Corteva loss narrows

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Wilmington-based Corteva, Inc. reported financial results for the quarter ended September 30,and provided guidance for the full year.

Corteva is the combined agriscience businesses of Dow and DuPont. It was spun off earlier this year from DowDuPont.

“Our teams around the globe delivered an extraordinary effort in the quarter to support our customers in the face of numerous challenges,” CEO James C. Collins, Jr., stated. “Corteva achieved solid earnings improvement relative to the prior year and made ongoing progress on our priorities for shareholder value creation, including securing new product registrations, driving continued synergy and productivity improvements, and returning cash to shareholders. We remain focused on driving operational discipline and committed to setting the stage for solid net sales and operating earnings growth in 2020.”

Generally Accepted Accounting Principles loss from continuing operations after income taxes was $527 million in the quarter. Operating EBITDA1 was a loss of $207 million, an improvement of 18 percent when compared to the same period last year on a pro forma basis2. Improvement in Seed operating EBITDA due to timing shifts in North America and cost savings was partially offset by lower Crop Protection operating EBITDA, due to the timing of sales in Latin America.

The Company reported a loss of0.69in earnings per share from continuing operations and a loss of $0.39for operating EPSfor the third quarter,

For the quarter, net sales declined two percent versus the same period last year, with flat organic sales. Favorable impacts from shifts of soybean and corn sales into the third quarter, driven by delayed planting in North America, were more than offset by shifts of Crop Protection sales in Latin America.

Local price declined three percent in the third quarter 2019 versus the same period last year, driven by North America. Higher replant in soybeans and corn, coupled with increased grower incentive discounts, contributed to the decline.

Volumes increased 3 percent versus the same period last year, as delayed North America planting shifted second-quarter sales into the third quarter. This volume growth was partially offset by declines in Latin America, where early demand for crop protection products shifted sales into the second quarter and delays in the Brazil soybean season shifted Crop Protection sales into the fourth quarter. Currency represented a headwind of 2%, primarily due to the Brazilian Real and Euro.

Financial Highlights

GAAP

Net Sales

EPS

Loss From Cont. Ops. (AT)

$1.91 B

$(0.69)

$(527 M)

v. 3Q 20182

(2%)

+90%6

+90%6

Non-GAAP

Organic Sales1

Operating EPS1

Operating EBITDA1

$1.94 B

$(0.39)

$(207 M)

v. 3Q 20182

-%

+35%

+18%

1. Organic sales, Operating EPS, Pro Forma Operating EPS, Operating EBITDA and Pro Forma Operating EBITDA are non-GAAP measures. See page 5 for further discussion. 2. First Quarter 2019 and prior year GAAP information is on a pro forma basis and was determined in accordance with Article 11 of Regulation S-X. Non-GAAP measures for these periods are reconciled to the GAAP pro forma measure. 3. North America is defined as U.S. and Canada. EMEA is defined as Europe, Middle East and Africa. 4. Enlist E3™ soybeans are jointly developed by Dow AgroSciences and MS Technologies™ 5. The company does not provide the most comparable GAAP measure on a forward-looking basis. See page 5 for further discussion. 6. Improvement over prior year for Loss from Continuing Operations After Income Taxes and GAAP EPS is primarily due to the absence of a goodwill impairment charge recognized in the third quarter 2018.

Summary of Third Quarter 2019

($ in millions, except
where noted)

3Q

2019

3Q

2018

%

Change

%

Organic

Change1

Net Sales

$1,911

$1,947

(2)%

– %

North America

$623

$537

16%

16%

EMEA

$305

$296

3%

8%

Latin America

$762

$875

(13)%

(11)%

Asia Pacific

$221

$239

(8)%

(6)%

($ in millions, except where
noted)

3Q

2019

3Q

20182

%

Change

GAAP Loss from Continuing
Operations After Income
Taxes

$(527)

$(5,336)

90%6

Operating EBITDA1

$(207)

$(251)

18%

GAAP EPS from Continuing
Operations ($/share)

$(0.69)

$(7.13)

