FMC Corp. FMC saw a healthy rise in its consolidated profits in second-quarter 2015, boosted by a sizable gain on divestiture of its alkali chemicals business to chemicals company – Tronox Ltd. TROX. But its adjusted earnings for the quarter trailed expectations.
The chemical maker posted a consolidated profit of $742.3 million or $5.52 per share in the reported quarter, a nearly seven-fold rise from a profit of $109.1 million or 81 cents per share a year ago.
Barring around $700 million of gain related to the alkali chemicals unit sale and other one-time items, earnings came in at 70 cents per share, missing the Zacks Consensus Estimate of 72 cents.
Revenues climbed roughly 12% year over year to $887.1 million in the reported quarter as the company saw a double-digit rise in sales in its core agriculture franchise. Sales, however, fell short of the Zacks Consensus Estimate of $916 million.
FMC Corp. continued to face challenges in global agricultural markets and unfavorable currency impact in the quarter. The company cut its earnings guidance for the full year factoring in the currency impact.
Segment Review
Revenues from the Agricultural Solutions division went up 18% year over year to $626 million in the quarter. Segment profits, however, fell around 7% to $121 million as higher pricing was offset by lower volumes and currency impact. The division continued to face challenging market conditions through the second quarter. Weak agricultural commodity prices, elevated channel inventories and reduced insect pressures affected demand for crop protection products. Global crop protection markets witnessed significant decline during the first half on a considerable decline in Brazil.
Health and Nutrition segment’s sales were flat year over year at $207 million in the quarter as higher volumes were masked by unfavorable currency impact, stemming from a weaker euro. Segment profit rose 3% year over year to $51 million as higher volumes and gains from manufacturing excellence more than offset the currency impact. The company witnessed healthy demand from the pharmaceutical market in the quarter.
Revenues from the Lithium unit slipped 3% to $55 million as reduced sales volumes of lithium carbonate and lithium chloride and currency impact more than offset higher revenues from specialty products. Profit slid around 39% year over year to $5 million, hurt by high cost environment in Argentina and unfavorable currency translation.
Balance Sheet
FMC Corp. ended the quarter with cash and cash equivalents of $477.5 million, a more than four-fold year over year rise. Long-term debt was $2,050.9 million, up around 78% year over year.
Outlook
FMC Corp. now expects adjusted earnings for 2015 to be in the range of $3.00 to $3.30 per share, down from $3.10-$3.40 per share expected earlier. The current Zacks Consensus Estimate for 2015 is $3.25.
For 2015, FMC Corp. expects revenues and earnings for its Agricultural Solutions segment to be $2.5-$2.7 billion and $510-$550 million, respectively.
FMC Corp., in April, completed its takeover of crop protection products maker – Cheminova A/S – for $1.8 billion. The buyout is a strategic fit for the company as Cheminova has a highly complementary product portfolio and technologies as well as geographic footprint. The company is making a good progress with the integration of Cheminova's operations. It expects to realize synergies of $120 million before 2017.
Progress in the integration process so far coupled with operational benefits of the Cheminova acquisition and cost saving measures are expected to deliver strong earnings growth during the back half of 2015 amid difficult market conditions and a challenging currency environment. FMC Corp. expects Agricultural Solutions segment's earnings to jump 40% year over year to $315-$340 million in second-half 2015. For the third quarter, segment earnings have been forecast in the band of $105- $125 million.
For Health and Nutrition, revenues are expected to fall by low single-digit percent in 2015 due to currency impact. Earnings for the year are forecast to be up by mid single-digit clip on sustained demand across health and pharmaceutical markets, improvement in operational efficiency and restructuring programs.
FMC Corp. expects earnings for the Lithium unit will be in the band of $15 million to $25 million in 2015. The company sees strong demand for specialty lithium products through the balance of 2015. However, operational challenges in Argentina are expected to continue to weigh on the results for this segment.
FMC Corp. is a Zacks Rank #4 (Sell).
Better-ranked stocks in the chemical space include Innospec Inc. IOSP and Trecora Resources TREC with both holding a Zacks Rank #1 (Strong Buy).
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