Good morning and welcome to the first quarter 2022 earnings call for FMC Corporation. This event is being recorded and all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s prepared remarks, there will be an opportunity to ask questions. To be placed in the Q&A queue, please press the star key then one at any time. If you are using a speakerphone, please pick up your handset before pressing these keys. 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 Seth, and good morning everyone. Welcome to FMC Corporation’s first 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 first quarter performance as well as provide an outlook for the second quarter and implied first half expectations. He will also provide an update to our full year outlook and implied second half expectations. 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 the 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 means adjusted earnings and EBITDA means adjusted EBITDA. A reconciliation and definitions of these terms, as well as other non-GAAP financial terms to which we may refer to in 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. Before I move into details on our results, I’d like to take a moment to provide an update on FMC’s position related to the war in Ukraine. In mid-April, we announced the decision to discontinue our operations in Russia and exit the country completely, making FMC the first crop input provider to exit Russia. We could not ignore increasing reports of potential war crimes, human rights abuses and other atrocities committed in Ukraine. Our values as a company do not allow FMC to operate and grow our business in Russia. Furthermore, as the war continued and new sanctions and counter-sanctions were levied, FMC’s ability to conduct business in Russia had become unsustainable. Our cross-functional team continues to navigate the extraordinary logistics and supply chain challenges in Ukraine and other parts of Eastern Europe. FMC and our employees raised nearly $300,000 for charities supporting the Ukrainian people and families in need. Our hearts and thoughts remain will all Ukrainians and especially our FMC colleagues and their families. Turning to FMC’s performance in Q1, we delivered strong results driven by robust volumes and solid pricing actions across all regions. We grew our revenue by 16% organically, EBITDA by 16%, EPS by 23%, and importantly expanded our EBITDA margins by approximately 60 basis points while confronting a variety of supply and cost challenges as well as increasing currency headwinds. With disruptions impacting several agricultural inputs, we believe some of our Q1 sales were accelerated from Q2 as customers looked to secure supply in advance. Given this context, our guidance for Q2 combined with Q1 actuals implies 11% revenue growth and 8% EBITDA growth for the first half of the year compared to the first half of 2021, which is much more front-loaded than prior years. Latin…

Thanks Mark. I’ll start this morning with a review of some key income statement items. FX was a headwind to revenue growth in the first quarter, as expected, driven by weakness in European currencies, particularly the Turkish lira and euro. The Brazilian real was a tailwind in the quarter offsetting modest weakness in several Asian currencies. We continue to anticipate FX headwinds for the remainder of ’22 as the U.S. dollar is expected to appreciate against many currencies of importance to FMC. Interest expense for the first quarter was $29.9 million, down $2.5 million versus the prior year period primarily due to the refinancing activity completed in the fourth quarter of last year. For full year 2022, we now expect interest expense to be in the range of $125 million to $145 million, an increase of $10 million at the midpoint compared to our prior guidance, driven by more rapid increases in U.S. interest rates than previously anticipated. Our effective tax rate on adjusted earnings for the first quarter was 14%, in line with our continued expectation for a full year tax rate in the range of 13% to 15%. Moving next to the balance sheet and liquidity, gross debt at quarter end was $3.8 billion, up roughly $600 million from year end. Gross debt to trailing 12-month EBITDA was 2.7 times at the end of the first quarter, while net debt to EBITDA was 2.5 times. Both metrics are slightly above our targeted full year average leverage levels as expected, given the seasonal build of our working capital. We continue to expect to maintain full year average leverage in our targeted 2.4 to 2.5 times gross, or 2.3 to 2.4 times net ranges. Moving onto cash flow on Slide 11, first quarter free cash flow of negative $664 million…

Thank you Andrew. Our first quarter performance in combination with the guidance to Q2 reflects FMC’s ability to mitigate cost increases through pricing actions and to fulfill robust demand and the challenging supply conditions. Our new product introductions continue to gain momentum with over 30% of expected full year revenue growth coming from products introduced in the last five years. Our global plant health business continue its impressive growth trajectory led by biologicals. 2022 is proving to be one of the most challenging years, even considering all we’ve had to manage since 2019. Our continued success stems from our strong customer focus, the way FMC’s cross-functional teams are overcoming headwinds, and finally the strength of our robust technology and new product pipeline. All these attributes will serve us well through the remainder of the year. I’ll now turn the call back to the operator for questions.

