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FMC (NYSE:FMC)

Q2 2011 Earnings Call

August 02, 2011 11:00 am ET

Executives

Pierre Brondeau - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

W. Foster - Chief Financial Officer and Executive Vice President

Brennen Arndt - Director of Investor Relations

D. Wilson - President of Specialty Chemicals Group

Milton Steele - President of the Agricultural Products Group

Mark Douglas - President of Industrial Chemicals Group

Analysts

Alina Khaykin

Rosemarie Morbelli - Gabelli & Company, Inc.

Peter Butler - Glen Hill Investments

Michael Sison - KeyBanc Capital Markets Inc.

Michael Harrison - First Analysis Securities Corporation

William Young - Longbow Capital

Kevin McCarthy

Jeffrey Schnell - Jefferies & Company, Inc.

Dmitry Silversteyn - Longbow Research LLC

Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2011 Earnings Release Conference Call for FMC Corporation. [Operator Instructions] Thank you. I'll now turn the conference over to Mr. Brennen Arndt. Mr. Arndt, please go ahead.

Brennen Arndt

Thank you, and welcome, everyone, to FMC's Second Quarter 2011 Conference Call and Webcast. Joining me this morning are Pierre Brondeau, President, Chief Executive Officer and Chairman; Michael Wilson, President, Specialty Chemicals Group; and Kim Foster, Executive Vice President and Chief Financial Officer. Pierre will begin the call with a review of our second quarter performance. Michael will provide an in-depth review of the BioPolymer and Lithium businesses that comprise our Specialty Chemicals group. Kim will then report on our financial position, and Pierre will complete the call by providing our outlook for 2011 and by taking your questions.

Our prepared remarks today will go a bit longer than typical as we have a number of important items to share with you. And joining Pierre, Michael and Kim for the Q&A session will be Milton Steele, President, Agricultural Products Group; and Mark Douglas, President, Industrial Chemicals Group.

A reminder today that our discussion will include certain statements that are forward-looking and subject to various risks and uncertainties concerning specific factors that are summarized in FMC's 2010 Form 10-K, our most recent Form 10-Q and other SEC filings. This information represents our best judgment based on today's information. Actual results may vary based upon these risks and uncertainties.

Our current 2011 outlook statement was issued this morning, which provides our guidance for the third quarter and full year 2011. We have posted this on our website available at fmc.com. Also on our website you will find a definition of certain non-GAAP financial terms we will refer to during today's call. They're under the heading entitled glossary of financial terms, as well as a reconciliation to GAAP of the non-GAAP figures we'll use today.

So it's now my pleasure to turn the call over to Pierre Brondeau. Pierre?

Pierre Brondeau

Thank you, Brennan, and good morning, everyone. As you saw in our earnings release, we delivered a strong second quarter performance. All 3 operating segments achieved double-digit earnings increases. Demand across our businesses and diverse end markets continues to be very healthy, especially in rapidly evolving economies. We are seeing rich opportunities for organic growth in every business and in turn, we are making good progress advancing our target external growth initiative.

Before we get into the quarter, I'd like to share with you our progress in achieving our Vision 2015 objectives. This is something I intend to do twice this year, at the midpoint of the year and at year end. As we begin the second half of 2011, I am pleased to report that we are ahead of plan toward realizing our Vision 2015 objectives. Let's look at the dashboard we used to measure our progress against the 5 key elements of our vision.

First, growing our leadership positions. The original plan presented to you last December was that solid organic growth we would achieve sales of $4.2 billion by 2015. That was based on the rich pipeline of organic growth prospects across our business as we saw at that time. We now see even more opportunities for organic growth that should enable us to reach 2015 sales in the $4.5 billion to $4.6 billion range. Complementing our organic growth is an external growth strategy.

We expect external growth initiatives. We raised our 2015 revenue to greater than $5 billion. We have a very focused disciplined strategy that includes both on M&A and product and technology acquisitions that reduces the risk normally inherent in external growth. We have now planned -- we have no plans to make transformational acquisitions or add a new business leg to our portfolio.

In the second quarter, we made good progress in regard with 2 announcements: the formation of agrochemical joint venture in Argentina that enhances our growth and market access in Latin America's second largest crop protection market; and the peroxygens acquisition in Europe that accelerates the globalization of our specialty peroxygens business. Both are small and very consistent with our M&A strategy and accretion requirement. Combined, they represent an investment in the $15 million to $20 million range and should generate $50 million to $60 million of sales in 2015. These initiatives are a first step toward reaching our recent 2015 goal of $800 million in company sales generated from external growth. We have a rich pipeline of external growth opportunities today, each small in size that when brought into FMC will provide us platforms to build upon for continued excellent growth and acceleration of our organic growth.

The second key element is increasing our reach. Through the first half of this year, we achieved our highest sales growth in rapidly developing economies. Across our businesses, we are focusing our investment in human resources and physical infrastructure in RDEs. Our RDE position is already strong. Last year, 43% or $1.3 billion of our company $3.1 billion total sales came from RDEs. Our plan is to double RDE sales by generating 50% over $5 billion 2015 revenue and we're on plan to do so.

The next element is capturing the value of common ownership. We have shifting from a highly decentralized organization to a balanced, centralized, decentralized model to better leverage our size and scale. As I call it, I think I'd want FMC to realize efficiency while maintaining strong accountability in our business units. Our global procurement team is in place and on schedule to deliver projected cost savings. The investments I just mentioned being made in RDE infrastructure will be shared across businesses. A great example is our Shanghai innovation center. The center will house Agricultural Products, BioPolymer and Lithium technical and commercial teams that will accelerate our growth largely by tailoring products to local markets in the region. We broke ground for the center in March and plants will be operational in the fourth quarter of next year.

The fourth element is practically managing our portfolio. Industrial Chemicals portfolio has been our real focus. We've addressed businesses that were competitively disadvantaged and underperforming for an extended period of time. Last year, we exited our phosphate and sulfur derivatives businesses. In the second quarter, we announced our intent to exit the sodium percarbonates businesses. We will wind down this business by year end.

Industrial Chemicals is making great progress in the transformation into a segment with sustained higher margin, greater earnings stability and significantly higher return on assets. Looking back in 2009, the segment realized an operating margin of 9%. In 2010, it was 12%. Implicit to our 2011 guidance is an operating margin in the midteens. They are well on their way to realizing and sustaining a 20% operating margin by 2015.

