Good morning, and welcome to the First Quarter 2023 Earnings Call for FMC Corporation. This event is being recorded and all participants are in listen-only mode. [Operator Instructions]. I would now like to turn the conference over to Mr. Zack Zaki, Director, Investor Relations for FMC Corporation. Please go ahead.

Thank you, Glenn. 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 imply second half expectation. 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 certain 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 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. Our Q1 results are detailed on Slides 3, 4 and 5. In Q1, FMC delivered solid results with strong pricing actions, accelerated growth of new products, increased market access and cost discipline, driving margin expansion of over 60 basis points versus the prior year period. We reported $1.34 billion in first quarter revenue, which is flat on a reported basis and up 4% organically. Revenue was flat due to FX headwinds and lower volumes. Adjusted EBITDA was $362 million, an increase of 2% compared to the prior year period and $7 million above the midpoint of our guidance range. EBITDA margins were 26.9%, an increase of over 60 basis points compared to the prior year period. This margin expansion was driven by pricing gains, strong mix and cost discipline. Adjusted earnings were $1.77 per diluted share in the quarter, a decrease of 6% versus Q1 2022 but $0.04 above the midpoint of our guidance range. North America had a record quarter with sales growth of 28% or 30% excluding FX versus the first quarter of 2022. You will recall, we built inventory for the region at the end of last year in anticipation of another strong quarter and aided by our investments to increase market access. We were able to take advantage of the available supply to gain market share, especially in Canada. Canada achieved record first quarter revenue and effectively doubled in sales compared to the prior year period due to high customer demand particularly for insecticides such as the recently launched Coragen MaX, low channel inventory for FMC products, price increases and product mix were also drivers for the strong performance in Canada. Product mix across North America also benefited from higher sales of new products with 29% of branded revenue…

Thanks, Mark. I'll start this morning with a review of some key income statement items. FX was a 4% headwind to revenue growth in the first quarter, with the most significant impacts coming from the Turkish lira, Canadian dollar, Pakistani rupee, Euro and Chinese renminbi. Looking ahead through the rest of 2023, we see continued modest FX headwinds in the second quarter, which diminish as we move through the rest of the year. For the second quarter of 2023, these headwinds stemmed primarily from Asian currencies, particularly the Indian rupee and the Pakistani rupee. Interest expense for the first quarter was $51.4 million, up $21.5 million versus the prior year period. Substantially higher U.S. interest rates were the primary driver of higher interest expense in the quarter. We now expect full year interest expense to be in the range of $205 million to $215 million, an increase of $5 million at the midpoint with the increase driven by somewhat higher short-term borrowings to support working capital than previously assumed. Our effective tax rate on adjusted earnings for the first quarter was 15%, in line with the midpoint of our full year expectation for tax rate of 14% to 16%. Moving next to the balance sheet and liquidity. Gross debt was $4.2 billion at March 31, up approximately $900 million from the prior quarter. Gross debt to trailing 12-month EBITDA was 3.0x while net debt-to-EBITDA was 2.6x, as expected, given the normal seasonal working capital build. Moving on to cash flow generation and deployment on Slide 10. FMC generated free cash flow of negative $915 million in the first quarter, down roughly $250 million versus the prior year, entirely due to lower adjusted cash from operations. The modest growth in EBITDA was more than offset by higher cash used for working…

