The crop-protection company cut its third-quarter revenue outlook to $65 million to $125 million, expects up to $675 million of charges from price cuts on inventory held by distributors, and said it will discuss further covenant changes with lenders. The shares fell about 35%.
FMC did not wait for its earnings date to tell investors the quarter had gone wrong. What it disclosed on Thursday went beyond a bad quarter.
The agricultural chemicals maker said third-quarter revenue is now expected to be between $65 million and $125 million, with adjusted earnings before interest, taxes, depreciation and amortization of negative $565 million to negative $510 million. The figures include $625 million to $675 million of charges tied to what the company called commercial actions: price cuts on FMC products already sitting in distributors' warehouses in Brazil, Argentina, the U.S. and Canada, and a change in how it prices products in the U.S.
The shares opened at $5.12, against Wednesday's close of $8.09, and were near $5.28 in early afternoon, down about 35% and at their lowest level since 2003.
What went wrong
"Third-quarter demand was weaker than we expected, driven by challenging market conditions and elevated levels of higher-priced FMC products held in inventory by certain channel customers, which are limiting product movement and replenishment demand," Chairman and Chief Executive Pierre Brondeau said.
The problem is price, not only volume. Distributors are holding FMC products bought at high prices while cheaper generic alternatives compete for the same farmers. Until that inventory moves, they have little reason to reorder. FMC's answer is to cut the price on what is already in the channel, which means compensating distributors and taking the charge now.
In the U.S., the company said it will move away from "a high gross-price and high-rebate structure," a model in which list prices are set high and large rebates are paid later. Simpler pricing can make products more competitive at the counter, but it gives up the cushion that rebates provide.
The balance sheet
The more consequential sentences concern lenders. FMC said it expects to be in compliance with its debt covenants at Sept. 30, but will hold "discussions with its bank group on potential further modifications to its covenants." It also said it has identified a triggering event for a possible impairment of intangible assets.
A company that expects to meet its covenants does not need to renegotiate them for the quarter just ended. Seeking further changes now suggests the company may expect less headroom in coming quarters as the charges flow through, though it did not say so.
The calendar
FMC will report full third-quarter results on Oct. 29 and hold its call the next day, when it plans to give a preliminary view of 2027 and 2028.
Market implications
One reading is that FMC is clearing the decks. Cutting channel prices once, resetting the U.S. pricing model and taking the charges in a single quarter could restore orders next season and give management a cleaner base for its 2027 outlook.
A second reading is that the reset exposes a structural loss of pricing power. Generic competition is forcing price cuts across major markets at once, the quarter's EBITDA is deeply negative, and the company is already discussing covenant relief. A stock trading at a two-decade low reflects doubt that the old margins come back.
For other crop-protection companies, FMC's description of high-priced inventory clogging distribution channels in the Americas is a question to put to their own managements.
What to watch
The Oct. 29 results and the Oct. 30 call, including the preliminary 2027 and 2028 framework, the size of any impairment, and the terms of any covenant amendment, which would be disclosed in a filing. Any change to the dividend would be the next signal on how management views the balance sheet.