FMC Corporation (FMC) Earnings Call Transcript & Summary

All right. So we're going to stay in the world of crop chems. And we have a fireside chat with FMC, of course, a large global producer and distributor of crop protection chemicals. We have Mark Douglas, CEO; and we have Andrew Sandifer, the CFO.

Let's start off with, guys, welcome to Farm to Market in person. Nice to see after a couple of years. Let's talk about the current year. Maybe you could just summarize what you're seeing in the current dynamic, how it's changed, what maybe you saw a few months ago and how you see the rest of the year playing out?

Yes. I mean listen, I think everybody in this conference knows the backdrop is positive for agriculture today. When you see what is happening with soft commodity prices, when you see what is happening with global food security or the Russian war, I think the backdrop is very positive. We said that back in our call February. Nothing's really changed in terms of how we view that. I think how the seasons develop will be important, whether you see is dry in North America right now, not too dry, but it's to be watched. Latin America, obviously finishing the season. Europe is great. I mean the -- apart from what's happening in Russia, Ukraine, but the rest of Europe looks very positive. Signs are that we'll get a good monsoon going through India this year. So I think generally speaking, anybody that's in the agricultural market does have a buoyant market to play with. That's how we see it today.

And okay. So talk about -- let's talk about the market a little bit. So what are crop protection inventories like in the channel, in different markets -- market dynamics in different markets? And how do you think your inventories compare to competitors?

Yes. I mean, listen, for us, inventories are where they should be right now. We had a very -- FMC had a very strong Q1, but we know some of that came from Q2 because people are just concerned about supply. Rightly so with what's happening in the chemical industry and the broader industry in general. I think inventories are in good shape. The only one we highlighted at our February call, which we're working through now, is parts of India. There was less rice acres given the seasonal weather, the monsoon in Q4. So we had more inventory as FMC, and I'm sure others did as well, but everywhere else is in pretty good shape.

So remember, you guys can -- everyone in the room here can submit questions on the app, and I can also -- maybe I'll poll for questions in the room later near the end. Okay. So this year, what are you seeing for application rates across the different crop chems products among the major row crops? It's a very strong ag backdrop obviously, and where are you not seeing any increases?

We're not seeing any increases anywhere. Everything is going well. I mean you're a grower. You've got inflation no matter whether it's seeds, fertilizers, crop chem, diesel. Whatever it is, your costs are up. But at the end of the day, your selling prices are up significantly as well. You'd have to look at something very odd to happen for soft commodities to come down, in our opinion, in the near term. In fact, if anything, soft commodities are going to stay where they are and there are potentials for increases. So I think, generally speaking, the application rates are going to be dictated by what does pest pressure look like. And I've often described crop protection chemicals as a bit like a fire extinguisher. Fertilizers are like an insurance policy. But when you've got bugs or fungus, if you don't deal with it, you're going to lose your crop. So it's a different dynamic for crop protection in the sense of there is an infestation, you have to deal with it. You have to have the products. Now generally speaking, you want the best products to deal with that. We're seeing that today. Our mix is very strong in terms of the technologies that are at the higher end of the scale that really deal with crops in a very efficient way.

I mean you had -- we've had dry weather in Brazil. We've got wet weather in the states. Is that -- I mean, what's on the ground going on right now [indiscernible] business?

Well, people -- the old hands, the agronomists will tell you the dry weather usually means that's good for pest infestation, so insects. Wet weather, warm weather is always good for fungus. So we'll see. It doesn't always play out like that because when we forecast, we try to forecast what we call an average year. It's almost impossible to do, but that's how we think about it.

Although as I think about last 10 years, it feels like the U.S. had lots of late springs, right? So is it almost a late spring is almost like a normal year? Does that make any sense what I'm saying?

Well, it depends. I mean, a late dry spring, which is kind of in the midwest right now, it's pretty dry. You've got to think that -- if that continues, that's a negative, but we'll see.

Okay. I think what drew -- what's drawn investors to FMC over the years is this algorithm, this prospect and continuation of this algorithm like EBITDA CAGR, right? So your midterm targets, right, you'll get 7%, 8%, 9% EBITDA growth every year. And that's deemed a very attractive exposure to ag for an investor. The last couple of years, there's been some ups and downs for different reasons. Can you elaborate on your ability to get back to that more predictable 7%, 8%, 9% EBITDA CAGR? What are the key drivers and risks to get there?

