Logo of jester cap with thought bubble.

Image source: The Motley Fool.

FMC Corp  (NYSE:FMC)
Q3 2018 Earnings Conference Call
Nov. 06, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Third Quarter 2018 Earnings Release Conference Call for FMC Corporation. Phone lines will be placed on listen-only mode throughout the conference. After the speakers' presentation, there will be a question-and-answer period.

I'd now like to turn the conference over to Mr. Michael Wherley, Director of Investor Relations for FMC Corporation. You may begin.

Michael Wherley -- Director of Investor Relations

Thank you, and good morning, everyone. Welcome to FMC Corporation's third quarter earnings call. Joining me today are Pierre Brondeau, Chief Executive Officer and Chairman; Mark Douglas, President and Chief Operating Officer; and Andrew Sandifer, Executive Vice President and Chief Financial Officer. Pierre will review FMC's third quarter performance and provide the outlook for 2018 and the fourth quarter. Andrew will provide an overview of select financial results. All three will then address your questions.

The slide presentation that accompanies our results along with our earnings release and the 2018 outlook statement are available on our website and the prepared remarks from today's discussion will be made available after the call. Before we begin, let me remind you that today's discussion will include forward-looking statements that are subject to various risks and uncertainties concerning specific factors, including, but not limited to those factors identified in our release and in our filings with the Securities and Exchange Commission Information presented -- represents our best judgment based on today's information. Actual results may vary based upon these risks and uncertainties.

Today's discussion will focus on adjusted earnings for all income statement and EPS references. A reconciliation and definition of these terms as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website.

With that I will now turn the call over to Pierre.

Pierre Brondeau -- Chief Executive Officer

Thank you, Michael and good morning, everyone. Q3 was another strong quarter for both businesses at the revenue and earnings level. It also was a quarter for executing on our commitments. The Ag Solutions business performed very well in a seasonally weak Q3 driving 5% pro forma sales growth, which was about 300 basis points higher than our forecast despite an estimated 4% to 5% headwind from foreign currencies. Revenue synergies continued to boost results and demand in Brazil was very strong in the quarter. As a reminder, we do not have precise data from DuPont in 2017 to calculate exact year-over-year impact from FX pricing or volume, but we base our FX estimates on what we saw in our legacy businesses.

In Q3, we successfully transferred to FMC delayed sites and countries from the DuPont acquisition, as discussed on our last earnings calls. These transfers did result in a shift of revenue into Q4 that was in line with our expectation, but they will not result in any missed sales for the full year. They remain one more delayed transfer, a small formulation site in India that we look here in the second half of 2019. We expect no impact on business results. On business integration is on schedule and we have begun the systematic rollout of the new SAP S/4HANA system starting with the corporate finance function. The complete rollout will be implemented by the end of 2019.

On the technology front, we are on track to launch our first new active ingredient from the legacy FMC R&D pipeline in North America in the first quarter of 2019. This fungicide will be branded LUCENTO and is based on the active ingredient bixafen. Our Lithium segment performed strongly in Q3 and we successfully completed the IPO of approximately 15% of Livent Corporation on scheduled last month to begin the separation of that business. Last night, we announced our intent to spin off the remaining 85% to FMC shareholders in a form of a dividend of Livent shares on March 1, 2019. The spin will complete the full separation and is expected to be tax free to FMC shareholders.

FMC Lithium will remain a reporting segment of FMC in the fourth quarter of this year, but will be reported as discontinued operations when we report first quarter results next year assuming the spin is completed in March. We have significantly reduced debt this year having paid down nearly $600 million of debt through October. Andrew will explain on this topic later on the call and describe the rationale for announcement to buy back $200 million of FMC stock by year-end. Our five year strategic plan is complete and being implemented. We will share it with you at our Investor Day on December 3. We are proud that we have been able to make significant progress on all our major initiatives that we set out to accomplish at the beginning of this year, including the DuPont integration, our SAP S/4HANA implementation and the completion of the Livent IPO, while delivering strong quarterly results.

