Corteva: New products and differentiated technologies support 2022 double-digit sales growth

Corteva, Inc. (NYSE: CTVA) (″Corteva″ or the ″Company″) reported financial results for the fourth quarter and full-year ended December 31, 2022.

Full-Year 2022 Highlights

• Full-year 2022 net sales rose 11% versus prior year with gains in both segments. Organic¹ sales increased 15% in the same period with strong gains in all regions.

• Seed net sales grew 7% and organic¹ sales increased 9%, with notable gains in Latin America corn and North America² soybeans, partially offset by the reduction of corn acres and canola volumes in North America². Price was up 9% globally, led by continued execution on the Company’s price for value strategy and recovery of higher input costs.

• Crop Protection net sales grew 17% and organic¹ sales increased 20%, with broad-based gains across all regions. Volume gains were driven by continued penetration of new products, including Enlist™ and Arylex™ herbicides and Isoclast™ insecticide. Price gains reflected strong execution across all regions in response to cost inflation.

• GAAP income and earnings per share (EPS) from continuing operations were $1.22 billion and $1.66 per share for the full-year 2022, respectively, with declines versus prior year driven by lower non-cash benefits associated with legacy retirement plans. Operating EBITDA¹ and Operating EPS¹ were $3.22 billion and $2.67 per share, respectively. Strong price execution, volume gains in all regions, and productivity actions were partially offset by inflation and currency headwinds.

• The Company provided full-year 2023 guidance³ and expects net sales in the range of $18.1 billion to $18.4 billion. Operating EBITDA¹ is expected to be in the range of $3.4 billion to $3.6 billion. Operating EPS¹ is expected to be in the range of $2.70 to $2.90 per share.

• The Company expects its previously announced acquisitions of Stoller and Symborg to close in 1H2023.
  

Summary of Fourth Quarter 2022

For the fourth quarter ended December 31, 2022, net sales increased 10% versus the same period last year. Organic¹ sales rose 11%, driven by Latin America and North America.

Price increased 12% versus prior year, reflecting continued execution on the Company’s price for value strategy and recovery of higher input costs. Volume declined 1% versus the prior-year period, largely driven by lower Pioneer corn deliveries in North America, the decision to exit Russia, and the war in Ukraine, as well as wet weather and low pest pressure in Asia Pacific and drought conditions in Latin America.

GAAP loss from continuing operations after income taxes was $41 million in fourth quarter 2022, compared to income of $155 million in fourth quarter 2021. Operating EBITDA1 for the fourth quarter was $370 million, up 41% compared to the prior year.

Seed Summary

Seed net sales were $1.6 billion in the fourth quarter of 2022, up from $1.4 billion in the fourth quarter of 2021. The sales increase was driven by a 19% increase in price, partially offset by a 1% decline in volume.

Price gains were driven by strong execution globally, as farmers prioritize yield to help offset inflation. Volume declines were driven by lower Pioneer corn deliveries in North America, the war in Ukraine, and the decision to exit Russia, partially offset by strong demand for corn in Brazil.

Segment Operating EBITDA was $71 million in the fourth quarter of 2022, up from $(11) million in the fourth quarter of 2021. Price execution and ongoing cost and productivity actions more than offset higher input and freight costs, lower volumes, and increased investment in R&D. Segment operating EBITDA margin improved by approximately 510 basis points versus the prior-year period.

Seed net sales were $9.0 billion in 2022, up from approximately $8.4 billion in 2021. The sales increase was driven by a 9% increase in price, partially offset by a 2% unfavorable currency impact.

The increase in price was driven by strong execution globally, led by North America and Latin America, with global corn and soybean prices up 9% and 11%, respectively. Volume gains in Latin America corn and North America soybeans were offset by reduced corn acres in North America and supply constraints in North America canola. Enlist E3^TM(4) soybean market penetration reached over 45% of total North American acres. Unfavorable currency impacts were led by the Turkish Lira and the Euro, partially offset by the Brazilian Real.

Segment Operating EBITDA was $1.7 billion in 2022, up 10% from the same period last year. 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 increased investment in R&D. Segment operating EBITDA margin improved by approximately 45 basis points versus the prior-year period.

Crop Protection Summary

Crop Protection net sales were approximately $2.2 billion in the fourth quarter of 2022 compared to approximately $2.1 billion in the fourth quarter of 2021. The sales increase was driven by a 7% increase in price, partially offset by a 2% unfavorable currency impact and a 1% unfavorable portfolio impact.

The increase in price was broad-based, with gains in all regions led by Latin America and North America, and mostly reflected pricing for higher raw material and logistical costs and the value of our differentiated technology. Continued penetration of new products was more than offset by wet weather and low pest pressure in Asia Pacific and drought conditions in Latin America. Unfavorable currency impacts were led by the Euro, partially offset by the Brazilian Real. The portfolio impact was driven by a divestiture in Asia Pacific.

Segment Operating EBITDA was $332 million in the fourth quarter of 2022, up 9% from the fourth quarter of 2021. Price execution, favorable mix, 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 60 basis points versus the prior-year period.

Crop Protection net sales were approximately $8.5 billion in 2022 compared to approximately $7.3 billion in 2021. The sales increase was driven by an 11% increase in price and a 9% increase in volumes. These gains were partially offset by a 3% unfavorable currency impact.

The increase in price, led by North America and Latin America, mostly reflected pricing for higher raw material and logistical costs and the value of our differentiated technology. The increase in volume was driven by continued penetration of new products, including Enlist™ and Arylex™ herbicides and Isoclast™ insecticide, with new product sales up 33% compared to the same period last year. Unfavorable currency impacts were led by the Euro and the Turkish Lira, partially offset by the Brazilian Real.

Segment Operating EBITDA was $1.7 billion in 2022, up 40% from 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 approximately 330 basis points versus the prior-year period largely driven by pricing execution and new and differentiated technology.

2023 Guidance

The outlook for agriculture remains robust in 2023, with record demand for grain and oilseeds as ending stocks continue to be under pressure. Commodity prices are above historical averages, and farmer balance sheets and income levels remain healthy, leading farmers to prioritize technology to maximize return. The Company expects an increase in U.S. planted area and continues to monitor dynamic weather conditions around the world.

The Company provided guidance³ for the full-year 2023. Corteva expects net sales in the range of $18.1 billion to $18.4 billion, growth of 5% at the mid-point. Operating EBITDA1 is expected to be in the range of $3.4 billion to $3.6 billion, growth of 9% at the mid-point. Operating EPS¹ is expected to be in the range of $2.70 to $2.90 per share, growth of 5% at the mid-point, which reflects higher earnings and lower average share count, partially offset by forecasted higher effective tax rate and interest expense. This guidance does not include previously announced Biologicals acquisitions, which are expected to close in the first half of 2023.

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 6 for further discussion. 4. Enlist E3™ soybeans are jointly developed by Corteva Agriscience LLC and MS Technologies™.

Read more at https://www.corteva.com/content/dam/dpagco/corteva/global/corporate/files/press-releases/02.01.2022_4Q_2022_Earnings_Release_Graphic_Version_Final.pdf