富美實 (FMC) 2013 Q3 法說會逐字稿

Good morning, and welcome to the third quarter 2013 earnings release conference for FMC Corporation.(Operator Instructions). I will now turn the conference call over to Miss Alisha Bellezza, director of investor relations for FMC Corporation. Ms. Bellezza, you may begin.

Thank you, Tony. Good morning everyone. Welcome FMC Corporation is third-quarter earnings call. With me today are Pierre Brondeau, President, Chief Executive Officer, and Chairman, who will review our third-quarter performance and business segment results; and Paul Graves, Executive Vice President and Chief Financial Officer, who will present select financial results. Pierre will conclude with our 2013 outlook. Following his comments, 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.

Today's discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors including, but not limited to, those factors identified in our release and in filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's information. Actual results may vary based upon these risks and uncertainties. Today's discussion will focus on adjusted earnings for all income statement and EPS references. A reconciliation and definition of these terms, as well as other non-GAAP financial terms that we may refer to during today's conference call, are provided on our website. Our current 2013 outlook statement, which provides guidance for the full year and the fourth quarter of 2013, can also be found on our website. I will now turn the call over to Pierre.

Thank you, Alisha, and good morning, everyone.

Let's begin with the third-quarter results. Total Company sales of $957 million increased $136 million, or 16% versus the third quarter last year, led by strong performance in our Agricultural Solutions segment. Regionally, Company sales were up 29% in Latin America, 11% in North America, 8% in NEA, and 6% in Asia. Compared to the same period last year, gross margin of $307 million was up by 3%. SG&A and R&D expenses of $144 million were up 4%, adjusted operating profit of $163 million was up 2%, adjusted earnings of $110 million were up 3%. Earnings per limited share of $0.82 per share were up 7% compared to a year-ago quarter.

Now, let me turn to segment performance starting with the Agricultural Solutions. Third-quarter sales were $530 million, up 25% from the previous year. Statement earnings for the quarter were $114 million, 13% over the previous year, as volume growth was partially offset by regional mix, investments in growth initiatives, and unfavorable currency impact. The Latin American season began strong with a rebound in Brazil's cut in acreage and their expanded policy patient insurgence.

In Asia, our direct market access, [Force], contributed to continued sales growth, while weaker past pressures in North America compared to last year reduced rescue insecticide again.

We continue to outpace market growth. The combination of our market positions and equally advantage products and strong customer relationships drove sales and earnings growth in the third quarter. M&A and strategic partnership have played an important role in our Ag Solutions vision 2015 growth strategy, and the third quarter was no exception. We announced three transactions during the last few months that will support near- and long-term earnings momentum. In August, we signed a licensing agreement with Belgian Crop Science for access to valifenalates. This product is another addition to our expanding front side portfolio used on high-value crops. It is already registered in sold in several countries, and efforts are underway to continue global expansion.

As we look toward the end of the decade and beyond, we believe growers will need a combination of steady chemistry and biologically-based products to enhance yields and prevent resistance.

Earlier in this quarter, earlier this month, we completed two important transactions which, together, create the foundation for a new biological crop protection platform. The ag biological market is estimated at about $1.5 billion to $2 billion to date and is expected to grow 10% to 15% per year for the rest of this decade and beyond. This is why we think now is the right time to invest in the biological space.

As many of you are already aware, we apply a unique business model in the crop production chemical space that helps us meet the needs of growers worldwide. As we enter the biological arena, we've taken another unique approach to building our capabilities. We've partnered with Chr. Hansen, the biosciences company, with industry-leading expertise in screening fermentation and process scale. Over the last several years, we've had a successful and productive relationship with Chr. Hansen on several projects. They are a first-class organization with deep expertise in biological, and this new alliance represents a natural evolution of our relationship.

We have also acquired the assets of the Center For Agricultural and Environmental Biosolutions. This organization, based in the Research Triangle Park, North Carolina, has amassed an extensive laboratory of microorganisms and a pipeline of biological products in various stages of development. This acquisition also brings proprietary discoveries in screening technologies, intellectual properties, and a team of scientists with strong a background in biological. We are building a novel end-to-end biological crop production platform by bringing together Chr. Hansen's biological capabilities and fermentation expertise, [Yipe's] extensive library of microorganisms and product pipeline, and FMC's core strength in formulation science registration, CO development, and marketing. This biological discovery and development model will allow us, FMC, to exclusively introduce novel products through a global market like this.

