Pierre R. Brondeau
Chairman and Chief Executive Officer at FMC
Thank you, Curt, and good morning, everyone. Since resuming the CEO role, I have taken in depth a look at the company and the crop protection market, which has led to revised full year outlook. To share my views, today's call will be more wide-ranging than a typical earnings call. We delivered a solid Q2 helped by a successful execution of our restructuring program. We expect continued growth in Q3 and Q4 from demand recovery led by the Americas where we expect channel inventory to approach normal levels by year-end. Q2 through Q4 also show higher revenue driven by volume with the rate of growth accelerating in Q4 as we shift into the next crop season. The markets have begun to recover as channel inventories are starting to normalize, even if not as fast as we had previously expected. We plan for FMC's pace of revenue and earnings growth to accelerate through the rest of 2024 and throughout 2025. We continue to firmly believe in the strength of the diamides portfolio, new product recently introduced and the technology pipeline. Later in the call, our newly appointed President, Ronaldo Pereira, will provide our views on the strength of the portfolio and how this positions us to take a full advantage of the demand recovery. Full year revenue and EBITDA guidance have been reduced to a slower demand recovery than we originally anticipated. To help mitigate a slower recovery in the second half, we have increased our cost saving targets and speed of execution. The lower guidance is more of a timing impact and is not a fundamental issue with the market or with FMC. We'll address the Q3 and Q4 profiles in more detail, but I want to quickly touch on two key points. First, the EBITDA margin guided for Q3 is not representative of the current company performance and operations. There is an expected COGS headwind in that quarter of about $40 million mainly due to mainly due to unabsorbed fixed costs in relation to a reduced manufacturing activity in the second half of 2023 that are now flowing through our P&L. Second, the strength of Q4 compared to Q3 is an exaggeration of the typically stronger sales report in the fourth quarter. Historically, Q4 has always been stronger than Q3, but is magnified this year by the shape of the demand recovery.
Our intent for the call is to share information that will demonstrate a confidence in our Q4 forecast. Overall, I am feeling positive about the company. Having said that, I see a number of areas where we can improve on our execution, and we are already implementing changes. I will share more detail in future conversations. I hope this help position my views of the company and market and provide context for the rest of the call. Slide three through five, provide an overview of our second quarter results. Revenue increased by a modest 2% with volume growth of 14%. In part, the stronger-than-initially-planned volume growth was enabled by strategic pricing actions made during the quarter. The 10% price decline was mainly driven by three things: One is competitive pressure, which is a normal market dynamic when demand starts to return. Two is a strategic intent to take back market positions in less differentiated products that we intentionally left to competitors by holding to a high price strategy when demand was low. And third is onetime incentives to address high-cost inventory in the channel. We began making these one-off adjustments as a way to speed up destocking ahead of the next crop season, which will begin in September. With demand returning, we do not plan to make these kinds of one-off adjustments going forward. It is important to recognize that from Q4 2021 to Q2 2023, we raised price every quarter. Even considering the recent price adjustment, we are still substantially ahead in pricing, and now that demand is returning, we can take strategic actions in pricing as a lever for sales growth in certain markets. With one full year of destocking completed, we saw a return to volume growth in many countries, particularly in the U.S., Brazil and Germany. As expected, we saw many more small orders to fill immediate needs as customers continue to actively manage inventory.
There are a few regional sales highlights I want to call out. North America sales were up 24%, mainly from volume in the U.S. with strong growth in herbicides. We are seeing customers waiting to order insecticides and fungicide until they observe test in the field. In Latin America, sales were up 14%, mainly from volume growth in Brazil. The region also showed strong gains in new products, including Coragen eVo and Premio Star diamide and insecticides, Boral Full and stone herbicides and Onsuva, a newly launched Fluindapyr-based fungicide. Lower price was driven by three factors, I mentioned earlier, competition in the market, strategic pricing on less differentiated products and onetime price adjustment. Asia sales were down 28%, and that was largely driven by volume in India. Channel volume in India remained high, especially in insecticide which has built up over a successive monsoon seasons. Sales of generic Rynaxypyr are acting as a smaller secondary headwind, where we pursue litigation for process patent infringement. Ronaldo will speak more to the diamides in a few minutes. We do not see the India channel inventory resolving until at least 2025. In other areas of Asia, Asian countries reported the strongest growth while China declined. Sales in EMEA were down 3%. Excluding sales to our diamide partner, the region reported overall sales growth in the low-teen percent driven by volume. The region delivered strong growth in branded diamides and fungicide. Looking at the EBITDA bridge on slide five. We delivered EBITDA of $202 million, which is at the highest end of our guidance range. The increase of 8% versus the prior year was due to volume growth, cost benefits from our restructuring actions and FX tailwinds.