Thank you, Andrew. Before I make my closing comments, I'd like to invite you to FMC's Investor Day on November 16 at our headquarters here in Philadelphia. Our agenda promises to be robust with dynamic showcases multiple speakers from commercial and functional areas and a chance to interact with FMC's executive leadership team. We will share more about our short- and long-term strategies, outline long-range financial goals and provide an early look at 2024 expectations. Please visit our website to register your interest in attending. I'm also pleased to announce a new collaboration with the Halo Trust, a humanitarian nongovernmental organization that restores livelihoods of people affected by conflict through demining activities. As you may recall, FMC was the first crop protection company to exit Russia 1 year ago, and we continue to support Ukraine and its farmers through various initiatives. As part of the collaboration with the Halo Trust, FMC is donating 3% of its 2023 sales revenue in the Ukraine to support expansion of its demining efforts. With this funding, the Halo Trust will be able to significantly increase its capacity to remove land mines from Ukrainian farms. This project not only ensures Ukrainian farmers can safely return to their fields for planting and harvest but it also contributes to improving food security around the globe. Finally, I'm proud to share that FMC is among just 6 companies in the world and the first crop protection company globally to have its net 0 target by 2035, verified by the science-based targets initiative organization. FMC has made substantial progress in recent years on its sustainability and net 0 goals. The company reduced Scope 1 and 2 greenhouse gas emissions at its operating sites by at least 2% in the last year, while at the same time, delivering record growth and increased revenue -- increased volume. In closing, FMC continues to perform strongly in a volatile market. Our performance is a result of our innovative portfolio of products that address a variety of grower needs across diverse crops, applications and geographies. It is also a reflection of the power of our product pipeline, which continues to provide us with exciting new synthetic and biological technologies. We have taken strong pricing actions to help recover from 24 months of unprecedented cost inflation and improved our product mix at the same time. Market access investments made over the past couple of years provide growth opportunities, especially for our new products. Input costs are receding, and we have good visibility into the year-over-year tailwinds in the second half of the year. But finally, other costs will be managed prudently while maintaining investments in R&D and expanding market access. These factors give us confidence in our raised guidance and position us to deliver another year of earnings growth and increased cash flow. I will now turn the call back to the operator for questions.

[Operator Instructions]. The first question comes from Christopher Parkinson from Mizuho.

Just given how well it appears price cost is trending at least to begin the year given your 1Q margin result. Can you just speak to the confidence that you have for your volume growth outlook for the balance of the year. And for those who may be skeptical on it, what would you say to them inclusive of where you think your progress on reducing inventories in key regions?

Yes. Chris. Maybe I'll start by just making a comment on the elements I talked about in terms of the overall market. I think one thing you have to put in perspective is although we're talking about volumes in Q1 and Q2, you have to remember that last year was an absolute record year in terms of total market for crop protection chemicals, driven a lot by volume, not just price. So although we're looking in the first half at what we would consider somewhat low volumes, it's lower. It's not absolutely low. So let's put that in perspective. The market is still operating at a very, very high level. On-the-ground usage is very robust in most parts of the world. So the actual market itself is looking good in terms of soft commodity prices are remaining elevated, growers are looking to plant as much as they can. We're going to see area increase in Brazil as we go through the end of this year as we enter the '23, '24 season. So all the signs are all good. Yes, we're seeing some adjustments that we talked about in terms of how we think about the marketplace. But overall, the volume perspective as we go through the year will improve for FMC. And let me talk about why I think that is. First of all, we talked a lot about new product introductions. And for us, those are the products that are introduced over the last 5 years. We just increased since our last guidance from $720 million to over $800 million of revenue this year from those products. The majority of that comes in the second half of the year. So that's growth we have in places like the U.S. and like Brazil. These are brand new formulations that…

That's helpful. And just as a -- to quick -- actually -- true follow-up to that question. Mark, you've spoken about and then you just hit on some of that with the NPIs, the non-diamide portfolio growing a little bit faster than the diamides when the original assumption was mid-single digits. If you could give us a quick update there as well as your biological assumption, correct me if I'm wrong, I think you were speaking about something about 230 to 300 plus there in terms of volumetric growth contribution. It seems like you're well on track as of the first quarter based on your PowerPoint commentary. If you could just hit on this other 2 further dynamics to go down one further level, that would be very helpful.

Yes. Thanks. So listen, on the portfolio itself, last year, we had 15% growth as a company. And this year, we're aiming for our rough 6% growth. When you look at the portfolio itself, the rest of the portfolio last year grew faster than the diamides. And that's not to say that the diamides weren't growing at a good rate. They were, and they have been since we acquired the products. This year, we expect the diamides to grow in that sort of mid-single-digit range, and the rest of the portfolio will grow at the same rate. That's the strength of that investment we've been making in the new products. So we have a very balanced view of how the company is growing across fungicides, insecticides and herbicides. The Plant Health business, of which biological is the major component, that business is expected to grow over 20% this year, and biologicals will grow pretty close to 30%, if not over 30%. So again, we have a strong mix there. We have more new products coming into the marketplace. But as you think about FMC going forward, you should think about that growth as more balanced across the overall portfolio, not just from a geographic perspective, but also from an intent perspective.

The next question comes from Vincent Andrews from Morgan Stanley.

