10-QPeriod: Q2 FY2020

Corteva, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 6, 2020For Securities:CTVA

Summary

Corteva, Inc. reported a solid second quarter for 2020, demonstrating resilience in a challenging economic environment. Net sales for the quarter were $5.19 billion, a decrease of 7% year-over-year, primarily driven by lower volumes, which were impacted by earlier than usual deliveries in North America and a normalized start to the season in Latin America. However, this was partially offset by a 1% increase in price and ongoing cost synergies. For the first six months of 2020, net sales increased by 2% to $9.15 billion, driven by a 4% increase in volume and a 1% increase in local price, despite a 3% negative currency impact. The company's focus on operational efficiency and cost management, as evidenced by the "Execute to Win" program, contributed to improved profitability and cash flow from operations compared to the prior year. Despite the ongoing uncertainties related to COVID-19 and market volatility, Corteva maintains a positive outlook, projecting a 1-2% increase in net sales for the full year 2020.

Financial Highlights

52 data points
Beta

Revenue

$5.19B

45.5% Gross Margin

Net Income

$760.00M

14.6% Net Margin

EPS (Diluted)

$1.01

Total Assets

$42.18B

Cash & Equivalents

$2.81B

Free Cash Flow

$1.06B

Financial Statements
Beta
Revenue$5.19B
Cost of Revenue$2.83B
Gross Profit$2.36B
R&D Expenses$273.00M
SG&A Expenses$965.00M
Net Income$760.00M
EPS (Basic)$1.01
EPS (Diluted)$1.01
Shares Outstanding (Basic)749.20M
Shares Outstanding (Diluted)751.60M

Key Highlights

  • 1Net sales for Q2 2020 were $5.19 billion, down 7% year-over-year, driven by volume declines partially offset by price increases and cost synergies.
  • 2First six months net sales increased 2% to $9.15 billion, with volume and price gains offsetting currency headwinds.
  • 3Income from continuing operations after taxes was $766 million for Q2 2020, up significantly from $483 million in Q2 2019, showing strong profitability recovery.
  • 4Operating EBITDA for Q2 2020 was $1.24 billion, down from $1.45 billion in Q2 2019, reflecting the impact of volume declines and SG&A expenses.
  • 5The company incurred $179 million in restructuring and asset-related charges in Q2 2020, primarily due to accelerated prepaid royalty amortization, compared to $60 million in Q2 2019.
  • 6Cash used for operating activities for the first six months of 2020 was $0.9 billion, an improvement from $1.1 billion used in the same period of 2019.
  • 7Corteva anticipates a 1-2% increase in net sales for the full year 2020, reflecting confidence in its business despite market volatility.

Frequently Asked Questions

Corteva's net sales in the second quarter of 2020 were $5.19 billion, a 7% decrease year-over-year. The primary driver of this decline was a 4% decrease in volume, attributed to earlier deliveries in North America shifting corn volumes into the first quarter and a normalized season start in Latin America for crop protection. This was partially offset by a 1% increase in price and ongoing cost synergies.

Corteva stated that agriculture was considered an 'essential business' in most regions, largely exempting it from severe operational restrictions. While there were localized disruptions in sourcing and logistics, these were temporary and did not materially impact financial results. The company has implemented mitigating strategies, including multi-sourcing and remote work. However, the pandemic did negatively impact foreign currency exchange rates and contributed to volatility in commodity prices, particularly corn due to reduced ethanol demand, which the company is monitoring closely for future impacts.

Corteva expects an approximate 1% to 2% increase in net sales for the full year 2020 compared to 2019, driven by anticipated price and volume gains largely offset by unfavorable currency impacts. Operating EBITDA is projected to be down 4% to up 1% versus 2019, and Operating Earnings Per Share is expected to be down 13% to up 1% versus 2019. This outlook does not account for potential further disruptions from the COVID-19 pandemic.

In Q2 2020, Corteva recorded $179 million in restructuring and asset-related charges, a significant increase from $60 million in Q2 2019. This increase was primarily due to $138 million of non-cash accelerated prepaid royalty amortization expense related to certain herbicide tolerance traits. The company also performed an interim impairment assessment for its seed and crop protection reporting units and tradename intangible asset due to COVID-19 impacts on future cash flows but concluded no impairment charge was necessary as fair value exceeded carrying value by more than 15% for reporting units and approximated carrying value for the tradename.