富美實 (FMC) 2014 Q1 法說會逐字稿

Good morning, and welcome to the first-quarter 2014 earnings release conference call for FMC Corporation.

(Operator Instructions)

I will now turn the conference over it to Ms. Alisha Bellezza, Director of Investor Relations for FMC Corporation. Ms. Bellezza, please you may begin.

Thank you, Keeley. Good morning everyone, and welcome to FMC Corporation's first-quarter earnings call.

With me today are Pierre Brondeau, President and Chief Executive Officer and Chairman, who will review our quarter performance, business segment results, and provide an update on our 2014 outlook, and Paul Graves, Executive Vice President and Chief Financial Officer, who will present select financial results. Pierre will conclude with an update on the plan to separate into two companies. 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 on 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 2014 outlook statement, which provides guidance for the full year and the second quarter of 2014 can also be found on our website. I will now turn the call over to Pierre.

Thank you, Alisha, and good morning, everyone. In our release, you saw that we generated $942 million in revenues, an increase of 3% over the first quarter of last year.

We delivered $0.95 in adjusted EPS, a decrease of 12% over last year, largely due to lower earnings in Agricultural Solutions. This was driven by the widely-reported weather factors that impacted the entire industry.

Combined with currency movements, the lower Ag performance reduced EPS by approximately $0.30, compared to the guidance we gave just over three months ago. Offsetting this, we had strong results in Health and Nutrition and Minerals, with both segments returning results in line with our guidance, and well ahead of the same period last year.

First-quarter sales in Agricultural Solutions were $467 million, down 6%, and segment earnings were $120 million, down 26%. The segment's operating margin was lower compared to the prior-year quarter, primarily due to unfavorable foreign exchange impacts, continued investments in sales, marketing and technical personnel, and changes in product mix caused by difficult weather conditions.

As we mentioned on our last earnings call, we were encouraged by the prospects in North America and Brazil, and we had expected segment earnings to be up low-teens percent. We have seen stronger lead demand in North America for our pre-emergent products, Capture LFT insecticide, and Authority herbicide.

The increasing concerns over corn rootworm and glyphosate positions supported our expectations that these brands would continue to outpace market growth, throughout the first and second quarters of 2014. However, as the extremely cold weather persisted throughout the quarter and into April, farmers delayed their use of these products, and it became clear that product wasn't moving through the distribution channel.

In Brazil, our results were impacted by the record-breaking drought in Sao Paulo state. This is the region that represents 61% of the country's sugarcane market. The market in which FMC holds over a 20% share, with a broad portfolio of insecticide and herbicide.

Our herbicide products are important in sugarcane, as they control difficult weeds that can severely impact yields. The drought conditions reduced crop replanting that would have normally taken place during this growing season, resulting in fewer herbicide applications, compared to the previous year. Compared to our initial guidance, the adverse weather conditions in North America and Brazil reduced adjusted earnings in the first quarter by approximately $0.25 per share, with unfavorable currency movement reducing earnings by a further $0.04 per share.

Looking across quarters, we had a very successful 2013-2014 season in Latin America. We are extremely pleased with the advances that were made in expanding our Latin America soybean presence, and a market position in these crops, such as tomatoes and potatoes, segments that leverage our portfolio of insecticides and fungicides.

In Brazil, we successfully launched Locker, a new three-way fungicide for soybeans, and we gained traction with Talisman, a broad-spectrum insecticide for use in both soybeans and cotton. We also grew in southern Brazil by expanding our relationship with cooperatives and further strengthening our most important customer relationship with another successful year of customer events.

As widely reported, planting in North America remains later than historical averages. We now believe that the combination of delayed planting and lower corn acres could result in fewer applications of Capture LFR to control corn rootworm.

However, we remain confident that the change in crop mix toward additional soybean acres will be favorable to us, and will drive increased demand for our Authority brand in herbicide. These products provide superior control of glyphosate-resistant weed from growers throughout the Midwest and South. We also continue to focus on a strong presence in niche crops, such as the sunflowers and rice that contribute to growth opportunity in these regions.

In 2014, we are strengthening our portfolio with several new product introductions into key segments, within both North and Latin America. We have developed three new herbicide products for corn: Anthem, Solstice, and Marvel which will complement our resistance management portfolio in North America. Additionally, in the second half of the year, we expect strong market reception in Brazil, as we introduce our new [captain] fungicide, Eclipse, and expand our Rugby insecticide into soybeans.

Our strong customer relationships, along with these new product introductions, will allow us to further benefit from the expected increases in soybean and cotton acres. With the second-quarter earnings increasing high-teens to low 20%, and the second half up approximately 35% versus the previous year, we expect that 2014 will follow a different pattern from our original outlook. However, the second half year-on-year increase above 30% is not unprecedented and is actually in line with what we have seen in recent years.

