Good morning, and welcome to the Third Quarter 2022 Earnings Call for FMC Corporation. This event is being recorded, and all participants are in a listen-mode only. [Operator Instructions]. I would now like to turn the conference over to Mr. Zack Zaki, Director of Investor Relations with FMC Corporation. Please go ahead.

Thank you, Jason, 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 early view of 2023. 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, net debt 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 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's strong growth continued in the third quarter with a robust start to the Latin American season as well as solid pricing actions across all regions driving our results. New products gained momentum in the quarter, growing 26% year-over-year. As expected, Q3 saw highest year-over-year cost inflation for 2022. Looking to Q4, we are seeing sequentially lower inflation across the supply chain. With this in mind, we expect a strong finish to the year and remain confident in our ability to deliver our fourth quarter and full year forecast. Our Q3 results are detailed on Slides 3, 4 and 5. Revenue was up 19% organically, EBITDA down 11% and EPS down 14%. As expected, these declines in the quarter were driven by the highest cost inflation this year, which more than offset the good start to the Latin American season and average global price increases of 7%. Adjusted earnings were $1.23 per diluted share in the quarter, $0.13 above the midpoint of our guidance range, with the vast majority of the outperformance driven by higher EBITDA. We delivered double-digit year-over-year growth across the portfolio, including 23% growth in herbicides, 19% in fungicides and 10% in insecticides. Third quarter sales were $1.38 billion, led by volume growth in Latin America and North America as well as price increases across all regions. In North America, sales increased 21% year-over-year. Fungicides grew rapidly in the quarter, especially on corn in the Midwest. Overall performance in the Midwest across corn, soybeans and other crops more than offset lower diamide sales in the West due to drought conditions. In Latin America, sales increased 35% year-over-year, led by Brazil and Argentina. With the backdrop of strong commodity prices and increasing acres, grower confidence in the region is high. Our…

Thanks, Mark. Let me start this morning with a quick discussion of two accounting changes we implemented on July 1. First, we changed our method for costing inventory in the United States from the Last-in, First-out or LIFO cost method to the First-in, First-out or FIFO cost method, consistent with how we account for inventory across the rest of our global business. This is the primary change made and the only one that impacts prior year reported earnings and EBITDA. Second, we changed our method of accounting for the determination of the market-related value for a class of assets within our qualified US defined benefit plan, impacting our net periodic pension costs. This change only impacts our historical GAAP results as we exclude non-operating pension charges from our adjusted results. Certain prior year amounts within the earnings tables included with our earnings release today have been recasted to reflect these accounting policy changes. Impacts to our recast and income statement are not material. Further detail on both of these changes are included in our third quarter 2022 Form 10-Q, which will be filed later today. Additionally, we have included a table in the appendix of today's slides that shows recasted adjusted EBITDA, earnings and EPS for 2021 for easy reference. There were no impacts on reported results for Q1 or Q2 2022 from these changes. With that, let's shift to a review of some key income statement items. FX was a headwind to revenue growth in the third quarter as expected, driven by weakness in European and Asian currencies, particularly the euro, Indian rupee and Turkish lira. We continue to anticipate FX headwinds for the remainder of 2022, driven by Asian and European currencies. Interest expense for the third quarter was $41.8 million, up $8.7 million versus the prior year…

