富美實 (FMC) 2014 Q3 法說會逐字稿

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

(Operator Instructions)

I will now turn the conference over to Ms. Alisha Bellezza, Director investor relations for FMC Corporation. You may begin.

Good morning everyone, and welcome to FMC corporations third-quarter earnings call.

With me today are Pierre Brondeau, President, 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. Following his comments Pierre will then be joined by Mark Douglas, President FMC Agriculture Solution; Ed Flynn, President FMC minerals; and Mike Smith, Vice President and Global Business Director FMC Health and Nutrition to address your questions.

Today's discussions 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 statements 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 call, are provided on our website. Our 2014 Outlook statements, which provides guidance for the full year and the fourth 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.

Before I begin, let me start by providing some comments on the market dynamic that are affecting our businesses today. Starting with Ag Solution, 2014 has been an unusual year with weather having a particular impact on our results. As you recall, the prolonged cold winter in North America impacted planting decisions and ultimately sales (inaudible) insecticides in the first half.

Additionally, the first half of the year was characterized by dry conditions in Brazil. This also negatively impacted our sales to sugarcane growers.

Unfortunately, Brazil is still experiencing drought conditions. Not only has the dry weather in São Paulo state reduced demand in sugarcane, we have also seen it in the Mato Grosso region. There it has led some growers to delay some planting into October as they wait for more favorable weather.

Europe has had a good season with favorable growing conditions for the major crops such as wheat, and oats (inaudible) and good demand for certain crop protection product, especially fungicide.

Asia is a more complex region, with multiple markets and crops, each with its own dynamics. For example, India is currently experiencing drought conditions, and in Thailand the removal of rice subsidies is affecting a major rice growing region.

China is itself a fragmented market, but it is expected to continue to increase the use of crop protection products in the near term. Overall, we expect Asia to continue to demonstrate growth for our industry in the next few years.

North America quickly shifted from extreme cold to very favorable growing conditions with a lower than normal pest pressures in the growing areas creating fewer opportunities for full-year applications. Today, these favorable conditions are leading to record yields in both soybean and corn creating downward pressure on commodity prices.

We see some consequences of these lower prices in the near term. First, in Brazil, we expect more soybean acres to be planted. Even the more touchy economics relative to the other crops. Planted acreage in cotton is likely to be stable given the government programs to reimburse growers for low prices. However, it is clear that growers are making their final planting decisions and the related crop protection buying selections later than usual this year.

In North America, the pattern of increased purchasing at the end of the year, which grows typically June anticipation of the next season needs may be more muted in the second half of 2014. As growers plan for the 2015 planting season, corn and cotton acreage are both likely to be reduced in favor of soybeans. Although final planting decisions will likely be taken later than usual.

Health and nutrition. Our diverse business and its end markets are showing similar growth patterns as in previous years.

The pharmaceutical end markets remain robust with our average sale product line continuing to maintain its leading position. Demand for our Texturant products serving nutrition markets is also strong, with the exception of certain beverage applications in China.

We have started to see the slowdown in overall economic growth in China impact consumer behavior. Which, when combined with Texturing inventory management by certain customers is beginning to lower demand for some of the products.

We expect demand in these applications to remain relatively weak for the remainder of 2014. However, we are seeing stronger demand for food ingredients in North America, which is providing a favorable product mix.

In Omega-3 markets the number of FDA approvals for omega-3 -based products reinforces our confidence in increased omega-3 pharmaceutical-grade demand in the coming years. The lithium market has been following a consistent growth trend in the recent years. Demand in industrial polymer [pharmacy] markets is growing steadily while demand in energy applications is growing more quickly, led by increased electric vehicle penetration.

For our business, Argentina remains the biggest challenge to operations. The challenges of operating in a high inflationary environment are (inaudible).

But we are now starting to see the impacts of import restrictions on our operations. For example, it was difficult to import certain critical engineering compliments into Argentina. These resulted in increased operational costs in the third quarter.

Despite these challenges in market [inaudible], FMC had a record third quarter in 2014. We generated $1 billion in revenue, for an increase of 6% over the same quarter last year. Adjusted operating profit increased to $184 million, a 13% increase compared to last year, and adjusted EPS was $0.95, an increase of 16% over last year despite volatile conditions in the quarter.

