FMC's CEO Shares Its Ag Unit's Successful Strategies with Investment Community
Source: FMC Corporation news release
FMC Corporation (NYSE: FMC) president, CEO and chairman, Pierre Brondeau, this week discussed a unique 'differentiator strategy' that has helped FMC Agricultural Products lead the industry in profitability and deliver eight consecutive years of record earnings. Brondeau made his remarks at the Credit Suisse 17th Annual Global Ag Productivity Conference in London.
"We have a winning differentiator strategy that broke an industry paradigm," said Brondeau. "The conventional paradigm is -- if you want to be successful in the agricultural industry, you either have to invent new active molecules or biotech products, or you need to be a generic company and compete on cost.
"We believed we could do both -- that we could do innovation our way and be globally cost competitive with anybody in the industry. And we have," said Brondeau. "This low-cost innovation strategy has worked very well for us."
In 2011, FMC Agricultural Products sales grew 18 percent to $1.46 billion and earnings grew 13 percent to $348 million with an earnings margin of 24 percent. Approximately 25 percent of sales were generated from product and market innovations introduced over the previous five years, said Brondeau.
FMC's innovation strategy is based on "aggregating technologies" where the company scouts the world for complementary technologies and products and applies them to key focus markets such as sugar cane, cotton, rice, oilseeds, fruits and vegetables. FMC creates new formulations with lasting proprietary position by blending them with other products in the portfolio.
To help significantly reduce costs, the business developed a virtual manufacturing operation built from a network of dedicated contract manufacturers and toll producers, largely in Asia. According to Brondeau, FMC does not own assets that produce agricultural active ingredients. The business cost structure is more than 90 percent variable.
"It takes years to build a virtual manufacturing network, and our network is made of true partners -- not suppliers at arm's length. Most have been with us for 10-15 years," said Brondeau. "We have 100 FMC employees in Asia supporting this virtual manufacturing operation focused on lowering costs, finding new, more efficient process routes and ensuring our partners maintain the highest safety and environmental standards."
As part of the company's Vision 2015 growth strategy, FMC Agricultural Products expects to continue delivering premium margins in the 25 percent range with sales increasing to $2.3 billion and earnings growing to $575 million by 2015, said Brondeau.
For the full presentation at the Credit Suisse 17th Annual Global Ag Productivity Conference, go to www.fmc.com/investorrelations.