富美實 (FMC) 2013 Q1 法說會逐字稿

Good morning and welcome to the first-quarter 2013 earnings release conference call for FMC Corporation. Phone lines will be placed on a listen-only mode throughout the conference. After the speakers presentation, there will be a question-and-answer period. I will now turn the conference call over to Mr. Andrew Sandifer, Vice President, Strategic Development and Investor Relations for FMC Corporation. Sir, you may begin.

Thanks, Tony. Good morning and welcome, everyone, to FMC's first-quarter 2013 conference call and webcast. Joining me today are Pierre Brondeau, President and Chief Executive Officer and Chairman and Paul Graves, Executive Vice President and Chief Financial Officer.

Let me start by reminding 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 2012 Form 10-K, our most recent Form 10-Q and other SEC filings. This information represents our best judgment based on 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 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 second quarter 2013 and a reconciliation to GAAP of the non-GAAP figures we will be using today. Based on our earnings release last night, we have a lot to cover, so let me now turn it over to Pierre.

Thank you, Andrew and good morning, everyone. In our earnings release last night, you saw that FMC posted strong results for the first quarter in 2013 and have taken several strategic decisions to solidify our path toward meeting our Vision 2015 goals while positioning the Company for continued growth beyond 2015.

What I would like to do this morning is begin the call with a recap of our first-quarter performance. Then have Paul provide an update on the Company's financial position. During those comments, we will refer to our results under our current reporting structure. I will then review the benefits and rationale of our announced portfolio realignment. Finally, we will be joined by Mark Douglas, President, FMC Agricultural Solutions; Ed Flynn, President FMC Minerals; and Mike Smith, Vice President and Global Business Director, FMC Health and Nutrition, to address your questions.

First, looking at the quarter, FMC delivered 10% growth on adjusted operating profit versus the prior-year period. Total Company sales of $990 million increased $50 million, or 5% versus last year led by continued strong performance in our Agricultural and BioPolymer businesses.

Regionally, sales grew 19% in North America. EMEA was up 11%, Asian RDEs were up 11% while Latin America was down 16%. Gross margin percent remained flat through last year at 37%. SG&A and R&D expenses of $148 million were also flat to last year. We delivered adjusted earnings of $1.10 per diluted share, an increase of 13% versus the year-ago quarter.

Let's turn to a more detailed look at our first-quarter performance in each of the operating segments. First, in Agricultural Products, first-quarter sales of $495 million increased 9% versus the prior quarter driven by strength in North America and successful new product introductions around the world.

Similar to the fourth quarter, North America saw strong early-season demand, particularly for resistance management product. In Latin America, due to the reduction in cotton planted area and a slow start in the sugarcane segment, sales decreased versus last year. However, market indications suggest increases in planted area in sugarcane, cotton and soybeans for the 2013 crop year, which signals strong performance in Brazil for the rest of the year.

Sales in Asia were up with growth from new products, partially offset by lower sales in Australia, the market which has been significantly impacted by drought conditions. In EMEA, sales were up with growth from a recent alliance, as well as timing of sales into Africa. Segment earnings for Agricultural Products of $163 million increased 25% versus the year-ago quarter. This increase was driven in large part by higher volumes, favorable product and regional mix and targeted price increases.

To put first-quarter results for Ag in perspective, with sales up 9%, following a 20% increase in Q4, we are continuing to deliver leading performance across growing seasons. This performance is even more remarkable in light of the decrease in planted acreage for cotton in Brazil, highlighting our continued strength in our core crops, the progress we are making in penetrating other crops and limited reliance in any single crop or region.

Additionally, we continue to benefit from the strong market acceptance of our recent management products in North America, giving us the favorable mix impact. And as I will discuss further when I share our outlook, we are expecting a strong season in Brazil with increased planting acreage, especially for cotton, sugar cane and soybeans, supported by new products that are already in strong demand.

I would like now to move on to Specialty Chemicals. Revenue in Specialty Chemicals was $236 million, up 9% versus the year-ago quarter with strong volume growth in BioPolymer, partially offset by lower lithium volumes. BioPolymer sales grew in the high double-digit percent with volume growth in all of our core product segments, which benefited from a recent capacity expansion, as well as growth in our newly acquired productlines. We continue to see strong demand growth in Asian markets and are pleased with the construction progress in our new Thailand facility expected to come online late in 2014.

Lithium sales were down mid-double digit driven by lower volumes as a result of our continued production constraints. Segment earnings were up 6% to $46 million due to strong BioPolymer performance, but partially offset by expected weak financial performance in lithium, which was substantially lower than prior profitability.

In our last conference call, we described the challenges of the lithium business experienced in 2012. During the first quarter of this year, we identified and validated manufacturing process and equipment changes. This will improve products and rates of (inaudible), debottlenecking the operation and achieving our full targeted production rate at our Argentina lithium operation.

