Corteva reports sales up 6% to $4.88 B in 1Q 2023

Corteva, Inc. (NYSE: CTVA) ("Corteva" or the "Company") reported financial results for the three months ended March 31, 2023.

First Quarter 2023 Highlights

• First quarter 2023 net sales rose 6% versus prior year with gains in both segments. Organic¹ sales increased 10% in the same period, led by EMEA² and North America².

• Seed net sales grew 7% and organic¹ sales increased 10%. Price gains were led by continued execution on the Company's price for value strategy and recovery of higher input costs. Volume declines were driven by a shortened Safrinha season, supply constraints in Latin America, and the exit from Russia.

• Crop Protection net sales grew 5% and organic¹ sales increased 10%, led by value capture in EMEA. Price gains reflected strong execution in response to cost inflation. Volume gains from continued penetration of new products, including Enlist™ and Arylex™ herbicides, were more than offset by product exits and delays in Latin America and APAC due to weather.

• GAAP income and earnings per share (EPS) from continuing operations were $607 million and $0.84 per share for the first quarter 2023, respectively. Operating EBITDA¹ and Operating EPS¹ were $1.23 billion and $1.16 per share, respectively. Strong price execution, product mix, and productivity actions more than offset inflation and currency headwinds.

• The Company increased full-year 2023 guidance³ to include the impact of the Biologicals acquisitions and expects net sales in the range of $18.6 billion to $18.9 billion. Operating EBITDA¹ is expected to be in the range of $3.55 billion to $3.75 billion. Operating EPS1 is expected to be in the range of $2.80 to $3.00 per share.

"Corteva delivered a solid start to 2023, reflecting focused execution coupled with continued demand for our innovative technology solutions. Our strategic actions to focus our portfolio in areas where we deliver differentiated value to customers are translating into accelerated growth in new product sales, continued margin expansion, and higher quality earnings.

"Ag fundamentals remain constructive as tight global grain supply continues to put pressure on ending stocks, keeping crop prices above historical averages and farm income levels healthy. We also see customer buying behaviors beginning to normalize as supply chain reliability improves.

"We are on track to deliver our 2025 financial objectives as our leading R&D organization continues to invest in new and differentiated technologies to drive a more sustainable global food and fuel system," said Chuck Magro, Corteva Chief Executive Officer.

Company Updates

• New Product Launches During the Quarter Reinforce Value of Innovation Pipeline

• The Company announced plans for the commercial launch of Optimum^® GLY Canola – a new, proprietary glyphosate trait technology intended to deliver enhanced weed control and a wider window of herbicide application, compared to first-generation glyphosate trait technology – so farmers have more choices and flexibility for effective weed management.

• The Company also announced the commercial launch of Vorceed™ Enlist^® Corn, which combines three modes of action for above-ground insect protection and three modes of action for below-ground insect protection including RNAi technology. It also includes tolerance to four herbicides – glyphosate, glufosinate, 2,4-D choline and FOPs – to help improve resistant weed management.

• Finally, the Company announced the commercial launch of Adavelt™ Active – a novel fungicide with a new mode of action that protects against a wide range of diseases that can impact crop yields. The Company received product registrations in Australia, Canada, and South Korea, and plans to offer Adavelt™ Active in additional countries in the future, pending regulatory approvals.

• Company Acquires Symborg and Stoller, Two Leading Biologicals Companies

• During the quarter, the Company acquired Symborg, an expert in microbiological technologies based in Murcia, Spain; and Stoller, one of the largest independent companies in the Biologicals industry with an expertise in plant health and nutrition, based in Houston, Texas.

• These investments reinforce the Company's commitment to providing farmers with sustainable tools that deliver optionality, enhanced value, and increased productivity.

• These acquisitions, when combined with its internal innovation capabilities, cement Corteva's Biologicals business as one of the largest in the world, with a platform positioned to accelerate growth within the rapidly expanding biologicals market.

• Company Announces Collaborations to Bring Sustainable Solutions to Farmers

• During the quarter, the Company announced a multi-year collaboration with Bunge to develop and commercialize soybean varieties with greater protein content, optimized amino acid profiles and lower levels of anti-nutritional factors for the animal feed industry. In-line with Corteva's commitment to delivering sustainable innovation to its customers, these products present a potential new value stream opportunity for farmers while giving feed compounders a more nutritious option to reduce their use of synthetic additives, lower costs, and shrink their carbon footprint.

• Separately, the Company announced a commercial collaboration with Bunge and Chevron U.S.A. Inc., a subsidiary of Chevron Corporation, to introduce proprietary winter canola hybrids intended to increase availability of plant-based oil feedstocks for the biofuel market. As part of a new double crop system in the southern U.S., this innovation will deliver solutions to farmers to increase productivity and income on their acres, while contributing to market expansion for lower carbon fuel options. Further, winter canola can act as a cover crop to enhance soil health and make farming practices even more sustainable.

Seed Summary

Seed net sales were $2.7 billion in the first quarter of 2023, up from $2.5 billion in the first quarter of 2022. The sales increase was driven by a 17% increase in price and a 2% favorable impact from portfolio and other, partially offset by a 7% decline in volume and a 5% unfavorable currency impact.

Price gains were driven by strong execution globally, led by EMEA, as farmers prioritize yield to help offset inflation. Pricing actions more than offset currency impacts in EMEA. Volume declines were driven by a shortened Safrinha season due to delayed soybean harvest, supply constraints in Latin America corn, and the 2022 decision to exit Russia. Unfavorable currency impacts were led by the Turkish Lira and the Ukrainian Hryvnia.

Segment Operating EBITDA was $652 million in the first quarter of 2023, up 15% from the first quarter of 2022. 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 165 basis points versus the prior-year period.

Crop Protection Summary

Crop Protection net sales were approximately $2.2 billion in the first quarter of 2023 compared to approximately $2.1 billion in the first quarter of 2022. The sales increase was driven by an 11% increase in price, partially offset by a 5% unfavorable currency impact and a 1% decline in volume, including the impact of product exits.

The increase in price was broad-based and mostly reflected pricing for the value of our differentiated technology, higher raw material and logistical costs, and currency in EMEA. Continued penetration of new products, including Enlist™ and Arylex™ herbicides, was more than offset by delays in the Latin America and Asia Pacific seasons due to unfavorable weather conditions and product exits. Unfavorable currency impacts were led by the Turkish Lira and the Euro.

Segment Operating EBITDA was $603 million in the first quarter of 2023, up 23% from the first quarter of 2022. Price execution, productivity actions, and favorable mix more than offset higher input costs, including raw material costs, and the unfavorable impact of currency. Segment operating EBITDA margin improved by more than 390 basis points versus the prior-year period.

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 farm balance sheets and income levels remain healthy, leading growers 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 updated its previously provided guidance³ for the full-year 2023 – increasing sales and earnings expectations for this period, including the impact of its Biologicals acquisitions. Corteva expects net sales in the range of $18.6 billion to $18.9 billion, growth of 7% at the mid-point. Operating EBITDA¹ is expected to be in the range of $3.55 billion to $3.75 billion, growth of 13% at the mid-point. Operating EPS¹ is expected to be in the range of $2.80 to $3.00 per share, growth of 9% at the mid-point, which reflects higher earnings and lower average share count, partially offset by forecasted higher effective tax rate and interest expense.

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.

Click here to download the full press release, including segment detail and reconciliations of non-GAAP and GAAP measures, or visit the Corteva Investor Relations website.

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 5 for further discussion.