Tags: FMC | emerging | market | demand

FMC Positioned to Take Advantage of Emerging Market Demand

By    |   Wednesday, 18 July 2012 05:20 PM

FMC (FMC) has positioned itself to take advantage of increasing demand in emerging market economies, a move applauded by analysts. Shares, however, are likely priced to reflect the economy for now, some analysts contend.

FMC is a diversified chemical company serving agricultural, consumer and industrial markets globally with solutions, applications and products. It operates in three distinct business segments: agricultural products, specialty chemicals and industrial chemicals.

The agricultural products segment develops, markets and sells all three major classes of crop protection chemicals — insecticides, herbicides, and fungicides — with particular strength in insecticides and herbicides. These products are used in agriculture to enhance crop yield and quality by controlling a broad spectrum of insects, weeds and disease, as well as pest control in non-agricultural markets.

Specialty chemicals consists of FMC’s biopolymer and lithium businesses. This segment focuses on food ingredients that are used to enhance texture, color, structure and physical stability; pharmaceutical additives for binding, encapsulation and disintegrant applications; ultrapure biopolymers for medical devices; and lithium for energy storage, specialty polymers and pharmaceutical synthesis.

The industrial chemicals segment manufactures a range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens, zeolites and silicates.

“We are focusing on increasing our presence in the rapidly developing economies of the world, RDEs, as we refer to them internally. Looking at sales growth in these economies by region shows good progress being made,” FMC Chairman and CEO Pierre R. Brondeau told analysts in a recent call.

“Sales in Latin America grew 38 percent; sales in Asian RDEs grew 13 percent; sales in Middle East & Africa grew 14 percent; and sales in Central and Eastern Europe and Turkey grew more modestly at 5 percent, mainly due to timing effects in the quarter.”

FMC has a market cap of $7.5 billion in a sector, chemicals, where the average company size is $9.18 billion. Its trailing 12-month P/E ratio is 18.38 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.61, compared to 1.76 for the sector.

Its projected earnings per share growth for the coming year is 13.18 percent, compared to a sector average of 14.04 percent.

Rapidly growing

Analysts are mixed on FMC, with buy or outperform calls from Jeffries, Ford Equity Research, Columbine Capital Services, and Ativo Research.

“With its increasing sales in the more rapidly growing economies of Asia and Latin America as well as its strong presence in the market for agricultural products, we think FMC is well positioned for future sales and earnings growth,” Standard and Poor’s analysts wrote May 9.

“However, we view the shares as appropriately valued at recent levels, and would hold, but not add to positions.”

FMC next reports on July 31.

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