FMC Corporation (FMC) Earnings Call Transcript & Summary

Since Andrew is ready, everyone, we'll kick off next with FMC. Okay. Let's move on to our next presentation here. It's going to be a fireside chat with FMC, of course, a large global producer and distributor of crop protection chemicals. Our discussion today will be with Andrew Sandifer, who's CFO and Executive VP. We also have Michael Wherley, the Director of Investor Relations on the line as well, in case you actually have some questions as well. So Andrew, welcome to the virtual BMO conference. Everyone, please enter your questions in the Q&A box. We've got some more last presentation. People are starting to -- they're waking up here. Great. Let's get some more interaction, please. So maybe Andrew, we could start off just a bit of a view of the world. So maybe talk about how you see the markets in your 4 different regions, the strengths and weaknesses and what's really driving kind of the puts and takes this year.

Sure. Yes. Look, it's an uncertain world with all the wonderful impacts of the COVID crisis around the world. But I'd say the fundamental outlook that we have is that agriculture is still both as an essential industry and just a necessity to the world. Fundamental demand in agriculture for crop protection chemicals remains strong. What we are seeing and what's sort of impacting our outlook on the market in different places is largely the impact of FX with a strong -- with the significant increase in the U.S. dollar, particularly from mid-February through the end of April. And then also some pockets of impacts in different parts of the world. So let me walk you around the regions and talk a little bit about what's going on in each region and particularly where there's some uncertainties or other impacts from COVID in addition to general market conditions. So let's start with Asia. I think, Asia, we have previously expected to see the market grow in the low single-digit range. We're now expecting on a U.S. dollar basis to see the crop protection market in Asia actually down slightly year-on-year. That's largely an FX impact, but there was some small demand destruction in China, in particular, in the first quarter around the disruptions from COVID. So in China, in particular, in Q1, as everybody knows, there were a lot of shutdowns, lot of lockdowns. We were able to continue production. We never shut down our manufacturing sites, but there were some challenges in being able to move product around the country that -- as with many governments, as the mitigations around COVID became more established, protocols were made that allowed more free movement of agricultural inputs and things did ease and we are seeing much more normal operation now. But unfortunately, Q1, there's a significant use of herbicides in rice planting, that is -- that's the time of the season that you use those products. So there may be some bit of demand around particularly rice herbicides. A huge business for us, but it's not 0 that may not be recovered in the year. When we think about the other crops that we participate in, in China, particularly fruits and vegetables, they're doing quite well. And just in terms of our condition in the market, a little bit of excess inventory in the channels, just as things have backed up a little bit with the lockdowns and the constraints in logistics in China. The other 2 big markets I'll point to in Asia, just talk a little bit about are India. And India is our third-largest country globally. It's a huge market for us. It's also a place where we have significant manufacturing. India has been getting more organized around their corona mitigations. It was a bit chaotic at first, but we're getting to a much better rhythm now in terms of availability of manufacturing labor and keeping product logistics flowing. Inventory levels are healthy in the market. There's good demand, but there is definitely some volatility in India. Final place I'll point to in Asia is -- it's nice this year to actually be able to say nice things about Australia after several years of drought and wildfires and all other kinds of natural disasters. Australian market is doing great. They would love more rain, but they've had some rain, and it really is we're starting to see inventories come down, and it's really getting to be a much healthier market there. So all in all, again, Asia, we think the market is going to be down slightly. I will say blanket statement we expect to grow across all regions this year on an organic and after-FX basis, but the market itself, I think, will contract a little bit. Moving to Europe. Europe is actually doing a little better than what we had initially started the year thinking, particularly driven by good economics and growth in Eastern Europe in cereals and, to a lesser degree, corn. Europe went through a Q1 of fair amount of disruption with the various COVID mitigations there. As the EU particularly got a little more coordinated and the creation of the Green Lane, the fast-track shipping and border-crossing protocols for agricultural inputs and agricultural supply, things have actually gone quite well. Italy, not a huge market for us, but a decent-size market and has -- we do have some manufacturing there. We continued operating throughout the entire lockdown, never shut down, continued, and