Turning now to slide three and our third quarter results. FMC reported third quarter revenue of just over $1 billion, which was 60% higher than Q3 2017. Adjusted EPS was $0.98 in the quarter, which was $0.06 above the midpoint of our guidance and up 40% versus the same period a year ago. The guidance beat was due to the strong performance of Ag Solutions, a $0.07 beat plus $0.08 for Lithium and $0.03 from a lower tax rate offset somewhat by a $0.05 headwind from higher than expected corporate costs and other costs. Andrew will address the higher corporate costs in his section.

Moving to slide four and Ag Solutions. Revenue of $924 million in the quarter increased 67% year-over-year on a reported basis and increased 5% on a pro forma basis. This was driven by 17% growth over acquired insecticide portfolio and 8% growth in our selective herbicides. We continue to capitalize on cross-selling opportunities and our global sales force delivered another impressive performance in its third full quarter with the combined portfolio. On a pro forma basis, we delivered strong top line growth in both Latin America and North America, which more than offset lower sales in Asia and EMEA.

Third quarter segment EBITDA of $216 million increased 57% versus the earnings from the year ago quarter and was $11 million above the midpoint of our guidance. Segment EBITDA margin was 23%, which was in line with expectations. As previously discussed, Q3 is the lowest margin quarter for many reasons. First, it is our lowest revenue quarter, yet (inaudible) is flat. Second, product mix shift to a higher percentage of FMC legacy products. And third, geographic mix shift to a lower contribution from our highest margin region. These elements were expected and will be seen each Q3 in the future.

Turning now to slide five. Q3 revenue growth was strong on a pro forma basis, but it was mixed across the regions. North America revenue increased 32% and Latin America revenue grew 9%. Revenue in Asia dropped 4% and in Europe revenue contracted 17%. North America and EMEA are in the low season in Q3. And therefore a relatively small absolute dollar increase or decrease creates a disproportionate percentage swing. In North America the key driver was volume growth from Rynaxypyr and Cyazypyr insect control. We saw continued overall expansion of the Dynamite (ph) portfolio. Of note was the late-season growth in California on tree nuts combined with growth in our herbicide portfolio.

In EMEA, our business contracted 17% in a seasonally light quarter, which only represents about 15% of annual sales of the region. The decline was due in large part to lower herbicide application on all seed rate because of dry weather. In addition, we saw orders move into Q4 on the back of a distribution change we are making in Belgium and Holland. This change is a tiny move and will not result in any lost sales. We are consequently expecting strong double-digit growth in the fourth quarter in EMEA.

In Latin America, our business grew 9% on a pro forma basis despite a strong FX headwind. This performance was primarily due to strong demand in Brazil, which grew 17% on the strength of our acquired products due to our expanded market access. We have taken advantage of increased exposure to co-ops in the south and more broadly to existing distributors. We are cross-selling a new portfolio with an emphasis on crops such as coffee and citrus.

In addition, we expect that cotton acreage will increase 25% this coming season driving stronger sales over insecticides and herbicides portfolio, which started in Q3. We also successfully implemented significant price increases across the board in Brazil. In Asia, revenue declined 4%. However, excluding our proactive restructuring of our India business we grew revenue 2% despite significant headwinds from foreign currency. We had strong sales of our acquired insecticide portfolio in rice and soybean in India, and in rice and fruit and vegetables in Japan and Korea.

Moving now to Lithium on slide six. Lithium delivered a strong third quarter with revenue up 19% compared to Q3 last year and segment EBITDA of $49 million, a 21% higher than a year ago. As a reminder, we will continue to include FMC Lithium in our segment results for the fourth quarter because FMC still owns approximately 85% of Livent Corporation, but we will limit our comments as Livent is reporting its quarterly earnings Authority. When we issue fourth quarter results you will see 15% of Livent's earnings deducted in the non-controlling interest line of our income statement and this is reflected in our guidance.

Turning to slide seven, which highlights the impact of the Livent's IPO on our EPS guidance. Excluding the adjustments for Livent, the midpoint of our guidance would still be at $6.05 exactly where it was a quarter ago. However, we now must account for the full stand alone cost of Livent, which are a $0.03 headwind as well as the approximately 15% minority interest deduction for Livent post-IPO, which is a $0.04 headwind. Incorporating those factors, we expect adjusted earnings per share for full year 2018 to be between $5.93 and $6.03 per share or $5.98 at the midpoint, which represents an increase of 121% versus 2017 EPS.

