soybeans and corn. Sales in Asia were up strongly, driven by growth of the two fungicides acquired from Bayer in December 2011 as well as strong market growth in China, Indonesia, Thailand, and the Philippines. In EMEA sales were up with growth in insecticide volumes in Africa and higher herbicide sales in the EU.

Segment earnings for Agricultural Products of $110 million increased 51% versus the year-ago quarter driven by strong volume growth, favorable mix, and targeted price increases.

Additionally, we recently announced several new external growth transactions. In November we entered into an exclusive distribution agreement with (inaudible) USA for access in the United States to a new biological fungicide bactericide. Under this agreement our North America team will develop and sell this product in major field crops in the United States.

In December we signed a global licensing agreement along with development and distribution agreements with GAT Microencapsulation AG, covering a range of advanced crop protection products and proprietary formulation technologies. FMC will be the main distributor of GAT's current product portfolio in virtually all global markets and will partner with GAT to develop new products that FMC will commercialize exclusively in the future.

In January we entered into a research and development collaboration agreement for several proprietary biological pesticides from Quimica Agronomica de Mexico. We will co-develop the new fungicides and insecticides for use globally.

These transactions underscore how our disciplined external growth approach continues to add value-creating technology and products for agricultural product business.

Moving now onto Specialty Chemicals. Revenue in Specialty Chemicals was $236 million, up 6% versus the year-ago quarter as higher selling prices and volumes across all businesses were partially offset by unfavorable [action] rate impact of the weaker euro on the BioPolymer business. BioPolymer continued its steady performance with sales growing in the mid-single digits despite the translation impact of the weaker euro.

Food ingredient sales benefited somewhat from recent acquisitions while prices were up across all applications. Lithium sales were up in the high-single digits with continued pricing gain and modest volume increases versus the prior-year quarter. Segment earnings were down 5% to $49 million, primarily due to higher operating costs in lithium which, despite posting its best quarterly performance of the year, was still substantially below prior-year profitability.

Before moving on let me address the lithium business in more detail. Our lithium business faced significant challenge in 2012 with manufacturing process issues related to the recent expansion project as well as higher costs overall in our Argentina operations. Our lithium team continues to work diligently to optimize our recently expanded lithium extraction operation in Argentina. While we still have not reached the production rate targeted for this project, we are making good progress and expect continued improvement over the next several quarters.

In addition, we are implementing a restructuring program in our lithium business that will better align our cost to macroeconomic and market realities. This restructuring will principally impact our Bessemer City, North Carolina, plant; Charlotte, North Carolina, office; and product and facilities in (inaudible) provinces Argentina. As a result we expect to incur charges between $10 million and $15 million primarily in the first quarter of 2013.

We also decided this quarter to write down a substantial portion of our investment to develop potash extraction capability in Argentina. Given the changes in market conditions, this project is no longer economically attractive. As such, we are discontinuing all work on potash in Argentina and we will repurpose the assets developed for this project as much as possible to future use in producing lithium.

Moving now to Industrial Chemicals. Revenue in Industrial Chemicals decreased 2% to $272 million with slightly higher volumes offset by lower prices, the translation impact of the weaker euro, the reduced sales of the zeolite product line which we announced we were exiting in being third quarter. Segment earnings of $38 million were down 10% from the prior-year period with slightly higher volume more than offset by higher operating costs and lower prices.

In alkali chemicals volumes were stronger than both Q3 and Q3 year-to-date average. Domestic soda ash demand showed improvement in the fourth quarter offsetting some of the decline in prior periods. Despite this, full year domestic soda ash demand was down versus the prior year. We increased exports by roughly the same amount that US demand was down to keep our products and assets fully utilized.

Our overall average soda ash price was down in the low single-digit dollars per ton in the fourth quarter versus the prior year. Soda ash prices in all markets were up in the quarter except for Asia. Domestic soda ash prices were up in the quarter, consistent with full year 2012 gains. Export soda ash prices to all markets except Asia were also up, while overall export prices were down.

In Asia specifically, soda ash prices for the quarter were down sequentially and year on year reflecting continuing excess capacity and soft demand in China. Soda ash prices within China and Chinese export prices are now, by our estimate, meaningfully below Chinese producers' cash costs.

