Corteva, Inc.

Good day everyone and welcome to the Corteva Q3 earnings conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Megan Britt. Please go ahead ma'am.

Good morning everyone. Thank you for joining the third quarter 2019 earnings conference call for Corteva Agriscience. The call is available to investors and media via webcast. We have prepared presentation slides to supplement our comments during this call. These slides are posted on the investor relations section of the Corteva website and through the link to our webcast. Speaking on the call today are Jim Collins, Chief Executive Officer and Greg Friedman, Executive Vice President and Chief Financial Officer. In addition, Rajan Gajaria, Executive Vice President of Business Platform and Tim Glenn, Executive Vice President and Chief Commercial Officer will join the Q&A session at the end of the call. During this call we will make forward-looking statements regarding our expectations for the future. I direct you to slides 2 and 3 of our earnings release for our forward-looking statement disclaimer. All statements that address expectations or projections about the future are forward-looking statements. These statements reflect our current expectations but are not guarantees of future performance and are subject to risks and uncertainty regarding assumptions. We urge you to review our SEC filings for discussion of some of the factors that could cause material differences and actual results. We are providing information on a pro forma basis, prepared in conformity with Regulation SX, to provide the most meaningful comparison. So please take note of the pro forma basis discussion in our earnings release and slides. Unless otherwise specified, all historical financial measures presented today exclude significant items, which can be found in the schedules that accompany our earnings release. We will also refer to non-GAAP measures, a reconciliation to the most directly comparable GAAP financial measure where available and other associated disclosures are contained in our earnings release and on our website. Turning to the agenda for the call today, Jim will review highlights for the third quarter, including progress on our priorities for shareholder value creation, results by region, and key drivers of second half and full year operating EBITDA. Greg will then review our third quarter financial results in more detail, including segment performance highlights and a comprehensive walk of operating earnings per share. Following this review, we will take your question before concluding the call. With that introduction, it's now my pleasure to turn the call over to Jim.

Thank you, Megan, and thank you to everyone joining the call and online. Earlier today, we reported third quarter results for Cortella, delivering solid earnings improvement relative to the prior year, despite the emergence of currency headwinds in Latin America and additional weather-related impacts in several key regions. As we consider the market backdrop for this quarter, uncertainty regarding North America yield, production, and ending stock levels for the 2019 season has persisted as an unprecedented planting season has now given way to an extraordinarily late harvest. To some extent, large carryover supplies have moderated market reaction to North American production problems, especially as markets expected Latin America to respond to elevated commodity prices with additional production. However, recent planting progress reports from Brazil, where markets were poised for a strong row crop season, indicate lack of rainfall is delaying soybean planting, which may have an impact on the timing and size of the second crop, or safrignon. Coupled with production disruptions and delays, recent softening in the Chinese economy, African swine fever, and slower growth in other emerging markets are impacting the demand outlook for commodity grains and oilseeds. On trade, while China has resumed purchases of some U.S. agricultural products, the timing of a full resolution is still unknown. In the face of this considerable market turmoil, our teams have remained focused on the levers in our control, taking self-help actions and driving execution in the marketplace, while setting the stage for a solid 2020, when we expect more normal conditions to arrive in many sectors of the ag markets. Now as we did last quarter, we would like to start our update today with some longer term perspective, where we can look beyond the market uncertainty that has continued to challenge our -to-day operations to evaluate the progress we are making as a company relative to our priorities for shareholder value creation, noted on slide five. As I said last quarter, these priorities continue to guide our strategic actions and underscore the quality of results we are working to achieve, particularly as we work dynamically to adjust to short-term market disruptions. Starting first on culture, we highlighted the launch of Execute to Win last quarter. With this, we are establishing an owner mindset for all employees to drive the cultural reinforcement that is needed to deliver and sustain our gains long term. So far, we've engaged more than 25% of our employee base in the initiative identification, planning and execution that we expect will ultimately contribute $500 million in incremental operating EBITDA over the next five years. On capital allocation, we remain committed to delivering cash to shareholders in the form of quarterly dividends and share repurchases, while continuing to invest in innovation and growth. In June, we announced the authorization of a share buyback program to return $1 billion to shareholders, which we expect to complete over the next three years. This quarter, we repurchased $25 million in shares. Additionally, Corteva paid its first quarterly dividend of $0.13 per share on September 13th and has declared its second continuous quarterly dividend payable on December 18th. In total, our actions so far will return approximately $220 million in cash to shareholders by the end of the year. On a priority related to developing innovative solutions, we delivered over $30 million in operating improvement from new products in the quarter, consistent with our commitment to deliver over $100 million in improvement in the second half and greater than $150 million for the full year. Prop protection and new product sales increased 56% versus the same period last year and are on track to grow to 12% of our overall crop protection sales by the end of the year. Products driving net sales and operating EBITDA improvement in the quarter included PowerCore Ultra in seed and Aralex herbicide, Vissaria fungicides, and Isoclast insecticides in crop protection. We continue to see momentum in our crop protection portfolio with notable geographic label expansions for Aralex and Rinscore herbicides, Isoclast insecticide, and Zorbat fungicide this quarter. On our priority around best in class cost structure, we delivered $100 million in cost synergies in the quarter and are on track to deliver approximately $150 million in cost synergies for the second half of 2019. Overall, we have now realized cumulative cost savings through the end of this quarter of the year, $800 million out of the $1.2 billion commitment expected by 2021. Finally, seasonal shifts during the period and currency obscured several positive signs of operational momentum. Based on the current USDA acres, we are confident that we gain share in pioneer brand corn and soybeans in North America. We also gained share in summer corn in Brazil and insecticides and fungicides globally. Further, in support of our growth in the spinosan insecticides, we announced today a project approved by the board of directors to add manufacturing capacity for key spinosan insecticide products to release supply constraints and grow our leadership in natural products. Aligned with our market growth expectations in insecticides and natural products over the midterm horizon.

