Andrew Sandifer: Thanks, Kevin. Look, I think the covenant discussions are well underway, going very positively. We’d expect to have something more concrete to disclose next week. So, some more to come there. Our most recent covenant amendment we did with 100% support of the bank group and at no cost. This covenant amendment may cost us a little bit, but it won’t be a material expense. So I’ll reserve comment until we have completed the discussions, but discussions are well advanced. We have gotten very positive feedback from the bank group. And just to reiterate, they see the need for us to adjust and go through this period of resetting our size of our business with this industrywide channel reset really is a transitory business condition.
So the banks have been very supportive of the company. We will, again, adjust the covenant to give ourselves room as we’re both reducing debt and allowing the trailing 12-month EBITDA to recover. So as Mark pointed to, certainly Q4, the guidance we have today is challenging, Q1 not likely to improve, and in Q2 we would expect to see an inflection point and start to see trailing 12-month EBITDA begin to recover. That will help with leverage. And then certainly any of the cash that we generate beyond paying the dividend at its current level, all of that cash flow will go to reducing debt. And including, I want to be very clear because there have been some questions about this. We have $400 million in senior notes that are due in February of 2024.
We will be redeeming those notes this quarter. So, we’ll have no near-term maturities to address. And that’s a part of the whole conversation with the bank group on the covenant. So, we’ll have some further information for you in the next week on the covenant. In terms of longer-term financial policy, I’m going to reserve comment there to our Investor Day. I will state that 2.5 target leverage on average has been our long-standing policy. We’ve run north of that on average for the past several years. So that’s something that we’ve had some very active discussions Mark and myself along with the board. So we’ll bring some further comments in that in two weeks in the Investor Day.
Kevin McCarthy: That’s helpful. And then secondly, Mark, to follow up on your prior comments regarding pricing and also the sales outlook for 2024. Would you expect price to trend flat up or down next year versus 2023?
Mark Douglas: A little early to tell, Kevin. We really not thinking through the volume price mix just yet. Generally speaking, price tends to be sticky for FMC over the years. We’ve seen that. We do tend to raise prices every year, even if it’s only 1% to cover some form of inflation in different parts of the world. So a little early to say I’ll give you more details on November the 16th when we talk about 2024. But volume, sorry Kevin just to finish that conversation, I would say just our new product introductions come through on volume for us not price. So that growth in new products would show up in volume expansion.
Operator: Our next question comes from Laurence Alexander of Jefferies.
Laurence Alexander: Good morning. Just two questions about framing. One is if you think about the loss sales this year, can you give us rough split between how much you think is order timing moved into the first half of next year? How much is permanently lost and how much you think you would recover by I don’t know ’25 -‘26?
Mark Douglas: It’s, Laurence, there is no push of sales into next year. This is all real inventory that’s been held in distribution retail and it’s been removed. It does not get pushed so I would say it’s zero going into next year. It truly is a reset of bringing those inventories around the world down and then growing from that new point onwards.
Laurence Alexander: Okay. And secondly on Diamides just for context, can you give a sense for how many reformulations you’re introducing? I don’t know either annually or over the next three, five years and how that compares with the cadence across the rest of your portfolio. And then also just for context, there have been other large chemistry classes that have gone off patent. What has been the typical growth trajectory for those over 5, 10 years after they went off patent?
Mark Douglas: Yes, I’m going to give you those details on November the 16th because we have a section on Diamides and the overall growth of the portfolio so we’ll put it all in context for you. Suffice to say that the number of formulations accelerates as we go over the next 5 to 10 years and those products are already in our pipeline that we’ll talk about. Well documented in terms of what happens to molecules when they go off patent. Generally the market expands, pricing alleviates but volume goes up and the net-net is you have an expansion of the market itself plus an expansion in overall dollars of profitability. I don’t think the Diamides will be any different. The difference may be the fact that they are so fragmented and different types of patents in different parts of the world.
You may see that coming off in different regions and we kind of showed that in the slides that we put forward. We have our own examples, Sulfentrazone, Clomazone that have been off patent for many years. They continue to grow, they remain profitable. We don’t see any difference for those Diamides, but we’ll put all that in context for you on the 16th.
Laurence Alexander: So your bias is they’re in line or better than average as opposed to worse than average?
Mark Douglas: You mean in terms of growth?
Laurence Alexander: Yes, in terms of what happens, in terms of that sort of typical trajectory. For historical example, do you think they’re kind of at least in line with the average?
Mark Douglas: Yes, I would say the Diamides will be higher than the average just because of the attributes that they have.
Operator: Our next question today comes from Mike Harrison with Seaport Research Partners.
Mike Harrison: Hi, good morning. Just speaking with the Diamides discussion, you guys have worked pretty hard to enable potential competitors to work with you on licensing and other commercial arrangements. You gave some details in the slides there, but how should we think about potential competitors? You mentioned there were five large ones and more than 60 smaller ones who have taken that avenue and are working with you and they’re now customers versus potential competitors out there who are looking to go with a load and create generic versions of your Diamides without working with you. And I guess how do you see that kind of evolving over the next several years?
