AgroPages-Corteva sales down 3% in Q2 2019-Agricultural news

Corteva, Inc. reported financial results for the quarter ended June 30, 2019 and provided updated guidance for the full year.

Commenting on the Company's second quarter 2019 performance, Chief Executive Officer Jim Collins said, "On June 1, 2019, we completed an important separation milestone, becoming a global, standalone, pure-play agriculture company - taking this step during an extraordinary period in our industry. In our initial quarter as a standalone company, we delivered technology-driven, organic growth in nearly all regions despite continued pressure from the unprecedented weather events that challenged near-term market conditions in North America."

Collins continued, "We remain committed to executing on our priorities and adjusting our actions focused on delivering continuous value for our customers and shareholders. We are delivering on our cost synergy targets, with an additional $200 million realized in the first half, and we continue to demonstrate our commitment to customer-centered innovation through the acceleration of new product launches that are helping to address real-time challenges facing growers around the world."

Summary of Second Quarter 2019

Weather-related planting delays and lower than expected planted area in corn, soybeans, and canola pressured sales in North America, and together with an unfavorable currency impact, drove a decrease in net sales of 3 percent in the second quarter 2019 versus the same period last year. Organic sales growth in Latin America was driven by strong early demand for Crop Protection products, while EMEA and Asia Pacific organic growth was primarily driven by strong demand for new products, including Isoclast™ insecticide, Zorvec™ fungicide and Arylex™ herbicide.

Local price declined 1 percent in the second quarter 2019 versus the year-ago period, with price gains in Rest of World2 more than offset by decreases in North America due to higher replant in corn and competitive pricing pressure on soybeans. Volumes were essentially flat versus the prior-year period due to 5 percent lower volumes in North America on weather-related impacts, offset by performance across the Rest of the World2on volume growth of 14 percent led by Latin America on pre-season early demand. Currency represented a headwind of 2 percent compared with the same quarter last year, with impacts driven predominately by the Euro.

GAAP net income from continuing operations totaled $0.5 billion in the second quarter 2019, down 50 percent versus the same quarter last year on a pro forma basis. Operating EBITDA1 for the second quarter 2019 was $1.5 billion, a decrease of 6 percent as compared to the same period last year on a pro forma basis. Improvement in Crop Protection segment operating EBITDA from new products and cost savings from synergies were more than offset by currency impacts, lower Seed results due to competitive pricing pressure in soybeans, higher replant in corn and lower Seed margins.

Summary of First Half 2019

Net sales for the first half 2019 were $9 billion, down 6 percent as compared to the prior-year period. Volumes were down 3 percent, with gains in Latin America, EMEA and Asia Pacific more than offset by the declines in North America. Price was flat for the period, with price improvements primarily due to strong demand for new products offset by North America. Currency was a headwind of 3 percent compared with the prior-year period.

Pro forma net income from continuing operations totaled $0.6 billion for the first half 2019, down 48 percent versus the same period last year. Pro forma operating EBITDA1 for the first half 2019 was $2 billion, down 13 percent as compared to the prior-year period. Declines in Crop Protection and Seed were primarily due to lower sales from the impact of weather delays and reduced planted area in North America, competitive pricing pressure, lower margins and currency offsetting cost savings from synergies.

The Company reported GAAP EPS from continuing operations of $0.63, with operating EPS1 of $1.42 for the second quarter 2019. Pro forma GAAP EPS for the first half 2019 was $0.77 with pro forma operating EPS1 of $1.75.

Outlook

Corteva revised its full year guidance of pro forma operating EBITDA2 to a range of $1.9 billion to $2.05 billion. Net sales for the full year are expected to be down about 3 percent.

Commenting on the Company's outlook, Collins said, "Despite the first-half challenges, we continue to see strength across our global business. Looking ahead to the second-half, we expect ongoing, solid adoption for high-demand products and anticipate continued ramp-up of recent product launches to continue driving high-value sales globally. We remain focused on delivering cost-synergy commitments and expect to see ongoing improvements from productivity actions in the second half. Overall, we remain firm in executing against our plans, capitalizing on the strength of our industry-leading product portfolio and business model in the face of a historic external environment."

Company Updates

• Share Repurchase Program and Quarterly Dividend: On June 26, 2019, Corteva announced the authorization of a $1 billion share repurchase program and its first common stock dividend. The share repurchase program is expected to be completed in three years. The inaugural quarterly common stock dividend is expected to return ~$400 million to shareholders annually. Collectively, these announcements reinforce the Company's ongoing commitment to return value to shareholders.

