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FMC Corp.'s (FMC) Q3 Earnings Top Estimates, Sales Trail

Zacks Equity Research

FMC Corp. FMC swung to a loss in third-quarter 2015, hit by restructuring & acquisition-related charges and currency headwinds. But its adjusted earnings for the quarter topped expectations.  

The chemical maker posted a loss of $2.4 million or 2 cents per share in the reported quarter versus a profit of $56 million or 42 cents per share a year ago.  

Barring one-time items, earnings came in at 42 cents per share, down from 72 cents per share logged a year ago. But it comfortably beat the Zacks Consensus Estimate of 38 cents.

Revenues edged up 1% year over year to $831 million in the reported quarter. Sales missed the Zacks Consensus Estimate of $916 million. FMC Corp. faced significant currency headwinds in the quarter, stemming from a slump in the value of the Brazilian real. The company’s results were also impacted by continued weakness in the agriculture market, especially in Brazil.
 

FMC Corporation (FMC) - Earnings Surprise | FindTheCompany

 

Segment Review

Revenues from the Agricultural Solutions division rose 5% year over year to $578 million in the quarter. However, on an adjusted basis, revenues for the division plummeted 32% year over year. Segment profits tumbled 49% to $59 million as higher pricing and cost reductions were more than offset by adverse currency impact and reduced third-party sales.

The division continued to face challenging market conditions through the third quarter. Conditions in Brazil remain particularly weak, evident from lower demand. Reduced acreage is affecting demand for crop protection products in the country.

Health and Nutrition segment’s sales fell 3.5% year over year to $196 million in the quarter as higher volumes were offset by unfavorable currency impact, stemming from a weaker euro. Segment profit rose 7.5% year over year to $47 million as higher volumes and reduced operating costs more than offset the currency impact.

Revenues from the Lithium unit slid 15% to $57 million on reduced sales volumes. Segment earnings plunged around 64% year over year to $2 million, hurt by high cost environment in Argentina and unfavorable currency impact.
 
Balance Sheet

FMC Corp. ended the quarter with cash and cash equivalents of $173.7 million, up around 40% year over year. Long-term debt was $2,048.5 million, up roughly 78% year over year.

Outlook

FMC Corp. reaffirmed its adjusted earnings forecast of $2.35-$2.45 per share for 2015, which it reduced from the prior view of $3.00-$3.30 per share earlier this month. The current Zacks Consensus Estimate for 2015 is $2.38.

The company expects revenues for its Agricultural Solutions unit to be roughly $2.3 billion for 2015. Segment earnings for the year are expected to be in the band of $370 million to $390 million. Earnings for the fourth quarter have been forecast in the range of $110 million to $130 million.   

For Health and Nutrition, revenues for 2015 are expected to be roughly $800 million. Earnings for the year are forecast to be between $193 million and $195 million. For the fourth quarter, segment earnings are expected to be in the band of $45 million to $47 million. Earnings are expected to be driven by sustained demand across health and pharmaceutical markets, improvement in operational efficiency and restructuring programs.

FMC Corp. expects earnings for the Lithium unit to be in the band of $4 million to $6 million for the fourth quarter and $16 to $18 million for 2015. The company sees strong demand for lithium products and favorable pricing trends to continue through the balance of 2015. Sales volumes are expected to be higher on a sequential basis in the fourth quarter, partly due to strategic sourcing agreements for lithium carbonate.

FMC Corp., on Oct 12, stated that it will cut corporate costs through layoffs, reduced discretionary spending and global procurement initiatives that are expected to be mostly complete by end-2015. The company plans to eliminate 800 to 850 jobs. It expects to achieve annual cost savings of $140 million to $160 million by mid 2017, up from $90 million expected earlier.

The company also said that it will reorganize its operations in Brazil to align it with near-term market conditions. The portfolio rationalization will reduce revenues in Brazil by $250 million year over year in 2015. The rationalization will allow FMC Corp. to further reduce the region's operating costs and increase its potential to deliver higher future earnings and return on capital.

Moreover, FMC Corp. stated that it will accelerate the integration of the acquired operations of Cheminova A/S. The $1.8 billion buyout is a strategic fit for the company as Cheminova has a highly complementary product portfolio and technologies as well as geographic footprint.

FMC Corp. currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked companies in the chemical space include Celanese Corporation CE, Orion Engineered Carbons SA OEC and Stepan Company SCL, all carrying a  Zacks Rank #1 (Strong Buy).

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