Moving to slide

six and a few highlights of our key performance indicators for the quarter. Net sales on a reported basis decreased 2% versus the prior period, primarily due to currency. Organic sales were flat for the quarter as weather drove offsetting shifts at the segment level. As we reported last quarter, market disruptions due to the weather in North America delayed planting and shifted seed sales into the third quarter. While strong early demand moved crop protection volume for Latin America into the second quarter. Further, pressuring third quarter performance, a lack of seasonal rainfall in Brazil delayed soybean planting and crop protection applications. Shifting crop protection volumes into the fourth quarter, primarily for visaria fungicide. Our operating EBITDA improved 18% compared to prior year, largely driven by the margin benefit from the shift of seed volumes and the continued realization of cost synergies. Demand for new crop protection products also resulted in margin expansion in the quarter, which helped to partially offset the more than $40 million hit to quarter from currency. Margin declines from higher corn and soybean replants and the seasonal shifts of Latin America crop protection volumes due to early demand coupled with the delayed seasonal rains further pressured operating EBITDA results for the quarter. For North America, when we exclude the impact of replant and despite the mixed shift we experienced to shorter maturity products, we held corn price in our pioneer brand. We reduced selling general and administrative and R&D costs 2% in the quarter on a net basis due to cost synergies as well as the discretionary actions taken to curtail spending.

Now slide seven shows third quarter highlights

by

region.

