富美實 (FMC) 2013 Q2 法說會逐字稿

Good morning and welcome to the second-quarter 2013 earnings 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 over to Mr. Andrew Sandifer, Vice President Strategic Development and Investor Relations for FMC Corporation. Mr. Sandifer, sir, you may begin.

Great, thank you, Cynthia. Good morning and welcome to FMC's second-quarter 2013 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.

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 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 risk 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 www.(technical difficulty) 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 third quarter 2013 and a reconciliation to GAAP of the non-GAAP figures we will use today.

We will begin today's call with Pierre reviewing second-quarter performance followed by Paul who will provide an update on the Company's financial position. Pierre will then describe our outlook for the year and provide a midyear update on our progress in delivering our Vision 2015 strategic plan.

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.

I will now turn it over to Pierre.

Thank you, Andrew, and good morning, everyone. As you saw from the release last night, we have a lot to discuss today. Let me start with the Company's performance in the second quarter.

Total company sales of $959 million increased $54 million or 6% versus last year led by strong performance in our Agricultural Solutions and Health and Nutrition segments. Regionally sales were up 16% in Latin America, 7% in North America, 6% in Asia, and EMEA was down 7%. Gross margin remained flat to last year at $343 million.

SG&A and R&D expenses of $155 million were up 5% versus last year. Our adjusted operating profit of $188 million was down 3% versus the prior year period. Adjusted earnings of $129 million or $0.94 per diluted share were up 2% versus the year ago quarter.

Turning now to segment performance. In Agricultural Solutions, sales grew 12% in the quarter versus a year ago to $443 million with strong demand in all major geographies except EMEA. In Latin America, we saw volume growth in the cotton segments in Brazil driven by the expected planted (inaudible) expansion and increased herbicide and insecticide demand in soybeans.

Favorable market conditions coupled with new product introductions provide strong performance indicators for the 2013, 2014 crop year.

In North America, continued healthy demand for a pre-emergence product led to additional volume gains in the quarter. Sales in Asia increased versus last year driven by volume growth, the result of a direct market excess initiatives in several countries.

In EMEA, demand was tempered by unfavorable weather that reduced (inaudible) pressures. Second quarter segment earnings for Agricultural Solutions of $125 million increased 11% versus the year-ago quarter driven by higher volumes and targeted price increases.

In Health and Nutrition, sales grew 9% in the quarter to $190 million driven by price momentum from new technologies, volume growth in all regions fueled by strong growth in our MCC product lines and acquisitions.

Our Food business saw robust demand growth in key Asian markets. In our Pharmaceutical business, hired demand led to market share gains with increased sales volume.

Last week we announced the acquisition of Epax, an omega-3 producer. This is a business that will be a very good fit with our food nutraceutical goals and pharmaceutical goals product lines. We are very excited by the prospects of this business which I will discuss in greater detail later in the call.

Second quarter segment earnings were $44 million. As you would expect, we incurred higher than normal acquisition costs in the quarter and we continued to incur cost in the implementation of a manufacturing excellence program. Including those expenses, Health and Nutrition segment earnings were up mid-single digits percent demonstrating the strength of our existing franchise as we invest to broaden our portfolio and increase MCC capacity.

Turning to FMC Minerals, second-quarter segment revenues decreased 2% to $244 million due to lower soda ash export prices and lower lithium volumes partially offset by higher soda ash volumes. Segment earnings for the quarter were $35 million, 21% lower than the previous year.

There were a number of elements that influenced this performance. Let me comment on a few of the primary drivers.

Beginning with alkali chemicals, revenue was $194 million, up 3% over the second quarter 2012 even though overall average soda ash pricing was down in the low double-digit dollars per ton versus last year demonstrating the volume benefits from our manufacturing excellence programs.

The year began with uncertainty around pricing in export markets mainly in Asia. We expected soda ash prices in Asia to be at the bottom of the pricing cycle in the first quarter. From there, we anticipated sequential improvements each quarter. For the most part, this is a trend that is playing out for the year.

However, the pace of recovery has been slower than we had originally anticipated. So in the second quarter despite double-digit dollars per ton improvement in overall export prices, the movement in Asian export prices was less than we had expected. As a result, alkali revenue and earnings were negatively impacted versus the second quarter of 2012.

That said, we are encouraged by (inaudible) price increase and we believe sequential improvements will continue. At the same time, our pricing and volumes in North America remain steady.

Moving to Lithium. Revenues were $51 million, down 16% versus the second quarter 2012. During the quarter, volumes were down versus the previous year. However, we continued to successfully implement the production process changes needed to improve reliability and provide the foundation for the full extension realization.