Let me now turn to our Health and Nutrition segment. For the quarter, sales of $190 million were 10% higher than last year, with segment earnings of $41 million, up 2% year on year. We generated volume increases in our food business, price increases across our core businesses, and partial quarter contributions from Epax's acquisition. These were partially offset by lower volumes in pharmaceutical markets spanning in recently acquired businesses, manufacturing excellence investments, and increases in certain raw material costs. Last week, we announced price increases to offset these raw material costs.

In our food business, growth was driven mainly by strong demand for functional ingredients in Asia, the majority of which was MCC. Over the last several years, the functional ingredients market in Asia has grown 12% annually. Our new MCC [Thailand] manufacturing facility will support this critical growing market. Construction is on schedule, and the plant is expected to be online late next year.

In the Pharma market, we saw a deceleration in the quarter, the pace of which caught us a little by surprise with first-half revenue growth, we had historical levels, we expected a slower second half of the year. However, it appears that the slowdown all arrived in a single month. Since then, we have seen the patterns return to normal levels, such that for the full year, we expect growth of around 6% over 2012. This is still twice what we typically see for the industry as a whole. In the third quarter, Epax will make every business operated as part of FMC for two months. We are pleased with the performance so far and consider the reaction to the acquisition has been very positive.

As I have described before, we are focused on the safe and successful startup of our second Omega-3 plan in Seal Sands, U.K. This facility will produce ultra-high concentrations pharmaceutical- and nutraceutical-grade products using proprietary technology. Start-up plans are on track, and we expect production from this facility will contribute to fourth-quarter results. Finally, you may be aware that, on October 15, a major earthquake occurred in the Philippines not far from our Health and Nutrition manufacturing facility in Cebu. Thankfully, no employees or contractors were injured. However, operations were temporarily suspended to assess potential facility damage. We are pleased to report that, as of yesterday, production at the Cebu site was safely return to full operation and the business impact has been nominal.

Now moving on to Minerals. Third-quarter revenues of $238 million increased by 6% over the previous year, and same-month earnings of $28 million were down 20% compared to the same period last year. Volume gains in soda ash and lithium were offset by lower average soda ash export pricing compared to last year. In alkaline chemicals, revenue of $182 million was 5% higher than last year. The result of additional volume in the quarter. Current alkaline market performance is consistent with our expectations. [ANSAC], export pricing increased sequentially in Asian markets, where prices are slowly increasing. ANSAC will continue to implement the price increases announced early this year, and we expect to continue to see upward movements. But on a year-over-year basis, average export pricing remained significantly below 2012 levels and resulted in lower profitability for alkali compared to the third quarter of 2012.

Accompanying the unfavorable pricing comparison, a (inaudible) operations encountered unusually poor mine conditions for the quarter. The (inaudible) panel we were mining was filled with insoluble material. These poor geological conditions are extremely rare, and the non-tronan materials significantly disrupted both the mine and plant operation. Given these conditions, we elected to perform additional maintenance on several mechanical and boiler operations at our Green River site, resulting in one-time costs in the quarter. In total, this wall of factors resulted in a $6 million hit to the segment's earnings. The good news is that we have finished mining in that section, and we are currently completing the scheduled longwall move to the next mine section.

In lithium, revenues of $57 million were up 8% compared to last year. But earnings were flat year on year in both 2012 and this year. Third-quarter financial results were depressed due to the operational issues that we have discussed. However, for the second consecutive quarter, plant operation in Argentina performed exactly as planned. During our second and third quarter shutdowns, we implemented process changes that fixed operational issues. In September, we sustained production rates 25% to 30% above pre-expansion periods. These rates were confirmed through the month of October, and we are confident that our operational problems are firmly behind us. We are now increasing our focus on the commercial side of the business to maximize profit from additional available volume and downstream product mix. Looking ahead, we expect that our lower manufacturing costs and optimized product mix will return lithium to meeting EBIT margins in the fourth quarter.

In summary, Agricultural Solutions continued to outperform the market, and we invested in a new platform that will position FMC to become a market leader in biological crop protection. Health and Nutrition grew with contributions from the food and Epax businesses and will remain on track with the construction of our new MCC [talent] plants. In Minerals, despite lower year-on-year segment results, lithium successfully completed operational improvements at the Argentina facility insert, and soda ash pricing sequentially improved in Asia with market indications pointing to continued price recovery.