Thank you, Andrew. Turning to Slides 9 and 10. I want to provide an early look at the key market and cost dynamics underpinning our emerging view of next year. Soft commodity prices remain robust and stock-to-use ratios for key crops remained below the average for the past decade, growers around the world will continue to rely on our advanced technologies to deliver high yields while they combat erratic weather and persistent drought conditions. As a result, we expect the overall crop protection market will grow in the low to mid-single-digit range next year on a US dollar basis. This favorable backdrop, combined with our continued pricing actions, strong demand for our newest technologies and further market access gains will provide solid support for profitable growth in 2023. There have been significant cumulative cost and FX headwinds to EBITDA over the past couple of years, which we intend to recoup through pricing and lower costs going forward. Clearly, all the recovery will not take place within a single year, but we expect to shift to improving margins in the second half of 2023. Headwinds to the top line will come from FX volatility as well as a normal range of registration losses, potential factors that could drive 2023 revenue higher include stronger market growth, better pricing or product mix and a reduction in FX volatility. On the supply front, we expect greater stability as we continue diversifying our raw material sources and experience fewer disruptions. Input cost inflation is expected to decelerate, and hence, input costs are expected to become a year-over-year tailwind in the second half of the year. In fact, we are already seeing improvements in the availability and cost of logistics. Regarding internal costs, SG&A and R&D expenses will grow at or below the rate of sales…

[Operator Instructions] Our first question is from Laurent Favre with BNP. Your line is now open.

Good morning. Thanks for taking my question. Mark, my question is regarding the cost inflation you're talking about for H1 and you're starting to have visibility on this. I was wondering if you could talk about the magnitude of this inflation, which it seems to me that it's so much that you're not confident to grow the margins for the full year. I think the choice of what is interesting, you're talking about margin expansion in H2, not for the full year. So, I was wondering if you could talk a little bit about this? Thank you.

Yes, certainly, Laurent. Well, first of all, let me clear up that little misunderstanding. We do expect margins to improve as we exit 2023 versus where we are today in 2022. So margins will improve next year. I think that's an important point because we have been talking about first half versus second half, but full year will be positive. Obviously, we've described quite a few times how costs flow through our P&L. The materials that we're buying in the second half of this year give us very good insight into the costs for the first half of next year. And we are seeing costs still higher than they were, but the rate of increase is slowing down, and that's very important because what that tells us is that as we enter the first half of next year, the materials that we will be buying and the cost of flow through the P&L in the second half of the year will be lower. So that's how we see the first half, second half. So costs go from being somewhat of a headwind in the first half to somewhat of a tailwind in the second half. Now when we talk about the full year, we don't have a budget at this point. So we are giving what we describe as an early look at next year. I think, though, that when you think about our five-year plan that we put in place in 2018, our top line of 5% to 7% growth and now 7% to 9% growth on the bottom line, they're very much where we're thinking we can be next year. And when you think about the slides that we put out there in terms of the cost dynamic and the market dynamics, market dynamics are pretty positive for us. So if you think about the following: if you think about price up next year in the sort of low to mid-single-digit range, you think of volume the same in the low to mid-single-digit range. You've got some registration losses. And you've got a market that's growing in the low to mid-single-digit range. You take that, you take an FX headwind probably in the low to mid-single digits, it's quite easy to see as being within the middle to the upper end of that 5% to 7% range, and that's how we're sort of modeling it at the very early stages. We described in the slides things that can move us up and down and if we're in that range, then obviously, we're going to get EBITDA leverage, and you should see EBITDA in that 7% to 9% range as well as improved margins. So the algorithm works, I'm confident in what we see in terms of our own portfolio, new product introductions coming in next year. It is a volatile world, but we are pretty confident about what we see next year, Laurent.

Thanks, Mark. And as a follow-up regarding more Q4 and a wide range. I was wondering if the uncertainty there is more about how much of an early season you get into 2023 in the northern hemisphere or to what extent in the southern hemisphere? You have had an incredible Q3, and inventories might be a bit high. And so therefore, Q4 volumes might be maybe a little bit, I guess, at risk.

Yes -- no, seriously, we have a range for a reason. We don't necessarily see that range as wide. There are a lot of things going on in the world right now, as we all know. I would say the season in Latin America, as we've said, has started well. We planned for that in Q3. We took advantage of that. We expect it to continue in Latin America as we go through Q4 and Q1. It is a strange time of the year because not only is the Latin American season in full swing, but things are moving in North America, things are starting to move in Europe ahead of the season. So it's a time of volatility in demand. And as we've said before, we tend to look at the years in two halves. Well, that applies to Q4 and Q1. So yes, there is a range there, but we don't consider it too broad. We're confident of our ability to deliver on Q4, looks good in Latin America, looks good in North America and Europe is gearing up well. So overall, I think the midpoint is where we said we would be for the full year, and we really haven't changed the second half at all. You've seen that in the numbers. It's going to be a good second half for us. So I think the range is appropriate for what we see in terms of what's going on in the world.