From both media reports and the financial report of publicly-traded Chinese soda ash companies it is clear that Chinese producers are losing money. This is not a sustainable situation. The silver lining is that the Chinese economy seems to be improving from 2012 levels which should bode well for the Chinese soda ash demand.

That said we also believe Chinese synthetic soda ash producers will see their costs continue to escalate as the economy recovers due to inflation, appreciation of the Chinese currency, energy costs, increasing emphasis on environmental regulation, and the possible removal of the VAT export rebate which was reinstated during the 2009 financial crisis. We now anticipate that soda ash prices in Asia will continue to soften in the first quarter of 2013 and then begin to rebound such that full-year 2013 pricing in Asia will be flat to slightly down.

In peroxygens higher volume were more than offset by unfavorable exchange rate impact, principally from the weaker euro and lower prices resulting in a slight reduction in sales versus the prior year. Peroxygens' results also continued to be hurt by the zeolite production line which we have now exited.

With that I'll now turn the call over to Paul Graves to cover our financial position. Paul?

Thanks, Pierre. Good morning, everyone. Today I will report on our free cash flow, our return of cash to shareholders, capital additions, and on our tax rate for 2012. I will then provide some comments on our expectations for these items for 2013.

So for full year 2012 starting free cash flow; free cash flow, defined as after all uses except acquisitions, dividends, and share repurchases, was $119 million below our most recent guidance due almost exclusively to investment in additional inventory in our Agricultural Products Group in anticipation of strong early season demand in North America in the first quarter.

We have returned $193 million to shareholders -- $145 million through share repurchases and $48 million in dividends. We made no additional share repurchases in the fourth quarter, but made dividend payments of $12.4 million. Capital additions in 2012 totaled $225 million with an additional $32 million invested through the other investing activities line, which is mainly investment into our Agricultural Products total network. For 2012 approximately 50% of this cash deployed to organic reinvestment was directed towards growth investments across the businesses.

Capital additions in the fourth quarter were $97 million. Key components of this higher investment level were the first phases of the BioPolymer Asia MCC plant announced last quarter and the completion of the Newark, Delaware, MCC expansion. We also continued multiple other small projects across all of the businesses.

As Pierre mentioned earlier, our tax rate in the fourth quarter of 2012 was substantially higher than the prior-year period, which itself was an unusually low 17.3%. As you may recall, we benefited from certain favorable one-off tax adjustments last year which did not repeat in 2012.

The tax rate in the fourth quarter was 30.5%, an increase over prior quarters attributable primarily to the impact of meeting higher demand in the Agricultural Products segment in Brazil and North America. As a result of these fourth-quarter factors, our tax rate for the full year was 28.2% compared to 26.3% in 2011 and a long-term tax rate which we expect to be approximately 27.5%.

Looking ahead to the full year 2013, consistent with the way we discussed cash flow at our December 2012 investor day, we are shifting our focus to cash from operations at our key metric of cash generation. By doing so we are separating the metric for cash generation from the choices we make on how we deploy that cash, such as to organic reinvestment, external growth, or return to shareholders through dividends or share repurchases consistent with how we look at cash flow ourselves.

On this basis we anticipate generating cash from operations of approximately $650 million in 2013 and we anticipate deploying $350 million in cash to fund capital asset additions and investments in our Agricultural Products total manufacturing network. We also expect to continue to invest in external growth, especially in Agricultural Products, BioPolymer, and Environmental Solutions.

We will, of course, maintain the discipline of regular return of cash to shareholders. With a 50% dividend increase announced in December, dividends will increase somewhat as a use of cash to approximately $75 million in 2013. We have $245 million of repurchase capacity remaining under the existing Board authorization, and as described at our December investor day, expect to deploy up to $150 million each year to share repurchases.

Before I hand the call back to Pierre to provide our outlook for 2013 let me make clear a change in segment presentation that you will see beginning in the first quarter of 2013.

Effective with fiscal year 2013 our segment earnings presentation will be updated to reflect how we currently make financial decisions and allocate resources. We also believe the changes provide a better understanding of the underlying profitability of each individual business segment. The changes are the following.

