Good morning and welcome to the Third Quarter 2021 Earnings Call for FMC Corporation. This event is being recorded and all participants are in listen-only mode. [Operator Instructions] After today's prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Mr. Zack Zaki, Director of Investor Relations for FMC Corporation. Please, go ahead.

Thank you, Chad (ph), and good morning, everyone. Welcome to FMC Corporation's Third Quarter Earnings Call. Joining me today are Mark Douglas, President and Chief Executive Officer, and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Mark will review our third quarter performance and provide an outlook for the rest of the year, as well as an initial view of 2022. Andrew will provide an overview of select financial results. Following the prepared remarks, we will take questions. Our earnings release, and today's slide presentation are available on our website and the prepared remarks from today's discussion will be made available after the call. Let me remind you that today's presentation and discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including but not limited to those factors identified in our earnings release and in our filings with the Securities and Exchange Commission. Information presented represents our best judgment based on today's understanding. Actual results may vary based upon these risks and uncertainties. Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, free cash flow, and organic revenue growth, all of which are non - GAAP financial measures. Please note that as used in today's discussion, earnings mean adjusted earnings and EBITDA means adjusted EBITDA. A reconciliation and definition of these terms, as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website. With that, I will now turn the call over to Mark.

Thank you, Zack. And good morning, everyone. FMC delivered record third quarter results. We grew our revenue by 10%, EBITDA by 12%, EPS by 17%, and importantly, expanded our EBITDA margins despite continuing cost pressures. Performance in the quarter was driven by broad-based volume growth and price increases. New products introduced in the last 12 months continued to gain momentum. And we are now forecasting sales from these products to account for more than 1/3 of our revenue growth this year. In addition, FMC's plant health business had an excellent quarter with 40% year-over-year growth led by biologicals. Looking ahead, we continue to expect a strong finish to the year driven by high-margin volume gains and accelerated pricing actions, as well as a robust global market backdrop. I'd like to take a moment to acknowledge our operations and procurement teams for their contribution to our third quarter performance. The supply chain and logistics challenges highlighted in our last earnings call continued to disrupt AgChem and other industries around the world. FMC was able to meet the strong grower demand for our products in a timely manner. Thanks to the work of these teams. Let me also briefly comment on COVID-19 's impact on FMC. All our manufacturing facilities and distribution warehouses remain operational and properly staffed. Our research laboratories and greenhouses continue to be fully active. And we have resumed in office operations in many parts of the world. FMC continues to follow all guidance given by local authorities. Turning to our Q3 results on slide 3, we reported $1.2 billion in Third Quarter revenue, which reflects the 10% increase on a reported basis, and a 9% increase organically. Growth was broad-based with 11 of our top 20 countries posting double-digit growth in the quarter. We had strong growth in…

Thanks, Mark. Let me start this morning with a few highlights from the income statement. FX was a modest tailwind to revenue growth in the quarter as expected, with the U.S. dollar weaker against many key currencies, most significantly in Latin America with the strengthening of the Brazilian reais and the Mexican peso. Interest expense for the quarter was $33.1 million, down $2.4 million from the prior-year period, driven by the benefit of lower debt balances and lower LIBOR rates. We continue to expect interest expense to be between $130 and $135 million for the full year. Our effective tax rate on adjusted earnings for the third quarter was 13.5% as anticipated and in line with our expectation for a full-year tax rate between 13% and 14%. Moving next to the balance sheet and liquidity, gross debt at quarter-end was $3.4 billion down roughly $400 million in the prior quarter. Gross debt to trailing 12-month EBITDA was 2.7 times at the end of the third quarter, while net debt to EBITDA was 2.5 times. Both metrics improved sequentially. Though still slightly above our targeted full-year average leverage levels, we expect to be at target leverage levels at year-end. Moving onto slide 9 in cash flow and cash deployment. Free cash flow for the third quarter was $300 million. Adjusted cash from operations was lower than the prior-year period, largely due to our decision to build inventory to help manage continued supply chain volatility, and to be prepared to fulfill strong demand in the fourth quarter and in early 2022. Capital additions were somewhat higher as we continue to ramp up spending, following the deferral projects last year due to COVID. Nearly 50% of this year's capital addition support capacity expansion. Legacy and transformation spending was down substantially with the benefit of the completion of our SAP program and lower legacy spending. We are maintaining our expectation for free cash flow in a range of $480 million to $570 million with continued expectations for seasonally strong cash flow in the fourth quarter. We returned $262 million to shareholders in the quarter via $62 million in dividends and $200 million of share repurchases. Buying back 2.1 million shares in the quarter at an average price of $95.26 per share. We have now repurchased just over 3 million shares this year, reducing our share count by nearly 2.5% since the beginning of the year. Year-to-date, we have returned $486 million to shareholders through dividends and repurchases. For the full year, we continue to anticipate paying dividends of roughly $250 million and to repurchase $350 million to $450 million of FMC shares. And with that, I'll turn the call back over to Mark.