Yes. I mean we put our plan together back in 2018 after we acquired the DuPont assets, and we had really an algorithm that said 5% to 7% top line growth, 7% to 9% EBITDA growth and then EPS growing faster than EBITDA. We're generally on -- we're right the range for revenue. We're slightly below in terms of EBITDA, but we've had $1 billion of costs and FX that we didn't have in the plan. So I feel very good where the company is. I think this year, we're at 6% EBITDA growth. So we're right at the range. It's a very attractive algorithm. When you think of a company like us, $5.5 billion in revenue, $1.4 billion in EBITDA, we're in a $65 billion market. We're a research company. We're applying 6% to 7% of our revenue into that model for R&D. You should be growing your EBITDA faster. And we have been. So I think that model is very much intact. Just the headwinds have been enormous when you [ think of ] the costs and the FX that we've had to deal with. We would be way above the top end of our range if it hadn't been for that. So we like that model. The R&D piece drives the model, the new technologies that have to come to marketplace. We have $2 billion to $3 billion in terms of peak sales from the pipeline that we have today. Now with this industry, as many of you know, it's a long cycle from inception to commercialization for synthetic chemistry, it's about a 12-year cycle. Now for the investments in biologicals that we're making, that's a much shorter cycle, maybe 3 to 4 years. A lot less money but much fast return. So the R&D pipeline is really what drives a company like FMC for that algorithm.

Now what really helped you post the DuPont acquisition that you and Pierre were able to really execute on and the team was just really grow the diamides. And diamides growth rates now are obviously going to come down. They can't be as amazing as they were earlier on. And so what is a reasonable expectation right now for top and bottom line growth to diamides in the next couple of years?

Yes. I mean, listen, this is a class of insecticides that is the leading class. It operates -- we're about a $2 billion franchise in diamides today in a $16 billion insecticide market. It was about -- just over $1 billion when we bought it. It's now $2 billion. So we've doubled the business in the last 4 years, which is, as you said, an incredible growth rate. I think high single digits over the long haul is a good number to be at. We don't disclose profitability, but it is higher than the average of the rest of the portfolio. I would say when you think about it, there's a lot of older chemistries out there in insecticides. They are being removed by the regulatory regime. So products like the diamides that are much more sustainable have a different environmental footprint. They're the ones that are winning in marketplace. So it's not as if we're taking share from other chemistries that are very much like diamides. There are not many chemistries like the diamides. We're taking share from older chemistries. And what's more important, the growth rate is really in specialty crops, so fruit and vegetables, protecting almond trees in California. All those types of activities are where the diamides are gaining market share. That's what drives that sort of high single-digit growth rate.

Now obviously, you're going to see patterns start to roll off as the years come by and you've been -- and this is well known in the market, and you've been taking steps to try to mitigate that by signing different arrangements and agreements. And talk about how that's going to happen, what the timing is, how margins change? Does the pie grow and your share of the pie, therefore, maybe your sales will be similar? Talk about how that's all going to work.

Yes. It's a pretty complicated...

In your words, not mine.

It's a pretty complicated area. Out of our $2 billion of sales, we have about $700 million that are through partners. So whether they're global partners or regional or local partners, we're giving access to that technology ahead of patent expiration, but the deal is they will buy from us after patent expiration. So it's a win-win on both sides. Our partners get access to markets that we can't access for various reasons, whether they're formulating the product with another active ingredient that we don't have access to or they have a different geographic mix than we do. It's very complementary. So it's not cannibalistic in the sense of they're taking share from FMC. We're both growing the pond, so to speak. We expect that to continue. The patent estate is very robust. We have over 1,000 patents on the 2 main products. Composition of matter patents expire in the next couple of years. But then we have process patents and manufacturing patents that extend well into the end of this decade. So it's not like there is one patent. It's not pharmaceuticals. Your generics don't come -- it's not one product. We spent a lot of time and effort formulating these products into new formulations. For instance, in the U.S., we launched a product that is 12x more concentrated than the previous products on the marketplace. Great sustainability profile, using less water, you're carrying less product, it's much more efficient, fits well into a precision ag model, using less to get more. So that type of formulation capability, again, patented. So it has a long patent runway. We're changing the game. We're not selling what was sold 15 years ago. We're selling new products that are very different applications.