It should be clear that this was a difficult quarter. We encountered unforeseen headwinds in currency movements and one-off costs in alkali that reduced our operating earnings by almost $20 million. And yet, we still delivered EPS that is well within our guidance range. This performance gives me even greater confidence that the targets for 2014 and 2015, which we outlined during our last earnings call, are firmly in sight.

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

Thanks, Pierre. Today I will review some of the financial highlights of the quarter, including capital additions, M&A activities, and how we are now accounting for the peroxygens activities. I will also describe the impact of foreign exchange volatility on the quarter.

Let me start with the accounting treatment of peroxygens. The divestiture process itself remains on track, and we expect to announce the results of this process by the end of the year. All of the financial information that I refer to today excludes items associated with peroxygens, which is now accounted for as a discontinued operation. This is the first quarter that we are presenting our results this way, with the reclassification also impacting our balance sheet.

You will note from our financial schedules that we have taken a charge to write down assets of the business, as required under current GAAP rules. This write-down was driven in large part by the accumulated foreign currency translation adjustments, or CTA, which currently sit on our balance sheet. These CTA are not strictly a peroxygens matter, as they are related to the former FMC Foret operations. When we restructured Foret a few years ago, a relatively large CTA balance was left behind and will now have to be written off to the income statement when we exit peroxygens. We are required by accounting rules to include this CTA balance when we assess the recoverability of the assets held for sale. So we therefore reduced the value of these assets by approximately $50 million after-tax. There are no cash implications of this write-down, and this does not impact our adjusted earnings or adjusted EPS.

Capital additions in the third quarter was $75 million, and year to date we have spent $153 million on capital projects. We now expect that, for the full year, capital spending will be approximately $300 million compared to our original expectation of $350 million. This reduction is due to two primary factors. First, we are now excluding the spending related to peroxygens; and second, we're delivering many of our projects for less than originally budgeted. So basically, we are completing the planned investments at a lower aggregate cost than originally budgeted.

From an M&A perspective, we announced two acquisitions, the valifenalate in CAEB, and one strategic alliance with Chr. Hansen. We have not disclosed financial details on these transactions. And while none of them involved meaningful upfront cash outlays, they will all require additional investments largely in the form of future R&D spending.

So now let me comment on the impact of foreign currency movements during the quarter. We saw some large and rapid swings in certain currencies; specifically, changes in the exchange rates of Brazil, India, Australia, Indonesia, and Japan relative to the US dollar were unfavorable to our results. In total during the quarter, unfavorable foreign exchange movements reduced our earnings by approximately $12 million, or approximately $0.06 per diluted share, all of which was reflected in the results of our Ag Solutions segment. While our earnings are typically protected from major currency movements through a combination of currency hedging and pricing actions, the movements we saw in the quarter were more rapid than usual. We are confident that we will be able to adjust pricing to reflect these currency movements in the coming periods.

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

Thank you, Paul.

Let's now turn to our outlook for the fourth quarter and full-year 2013. In the fourth quarter, we expect to deliver adjusted earnings of $0.90 to $1 per diluted share, a 23% increase, versus the fourth quarter of 2012 at the midpoint of the range. Agricultural Solutions earnings will be up in the mid- to high-teens percent, reflecting strong growth in Latin American markets and potentially early-season demand in North America. In Health and Nutrition, core business growth, combined with Epax's contributions, will increase quarterly earnings in the mid-20% over last year. And in Minerals, we expect continued sequential improvement in Asia's soda ash export pricing as well as improved lithium margins. However, lower average export for the ash prices will decrease segment earnings by mid-single-digit percent compared to the fourth quarter of 2012.

Overall, our full-year forecast remains consistent with the previous quarter's earnings call. We expect adjusted earnings to be between $3.74 and $3.84 per diluted share, a 12% increase over 2012 at the midpoint of the range. We anticipate another strong finish in Agricultural Solutions based on favorable market conditions and share gains in Latin America. Brazil's cotton [plantadeira] has rebounded, and we are gaining share in the rapidly expanding Latin American soybean market.