The final element is disciplined cash deployment. Our plan is to deliver cumulative cash flow of $2 billion during 2011 to 2015. With the strength of our balance sheet and solid investment grade rating, we have approximately $1 billion in additional debt capacity. With these combined $3 billion, we see approximately $2 billion going to new growth capital next-on [ph] initiatives and $1 billion that is to be returned to shareholders in the form of share repurchases and increased dividend. In the fourth quarter last year, we repurchased $100 million of our share. In February, we increased our dividend by 20% and we will repurchase 100 million of shares in the third quarter.

So in summary, I'm pleased to report that we are ahead of plan towards realizing our Vision 2015 objectives.

Now moving to our second quarter 2011 performance. Sales of $812 million increased $65 million or 9% versus last year, excluding the prior year impact of exigent businesses. Sales increased in all businesses and all regions. Adjusted earnings of $1.53 per diluted share increased 18% versus the year ago quarter. On a regional basis, adjusted to exclude exigent business, sales in EMEA increased 22%. In Asia, we're at 12%. Sales in Latin America grew 11% and sales in North America were up 1%.

Our gross margin of $299 million increased by $34 million or 13% versus last year. Gross margin percent of 36.8% improved by 137 basis points over last year, driven by higher selling price, higher volumes and improved mix, only partially offset by higher cost.

SG&A of $104 million increased $12 million or 13%, largely due to increased spending on targeted growth initiatives and to a lesser extent, foreign exchange. Adjusted earnings before interest and tax of $166 million increased $20 million or 14% compared to last year.

Let's take a more detailed look at the performance of each of our operating segments in the quarter. First, Agricultural Products. Second quarter of sales of $333 million increased 12% driven by broad-based growth across Asia, Latin America and EMEA. The highest sales gain was achieved in Asia, reflecting continued volume growth in all key countries as well as selected price increases. Growth was especially strong in China, Indonesia and India. Sales in EMEA also increased significantly, driven by strong herbicide and insecticide volumes. In Latin America, the sales increase was broad-based led by Brazil. Sales in North America declined, reflecting the shift in some herbicide volumes to the first quarter and less favorable weather conditions than a year ago, which impacted our cost in herbicide. Segment earnings of $94 million increased 18% versus the year ago quarter driven by the broad-based sales growth, partially offset by higher spending on targeted growth initiatives.

Moving to Industrial Chemicals. Second quarter revenue of $255 million increased 7%, excluding the prior year impact of exigent businesses, driven primarily by higher selling price in soda ash and peroxygen. Segment earnings of $36 million increased 21% as a result of the sales gain and the continued favorable mix shift toward higher end specialty peroxygen, partially offset by startup cost associated with the Granger soda ash facility and higher raw material energy cost.

Looking at the drivers of segment performance in the quarter. In soda ash, the year is shaping up as we expected. In the second quarter, sales and earnings growth continued to benefit from higher selling price in 2011 contract. The volume growth was capacity constrained in advance of the Granger facility coming online in early July. Granger is running well and on its way to ramping up to produce at an annual rate of 500,000 tons by the fourth quarter.

During the quarter, our export organization, in fact, continued to benefit from Chinese exporter cost pressures and they assume to price export business above delivered cash cost. In early disruption [ph] in China, as tightened market conditions allowing Chinese producers to increase prices in domestic and exposed markets. It appears that the supply restrictions and price hikes have led Chinese exporters to retain profit margins, reflecting the change in behavior from their historical pattern or returning to pricing at incremental EBIT cash growth.

In June, NSAC announced a price increase of $50 per metric ton effective July 1 or as contracts allow. They are realizing some early successes. Consequently, we have included higher soda ash export pricing and outlook for the Industrial Chemicals segment for the second half of the year. As a result, we now see our global average selling price earned in the low double-digit versus last year as compared to our original expectations of high single-digit. So the Granger facility is running well and ramping up to the full 5,000 tons per year right by year end. Even with this volume, the U.S. soda ash producers are forecast to remain supply constrained beyond 2011. In early June, we announced a $20 per ton price increase for domestic off lease [ph] contract. As is the case every year, those increase was effective July 1. It will have very low impact on 2011 results as the vast majority of domestic contracts as prices peak for the calendar year.

The announcement does however form the basis for 2012 contract negotiation, which typically appear in November and December. So in summary, we see favorable conditions for soda ash continuing well beyond 2011.

Moving to peroxygens business. We realized double-digit sales growth even by higher selling price across all product lines. Earnings benefited from the sales gain and the continued favorable mix shift towards specialties, partially offset by higher raw material energy cost. In hydrogen peroxide, sales growth in Europe was especially strong versus last year in persulfate, one of the specialty product. Higher sales in the oil and gas segment was the primary driver.

During the quarter, Industrial Chemicals continued to take important steps to realizing its high-performance objectives within Vision 2015. As noted earlier, in June, we made the decision to exit the sodium percarbonate business by December of this year. For perspective, this business -- this year, the business is projected to generate sales of approximately $13 million and operate in the loss position. Competitive advantages and underperforming results have made it uneconomical to continue. We have begun to wind down operation at a business production facility in Spain and will exit the business completely by year end. Accelerating the globalization of our specialty peroxygen business is central to realizing the growth and operating margin objective for Industrial Chemicals.

An important step to that end was taken last week as we announced the acquisition of the European persulfates business of RheinPerChemie GmbH. This acquisition enables us to accelerate the globalization of our specialty peroxygen initiatives in our elemental electronic safety and immediately broaden our peroxygen's portfolio to our customers in EMEA. RheinPerChemie manufacturers persulfate in Rheinfelden, Germany and has a sales office in Hamburg, Germany. We expect to close the transaction by year end. We are not permitted to disclose the terms of the transaction.

Let's now move to our Specialty Chemicals segment for an in-depth review of the BioPolymer and Lithium businesses that forms Specialty Chemicals, I'll turn the call over to Michael Wilson. Michael?

D. Wilson

Thank you, Pierre, and good morning, everyone. I'm pleased to be with you today report on the current performance and outlook for our Specialty Chemicals group. After updating you on our second quarter performance, I'll provide insights into the growth strategies we're employing in BioPolymer and Lithium to deliver on our contribution to Vision 2015.

First, a review of second quarter performance. Revenue in Specialty Chemicals was $229 million, up 6% versus the year ago quarter. Despite capacity constraints in Lithium, driven by higher selling prices in all businesses and strong volume growth in pharmaceutical ingredients and lithium specialties. BioPolymer achieved record sales and earnings in the quarter. The pharmaceutical ingredients sales gains were realized in all product segments, while food ingredient sales were driven by dairy and beverage markets in Asia, particularly China.