Okay. Thank you, Mark.

Our next question comes from Christopher Parkinson with Mizuho. Your line is now open.

[Technical Difficulty] Top-down perspective on the growth rates for the diamides, plant health, on new products, including Cyazypyr [ph]. And just -- I think you said registration losses would be more or less in line with historical averages. Just any preliminary thoughts on how we should be thinking about that throughout the balance of 2023. Thank you very much.

Yes. Chris, could you just repeat the first piece of your question? We didn't hear it.

Oh, I'm sorry. No, I was just asking you to potentially parse out your preliminary thoughts on growth rates for the diamides, your plant and health portfolio and new products just broad-based thinking of how you're assessing that. Thank you.

Thanks, Chris. Yes. So let me take the diamides first. This year, year-to-date, we're up in the high mid-single digits. We would expect that same growth rate next year as we go forward. We're getting new registrations, especially for Cyazypyr. That market is growing rapidly in many parts of the world, which is good news. On new products, the new products are about $600 million this year in terms of overall revenue. We're about 10% of revenue. We would expect that to increase next year. I don't have the exact amount, but I would expect it to move upwards in terms of overall revenue, certainly given the strength of what we've seen over the last couple of years with new product introductions. And then the plant health business is doing extremely well. It's growing north of 20% this year. Biological is growing even faster than that. I would expect that business to continue growth of north of 20% as we go into next year, driven mainly by biologicals. So overall, that whole new product mix that we have going through the business is getting stronger every year. And it's interesting when you think about it, we closed the DuPont deal five years ago this week, which is frankly hard to believe, but the $600 million of what we call products launched in the last five years have all been put in the marketplace since that acquisition. So, it just shows the power of that innovation engine that we have, and it's certainly been accelerating as we've gone over those 5 years. So more to come from that pipeline, but hopefully, that gives you sort of a flavor of how the 3 pieces fall out.

That's very helpful. And just as a quick follow-up, if we aggregate the quarterly cost headwinds, so the recent $169 million in Q3, you got plus or minus 3.79% year-to-date. A part of that is raw materials part of that, I believe, transportation logistics. And part of that is also, correct me if I'm wrong, operating on getting – procuring certain raw materials that are off contract. In addition to this, let's say, standardized the potential for raws to roll over, how should we think about the other parts of that, so in terms of optimizing procurement from your core suppliers and then also transportation in terms of freight costs and everything else. Just if you have any other details on that, that would also be incredibly helpful? Thank you.

Yes. I'll give you a high level view and then Andrew, if you want to make a couple of comments. Listen, I think we've been in such a period that we've never seen before in terms of volatility and movement in supply that we're very hopeful that as we get into 2023, we're starting to enter into more of a stable environment in terms of how we operate, that has many benefits. Obviously, stress on the organization is an important one. But second is cost because it allows us to go back and get materials from what we call our prime resources where we have the best conditions, the best terms, the best pricing. We are seeing, and I just said it in the script, we are seeing logistics costs freeing up. Obviously, we're all pretty much aware that the world is entering into a recessionary period, there is less goods moving around the world. What does that mean? It means container space is freed up. It means lower maritime shipments. We're seeing lower cost for road freight in different parts of the world and where we sparingly use air freight, those costs are coming down as well. So we are seeing the whole cost complex around logistics getting better. Andrew, do you want to make any other comments?

