Corteva(CTVA) - 2024 Q3 - Quarterly Results

Financial Statements Consolidated Statements of Operations For the third quarter of 2024, Corteva reported a net sales decrease of 10% year-over-year to $2.33 billion, leading to an increased net loss of $524 million compared to a $321 million loss in Q3 2023. For the nine months ended September 30, 2024, net sales fell by 4% to $12.93 billion, and net income attributable to Corteva decreased to $948 million from $988 million in the prior year period Q3 2024 vs Q3 2023 Performance (in millions) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,326 | $2,590 | -10.2% | | Income (loss) from continuing operations | $(519) | $(315) | -64.8% | | Net income (loss) attributable to Corteva | $(524) | $(321) | -63.2% | | Diluted EPS | $(0.76) | $(0.45) | -68.9% | Nine Months 2024 vs 2023 Performance (in millions) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $12,930 | $13,519 | -4.4% | | Income from continuing operations | $913 | $1,172 | -22.1% | | Net income attributable to Corteva | $948 | $988 | -4.0% | | Diluted EPS | $1.35 | $1.39 | -2.9% | Consolidated Balance Sheets As of September 30, 2024, Corteva's total assets stood at $41.9 billion, a slight decrease from $43.0 billion at year-end 2023. Key changes include a decrease in inventories from $6.9 billion to $5.7 billion and a significant increase in short-term borrowings to $3.7 billion from $198 million. Total equity decreased slightly to $25.0 billion Balance Sheet Summary (in millions) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $15,649 | $16,260 | | Inventories | $5,674 | $6,899 | | Total Assets | $41,908 | $42,996 | | Total Current Liabilities | $10,424 | $10,409 | | Short-term borrowings | $3,741 | $198 | | Total Liabilities | $16,929 | $17,717 | | Total Equity | $24,979 | $25,279 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, the company experienced a net cash outflow from operating activities of $2.03 billion, an improvement from a $2.60 billion outflow in the same period of 2023. This was primarily driven by changes in working capital, including a large increase in accounts receivable and a decrease in deferred revenue. Financing activities provided $2.14 billion in cash, largely from debt issuance, while investing activities used $466 million Nine Months Cash Flow Summary (in millions) | Activity | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $(2,028) | $(2,604) | | Cash from Investing Activities | $(466) | $(1,773) | | Cash from Financing Activities | $2,137 | $3,603 | | Net Change in Cash | $(402) | $(842) | - Key drivers for the cash used in operations included a $1.45 billion increase in accounts receivable and a $2.97 billion decrease in deferred revenue, partially offset by a $1.06 billion decrease in inventories[3] Segment and Geographic Performance Segment Net Sales In Q3 2024, both major segments saw sales decline year-over-year, with Seed net sales falling 21% to $691 million and Crop Protection net sales decreasing 4% to $1.64 billion. For the nine-month period, Seed sales were down 1% while Crop Protection sales fell by 9%. The decline in Crop Protection was primarily driven by a significant drop in Herbicides sales Q3 Net Sales by Segment (in millions) | Segment | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Seed | $691 | $878 | -21.3% | | Crop Protection | $1,635 | $1,712 | -4.5% | Nine Months Net Sales by Segment (in millions) | Segment | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Seed | $7,773 | $7,837 | -0.8% | | Crop Protection | $5,157 | $5,682 | -9.2% | Geographic Net Sales Geographically, the most significant sales decline in Q3 2024 occurred in Latin America, where Seed sales dropped 43% and Crop Protection sales fell 9%. For the nine-month period, North America Seed sales showed growth of 4%, while Crop Protection sales in the region declined by 10%. EMEA and Latin America experienced sales declines across both segments for the nine-month period - In Q3 2024, Latin America was the weakest region, with Seed net sales falling from $380 million to $218 million and Crop Protection sales declining from $844 million to $771 million[6][7] Nine Months Net Sales by Geography - Seed (in millions) | Region | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | North America | $5,394 | $5,192 | +3.9% | | EMEA | $1,365 | $1,441 | -5.3% | | Latin America | $696 | $847 | -17.8% | | Asia Pacific | $318 | $357 | -10.9% | Nine Months Net Sales by Geography - Crop Protection (in millions) | Region | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | North America | $1,703 | $1,901 | -10.4% | | EMEA | $1,311 | $1,555 | -15.7% | | Latin America | $1,458 | $1,537 | -5.1% | | Asia Pacific | $685 | $689 | -0.6% | Reconciliation of Non-GAAP Measures Organic Sales and Operating EBITDA For Q3 2024, Organic Sales (Non-GAAP) were $2.46 billion, a 5% decrease from the prior year. The company reported an Operating EBITDA (Non-GAAP) loss of $100 million, a significant decline from a positive $18 million in Q3 2023, driven by a larger loss in the Seed segment. For the nine-month period, Organic Sales were $13.2 billion (down 2%) and Operating EBITDA was $2.85 billion, down from $3.00 billion year-over-year Operating EBITDA by Segment (in millions) | Segment | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Seed | $(320) | $(138) | $2,126 | $1,972 | | Crop Protection | $246 | $184 | $811 | $1,107 | | Total Operating EBITDA | $(100) | $18 | $2,851 | $2,995 | - The reconciliation from GAAP Income to Operating EBITDA shows adjustments for items such as depreciation & amortization ($925M YTD), interest, taxes, and significant items ($297M YTD)[10] Net Sales Change Analysis This section provides a detailed breakdown of the