Wondering if I could ask on the cost side of the equation for the back half of the year. I noticed that your expectations for raw material costs are still sort of at the midpoint of your sort of outlook. So could you talk about sort of the visibility you have there and why it's going to be more 3Q loaded than 4Q? And then just as we think about the overall second half, if I look at what you're guiding to, it looks like revenue up about $375 million year-over-year. And EBITDA is up about $115 million year-over-year. So is there anything else in between those 2 numbers beyond just price being up, volume being up and raw material costs being down? Is there sort of an SG&A or an R&D catch-up in the back half of the year? That's embedded in there or anything else like that?

Yes. Thanks, Vincent. I'll give you some high-level comments on how I see the overall cost picture playing out through the year. And then Andrew, if you want to dig into a couple of the details that Vincent raised. Certainly, from a cost -- let's put it, cost input in terms of raw materials, logistics, all other supplies, et cetera. We do have a very good view now of certainly Q3 and pretty close to finally in Q4. If you remember the way costs flow through our P&L, we have about a 6-month hang-up as inventory gets pushed through to revenue. So what do we see today? We know Q3 already. And the reason we're saying that the second half of the year is more front-end loaded into Q3 is that last year, Q3 was an extremely high impact from raw material inputs, in fact, the highest we've ever seen. We see that reversing now and most of our costs are locked in for Q3. So we know we have a significant uptick in Q3. So don't think of the second half has been back-end loaded into Q4. It's not. It doesn't mean to say that Q4 won't be good, but Q3 will be the area where we see the biggest EBITDA improvement because of costs. On SG&A, we continue to manage that well. FMC has done that well for the last 2 to 3 years. We're very flexible in how we move our SG&A around and where we need to save, we can, and we exhibited that in Q1. But Andrew, if you want to talk a little bit more about some of the flows of the cost go ahead.

Yes, Vincent, I think, look, our outlook for cost is essentially unchanged from the beginning of the year. We still expect a pretty substantial headwind from input costs in the first half and then a reversal of those into a tailwind in the second half. As Mark noted, Q3 of last year was the biggest cost increase we've ever had in our history, $169 million of cost increase in 1 quarter. So that reversal is pretty pronounced and really drives much stronger results in Q3 anticipated for this year than certainly the split in that second half being very Q3 heavy for the EBITDA growth. I think as you also noted, certainly, a part of that cost headwind is growth in SG&A and R&D. And we do fully intend to continue investing in the growth of the business through new product development through market access investments and resources, both commercial and agronomic, to go support the our new products out in the world. That is a nontrivial portion of the cost headwind for the year, probably on the order of 40%. And that is something that in Q1, we did modulate a bit as we saw the quarter evolving and slowed some of our SG&A investment as you saw in the reported P&L, net of FX benefits, SG&A spending was actually down in the quarter. If you remove those FX benefits, we did spend more in SG&A this year than we did last year, but probably at a bit slower pace than what we'd anticipated going into the quarter. We'll continue to adjust spending, particularly in the noncustomer-facing nongrowth supporting areas as we go through the year and see how the business evolves. But I think, look, the bottom line is the cost environment is pretty much as we expected. I think we're managing through that. And that lapping, that big headwind from Q3 of '22 is a big factor in driving our second half EBITDA growth.

Okay. And if I could just ask a quick follow-up. Slide 10 on the cash deployment. You do talk about the potential for inorganic growth through M&A this year. I would assume that's going to be on the sort of smaller side of the equation, if anything comes to fruition? Or is that not correct?

Yes. No, I think, Vincent, we've said many times that we're very interested in adding to our technology portfolio, especially in the Plant Health Space, whether biologicals or one of the other elements. They do tend to be lower investments in the tens of millions of dollars although we did make the BioPhero acquisition last year, which was pretty close to $200 million. So you can get up there into the couple of hundred million, depending on what it is you're buying. But generally speaking, the things we're looking at are more in the tens of millions of dollars right now.

Our next question comes from Tony Jones from Redburn.

I wanted to also talk about raw material costs a bit. So as cost go deflationary in H2 and presumably, that continues into '24, how do you see your prices holding up maybe an industry and an FMC level?

Yes. Tony, I'll certainly talk from an FMC perspective. We -- as I said, I think it was on the last call, we're not a commodity chemical company. Our prices don't shoot up overnight and they don't come down overnight. And I think that's an important facet that people have to remember. We have spent the last couple of years absorbing a tremendous amount of inflation of input costs and early in '21, we started to move price and we built as we went through the year and then we gained price last year. And obviously, we're still moving price today. That will not slow down. We intend to recover all of the input costs that we've seen in terms of inflation. So while we were a bit of a shock absorber for our customers as we went up this curve, we intend to keep that as we go to the other side of the curve. So we're very confident of our ability to hold price. You saw that in Q1 that will continue in Q2 through the rest of this year and as you rightly say, into '24 as well.