Lithium sales growth was led by butyllithium, serving pharmaceutical and chemical synthesis markets. Given our lithium capacity constraints, we have delivered top line growth this year by increasing sales of higher value downstream products like butyllithium at the expense of upstream primary compounds sold into lower value segments. Of course, we've been careful to protect market share in key primary growth segments such as energy storage.

Segment earnings of $56 million were 10% higher than the prior year quarter as a result of the strong commercial performance despite higher raw material cost and higher weather-related operating cost in Argentina. The wettest weather conditions in a decade in Argentina presented operational challenges in the quarter. Heavy rain and snow, which washed out and blocked roads, created logistical challenges impacting production yields and costs. While we believe the worst of the winter weather is now behind us, we expect to experience further production inefficiencies in the third quarter due to lower second quarter brine production and dilution of the lithium brines in the solar evaporation ponds by the heavy precipitation. This will effectively result in some shift in Lithium earnings from the third quarter to the fourth quarter.

Moving to our outlook for the third quarter and the full year. We expect continued strong earnings performance across the segment. For the third quarter, we project earnings to increase approximately 5% as higher volumes and selling prices in BioPolymer and Lithium Specialties are partially offset by increased spending on growth initiatives, higher raw material cost and the weather-related lithium production issues in Argentina.

For the full year, we project sales to be up mid-single digits, driven by continued volume growth and higher selling prices in BioPolymer and Lithium Specialties. Full year segment earnings are expected to be up approximately 10%, consistent with prior guidance. BioPolymers projected to achieve its seventh straight year of record earnings due to continued strong commercial performance, which will more than offset the impact of higher raw material costs. Lithium performance will benefit from the sales gains in Lithium Specialties. As a result, the Specialty Chemicals segment will deliver its sixth consecutive year of record earnings.

Let me now turn to a more detailed review of the growth strategies we're employing in BioPolymer and Lithium to deliver on our Vision 2015 commitments. Achieving faster top line growth is an important element in realizing our 2015 objectives with Specialty Chemicals. Across the next 5 years, we see top line growth rising from its historical 6% to 7% level to approximately 10%. Driving this rate increase will be increasing sales of faster-growing product lines such as MCC for food ingredients and pharmaceuticals and lithium compounds for energy storage applications. Earnings will be enhanced by this mix shift. Though Specialty Chemicals has always had attractive operating margins, we plan to achieve operating margins of approximately 26% by 2015.

Let's take a look at each business and how it will contribute to this even higher level of performance. Starting with Lithium. The business today accounts for approximately 30% of segment sales or approximately $220 million. We're the second largest supplier in terms of revenues with a broad market presence in both upstream primaries and downstream specialty. Our longer term outlook for lithium is as bullish as it's ever been. We expect to see continued strong demand in energy storage and synthesis applications drive global market growth. Overall, we forecast global lithium demand will grow at approximately 6% to 7% through the next 3 to 4 years.

Going forward, the energy storage segment is expected to be the premium growth driver for the overall market. Traditional, non-transportation energy storage applications have been growing in the 15% range over the last 5 years. With the increasing focus on electric vehicles, the future growth of lithium to support new battery solutions is expected to be significant. We believe that lithium supplied to the transportation segment could account for over 40% of overall demand by 2020.

Today, we also to our view [ph] -- 8 months ago at Investor Day, we see even more opportunities in transportation particularly in Asia for applications such as intercity buses and mopeds. Transportation application should gain traction in the 2013 to 2015 timeframe. All else being equal, this will drive the overall market growth rate to near 20% in the 2015 to 2020 period. Therefore, across the 2010 to 2020 period, we expect trend line lithium market growth to approximately 12%.

Despite the recent weather-related challenges, the 30% capacity expansion at our operations in Argentina continues to progress and we expect to bring the capacity onstream by the end of this year. Accounting for the resident's time necessary to concentrate the additional brine via solar evaporation, we will begin to supply the market with additional product mid-next year. In addition to serving the demand growth of existing customers, we expect the project to significantly lower our overall cost to improve process technology. Given the favorable long-term outlook, we're already reviewing plans for further expansion, which will likely bring on the stages beginning in 2014. We will see some additional near-term capital requirements as a consequence of these plans. This capital will build toward enhancing the natural gas supply to our facility, as well as preparing the evaporation ponds for greater productivity.

Let me now turn to BioPolymer. BioPolymer currently accounts for over 70% of Specialty Chemicals revenues or approximately $650 million. BioPolymers comprised of 2 roughly equally sized market-oriented businesses focused on food ingredients and pharmaceutical excipients, respectively. Leading market divisions across these businesses account for more than 90% of BioPolymer revenues.

We support both businesses through a common infrastructure that delivers cost-efficient products, core technology and administrative support. Although the food and pharmaceutical markets have different market and competitor drivers, we are able to drive the premium for our products in both businesses by focusing on segments where our products add clear value to our customers ability to sustain and grow their own products.

BioPolymer's core markets are growing approximately 4% to 5% per year. Over the last 5 years, BioPolymer has grown its top line at an annual rate of 10% through a combination of organic growth and bolt-on acquisitions. Over the same period, our growth on an earnings basis has been in the low to midteens resulting an overall margin improvement. We believe that today we are among the most profitable suppliers of food ingredients or pharmaceutical excipients.

Our success is driven by delivering superior value to our customers. The core expertise is driving improvement in our customers product life cycle through the combination of new technology, improved cost and use and global reach.

Partnering with category leaders has been and will remain critical to our success. In food ingredients, we supply the majority of the global food processors and have strong positions with many regional leaders throughout the world. Our products and technology impart critical functionality, including suspension stability in beverages and desired texture to a wide array of food products.

In Pharmaceuticals, we have a similar presence with almost key innovators in addition to strong positions with leading generic players. In our experience, it has been the leading customers who have grown the fastest and have the best ability to commercialize new products around the world, whether internally developed or acquired.

As these customer expand globally, we've tended to grow with them. Our products and technology provide performance attributes to pharmaceutical tablets across a broad array of active ingredients and manufacturing processes. Core strengths of BioPolymer include a thorough understanding of both the customer application and product technology, deep capabilities in core materials science and process technology and the demonstrated ability continually drive productivity and efficiency improvement.

Our success in this latter area have led us to have the lowest delivery cost to customers in almost all of our product lines. Our approach is two-pronged. First, in our operations, we have a strong culture that annually targets to drive out cost to define plans focused on raw material yield improvement, energy savings and low capital capacity debottlenecking.

The second advantage stems from how we go to market. Our sales, marketing, innovation and administrative structure is lean and efficient and is significantly lower in cost than most of our competitors. We believe that we can continue to drive productivity to successfully offset cost increases and thus, deliver superior value to our customers.