Okay. I want to get into some more mid- and long-term ideas, but I did get a question on the app. That's a little more interesting short-term or what we've seen the last -- so given the strong Q1 and your outlook that you reiterated, are you surprised about the stock reaction more recently versus peers? What do you think people are missing or misunderstood from the earnings call?

Yes. So great yes, I was surprised by the stock reaction. We had a very strong Q1. We maintained our EBITDA forecast for the year at $1.4 billion while absorbing an exit from Russia, which we felt was the right thing to do. We're still calculating the impact of that exit, but it's somewhere in the $20 million to $25 million of EBITDA. That's a de facto raise. I think the market completely missed that. We're managing through a very volatile environment. We all know that. That will change as we go through the rest of the year and into next year, that should change. But the way the company is performing, dealing with all the activities that are out there, very strong demand, pricing actions where we delivered 8% price in the quarter, roughly mid-single-digits for the full year to offset costs. I think the company is performing at a very high level. So we were surprised when we saw the stock go down. It's come back, not quite to the point that it was. But I think people are missing the fact that the company is performing at a high level. We have 26%, 27% EBITDA margins. There is nobody in the industry growing at 7% to 8% on the revenue line with those sort of EBITDA margins, despite the significant cost inflation that we've got. So I think the story will develop. I think our ability to continue to hit the numbers that we've said, I think that will play an important part in that stock appreciation because I think it was oversold.

Do you think you're a victim of your own past success? Which was you were the stock to own in my ag chems coverage. Like if you wanted to make money -- I'm debating if I'm going to say this more publicly. [ I said this many times on the phone to clients ]. If you wanted to make money in my space up until about the summer of 2020, you did one thing and one thing only in my entire coverage. Do you know you did? You went long FMC, you went short something else. I'm not going to say what that stock is. And that changed in the summer of 2020. And then fertilizer price, commodity price started taking off, and people got more interested in the commodity stocks and FMC hasn't been that as strong a stock since. Is that fair enough? Do you think you're a victim of your own product success in that you did do so well and now people are waiting for, well, what's next? Because I've seen you do this before, [ 79% ]. Now I want to see what's next. Do you think that you're -- that, that's -- yes.

Listen, it's a good point you're making. I do think that the company is robust in a way that many people don't see. Lots of companies have a hiccup. We had an issue in Q4 2020 that we had to deal with. We're well past that now. We've been hitting our numbers every quarter. The future and long-term growth algorithms are very much in place. If you want to be overexposed to corn and soy, you're not going invest in FMC because our big business is specialty crops, where we add tremendous value. So through the cycle, FMC has outperformed. All the way back to 2008, 2009, our business continued to perform. I think what also happened recently is the fact that with fertilizer prices moving so much, people are getting into ag expecting everything to move in the same way. It doesn't. It's a very different business from a crop protection standpoint. But if you look at our algorithm of growth, it's very much intact as we just talked about. But the fact that the pipeline is coming into life as well. That adds all that extra value. Don't link us to corn and soy because we're under-indexed in those areas. We're very much a fruit and vegetable specialty niche crop, which is constant. It's constantly growing. So that piece is what people should be focused.

Right, like maybe on a given day, FMC is not so sexy because you are very broadly diverse against crops and you're very broadly diverse against regions, and you're not an obvious play if natural gas goes at $30 or there are sanctions against this country or that. But over the cycle, if you want -- if you think we're in an ag cycle and you don't want to, with the price of potash ureas tomorrow and in 2 years, you are the place you go when you are maybe safer, high-quality ag exposure, right?

And I think you've seen that before.

Right. We've seen it before. Right.

But you're now seeing it again in the sense of the way the company is performing. Listen, at some point, soft commodity prices are going to change. When corn was at $3 and soybeans was at $7, we were performing at the same high level we are today. That's an import facet of the company. It's different to some of the other companies that are out there.

Okay. So why don't we -- maybe just one more thing on shorter-term stuff, the inflation. The different costs and FXs you've seen. Maybe just talk a bit more about your abilities to mitigate those impacts through price coverage.

