Corteva Agriscience Reports Second Quarter 2019 Operating Results - Capitalizes on Strong Performance Outside North America; Company Updates Full Year Outlook

WILMINGTON, Del., Aug. 1, 2019 /PRNewswire/ -- Corteva, Inc. (NYSE: CTVA) today reported financial results for the quarter ended June 30, 2019 and provided updated guidance for the full year.

Commenting on the Company's second quarter 2019 performance, Chief Executive Officer Jim Collins said, "On June 1, 2019, we completed an important separation milestone, becoming a global, standalone, pure-play agriculture company - taking this step during an extraordinary period in our industry. In our initial quarter as a standalone company, we delivered technology-driven, organic growth in nearly all regions despite continued pressure from the unprecedented weather events that challenged near-term market conditions in North America."

Collins continued, "We remain committed to executing on our priorities and adjusting our actions focused on delivering continuous value for our customers and shareholders. We are delivering on our cost synergy targets, with an additional $200 million realized in the first half, and we continue to demonstrate our commitment to customer-centered innovation through the acceleration of new product launches that are helping to address real-time challenges facing growers around the world."

Summary of Second Quarter 2019

Weather-related planting delays and lower than expected planted area in corn, soybeans, and canola pressured sales in North America, and together with an unfavorable currency impact, drove a decrease in net sales of 3 percent in the second quarter 2019 versus the same period last year. Organic sales¹ growth in Latin America was driven by strong early demand for Crop Protection products, while EMEA² and Asia Pacific organic growth was primarily driven by strong demand for new products, including Isoclast^™ insecticide, Zorvec^™ fungicide and Arylex^™ herbicide.

Local price declined 1 percent in the second quarter 2019 versus the year-ago period, with price gains in Rest of World² more than offset by decreases in North America due to higher replant in corn and competitive pricing pressure on soybeans. Volumes were essentially flat versus the prior-year period due to 5 percent lower volumes in North America on weather-related impacts, offset by performance across the Rest of the World² on volume growth of 14 percent led by Latin America on pre-season early demand. Currency represented a headwind of 2 percent compared with the same quarter last year, with impacts driven predominately by the Euro.

GAAP net income from continuing operations totaled $0.5 billion in the second quarter 2019, down 50 percent versus the same quarter last year on a pro forma basis. Operating EBITDA¹ for the second quarter 2019 was $1.5 billion, a decrease of 6 percent as compared to the same period last year on a pro forma basis. Improvement in Crop Protection segment operating EBITDA from new products and cost savings from synergies were more than offset by currency impacts, lower Seed results due to competitive pricing pressure in soybeans, higher replant in corn and lower Seed margins.

Summary of First Half 2019

Net sales for the first half 2019 were $9 billion, down 6 percent as compared to the prior-year period.  Volumes were down 3 percent, with gains in Latin America, EMEA and Asia Pacific more than offset by the declines in North America. Price was flat for the period, with price improvements primarily due to strong demand for new products offset by North America. Currency was a headwind of 3 percent compared with the prior-year period.

Pro forma net income from continuing operations totaled $0.6 billion for the first half 2019, down 48 percent versus the same period last year. Pro forma operating EBITDA¹ for the first half 2019 was $2 billion, down 13 percent as compared to the prior-year period. Declines in Crop Protection and Seed were primarily due to lower sales from the impact of weather delays and reduced planted area in North America, competitive pricing pressure, lower margins and currency offsetting cost savings from synergies.

The Company reported GAAP EPS from continuing operations of $0.63, with operating EPS¹ of $1.42 for the second quarter 2019. Pro forma GAAP EPS for the first half 2019 was $0.77 with pro forma operating EPS¹ of $1.75.

Outlook

Corteva revised its full year guidance of pro forma operating EBITDA² to a range of $1.9 billion to $2.05 billion. Net sales for the full year are expected to be down about 3 percent.

Commenting on the Company's outlook, Collins said, "Despite the first-half challenges, we continue to see strength across our global business. Looking ahead to the second-half, we expect ongoing, solid adoption for high-demand products and anticipate continued ramp-up of recent product launches to continue driving high-value sales globally. We remain focused on delivering cost-synergy commitments and expect to see ongoing improvements from productivity actions in the second half. Overall, we remain firm in executing against our plans, capitalizing on the strength of our industry-leading product portfolio and business model in the face of a historic external environment."