Turning to slide 10, I want to provide an early look at the key dynamics underpinning our planning process for next year. We view 2022 as another year with a good micro environment, obviously, notwithstanding the impact weather can have on any single quarter. We expect the soft commodity pricing momentum will carry into next year with global demand for crops remaining healthy. As a result, we are assuming the overall crop protection market will grow in the low to mid-single-digit range next year on a U.S. dollar basis. FMC's growth will be driven by broad-based volume gains across our portfolio, pricing actions reflective of cost increases, continued expansion of diamine volumes in existing and new markets and further penetration of new products

and expansion of our market access in underserved geographies. We expect cost pressures this year will persist well into 2022 as the industry grapples with global supply demand imbalances, structural changes in China's industrial policy and energy supply, tight ocean freight capacity, and labor cost inflation. Taking all this into consideration, our current early thinking would suggest year-over-year revenue growth of 5% to 7%, EBITDA growth of 7% to 9%, and EPS growth at over 10%. In line with our long-range plan. We will share more detailed guidance for 2022 in our February call. To conclude our prepared remarks, the second half of the year is playing out as we forecasted.

We executed very well in the quarter, not only from an external perspective in driving demand and pricing across all regions, but also importantly, internally by fulfilling that demand with products in a timely manner under challenging supply chain conditions. The only change in the second half is a timing shift of costs. And hence we're not changing our full-year guidance. The overall crop protection market fundamentals are positive and we remain confident in our ability to deliver our fourth quarter forecast. I'll now turn the call back to the Operator for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. And the first question will be from Christopher Parkinson, from Mizuho. Please go ahead.

Great. Thank you. So, given all the challenges FMC and everybody else in the industry is facing, on both raw material, supply chains and now transportation logistics, here today, where we stand, can you just give us an update on the market -- as the market ads into 2022 regional price initiatives and how you're ultimately poised to combat these challenges. Thank you.

Thanks, Chris. Look to unpack that.

Sorry.

When we look at the market today and some of the dynamics that we've outlined in studies as we look forward to 2022. Why don't I take a look at the cost elements first and just what are we seeing? I think from a raw material perspective, raw materials are still staying high. But more importantly, it's not just the cost here is the supply side that is causing. I would say the most sleepless nights as we go through the end of the year. I think we're starting to see some of the very large commodities come back a little bit, such as propylene and ethylene, which we believe will help the pricing and packaging because we've seen tremendous accelerations in packaging costs. I don't think that's necessarily going to help with the supply side in terms of how long it takes to get packaging that has been a big problem for us on many other people this year. I think the specialty chemicals continue to be disrupted. We are obviously seeing much higher prices in that area, but we're also seeing continued disruptions out of China.

A lot of people hear the latest news around the energy controls that we've seen in many of the major producing provinces. We don't see that going away particularly quickly. There are now diesel constraints in China related to the amount of fuel they have. So that's potentially going to constrict movement of goods within China that can -- that could cause us problems as we go into next year. And then I think the last one really is freight. We continue to see tightness in ocean freight. I noticed a couple of the big ocean freight companies have released earnings and said, don't expect that to change as we go through mid-year, next year into the second half of year, next year, we would agree with that. We think ocean freight is going to remain tight and availability will be somewhat -- somewhat spotty. So, I think the environment is pretty much what we expected with the exception of the potential for further disruption in China in Q1, as we go through Chinese New Year, as we go through the Winter Olympic shutdowns, we are planning for all of that, obviously. We've known about that for some time, but that doesn't mean to say there won't be disruptions. I think my view has changed from our August call where we talked about the potential softening of raw material prices and availability in the second half of the year.