had very good business in Q1 and continue to expect to have good business throughout the year. We've got a couple of new products, the second year in the market for a couple of key new herbicide products for cereals. It's a market where we're underrepresented, and it's a big market in Europe. So we're seeing some good growth there. The diamide is doing very well in Europe. I think the big story in us for Europe right now is growth in Russia, Ukraine, Eastern Europe, places that we've historically been underrepresented. So some good opportunities there. From an overall health of the market after -- with COVID, et cetera, again, I think the logistics are normalizing. I think we've had better weather, some mix of rainy and dry periods, particularly in Northern Europe, but better than the last 2 years. There is a little bit of excess -- some excess inventory, channel inventory in Northern Europe, in particular, where fungicides are pretty backed up. We are underrepresented in fungicide. We're trying to grow that business. But not a huge issue for us, but for the market, it's a little more of a challenge. But it's been a good situation. Again, I think our overall feeling on Europe is that it's going to be a healthy, still low single digits, but in the higher end of low single digits kind of growth market for us -- for the market. Everybody's favorite market, Latin America, or one of their favorite markets. We've downgraded our outlook for Latin America, the market significantly and it's really driven by FX. So underlying demand and volume level is still very strong, but we've seen some substantial devaluation in the BRL and other related currencies. The COVID impacts in Latin America are still evolving. With Brazil, there have been a hodgepodge of different restrictions, but hasn't really impacted our operations, our agricultural operations. We're still continuing to see very strong growth in soybean, particularly in the south part of Brazil. We're leveraging the very strong access we have with cotton, coffee and sugarcane producers in the north to get access to other crops as well. And certainly, sugarcane is one -- it's an interesting crop to talk a little bit about. That's a key position for FMC. We're the market leader in sugarcane in Brazil. And despite low sugar prices, the sugar mills and sugarcane plantations have continued to replant crop. And with that replanting, you're seeing a very strong demand for premium herbicides and insecticides and which particularly where we're strong in the market because it has a very yield-benefiting impact, not just their systemic impact on the plant, not beyond just protecting against weeds and bugs that have helped increase the yield. So the economics of increasing yield really offset any pressures from lower commodity price to want to trade down on any kind of chemistry. Would be remiss if I didn't talk about the 2 other big countries in Latin America because everybody gets -- Brazil gets all the focus. And certainly, it should get a lot of focus, but we're seeing very strong growth in Argentina, really driven by soybean and particularly herbicide products for soybean. And seeing very solid growth in Mexico with fruit and vegetable. So the overall market conditions, underlying conditions, underlying volume demand very strong. It's really a story of FX impacts in Latin America. And then finally, North America, lots of focus on North America. Certainly, North America is important for us. But given our geographic balance and North America is less than 1/4 of our total global business, we are much more heavily participating in specialty crops. We did play a bit in soy and corn, but at a much smaller scale than most of our peer companies. But we've got a pretty good -- our sense for the market in North America, it's a low single digits market. We'll grow a little faster than that, yes. But it's really driven -- the market is being driven by increased acres for real crops. And then let's not forget Canada, where we've had 2 success -- 2 years of dry conditions that appear to be resolving this year. Planting progress has been good, much faster and much further along than what we've seen in the prior years. Channel inventories are recovering. We'd like to think -- we think about our business in North -- in the U.S. particularly in 2 different parts, sort of the Heartland, the Midwest, the corn/soybean belt. That area, there's still a little bit higher channel inventory than we might like that's continued to improve for our products is we've actually throttled back sales of some of the older formulations of pre-emergent herbicides that we have in the market. And really, that allowed us to just sort of flow through. And we focused all our real push this year on some of the more new formulations. And when you're outside the Heartland, where you're affectionately the Horseshoe, which is more specialty crops, whether it's fruits, vegetables, tobacco, other kinds of products out there, all of those, we're quite comfortable with inventory positions there and continue to do good business. So net-net, it's still -- it's a flattish market globally. We're still anticipating 8% organic growth across the world, evenly split between volume and pricing. So we think it's going to be another good year of well-above market level growth for FMC.

