Philadelphia, Pennsylvania, USA
February 4, 2015
Fourth Quarter 2014 Highlights
- Consolidated revenues of $1.1 billion, a decline of 3 percent
- Consolidated adjusted earnings per share of $1.12, an increase of 7 percent
- Agricultural Solutions segment earnings of $130 million, a decline of 5 percent
- Health and Nutrition segment earnings of $44 million, an increase of 9 percent
- Minerals segment earnings of $48 million, an increase of 32 percent
Full Year 2014 Highlights
- Consolidated revenues of $4.0 billion, an increase of 4 percent
- Consolidated adjusted earnings per share of $4.03, an increase of 4 percent
- Agricultural Solutions segment earnings of $498 million, a decline of 8 percent
- Health and Nutrition segment earnings of $188 million, an increase of 11 percent
- Minerals segment earnings of $167 million, an increase of 30 percent
FMC Corporation (NYSE: FMC) today reported fourth quarter revenue of $1.1 billion, a 3 percent decrease versus the same period in 2013. The company reported net income of $76.5 million, or $0.57 per diluted share, in the fourth quarter of 2014, compared to net income of $27.1 million, or $0.20 per diluted share, in the fourth quarter of 2013. Fourth quarter results include charges of $74.5 million after tax, or $0.55 per diluted share, compared to charges of $114.3 million after tax, or $0.85 per diluted share, in the prior-year quarter. Excluding these items in both periods, adjusted earnings were $1.12 per diluted share, an increase of 7 percent versus the prior-year quarter of $1.05.
Segment Results
FMC Agricultural Solutions
Fourth-quarter segment revenue for FMC Agricultural Solutions was $626.9 million, a decrease of 7 percent versus the prior-year quarter. For the full year, segment sales of $2.2 billion increased 1 percent. Fourth-quarter segment earnings were $130.3 million, a 5 percent decrease versus the prior-year quarter. Full-year segment earnings of $497.8 million decreased 8 percent versus 2013.
In the quarter, slow demand in Brazil continued to impact the business, particularly due to a reduction of cotton acreage, continued dry conditions impacting sugarcane and higher than normal channel inventories. The impact of this slowdown was partially offset by stronger demand in other parts of Latin America and in North America. In Mexico, demand for herbicides and insecticides for use in fruit and vegetable crops increased, and continued market penetration in Argentina resulted in higher revenue. North America saw higher demand for pre-emergent herbicides that resulted in higher sales and higher prepayments collected during the fourth quarter compared to the fourth quarter 2013. In the quarter, operating margins were slightly up over last year, with improvements from reduced third party product sales offset by currency headwinds and increases in planned development and research investments.
Global crop protection markets are expected to be flat to slightly down in 2015. The macroeconomic environment remains uncertain, mainly in light of current expectations of currency movements, interest rates, agricultural commodity prices and oil prices. FMC expects that earnings contributions from the Cheminova acquisition, the continued spread of weed resistance in North and Latin America, and market share gains in Asia and EMEA will drive full-year segment earnings 15 to 30 percent higher in 2015 than 2014.
FMC Health and Nutrition
Fourth-quarter segment revenue for FMC Health and Nutrition was $191.8 million, an increase of 1 percent versus the prior-year quarter. For the full year, segment revenue was $828.2 million, an increase of 9 percent over 2013. Segment earnings of $44.2 million were 9 percent higher than the prior-year quarter. Full-year segment earnings were $187.9 million, an increase of 11 percent. Revenue increases in the quarter were driven by demand in health markets globally and in North American nutrition markets, but were partially offset by the rapid devaluation of the Euro against the dollar, continued softness in the Chinese beverage markets and reduced demand for nutraceutical omega-3 products. During the quarter, an initiative to improve operational efficiencies was launched that will result in restructuring charges in 2014 and 2015.
For 2015, full-year segment earnings are expected to increase by mid-single digit percent. Earnings growth is expected to come from moderate demand recovery in the Chinese beverage market, continued demand for pharmaceutical products, particularly excipients, and benefits from operational improvements.
