Corteva delivers year-to-date sales and earnings increases over prior year
Nov. 5, 2020
Corteva, Inc. (NYSE: CTVA) (“Corteva” or the “Company”) Wednesday reported financial results for the third quarter and nine months ended September 30, 2020
3Q 2020 Results Overview
- Net sales for third quarter 2020 were down 3% versus prior year. Organic sales grew 9%. Volume and price improvement on continued penetration of new products were more than offset by the impact of currency and seasonal shifts in Seed.
- Crop Protection net sales grew 9% and organic sales increased 21% with sales gains in every region except North America. Volume and price improvement were primarily driven by the continued adoption of new Crop Protection products in Latin America, Asia Pacific, and EMEA.
- A return to a normalized North America season drove lower Seed volumes in third quarter 2020, resulting in lower year-over-year sales in Seed, with net sales decreases of 23%, down 14% on an organic basis.
- GAAP loss and earnings per share (EPS) from continuing operations were $(390) million and $(0.52) for the third quarter 2020, respectively.
- Operating EBITDA1 was a loss of $(179) million, improved 14% versus prior year. Operating EBITDA margin improved 120 basis points. Volume gains and favorable mix in Crop Protection, coupled with execution on synergies and productivity, more than offset timing shifts in Seed and currency headwinds to drive margin expansion.
- Merger cost synergies and productivity were approximately $40 million for the third quarter and remain on track to be $230 million for the full year. SG&A expense as a percentage of sales improved 175 bps on currency, ongoing productivity, cost controls, and lower commissions.
- The Company continues to maintain a strong liquidity position – and took further action during the quarter to strengthen its cash flow focus, improving net working capital turns 7% versus prior year.
“Corteva’s performance year to date in 2020 reflects the strong and consistent execution from our global team. We delivered sales and earnings growth during the first three quarters of the year despite continued market volatility and uncertainty. Our portfolio of new technology was a critical driver in this progress, as we delivered volume and price improvements in almost all regions through the launch and ramp-up of our new Seed and Crop Protection products, including Enlist E3™, Qrome®, Inatreq™, Arylex™ and Rinskor™, as well as continued demand for key differentiated technologies such as our supplyconstrained Spinosyns. In Seed, our price for value strategy resulted in margin expansion, even in the face of ongoing challenges and competitive pressures. Additionally, we continued to fortify our already strong balance sheet and liquidity position by preserving cash and implementing further actions to reduce costs and optimize productivity. Reflecting our commitments on disciplined capital allocation and strong cash generation, we are accelerating our continued actions to return cash to shareholders – as evidenced by our decision to pull forward our previously announced share buyback.
We affirmed our full year guidance for 2020 – and remain confident in the path we have outlined. Our teams around the world are tightly managing all levers as we focus on finishing 2020 strong – and, as we look ahead to 2021, ensuring we are best positioned to maximize the potential of our industry-leading innovation pipeline and global distribution system while continuing to drive margin enhancement, accelerate productivity improvement and deliver increased value for our shareholders.”
– James C. Collins, Jr., Corteva Chief Executive Officer
Price for Value Strategy Strengthens Competitive Position Globally
Corteva is strengthening its position in key Seed markets through its superior product performance and price for value strategy. Building on the ongoing ramp-up of Qrome® in North America, Corteva has driven year-to-date Seed price increases in Asia Pacific, Latin America and EMEA on the strength of its product portfolio.
Driving Additional Progress on Accelerated Enlist E3™ Launch
The Company continues to rapidly ramp-up its Enlist E3™ technology – and has implemented changes to its Seed production plan to meet expected demand in 2021. With strong early orders as an indicator of adoption increases, Corteva remains confident in its market penetration expectations.
Previously Approved Capacity Expansion on Track to Accelerate Growth
Corteva continues to drive sales growth on its supply constrained, high-margin Spinosyns insecticides. Year-to-date overall insecticide sales increased 5%, driven by continued capacity expansion progress. These actions are expected to enable $1 billion in sales of Spinosyns insecticides by 2023, an expected 30% increase over 2020 estimates.
Summary of Third Quarter 2020
For the third quarter ended September 30, 2020, net sales declined 3% versus the same period last year, as organic sales increased 9%.
Volume increased 7% versus the prior-year period. Gains were driven primarily by continued adoption of new Crop Protection products, and were partially offset by the impact of seasonally lower Seed volumes due to a more normalized planting season in North America as compared to the prior-year period.
Local price increased 2% versus third quarter 2019. Higher prices in Latin America were more than offset by the impact of currency, which represented a headwind of 11% globally. Currency mitigation and new products drove price gains in Latin America, EMEA, and Asia Pacific.
GAAP loss from continuing operations after income taxes was $(390) million in third quarter 2020. Operating EBITDA for the third quarter was a loss of $(179) million, a 14% improvement compared to the same period last year. Volume gains and favorable mix in Crop Protection, coupled with ongoing cost synergies and productivity efforts, more than offset currency and the impact of timing shifts in Seed.
The Company continues to drive working capital and productivity improvements, with a focus on cash flow. As a result, Corteva delivered a 7% improvement in Net Working Capital turns.
Summary of Year to Date 2020
For the year-to-date period ended September 30, 2020, net sales increased 1% versus prior year, with an organic sales increase of 6%.
Volume increased 4% versus the year-ago period. Year-todate volume gains reflect increased demand for new products globally and volume growth attributable to the recovery of planted area in North America.
Local price increased 2% versus the prior-year period, with price increases in most regions. Currency represented a headwind of 4%, driven primarily by the impact of the Brazilian Real.
GAAP income from continuing operations after income taxes was $657 million year to date in 2020. Operating EBITDA for the year-to-date period was $1.85 billion, an increase of 5% as compared to the same period last year on a pro forma basis. Favorable mix and volume gains, coupled with ongoing productivity actions, more than offset the unfavorable impact of currency.
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