We now turn to segment results. Third-quarter sales in agricultural solutions were $549 million a 4% increase over the third quarter of 2013. Segment earnings were $117 million, up 2% over last year.

Within Agricultural Solutions the year-over-year growth in revenue was driven by Latin American business. The 9% growth in that region demonstrates the strength of our business model within a highly competitive marketplace, and with challenging external conditions.

Increased weed resistance in Argentina resulted in higher sales of our Authority herbicides and in Mexico are focused on fruits and vegetables resulted in sales increase for recently introduced Muscidae insecticide and Roval fungicide products. We expect demand in both these countries to continue to be strong into the fourth quarter.

In Brazil, as I mentioned earlier the drug conditions reduced demand for a sugarcane product as growers cut back on all [inaudible] and continued to replant at a lower rate than typical. Offsetting this, we saw solid demand for [continent] soybean products.

Margins in Latin America improved versus the second quarter (inaudible) last year as we benefited from a mix of higher value products. This benefit was partially offset by increased spending on logistics, currency hedging and recent development cost in the region. In North America, additional demands for cotton products was offset by weaker than normal price pressures in the Midwest that reduced demand for full-year insecticide versus the previous year.

As we look toward the fourth quarter, Latin America will be the largest contributor results. We expect to continue gaining market share in (inaudible) and soybean as we expand our market presence with a burgeoning portfolio. We also expect to benefit from our strength in cotton as the planting season gets underway in November.

We expect growing demand for a subbing free emergent herbicide in North America following an increased market share in the 2014 season, and supported expectations of increased soybean acres and expansion of weed resistance in 2015. We expect these factors to offset an otherwise weak overall market and meet the fourth quarter segment earnings to be flat to up single-digit percent over the previous year, which was particularly strong for us.

Now turning to health and nutrition. Segment revenues of $203 million increased 7%, an operating profit of $44 million was 6% higher than last year.

In the quarter, demand in the pharmaceutical end markets that we serve was solid. There was particularly strong demand for our (inaudible) in Asia and Europe, especially for the global farmer customers who could use generic prescription products.

We also saw increased demand for alginates used in pharmaceutical applications. Overall, an increase in profitability benefited from changes to the mix of food ingredients sold.

In North America, higher volume of Texture and Stability solution upset weaker than expected demand for similar products in China. For the remainder of the year, increased demand in health market, particularly in Europe and Asia along with higher demand for nutritional markets in North America is expected to offset continued weakness in demand for beverage applications in China.

We expect omega-3 sales to be lower as certain customers shift orders in the first half of 2015. As a result, we expect fourth quarter segment earnings to be flat through the previous year.

Let me now review Minerals. Revenue of $264 million increased 11% (inaudible) profits of $39 million increased 42% versus the same period last year. Both minerals businesses performed as expected, as our manufacturing (inaudible) volume and efficiency gains. (inaudible) and improved operations in both (inaudible) resulted in (inaudible) increase profitability in the fourth quarter 2013.

In alkaline chemicals revenue of $197 million increased by 9% over the previous year quarter. Higher realized pricing in additional manufacturing volumes generated higher profitability and offset the headwinds of higher energy costs.

With regard to manufacturing operations, we are now operating at or above record production levels despite encountering higher than average levels of insoluble materials. We will move the long wall in the fourth quarter again this year, but we expect the higher year-over-year pricing and improved production will contribute to stronger alkaline profitability versus the fourth quarter of 2013.

In Lithium, sales of $67 million were 19% higher than the previous year. Improved operations produced additional volumes and allowed for higher sales in the quarter.

As I mentioned earlier, conditions in Argentina remain the headwind to profitability and had negative impact on our cost structure. This headwind is expected to remain in the fourth quarter, nevertheless we should expect that improved operation in lithium will deliver low teens profitability for the full year.

In Minerals, how lithium operations will achieve 12 consecutive months of improved operations in Argentina in the fourth quarter, and we expect near record production in alkaline operation. The strong performance is expected to be partially offset by the current challenges of operating in Argentina. Segment earnings are expected to grow mid-single digit percent year over year.