Going forward, our ability to grow our business at above-market rates while expanding margins is based on successfully executing against 4 strategic imperatives. Specifically, we must invest in core products to further strengthen our leadership positions, expand our position in rapidly developing economies, leverage our customer relationships and application expertise by broadening our specialty food ingredient portfolio and expand our pharmaceutical tablets excipient product and technology offering.

Let me comment briefly on each of these imperatives. With regard to strengthening our leadership position in core products, we are investing to expand capacity to support growth. We have recently completed an expansion of our Cork, Ireland MCC plant are currently expanding our MCC capacity in Newark, Delaware and our alginate capacity in Norway. We're also evaluating a project to build greenfield MCC capacity in Asia. Our innovation investments include significant focus to introduce new higher functionality attributes to our key products as well as process technology advancements to improve cost and quality.

Next, we will continue to focus on growth in rapidly developing economies. Today, these markets account for approximately 1/3 of BioPolymer revenues and continue to offer significant growth opportunities. For example, in Asia, revenues generated this year will be more than double those generated just a few years ago. China and India currently represent BioPolymer's largest markets after the United States and the U.K. Our new Asia innovation center in Shanghai will accelerate our ability to tailor products to local markets and develop new technology we will leverage on a global basis.

We will also open a new application laboratory in Singapore in the third quarter to support further growth in Southeast Asia. Of our 7 BioPolymer technology centers, 5 are located in rapidly developing economies. Outside of Asia, Latin America and Eastern Europe, where we have relatively low penetration, are also key regions of focus. On average, these markets will continue to offer attractive growth that is more than double the growth rates we're seeing in developed regions.

To expand our portfolio in food ingredients, the next imperative, we are pursuing several organic and external strategies that would broaden our position into other value-added food ingredients. Our deep applications knowledge in texturants provides the foundation for us to leverage our capabilities into adjacent texture ingredients. We're also selectively evaluating specialty ingredient opportunities that can move us outside of texture, broadening our capability to serve our customers in key markets, such as dairy and beverage.

Finally, in pharmaceuticals, we have a great franchise with strong customer relationships and expertise in tablet excipients that provide a solid basis to broaden our portfolio. We're focused on adding products which expand capabilities and control the release technologies and in partnering with our customers to improve the potential of drugs with poor solubility. Overall, BioPolymer is an excellent platform that is well positioned for top and bottom line growth.

In summary for Specialty Chemicals, I feel good about where we are and where we're headed. We have a track record of strong performance, attractive organic growth opportunities in both BioPolymer and Lithium and a portfolio of attractive external opportunities to augment that growth. Given that, I'm confident we will achieve our Vision 2015 objectives.

I'll now turn the call over to Kim Foster, and we'll be happy to answer any questions during the Q&A. Kim?

W. Foster

Thanks, Michael, and good morning, everyone. Throughout the call this morning, you've heard examples of attractive organic growth opportunities across our businesses, and you've heard of our intend to fully capitalize on these opportunities. Based upon these opportunities, we intend to accelerate certain projects in soda ash, lithium and BioPolymer that were originally just outside the planning horizon of Vision 2015. As we reported on last quarter's call, this would increase capital spending by about $200 million to $400 million in the next 5 years. These expansions will add to the organic growth rate of our businesses within the Vision 2015 planning horizon and will provide returns comfortably in excess of our return on invested capital goal of 15% for the company. In fact, we have accelerated the spending on certain dimensions of these projects into 2011, an upward revision since our last conference call. This accelerated spending will add approximately $40 million to our 2011 capital forecast, raising our outlook for 2011 capital expenditures to $200 million.

As Pierre reviewed in soda ash, we see continued demand growth across the next 5 years and beyond, particularly in export markets. Our Granger facility is now running well and ramping up to the full 500,000 tons per year rate by year end. Nonetheless, even with this Granger volume, the U.S. soda ash industry is forecast to remain supply constrained in 2011 and beyond. Given this favorable outlook, we've begun a process design and detailed engineering work for a second phase capacity addition at Granger. The intent of the second phase is to bring Granger capacity to 1.2 million tons per year by 2014. Our concept is to utilize the existing solution mining technology from our West Waco plant and the design of our second phase Granger expansion. This new design will enable us to scale capacity beyond 1.2 million tons in the future.

As Michael outlined in Lithium, we have a 30% capacity expansion currently underway in Argentina that is projected to come on stream at the end of this year with product hitting the market mid-next year.

Across Lithium end markets, we see enhanced near-term growth particularly in energy storage, both in current battery applications and as transportation applications raised the growth curve in the 2013 to 2015 period. Accordingly, we are currently reviewing plans for further expansion beyond the one currently underway and will do so in stages. The near-term capital requirements for this staged approach will be directed towards enhancing the natural gas supply, serving our facility as well as preparing the evaporation pumps for greater productivity.

And in BioPolymer, we're planning to continue capacity expansions to support the very attractive growth Michael shared with you, particularly for microcrystalline cellulose or MCC, serving food ingredients and pharmaceutical markets in rapidly developing economies.

In the first quarter, we completed expansion of our Cork, Ireland MCC production. Another MCC expansion is currently underway at our Newark, Delaware facility and this capacity is projected to come on stream near the end of 2012. Also underway is an expansion of our alginate facility in Norway, and beyond these projects, we're evaluating the placement of a grassroots MCC facility in Asia.

Moving to cash flow. Our forecast for free cash flow is revised to include the 2011 component of these projected expenditures. As a reminder, free cash flow is defined as after all uses except acquisitions, dividends and share repurchase. Our projected free cash flow for 2011 is projected to be $200 million to $225 million versus our previous forecast of $300 million. This revised projection incorporates 3 additions: higher growth capital of $40 million I just discussed; the payment of a $45 million fine concerning alleged violations of competition law in the hydrogen peroxide business in Europe during the period 1997 to 1999. We recorded an expense for this on our 2006 income statement. In the second quarter of this year, we are notified that the judgment was affirmed and the fine should be paid in the third quarter. And finally, cash of $5 million to $10 million, which is already provisioned for restructuring, primarily related to the sodium percarbonates business we're exiting in Europe.