And then for a follow-up, you're obviously very positive on your new product growth. But I was wondering if we should be expecting some sort of acceleration in capacity -- sorry, CapEx for new capacity, how do you see CapEx then developing over the next couple of years?

Yes. I'll just give you my view and then Andrew, please jump in on some of those CapEx numbers. We do plan forward. Obviously, it takes us 3, 4, 5 years to get new facilities up and running from the initial stages of planning. We're already well into that curve. We have a very robust pipeline of new active ingredients, and that planning is folded into our near-term view of CapEx. When we get together in November, we'll give you the longer-term view of what CapEx investment will be. CapEx tends to be more modest for a company like ours, even when we're investing in the real active ingredient synthesis. So we're not like a major petrochemical company. So our forecasts include what we need today. But Andrew, do you want to make a comment?

Yes. So certainly, Tony, I think you've seen a step up in the capital additions and investing activities that we're guiding for this year in the range of $140 million to $180 million. At the midpoint, that's a little over $40 million increase versus the level of CapEx in the prior year. And that step up very much reflects what Mark is pointing to in terms of the investment to support new products and capacity growth. I think that $160 million to $180 million range is probably the right number for the next couple of years. We do have a succession of new products coming to market that will require investment in capacity to be able to support their production and their growth and not the least of which continue to build out support for all of our broad products, including biological. I don't think you should expect it to go much further north than that 160 to 140, 180 range over the next several years. I think just in terms of the pace of our growth, and as Mark mentioned, just the lower capital intensity of our business shouldn't be a significant difference from there. But again, at a midpoint of $160 million in CapEx this year on the guided $6.15 billion in sales, a very low capital intensity business.

Next question comes from Stephen Byrne from Bank of America.

Our view on new crop chemicals is that they generally take a long time to ramp, this metric that you're quoting or 15% of your sales from products introduced in the last 5 years. Would you characterize that as a faster ramp than say, historical ramps on new products and more importantly, what are you doing differently to drive that? You mentioned, Mark, about investing in commercial. Is this staffing that's driving this? Is this your outreach to farmers in some way? Or is this just sharing the margin with the retail channel? What's driving it?

Yes, I think a couple of things. Steve. On the growth side, I don't see this as being -- I don't see it as being an exceptionally accelerated rate right now. It's pretty normal for products to grow at this sort of rate. I think what is unique for us is the number that we're introducing. Our number of introductions, whether it be from our discovery and development pipeline of new active ingredients, or whether it's local formulation work in our research laboratories that are based in region, I think the number is increasing. Therefore, you're seeing the gross number get bigger every year just because every year, we're not slowing down. I can think of some of the insecticides that we have that are 20, 30, 40 years old, they're still growing and they're still viable and still developing new formulations. So I would say, a number of products is key. So the productivity of our R&D organization is high. And then I think the second piece is what we've been investing in over the last couple of years, which is real resources on the ground to support growth. So when we talk about market access, we're not just talking about sales people, i.e., commercial people. We're talking about agronomists. We're talking about tech service people. We're talking about marketing people who can launch products in a region. It's that type of background activity that you have to invest in from an SG&A perspective to make sure that the products you're launching are getting the traction it needs. So it's that more holistic approach to new products that I think is bearing fruit from us. And when I look at the pipeline, not just of active ingredients themselves, but of the product development work in the regions, it continues to accelerate. I mean, think about it. We got 2% of our revenue this year is coming from products launched this year. That's a very high number, and we've been hitting that number for the last couple of years, and we expect to see that to continue. So it's not one thing. It's holistically how we built the engine that delivers the new products to market.

And then, Mark, maybe just a little bit on your outlook for the overall market. It seems like you're a little more cautious with excluding the nonselective herbicides, it's now you're looking for a flat market. Is that primarily price-driven or volume?