We had an abbreviated shutdown during which we upgraded our peroxygen plants. Despite these outages, we produced at a flat rate in Q2 versus Q1 and are now seeing improved operating consistency and yields. In the third quarter, we will use the scheduled annual plant shutdown to make additional engineering upgrades. We are confident that these are the final changes needed to reach sustainable full operating rates.

Starting in September, we expect daily production rates that will achieve our targets. Of course, we continue to pursue manufacturing excellence initiatives in the Lithium to improve our cost position and offset headwinds related to operating in Argentina.

In the peroxygens segments, during the second quarter, we took a planned maintenance outage. These contributed to quarterly revenues of $84 million, down 5% versus 2012 and segment earnings of $4 million, down 49% over last year. In a few moments, Paul will summarize the status of a divestiture process and our decision to reclassify these segments to discontinued operations.

In summary, our businesses performed largely as expected. Agricultural Solutions' unique business model continues to outperform the market; Health and Nutrition's solid growing base business will be enhanced in the first growing nutraceutical market. And in Minerals, we delivered improvements in Lithium and we are encouraged by sequential improvements in export soda ash pricing.

Let me now turn the call over to Paul for a discussion on our financial position and an update on our M&A activities. Paul?

Thanks, Pierre. Today I will review cash generated from operations, capital deployment including our plans to return cash to shareholders. I will touch upon our tax rate and I will update you on our M&A activities particularly the peroxygens divestiture process.

Let me start by providing what I hope are some clarifying comments on the impact of reclassifying peroxygens to discontinued operations. Our divestiture process is well underway and we are pleased with the interest level for the business. We remain on track to conclude a transaction before the end of the year.

Given this, we concluded that we met the tests for moving the segment to discontinued operations. This reclassification will impact our reported results starting in the third quarter. To be very clear, the second-quarter results include peroxygens results.

Now looking forward to the rest of the year, our third-quarter results will exclude peroxygens results for all of 2013, not just for the third and fourth quarters. In addition, the reclassification will result in changes to some of the specific line items that we have traditionally provided full-year guidance for such as operating cash flow, depreciation and amortization and capital spending targets.

In light of this, we will no longer include peroxygens in our guidance statements. All guidance we are giving today and going forward excludes peroxygens. So having hopefully cleared that up, let me now turn my comments to some specific items in the second quarter and for the rest of the year.

Cash generated from operations for the six months in 2013 was $245 million. For the full-year, we had previously indicated a target of $650 million of operating cash flow. The reclassification of peroxygens to discontinued operations combined with the lower earnings expectations in alkali means that the reported cash from operations for the full year is now likely to be closer to $600 million.

Turning to capital deployment, capital additions in the second quarter including those reported in the other investing activities line were $53 million. Year to date, they were $81 million. A significant proportion of spending to date has been on the construction of the new MCC plant in Thailand and to support expansion in our agriculture manufacturing network. These will continue to be the largest items in our capital spending for the rest of the year.

Now onto share repurchases. Given our increased confidence and a successful divestiture of the peroxygens business, we have made the decision to return a portion of the expected proceeds to shareholders as we have previously communicated. To achieve this, we have entered into an accelerated share repurchase program for approximately $250 million of our shares. An initial delivery of shares will begin shortly with the program targeted for completion by year end.

Now onto M&A activities. During the second quarter, we made the final payment on our repurchase of the FMC Wyoming minority interest. We did not make any other acquisitions or divestitures in the quarter.

You saw in our announcement last week that we completed the acquisition of Epax for approximately $345 million in July which implies an enterprise value to EBITDA multiple which is in line with our current trading multiple. You should expect to see the impact of this acquisition and of the share repurchase on our net debt position in the third quarter. We expect that this acquisition will be immediately accretive to EPS and is included in our updated full-year guidance numbers.

Finally, our tax rate. Our adjusted consolidated tax rate for the quarter was 24.8%. Although there were many contributing factors, the lower tax rate in the quarter reflects the trend we are seeing as we earn a higher proportion of our profits in lower tax jurisdictions compared to in the past. Although the impact of this can vary from quarter to quarter, this trend gives us comfort in lowering our guidance for tax rates for full-year 2013 by 150 basis points to 26%.

Let me finish with some comments on our updated guidance for the full-year. We recognize that there are many moving parts so let me conclude by summarizing how they have impacted our guidance for the year.

Our previous guidance range had a midpoint of $4.00 per diluted share and our revised guidance is $0.20 lower than this at a midpoint of $3.80 per diluted share.