During the fourth quarter, we sustained production at throughput rates higher than the pre-expansion level. We also successfully demonstrated an extended full-scale test, production at 20% above pre-expansion levels. We are abbreviating our normal third-quarter maintenance outage and adding an additional shutdown in the second quarter to allow phased implementation of these proven changes to our manufacturing process. This will position us to ramp up [seller] brine production during the third quarter to the targeted 25% expansion throughput rate that we have discussed in past quarters.

And because it takes about four months on average to go from final salable brine to sell a lithium product, we will begin to see the financial benefit of the expansion in the fourth quarter with the return to mid to high teens operating profits.

As mentioned last quarter, we have also announced several manufacturing expansion initiatives in our lithium operation that will reduce further manufacturing costs. We expect benefits from increased throughput and manufacturing excellence to be fully realized in 2014.

Moving to Industrial Chemicals, revenues in Industrial Chemicals decreased 5% to $260 million with high volume in Alkali offset by lower export prices. Segment earnings of $33 million were down 37% versus a year ago when overall soda ash export pricing was much higher.

In Alkali Chemicals, revenues were down mid-single digits percent with higher export volumes and higher domestic pricing offset by continued pressure on export prices, particularly in Asia. Although domestic soda ash prices were up slightly in the quarter, our overall (inaudible) soda ash price was down in the high double-digit dollars per ton in the first quarter versus the prior year.

As anticipated, soda ash prices in Asia softened in the first quarter. We continue to see signs that Asian pricing is reaching the trough with producers in China still only providing monthly rates -- monthly rather than quarterly contract pricing. We are also encouraged by the recent $30 per ton price increase announced by ANSAC and we continue to expect Asian prices to start increasing in the second quarter. Though given the slower-than-expected GDP growth in China so far this year, (inaudible) in pricing is likely to be later in the quarter than we initially anticipated.

So overall, the quarter turned out largely as expected with strong performance from our Ag and BioPolymer businesses, weakness in Asian soda ash pricing and a path forward for lithium to deliver on its capacity expansion finalized. With that, I will now turn the call over to Paul Graves to cover our financial position.

Thanks, Pierre and good morning everyone. Today, I am going to briefly discuss working capital balances, cash generated from operations, progress on capital deployment plans, which includes capital additions, M&A and returns to shareholders and finally, touch on our tax rate for the quarter and the full year.

Let me start by making a few comments on quarterly trends in working capital and capital investments in each of our major businesses. First, in the agriculture business, we generally have higher accounts receivable in the first quarter since we have carryover balances remaining to be collected in Latin America where collection periods are measured in months rather than weeks. And we also make the majority of our North American sales in this quarter. We typically see receivables balances fall in the second and third quarters as customer payments are collected. However, we typically see that, as the southern hemisphere growing season starts in the third quarter, receivables balances start to increase again.

From an inventory perspective, and we described to you last quarter that much of the recent increase in the inventory in agriculture is related to excess inventory held as a direct result of three factors -- drought conditions in Australia, reduced cotton planted area in Brazil and the delayed registration of a new product in Brazil. Now this inventory remains on the balance sheet and will do so until the next southern hemisphere growing season gets underway in the second half of the year.

A final component of working capital associated with our Ag business is accrued customer rebates, which are primarily related to the timing of North American sales. In general, these rebates accrued through the year and are mostly paid out in the fourth quarter. Taking these factors together, it is not unusual to see a cash outflow in this business in the first quarter with the second and third quarters typically our strongest cash-generation periods.

In BioPolymer, we have long supply chains and for some raw materials relatively short seasonal buying windows, especially in seaweed. And therefore the levels of inventory we hold in this business are relatively high. The first two quarters are seasonally our strongest creating further upward pressure on inventory and the receivables during this part of the year. Although not as pronounced as in the Ag business, the first quarter is also one of the weaker cash-generation quarters for BioPolymers.

In Alkali, we hold relatively little inventory; however, our collection terms are typically longer and for export than for domestic sales. As exports continue to become a larger part of our business mix in Alkali, we expect to see our receivables balances increase, all other things being equal. Although not a seasonal effect, we would expect that increased revenues generated overseas will therefore have an impact on our working capital due to these extended collection terms.

To be clear, our position on working capital is to ensure that we maintain or improve our working capital productivity metrics. It is not to focus solely on the quarter-end balances. We recognize that our businesses have quite substantial amounts of capital tied up in working capital; however, we continue to have working capital productivity levels that are consistent with historic levels. We consistently look for ways to improve these metrics and currently have a number of programs in place focused on this. That said, any benefits we see will likely take multiple quarters to materialize in a meaningful way.

With that backdrop, cash flow from operations in the first quarter was negative $32 million. However, we are reaffirming our guidance of generating cash from operations of $650 million in 2013 with the bulk of that cash expected to be generated in the second and third quarters.

Shifting now to capital deployment, capital additions in the first quarter of 2013, including that reported in the other investing activities line, totaled $33 million. We are reaffirming our expectation for 2013 of deploying $350 million into capital asset additions. We previously described to you that nearly half of our 2013 spending will go toward construction of the new BioPolymers MCC plant in Thailand and to support expansion in our Ag manufacturing network. Much of the spending on these projects will occur in the second half of the year.