We will compensate for the potential loss of some Capture LFR in North America in multiple ways. They will be the recovery in Q2 and early Q3 of delayed first-quarter sales. We are seeing a favorable change in crop mix toward additional soybean acres in Brazil and North America, combined with a strong cotton and soybean planting season in Latin America in the second half of the year.

We continue to gain market share in corn, soybean, and cotton, driven by the strong portfolio of new products. Given these factors, we are highly confident in achieving our outlook of mid-teens percent year-on-year growth in 2014, leading to another record year of earnings.

In conclusion, our existing portfolio continues to demonstrate its resilience. We continue to gain market share in soybean and corn, and we are successfully introducing new products, including the seven major brands already mentioned today.

In addition, we have a very rich pipeline of products in development, including our biosolutions research. Our innovation engine will continue to make FMC the fastest-growing Ag company for years to come.

Now, turning to Health and Nutrition, segment revenues of $226 million increased 18%, and operating profit of $51 million was up 17% over last year. In the quarter, demand for colloidal MCC and carrageenan-based ingredients increased in nutrition end markets.

We continue to work closely with our customers to help develop new applications for protein delivery such as almond milk in North America, and cereal-based beverages in Asia. Our new Thailand MCC plant, which is expected to start at the beginning of 2015, will support our growth in Asia.

In health end markets, we saw a robust demand for our pharmaceutical excipients, especially binders, which was consistent with our expected growth rate, and confirmed our view that overall pharmaceutical demand has returned to historical growth patterns. Our Avicel platform continues to benefit from a strong brand recognition.

As we expand our product portfolio to include new encapsulation solutions and Omega-3 offerings we expect to leverage our resources and deliver higher growth rates from our health portfolio than we have seen historically. In Omega-3, our new Seal Sands facility received the necessary regulatory approvals, and we delivered first customer shipments of pharmaceutical-grade products. Seal Sands utilizes advanced technology to manufacture high-purity, high-concentration products that command a premium price over low concentration Omega-3, and is essential for pharmaceutical-grade applications.

We were pleased to see three new prescription formulations of Omega-3 approved by the FDA earlier this year. We see this as a positive development for near-term demand for our products. Our technology allows us to efficiently serve the pharmaceutical market, and over time will, enable cost-effective penetration into the high concentration nutraceutical end markets.

The Health and Nutrition business faced some headwinds during the first quarter. Asian currency movements and continued increases in seaweed cost had a modest impact on business performance. We have been working closely with customers, and successfully offsetting these higher costs through a combination of price increases, ingredient substitutions, and reformulation, that create new solutions to meet their market needs.

Looking forward, in Health and Nutrition, we expect second quarter segment earnings to increase low-teens percent over the previous year. In light of the strong first-quarter performance, and trends in the Health and Nutrition end markets, we continue to expect that full-year segment earnings will increase mid-teens percent.

Now let me review Minerals. In the quarter, revenues of $249 million increased 11% and operating profit of $37 million increased 27%. The businesses performed as planned, with improved operations resulting in additional products and volume.

In alkali chemicals, revenue of $185 million were 2% higher than last year, as anticipated pricing, excluding freight charges, was above the previous year, with the most notable increase in Asian export prices. Higher products and volume in the quarter also contributed to this sales growth. Revenue increases were partially offset by higher energy costs.

Prolonged cold weather contributed to a spike in natural gas prices that was unfavorable in the quarter. Additionally, our contract prices for coal were higher than last year. We are looking at alternatives to reduce these costs, including renegotiation of our coal contract, and alternative supply sources.

In lithium, revenues of $64 million increased 45% over the previous year. Higher volumes out of Argentina allowed us to take advantage of increased demand for lithium, particularly in energy storage applications. Pricing remained stable during the quarter, with product mix more heavily-weighted toward primaries which account for most of the volume growth.

The business achieved a low-teens operating margin in the quarter, despite continued inflation headwinds in Argentina. We expect the operating margin to continue improving sequentially throughout 2014.

Looking at the second quarter, segment earnings in Minerals are expected to be up low-teens percent over the second quarter of 2013, driven mainly by increases in volume. For the full year, we expect segment earnings to increase high-teens percent in 2014. As we described during our last earnings call, our outlook for alkali chemicals only includes price increases that are specified in existing short and long-term contracts.

We remain optimistic that the soda ash pricing environment is improving and we continue to be very supportive of ANSAC's efforts to pursue additional price gains in export markets. We remain confident that we will produce record volumes as we operate within normal geological conditions, and continue to benefit from higher products and volumes, as a result of the manufacturing excellence programs.

In lithium, higher production volumes supporting increased demand will be the largest driver of improved business performance. Increased sales in primaries are expected to significantly contribute to revenue and earnings growth in 2014.