Allocation of certain long-term incentive costs, primarily stock-based compensation, from the category other income expense net to each business segment. Allocation of the depreciation on capitalized interest associated with the completed construction projects from the category other income expense net to each business segment.

The presentation of the impact of non-controlling interest, which was previously netted within each individual segment, as its own line item. This principally impacts the results of our Industrial Chemicals segment, which has the majority of our non-controlling interests.

We will combine the two previous line items, other income expense net and corporate expense, into their own line item renamed corporate and other. All forward-looking comparisons you hear today will reflect this change in segment presentation. We have posted a supplemental exhibit on our website that provides details for 2010 through 2012 by segment under this new segment presentation.

With that I will turn the call back to Pierre.

Thank you, Paul. Let me now share with you our outlook for the full year 2013. We expect to deliver full-year adjusted earnings of $3.81 to $4.01 per diluted share, a 12% increase at the midpoint of this range.

Our Agricultural Products segment is expected to achieve its 10th consecutive year of record earnings in 2013 with segment earnings to increase in the mid-teens percent. Increased volumes in all regions due to strong market conditions, growth in new and recently introduced products, direct market access initiative in Asia and Latin America, and sales from new fungicide products will be partially offset by the continued investment in targeted growth initiatives.

Agricultural Products results are expected to show pronounced strength in the early and latter part of the year due to a large participation in Latin America.

In Specialty Chemicals segment earnings are expected to increase in the high single digit percent. Our BioPolymer business will benefit from capacity increases where we will continue to focus on improving operating performance in lithium.

In Industrial Chemicals, we anticipate flat segment earnings for the full year. Domestic soda ash prices will increase in the low to mid-single digit (inaudible) versus the prior year. Soda ash prices in Asia are expected to continue to soften into the first quarter and then begin sequential improvement through the remainder of the year.

The net result of domestic and export pricing actions for soda ash should be a flat to slightly down global average price year over year. We also expect to begin seeing the benefits of our manufacturing excellence initiative during 2013.

Overall, the expected recovery in soda ash pricing and the seasonality of the Agricultural Products business will drive the quality performance of the Company with strong year-on-year growth in the third and fourth quarter and a weaker second quarter. For the first quarter of 2013 we expect adjusted earnings of $1.02 to $1.12 per diluted share, a 10% increase versus the prior year at midpoint of this range.

In Agricultural Products we expect segment earnings to be up approximately 20%, reflecting anticipated strong early seasonal demand in North America and a strong finish to the Latin America season.

Specialty Chemicals segment earnings are projected to be up in the high-single digits on a percentage basis. BioPolymer is expected to continue its steady, solid performance. Lithium is expected to show little improvement versus the prior year as we continue to improve operations in Argentina and reduce our purchases of third-party sourced intermediate materials.

And in our Industrial Chemicals we expect first-quarter segment earnings to be down in excess of 20%, principally due to lower soda ash export pricing.

Before taking your questions I would like to include in this report my latest thoughts in light of the reports which were issued post-earnings release or from some questions which were asked.

First, let me reaffirm a few things. We are not retracting from any of the statements we made in early December at FMC investor day. The Company has never been as strong and is getting stronger.

Ag is firing on all cylinders and even getting stronger with new product lines which continue to amaze me. BioPolymer has invested in new product lines through acquisition, new technology, and new MCC capacity. This business is going to take advantage of these to demonstrate growth throughout the year while still investing in capacity for future growth in Asia. Demand for our new product is strong.

Environmental Solutions is on a solid growth track, given its impact on earnings is still small. Peroxygens is now stable following the restructuring of the zeolite business.

The only two elements which had changed since our investor day are timing issues. We were expecting soda ash export pricing to strengthen in the first quarter. All the data we have in our hands indicates that export pricing will turn around, but we now believe that it will be later in the second quarter.

We finally understand the lithium production issue. The process was clearly damaged during the expansion and entered us to even operate at three expansion levels. We believe that we have a process fix which will be implemented in two steps. Step one started last week.

The difference between an EPS guidance centered around $4 and the current one at $3.91 is only timing. No other fundamental change in the businesses.

2013 is a key year on the way to delivering our Vision 2015 target as we are expecting following the strong first quarter to see every single business operating at its full potential at some point in the second half of the year and see FMC deliver the fourth consecutive year of double-digit earnings growth.