Yes, I'll talk about some of the activities and Andrew, please chip in on cost side. Like everybody, we've seen cost inflation. We've been battling this for the last couple of years. We've been very vocal in the sense of we see this continuing through the rest of the year. We do believe that '23 is going to be a different year. At some point, China is going to change the COVID impacts, the way they're doing the lockdowns. Things will change, things will free up. It's not necessarily just the cost of what is what you're procuring. It's the availability. And I think a lot of people are starting to understand that, as a grower, you need products to protect your crops. If you can't get them, that's a serious issue. You might have to pay more to get them. But from our standpoint, securing that supply, whether it's from our own facilities or somebody else's, once those facilities go into a lockdown, you have to deal with it, and that's the inflated part that you're dealing with. That will change. We're already seen packaging becoming much more available in places like Latin America. That wasn't the case at the beginning the year. Road freight in the U.S. is freeing up. We're seeing much better road freight rates in the U.S. and much better availability. We expect maritime to change as we go through this year. All those things will start to free up and create a better backdrop for a company like FMC. It's not going to stay like this forever. It will look different. But we've been managing very well through this environment. We're just waiting for this turn to occur and when it does, we'll be in a better shape. Andrew, do you want to talk about the cost side?

Yes. I think Mark said on a couple of very, very important points, particularly this -- really this cost of disruption. It's not just like-for-like unit cost differences. It's not straight inflation. It's the premium you pay for sourcing across multiple suppliers instead of focusing your purchases on a single supplier. It's having to use higher-cost modes of transit because of lack of availability of ocean freight, for example. So as disruption eases -- I'm not even going to ask for normalizing because I'm not exactly sure what normalizing is anymore. But as this level of disruption eases, as supply chains rebalance, that becomes a tailwind for FMC. And it's a tailwind, it's not an observable index, then all of a sudden, you go, wait a second, why am I not getting price back? You're not because -- and yet the price very sticky because it's not that explicitly linked to those kind of cost inputs. So that cost of disruption should start to settle out. But right now, I think the expectations for this year, we've anchored on what we see and the visibility we have, particularly on raw materials, and we're pricing against it. So I just leave you with, Joel, the comment that -- reiterate Mark's comment. Our intent this year is to more than offset COGS increases with price. It likely will also in markets hit FX as well. And then use volume and mix, importantly mix, to help offset our investments in SG&A and R&D, particularly in funding the growth of new products and high-value contribution.

Okay. Let's get into some more midterm discussions, right? So what are the big gaps that exist in your portfolio now? And investing in that, how does that compare to share buybacks and any other priorities you have?

I'll let him talk about the share buybacks.

You were talking a lot.

But on the portfolio side, we're underweight fungicides as a company. So we're actively investing in R&D to grow the R&D pipeline for fungicides. We have 4 fungicides in our pipeline. They're a little longer term, but they are there. We're obviously doing other things in terms of looking at other people's technology and how access some of that. I would say the big piece that we're investing heavily in and really, it is an M&A focus for us is really the biological space. We have a plant health business that compromises (sic) [ comprises ] of biologicals and micronutrients and seed treatments. It's getting close to being a $300 million business now growing in the 20% range. This is a big demand that's coming from the marketplace. We've been selling synthetic chemistry for years, decades. Now the biologicals are starting to grow and now that real R&D is being applied to them, they're starting to gain acceptance in the marketplace. We're investing heavily through our FMC Ventures group into completely new technologies, whether it's a relationship with Novozymes on enzymes for use as pesticides, which has never been done. Micro peptides by pheromones that are produced not synthetically. All these are areas around the core that will come for the future. So that biological space is taking a lot of our investment in terms of increasing in R&D dollars, but also from a venture capital standpoint inside the company as well. So that does compete with stock buybacks or dividend increases. Andrew, why don't you talk about that?

I think this is an important part that's the corollary to the algorithm we were talking about earlier, Joel, on the P&L in terms of our goals for revenue and EBITDA growth over time. It's a discipline around a use of capital that's focused first on funding the growth. First and foremost, we fully fund the growth. Some of that flows through into operating cash flow. Some of that is inorganic opportunities. We did buy out of a development partner of ours to buy out full rights in the [ fund cycle for Windipere ] about a year ago. We're on the hunt for additional opportunities for -- particularly in biological space, precision ag areas as well for new technologies that can help accelerate growth. After that, the cash that's remaining we pay an increasing dividend. We've increased the dividend 10% a year for the past 4 years, and the remainder goes back to shareholders as repurchases. If you look at our guidance for this year, we've guided to free cash flow of about $625 million at the midpoint, expecting to repurchase $550 million at the midpoint of shares and paid $270 million in dividends. So obviously, they get those numbers to tie, you've got to increase the size of your borrowings as you're growing your EBITDA. And that's the final piece, that we've been very disciplined about maintaining an efficient balance sheet, staying within target ratios but not letting cash build up. So it is more -- there is an algorithm there as well, Joel, in terms of keeping that discipline and having that competition between investments and additional growth. And if there is excess cash, which there has been substantial and will be substantial, return that through dividends and buybacks.