North America's sales improved 16% for the third quarter due to weather related planting delays that shifted seed sales for corn and soybeans into the period. While seed sales are up 102% compared to prior year, crop protection sales declined 7% as both delayed planting and delayed harvest impacted the timing of fertilizer and crop protection applications. The historically slow 2019 planting season in the U.S. has contributed to delays in harvest, fall field preparation and fall fertilizer applications. The most recent crop progress report indicated that only 41% of the U.S. corn and 62% of the U.S. soybeans were harvested. For corn, this percent harvested is the fourth slowest in the last 39 years and the soybean percent harvested is the sixth slowest. Delayed planting and now harvest have contributed to elevated channel inventories and crop protection combined with large distributor inventory reduction initiatives restocking rates have slowed, delaying the timing of fall crop protection sales. While harvest slowly progresses, momentum is building in North America for the 2020 season. Our seed pricing for the 2020 North America season was released to our sales teams in September and demonstrates our confidence in the strength of our new product performance. We price for the value created by new technology and we provide growers choice with high performing seed offerings delivered through our multi-channel, multi-brand approach. We are preparing for an aggressive ramp of chrome corn products which are expected to be approximately 20% of our lineup in 2020 and the launch of Lumialza seed treatment, our new proprietary bio-based nematocyte which will be launched in the Pioneer brand. In corn, considering the mixed benefit from new technology, we expect to drive low single digit price gains year over year in our Pioneer and multi-channel brands. We are also expanding the enlist E3 soybean offerings in our commercial product lineup next year and expect that technology will penetrate 10% of the market. On price for soybeans, we expect to be flat due to continued market competitiveness. Moving to Latin America, reported and organic net sales declined for the quarter largely due to the impact of weather related volume shifts in crop protection and currency. As we noted last quarter, the strong early demand shifted approximately $80 million in sales that would normally have occurred in the third quarter into the second quarter. The delay of seasonal rains in Brazil in the third quarter slowed soybean planting progress and resulted in the shift of approximately $50 million in expected crop protection sales into the fourth quarter, primarily from Basaria and Pungisai. Seed reported net sales up 7% for the third quarter in Latin America, largely due to the year over year price improvement. Strong performance of Leptra and Powercore Ultra corn products drove a 14% year over year increase in seed price. Seed volumes were down for the quarter due to the lack of seasonal rain delaying summer planting progress and input purchases in preparation for the Saffronia season. We are paying close attention to the development of the crop season in Brazil as continued challenges may impact planting, crop protection applications, crop input technology selections and the size of the Saffronia corn crop. We have also been following the presidential elections in Argentina and the decline of the dollar as of the quarter end compared to the start of the year. Approximately 20% of our Latin American net sales come from Argentina and we are relatively insulated from the currency devaluation as sales are predominantly done in U.S. dollars. However, government policies unfavorable to agriculture would impact our outlook for 2020 and beyond. In Asia Pacific, organic net sales were down 6% due to drought in key countries in the region which significantly lowered planting and treated acres and drove lower crop protection volumes in the region for the quarter. Seed reported net sales were up 19% year over year on strong volume in corn in Philippines and improved pricing in India due to high demand for other crops. Finishing up with Europe, Middle East and Africa, up 3% on a reported basis and 8% on an organic basis. Continued increased demand for new crop protection products like Aralex cereal herbicide contributed to growth in crop protection sales for the region in the quarter. In seed, declines in canola due to drought conditions in north and central Europe impacted volumes. Currency devaluation in the region lowered overall sales growth by 5%. Recent regulatory developments in Europe, particularly the announced ban of chlorpyrifosid insecticide in several countries have not had a meaningful impact on the quarter. We are still quantifying the impact to 2020 but expect the impact for all regulatory challenged products to be only $10 million and offset by expanded registrations for new crop protection products like Aralex and Rinscore herbicides and Zorbeck fungicides. So now I'll turn to slide 8 and cover the drivers of our operating EBITDA for the

second half and full year 2019. Last quarter we shared our expectation to deliver operating EBITDA about