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

Thank you, Pierre.

Let me start with cash flow. For the year to date net cash provided by operating activities was $235 million compared to $381 million at the same point last year. The biggest factor driving this lower performance is the Agricultural Solutions business, where we've seen different quarterly patterns of sales and collections all year.

This was especially the case in the third quarter this year when growers in Brazil elected to obtain possession of the harvested crops, rather than sell at the lower prices. And they regrettably managing the payments to their own suppliers accordingly.

We expect to generate approximately $350 million of cash from operations for the full year, slightly below last year. Again due to different patterns of business and agricultural solutions.

The outcome of the full year will largely be driven by our receivables collections performance in Brazil. As well as a pattern of ordering; including prepayments we receive and rebates we pay in North America.

We are in very close and frequent dialogue with all of our customers and we manage our exposure to each one very carefully. Despite the increased accounts receivable balance, we do not believe there's been any meaningful deterioration of credit quality of our customer base.

Currency movements had very little impact of our revenue or earnings for the quarter, although we continue to see some swings in exchange rates. Movements in individual currencies will largely offset each other. All of our exposures we're hedged.

However, we did see currency movements impact our tax rate in the quarter. Our underlying tax rate remains in the 25-26% range.

However, the reevaluation of certain monetary assets in Brazil and Norway created a buck credit of $5 million to our tax charge, leading to a reported rate closer to 22.5%. This did not impact our cash tax liability.

We continue to expect that our underlying tax rate will remain in the 25% to 26% range for adjusted earnings for the full year, excluding the impact from these discrete items. Starting in this quarter, we will provide additional disclosures to our adjusted tax rate in our 10 Q, showing these discrete items separately.

We funded approximately $53 million in capital additions during the quarter, which was primarily associated with the ongoing construction of the Thailand NCC facility and the gas pipeline in Argentina. We anticipate full-year capital additions will between $240 million and $270 million. This is lower than we previously forecast due to a combination of timing with some projects being deferred until 2015 or later, and increased discipline around our capital spending in the current environment.

In the quarter we incurred approximately $15 million of legal and professional fees associated with the acquisition of Cheminova and the divestiture of Alkali. We also took out a series of four currency contracts to hedge our exposure to Danish krone as a result of the Cheminova acquisition.

Finally, let me note that just after the quarter closed we completed the acquisition of the remaining 6.25% interest in FMC Wyoming. We made total payments of approximately $95 million to acquire this interest.

Also, after the quarter closed in connection with the acquisition of Cheminova we entered into a commitment for a term loan up to $2 billion, and extended our $1.5 billion revolving credit facility out to October, 2019.

With that I will now turn the call back to Pierre to summarize and to give an update on both the Cheminova acquisition and the Alkali chemical sales process.

In the fourth quarter we expect to deliver adjusted earnings of $0.95 to $1.05 per yielded share. For the full year, we expect adjusted earnings to be between $3.85 and $3.95 for [yielded] share.

The challenging environment in the agricultural markets we are seeing today does not diminish our excitement about the need and long-term prospect for our business. Agricultural solutions with its focus on innovation and technology and its ongoing investment in market (inaudible) continues to outperform the crop protection industry.

The acquisition of Cheminova further strengthen our business providing greater balance to our portfolio of broader geographic reach and increased scale in the area of research and development. We remain on track to close the acquisition in the early part of 2015.

As we previously said, we are targeting delivering synergies of approximately $100 million to $130 million by the third year, and we expect that the majority of the actions needed to deliver these synergies will be completed in the first two years.

With regard to Alkali chemicals, as you can see the business continues to perform well. We are on track to launch the sale process in the coming days, and based upon feedback so far we expect a lot of interest. It remains our intention to announce the results of the sale process in the first half of 2015.

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

(Operator Instructions)

Your first question comes from the line of Mike Sison with KeyBanc.

Good morning guys.

Good morning.

Pierre when you think about 2015 for the Ag solution -- your base Ag solution business, given the puts and takes with where commodity prices are. Can you maybe give us some help in what type of profitability you think this business can produce in this type of environment?