Moving to our balance sheet. On June 30, gross consolidated debt was $623 million and debt net of cash was $436 million. This level of cash on hand of $187 million gives us optionality, for example, to easily fund $100 million in share repurchase. Regarding the share repurchase, our strategy of returning cash to shareholders continues to balance prudent financial policy with the competing demands of investments to support organic growth and capital to support selected external investments. As we evaluated these factors in the second quarter, we repurchased $10 million essentially to offset dilution from stock option exercises, something we've consistently done and intend to continue doing. However, we remain fully committed to Vision 2015 objective of returning significant cash to shareholders in the form of cash dividends and stock buybacks. Within this context, in addition to the capital investments to support organic growth prospects and focused external opportunities, we will repurchase 100 million of our stock in the third quarter in open market transactions under the existing Board authorizations.

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

Pierre Brondeau

Thank you, Kim. Regarding our outlook for the full year 2011, we have raised the midpoint of the range versus our previous outlook and now expect adjusted earnings of $5.60 to $5.80 per diluted share, a 15% increase over 2010 at the midpoint of the range. Our Agricultural Products segment expect to achieve its eighth straight year of record earnings, up approximately 10% versus a year ago, driven by strong market conditions across most region and the contribution of new and recently introduced products, while increasing spending on growth initiatives and absorbing higher raw material cost.

As Michael outlined, Specialty Chemicals is expected to deliver its sixth straight year of record earnings, up approximately 10% led by the seventh straight year of record earnings in BioPolymer and enhanced by sales gain in Lithium Specialties, partially offset by increased spending on growth initiatives and higher raw material cost.

In our Industrial Chemicals segment, we expect the highest earning growth, up approximately 30% driven by broad-based sales gain across soda ash and peroxygen and the continued favorable mix shift towards specialty peroxygen.

Moving to our outlook for the third quarter of 2011. We expect adjusted earnings of $1.25 to $1.40 per diluted share, a 12% increase versus the year-ago quarter at the midpoint of the range. In Agricultural Products, we expect segment earnings to be leveled to the year ago, as growth in Latin America is offset by higher raw material costs, increased spending on target growth initiatives and lower North American sales due to less favorable weather conditions in the last year. In Specialty Chemicals, we project earnings to increase approximately 5% as higher volume and selling prices in BioPolymer and Lithium Specialties are partially offset by increased spending in growth initiative in BioPolymer, higher raw material costs and higher weather-related operating cost in our Argentina Lithium facility. In Industrial Chemicals, earnings are expected to be up approximately 30%, driven by higher selling prices in soda ash and peroxygen and the benefit of volume growth in soda ash export market. Based on our outlook for a 15% earnings growth for the full year and 12% earnings growth for the third quarter at the midpoints of their respective ranges, this is implying a very strong fourth quarter with earnings growth in excess of 20%. With the healthy demand we continue to see across our businesses, the diverse end markets we serve and our strength in a rapidly developing economy, we're comfortable with that fourth quarter outlook.

With that, I thank you for your time and attention. I'll be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Kevin McCarthy with Bank of America.

Kevin McCarthy

Would you comment on the current level of soda ash prices in China and also your view of manufacturing cost in China through the 2 primary synthetic production methods there, how are those trending?

Mark Douglas

Kevin, this is Mark. With regards to China, we're seeing prices at very high levels for the domestic market well in excess of $300 a metric ton. That's increased over the last few months and indeed, the last couple of quarters, as we've watched a number of the input costs increase, certainly for energy. I think a lot of people are aware of the energy restrictions in China that's occurred over the summer period. That's made prices move higher, we've seen input cost in terms of labor and other raw materials. So we have seen that ramp-up continuing. We've also seen a ramp-up for both technologies that are used, the how process and the Solvay process. Obviously, they're very different in terms of their input costs and also output given one methodology gives you a product you can sell into the fertilizer industry. So overall, we see those prices remaining high. We don't quite know where they'll go in the future given that there is capacity coming on in China in the fourth quarter. But certainly, from an export standpoint, we've seen prices stay high, and as you know, ANSAC has been following that activity.

Kevin McCarthy

Very good. If I may switch gears to Ag. Milton, I was wondering if you could comment on the joint venture that you've announced in Argentina. I generally think of FMC as having concentrated on Brazil, and at least on a relative basis, somewhat deemphasized Argentina over the years. Is that fair to say? And what has changed? Maybe you could talk about some of the upside opportunity that you see in making these investments?

Milton Steele

Kevin, Milton. Thank you. Argentina, we've been selling in Argentina for many, many years but relative to Brazil, it’s been relatively small. We continue to believe or we do believe today that this is an important agricultural market, the second-largest in Latin America, and what we want to do is increase our market access capabilities. So we formed the joint venture with a local company, which will give us more distribution capabilities on the ground, and we expect to grow our business in this market significantly over the next 5 to 10 years.

Kevin McCarthy

Okay. And then finally, if I may, just a couple of financial questions for Kim. Kim, can you comment on why interest expense would've increased sequentially when net debt declined $141 million versus the first quarter? What is behind that please?

W. Foster

Yes, two things, Kevin. One is that the way that if you looked at the daily net debt levels throughout the second quarter, you'd see that the real drop literally happened in the last few days of the quarter, which was predominantly associated with the credit terms that the Ag business has. So while there was a drop, it really was only a few -- it happened in a few days. In addition, we had some short-term borrowings in Brazil, which have a higher interest rate. We borrow from 3 separate sources there, but on average, the interest rates there are probably 300 to 400 basis points higher than the U.S. So it's a mixture of both of those things.

Operator

Our next question comes from Mike Sison with KeyBanc.

Michael Sison - KeyBanc Capital Markets Inc.

In terms of soda ash expanding Granger in the second half of the year, could you just talk about a little bit the demand environment? There's some macro concerns out there, and I just wanted to sort of hear your perspective of sort of how demand is shaping up for that business and maybe the expansion. Is the expansion more maybe supply constrained elsewhere in the world that gives you the opportunity to expand there?

Mark Douglas

Mike, this is Mark. When you look at the world of soda ash, I think we have the world's lowest-cost facility in Wyoming, and that allows us to compete with synthetic soda ash primarily out of Asia. On the basis of the macro demand, flat glass, container glass, chemicals, detergents are all what drives soda ash. And as you can imagine, in rapidly developing economies, the overall consumption of soda ash is less compared to places like Western Europe and North America. So our export business is growing rapidly. That's where the Granger expansion is targeted, and quite frankly, we're competing very successfully against the synthetic producers. As I just said, their costs are increasing. So even with a demand on a macro level that may be choppy in some parts of the world, we are very, very confident that we'll be able to compete with synthetic producers anywhere in the world. Hence, the expansion of 500,000 tons, plus the next look for Granger, which will take us up to a potential 1.2 million tons, all of that targeted at the export markets.

Michael Sison - KeyBanc Capital Markets Inc.

Got it. And the startup costs for Granger, are those done?