I'm somewhat less confident of that now given how we're seeing things develop, so I'm taking a little more of a conservative view on raw materials and cost and availability as we go through our planning process. What does that mean for us from a demand perspective? Well, as I said in the script, demand is good. No mistake, Ag is pretty robust around the world. Our growth was very consistent across all regions. I think we'll see that continue next year. Soft commodity prices are robust, we see good demand for fruit and vegetables and specialty crops around the world, which frankly is the vast majority of our portfolio. On the pricing front, we have been much more aggressive in moving prices in the second half of the year that's starting to bear fruit now. I think you've got to remember that the agricultural industry is a specialty chemical industry in general, and we certainly -- we sell on value. This is not selling propylene or ethylene where prices move quickly. Now there are parts of the industry like the non-selective herbicides that do move quickly, they are tend to be more formulaic, more generic. We don't participate in those markets. However, having said that, we have put mid-single-digit price increases into many countries in the world. They have been accepted and the orders are flowing at the new levels. We will take a look in Q1 of pricing again, see where raw materials are and we will continue to move price in tandem to regain the cost impacts that we've seen over the last 12 months. So rather aligns to what was a long question, but hopefully you get the flavor of how we're thinking.

I apologize, but I appreciate the color. Thank you very much.

And the next question comes from Joel Jackson from BMO Capital Markets. Please go ahead.

Hi, good morning. I'm just going to speak into -- I just want first clarification, Mark. When you -- I think I heard you say you expect 10% EPS growth in 2022 right now. EPS, for you guys usually doesn't include share buyback. So, is that using $6.79 midpoint for this year, excluding buybacks, you get in the second half of this year and buybacks next year to get the 10%? And the other question I want to ask was following up on Chris's question, if you look into the first half of the year, even Q1, so you've had where you had a bit of margin expansion in the third quarter and your guiding to a little bit of margin expansion in the fourth quarter. So, would we expect -- you expect to have margin expansion also in Q1, in the first half of the year?

Yeah. Joel, let me take the first one -- the second piece first, and then Andrew can answer the share account question. Yeah, listen, when you look at our margins, you are right, in the second half of the year we have started to improve the margins again, we've been on that track for the last three years. We do know that we're going to see higher raw material costs in the first half of next year. However, pricing is kicking in. And then don't forget, you've got the impact of the new products that we're bringing to market. We are on the track to sell about $140 million of new product launches this year, from products launched this year. They tend to be at higher margins, so that takes to -- that starts to improve your margin. Q1 last -- this year was a low quarter for us. I would expect Q1 margins to look a little better than they did in Q1, 2020 and then continue that normal trajectory that we have of improving margins as we go through the rest of the year. Obviously, I'll caveat that with saying, whatever happens to raw materials and the pricing balance as we go through the year. Andrew, do you want to comment on the share count and the EPS?

I think Joel's absolutely right. When we give indications of EPS growth, that does not include any benefit from share repurchases. We haven't yet have it completed. So, we're assuming and that look forward for next year of 10% EPS growth that's just reflecting aggressive EBITDA change in items between EBITDA and Net Income and the benefit of the share repurchases that we are doing in 2021. We've done 300 million to-date. Not all of which do you get that benefit in share count in the year that you do it. That feathers in over time in the weighted average share count calculations. So again, that 10% EPS outlook for next year, and look, we're still working to budget is not firm, but we certainly know nothing is built into that assuming benefit of any additional share repurchases in '22 as is consistent with the way we've provided guidance in the past.

Thank you.

The next question will be from Steve Byrne with Bank of America Securities. Please go ahead.

You guys thank you. Mark, can you talk through how you distribute your products in the distribution channels in Brazil? I ask because we understand there have been some changes in that channel. We have the formation on some big farmer buying groups. All of Syngenta selling through their own stores and some consolidation at the independent. So, is any of that making it more challenging to get price? And or is that comment you've made a quarter ago about going after volume over price, has that changed now?