Yes. Let me maybe take the opportunity to give you at least the essential view of the market going into 2015 and what we are seeing, then I will tell you what kind of growth rate we could expect when we talk about profitability.

So first, let me talk about the biggest region, Latin America and mostly Brazil. If you look at Brazil from an overall acreage and crop protection chemicals I would say for us it's a market which will be overall flat to slightly up. We see soybeans flat to slightly up, the same for corn and the same for sugarcane, and may be the place where we see the biggest challenge could be cotton getting into next year. So overall that would be for us the region which will be the fastest growing even if it's a bit sluggish compared to some other year.

North America, as an overall region, whether it's acreage or crop protection chemical, we see a market overall which is down single digits. We see soybeans being quite good with the shift from corn into soybean, and soybean acreage and crop protection chemicals being up in the low- to mid-single digit percent.

Corn being down in acreage and down to flattish for the crop chemical market. Cotton, as in Brazil, we see cotton being a down market next year. So overall a slightly down single-digit market for North America.

Europe, we also see a flattish type of a market, may be flat (inaudible) which is very important to crop over there, but overall a flattish market. Where we see Asia up in the single digits. It's a fragmented region it's always a more difficult region to forecast, but we could see Asia providing growth.

So if you look at the overall market, acreage and crop protection chemicals [following] the acreage to a region will bring a flat- to low-single digit growth that would be Brazil, Latin America and Asia. And two regions will be flat to down single digits that would be North America and Europe. That results with being 2015 being a flattish market or very low-single digits overall worldwide.

Now if I look at FMC and how can we perform in a market like this? I strongly believe that we will continue to outperform like we have done previous years.

And I would say like we have done this year, I think if you look quarter to quarter the performance of our business is still very far from our expectations. But if you forget about our expectation and put the performance of our business against other crop chemical competitors, we are doing quite well.

So if I look into next year, 2015, what kind of growth could we expect? I think there is four very significant drivers for us of growth above market. First, we still believe that our business model, speed of product development, formulation technology, decentralized model and very flexible model will allow us to keep on growing above the market like we've been doing in the previous years.

We're also going to see the start of the revenue synergies with the Cheminova acquisition. I would say most likely in the second half of the year and Latin America, Brazil will be the first place we will see those synergies.

I believe our new products, new technology and low market share, we will continue as we have done this year to gain market share in soybeans and corn. And last, very importantly even if it is not at the level of what we have seen in the past, we still believe that Brazil and Latin America will be the fastest growing region. And remember, this is where we have more than half of our business.

So you put those four factors together in an overall market worldwide we should be flat- to low- single digits. I think we could outperform the market somewhere between 300 basis points to 500 basis points. That would be the forecast that we do from a margin, I think this year we've seen a division of margin mostly due to the first half of the year. Where, you remember, we had sales of third-party product beyond what we were expecting. But today we're looking at margins for the fourth quarter which will be very much in line with what we had in previous quarter.

For the third quarter we are very slightly under last year performance, but it is mostly a balance. North America-Brazil which is not the same as we had in previous year.

Remember North America is the highest margin region. So nothing here, which is (inaudible) problem with the business. So we should be able to see the margin growing at the same speed as our top line plus cost synergies we'll be generating from the acquisition of Cheminova.

Great. And then just one quick one on Cheminova. You've talked about improving that business from high- single digits to high-teens with the synergies over the next several years.

How do you feel about the starting point, the high-single digits given the environment? Is that really the place to start? Or have you rethought of the starting base for Cheminova as you enter 2015 and 2016?

All of the information we have at this stage and remember, it's not gross so we also competing with Chemical Abbot. All of the information we have from the divisions process, everything is telling us that the expectation to start in the high-single digit this year.

They have been mentioning, and they are very highly focused on protecting their margin. And then we do have, as I've outlined before, multiple actions we are expecting to take place to bring the margin to the high- single digit.

Just to repeat myself, I think the first situation, the first important to have our cost synergies. Just on cost, not talking about revenue synergies. We're going to be able to see the margin going from the high single digit to the mid double-digit around the 15% and that is just by acting on the cost synergies.