Turning to slide three, (ph) which summarizes our outlook for the full year and for the fourth quarter. We expect 2018 Ag Solution revenue will be in the range of $4.2 billion to $4.26 billion; on a pro forma basis, this equates to a nearly 10% year-over-year increase at the midpoint. We also expect Ag Solutions EBITDA will be in the range of $1.195 billion to $1.215 billion, which is a raise of $5 million at the midpoint relative to prior guidance. Our expectation for the overall crop protection market has slightly improved from what we said in August.

On a US dollar basis, we now expect the global crop protection chemical market to be up low-single digit in 2018. The two regional outlooks that have improved are North America, which we expect will be up low-single digit due to a more pronounced strength in herbicide and Latin America, which we expect will be up high-single digit with a change in forecast, primarily due to recent FX driven price increases. We still expect the market in Asia to be flat to up low-single digit, while our European forecast is slightly more conservative. We expect it to be up low-single digit on a US dollar basis and down low-single digit in local currency.

FMC is growing considerably ahead of the market in 2018. Increased market access in many parts of the world is one of the largest factor. First, this includes new and enhanced distribution and crop access in Brazil, particularly in the south. Second, full utilization of our new super digital model in Asia resulting in more coverage -- in India, sorry, resulting in more coverage. And third, full direct market access in Europe with growth in Eastern Europe and improved access in France and Benelux countries. Another growth driver is the launch of new formulations developed by the regions to respond to local customer needs.

In 2018, we launched three formulated products, which we expect will contribute 1 percent point of the overall growth rate. For FMC, fourth quarter Ag Solution revenue is expected to be in the range of $1.015 billion to $1.075 billion. This revenue forecast represents a pro forma growth rate of 12% at the midpoint for the quarter and implies 9% pro forma growth for the second half of 2018. Segment EBITDA is forecasted to be in the range of $280 million to $300 million in Q4. This outlook includes an estimated $3 million to $4 million headwind for the quarter from the recent trade tariffs. We are confident in our Q4 forecast largely due to visibility in Brazil with 85% of expected revenue in that country already booked as orders. This is a much higher level of heading into the period than in previous years. We are also confident, we will manage the FX headwind in Brazil with pricing images.

Moving over to Livent. I'm just going to repeat the guidance that Livent issued last night. We expect full year segment revenue to be in the range of $440 million to $450 million, a year-over-year increase of 28% at the midpoint. Livent has decreased its full year EBITDA forecast by $5 million at the midpoint to a range of $193 million to $197 million to account for $5 million of stand-alone costs. Q4 guidance for Livent revenue is in the range of $117 million to $127 million, representing a year-over-year increase of 8% at the midpoint and EBITDA guidance is between $43 million and $47 million due to about $4 million of stand-alone costs. We now expect adjusted earnings per share in the fourth quarter to be between $1. 33 and $1.43.

So we'll now turn the call over to Andrew.

Andrew Sandifer -- Executive Vice President and Chief Financial Officer

Thanks, Pierre. I'll start this morning with a few specific income statement items and move to the balance sheet and cash flow. I'll also provide an update on the use of proceeds from the Livent IPO. Corporate expense is $29.7 million, $7.6 million above the quarterly pace of expense implied by our guidance at our last earnings call. This increase in expense was driven primarily by foreign exchange impacts on intercompany fund movements. We are currently operating in a dual IT system environment, which makes it more challenging to address currency and balances on intercompany fund movements.

While, a large portion of the impact in the quarter was non-recurring the system challenges are likely to cause some volatility in our corporate expenses on the order of plus or minus $1 million to $2 million per quarter. This variability will go away as we exit the DuPont TSA in late 2019. We estimate foreign exchange was 4% to 5% top line headwind in the third quarter for our Ag Solutions segment. Importantly in Brazil, we estimate that we offset a 100% of the impact of FX on earnings in Q3 through significant price increases complemented by our hedging activities.