The operating profit reduction due to the reclassification of peroxygens accounts for around $0.15 to $0.20 per share. The slower pace of recovery in pricing in alkali export markets accounts for a further $0.10 to $0.15 per share. The combined benefit over the final five months of the year of Epax and the $250 million share repurchase program are in the range of $0.07 to $0.12 per share.

Lower tax rates are offset by higher corporate costs which is largely due to an initiative to reorganize our finance function to be more closely aligned with FMC's growth plans.

With that, I will turn the call back to Pierre.

Thank you, Paul. Let me now share with you our outlook for the third quarter and full-year 2013. For the third quarter, we expect to deliver adjusted earnings of $0.75 to $0.85 per diluted share, a 5% increase versus the third quarter of 2012 at the midpoint of the range.

Agricultural Solutions earnings will be up in the low teens percent reflecting a continuation of our first-half momentum and propelled by a strong start to the Latin America season.

In Health and Nutrition, continued strength in our core businesses offset by residual M&A costs, we are increasing our earnings in the low single-digit percent. And in Minerals, we anticipate sequential improvement in (inaudible) soda ash export prices and improved Lithium margin. However, the slower pace of export soda ash pricing recovery will decrease segment earnings by low teens percent versus third quarter 2012.

Now for the full-year, we believe our 2013 adjusted earnings will not accurately reflect FMC's earnings potential going into 2014 since they are temporarily depressed by the shift of peroxygens out of our adjusted earnings outlook with only partial benefit from Epax and share repurchases. We expect full-year adjusted earnings to be between $3.72 and $3.87 per diluted share as we take a prudent approach to expectation of the pace of soda ash pricing recovery in export growth markets.

We expect a strong finish in Agricultural Solutions based on early-season indications of continued strong market conditions and share gains in Latin America. Brazil cotton acres are expected to increase and we are expanding our presence in Latin America soybeans which are also forecasted to see increased acreage.

New products will deliver volume gains globally and demand for resistance management products in North America will drive segment earnings in the mid to high teens percent over 2012.

In Health and Nutrition, we expect segment earnings to increase in the low teens percent driven by continued growth in our traditional market segments and a partial benefit from our Epax acquisition. This will be partially offset by acquisition-related and manufacturing excellence cost.

We anticipate Mineral's earnings to be down about 20% for the year although we expect recovery in both businesses with improvements in operating profit in the second half. By the fourth quarter, we expect improved Lithium operating margins to be sustained into 2014. In alkali chemicals, although we cannot be certain of the exact timing, we anticipate quarterly sequential increases in Asia export pricing will translate into year-on-year improvement by the fourth quarter.

Our North American markets will realize a low to mid-single digit dollar per ton increase in pricing versus the prior year. Successful implementation of manufacturing excellence program will continue to deliver additional production volumes.

Let me give you now an update on our Vision 2015. Since we launched our Vision 2015 plan, we have provided updates twice per year. Let me now describe where we stand at midyear 2013.

To begin, we are reaffirming our outlook for 2015 with expectations to deliver $5 billion in revenues, $1.2 billion in EBIT and adjusted EPS between $5.75 and $6.25 per diluted share.

We have made significant progress on our goals of strengthening FMC's core business. In Agricultural Solutions, we continue to outpace market growth through our unique business model. 2013 will be our 10th consecutive year of record earnings. Our Agricultural Solutions business is fueled by organic growth and supplemented by additional investments in product line and geographic expansions where we bring value to the market.

In Health and Nutrition, our growing portfolio will accelerate segment earnings growth. We are expecting executing our excellent growth strategy and the Epax acquisition (inaudible) are resolved to broaden the scope of this segment. This transaction expands our presence in the $21 billion nutraceutical industry and gives us a leading platform in the fast growing omega-3 market.

Epax is a leading manufacturer of high purity, high concentration segments of the omega-3 market and uses proprietary purification and concentration processes to produce high purity premium grade omega-3 fatty acid. These products are used in dietary supplements, pharmaceutical and food applications.

We will use our global footprint to sell this premium functional ingredients to new and existing customers for their end-use applications. We have targeted the omega-3 segment for many reasons including the depth of scientific data supporting its health benefits and the high projected growth rate of 12% to 15% per year. It is a natural fit in our Health and Nutrition segment sharing another key business characteristics.

Omega-3 starts from natural sources derived from Marine-based traceable raw materials from one of the world's most sustainably managed fisheries. Working with these natural raw materials requires the ability to manage a long and complex supply chain, something we are very familiar with at FMC. We are very excited about this important addition to our portfolio and the new business opportunity ahead of us.

Another component of the Vision 2015 plan is to capture value of common ownership across FMC. In the past, I have talked about our procurement transformation and the benefits of manufacturing excellence. Both of these programs remain firmly on track.