Our newly introduced crop protection products are growing globally, and demand resistance management products in North America remains strong. Taking these factors together, we anticipate segment earnings will be up mid-to high-teens percent compared to 2012. In Health and Nutrition, we expect segment earnings to increase in the high single-digit percent, driven by continued growth in our core market segment and partial-year benefits from our Epax acquisition. This will be offset somewhat by costs associated with acquisition and manufacturing excellence initiatives. Minerals segment's earnings are expected to be down in the mid-20s percent due to lower average export soda ash prices and the impact from lithium's operational challenges earlier this year. We are confident that our lithium operational issues are behind us, and we expect lithium operating margin to improve in the fourth quarter, a positive sign as we had into 2014.

An alkali chemicals, we expect the North American market will realize a low- to mid-single-digit [darpatones] increase in pricing versus the prior year, with volumes also steadily up. We anticipate Asian export markets to sequentially improve, but the pace of the improvement remains difficult to predict. Finally, manufacturing excellence program in alkali will continue to deliver additional production volume that will offset some price weakness.

Now I will turn the call over to the operator for questions.

Thank you. (Operator Instructions) Kevin McCarthy, Bank of America Merrill Lynch.

This is Chris Perella on for Kevin. Pierre, could you size your ag biologicals business and maybe go into more detail on how the -- you bring a unique manufacturing process to that? Is that -- the relationship with Chr. Hansen growing the microorganisms that you have gotten from CAEB?

Yes, in terms of the manufacturing process, we intend to develop the products with our CAEB acquisition. And the fermentation process for manufacturing will be done within Chr. Hansen factories; so they will be producing the product for us, which will then be formulated and commercialized. From a size standpoint, I think for us we are looking at a nascent market. What is very important is -- when you look at the contribution-less market, we are talking a 2017 to 2020 to really see sales taking off, but it is not of a major impact in the short term.

Thank you. And just a quick follow-up, the overall crop protection market -- what do you see as the growth in that market this year with the recognition you're doing appreciably better than that?

This year, if you look at the crop protection market, the chemicals part, I would say, to meet single-digit market growth globally. So 5% would be the number.

Okay. Thank you.

And once again, that's the market, that's not our performance. We are growing much faster than the market growth.

Michael Cox, Piper Jaffray.

My first question is on the currency headwinds. I'd be curious how much of the -- of your guidance range was altered by currency. You noted $0.06 in 3Q. How about in Q4?

So in Q4, I think -- you know, the thing which was surprising, and I'll have Paul add to my comment, but what happened, it was a very abrupt movement, especially in Brazil, where the currency changed and hit us by about $13 million. So $0.06 in the third quarter was the currency movement in ag. Which revert back, and today I'd say we are about on top of our edge, so we don't have much of an impact forward in the fourth quarter. Paul, if you want to add anything to that?

Look, I think Pierre just sized it perfectly. There's no adjustment in the Q4 forecast to reflect expectation of further foreign currency movements. And when we look at where the rates are today, it's seesawing around a little bit, but we don't see today that same impact coming through in Q4 that caused in Q3.

Okay, that's helpful. And my follow-up question is on North American ag. Last year at this time, we had an early harvest, high grain prices, and it seemed to pull demand in Q4 through the dealer channel to be fully stocked with crop protection chemicals. I'd be curious how you're seeing the demand environment from the dealer perspective as we look at Q4 this year, given those factors have reversed.

Hey Michael, this is Mark. Yeah, you're absolutely right. From last year, it was a very positive start to the season, and actually we are seeing very similar trends. From our perspective, you know that we are heavily involved in the resistance side of North America. So for us the season does come early as we look at corn route one resistance and putting our products down. So for us, it is a little early this point, but Q4 could be very good for North America as we roll into the early part of the season.

Very good. Thanks a lot.

Sandy Klugman, Susquehanna Financial.

Question for Mark on North American ag. You've obviously seen strong curbside demands combat glyphosate-resistant weeds. Looking forward, how do you anticipate that this demand is going to be impacted by the launch of dicamba-tolerant and 24d-tolerant traits?

Obviously, resistance has been very important for the selective herbicide that we have. We don't see that slowing down at all, even with the introduction of new traits. What we do see is the resistant acres continuing to develop, especially for glyphosate, and we will be part of that program. Obviously resistance does tend to come rather quickly now, we all know that. After a number of years, we see resistance building across a number of the regions, so we would expect that growth to continue as we move forward of the next few years.