Okay. So we have a question -- thank you for that. Good start to this. So we have a good question now an investor has submitted. So what are the FX, I guess, change -- what are the FX assumptions embedded into your guidance for this year? And how are the mitigation steps that you have taken in Brazil, how are they working?

Yes. So FX -- look, FX is a significant headwind for us in the year. We've continued to do the same systematic hedging that we've done for years in Brazil and around the world. No hedging program can offset all of the movements in currency, particularly when they're rapid, very rapid and very pronounced movements like we've seen. I do think people should think carefully. FX for us, BRL is certainly a significant part of the story, but it's only roughly half of what we are dealing with in terms of currency headwinds. The U.S. dollar has strengthened, broadly speaking, against European currencies as well as Asian currencies that are important to us. I've said it before. I'll say it again. The most important lever that we have in dealing with FX is price. And certainly, for BRL, which is more than half of the headwind, it's a market where customers are used to regular changes in price lists due to changes in FX rates. And it's -- the magnitude, we don't break it down by region, but the overall headwind we're looking at is about $220 million in revenue, $170 million in EBITDA for the full year. Yes, it's a pretty big headwind to go against. But we're also dealing in an environment where we have relatively modest cost headwinds as opposed to the prior couple of years. Pricing to recoup FX is easier than pricing to recoup costs. Because particularly in markets like Brazil, the markets are used to local currency price is changing with exchange rates. So for over half of what we're facing, it's a rather mechanical normal process to work through just sort of renegotiating prices and moving prices with customers. When we get into Europe and Asia, it's a little more nuanced. In Asia, we're actually taking a little bit of a stepwise approach in Q2, not moving immediately to raise prices because of not wanting to appear to be adding on to COVID-related disruption and misery in different countries in Asia. But we do intend to raise prices in the second half. And similarly, in Europe. The net-net story is, in Q2, we have a pretty negative price FX comparison. But as you get through the full year, on EBITDA, we'd expect to cover about 95% of that FX headwind, and that's all through price movement. So it's not a small price increase. We're talking about $160 million in price increases. But to put it in perspective, the year before, we did almost $140 million in price increases, and that was largely driven by raw material costs with the escalation of active ingredient costs in particular, which is a bit more challenging conversation to have with customers, as opposed to saying, "Hey, BRL moved from BRL 4.10 to BRL 5.60, our BRL price list is changing." It is a much simpler discussion to have related to FX movement.

That's another question I wanted to ask was, yes, your guidance implies a large price increase in the second half of the year. What really gives you the confidence you can do that?

The fact that we've done it time and time again, the combination of the way we structure our sales and the sequencing and negotiation and just -- the reality is that all of -- the BRL has basically weakened against the basket of currencies around the world that are competitively important to us. We're not at some unique disadvantage versus our competitors in terms of the FX impacts in Brazil. So I think we have a very good sort of processing machine, if you will, in Brazil, with our commercial organization, to continuously move price. I think what we're seeing is the Brazilian growing seasons are sort of off-cycle from ours because it's in Southern Hemisphere. And we're coming to the end of the 2019/2020 growing season. This is the hardest time of year to move price because you're sort of just wrapping things up. As we're starting negotiations now and particularly as we get late in Q2 and into Q3, really, the pricing negotiations with customers for the next growing season, the reset in price list relative to the move in the BRL is expected. So it's not to say it's a slam dunk, but we've done this for many years in a row, we've seen significant FX movements. And I think that moving quickly on the price list is the biggest lever we've got.

Tremendous performance with Rynaxypyr and Cyazypyr since you acquired those assets a few years ago. Talk about maybe are you still being able to get a bit of growth there in Eastern Europe, underserved market for those products? How much more runway do you have to really grow Rynaxypyr and Cyazypyr at above market? Or are we ending the end of that? Are we -- sorry, are we nearing the end of that?

We're nowhere close to the end of that. When we look at our longest-range strategic planning, we see the diamide, the family of Rynaxypyr and Cyazypyr products growing at a compound annual growth rate in the mid-single digits through 2030, right? So we're not even talking mid-decade. We're talking to the end of the decade and stronger than that in the first half of the decade. We grew the diamide in the low double digits, almost mid-teens last year. We're going to do low double digits again this year. This is sort of what's baked into our forecast. It really is a case of -- it's a combination of factors. Diamides are very high-performing products, they're more focused. They provide very long-acting control, have very limited impact on nontarget species. Particularly, they are very safe with pollinators, which, as everybody knows, is a particular concern with insecticide. So it really is a superior product. We had a great run with expanding the penetration of the products by taking them to different customers that were FMC customers, not DuPont customers, broadening that market access, and then by broadening the number of application the products are registered for. We've been continuing to grow that set of registrations pretty extensively. Mark mentioned last week, this year, we're expecting to get about 300 new registrations around the world for product, and 90 of those just for this year are for the diamide. So there's a tremendous amount of continued opportunity to increase penetration by broadening not only the amount used in existing crops, but also broadening the crops that they're used on. Yes. Other pieces that fit in with that, the diamides are largely sold as stand-alones right now. We are starting -- introducing new formulated products that combine the diamide with other products. We just got EPA approval in the U.S. for a combination, a mixture of Rynaxypyr and bifenthrin under the tradename Elevest. Elevest is -- it will be coming out in the market in the U.S. late this season and then more significantly next year. And it's a product that we plan to take around the globe. And what it really lets you do is it takes that long-lasting control of Rynaxypyr along and lets you couple that with the quick action of bifenthrin. So you get the immediate kill that's often very invaluable to customers to feel like when they've applied that something is having an impact. And then you get that sustained control that Rynaxypyr can provide. So that's just one example of a significant amount of growth that we think is out there for doing things with formulation around the diamide. And certainly, FMC's history prior to acquiring the diamides and other products from DuPont at the end of '17 is really around that use of formulation technology with active ingredients to expand their efficacy and to make them more value -- create more value and use for growers in an application. So lots of levers to continue pulling to drive the growth of the diamide.