Yes, Steve, let me talk about Brazil and maybe I can tackle your very last comment there. What I actually said, and I think there was some confusion here, I said there were opportunities for us to take volume around the world with our high profitability products which we were doing. We were increasing prices then, and were not foregoing price for volumes. I just want to be perfectly clear. You can see that in Q3, you can certainly see it in Q4, and you'll see it next year. Price is a very important mechanism of how we move against cost in FX, we continue to utilize that, but volume is also very important to us. In Brazil, taking the second piece on Brazil, there are three main channels to market in Brazil. First of all, there are the co-ops, which are very dominant in the south, very large farmer owned co-ops that service the marketplace. In the north, in the mid, you do have some co-ops, but you also have distribution and retail. So, you have large distribution and some locally-owned retail. And then [Indiscernible] is direct to growers. That occurs really where you have very large mega growers, mainly in the matter [Indiscernible] area in by year, especially formulated around soy, corn, and cotton. So those 3 -- those are 3 pretty big defined channels. I think you're right in your assumption and your statement that there are changes occurring in the Brazilian distribution market. There is nothing that we would say would change the way we view the market. We actually sell through all 3 different groups, direct to grower, distribution/retail and through the co-ops. We don't see that changing in certainly in the mid-term, given that the market is so large and there is so much fragmentation, especially through the distribution and retail channels that we don't see some of the changes out there impacting our ability either A, to grow the portfolio with the new products we're introducing, or B, to get price in Brazil.

Thank you.

The next question will come from John Roberts from UBS. Please go ahead.

Thanks, and nice quarter. It looks like you're expecting 4% price in the fourth quarter in prices accelerating upward, I think so. How do I square that with the 5% to 7%, 2022 revenue growth? Will revenue growth be primarily price in 2022?

It will be a mixture, John. Obviously, you see where we are in terms of the mid-single digits. We do continue to see volume expansion as we go through next year. I think the 5 to 7 is a rough number today. As we said, once we get through all our analysis of where the volume flows out, we'll see where that sits. And then we will see what price ends up at the end of the fourth quarter and how that plays out for either a future price increases in Q1 and Q2 as we go through the year. But it's too early to make that delineation between what's exactly price, what's exactly volume, and exactly how much of the top line is going to grow 5 to 7.

Thank you.

The next question comes from Adam Samuelson, from Goldman Sachs. Please, go ahead.

Yes. Thanks. Good morning, everyone. Mark, I was hoping that I'll come back to -- I think it came up in Steve's question from the comments on the second quarter call about maybe leaning into the volume growth on your higher-margin products. I think the comments were directed more around some emerging markets in Asia and India specifically. And I guess, just -- can you give any thoughts or updates on how you think you're doing or success of that in terms of gaining or trying to get some new market share for some of those active ingredients. And I guess in that context, you listed a whole bunch of countries where you're putting in price actions, in the fourth quarter or they're already in place and maybe it was purposeful, maybe it wasn't but I didn't hear India on that list. And so just any kind of clarification or comments there.

No, I think listen. I mean, when you have a 9% to 10% top-line growth, you're obviously doing something right in the marketplace, whether it's moving your price, and or gaining market share in certain parts of the world. I think both of those pieces play out. India has had a good quarter for us. We grew in India despite the fact, and I think I put this in the script, the monsoon was very spotty in India. There were some markets, particularly the soy market, was impacted by very dry weather. We are moving prices all across Asia, including India. The specialty markets in India are very good for us. The diamine portfolio continues to grow well, taking share from some of the older chemistries out there that we talked about on the last call. And I would say Southeast Asia is also very strong in terms of how we're growing. And then last but not least in Asia, is Australia. Australia has been a very good market for us with the launch of our new Isoflex Herbicide, but also the VANTACOR insecticide the first launch was there in Australia as well. So, price is pretty much across -- I only gave a couple of examples of countries, but we've moved price and are moving price pretty much in every country in the world as we move through the end of the third quarter into the fourth quarter. So, you should certainly see that benefit starting to play out as we move into early next year.

I -- I appreciate the [Indiscernible]. Thank you.

And the next question will be from Kevin McCarthy from Vertical Research Partners. Please go ahead.

