Fitch Ratings has downgraded FMC Corporation's (FMC) Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and downgraded the Short-Term IDR to 'B' from 'F3'.

Fitch has also downgraded FMC's senior unsecured ratings to 'BB+' from 'BBB-', assigning a Recovery Rating of 'RR4'; downgraded the subordinated rating to 'BB-' from 'BB', assigning a Recovery Rating of 'RR6'; and downgraded the commercial paper to 'B' from 'F3'. The Outlook is Stable.

The downgrade reflects greater generic competition and the resulting pressure on earnings and cash flow generation. FMC's dividend cut supports future free cash flow (FCF) generation; however, weaker forecasted EBITDA leads to higher-for-longer leverage and a longer deleveraging path. The ratings and Stable Outlook also consider FMC's position as the fifth-largest global agrochemical company, its broad product portfolio and intellectual property, the strength of its growth portfolio, and its historically strong margins.

Key Rating Drivers

Generic Competition: Heightened generic penetration in Latin America weighs on pricing and volumes for branded Rynaxypyr. FMC has reduced manufacturing costs, improved fixed-cost absorption, and reformulated products to defend share. It is shifting growth to data-protected and new active ingredients that face less generic pressure. These steps should improve FMC's price competitiveness versus generics, but at lower margins.

FMC's growth portfolio has offset some pressure on the core portfolio, but not enough to fully counter headwinds from generics. Fitch expects that over time, the growth portfolio will stabilize some of the runoff FMC faces from generic competition. Growth in plant health and active-ingredient products should help it maintain a competitive edge and pricing power. Failure to sustain commercial success from new launches could pressure credit quality.

Elevated Leverage and Execution Risk: Fitch expects leverage to exceed 4.5x in 2025 on lower EBITDA and negative FCF after dividends and remain high through 2028. While leverage starts to decline in 2026 due to debt reduction efforts, Fitch expects operating weakness to persist in 2026, as near-term gains from the growth portfolio only partially offset generic competition and higher working capital needs to meet competitor payment terms. Risk from generics is increasing while FMC is adding resources in Brazil to win large-farmer business, raising execution risk and supporting a higher-for-longer leverage profile.

Dividend Cut Supports FCF Generation: FMC's announced dividend cut reduces annual cash outlays by about $250 million starting in 2026, supporting FCF. Fitch expects FMC's reduced dividend burden enables the company to generate positive FCF of around $130 million to $150 million annually starting in 2026, despite lower EBITDA and higher working capital needs tied to competition.

Seasonality: Working capital swings are significant, with net working capital and seasonal borrowing peaking in the second quarter. FMC exited 2023 with higher borrowings due to destocking, which largely reversed by YE 2024. Fitch expects seasonal trends and higher net working capital to drive greater short-term borrowings exiting 2025.

Diversified Global Platform: The rating is supported by FMC's role as a major global crop protection company, with a diverse product mix, geographic footprint and crop exposure. Sales are balanced across Latin America, North America, EMEA and Asia, with revenue from a variety of crops including soybeans, fruits and vegetables, rice, and others. Demand is largely stable, driven by food, animal feed and biofuels, leading to predictable consumption.

Subordinated Notes Assigned Equity Credit: Fitch has assigned 50% equity credit to FMC's junior subordinated notes under the Corporate Hybrids Treatment and Notching Criteria. Key factors include the notes' subordination to senior debt, absence of material covenants or events of default, maturity beyond five years with no call dates within that period and FMC's unconstrained ability to defer coupon payments for more than five years, although deferred coupon payments are cumulative. Fitch believes that FMC plans to have this instrument in its capital structure until leverage materially improves to support a stronger rating.

Peer Analysis

FMC's credit profile benefits from its leading market position in crop protection and the underlying attractive fundamentals of its end markets. FMC is smaller in scale than peers Corteva, Inc. (A/RWN), The Mosaic Company (BBB/Stable) and CF Industries, Inc. (BBB/Stable). FMC's market position is not as dominant as that of Mosaic and CF Industries, which are among the world's largest fertilizer producers.

FMC's revenue is more variable than Corteva's, as Corteva historically benefitted from the diversity of the more stable seed business. Compared with CF Industries and Mosaic, FMC's revenue and EBITDA are more stable, as the company is not as exposed to global commodity prices and the more volatile nature of the fertilizer market.

FMC's EBITDA margin compares well to Corteva's, due in part to its singular focus on crop protection, lack of licensing fees and diamide pricing benefits. FMC's EBITDA margin is generally lower than that of Mosaic and CF Industries, but it also exhibits greater consistency due to the nature of the fertilizer market.

FMC has the weakest financial profile among its peers. Corteva maintains a more conservative capital structure, often carrying negative net debt at year-end in advance of seasonal working capital needs. FMC's EBITDA leverage is higher than that of CF Industries and Mosaic, but its more stable end-markets and lower capital expenditure (capex) burden allow it to carry comparatively greater leverage at a given rating category.

Key Assumptions

Revenue declines in 2025, driven by greater generic competition, lower partner sales, the reclassification of India as held-for-sale, full-year impact of 2024 asset sales, partially offset by strong revenue in FMC's growth portfolio. Growth remains weak in 2026 as continued challenges in certain markets, outweigh performance in the growth portfolio. Revenue begins to improve in 2027 as the company laps easier comparisons and realizes better price, mix and volumes. Revenue growth in the low- to mid-single digits thereafter;

Gross profit margins decline to 36% to 37%, driven largely by price reductions to branded partners on cost-plus contracts and increased generic competition, offset by the benefits from manufacturing cost restructuring initiatives;

R&D averaging around 6.5% of sales. Flat selling, general and administration expenses in 2025 and 2026, as cost savings from restructuring largely offset additional corporate and marketing investments;

Capex around 3% of revenue;

Dividends in line with management guidance of around $40 million annually beginning in 2026.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

Continued earnings weakness leading to EBITDA leverage durably above 4.5x;

Free Cash Flow, after dividends, that is consistently at or near break-even.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

Gross debt reduction and/or improved operating performance leading to EBITDA leverage sustained below 3.5x;

Successful broadening of the business platform through diamide product extensions and/or new product introductions, leading to a sustained EBITDA margin in the mid-20s.

Liquidity and Debt Structure

Liquidity and Debt Structure: FMC's liquidity is solid, with seasonal borrowings in line with the prior year and demonstrated market access. At 3Q25, FMC held about $500 million in cash and had more than $800 million available under its $2 billion revolving credit facility, which matures in 2028 and includes an accordion to $2.75 billion. In February 2025, FMC amended financial covenants and extended the revolver maturity by one year to 2028. Fitch expects FMC to obtain additional covenant headroom as needed. In May 2025, FMC issued $750 million in 30-year subordinated notes and used proceeds to redeem $500 million senior notes due May 2026. FMC has $500 million of debt maturing in October 2026, which Fitch expects the company to refinance ahead of maturity. Beyond that note, FMC has no other material maturities before 2029.

Issuer Profile

FMC is the fifth-largest crop protection company, focusing on insecticides, herbicides and fungicides, with a global manufacturing platform and diversified sales footprint across Latin America, North America, EMEA and Asia.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

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