2022 FMC Annual Report Highlights and Analysis

A breakdown of the FMC business in 2022 and what that means for 2023 and beyond

FMC is an American agriculture company dedicated exclusively to crop protection chemistry/biologicals and their delivery.

FMC has helped protect growers’ fields and yields for over 100 years. FMC was founded in 1883 as the Bean Spray Pump Company by John Bean, who developed the first piston-pump insecticide sprayer. In 1928 Bean Spray Pump purchased the Anderson-Barngrover Co. and Sprague-Sells Co. and changed the company name to Food Machinery Corporation. FMC was born.

In 2017, FMC acquired a significant portion of DuPont’s crop protection portfolio, further enforcing the promise to FMC customers, retailers, and distributors: Advancing Chemistry to Advance Agriculture.

FMC has five active ingredient plants, sixteen formulation and packaging sites, and products sold in approximately 120 countries.

FMC is the 5th largest ag chemistry company (6th largest if you include the seed portion of UPL business). FMC tends to associate itself with the big four— Bayer, Syngenta, Corteva, and BASF with themselves as the 5th member.

If we look at the breakdown of the six largest companies in crop protection and seed manufacturing, there are three distinct couplings today:

1. Bayer Crop Science and Syngenta (Seeds and Crop Protection business units only) are both well over $20 billion in 2022 revenue. (Note: If we were to include Syngenta China and ADAMA, they would be at >$33 billion and the largest of all)

2. Corteva and BASF are north of $10 billion USD in 2022 revenue but below $20 billion.

3. FMC and UPL are hovering right around $6 billion in 2022 revenue.

Arguably, ADAMA (a part of Syngenta group, but not included in their revenue number above) could fall into grouping #3 with FMC and UPL

There is a 4th as well where we could have the likes of Sumitomo Chemical Company Ltd. and Nufarm Ltd.

FMC is in the same camp as Corteva: pureplay publicly traded ag company (hopefully Syngenta will join them soon).

This makes FMC a lot of fun to dig into.

Index:

1. Overview

2. Insecticide Business

3. Plant Health Business

4. Precision Ag Business

5. Fungicides, Herbicides and Venture Capital

6. SG&A, R&D and Inventory

7. Outlook for 2023 and Beyond

8. Final Thoughts

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1. Overview

FMC delivered a record performance in 2022.

Their revenue of $5.8 billion increased by $757.1 million, or about 15% compared to 2021. The increase was driven by higher volumes, which accounted for an approximate 11% increase, and strong pricing, which accounted for an approximate 7% increase. Latin America and North America primarily drove volume growth. (Note: Foreign currency had a negative impact of 3% on revenue which is where the 15% comes from). Notably, North American sales grew fastest in 2022.

Adjusted EBITDA of $1.407 billion was up 7% from 2021. They did, however, see their EBITDA margins decline for the 2nd straight year (2020 has been the high mark):

Gross margin was 40%, a decrease from 43% in 2021 due to higher input costs and unfavorable currency headwinds.

For context, Corteva has around 18.5% EBITDA margins as the lowest of the big five and Bayer would be the highest, coming in at about 27% in 2022.

FMC has the 2nd highest EBITDA margins even with the two-year decline. I suspect they have been eating a bit of the cost of the raw material fluctuations over the past couple years which would at least partly explain their EBITDA margin decline.

FMC revenue is heavily driven by insecticides and herbicides, totaling…