Corteva Reports Third Quarter and Year-to-Date 2022 Results

Date:11-04-2022

Corteva, Inc. (NYSE: CTVA) (″Corteva″ or the ″Company″) reported financial results for the third quarter and nine months ended September 30, 2022.

2022 YTD Highlights

• 2022 YTD net sales rose 12% versus prior year with gains in both segments. Organic¹ sales increased 16% in the same period with double-digit gains in all regions.
  

• Seed net sales grew 5% and organic¹ sales increased 8% year over year, with notable gains in EMEA² as well as North America2 soybeans, 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 22% and organic¹ sales increased 26%, with broad-based gains across all regions. Volume gains were driven by continued penetration of new products, including Enlist™ and Arylex™ herbicides and Onmira™ fungicide. Price gains reflected strong execution across all regions in response to cost inflation.
  

• GAAP income and earnings per share (EPS) from continuing operations were $1.26 billion and $1.72 per share for the period, respectively. Operating EBITDA¹ was $2.85 billion, a 23% 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 $2.50 per share, up 21% compared to prior year.
  

• The Company affirmed full year 2022 net sales guidance³ of $17.2 billion to $17.5 billion. The Company increased the mid-point of its Operating EBITDA¹ guidance, and now expects it to be in the range of $3.0 billion to $3.1 billion. Operating EPS¹ is expected to be in the range of $2.45 to $2.60 per share.
  

Company Updates

Company Signs Agreement to Acquire Biological Leader Symborg

• During the quarter, the Company announced it had signed a definitive agreement to acquire Symborg, a leader in microbiological technologies based in Murcia, Spain.
  

• The Company first collaborated with Symborg to scale up and bring farmers Utrisha™ N and BlueN™ nutrient efficiency optimizer as part of a distribution agreement between the two companies.
  

• This transaction continues the Company’s commitment to build a more differentiated and sustainably advantaged portfolio that provides cost-effective solutions for farmers.

Company Initiates First Significant Steps Towards Portfolio Simplification 

• During the quarter, the Company made a business decision to exit commodity glyphosate products, reflecting our commitment to disciplined and strategic portfolio management – prioritizing core markets and crops to optimize resource allocation and drive long-term value creation.
  

• This decision allows the Company to simplify operations and focus investments on delivering greater value to growers through more differentiated and sustainably advantaged solutions.
  

• As a result of this decision, the Company expects an approximate $300 million headwind to net sales related to commodity glyphosate products in 2023.
  

Enlist™ System Crosses $1B in Net Sales

• The Company delivered approximately $1.1 billion in sales for the Enlist™ system during the nine months ended September 30, 2022, an increase of nearly 80% versus the same period last year.
  

• The Company expects 2023 Enlist E3™⁴ U.S. market penetration in the mid 50% range, representing approximately 70% of Corteva’s lineup – a notable accomplishment considering this technology has only been in the market for 3 seasons. The percentage of Enlist™ with proprietary Corteva germplasm is expected to reach approximately 65%.
  

Summary of Third Quarter 2022

For the third quarter ended September 30, 2022, net sales increased 17% versus the same period last year. Organic¹ sales rose 22%, with double-digit increases in all regions.

Volume grew 9% versus the prior-year period. Demand for new Crop Protection products drove double-digit net sales growth for the segment, with an organic¹ sales increase of 22%. Higher seed volumes were driven by higher other oilseed sales in India, as well as a later start to the planting season in North America, which shifted some corn and soybean sales into the third quarter.

Price increased 13% versus prior year, reflecting continued execution on the Company’s price for value strategy and recovery of higher input costs.

GAAP loss from continuing operations after income taxes was $(322) million in third quarter 2022. Operating EBITDA¹ for the third quarter was $96 million, up from a loss of $51 million in the year-ago period.

Seed Summary

Seed net sales were $862 million in the third quarter of 2022, up from $738 million in the third quarter of 2021. The sales increase was driven by an 11% increase in volumes and a 10% increase in price, partially offset by a 4% unfavorable currency impact.

Higher volumes were driven by higher other oilseed sales in India, as well as a later start to the planting season in North America, which shifted some corn and soybean sales into the third quarter. Price gains were driven by strong execution globally, as farmers prioritize yield to help offset inflation. Unfavorable currency impacts were led by the South African Rand and the Euro.

Segment Operating EBITDA was $(224) million in the third quarter of 2022, down 3% from the third quarter of 2021. Price execution, volume gains, and ongoing cost and productivity actions were more than offset by higher input and freight costs, including commodity costs. Segment operating EBITDA margin improved by approximately 340 basis points versus the prior-year period.

Seed net sales were $7.3 billion for the first nine months of 2022, up from approximately $7.0 billion for the first nine months of 2021. The sales increase was driven by a 7% increase in price and a 1% increase in volumes. This gain was partially offset by a 3% unfavorable currency impact.

The increase in price was driven by strong execution globally, led by North America and EMEA, with global corn and soybean prices up 7% and 10%, respectively. The increase in volume was driven by gains in EMEA as well as North America soybeans, partially offset by reduced corn acres in North America and supply constraints in North America canola and Latin America corn. Unfavorable currency impacts were led by the Turkish Lira and the Euro.

Segment Operating EBITDA was $1.6 billion for the first nine months of 2022, up 4% 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 the unfavorable year-over-year impact from the remeasurement of a previously held equity investment. Segment operating EBITDA margin declined by approximately 10 basis points versus the prior-year period.

Crop Protection Summary

Crop Protection net sales were approximately $1.9 billion in the third quarter of 2022 compared to approximately $1.6 billion in the third quarter of 2021. The sales increase was driven by a 15% increase in price and a 7% increase in volumes. These gains were partially offset by a 4% 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. The increase in volume was driven by continued penetration of new products, including Enlist™ herbicide and Zorvec™ fungicide. Unfavorable currency impacts were led by the Euro. The portfolio impact was driven by a divestiture in Asia Pacific.

Segment Operating EBITDA was $352 million in the third quarter of 2022, up 71% from the third 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 570 basis points versus the prior-year period.

Crop Protection net sales were approximately $6.3 billion for the first nine months of 2022 compared to approximately $5.2 billion for the first nine months of 2021. The sales increase was driven by a 13% increase in volumes and a 13% increase in price. These gains were partially offset by a 4% unfavorable currency 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 nearly 50% compared to the same period last year. The increase in price, led by North America and Latin America, mostly reflected pricing for higher raw material and logistical costs. Unfavorable currency impacts were led by the Euro and the Turkish Lira.

Segment Operating EBITDA was $1.4 billion for the first nine months of 2022, up 51% from the same period last year. 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 410 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 farmers to prioritize technology to maximize return.

As a result, the Company affirmed full year 2022 net sales guidance³ of $17.2 billion to $17.5 billion, which at the mid-point represents expected net sales growth of 11% for the year. The Company increased the mid-point of its Operating EBITDA¹ guidance, and now expects it to be in the range of $3.0 billion to $3.1 billion, which at the mid-point represents expected Operating EBITDA¹ growth of 18% 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™.