break even for the second half. Due to further negative impact from currency, operating EBITDA is now expected to be a loss of $70 million compared to the same period last year, which is the lower end of the previous range. Currency, particularly the devaluation of the Brazilian REI, is expected to reduce second half results by about $80 million overall. Other drivers that we outlined last quarter as part of our second half guidance are on track to deliver. Due to the late North America season, we recognized seed revenues in the third quarter, which offset the crop protection volumes that shifted into the second quarter due to the early demand for products in Latin America. We continue to expect strong price improvement year over year on supply constrained, high demand products, primarily in our insect management portfolio. And we expect to have year over year improvement in Latin America largely due to the expansion of new products like Bacerea fungicide as well as Leptra and Powercore Ultra corn products. We have also maintained our momentum to deliver additional cost savings from Synergies in the second half, targeted to deliver over $150 million in incremental savings, which will bring our annual incremental savings to $350 million. In total, the second half guidance represents an approximate $130 million, or 65% improvement over the prior year. Full year pro forma operating EBITDA is now expected to be about $1.9 billion, the low end of the previous range, and down about 8% versus 2018. We are affirming the full year indication for net sales as a decline of roughly 3%, predominantly on currency headwinds. On an organic basis, we still expect sales to be about flat year over year. Before I turn the call over to Greg, I'll summarize by commending our teams around the globe for an extraordinary effort in the quarter to support our customers in the face of numerous challenges. Porteva achieved solid earnings improvement relative to the prior year and made ongoing progress on our priorities for shareholder value creation. We remain focused on driving operational discipline and committed to setting the stage for solid net sales and operating earnings growth in 2020. With that, I'll turn it over to Greg.

Thank you, Jim. Turning now to slide nine for a summary of our third quarter results. Please note that the prior year period is on a pro forma basis for operating EBITDA and operating earnings for share. As Jim covered, 2019 continues to be a very dynamic and complex operating environment, particularly in North America and Latin America, which is evident in our third quarter results. Net sales of $1.9 billion were down 2% versus prior year on a 3% increase in volumes. Offset by a 3% decline in local price and a 2% headwind from currency. North America volumes were up 31% in the quarter as a result of soybean and corn sales that shifted from the prior quarter due to delayed planting. Offsetting this was the early demand we experienced for crop protection products in Latin America in the prior quarter and delays in the Brazil soybean season, which shifted expected crop protection sales into the fourth quarter. Local price was impacted by competitive pricing pressure in North America's soybeans, higher replant in soybeans and corn, and the impact of grower incentive discounts in North America. Turning to operating EBITDA, we reported a loss of $207 million, which was an 18% improvement versus the prior year period on a pro forma basis. Overall, improvement was driven by favorable timing shifts in North America seed sales and roughly $100 million in cost savings from synergies that we delivered during the period. These were partially offset by shifts in crop protection sales in Latin America, and currency was a headwind. We delivered expansion in our overall operating EBITDA margin in the quarter as a result of the timing shifts we discussed earlier and cost synergies recognized during the period. All in all, operating EBITDA margins improved by more than 200 basis points led by our seed segment. This translated into a loss of 39 cents for operating earnings per share, up 35% from the third quarter 2018 on a pro forma basis. Turning to slide 10 for a year over year comparison of our operating earnings per share. Realized cost savings from synergies contributed 14 cents to operating EPS in the quarter, while volume contributed 8 cents of improvement primarily due to the sales shifts in seed and new product sales we delivered in the quarter. A 12 cent headwind on pricing and cost was a product of increased replant in soybeans and corn and increased grower incentive discounts coupled with higher commissions and new product launch costs. Currency was a 6 cent headwind in the quarter. In addition, tax was a benefit of 4 cents. Our base tax rate for the quarter was .8% up from the third quarter 2018 rate of 2.4%. Lastly, we generated 13 cents of benefit primarily from foreign exchange gains related to our hedging programs to offset exposures for the foreign currency denominated monetary assets and liability that we carry on our balance sheet. Turning to our segment results, slide 11 highlights the performance for the quarter in both our crop protection and seed segments. In crop protection, net sales were 1.2 billion for the quarter, down 12% from the prior year period. The decrease was primarily due to an 11% organic decline, predominantly from volume shifts in the quarter. Crop protection operating EBITDA was 119 million for the quarter, down 25% from the prior year period. Volume declines in Latin America, grower incentive discounts in North America, new product launch costs and currency drove the decline in operating EBITDA while the segment continued to deliver on cost energies. In seed, we reported net sales of 681 million for the quarter, which is up 24% from the same period last year. Higher sales were principally from a 31% increase in volumes as a result of the weather-related delay from North America, which shifted seed sales from the second quarter into the third quarter. Local price was a headwind of 5% in the quarter due to higher replant in soybeans and corn in North America. Currency was a headwind of 2%. Seed operating EBITDA was a loss of 295 million, an improvement of almost $80 million over the prior year period. Our results reflect the shift of soybean and corn sales in North America and continued progress on cost savings recognized in the quarter. Unfavorable local price impacted by replant and currency headwinds partially offset the -over-year volume improvement. Seed operating EBITDA margin improved by almost 25 percentage points. Turning now to slide 12 and an update on our modeling guidance, including a bridge of operating EBITDA to operating earnings per share for the full year 2019. Touching first on net sales, we continue to expect to be down about 3% over prior year, unchanged from prior guidance. This is due to unfavorable currency. Organic sales are essentially flat. We now expect appreciation expense to be approximately $575 million and interest expense to be about $100 million for the year based on our current forecast. We have updated our estimate on exchange losses, net attacks, which reflects our full year estimate for the cost of the program. Now expect a 70 to 80 million loss for the year. Based on the 1.9 billion operating EBITDA guidance for the year, this translates into an operating earnings per share range of $1.20 per share to $1.26 per share at a midpoint of $1.23 per share. This represents about a 4 cent improvement over the midpoint of our prior guidance on operating earnings per share. Before I turn the call back to Megan, I want to touch on the directional targets we provided for 2020 operating EBITDA back in August. We remain committed to executing against our cost synergies and productivity programs that we outline and fully expect to deliver on those targets in 2020. You will recall in August that we sized anticipated headwinds of approximately $100 million for the next year, but we continue to monitor market conditions that may alter that estimate. We are evaluating planted acres and costs for the next year. It is too early to provide definitive guidance. Our focus is still on delivering a solid year of growth in both net sales and operating EBITDA for 2020. We will provide more definitive guidance during our fourth quarter call, and I look forward to sharing more at that time. I'll now turn the call back to Megan to open the Q&A.