Good morning. Mark, I was wondering if you could speak to the cost shift from the third quarter to the fourth quarter. If I look in slide five, it appears as though costs came in $23 million lower than you had previously anticipated, and you'll have to back half unchanged. So, $81 million is the expectation apparently for 4Q. Maybe you just kind of help us understand what is going on there, and if the $81 million perhaps conservative given the experience in the third quarter?

Yes. Thanks, Kevin. It's a pretty simple move actually in terms of what we saw in costs. There's two main elements and I'll talk about them both high-level and Andrew, if you want to talk about one of the pieces. You can split it 50-50, essentially. We had some SG&A and R&D expense that we thought would fall in Q3 when we originally forecasted the second half of the year. And it didn't -- it's going to fall in Q4, so we're seeing about half that change really due to some R&D project work, as well as, some SG&A expense that we built with the Q3. And then the second half is really just how some costs have flown through our income statement. And Andrew, do you want to talk about that from just a pure procurement perspective?

Sure. Look, I think as Mark said, its April’s driver between SG R&D spending timing, as well as COGS increases. And it really is essentially a cost mix issue in terms of what sold and what came out of inventory this quarter versus what we had initially modeled when we gave guidance. So that costs we are seeing in our inventory and certainly in the step-up of inventory, you see year-on-year and sequentially on our balance sheet, you can see evidence of that higher costs are sitting in our inventory. It just flows through the P&L a little more slowly than we had anticipated when we gave guidance. That $80 million headwind -- $81 million headwind for the second half still feels like the right number for us, There are these things that are being spent on R&D or around a lot of field trial investments, other things that are part of supporting our long-term development pipeline, SG&A spending will be a part of supporting the sales growth. And then the COGS again, it's sitting in inventory. It just hasn't flowed through yet through the P&L. So, with a strong volume growth in Q4, you'll see that.

Perfect. Thanks very much.

And the next question will be from Vincent Andrews, from Morgan Stanley. Please, go ahead.

Thank you. Good morning, everyone. Maybe Mark, you could discuss or compare and contrast the South America and operating environment looks a lot healthier this year versus last year, just given the much better start to the planting season, which generally pretends to good news for the second crop and so forth. So, we also have higher coffee and sugar prices. So are you seeing better demand than maybe anticipated a few months ago when we didn't know how that was going to play out. And are you more optimistic about 1Q or sort of 4Q, 1Q as result?

Yes, thanks, Vincent. Listen, Latin America, you're right. I mean, the planting season is underway. It's much better than it was last year. The rains came at the right time. Last year we had very dry drought weather which impacted the industry. This year we're not seeing any of that. I think on the back half as you just said, very good commodity prices and a lot of people concentrate on soy and corn. But you highlighted sugar is very high $0.19 is a good number for sugar. Coffee is high. More importantly for us, cotton is high as well. And if you remember, early in the year we talked about how we were thinking about the cotton business acreage declined in the '21 to '20 season by about 15%. We're expecting and we're seeing that coming back as we said earlier in the year so the '22, '21 season will be very robust; price is high, demand coming back after COVID. So, all of that is very positive. I would say, don't focus just on Brazil. Argentina is also a very important market for us now. It is well in excess of $200 billion. I think it's our fourth largest country now in the world. We have a good portfolio on soy and cereals in Argentina. Denmark, it is also moving in the right direction better than it did last year. And then the rest of the region not to be missed for us is Mexico. Mexico is a very important country for our specialty products on specialty crops. We do a lot of business on corn, on fruit and vegetables. There is tremendous business for us on avocados, those types of high-value commodities. Mexico is growing well, season is going well there, the weather conditions have been good. So yes, I would say overall, Latin America feels much more robust than it did this time last year, and that's how we felt it would play out, and so far, so good.

And the next question will come from Mike Sison from Wells Fargo. Please go ahead.

Hey, good morning, guys. Can you maybe talk about diamines heading into '22. Any -- what type of growth do you see; you got some new products there and then maybe how much of that growth could come from the new -- the licensing agreements that you've had set up over the last couple of years?

