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Rating Action:

Moody's Upgrades FMC Corp.'s Sr. Unsecured Ratings To Baa2; Outlook Stable

04 Jun 2007
Moody's Upgrades FMC Corp.'s Sr. Unsecured Ratings To Baa2; Outlook Stable

Approximately $ 940 million of long-term debt securities affected

New York, June 04, 2007 -- Moody's Investors Service upgraded FMC Corporation's ("FMC") senior unsecured debt ratings to Baa2. The upgrade reflects the significant progress the company has made in improving its credit metrics and reducing contingent liabilities. Moody's also believes that a continued favorable demand outlook for its products will translate into improved performance for 2008 and 2009. FMC's last rating action was a move to investment grade in June of 2005. The ratings outlook is stable.

The following summarizes the ratings activity:

$45 million debentures due 2011 - raised to Baa2 from Baa3

Medium-term notes due 2008 - raised to Baa2 from Baa3

Senior unsecured industrial revenue bonds due 2007 to 2035 -- raised to Baa2 from Baa3

$600 million revolver due 2010 - raised to Baa2 from Baa3

The Baa2 ratings reflect FMC's moderate leverage; product, customer, and geographic diversification; good business scale with 2006 revenues exceeding $2.3 billion; and leading market positions in such products as peroxides, carrageenan, and soda ash (the company typically has number one or two market share in most of its product lines). In addition, Moody's believes FMC's results are somewhat less susceptible to the economic cycle than other chemical manufacturers due to the size of their agricultural and biopolymers businesses. Additionally, Moody's believes that the impact of high petrochemical feedstock and energy costs is less than many other commodity chemical producers. The upgrade is also supported by improving operating margins, the strong performance of the Agricultural segment, and improving supply/demand fundamentals within the Industrial Chemicals segment. However, the ratings also consider agricultural market risks including the seasonality of sales, the significant influence of weather, and the effect of crop prices and government subsidies on farmers' use of FMC's herbicide and insecticide products. The ratings also reflect continued spending for environmental remediation, an underfunded pension balance, material operating leases, and the cyclicality of the Industrial Chemicals segment.

The ratings are further supported by FMC's moderate leverage. With FMC's successful actions to both reduce and refinance debt reported interest expense in 2006 was about $42 million versus just over $80 million in 2004. The company publicly stated its intention to reduce net debt to $600 million by the end of 2006. At the end of 2006 net book debt was well under this target at about $460 million. The ratings upgrade also incorporates more favorable industry dynamics within FMC's soda ash product line, whereby soda ash is the largest component of Industrial Chemicals revenues (FMC markets soda ash through its 87.5% interest in FMC Wyoming Corp.). Soda ash effective capacity utilization has significantly improved from the particularly weak levels experienced in 2000 and 2001 (just over 85%), and since 2005 operating levels are close to 100% for operating units in the US. Moreover price increases announced by the industry have significantly improved operating performance. Moody's recognizes that it has taken time for the company to realize the full benefit of these price increases as in the past a significant portion of customer contracts contain price restrictions. Most of these restrictions expired by the end of 2006.

The ratings also consider the strong performance of FMC's Agricultural segment, driven by a favorable global farm economy and beneficial crop and product focus in Latin America. The Agricultural segment's EBITDA had been steady at about $100 million over the three years ending 2003 and increased to just over $182 million in 2006. EBITDA margins, adjusted for one time items have improved to above 23%. Moreover, this segment should continue to post good earnings due to its focus on near-term innovation and high crop prices. Moody's also notes that insecticides (64% of Agriculture segment revenue) tend to be less susceptible to competition from GMO crops compared to herbicides. However, the ratings recognize that FMC is a small player in both insecticides and herbicides and actions by competitors could have a significant negative impact on FMC's financial performance.

The stable outlook reflects Moody's expectation that the company will sustain or increase the current volume of business and generate at least $180 million of free cash flow in 2007.

FMC Corporation is a diversified chemicals company headquartered in Philadelphia, Pennsylvania. The company reported revenues of $2.4 billion for the LTM period ended March 31, 2007.

New York
William Reed
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Brian Oak
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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