• Enlist E3TM(4) Licensing Update: In the second quarter 2019, Corteva sold more than 150,000 units of Enlist E3TM soybeans in North America and began recognizing licensing income related to the proprietary trait technology for over 100 executed licenses to date. Enlist E3TM soybeans are estimated to be on greater than 10 percent of North American planted soybean acres in 2020.

• Label Expansion for Transform® WG insecticide: On July 12, Corteva Agriscience announced the fully restored and expanded federal label from the U.S. Environmental Protection Agency for Transform® WG insecticide with Isoclast™ active. Eight new crops, including corn and alfalfa, are on the expanded label, which also restores the previously labeled use for soybeans and cotton - and provides farmers with a distinct mode of action in the management of destructive insects. In the second quarter 2019, Isoclast™ insecticide sales were approximately $40 million, a more than 70 percent increase from prior year.

Crop Protection Results

Crop Protection net sales were $1.9 billion in the second quarter 2019, down 1 percent from the second quarter 2018. A 3 percent increase in volume was more than offset by a 4 percent decline in currency. Rest of World organic growth was 21 percent compared to the prior-year period.

Volume growth in the segment was primarily driven by strong early demand for spinosyns insecticides and seed applied technologies in Latin America, and sales from new products, including ZorvecTM fungicide, IsoclastTM insecticide and ArylexTM herbicide, which increased 73 percent from prior year. This growth was partially offset by the impacts of wet weather in North America, which negatively impacted corn and soybean herbicide and nitrogen stabilizer applications. Unfavorable currency impacts were driven predominately by the Euro.

Crop Protection operating EBITDA was $0.5 billion in the second quarter 2019, up 6 percent from the second quarter 2018 on a pro forma basis. Cost synergies, ongoing cost reductions and sales from new products more than offset the unfavorable impact of currency.

Crop Protection net sales were $3.3 billion for the first six months of 2019, down 2 percent from the prior-year period. The decrease was primarily due to a 5 percent decline from currency, partially offset by a 2 percent increase in local price and a 1 percent increase in volume. Rest of World organic growth was 17 percent compared to the prior-year period.

Unfavorable currency impacts primarily due to the Euro were partially offset by increases in local price. The increase in volume was driven by sales from new product launches, including ZorvecTM fungicide and IsoclastTM insecticide, which increased 56 percent for the first half, and strong early demand for spinosyns insecticides in Latin America, partially offset by the impacts of wet weather in North America.

Crop Protection pro forma operating EBITDA was $0.7 billion for the first six months of 2019, down 10 percent from the first six months of 2018. The unfavorable impact of currency, volume declines in North America and higher input costs more than offset cost synergies and ongoing cost reductions.

Seed Results

Seed net sales were $3.7 billion in the second quarter 2019, down 4 percent from the second quarter 2018. The decrease was primarily due to a 2 percent decline in local price, a 1 percent decline in currency, and a 1 percent decline in volume. Rest of World organic growth was 10 percent compared to the prior-year period.

The decrease in local price was driven by competitive pressure in soybeans in North America, as well as an increase in corn seed replant in the U.S. Unfavorable currency impacts were due primarily to the Euro. The decline in volume was driven by significant weather-related planting delays and flooding in North America, leading to a reduction in expected planted acres for corn, soybeans, and canola. Volume declines were partially offset by corn sales recovered from the first quarter weather-related delays and a change in the route-to-market in several markets, coupled with increased demand in EMEA for corn and sunflower seed, as well as strong early demand for corn seed in Latin America.

Seed pro forma operating EBITDA was $1.0 billion in the second quarter 2019, a decline of 11 percent compared to the second quarter 2018 on a pro forma basis. Competitive pricing pressure and lower margins more than offset cost synergies in R&D and ongoing cost reductions.

Seed net sales were $5.7 billion for the first six months of 2019, down 8 percent from the first six months of 2018. The decrease was primarily due to a 4 percent decline in volume, a 3 percent decline in currency, and a 1 percent decline in local price. Rest of World organic growth was 7 percent compared to the prior-year period.

The decline in volume was driven by weather-related impacts in North America and the impact of early deliveries of corn seed in the fourth quarter 2018, which were partially offset by favorable corn seed demand in EMEA. Unfavorable currency impacts were driven predominately by the Euro. The decrease in local price was driven by the impact of the North American market.

Seed pro forma operating EBITDA was $1.4 billion for the first six months of 2019, a decline of 15 percent compared to the first six months of 2018 on a pro forma basis. Volume declines in North America, competitive pricing pressure and the unfavorable impact of currency more than offset cost synergies in R&D and ongoing cost reductions.