Yes. I think we've talked in the past about the makeup of our cost headwinds. The largest piece being active ingredients or the intermediate used to produce them. Those are very specific to FMC into our product mix. So, while certainly, I think people are seeing some cost turning in certain commodity chemical categories, for example, given the nature that most of our cost headwind has really been around the supply/demand dynamics and disruption of availability for these very specialized intermediates and active ingredients that we purchased. That decrease in disruption that Mark referenced is starting to give that benefit of allowing us to reconcentrate purchases back on strategic suppliers. And that's where we're expecting to see the turn. That is our biggest cost bucket these raw materials that for active ingredients and the intermediates. It's also the slowest to flow through our P&L. So that's why it takes the longest time to react to changes. But we do see some good reasons to be optimistic there. Packaging is our second largest -- much smaller, but second largest cost bucket. It's still very mixed, where we've seen some reduction in input raw material costs in certain parts of the world, but still some disruptions in availability. It's still a mixed area for us and an area where we are optimistic to see improvement going into 2023. And then as Mark commented, certainly on logistics, which is the smallest of the three buckets, but the one that flows through our PL most quickly, we are seeing some signs of improvement both in ocean and air as well as in rail in terms of availability and cost.

Very helpful. Thank you so much.

Thanks, Chris.

Our next question comes from Vincent Andrews with Morgan Stanley. Your line is now open.

Thank you. Good morning, everyone. I wanted to follow up on the price comments for 2023. If I've got my math right, you guys have been achieving high single-digit pricing year-to-date, very strong. It seems like you've got a good uptake from your customers. So if you're talking about low single-digit into next year, I assume that that's a new round of pricing that you're anticipating introducing. And I'm just wondering because it's only early November, and you don't have your plan yet. Is that just sort of a placeholder and you haven't decided exactly how much price it takes for next year, or just sort of what is the pricing philosophy for next year? And does it vary by region?

Yes. Thanks, Vincent. Yes, it does vary by region. And it varies in the method of how we implement prices in certain parts of the world, such as Europe or the US, we have a price book that goes out before the season starts, and all sales are based upon those price books. Now over the last two years, we had actually changed mid-season because of just the scale of what we see. In other parts of the world like Latin America, the cost and the prices moved constantly. So it's not as if you have a price, you're moving prices constantly. So the way we see next year, we are definitely moving prices. We already have in the US. We are in Europe as well. We're also moving in parts of Asia. So we're on the track to recoup the EBITDA that we've had the compression with over the last couple of years. And as I said, we're not going to get that all back in one year. So 2023, 2024 will be the years of us coming down the other side of that curve as we hold price and raise price in certain parts of the world. So yes, I think the basic answer is, we continue to be aggressive on price. We've had margin compression that we don't like, and we're going to get those margins back.

Okay. And then just on the new market initiatives, obviously, I know this has been a important initiative, and now you're starting to see the results. And I'm just wondering, as you see those results, is it sort of creating new opportunities or new lines of sight on other things you can do within those markets with other molecules, just is the opportunity set broadening, I guess, is my question.

Yes. Listen, I think once you start down the road of expanding where you're actually selling then growth rates accelerate, and that's what we've seen. I'll just give you a little factoid that we talked about growth in Latin America being very strong. 50% of our growth in Brazil in the third quarter was our new market access. So what does that basically mean? It means we're selling onto new acres that we never sold them to before. We're selling to broader distributors and co-ops with deeper relationships. And we're selling a portfolio that is somewhat different to what we've sold before. For instance, I talked about the bifenthrin based products for [indiscernible] that is a big problem in the Brazilian soybean market and we have the best solution there. So we're expanding our sales into new areas. US is another good example. We've added a number of salespeople and tech service people over the last 12 months. That means we're calling on more retailers. We're calling on different distribution outlets, and we're getting our portfolio into hands that have never been in there before. So, when you think about FMC's price and volume growth, that volume growth is not to the same customers. The volume growth is going to new people, new markets, new acres, new crops that we've not been on before. So, we see that as something very positive. And I would say we're at the beginning of a multiyear asset by FMC to really improve our market access, which will improve our market share and profitability. I'm very happy with what I see today. Obviously, we have to train new sales people. We have to train tech service. But you know what, within a 12-month period, good salespeople start to get returns, and we're seeing that now.

