Philadelphia, Pennsylvania, USA
August 5, 2015
Second Quarter 2015 Highlights
- Consolidated revenues of $887 million, consolidated adjusted earnings per diluted share of $0.70
- Agricultural Solutions segment earnings of $121 million
- Health and Nutrition segment earnings of $51 million
- Lithium segment earnings of $5 million
- Closed the acquisition of Cheminova and commenced the process of integration into FMC Agricultural Solutions
- Completed the sale of Alkali Chemicals
- Full-year adjusted earnings per share reduced to $3.00 to $3.30 due to currency impact risk
FMC Corporation (NYSE: FMC) today reported second quarter revenue of $887 million, a 12 percent increase over the same period in 2014. The company reported net income of $742 million, or $5.52 per diluted share, in the second quarter of 2015, as compared to net income of $109 million, or $0.81 per diluted share, in the second quarter of 2014. Second quarter 2015 results include an after-tax gain on the sale of Alkali Chemicals to Tronox Limited of approximately $700 million. Excluding this gain and other items, adjusted earnings were $0.70 per diluted share, a decline of 15 percent versus the prior-year quarter adjusted earnings of $0.82 per diluted share. Adjusted EPS was in-line with expectations, with solid business segment performance offset by unfavorable foreign currency exchange impacts and temporarily higher Cheminova-related interest expense.
conditions for FMC Agricultural Solutions through the second quarter. Multiple factors weighed on demand for crop protection products, including high channel inventories, poor planting conditions, low pest pressures and soft agricultural commodity prices. Through the first six months of 2015, on a U.S. dollar basis, the global crop protection market declined compared to the same period of 2014, driven mainly by the significant decline in Brazil, which we estimate is down approximately 25 percent through June 2015. In addition, FMC took several important integration steps over the past three months to align how the new FMC Agricultural Solutions will access the market in key regions. These actions create short-term headwinds for the FMC Agricultural Solutions segment, but will more than repay themselves heading into the 2015/2016 season.
"FMC's Health and Nutrition segment saw healthy demand from the pharmaceutical market, increases in certain nutrition markets and an increase in its operating margins in the quarter. The Lithium operations continued to perform well and saw positive price and demand trends across the majority of its business.
"The strengthening U.S. dollar continues to create a significant headwind to our reported results. In the second quarter, foreign exchange fluctuations negatively impacted the reported revenue and adjusted operating earnings for all segments," Brondeau said. "We expect the foreign exchange headwinds to continue and to potentially increase over the second half of the year, particularly in Brazil where the Real has depreciated by more than 40 percent over the last 12 months."
FMC Agricultural Solutions
Second quarter segment revenue for FMC Agricultural Solutions was $626 million, an increase of 18 percent versus the prior-year quarter. Segment earnings in the second quarter were $121 million, a 7 percent decrease from the prior-year quarter. On a pro forma basis, as described in the Press Release Schedules on page 8, second quarter segment revenue was $684 million, a 23 percent decline compared to the same period in 2014, and segment earnings were $117 million, a 30 percent decline compared to the second quarter of 2014.
Pricing in local currencies increased in the quarter compared to the same period a year ago; however, price increases only partially offset the unfavorable impact of foreign currency movements and lower volumes. Excluding the impact of foreign exchange, second quarter 2015 pro forma revenue declined 14 percent versus the prior-year quarter and pro forma segment earnings increased 5 percent, as ongoing cost reduction initiatives across the business helped offset the negative impact of lower volumes.
During the quarter, FMC Agricultural Solutions commenced certain actions triggered by the acquisition of Cheminova, including rationalizing some product lines ahead of the 2015/2016 season and initiating a sale process for its Consagro subsidiary in Brazil. In addition, the business continued to reduce sales of low-margin third party products, a process started in the first quarter 2015. These decisions reduced second quarter segment earnings by approximately $15 million. However, these portfolio actions will strengthen the market position of FMC Agricultural Solutions and position it to deliver continued strong performance in 2016 and beyond.