Thank you, Greg. With that, let's move on to your questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

Thank you. And ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Also, we do ask that you please limit yourself to one question, and we'll take our first question from David Begledier with Deutsche Bank. Please go ahead.

Thank you. Good morning. Jim and Greg, just on your 2020 guidance, you initially called out normalizing North American market conditions to be about $250 million. Is that still on track, and how is that into play with the $100 million plus perhaps of other headwinds you might see for next year due to planted acreage shifting? Thank you.

Yeah, thanks, David. This is Greg. You're right. In August, we updated our midterm targets for 2020 and included some expectations related to North America. Related to that, we're monitoring several factors that will influence our 2020 outlook, but we feel that $250 million is still a reasonable estimate. We're still planning on things like cost synergies, additional productivity, and new products consistent with our indications in August. And we're closely monitoring some elements here that we considered headwinds, such as currency, trade negotiations, channel inventories, planet area, regulatory actions, and things like that. There's a couple other elements here that I think would be helpful. Like maybe Rajan, you can provide some color on seed production. Sure.

Thanks for the time, Greg. Excited about 2020. There is obviously a lot going on here with new product launches, et cetera. But to answer the specific question, Greg, on the seed production, one of the biggest drivers for headwinds for seed production next year is the commodity prices. As we look at the commodity prices, they've increased year over year, and that's being factored in. Harvests are delayed across the Midwest, like we know. And so we are looking at what the yield impact of that could be as we go in. But overall, I would say that we are really excited about 2020 and the delivery of the $250 million that we have discussed in August, like Greg said.