However, it is important to remember that more than half of our production is further processed into downstream products. We maintain leading market position in these downstream segments, so we will continue to manage our supply to maximize overall margin. We remain confident in our ability to continue delivering operating margin improvements sequentially throughout this year.

Turning to our outlook for the second quarter, we expect to deliver adjusted earnings of $1.05 to $1.15 per diluted share, a 17% increase versus the second quarter of 2013, at the midpoint of the range. Although weather resulted in a slower than anticipated start in Ag, we expect this strong second quarter performance, with segment earnings up high-teens to 20% over the second quarter of 2013. In Health and Nutrition we expect to deliver a low-teens percentage increase in segment earnings, driven by strong demand across all product categories, and in all major end markets.

In Minerals, our outlook includes continued lithium margin improvements and a sequential pricing improvement in soda ash. This combination, along with higher production volume in both businesses, is expected to increase segment earnings by low-teens percent compared to the second quarter 2013.

For the full year, our expectation of adjusted earnings continues to be $4.35 to $4.55 per diluted share, a 15% increase over 2013, at the midpoint of the range. We are maintaining our outlook for full-year revenues and segment earnings in Agricultural Solutions to be at mid-teens percent over the previous year.

The second half of the year is expected to show strong results, driven by increased soybean and cotton acreage in Latin America, improved sugarcane production in Brazil, new product introduction, and our investment in market access channels around the world will continue to strengthen our customer relationship. We are confident 2014 will be another record year for Ag, building from the 10 previous years of record performance.

In Health and Nutrition, we anticipate full-year revenue growth of mid- to high-teens percent, with segment earnings up mid-teens percent for 2013. We see strong market demand for our stability and [audacious] solutions in nutrition end markets, and we are extremely pleased with how our health ingredients portfolio is performing in markets that exhibit solid underlying growth.

In Minerals, both alkali chemicals and lithium will deliver record annual volumes in 2014, as a result of operational excellence programs. We see strong market demand in lithium, and favorable pricing trends in soda ash. We continue to expect segment revenues to increase in the mid- to high-single digits percentage and segment earnings to improve high-teens percent over 2013.

I will now turn the call over to Paul to cover financial highlights.

Thanks, Pierre. Today I will focus on a few specific items that were notable in the quarter, including foreign exchange movements and cash generation. I'll also touch on capital spending, the closing of the peroxygens transaction, and separation costs incurred to date.

As Pierre mentioned, foreign exchange was a headwind in the quarter. Across all of the businesses, unfavorable currency movements impacted adjusted EPS by approximately $0.05. In particular, adverse movements in the Brazilian real, a range of Asian currencies, and the Argentine peso all hit our reported earnings, despite a counteracting favorable movement in the Euro. We continued to mitigate our exposures with appropriate hedges wherever practical.

This quarter was an unusual one, with multiple factors contributing to lower-than-expected operating cash flow. In the quarter, cash required by operating activities was $85 million. The largest single factor was the lower EBIT performance in Agricultural Solutions, although some temporary working capital increases in Health and Nutrition, and lower receipts from government receivables in lithium also contributed to the lower performance.

The second quarter is traditionally our strongest cash generation quarter, as a significant proportion of our Latin American season sales are collected. We expect this year to follow a similar pattern.

Our actions to reduce our working capital remain on track, with significant progress made to date on inventory levels in Agricultural Solutions. We are now rolling out similar programs in Health and Nutrition. We have initiated programs focused on our terms of sales in every business, and have commenced the final step in implementing a global procurement system that will allow us to take a more dynamic approach to how we handle payment terms to our vendors.

As we have said before, we remain very focused on increasing our operating cash flow, but we will tread very carefully around any major changes to our working capital policies, given the importance of the use of working capital to support our customers and our business model. We expect to see the benefits of our efforts start to show later in 2014, and into 2015.

As expected, capital additions were approximately $47 million in the quarter, compared to a total of $26 million in 2013. Increased spending in the quarter was primarily associated with construction of the Thailand MCC facility, which remains on track to begin commercial sales in early 2015. In the quarter, we completed the sale of peroxygens, receiving net after-tax cash proceeds of $193 million.

With regard to the separation process, we incurred approximately $3 million in separation costs in the quarter, largely a result of spending on external advisors. We expect that cost to increase in the next few quarters, as we start to execute on the complex process of separation. We are currently performing a thorough review of the expected additional costs, and will report an updated estimate with our second-quarter results.

Finally, in the quarter, we announced an 11% increase in our dividend rate, in line with the earnings growth we delivered in 2013. With that, I will now turn the call back to Pierre.

Thank you, Paul. Before we turn to Q&A, let me brief you on our separation activities.