Separately, in the first quarter, we acquired Nippon Sheet Glass, a 6.25% minority interest in FMC Wyoming, which brings our ownership to 93.75%. This acquisition has led us to reduce our forecast of noncontrolling interest as reflected in the outlook segment posted to our website this morning.

During the first quarter, we returned $128 million to shareholders, $18 million via dividends and $110 million via share repurchases. In the quarter, 1.8 million shares were repurchased at an average price of $59.61. We expect this to have an approximate full-year positive impact on EPS of $0.04.

Now, as you also saw in our press release, the FMC Board recently approved an expansion of the Company's share repurchase authority to a total of $500 million, replacing the previous authority and any unused amounts. We expect to complete this new plan over the next two years.

Our cost of share repurchases for the rest of this year will be related to the potential divestment that Pierre will talk about next. We believe we will generate enough cash from operations to fund the proposed capital investments and any acquisitions we may undertake. As such, we would expect to return a portion of the proceeds from the divestment of FMC Peroxygen to shareholders through share repurchases and we will consider these actions ahead of completion of the divestiture should we become comfortable that a divestment is reasonably likely to take place.

Finally, our tax rate in the first quarter benefited from a one-off gain from tax credits relating to 2012. Because of the delay in the US in passing budget legislation in December, we were unable to claim in 2012. We expect our tax rate for the subsequent quarters to be in line with our historical rate of 27.5%. With that, I will turn the call back to Pierre.

Thank you, Paul. Let me now offer some additional context on the portfolio realignment we announced yesterday. When we launched Vision 2015, we committed to actively manage our portfolio of businesses to optimize the long-term profitable growth of the Company. This is precisely what we have done over the past three years. We exited the phosphates, sodium bicarbonates and zeolites productlines and invested heavily in the growth of our core Ag and BioPolymer platforms.

In our earnings release yesterday, we announced steps to simplify and focus the Company's business portfolio around three core platforms where FMC has a sustainable competitive advantage. These platforms provide FMC with fast growth, high margin and high returns on capital. When we look at our portfolio, we see two growth platforms that are supported by a strong cash generator.

Our first core platform is focused on functional ingredients for the food and pharmacy (inaudible) markets. Our BioPolymer business has been an industry leader in that space for decades and is on track to deliver its ninth straight year of record performance. BioPolymer is an important growth engine for FMC and we believe there are exciting opportunities to expand our participation into broader adjacent markets.

With this expanded scope, our BioPolymer business becomes a standalone reporting segment called FMC Health and Nutrition. This new segment named better reflects the broader marketplace where we will expand our participation to fuel accelerated growth organically and through external opportunities.

Mike Smith, who has run our BioPolymer division for the last eight years, will lead FMC Health and Nutrition. He and his team will implement a strategy to increase our investments to broaden FMC's participation in food, pharmaceutical, nutraceutical, personal care and related markets.

Our second platform is our Agricultural Products business. As you all know, this is a high-growth platform that is well on track to deliver its 10th consecutive year of record performance. This business has outpaced market growth as we will leverage our technologies, expand the geographies and acquire new productlines to broaden and strengthen our portfolio.

Our unique business model delivers sustained industry-leading growth and profitability. To recognize the breadth of products, technology and service value we bring to the market, Agricultural Products group will now we called FMC (technical difficulty) and will remain under the leadership of (technical difficulty).

And finally, (technical difficulty) as a strong foundation to support the growth initiatives in FMC Health and Nutrition and FMC Agricultural Solutions. FMC Minerals includes our cost-advantaged Alkali business, which sits on the world's largest natural trona reserve. This business operates under a low-cost model using advanced extraction and processing technology.

This third platform will also include our lithium business, which employs similar manufacturing methods. Operating these two businesses with one segment allows us to leverage technical resources and more efficiently improve operating performance through manufacturing excellence. We will operate FMC Minerals based on the fundamentals as we see them, commodity businesses driven by supply/demand balance and relative cost position.

Ed Flynn will lead the new FMC Minerals segment. He is a veteran FMC leader and brings deep experience in operating commodity mineral extraction businesses to a lithium operation. As a result of this realignment, Michael Wilson, President of the former Specialty Chemicals group, is leaving FMC to pursue other opportunities. All of us at FMC wish him success and thank him for his leadership over the last 16 years.

Finally, let me comment on Peroxygen. Although Peroxygen is a successful profitable business and has been an important part of FMC for many years, we no longer view it as a strategic fit given the evolution of our portfolio and our increased focus on the three core platforms.

Given this, we have begun exploring the potential divestiture of this business. During this assessment, FMC Peroxygen will become its own reporting segment. This new segment will include certain productlines currently sold through the Environmental Solutions businesses given the high degree of integration with the Peroxygen supply chain. We believe that with the right focus and investment, this business has strong growth potential, but we think that potential can be a lot more successful by others.