Company Updates

• Share Repurchase Program and Quarterly Dividend: On June 26, 2019, Corteva announced the authorization of a $1 billion share repurchase program and its first common stock dividend. The share repurchase program is expected to be completed in three years. The inaugural quarterly common stock dividend is expected to return ~$400 million to shareholders annually. Collectively, these announcements reinforce the Company's ongoing commitment to return value to shareholders.
  
  
• Enlist E3^TM(4) Licensing Update: In the second quarter 2019, Corteva sold more than 150,000 units of Enlist E3^TM soybeans in North America and began recognizing licensing income related to the proprietary trait technology for over 100 executed licenses to date. Enlist E3^TM soybeans are estimated to be on greater than 10 percent of North American planted soybean acres in 2020.
  
  
• Label Expansion for Transform^® WG insecticide: On July 12, Corteva Agriscience announced the fully restored and expanded federal label from the U.S. Environmental Protection Agency for Transform^® WG insecticide with Isoclast™ active. Eight new crops, including corn and alfalfa, are on the expanded label, which also restores the previously labeled use for soybeans and cotton - and provides farmers with a distinct mode of action in the management of destructive insects. In the second quarter 2019, Isoclast^™ insecticide sales were approximately $40 million, a more than 70 percent increase from prior year.

Crop Protection Results

Crop Protection net sales were $1.9 billion in the second quarter 2019, down 1 percent from the second quarter 2018. A 3 percent increase in volume was more than offset by a 4 percent decline in currency. Rest of World organic growth was 21 percent compared to the prior-year period.

Volume growth in the segment was primarily driven by strong early demand for spinosyns insecticides and seed applied technologies in Latin America, and sales from new products, including Zorvec^TM fungicide, Isoclast^TM insecticide and Arylex^TM herbicide, which increased 73 percent from prior year. This growth was partially offset by the impacts of wet weather in North America, which negatively impacted corn and soybean herbicide and nitrogen stabilizer applications. Unfavorable currency impacts were driven predominately by the Euro.

Crop Protection operating EBITDA was $0.5 billion in the second quarter 2019, up 6 percent from the second quarter 2018 on a pro forma basis. Cost synergies, ongoing cost reductions and sales from new products more than offset the unfavorable impact of currency.

Crop Protection net sales were $3.3 billion for the first six months of 2019, down 2 percent from the prior-year period. The decrease was primarily due to a 5 percent decline from currency, partially offset by a 2 percent increase in local price and a 1 percent increase in volume. Rest of World organic growth was 17 percent compared to the prior-year period.

Unfavorable currency impacts primarily due to the Euro were partially offset by increases in local price. The increase in volume was driven by sales from new product launches, including Zorvec^TM fungicide and Isoclast^TM insecticide, which increased 56 percent for the first half, and strong early demand for spinosyns insecticides in Latin America, partially offset by the impacts of wet weather in North America.

Crop Protection pro forma operating EBITDA was $0.7 billion for the first six months of 2019, down 10 percent from the first six months of 2018. The unfavorable impact of currency, volume declines in North America and higher input costs more than offset cost synergies and ongoing cost reductions.

Seed Results

Seed net sales were $3.7 billion in the second quarter 2019, down 4 percent from the second quarter 2018. The decrease was primarily due to a 2 percent decline in local price, a 1 percent decline in currency, and a 1 percent decline in volume. Rest of World organic growth was 10 percent compared to the prior-year period.

The decrease in local price was driven by competitive pressure in soybeans in North America, as well as an increase in corn seed replant in the U.S. Unfavorable currency impacts were due primarily to the Euro. The decline in volume was driven by significant weather-related planting delays and flooding in North America, leading to a reduction in expected planted acres for corn, soybeans, and canola. Volume declines were partially offset by corn sales recovered from the first quarter weather-related delays and a change in the route-to-market in several markets, coupled with increased demand in EMEA for corn and sunflower seed, as well as strong early demand for corn seed in Latin America.