We have made steady progress since announcing our plan to separate FMC into two publicly-traded companies. A dedicated program management office is in place to manage the separation-related activities. Work on this complex separation is well underway, and the PM model ensures that our business teams can remain focused solely on their operations.

We have named several internal leaders who be aligned with each new company, and importantly, a search for a CEO for FMC Minerals is progressing well. We expect to make an announcement about this in the second quarter. The separation process is complex, but we are confident that we are on track to complete the transaction in the first half of 2015.

We will continue to update you on our progress over the coming months. Now, I will turn the call over to the operator for questions. Operator, please?

(Operator Instructions)

Kevin McCarthy, Bank of America.

Can you discuss how the weather-related impacts might have broken out between North America and Latin America, and basically the polar vortex versus the drought-related pressures that you referenced in Sao Paolo?

Yes. I would say, as you know, the first quarter in Latin America is much smaller in size than our business in North America, where usually the first quarter is a much larger quarter. So if you look versus our expectation, by far the biggest gap will reside in North America. That is where we are expecting to have the biggest sales because of the indication. On top of that which did not help, we had slower sales in the Brazil than what would we be expecting, but once again, it doesn't help in a situation which is difficult from a weather standpoint, but the vast majority of the gap came from delay in the pre-emergence planting, pre-emergence project, it was a delay also in Capture LFR for us for corn, so the vast majority of the problem came from North America.

So Pierre, just to follow-up on that, you obviously left your annual EPS range unchanged. Is it the case that these are entirely transitory, and you'll make it up in future quarters?

Or is some of it lost permanently, just due to the vagaries of the season? And you have other counterbalancing positives to get to the same place for the annual EPS?

Yes. I think really it is the latter. First, what we lost in Brazil, if you look at the quarter when the season is the backend of the year is lost, but it's not that critical in size. So the focus in terms of what did not happen the first quarter should be on North America.

A large part of what was not sold in North America will be sold -- will be recovered throughout Q2 and Q3. That we know. But we believe -- and especially for corn and Capture LFR, we believe that there is some sales which are being lost, and that's why you don't see a complete transfer of what was lost in Q1 into Q2. We're going to have a robust Q2. But you will not see 100% transfer.

So there is mitigating factors which I see, if I will look to the future as overwhelmingly positive. First, there is -- for multiple reasons I am sure you have heard, there is a transfer to more soybean crops, which for us is important, as our market share in soybean is much stronger than our market share in crops.

There is today a strong planting season with solid acreage increase in Latin America, possibly beyond what we're expecting. Most importantly, we have introduced multiple new products.

I mentioned in the scripts seven new brands we've put on the market, and I have to say that those products are taking off very, very strongly, and seeing a very strong demand. So if I look at where we are, the possible loss we could see in one specific product, which is for corn, will be more than compensated by what we see happening around that, and our penetration of new technologies.

I appreciate the color. Pierre, last question if I may, maybe for Paul. Can you discuss your payment terms by region and/or product line, and how they might change in the future, if at all, as you increase your focus on working capital?

I think if I was to go through payment terms for every product and every region it might take most of the rest of the call. I mean, it certainly varies, but if you mean payment terms, you mean in terms of sales rather than our payment terms. It's certainly the case that generally speaking, we have our shortest terms in the Americas, North America, we probably have our longest terms, particularly in Ag, down in Latin America, and Europe tends to be closer to the North American example, and Asia tends to be a bit further out.

So generally speaking, as our mix of sale changes towards emerging markets, we tend to experience longer collection terms. Now as we look forward, I think the question is open for us as to how we want to think about going to market with some of our customers and with some of our products. It's early stages in most of our business to have that assessment, so I think would be premature for me to try to predict what the impact would be.

Okay. Maybe I'll follow up on that. Thank you Paul.

John McNulty, Credit Suisse.

So with regard to your North American Ag business, my understanding was historically it's always been a very large pre-emergence business. It sounds like that may be changing a little bit, where it's more of an even mix, but can you walk us through how we should be thinking about the mix in North America, how much is -- what percent say is pre-emergence, versus pro post-emergence?

Yes. I'll get Mark to comment, but there is a change. I mean, there is a change -- pre-emergent has always been big for us, but we are evolving. And I do say that we are strengthening also our position in corn and soybean and beyond pre-emergence.

So there is an evolving product line, and we are gaining market share in crops where we've been historically claiming we are not a target, but we have such a strong portfolio and we're the size now that clearly we do our evolving portfolio of those crops. And I must say very successfully with a lot of runway. Mark, do you want to add?

No. I think, John what I would say, there is the pres are very important to us. They have grown significantly over the last few years, as you know, both on soy for glyphosate resistance and the corn rootworm resistance, but now are introducing some new suites of products in particular, Anthem in North America, as a soy herbicide that can be used both as a pre- and a post, but we see the post side growing.

