Corteva Reports Second Quarter and First Half 2022 Results, Raises Full-Year Net Sales and Earnings Guidance

Corteva, Inc. (NYSE: CTVA) (″Corteva″ or the ″Company″) reported financial results for the second quarter and six months ended June 30, 2022.

First Half 2022 Highlights

• First half 2022 net sales rose 11% versus prior year with gains in both segments. Organic1 sales increased 14% in the same period with gains in all regions.
  
  

• Seed net sales grew 3% and organic¹ sales increased 6% year over year, with notable gains in EMEA², partially offset by the reduction of corn acres and canola volumes in North America2 . Price was up 7% globally, led by continued execution on the company’s price for value strategy and recovery of higher input costs.
  
  

• Crop Protection net sales grew 24% and organic¹ sales increased 28%, led by North America² and Latin America. Volume gains were driven by continued penetration of new products, including Enlist™ and Arylex™ herbicides and Onmira™ fungicide, and strong early demand in Latin America. Price gains reflected strong execution across all regions in response to cost inflation.
  
  

• GAAP income and earnings per share (EPS) from continuing operations were $1.58 billion and $2.16 per share for the first half of 2022, respectively. Operating EBITDA¹ was $2.76 billion, a 17% improvement over prior year on strong price execution and volume gains in all regions and productivity actions, partially offset by inflation and currency headwinds. Operating EPS¹ was $2.61 per share, up 19% compared to prior year.
  
  

• Management increased full year 2022 net sales and earnings guidance³. Net sales is expected to be in the range of $17.2 billion to $17.5 billion and Operating EBITDA¹ is expected to be in the range of $2.95 billion to $3.10 billion. Operating EPS¹ is expected to be in the range of $2.45 to $2.60 per share.
  
  

• The Company announced a ~7% annualized dividend increase effective in the third quarter – reflecting continued focus on returning capital to shareholders.
  

Company Updates

Company Announces Completion of Strategic Portfolio Reviews

• In connection with its previously announced business realignment, the Company completed strategic portfolio reviews, aimed at refining the Company’s strategy and accelerating short-term and long-term margin growth.
  
  

• The outcome of this analysis is the Company’s plan to exit non-strategic geographies and product lines while emphasizing its core markets and crops, representing over 95% of its current total net sales and 99% of its current total Operating EBITDA¹.
  
  

• These portfolio decisions will position the Company to focus investment on delivering greater value to growers through more differentiated and sustainably advantaged solutions, leveraging its pipeline to drive advancements in global food security and climate change.
  
  

• The Company is also right-sizing and optimizing its cost structure to enable greater agility and accountability for the performance of its two business units, Seed and Crop Protection.
  
  

• As a result, the Company expects to record total restructuring and other charges of approximately $400 million through the second quarter of 2023, roughly half of which represents cash payments.
  
  

• In the second quarter of 2022, the Company recorded $68 million of restructuring and other charges, of which $45 million related to the Company’s previously announced exit from Russia.
  
  

• As a result of these actions, the Company expects to achieve more than $200 million in run-rate savings by 2025.
  
  

• Additional information on the outcome of the strategic portfolio reviews will be shared on September 13th at the Company’s 2022 Investor Day.
  

Enlist™ System Accelerates Market Penetration for 2022

• The Company delivered approximately $980 million in sales for the Enlist™ system during the first half, an increase of more than 60% versus the first half of 2021.
  
  

• The Company raised its Enlist E3™⁴ 2022 market penetration outlook to greater than 45% of U.S. soybean acres, up from greater than 40% expected previously.
  
  

• The Company estimates that greater than 80% of Enlist E3™⁴ acres will receive an Enlist™ herbicide application, reflecting strong market demand and positive grower feedback on the ease and simplicity of the system.
  

Summary of Second Quarter 2022

For the second quarter ended June 30, 2022, net sales increased 11% versus the same period last year. Organic¹ sales rose 13%, with increases in all regions.

Volume grew 4% versus the prior-year period. Demand for new and differentiated Crop Protection products, coupled with strong early demand in Latin America, drove double-digit net sales growth for the segment, with an organic1 sales increase of 28%. Lower seed volumes were driven by the reduction of corn acres and supply constraints in North America canola.

Price increased 9% versus prior year, reflecting continued execution on the Company’s price for value strategy and recovery of higher input costs.

GAAP income from continuing operations after income taxes was $1.00 billion in second quarter 2022. Operating EBITDA¹ for the second quarter was $1.72 billion, up 18% compared to the year-ago period.

Seed Summary

Seed net sales were $3.9 billion in the second quarter of 2022, up from approximately $3.8 billion in the second quarter of 2021. The sales increase was driven by a 7% increase in price, partially offset by a 1% decline in volume and a 2% unfavorable currency impact.