Sounds great. Thank you very much.

Thanks Vincent.

Our next question comes from Kevin McCarthy with VRP. Your line is now open.

Yes, good morning. Mark, I think you've closed on the BioPhero deal and owned it for maybe three or four months at this point. So can you provide an update on what you're seeing in that business and your level of confidence in the strategy to leverage the technology across major crops with an eye towards your goal of $1 billion in sales by 2030? And more broadly, what are you seeing in the pipeline as it relates to future inorganic growth potential for your biologicals platform?

Yes. Thanks, Kevin. It's hard to believe that we've owned the business for three or four months, there's been a lot of progress. First of all, on integration. Integration has gone very smoothly. The good news is that our biologicals platform and plant health platform is based in Copenhagen, which is where BioPhero are based, and we're only about kilometers apart from each other. So that's working really well. There's been very good dialogue there. I think the most important thing that I can tell you is that we made our first commercial sales in the last three to four months. We made our first commercial batches of one product, and we've actually scaled up a second product. So the timing was very good for us. It allowed us to integrate and get the first commercial sales, that's an important step to prove that the technology works and customers are willing to buy that technology is very important. The pipeline is pretty much as what we said it was. We have five products in research today and then moving through at the rate that we would expect. I think the most important other aspect is manufacturing strategy. This is fermentation and it is new technology to FMC. Our manufacturing groups are hiring people right now with fermentation capabilities to augment what BioPhero have and we're making great progress on our strategy for where are we going to manufacture? Are we going to do it ourselves or we doing it with third parties? Is it a combination? So all of that is going very well. Second part of your question, Kevin, regarding the inorganic opportunities for M&A. We do have a number of targets that we're looking at today from a plant health perspective. They are based around the biologicals platform. I'm not going to say any more than that, except that this is, and I've said it in numerous times, this is an area of focus for FMC, not only from an M&A perspective, but from our ventures group as well. I think many of you know that we set up a ventures group about 2.5 years ago. Actually, BioPhero was one of the first companies that we ever invested in. We do have other investments in peptides that are going very well. These are new areas for biologicals to be used as pesticides. So I expect to see more from us on that M&A front.

Thank you for that. And then secondly, if I may, are you seeing inventory levels that you would describe as outlying either in terms of being too high or too low in any of your major markets nowadays. A – Mark Douglas: Well, I think generally speaking, overall, we would say we're happy where inventory levels are in the marketplace. There are pockets of higher inventories. We talked about India before. The last few years, with the weather monsoons played out and rice acreage reductions, have not been great. So we're working through inventory there. I would say in the US, things are fine. Europe is pretty okay for us. one or two pockets in the South because of the dry weather that we had last year. I would say in Latin America, there are parts of Brazilian market where they had a drought last year that you can imagine inventories are high. Inventories are high right now in Brazil because we're in the planting season. But we're happy with where our inventories are right now.

Thanks very much.

Our next question comes from Joel Jackson with BMO. Your line is now open.

HI, Mark. You're not going to like this question, but I'm going to try. I'm going to connect the dots to what you said so. You said you’re on pace to hit the five year target that you set in 2018 for 2023. If I take 8%, if your 2018 EBITDA CAGR that, that's about 1.6-something billion EBITDA next year. Then I think you said well, but you're on pace for 8% or nothing you say wouldn't take out of the range, that normal 7% to 9% growth rate off of this year, that would imply $1.5 billion EBITDA next year. Can you clarify your comments, please? A – Mark Douglas: Yes. I think maybe you misunderstood, Joel. I said that next year, we would have in the range of 5% to 7%, 7% to 9%. When you look at the five-year average, we're at about 6.5% revenue growth, and we're slightly below the EBITDA number for the last four years. I think we're about -- we're at 1.4%. And I think our forecast for 2022 in the long-range plan was 1.45%. But if you back out Russia, we're up 1. 425 billion, so we're $25 million below on $1.45 billion. That's not a lot. So when you think about the significant costs we've had -- and I think through the planning period, we're over $1 billion of cost in FX, Andrew, is that correct?