Thanks, Mike. Yes, diamine, so we've talked in the past about our growth algorithm and how we're in the 9-high single-digits, low double-digits range, year-in-year-out. I would expect that type of number next year as well. We are seeing traction with all the agreements that we put in place. We're not going to split out on a regular basis. The -- what we selling to the partners versus what we sell ourselves. But periodically, we'll give an update on how that's playing out, but the growth is good. I think you highlighted 1 area which is the new formulations, the VANTACOR launch that we put in place. This is a very, very novel formulation. It is much higher concentration. Therefore, it's easier to use. It's very easy to disperse in other mixers as growers use it. We've already seen tremendous traction in the 2 countries we've launched. There'll be more countries launched next year on VANTACOR. We expect that new formulation to cannibalize and grow the market for us. So, some of the old Rynaxypyr formulations will disappear, and VANTACOR will continue to take that business, but also grow the overall market share. And then there's some other things we have planned next year for product launches. So, diamines continue to be successful. I think a lot of people who think about the diamine is focused on Rynaxypyr. We're also seeing a lot of growth on Cyazypyr. It was launched slightly behind Rynaxypyr. It has a slightly different mode-of-action. It covers a different crop spectrum. And we're now starting to see that product really move on the specialty crops. We're seeing a growth in -- seeing significant growth in Europe, parts of Asia, really the two markets we're focused on. So, we like the prospects for Cyazypyr. It's not to say that for Rynaxypyr doesn't continue to grow, it does and it will do. But I think Cyazypyr over the next couple of years will come into its own.

Got it. Thank you.

And the next question will come from Mike Harrison from Seaport Global Securities. Please go ahead.

Hi, good morning. You noted that the North American business would have been up around 20% or more if we adjusted for the diamine partner sales. Can you talk about some of the underlying drivers in that North American business for the second half, if there's some inventory restocking going on from share gains, or are we really just lapping some of the disruption that we saw in the prior year. It seems like there are a lot of moving pieces and I was hoping you could help us parse those out. Thank you.

Yes. Certainly, Mike. You won't really lap until we get through Q4. We did not have a good Q4 in North America last year, so really you will see that lapping occurring in Q4. Now, I think that -- listen, the real energy in our North American business is how we are changing the portfolio. You've heard us talk in the past a lot about our preemergent herbicides, the authority brands, which really were a bedrock of how we grow our North American business. Overall, our preemergent business, while still growing, is shrinking in terms of parts of the portfolio. Our business is actually accelerating because of the new products we're introducing. We introduced Lucento last year, which is a more specialty fungicide. We launched Xyway another fungicide for us. A new area, it's an in-ground fungicide for corn applications where we've never participated before. So that's a market that is a very large market. We have some very unique technology with Xyway. And in its first year, it far exceeded our expectations and we have big growth plans for 2022 season. And then you have the insecticide launches, Elevest and Vantacor in the U.S., which are targeted more towards the specialty crops. So, the growth you're seeing in North America is nothing to do with restocking, etc. It is all to do with how the portfolio is shifting, a new products are accelerating our growth. So, we do feel very good about what we expect next year in North America. The market itself is robust, so as you're launching products into a robust market, you should get that good growth and we're seeing that now.

Thank you. And the next question will be from Chris Kapsch from Loop Capital Markets. Please go ahead.

Yeah. Good morning. Thank you. Just peeling back, the onion a bit more here and no pun intended, but on the challenges in and around the raw material and packaging sourcing, despite all the focus on these challenges across the broader industrial sector, and while you are certainly incurring higher costs, you guys were able to deliver pretty good, organic growth in 3Q and applied the implied organic growth for 4Q remains intact. So, in other words your volumes don't seem to be -- have been constrained all that much despite the disruptions. So just wondering, is that a fair characterization? And also, just looking for more color here. Do you think you're simply doing better than the rest of the industry or does this reflect maybe a more -- your more balanced geographic footprint, whereas the challenges may have been more acute in North America? But just some more color on that, and then I had a follow-up.