David, it's Jim. Obviously, a complex market that we're looking towards. I think Greg did a nice job of summarizing all the elements. I'll reinforce that pipeline, you know, delivering going forward. You've heard a lot about Chrome. We'll have a list out there. We're ramping up products that we launched this year, like Paraxalt in Asia and Zorbeck in Europe and Isoclast, our newest insecticide. Of all the items that we've talked about, probably the one area that will have the biggest impact on 2020 will obviously be the planted area. And so maybe to close off this question, maybe ask Tim to just give a little insight on what we're seeing out there in the field around kind of expectations for 2020. Thanks,

Jim. And good morning, David. You know, as we look at 2020 in terms of the planted area in North America, I think the expectation we should have is that we'll return to more of a normal level. And so that would imply something in the neighborhood of about 11 million acres that would come back into production on corn and soy. And from that point, you know, when you determine, you know, the next critical thing is the mix between corn and soy. And so we monitor closely the ratio between soybeans and corn prices, commodity prices. And, you know, today that's somewhere in the neighborhood of around 2.4. And at that level, it would imply that, you know, somewhere in the neighborhood of about one-third of that, around 11 million acres would come back into corn with the balance going to soybeans. So now, note that is very dynamic and that's changing every day. And over the course of weeks or months in between now and planting, that can vary quite a lot. And, you know, that's one of the real key indicators that we're looking at. So today, that's the implications we see. We monitor it every day and we'll continue to do that all the way until

farmers make their final decisions. Great. Thanks, Tim.

Our next question will come from Jeff Zakoskas with JPMorgan. Please go ahead.

Thanks very much. You have a very dynamic cost reduction program, but there really hasn't been much change in SG&A costs year over year. And I think your SG&A costs were even a little bit higher in the third quarter. Can you discuss why that's the case? And you also have negative currency translation. So you would think that those numbers would be lower. Are you spending more on the SG&A line in order to promote products? And so that's, you know, adding to your costs or are there other factors? Can you discuss those issues?

Absolutely. Thanks, Jeff. This is Greg. So, yes, when you look at our SG&A line on the income statement, there are some non-operating costs included in that line item. So those non-operating costs, in fact, are up year over year, and those are costs that are specifically related to our discontinued businesses, things like increased litigation costs or increased costs related to remediation, environmental remediation. So if you take that piece out, we're relatively flat to slightly up, as you said, in SG&A. And the key driver of that in the third quarter is commissions. Commissions are variable based on our revenue, in particular to seed. So with our seed revenues going up as significantly as they did in the third quarter, there's a proportional element that increased our commission expense. There's also another component of commissions that did increase as well, and that is some competitive rate increases that we implemented earlier at the beginning of this year to bring our commission structure up to market rates. So if you take those increases, you also take into account the cost savings that we executed relative to our synergy, and then also some reductions that you see on the corporate line item. Net net SG&A for the quarter was

about flat to slightly up.

Our next question will come from Joel Jackson with BMO Capital Markets. Please go ahead.

Hi, good morning. Maybe you could expand a bit about your guidance that you expect soybean price mix, soybean seed price mix, to be a little flattish. Could you talk about maybe what's going on in the mix versus like for like pricing and some of the data points out there in the market from competitors on some of the soybean list pricing things?

Yeah,

Joel, let me start and then maybe I'll turn it to Tim. We launched our price cards here back in September, and so he's probably got the latest and greatest. But as we launched those cards, we expected overall prices to be flat to up slightly. But there are some downsides in those cards due to competitive competition that's out there. But we have some new technology that's mixed in there as well. So we see a lift going on. So all in all, we feel really good about the performance, especially in our A-series soybeans, and so that's going to carry a lot of weight in our pricing movement going forward. But Tim, do you want to give a little more color on soybean pricing? Yeah,

Joel, on pricing, obviously it is value driven and that we're in the time of the year right now where farmers are evaluating the products that they use this past year with delayed harvest that probably take a little bit longer than we typically see. And at the end of the day, they're going to evaluate what their best options are. So we price for value. Our approach this year is to have roughly flat on soybeans, and that is a combination of some existing products in our lineup that may be flat with year over year or possibly adjusted down a little bit, and then new varieties that come into our lineup really driving some upside and pricing opportunities. So it's a highly competitive market, no question. We're very blessed that we've got a strong portfolio of products in both the pioneer and multi-channel brands. We've got the, I feel very confident that we're setting the pace in terms of product performance on the Roundup A2 Extend segment. We've got extremely strong demand for our Enlist E3 technology, and those Enlist E3 products are priced comparable to our leading varieties. And so it's a combination of many things, primarily mix-driven that's going to allow us to hold prices as we move into 2020, but you're exactly right. It's a highly competitive market as it always is, and farmers are going to make their choice based

off of what delivers most value to them.