For the Lithium segment, FX had virtually no impact on revenue and with a modest tailwind to earnings in the quarter. We lowered our guidance for adjusted effective tax rate for the full year to a range of 16% to 17%, a reduction of 50 basis points at the midpoint of the range, driven by our updated forecast of the mix of earnings across various jurisdictions. The 14.6% adjusted effective tax rate for the third quarter brings our year-to-date provision for taxes in line with this updated guidance.

Moving onto the balance sheet and cash flow on slide nine. FMC generated adjusted cash from operations of $550 million in the nine months ended September 30, 2018, up nearly 80% compared to the prior year period, driven by higher EBITDA. We also continue to benefit from lower working capital build for the DuPont acquisition than initially expected. Looking to the full year, we are raising our guidance for adjusted cash from operations to a range of $700 million to $750 million. Using strong cash flows from Q3, we paid down $300 million of term loan debt ending the quarter with $2.75 billion in gross debt. This is down nearly $450 million from the beginning of the year. We completed the Livent IPO in October and FMC received net proceeds of about $320 million from the sale of 20 million shares of Livent.

On October 31, we used $150 million of those proceeds to further pay down term loan debt consistent with our commitment to reduce leverage in line with the impending loss of Livent EBITDA early next year. This increase is our cumulative debt reduction this year to nearly $600 million. With debt-to-EBITDA, excluding Lithium now below 2.5 times and consistent with our targeted solid investment grade credit profile, we will use the remainder of the Livent IPO proceeds and other excess cash on hand to begin repurchasing FMC shares. We are launching a program to purchase $200 million of FMC shares via open market purchases by the end of this year under our existing share repurchase authorization. This initial $200 million share repurchase marks an inflection point in FMC's transformation, as we move past deleveraging from debt funded acquisitions to generating substantial free cash flow going forward. You can expect the cash generation and its deployment are key topics we will cover at our coming Investor Day on December 3.

With that I'll turn the call back to Pierre.

Pierre Brondeau -- Chief Executive Officer

Thank you, Andrew. I could not be more pleased with where we are today. We are preparing FMC for a long period of growth while delivering exceptional results in the short term. We are delivering on every front. The 10% global revenue growth rate for Ag business in 2018 on a pro forma basis much above the market with a strong EBITDA margin close to 29%. We are flawlessly integrating the DuPont business and realizing early sales and cost synergies. We successfully completed the IPO of Livent in challenging market condition.

Our SAP implementation is on track. Our cash flow is strengthening. We are paying down debt quickly and returning $200 million to our shareholders through a stock buyback. More importantly, we have a strategic plan firmly in place which leverages our core competency the strength of our current portfolio and our unique ability to develop short to long term technology. As I said before, our team is delivering on every front. I cannot wait to discuss the future of the company on December 3, with all of you.

I will now turn the call back to Michael Wherley.

Michael Wherley -- Director of Investor Relations

Thank you, Pierre. As Livent has just had its own conference call, we'll keep this Q&A session focused on our Ag business other than answering any potential questions you might have on the Livent separation plan.

Operator, you can now begin the Q&A.

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from the line of Christopher Parkinson with Credit Suisse. Please go ahead.

Christopher Parkinson -- Credit Suisse -- Analyst

Great. Thank you. Given your new revolving portfolio on a geographic and product basis, how should we think about your long-term outlooks given your newly found independence? I'm sure you guys want to front run yourselves on the Analyst Day, but just how should we perceive your own thought process regarding the acquired R&D platform from DuPont and maybe just a quick comment on the strategy regarding the FMC evolved, if you want to call that, in acquiring mid to late stage molecules? So just any comments on that would be greatly appreciated. Thank you.

Pierre Brondeau -- Chief Executive Officer

Thanks, Chris. I appreciate the question, but as you can guess really discussing technology in depth would require a lot of time, which we intend to do at Investor Day. We'll have our Chief Marketing Officer and Chief Technology Officer going deep into our technology capability. What I would say is, we do have with the combination of FMC and DuPont. The DuPont business, we acquired developed capability, which is quite unique. We do have now coming from DuPont a very strong discovery organization and ability to bring new molecules, new active ingredients, new mode of actions toward development stage.