[Operator instructions] Our first question today is from Vincent Andrews at Morgan Stanley. Please go ahead, Vincent.

Thank you very much. Mark and Andrew, the 8% pricing in the quarter in all regions was extremely strong - it was almost twice what we’d been anticipating, and I think it compares versus 4% in the fourth quarter. What did you do differently in this quarter, if anything, to get that strong pricing achievement so quickly, and if you could also comment whether there’s any mix in that 8% number or just what mix would be in general.

Yes Vincent, thank you. Mix for us resides in volume, so what you’re seeing in price is all actual price invoiced to the marketplace. Listen, I think we’ve been very clear as we went through the second half of last year, we started moving price in North America actually in Q2 and then raised in other regions as we went through the year. I think you can see that in our results as pricing continued to build. What we realized as we were going through Q4 was that costs were going to come in significantly higher than we had forecasted internally as we entered 2022, so we made the decision that not only would we raise prices in markets that were active at that point but also getting ready for other markets around the world, so what you saw was really a broad-based move by FMC across pretty much every country to really drive price in anticipation of costs, and you could see that in the quarter - pricing was higher than costs in the quarter. It’s not going to look like that in every quarter as we go forward. If you will recall, we did say that we expected price to offset COGS impact of inflation and availability throughout the year. We still maintain that. What you should see through our results, though, is that our pricing is much higher than we anticipated because that impact of the supply disruptions and cost in general is still flowing through the business, so we need that cost - make no mistake, and the commercial groups are very active in the marketplace. If we continue to see disruptions in costs, we will continue to move price. I think that’s something that’s very important not only for FMC but for the industry in general. Things are not getting better out there. When I think about what we’re seeing, I don’t think we’ve seen the full impact of COVID yet in China, all the lockdowns that we see. We’re having supply disruptions in China probably as bad as they’ve been in the past. What worries me more is the logistics out of China, the amount of freight that is trapped in the major ports in China. Just the amount of freight--ships that are stuck outside China suggests that that wave is yet to come, so we’re getting ahead of the curve. I think that’s the right thing to do. Pricing is the main tool. Now, that’s not to say we’re not managing costs internally - we alluded to that in the call. We did move SG&A lower through actions that we took. Some of that flowed into Q2 from our forecast, but then you look at the first half, it’s a very strong first half.

Thank you so much.

Our next question comes from Laurent Favre from BNP Paribas. Please go ahead, Laurent.

Hi, good morning, and thanks for taking my question. Mark, it’s really related to your market assessment, and I was wondering if you could talk a little bit about, I guess, volumes including mix, so really intensity of use. Are there reasons why you would not expect a higher intensity of use, more spraying, but also can you talk maybe about the risk of down trading with farmers being so squeezed on all sorts of input costs, including fertilizers. Thank you.

Yes, thanks Laurent. When you look at the market today, we view the market obviously as a positive backdrop - soft commodity prices are high, stock to use ratios are very low, almost at 10-year lows in some cases, so we know many of the regions that are entering their planting seasons now are going to plant as much as they possibly can. Allied to that is the fact that to get the most yield, you will want to use the best products. Now, one thing that is often misunderstood is pricing is not necessarily related to value. Generics sell on price. We sell on value, so the usage of our products enables greater productivity and yield gains than you can get with other types of products, and that’s proven to be true as we’ve gone through numerous cycles. When I think back to 2008 and 2009 in this business, the ag business performed extremely well - why? Because people want to get the highest yields they can and they tend to use the best technologies to do that. We’re seeing that with demand for our products. Think about the comments I made about--you know, we’re going to have $600 million of revenue this year from products introduced in the last five years. That tells you that the newer products are the best ones to use to get that yield. We don’t see people reducing sprays at this point. We think applications will continue as normal. Remember, if you have insect pressure, you have a choice to make - you either remove the insects or you lose your crop. That’s very important when it comes to actual usage of products. Our backdrop is positive, we believe the markets will continue like this certainly this year and probably into next year as well. We don’t see anything on the horizon that will change that, so from our perspective, it is making sure that we can get those high quality newer technologies to the marketplace certainly in the right time frame, given all the disruptions we’re seeing.