We are also expanding into corn on the post side, so I think you'll see it creep up over the next couple of years as we gain traction with those brands and the market access, so definitely pres are not going to go away for us. We see resistance acres continuing to grow, especially on the soy side. So you'll see that as a major area, but expect the post to start to grow and become more of a significant part of the portfolio, especially as we go into that 2015-2016 seasons in the next couple of years.

Okay. Great, and just as a follow-up, I know historically, there's normally a pretty solid margin drop off from the first half of the year to the second half, just because of geographic mix. And I'm wondering how we should be thinking about that in 2014, just given that again some of this pre-emergent product is actually moving later in the year on the North American side. So how should we be thinking about the margin progression?

Yes. I think John, what you are seeing is because there is a push -- a transfer from Q1 into Q2, Q3, so you will see lots of those North American high-margin product being pushed in the second half of the year. So you will have a more uniform, or less of a differential in the margin this year, because there is a dealer in the North American season. So those high-margin products will be pushed into a Q2 and into Q3 -- smoothing out the differential in terms of margin.

Great. Thanks very much for the color. Maybe one last question if I could.

On the Health and Nutrition side, your outlook for low-teens growth in the second quarter. Why is it sequentially -- why is that growth moderating, especially when you've got the Omega-3 platform actually -- it sounds like up and running now, and it should be a contributor to revenue and profits.

Yes. It is -- that is actually a good question, John. It is just the fact that today because we are starting into the Omega-3 business, the orders are a bit more lumpy than for our other products, so we are going to have a pattern of order for Omega-3, as we are starting to sell to some large customers.

And we have not yet reached a number of customers that is such that we'll see a very smooth ordering pattern throughout the year. We expect to see it much smoother in 2015 and 2016, but this year there will be some lumpiness in Health and Nutrition, just because of the order pattern on Omega-3.

Great. Thanks very much.

Robert Walker, Jefferies.

Thank you. Good morning. I guess in Ag, what is the difference in margins between North and South America, and how much was mix a factor in the Q1 margin decline?

Do you want it?

No, go ahead, Mark.

Robert we do not actually disclose the margins between North and Latin America, but they are different. North America is a higher-margin area for us, and Latin America tends to be a little lower, obviously depends on mix. Mix is an impact, given where we saw North America come out, and where we saw Latin America come out, given the weather conditions Pierre had already talked about.

But there is a difference between the two. You can't look at the whole of Americas and say that they are the same. And as North America was down versus our forecast, given the weather conditions, we saw that mix change from a year on year.

Without going in too much detail around regional, but to give you a sense for last year, if you take the first quarter, usually we achieved very strong, driven by North America. We tend to have an operational margin for FMC Ag business, which is north of 30%. Last year it was 33%, where you usually see a fourth quarter which is more in the 20s to mid-20s.

So that gives you a sense, and the fourth quarter is usually very much driven by Latin America. So that gets you a sense of the difference in mix and product line we are selling in those two regions. Just -- the question John asked, around the way our product line is evolving, with a change in pre-and post mix, we are going to see potentially over the years -- not this year -- this being different and changing with maybe a smoother differential from a quarter to another.

Okay. Thank you. And how much of your normal Q2 sales in Ag have slipped into Q3 because of the delayed planting?

If you will look, we were initially forecasting I think Q2 in the mid-teens growth. And now we are looking maybe in the low 20s. So that gives you a sense about one-third -- one-fourth of the growth in the second quarter is coming from Q1 sales, and then we are going to have Q3, but Q3 is a bit more complicated, because we are going to have a combination of some of the sales pushed up from Q1, we are going to have a very favorable mix around soybean, and we are going to have new technology.

But maybe I can take that opportunity to talk a bit about the second half, because I know a 35% increase in the second half of the year -- year-on-year, seems to be like a big number. We are quite comfortable here with that number. First, if you look at historical patterns, look at your 2012 versus 2011, we had a 37% increase in the second half versus the first half, with a fourth quarter which was up 52%.

Even last year, which was not the most spectacular growth, we still had a fourth quarter with a 24% growth year-on-year so those numbers from 24% to 52% don't make this second-half that different from historical data. If you look at the way we look at it, it's a very fairly simple break. If you take our growth rate to get to the mid-teens, there is three big buckets. But one third of our growth is going to come from what we see as acre change, and a change in the mix between soybean and corn.

There will be one third, which will be coming from the market share gain we have in soybean and corn, and most of that given driven by new technology. I think it's a trend we see. We like it. Our strategy is evolving. We will be more of a player in large row crops.

And one-third is really new technology for other crops. We've talked about the secondary type of crops. So those three areas are very well defined and makes us quite comfortable around the numbers we are contemplating for the second half.

