FMC is taking aggressive steps to clear excess inventories of crop protection chemicals in key agricultural markets, including Brazil, sending its shares plunging more than 30% in New York trading on Thursday.
The U.S. agrochemical company sharply reduced its third-quarter revenue forecast to between $65 million and $125 million, down from a previous range of $840 million to $900 million. The move underscores the mounting pressure from generic competitors and raises fresh concerns about FMC’s financial health.
In a statement, FMC said it would cut prices on several crop protection products and overhaul its rebate structure in the United States, abandoning a model built around high list prices and substantial discounts offered to distributors.
Under the new approach, the company intends to narrow the gap between gross prices and the amounts customers actually pay, seeking to compete more effectively with lower-cost generic products.
While the rebate overhaul is focused on the U.S. market, FMC’s competitive challenges extend well beyond North America.
The company said the price reductions would also cover Brazil, Argentina and Canada. Brazil is particularly important to FMC, historically accounting for more than 20% of its sales.
The rapid expansion of generic crop chemical suppliers such as Tecnomyl and Agriconnection in Brazil illustrates the competitive pressure facing established manufacturers.
The abrupt strategy shift also casts new light on a management departure that had raised questions in the Brazilian market.
In September, Renato Guimarães, FMC’s chief executive for Latin America, announced his departure from the company. The announcement came through the executive’s own LinkedIn account rather than an official company statement, as reported by Brazilian agricultural news outlet AgFeed.
Thursday’s decisions provide additional context for the departure of a senior regional executive, although it remains unclear who initiated the move.
Investors Lose Patience
FMC Chairman and Chief Executive Officer Pierre Brondeau told investors the measures would help position the company to operate at its “full potential in 2027, 2028 and the long term.”
Investors were unconvinced. FMC shares tumbled more than 30% on the New York Stock Exchange, bringing the stock to its lowest level since 2003, according to Bloomberg.
The turmoil also spread to the company’s debt.
Yields on FMC bonds surged to 10.5%, Bloomberg reported, reflecting heightened credit risk at a company that has already lost its investment-grade rating.
Bondholders have reason for concern. Although FMC expects to remain in compliance with its debt covenants, the company plans to enter negotiations with lenders to amend those provisions and gain additional financial flexibility.
Under the terms of a $2 billion revolving credit facility, FMC’s leverage ratio — debt relative to adjusted earnings — was not permitted to exceed six times as of Sept. 30.
The company is scheduled to release its third-quarter financial results on Oct. 29.
Another significant risk lies in FMC’s credit ratings.
If two of the three major rating agencies — S&P, Fitch or Moody’s — downgrade the company, FMC would be required to pledge substantially all its assets as collateral to its lenders.
The prospect adds to mounting concerns about the company’s ability to stabilize its balance sheet while rebuilding demand.
Thursday’s announcement is only the latest in a series of attempts to turn the business around.
Earlier this year, FMC sold operations in India. In July, it also reached an agreement to raise $400 million by selling a 20% equity stake to Belgium’s Tessenderlo Group.
Despite those measures, investors appear increasingly frustrated by management’s struggle to establish a convincing recovery strategy.
A Strategy Running Out of Options?
A person with extensive knowledge of agricultural markets, particularly in Brazil, questioned whether FMC’s aggressive price cuts would deliver the intended results.
“Lowering prices does not necessarily generate immediate demand. Cutting prices without reducing production costs does not work,” the person said.
The person also argued that FMC has lost its ability to innovate commercially and has struggled to reinvent its market-access strategy as its pipeline of new products has run dry.
The criticism extended to the company’s board.
“It is incomprehensible that the board continues to retain a CEO who has demonstrated an inability to change course and build a market-oriented team,” the person said.
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The financial implications of FMC’s pricing strategy are substantial. The company now expects third-quarter net revenue of just $65 million to $125 million, compared with its previous forecast of $840 million to $900 million.
Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, are expected to swing to a loss of between $510 million and $565 million.
FMC had previously projected positive adjusted EBITDA of $120 million to $150 million for the quarter.
The deterioration in earnings expectations highlights the financial cost of clearing inventories amid intensifying competition from generic manufacturers.
FMC’s market capitalization stood at approximately $820 million following Thursday’s selloff, underscoring the scale of the crisis confronting one of the world’s established crop protection companies.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