Thank you. As a follow-up on pricing, you mentioned you’re lapping some increases from last year in the quarter, but last year in Q2 I think your pricing at group level was flat as it was in Q1 last year, so I was wondering maybe could you talk about specific areas, either geographically or in terms of product categories, where we should expect this slowdown in pricing into Q2?

Yes, in the U.S. we started to raise prices last year in Q2, so it should be a little more muted as we go through Q2 and then certainly into Q3 and into Q4. Latin America is not really an impact in Q2, a small amount, but you’ll see that much more in Q3, certainly in Q4. Really, I would focus on North America in Q2 on price; everywhere else will be catching up as we lap ourselves in Q3 and Q4.

Thank you.

Our next question comes from the line of Josh Spector from UBS. Josh, please go ahead.

Yes, thanks for taking my question. Just on the comments about China and the logistics and supply risk, wondering how you’re thinking about the potential risk this time versus a couple of years ago and perhaps what’s changed to maybe limit the volume impact on your side or mitigate some of the cost pressure.

Yes, thanks Josh. Listen, the playbook is pretty similar for us. Procurement and supply chain work hand-in-hand basically on a daily basis to understand the flow of goods, and you have to remember, you obviously read about the major lockdown in Shanghai but I believe something like 330 million people are in lockdown all over the country and that’s changing day to day, so we’re navigating day to day movement of goods from one facility to another or movement of goods to ports and out of the country. That’s not dissimilar to what we’ve been doing over the last two to three years in China. We are seeing more congestion at the ports given just the amount of lockdowns, so it’s a case of not just manufacturing the products in China or getting the mediates or fine chemicals, but then getting the product out of China. That’s where we’re keeping a very close eye on what is happening with logistics. We’re using different ports to traditional ports that we would use. We are using more air freight to get product out in time. I don’t think it’s anything what I would call different to what we’ve managed over the last two or three years, but the intensity is certainly higher than it has been as we have gone through Q4 and into Q1.

Okay, thank you.

Our next question is from PJ Juvekar from Citi. PJ, please go ahead.

Hi, this is Patrick coming on for PJ, thanks for taking my question. Just a question on diamides--

PJ, please confirm your line is not muted.

Hello, can you hear me?

Unfortunately we can’t hear anything from your line, so we will have to move to the next question. The next question comes from Joel Jackson from BMO Capital Markets. Joel, please go ahead.

Hi, good morning. Mark, I don’t want to put words in your mouth, but last quarter we talked about Slide 7, which is your upside and downside scenarios and would you think that you’re leaning more to the upside or the downside. I think you said leaning more to the upside. What I see now on the upside is to get to the upside scenario at $1.4 billion, you need to have higher price increases than what you would have thought a few months ago. Can you maybe talk about that a little bit?

Yes, sure Joel. Listen, we’re anchored on $1.4 billion of EBITDA for a reason - it is the highest probability we see for the results for this year. It is a range that we’ve put in place and it’s there deliberately. The world is not simple right now and I think everybody knows that, but certainly when we were together on the February call, we had this view and we haven’t really changed it. In fact, if anything, with the Ukraine war situation, it has probably got worse from that perspective, plus the COVID-19 lockdowns in China are worse than they were before, so you can see rationally why we kept the range wide. It doesn’t mean to say that we’re still not anchored on the 1.4 - we are. You’re right - if things were to move to the upper end of this range, we would have to see a better mix, even more pricing than we’ve got today, and costs perhaps mitigating themselves with less FX impact. That’s a lower probability than where we are at 1.4. Also equally is a lower probability of the 1.32 at the low end of the range, and we have to believe that things would get so severe that we couldn’t offset that by a price or that the market demand weakens because of significant weather issues in regions. I think the upper end is a low probability but so is the low end - that’s why we’re anchored on that 1.4 at the middle. When you see what we put there around the market growth, the strong demand, they’re all relevant. We are getting the mid single digit price increases. Costs are elevated - we see that, but we are mitigating that. FX is a headwind, but once again we’re mitigating that with volume, which we have said we always would do, and then we’re trying to manage those supply disruptions. The only new one there is Russia and Ukraine and we’re managing that, so you can see why we still kept the range wide, but there is a lower probability at each end of that range and a much higher probability in the middle.

