And then there are other parts like Brazil, where it is a price-competitive market. Now remember, when we talk about our price reductions in Brazil, roughly half of that is activities we put in place to help our customers with their high-priced inventory. So all that price is not necessarily a price drop for the list sheets that you see. So please keep that in mind. When you think about FMC, you look at the volume, you look at the price and look at the margin. That’s how we’re managing the company. And you know what, we think that will serve us well when we come through this period as we get into the second half of the year. And certainly, as we accelerate through 2025, having a base for margins that are based around a solid price and then when volume comes back, our products will grow into that volume space.
We believe that’s the best strategy to tackle this. Andrew, do you want to comment on the cost price piece for the year?
Andrew Sandifer: Sure. I think certainly, on the price dynamics, first quarter low to mid-single-digit price headwind, heavily anchored in Lat-Am, a little bit in Asia. For the remainder of the year, prices are actually pretty flat. We’ll be anniversarying some price reduction in Q3 and Q4, as Mark described, much of that is rebated incentives, not necessarily list price changes. So it’s the absence of headwinds as well in the second half of the year as we see stabilizing market conditions. So for the full year, you end up with a low single-digit price headwind. Certainly, relative to cost, cost is going to be a strong tailwind this year as we get through the full year in Q1, no but as we get through the full year, input costs will start to turn to a tail as we get past the high cost of inventory.
And then certainly, with all the restructuring actions that we’re taking, that will help generate a further tailwind this year. So the net price/cost relationship for the year is positive.
Operator: Our next question comes from Steve Byrne from Bank of America.
Salvator Tiano: This Salvator Tiano filling in for Steve. So firstly, I wanted to touch base again on kind of the Q2 to Q4 assumptions. So as you said before, you’re kind of assuming a 15% increase in revenue after Q1 year-on-year. And even if we think about the flattish price you’ve just mentioned and most of the NPI benefits coming there, it still looks to me that you’re assuming probably double-digit volume increase on the legacy business. Is that correct? Are there any components of leasing? And what would drive such a strong growth versus, I guess, your expectations for the market being down a little bit overall, how would you outgrow the market, excluding the NPIs which I took out of the equation?
Mark Douglas: Andrew, do you want to take it?
Andrew Sandifer: Sure. Look, I think we’re — as sales we’ve talked about, we’re expecting pretty strong growth from new products in the second half. The first half is down across the board. So that growth from Q2 to Q4 is stronger than the full year growth. So there is growth in the core portfolio, absolutely. Probably more like high single digits rather than mid-teens, a little stronger growth from new products in that Q2 to Q4 time horizon. I think we have to be a little bit careful with percentages here. We’ve had a major market reset in 2023 and as the channel starts to settle out, normalize on inventory, the dollar amounts we’re talking about in terms of incremental growth are not egregious by any means when you think about the dollar growth that, that would imply for our core portfolio and a core portfolio that’s performed pretty strongly historically.
So I think we think that’s a pretty reasonable balance. But again, that strong base and that strong driving on the new products is what really helps reinforce the acceleration and the leverage to the bottom line in Q2 through Q4.
Salvator Tiano: Okay, perfect. And I wanted also to check on what you mentioned before about the nonbrand diamides. I’m just wondering, so the idea of having partners was to kind of extend the — you sign agreements and you extend kind of your protection here as you will prevent them from competing with you directly at some point. But you mentioned that — it’s a separate business. You have no visibility into what they do. I’m not really sure why wouldn’t you try to from the start have an idea of what is their sell-through or how much they sell in the market? Do you have any plans to start understanding better or request from them more information so you can figure out what kind of the overall diamide consumption in the channel?
Mark Douglas: Yes. I mean, listen, it’s a very valid question. You’ve got to remember that they’re selling products still into the marketplace from their inventory. We’re not replenishing their inventory because they’re not buying it. It’s exactly what we’re doing with our suppliers and what our customers are doing to us. A big piece of that market is seed treatment. Do not underestimate how much volume of the diamides goes into treating seeds around the world. It’s a large volume. They also operate in markets that we don’t necessarily have access, whether it’s on a geographic basis or a crop basis. So once again, this is a $70-plus billion market for pesticides that is highly fragmented. It is not unusual for us not to know where those products are going.
However, what we do know is that when they see a utility for diamides, they’re using FMC’s technology and that’s what’s important to us. So we think about it in that way. I think the other thing you’ve got to remember is we’re talking about where the forecast currently sit. Forecast can change and frequently do. They did last year. The forecasts that the partners put in place in January is very different to what it looked like in September. We could well see a difference in their September forecast or their August forecast than what it is today. So we’ll see. For us, the partners are very valuable. They’ve worked extremely well since we bought the assets way back in 2017 and they will continue to work well. They are just going through the same phenomena that we are.