Let me now share with you our outlook for the second quarter and the full-year 2013. Please know that all of our guidance is under a (inaudible) reporting segment. Before the end of this quarter, we will provide historical segment financials under the new reporting structure and we will begin reporting this way with the second-quarter results.

For the second quarter, we expect to deliver adjusted earnings of $0.87 to $0.97 per diluted share, flat versus the second quarter of 2012. Continued strength in Agricultural Products with segment earnings in the second quarter expected to be up in the mid to high single digit percent versus a very strong second quarter in 2012.

Specialty Chemicals segment earnings are expected to be flat as continued weak performance in lithium offsets growth in BioPolymers. And in Industrial Chemicals, we expect earnings to decrease approximately 20% due to continued pricing pressures in export markets, which we now expect to begin improving later this quarter.

We are increasing our full-year adjusted earnings by 9% to a range of $3.93 to $4.07 per diluted share, a 15% increase over 2012 at the midpoint of this range. This change demonstrates our confidence in the full-year outlook and the benefit of investments we made in the first quarter.

Our Agricultural Products group is expected to deliver its 10th consecutive year of record earnings driven by volume growth and new product globally as favorable grower economics and strong market conditions continue. Market indications in Brazil suggest increases in planted area in sugarcane, cotton and soybean for the 2013 crop year, which signals strong performance for the rest of the year and should result in operating earnings increasing in the mid to high teens percent for the year.

In Specialty Chemicals, segment earnings are expected to increase in the mid to high single digit percent. Our BioPolymer business will benefit from capacity increases while we (inaudible) process modifications to improve lithium operating performance.

Finally, in Industrial Chemicals, we anticipate earnings to be down mid-single digit for the full year. Domestic soda ash prices are expected to be up in the low to mid-single digit dollars per ton versus the prior year. Soda ash prices in export markets are expected to begin improving toward the end of the second quarter and will continue sequential improvement through the remainder of the year. The net results of domestic and export pricing actions for soda ash should be a global average price for the year, which will be down compared to 2012.

We also expect to begin seeing the benefits of our manufacturing excellence initiatives during 2013, which will enable volume growth and partially offset the weakness in pricing. With that, I thank you for your time and attention and I would be happy to take your questions. Operator, please.

(Operator Instructions). Laurence Alexander, Jefferies.

Good morning. This is Rob Walker on for Laurence. I guess in Ag this quarter, you had 80% plus incremental margins. Was that simply mix and I guess why do you expect that to change later this year?

Yes, the improvement in operating profit is mostly due to regional mix and we expect -- and you see that every year. Usually operating earnings go down in the second half of the year when the market is more driven by Latin America and Brazil and is higher in the first part of the year when it is driven more by North America and EMEA.

Okay, great. And then on the assets for a potential divestiture, can you give us a rough EBITDA margin estimate for kind of the assets you are considering and a timeline for what you are using to make a decision?

Regarding the timeline, we believe the process is going to be moving forward at a good pace. I would actually believe that a divestiture of this business, or at least a contract signed with a buyer, would be possible somewhere between the end of the third quarter and the beginning of -- and the end of the fourth quarter. So sometime in the last four months of 2013.

In terms of EBITDA for the business, we are going to take a little time to reissue all of the earnings number, EBITDA numbers, EBIT number for each of the segments during this quarter. So while we are doing this work and we will be issuing that for you guys to update your model, I don't want to be too precise, but I would say that the Peroxygen business EBITDA margin, which are in the mid to high teens.

Great. Thank you.

Kevin McCarthy, Bank of America-Merrill Lynch.

Good morning. This is Chris Perrella on for Kevin. Jumping to the lithium business, what is the outlook for pricing for 2013 within lithium? And in terms of volume production, I know you took more shutdowns in the first quarter. Will you be able to produce more lithium in the second quarter?

So in terms of pricing 2012 -- 2013, sorry, is a year of flat pricing. There is not much change on our market today and we have stability. From a volume, I really think that you have to look at two things. First of all, the second quarter, we are going to be taking a shutdown, we are going to be implementing the retrofit of the plants to run the plant under the new process, so on the changed process. So I would not expect significant volume change.

You will start to see volume change of the brine in the third quarter. We will still have a little outage, a shorter one. You will see volume change from a brine standpoint in the third quarter and we will be reporting on that. But, as you know, there is about a three to four-month period before you actually see that increase in production into a final salable lithium process, whether it is your hydroxide carbonates or (inaudible). So it is really in the fourth quarter that we are going to see the translation of this improved production into financial results.

All right, thank you. And just a brief follow-up on Ag. With the delayed US planting, what is the risk or what crops would be most affected for FMC?

It is going to be very low or no impact to us, but I'm going to ask Mark, Mark Douglas, to give you a better color on what is happening overall for the industry with the delayed planting, which we estimate and Mark can confirm that by being about a couple of weeks.