Okay, and then secondly here, when I look at your margin guidance, you had a bit of margin expansion in Q1 and then you’re modeling--then your [indiscernible] guiding to some pretty tough margin contraction in Q2, some of the lowest margins you’ve had in a long time. Then Q3 and Q4--for Q2, sorry. Then for Q3 and Q4, you’re guiding to maybe modest margin contraction. Can you sort of help bridge that a bit - expansion in Q1 year-over-year, then pretty sizeable contraction in Q2 and kind of modest contraction for the second half of the year?

Yes Joel, it’s Andrew. Let me take that one. Look, I think Mark commented earlier, we moved price very aggressively in Q1 because we see this continuing surge of cost inflation, so we probably--you know, we did have a stronger comparison and a positive comparison between price and cost, overall cost, not just COGS in the first quarter that will not carry through the full year. I think you also have to remember that Q1 of ’21 was a relatively weak quarter for us. It was a down quarter in revenue which, given the fixed costs we have in SG&A and R&D, resulted in a weaker comparison for margin, so while we’re certainly pleased to see a positive EBITDA margin comparison Q1 ’22 versus Q1 ’21, just given the magnitude of price movement to offset costs we’re talking about, the mathematical dilution of margins is pretty substantial. If we dollar for dollar offset cost increases with price increases, we’re going to have a reducing percentage margin - it’s just math, and you see that effect get more and more pronounced as you get into the latter part of the year, continued very high levels of cost increase, but then offsetting that with very strong price increases. Unfortunately, that net-net is on a percentage margin dilutive. The pattern you’re seeing is not unexpected. We do expect to see tougher comparisons on the EBITDA margin percent in the second half, but I do think it speaks well for the long term future here, which is eventually costs will level off. I don’t believe we’re in a position to call a bend in the curve. As Mark’s highlighted, there’s certainly a number of uncertainties particularly around logistics and ocean freight coming in and out of China at the moment that don’t suggest that we’ve reached the bend in that curve yet, but there is a bend that will come and with the stickiness of pricing in our industry, that will be the opportunity to see percentage margin begin to expand and recover. But for the rest of this year, I think that the formula is clear - we price aggressively, we move to offset COGS inflation, we use volume and mix to offset FX as well as any investments in our SG&A and R&D growth, and overall deliver what we believe to be a very strong full year performance in very challenging times.

Thank you.

Our next question is from Christopher Parkinson with Mizuho Securities. Please go ahead.

Great, thank you so much. When investors take the time to actually parse out the growth rate for the diamides and biologicals perhaps at a lower base, and then subtract just the annual registration losses, what’s your current assessment of the remainder of the portfolio, so kind of the other core products as well as some new launch products, and what are you most excited about for 2024? Perhaps an alternative way of asking that is just how do you generally characterize your aggregate growth contribution from more environmentally CPC formulations versus the past few years? Thank you.

Yes, thanks Chris. The diamides are growing pretty much as we’ve said they would grow - they’re in the high single digits. We saw that in Q1, we’ll see that through the rest of the year. When you look at our overall growth rates for the year, you can see that the rest of the portfolio is also growing strongly. Plant health, we talk about a lot because the biological investment there is going really, really well. I would say that when I think about on average of, what, somewhere around 7% revenue growth, the rest of the portfolio is growing in that mid single digits-plus and the new products that we’re introducing are growing much faster than that. We have about a 1.5% drag on the portfolio just because of registration losses. It’s been a little lower in the first half of this year, it might be a little lower than that full year, maybe 1% range, but it’s about the right place to be. You can see that the portfolio overall is performing very well. I talked about the $600 million of revenue from the products in the last five years, but I think it’s the growth rate of that that’s occurring. It was $400 million last year, it’s $600 million this year - that means we got $200 million of brand-new growth, so that’s what we should be focused on and that is coming from not only the big products that we launch, whether it’s a fluindapyr fungicide or an Isoflex herbicide, those are the bigger products that are in the multi-hundred million dollars range when they reach their peak size. What often gets overlooked is the amount of work we do on brand-new formulations that come to market every year. Last year, I think we had something like $170 million, $180 million of products introduced within the year. It’s slightly less than that this year, but it’s still substantial. Don’t underestimate the value that that brings. Those products are new, they are coming to market at higher margins so you’re improving the mix, so it’s all three things for us. It’s the core, it’s the local formulations that we do in our research facilities around the world, it’s the very large pipeline products that come through, and obviously the diamides continue in that high single digit range.