Okay, great. And just a similar question on capture. I mean, you have more hybrids with two modes of action against the low-ground pests. You have commercialization such as Mon's CRW3 product, which is going to use [RNA AI] technology as another mode of action against corn root worms. Do you see any threats from these products going forward?

Wall, you know, Sandy, it is competitive market out there, but we were one of the first in with a patented product for the application side, so we took significant market share. We continue to see that grow, and we're certainly not sitting on our laurels in terms of how we develop that segment, make it easier to use. If you think about how fast the planting occurred in this season, given the weather conditions, our products had to go down in an easy manner so the growers could use them very easily. We are going to progress that so, yes, there will be more competition, but I'm very confident with the branding that we have in the marketplace, our ability to capture new acres, and bringing new technologies to play that will continue to grow our share.

Okay, great. Thank you very much.

John McNulty, Credit Suisse.

Just a quick question on the Health and Nutrition side with the shock, it sounded like, on the pharma dip down; and I guess it sounds like it came back up. What drove that? What is going on with that business, and how we should think about the volatility in that going forward?

I think it was a fairly unusual situation. It was an older pattern, and we actually saw a very strong first couple of quarters, which were out of norm. We were expecting the slowdown. And just people were -- in their manufacturing were stocking more product than needed, looking at the growth of the industry. But usually, when this kind of situation happens, you see things are being recalibrated over a longer period of time. For some reason, some of our very key customers had a pretty abrupt control of stock, and all of that happened during the month of August.

So that was the biggest surprise for us, was not the fact that the second half would be growing slower than the first half, which was above 10% growth rate, which is above our normal rate for the full business, but the speed at which they did their inventory corrections. It was abrupt, but we are back to normal patterns. So if you knew the year is going to close very much where we are expecting it, around a 6% growth rate, but it's got to be done with a April file, which is, from a quality basis, a bit unusual with a 10% growth rate -- 10%, 11%, the first half and maybe single-digit in the second half.

Okay, great. And then just as a follow-up, when I look at the balance sheet, you had a pretty big spike-up in your short-term debt. And I know -- I guess you had indicated earlier in the year that if you thought peroxygens was a lot, you would start buying back stock pretty aggressively knowing that, and you would take on the debt too. Is that what that debt is for, or is there something else behind it? Because it does seem like a pretty big surge. And how should we think about future share repurchases if that was what was driving it?

Sure, let me answer that one. So the spike in the short-term debt is as follows. And first of all, let me just touch on each of the points -- we bought Epax, and we did a share repurchase, as you know, in the second quarter that we announced. Both of those were funded in the short-term debt market. And the reason for that is that we launched a new commercial paper program earlier this year, and we want to make sure that we got that program up and running; we had enough volume going through that CP program to establish our name in the market. It is certainly a much higher level than we will intend to keep it at. You should not assume that short-term debt level stays at those elevated levels that you see today. We have obviously proceeds to come in from the (inaudible) divestment, and we will be looking at a mix of short- and long-term debt, as we always do, later this year and into early next year to make sure that we don't get those balances to place that we're not comfortable with.

Great. Thanks very much.

Michael Sison, KeyBanc Capital Markets.

In terms of ag, can you give us an update on how the fungicide business is doing this year as one of the areas of growth? Maybe size it by the end of the year and what type of run rate growth we will see going forward?

Yes, thank you, Mike. I will let Mark talk about it, but it is one of the positive developments. Part of our -- one of our strategies first to grow a fungicide market. You know, we've made some acquisition of key actives from there, and those are very successful. So, Mark, if you want to give some color to the question.

Yeah, Mike, as you know, we've been putting a lot of effort behind growing the fungicide side of our business. It is where, I would say, our portfolio needs the largest part of growth. It's typically about 8% to 9% of our overall portfolio, and obviously we want to get that up to a number that's more representative of where the market is. I would say we are having great success in Brazil, especially on the soil with newly introduced products. We're seeing activities in Europe as well. Overall, Asia should be a good market for us; we've got new products going in there. The products we bought from Bayer CropScience are seeing acceleration in China, especially this year. So overall, I would say we're very confident that that market will continue to grow for us. It's becoming meaningful, it will become more so as we go through the rest of this decade, for sure.