FMC is bringing a formulations technology, which DuPont didn't have before, enhancing the value of those active ingredients, which are being developed by DuPont. Third of all, FMC and DuPont had complementary capability in terms of technology development and field testing in each of the region of the world allowing us, testing, data gathering, but also fast development of formulation for local requirements. So we will describe all of these, but technology and a blend of short-term, mid-term, long-term technology will be a very key driver of FMC growth in the future.

Christopher Parkinson -- Credit Suisse -- Analyst

And just a quick follow-up. Just given the role of the TSA, the eventual refined corporate cost structure, as well as your, let's say greater geographically balanced portfolio with better Asian exposure, which to my understanding is better payable terms. Can you just give us any sense on just how you're thinking about your future cash flow generation versus history, especially given your relatively low , I mean, in CapEx requirements, just any broad color there would be appreciated. Thank you.

Pierre Brondeau -- Chief Executive Officer

Yes, Chris. Broad color and as Andrew said in his comments, we want to make cash deployment a very critical topic at Investor Day. You will see -- start to see in 2019 a significant increase in the cash generated by the company and real step-up will be in 2020. The reason for which 2019 will be a little bit less than the following years is because we still have SAP implementation costs and some integration costs. Then you have the real jump into 2020 all the way to 2023. If you look at the cash, we will be generating, including the structural saving which will take place with (inaudible) implementation. If you look at the capital spent and we'll detail that.

If you look at the cash before R&D because we want to make sure, we fully fund R&D for growth. You're going to get to a place where we're going to have to change the way we are returning cash to shareholders. So we'll have very significant non-allocated cash for the next few years, which we intend to return in most part to shareholders through dividend and stock buyback. And we'll be discussing with you these unallocated part of cash, which you will see for the size of our company is a pretty significant number. How we are deciding to do that through the regular payments of dividends and what we will do through repetitive stock buyback.

Christopher Parkinson -- Credit Suisse -- Analyst

That's great color. Thank you.

Operator

Next, we will go to the line of Don Carson with Susquehanna Financial, one moment.

Michael Wherley -- Director of Investor Relations

Please move to the next question, if he's not available.

Operator

One moment, please.

Michael Wherley -- Director of Investor Relations

Operator, please move to the next question.

Operator

Yes. One moment my computer it's froze. One moment.

Don Carson -- Susquehanna Financial -- Analyst

Hello. Can you hear me?

Pierre Brondeau -- Chief Executive Officer

We can hear you.

Don Carson -- Susquehanna Financial -- Analyst

Thanks. Sorry about that. Yeah. Question in South America, there was a lot, you kind of round tripped on the real, you went from went from BRL3.68 to BRL4.10, back to BRL3.68. How did that affect your ability to raise local currency pricing? And if you raised them at that BRL4.10 peak, should you be able to hang on to those increased real pricing and hence expand margins as you get into the fourth quarter?

Pierre Brondeau -- Chief Executive Officer

Yes, Don. That's a regular situation you will always face when you connect your pricing to currency. I think, it's an important point you're making. As we said before, on the way up when the -- I'm sorry, when the currency goes down and we're increasing price, we have a lag. We're always behind by a few percentage points. When then the currency strengthened the same thing is happening. Then we become ahead of the game, because we hold the price as long as we can to the previous currency. So needless to say that while the currency was going up quite fast all the way to BRL4 in Brazil, the fact that we're able to take to zero impact -- the currency on EBITDA in the third quarter was -- made us pretty -- feeling pretty strong about our ability to move price up. And now the job you have is, as the currency strengthened, is to try to hold on to your older price as long as you can, but you will have to bring it back closer to currency as it goes. And you always face a lag negative at the beginning and the currency weakening and positive when the currency is strengthening.

Don Carson -- Susquehanna Financial -- Analyst

And can you talk about your CLS position in Brazil; how collection has been going and where are receivables by historical standards as a percentage of sales?

