Corteva, Inc. Q4 FY2024 earnings call

• Q4 Results: Finished 2024 as expected, achieved 20% operating EBITDA margin for the first time in 2024, operating free cash flow improved by nearly $500 million to about $1.7 billion in 2024, and returned approximately $1.5 billion to shareholders via dividends and share repurchases for the full year.
• Market Fundamentals: Overall ag fundamentals remained constructive with record global consumption of corn and soybeans, a tight corn market, and signs of stabilization in the crop protection industry.
• 2025 Outlook: Refined 2025 view to reflect additional currency headwinds (Brazilian real, Canadian dollar), expecting a flattish market with low single-digit volume gains and low single-digit pricing headwinds. Anticipates 10% EBITDA growth and 100 basis points of margin improvement, and plans to execute $1 billion in share repurchases in 2025.
• 2027 Framework: Targets $1 billion in incremental net revenues over 2025-2027 from three growth platforms (increased out-licensing income, ramp-up of CP products, biological growth), $1 billion in gross productivity, cost, and deflation benefits, and aims for ~100 basis points of EBITDA margin growth per year, expecting $1 billion EBITDA growth by 2027 with EBITDA margins of 23%-24% at the midpoint.

Seed: In Q4, organic sales were up 16%. For the full year 2024, seed organic sales were up 4%, with pricing up 3% and volume up 1%. Pioneer maintained its rank as the number one corn and soybean brand in the US. Enlist E3 soybeans reached 65% market penetration, and the Enlist system, including herbicide offerings, had sales of $1.9 billion in 2024. Crop Protection: Q4 organic sales were up 11%. For the full year 2024, crop protection organic sales were down 2%, with volume gains offset by price decline. Q4 saw double-digit organic sales growth and 800 basis points of margin improvement, largely due to demand for technology in Brazil. New products in Spinozan had double-digit volume gains in 2024, and biologicals had mid-single-digit volume increases in 2024, expected to strengthen in 2025.

• 2025 operating EBITDA is expected to be in the range of $3.6 billion to $3.8 billion, approximately 10% improvement over the prior year.
• Operating EPS is expected to be in the range of $2.70 to $2.95 per share.
• Free cash flow to EBITDA conversion rate is expected to be in the range of 40% to 45%.
• Faces a low single-digit headwind on net sales and approximately $275 million headwind on operating EBITDA due to currency fluctuations.
• Expect about 60% of sales and roughly 80% of EBITDA to be delivered in the first half of 2025.

• Currency fluctuations, particularly the Brazilian real, Turkish lira, and Canadian dollar, which impact US dollar reported results.
• Uncertainty around trade policy impacts on raw material sourcing, with limited confidence in fully modeling potential effects at this time.
• Competitive pressure in markets like Brazil affecting pricing dynamics.

Q: Christopher Parkinson from Wolfe Research asked about corn acres, PowerCore, and FX impact on guidance.

A: Chuck Magro and David Johnson discussed market fundamentals, currency headwinds, and how these factors triangulate the midpoint of guidance.

Q: Vincent Andrews from Morgan Stanley inquired about crop protection and seed production costs.

A: Chuck Magro, Robert King, and Judd O'Connor commented on cost reduction programs in crop protection and seed, including high-cost inventory in seed and progress in CP cost takeout.

Q: Kevin McCarthy from BMO Capital asked about drivers of 800 basis points margin increase in crop protection.

A: Robert King explained that drivers included strong performance in Brazil, biologicals, new products, fungicide/insecticide growth, and cost reductions.

Q: Josh Spector from UBS questioned the guidance changes, specifically the cut in the top end.

A: David Johnson explained that the changes were due to FX headwinds and adjustments in price and volume assumptions.

Q: David Begleiter from Deutsche Bank asked about separating crop protection from seeds.

A: Chuck Magro stated that the integrated offering provides synergies and value for farmers, and he wouldn't take separation off the table but is confident in the integrated strategy.

Q: Salvador Keanu (filling in for Steve Byrne) asked about dicamba outlook.

A: Judd O'Connor said there's no upside baked into the 2025 plan for dicamba, but E3 products have strong order books.

Q: Rachel Leon (filling in for Patrick Cunningham) asked about just-in-time purchasing behavior.

A: Robert King said it's a behavioral shift due to economic conditions and is prepared for it moving forward.

Q: Edlain Rodriguez from Mizuho asked about competitive pressure in Latin America seed.

A: Judd O'Connor and Chuck Magro discussed improved COGS position, pricing opportunities, and better inventory cost position for 2025.

Q: Frank Mitsch from Fermium Research asked about working capital.

A: David Johnson said core working capital elements are expected to be a slight headwind in 2025, returning to more normal levels.

Q: Ryan Weis (filling in for Aleksey Yefremov) asked about raw material sourcing and tariffs.

A: Chuck Magro said CP raw material sourcing from China is manageable with multi-sourcing, and no impacts are baked into guidance yet.

Q: Richard Coty Torena from Wells Fargo asked about North America crop protection.

A: Chuck Magro and Robert King commented on improving farmer margins, tight inventories, and positive movement of products in North America.

Q: Kristen Owen from Oppenheimer asked about hedging practices.

A: David Johnson explained that they hedge currencies on a year-for-year basis, with BRL being a significant exposure.