FMC Corp.'s Earnings Trail, Profit Skids - Analyst Blog

Chemical maker FMC Corporation's FMC profit tumbled in first-quarter 2014 as harsh winter weather in North America hurt its core agriculture business and the company took higher charges in the quarter.

Consolidated profit, as reported, sagged roughly 50% year over year to $65.6 million or 49 cents per share in the reported quarter from $130.9 million or 94 cents a share a year ago.

Adjusted earnings from continuing operations for the quarter were 95 cents per share, missing the Zacks Consensus Estimate of 99 cents and trailing the year-ago adjusted earnings of $1.08 per share. Adjusted earnings exclude charges (totalling around $61 million) including costs associated with restructuring, business separation and acquisitions. The Pennsylvania-based company recorded charges of around $18 million a year ago.
 

Revenues rose roughly 3% year over year to $941.8 million in the reported quarter, but missed the Zacks Consensus Estimate of $991 million

Segment Results

Revenues from the Agricultural Solutions division dipped 6% year over year to $466.9 million in the quarter. Segment profit slid 26% to $120.1 million as bad weather delayed demand for pre-emergent products in North America while dry conditions led to depressed production of sugarcane in Brazil. Unfavourable currency swings also hurt margins for the division.

Health and Nutrition segment's sales moved up 18% to $226.2 million in the quarter. Segment profit increased 17% to $50.9 million on higher demand of colloidal microcrystalline cellulose and pharmaceutical binders and contributions of omega-3 products. FMC Corp. secured regulatory clearance for its new Seals Sands omega-3 production facility in the U.K. and started selling pharmaceutical grade omega-3 product lines.

Revenues from the Minerals unit rose 11% to $248.7 million. Profit climbed 27% year over year to $36.8 million. Gains were witnessed in Alkali Chemicals on increased Asian soda ash pricing and higher production volumes, offsetting the unfavourable impact of increased energy costs. Lithium manufacturing operations executed in sync with plan with increased production volumes meeting higher demand, particularly in energy storage applications.

Balance Sheet

Cash and cash equivalents at the end of the quarter were $92.5 million, up 12% year over year. Long-term debt fell around 6% year over year to $1,154 million.

Outlook

FMC Corp. backed its adjusted earnings forecast of $4.35 to $4.55 per share for 2014, representing a 15% year-over-year rise at midpoint of the range.

FMC Corp. expects news products and market access investments to drive results in its Agricultural Solutions segment in 2014. It forecasts full-year segment earnings to increase in mid-teens clip over 2013 driven by increased demand for herbicides in North America, higher production of sugarcane in Brazil and new product introductions.

For Health and Nutrition, earnings are anticipated to increase in mid-teens clip versus 2013, led by increased volumes for texture and stability solutions, omega-3 products, natural colors and binder product lines.

FMC Corp. expects earnings in the Minerals segment to increase in high-teens clip on the back of improved performance in Lithium operations and higher soda ash volumes and pricing compared with 2013.  

FMC Corp., in Mar 2014, announced its plans to split itself into two independent public companies. The move will allow the company to separate its growth businesses - Agricultural Solutions and Health and Nutrition – from the Minerals division, which is a more cyclical business.

The breakup will result in the creation of two distinct companies – “New FMC”, which will consist of the company's Agricultural Solutions and Health and Nutrition segments, and "FMC Minerals", which will comprise its Minerals division that includes Alkali Chemicals and the Lithium businesses.

FMC Corp. started initial preparations for the separation in the reported quarter and remains on track to close the separation in first-half 2015, following which, each company is expected to be listed on the NYSE.

FMC Corp. is a Zacks Rank #4 (Sell) stock.

Other chemical stocks worth considering include Compass Minerals International Inc. CMP, Celanese Corporation CE and The Dow Chemical Company DOW. While Compass Minerals holds a Zacks Rank #1 (Strong Buy), both Celanese and Dow carry a Zacks Rank #2 (Buy).