FMC CORP. $88(New York symbol FMC; Manufacturing sector; Shares outstanding: 134.6 million; Market cap: $11.8 billion; Takeover Target Rating: Medium; Dividend yield: 0.8%; www.fmc.com) is a diversified chemicals manufacturing company based in Philadelphia, with clients in the agricultural, industrial and consumer markets.
In November 2017, FMC acquired part of the crop protection business of DowDuPont (New York symbol DWDP). At the same time, DowDuPont acquired FMC’s Health and Nutrition line. The transaction saw FMC pay DowDuPont $1.2 billion in cash.
As a result, the company now has two main businesses: FMC Agricultural Solutions (88% of 2017 revenue) makes crop protection chemicals including insecticides, herbicides and fungicides; and FMC Lithium (12%) supplies lithium metal to makers of batteries, pharmaceuticals, greases and lubricants, and glass and ceramics.
FMC’s revenue from ongoing operations rose 21.5%, from $2.37 billion in 2013 to $2.88 billion in 2017.
However, the company’s earnings history is much more erratic. Its earnings fell 45.7%, from $2.47 a share (or a total of $342.4 million) in 2013 to $1.34 a share (or $190.4 million) in 2014. FMC then lost $1.66 a share (or $212.6 million) in 2015, partly due to restructuring costs. Earnings rebounded to $0.96 a share (or $130.7 million) in 2016, but FMC lost $0.64 a share (or $83.3 million) in 2017.
If you factor out all unusual items, earnings per share jumped 41.1%, from $1.92 in 2016 to $2.71 in 2017.
In the quarter ended June 30, 2018, FMC’s revenue soared 92.2%, to $1.3 billion from $656.8 million a year earlier. That’s due to the new operations from DowDuPont. On a comparable basis, revenue for the Agricultural Solutions business rose 8%. As well, revenue at the lithium business jumped 45.8% on higher volumes and prices.
If you disregard one-time items, FMC earned $1.78 a share (or $242.0 million) in the quarter. That’s up 270.8% from $0.48 a share (or $64.8 million) a year earlier.
As of June 30, 2018, the company’s long-term debt was $2.9 billion. That’s a moderate 25% of FMC’s market cap. The company also held cash of $326.4 million.
FMC now plans to spin off its lithium business as a separate company called Livent Corp.
As part of that plan, it will first sell 19.9% of Livent’s shares in an initial public offering for $100 million. The new shares will trade on the New York exchange under the “LTHM” symbol. FMC plans to eventually hand out its remaining Livent shares to its own shareholders as a tax-deferred dividend.
Livent should continue to benefit from rising lithium demand, particularly as that metal is a key component in batteries for electric cars. As well, its Salar del Hombre Muerto mine in Argentina is one of the lowest-cost lithium mineral deposits in the world. Livent’s strong reputation also cuts its risk: it gets 60% of its revenue from customers that have purchased its lithium for at least two years.
FMC shares have risen more than 40% since the company announced the DowDuPont deal in March 2017. Even so, the stock trades at a reasonable 14.5 times FMC’s forecast 2018 earnings of $6.08 a share. The $0.66 dividend yields 0.8%.
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