Now let's go to, say, biologicals a little bit. So you talked about it excitingly. You still, I think, only saying somewhere about $0.5 billion of sales by 2025, still not the biggest [ fiber ] portfolio. What needs to happen for it to become bigger?

Yes, I think a couple of things. Number one, on the M&A front, there are opportunities as we see it to acquire biological either technologies or companies that would expand our geographic footprint. Biologicals are interesting, the biggest class are microbials and there are rules around the world of importing microbes into countries where they're not native. So you're never going to a blockbuster molecule. You're not going to have $1 billion biological. You are going to have lots and lots of $50 million or $30 million, and they're going to be very specific to different crops in different geographies. So it's a much more fragmented business and it needs that level of investment. So where we're focusing all our M&A efforts is in that biological space, both from a technology and a geographic perspective. So I think to get above the $500 million, it is market adoption, getting the right products that perform well, are consistent with good quality and then getting the sales force behind that to drive that growth.

So you mean, there's a lot of companies that are looking at biologics, like the little, small companies that have been at this conference different years, for many years. So if it's a lot of small opportunities, does that -- something gets better developed by little companies on one project, one product, sorry, or big companies that have bigger R&D budgets? Does that make sense what I'm asking?

Yes. Yes. I think it's -- I don't think it's one or the other. I think it's a combination. So companies like us, we are focusing on building out our microbial expertise. There are other companies focused on some different technologies that they are doing same. At some point, those will be the ones that become attractive because they've reached some form of critical mass. They have a product that works. So at the end of the day, the product has to do a job. Just because it's a biological, it has to perform. It has to remove a pest or it has to be a biostimulant that enables a plant to survive stress better. All those things come into play. For us, our R&D focus is really around fermentation, building out our fermentation knowledge and capabilities to be able to have these products that express the pesticide that you want. So I think it's a combination of the 2, M&A to attract new technology investments that we are investing in other companies. We're not necessarily buying them because we want access to the technology, but then our own R&D capabilities. Listen, as one of the leading R&D companies in the space, we do have a lot of capabilities that are applicable to biologicals.

How do you get a sales force? So $30 million, $50 million is nothing, but maybe if it's one regional product, it could be a lot for that one regional sales guy. Is that how to think about it? For that one regional salesperson, it's a big deal, even if it's small to you, I mean to Mark Douglas.

So think of it this way. Sales forces sell synthetics, that's what they've been doing for decades, 50, 60 years. You have to, a, incentivize them; but b, put the horsepower behind it around education. We're educating our own sales force as much as we're educating distribution retail and growers because at the end of the day, this is new technology. It's a new way to sell. The products behave differently. You have to apply them sometimes differently at different points in the cycle, in the growing cycle. So all that is occurring in the background. We're investing in resources around the world that are now purely focused on biologicals, [ demand ] generation for biologicals. They're not interested in Rynaxypyr or the diamides or anything else. They are purely focused on driving the growth of biologicals. That's why our growth rates have continued to accelerate.

And I imagine like regional products, so like this is going to be oversimplifying it, but something may work -- one biologic may work in Western Illinois, but in Eastern Illinois. Then the next product may not -- like it's not so finite, the regions. So -- and the performance of the customer could be different to a 100 miles away. Does that make sense on saying?

Yes, it's not quite as narrow as that, but I know what you mean. If you're in Argentina and you're using a biological, it may be a very different biological trend. So very different formulations.

But could Mato Grosso change from Mato Grosso to suit? Could it be that regional?

It depends. If you're putting biologicals into the soil, the type of soil, the organic matter that's in the soil. Biologicals are living organisms, they have to grow. So they have to have the right conditions to grow. You formulate them to give them the best chance to do that. But yes, different agronomic conditions will change how biologicals perform.

