FMC Corporation Buy Pitch Middlebury SIC Materials & Utilities Group

Background/Company Profile Food Machinery and Chemical Corporation is an American Chemical Company founded in 1883 in Philadelphia, Pennsylvania. FMC Agricultural Solutions. Sells chemicals, insecticides, herbicides and fungicides. FMC Lithium. Manufactures lithium for use in a wide range of lithium products used in energy storage, polymers and chemical synthesis application.

Investment Thesis FMC’s Corp will soon be performing a spinoff of its highly successful lithium business that we believe will generate new value for shareholders. The planned spinoff allows a low risk- high reward opportunity to invest in a lithium business that can generate fantastic revenue growth with very little competition in the industry. We find FMC to be undervalued

Stock Details

FMC Agriculture FMC acquired a significant portion of the DuPont Crop Protection Business to transform FMC into a tier-one leader and the fifth largest global provider in the agricultural chemicals market. The acquisition included Dupont’s herbicides and insecticides. FMC’s agricultural business has shown slow but steady growth over the past several years. The acquired insecticides are predominantly based on patent-protected active ingredients and are growing well above market patterns. The growth out of this stock is not primarily being driven by the agriculture business but the business is solid.

FMC Lithium FMC Corp produces lithium that is 99.5% pure. This company is the highest grade lithium supplier in the world. The lithium is mined in Salar del Hombre Muerto in the Andes Mountains. FMC has a global business with lithium processing around the world and FMC refines the lithium that it mines into ingots and rods. The lithium business accounts for 12% of revenue.

Lithium Demand As the demand for electric cars is predicted to increase in the future, Lithium demand is predicted to spike significantly. Projections for the Lithium market support that there will be an overabundance of demand with a lack of supply. Lithium is a material that has a variety of uses. It is used in metal alloys for aircraft, electric batteries and heat resistant glass.

Competitors There are a variety of competitors in the agricultural sector. This is a relatively consolidated industry but FMC has proven that it can create reliable revenues with an extensive agricultural and pesticide division. In the Lithium sector there are very few major players. This is because to produce large amounts of lithium requires access to the Lithium Triangle in South America. The only companies with access to this triangle are FMC Corp, Abemarle Corp, Sociedad Quimica y Minera de Chile and Orocobre. Of these corporations, only FMC and Abermarle are primary producers in the industry.

Ratios FMC Corp Albemarle Dow Dupont Monsanto Orocobre (Not Traded On NYSE) Price to Earnings 19.58 187.35 70 21.9 52.74 Price to Book 3.78 3.1 1.475 7.88 4.5 Return on Equity 23.1% 1.47% 2.31% 43.6% 9.47% Debt to Equity 1.12 0.39 0.3 1.05 N/A Current Ratio 1.65 2.06 1.91 1.28 8.12

Balance Sheet

FMC Lithium Spinoff Increased focus on FMC Core business allowing for better performance for FMC Agriculture Increased value is created for shareholders when compared to a simple sale. There is team in place that already has proven success at generating revenue. Huge potential upside if the spinoff succeeds and the Lithium business continues to improve its returns. https://www.krannert.purdue.edu/faculty/mcconnell/publications/The%20Stock%20Price...2013%20jpm.2015.42.1.143.pdf

DCF Cash Flow Y1 465.7 Bear Case = $93 Base Case =$103 Bull Case=114$ WACC= 8.41% Final Price Per Share= $103.6

Risks The risk of failed spin off: while this is always a possibility, the chance of failure seems to be low; they are making preparations to “spin off” within a year. Lithium Oversupply: more businesses are shifting toward lithium in order to tap into the rapidly expanding battery market. Decrease in oil prices: Alternative energy sources (lithium) will have to keep lowering prices to make themselves viable in the energy market. This low price standard could indicate some turbulence in lithium production.

Analyst Consensus Price

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