And let's talk about this decade. And I have a question coming in as well from an investor and I was going to ask you next as well is, the manufacturing and composition patents expire on those products across -- in over a decade? You talked about going out and licensing -- signing up manufacturing distribution arrangements, doing licenses. When do those start? What progress have you made? How many competitors are you signing up to these? Maybe talk about that process.

Yes. Sure. So just very quickly to ground everybody, we have over 1,000 patents on the diamide. 600 of them deal with the manufacturing processes for the diamide and the precursor molecules that are needed to make them. These are 15- and 16-step processes. A number of those intermediate stages create material that have no other commercial use than to continue to be used to make -- to drive on to either Rynaxypyr or Cyazypyr. Those process patents start expiring at the end of '25, many going to '26, '27, some actually out to 2030. So quite still a long road where we have very strong patent protection on the products on the way they're made and just, again, not to belabor it, but it's important for everybody to understand, the composition of matter is one thing, the actual molecule. When you're registering an agricultural chemical, it's not just the composition of matter that matters. It's everything else that comes as byproducts along with the production process. So there's an impurity profile of other things that are present when you finish the manufacture of Rynaxypyr that end up still being included with the final product. To use the data that we have all of our registrations globally based on, you have to have the same impurity profile, which means you have to use our manufacturing process. There's no way to duplicate it. We've tried. Others have tried. You cannot mirror that impurity profile without using our process. So anyone who try to register Rynaxypyr, Cyazypyr using our data would not be able to do so unless they were using our manufacturing process, which we're not licensing. So what we're doing instead is we're entering into long-term agreements now that -- and you have us producing the active ingredient and selling either active ingredient or formulated products to partners, which then they can take to the market and help us expand the application. I mean, look, we're growing the diamide fast, but there's a lot more places diamides can be used than we can physically touch, right? We can't take it to all parts of the market on our own quickly. So what we end up doing is selling at a very reasonable price the active ingredient, allows a decent markup for our partners. And because we have no SG&A and very little formulating costs, no promotional cost, none of that with it, we end up with EBITDA margins that are about the same, whether we do a sale of our own product or sale through a third party. So it's a very economically attractive model for us. For our partners, they don't have to make the substantial capital investment to try to build the 16-step process. And as I mentioned, including many intermediates that have no other use other than making Rynaxypyr. So trying to get the scale on that is hundreds of millions of dollars of capital that you'd have to tie up. And at a manufacturing scale, it will be dwarfed by what we produce. So our goal is to sign up people. We can sign in -- there are 10-year or longer supply agreements, so we're sole supply of those materials well beyond the patent expiration, allows us to continue growing scale and -- of the manufacturing assets, lets us concentrate on the production, lets others join us in taking those to market. At present, we have 4 global partnerships. I can't name names, but I think people can do the math in terms of who might -- big 4, large global partners. We have about 45 partnerships with local or regional -- adding scope with local or regional countries. We are selling under many of those arrangements already, and we'll continue to ramp up sales under the other arrangements through this year. We'll continue to give some updates, but it is becoming a more significant portion of the business. And I think, again, that strategy here is simply to -- it is a win-win for us and for our partner. They avoid all of the very significant, not only capital investment, but having to do all the work to register and create the data to go to, to try to introduce a new product, rather getting it from us from world-scale production economics and then doing their own work either around formulation or how they fit in them with other products to allow them to address pieces of the market that we might not be able to directly do.

So we have a question from Daniel who asks, what is your plan for developing biological solutions for crop protection?