Yes. I think I'll just explain why we feel the nonselectives are driving the overall market. I think it's going to be a combination, depending on region of price and volume. I don't think there's any one that I would say it's all volume or oil price. I mean we do see growth in North America and Europe and the Middle East and Africa. So those markets will continue. That will be a combination of price and volume. Latin America, we're talking about a down market. We see that mainly driven as price. Volume is pretty good. As I said, we expect an acreage increase as we go through this year into the next season in Brazil. So volumes will be good. It's mainly price that we see from an overall perspective in Latin America. And then Asia is down low single digits. Again, more likely to be priced than it is volume. Although India, as we've talked about, we have higher channel inventories. We know the market has higher channel inventories there may be some volume impacts in places like India as well.

Our next question comes from Richard Garchitorena from Wells Fargo.

Just wanted to ask about the Plant Health business. It looks like it grew 30% in the EMEA, 10% LatAm, Oh God, only 8% organically. So you talked about North America sort of what you're seeing there and sort of how that should play out through the rest of the year given your overall expectations for growth, 20% overall.

Yes. Listen, the Plant Health Segment has its ups and downs just like any of the other segments in the Crop Protection. So it's not unusual to see similar trends across the regions. North America is a market that we expect the business to grow rapidly. We have a number of new products that we're introducing, some of them pretty sophisticated formulations of synthetics as well as biologicals to aid the grower to give them new tools. Brazil is already a big market for us and continues to grow. I think in Europe, we're getting some more traction in terms of not just the biological piece, but the nutrition piece as well. So we have a very full range of micronutrients that we sell around the world. Europe is a key market for that. And then I would say the next piece is Asia. Asia is very fragmented in terms of each country has its own requirements. We're making very good progress in places like Korea. We're now targeting India as another market that we feel we should be selling more of these products into. So when I talk about the biologicals growing pretty close to 30% and plant health overall growing at 20-plus percent is really coming from pretty much every region in the world, but with a very different mix.

Great. And just a follow-up in terms of new product sales. North America saw a big uptick in the first quarter at 29% versus 19% in the fourth. So is it fair to say, as you move through the year, that's going to continue to add cumulatively. So how big could it get by the time you get to the fourth quarter, that's definitely going to be helping margins as well, I would assume.

Yes. I mean when you think of the new product introductions on a full year basis, this year, we're targeting something like $120 million of sales within this year. So if you look at the first quarter, it's pretty much on a little bit lower because it's more second half weighted in terms of North America and Latin America, getting ready for the next season. So you launch initially at this part of the season, and then you gain the full benefit as you go through the year. So you should expect to see that build. But the overall number of $120 million is what we launched this year, the overall number of just north of $800 million is building nicely as we go through the year. We're getting traction across all those products that we've launched in the last 5 years.

We have our next question. And it comes from Josh Spector from UBS.

Two questions on the volume side. I guess when you think about Latin America and the volume shortfalls in the first half because of the drought conditions, I guess, what gives you confidence that inventory levels aren't at risk to the back half or into next year? And kind of similarly on the diamides, where you talk about some partner channel destocking. What's the visibility that, that doesn't bleed into the second half as well?

Yes. I think on the channel inventories, we'll see how we go through the second quarter. The markets are moving. You know what, if the market doesn't change much, yes, there will be some channel inventory hangover as we go into the next season. That occasionally happens. As the weather patterns improve as we go through the second quarter, we should be eating away at some of that inventory. So we'll see where the market gets to. Our expectation, as we're forecasting is for a more normal season as we enter Q4 and Q1 into next year in Latin America. On the diamides, what we're telling you in our guidance now is that the partners that are reducing inventories, that's not just an event now that continues through the rest of the year. So that's already built into our forward-looking guidance.

Our next question comes from Aleksey Yefremov from KeyCorp.

On India inventory adjustment, Mark, is there -- could you just describe the progress that has happened so far and how much longer this could take?

Yes, sure. So we talked about it for a couple of quarters now. We had 2 to 3 years of very different monsoon patterns in the north and south. Last year, we had significant rice acreage reduction. So those are the catalysts for having higher inventories. We're going to work through that this year and probably into early next year. Given where the 2 seasons are in India, different types of products are sold on different crops. So once you get through 1 part, you've got to wait until the next season. It's not as if it's continuous. So in India, really, it's -- it's a case of work it down this year into early next year and then continue on our path of growth in India. Still a very, very important market for us. New product launches are carrying, good portfolio there. And obviously, inputs are needed to improve the productivity of the Indian growers.

And just because Asia was the largest drag on sales this quarter, you also mentioned dry conditions in Australia and they come as a first bullet in your Asia comments. Was this a larger negative than India? And do you have any broader comments about Asia, whether this will continue to be sort of the most negative region for you this year?