With that I thank you for your time and attention and we will be happy to take your questions.

(Operator Instructions) John McNulty, Credit Suisse.

Good morning. Just a couple of questions. So on the lithium guidance, in particular for the first quarter it seems even lighter than I would have expected for the business to be flat year over year considering all the weather issues that you had last year.

So I guess two questions around that. First, does it include the charge that you talked about, or is that ex-charge? And if it's ex-charge, then what is happening? Because it does seem like your volumes, at least in the commodities side, were really almost nonexistent last year and so the idea that they are going to be flat with that this quarter seems a little bit low.

Yes, John. First, the numbers we are talking about our ex-charge and just I want to refer back to my last point. Where we are in lithium today, and you know it has been a struggle.

Yes, we had the weather issue at the beginning of the year, but I think most importantly we now realize that the process, the manufacturing process itself, was clearly damaged during the expansion. And the damage was significant to a point that we do have to really find the manufacturing process.

We are implementing those changes which are requiring changing equipment in process and start on the plant at multiple times. So we are going to have a poor quarter from a manufacturing standpoint in Argentina which is at the beginning of a process because from the brine is what we are doing, producing the chloride and carbonate and the other derivatives. So that is where we are.

Second quarter we will see real improvement, still challenging. And I think it is in the second half of the year with the process change we do have in place right now -- I mean we have remedies. We have engineering firms and our own engineering staff working on it. It is going to take into the third quarter to see the full production rates.

Okay, great. Then on the North Carolina changes, or the restructuring around that, I thought your North Carolina plant was largely an upgrading facility where you were producing some pretty high-end product. So I guess what changes are happening there and are you changing your product mix at all, or is it just kind of a streamlining of the process in North Carolina?

Couple of things we are doing. We had a plant and you know we have been in the past highly focused on pushing product out of the door. We believe that we have significant ways today to improve our process, to improve our control, and streamline the plant.

So what we are doing is without losing in terms of capacity, we are implementing changes which are fairly significant in the plant, which will allow us to reduce staffing and cost.

Okay, fair enough. Then just on the soda ash side and your confidence that the pricing starts to come back in the export markets, particularly in Asia or tied to Asia in the second quarter. Have you started to see some of the Chinese producers dial back their capacity or shut the facilities down temporarily? Or is that something that you are just hoping for or expecting on the comp?

I am going to ask Ed to answer that question.

Hi, John. There have been some, which always happens at this time of the year, closures because of the Chinese New Year. Then what happens is some of those plants don't come back up after the Chinese New Year.

The other sign that we are seeing is that it is being reported that the Chinese will not quote quarterly pricing, which, as you would know, if they are not going to quote quarterly pricing that is because they think pricing is at the bottom and they expect it to come back up. So we are kind of looking at what their competitor behavior is.

Okay, fair enough. Thanks very much for the color.

Thank you, John.

Eugene Fedotoff, Longbow Research.

Good morning, guys. Couple questions, first on Ag segment. Your first-quarter expectations were very strong despite difficult year-over-year comp in the segment. Just wondering if results are going to be or operating profit is going to be driven by volume growth there or margin expansion mostly.

I think, Eugene -- and I will ask Mark to make additional comment -- but if you look in the fourth quarter, the very strong performance is, first, due to a very positive mix.

First, we had a very strong preseason demand in North America. We also had a very strong demand for product which are addressing the glyphosate and corn woodworm trait resistance. Those products have been developing very quickly and are very new technologies.

Also, we have seen strong sales of bifenthrin. So you put those together; volume, of course, we are higher but we had a 20% increase in sales. But really we had a very positive mix. Mark, do you want to add anything?

I wouldn't add anything more on the fourth quarter. Was the question related to the first quarter or fourth quarter?

First quarter.

First quarter. You know, Eugene, when you look at what we have got going forward we have indicated a 20% growth. That is all predicated on volume. We have early season demand in North America that we believe is going to be strong and we are looking for a strong finish to the Latin American season, so it is predominantly volume driven.