In procurement, we now expect to exceed our original procurement target and save over $120 million by 2015. We are already realizing the benefits from manufacturing excellence which was launched earlier this year. Incremental volumes and lower production costs as a result of manufacturing excellence in the alkali operation have given us the confidence to roll out senior programs in Lithium and Health and Nutrition.

Let me conclude this discussion about our Vision 2015 progress by walking you through the steps we have taken this year and how they add up over the next two years.

Earlier I said that 2013 earnings were temporarily depressed as we lose the full-year contribution of peroxygens. The share repurchase that we completed the third quarter will help mitigate the impact to EPS but for 2013, it will only provide a partial year of benefit. The acquisition of Epax also helps to replace lost operating profits. But again, we will only get five months of benefit from this additional business.

So as we head into 2014, we are expecting tailwinds from first of all, full-year impacts of $360 million in share repurchase plus an additional $100 million to $150 million of share repurchase in the year; full-year operating profits from Epax; full-year improved Lithium operating margins; continued soda ash export pricing recovery and benefit of manufacturing excellence initiative in 2013. All of these supported by accelerating growth in our Agricultural Solution and Health and Nutrition segments.

For 2014, we anticipate the combination of these factors could deliver between $0.80 and $1.20 of incremental EPS.

Moving now from 2014 to 2015. Accelerated performance will be driven by further realization of benefit from acquisitions in Health and Nutrition and continued portfolio expansion in Agricultural Solutions. Our new Thailand MCC plant expected to come online at the end of 2014 will deliver additional volume growth for the expanding Asian markets in Health and Nutrition.

We will reach over $120 million in procurement savings and achieve the (inaudible) of city-states manufacturing excellence improvements across the Company. We expect continued impact from share repurchases complemented by additional $100 million to $150 million of share repurchases in 2015.

We expect that all of these initiatives when factored together will lead to another $1.00 to $1.20 in incremental EPS over 2014.

As you can see, we remain very confident in their roadmap and their ability to reach our Vision 2015.

Now with this, I will turn the call back over to the operator for questions. Operator, please.

(Operator Instructions). John McNulty, Credit Suisse.

Good morning and thanks for taking my question. Pierre, with regard to the Ag business, I know there has been some concern around pricing in general and what that might have in regard to impact on your volume. So can you walk us through how you think about soft commodity pricing and how that drives your Ag business in terms of volumes one way or another?

Yes, and I will ask -- let me say a few words and I will ask Mark to add. But generally speaking what we see today as fluctuations of pricing of commodities didn't have yet and we are not forecasting any significant impact. The range in which we see the variation are such that it is not likely to have an impact on protecting crops and improving yield.

Additionally, some of the biggest fluctuations have been in corn which as you know is not one of our largest markets. So two things. First, I think the variation in price are not such and not forecasted to be such that it will impact crop protection chemicals plus our mix in portfolio is less impacted than other companies which are much heavier in the corn market.

I don't know, Mark, if you have any additional comment?

I think the only thing I would say is the fact that we have such a divest portfolio across many different crops when you look at where a lot of the commodities are today and even the forward curves, the prices are still considerably higher than they have been over the last five to 10 years. That bodes well for us. Obviously yields are important as well and given the types of weather conditions we have had across the world, there are no guarantees of where those yields are going to come out.

So we are pretty confident that the numbers we are seeing in the forward curves dictate that there will still be a lot of activity in the crop protection chemical market.

We continue to have a strategy of intentional fragmentation and I think it plays quite well for us when there is fluctuation in prices of certain commodities.

Great, thanks very much. And then just as a follow-up, the Epax platform, can you walk us through how to think about what the accretion might be for 2014 as part of the color and guidance that you'd just given?

Sure. Happy to do that. Clearly this is a business that is going to replace a significant chunk of the peroxygens operating profit in 2014 and 2015 and certainly by the time we get through the 2015 process, we would expect that really the entirety of the lost peroxygens operating profit will be replaced by the operating profit in this business.

So very quickly, it gets us to operating profit neutrality. In terms of the cost of financing of this acquisition, it was a cash acquisition. It is an interesting dynamic as to financing today. We have a bank and a long-term cost of financing that is in the 3.5% to 4% range and we also have a recently launched commercial paper program which as you know short-term rates are extremely low. So we certainly are getting a benefit from the lower financing rates and certainly in the short term, we will be funding this acquisition along with the commercial paper.

I would take probably that 3.5% to 4% range though as the more appropriate long-term cost of interest for which to calculate the EPS accretion in the future.

Great. Thanks very much for the color.

Kevin McCarthy, Bank of America.