Yes. I mean Australia was -- the impact was bigger than what we're doing in India, obviously. A country like Australia, people often don't think about as being terribly important in terms of the overall portfolio. But within 1 quarter, it can be because you're starting the season. So when you have a weather delay, that can impact a region, and you saw that in terms of what happened in Asia. Now the expectation in Asia is that we'll get past that. And once we get into the other markets like ASEAN, parts of China, Pakistan is growing nicely for us. Those countries will pick up the slack. So I wouldn't expect those numbers to be replicated as we go through this year. Australia was a key driver. Obviously, we didn't know about it when we gave our last forecast and it really is weather-related. It's not anything to do with the performance of the portfolio.

Our next question comes from Adam Samuelson from Goldman Sachs.

Question, and this might be for Andrew. Just as we think about cash flow and specifically kind of the cadence of working capital through the year, I mean, I appreciate there's inflation on the sales line. So this would normally build and there is normal seasonality, but it does seem like a slightly bigger than average or higher than normal step-up in receivables through in the first quarter. Can you just help us think about the cadence of working capital and cash flow and just how you're thinking about how tightly you're managing that to the -- in the current environment?

Sure, glad to. Look, I think for us, seasonally, Q1 is always profoundly negative free cash flow. Both from the timing of sales and where we're growing in the world geographically. But also -- and I don't forget we've taken very substantial prepayments from customers in North America in the fourth quarter. So we're shipping a lot of product in Q1 that's essentially already been collected. So the size of this year the negative free cash flow of 915, up about $250 million versus the prior year. That just reflects the size of the growth of the business. I mean, we grew the business over $800 million last year. The amount of price and cost inflation that's flowing through receivables and inventory in particular to support that. Quite honestly, the $900 million, roughly $900 million negative free cash flow that we turned in this quarter was actually slightly better than our internal forecast. So we were pleased with that. Some good discipline around collections and actually in terms of what was expected to be collected in the quarter. We actually performed slightly better than what we were forecasting at the beginning of the quarter. The really big driver year-on-year are receivables and inventory. And that really -- again, it's the flow-through of inflation through working capital. So I think the pattern of our working capital and our cash flow for this year is very similar to what you've seen in the last 4 years, strongly negative in Q1, will be modestly positive in Q2, and then you see significant positive cash flows in Q3 and Q4. On a cumulative free cash flow basis, we don't turn cash flow positive until some point in the third quarter. This also impacts our cash deployment that we tend to do. If we're going to do share repurchases, it tends to be back half weighted because it's more in line of when we are generating positive free cash flow. So I would just say, in summary, we were -- we are actually pleased with our free cash flow performance in the first quarter. We recognize it's a big number, but that's just the realities of the seasonality of our working capital, again, was slightly better than what we were anticipating and we expect a normal pattern as we go through the rest of the year.

All right. That's helpful color. And then just on the cost side, appreciate the SG&A control and some of the -- sometimes quarter-to-quarter timing differences that you can have on some of the spending. But how should we think about kind of a range of outcomes in terms of year-on-year spending growth in R&D, year-on-year growth in SG&A and just what would get you towards the -- just help us -- and kind of what that can be for the balance of the year?

Yes. We can give you some rough thoughts here because it's very easy to be falsely precise with a 9-month outlook here. I think our general expectation is SG&A is probably growing in line with sales for the full year. We could adjust that depending on market conditions, and we have some ability to both from timing of spend and choices when we make some investments, we could slow that down in a given period. But I think assuming that SG&A growth generally in line with sales growth this year is not a bad assumption. R&D, I would expect to grow substantially above the growth of sales this year. We are investing very heavily in our new product pipeline and the continued development of differentiated formulations. And we do have a step-up this year in the acquired Fairmont business where we are investing a nontrivial amount of incremental R&D versus what we had in 2022 results and continue to drive forward the Fairmont product line to start bring products to market here shortly. So something north of the sales growth level for R&D growth would be what I would expect.

Well, our next question comes from Joel Jackson from BMO.

Could you maybe elaborate a little bit on what products or types of products would likely or see more stickier pricing than others?