Yes, thanks, Pierre. Hey, Chris. As Pierre just said, we are looking at a couple of weeks to maybe three weeks delay right now. We know people are obviously planting. The weather changed from last weekend. Although if you watch the weather forecast every day, in the Midwest, it is changing quite rapidly. It is too early to tell what the impact on us would be. We have a lot of pre-emergence and resistance products in the pipeline right now as you can tell from our Q1 sales, very strong. It is a great business for us in North America.

I wouldn't say right now there is any impact on us. We have a broad portfolio, we have insecticides, herbicides and fungicides and as you know, we tend to focus on a lot of the niche crops. So right now, we don't see any impact.

Thank you.

John McNulty, Credit Suisse.

Yes, thanks. This is actually Alina Khaykin sitting in for John. So first on lithium, kind of given all of the noise and moving parts over the past year or so, how should we be thinking about operating leverage or earnings from the business as we move through the year? I know it it's obviously going to get higher in the back half, but can you give us some kind of order of magnitude?

Sure, let me broadly qualify what we are talking about today. We believe we do have process changes today under control and we do believe the rampup will take place through the third quarter with impact on the financial results in the fourth quarter. All of this will average to a range of about 10% operating earnings throughout the year. We believe it is a business which could sustain as soon as next year operating earnings in the 20% range. So think about $250 million and a doubling of the earnings from the high single digit, low teens into the high teens 20% range.

Okay, that's helpful. And then also on the cash flows, in the past, you've indicated that you would buy back about 100 million to 150 million per year and you kind of hit that range already in 1Q. So are you taking a more aggressive approach to deploying cash toward stock buybacks or was it just more of a one-off opportunistic approach this quarter?

Well, I will ask Paul to add to my comment, but I think it's two situations which are happening in parallel and which are not connected. You know that we committed to return -- when we did our last analyst call, we committed to return around $150 million to shareholders with a blend of stock buyback and dividends over the next three years. And actually this is what we did in the first quarter, looking at the strength of our business, the confidence we have in the year and where we are going. We decided to take advantage of what we believe was a strong cash flow situation and strength in our core businesses to do a stock buyback in the first quarter.

So this is in line with what we decided to do every year and then we had the dividend, following the dividend increase we announced in the last December. Now there is another event, which is taking place, our decision to simplify our portfolio and exploring the divestiture of the Peroxygen business. That is something which we believe will lead to a more aggressive stock buyback once the proceed or just ahead of the divestiture once we are certain of where we are going. That will accelerate and amplify our stock buyback for 2013 into 2014. Paul, do you want to add something?

No, the only thing I would add is historically we have made our share repurchases at various times of the year and it just made sense to us to get this repurchase done in the first quarter. No big policy reason behind that, no change to the way we think about repurchases, but we wanted to get this done in the first quarter because it just made more sense to do so.

Okay, that's helpful. Thank you.

Mike Sison, KeyBanc.

Hey, good morning, guys. Nice quarter I thought. In terms of Industrial Chemicals, when you take a look at the year, can you help us understand why, at least in your opinion, soda ash pricing export should start to improve and then if it doesn't, if it so happens it doesn't, what would the outlook for you look like? I mean it seems like that is the only variable in that segment that causes some uncertainty for you.

Mike, first, you are correct. All of the variables we have in front of us, we do have a good handle on pretty much everything in the business, including lithium. Now we believe we are at the execution stage, not at the investigational stage. The place where we don't have full control, of course, the pricing situation for export. There is multiple signs -- and I will ask Ed Flynn after to add to my comments -- but there is multiple signs.

The first one is clearly there was no further decrease and very clear signal of stabilization in the pricing in the month of March. So it seems -- every indicator we have seems to be showing that the pricing are reaching the bottom in the month of March. We are confirming and our people on the ground over there have confirmed that the Chinese producers, as we said in the last call, are not giving three months contract anymore. We just confirmed that. We had a team flying out to Asia last week. They are only going with monthly supply, which usually is a very good indication. You have also heard that ANSAC and all of the members of ANSAC have decided on a price increase for Asia of $30 per ton.

If you look from an industry dynamic, we are seeing two things happening. There is a start of a rationalization in terms of production and there have been a couple of companies, which have been announcing shutdown and those are the high-cost producers, which have been announcing shutdown of capacity and that will be tightening supply into Asia.

The final indicator which come into our model is, despite the fact that Chinese GDP is not as robust as what we were expecting, some of the markets, which are a leading market for soda ash, are showing strength and we are talking about the automotive industry, as well as the flat glass industry. So when we bring all of that, we do have and the belief that there is no reason for us not to see price increase starting to rise at the end of the second quarter, showing impact in the third and fourth quarter. Ed, if you want to add anything?

No, I think you covered it well, Pierre.

Thank you.

Okay. And then just one quick follow-up on the Ag side. I was surprised to hear that Latin America was a little bit sluggish and impressed that the rest of the areas geographies were able to overcome that. So when you think about your comments of growth in acreage, are you seeing orders in those areas or maybe just give us a little bit of color of what you are seeing now to show that Latin America is going to recover as the year unfolds?

