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FMC is a pure-play crop chemical producer and one of the five largest patented crop protection companies in the world. Its largest products—the diamides, which generated 39% of sales in 2023—are set to see patents expire and face increased competition from generic products in the coming years. However, a pipeline of new premium products should allow FMC to continue producing new crop chemicals as older products roll off patent. The company has a strong pipeline of synthetic and biological products that should more than replace lost diamide profits. FMC’s product portfolio currently skews toward insecticides, which generate over half of revenue, but many of its new products in the pipeline are herbicides and fungicides, which should result in a more balanced portfolio among the three primary types of crop protection chemicals as new products are commercialized over the next decade.
Key Morningstar Metrics for FMC
Fair Value Estimate: US$110
Star Rating: 5 Stars
Economic Moat Rating: Narrow
Uncertainty Rating: High
Economic Moat Rating
Our narrow economic moat rating is based on intangible assets, as FMC’s patented crop protection products provide the company with pricing power. Crop chemical companies realize premium prices on their patented products, generating returns in excess of the cost of capital. It typically takes 5-10 years to bring new products to market. In addition to years of research and development, these chemicals require regulatory approvals as they are tested for consumer, environmental, and worker safety. Approved patents have protection that lasts for 20 years from the research phase on the active ingredient, which is known as the molecule. Crop chemical companies take additional steps to extend a successful product’s patent life by up to five years by patenting the product formula and specific manufacturing processes. We expect demand for FMC’s new products will allow the company to continue to safely outearn its cost of capital over at least the next decade.