Yes, that's a great question. Look, biologicals we have a plant health business. It's about -- growing to about $200 million this year, which includes our biologicals business as well as some micronutrients and other plant health-type products that we sell across the globe. We've been involved in this space for at least 10 years, including a number of small acquisitions in the earlier part of the last decade. We're continuing to do pretty extensive development. We have an ongoing partnership with Chr. Hansen, particularly on the manufacturing side for many of these products. So we continue to have some introductions there. The thing we like about biologicals, it's a good complement to synthetic chemistry, particularly in markets like Europe where regulatory restrictions are making it harder and harder to introduce new product. Biological products often are more targeted, tend to have less off-target impact, less collateral damage, if you will. And they are viewed differently by regulators and can be sometimes, depending on the country, a little faster to bring to market. So we have a very focused effort there. We're continuing to grow it. Small, but it's growing double digits. And certainly, we just suggest that more news to come, but that entire plant health platform right now, circa $200 million, so not necessarily material, but becoming more relevant. And particularly, as we think about managing product life cycle and managing new product registration, particularly in Europe, becoming an increasingly important source of new products.

That's helpful. Okay. Let's talk about you're starting to launch Fluindapyr soon. I think the ramp will be slow, but talk about what you expect from Fluindapyr next year or the year after. What are the key things you have to hit? How could the forecast be better? How could the [indiscernible]? [ How could it get ] worse? Maybe talk about that.

Sure. So Fluindapyr is a fungicide that we've been jointly developing with an Italian company called Isagro. So Isagro discovered the compound, didn't have the capability to fully develop it on their own. So earlier in the 20-teens, we partnered with them to further develop it and bring it to commercialization. We announced last week we're buying out their -- Isagro's remaining rights to molecule. So we now have -- we'll have full control globally of the molecule. It's very late-stage in development. We'll actually have our first introduction this fall in Paraguay. That's actually an Isagro formulation. They're going to be the first one to introduce. We'll bring it in to the U.S. on a very limited basis in the spring of '21 and then more substantially in '22. And then we'll move around the globe, but particularly Europe, 2023, Brazil in 2024. So Fluindapyr. Fluindapyr is a carboxamide fungicide. And that class of fungicide is one of the newest classes, so it has the least resistance built up out there. It works particularly well on a lot of plant diseases, but Asian soybean rust, in particular, which is one of big concern. So obviously, works in row crops like soy, but also works in specialty crops, and has actually some very interesting applications in turf. Turf not a huge market, but it's one where -- it's a nice specialty market that we like to play in. With the acquisition of the global -- the remainder of the global rights from Isagro and so now we control the whole molecule, we expect peak sales in the $350 million to $400 million. That will take 5, 6 years, at least to get up to that kind of trajectory. Again, we don't get Brazil registration until 2024, right? So it will take several years in Brazil to bring that up to maturity. And Brazil is certainly a very large market for this product. But it's going to -- we're very confident this is going to be a pretty successful molecule. It brings some very different performance. And fungicide, in particular, there's room always for new fungicides because of resistance issues. Resistance breeds very, very quickly with funguses. So being -- if we can put into rotation with other fungicides to prevent resistance from developing, I think there's going to be a good demand for Fluindapyr. In 2021 -- in 2020, it's a nonevent. Paraguay is a relatively small country, but it is our first commercial launch. In 2021, we might see tens of millions of dollars from this product line. But then, as we get later into the middle of the decade and beyond, and particularly as we get up to scale in Brazil and Argentina and in Europe, we'll see this thing ramp fairly quickly. And just to put it in perspective, $350 million to $400 million molecule would be our third or fourth-largest active ingredient in our portfolio, right? It will be a significant product launch for FMC. So we're really excited about Fluindapyr. We're really pleased with being able to get the remaining rights from our development partner. It's a good win-win deal. And the incremental economics are incredible. So it really helps us both from a faster and broader commercial adoption, but also just having sole control of the molecule from a strategic perspective also has significant value.

And best of different things going on in the broader market, maybe you can sort of talk about risk, opportunities and how you see them affecting your business or not. So shifting pesticide resistances, we've seen this in the last decade, more insect protection going to see technologies. We've seen a consolidation, of course, among your competitors. So maybe even some of these large now consolidated crop and seed, crop chems and seed conglomerates trying to maybe take the retail -- trying to take the retail out of the business and go more direct to grower. Different things like that, how do you see that playing in your business in the next 5 years?