Right? And EBITDA, I think, Joe, just to put a couple of markers down, with our five-year goals, at the midpoint of our guidance for this year, revenue would be 7.4% compounded. So above the high end of our 5% to 7% range that we target over that time period. EBITDA is just about 6% at the midpoint. And as Mark pointed out, that's after swallowing $25 million in lost EBIT in -- by the exit of our Russian business absent that decision a little bit better. I think the comments earlier in the call and in the script are been Mark made around the 5% to 7%, 7% to 9%, very specifically to single year 2023. We think that relationship of top line and bottom line, where the top line grows at a multiple of the overall market with a balance of pricing and volume, and where the bottom line grows faster and we see margin expansion, particularly in the second half, as we've discussed some of those dynamics is the right way to be thinking about 2023. But I'll echo Mark's earlier comment. We don't have a budget yet. We're in the midst of that roll-up process. This is from working through that process and I think a recognition of a very strong market backdrop that we're operating in right now. And I think a good – some good signs of momentum in the right direction around costs and continued strength with volume.

Okay. And then my follow-up would be, I guess, a little bit small two-parter. So I think CapEx went down $25 million this year. Would that mean we're going to have more CapEx next year? And then if you've got inflation hurting net working capital this year that's brought down your free cash flow, are you expecting next year to have some very positive tailwinds on net working capital and free cash flow?

So let me hit both pieces. I think, yes, we did bring down the midpoint of our CapEx guidance this year by about $25 million. That's really driven by availability of materials and labor to do the projects we had in the pipeline. We still think $150 million to $175 million is the right range, steady state for our business and it's also limited by our own internal capability to execute. So I don't expect some big step up in CapEx next year. But $150 million to $175 million is probably a more normalized range looking to '23 and beyond. In terms of the working capital impacts on cash flow, look, we're dealing with massive cost inflation and large price increases at the midpoint, $650 million in sales growth this year. Given our cash cycle, it's going to take a little while to catch back up and have that flow all the way through and be collected. With the higher sales in Q4, the dynamics of the -- where the markets we sell in, in Q4, so that you don't collect on those sales in the same quarter. So that's the reason for the decrement down in free cash flow this year. And as I commented in the script, and I'll echo here, we do expect to revert back to the more normal 70% to 80% conversion range next year as we work through some of that and catch up on some of that inflation on working capital. We are still expecting some inflation in cost next year. We are expecting to continue raising prices next year but at a lower rate. So it should not be the same substantial headwind in cash that we have this year. It really is that just catching up on very, very rapid inflation and price escalation that's hitting our working capital in the short term.

Our next question comes from Adam Samuelson with Goldman Sachs. Your line is now open.

Thank you, good morning everyone. Maybe following up on Joel's line of questioning on the growth. And I'm just trying to connect this concept of price cost and FX has been a kind of multiyear headwind to the business and this idea that you do think there is potential to catch up. And I just want to just clarify because that does actually occur. I presume that would get you to a year where you have scope to exceed that kind of 7% to 9% EBITDA growth algorithm. And especially, I'm trying to think on a year-on-year basis, there's the absence of these secondary supplier sourcing, which are incremental costs you're incurring to drive volume that are difficult to recoup. The absence of that could be bigger tailwind. I'm just trying to connect kind of if we can actually -- when can we actually think -- get at caught up on price cost, FX kind of the net of those three, which has been pretty sizable headwind for the last couple of years. A – Mark Douglas: Yes. Well, I think we've been pretty explicit that I would say we're starting to see some of that in Q4, and we'll see more of it as we start to go through next year. But I think where you see the real turn is the second half of the year because at that point, we will be continuing to benefit from the price increases. And at that point, if everything goes as we think it should go, then prices will actually be coming down in the second half of the year for raw materials, logistics, et cetera. So that's when we should start to see that acceleration of margin, and you will see that continuing through 2024. So it's really 6 months out from now, although we're starting to see the first signs of it now. Andrew, would you want to add anything?

