FMC: A Cautionary Tale of Patents and Pestilence

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Now, one doesn’t often think of agricultural chemicals as being particularly prone to the whims of fate, but then one hasn’t spent enough time observing the markets. FMC Corporation, a purveyor of things that make crops grow (and, incidentally, keep other things from growing), recently experienced a downturn. A rather significant downturn, actually. A 71.5% tumble in 2025, according to the scribes at S&P Global Market Intelligence. It’s enough to make a seasoned investor raise an eyebrow, and perhaps check the ingredients list of their morning porridge.

The situation, as is so often the case, is less about a sudden catastrophe and more about a slow unraveling. Pierre Brondeau, a man apparently recalled from a well-deserved retirement (one imagines a hammock and a lifetime supply of gardening gloves) has declared 2025, and likely 2026, a ‘reset year’. A reset. It’s a wonderfully vague term, isn’t it? Suggests everything will be fine, just… different. Like rearranging the deck chairs on the Titanic, but with more fertilizer.

The core of the issue, as is frequently the case in this world, is patents. Or, more accurately, the loss of patents. When a chemical’s exclusivity expires, it’s like releasing a particularly effective goblin into a crowded marketplace. Suddenly, everyone’s selling the same thing, and the price… well, the price tends to resemble something one might pay for a slightly bruised turnip. FMC’s higher-margin concoctions are succumbing to this fate, inviting a swarm of generic competitors. And, compounding the problem, the customers – largely in South America – are finding it increasingly difficult to pay for anything, thanks to a combination of high interest rates and the general unpredictability of the weather. It’s a trifecta of woe.

The question, of course, is whether this is merely a temporary dip, a chance to accumulate shares before a recovery, or a sign that FMC is heading towards a particularly thorny patch of ground. A value trap, as they say. One must tread carefully.

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Retrenchment, Divestitures, and the Art of the Slightly Smaller Loss

The stock took its first significant tumble after the fourth-quarter 2024 report, and then suffered another blow in late October with the third-quarter 2025 earnings. And with that came a reduction in the dividend. An 86% reduction, to be precise. It’s a bold move, cutting the payout to shareholders. A bit like telling a dragon you’re downsizing its hoard. But sometimes, one must make difficult choices.

In February, FMC missed revenue expectations, and the forecast for the year was… less than enthusiastic. The market, it seems, had hoped for more. Management, with a commendable degree of honesty, admitted they would be taking ‘aggressive pricing actions’ to counter the generics, cutting costs, and attempting to bypass distributors by selling directly to large growers. A sensible strategy, in theory. Though one suspects the distributors weren’t entirely thrilled.

The decline was significant enough to warrant FMC’s removal from the S&P 500 index. A symbolic loss, perhaps, but a loss nonetheless. Like being politely asked to leave a particularly exclusive garden party.

But things took a turn for the decidedly worse in October. FMC announced it was putting its Indian business up for sale. This triggered a significant accounting adjustment, causing a 49% decline in headline numbers. Even without the adjustment, revenue was down 10%. And to add insult to injury, cash collection in South America remained… problematic. It seems getting farmers to pay for things when the harvest is poor is surprisingly difficult. Who knew?

Faced with these headwinds, management took the drastic step of reducing the dividend from $0.58 to a mere $0.08. A desperate attempt to preserve cash and pay down the company’s rather substantial debt – over $4.5 billion as of the third quarter. It’s a bit like trying to bail out a sinking ship with a teacup, but one applauds the effort.

The Road Ahead: Seeds of Doubt and the Hope of a Bountiful Harvest

Value investors are circling, naturally. And I, for one, have taken a small speculative position. A calculated gamble, you might say. Though all gambles involve a degree of luck, and luck, as any farmer will tell you, is a fickle mistress.

Key factors to watch include the price FMC gets for its Indian business, and whether it can improve cash collections. Crop prices will play a role, of course. Farmers struggling under the weight of a poor harvest aren’t likely to splurge on new insecticides and herbicides. It’s simple economics, really.

FMC is also consolidating its manufacturing operations into lower-cost sites, a process expected to be completed by the end of 2026. This will likely involve further restructuring costs, but it’s a necessary step if the company hopes to remain competitive.

Management doesn’t expect any new patent-protected products to hit the market until 2028. A long wait, to be sure. But if those products are successful, revenue and margins could expand again. Until then, FMC may struggle as it competes on price in a cyclical industry. There’s significant upside potential, but also the possibility of further struggles. It’s a bit like planting a seed in rocky soil – you can hope for the best, but you must also be prepared for the worst.

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2026-01-15 21:24