Sure. Look, we are unapologetically a crop chemical company. We don't do seeds. We don't want to do seeds. We think there's a place, and we hear directly from customers around the world. There's a need and a desire for someone who comes in independently and says, here's what we think the best solution is for your particular problem, irrespective of whose seeds you're buying. I think that the overall trends of resistance, of shift in delivery form play well into our hands. We have high-performing products that have less resistance. They're newer. We're bringing new products to bear, a lot of new products in the pipeline, a number of new products, including some very exciting new herbicides that come here shortly after Fluindapyr that will help address resistance issues. So resistance creates great opportunities for us to continue to do formulation, continue to design products that help farmers manage around resistance, particularly to some of the older, very high-volume chemistries like glyphosate. The rise of the use of seed treatment, look, we sell a lot of material into seed treatment. It's nothing new. I think it's a great way of -- it's another wonderful way of delivering crop protection. We also have a number of other application technologies like our Thrive 3D technology that while not a seed treatment is a foam that's applied in furrow as you're planting seed at the same time the seed is being planted into the ground. So it gives the farmer operating efficiencies, also has some efficacy improvements and reduces the volumes of material that have to be used. But in all those cases, there are great opportunities there for continuing to deliver higher value to the grower, and from that, being able to capture the value. So we're very bullish on what the opportunities that seed treatment, that the rise of precision agriculture, a very similar discussion there, where we can tailor products that help growers create more value. Yes, this question about retail and the role of distribution in the U.S., in particular, and other places, I think, fundamentally, it comes down to this: we have competitors who play both in seeds and in chemicals. Historically, no one has been able to fully bundle seeds and chemicals because farmers resisted. And where it's been tried, it's been undone. Syngenta bundled them together several years ago, they now sell them entirely independently. Corteva just announced yesterday that they're doing some direct-to-retail brand instead of not -- instead of relying as heavily on -- pioneer only direct to farm. So I think there's a lot of pushes and takes there. I don't see fundamentally a restructuring of the distribution chain in the U.S. I think it's too entrenched. I think there's too much value to the farmer from the advice of services provided. So we don't see that as a threat. And fundamentally, we don't see -- again, we don't see the need to be in seeds nor do we see a disadvantage to some of our competitors having both seeds and chemicals because, just practically speaking, the bundle has never worked

Just about a minute left. One of the #1 questions for investors the last couple of years, but especially now this year and next year is free cash flow conversion. Do you think FMC can get to 70% free cash flow conversion next year? What are the key levers or headwinds to get there?

Yes. So look, free cash flow for FMC has been an evolution and will continue to be an evolution. We use free cash flow conversion as a way of marking our progress. It's not the means to the end, right? We set a goal to get north of 70% on free cash flow conversion. We think we can get there. 2021, we're probably in the mid-60s. Where we're guiding this year is in the 55% to 57% of free cash flow conversion. But let me also be very, very careful. When we talk about free cash flow, we are talking about the cash left to buy back stock, to pay dividends or to do small tuck-in M&A. It's after paying for all legacy items. It's after paying for all capital investment. It's after all of the things that flow through our P&L. It's after interest, it's after tax, it's after everything. So oftentimes, free cash flow definition, they're a bit fluid. And I would suggest that there are some imprecise comparisons that have been made in a number of quarters comparing our free cash flow with others. Key things that are going to drive free cash flow improvement in '20 and in '21, biggest thing in '21 is we will get past the investments we've been making to implement a 1 SAP system around the world following on years of portfolio movement and divestitures and acquisitions. About $125 million in spending that won't occur in 2021. That's the next big step. Supporting that also has a lot of work we're doing on improving working capital, much of which is enabled by new tools that come with the SAP system. So I would say 2021 in the mid-60s and then building from there as we continue to drive working capital efficiency. There will be some swings and some noise because of we've reconfigured some capital projects that's shifting some spending from this year into next year. So there are always some things that move across periods. But if you think about that trend, we'll see an upper turn on cash conversion. And more importantly, think about the dollars of free cash flow that are generated. We're going to be driving at the midpoint of guidance, almost $500 million, $475 million in free cash flow. We got $300 million last year. And on a recast basis, $130 million the year before. We're going to drive -- continue driving that dollar amount of free cash flow up. And I think important for people to also understand, I know we're out of time, but very quickly, when we have excess cash, we give it back to shareholders. And since we launched our strategic plan in fourth quarter of 2017 -- excuse me, 2018, we've returned almost $900 million to shareholders, $600 million in repurchases and almost $300 million in dividends. We paused repurchases for a short period now because of uncertainty around COVID, but they will be back. And I think we have a very strong track record of as we increase the cash flow and the borrowing capacity of the business, we will keep it at target leverage and return that excess cash to shareholders. So I apologize for running long, but I wanted to make sure [indiscernible] to that.

No. That's great. All right. Thank you, Andrew. Thanks, Mike. Have a great day, and see you.

Great.

Thanks, everybody.