Okay. And then, Pierre, when you think about Health and Nutrition, you've got some capacity coming on stream heading into 2014. You had some cost and unusual order patterns here in 2013, and you're making investments for some of your businesses. What type of growth rate do you expect that segment to return to as we head into next year or over the next couple of years?

Sure, when I look year on year, we believe, especially if you include the Epax acquisition, we will be in the teens with 10% to 15% growth rate. With the core business, if you exclude the acquisition of Epax being in the high single digits. So it is a business today; it's been a business where we have made a lot of investment changes, spent a lot of money in integration launching the new plants. I think we're going to be demonstrating a very strong performance in the fourth quarter, and we're going to get into next year, I would strongly hope, with the MCC plants and leveraging the Omega-3 acquisition that we're going to be in the double digit growth rate.

I know there was -- there is potentially some questions around the growth rate of this business for the year which seems to be a bit lower than what was our guidance on the less quarters -- I'm talking for 2013. You know, we just acquired Epax, and a big part of the growth of the business will come from a new plant, and I think that's where we should have some question mark around the timing. We were hoping initially before we did the acquisition and through the dividends that we could have a startup of the plants around the first quarter. It's looking now as an early November -- everything is going well, the plants, the technology, everything is exactly where we thought; but you know, when you start a new plant, those kinds of things happen. So that's the only thing if you see some changes in our forecast; it's only due to a timing around our Epax plant. So, for me, 2014 is the year where this business will benefit from all of the acquisitions we've made as well as the investment in the core business allowing to have the growth we can have.

Great. Thank you.

Mike Harrison, First Analysis.

Pierre, you noted a deceleration in pharmaceutical demand. It sounds like that's just temporary. Are there any factors that you're concerned about that could be a longer-term concern there?

Right now, we do not see anything which would be concerning. I think it was a pattern -- you know, one of the issues you have when you are in the pharma business that we are, we have some very big customers. And if some of those customers would have a very different pattern to order products and then correct on whatever stock they had, you can see some quarterly numbers which would be surprising. I think that the only surprise is some of them over ordered and changed their -- and correct their inventory situation very abruptly in a month, which they usually don't do. But I do not see anything which seems to be a general direction for the business. I have to say, and maybe I'll ask Mike to add some color to this comment, I think the order pattern we are seeing now going into the fourth quarter are back to the more normal rates we're expecting for this business.

Yeah, that is certainly correct, Pierre. As we have seen, our October sales have rebounded into the more typical growth ranges, and we anticipate that to head right through into through the fourth quarter.

And then just to continue on the Health and Nutrition, what raw materials are moving? How much are they moving? And the pricing action that you announced, is that part of the course of normal price increase announcements, or was it kind of an unusual announcement for you?

Well, I think in general, it was a relatively normal price increase announcement. We are always seeking to ensure we are offsetting the higher input costs. The most significant raw material input cost pressure we're saying is actually in seaweed for both our carrageenan and alginate business. So the recent price increase announcements, while wide across our Health and Nutrition business, the largest raw material that we are seeking to offset the impact from are really the seaweed-based raw materials.

On this question, let me add some numbers. The third quarter, we faced a almost $5 million just for the Health and Nutrition business increasing raw material costs. So that was a headwind -- we are used to this kind of fluctuation in this business, and we usually are capable with our technology to push this cost increase into our customers. But every time you have some abrupt change in pricing, you always have a phase where there is a timing issue, and price increases were abrupt this quarter. We announced, lately, a price increase, and we're going to be recovering what we lost. But it was about $5 million of headwind in the quarter for raw materials.

All right, thanks. And the last question I have is related to the lithium process changes. When you talk about being in a run rate that is 25% to 30% above pre-expansion, did you expand your pond capacity by 25% to 30%, or did the process changes enable high recovery of lithium from the overall brine stream?

So the way we are operating, actually, it's almost a bit of everything. We do have -- we have been expanding our pond, but we also have some technology for -- to pre-concentrate the lithium in some pre-concentration pounds. So we are able to feed the columns with higher concentration product, so it's a combination of process change, higher lithium concentration in pond expansion. And to give you the numbers, just to be very specific on daily rate, before we were talking about the pre-expansion, we were operating at rates which were around 9.5 tons per day, and we've been operating over the last two months, September and October, continually at 12.5 up to 13 tons per day.

All right, then, thank you very much.

Laurence Alexander, Jefferies.