drivers behind net sales changes, comparing GAAP results to Organic (Non-GAAP) changes, which exclude currency and portfolio impacts. It further dissects organic changes into price/product mix and volume components for both quarterly and year-to-date periods Q3 2024 vs Q3 2023 In Q3 2024, total net sales declined 10% (5% organically). The organic decline was driven by an 8% drop in price/mix, partially offset by a 3% increase in volume. The Seed segment's organic sales fell 17%, driven by a 12% volume decline, particularly in Corn. The Crop Protection segment's organic sales grew 1%, with an 11% volume increase offsetting a 10% price/mix decline - Total company organic sales fell 5% in Q3, composed of a -8% impact from Price & Product Mix and a +3% impact from Volume. Currency had a -5% impact[11] - Seed segment organic sales dropped 17%, driven by a 12% volume decrease and a 5% price/mix decline. Corn sales were particularly weak, with a 31% organic sales decline[12][14] - Crop Protection organic sales grew 1%, as a strong 11% volume increase (led by Insecticides and Fungicides) more than offset a 10% decline in price/mix[13][15] Nine Months 2024 vs 2023 For the first nine months of 2024, total net sales decreased 4% (2% organically), driven entirely by a 2% volume decline. The Seed segment's organic sales grew 1%, supported by a 4% price/mix improvement. In contrast, the Crop Protection segment's organic sales fell 7%, with declines in both price/mix (-5%) and volume (-2%), led by a 14% organic sales drop in Herbicides - For the nine-month period, total company organic sales fell 2%, driven by a 2% volume decline, with Price & Product Mix being flat. Currency had a -2% impact[16] - Seed segment organic sales grew 1% YTD, with a 4% price/mix increase offsetting a 3% volume decline. Soybean sales showed 4% organic growth[17][19] - Crop Protection organic sales fell 7% YTD, driven by a 5% price/mix decline and a 2% volume drop. Herbicides sales were down 14% organically[18][20] Significant Items For the nine months ended September 30, 2024, Corteva recorded $297 million in pre-tax charges for significant items. These were primarily composed of restructuring and asset-related charges ($199 million pre-tax YTD) and estimated settlement expenses related to Lorsban® ($101 million pre-tax YTD). These charges negatively impacted diluted EPS by $0.31 for the nine-month period Year-to-Date Significant Items (Pre-Tax, in millions) | Item | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Restructuring and asset related charges, net | $(199) | $(93) | | Estimated settlement expense (Lorsban®) | $(101) | $(156) | | Acquisition-related costs | $(6) | $(41) | | Total Significant Items | $(297) | $(271) | - The total after-tax impact of significant items for the first nine months of 2024 was a charge of $219 million, or $0.31 per share[22] Operating Earnings Per Share (EPS) The company provides a reconciliation from GAAP EPS to a non-GAAP Operating EPS. For Q3 2024, the GAAP loss per share was $(0.76), which adjusted to an Operating Loss per share of $(0.49). For the nine-month period, GAAP EPS of $1.29 was adjusted to an Operating EPS of $2.24. This compares to a nine-month 2023 Operating EPS of $2.54, indicating a year-over-year decline in underlying profitability GAAP EPS to Operating EPS Reconciliation (Nine Months 2024) | Description | Per Share Amount | | :--- | :--- | | GAAP Diluted EPS from continuing operations | $1.29 | | Less: Non-operating benefits (costs), after tax | $(0.14) | | Less: Amortization of intangibles, after tax | $(0.50) | | Less: Mark-to-market gains, after tax | $0.00 | | Less: Significant items charge, after tax | $(0.31) | | Operating EPS (Non-GAAP) | $2.24 | Operating EPS Performance | Period | 2024 | 2023 | | :--- | :--- | :--- | | Q3 Operating EPS | $(0.49) | $(0.23) | | Nine Months Operating EPS | $2.24 | $2.54 | Base Income Tax Rate Corteva reconciles its GAAP effective income tax rate to a non-GAAP Base Income Tax Rate. For the nine months ended September 30, 2024, the GAAP effective tax rate was 23.1%. After adjusting for significant items, non-operating costs, and other specified items, the Base Income Tax Rate was calculated to be 22.7%, compared to 20.3% in the prior-year period Tax Rate Reconciliation (Nine Months 2024 vs 2023) | Rate | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Effective income tax rate (GAAP) | 23.1% | 17.2% | | Base income tax rate (Non-GAAP) | 22.7% | 20.3% | Exchange Gain (Loss) Analysis The report details the components of foreign exchange gains and losses. For the nine months of 2024, the company recorded a total pre-tax exchange loss of $234 million, an improvement from a $242 million loss in the prior year. This was composed of a $199 million loss from subsidiary monetary positions and a $35 million loss from hedging programs Total Exchange Gain (Loss) Summary (Pre-Tax, in millions) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Q3 | $(97) | $(102) | | Nine Months | $(234) | $(242) | Free Cash Flow Free Cash Flow is a non-GAAP measure defined as cash from continuing operations less capital expenditures. The report provides a reconciliation for the full year 2023, where Free Cash Flow was $1.21 billion. It also includes the forward-looking guidance for full-year 2024, projecting Free Cash Flow to be in the range of $1.5 billion to $2.0 billion Full Year 2024 Free Cash Flow Guidance (in millions) | Metric | Low End | High End | | :--- | :--- | :--- | | Cash from operating activities (GAAP) | $2,100 | $2,600 | | Less: Capital expenditures | $(600) | $(600) | | Free Cash Flow (Non-GAAP) | $1,500 | $2,000 | - For the full year ended December 31, 2023, the company generated $1.214 billion in Free Cash Flow[40]