Seed pro forma operating EBITDA was $1.0 billion in the second quarter 2019, a decline of 11 percent compared to the second quarter 2018 on a pro forma basis. Competitive pricing pressure and lower margins more than offset cost synergies in R&D and ongoing cost reductions.

Seed net sales were $5.7 billion for the first six months of 2019, down 8 percent from the first six months of 2018. The decrease was primarily due to a 4 percent decline in volume, a 3 percent decline in currency, and a 1 percent decline in local price. Rest of World organic growth was 7 percent compared to the prior-year period.

The decline in volume was driven by weather-related impacts in North America and the impact of early deliveries of corn seed in the fourth quarter 2018, which were partially offset by favorable corn seed demand in EMEA. Unfavorable currency impacts were driven predominately by the Euro. The decrease in local price was driven by the impact of the North American market.

Seed pro forma operating EBITDA was $1.4 billion for the first six months of 2019, a decline of 15 percent compared to the first six months of 2018 on a pro forma basis. Volume declines in North America, competitive pricing pressure and the unfavorable impact of currency more than offset cost synergies in R&D and ongoing cost reductions.

Second Quarter Conference Call

The Company will host a live webcast of its second quarter earnings conference call with investors to discuss its results and outlook today at 9:00 a.m. ET. The slide presentation that accompanies the conference call will be posted on the Company's Investor Events and Presentations page. A replay of the webcast will also be available on the Investor Events and Presentations page.

About Corteva Agriscience

Corteva Agriscience is a publicly traded, global pure-play agriculture company that provides farmers around the world with the most complete portfolio in the industry - including a balanced and diverse mix of seed, crop protection and digital solutions focused on maximizing productivity to enhance yield and profitability. With some of the most recognized brands in agriculture and an industry-leading product and technology pipeline well positioned to drive growth, the Company is committed to working with stakeholders throughout the food system as it fulfills its promise to enrich the lives of those who produce and those who consume, ensuring progress for generations to come. Corteva Agriscience became an independent public company on June 1, 2019, and was previously the Agriculture Division of DowDuPont. More information can be found at www.corteva.com.

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Cautionary Statement About Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and may be identified by their use of words like "plans," "expects," "will," "anticipates," "believes," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about Corteva's strategy for growth, product development, regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, outcome of contingencies, such as litigation and environmental matters, expenditures, and financial results, as well as expected benefits from, the separation of Corteva from DuPont, are forward-looking statements.

Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond Corteva's control. While the list of factors presented below is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Corteva's business, results of operations and financial condition. Some of the important factors that could cause Corteva's actual results to differ materially from those projected in any such forward-looking statements include: (i) effect of competition and consolidation in Corteva's industry; (ii) failure to successfully develop and commercialize Corteva's pipeline; (iii) failure to obtain or maintain the necessary regulatory approvals for some Corteva's products; (iv) failure to enforce Corteva's intellectual property rights or defend against intellectual property claims asserted by others; (v) effect of competition from manufacturers of generic products; (vi) impact of Corteva's dependence on third parties with respect to certain of its raw materials or licenses and commercialization; (vii) costs of complying with evolving regulatory requirements and the effect of actual or alleged violations of environmental laws or permit requirements; (viii) effect of the degree of public understanding and acceptance or perceived public acceptance of Corteva's biotechnology and other agricultural products; (ix) effect of changes in agricultural and related policies of governments and international organizations; (x) effect of disruptions to Corteva's supply chain, information technology or network systems; (xi) competitor's establishment of an intermediary platform for distribution of Corteva's products; (xii) effect of volatility in Corteva's input costs; (xiii) failure to raise capital through the capital markets or short-term borrowings on terms acceptable to Corteva; (xiv) failure of Corteva's customers to pay their debts to Corteva, including customer financing programs; (xv) failure to realize the anticipated benefits of the internal reorganizations taken by DowDuPont in connection with the spin-off of Corteva; (xvi) failure to benefit from significant cost synergies and risks related to the indemnification obligations of legacy DuPont liabilities in connection with the separation of Corteva; (xvii) increases in pension and other post-employment benefit plan funding obligations; (xviii) effect of compliance with environmental laws and requirements and adverse judgments on litigation; (xix) risks related to Corteva's global operations; (xx) effect of climate change and unpredictable seasonal and weather factors; (xxi) effect of counterfeit products; (xxii) failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions; and (xxiii) risks related to the discontinuation of LIBOR.