Got it, and just a very quick follow-up. Mark, before everything that’s happening with the war, the EU was actually evaluating a host of chemistries, and there were one or two of them that are in terms of environmentally, let’s say friendliness or lack thereof, and two of them and one in a particular is a direct competitor of the DiaMark portfolio. How is your team assessing the potential opportunity for the diamides based on the potential for further regulatory actions? It seems like it’s already benefited, it has been benefiting you over the last several years and potentially will benefit you, but what are you updated thoughts on that and how that could potentially further contribute to that portfolio’s growth? Thank you.

Yes, look - as we think further forward on the diamides, not only are we growing ourselves, our new partner sales are growing nicely as well, roughly at the same rate that we are internally to FMC. Obviously we’re taking new products into new markets with new registrations, our partners are doing the same, but we are taking market share in insecticides with the diamides. When you look at some of the older chemistries, whether it be the neonicotinoids or whether it be the carbamates, and now some of the other chemistries also coming under pressure - in fact, some of our own chemistries coming under pressure, we’re losing registrations of Indoxacarb in Europe this year, which is a great molecule but doesn’t fit the profile for the EU. That churn is happening in the industry and we are taking advantage of that. We expect that to continue. It is one of the growth drivers for the diamides as we look forward for the next 10 years. That will not slow down; in fact, you could argue the replacement of older technologies will accelerate as we go through time, especially in jurisdictions like Europe, so it is a positive for us. We see it that way and we have taken advantage of it, and we’ll continue to do so.

Great, thanks for the color.

Our next question is from Tony Jones at Redburn. Tony, please go ahead.

Thanks everybody, thanks for taking my question. You talked about cost inflation should be peaking and reversing at some point, but when we look at the industry, in the past we’ve seen some companies give back prize. What’s your expectation from an FMC perspective, because the portfolio today is very different than last time we were in a period of cost inflation, so any thoughts on that would be really helpful. Thank you.

Thanks Tony. Listen, you heard me comment earlier about the fact that we sell value, and that’s something that we have always done and will continue to do. When you look at some of the chemistries in this space, they are very commoditized and almost index-linked - you can think of the non-selective herbicides, which move up very quickly and they move down very quickly. Our portfolio historically has never done that, and you could argue that with the portfolio as it is today, it is even less likely to move quickly. It’s taken us a while to get to this point. We didn’t recover all the costs last year. Our intent I when we come out of this cycle that our margins will have in fact improved because of all the efforts that we’ve put in place with regards to SAP, etc. Our plan over the long haul is to make sure that these prices are sticky by selling the value aspect of the portfolio. We don’t have the non-selective herbicides, we don’t have that large generic portfolio, so we do not expect to have that large swing in prices when we come through the other side of this.

Thank you, that’s really helpful. Just a really quick follow-up, can you indicate the rough additional SG&A costs, maybe absolute terms moving from Q1 to Q2, just so we can make it accurate in the model? Thanks.

Andrew, do we have that absolute number? I don’t think we do, do we?

We don’t. Look Tony, I would say that I think our SG&A as a percentage of sales was probably a bit light in Q1 relative to what you should expect in Q2.

Thank you. Thanks guys.

Our next question comes from Michael Piken from Cleveland Research. Michael, please go ahead.

Yes, good morning. Just a question regarding some of the costs of the active ingredients themselves. I totally understand the logistical--

Michael, we’re unable to hear you. Can you please check your line’s not on mute?

Yes, can you hear me now? Hello, can you hear me?

Unfortunately we can’t hear anything from Michael’s line, so we’ll move onto the next question. Your next question is from Arun Viswanathan from RBC Capital Markets. Arun, please go ahead.

Great, thanks. If I look at the EBITDA growth in ’22, it looks like if we use the $1.32 billion that you did last year, you’re about--

Arun, your line is now open for your question, please proceed.

Yes, I’m speaking. You can’t hear me? Can you hear me now? I’m here. Hello?

Yes, we can hear now. Please go ahead.

Okay, great. It looks like you’re guiding to about 6% EBITDA growth at the midpoint in ’22, and understandably there’s a lot of challenges that you guys have detailed on costs and so on and uncertainty. But when you look out into ’23 and ’24, do you expect to get back into a 7% to 9% EBITDA growth rate, and potentially even at the upper end of that just given some of the replacement that has to go on for lost production out of Ukraine? How should we think about the new outlook for FMC, should it be within the range that you provided in the past back in your ’18 investor day?