Great, thank you. Also, just a follow-up on the Ag. Last year you had some rainy conditions in Europe and a drought in the US here. What was the negative impact, I guess, from those conditions and do you expect normal seasonal this year? What would be the positive or easier comp year over year if we see a normal season in North America and Latin America this year?

We didn't -- in North America, because a lot of our products are sold early season and there was significant insect pressure in the third quarter, we had a very good year in North America. Predicting the weather is, as you know, very difficult but if we have a normal season we should be looking at in North America high single-digit growth in terms of our participation in the market.

In Europe, acreage will be pretty flat. I would expect the market to be much flatter in Asia with much lower growth.

I think one of the situations we very often exchange with the strength of our Latin America business is, first, as Mark said, we were not very much impacted directly in North America. But in addition, drought conditions at times would keep commodity price high creating increase in planting acreage in other regions of the world like Latin America. And it was the case as you saw the increase in soybean planting.

So it also created a very positive performance for us in Latin America. So all-in-all, by the nature of our products and the strength in Latin America, we were not impacted negatively by the weather conditions in the world.

Switching gears, wanted to follow-up on the discussion, on lithium discussion. Pierre, you mentioned that you expect lithium business to be back operating at a full capacity in the third quarter. Just wanted to follow-up on that.

Is that going to be including the expansion you had, the 30% expansion in capacity, or that is going to be just pre-expansion?

You were breaking up, I am sorry. The question was the recovery of our lithium business. When -- you said second half of the year?

I believe you mentioned that you expect the business to return to full operating capacity in the third quarter. Do you mean full operating capacity including the 30% expansion that you had, or that is going to be excluding that expansion?

We are still right now changing the process conditions we have. We believe we will get -- we want to keep on ramping up, so a lot of fixing the process according to protocol we have defined is going to take place in the first two quarters of the year. We believe we will be successful and that is when we will see significant ramp up of manufacturing.

So we believe we will get past pre-expansion capacity to go toward a capacity closer to what was expected post-expansion, but it is going to be happening, ramping up during the second half of the year. We will get that point in the third quarter or beginning of the fourth, we don't know yet. We have to wait another, I would say, 60 days to see how the two-step process improvement we are putting is progressing.

Great, thank you for the color.

Our objective is and remains to reach capacity which are past expansion capacity.

Got it, thanks.

Kevin McCarthy, Bank of America Merrill Lynch.

Yes, good morning. Paul, I was wondering if you could comment on the recent trends in working capital. As best I can tell the trade working capital was up more than $400 million in 2012, and it seems about half of that was attributable to inventory.

I think you had commented you intentionally built some inventory to fuel the growth in agriculture, but it looks like the rate is perhaps running about double or higher. So perhaps you could comment a little bit on how much was organic versus acquisitions and finished goods, product lines, and so forth to help us better understand what is going on in inventory.

Sure. I think it is pretty straightforward. It is the Agricultural Product segment at the end of the year building inventory really across both Latin America and North America.

I'm not quite sure it is quite double as you described. It is certainly ahead of what we expected when we gave guidance earlier but it is all material to be sold into the markets that we see today. This is not speculative inventory building. This is, given our supply chain in that business, building inventory to meet demand.

Okay, sorry to be unclear about doubling. It looked like it was up 44% year over year versus your Ag sales growth guidance in the high teens. And so I was wondering if it is elevated in other areas of the company as well or just exclusively an intentional Ag build.

It really is almost entirely an Ag build and it is intentional, so which is -- (inaudible). This is not -- you shouldn't read into this that this is anything other than what we think is the right decision for the Ag business.

Understood. Then also related to cash flow, Paul, would you comment on pension contributions in 2012 and what the outlook might be for 2013 in that regard?

Sure. Like I said, the pension contributions -- the environment, as you know, is a tough one for pension contributions and we continue to assess what is the right place to be. We would expect the pressures on pensions, given where interest rates are and given some of the rules around pension contributions, to continue in 2013 and hopefully ease beyond that. But we would expect similar sort of expectations as to what we are going to need to fund into the pension contributions sitting here today with markets and interest rates to be pretty similar in 2013 as they were in 2012.

Okay. Then final question, if I may, for Ed on soda ash. Would you comment on what is ANSAC seeing with regard to soda ash export prices outside of Asia, specifically Latin America, and how you would expect those to trend in the first half of 2013?

