• Operating Loss: Reported an operating loss for the third quarter.
• Controllable Savings: On track to deliver over $400 million in savings from controllables for the year.
• Seed Business Performance: Delivered approximately $175 million in controllable benefits year-to-date.
• Crop Protection Volume Growth: Second consecutive quarter of volume gains.
• Operating EBITDA: Updated full-year operating EBITDA range to $3.4 billion at the midpoint.
• EBITDA Margin: Positioned to achieve approximately 20% for full-year EBITDA margin.
• Free Cash Flow Guidance: Reaffirmed range of $1.5 billion to $2 billion for the year.
• Share Repurchases: Committed to $1 billion in share repurchases for the year.
• Organic Sales: Third-quarter organic sales down 5% compared to prior year.
• Seed Organic Sales: Down 17% in the third quarter.
• Crop Protection Organic Sales: Up 1% in the third quarter.
• Operating EBITDA Year-to-Date: Approximately $2.9 billion, down 5% compared to prior year.
• Operating EBITDA Margin Year-to-Date: 22%, essentially flat compared to prior year.
• Net Sales Guidance: Expected to be in the range of $17 billion to $17.2 billion for the full year.
• Operating EPS Guidance: Expected to be in the range of $2.50 to $2.60, down 5% compared to prior year.

• Warning! GuruFocus has detected 9 Warning Sign with CTVA.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Corteva Inc (NYSE:CTVA) is on track to deliver over $400 million in savings from controllable expenses this year.
• The Crop Protection business showed earnings and margin growth, driven by demand for differentiated technology and deflation benefits.
• The Seed business delivered strong performance with approximately $175 million in controllable benefits year-to-date.
• Corteva Inc (NYSE:CTVA) achieved notable share gains in North America, reflecting the value of its technologies to farmers.
• The company is expecting double-digit operating EBITDA growth in 2025, driven by controllable factors and increased R&D investment.

Negative Points

• Corteva Inc (NYSE:CTVA) experienced an operating loss in the third quarter.
• Organic sales were down 5% compared to the prior year, with seed sales down 17%.
• The company is facing competitive market dynamics, particularly in Latin America, impacting pricing and sales.
• There is an expected 20% year-over-year reduction in Argentina's corn planted area due to crop issues.
• The Crop Protection market remains mixed, with ongoing challenges in Brazil due to early season conditions.

Q & A Highlights

Q: Could you break down the $150 million of inflation and other costs, particularly the seed trade transition costs? A: Dave Johnson, Executive Vice President and CFO, explained that about 2/3 to 75% of the costs are in the Seed business, primarily due to trade transitions. Tim Glenn, Executive Vice President of Seed Business Unit, added that the costs are related to transitioning corn traits in North America, which will be a factor over the next couple of years.

Q: Can you elaborate on the initial modeling for seed and crop protection cost deflation in 2025? A: Chuck Magro, CEO, stated that the $600 million gross cost improvement is driven by cost management, productivity, and deflation, with deflation accounting for about half. He emphasized that seed deflation benefits will be realized over three years, starting in 2025.

Q: How much seed sales were deferred to Q4 from Q3, and what's the impact on earnings? A: Tim Glenn noted that the reduction in Argentina's corn area is real and not deferred. The impact is significant as Argentina is a major seed market with high margins. The reduction in Brazil's summer corn area also represents a permanent volume loss.

Q: Why are seed royalties expected to decrease next year, and where does Corteva stand on its journey to royalty neutrality? A: Chuck Magro mentioned that Corteva is ahead of schedule on its path to royalty neutrality, expecting to achieve it by the end of the decade. Tim Glenn added that the focus is shifting from royalty reduction to royalty collection, with significant progress in licensing new technologies.

Q: Can you clarify the expectations for crop protection volumes and pricing in 2025? A: Chuck Magro indicated that the crop protection industry is stabilizing, with Corteva expecting mid-single-digit volume growth driven by new technologies and biologicals. Pricing is expected to remain under pressure, but the company anticipates outperforming the market.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.