Andrew Sandifer: Joe, it’s Andrew, I’d just add one additional comment there. We set out those goals in November. We highlighted 6% to 9% revenue CAGR and a 9% to 14% EBITDA CAGR of the ’26 horizon. With the adjustment with the lower results in 2023 and the slower start in 2024, you’re really only talking about increasing that by 1 percentage point. right? As we’ve shown in the updated slides today, a 7% to 10% top line CAGR and a 10% to 15% bottom line CAGR. So it’s not a fundamental shift by any means and the amount of growth we were targeting. And the logic as Mark has outlined here of how we think we can deliver that.
Operator: Our next question comes from Vincent Andrews from Morgan Stanley.
Vincent Andrews: There was one more piece to all that, I think, was just the fixed cost absorption, right? That’s obviously hurting you now. When do you think you’ll get your plant rates back up to a level where you’ll get that better fixed cost absorption? And do you have a way of quantifying that for us?
Mark Douglas: Yes, I’ll take it at the high level, Vince and then Andrew, you can make a few comments. We have numerous manufacturing facilities that are built up of individual production lines or synthesis units. Those synthesis units are coming up and down constantly. I would say as we enter Q2, we start to see more of those lines coming back. We already have cases today where we’re out of inventory. So we’ve been pushing inventory down dramatically over the last 6 to 7 months and you can see that in our inventory numbers. That will continue. You always have some dislocation between what sales is selling and what the demand forecast says. So we see that tension now. And that’s a change for us. We haven’t seen that in the last 6 to 7 months.
So we’re starting to see the signs of our inventory levels in certain key areas coming down to a point where we know we’re going to have to fire up some of those units again. I expect that to happen in the Q2 period. So Andrew, do you want to talk about what impact that has as we go forward?
Andrew Sandifer: Yes. I think, Vince, certainly when we think about the cost impact from last year, part of that is the carryover of bond variances of fixed cost absorption. And that really hits most significantly in Q1 and to a lesser degree in Q2. As Mark described, as we start ramping up production more broadly through the first half of the year and definitely into the second half. we’ll get past that unabsorbed fixed cost headwind. But it’s certainly a contributory factor into why the EBITDA in Q1 is depressed more than the sales drop.
Vincent Andrews: Okay. And then if I could just ask on the raw materials. It sounds like your comments for the year that they’re going to be flat but that seems to be a function of carrying the higher cost inventory. And I believe Andrew, you referenced that you currently invoicing raw materials below what you’re expensing them at. So I don’t know how you want to quantify it or give us a sense of it. But if raw material prices where they are today, stayed flat as we move through this year into next year. What type of deflation benefit might be available to you once things are kind of back to fully upending from a production perspective?
Andrew Sandifer: Like Benson, I think that trend is clear and real. I don’t think we’re prepared to quantify that today because, obviously, it’s going to depend on how the rest of the year plays out. But you’re absolutely correct. What we said and what we’re seeing for the materials we are buying, we are buying them at or below cost of what we have in inventory. So it will be a tailwind as we go through the year and will improve as we get through the year. We’ll have to see how the rest of the year plays out to see what the actual magnitude of that tailwind is going into ’25.
Operator: Our next question comes from Mike Harrison from Seaport Research Partners. Mike, your line is now open.
Michael Harrison: I was hoping that maybe you could give a little bit more color on what you’re seeing with new products. Maybe talk a little bit about the commercial traction that you’re getting on some of the products that you introduced over the last couple of years? And maybe just remind us what new launches you’re expecting in 2024.
Mark Douglas: Yes. Sure, Mike. We talk about this a lot because obviously it’s a big driver of our growth and also from our profitability standpoint. I think what we’ve been doing over the last few years is really a mixture of what we call product extensions which you’ve seen in the diamides area. I mean, we keep talking about Premier star. We need to put that in context I’m not going to give you the exact number because obviously, we have a lot of competitors listening in on the call. But in Q4 alone, we had tens of millions of dollars of brand-new business. So that’s extending the diamide franchise in key crops in Brazil like soy. So those are types of products that are really driving the growth. When you look at the roughly $200 million of new growth in 2024.
About $100 million of that is products that are launched within the year. Now $100 million in reference it’s usually anywhere from $100 million to $150 million on an annual basis. That’s what we’ve been tracking at. So our expectations for the brand new product launches are not out of line with what we’ve done historically despite how difficult the market place is. So we know we can sell those new technologies. We know growers are always looking for new alternatives to combat pests. It’s split pretty much across all the regions, led by Asia and then Latin America and Europe and North America are all pretty much similar. So the good news there is it’s in different geographies on different crops. So we’re not banking on the growth of the new products by one big hit with one molecule.
That’s the good news. And that’s how we like to play this. The other one is really our new fungicide, fluindapyr. That is gaining traction. We launched in Brazil. We launched in Argentina. We expect that to grow considerably as we grow through this year. This is our first real entree into a market that’s called Asia soybean rust in Brazil. It’s a $2 billion market, give or take and we have very little revenue there today. So that’s another example of us taking a brand-new product, driving it into a geography and market space.
Michael Harrison: All right. That’s very helpful. And then maybe just a little bit more detail on what you’re seeing with channel inventories in India, sounds like that was an issue in the fourth quarter but also expected to kind of remain an issue as we go through 2024. Any more detail you can provide there?
Mark Douglas: Yes. Listen, channel inventories are high. We are carrying high channel inventories. We are not the only ones. Other people on earnings calls have highlighted India. You’ve had at least 3 years of bad monsoons as well as low pest pressure. So there is a lot of inventory that needs to be worked through that. We’ll take all of ’24 and probably into ’25 to work that down, depending on what the weather patterns look like. If you look good, then we may get some acceleration. If not, it’s going to take a while. So you’re probably going to hear us talk about India pretty much every quarter as we go through this year and certainly into early next year. I doubt we’ll be the only ones talking about that either.
Operator: Our next question comes from Adam Samuelson from Goldman Sachs. Adam, your line is now open.
Adam Samuelson: Yes. Maybe just a bit of a clarification just on the assumptions for the full year on price and maybe distinguish a little bit by region because it seems like the pricing competition. It’s more severe in Latin America and maybe in India. Just how do we think about the total price cost balance for this year in aggregate. And as we think about that inflection in profitability into ’25, kind of how would you frame the risk if pricing doesn’t start to probably that price cost balance doesn’t start to flip more favorably again?
Mark Douglas: Yes, Adam, let me just start by giving you an overview of how we think about that price volume mix around the world. And Andrew, then you can comment on the price cost element. In these environments, one thing we are determined not to do is go and chase volume. And you can see that in our margins. Our margins are roughly 22% as we finish the year. They’re at industry level highs. You can’t see that for every company out there. And the important thing is that we’re managing price very carefully, not chasing volume where there is no volume and also managing the balance sheet. So you have to take all that into consideration about how you think about FMC’s strategy on price. We do take price where we can and we’ve proven that in Europe and other parts of the world.