Yes, good morning. Pierre, you affirmed our Vision 2015 EPS range of $5.75 to 6.25. Based on where you are guiding this year, it looks to be a two-year compounded growth rate of 24% to 27% there. So I guess a few questions.

One, could you assess your level of confidence you will be able to get there? Also how much will be achieved operationally versus financial levers? And in particular, do you think you need to do additional acquisitions beyond the Epax deal in order to get there?

Thanks for your question. Let me try to -- I'll give you two numbers. Let's look first historical performance versus going forward. Roughly if you take into account the share space we went in the last four years from about slightly over $2.00 per share so close to $4.00 per share, $3.80 and if you remove peroxygen on both ends, we doubled in four years the earnings per share.

So what we have to do in two years which is increasing by 50% is about in line with the average growth rate we had over the last four years. I have to say that we do feel pretty confident in where we are. I think we have the Company today where we want it to be. We have finally at this point the right structure with the focus on the segment where we are advantaged, the right portfolio and three very solid business models.

So if you go into 2015, let me give you the high level bridge to get to this $5.75 to $6.25. Think about Ag Solutions. We've been growing earnings over the last four years close to -- operating earnings close to 20% per year. Today if you look at our portfolio, the new technology which are coming in the pipeline, the strength in Brazil, we do not see any reason for a slowdown in the growth rate in Ag Solution.

So when you look at the operating earnings of Agricultural Chemical which are north of [$500 million] and you apply the 20%, that gives you an idea of the impact on earnings per share.

You look at Health and Nutrition, we believe we are going to start to see the momentum in 2014 increasing in terms of earnings growth. Today we have not been able to leverage -- we did in the three and four years ago but the last two years we have been investing a lot in R&D, in acquisitions, in integration for this business so not been able to translate the topline growth into earnings growth.

But if you should think about new plant coming on stream, the new portfolio, we do believe we are going to start to see the core business growing in the low teens and you add to that the comment made by Paul about Epax adding operating earnings, what we will be look losing from peroxygens.

Think about minerals now, the third segment and once again, we have uncertainty around the timing but just to frame the numbers, there is today a gap of about $40 per share in between the North American pricing and the export pricing. Think about the fact that every $10 of price increase represents about $20 million of EBIT. So that gives you a sense of the potential of EBIT growth in this business if we go back to an historical situation which should be the case. There is no reason for that to be different where export pricing are in line with domestic pricing.

We don't know when and how but potentially you do have this $80 million to $90 million of EBIT in price balance between Asia and North America in terms of increase.

So if you take those calculations and just total that and then add to this that we will have -- mostly likely too positive impact. We believe tax rate going forward will be lower, start by (inaudible) impact and we will have higher interest, you very quickly get into this range of $2 of EPS growth.

That is really helpful. I appreciate that run down. If I may summarize, Pierre, would it be fair to say that you don't believe you need to use the balance sheet incrementally to achieve your 2015 targets beyond the share repurchases that you have already outlined in your release last night?

No, we don't. We will most likely if we do further acquisition, what will be guiding us will be making acquisition of the type of the one we did in Epax because from a product portfolio, it fits very well our growth. But impact will be seen mostly beyond 2015 so it is going to be much more acquisition done to improve and keep on growing our portfolio rather than being used to meet our 2015 targets.

Then a quick follow-up question if I may for Paul on the accelerated share repurchase. I think in your release, you indicated approximately 3.2 million shares by the end of this month. Can you help us understand how that will flow through your share count? I think in some other cases across the sector there is less than 100% immediate realization with a subsequent true up. Is that the case here as well?

It is, it is. We get delivered about [80%] of the expected shares on day one and so that is the number that we have reference and obviously the counterparty, the bank that we have engaged with to do this has flexibility as to the timing and the pace of which they make the repurchases. And so once -- and they have a time limit on it which means they have to get it done before the end of the year. So they will come back at the end of the repurchase program and tell us exactly how many shares they repurchased and we will either have slightly more or slightly less shares repurchased. We may have a slightly different total cash payment around that $250 million but we will know the final 20% once the program is completed.

So the 3.2 is net of the 20% haircut? Okay, thank you very much.

Laurence Alexander, Jefferies.

Good morning. This is Rob Walker on for Laurence. I guess how should we think about the cash flow bridge over the next two years? Any kind of puts and takes?

Operating cash from the businesses I think historical cash generation patterns we don't expect to particularly change in any of our businesses. Clearly the sensitivities we have are around working capital clearly in our agricultural business and as I have said many times before, the faster and the more we grow in that business, the greater the demand it makes upon us for investing in working capital. We will continue to do that so that is clearly going to be a factor as it always has been.