Mark Douglas

Yes, pretty much so. I mean we had all the costs virtually in the second quarter. And now Granger, as Pierre said earlier, ramping up to full production.

Michael Sison - KeyBanc Capital Markets Inc.

Great. And then last question. Pierre, when you think about the fourth quarter, it's clearly going to be the stronger of the 2, the growth there has to be pretty exciting relative to the third quarter. What are the put and takes? It tends to be the most difficult quarter for chemicals to predict. Do you think visibility is still pretty good for you as you head into that quarter?

Pierre Brondeau

Yes. Actually, let me take, if you don't mind, an opportunity to talk a bit about our full year and third quarter and fourth quarter because we actually feel quite strong about the way the year is unfolding and we feel quite strong about the demand or positioning for our product. First, the third quarter, as you know, we are guiding with an EPS about -- if you take the midpoint of our guidance, so about 12% versus last year. And there is certainly a number which could be viewed as slightly below what a company like ours could be delivering in such a quarter but there is some very well-defined event which will be over in this quarter. First, we were talking about soda ash. That business has 2 things which are happening. First of all, you know that every 5 or 6 quarters, we move the longwall where we are mining. Last year, it was in Q2. This year, it's in Q3. And Granger, as much as the startup costs are being done, last year, operating with full staffing on the ramp-up capacity, so we have the cost of a full plant, but we are not producing at full capacity yet. That is about a $7 million impact on the quarter versus normal operations. We've talked about the 2 snowstorms and the yield issues we have in Lithium, we believe it's going to be an impact of about $3 million in the third quarter and then the weather in North America for Ag business, and we qualify that versus a normal quarter at about $5 million. So you put all of those elements together, which are very well defined. You're talking about a $15 million impact on the quarter. If you would add that number to what we are forecasting as earnings, you would have a year-on-year earnings growth for the third quarter, which would be comfortably above the 20%. So now moving on to the fourth quarter. Obviously, it proved, sequentially, the long haul, it will be done; Granger will be operating at full capacity; lithium, the yield issues will be behind us; and from an Ag standpoint, we get into the Brazil season, which we have no reason not to believe will be another very strong season for us. So if you look at the fourth quarter, it is pretty much a quarter which is shaping normally for our 2 business, Specialty and Ag, and shaping very strong for industrial because the one-off we talked about will be over, Granger will be at capacity and we have a very strong price situation. So the year looks well on target, maybe with the distribution across the 2 quarters, which is not your regular distribution, but we are quite comfortable with this forecast.

Operator

And we'll go to the Peter Butler with Glenhill Investments.

Peter Butler - Glen Hill Investments

Where do you expect your tax rate to be in the second half and next year? And over the longer term, what direction is your tax rate going?

W. Foster

Peter, this is Kim. As far as 2011 go, and we're talking about the tax rate on adjusted earnings, we have guided that at 29%. We still believe it will stay at 29%, which is of course a mixture of higher domestic tax rates and lower foreign tax rates. As it relates to the future, now you're asking me to get into the mind of what's going on in Washington, D.C. and project what is going to happen from that perspective. What I can tell you from a modeling perspective is we looked out in Vision 2015, we assumed that we would be able to keep effective tax rate to about 29%.

Peter Butler - Glen Hill Investments

Okay, okay, okay. And the other question I have is also financial, Kim. What is your company targeting for debt-to-market cap?

W. Foster

Debt-to-market cap. Peter, I'll have to go back and think about that for a second. So what we are targeting, how we're targeting to maintain our net debt is we're targeting to continue to maintain strong credit rating in the same credit rating that we have today, which gives us a leverage ratio of about one. And as you look at the Vision 2015 projections and why we said we could add an additional $1 billion of cash to return to shareholders or for growth is we are projecting to maintain that targeted debt leverage ratio of one. So that's actually how we've been planning and that's what driving our stock buyback here in the third quarter.

Operator

Our next question from Bill Young with ChemSpeak.

William Young - Longbow Capital

Back on soda ash. You emphasized how much of the growth you expected, predominantly in the export market. So 2 questions. Where do you stand now? What percentage of your soda ash is exported? And what might it be by your 2015 goal year? And also could you give us an idea on a percentage basis, how much your soda ash prices have increased 2011 versus 2010?

Mark Douglas

Bill, this is Mark. When you look at our total export versus domestic, we're just above 50% in terms of our export volume versus domestic, and that will continue to increase a couple of percentage points as we go through the remainder of the period. But to 2015, it'll be obviously higher than it is today, somewhere in the 50% to 55%, 60% range. Most of that expansion, as I said earlier, will go into the export market. In terms of overall pricing, your second point, we had -- if you remember back to the first quarter and late last year, we said our prices would be up in the single digits, mid-single digits to high single digits in terms of dollars per ton. Right now, we're looking at low single digits in terms of dollars per ton right across every ton that we sell.

Operator

And next we'll go to Rosemarie Morbelli with Gabelli & Company.

Rosemarie Morbelli - Gabelli & Company, Inc.

Pierre, could you give us a little more details on the rich opportunities you see for organic growth?

Pierre Brondeau

Sorry, we couldn't hear the question.

Rosemarie Morbelli - Gabelli & Company, Inc.

All right. Sorry. I was wondering if you could give us a little bit more detail on what you refer to as a rich opportunity for organic growth?

Pierre Brondeau

Actually, let me just make a quick correction. I think Mark said low single digits for pricing. It's low double digits. That's what we see for the year. In the script, I think we talked about 12% or something like that, so that's the number, low double-digit. I think we are seeing growth today in multiple places. First of all, as a company, we're seeing the same kind of growth rate in most of our businesses as we were forecasting like in Ag chemical, but there is a few places where the demand is strengthening and the pricing is positive. So we do have today a very strong demand and above what we are expecting in our food BioPolymer business for MCC and especially in China and Asia for dairy product, hence, the reason for which we are looking today at bringing on a new grassroot capacity in China. So that is a part of the company which is looking stronger from a growth standpoint than what we're expecting. The other one is Lithium. On Lithium, the endpoint is still the same as what we were seeing by 2020, but we are seeing, especially in China, a faster adoption of lithium battery for some heavy vehicles and small motorcycle and we see more of an impact in 2013 to 2015 that we were seeing before, which is accelerating the need for us to increase our capacity. Peroxygen, we are very successful with our move toward more specialty and it's also a place where we do have opportunities in the oil and gas field or in the food field, we are seeing more growth opportunities. So that's one of the reasons for which we're looking maybe at enhancing our capital spending by $200 million to $400 million because of all of those segments where we are seeing opportunities beyond what we had in 2015 plan.