Yeah, listen up. I don't want to make it sound like it's easy because it is not. And every Company in this pace is going through the same things, we face similar disruptions. It maybe in different parts of the portfolio for different people. But I think we all have inherently the same fundamental issues that we're dealing with. Now, we do have a pretty good network around the world. Our reliance on China has dropped dramatically over the last 5 to 7 years. I think today we're at about 45% rely on, on all intermediates, fine chemicals, and active ingredients. That's way, way lower than it used to be for the traditional FMC AG business when I joined way back in 2012. So, I think that's one aspect. We have lost sales over the last 6 months in terms of looking at the portfolio and where we couldn't deliver but I think with a strong portfolio, we did correct our inventories as we went through this year. We have built inventories, and Andrew can talk about the impact on working capital there. But I think we've tended to weather it rather well, but make no mistake, I think we've left revenue out there that somebody else has probably picked up. It's not significant, it's in the 10's of millions of dollars, but it's still business that we could've had that we've missed. So, we're not immune to this by any means, and I expect that to continue as we go into next year.

Sorry?

Now, the follow-up, and you touched upon this a little bit mentioning you're dependent on China being down the 45%. Seems like you've maybe gotten a head start on this -- maybe relative to the broader industry, based on some rolling blackouts years ago and then an active ingredient -- and active ingredient plant in China being adjacent to that explosion, maybe a couple of few years ago now. So just wondering on just your thinking on strategy for supply chain going forward, should we expect you will continue to diversify further? Just what is the thinking in that regard with respect to juxtapose against your strategic growth imperatives. Thanks.

Yeah, listen, we've been on a strategy for the last at least 5 years, almost 6 years since we bought the Cheminova assets back in 2015, of really diversifying our supply chain and manufacturing footprint. That continues for the new molecules that we're adding capacity right now. We're adding capacity in Denmark, and in India. And we will continue to expand that active ingredient footwork through our own -- footprint through our own operations. We have active ingredient manufacturing in the U.S., in Puerto Rico, in Denmark, in India. 6 years ago, we never had pretty much any of that. So, we really have changed our strategy to be more diverse, to have more points of manufacture. We make sure that from a registration basis, which frankly it is the long pole in the tent here. It's getting your registrations. We do when we registered -- when we manufacture new products, we make sure we have two or sometimes three different sources of manufacturing point so that we have that ability to move our manufacturing around the world based upon our registrations. I'm not so sure we're any different to some of the people out there, there are some people who are more dependent on China, some people who are less. I feel good about where we are today. I don't think you're ever going to get out of China, it's impossible. Just the size of the Chinese chemical industry in the specialty chemicals that come out of there, you will always be dependent on an intermediate or a fine chemical. The real issue for you strategically, and especially for us is how do you de -risk that to a point where you're more comfortable with it? And we're getting close to that. We're not quite there yet, the next couple of years we'll move it even further, but I think we're on the right track and certainly, it's being paying dividends for us.

Thanks for the color.

The next question will come from Arun Viswanathan (ph) from RBC Capital Markets. Please go ahead.

Great. Thanks for taking my question. Congrats on a nice quarter there. I guess the first question is just on COVID. Last year you had some impact, North American Logistics in Q4. I would imagine that potentially there had been some impact as well in Asia more recently. Could you verify if that's the case and then also maybe in Latin America, what you're experiencing as it relates to COVID down there. Thanks.

Yeah. Thanks, Arun. Listen, there are 2 real impacts. 1, is your ability to supply and then 2, is what's happening on the demand side. On the supply side, look, I think we've got used to working in an emergency mode over the last 3 or 4 years. We've had -- somebody just said earlier, we had explosions in China that we've had to deal with, environmental policy changes in China, then we've got COVID and all the freight issues and manufacturing issues related to that. I don't think there's been anything in the last 6-month period since we had our last call where anything's fundamentally changed from a supply perspective. It's not that there are non-issues out there, there are. The energy power issue in China is certainly causing disruption, and we'll see how that plays out once we get into the winter time. From a demand perspective, we don't often talk about this, but I would say, certainly in the third quarter, maybe late in the second quarter. I would say the only part of the world where we saw demand issues was Southeast Asia. There was more lock-downs there in Vietnam, parts of Indonesia, the Philippines, Malaysia, Thailand, than any other part of the world so we did see --we did struggle getting into the marketplaces than we saw some demand destruction, not significant. Brazil, not an issue. Many of the growers are well-prepared for this growing season. They have a lot of personnel on-site. Vaccination rates are actually pretty high in Brazil and growing constantly. So, we feel better about Brazil from a COVID perspective, going into the '22 season than we did going into the '21 season. So yes, disruptions there. It's not significant at this point, I would say it's at the level where we've been dealing with it and we'll continue to deal with it.