These three factors more than offset lower pricing and COGS headwind related to the sell-through of higher cost inventory. Slide six provides an update on our progress in our restructuring actions. We are making excellent progress and have already realized considerable cost benefits through June. We now expect between $75 million to $100 million of cost benefits in 2024 net of inflation and are on pace to achieve over $150 million of gross run rate savings by 2025. On July 11, we announced that we entered into an agreement to sell our Global Specialty Solutions business for $350 million Envu. We're expecting the transaction to be completed by the end of the year, we will continue to include the results of this business in our reported figures until the deal has closed as it does not meet the criteria to be moved into discontinued operations. Our guidance for the second half includes earnings and cash flow from this business. Looking ahead to the rest of the year, we have updated our full year revenue guidance to a range of $4.3 billion to $4.5 billion, which is 2% lower than prior year at the midpoint. This is $200 million reduction between the midpoint of our new and prior gains and about half of that attributed to lower first half sales that we do not expect to make up this year. The remaining reduction is mostly the result of a slower-than-expected demand recovery. Although demand recovery is slower than originally anticipated, we do not see improvement in most geographies -- sorry, we do see improvement in most geographies with the exception of India. A revised EBITDA guidance of $880 million to $940 million reflect the lower revenue outlook and is a 7% reduction at the midpoint against prior guidance and prior year.
We expect third quarter revenue to be between $1 billion and $1.09 billion, which is 6% higher at the midpoint versus prior year. Volume is the key driver with pricing expected to be down low single digits. Year-over-year pricing headwinds are lower compared to the second quarter as we do not plan to continue onetime incentives now that much of the high-cost inventory in the channel has been reduced. Overall, pricing levels in the third quarter are expected to be similar to the second quarter. Third quarter EBITDA is expected to be between $165 million and $195 million, representing 3% growth at the midpoint. EBITDA margin midpoint of 17% reflects the outsized impact of $40 million COGS headwind we expect during the quarter. The headwind is mostly attributed to unabsorbed fixed costs related to reduced manufacturing during the second half of 2023. Absence of this headwind, we put our implied third quarter midpoint EBITDA margin in line with historical Q3 average. Fourth quarter revenue is expected to be between $1.34 billion and $1.45 billion, which is 22% higher at the midpoint. Volume is expected to be the key driver of sales supported by new products, improving demand and growing market share. Price and FX are both expected to be low single-digit headwinds. Fourth quarter EBITDA is expected to be between $353 million and $383 million, up 45% at the mid, almost entirely attributed to higher sales. Costs are expected to be favorable from restructuring benefits. The quarterly pace of result this year is forecasted to be different from what we reported in the past. Typically, the third quarter is the lowest revenue quarter in the year. This year, it is expected to be higher than the first and second quarters due to the timing of the demand recovery.
Our second half revenue split between Q3 and Q4 has historically been about 46% third quarter and 54% fourth quarter. This year, we are gaining to a quarterly revenue split in the second half of 43% in third quarter and 57% in fourth quarter. The higher-than-usual sales in Q4 are due to the shape of the demand recoveries. To achieve the midpoint of our full year guidance we expect to grow in the second half by 15% revenue and 28% in EBITDA with a strong fourth quarter. There are four reasons, we are highly confident in those numbers. One, there are signs that demand is recovering. Our second quarter volume is evidence of that. What we're seeing in our second half order books also reflects that improvement. For example, in Brazil, we have about 1/3 of the orders in our book that we'll need to reach that country's second half targets. At this time last year, it was almost 0. Early indications after one month of second half operation, show that the regions are on track to reach their targets. Two, a large portion of the sales growth we expect in the second half is coming from products launched in the last five years. We see solid demand for these products due to their differentiation from other technologies. Some examples include Onsuva fungicide and Coragen eVo insecticide in Latin America; Overwatch herbicide in Asia based on the new active ingredient, Isoflex; and new diamide formulation in North America like Elevest and Altacor eVo. Three, improve orders from our diamide partners. Similar to FMC, our partners have been attempting to work down high level of inventories. Levels are now reaching a point that are supporting other purchases. And four, cost management. We have shown the ability to effectively control costs and deliver on our restructuring savings commitment. They will continue in the second half.
I will now hand the call over to Andrew to cover some financial items, including our cash performance and outlook.