Thank you very much.

Dmitry Silverstein, Longbow Research.

Good morning. Excuse me. Good morning. I wanted to sort of kick the dead horse one more time on the Ag discussion.

In the first quarter, obviously besides North America -- you are looking at sort of northern hemisphere sales overall, as being contributive to the quarter. So if you look at the European sales and Asian sales, versus your North American sales, was the North American sales -- in other words, were the regions outside of North America -- where the weather was more normal, and hopefully you are benefiting just from share gains and new product introductions, were volumes or revenues up in Europe and Asia? Even though it's a small business for you, offsetting the weakness in North America a little bit?

If you look -- I'm going to ask Mark to come with more detail, but if you look, at the end of the day the first quarter for us is an Americas story and mostly a North American story. Remember, I think Europe is about, or EMEA is about 6% of our sales, and Asia is about 16% of our sales. If you put on top of that that's usually because of our market share in pre-emergent products, in North America, and we have the end of the Brazilian season. Usually, it's mostly a North American story.

So yes. We didn't suffer like other companies did, we didn't suffer. Europe was overall healthy, and Asia is in good shape. We're going to see [Asia] for the rest of the year we do have some great growth expectations, but in the first quarter, those are too small to influence our numbers. Mark do you want to add?

I wouldn't add a lot to what you said, Asia's doing well. We have, as you said, good growth expectations. We have good market access strategies in place in Indonesia, Philippines, we see good growth in China.

Europe, as we said is only 6% of the portfolio, so it doesn't really swing a lot in Q1. But we do expect a number of our activities in Europe to benefit on the herbicide side, as we go through the year, so we do expect growth as we go through Q2, Q3 and possibly into Q4 for Europe, but Q1 was not a factor.

Thank you, Mark, and as a follow-up, and switching gears a little bit on the lithium business, you talked about expectations of sequential margin improvement there through the year. How should we think about where the fourth quarter should end up, in terms of margins, and where we should -- what we should look for in 2015?

Yes. I think we're going to go this year from a low-teens margin to a mid-teens EBIT margin. That's the range we are expecting for the lithium business.

Okay. And in 2015, hopefully you'll start with low-teens -- with mid-teens, and go from there?

Yes. Correct. We've always said -- this business is certainly north of 15% EBIT margin when it�s operating, so we clearly are on the recovery path. We like what we see, we like our market position.

We are able to renegotiate those contracts. We have been away from -- I think I said with 45% increase in sales in lithium, it's a lot of renegotiations that take place on contracts. So it's going to improve to the mid-teens, and take off from mid-teens in 2015.

Thank you, Pierre.

Mike Sison, KeyBanc.

Pierre, I appreciate your confidence for the second half there for Ag. But could you maybe share some of the risks that you may see in the second half? I mean, some of the North American business, as you noted, was pre-emergent, can some of your customers skip that potentially, and just move on? I just want to understand maybe the things you need to watch out for potentially?

Well, it is the Ag world. There is always risk.

Let me talk about North America. We are in April. We know the second quarter was a slow start, but right now -- I mean, product are moving. So there is no doubt that we are on a positive trend, so the numbers we are giving, at least for the North American part, are quite solid.

The question always -- the question will always be -- should we suffer from a terrible weather condition which is not predictable today in Brazil -- we never know that. We don't see it. The demand is robust. The plan for acreage planting is robust. Our new product introduction is incredibly successful, beyond our expectation.

Listen, I would dare to say, Mike, that it would not -- we would not have had the weather we had in the first quarter, looking at the fact that we will close the year at 15% increase, despite the first quarter, we would have had in our Ag business, an absolutely incredible year beyond what we were expecting. That's why we have a level of confidence which is strong, assuming there is not anything we are not -- we could not predict in Latin America in the back end of the year. From a North American market, products are moving, we are following that on a daily basis, but so far so good.

Okay. And then you talked about one-third of the improvement coming from market share in soybean and corn. What is it, in terms of the new technology that you're rolling out, that is giving you the edge, and then when you talk about that, is that business -- that customers have said -- you won this. We'll just take it when we need it.

We'll let the world Ag expert answer this one.

Thanks, Pierre. Mike, when you look at soybeans as an example, and let's take Latin America, it's a big market. If you go back to 2011 we had about 3% market share, in what was over a $3 billion market. If you look at our business last year, we were at 6.5% market share in a $5 billion market. And that's all coming through our insecticide portfolio and now our new fungicide portfolio, so we are definitely increasing market share.

Why are we doing that? We have some technologies that are broad-based. Pierre mentioned in the scripts a product called Talisman. That's a product we've had for cotton growers for many years. For the last few years, and certainly it's a broad-spectrum insecticide.