In the ag business, if you look at the share gains you've had this year, if you straight-line them into next year, how much of a tailwind are they? And in the biologicals area, is the longer-term objective to become a vertically integrated clearinghouse for biologicals or -- how are you approaching that business model?

Could you repeat the end of your question biological? You just broke a little bit.

Sorry. On the biological, is the longer-term goal to become like a vertically integrated in terms of driving the R&D and the production and the marketing in-house? Or are you going to eventually do an analogy to what you've done on the chemical side and outsource through totaling agreements?

On the biological space, I think we are still operating almost with the kind of business model we have today where we do have today -- we do have the active ingredients which are produced by tall processers, and then we do the formulation. You can think about a model, which is about the same, where our pond accretion enhancement will be the manufacturing arm of the alliance and producing those active ingredients. Instead of being chemical, those actives will be biological, but it will be the same thing. I think the only difference versus our current business model, in terms of vertical integration, is that today, we do not do active ingredients research per se. Where, in that case, if you consider the new biologicals active, we will be doing this research.

Now, it makes sense with our business model because the technology to develop biological actives is not as involved, intensive, and long as it is for chemicals. So your question is very appropriate. It's not a fundamental change of our vertical integration; we will still be using a partner to produce the product but will be more involved in the active ingredient research for biological than we have on the chemical side.

Hey Mark, do you want to add or answer the first part of the question -- growth rate with the penetration?

Yeah, sure. Lawrence, to answer your question on the first part, which was the kind of growth rates going forward. When you look at what we've put forward for Vision 2015, and we are still very much on track for that, 2014 and 2015 have to grow to the mid- to high-teens, and we still see that going forward. Our run rate for new products introduced keeps climbing year on year, and we have a plan by 2015 to be in the 30% to 35% range. A lot of that is through formulation signs that we apply into the marketplace, further penetration into [soy], and other crops around the world. So we feel very good about that growth rate going forward through 2014 and 2015.

On the biological front, Pierre pretty much had it nailed, we are going to be in research for biologicals. It's very important for us. We believe it's a much faster approach to bringing new actives to the market. Plus the fact that, with our formulation capabilities and market access, we believe there is a real space and a growing space for synthetic chemistry and biologicals together. I think they're going to have a synergistic effect, which will bring new modes of action that will allow us to once again expand our market access and penetration.

Peter Butler, Glen Hill Investments.

How do you guys see the global soda ash capacity in the second half this year and next year in light of the -- the synthetic producers have very high costs and a very high inflation rate on costs, and you hear rumbles about shutdowns, etcetera. What does your survey show on capacity coming on here?

Thank you, Peter. Let me start to answer that, and I'll ask Ed to complete my answer. But directionally -- and that is one of the reasons for which we were able to deliver higher average domestic price here in North America and we are seeing sequentially, even if it is slower than what we're expecting, sequentially increasing price in the export market and mostly in Asia, is because we are seeing a tightening of the supply demand. It is a combination of synthetic plants being shut down and the latest one where the plants from -- the announcement from Solvent. Some Chinese plants shut because of environmental situation.

And a demand, the market we are serving -- if you look to the -- especially in China, and the growth is being driven by China today -- but, especially around the glass packaging, [Flat] glass detergent, those markets also have been growing maybe more strongly over the last few months. So we see a tightening of the supply demand, which is creating an environment where we are able to reestablish pricing which are more in line with historical pricing. I think the soda ash market is going to grow by 5% this year -- or 3% to 5% this year, mostly because of the demand on the market. Ed, do you want to add something to this conversation?

Yeah, hello, Peter. Let me just add a little bit -- you are correct on the synthetics, and we've begun to see some of them shut down. Pierre mentioned that Solvay announced the shutdown of their Portugal plant in Q2, Q3. They also announced a rebalancing of their Italy operation around the same time to balance supply and demand. In Australia, Penrite shut down in the third quarter. Also, the Turkish producer Eddie [Soto] announced that their Beypazari expansion will be delayed and won't be fully running until 2016. And they also announced the further expansion of Kazan will be delayed until 2017, 2018. Tata in the UK recently announced that they are evaluating shutting down their Winnington, UK plant; they haven't made a decision but they notified the Works Council. Pierre referenced the environmental issue with the Chinese [Juve] plant, which is a 1 million-ton plant, was shut down in third quarter because of a fish kill and now is running again only at about 30% capacity.

