Pierre Brondeau (center),Chairman and CEO

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Market-leading ambitions

When Pierre Brondeau took the helm as CEO of FMC at the start of 2010, he set to work changing the company’s mentality.

Market-leading ambitionsFMC

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According to Pierre Brondeau, previous management and former CEO Wil-liam Walter “was focused on what the

company had to do … to get a healthy balance sheet” after the 2001 spin-o� of FMC Tech-nologies, a maker of industrial equipment. By the time Brondeau joined FMC in late 2009, the company was in a stronger position. It had posted its second-highest earnings fi gure at that time, $228.5 million, in the recession-ary environment of 2009, along with $2.83 billion in sales. Brondeau joined FMC from Dow Chemical, where he was chief executive of its advanced materials unit following Dow’s

acquisition of Philadelphia-based Rohm and Haas in April 2009. Brondeau was president and COO of R&H when it was acquired by Dow and was viewed as the likely successor to Raj Gupta as CEO of R&H at the time.

Brondeau aimed to take FMC, which has oper-ations in agricultural chemicals, specialty chemi-cals, and industrial chemicals such as soda ash to the next level. “I’m a grower of companies, not a penny-pincher or a cost-control kind of guy,” he says. In 2010, he unveiled an ambitious plan to grow FMC’s revenues to $5 billion by 2015, put-ting billions to work on new capital projects and acquisitions. A little over halfway through that

time frame, FMC has raised its targets (CW, De-cember 24/31, 2012, p. 25). The company now forecasts revenues to total $5.5 billion by 2015. It will focus more on organic growth, as opposed to acquisitions, than anticipated in 2010, and it expects to invest $2.6 billion over 2010–15 on growth initiatives.

Beyond 2015, Brondeau sees company revenues approaching $10 billion even without big acquisitions. Combining organ-ic growth with “mid-size or bolt-on deals, we can take the company north of $8 bil-lion in revenues beyond 2015,” Brondeau says. “We are growing 13% per year.”

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From left to right: Michael Wilson president/spe-cialty chemicals; Paul Graves, executive v.p. and CFO; Pierre Brondeau, chairman and CEO; Mark Douglas, president/agricultural products; Edward Flynn, president/industrial chemicals

18 | IHS Chemical Week, January 21, 2013 chemweek.com

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If FMC matches Brondeau’s aggressive growth plans, it will be among the world’s largest specialty chemical companies. “I think there is room for a leading specialty chemicals company which has the finan-cial means to play a key role in the devel-opment of this industry,” Brondeau says. “I think we can be that company.” In other words, FMC can fill the market position left vacant by the sale of R&H.

Big bets on Ag, specialtiesTo get there, FMC is banking on growth in

agricultural chemicals and specialty chemi-cals, particularly biopolymers. Over the next three to five years, the agricultural chemi-cals business will have the greatest impact on growth, Brondeau says.

FMC’s $1.8-billion agricultural products business is focused on agricultural chemi-cals. It does not play in seeds or traits, unlike the major competitors in the segment such as BASF, Bayer, Dow, DuPont, Monsanto, and Syngenta.

“If you look at markets today, we are mostly in herbicides and insecticides,” says Mark Douglas, president/agricultural products at FMC. “We are investing in fungicides because we think we are underrepresented.” About 7% of the segment’s revenues are currently derived from fungicides, Douglas adds. Insec-ticides are the largest agricultural chemicals business for FMC with leading positions in py-rethroid and carbamate chemistries.

Compared with big agricultural chemicals firms, “[w]e are almost the reverse,” Douglas says. “They are in wheat, corn, and soy.” While FMC does work with corn and soy crops in Latin America, “[o]ur business … is focused on sugarcane, fruits and vegetables, cotton, and rice,” Douglas adds. The company also does not develop active ingredients in-house.

FMC relies on acquisitions, licensing agree-ments, and joint ventures to obtain a portfolio of active ingredients for its herbicides, insecti-cides, and fungicides. “We are seen as a route to market for [smaller] companies with new technology,” Douglas says. “We don’t care where the ingredient comes from, and they don’t have to worry that we have an interest in another ingredient we’ve invested in that may block them.” The company has a scouting group that researches patents and technolo-gies looking for promising molecules, Douglas says. It also works with academics on projects, such as embryonic insecticides and fungicides, and is sometimes approached by active ingre-dient makers with new ideas.

In terms of acquisitions, FMC typically aims for product lines in agricultural chemi-cals. For example, in late 2011 FMC acquired 2 fungicide product lines from Bayer with about $30–40 million in annual revenues. The company aims to grow the revenues of those product lines—its new base in fungi-

cides—to as much as $200 million, according to Brondeau.