I had a question from the audience. I'll ask, this is a change in topic. So can you please ask them -- that would be you, how can they manage inventories versus the past? In the past, maybe you didn't have as much visibility in -- this is not my words, by the way -- how much visibility you had into your inventory in Brazil. What are you doing different that's now -- where are you different now?

Yes. I mean, listen, everybody knows what happened in Brazil to all the [ ag put ] input companies in 2015. Today, we have a system that is very different. We manage inventory not only in our own facilities, not only in third-party warehouses but also at the grower level. So our sales force and our financial groups are actually lockstep in terms of how much product are we selling into the market? How much is actually getting through to the grower? And then importantly, how much is getting used on the ground? So the system is completely different to what it was 7, 8, 9 years ago in terms of how we manage inventory in Brazil. And right now, as I said earlier, there are no issues with inventory in Brazil for us.

I've got another question that's interesting. How does the crop protection industry perform in recessionary environments?

So go back to 2008, 2009, the last major recession on a world scale. A company like FMC had record revenue and record profits during that time, on a track record of delivering that year-on-year. There was no missed beat in terms of how a company like FMC performs in a recessionary environment. Think about it. Agriculture, it's not directly linked to the broader industrial complex when you have a recession. People need to eat. Think about the fact that the world needs to produce 3% more output every year just to keep flat with human demand for food, fuel, fiber, et cetera. So we have a constantly growing market no matter what the macroeconomic backdrop. People need to eat. Look, how food security has become such a major topic with what Russia has done to the Ukraine. It took one event and the world is now panicked around food security. I think I'm correct in saying, the world only has 40 days of food supply. That's not a lot. So the notion of a company like ours, providing technology to improve yield no matter the economic backdrop, that's a very attractive proposition because you know you have that long-term growth.

I've got a question also from the audience. Rynaxypyr patent infringement. Please explain the issue.

So in India and in China, there are companies that are trying to illegally produce the products that we have that are patented. We have a whole team set up inside the company that monitors the market, monitors who is doing what in those 2 countries. And these are small -- generally smaller companies that are trying to illegally produce material for their local markets. Our job is to stop that. So when you see a press release from FMC talking about a patent win in India or a patent win in China, which we've had many of recently, that is to stop these smaller producers producing a product that is illegal. So that's what those patent wins are. We're stopping people infringing our patents. And I have to say, in China alone, we've had tremendous success with the local courts in putting those companies backwards. So it's a very important facet of how you manage your portfolio.

So I mean, the exciting part of FMC is now, some of the AIs that you got from the DuPont acquisition and now you're starting to put them into the market. So can you talk about what are the reasonable growth levels you'd expect from the new active ingredients, '22, '23, '24? What does the cadence look like for '25?

Yes. So if you look at the company today, we have a metric that we measure inside the company, which is products introduced over the last 5 years contribute to how much of this year's revenue. Because that's really the cycle of growth of introduction. Today, we have a revenue of about $5.5 billion, $600 million of that revenue comes from products that have been introduced in the last 5 years. That number is continuing to accelerate as that pipeline comes to life. So think about it, that's what, call it, 11%, 12% of the portfolio is coming from products introduced in the last 5 years. That number should only go up 15%, 20% should be a reasonable number given the types of products we're bringing into the marketplace. The new products that we're bringing in, whether it's Isoflex, which is a brand-new herbicide for cereals or whether it's Fluindapyr, which is a brand-new fungicide for numerous crops, they're all in that $400 million to $500 million of revenue at peak sales. So they're not small products, and they really ramp as we go through this decade.

One of the things I thought was interesting was -- remember when we did an ESG road show, focused road show in fall of 2020, and you had rolled out your product development ideas which, if I recall, was you had a number of criteria, want to say 5 -- and as long as the new products that you're rolling out improves in at least 1 of the 5 metrics, and that was very important for you to increase the sustainability of your products. Can you talk about how that model has worked, any success stories? I don't know if it's too early to really judge.

Yes. I mean -- so we have an award-winning sustainability matrix that we have in R&D, which basically maps out a new product. And it says, how sustainable is it in 5 different areas, whether it's water, food, human consumption, et cetera. And we map that against what's out there in the marketplace. If the new product that we're developing does not have a better profile than what's out there today, we won't develop it. And we've actually killed products very early in research to say, this is going to have some issues at a future point, stop. Because the world is becoming and quite rightly so, more sustainably focused from a chemicals perspective. So the products that are in there, it's not a one shot and then let's wait 12 years and see what happens. We have a 7-stage stage-gate process. That model is used at every gate. So as you develop a product, you learn more about it. Sometimes things are not so good, sometimes things are even better. So the real challenge is, if you're going to kill a product from a sustainability perspective, do it early and then move on to the next product. That is rolling through our system today and is becoming very, very effective.