Full-year segment revenue is expected to be within the range of $2.5 billion to $2.7 billion. Full-year segment earnings are expected to be in the range of $510 million to $550 million. Despite unfavorable foreign currency impacts and continued difficult market conditions, progress to date on the integration reinforces the strategic and operational benefits of the Cheminova acquisition and increases the company's confidence in FMC Agricultural Solutions' ability to deliver strong earnings growth during the second half of 2015.
As a result of targeted growth programs, ongoing cost savings initiatives and the expected acceleration of the cost and revenue synergies, FMC Agricultural Solutions is expected to deliver strong performance in the second half 2015. Over the next six months, we expect segment earnings of between $315 million to $340 million, an increase of approximately 40 percent compared to the pro forma segment earnings for the second half of 2014. The 2015/2016 season in the Southern Hemisphere typically starts late in the third quarter. Given the difficult market conditions currently experienced in Brazil, there is higher than normal uncertainty as to when growers will make purchasing decisions. Consequently, third quarter guidance for the Agricultural Solutions segment is a wider range than in prior years, without impacting second half guidance. For the third quarter, the company expects segment earnings to be in the range of $105 million to $125 million.
FMC Health and Nutrition
FMC Health and Nutrition second quarter revenue was $207 million, flat versus the prior-year quarter. Sales volumes increased over the prior year quarter, driven by MCC products in both pharmaceutical and food end markets, with prices remaining stable across the portfolio. Unfavorable foreign currency exchange impacts, primarily from a weaker Euro, partially offset the revenue gains delivered by higher sales volumes. Excluding foreign currency impacts, revenue increased approximately 6 percent compared to the second quarter of 2014.
Segment earnings of $51 million were up 3 percent compared to the prior-year quarter, as higher sales volumes and benefits of manufacturing excellence initiatives were partially offset by unfavorable foreign currency impacts. Excluding the impact of foreign currency, segment earnings for the second quarter of 2015 increased 8 percent compared to the prior-year quarter.
Full-year segment revenue is expected to be down low single-digit percent, driven by currency, while segment earnings are expected to increase by mid single-digit percent. Earnings growth is anticipated primarily from continued demand in the health and pharmaceutical markets and realizing the benefits of ongoing operational improvements and restructuring programs over the second half of the year.
FMC Lithium
Second-quarter segment revenue for FMC Lithium was $55 million, a decrease of 3 percent from the prior-year quarter, as higher specialty product revenue was offset by lower sales volumes of lithium carbonate and lithium chloride and unfavorable foreign currency exchange impacts. Segment earnings for the second quarter were $5 million, a decline of 39 percent versus the prior-year quarter. Favorable operating performance only partially offset continued inflationary cost pressures in Argentina and unfavorable foreign currency exchange impacts. Excluding the negative impact of foreign exchange, revenue and segment earnings for FMC Lithium increased 2 percent and 17 percent, respectively, compared to the second quarter of 2014.
For the remainder of 2015, demand, particularly for specialty lithium products, is expected to remain strong. However, the economic situation in Argentina is expected to continue to affect the reported results for Lithium. Full-year reported segment earnings are expected to remain within the range of $15 million to $25 million.
Corporate and Other
For the quarter, corporate and other expenses were $17 million, and net interest expense was $25 million. The higher interest expense was due to certain international borrowings of Cheminova, which carry interest rates significantly higher than FMC's normal borrowing rates. These borrowings cannot be refinanced until the second half of 2015. In the second quarter, depreciation and amortization was $31 million, and capital expenditures were $28 million. On June 30, 2015, gross consolidated debt was $2.3 billion, and debt, net of cash, was $1.8 billion. The underlying adjusted tax rate was 27.1 percent in the first half of 2015.
2015 Outlook
Adjusted earnings per share are expected to be in the range of $3.00 to $3.30 for the full year 2015.
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