Yes, Mike, it's quite simple. The statements we are making are linked to orders, which are coming in very strong for the Latin America and especially the (inaudible) season. As you know, you really see the sales in the third and fourth quarter, but orders are coming in very strong and we also do have statistics and information around planted acres. And I think, Mark, could you please confirm pretty much across the board in cotton we are expecting right now acreage increase?

Yes, Pierre, we are seeing cotton acreage increases. We know soybean is increasing. It is a strong replanting season for sugarcane where we have great marketshare. So all those crops for us are important down in Brazil. We are also seeing growth in Argentina as well as the other Latin American countries. Mike, I think the other thing I would add is we are introducing some new products this year into Brazil that already we have registration for and we are seeing good demand. So I am very confident that, as we approach the third and fourth quarters for Latin America, it will be a very strong season for us.

Great. Thank you.

Mike Harrison, First Analysis.

Hi, good morning. Just sticking with Ag for a minute; it sounds like a nice driver of the mix was products dealing with resistant streams. Are those typically more geared toward pre-emergent treatments that are going to be your highest profitability or is it something that we could see being strong all through the North American growing season?

I think usually we do have a very strong pre-emergence productline with a very strong mix here. So the impact is usually more visible in that part of the business than in the rescue market, for example. I think we do have technology, which is very, very strong, especially around corn rootworm resistance, around glyphosate resistance. I think we have developed products, which are very much in line with the trend we are seeing today in the market from a resistance standpoint. So we tend to have a stronger from a mix and profitability standpoint pre-emergence market. I do not want to say that you can't apply the same type of reasoning to the entire productline. Mark, do you want to add something?

No, you have nailed it. I wouldn't add anything else.

All right. And maybe a couple of questions on the lithium business. Just in terms of realigning lithium and combining it with the soda ash business, clearly, soda ash is something you use in the lithium carbonate production process. But can you just help us better understand some of the overlap between those two businesses and does the combination there suggest that you might be focusing more on, in the future, on mining of lithium hard rock resources as opposed to brine-based production?

All right. First, when we bring those businesses together, it is not because they do have a connection at the end markets or because we do use soda ash in lithium. I think the reasons for which we are bringing those businesses together is first the success -- as we have seen in the last few quarters, the success or failure of this business will depend upon our ability to run strong manufacturing excellence programs and be able to be a low-cost producer.

There is lots of commonality from a manufacturing standpoint, extractions standpoint, separation standpoint between the two manufacturing processes. Actually, there is a team which is putting in place all of the process change, which is supporting our lithium operation. That is a team today, which is a technology team from our Wyoming soda ash plant. So you do have a lot of manufacturing synergies and the need to operate those two businesses as low-cost reliable manufacturing processes. That is the first one.

The second one is the leadership we have to run those businesses. Ed Flynn will be running the group. Eric Norris will stay to run the lithium business and he is doing a tremendous job at turning the situation around.

We are convinced those businesses need to be run as a commodity business driven by supply demand. There is high barriers to entry when you want to get into the lithium business, but once the product is made, they are very often interchangeable. I think you take a product made by a good manufacturer like (inaudible), all the quality will be very identical to the quality of a good product made by FMC.

So you get into a situation where supply demand will guide how this business is doing. And we want to be managing the business the same way we do in soda ash, being very careful in understanding the end market to decide upon capacity. Those are the reasons. We are not intending to go more toward rock mining (inaudible) production; we are staying very true to what we know best how to do today from a manufacturing standpoint, which is brine production.

All right, and then just in terms of the resource in Argentina, how long is the expected maintenance shutdown in Q2 and in terms of the process changes, does the new process rely any more or less on evaporation?

Yes, the new process doesn't rely more or less, same thing. I think the biggest challenges we had, the process today, now the way the process is designed with the different pounds we had and the evaporation process is very defined. Lots of the technology, which had to be worked on, were around separation technology. And that is where we did most of the work in order to make sure that the columns we used to have operating at very different concentration of lithium would be operating with the same efficiency over the long run and what were the operating parameters to do that. This is what we have been working on.

So we do believe now that we do have the evaporation well under control. We believe that we can seed, of course, as soon as -- we always have to take into account the seasons and the winter versus the summer, but we do believe that we know now how to produce high concentrated product, which will feed the separation and we believe that we know how to run the separation columns in a way which will work as well with high concentration versus lower concentration.

So those were mostly the changes we are working on. I think the shutdown is going to be what we are going to see as it goes. That is why we are not expecting much coming from the second quarter; it is going to be multiple weeks of shutdown in the second quarter.

Peter Butler, Glen Hill Investments.

Yes, good morning, good morning. If one was optimistic on the proceeds from the sale of the Peroxygen business, would you be expecting to get something like 3 times sales or more?

No, I think we do not want at this stage to publicly speculate around how much we are expecting from the Peroxygen business, but, as we said before, it is a $350 million business with EBITDA margin in the high teens. If you look at that and comps are fairly easy to find in terms of dividend multiples, but I can tell definitely I would be very happy to get 3 times sales, but we will not get 3 times sales for that business. Unless you are somebody who can do that, then please help me.