Mark Douglas -- President and Chief Operating Officer

Yeah, Don. It's Mark. Receivables are in very good shape, especially in Brazil. I think, you know that we spent a lot of time and effort over the last couple of years, really getting the quality of our business back in shape after 2015. So we feel very strong about where we are. Collections have been very good. Past dues are down at the lowest levels, they've been for the last three to four years. We're obviously in the season now, so we'll see how things go. But for us, we're very confident about where our receivable levels are and more importantly so about where our past dues are heading.

Operator

Thank you. And our next question goes to the line of Daniel Jester from Citi. Please go ahead.

Daniel Jester -- Citi -- Analyst

Yeah. Hi. Good morning, everyone. So I think in your prepared remarks you said that you might have a $0.02 of headwinds from tariffs from China. Can you just comment about -- if those tariffs is sustained in 2019 just color on the order of magnitude of what that could be? And is there anything that you could do in your own supply chain to mitigate some of those costs?

Pierre Brondeau -- Chief Executive Officer

I think the currency impact, if we project our sales to 2019 to give you an order of magnitude. If tariffs stay around 10%, we believe it's going to be around a $10 million negative impact on EBITDA. If the tariffs move to a 25% range, it would be in the $30 million to $35 million impact on EBITDA. That would be, if we are not successful at getting any exception, as you know, we are filing for exemption to some of the critical raw materials or product. I cannot anticipate on how successful, we will be in doing that, but the two numbers I gave to you would be the max impact.

Daniel Jester -- Citi -- Analyst

Okay. Thank you. That's very helpful. And you commented on your higher market growth view for North America. I think previously you thought the US is going to be -- or North America to be down a little bit this year and now it looks like it's going to be up. Can you just dive into that? Is there something specific that's driving that change? And can you give us any broad sense as to where you think the markets should go into next year, with some of the anticipated shift in acreage that we might see between corn and soybeans? Thank you.

Mark Douglas -- President and Chief Operating Officer

Yeah, Dan/ It's Mark. North America was stronger than we thought. We continued to do very well with the Dynamite acquisition especially in California, I think, we noted that in one of the slides. We saw it in other niche crop as well toward the end of the season. Now of course, as Pierre said in his prepared remarks, it's a bit of a slowest time in North America, so you don't need much movement to get significant percentages. I think, we also saw good business with our selected herbicides based on two key molecules, we've launched some new products this year, and they've done very well going to the third quarter. So think of the herbicide and the insecticide portfolio is doing better than we thought.

Obviously, we're watching very carefully as we roll into the next season for the US given where our corn and soy projections are. Frankly, I think it's too early to tell where growers will go with this. We're watching it very closely. I think you do know that we have more -- much more of an exposure to soy in the US market than we do corn. Obviously, that's offset by a greater exposure in Brazil. And we know that Brazil right in that planting season now, which is going very well. We expect them to have roughly about a 3% increase in acreage for soy. So for us, it's a (inaudible) watch and see really. We're making sure that our supply chains are well positioned to take any advantage of movements in the US and in particular in Brazil. But right now, as I said, bit too early to figure that one out.

Pierre Brondeau -- Chief Executive Officer

And one additional comment around Europe and North America, we like to repeat that. So third quarter is a low season, so don't forget that, dollars change creates significant movement in percentage, when actually it is not that big of a change. So there is a bit of the effect we are operating at a time (inaudible) 15% of the US sale. So not as big as the percentage might indicated down or up.

Daniel Jester -- Citi -- Analyst

Thank you.

Operator

And the next question will come from Steve Byrne from Bank of America.

Steve Byrne -- Bank of America -- Analyst

Yes. Thank you. I understand that there's been reports recently of some corn rootworm resistance developed to Herculex proteins. I just wanted to know whether or not that created an opportunity for you. Do you -- is your insecticide platform includes some products that would control below-ground insects as a seed treatment?

Mark Douglas -- President and Chief Operating Officer

Yeah, Steve. We're not in the seed treatment side, but we're very much in the in-furrow application of insecticides, especially for corn rootworm. We have also seen instances of increased infestation. We're well positioned to take advantage of that as we go through the next season. Not only with our branded product Capture LFR which is a liquid fertilizer-ready in-furrow application, but with our new foam applied technologies that we're introducing into the marketplace, which much more sustainable in nature. We'll talk more about that in Investor Day. But yes, you're right, we are seeing instances and we're well prepared for that with our portfolios as it stands today.