Additionally, there may be other risks and uncertainties that Corteva is unable to currently identify or that Corteva does not currently expect to have a material impact on its business.  Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Corteva's management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Corteva disclaims and does not undertake any obligation to update or revise any forward-looking statement, except as required by applicable law. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the "Risk Factors" section of Exhibit 99.1 of Amendment No. 4 to Corteva's Registration Statement on Form 10 and of Corteva's Quarterly Report on Form 10-Q for the period ended March 31, 2019, as modified by subsequent reports on Form 10-Q and Current Reports on Form 8-K.

Corteva Unaudited Pro Forma Financial Information
In order to provide the most meaningful comparison of results of operations, supplemental unaudited pro forma financial information for the first quarter of 2019 and prior has been included in this presentation. This presentation presents the pro forma results of Corteva, after giving effect to events that are (1) directly attributable to the Merger, the divestiture of Historical DuPont's specialty products and materials science businesses, the receipt of Dow AgroSciences, debt retirement transactions related to paying off or retiring portions of E. I. du Pont de Nemours and Company ("Historical DuPont")'s existing debt liabilities, and the separation and distribution to DowDuPont stockholders of all the outstanding shares of Corteva common stock; (2) factually supportable and (3) with respect to the pro forma statements of income, expected to have a continuing impact on the consolidated results. Refer to Amendment No. 4 of Corteva's registration statement on Form 10 filed on May 6, 2019, which can be found on the investors section of the Corteva website, for further details on the above transactions. The pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X, and are presented for informational purposes only, and do not purport to represent what the results of operations would have been had the above actually occurred on the dates indicated, nor do they purport to project the results of operations for any future period or as of any future date.

Non-GAAP Financial Measures
This earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. These measures include organic sales, operating EBITDA, pro forma operating EBITDA, segment operating EBITDA, pro forma segment operating EBITDA, operating earnings per share, and pro forma operating earnings per share. Management believes that these non-GAAP measures best reflect the ongoing performance of the Company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the Company and a more useful comparison of year over year results. These non-GAAP measures supplement the Company's U.S. GAAP disclosures and should not be viewed as an alternative to U.S. GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Reconciliations for these non-GAAP measures to U.S. GAAP are provided in the Selected Financial Information and Non-GAAP Measures starting on page 13.  These non-GAAP measures are being reconciled to a pro forma GAAP financial measure prepared and presented in accordance with Article 11 of Regulation S-X.  See Article 11 Pro Forma Combined Statements of Operations starting on page 21.

Corteva does not provide forward-looking U.S. GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable U.S. GAAP financial measures on a forward-looking basis because the company is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, foreign currency exchange gains or losses and potential future asset impairments, as well as discrete taxable events, without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP results for the guidance period.

Organic sales is defined as price and volume and excludes currency and portfolio impacts. Operating EBITDA is defined as earnings (i.e., income from continuing operations before income taxes) before interest, depreciation, amortization, non-operating costs, net and foreign exchange gains (losses), excluding the impact of adjusted significant items. Non-operating costs, net consists of non-operating pension and other post-employment benefit (OPEB) costs, environmental remediation and legal costs associated with legacy businesses and sites of Historical DuPont. Segment Operating EBITDA is defined as Operating EBITDA excluding corporate expenses. Operating earnings and operating earnings per share are defined as "Earnings per common share from continuing operations - diluted" excluding the after-tax impact of significant items, the after-tax impact of non-operating costs, net, and the after-tax impact of amortization expense associated with intangible assets existing as of the Separation from DowDuPont. Although amortization of the Company's intangible assets is excluded from these non-GAAP measures, management believes it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized.

^{® TM SM} Trademarks and service marks of Dow AgroSciences, DuPont or Pioneer, and their affiliated companies or their respective owners.