FMC Profit Plummets, Plans More Job Cuts on Brazil Volatility
FMC, which earlier in the month said it would slash jobs and reorganize due to heavy exposure to the volatile Brazilian market, reported its third-quarter Agricultural Solutions profit plummeted 49% from a year ago.
On Oct. 12, FMC announced that it would expand and accelerate the Cheminova integration, reorganize the company’s operations in Brazil, and increase cost savings targets to reduce enterprise-wide operating costs. Cost savings will be $140 million to $160 million, compared to the prior target of $90 million. FMC now expects total headcount reductions of 800 to 850 positions, an increase from the previous target of 500 to 550 positions. The majority of the actions to achieve these savings will be implemented within the next six months, it said.
Pierre Brondeau, FMC president, CEO and chairman said: “Our October 12 announcement set out the difficult market conditions our Agricultural Solutions business is facing, particularly in Brazil, which are reflected in our third-quarter results and our guidance for the remainder of the year. The actions we are taking will appropriately align Agricultural Solutions’ business model and cost base to these market conditions. We are pleased with the faster-than-expected progress integrating Cheminova with FMC. Our combined product portfolio has allowed us to focus on higher margin, proprietary differentiated products and to restructure our cost position to better reflect current market opportunities. The cost reduction actions we have initiated will allow us to deliver an additional $50 million to $70 million of savings in 2016, compared to what we will deliver in 2015.”
FMC said that a rapid devaluation of the Brazilian real, which depreciated over 50% versus the U.S. dollar in the past 12 months, and over 25% versus the U.S. dollar during the third quarter alone, will hurt its profit through the second half of 2015. “Customer-held inventory levels remain elevated, limiting FMC’s ability to increase prices quickly enough to fully offset the impact of these currency movements,” it said in an Oct. 12 statement.
The Philadelphia-based company posted revenue of $578 million, up 5% versus the prior-year quarter. Segment earnings were $59 million. On a pro forma basis, third-quarter segment revenue declined 32% compared to the same period in 2014, and segment earnings were 49% lower from a year ago, as price increases and ongoing cost reduction programs only partially offset the negative impact of foreign currency movements and reduced third-party sales.
Assuming the current foreign exchange rate for the Brazilian real remains stable through the end of 2015, full-year segment revenue is expected to be approximately $2.3 billion. Full-year segment earnings are expected to be in the range of $370 million to $390 million, with fourth-quarter segment earnings in the range of $110 million to $130 million.