Corteva, Inc. — Q2 2021 Form 10-Q Summary
Business context and period. This combined, unaudited filing covers Corteva’s quarter and six months ended June 30, 2021, with comparative periods ended June 30, 2020. Corteva reports Seed and Crop Protection segments; E. I. du Pont de Nemours and Company (EID), a wholly owned subsidiary, also files as a reporting company.
Financial performance
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Net sales | $5.627bn | $5.191bn | $9.805bn | $9.147bn |
| Income from continuing operations, after tax | $1.018bn | $766m | $1.631bn | $1.047bn |
| Net income attributable to Corteva | $970m | $760m | $1.570bn | $1.032bn |
| Diluted EPS from continuing operations | $1.37 | $1.01 | $2.18 | $1.37 |
| Operating EBITDA (non-GAAP) | $1.461bn | $1.236bn | $2.365bn | $2.030bn |
| Cash used for operating activities | Not presented quarterly | $643m | $869m |
- Q2 sales increased 8%: volume +5%, currency +2%, and local price +1%. First-half sales rose 7%, reflecting volume +4%, local price +2%, and currency +1%.
- Q2 Seed sales were $3.780bn and Crop Protection sales were $1.847bn; both segments grew year over year. Segment operating EBITDA was $1.123bn for Seed and $370m for Crop Protection in Q2.
- Cost of goods sold was 53% of sales in Q2 versus 54% a year earlier, and 55% for the first half versus 56%. Higher input, freight and logistics costs were partly offset by productivity actions.
- Q2 effective tax rate was 21.8% versus 9.2%; first-half rate was 22.1% versus 16.4%. The 2020 comparison benefited from discrete tax items.
- At June 30, cash, cash equivalents and marketable securities were $2.900bn, versus $3.795bn at December 31, 2020. Total debt was $1.778bn, versus $1.105bn at year-end; the increase primarily reflected seasonal working capital and capital spending. Current assets were $14.285bn and current liabilities $7.252bn.
- First-half investing cash use was $17m and financing cash use was $27m. Capital expenditures were $269m. The company returned approximately $750m to shareholders through repurchases and dividends.
Material changes and notable items
- Profit and sales improved year over year, supported by higher volumes, pricing, product mix and favorable currency. Management cited increased raw-material, freight and logistics costs as continuing headwinds.
- Other income included non-operating pension and post-employment benefit credits of $328m in Q2 and $653m in the first half, substantially higher than the respective prior-year periods. This materially supported reported earnings and should be distinguished from underlying operating performance.
- Restructuring and asset-related charges were $135m in Q2 and $235m in the first half. They included non-cash accelerated amortization of prepaid royalties ($112m in Q2; $119m in the first half) and costs from the 2021 restructuring program.
- First-half operating cash outflow improved to $643m from $869m, but remained negative, reflecting seasonal working-capital movements, including receivables and deferred revenue.
Outlook, risks and contingencies
- Management raised its 2021 outlook: net sales growth of approximately 7%–8%; growth in Operating EBITDA of 20%–25%; and growth in Operating Earnings Per Share of 33%–40%. These are non-GAAP measures; the company says it cannot reconcile them to GAAP without unreasonable effort.
- For 2021, Corteva expects restructuring charges of $130m–$170m, approximately $130m of non-cash accelerated prepaid royalty amortization, and capital expenditures of $600m–$650m. The new restructuring actions are expected to generate about $70m of annualized savings by 2023.
- The company expects constrained supply chains, elevated freight and raw-material costs, and inflationary pressures to continue. It cited uncertainties from COVID-19, weather and climate, commodity markets, currency movements, regulation, competition, product approvals and customer credit.
- Legacy PFAS/PFOA matters remain significant. Environmental remediation accruals were $335m; reasonably possible exposure above accruals was estimated at up to $569m. The filing says certain PFOA losses are reasonably possible but not estimable. A January 2021 agreement established PFAS cost sharing and escrow arrangements with Chemours and DuPont, subject to specified limits and allocation terms.
- A July 2021 Delaware settlement requires the companies collectively to pay $50m, with Corteva’s stated share $12.5m; the filing also describes potential supplemental payments capped at $25m in aggregate. Other PFAS litigation and remediation exposure remains uncertain.
- CEO James C. Collins, Jr. announced he would retire by December 31, 2021; Corteva was searching for a successor. The filing identifies the transition as a business risk.
- After quarter-end, the board authorized a new $1.5bn share repurchase program on August 5, 2021 and approved an increase in the quarterly dividend from $0.13 to $0.14 per share in July.
Important facts for investors to verify
- How much of the earnings increase reflects recurring operating performance versus pension/OPEB credits, tax items and excluded restructuring or royalty charges.
- Whether the raised full-year outlook is achieved amid persistent input, freight, logistics and inflationary pressures; confirm the definitions and calculation of the non-GAAP guidance.
- Seasonal cash conversion, customer receivable exposure and the use of short-term borrowing and the receivable repurchase facility.
- Potential cash costs, allocation mechanics and exposure limits under the PFAS agreements, alongside the range of environmental liabilities and other litigation outcomes.
- The filing reports both consolidated Operating EBITDA and segment operating EBITDA measures; confirm the definitions and reconciliations when comparing figures across periods or with peers.