The company has been clear about what ar-eas it highlights for acquisition. “At the 2010 investor day, we said we were interested in ex-panding the food ingredients business,” says Andrew Sandifer, v.p./corporate planning and investor relations. The company builds a pipe-line of small, technology-focused potential targets through conversations with custom-ers and researching target industries. “We are talking to banks, venture capitalists, partners, competitors, customers, and sifting through what comes up,” Sandifer says. “I wish there were an algorithm for doing that ... It’s a bit messy.” The company then follows a buy-and-build strategy, using small acquisitions to gain a foothold in targeted sectors—such as fungi-cides—and building out those businesses.

The biopolymers portion of FMC’s spe-cialty chemicals business—which includes

alginate, carrageenan, and microcrystalline cellulose (MCC)-based products—provides further examples of that strategy. In August 2012, FMC acquired Pectine Italia (Milan), a maker of pectin, a thickener and stabi-lizer for foods that is derived mostly from lemon peels. FMC believes that pectin can be a $100-million revenue business within five years, says Michael Wilson, president/specialty chemicals. The company has done something similar in natural colors for food, buying small businesses in Chile and the UK to gain a foothold, with an eye toward build-ing the businesses out, Wilson notes.

FMC is also investing in capacity expansions in its colloidal MCC business, expanding fa-cilities at Newark, DE; and Cork, Ireland, and building a $100-million plant in Thailand. The Thai plant will be online by late 2014, and was built because of growing demand for protein in rapidly developing Asian economies. “There is not enough dairy to meet all the milk and protein demand in China,” Wilson says. “So they have nondairy protein beverages, and use MCC to give it the same mouthfeel as milk.” In developed economies, demand growth for MCC is driven by a nearly-opposite trend: growing consumer preference for processed foods, especially beverages and desserts, with less fat content.

Biopolymers is one component of FMC’s specialty chemicals segment; the other is lithium, where it is the second-largest global producer, after Rockwood Holdings. The com-pany has a highly-integrated lithium position in Argentina, with a proprietary process and compounding expertise. About 25–30% of the lithium business is tied to lithium-ion batter-ies, which is the fastest-growing lithium end market, Wilson says.

“Driving that growth [in lithium-ion bat-teries] for the past five years is consumer elec-tronics, and we expect that will continue to grow,” Wilson says. However, while growing market penetration of laptops, and now tab-let computers and smartphones, should sup-port healthy growth in lithium-ion battery demand, the electric vehicle (EV) market has been disappointing.

FMC has cut its expectations for the pen-etration level of EVs and hybrid electric ve-hicles (HEVs) by 2020, Wilson says. The company now expects total EV and HEV pen-etration into the vehicle market to be around 4–5% by 2020, down from a 6% expectation 3 years ago, he adds. “But probably more impor-tantly, it will be weighted more towards HEVs rather than EVs,” Wilson says. “That has con-

FMC uses of capital 2010-12. Source: FMC.

Cash deployment(Total = $1.5 billion)

OrganicGrowth

40%

Cash toShareholders

35%

Other 5%

M&A20%

FMC segment revenues for 2011. Source: FMC.

Sales breakdown(In millions of dollars)

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Indu

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Spe

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200

400

600

800

1,000

1,200

1,400

$1,600

a highly favorable cost position, the industrial chemicals segment is looking at growth in other, less-commoditized, businesses. Encom-passing about 5% of industrial chemicals sales, the newly formed environmental solutions group will be a focus for M&A, says Edward Flynn, president/industrial chemicals. The company had already sold ground trona for

scrubbing applications to electrical utilities, and it recently added persulfates and in situ remediation technology via two small acquisi-tions. “From an acquisition standpoint, we are going to focus on growing the environmental business,” Flynn says.

The environmental business will also be at the forefront of new hiring in industrial chemicals. “We are investing heavily in peo-ple” in the environmental group, Flynn says.

FMC is also looking at growing specialty applications in peroxygens. About 30% of industrial chemicals nonalkali sales went to specialty applications in 2011, and the com-pany plans to grow that to 50% by 2015. It is particularly looking at aseptic packaging applications in the food industry and high-purity peroxygens for computer chips, Flynn says. The latter will require some capital in-vestment to ensure that FMC can make per-oxygens to the exacting standards of chip-makers, Flynn adds.

New team, new companyAs CEO, Brondeau has brought in some for-

mer colleagues from R&H—including Doug-las and Sandifer—but he perhaps made the biggest splash when FMC named Paul Graves, former lead chemicals banker at Goldman Sachs, CFO last fall.