Then there is pricing for right technology, I think they do have some very interesting technology, which blended with ours is going to allow us to put on the market some very interesting product which will allow us to have new technology and the mix is always favorable to us. And then revenue synergies in the right applications. So we've got all of those numbers outlined and I believe we're going to get -- in the next two or three years, we're going to bring the high-single digits to the 17%, 18%, 19% range.

Thank you Pierre.

Your next question comes from the line of Dmitry Silversteyn from Longbow Research, please proceed with your question.

Thank you (inaudible) for providing the very good discussion on the Ag expectations for 2015. But switching the gears a little bit to Health and Nutrition. Can you talk a little bit about what's going on with the Omega-3 approvals and sort of why the change in timing?

Also can you provide a little more detail on the Chinese beverage market that seems to be causing you a little bit of a headwind both on top line and margin? And just talk about sort of the Outlook for the business for the fourth quarter in terms of fundamentals, probably more so than any specific items which you have already provided.

Let me give you an overview. And then I will ask Mike to give some more color. First Omega-3, it is not completely surprising what we are facing. As you know we bought a new business, a new technology and we are going to have to grow that business. So we know, and we knew from the beginning, that we were going to have a dependence at the beginning on some large pharmaceutical customers who are placing orders which held a bulk part, the biggest parts of our business.

Those customers are themselves new players, a company growing in Omega-3. So we have a new product we are selling to customers who are pushing in the market a new product. All of this is working well. But we know until we have more pharmacy gold customers and we have developed the right Muscidae product which will give a broader base to our business, it is going to be lumpy. Right now we rely on too few customers which are very large to have a regular demand. So we have (inaudible) of them the biggest one.

The market penetration is a bit slower than what they were expecting. They are bringing new product to the market, so they have asked us to take the order in the first quarter if we wouldn't mind. We're in the fourth quarter, of course being a partner as we are we agreed to move those orders to the first quarter.

So this one, I have to say this one around Omega-3 is not a surprise. It's not concerning it's going to take us a good year for us to have the new Muscidae product, have our customers establish their market. We knew of from day one, it's always the uncertainty when you penetrate a new market with a new technology.

I think the one where we are having a closer eye is the situation, the MCC situation in China. The second quarter was slower than expected. The third quarter was slower than expected.

I think there is some impact on the economy, the growth of the economy in China which is maybe seeing less penetration in terms of the growth rate of those high-end beverage in China than we were expecting. Which has led some of the very large suppliers to control their stock and their inventory.

Now, if the slowdown versus what we were expecting is mostly the results of our customers controlling their inventory better because the growth rate is in the high-single digits, low-double digit, instead of the 20%. Then it's not a big problem. If it is because there is a more intrinsic slow down of the penetration of those products in the beverage industry then there is a more serious question.

That's what we are trying to solve through its two quarters of slower growth and even this quarter I think, Mike, there was new growth for MCC business. So, we have to understand what all the very key drivers behind that performance.

In one case inventory correction, I'm just worried. More fundamental demand then I would be a bit more concerned about what we need to do next to still continue to grow in this market. Mike, do want to give some more color?

I think the one thing that I would add to Pierre's comments is that starting at the end of last year into the beginning of this year there have been some significant increases in dairy protein and that has also reduced some of the demand for dairy protein beverages. So that combined with some of the lower growth in consumer demand in China for dairy protein beverages, and also a significant slowdown in peanuts-based beverages has really caused a reduction in the demand.

And also as Pierre mentioned, as those significant customers have continued to grow last year and produce a lot of product into the beginning of this year, we have seen a few of our very large customers start to reduce their inventory throughout a very extensive retail system throughout China during the last few quarters, and we expect that to continue into the fourth quarter. And of course as Pierre mentioned we're really focusing on the underlying demand for some of these important segments, and trying to determine more specifically when, and to the extent that demand in China will be bringing its growth pattern.

In summary, Omega is not a big problem expected new market, new technology. MCC, we really want to stay very close to the action to understand the fundamental reasons for the slow down.

Okay. That's helpful. And as a follow-up can I ask a quick question about the Mineral business and the guidance for 2014 fourth quarter.