It's now playing very well into the soy arena, where we see different types of pests coming and the growers want to utilize a broad spectrum insecticide. We already have, as you know, we have talked about very strong relationships with cotton growers. We have a high market share, that allows us to translate that market access to soy.

So it's a combination of bringing new technologies, like the Talisman, new fungicides like Locker, plus our strong market access, and already exposure to current crops. But we like that mix, and we're going to push more new products down that pipeline as we go forward.

I think we have said in the past that about 25% of our portfolio comes from new products introduced in the last five years. As we head through 2015 we expect that number to increase to 30%. So we are seeing that throughput of new technologies and it'll continue at a rate.

I think, Mike, we've talked a lot about R&D model, how we access actives, then do toxin formulations. This technology engine is giving us one of the fastest product invention that any Ag firm might have.

And we've been -- right or wrong -- because things have been good so far -- but we've been careful on how aggressively we penetrate the soybean or corn market, but when we see the possibilities we have to resolve some of our issues, customers are facing, and some of the technologies we have, I think we are not going to hold back. And we are going to focus as much on crops like soybeans and corn as we've been in the past on cotton and sugarcane, or other smaller crops like potato or rice. So it's working, and those are new products which are responding to a changing environment in customer needs.

Thank you.

Mike Harrison, First Analysis.

On the lithium side, can you comment a little bit on what you are seeing in organometallics particularly as you get into the Ag business, where there have been some changes there?

Could you repeat the question please? I couldn't understand what you said.

I was wondering about organometallics within the lithium market, and if you are seeing any weakness in butyl lithium in particular. I know that you guys have exposure in polymerization, but I was wondering if you were seeing weakness in Ag or crop protection synthesis products?

Well, yes. Ed can answer. There was a major change where a customer, Bayer moved away from a product which was using butyl lithium so I would say no weakness for us or our competitors from a market standpoint in butyl lithium.

But certainly an impact we've been seeing because Bayer was such an important player in that space as a customer for us, that in walking away from a formulation which was butyl lithium-containing has been creating a hole in this market, but the rest of the market growing fast. It has allowed to little by little compensate for that, maybe Ed, you want to give more color?

Not much to add. It was just that the market that's affected is Europe, and we haven't seen any impact in Asia or in the US, and there are some rumors that there will be better butyl lithium demand in Europe down the road from other products.

So I think the weakness we see in numbers, for me, the way we look at them, are more specific case related than they are across the board weakness. For us, it's been a pretty healthy business.

All right. And as I look at the alkali business, it sounds like the pricing into Asia is improving and you mentioned some higher costs that you encountered during the first quarter. So as we look into Q2 for margin there, should we expect a pretty meaningful step-up there? Or are there other costs that we should keep into consideration, you mentioned the coal contract as well, so a lot of moving pieces.

I think there is a lot of -- lots of moving pieces. For us, in alkali, through the year, the trend is up, in terms of margin. I'm not going to say today it is dramatically up. I mean, it's in our forecast. We are looking at a stronger margin in Q2 then we would look in Q1.

The positive for us -- the two big positives are the volume and a better utilization of our assets. The plants are operating extremely well. I must say, we had four tremendous months so far, including April, and pricing is going up. On the negative, we have coal, which is still a challenging situation for us.

Now, realize that when we do the forecast and we are going to stick with that for a while until we have better clarity, we are not forecasting major changes in pricing. Today the price overall for us in the first quarter year-on-year, we are up in the mid-single digits. Around 5%, mostly driven by price in Asia.

When we go forward into the rest of the year, we are forecasting not as much of a year-on-year increase because we are not speculating on any inflection point on Asia prices. So right now, despite the fact that we have a mid-single-digit price increase and double-digit year on year price increase in Asia, we are forecasting pricing overall to be in the low single digits for the year because we are not speculating on pricing, until we understand where the markets are going.

The trend is positive. We have been burned before, so we are careful. So to answer your question, slightly up on volume and pricing. With adverse effect of corn price.

All right. Thanks very much.

Peter Butler, Glen Hill Investments.

Pierre, considering all your contract obligations, et cetera -- is there a rule of thumb on what would be the P&L impact on FMC if soda ash prices rose 10% in a year?

If soda ash on average goes up 10%, overall -- I mean, think about -- we are selling about 4 million tons of soda ash in the world. The 10% on average price would be something in between $10 and $15 per ton. So you're talking about a number around $60 million of EBIT impact, if I do the calculation right. So that's the kind of number we're talking about. That is the range.

If you had the opportunity to declare victory on your 2015 goals, when we do take the victory lap? And perhaps set some goals for 2020?