Yes, Kevin. As prices dropped in Asia we saw a little bit of pressure in Latin America in 2012. As you know, most of what we do down in Latin America is contracted so we saw little price pressure, but we should not see a lot of movement for the rest of 2013.

Okay, thanks very much.

Sabina Chatterjee, Wells Fargo.

Good morning. This is Frank Mitch sitting in for Sabina.

It is only right, Frank. It is only right.

I am very happy that she let me take this opportunity, so thank you. Ed, you commented that demand in soda ash in the US was down in 2012. Can you talk about the areas specifically that it was down and what your expectations are for 2013 there?

Sure, Frank. If you recall, in the beginning of 2012 there were a lot of solar glass plant closures. I believe Nippon Sheet Glass closed a plant and I believe Asahi might have closed one as well.

So domestic demand, when you look at the USGS stats for the first half of 2012, was down somewhere in the neighborhood of about 8%. In the second half we saw some increase in demand, but it was not enough to overtake the poor demand in the first half of the year. Now where the increase is coming and we see them continuing in 2013 --.

But auto glass is up and you see, when you look at the statistics, autos were up year over year. Housing is up and we are also looking at -- the Architectural Billings Index is giving us a positive sign that we do think we will see some flat glass growth. And, in addition, we are seeing -- we just saw that Asahi announced that they are going to restart a float line that they had idled in Tennessee, so the signs are positive for domestic growth.

All right, so low single-digit increase in 2012 -- I'm sorry, in 2013 versus 2012?

That is correct.

All right, great. You guys have commented that you are expecting CapEx to be $350 million in 2013, which is materially above the $225 million last year. Can you remind us about the specific projects and timing of those projects; when we might see some of the new capacity startup, etc.?

I think, Frank, I would say the two biggest categories for us in terms of capital investment first it is the MCC plant which we are building in Thailand. This plant will be starting up in 2014, so we will start to see sales from that plant in 2014.

The other big demand for growth capital is in the Ag business. That is capital money which will be used to increase our capacity in place like Latin America, but also capital money used to increase capacity at all of our [trona] manufacturers in Asia. So those two are a very big chunk of the growth capacity, and you know we usually have a maintenance capacity which is around depreciation which is about $130 million.

All right, terrific. And the benefits of that expansion in Latin America in Ag should be later this year?

Later this year, yes.

All right. Thank you so much.

Peter Butler, Glenn Hill Investments.

Good morning. In the past you have -- and in your press release you talk about manufacturing excellence. I think it was one of the previous conference calls where I think it was Mark Douglas was talking a $60 million program to reduce costs. That was several quarters ago. Subsequent to that you brought in a number of people to help you on manufacturing and supply chain expertise.

And I am wondering if that $60 million number is a low number now with the new concepts and expertise. What is your assessment?

Thank you, Peter. Let me divide that in two categories. First, there is the work which was done initially by Mark when he joined the Company, which was mostly focused around procurement. That work is well on its way.

We are passing the $60 million savings. We have an $80 million savings target for 2015 and today we are looking at over $100 million savings for procurement. So this program is well in place and we have restated the target will be above the $60 million this year and well on our way to $100 million in a couple of years.

The manufacturing excellence program is really following the pilot plant taking off this year. We are targeting two places initially. One is -- I remember for manufacturing excellence we talk about 10% capacity increase and 5% manufacturing cost decrease.

The first two we are targeting are soda ash plants in Wyoming and our manufacturing site in North Carolina for lithium. When I talked to about staffing reduction without losing manufacturing capacity that is what we are implementing and for which we are taking a charge.

If you look at the performance of our soda ash and Industrial Chemicals business, despite the pricing situation we are going to have a strong year this year. So it is because we are capable of moving more volume through manufacturing excellence at lower cost versus what we did before.

So the program is well in place and it is going to be a process by which we are going to be rotating. So focus on lithium and our alkali business this year and we will decide what is the next series of plants which will be seeing manufacturing excellence program.

Pierre, you were -- in your press release you were talking about having a careful, prudent approach and you mentioned three major variables -- the soda ash, the lithium operations, and what Ag might actually do in the second half.