The flattish guidance on the EBIT line. Is that largely the function of the Argentina issues with lithium or -- because the [long wall move] small space basically in the same quarter, so that shouldn't be incrementally different unless you expect to experience higher cost in moving the long wall versus last year. So, is the lithium problems in terms of Argentina an extra cost (inaudible) enough to offset the growth that you would expect from Alkali, which you had a pretty good nine month year-to-date.

Let me give to you a little bit of the dynamic and Ed, please jump in. But I think if you look at overall Minerals it is going to be a quarter which will be flat year-on-year, and if you exclude the shut down of the plants we had it will be about the same profitability sequentially from the third quarter. So, we believe year-on-year we're going to be up mid-single digits versus a year ago. And we were very strong (inaudible) in the second quarter.

But the second quarter, I must say, was -- the business has been operating very, very well. It was almost flawless operation, pricing was good, plant operation were good in both businesses. But it was a fairly easy comp if you look from a year ago when we had multiple issues. So the 30%-plus growth in earnings for the business in Q3 is not completely representative of what we were expecting as being a regular growth in earnings for that business.

I think the business continues to fair well. We believe it's going to be operating the same way in the fourth quarter as it did in the third quarter. But I think we are going to be against a much stronger quarter -- last year. But there is no fundamental change around pricing operation with the plant, we had the turnaround in the middle.

There's no fundamental changes going into Q4 from Q3 it is about the same performance. The comp was easier in Q3 than it is in Q4. And you can look at our numbers last year, Q3 was by far the weakest quarter we had in Minerals.

Thank you.

Your next question comes from the line of Mike Harrison from First Analysis, please go ahead.

Good morning.

Good morning.

Paul, I wanted to ask you to dive a little bit deeper on the cash conversion. If I look at kind of where this year's probably going to shake out it looks like you are guiding to 8% or 9% cash from operations as a percent of sales. If I look at where your EBITDA margins going to shake out probably 21% or 22%.

Does the receivables issue and maybe other working capital stuff explain that GAAP fully? Or can you maybe walk us through why there's such a big gap between the cash conversion and the EBITDA margin.

The biggest factor is by a distance working capital. And it's largely driven by -- if you look back historically we've grown our receivables in the major market in Brazil double digit each year, in line with how the sales in that market has grown. And what we have seen this year that is being compounded little bit by slower collection rates and you can take a glance at our balance sheet and see how accounts receivable have expanded certainly in advance and greater than the revenue has. So, that is by far is the single biggest factor that drives that delta between the EBITDA number and the cash conversion number.

And then on the Ag side you noted that in North America that pest pressure was lower than expected. I was just hoping to understand whether that means there is a lot of inventory built up in the channel either at farms or maybe at distributor's warehouses that could negatively impact next year sales. Is that how it works? Or do you guys end up buying the products back when they go unused so you have a better sense of where the inventory levels are? And then maybe address the same issue whether that is taking place in South America.

Mike it's Mark here. I will take that one.

From a North America perspective I would say it is a mixed bag in terms of what we see for channel inventories given the conditions we saw earlier in the year, given the extreme cold and what happened with soil insecticides for the corn space I would say we are going into next year with elevated channel inventories in that space. So that's something that we are watching very carefully.

I would say on the opposite end of the spectrum we had a very good year with our pre-herbicides on soy, our Authority brands. I would say we're going into next year with normal or even low inventories in certain parts of the country in the channel. So that bodes well for 2015 on our soy herbicides business.

Looking down in Brazil, clearly what we saw going through the third quarter was grower intentions changing in terms of timing given what they saw with commodity prices, and certainly the weather aspects in Mato Grosso and Sao Paulo state. I would say going into the season now channel inventories are high.

Obviously we are we waiting for the rains to come. They're supposed to come for the next week or so. Once that happens things will start to free up.

But it is definitely delayed, and I would say yes, channel industries are elevated in Brazil. Not necessarily so in Argentina, by the way. Probably the opposite there, where we are seeing good need for our pre-herbicides once again. The problem there is getting the import materials through the borders.

Okay, thank you very much.

Your next question comes from the line of Kevin McCarthy from BofA.

Good morning. I guess a two part question on soda ash. First, I think you indicated you paid $95 million for the 6.25% interest in your Wyoming operations that you didn't already own. I was just wondering how you arrived at that value?