The increase in price was driven by strong execution, with global corn and soybean prices up 6% and 8%, respectively. Lower volumes were driven by reduced corn acres in North America and supply constraints in North America canola and Latin America corn, which more than offset gains in EMEA and North America soybeans. Unfavorable currency impacts were led by the Turkish Lira and the Euro.

Segment Operating EBITDA was $1.2 billion in the second quarter of 2022, up 10% from the second quarter of 2021. Price execution and ongoing cost and productivity actions more than offset higher input and freight costs, the unfavorable impact of currency, and lower corn acres and canola volumes in North America. Segment operating EBITDA margin improved by approximately 170 basis points versus the prior-year period.

Seed net sales were $6.5 billion in the first half of 2022, up from approximately $6.3 billion in the first half of 2021. The sales increase was driven by a 7% increase in price. This gain was partially offset by a 1% decline in volume and a 3% unfavorable currency impact.

The increase in price was driven by strong execution globally, led by North America and EMEA, with corn and soybean prices each up 7% globally. The decline in volume was driven by reduced corn acres in North America and supply constraints in North America canola and Latin America corn, which more than offset gains in EMEA and North America soybeans. Unfavorable currency impacts were led by the Turkish Lira and the Euro.

Segment Operating EBITDA was $1.8 billion in the first half of 2022, up 4% from the first half of 2021. Price execution and ongoing cost and productivity actions more than offset higher input and freight costs, the unfavorable impact of currency, lower volumes in North America, and the unfavorable year-over-year impact from the remeasurement of a previously held equity investment.

Crop Protection Summary

Crop Protection net sales were approximately $2.3 billion in the second quarter of 2022 compared to approximately $1.8 billion in the second quarter of 2021. The sales increase was driven by a 14% increase in volume and a 14% increase in price. These gains were partially offset by a 2% unfavorable currency impact and a 1% unfavorable portfolio impact.

The increase in volume was driven by continued penetration of new products, including Enlist™ herbicide and Onmira™ fungicide, coupled with strong early demand in Latin America. The increase in price was broad-based, with gains in all regions led by North America and Latin America, and mostly reflected pricing for higher raw material and logistical costs. Unfavorable currency impacts were led by the Euro. The portfolio impact was driven by a divestiture in Asia Pacific.

Segment Operating EBITDA was $509 million in the second quarter of 2022, up 38% from the second quarter of 2021. Pricing and volume gains and productivity actions more than offset higher input costs, including raw material costs, and the unfavorable impact of currency. Segment operating EBITDA margin improved by more than 200 basis points versus the prior-year period.

Crop Protection net sales were approximately $4.4 billion in the first half of 2022 compared to approximately $3.5 billion in the first half of 2021. The sales increase was driven by a 16% increase in volume and a 12% increase in price. These gains were partially offset by a 3% unfavorable currency impact and a 1% unfavorable portfolio impact.

The increase in volume was driven by continued penetration of new products, including Enlist™ and Arylex™ herbicides and Onmira™ fungicide, with new product sales up more than 60% compared to the same period last year. In addition, the Company experienced strong early demand in Latin America.

The increase in price was broad-based, with gains in all regions led by North America, and mostly reflected pricing for higher raw material and logistical costs. Unfavorable currency impacts were led by the Euro and the Turkish Lira. The portfolio impact was driven by a divestiture in Asia Pacific.

Segment Operating EBITDA was $1.0 billion in the first half of 2022, up 45% from the first half of 2021. Pricing and volume gains and productivity actions more than offset higher input costs, including raw material costs, and the unfavorable impact of currency. Segment operating EBITDA margin improved by more than 320 basis points versus the prior-year period largely driven by pricing execution and new and differentiated technology.

2022 Updated Guidance

The outlook for agriculture remains robust despite recent commodity price volatility. The Company expects record demand for grain and oilseeds in 2022, which should support commodity prices as ending stocks remain under pressure. Grower balance sheets and income levels remain healthy despite increased input costs for fuel and fertilizer, leading customers to prioritize technology to maximize return.

As a result, the Company updated its previously provided guidance³ for the full year 2022 – increasing sales and earnings expectations for this period. Corteva expects net sales in the range of $17.2 billion to $17.5 billion, which at the mid-point represents expected net sales growth of 11% for the year. Operating EBITDA¹ is expected to be in the range of $2.95 billion to $3.10 billion, which at the mid-point represents expected Operating EBITDA¹ growth of 17% for the year. Operating EPS¹ is expected to be in the range of $2.45 to $2.60 per share. The Company is not able to reconcile its forward-looking non-GAAP financial measures to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of its control, such as Significant Items, without unreasonable effort.

1. Organic Sales, Operating EPS and Operating EBITDA are non-GAAP measures. See page A-5 for further discussion. 2. North America is defined as U.S. and Canada. EMEA is defined as Europe, Middle East and Africa. 3. The Company does not provide the most comparable GAAP measure on a forward-looking basis. See page 7 for further discussion. 4. Enlist E3™ soybeans are jointly developed by Corteva Agriscience LLC and MS Technologies™.

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