Well, you have got an expert sitting beside you, don't you?

Unfortunately, he's not a banker anymore; he is just a regular CFO. Seriously, Peter, I think it is a good question. It is important for us to have a good divestiture process because it is a good business, it has a good potential, it's a healthy business. It is not a turnaround situation at all. So we are selling a good business, which has a growth platform, a specialty platform and a commodity platform. So it is a very interesting -- it is a business which returns cut cost of capital, which has good EBITDA margin and cash generation. So it is going to be a good sale, but these kind of businesses don't go for 2 or 3 times sales. But we are expecting good proceeds, which will be important to keep on returning more aggressively in the coming quarters cash to our shareholders. It would also be important for the growth of the Company.

Does this -- you have separated out the Peroxygen, but you have sort of consolidated the lithium. Does this say that lithium is a keeper?

Yes, for now, lithium is a keeper. I think it is a platform. As I said, what we wanted to do -- Peroxygens is a great business. I do not believe today it is a business where we are looking at the strategy we have at the Company, the prioritization from one of the places where we are highly differentiated. I think we decided to focus our capital spending research money and acquisition money into the three platforms where we believe we are or can be advantaged and where we have growth potential. Today, with the work we have done, we are feeling much better than six months ago about lithium, so we believe lithium is part of our portfolio.

Thank you for your help. Thank you.

Brian Maguire, Goldman Sachs.

Hi, good morning, guys. I just wanted to ask quickly on the deceleration in the Agricultural sales growth. It went from year-over-year growth of about 20% in the fourth quarter down to 9%. Just wondering if, in hindsight, there might not have been some pullforward in demand into the unusually strong fourth quarter? And kind of related to that, what kind of gives you confidence that it is going to rebound back to -- it looks like you are expecting kind of north of 20% sales growth rate for much of the rest of the year.

I think we always look -- I mean we report sales like any public company on a quarterly basis, but you know how much two weeks of orders can make a difference when you are jumping from a season to another. The fourth quarter is the strongest season in Brazil and you just need sales to be moved up or moved down by customers and you can see the major changes in the way sales are.

So what we do here internally is very often we look at sales growth over a season. So we have been growing historically in the mid-teens and up. And I think if you look over a two-quarters period, we are in the 15% growth if you take the fourth quarter and the first quarter between Latin America and North America. And we believe if you look at a 15% growth over those two quarters, it is still a leading growth number.

We believe it is a strong performance, especially I mean let's face it, cotton, which is a big crop for us, decreased in acreage in the fourth quarter last year. So we had some headwind, which we do not believe will be here going into the second half of this year. That is why we are forecasting a growth rate for the second half of the year between performance of the business today, new product introduction orders, which we have in the book. We are looking at a growth rate north of 15% and more in the 18% to 20% that is for the Ag business than what we have seen as an average for the last two quarters.

But I think we always have -- and you know that very well. There is no deceleration at all. There is seasons and there is the season which is more influenced by Brazil, one which is more influenced by North America and depending upon where a few weeks go, you have a changing number. So we tend to win growing seasons together rather than looking at the quarters when we analyze the business.

Okay, great. And just looking at the potential sale of Peroxygen, it looks like, based on $350 million of sales and a high teens EBITDA margin, it would probably be dilutive to EPS by around $0.25. So just wondering if you are committing to buy back an amount of stock to sort of offset that level of dilution or should we expect maybe less than that?

A couple of things. It should be dilutive less than the number you are stating here in terms of EPS. So yes, there will be a dilution from the sales, but there will be a compensation through stock buyback. I don't want yet to comment around what will be the impact for the year. We are going to work through this process as we see the sale going.

Let me tell you if I would say at a high level how Paul and I will look at the financial transaction. It all falls in place. We believe there could be a dilution in terms of operating profit, which would be due to the sale of the business, which is a profitable business. There would be a stock buyback, which would at least compensate for the loss of operating earnings into EPS to avoid to see a dilution at the EPS level.

Following that, the refocus on three platforms, and especially on Health and Nutrition, should allow us to make some bolt-on acquisitions to buy back, if I may say, EBIT when we look at our 2015. So if all goes well, you could see very little reduction of your EBIT when we target Vision 2015 numbers, but potentially an improvement on your EPS number.

Okay, that makes sense. I appreciate it.

Frank Mitsch, Wells Fargo Securities.

Hey, good morning. It's Sabina Chatterjee in for Frank Mitsch. Just some quick follow-ups. Pierre, can you quantify the amount of Asian capacity that is shutting down when you mentioned Industrial Chemicals? And how many more of these $30 per ton type increases do you think you will need to hit the full-year guidance for that segment?

Well, first, I talked about shutdown; I did not specify Asian shutdown per se. I think -- I do not like too much to talk about other companies. I think those shutdowns have been publicly announced. So if you want to take a look at that, it is just difficult for me to comment about other publicly traded companies or companies in accord, but those shutdowns are defined and have been publicly announced.