FMC Minerals
As previously announced, FMC signed a definitive agreement to sell its Alkali Chemicals business to Tronox Limited for $1.64 billion. The transaction is expected to close at the end of the first quarter subject to customary regulatory approvals and closing conditions. As a result, Alkali Chemicals will move to discontinued operations for 2015, and the FMC Minerals segment will be renamed FMC Lithium.
Fourth-quarter segment revenue for FMC Minerals was $273.5 million, an increase of 4 percent from the prior-year quarter. For the full year, segment revenue was $1.0 billion, an increase of 7 percent over 2013. Revenue for the fourth quarter and full year in Alkali Chemicals was up 7 percent and 4 percent over the prior-year periods driven by higher volumes and pricing. Fourth-quarter revenue in Lithium was down 3 percent over the prior-year quarter driven by product mix. For the full year, Lithium revenue was up 15 percent and earnings in the business were up approximately 125 percent related to strong operational performance and higher volumes.
Segment earnings for the fourth quarter and full year were $47.9 million and $166.7 million, up 32 percent and 30 percent, respectively. The earnings improvement was a result of favorable year-over-year pricing and record production in soda ash and improved Lithium operations, partially offset by the increasing cost environment in Argentina.
For 2015, demand for energy storage applications continues to grow at double-digit rates leading to an anticipation of higher prices for both lithium hydroxide and carbonate. Reduced sourcing of lithium carbonate from third parties and softness in butylithium demand will lead to slightly lower revenue in 2015. Additionally, the challenges of operating in Argentina, both from a macroeconomic and operational perspective, are expected to be a drag on reported segment earnings. As a result, reported segment earnings, which will include only our FMC Lithium business, are expected to be within the range of $15 million to $25 million.
Corporate and Other
Corporate and other expenses were $19.9 million, and interest expense, net, was $15.8 million. For the quarter, depreciation and amortization was $33.2 million and capital additions were $75.5 million. On December 31, 2014, gross consolidated debt was $1.7 billion, and debt, net of cash, was $1.6 billion. The underlying adjusted tax rate was at 21.4 percent in the fourth quarter and 24.5 percent for the full year.
The Cheminova acquisition remains on track to close in the first quarter of 2015, subject to final regulatory approvals.
Outlook
Pierre Brondeau, FMC president, CEO and chairman, said: "In 2014, the agriculture industry began experiencing a slowdown, particularly in Brazil. Given our leading position in Brazil, this significantly impacted our results. Looking forward to 2015, multiple factors suggest that the crop protection market globally will be, at best, flat to 2014. However, the benefits of Cheminova, especially a more balanced geographic exposure and the ability to realize cost and revenue synergy benefits, will allow FMC to grow segment earnings in Agricultural Solutions between 15 and 30 percent.
"In Health and Nutrition, while we are pleased with the performance in 2014, we believe there are opportunities for improvement by focusing on operational efficiency. Our Manufacturing Excellence programs have demonstrated significant benefits in both Alkali and Lithium, and will be implemented in this segment during 2015.
"The process to sell Alkali Chemicals went very well, and we are pleased with the terms we achieved. In Lithium, we are optimistic that demand for downstream products, particularly for energy storage applications, will continue to grow rapidly. Despite strong underlying performance in our Lithium business, we are unable to produce consistent results across multiple years due to the challenges of operating in Argentina's high-inflation environment.
"2015 is an important year for FMC. In the first part of the year, we will complete the steps we have previously announced in order to position FMC for the future. After we close on the Cheminova and Alkali transactions, we will be in a position to provide additional insights into 2015 and our performance expectations for the next few years."
2015 Guidance
Additional earnings guidance will be reviewed during the fourth quarter earnings call on Thursday, February 5, 2015. On April 16, 2015, the company will host an investor day in New York City. Detailed earnings per share guidance for the first and second quarters and the full year will be provided at that event.
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