Steve Byrne -- Bank of America -- Analyst

And the recent EPA label revision on Dicamba has a lot of the professional applicators upset about the additional certification requirements that many of them think they're not going to be able to achieve. Does that -- is that a net benefit to your selective herbicide platform?

Mark Douglas -- President and Chief Operating Officer

Well, yeah. I mean obviously, we don't participate in the Dicamba market directly, but we do have some market leading position in pre-emergent herbicides for soy with our authority brands. Obviously, if we can continue to grow that franchise, if there are issues with Dicamba we will certainly take that opportunity. However, I do have to say, a lot of the new technologies of the companies that are promoting those are also promoting the use of pre-emergent herbicides as well, of which, as I said, we're the market leader so we will take advantage of that.

Steve Byrne -- Bank of America -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question will come from Mike Sison with KeyBanc.

Curt Siegmeyer -- KeyBanc -- Analyst

Hi. Good morning, guys. This is Curt Siegmeyer in for Mike. I was just curious in terms of the benefits that you've seen from DuPont largely from cross-selling and some of the distribution benefits that you've talked about. What inning would you characterize us in, in terms of those benefits and how should we think of that in terms of contribution to potential top line growth in '19?

Pierre Brondeau -- Chief Executive Officer

I think today, we are growing. If you think about this year, the overall company will be growing about 9% in the business, that will be due to a -- the DuPont portfolio growing in the high teens and maybe low 20% range, which is very fast. So what is important for us and we are spending a lot of time studying that is to try to understand how much of this is very short-term synergies versus what is more sustainable synergies. We do not believe, we're going to be growing the portfolio side despite. (technical difficulty)

Operator

One moment, we may have lost the main feed.

Michael Wherley -- Director of Investor Relations

Can you hear us?

Operator

There you are, yes, we can hear you now.

Curt Siegmeyer -- KeyBanc -- Analyst

Hey, guys. Can you hear me?

Pierre Brondeau -- Chief Executive Officer

Yes.

Curt Siegmeyer -- KeyBanc -- Analyst

Okay. Thanks for that. I lost a little bit of the last part but I'll --

Pierre Brondeau -- Chief Executive Officer

Let me give you the bottom line, OK? What we'll be discussing (technical difficulty)

Operator

And we are unable to hear. Mr. Wherley? Ladies and gentlemen, please -- one moment please. You may begin.

Michael Wherley -- Director of Investor Relations

Can you hear us?

Operator

Yes.

Michael Wherley -- Director of Investor Relations

Okay. Thank you. Can we just resume with that last question from KeyBanc. Sorry, about that. We had an interruption.

Operator

And you may begin.

Michael Wherley -- Director of Investor Relations

Can you hear us operator?

Operator

Yes. I can hear you now.

Michael Wherley -- Director of Investor Relations

Okay. Let's go back in the Q&A and start with the next question. I believe it's Mark Connelly at Stephens.

Joan Tong -- Stephens -- Analyst

Hi. How are you? This is actually Joan Tong for Mark Connelly. You guys called out Rynaxypyr and Cyazypyr are one of the key drivers for the strong North America results despite weak seasonality. Can you just tell us what additional growth opportunity do these product have? Which geographic regions offer the best potential and -- or maybe perhaps talk about how deeply penetrated are these products in there -- in a market? Hello?

Operator

One moment, please. I hear you.

Michael Wherley -- Director of Investor Relations

Can you hear us?

Operator

We can hear you now.

Michael Wherley -- Director of Investor Relations

Well, if it goes blank again then, we're just going have to end the call, but let's try and answer this question. Mark go ahead.

Mark Douglas -- President and Chief Operating Officer

Sure. Thanks. So yeah, as I was saying that the over 50% of the growth of the Dynamite products are coming from Asia. So we see growth both in Asia, in Europe, in North America and in selected parts of Brazil and Latin America. When we get to Investor Day on December 3, we'll be digging into more details around why we see these products continuing to grow? What is it, that makes them special in terms of their performance versus other competitive chemistries. But we do see, Cyazypyr, in particular which was a later launched product as having very good growth opportunities, especially on niche crops. So rather than going to all the details today, we'll certainly address that at the Investor Day on December 3.