And then the second part, since the last earnings call I think you've quantified the expected dilution from the future divestiture of the business at $0.55. And if I look at the new EPS range for 2014, it is roughly 14% of that range, fairly large number there.

So I am wondering how committed you are to divesting the business? And whether the changing market conditions are something that you are watching in that context?

Let me take a stab at those questions. I think first of all in terms of the purchase of the FMC Wyoming stake. We had a long-term relationship with the holder of that stake, Sumitomo, on various contractual rights and commitments on both parties side, which shaped in some regard the way we structured the buy out and evaluation of that buyout. It was a negotiated deal, as you can imagine removing a 6.25% minority holder so that we could actually have full control and pursue what we needed to with regard to ownership of that asset that's valuable to us.

There were a bunch of, without getting into the details, payments that were historical dividend cash catch up and there were some payments to take them out. But it was a base valuation that we negotiated with the other side rather than -- and anything mechanical I can necessarily share with you.

In terms of 2015 and the dilution impact we talked about, our assumption and our method has always been to assume to forecast 2015 as broadly being in line with 2014. We don't have anything particularly large and major that we can point to today that would suggest 2015 is going to be significantly different based on contracted prices or anything else. So it remains our best estimate as to the likely performance for 2015.

I think we remain committed to a sale of that business, and I think it's going to be a very attractive business to a number of buyers. We think it is a business that certainly doesn't form a long-term part of FMC into the future as we close on Cheminova. And we think it's the prudent thing to do with regard to our balance sheet.

We've talked many times about the importance of having a strong and flexible balance sheet as we operate in the Ag business. As Pierre pointed out, over half of our Ag business is in Latin America and they are have very different working capital terms down there. We think a strong balance sheet is really important to our business, so we remain very committed to selling it.

Okay. That's clear enough, thank you for that. The second question if I may on the Ag business. What percentage of your herbicide sales would you say are sold to address glyphosate resistant weeds?

Good question Kevin, I would say with the pre-herbicides for us Sulfentrazone is our big molecule, both in Argentina growing in Brazil and North America. It's probably in the 65% to 70% range in terms of selected herbicides, so it is a big market for us, a big molecule -- continue to see that weed resistance grow in North America.

As I said we're starting to see it in Brazil now. We are ideally placed to see that suite of products grow, and we are adding to both the pre- and the post-herbicides as we continue our innovation development.

Just to be clear Mark, if I look at that 65% to 70% that is selective herbicides, would all of those address glyphosate resistant weeds or just a subset? What would the next cut on it be?

I will get with Alisha and come back to you on that exact cut Kevin. It is the majority, but the exact percentage I do not have right now in front of me.

Okay. I will circle back, thank you very much.

Your next question comes from the line of Frank Mitsch from Wells Fargo Securities LLC.

Good morning gentlemen, a couple of clarifications here. In terms of, Paul you mentioned that the expectation of soda ash 2015 was essentially flat with 2014. I know we are coming up on contract time for the 2015 contract in a month or so here. So is the general thinking that soda ash pricing 2015 might be flat then?

We are looking, it's still very early in the process. You know we closed those contracts throughout November and December but I would say today there is not, looking at the growth, a lot of room so it is a low-single digit potential increase in pricing.

Terrific. And then Pierre on the movement of the long wall, that's about it a $4 million impact, is that correct?

That's correct.

Great. And then I was struck by the comment talking about Ag and thank you so much for the detailed look at 2015. You are expecting sugarcane in Brazil to essentially be flat in 2015. And obviously you suffered through the drought here in 2014.

I know commodity pricing is running against you. But why would you think that would just be flat for you guys and not potentially higher?

Frank, its Mark. You are right we suffered through a couple of years of pretty major declines in terms of that industries profitability and then ends the input. I think we are just taking a prudent course of action here. We've been hit not only by commodity prices in terms of the world's sugar price but also ethanol caps in Brazil, they have impacted the industry.

And not to forget that perhaps even bigger than that is the weather impacts, and predicting weather as you know, is not easy. So I think we're just taking a cautious approach to sugarcane. We've had two years of very, very difficult conditions and we are forecasting that to roll into the early part of next year. Of course that could change, but I think this is the best course of action.