Okay. Thanks for that. And as a follow-up, maybe I can just ask about cash flow. So, as you move into '22, what are some of the buckets that you would envision, that could push that 525 or so, midpoint for free cash flow, but higher, is working capital, a potential leverage just given the cost inflation that you've experienced this year? Thanks.

Thanks, Arun it's Andrew. Look, I think you're hitting on some of the conversations we're having right now as we're going through the budgeting process but some big strokes for you. Certainly, for free cash flow growth, '22 versus '21. First and foremost, is driven by growing the profitability of the business. So, EBITDA growth will be a big contributor. Working capital? Yes. Our long-term vision is to drive better working capital efficiency. For 2022, we're going to have to balance that a bit with having a bit more safety stock in the system because of the level of volatility that we have in the supply chain right now. And you certainly see that on our Balance Sheet for -- where we ended up at September 30th of this quarter with a big increase year-on-year on inventory, which is both, as you noted, cost inflation. But also, some conscious choices to hold a little extra inventory in certain product lines where we've had some volatility in the supply chain. I would say at this point, we haven't worked through all the implications for 2022 of working capital yet. But I think our long-term trajectory is, yes, to continue driving improvements in working capital to contribute to free cash flow growth. And if you look at the other 2 lines, the other 2 big buckets below that, on capital additions, I think we continue to have an expectation of somewhere about $150 to $200 million a year being the right pace, particularly with a significant portion of that going to capacity expansion to support new products, and as Mark described with our strategy to disperse our production base and have active ingredient manufacturer, in particular the new ingredients, outside of China. And then finally on the legacy and transformation, the transformation piece, we're basically done. We finished our SAP implementation at the beginning of the -- the end of last year, final cleanup in the beginning of this year. There's no big transformation spending on the horizon. And there's no fundamental driver of growth in legacy spending. They'll -- certainly a year-to-year volatility and just timing and lumpiness about some of that spend but not fundamental growth. Those are the key elements. I think it's premature to give him any more extensive color on where free cash flow could be other than absolutely looking to continue to push growth of free cash flow and free cash conversion as we move forward with the business. Thanks.

And the final question today will come from Michael Piken from Cleveland Research. Please go ahead.

Good morning. Just a question in terms of the buying behavior of your customers. Are you seeing a change in their attitudes towards wanting to procure more inventory and being a little bit less price-sensitive in this type of environment? And then secondarily, if you do have customers that are looking to make purchases, are you willing to extend more credit for them to get inventory in place or how are you handling if there are any timing shifts? Thanks.

Listen, I don't think we're seeing a fundamental shift of how distribution retail or direct growers buy. I think there is an acknowledgment out there in the marketplace that in some cases for products that are absolutely needed. It's not just the price, it's availability. So, there's certainly a desire for people to make sure that as they enter their season, that they have material available. Doesn't mean to say that we FMC, we're not seeing a tremendous amount of what I would say forward buying in Q3. All the growth was related to products that went on the ground in that quarter. So, think about full herbicide applications in Europe on cereals same thing in North America, insect pressure in North America early in the quarter was strong. So those types of things are what are driving the growth. It'll be interesting to see how the market evolves for the U.S. as we go into the buying season, which is effectively now getting ready for the season. I do think that recognition is strong that, some materials are not going to be available in the quantities that are needed. And some people are going to miss out on that. So, price, in certain areas, is always important, but in others where it's high value and you absolutely need to protect those crops, then yes, I do see people buying to make sure that they've got product in that channel, in their warehouse when they needed. But we'll see how that develops through the fourth quarter into the first quarter. We may see similar behavior as we go into the European season, which really kicks off in Q1.

Alright, thank you. Thank you for that Mark. That is all the time that we have for the call today. Thank you. And have a good day.

And thank you. This concludes the FMC Corporation Conference Call. Thank you for attending. You may now disconnect your lines.