Yes, Joel. I mean, I think when I look at the portfolio, we have a lot of what we call differentiated products across the portfolio, especially from that NPI metric that I talked about. So if you think about the more recent formulations, the more recent active ingredients we've put in place, they're all bringing new modes of action on new ways of removing pests that are highly advantageous to the growers. So it's like a lot of different industries. The more specialty nature you have the more opportunity for differentiation, therefore, you've got more opportunity to hold price. And we see pretty much a large chunk of our portfolio have those sort of characteristics. I would say certainly on the insecticides, almost all on the fungicides because they're all new business for us. And then on the new formulations for the pre-emergent herbicides as an example, in North America, and then other areas of herbicides, whether they're specialty herbicides on cereals. Those are the types of areas where we see us holding price.

And then just on your Slide 9, you give your drivers for upside EBITDA guidance range drivers. Better anticipated mix, which is a general statement, but maybe you can give 1 or 2 most likely examples where you could get better than anticipated mix to hit the upside?

Yes. I mean, certainly, the way we tried to structure this for people was to say, look, we're seeing a couple of things on the upside here around better mix as we improve the portfolio, the mix is improving. One thing you really don't see that now because just of the sheer magnitude of inflation that we've had going across the portfolio. Once that starts to receive, the mix element will become more apparent. And Andrew and I have been very focused on that as we think about driving the portfolio. The market share gains are very important. And those market share gains are happening not just in the U.S. although we've been talking about that, our activities around new insecticides, new fungicides, especially for corn and soy in the U.S. Certainly in Brazil on market access around soy and corn where we've definitely improved our market share over the last few years and are bringing even more products to improve that. I think in Asia, the ASEAN countries, so thinking here of Indonesia, the Philippines, Thailand, where there is a lot of rice and a lot of specialty crops, again, putting investments in to gain share. I would say those are the 2 areas on the upside. For the midpoint, we're getting our mid-single-digit price increases. That's going really well. The cost headwinds we are seeing decelerate pretty much at the rate we thought it would, as I said, going to be very positive in Q3. We're not really seeing any supply chain disruptions now. Things are -- I wouldn't say back to normal because I hesitate to do that. But certainly, what we do see, we're managing very easily compared to where we were certainly 1 year or 18 months ago. And then on the downside, I think the only thing we highlighted here was we're expecting a lower market growth than we were before, and that's probably on the downside. The positive thing here is we raised the lower end of the guidance, frankly, we're not seeing all these other elements. We're not seeing price momentum slowing. We're not seeing a product mix deteriorate. Input costs are not returning to an inflationary environment for us. So you can see how we're thinking about the world. The world is from a midpoint up is looking pretty good.

The last question comes from Mike Harrison from Seaport Research Partners.

In terms of EMEA, you mentioned the herbicides volume weakness there. Can we get a little more color on what you're seeing? And maybe help us understand if this has more to do with growing conditions or planted acres? Or maybe has something to do with competitive dynamics?

Yes, Mike, I think the way I would describe it is, cereals market, core countries in Europe, so France, Germany, Northern Europe, U.K., growers and distribution, in particular, really taking notice of their working capital in this area. Cereals spot prices in Europe are lower than other parts of the world. I think it's just a prudent approach from the chain, the value chain in Europe on cereals right now. They will be using products. The question is how much do they replenish their inventory as we go through the rest of the season. So it's more of an industry dynamic than it is a peculiar FMC dynamic at this point.

All right. And then in terms of the registration losses and the impact of the Russia exit? Are we lapping some of those headwinds in EMEA, I guess, during Q2 and as we get into the second half of the year?

Yes, you will lap Russia now Q2. So that won't be a factor we'll be talking about anymore. We will still have registration losses in Europe. I think this year, we're talking about just north of 1%, something like that in terms of revenue. So it's a pretty -- what I would call a normal number. Europe does tend to be the area where we have more of these given the regulatory regime that's in Europe, but nothing out of the ordinary for the rest of the year, I would say. So as we wrap up here, I'd just like to make 1 comment. The questions have been very good. I mean, ranging from everything in the P&L to the balance sheet. I think you can hear from the term that we're talking about in terms of the second half of the year we're feeling very good about the second half of the year. We have very, very good insight into where our cost structure is and the ability to manage our costs from an SG&A and R&D perspective as we go through the year. I think the growth on NPI is very exciting for a company like FMC. When you're having $800-plus million of your revenue coming from products launched in the last 5 years, and $120 million of products launched within the year. That tells you that the R&D and the innovation machine and the marketing machine is working very well together. That is a confidence booster for us in terms of how we think about new volume for the rest of the year. Thank you.

And that's all the time that we have for the call today. Thank you, and have a good day.

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