I think we do not need another price increase announcement. I think we will see how it goes. We have a price increase announcement now and then we are going to be managing the market as it goes and see where this number is going to take us. But I want to make sure we don't mislead people when we talk about pricing being low in Asia. It is low, but to bridge the gap between an Asia pricing and a domestic pricing, you don't need multiple $30 increase.

Okay. And then on the Argentina lithium question, you are calling for flat EBIT in Q2. So I guess the costs aren't going to be that onerous. And then we should get a nice boost in Q4, but it doesn't look like guidance is calling for that. So can you help me reconcile that? Is it that you see Q3 down from Q2 levels? Is that a seasonality issue?

No, I think what we are going to see is Q2 is going to be low because, as I said, the plants will be down and it is not going to be -- you are correct. It is not going to be a very high capital spending to get the plant to operate. It is a fairly -- those are more technology [re] than in process changes. So it is not going to be a high expense, but the plant is going to be off for a while.

We are looking at a slight improvement in earnings for lithium in the third quarter, more toward the back end of the quarter. And it is only because when you produce seller brine, between that time and the time you have your lithium compounds, whether it is [buelly] or nitroxide or chloride, it takes about three to four months.

So if you look, imagine the plant, we begin the retrofit at the beginning of the second quarter. We start to increase capacity toward the back end of the second quarter into the beginning of the third quarter. Those products will only hit the market by the very end of the third quarter. So you will have a slight improvement in the third quarter and you will start to see your mid-teens EBIT in the fourth quarter.

Okay, thank you.

Rosemarie Morbelli, Gabelli.

Thank you for squeezing me in and good morning. Pierre, have you seen any signs of pickup in the demand for lithium related to either HEV or EV or energy storage or is that still kind of on hold?

I have to say that it is still pretty much the same story than we have been talking about for the last six months, which is there is expectation, which are differing from the Company to another, but roughly we are seeing the growth for EV, if it takes off, (inaudible) take off post-2015 and it is a bit slower than what most companies would have said a year or two ago. So there is no significant change or increase in pace in this market today. I think the growth from an energy standpoint is more driven by electronic device than it is by electric vehicles.

And are those still growing at about -- I mean in terms of the demand for lithium -- at about a 10% a year?

Yes, correct. That is the right number.

And since we are on lithium, could you update us on the restructuring going on at your plant in North Carolina?

Yes, it is going well. I think we are hitting all of the marks from a cost reduction, staffing reduction, improved operations, so we are right on where we are expecting to be.

And would that be enough to offset some of the expectation from the plant, the operation in Argentina?

No, if you are looking at -- there won't be a positive impact this year, which is pretty much into the guidance already. The way capitalization of manufacturing variance work and the way the accounting work and the speed at which you do it, our objective really is -- I mean those are bits and pieces, which will improve the picture, but really, for us, it is getting the plant to be changed in the second quarter, having full-rate production reached of brine in the third quarter, bring this business to mid-teens EBIT to sales ratio in the fourth quarter, get that business to a 20% operating earnings to sales over 2014.

Okay. And then on another subject, you talked about seeing some signs of demand for a flat glass increase in China. And if I am correct, demand for flat glass usually leads the demand -- the growth in commercial construction by about six months. First of all, am I correct in that assumption, and are you seeing the same type of demand in North America for the flat glass?

No, I think we are not seeing the same type of jump in North America for flat glass.

And am I correct, Pierre, in thinking that at least commercial construction (multiple speakers)?

Your assumption is correct. When you see demand, it is a sign in the building and construction mostly driven by commercial and yes, it is a three to six, seven-month time (inaudible).

Okay, thank you very much.

Thank you.

At this time, we will turn the call back to Mr. Brondeau for closing remarks.

Thank you very much and thank you all for your questions. I believe we had a strong first quarter. We believe that even in an environment of prolonged economic uncertainty, 2013 will be another record year for FMC with EPS up 15% versus prior year. By the fourth quarter, we expect to see a recovery in FMC Minerals with increased export pricing versus the prior year and manufacturing improvements in lithium that will return the business to normalized EBIT margins.

FMC Health and Nutrition will continue to strengthen its portfolio while growing sales in the double-digit range. And FMC Agricultural Solutions will again outpace market growth on mid to high teens increases. We have delivered leading performance for several years. We will close the year with three core business platforms performing strongly and I'm confident that our portfolio realignment will accelerate at growth, continue our strategic goal to deliver our Vision 2015 goals and position the Company for continued success beyond 2015. Thank you very much.

Thank you. Ladies and gentlemen, this conference will be available for replay after 1 PM Eastern Time today running through June 1 at midnight. You may access the AT&T executive playback service at any time by dialing 800-475-6701 and entering the access code of 277292. International participants may dial 320-365-3844. Once again, those phone numbers are 800-475-6701 and 320-365-3844, using the access code of 277292. This does conclude the FMC Corporation first-quarter 2013 earnings release conference call. You may disconnect.