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Original Source: FD (FAIR DISCLOSURE) WIRE
. Brennen Arndt, FMC Corporation, IR . Bill Walter, FMC Corporation, Chairman, President, CEO . Ted Butz, FMC Corporation, VP, Gen. Mgr., Specialty Chemicals . Kim Foster, FMC Corporation, SVP, CFO . Robert Feliz, Gabelli and Company, Analyst . Kevin McCarthy, Banc of America, Analyst . Robert Goldberg, Scopus Asset Management, Analyst . Stuart Lippy, Freedom Capital, Analyst . Brian Furlaw, Sigma, Analyst . Dmitry Silversteyn, Longbow Research, Analyst
Co. reported that 2Q06 EPS was at the high end of the range issued in the outlook at the last conference call. 2Q06 sales were $592m. 2Q06 GAAP net income of $46.3m or $1.16 per diluted share. 2Q06 non-GAAP earnings were $1.47 per share. Co. is reaffirming full-year 2006 outlook for earnings before restructuring and other income and charges of $5.35-5.55 per diluted share. Co. expects 3Q06 earnings before restructuring and other income and charges of $0.95-1.05 per share.
A. Key Data From Call 1. 2Q06 sales = $592m. 2. 2Q06 GAAP net income = $46.3m. 3. 2Q06 GAAP diluted EPS = $1.16. 4. 2Q06 non-GAAP EPS = $1.47. 5. 2Q06 CapEx = $28.8m. 6. 2Q06 share repurchase = approx. 315,000 shares at a total cost of $20m. 7. Full-year 2006 diluted EPS guidance (before restructuring and other income and charges) = $5.35-5.55. 8. 3Q06 EPS guidance (before restructuring and other income and charges) = $0.95-1.05.
S1. 2Q06 Business Review (B.W.) 1. Opening Comments: 1. EPS was at the high end of the range issued in the outlook at the last conference call. 2. Ag Products met earnings expectations through improved margins. 3. Specialty Chemicals delivered double-digit earnings growth on higher volumes and selling prices. 4. Industrial Chemicals continued to realize significant pricing
leverage, particularly in soda ash. 2. 2Q06 Performance: 1. Sales of $592m were up 5% vs. 2Q05. 2. Earnings before restructuring and other income and charges of $1.47 per diluted share were up 9% over 2Q05 of $1.35 a share. 3. GAAP net income of $46.3m or $1.16 per diluted share. 1. GAAP earnings included a net after-tax charge of $0.31 per share related to discontinued operations and restructure and income and charges. 4. Non-GAAP earnings were $1.47 per share vs. $1.35 in 2Q05. 5. 2Q06 performance was achieved despite the impact of higher energy and raw material costs across the corp. vs. prior year higher company-wide energy and raw material costs, unfavorably impacted earnings by $0.27 per share in the qtr. 1. Currency translation had an unfavorable impact of $0.02 per share vs. 2Q05. 6. In Co.'s view, 2Q06 performance clearly reflects the benefit it derives from its end market diversity and relative insensitivity to GDP cycles. 3. Other Details: 1. All of Co.'s businesses hold leading market positions.
2. Relative to others in its sector, Co.'s revenue stream is less
sensitive to GDP cycles as a result of the diversity of its
end markets and customer base. 3. FMC benefits from a diversified and integrated cost structure. 4. Relative to other chemical companies, FMC has limited dependence on petrochemical feedstocks. 5. FMC mitigates its exposure to the volatility of energy costs
by hedging 80% of its planned purchases of natural gas on a
rolling 12-month basis. 4. Ag Products: 1. Revenue of $184m was 6% lower than $196m achieved last year. 2. North American sales declined as a result of the previously reported shift of product sales into 1Q06 and the continued impact of generic bifenthrin competition. 3. Due to the timing of certain sales in Eastern Europe, overall European revenue was low. 4. Sales in Asia continued to show good growth, particularly in China, Australia, and Korea.
5. Latin American sales rose modestly. 6. Earnings of $44.5m were essentially level to 2Q05. 7. Margin expansion was achieved through improved product mix and continued supply chain productivity improvements, which together more than offset the revenue decline in higher raw material costs. 5. Industrial Chemicals: 1. Revenue of $252m increased 14% vs. 2Q05, as sales gains were
achieved across soda ash, peroxygens, and Foret. 1. Higher selling prices for soda ash and hydrogen peroxide were the primary drivers. 2. This revenue increase was achieved despite the impact of unfavorable currency translation primarily the euro on the European operations. 2. Segment earnings of $24.9m, increased 2% vs. 2Q05, as the revenue gains were mitigated by: 1. Higher energy costs, particularly in Spain. 2. Higher raw material costs.
3. Absence of profits from Astaris, which was divested in Nov.
of last year. 6. Corporate Items: 1. Corporate expense of $11.2m was essentially level to 2Q05. 2. Interest expense net was $9.2m, down from $17m in 2Q05 due to lower interest rates and debt levels. 3. On 06/30/06: 1. Gross consolidated debt was $680.4m.
2. Debt, net of cash, was $476.6m. 4. 2Q06 D&A was $33.5m.
5. 2Q06 CapEx was $28.8m.
S2. Specialty Chemicals (T.B.) 1. 2Q06 Highlights: 1. Revenue of $156.6m, increased 5% over 2Q05, while earnings increased 12%. 2. Lithium and BioPolymer's pharmaceutical business delivered
strong performance. 1. Lithium's performance was a result of higher pricing in the upstream primary business due to tight industry supply demand, coupled with continued volume growth in the downstream specialties business. 2. BioPolymer results were led by good performance in pharmaceutical excipients, offset in part by weaker than expected results in the food ingredients business. 3. Pharmaceutical excipients showed broad growth across several product lines driven primarily by growth in generic pharmaceuticals in the US and emerging markets. 4. The food business was impacted in 2Q06 by higher energy and seaweed cost, a low order pattern for pet food carrageenan and an inventory reduction program at one of the larger customers. 1. Pet food and the inventory reduction issues are now behind Co. and it has seen normal order patterns return.
5. Co. expects seaweed and energy costs to remain slightly higher
in 2H06 than the prior year. 1. FMC has raised prices and is driving various productivity initiatives to mitigate these impacts. 6. YTD performance for the group was ahead of last year, with earnings up 11% on 5% growth in revenues. 7. For the full-year, Co. expects revenues to increase approx. 5% over 2005 with earnings growth of approx. 10%. 1. As it has been typical of the segment, 2H06 results are expected to be lower than those in 1H06. 8. Lower Lithium results in 2H06 due to timing of planned
maintenance shutdowns and order pattern changes in the
synthesis market will only partially be offset by continued
growth in BioPolymer. 2. Lithium: 1. The division is a global supplier of value-added lithium chemistry. 2. With revenues of approx. $185m, Co. is the second largest supplier in this $500m market. 3. Overall growth of the industry is around 4-5% per year, led by the energy storage and pharmaceutical synthesis markets. 1. Energy storage market is growing between 8-10% per year while the synthesis market is growing between 5-7%. 4. The remainder of the business, which includes polymers and various other industrial applications, historically has grown at rates similar to GDP. 5. FMC's strength in this business is in downstream specialty applications where it serves higher value end-users and where it has technical capabilities that are unmatched in the industry. 1. These markets due to lithium continue to exhibit attractive growth …