Corteva Agriscience hosted meeting with sell-side analysts, offers 2019 guidance

Corteva Agriscience™, Agriculture Division of DowDuPont (NYSE: DWDP), hosted a meeting with sell-side analysts on February 21 in New York City. (Presentation)

 

At the meeting, James C. Collins, Jr., chief executive officer-elect, and Greg Friedman, chief financial officer-elect, reviewed strategy and priorities for shareholder value creation for Corteva Agriscience (“Corteva” or “the Company”), as it moves toward the intended separation from DowDuPont on June 1, 2019. Corteva also provided financial guidance for the full year, as well as confirm its mid-term financial targets and intended uses for cash which were both presented at its investor day in November 2018. 

 

“As a global pure-play agriculture company, Corteva is built to win through our customer-focused culture and unique ability to deliver a complete solution of innovative seed, crop protection and digital agriculture products to farmers, enabling them to maximize productivity and profitability as they work to meet rising demand in the face of fewer resources,” said Jim Collins. “We believe we have an industry leading pipeline, unique routes to market where we have leading positions and strong brands and a culture focused on driving cost competitiveness to deliver attractive returns on the investments we are making. We believe Corteva is well positioned to deliver above-market growth and to drive value for shareholders.” 

 

 

“We continue to drive sales performance by taking full advantage of our robust product pipeline. We are also focused on moving beyond merger-related synergies to delivering productivity, which is a cornerstone of our performance-based culture, and emphasizing continuous improvement across all of our processes,” said Greg Friedman. 

 

He continued, “We’re looking forward to our sustained engagement with the investment community over the coming weeks as we expand on our strategy to capitalize on the significant opportunity we see ahead.” 

 

At the meeting, Corteva reiterated its outlook for the first half as the Agriculture Division of DowDuPont, provided its guidance for the full year 2019 and confirmed its targets for performance over the mid-term, which collectively reflect a focus on delivering above-market growth. 

 

For the full year 2019, the Agriculture Division of DowDuPont expects: 
 

• Total reported sales to be approximately flat with the prior year, up 1 to 2 percent organically. Above-market growth in 2019 is expected to be offset by approximately $350 million in currency pressure, primarily from the Euro and the Brazilian Real; 

• Operating EBITDA is expected to be approximately $2.8 billion, which reflects growth of approximately 4 percent or up approximately 7 percent excluding currency. This estimate assumes $100 million in growth and $300 million in cost synergies, offset by $200 million of higher input costs, investments for growth, and other headwinds; 

• Capital expenditures of approximately $650 million; and 

• An estimated full-year operational tax rate in the range of 19 to 21 percent for Corteva as a standalone company.

 

The Company’s sales guidance for the full year 2019 assumes flat to 1 percent growth in seed sales for the industry globally and a 2 to 3 percent rise in crop protection sales for the industry, excluding the impact of currency. It also assumes stabilization of commodity prices, as crop inventories begin to come down, setting the stage for growth in the overall market beginning in 2020. The Company also assumes a shift in U.S. planted area from soybeans to spring wheat, corn and cotton. This overall shift in crops is expected to be margin neutral for Corteva. 

 

Corteva, as a standalone company, also projects its dividends will be 25 to 35 percent of net income, or an estimate of approximately $400 million annually. Immediately following the spin, we anticipate the new board will implement a share repurchase authorization consistent with a commitment to return excess capital to shareholders. Dividends and share repurchases are subject to Corteva Board of Director approval. 

 

Beyond 2019, in the mid-term, Corteva is targeting: 

 

• Net sales growth of 3 to 5 percent annually, inclusive of annual organic sales growth of 1 to 2 percent above the market in seeds and 1.5 to 2.5 percent above the market for crop protection. This range excludes potential currency impacts; and 

 

• Agriculture Division Operating EBITDA benefits from top-line growth at two times sales growth, including cost synergy delivery and margin expansion.

 

The presentation materials from the sell-side analyst meeting are available at DowDuPont’s website.