Yes. Adam, I would just add, I think as you think about expectations for 2023, in particular, as Mark pointed out, that shift in cost from being a headwind to a tailwind is likely second half. And then just the nature of catching up on that cumulative price cost, FX relationship, that's going to take more than a year to do, and Mark had commented that in our prepared comments. That is not something that's just going to switch back immediately. We will continue raising prices. We'll continue holding prices as costs begin to decelerate and turn the other direction, that's when we'll see the margin to catch up and the catch up on that relationship. So could next year be better than 7% to 9% at the bottom line? Possible. Again, we don't have a budget yet. But what we do feel very confident about is that relationship between top line growth at a multiple of the overall market driven by a balance of volume and pricing, with leverage to the bottom line, particularly in the second half next year as we get to a reversal of the cost direction that we've had for past multiple years, that, I think, is something we can feel very confident about going into 2023, even in the absence of a full budget.

Got it. And I appreciate you don't have a full budget, so this will be something that will get much closer scrutiny kind of through the next few months and the year outlook in February. But on the SG& A and R&D side and looking at the way you find the cost dynamics, you talk about labor cost inflation, which is evident, but continued investments across kind of all your key kind of investment areas. Is there any notable or sizable step-up on the SG&A and R&D side that in excess of some of the broader inflation that we're seeing that we should be contemplating? A – Mark Douglas: No, I don't think so, Adam. We're investing in R&D at an appropriate rate right now. That will step up next year as obviously we continue. We're introducing new products into our pipeline. Precision Ag is getting the appropriate funding and that is growing well for us. And then on the SG&A side, we will not slow down on the market access investments around the world. And then we have the inflationary rates that we see for people costs around the world as we go into next year. But I don't think there's anything there that I would call a step up. Andrew, I don't think there's anything.

No. I think at this point, I've just guided that we would expect SG&A and R& D to grow no faster than sales. That would allow plenty of room to continue funding the investments Mark has described to deal with inflation. And then on the SG&A side, in particular, we're continuing to drive leverage out of our back office. We are making investments in customer-facing market access areas of SG&A, but in more of the back office business process part of SG&A, we're working very hard to continue to drive efficiencies out of the business. So that kind of leverage on sort of back office SG&A you should also expect to continue.

Super helpful. Thanks

Thank you.

Our next question comes from Stephen Byrne with Bank of America. Your line is now open.

Andrew, just a couple of minutes ago, you made a comment about expecting further cost inflation in the first half of next year. Is that just a year-over-year comment, or do you expect inflation sequentially from here? I raised that as we've heard about some actives being sourced from China that have already deflated significantly. So can you comment on where are your raws inflation in the third quarter year-over-year? And are you seeing a difference between whether you're sourcing those raws and actives from China versus other parts of the world?

Steve, I think great point. Let's let me parse that in a couple of pieces. First, when we're talking, we've been talking about inflation year-on-year change. So we expect there to be year-on-year increase in our costs in the first half of next year, principally based on what we are seeing in raw material, active ingredient intermediates that we are entering purchase orders for right now. Now I think we've tried to highlight, and let me reemphasize, we can only speak to the mix of things we buy. We are aware and have seen market data on a number of more generic commodity active ingredients are being sourced out of China, where there have been some announced price decreases. We are buying, for example, intermediates for diamides, which are highly specialized and have very few, if no other commercial uses and very limited number of suppliers, that dynamic may be FMC specific. I will say this, again, we are seeing a decelerating rate of inflation as we look into the first half, although costs will be up year-on-year. And as we – that gives us confidence and as we continue to look at how supply disruptions are resolving and how they – our ability to, again to ship more production back to revert suppliers and concentrate the buy a bit relative to what we've been doing in the past several quarters, gives us confidence that we're going to see this benefit going into the second half. So again, I think cost inflation should be lower in Q4 than it was in Q3. It should be lower than the first half next year than it was in Q4, still up year-on-year. And as we get into the second half, we start to get to a positive year-on-year comparison. Does that help?