Joan Tong -- Stephens -- Analyst

Okay. Thank you. And then just one follow-up. So thanks for the color on the impact of Chinese tariff earlier. Just maybe one follow-up on China as well. So we are seeing Chinese chemical producers are facing -- rising environmental compliance cost. Just wondering how much of your business are being sourced in China. And also maybe longer term, are you thinking about maybe perhaps the evolution of how you change like, how you source your raw materials going forward? Will that be a more of a significant shift toward India and other parts of the world? Thank you so much.

Pierre Brondeau -- Chief Executive Officer

Regarding China I mean from a business and size of the country in sales, China is one of the top 10 countries in the world, but this is not where the issue is for us. One of the challenges, I would say, we have is, the supply of active ingredients and raw material for FMC, as well as for most of the other Ag Chemical Company comes from China. So there is always two issues we are facing. One is the cost. And the more constrained on supply there is from China the higher the risk of the cost going up.

And the other one is because of environmental reason shutdowns, which would prevent the supply of active ingredients or raw materials. So the second one is always something we're watching because if the issue happened there is not much we can do. We've been dealing quite well with that. We are well structured with multiple qualified suppliers for most of our products. So we have to use the flexibility of our the supply chain. But it's something so far we have been able to manage and expect to be able to manage without short supply in customer in the foreseeable future.

The price is something which is -- which we'll have the address now. I have to say the cost of raw material impact in 2018 is not very significant just because of the way accounting work, the increase of cost is pushed into the product which then are going into inventory and you are impacted on the cost when you sell the product. So we are currently expecting raw material pricing not to be a very significant issue in 2018, but certainly something we'll have to watch in 2019 and for which we're going to define a very well thought through pricing strategy.

Operator

Thank you. Our next question will come from Mike Harrison, Seaport Global Securities. Please go ahead.

Mike Harrison -- Seaport Global Securities -- Analyst

Hi. Good morning.

Pierre Brondeau -- Chief Executive Officer

Good morning, Mike.

Mike Harrison -- Seaport Global Securities -- Analyst

I didn't realize that separating Livent would lead to some potential technical difficulties on the call. I was wondering if you could talk a little bit -- a little more detail about your ability to manage through the FX impact and in particular around the hedges. I'm just wondering if there was sort of an unusual contribution from the hedges in Q4 and as we go forward through the season maybe they get shorter term or if they get more expensive they become less effective somehow.

Pierre Brondeau -- Chief Executive Officer

I'm going to ask Andrew to address the hedging process and what we've done. Now let's put things within context. Most of the work, which was done to limit the impact of currencies on our business was done through pricing, that was the biggest driver, that's where most of the work was accomplished. Now hedging was a very interesting complimentary strategy we had to protect us further. Andrew?

Andrew Sandifer -- Executive Vice President and Chief Financial Officer

Yeah. Thanks Pierre. Mike I think -- thinking about Brazil specifically I would not say there was an extraordinary benefit from hedging in the quarter. We did supplement our hedging approach with some additional layers of hedging in advance of orders being.

Operator

That does conclude the FMC Corporation third quarter 2018 earnings release call. Thank you for your participation. You may now disconnect.

Duration: 60 minutes

Call participants:

Michael Wherley -- Director of Investor Relations

Pierre Brondeau -- Chief Executive Officer

Andrew Sandifer -- Executive Vice President and Chief Financial Officer

Christopher Parkinson -- Credit Suisse -- Analyst

Don Carson -- Susquehanna Financial -- Analyst

Mark Douglas -- President and Chief Operating Officer

Daniel Jester -- Citi -- Analyst

Steve Byrne -- Bank of America -- Analyst

Curt Siegmeyer -- KeyBanc -- Analyst

Joan Tong -- Stephens -- Analyst

Mike Harrison -- Seaport Global Securities -- Analyst

More FMC analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.