Rosemarie Morbelli - Gabelli & Company, Inc.

Did I understand properly, Pierre, you are actually increasing your CapEx expectations by an additional $200 million to $400 million from what you talked about during Vision 2015?

Pierre Brondeau

That's correct. We are more than increasing, I would say accelerating those -- our spending, which we would have to face at some point, but I think with the demand for MCC, the acceleration of the demand for Lithium and the robustness of our soda ash business, we are moving forward that spending. So from a spending rate standpoint, really $200 million to $400 million will be increased in between now and 2015 versus what we said at the last presentation of Vision 2015.

Rosemarie Morbelli - Gabelli & Company, Inc.

And on lithium for battery applications. Have you seen a pickup already? Or I mean outside of the heavy vehicles in China, have you seen anything else going on regarding the regular vehicles that would be higher growth sooner than you expected for that particular category?

Pierre Brondeau

No, no. For the light vehicle, the passenger vehicle, we are still looking at significant change in demand by the 2016-2017 timeframe. I think there is a specific speed-up of the demand for the 2 types of vehicles I talked about, but that's the only place where we see a faster demand.

Operator

Our next question is from Laurence Alexander with Jefferies.

Jeffrey Schnell - Jefferies & Company, Inc.

This is Jeff on for Laurence. Could you talk a little bit about your raw materials? How much raw material inflation did you experience in each segment and when do you expect raw material pressures to peak? And then also if you could quantify any gap between pricing and raw materials and when do you expect pricing to catch up?

Pierre Brondeau

Sure. Let me talk about the 3 business groups and how it impacts the company as a whole. We are seeing raw material inflation in our Specialty business, mostly on the BioPolymer side, and on our Ag business on pet chem product but also other products. So there is cost inflation on raw material we had since the beginning of the year and accelerating a bit in the second half, but we do have more than 100% coverage of that raw material price increase with our own cost increase, with our own price increase. So there is no impact on earnings of our Specialty and Ag business with raw material because we are just covering with price. On the industrial side, that is a positive price growth situation. We have very low inflation on raw material cost on the ICG side. And if you look at the low double-digit pricing increase this year, that is from stating into a $40 million, almost all of it going to the bottom line.

Operator

Our next question is from Dmitry Silversteyn with Longbow Research.

Dmitry Silversteyn - Longbow Research LLC

I just want to clarify. I heard it said a couple of different ways, so I just want to make sure I understand. The low double-digit price increase in soda ash, was that in percentage terms or in dollar-per-ton terms?

Mark Douglas

Dollar-per-ton terms, Dmitry.

Dmitry Silversteyn - Longbow Research LLC

Okay. I just thought I heard like a 12% number from Pierre, so that's what's caught my attention.

Pierre Brondeau

Yes. Sorry, dollar.

Dmitry Silversteyn - Longbow Research LLC

Okay, got it. Second question, as you look at adding capacity for Granger and taking it up to 1.2 million tons over the next couple of years, we've had an announcement from the #3 player in the U.S. that's thinking about, at least publicly thinking about adding capacity. I was wondering if that's kind of part of your thinking about the overall market size or market capacity in North America. And also, we've had about 6 months or so of Solvay operating outside of ANSAC umbrella in the export markets. Can you comment if you've observed any changes in behavior or price dynamics or contract negotiations or supply dynamics with Solvay being basically a third force now in the export markets?

Mark Douglas

Dmitry, this is Mark. I'll try to answer both of your questions there. In terms of somebody else expanding in North America, actually it confirms where we're going in terms of the quality of natural soda ash out of the U.S. and our ability to compete. We see in what we would call "ANSAC land" in terms of the next few years, roughly about 2.5 million tons of growth that can absorb natural soda ash. So what we have moving now is 0.5 million up to 1.2 million if we approve the second stage of Granger by the end of 2014. So as far as we're concerned, it makes sense that somebody else would look to expand as well. It reaffirms our position in terms of the world market. In terms of your second piece, I have really no comments on Solvay. I mean you can tell by our growth and our ability to get pricing that ANSAC is a very powerful force in soda ash, and we're very happy with our position, so I really have no comment on Solvay.

Dmitry Silversteyn - Longbow Research LLC

Okay, fair enough. Secondly, did I understand you correctly from the breakdown you gave in the Industrial Chemicals land that your North American volumes were down? Is that the right way to think about that? You said overall sales were up 4%, but I assume there was a lot of pricing mix in there.

Mark Douglas

Yes. No, demand is not down in North America. Demand is up in the very, very low single digits, but it's not down at this point.

Dmitry Silversteyn - Longbow Research LLC

Okay, all right. I guess I'm going to have to revisit that because you talked, like I said, you talked about North American sales being up 1%. So again, I mean I'm assuming there's some pricing in there, but maybe not.

Pierre Brondeau

Just one comment. 1% from North America, it's me who gave that number at the beginning of my script, maybe, but it was FMC-wide. So the entire company is up 1% in North America.

Dmitry Silversteyn - Longbow Research LLC

Very good, okay, very good. And then secondly, just talking about the peroxygen acquisition that you guys did in Europe and sort of the rationale behind it. I mean I understand that you're trimming some unattractive businesses in Spain and you're looking to expand your peroxygens or you're looking to, I guess, develop a global peroxygens business. At the end of the day, this is, I don't think you will disagree, this is not necessarily a market where you want to invest for growth and be more of a cash cow market to support growth in BioPolymers and crop protection. So within that context, can you comment on how attractive you see some of the Industrial Chemical niches? And should we not be surprised when we see you make acquisitions in this area?

Pierre Brondeau

Yes. Let me address that in the context of the total company. I think we are moving out of businesses where we are not competitive, which are not profitable, and that's the case of the percarbonate and that was the case of the phosphate business. Now we do have a growth strategy in Lithium, in BioPolymers and Ag. But we do also have a growth strategy in our Industrial Chemical. Now we all understand that the soda ash business is a supply-demand and cost situation. Now peroxygen is a very different story. Peroxygen, we are operating in a world where we are moving away from commodity into higher-margin specialty product in growing application, whether it's oil and gas, whether it's food application. Those are providing great opportunities for growth in the future. What is very critical for us to grow in the peroxygen is to have a global footprint for this business, so doing small acquisitions, which allow us to position a portfolio in growing segment in specialty high margin is very central to what we are planning to do.

Operator

Our next question is from John McNulty with Credit Suisse.

Alina Khaykin

This is actually Alina Khaykin sitting in for John. Just a few questions. First, on the Lithium expansion, can you comment on how much of the $20 million to $25 million that you plan to spend is going to hit in 3Q and 4Q?