Operator: Our next question comes from Brian Wright from ROTH MKM.
Brian Wright: Could you give us a little bit of an update on the plant health outlook and as far as that reflects for 2024?
Mark Douglas: Yes, absolutely. Plant health was down in 2023, mainly because of the segments that we’re in. We have a big exposure to one particular segment in Brazil that was down. We had growth in other parts of the world. We see plant health coming back to its more normal growth rates in 2024. And those growth rates are high teens, low 20s. And with the biologicals component, somewhat higher than that. So you should expect to see the Plant Health business back to its normal cadence. We’re also doing what we said we would do in our Investor Day. We’re investing in new business models for this business. And despite all the changes we’re making, we have carved out the ability to create a new business model in Brazil for the plant health business.
So we’re going to be very interested in seeing how a purely dedicated plant health business starts to perform once it gets its breadth of portfolio which is doing today. So I expect it to be very good growth in 2024 for plant health.
Operator: Our next question comes from Laurence Alexander from Jefferies.
Laurence Alexander: Just given the controversy around diamides, can you characterize how diamine margins are performing compared to the overall business? And secondly, in the rebound in the back half of the year, do you expect the new products, including diamides to rebound faster or slower than the average business? And then lastly, I can’t help it because you mentioned the seed treatment. How large is seed treatment roughly as a percentage of global diamide volume? Is it like 10% to 20%?
Mark Douglas: Yes. We don’t — that last bit, we don’t break out, Laurence. I don’t know what controversy you’re talking about, about the diamides. We love the business. Higher margins than normal in general, have been since we bought the business, continue to be so. Margin, profile, very strong. I would expect — I think it was the middle part of your question that as the diamides continue, we’ll see what happens with our India business as we go through all the channel inventory work. That may be a drag. Partners, we’ve already said, is going to be lower. The rest of the branded will see as we accelerate through the year. The new product introductions will definitely be faster growth than the rest. That’s how we see the business. It’s a strong franchise has been since we owned it and it continues to be.
Operator: Our next question comes from Arun Viswanathan from RBC Capital.
Arun Viswanathan: Apologies if I missed this but maybe I’ll just ask a question on the longer-term outlook. So you did reiterate the rolling 3-year forward view which maybe you can just kind of flesh out how you’re thinking about ’25 the well. So is it kind of $975 or so for ’24 growing to about $1.2 billion of EBITDA in ’25 and then that gets you to the $1.4 billion midpoint in ’26. And is that ’25 growth really that $150 million of run rate savings and then maybe exiting the year in a more normal environment in Brazil. How are you thinking about kind of that longer — medium- and longer-term outlook at this point?
Mark Douglas: Yes. Listen, I’m not going to guide’ ’25 in February. I can tell you that the growth that we see is related to new product introductions, more normal market growth at the top line. we will then see the benefit of our restructuring program hit the bottom line and the absence of all the headwinds that we’re seeing today, those will reverse and will obviously contribute to the growth in EBITDA next year. Andrew, do you want to give any more color?
Andrew Sandifer: Yes. Look, I think Mark is right, it’s a little early to guide ’25 specifically. But in terms of shape of the curve, we’ve always expected ’25 was a big acceleration. You pointed to some of the factors that compound that in terms of the restructuring benefits as well as coming out from higher cost inventory that we have right now in our inventory. But with then still continued very strong growth in 2026. So that’s how I described the general shape of the curve at this point, a pretty big step-up in ’25 and continued strong growth in ’26.
Operator: Our next question comes from Andrew Keches from Barclays.
Andrew Keches: Andrew, can you just talk about the seasonality of cash flow, particularly in the early part of the year. Typically, that’s a pretty large seasonal draw. So any high-level thoughts on the magnitude of that relative to historical patterns? And then the follow-up would just be, can you clarify, I think you said that the covenant leverage would end this year below 3.5 which stood out to me because covenant leverage is typically above the simple net debt to EBITDA. So does that include already the assumption about a divestiture of GSS?
Andrew Sandifer: Let me hit those questions. I think in terms of seasonality of cash flow this year, we expect a very different profile for cash flow seasonally this year. We would normally have a large working capital build in Q1 driven by inventory build as — you’re painfully aware, we have plenty of inventory at the moment. So we would expect a much more limited working capital build in Q1. So a much more limited negative free cash flow in Q1 which is a big part of helping us move forward on deleveraging quickly. I think through the rest of the year, you’re going to see a little more acceleration as we go through the year. We are typically free cash flow heavy in the second half in Q4 in particular. But the — certainly, the historic large outflow in Q1 should not be repeated this year.