I think Health and Nutrition has been a relatively static and standard working capital draw on the business too. So I don't expect that to change meaningfully in the future and we don't expect the Epax acquisition to make a big change to it.

The Mineral segment clearly has upside from where we sit today with profitability lower in both the soda ash and the Lithium businesses. Clearly as profitability feeds through in that business, it does feed straight through to the bottom line.

In terms of capital spending, we expect and clearly we are in a little bit of flux with peroxygens moving out and Epax and others coming in but generally speaking, we would expect to continue to spend in the $350 million range of capital spending through that period as well.

The one thing that you will see as well is our cash taxes will be slightly higher going forward. We have tended to use up most of our offsets in the US so cash taxes will be a little bit higher. We have obviously factored that into our guidance for 2013 and we will continue to factor it in going forward.

Thanks. And then just an update. What should we think for a timeframe in terms of minerals results through normalizing to that level you spoke to earlier?

We are being very, very prudent today. Let me tell you the facts we are seeing. I would be completely candid here and tell you that we have some difficulties to translate the facts we are seeing with the timing of the recovery. We have no doubt that the pricing is turning around. We have seen sequential improvement over the last couple of quarters and we are forecasting sequential improvements especially in Asia going in the next two quarter. It is more difficult to see when we go to a more normalized situation. We decided to be prudent in this forecast and not to plan to go back to a normalized situation in 2013 believing it will help in early 2014 but we have not precisely defined that.

What I was seeing first of all, you have heard [Sylvain] has been shutting down facilities which were not economical in Europe as well as shut down of capacity in Australia. We also are seeing now a significant shutdown taking place in China. Other shutdown which are extended for maintenance plan of less economical plans so we are seeing today the situation where the demand and the supply directionally are starting to tighten.

We believe Chinese producers are still selling below their cash cost but we believe they are starting to retract from export so all of the facts today are pointing toward a situation which should be going back to normal but the spirit which are going to go back to normal will also being factored by the spirit which the key market for soda ash utilization will be growing in China and Asia. And we see that some question marks.

So today, more by being prudent than by great science we have decided to be careful for the next six months as we don't see exactly the timing and believe it will be happening at this stage some time beginning of 2014. But we have not precisely defined when.

Great, thank you.

Frank Mitsch, Wells Fargo Securities.

Good morning. Just a follow-up on that last question. So at this point from a demand perspective, in Asia you are unclear as to when we will see a rebound in demand to push the soda ash price back to normal levels but sometime in the next six months is when you think that we will see that?

Yes, that is correct, Frank. We believe sometime in the next six, nine months is when we will see the demand picking up. As much as the demand picking up is with the growth, the supply-demand being balanced so it is a blend of demand together with capacity shutdown and the two together should bring an equilibrium situation where we will rebound back to more of a historical levels. So six to nine months would be something I would say is within the range.

All right. Terrific. Sticking with a mineral space, I believe you had mentioned that you expect in Q4 your Lithium margins to get back to normal levels. What are you seeing there, what gives you the confidence that you will see that pick up on the Lithium margin side?

Yes, we do. The key reason is our ability now to run the plants. We had multiple weeks where we have been able to run the ponds and to run the separation column at the higher capacity. You remember before the days when we started to make an expansion, we were producing at a daily rate of about 9.5 tons per day and today we are around the 12 tons per day production rate and we have been able to do that on a very regular basis for a long period of time.

So we are going to use the shutdown during the month of August to do the final engineering changes and the plan should be up and running toward the end of August definitely first week of September and produce for the next four months at full capacity.

We have all of the [evidence]. I do receive personally two weekly reports on the status and we feel very strong about the fact that we have the technical solutions and the engineering to run the plant at full capacity starting September 1.

That is very helpful. Thank you.

Mike Sison, KeyBanc.

Good morning, guys. In terms of Ag Products, you gave us an update on cotton and soybean. Any thoughts on sugarcane, or like Brazil as well as some of the other major crops in terms of growth for the rest of the year. I think rice and fruits and vegetables tend to be pretty important for you.

Mike, it is Mark here. We are seeing increasing sugar production down in Brazil. We are looking at probably a 5% increase in total acres. Weather is wet right now so the planting season is getting extended which is good news for us. So you can expect to see sugar grow.

Soybean, we expect to be in the 5% range as well in terms of expanded acres. But the good news there is we are expanding our presence, it is not just acreage for us, it is putting fungicides into soybeans, more insecticide so we are taking share in those segments as well. So we get the double advantage of both market share gains and acreage.

Cotton, we expect to see the biggest increase probably around about 20%. There was a significant decrease last year if you remember and now it is bouncing back quite strongly down in Brazil and that is good news for us given our position. So we are seeing significant expansions in Brazil.