Pierre Brondeau

The all capital spending is hitting our cash flow for the $25 million in 2011. How much of the remaining spending, maybe Michael, you have the remaining spending in 2011? Or Kim?

W. Foster

Kim. Let me just, in a big picture way, and of course we disclosed this, we've spent a little short of $80 million in the first 6 months. And so when you think of $200 million, which is the forecast we gave for the full year, certainly, the majority therefore of that is backloaded and most of it is associated with the expansions that we've talked about, the Lithium expansion and the expansion at the studies we're doing at Granger and also the investment that we're doing in the Newark expansion. And let me turn it over to Michael to see if he'd like to add anything to that.

D. Wilson

I don't have the spending for that project by quarter in front of me. I'm sure that's something we can get for John later.

Alina Khaykin

Okay. And also actually, just one more question on the BioPolymer business or MCC expansion. Can you comment on how much you plan to spend for that in the second half of the year, when you're evaluating the additional MCC expansion?

W. Foster

I believe the number that's forecast for the second half for the Newark expansion is somewhere in the neighborhood of $5 million in 2011 spending. Again, the prior expansion in Cork has been completed. It's completed at the end of the first quarter, so this is an expansion that will mostly take place during the course of 2012.

Pierre Brondeau

The cost of the total expansion is about what? $15 million to $20 million?

W. Foster

It's in that neighborhood, yes.

Pierre Brondeau

Yes. If you think the $15 million to $20 million for Newark with about 25% of it being spent this year.

Operator

And next, going to Mike Harrison with First Analysis.

Michael Harrison - First Analysis Securities Corporation

I was hoping, Michael, that you could maybe provide a little bit more detail on the weather issues in Argentina. I was just trying to get a better understanding, is the impact that you're seeing there, is it more cost-related in terms of snow impacting transportation or freight or anything like that? Or is it mostly volume related and related to the operations and the dilution of the brine ponds, et cetera? And then as you think about the impact you saw this quarter, should we expect that to worsen in the third quarter?

W. Foster

Mike, I think really the impacts are twofold, and they cover both areas they talked about. I mean the issues that we had during the second quarter from the heavy precipitation, and let me just put that in context, we've had more rainfall year-to-date in Argentina at the Salar than we normally have on an annual basis so, and it was compounded in the form, at least in 2 significant storms, that happened late, there were snowstorms that happened late in the second quarter. So the primary issues have been logistics-oriented from a standpoint that it's washed out roads, there's been road blockages occurring both between Pocitos in Argentina and the Salar and also for the route across the Andes to get product and to get raw materials and supplies from Antofagasta in Chile. So because of that, we did have lower efficiency, lower production during the second quarter. That kind of puts us behind the 8 ball, given the fact that we've been capacity constrained throughout the year anyway. So we think most of those issues are behind us with the weather. The supply lines are now open. We don't expect the ongoing logistics costs. But however, in order to maintain production in the second quarter, we pulled down the brine levels in the ponds fairly significantly, and we have to give the brine time to recover both in terms of solar evaporation. And then compounding that was the fact that the additional precipitation then dilutes the concentration of lithium in the brines, so you have a bit yet longer in order to get it concentrated to the usable concentration. So that's really the impact that we anticipate in the third quarter. The good news is, is that the demand is very strong, so as we get those brines to the right concentrations, we will process them and we fully expect to make up the volume then in the fourth quarter. And that's why I referenced the fact that effectively, this has an earnings shift effect of earnings from the third quarter to the fourth quarter.

Michael Harrison - First Analysis Securities Corporation

And with respect to pricing in Lithium, I know you guys announced the price increase as it did Shemetal [ph]. Conspicuously absent there is SQM. Do you need SQM to follow on a price increase for lithium carbonate in order to make that successful?

W. Foster

I don't think it's absolutely necessarily given our supply-demand situation and the tightness of supply. Clearly, SQM is the large global leader in lithium carbonate. Their actions are relevant in the marketplace. But again, I think that's muted by the supply-demand situation. And just to provide a little detail for those, I mean, I think it was in June we announced the price increase in lithium carbonate as well as the other primary salts. In lithium carbonate, it was 20%, in the other salts, it ranged between 15% and 25%. And then yesterday, we announced a price increase in downstream products, including butyllithium, which in the neighborhood of 8%.

Michael Harrison - First Analysis Securities Corporation

And then a question on the Ag business. I was just hoping to get a better understanding of how much North American volumes were down year-on-year. How much of that could you point to as the pull-through from Q1? And how much was related to the weather impact? And then should that weather impact actually worsen in terms of the impact on volumes as we look into Q3?

Pierre Brondeau

Yes. I'm going to ask Milton to comment because the second quarter for Ag was very strong and was significantly up in sales and earnings. So the second quarter, even if there were some shift into the first quarter and there were weather-related performance issues in North America, we benefited in the second quarter from the very strong performance in Asia, Europe and Latin America. So just on Ag, generally speaking, first quarter was very strong, second quarter was extremely strong, now third quarter is a place where we're going to get hit by the North American impact weather issue more before we get into the fourth quarter with a Latin America season, which we have more reason to believe will be strong. So the only issue around earnings, and we talked about the $5 million impact, we believe, versus normal weather would be only into the third quarter. So Milton, if you want to add?

Milton Steele

Yes, Pierre, and Mike, I don't know if I can add much more. We sort of quantified what the impact will be in the third quarter. It has to do with some of our post-emergent herbicides and evaluation on cotton. As you know, Texas is probably in one-in-a-century drought and has lost a lot of cotton, there will be no need for defoliants. So we see this as weather-related and Pierre has put a quantification of that of around $5 million. I don't know what else I can add to that than has already been said.

Pierre Brondeau

And all in all, I mean we feel very good about the performance of the Ag business year-to-date, and we feel good in the fourth quarter and we have this third quarter where we rely more on North America with a better weather situation. But all in all, if you look on a full year basis, we're going to end up with a very strong year and the eighth year of record earnings for this business.

Operator

That will conclude the Q&A session. I'll turn it back to Mr. Brondeau for any closing remarks.

Pierre Brondeau

All right. Thank you very much, and thank you very much for staying with us beyond the time. We had a lot of things we wanted to share with you. We feel good about where we are. We feel strong about the rest of the year, and we hope you do too. Thank you very much, and we'll be in touch soon.

Operator

Ladies and gentlemen, this concludes the FMC Corporation Second Quarter 2011 Earnings Release Conference Call. You may now disconnect.

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