So it’s a broad-based combination there. And it really does allow us to deliver what will be one of the strongest margin quarters in quite some time for FMC. But it is a combination of all of those factors in the fourth quarter. It’s input cost, it’s volumes, it’s operating expense discipline, it’s the continued pricing benefit of actions we’ve already taken, all of those factors.
Operator: We have our next question comes from Laurence Alexander from Jefferies.
Dan Rizzo: This is Dan Rizzo on for Laurence. Thank you for taking my question. I thought I remembered in 2015, 2016 that channel inventory destocking became a multi-season issue. I was wondering how things are different now and if that is somewhat of a risk to happen again.
Mark Douglas: Yes. 2015, you’ve got to remember back to 2015, it seems a long time ago now, but that was a particular event in Brazil. It was both inventory, it’s currency impact and it was, again, that scarcity of products leading into that. I think this is different in the sense of it’s broader and it’s happening much faster. In other words, the decreases we’re seeing on a quarterly basis right now, they’re much more extreme than they were before. I think the other thing for us, in particular, although there was a lot of people impacted by the Brazilian event, there was a new seed trait that was introduced into Brazil for soybeans, which impacted insecticides within a reasonably short time frame. That was a factor that it’s certainly not at play today in any way, shape or form. So, I don’t necessarily look back on Brazil as a proxy for what is happening today.
Dan Rizzo: All right. Thank you. That’s helpful. And then have you guys kind of quantified what a headwind unfavorable cost absorption will be given the lower production levels you talked about in the second half of the year?
Andrew Sandifer: Yes. We have not yet quantified that in part because it’s a moving target. We do anticipate based on what our operating levels are right now that there will be some modest fixed cost absorption headwinds in Q4. That’s built into our guidance, be very clear. It mitigates — it offsets a small amount of the input cost benefits we have in Q4. But in terms of how that might bleed over into next year, it’s too early to know because it’s going to depend on how we operate through the rest of the year. I think we’re being very thoughtful about managing our inventories, trying to bring them down in line with current demand, but also leave ourselves in a position to be able to capitalize on the eventual recovery of market.
So, it is a bit of a moving target. But I think key message, both our Q3 and Q4 guidance reflect our expectations for any impact of unabsorbed fixed costs in these periods. And as we look forward to the next year, it’s really going to depend how the rest of the year plays out.
Operator: We have our next question comes from Adam Samuelson from Goldman Sachs.
Adam Samuelson: I was hoping to maybe draw a little bit closer distinction in the terms of the second quarter sales decline and the trends you’re seeing between orders from your customers for — where you’re a supplier of the diamides to other crop chem manufacturers to sales into the channel? And is there actually any distinction in terms of sales trends and magnitude of decline to glean from those just as we think about kind of where the change in activity levels have occurred, and I mean, again, it’s been global, it’s a magnitude that’s really not with recent precedent, but I’m just trying to distinguish where you’re now a bigger supplier to other manufacturers than you were historically. Kind of how that has — if there was any meaningful change in distinction between those two sales trends?
Mark Douglas: Yes. Listen, I think we just commented on the fact, Adam, that the branded diamides that we’re selling ourselves into the marketplace did much better than the overall portfolio. That’s a subset of that new product introduction. In other words, we’re introducing new branded diamides that are very differentiated. That’s what the market is looking for. The market is looking for newer products that enable them to remove pest brake resistance, et cetera. I think the sales to our partners, that is used for a number of different applications, whether it’s for seed treatment or whether it’s portfolio applications. So they’re going about their business in their own way in managing their inventory as they are. There’s no indication, as I said earlier, that their volumes to the end users are falling off.
It’s more an inventory management perspective. But I do want to emphasize the fact that our own diamide sales, our own branded products are doing extremely well, especially the recently launched products.
Adam Samuelson: Okay. And then, if I just think about the fourth quarter and the cadence of revenues for the balance of the year where you have volumes improving in 4Q. Can you talk about just the magnitude that the expected contribution from some of those new product introductions and kind of where not really firm orders per se, but where — just help us that meeting a discrete building block to return to growth in 4Q versus kind of what is just an assumption of a return to more normal buying patterns from your channel partners, presumably in South America, most notably?