I am wondering -- normally I think of FMC with very, very conservative estimates and assumptions, and I am wondering with the problems that you have had more recently I am wondering if those assumptions have gotten even more conservative. How much room do you have for significantly doing better on those variables?

You know, Peter, I think we are prudent and we are prudent because there is things we truly don't know yet. Clearly in a soda ash pricing ramps up faster than what we are seeing today and it is not impossible. The Chinese industry is strengthening. We are very convinced that we are going to see a turnaround of pricing.

Now it is very hard to know -- if you ask me if I feel very good about soda ash pricing in the next four or five quarters I would say yes. How it is going to unfold in the next two quarters is more of a question, because plus or minus a quarter, as you know, will make a difference on the year.

So this one we do not know. Could it be stronger? Absolutely it could be stronger. Lithium we finally believe we do have some fix for the issues and we finally understood exactly what was the problem. We had to put lots of resource including external resource.

Could we see a better result in terms of production from our step one and then step two changes? We could. This one I would be careful, because it is relay a process technology. And we want to do that not to make the same mistake we made last year to try to rush the plant back to production.

You know, Ag is an incredible business. I'm starting to get used to those numbers, but it still amazes me how fast we can grow and how many surprises we have. And it is not by luck. We have an incredible, incredible product line coming up. When you look at how much we are growing in places where there is resistance to other products, it is not by luck. It has been studied, it has been developed, and the pipeline is rich.

So if you have a season in Latin America which grew a little bit our way from a weather standpoint, with the product we have and the structure we have could it be stronger than what we have in the fourth quarter? Absolutely. We don't know. It is hard for us to predict that.

So when I look the only place where I want to be careful, because this time we are going to go step by step, is in lithium. We want this plant to be viable for the long run. We are not going to make the same mistake we made last year to rush through the year the turnaround.

The other two -- could we have a positive surprise in Ag and could we have a positive surprise in soda ash? Absolutely. Do we know if it is the case? I cannot state today. We know we hope that the next call will be much closer to tell you what will be happening, especially around soda ash.

Thanks for the help, Pierre.

Thank you, Peter.

Brian Maguire, Goldman Sachs.

Good morning. This is Neal Sangani on for Brian. Just a couple of questions on lithium. One of your competitors mentioned that they are expecting some flattening in carbonate and hydroxide prices with some of the capacity ramp ups globally.

What outlook on prices do you have for your guidance there and also on some of the more downstream lithium products?

We cannot be blamed for the capacity increase of this. I am going to let Michael talk about pricing.

Hi, Neal. This is Michael Wilson. I think with regard to pricing we still can see pricing moving upwards in lithium overall, but you are probably talking about across the industry prices moving up mid-single digits, which would be at a bit slower pace than we certainly saw in 2012.

Okay. On the product side, you mentioned at the investor day converting more of the upstream products to more high-value downstream products. How much of that product portfolio shift is going to occur in 2013 and what is going to be the earnings impact?

Well, we are focused, and we have talked about over the last couple of years, of really strategically placing our volume into the higher value, higher growth segments. So for us that is the energy markets, particularly for secondary batteries, and then also in the polymer and synthesis markets, so the organolithium.

So we will continue that focus. I don't know that that focus is going to be substantially different in 2013 than it was in 2012 so I don't see a big shift driving a different result.

Okay, thank you.

Andy Cash, SunTrust Robinson Humphrey.

Just to stick with the lithium theme here. I think you guys were talking about something toward 30% growth in lithium battery demand in the transportation market and somewhere around 10% overall. Given the restructuring talk this morning in that space and also we are seeing Dow Chemical and its write down of Dow Kokam, its lithium battery joint venture, so there is some restructuring downstream.

I am just curious if you have a new overall growth number for lithium in transportation and just an overall number.

This is Michael again. In terms of growth expectations for lithium, again as we look at the period between now and 2020 for the industry overall, we still see a compound annual growth rate of roughly 10%. Slightly lower in the period between now and 2015 and then accelerating after that.

We had reevaluated our growth expectations for the transportation industry in 2012 and have talked about roughly a 4% penetration of EV vehicles, really of all types -- HEV, PHEVs -- into the transportation sector by 2020. We still believe that number is roughly the case. That makes us probably a bit more conservative than a lot of other folks.

