Corteva reports bigger net loss in fourth quarter

Date:02-01-2024

• Full-year net sales and earnings demonstrates solid execution and strength of portfolio

• 2024 guidance3 reflects continued operating EBITDA¹ and margin growth

Corteva, Inc. (NYSE: CTVA) (″Corteva″ or the ″Company″) reported financial results for the fourth quarter and full-year ended December 31, 2023.

Full-Year 2023 Highlights

• Full-year 2023 net sales declined 1% and organic¹ sales decreased 3% versus prior year with gains in North America² and EMEA² offset by declines in Latin America and Asia Pacific.

• Seed net sales grew 5% and organic¹ sales increased 7%. Price was up 13% globally, led by continued execution on the Company’s price for value strategy and demand for new technology. Volume declines were driven by lower corn volumes in Latin America, the exit from Russia, and lower corn planted area in EMEA², partially offset by increased corn acres in North America².

• Crop Protection net sales declined 9% and organic¹ sales decreased 12%. Volume declines, largely in Latin America and North America², were driven by strategic product exits, inventory destocking, and delayed farmer purchases. Price gains reflected pricing for value and strong execution in response to cost inflation led by EMEA².

• GAAP income and earnings per share (EPS) from continuing operations were $941 million and $1.30 per share, down 23% and 22%, respectively, compared to prior year.

• Operating EBITDA¹ was $3.38 billion, a 5% improvement over prior. Operating EPS¹ was $2.69 per share, up 1% compared to prior year.

• Cash provided by operating activities – continuing operations was $1.8 billion, up 98% compared to prior year. Free cash flow^1,4 was $1.2 billion.

• The Company provided full-year 2024 guidance³ and expects net sales to be in the range of $17.4 billion to $17.7 billion and

• Operating EBITDA¹ to be in the range of $3.5 billion to $3.7 billion. Operating EPS¹ is expected to be in the range of $2.70 to $2.90 per share. Cash provided by operating activities – continuing operations is expected to be in the range of $2.1 billion to $2.6 billion. Free cash flow^1,4 is expected to be in the range of $1.5 billion to $2.0 billion.

"Corteva's 2023 results reflect the execution of our value creation strategy, including its focus on productivity, differentiated product mix, and cost discipline. This, alonaside stand-out performance from our Seed business, allowed us to deliver growth in eamnings, cash and margin despite an ongoing imbalance in the global crop protection industry, Overall agriculture fundamentals remain constructive, with record-setting demand for grain, oilseeds, meat and biofuels continuing into 2024.

At Corteva, we see 2024 as another vear of strong demand for our differentiated products and a continued focus on controlling the controllables, delivering advanced technology to our customers and generating consistent, incremental value for our shareholders. We have adjusted the 2025 inancial framework based on 2023 results and the expectation for continued earnings growth and margin expansion in 2024 and 2025."

Chuck Magro

Chief Executive Officer

Summary of Fourth Quarter 2023

For the fourth quarter ended December 31, 2023, net sales decreased 3% versus the same period last year. Organic¹ sales declined 8%.

Volume declined 9% versus the prior-year period, primarily in Latin America, impacted by ongoing headwinds in the Crop Protection segment and strategic product exits. Lower Seed volumes were driven by lower expected planted area and delayed farmer purchases due to unfavorable weather in Brazil.

Price increased 1% versus prior year, reflecting broad-based pricing execution in Seed and the continued execution on the Company’s price for value strategy, while managing challenging market dynamics in Crop Protection. 

GAAP income from continuing operations after income taxes was a loss of $231 million in fourth quarter 2023 compared to a loss of $41 million in fourth quarter 2022. Operating EBITDA1 for the fourth quarter was $386 million, up 4% compared to prior year. 

Seed Summary

Seed net sales were $1.64 billion in the fourth quarter of 2023, down from $1.65 billion in the fourth quarter of 2022. The sales decrease was driven by a 10% decline in volume, partially offset by a 7% increase in price and a 3% favorable currency impact.

Lower volumes were driven by lower expected Safrinha planted area and delayed farmer purchases due to unfavorable weather in Brazil. The increase in price was broad-based, driven by strong demand for top technology products, and strong operational execution across the portfolio.

Segment operating EBITDA was $145 million in the fourth quarter of 2023, an improvement of 104% from the fourth quarter of 2022. Price execution, reduction of net royalty expense, and ongoing cost and productivity actions more than offset higher input costs, lower volumes, and the unfavorable impact of currency. Segment operating EBITDA margin improved more than 450 basis points versus the prior-year period.