You mentioned some rumors. There's a rumor that Tsingtao plant in China may shut down -- that's an 800,000-ton plant. We did see the Chinese export price rise in September from $191 in August to $195, and we are seeing Chinese industrial production stop its decline in the first half of the year and is beginning to climb again back over [10]. And specifics that Pierre discussed on what we're seeing in Chinese domestic demand, auto production is up 12%, flat glass is up 10%, container demand year over year is up 4%, and detergent is up 13%. So we are seeing both supply restrictions or shutdowns that I don't believe have worked their way into the marketplace yet in terms of putting less soda ash on the water, and we are seeing demand increase inside of China. I hope that helps.

Yeah, that was very helpful. Thank you. My follow-up question is, I guess I can't write fast enough or comprehend -- you mentioned that the third quarter was difficult because of unexpected costs. And you mentioned that in sum that this cost you $20 million, and then later on you talked about the currency headwind being something like $12 million or $13 million. Is the $12 million or $13 million currency negative part of the $20 million, or could you just go through some of the bigger pieces of the $20 million?

Yes, Peter, if you look at the headwind, when we talked about $20 million, we were referencing mostly to two things. One was the $12 million to $13 million currency impact and the $6 million one-time cost we had to face in the minerals business. That was dimensioning. I mean, I could add also, we had a $5 million headwind on the raw material pricing for Health and Nutrition; we don't do that as a one-time headwind because we are used to those movements, and we [re-color] that with price increase in the [full-year] quarters. And you know that when price will go back down, cost will go back down. We'll keep the price up for a little while and get this money back. So the one-time $20 million there is mostly the currency, $13 million there is in the one-off time with the -- on the minerals business.

Okay, well, thank you for your help.

Frank Mitsch, Wells Fargo Securities.

Can you talk about the demand side of the equation? How undersupplied is that market? Room for more? And what your thoughts are there.

Yes, the demand is fairly where we were expecting it. There is the market supply demand is about balanced. I think we're operating at about 85% of the demand, so there is no major chance in the way we are looking. The big question mark is still how big electrical vehicles will be, but it's a post-2015 question. I'd say the commercial side is not as much a market change than it is for us to get back in this business with the right mix of product and more sales. We've been under-supplying our customers versus what they wanted for a couple of years or a year and a half; most of the contract are one-year contracts. We are working our way back -- we do have a very strong reputation around quality and are really viewed as one of the top suppliers from the quality standpoint. So some of the customers are more than welcoming us as a strong supplier, but it's more of a net fancy commercial strategy that in it is a supply demand situation in the market. It's still a market which is growing today in the 6% to 8% range per year.

Terrific, thank you. And then obviously you mentioned before that you are on track for peroxygens by year end. At this point, we pretty much were set with the portfolio at FMC; you wouldn't anticipate any other major changes to we have right now?

For now, no major changes. But, you know, as any good management team, we always look at our portfolio to make the right decision at the right time. But right now, we have a three-segment, stable organization.

Thank you so much.

Thank you. And at this time, I'll turn the conference back over to Mister Brondeau for closing remarks.

All right. Thank you very much. In closing remarks, I would like to say that we are pleased with the performance of the Agricultural Solutions business, which continues to outpace market growth and will deliver the 10th consecutive year of recall earnings. We're expanding our portfolio of chemistry and investing in a premier biological platform to ensure we continue to deliver these results. The Health and Nutrition business is well-positioned to deliver greater revenue and earnings growth going forward. Our core markets continue to perform well while acquisitions, especially Epax, broaden our offerings and contribute to this accelerated earnings growth. Health and Nutrition is on track to deliver a ninth straight year of recall earnings performance, and the fourth quarter will demonstrate the momentum in this business, which will continue in 2014. Our Minerals business is recovering, with export prices increasing, and lithium operational improvements successfully implemented. This business should also experience strong, positive momentum going into 2014.

Despite what has been a challenging 2013, we expect to deliver another solid performance with 13% revenue growth and 12% earnings per share growth. We remain confident that all our businesses are aligned to finish this year in a position of strength. As we enter 2014, we expect business fundamentals to improve over 2013, giving us confidence that we firmly remain on track to deliver our Vision 2015 commitment. Thank you very much for your time and attention.

Thank you. And this concludes the FMC Corporation third-quarter 2013 earnings release conference call.