Yes, thanks Arun. Listen, next year is the last year of our five-year plan. We’re tracking well on revenue, right in the middle of the range. We are slightly below on EBITDA, but as Andrew and I were discussing the other day, since ’18 through ’21, we’ve had over $600 million of costs and FX headwinds and we’re only just slightly below the lower end of the range. Look, I’m not going to guide ’23 - it is way too early to guide ’23, but there’s no reason to believe that if the situation starts to normalize, that we wouldn’t be in that 7% to 9% range. We’re obviously not going to cover the gap that we’ve had over the last couple of years, so we will likely end up somewhere at the low end of that range at the end of the five-year plan - commendable results, to say the least, given everything that we’ve had, and frankly this year’s cost and FX is higher than we’ve seen at any point of the last five year in terms of this plan, so we’re swimming against a very strong tide and right at the edge of our range. We do feel that the company has performed well since 2018 on both metrics. After 2023, we are going to be putting together a new long range plan. Whatever timeline that takes, we will make that decision. We would expect to come out with a new long range plan towards the end of 2023, where we’ll be public with where the company is going over what time frame, but for now we’re just sticking with where we are and obviously that 7% to 9% EBITDA range is what we’d be aiming for for next year.

If I could ask a follow-up to that, is there any discrete items, whether it be the deals that you guys have signed for partnerships or maybe some fungicide M&A, or anything like that that you could point to that could help us understand and frame the longer term growth possibilities?

I think from a portfolio perspective, I think you’ve got all the pieces of information that we’ve given out in terms of the pipeline growth, the diamides longer term view, the portfolio itself, the core portfolio. At this point in time, obviously we’re always looking at M&A from a technology perspective. They tend to play out over the long haul, it wouldn’t impact the near term, but we are looking at a number of items on the technology side of M&A. I don’t think there’s anything there that we have that you don’t have in terms of trying to model where the future growth of the company is. I think obviously as we go through this planning cycle, we’ll have a much better view at the end of ’23 around where the company will be going over the next decade.

Thanks.

Our next question comes from Adam Samuelson from Goldman Sachs. Adam, please go ahead.

Yes, thanks. Good morning everyone.

Morning Adam.

Morning. I guess some of this might be tricky because of where you are in the season, but I would just love to get your thoughts on channel inventories. It does seem like there was a good amount of pre-buying in a lot of different regions ahead of maybe an expectation of additional price increases, concerns around supply chain, and just if you could just take a tour around the world about where you think channel inventories sit as you’re going into certainly the northern hemisphere growing season and Brazil, where you’re more off-season, just how you think activity levels and restocking sits there.

Yes, sure. Thank you. Generally speaking, we are not concerned about channel inventories. There are a couple pockets in the world, one we alluded to, which is India - in Q4, weather patterns were not great and there is a reduction in rice acres in India, and you saw some of the comments about strong growth in ASEAN and Australia offset by India. We’re taking the opportunity to reduce our channel inventories in India at the beginning of the year. We expect that to normalize pretty quickly as we go through the first half here. Outside of that, northern hemisphere, I don’t think we’re carrying excess inventories as we’re going into the channel, into the season. Recommendations from our group are that we expect normal pest pressures for the year going forward in Europe and in the U.S. here, so we’re not seeing anything that we would say is concerning at all. They seem pretty normal to us. In Latin America for us, normal. Argentina, Brazil, Mexico, [indiscernible] we’re where we should be at this point in the season. Demand has been very good for us. Our growth rates are in line with how we’re penetrating the market. You’ll recall on the call here, I just talked about the fact that we’ve been spending a lot of time and effort improving our market access into the soy complex in Brazil, and that’s where our growth is coming from, whether it be with insecticides or some of the newer herbicides that we have in place. We’re not worried about where our inventory levels at all in Brazil or Argentina.

Okay, and then just a quick follow-up on the decision to cease operations or sales in Russia. It implies about $75 million of business there last year. Is that something, as we’re modeling that going away? I presume there’s a tail to winding down activities, so it doesn’t just fall to zero immediately. I guess the corollary question would be in Ukraine, what’s the size of business in Ukraine and what’s the expectation on volumes there, just given a lot of the planting disruptions and logistical issues of getting product into the country?