But overall, even at that rate, the transportation segment then would be projected to grow at a compounded annual growth rate of about 33% between now and 2020. So the number you have is approximate to where we are.

And just a question on Ag. Could you give us a rough idea of how much new product introductions in 2012 helped your overall sales and what are your expectations for 2013?

On new product introductions we tend to look at it longer term given the way the products flow, but it is significant. We have roughly today -- as our portfolio of products that are introduced over the last five years, roughly 25% of our total new products impact that revenue. That should increase towards 30% in terms of 2015 numbers. So you can see we are ramping up our products as we look at Latin America, North America, and Asia.

Thank you very much.

Laurence Alexander, Jefferies.

This is Rob Walker on for Laurence. I guess first question, looking out the next few years do you expect CapEx to stay roughly at 2013's target? And I guess is the elevated CapEx expected to accelerate your top-line growth from current levels, or is it necessary to current the growth rates you are seeing?

I think we are looking at a current CapEx in the $350 million for the next three, four years. And, yes, we do expect -- our top line has been growing somewhere between 10% and 15% over the last three, four years and that is the kind of top-line growth we are expecting to be at throughout the next three, four years.

The capital spending we are currently undertaking is here to sustain the type of growth we have been facing. If you will look, for example, the BioPolymer business has been highly limited in its growth rate in MCC because of a lack of capacity. That is why all of the capital spending, the demand is very strong. So if we want to keep on growing that product line, which is growing in the 20% range, we need new capacity.

Thanks, and then just a follow-up on that point. Of the growth CapEx portion roughly what do you expect the ROIC or IRR to be going forward?

If you look overall as a company, most of the capital spending we are looking into has a return above 18%. The Company this year had a return as a whole of 22% and we do expect to stay in these high numbers between now and the next two, three years.

Thank you.

Mike Harrison, First Analysis.

Good afternoon. Thanks for sneaking me in. Just on the lithium operation, is the potash production up and running now?

No, Mike, we decided to stop the potash project. We believe the current conditions for potash, where we are in our project in Argentina and some possibilities we will have to reuse ponds and equipment for a lithium facility. The focus we want to have on our lithium operation it made sense for us to stop the potash project and not continue. So today, as we stand today we are not planning any longer to develop a business, a potash business to complement our lithium business.

All right. And then looking at the other side of specialty, as we think about the new BioPolymer capacity that is coming on-stream during the year, how should we think about the pattern of revenue ramp? Is it going to be lumpy or maybe more steady?

Then probably on the margin side, are there a lot of costs that could lead to some margin lumpiness as that capacity comes on stream or should margins also be fairly steady?

So what we are looking -- if you look, the BioPolymer business it is a very key business for us. We have done a lot in terms of increasing capacity. Remember, we increased capacity in Europe, in the US, building a plant in Asia. We made multiple acquisitions to (inaudible) impacting.

This is going to start to really pay off and show a growth rate for this business which will be healthy. We believe it is a business which can sustain a high single-digit top-line growth, and we believe that it is a business where we will see a stable to improving margin. So right now I believe 2013 and going forward should start to demonstrate our ability to growing even faster this business which has been doing well and leveraging that in significant earnings growth.

All right. Thanks very much, Pierre.

You're welcome. Thank you.

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

Thank you very much. FMC delivered another solid year in 2012 with sales up 11% and operating profit up 16%. Return on invested capital remains very high at 22.9%. We generated a total shareholder return of 37% for 2012 as the market rewarded the steady earnings growth and clear strategy.

For 2013, as we said before, we are taking a careful, prudent approach in viewing the Company's potential performance, recognizing that several variables could impact our results. The timing of recovering soda ash at spot, the speed at which we continue to improve the performance of our lithium business, and just how strong Latin America Ag markets will be in the latter portion of the year.

That said I am very confident in our ability to deliver another record year of performance in 2013, and that we are firmly on track to meet or exceed all of our Vision 2015 targets as we described to you in detail at our December investor day. I would like to thank you very much for joining us. Thank you.

Thank you. Ladies and gentlemen, this concludes the FMC Corporation fourth-quarter 2012 earnings release conference call. You may now disconnect.