FMC's CEO Discusses Q4 2011 Results - Earnings Call Transcript

FMC (FMC)

Q4 2011 Earnings Call

February 09, 2012 11:00 am ET

Executives

Brennen Arndt - Director of Investor Relations

Pierre R. Brondeau - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Mark A. Douglas - President of Industrial Chemicals Group

W. Kim Foster - Chief Financial Officer and Executive Vice President

Milton Steele - President of the Agricultural Products Group

D. Michael Wilson - President of Specialty Chemicals Group

Analysts

Robert Walker - Jefferies & Company, Inc., Research Division

Sabina Chatterjee - Wells Fargo Securities, LLC, Research Division

Michael J. Sison - KeyBanc Capital Markets Inc., Research Division

Peter Butler

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Eugene Fedotoff - Longbow Research LLC

William Young

Michael J. Harrison - First Analysis Securities Corporation, Research Division

John P. McNulty - Crédit Suisse AG, Research Division

Robert Reitzes

Presentation

Operator

Good Morning and welcome to the Fourth Quarter 2011 Earnings Release Conference Call for FMC Corporation. [Operator Instructions] I would now turn the conference over to Mr. Brennen Arndt. Mr. Arndt, you may begin.

Brennen Arndt

Thank you, and welcome everybody to FMC's Fourth Quarter 2011 Conference Call and Webcast. Pierre Brondeau, President, Chief Executive and Chairman, will begin our call with a review of fourth quarter performance. Following, Pierre Mark Douglas, President Industrial Chemicals, will provide us an in depth review of the performance and prospects for our soda ash and peroxygens businesses. Pierre will then give us a progress report on the significant progress we made in 2011 implementing our Vision 2015 strategic plan. Following Pierre, Kim Foster, Executive Vice President and Chief Financial Officer, will report on our financial position. Pierre will then finish our remarks by providing our outlook for the first quarter and full year 2012. And we'll complete the call by taking your questions.

Joining Pierre, Kim and Mark for the Q&A session will be Milton Steele, President Agricultural Products; and Michael Wilson, President Specialty Chemicals Group.

Our discussion today will focus on adjusted earnings for all income statement and EPS references on our website available at fmc.com You will find the definition of adjusted earnings and certain other non-GAAP financial terms that we may refer to during today's conference call under the heading entitled Glossary of Financial Terms, as well as we provided a reconciliation to GAAP of the non-GAAP figures we will use today.

Also posted on our website, I'd like to call your attention to the current 2012 outlook statement, which provides our guidance for the full year and first quarter 2012.

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

Pierre R. Brondeau

Thank you, Brennen. And good morning, everyone. Our fourth quarter results provided a strong finish to a year of remarkable accomplishments for FMC. We achieved record financial performance in 2011 and made great progress implementing our Vision 2015 strategy plan.

Here is a brief summary of our accomplishments in 2011. Sales and EBIT both increased 13%, excluding the prior year impact of exited businesses. Earnings per diluted share grew by 21%. Free cash flow of $180 million was generated. Return on invested capital increased to 23.9%. Agricultural Products delivered eighth year of record earnings. Specialty Chemicals achieved sixth consecutive years of record earnings led by the seventh consecutive year of record earnings on BioPolymer. Industrial Chemicals realized robust earnings growth, the highest profit growth among our segments on the strength of our soda ash business and continued shift towards Specialty Peroxygens.

Across our businesses, we completed 4 company or product line acquisition, formed 2 joint ventures and established 2 product development and distribution agreements, all designed to strategically broaden our capacity to serve customers and enable us to capitalize on organic market growth opportunities. And alongside these external growth initiatives, we returned $206 million to shareholders in the form of dividends and stock repurchase.

2011 indeed was a very good year for us and we are confident that we'll deliver another record year in 2012.

Moving to our fourth quarter 2011 results. Sales of $909 million increased by 17% last year excluding the prior year impact of exited businesses. Adjusted earnings of $1.58 per diluted share increased 44% versus the year quarter ago. This stable adjusted earnings is well above the $1.30 to $1.40 range in the guidance we issued last quarter as we benefited from lower tax rate than projected in our previous guidance. We do expect this lower tax rate to be a sustaining contributor to our highest earnings profile going forward. Kim will review the details of this lower tax rate later in our call.

Our gross margin of $294 million increased by 11% versus last year, while on a percent basis our percent gross margin essentially equaled that of last year.

SG&A spend of $115 million was leveled to a year ago despite the significant sales gain. Adjusted earnings before interest and taxes of $145 million increased 24% versus last year. On a regional basis looking at the result, excluding the prior year impact of exited business, we have clearly demonstrated our continued success in penetrating rapidly developing economies. Asia has the highest sales growth, up 15%, as Specialty Chemicals nearly doubled. Latin America, grew 30%, driven by robust growth in ag product and soda ash while EMEA increased 11%.

Let's take a more detailed look at the performance of operating segments in the quarter. First in Agricultural Products. First quarter sales of $409 million increased 22% versus the year ago quarter led by robust sales growth in Latin America. The sales gain in Latin America were driven by strong demand in key Brazilian market segments, such as cotton and sugar cane, as well as the new product in production and sales from a new venture in Argentina. Sales in EMEA increased significantly based on the strength of insecticide and herbicide sales in France and Italy. In North America, sales were lower than a year ago due to a shift into turning of fall application sales, where we recorded in the third quarter of this year versus the fourth quarter of last year. In Asia, sales were essentially leveled to a year ago as higher insecticide volumes in China, Indonesia and Korea were offset by lower lower herbicide volumes due to less favorable weather conditions in China, Pakistan and India, which impacted the regions with crops.

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