Graves was the lead banker at Goldman, which advised R&H during the tumultu-ous negotiations with Dow in 2008 and 2009. “You go through such a long process, weekends together, fights … [Y]ou see a guy in tough situations,” Brondeau says. When

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sequence for lithium demand, because you’ve got a lot more lithium in an EV than you do in an HEV.”

The company admits it is uncertain as to when the inflection point, when EVs and HEVs become a big driver for lithium-ion bat-tery demand, will be reached. But “[w]e still firmly think it will happen,” Wilson says. In the meantime, “I’d say, in contrast to what we saw earlier, we don’t see a need for another significant increase in [lithium] capacity be-fore 2015,” Wilson adds.

While FMC may not be investing in a lithium capacity expansion anytime soon, it has plenty of uses for the $4 billion in capital it expects to spend over 2010–15. About $1 billion of that will go toward dividends and share buybacks, about $1 billion to acquisitions, and about $1.5–1.7 billion to capital spending, FMC says. The company’s capital expenditure for 2012 totaled $250 million, and it is planning for $350 million in capital spending in 2013, according to Brondeau.

However, “I have on my desk right now about $500 million to $600 million in re-quests [for capital spending],” Brondeau says. If FMC’s capital spending does reach that level in 2013, “[w]e could spend about $100 million to $150 million in mainte-nance capital expenditure, and the rest is growth expenditure,” Brondeau adds.

FMC’s capital expenditure will not reach that level, though, primarily because it does not have the organizational capacity to man-age such a high spending rate. “We are struc-turing ourselves for $350 million to maybe $400 million capital expenditure over the next 3–4 years,” Brondeau says. “But I think after 2016 or 2017, we will go back to the $250-million range. If I listened to my orga-nization, we’d spend $600 million, then $600 million, then $100 million. I’m smoothing that out a little.” The ramp-up to $400 million will be driven by a need for new capacity in agricultural chemicals, food ingredients, and soda ash, Brondeau says.

In soda ash, the largest part of FMC’s in-dustrial chemicals business, the company says it has the lowest-cost position in the world with its holdings in Granger, WY; and Green River, WY. While soda ash is a com-modity and the business will shrink as a pro-portion of FMC over time, Brondeau sees the business as a strong cash generator. “I am fine with [a commodity piece] as long as … you are the best at it,” Brondeau says.

While FMC’s soda ash business benefits from

Brondeau joined FMC in 2010, he quickly saw Graves as a potential success to W. Kim Foster, FMC’s former CFO, who was sched-uled to leave in 2012 because of the com-pany’s mandatory retirement age for senior executives.

Graves, who is currently familiarizing him-self with FMC’s businesses, sees himself as “a second pair of eyes and on every major judg-ment. I am an outsider, and I think Pierre wants me to continue to create ideas and be skeptical.” Although the transition from in-vestment banking to corporate leadership is relatively rare, Graves says it’s not for lack of interest among bankers. “When I took this job, I had many former colleagues call me and say, ‘How did you do that?’,” Graves says.

Brondeau says he values people skills in se-nior leaders. “You aren’t an executive at this level without having a strong strategic mind-set, great operational capabilities, and great knowledge of your field,” he adds. “I am very focused on hiring people with the emotional intelligence to understand the culture.”

FMC’s culture, which was previously fo-cused on cost control, has shifted emphasis to growth in the past few years. “When I became CEO, the cultural shift was to go from finding every single dollar you can save to spending dollars to generate profitable growth.”

The company is highly focused on invest-ment returns, however. Senior executives say the company is rigorous in its investment deci-sion process, and that high returns are a must. Brondeau also notes that FMC’s specialty ori-entation means that it can “build a growth sto-ry where things are very much in our hands.” The company is “not very energy intensive, not petrochemical dependent,” he adds.

With the company on the way to achiev-ing its 2015 goals, Brondeau has an eye on what’s next. “Pretty soon we are going to have to talk about our 2020 goals, and we are building towards that,” he adds. Later in the decade, FMC expects to have the financial means to take bigger risks. “Beyond 2015, we will revisit our approach [to acquisitions] and what role they play,” Graves says. “I think we will look very hard at whether it is time to take a bit more risk.”

But FMC isn’t quite there yet, and the company hopes to maintain its cash disci-pline and resiliency to economic conditions. “I would like us to be as big as we can, with as much financial means as we can have, without losing the critical characteristics of the company,” Brondeau says.

—vincent valk in philadelphia

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douglas: Expanding into fungicides.

graves: CFO a second pair of eyes and ears.