Corteva, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts are in U.S. dollars; financial results below are for Corteva consolidated unless noted. The filing is also a combined report for wholly owned subsidiary EIDP, whose results are substantially the same, with certain standalone differences.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net sales | $2.590bn | $2.777bn | $13.519bn | $13.630bn |
| Continuing-operations income (loss), after tax | $(315)m | $(322)m | $1.172bn | $1.257bn |
| Net income (loss) attributable to Corteva | $(321)m | $(331)m | $988m | $1.202bn |
| Diluted GAAP EPS | $(0.45) | $(0.46) | $1.39 | $1.66 |
| Operating EBITDA, non-GAAP | $18m | $96m | $2.995bn | $2.854bn |
Margins: Gross margin, calculated as sales less cost of goods sold, was approximately 36.4% in Q3 versus 32.3% a year earlier, and 44.1% for the nine months versus 41.8%. Operating EBITDA margin was approximately 0.7% in Q3 versus 3.5%, and 22.2% year to date versus 20.9%. Operating EBITDA is a company-defined non-GAAP measure. Segment operating EBITDA, a separate measure, was $46m in Q3 versus $128m and $3.079bn year to date versus $2.937bn.
- Cash flow: Operating cash used was $2.604bn for the nine months, compared with $2.146bn used in 2022. Investing cash used was $1.773bn, including $1.456bn for acquisitions; financing cash provided was $3.603bn. Capital expenditures were $412m.
- Liquidity and debt: September 30 cash and cash equivalents were $2.254bn and marketable securities $108m. Total debt was $5.899bn, up from $1.307bn at year-end 2022; cash and marketable securities less total debt was approximately $3.537bn net debt. The company reported $5.5bn of available committed credit facilities, plus foreign-currency credit lines. Its debt-to-capitalization covenant was met.
- Balance sheet: Current assets were $16.333bn and current liabilities $10.348bn. Receivables were $6.581bn and inventories $6.320bn. Commercial paper outstanding was $3.417bn.
- Shareholder returns: Approximately $910m was returned through dividends and repurchases in the first nine months. The quarterly dividend was increased to $0.16 per share.
Changes versus comparable periods
- Q3 sales fell 7%, mainly on a 15% volume decline; price, currency, and portfolio effects partly offset the decline. Year-to-date sales decreased 1%, as a 10% volume decline and 2% currency headwind largely offset 9% higher pricing and favorable portfolio effects.
- Q3 Crop Protection sales fell 11% and segment operating EBITDA fell 48%, reflecting destocking, delayed purchases, lower volumes and pricing, and higher input costs. Year-to-date Crop Protection sales fell 10% and segment operating EBITDA fell 18%.
- Seed sales grew 2% in Q3 and 7% year to date. Year-to-date Seed segment operating EBITDA rose 24%, supported by pricing and productivity actions.
- Q3 operating EBITDA declined despite lower cost of goods sold; year-to-date operating EBITDA improved. Cost of goods sold as a share of sales declined in both periods. GAAP net income attributable to Corteva declined year to date, in part because discontinued-operations charges rose to $174m from $46m.
- Interest expense increased to $171m from $43m year to date, primarily due to higher rates, new notes, and short-term borrowings. Other expense was $354m versus $89m income, including foreign exchange losses and higher non-operating pension costs.
- Stoller and Symborg were acquired in March for a combined purchase price of approximately $1.590bn. Their biological products contributed to favorable portfolio effects; acquisition-related costs and acquired-intangible amortization also affected results.
Outlook, commentary, and risks
- Management affirmed 2023 guidance: net sales of $17.0bn–$17.3bn, Operating EBITDA of $3.25bn–$3.45bn, and operating EPS of $2.50–$2.70. These are non-GAAP outlook measures; the company said it could not reconcile them to GAAP without unreasonable effort.
- Management described the agriculture outlook as positive, citing grain and oilseed demand and generally healthy farm finances. It also cited lower-than-expected corn acreage in Brazil, crop-chemical headwinds, delayed farmer purchases, and elevated generic competition.
- A November 2023 Crop Protection network optimization plan is expected to produce total pretax restructuring and asset-related charges of $410m–$460m, including $165m–$175m of asset impairments. Expected future cash payments are $90m–$120m, actions are expected to be substantially complete in 2024, and estimated annual run-rate savings by 2025 are $100m. The outlook also referred to approximately $265m–$285m of net pretax restructuring charges expected in 2023 for these activities.
- The 2022 restructuring program had incurred $350m of pretax charges through the filing date; management did not expect further material charges from that program and estimated $210m–$220m of run-rate savings by 2025.
- PFAS matters: In September, settling companies funded a $1.185bn Nationwide Water District Settlement Fund. Chemours contributed 50%; DuPont and Corteva collectively contributed the other 50%, under their allocation arrangements. Final court approval was pending, with a fairness hearing scheduled for December 2023. Corteva disclosed an estimated aggregate share of approximately $600m under the broader MOU cost-sharing framework; the filing does not clearly state Corteva’s individual cash contribution to this specific fund. Other legacy PFAS and environmental proceedings remain, and management said reasonably possible liabilities could exceed accruals but could not estimate the excess.
- Other legal exposure includes FTC and state antitrust litigation concerning crop-protection products, Lorsban-related claims, and intellectual-property disputes. The company is defending these matters; outcomes and potential losses are uncertain. The filing reported no material change to risk factors from the latest 10-K.
- Additional risks include weather and climate variability, agricultural demand and commodity conditions, input costs, currencies and inflation, regulation and product approvals, competition, customer credit, supply-chain disruption, and litigation. Management cautioned that guidance excludes extreme weather, major operational disruptions, significant demand or customer-payment changes, and further acceleration of currency or inflation impacts.
Investor facts to verify
- Whether the 2023 sales, Operating EBITDA, and operating EPS guidance is achieved, and how the non-GAAP measures reconcile to reported GAAP results.
- Crop Protection demand, pricing, destocking, input costs, and whether Seed strength and productivity gains persist.
- Working-capital cash use, commercial-paper balances, debt and interest costs, and the availability of committed credit facilities.
- Final approval and funding mechanics for the Nationwide Water District Settlement, Corteva’s ultimate PFAS share, and potential exposure beyond recorded accruals.
- Actual restructuring charges, cash payments, site actions, and delivery of the stated savings targets, including the newer Crop Protection plan.
- Acquisition integration and returns from Stoller and Symborg, alongside the related goodwill and intangible-asset balances.