One additional thing Frank, you are correct. The sugarcane situation in Brazil is complicated because on one side there is low production which is due to the drought situation. But there is also because of the cap on oil pricing which creates a limitation on the ethanol pricing.

There is actually despite the low production, it's one of the products, we are following very closely what is called the stock-to-use which is a very important ratio in terms of understanding how much the inventory is building up and today, if you look in Brazil, sugarcane is one of the places where there is the highest stock-to-use ratio. So despite the low production because of the issue on the ethanol side there is a very high stock-to-use.

Now, as Mark said, we are taking the approach that in the short term because there was not a changing regime, the government is the same, the same prism, same government, we are not forecasting a change in terms of freeing the pricing at the pump. If such an action would take it could definitely change that picture. But we cannot anticipate that. So assuming price of ethanol keeps the same limitation because of the size of the stock to use right now we are forecasting a flattish market in Brazil.

Terrific, thank you so much.

Your last question comes from the line of Sandy Klugman from Vertical Research.

Hi, thank you. So two-part question on Ag.

Soy has obviously become a bigger part of your portfolio. This should position you well given the acreage outlook going forward. But I was hoping how you could comment on how the margins for soy tells compared to other key end markets, such as fruits and vegetables, cotton and sugarcane.

Then the other question, just in North America we're getting closer to the commercialization at the camden tolerant and 2-4D tolerant traits. How do you expect this to impact demand for your Authority product line going forward?

Sandy, let me take the first one. On the soy complex for us, pre-herbicides are very important. But we also have a mix of very important fungicides down in Brazil as well as insecticides.

I would say when you look at our overall EBIT margins soy is right at the average of all of our product range. So doesn't skew it up or down, it puts us basically in our 20% range. So it's a key contributor to the portfolio, but is not just anyone product, there is a whole suite there.

To answer your second question on the new traits that are coming through, yes obviously we are watching this very closely in terms of the EPA authorization and what a lot of people are looking at in terms of how that will impact the soy market. Like a lot of genetics when they come in, you do see a decrease in terms of chemistry. But then depending on how resistance builds the chemistry comes back.

So yes, I think there will be an impact. But I think one thing that is very important for people to remember is, we still have market share to gain in many parts of the world. So for us the soy complex is something we are still focused on with new technology we are bringing to market. So despite genetics coming in with different traits, we believe it is still a very attractive space to us as we develop new alternatives.

Okay. That's helpful, thank you very much.

All right so just to conclude let me give a few words to conclude the call. We understand that the performance of the Company is not at the level of our expectation, because we are operating under difficult market conditions in our core segment. Nevertheless within the context of the market we have today we believe we continue especially in our Ag business and to some extent the Health and Nutrition business to perform above competition.

From the transformation standpoint, we feel now we are at the right place. The Alkali business is generating a lot of interest so we should have a pretty smooth and competitive process. Cheminova, we have no new concern, we are still feeling very strong that it was the appropriate move for us in our journey to building a very strong Ag health and (inaudible) company.

The Company next year will be larger, [seeper], more focused. We do expect to continue to deliver strong results with highly predictable Health Initiative business. And definitely as I said before, we are definitely expecting for all the reasons that we have been stating to outperform these Ag markets.

So we are in the process of the transformation. We know the first quarter we'll see a lot of movement. We do expect to have much more clarity as soon as the acquisition is closed and the sale of the Alkali business is done. And that should lead us to a very solid year for 2015 within the context once again of the markets we are operating in, but I certainly expect a strong year above market conditions for our Company.

As soon as we have clarity which means we have a sign on Alkali and we have closed on Cheminova, we will bring investors, analysts together with us and give you a full picture. We will go through our regular vision 2020 exercise. We will do it a bit differently this year, I think because of all of the moving parts, we will give you a much more granular view on 2015, 2016 and 2017. And then a strategy direction for 2020.

But I think it will be important for us to state the shorter term 2015, 2016, and 2017 in a much more precise way because of all the moving parts. So thank you very much for your attention and we will be in touch. Thank you.

Thank you, this concludes the FMC Corporation third-quarter 2014 earnings release conference call.