90%6

Operating EPS1 ($/share)

$(0.39)

$(0.60)

35%

Company Updates

  • 2020 Launch of Key Seed Products: Corteva recently launched the 2020 sales season in North America3. Expanded launch of new Qrome® products are expected to provide low single digit price uplift in corn, given demonstrated yield advantages. In soybeans, the new Enlist E3offerings are expected to scale to 10% of North America acres with continued licensing opportunities.
  • New Investment Authorized to Expand Spinosyns Capacity: Corteva’s Board of Directors recently authorized an investment to increase Spinosyns fermentation capacity by 30% to address global market growth in insecticides that handle chewing insects in specialty and row crops. The additional capacity will be staged to come online over the next few years and will generate >$100 million of annual operating EBITDA1 at maturity.
  • Delivering on Commitment to Return Cash to Shareholders: Corteva took two critical next steps related to shareholder remuneration commitments as it intends to return approximately $220 million to shareholders by the end of the year. The Company repurchased shares in the quarter as part of its $1 billion share repurchase program and in October declared its second continuous quarterly dividend since spin.

Crop Protection Summary

Crop Protection net sales were $1.2 billion in the third quarter, down from $1.4 billion in the same quarter last year. The decrease was due to a 9% decline in volume, a 2% decline in local price, and a 1% decline from currency.

The volume decline was driven by early demand for Spinosyns insecticides and seed applied technologies in Latin America, where approximately $80 million of sales shifted into the second quarter and a delayed soybean season in Brazil shifted sales into the fourth quarter. These shifts more than offset the approximate $65 million improvement in new product sales, driven by EMEA, versus the same quarter last year. The decrease in local price was driven by grower incentive discounts in North America. Unfavorable currency impacts were primarily due to the Brazilian Real and Euro.

Crop Protection operating EBITDA was $119 million, down 25% from the same period last year. Volume declines in Latin America, grower incentive discounts in North America, and currency more than offset cost synergies, sales from new products, and ongoing productivity.

($ in millions, except
where noted)

3Q

2019

3Q

2018

%

Change

%

Organic

Change1

North America

$397

$425

(7)%

(7)%

EMEA

183

163

12%

16%

Latin America

491

621

(21)%

(20)%

Asia Pacific

159

187

(15)%

(14)%

Total Crop

Protection Net Sales

$1,230

$1,396

(12)%

(11)%

Seed Summary

Seed net sales were $681 million in the third quarter, up from $551 million in the same quarter last year. The increase was due to a 31% increase in volume, partially offset by a 5% decline in local price and a 2% decline from currency.

Strong volume growth was driven by significant weather-related planting delays in North Americain the first half of the year, which shifted soybean and corn seed sales into the third quarter. The decline in local price resulted from competitive pricing pressure in soybeans in the U.S. and increased soybean and corn replant in North America, which was partially offset by mix improvement in Latin America. Unfavorable currency impacts were primarily due to the Brazilian Real.

Seed operating EBITDA was a loss of $(295) million, compared to a loss of $(372) million in the same period last year. Volume gains from delayed seed sales in North America, cost synergies, and ongoing productivity more than offset decreases in local price and the unfavorable impact of currency.

($ in millions, except
where noted)

3Q

2019

3Q

2018

%

Change

%

Organic Change (1)

North America

$226

$112

102%

102%

EMEA

122

133

(8)%

(3)%

Latin America

271

254

7%

9%

Asia Pacific

62

52

19%

23%

Total Seed Net Sales

$681

$551

24%

26%

Outlook

The Company affirmed 2019 guidance for net sales and expects operating EBITDA at approximately $1.9 billion, which is the lower end of the previously communicated range of $1.9 billion to $2.05 billion. The Company now expects to deliver at the lower end of the previously communicated range largely due to further negative impact of currency. The Company revised its full-year operating EPS range, now expected to be between $1.20 and $1.26 per share. Using the mid-point, this represents a $0.04 improvement over the mid-point of the prior guidance.

Corteva 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.

More information can be found at www.corteva.com.

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