It does. So what were raws inflation year-over-year in the third quarter? And maybe more broadly, what limits you from being able to push price not more than 7% to close that gap? Are you seeing any erosion and discipline from competitors, or is it certain regions of the world or certain ag economies that really represent the challenge on pushing price more than that?

No, I don't -- it's Mark here. I don't think so. I think we're in the high single digits. That's a lot of price when you're at our size and especially with our EBITDA margins. So for us, it's not -- you're never going to get all of this back in one or two quarters. The costs flow over a period of time and you work your way through back on a same sort of principle. At the end of the day, we are a fine and specialty chemical company. We're not a commodity chemical company. So it takes us a little bit to get it on one side. But on the other side, we keep it. And I think that's an important asset that you have to remember. I think Andrew outlined pretty well, the inflationary aspect that we're thinking through. But for me, I think the way we're growing the business, and don't forget this year is going to be a record year for us. I think we're taking the appropriate actions on price and we'll continue to do so. And in addition, we're gaining market share by our market access activities. So I think the two combined produce very strong results.

And I think, Steve, just one last comment there. You have to think about maintaining that, if we continue to have effective full year price increase next year and the second half where costs are declining, you get that -- you're starting to get real margin recovery. So raising prices into that are -- we're basically trying to set the price where we can hold it and hold that margin as costs begin to decelerate and recoup the margin with decelerating costs and the stickiness of those price increases. As Mark mentioned, that's very much the hallmark of a specialty business as opposed to a commodity business.

Thank you.

Our next question comes from Artem Chubarov [ph] with Redburn. Your line is now open.

Thanks for taking my questions. I think we've already touched on that a bit. But getting back to your full year guidance of low to mid-single-digit growth, is that correct to assume that you're penciling in low single-digit price increase, or is it more like the mid- or high single-digit growth? Would you have any comments on that, please? Thank you. A – Mark Douglas: Yes, I think I said it earlier at the beginning, when we think about next year, pricing in that low to mid-single-digit range, volume in the low to mid-single-digit range is appropriate for how we're thinking our early thinking for next year. So if you're specifically focused on price, I would think in that low to mid range.

All right. Thanks very much. Just wanted to confirm that. Thank you. A – Mark Douglas: Thank you.

Our next question comes from Josh Spector with UBS. Your line is now open.

Yes. Hey, guys. Good morning. Two quick ones, if I may. Just when you talked about diamides gaining momentum in Asia, is there a way to think about the penetration of those products in that market versus the rest of the world and the runway there? And when you talk about increased market access in Latin America, have those people and costs have been put in place and now you're going to reap the benefit of that, or is that something where costs are still ramping? Thanks. A – Mark Douglas: Thank you. Yes, most of -- taking the second one first. Most of the costs have already been embedded in the Latin American business, and we'll see those benefits. We've seen them already, but we'll see them accelerate as we go through next year. On the diamides in Asia, listen, there's two very big markets for us, rice and fruit and vegetables and pretty much every country grows rice and pretty much every country grows fruit and vegetables. Diamides in Asia is our biggest market, about 50% of the diamides sold in Asia. So you could think about pretty much every country are our major markets and rice and key ones

Okay. Thank you. A – Mark Douglas: Thank you.

That was our last question. So I'll pass the call back over to the management team for closing remarks. End of Q&A:

Yes, there are no more closing remarks. That is all the time that we have for the call today. Thank you, and have a good day.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.