Okay, great. I think last time you gave us sort of direction of where the export pricing was. It was up $30 is the announcement. Were there a more increases announced for insect, soda ash?

No, we only announced the $30 increase a while ago and that is what we are currently implementing.

And if that is implemented then, the outlook that you have for that business is what you are looking for?

Corrent, correct.

Okay, great. Just one last one, it looks like the Epax acquisition is going to be a very nice addition. Are there a lot of these type of companies with this type of technology and products that are out there that you can buy going forward?

We have a -- I say now that we have broadened the way we want to policy (inaudible) this market, we do believe there is a healthy pipeline of companies of that type or slightly bigger or divisions of companies so we are doing our homework now. That being said, you know the way FMC operates. We are going to first digest this one, successfully integrate it before we look forward for the next one. And we are going to keep moving forward in acquisitions but avoid to run two or three at the same time.

But yes, there is a healthy pipeline of opportunities which fit quite well our portfolio and I would say it is a nice range for me of cost versus sales which is bringing us well as the speed of accretion. I think that is the kind of acquisition we would like to make.

Okay, great. Thank you.

Mike Harrison, First Analysis.

Good morning. Looking at the pectins and bio colors businesses, I believe that your plan was to purchase a regional player with good technology and then build out the platform more or less organically across the rest of the globe.

Can you give us an update as to where you are in that process on pectins and bio colors? And then does the Epax business with omega-3s also kind of follow a simpler strategy or was that more global to begin with?

That is a good question. So let me start with bio colors. Bio colors we actually bought two regional players, one in Latin America and one in England. Those two companies together give us the base manufacturing and technology we need at this stage to grow in this market.

What we are doing at this stage and what the Health and Nutrition organization is doing is creating plants, smaller plants, dilution plants which will be positioned in the key markets and we currently have in place the capital investment. So we are going to be building expansion in North America and in Asia to be able to supply these markets from the businesses we have bought.

So we are following the plan as we announced it which is using the two acquisitions we have made supplemented by capital expansions which have been approved now and moving forward to expand into other regions with dilution plant.

So this one is well on its way and most of the spending will be done through capital spending.

Pectin is much earlier. We are still at a stage where we are operating the plants in (inaudible). We are learning the process. We are also developing new products, new technology to try to penetrate the high-end pectin market.

So I would say versus natural colors, we are at a much earlier stage. I think we are going to have to decide how and when we will expand these plants by sales. It will not allow us to be a major player in pectin. We will have to expand with another sizable plant. That decision has not been made. I think we are still in the early phase of our development in the pectin business.

Omega-3 is quite different. By buying Epax, we do buy two plants which have significant capacity possibilities and we are going to be leveraging our sales organization to promote further those products. So here it is a much bigger play already. It is bigger than pectin, it is bigger than natural colors together with the possibility of leverage, the two plants we have acquired through the acquisition of Epax through our current salesforce.

As we think about the cost structure in the soda ash business, what kind of benefits have we seen already from the manufacturing excellence program there and can we also get an update on the timing of the Longwall move? Is that something that is going to hit the fourth quarter?

Yes, Mike, this is Ed Flynn. I will take the second question first. Right now it appears that the Longwall move is going to happen in the beginning of October so that will be a fourth quarter event.

In terms of the price structure, we have only completed the pilot in Green River manufacturing excellence on our largest plant, our model plant, but we have seen significant throughput benefits and increases on stream time which lead to certainly greater efficiency. So we have decided to roll the program out through the rest of Green River in 2013 and 2014.

All right. Thanks very much, Ed.

Peter Butler, Glen Hill Investment.

Hi. Hey, Pierre, you are a really very conservative guy so you must be really be confident in the internal outlook at FMC to encourage Wall Street analysts to scratch out their old first call numbers and write in much bigger numbers.

Good morning, Peter. Let's talk about 2015 in terms of my confidence in where the Company is going. I know that the confidences is today for 2014 and 2015 is below our target number but I tell you, I like where we are today. I like where the Company is positioned. I believe we have a very well structured Company, much better than where we were at the beginning of the year. I believe we are going to have significant tailwind getting into 2014.

And if I look at the numbers we are capable of delivering in a period where we have not only challenges but where we have -- we made a decision which was not (inaudible) if you look at the EPS impact to remove peroxygen. We are still delivering very strong results and almost every single business is going to get into 2014, 2015 with tailwinds either because of markets or because of acquisition or because of technology or because of increased capacities.

So yes, if I look at our objectives, the one we declared for ourself in 2010 when we started this process and where I am right now in the second part of the year, I feel very strong about 2014 and 2015 and actually like where we are.

