FMC Corporation (FMC)

Q2 2010 Earnings Call

July 29, 2010 11:00 pm ET

Executives

Pierre Brondeau - President & CEO

Milton Steele - VP and General Manager, Agricultural Products

Kim Foster - SVP & CFO

Ted Butz - VP & General Manager, Specialty Chemicals

Michael Wilson - VP & General Manager, Industrial Chemicals

Analysts

Scott Levine - JPMorgan

Hamzah Mazari - Credit Suisse

Jonathan Ellis - Bank of America

Corey Greendale - First Analysis

Bill Fisher - Raymond James

Richard Skidmore - Goldman Sachs

Michael Hoffman - Wunderlich Securities

Presentation

Operator

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Previous Statements by FMC
» FMC Corp. Q1 2010 Earnings Call Transcript
» FMC Corporation Q4 2009 Earnings Call Transcript
» Fmc Corporation Q3 2009 Earnings Call Transcript

Good evening, and welcome to the second quarter 2010 earnings release conference call for FMC Corporation. Phone lines will be placed on listen-only mode throughout the conference. After the speaker’s presentation, there will be a question-and-answer period. (Operator Instructions). Thank you. I'd like to turn the conference over to Mr. Brennen Arndt. Mr. Arndt, you may begin your conference.

Brennen Arndt

Thank you very much. Thank you, and welcome everyone to FMC’s second quarter 2010 conference call and webcast.

Pierre Brondeau, President and Chief Executive Officer, will begin the call with a review of our second quarter performance. Following Pierre, Milton Steele, Vice President and General Manager, Agricultural Products will report on AG product second quarter performance, third quarter outlook and then provide an in-depth review of the differentiating strategy.

The group is employing to sustain growth while delivering operating margins well ahead of industry averages. Milton will then turn the call over to Kim Foster, Senior Vice President and Chief Financial Officer, for a report on our financial position. Pierre will then provide our outlook for the third quarter, full year 2010, and we’ll complete the call by taking your questions. Joining Pierre, Kim, and Milton for the Q&A session will be Ted Butz, Vice President and General Manager, Specialty Chemicals; Michael Wilson, Vice President and General Manager, Industrial Chemicals; and Mark Douglas, Vice President, Global Services and International Development.

A reminder to everyone that our discussion today will include certain statements that are forward-looking and subject to various risks and uncertainties concerning specific factors summarized in FMC’s 2009 Form 10-K, our most recent Form 10-Q, and other SEC filings. This information represents our best judgment based on today’s information; actual results may vary based on these risks and uncertainties. During the conference call, we will refer to certain non-GAAP financial terms. On the FMC website available at fmc.com, you will find the definition of these terms under the heading entitled Glossary of Financial Terms. In addition, we have provided our 2010 outlook statement and a reconciliation to GAAP of the non-GAAP figures that we will use today

It's now my pleasure to turn the call over to Pierre Brondeau, Pierre?

Pierre Brondeau

Thank you, Brennen, and good morning, everyone. As you saw in our earnings release, we did strong second quarter performance, better than our expectations. We realized strong sales growth in agricultural products and specialty chemicals and demand recovery in additional chemicals. Our second quarter earnings increased 16% to $1.28 per diluted share before structuring and other income and charges on revenue of $770 million, which increased 11%.

In Agricultural Products, sales of $294 million increased 60% while segment earnings of $18 million were down 12%, slightly better than expected. In Specialty Chemical, sales of $215 million increased 11% and earnings of $51 million increased 26%. Industrial chemical, sales of $269 million, increased 5% and earnings of $30 million, more than double up 121%, which was above our expectations. On a GAAP basis, we reported net income of $66 million or $0.90 per diluted share. GAAP earnings in the current quarter included a net charge of $28 million after tax of $0.38 per diluted share versus a net charge of $11 million after tax or $0.16 per diluted share in the prior year quarter.

With that reconciliation our non-GAAP earnings were $1.28 per diluted share in the current quarter, an increase of 16% versus $1.10 per diluted share in the second quarter of 2009. Going forward, our outlook is for the strong performance to continue in the third quarter and for the full year. In the third quarter, we expect earnings of $1 to $1.60 per diluted share before restructuring and other income and charges, 21% increase at midpoint of this range. For the full year, we have raised our outlook to $4.65 to $4.80 per diluted share before restructuring and other income and charges. The 13% increase at midpoint of this range.

Let's now take a more detailed look at the second quarter performance in each of the operating segments. First, in Specialty Chemicals, revenue of $215 million was 11% higher than the prior year quarter, driven by a robust demand recovery in Lithium Primaries and higher volumes in selling prices in Biopolymer.

Segment earnings of $51 million, increased 26% above the prior year as a result of the strong commercial performance in Biopolymer and higher volume in lithium primaries, partially offset by higher raw material cost. In Lithium, our upstream primaries business continues to experience a V shaped demand recovery, driven largely by growth in battery and metals markets in Asia.

Second quarter Lithium Primaries volume increased substantially versus prior year, while selling prices have stabilized in recent months at a level lower than last year. A downstream lithium business contributes to top line growth through higher selling prices. Lithium earnings in the quarter increased substantially versus last year as a result of the sales gain in the margin leverage on this top line growth.

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