Okay. And any other sustainability initiatives that you sort of have really gotten more excited about last 6, 12 months that you sort of thought about as you advanced your ideas?

Yes, I think some of you may have seen the announcement that we said we learn to be as a company net zero by 2035 which is a very, very aggressive target. We are basing that upon the Sustainability Index. And we are one of the first companies today from a -- many of you know there are Scope 1, Scope 2 and Scope 3 for emissions. Scope 3 is the biggest one for many companies because it is all the emissions that are generated from the products that you procure and bring into the company. We actually have Scope 3 mapped out by classification and the plans are already starting for how we're going to tackle those. So I do think that 2035 net zero number is a very important target for a company like us because it's already driving change. I'll give you a really good example. We're building a very, very large greenhouse at our research center in Stine, in Delaware. It needs to be heated, obviously. You would naturally go for a natural gas boiler. So we said no, we're not going to do that. If we're going to be net zero, this is a greenhouse that's going to be around for 30, 40 years, state-of-the-art. What technology should we be using to heat this? Can we use solar? Can we use wind? Can we use some other form of off-gas? What can we do? That's a change in the company's thinking. So that sustainability growth area is now permeating into the company, especially from a manufacturing perspective.

I got a question for next year's earnings. So what is your outlook? You're going to love this. What is your outlook for 2023? If costs start to ease, is there potential for EBITDA growth to be above the 7% to 9% range?

2023 already, and it's May. Yes. Okay.

Listen, I just read what they tell me.

Yes, of course. So I think the 5% to 7% top line growth and 7% to 9% is where I would say we should be today. Now having said that, if costs start to alleviate and we believe price is sticky, then yes, we should start to see margin expansion. We don't actually need costs to come down a lot. We just need them to stabilize, and then we'll see that margin expansion. We've done a very, very good job margin through the cycle. So I do think there is the potential for us to get to the higher end of that range. Whether you could get over the top of that range, we don't know because we don't have sight of where costs are going to be yet. But theoretically, yes, there should be better margin '23, and especially in '24 as we go forward.

And in your house view, it seems like maybe you think costs might flatten by the end of the year and then you'll achieve with the lag that flat cost in the first half of '23. Does that make sense?

Yes. It could do, except the way we do our accounting, we roll products through inventory. It's a 6-month cycle. So costs that we incur in the second half of 2022 would come -- some of it would come to us in the first half of '23. So there is a [ potential for growth ].

[ We're lapping ] greater P&L somewhere in the middle of first half of '23?

Yes. Right. Yes.

Okay. We have about 3 minutes left. Are there any questions in the room? Anybody want to do with their hand up? All right. So if I think about the next few years, what are you most -- or I got a question from the app. Here to go, okay, last one. If I didn't get your question, it's okay. This is out of left field, you ready? Okay. Any concerns with solar farms taking out productive land used to grow crops?

No. Because there are other types of land you could use. You wouldn't take very productive agricultural land and put solar panels on it. You might take pastureland or grassland, some other type of land or brownfield sites to put solar on, but you wouldn't take highly productive agricultural land, not at this point.

Okay. So what are you most excited about for the business in the next 3 years?

So I think the sustainability side of the company and the way we're driving R&D. I also think our opportunity is with market access. A company like us that has 8%, 8.5%, 9% market share. There's an awful lot of market out there that we can use technology to gain market share. But we need to think about market investment, more boots on the ground, how distribution and retail work in different parts of the world, how we operate with them. All that push into the marketplace is opportunity for a company like FMC. So it's not high on the list to date, but it's coming, and it's an area that we've already been investing in. Indonesia, Brazil, India itself, all around boots on the ground, getting products into the marketplace. More importantly, generating demand pull. There's nothing better than a farmer going to retail and distributors saying, I want this product. That is tremendous value to FMC. So that's why you'll start to see us focus more.

Okay, gentlemen, thank you very much.

Thank you much.

Thanks, everybody.