Maybe it is kind of like -- maybe it is going to sound strange but maybe it is the first quarter where I'm lowering the year target and maybe that is the strongest I have ever felt since I have been at FMC with what we have in front of us.

I had another thought, Pierre. I have been really impressed with two of your acquisitions at least, the Bayer and the Epax. And there has been a lot of thinking about your M&A program. But I think equally important at FMC is that I am really very, very impressed with the top management team you have been building, bringing in people from hither and yon and maybe you could highlight a few of what these guys are doing to reduce your fixed cost and improve your supply chain, manufacturing efficiencies, your acquisition program, your ag, etc. You have an opportunity to highlight a few of these acquisitions.

Thank you very much, Peter, for your comment. I never talk about what the others are doing because I want to take all of these credit. But no seriously, we do have a great team and let me say a couple of words about what you have said because I think you made an important statement.

This Company has been growing over the last couple of years through tremendous changes. We do believe we are going to have a state of the art procurement organization today and it is only the beginning of the savings. If you look, we are only addressing partially our spending and generating significant savings.

Our supply chain has improved across the Company and in manufacturing excellence and we see it in soda ash today already this 10% capacity increase finding a plant within the plant with minimum capital investment is working and I can tell you we are going to see some significant impact going in 2015.

I think, Paul, today is also undertaking something which -- and you have seen the cost and corporate cost increasing. That must be where it is coming from but Paul is undertaking right now a very significant change in our finance organization. That will lead to significant savings and a stronger organization as we grow. We believe that what he is doing we will be able to run a much larger company with the same organization we have today and decrease our spending as a percent of sales.

And last, I like to say the team has put in place tremendous organization today in Latin America, in Asia and most in China to grow further. So your comment is welcome and yes, we have made some -- I feel good because we have made some great progress across the Company from an operational standpoint.

Sounds good. Thanks for the help.

Dmitry Silversteyn, Longbow Research.

Thanks for taking my call. A couple of things. First of all, this manufacturing excellence program in Green River and the debottlenecking and the productivity improvements that you are able to get. But do you have an idea of what sort of the growth in production will be coming out of that program once these initiatives are implemented throughout the Green River facilities? Are we are we looking at 100,000 tons a year or are we looking at something more or less than that in terms of incremental soda ash volumes that you will be able to get?

I think what we are going to be able to get here is about what we will be able to get when we implement the same program. But I would say today we produce somewhere -- last year we produced around 3.6 million, 3.7 million tons per year in the plant and we are expecting manufacturing excellence between the ramp up this year and through next year about 10%. So we could expect 300,000 to 400,000 tons additional versus where we were last year.

This is why when I bridged to 2015 number in Vision, think about the $40 per ton I talked to you about and think about an additional 300,000 tons of production. That is what we are talking about.

So you mean you are basically able to get about probably 50% of the volume that you would have gotten from the restart of the remaining Granger without laying out the $200 million CapEx for it?

Exactly.

Wow, okay. And then secondly, you talked about peroxygens impacting you for the year about $0.15 to $0.20. Can you give us an idea what the first half impact was?

Yes. Roughly the first half was the same in each quarter.

It is about the same in each quarter. About half of that. It is reasonably evenly spread on a half year because the quarters move around. But on a half year to half year basis, it is roughly the same between the two parts.

Again, just let me just repeat though you won't actually see that coming out of our report numbers until Q3. When you see the Q3 numbers, peroxygens is going to be removed for the full-year; the entire year will be remove. So the moment all of the numbers include peroxygens for Q1 and Q2 but from now on everything you see from us will exclude peroxygens from every period.

I understand that, Paul. I was just trying to look and see how close my second half peroxygens expectations were to what you were expecting.

Okay.

I appreciate it. Thank you. That is all I have.

Thank you very much. So let me now close. I think to conclude, 2013 is shaping up to be quite a year of change but we see our Company emerging in a stronger position than when we started the year.

Ag Solutions and Health and Nutrition will each deliver another record year of encouraging profits. Minerals will finish a turnaround in midterm operations and continued recovery in export pricing. We will integrate the Epax acquisition and complete the peroxygens divestiture.

As I said before, we like where we are today and we will be very well positioned to start strong in 2014 with a structure focused on our core competencies and advantaged business. We remain firmly on track to meet or exceed our Vision 2015 targets. We are executing a growth strategy across the enterprise pursuing the right opportunities to expand our portfolio and delivering premium shareholder return.

Thank you very much for your time and your attention.

Thank you. This concludes the FMC Corporation second-quarter 2013 earnings release conference call. You may now disconnect.