Seed net sales were $9.5 billion for the full year of 2023, up from approximately $9.0 billion in 2022. The sales increase was driven by a 13% increase in price, partially offset by a 6% decline in volume and a 2% unfavorable currency impact.

The increase in price was broad-based and driven by strong demand for top technology and operational execution globally, with global corn and soybean prices up 14% and 7%, respectively. Pricing actions more than offset currency impacts in EMEA. The decline in volume was driven by the 2022 decision to exit Russia, lower corn planted area in EMEA, reduced summer corn planted area and lower expected Safrinha corn planted area in Brazil, partially offset by increased corn acres in North America. Unfavorable currency impacts were led by the Turkish Lira and the Canadian Dollar.

Segment operating EBITDA was $2.1 billion, up 28% from the same period last year. Price execution, reduction of net royalty expense, and ongoing cost and productivity actions more than offset higher commodity and input costs, lower volumes, and the unfavorable impact of currency. Segment operating EBITDA margin improved by approximately 390 basis points versus the prioryear period.

Crop Protection Summary

Crop Protection net sales were approximately $2.1 billion in the fourth quarter of 2023 compared to approximately $2.2 billion in the fourth quarter of 2022. The sales decline was driven by an 8% decrease in volume and a 4% decrease in price, partially offset by a 6% favorable impact from portfolio.

The decrease in volume was driven by strategic product exits and channel inventory destocking, primarily in Latin America. Price declines in North America and Latin America were driven by challenging market dynamics. The portfolio impact was driven by the Biologicals acquisitions, which added approximately $140 million of net sales.

Segment operating EBITDA was $267 million in the fourth quarter of 2023, down 20% from the fourth quarter of 2022. Price and volume declines more than offset lower input costs, productivity actions, and the favorable impact from the Biologicals acquisitions. Segment operating EBITDA margin declined by 235 basis points versus the prior-year period.

Crop Protection net sales were approximately $7.8 billion in 2023 compared to approximately $8.5 billion in 2022. The sales decrease was driven by a 14% decrease in volume and a 1% unfavorable impact from currency. These declines were partially offset by a 4% favorable impact from portfolio and a 2% increase in price.

The decrease in volume was driven by strategic product exits, channel inventory destocking, and delayed farmer purchases. The increase in price was led by EMEA, and mostly reflected pricing for the value of our differentiated technology, including new products, and currency in EMEA, partially offset by challenging market dynamics in Latin America and North America. Unfavorable currency impacts were led by the Turkish Lira and Chinese Renminbi. The portfolio impact was driven by the Biologicals acquisitions, which added approximately $420 million of net sales.

Segment operating EBITDA was $1.4 billion in 2023, down 18% from prior year. Pricing execution, productivity actions, and the favorable impact from the Biologicals acquisitions were more than offset by lower volumes, higher input costs, and the unfavorable impact of currency. Segment operating EBITDA margin declined by 215 basis points versus the prior-year period.

2024 Guidance

The global outlook for agriculture remains constructive overall in 2024. There was record-setting demand for grain, oilseeds, and  biofuels in 2023 and we expect that to continue to grow in 2024. On-farm demand remains steady and overall strong. The Crop Protection industry is working to rebalance after the significant destocking in 2023, however we expect the industry to modestly improve as the imbalance between product going into the channel and on-farm consumption returns to alignment.

The Company provided guidance³ for the full-year 2024. Corteva expects net sales in the range of $17.4 billion to $17.7 billion, growth of 2% at the mid-point. Operating EBITDA1 is expected to be in the range of $3.5 billion to $3.7 billion, growth of 6% at the mid-point. Operating EPS¹ is expected to be in the range of $2.70 to $2.90 per share, up 4% at the mid-point, which reflects higher earnings partially offset by interest expense and a higher base tax rate. Cash provided by operating activities – continuing operations is expected to be in the range of $2.1 billion to $2.6 billion. Free cash flow^1,4 is expected to be in the range of $1.5 billion to $2.0 billion. The Company plans to repurchase approximately $1.0 billion shares in 2024.

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, Operating EBITDA and Free Cash Flow 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. 4. The definition for Free Cash Flow was revised to utilize cash provided by (used for) operating activities-continuing operations. See page 6 for further

discussion.