During its third-quarter fiscal 2025 earnings call late last year, FMC (FMC) slashed its quarterly dividend by 86% to $0.08. FMC stock crashed after that release, as the company also missed estimates by a mile.
While FMC has yet to release its Q3 2026 earnings, the company provided guidance earlier this month that was nothing short of a shocker. The company forecast revenue between $65 million and $125 million, which was a fraction of the $840 million to $900 million it had previously guided. Although the firm attributed the sharp drop to “commercial actions” — having lowered prices for some products with channel customers — markets did not buy that argument and sent FMC stock to a multiyear low.
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Meanwhile, although FMC has maintained the same dividend since it lowered the payout last year, its dividend yield has spiked to a juicy 6% thanks to the sharp fall in its share price. With that in mind, let's explore whether FMC could lower or suspend its dividend yet again.
www.barchart.com What Challenges Does FMC Face?
Companies lower dividends when they face serious headwinds, of which FMC is facing aplenty, both on the macro and company-specific level.
On the macro level, crop prices have been weak, while input costs — particularly fertilizers and fuel — have risen sharply this year. According to FMC, buyers have been cautious, cutting discretionary expenses as well as responding by shifting to cheaper generics and/or reducing the number of applications. It does not help that demand for insecticides, which account for the bulk of FMC’s revenues, has been particularly weak amid lower insect pressure.
To make things worse, FMC has lost patent protection on some of its most profitable chemicals, such as insecticide ingredient Rynaxypyr. Patent expirations open the gates for lower-priced generics, which leads to higher competition and pricing pressure.
FMC's balance sheet is also stretched, and the company had net debt (gross debt minus cash) of $3.8 billion at the end of June. In 2025, FMC reported adjusted EBITDA of $843 million, 7% lower than the previous year. The company’s EBITDA is set to plunge further this year, which would worsen its leverage ratios.
www.barchart.com FMC Amended Its Debt Covenants in April
Alongside the Q3 guidance release, FMC said that while it expects to comply with debt covenants as of the end of the quarter, the firm “intends to engage in discussions with its bank group on potential further modifications to its covenants over the next year to provide greater flexibility.”
Notably, the financial covenants under FMC’s credit facilities were last amended in April, and if the earnings continue to tumble, it might need further relief from lenders. Last week, S&P Global put FMC’s credit ratings on “CreditWatch with negative implications,” which implies a “high probability” of a rating cut over the next 90 days. The credit rating agency, however, expects FMC to “successfully negotiate additional relief” with lenders in case it needs to seek amendments.
FMC Is Working on Deleveraging
FMC is working on deleveraging its balance sheet through asset sales and expects net debt to fall to $2.6 billion by the end of this year. The company's annual cash outflow toward dividends is also in the ballpark of $50 million. That number is not exorbitant, but given FMC's precarious financial position, it's not small change, either.
The question about a possible dividend cut popped up during the Q2 earnings call. FMC CEO Pierre Brondeau responded that a potential cut is “certainly a topic we will have with the Board and continue to have with the Board.” However, Brondeau stressed that “absolutely no decision has been taken at this stage.”
With FMC now in a worse position than it was during the previous earnings call, I believe a dividend cut or suspension is something the company should consider. While a dividend cut alone won't bail out FMC, it would be yet another step toward deleveraging. That's something the company badly needs.
On the date of publication, Mohit Oberoi had a position in: FMC . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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