Thanks, Peter. Actually I'll give you a good report in detail to tell you how we're going to be doing that. What we are planning to do is, we are working today the Vision 2020 and we're going to have a series of conversations with our Board. That will and by October/November to have a Vision 2020 for FMC Minerals and a Vision 2020 for FMC. The New FMC.

What we will do is we will hold a Vision 2015 -- a Vision 2020 investor day in December. The way we will look at it is, we will first see where we are, because when you are at the end of 2014, you should be able to say if you will reach your 2015 goal, and so we would start the day by looking at FMC as it is today versus 2015 and if we should take a victory lap.

And then we will present Vision 2020 for FMC Minerals and Vision 2020 for New FMC. Now I can tell you versus Vision 2015, highly, highly confident that we will beat 2015 in Ag. Very strong confidence around Health and Nutrition.

Looking at the evolution of lithium, I believe we will be able to declare victory. The only place where we have a question is on part of the -- on the alkali business -- soda ash -- we know versus Vision 2015 everything we wanted to do around plant capacity, we will. But around the domestic market, we are online. The only question market is Asia pricing and export pricing.

So where we are today around Vision 2015 I think we want to hit the mark everywhere, except in half of the sales of soda ash, which today, we just don't know. I mean, it's still a year and three quarters away. We are seeing positive trends but we don't have the answer.

Okay. Thanks for your help, Pierre.

Rosemarie Morbelli, Gabelli & Company.

Pierre, on the lithium, you said that you are processing about half of your production into downstream products. Those are higher-margin products, if I am not mistaken. Is it at all possible for you to move more than half of your production into downstream?

No. It is difficult Rosemarie because -- well, let's face it. They are high-margin product -- and butyl lithium is one of the products which is complex to move. It's complex to move around, for which you do have higher pricing and higher margin.

But there is a single digit growth for this market. The growth is mostly coming from primaries carbonate and hydroxide. So if you look over time, the business will continue to grow. We do expect to see low double-digit growth rate, but it will happen mostly because of growth in the primaries, which tend to have lower margin than the product like butyl lithium.

Okay. And then I was wondering, as you are moving more into crops like corn and soybean, are you -- you are now going to go against the bigger player. So you are you anticipating more volatility? Are you anticipating more pricing pressure, or are your offerings totally different from what they are offering?

Yes. I think the way we are evolving in our thinking is -- I don't want to sound arrogant, but I think we are looking at ourselves as a big player now. And we believe we have the technology capabilities to compete with anybody on the chemicals front. So we do have unique offering, which differentiates ourselves.

It doesn't mean like a company like a Monsanto or Syngenta, which clearly have a broader spectrum of products, we are going to go head-to-head against them in every aspect of our business, but we believe we have a technology portfolio which is such that we can make a very interesting offering to our customers in highly technical places, where we'll protect our margin. But don't confuse what I said with us deciding to go very broadly into soy and corn. We've cultivated products.

Lowering our margin. We're going to stay very technical, very specific, but yes. We believe we have a size today and a reach which allows us to compete in most markets.

Thanks. And that is really helpful, if I may ask one last question, looking at the complexity of the separation, could you give us some idea as to the elements which are making it take so long to achieve?

Our timing and that's hard to jump in, but our timing for separation, if you look at any of the other companies which have done separation in the past, or which are in the process of separating, the timing -- we are anticipating the end of the first quarter so it's about one year from the vote of the Board to the actual separation is about standard. There is lots of complexity. Think about the number of legal entities the company will have, which will have to be changed.

Think about systems like IT and being able to replicate that. So we are very much in the norm. Paul, do want to add?

No. I think there's nothing particularly unusual about what we're going through. Its legal tax and regulatory transfers and approvals that take, by far, the most time. They just take time going through various authorities to get the sign-offs that you need.

We obviously have to perform separation of certain functions whether that's the compliance functions, computer systems, et cetera, which also takes some time. And we also have to have one eye on the complexity around SEC reporting around two different entities, and how that might factor in. So going through all of that complexity, it's a 12 month process no matter which way you cut it, driven largely by factors outside our control.

The think -- I think what we really want to do is -- of course when you do separation you want that to happen as quickly as possible, but we are building two great companies for the long run, and it would not be appropriate for us to take any risk to shorten this processes by a couple of months. That would not make a difference in the long run, and we do not want to take any risk. We want to have a flawless process, and two companies ready to go from day one.

So the timing is appropriate. We really -- we believe we are on track but we will never rest the [for safe]. The other thing we are really doing is isolating our business organization from this process. We need to make sure they keep on focusing on technology and customers, and running their plants. So it's also something we have to take into account during the process.

I want to thank everyone for joining us today, that's all the time we have for the call. I'm available for additional questions that you may have. Have a great day.

Thank you. This concludes the FMC Corporation first-quarter 2014 earnings release conference call. You may now disconnect.