Sure. I’ll let Andrew comment on the actual numbers. We are working through what the financial impacts will be both from a P&L and a balance sheet impact. We do believe that we have opportunities to offset maybe not all of that impact but certainly the vast majority of it, so we’re working through that right now. I would say that Ukraine, we’re expecting very low planted acres, especially obviously in the east. Our groups are active, our sales people are out, growers are planting, it’s just under very, very difficult conditions. Getting material into the country, we are doing that. It’s once you’re in country, it’s working through distribution, etc. It’s not, as you can imagine, particularly easy, so I would expect acreage to be down significantly in Ukraine but we will obviously do everything that we can to get material into that country and make sure they can plant every acre they can. Andrew, do you just want to comment on the rough impact?

Sure. Just some dimensions for you on Russia and Ukraine, between the two countries there’s about $100 million in revenue in 2021, about 70% Russia, 30% Ukraine. The Russian business, we did operate in the first quarter. What was built into our budgets for the remaining three quarters of the year was about $20 million to $25 million of EBITDA contribution from the Russian business, so that’s the headwind we’ve got to address with either redirecting the material not longer being sent to that market to other markets, or finding other opportunities. That’s certainly a part of our upside-downside discussion that Mark went through in his prepared comments about the guidance for this year. Regarding Ukraine, as Mark mentioned, we are operating. We do not expect to hit our initial expectations for the year, but the business is operating and we’re continuing to ship, and we will continue to support Ukrainian farmers to the best we can. I do think you should expect that we will take a restructuring charge in the second quarter for the exit of the Russia business. We are not in a position right now to finalize that number given that we’re still in the process of finalizing the exact pieces of our exit there, but there will be a largely non-cash restructuring charge in the second quarter to reflect the exit of the Russia business.

All right, that’s all really helpful. I appreciate it, thank you.

Our final question on the call today comes from Michael Sison from Wells Fargo. Michael, please go ahead.

Hey guys. You sort of noted that you felt there could be growth in 2023 in terms of the ag markets. Any thoughts [indiscernible] maybe extend the cycle for another year or so?

Yes, listen - we’ve gone through a period of very low growth in the ag sector over the last, I would say, last three to four years. Let’s take a step back and look at what is happening on soft commodity prices, what would you have to believe that would drive soft commodities right now. I mean, certainly the Russia-Ukraine situation is driving cereals, you’ve had weather impacts in Latin America last season in the south of Brazil, north of Argentina. We’re watching weather very closely around the world - there is always a weather impact somewhere to disrupt the market, that’s just a fact of life. You’ve got to believe that soft commodities right now are going to stay elevated, and that being the case, that’s a generally a good backdrop for us as crop protection input providers. We’re looking at ’23 as--it is very early, we’re only in the start of May, but we’re looking at ’23 as an extension of ’22. That’s how we’re thinking of it right now. It should be a positive backdrop. We don’t see any negatives out there that are going to fundamentally shift this, so ’23 should be a good year.

Got it. Then I think you are looking, or you’re trying to reduce some of your manufacturing footprint in China and move it to other parts of the world. Where are you in that endeavor, and have you made any meaningful progress?

Yes Mike, we’ve talked about this subject before. I always allude back to the 2015 time frame when we bought Cheminova - prior to that, we were about 95% to 90% dependent ton China for pretty much all the raw materials, intermediates, fine and speciality chemicals. We’ve been working and we’ve had a program to really ensure that we have a balanced supply chain of manufacturing footprint around the world, not only with the Cheminova acquisition but with the Dupont acquisitions as well, and today we’re probably in that 43%, 45% range dependent upon China. Our aim is to get that to sub-40% within the next year or so. We’ve done a very good job of setting up manufacturing with the assets, whether it be in India or Europe. We’ve shifted some toll manufacturing into Europe and Mexico, as an example, to feed Brazil. We will continue to do that. It is something that, frankly, is never-ending. I would like to get it into the 30% range. I don’t know whether my manufacturing and procurement people would agree with that, but I think if we could get China dependency on 30%-plus would be almost ideal for us, with a good balance between India and Europe and the U.S. being the rest. I think we’d be in great shape by then.

Got it, thank you.

Okay, thank you very much. That is all the time that we have for the call today. Thank you and have a good day.

This concludes the FMC Corporation conference call. Thank you for attending. You may now disconnect.