We'll take our next question from Christopher Parkinson with Credit Suisse. Please go ahead.

Great, thank you. There have obviously been a lot of moving parts in 2019, and just with the ag market, FX, input volatility, weather, trade timelines, you name it. But can you just really just boil down the Corteva story into three to four primary reasons on why investors should focus on the stock? Is it projected market outperformance and seed and CPC, the cost cuts, et cetera? Just what can you do you believe your global team could do better? And what should we be talking about mid-year in 2020? Just a few puts and takes would be appreciated. Thank you.

Yeah, Chris. Thanks for the question. As we said earlier, obviously we're monitoring a number of factors as we head into 2020. The first of those that Greg mentioned and others asked about, Jeff, asked about is the kind of the way that the recovery in the market in North America. So first and foremost, you have to acknowledge 2019 was an unprecedented year that we have not seen in the industry in a long time. So as we more normalize and move in to 2020, we'll expect to see a lot of that come back. And that's in our core market. It's in North America. It's where we have our largest lineup. And so obviously it affected us disproportionately in our business around the world. So if you then strip out North America and look at rest of the world, 2019 has been an extraordinary year. Year to date, we've got our different regions are like Europe, Asia, Latin America. They're all organically, you know, 7%. We've got insecticides growth. Our entire insecticide portfolio year to date is up 9%. So, you know, you strip out just what happened in North America. You can really see the energy and the momentum in the rest of the world and behind the scenes. On top of that, as we said, going into 2020, we're going to carry continue to carry through on the cost energy momentum that we've had. We have good line of sight and visibility as well as additional productivity actions that we have taken to really respond to the market conditions that are going on. So we can be in a better position to support our customers. And then third on that list is new products. You know, where you've heard Tim talk about Enlist. We're excited about that lineup now. Really, really hitting that hard. We'd expect Enlist to grow to be about 10% of the overall market. We've got Chrome coming in. There's been a nice lift on Chrome. And then there's a lineup of protection products like Aralex in Europe, one of the strongest new herbicides being launched in cereals, RinsCore for rice, Isoclast and Zorvec in specialty crops that are doing really well. So that pipeline has to be the third marquee element of that. So a recovery in North America, continued great momentum on cost energies and additional productivity actions. And then our new product pipeline. As we take a step back from the income statement and really look at where we're going to sit with our balance sheet, obviously we've got a strong commitment to returning cash to shareholders. And we've talked a lot about that in the past around the dividend announcement, but also a continued commitment as we go forward around an appropriate amount of share repurchases. So I think that is a pretty compelling story as to why

Corteva is a great vote here going forward.

Our next question will come from Vincent Andrews with Morgan Stanley. Please go ahead.

Thank you and good morning, everyone. If I could just ask you about the pioneer share gains in corn and soy in the U.S. One, if you could size it for us, you know, a half a point, full point, something like that. And secondly, if you can kind of help us understand how much of that just came from pure outperformance of the product versus obviously a tricky season with different maturity changes and so forth. You know, were you able to be more nimble than some of the smaller competitors to serve the farmers needs at the last minute? I guess what I'm trying to get at is how much of that share gain are you very comfortable you're going to carry into 2020 and build on versus how much could have just been some good execution in a challenging season?

Yeah, it's a great question, Vincent. Thanks for that. You know, we really we start with the based on the current USDA acreage forecast that we have. It's kind of the best data we have. And as I mentioned in my opening comments, we believe we have gained share in both corn and soybeans in North America. And that's that service, the high service, high touch approach, I think, is part of that really shining through the fact that we're with those growers in their fields. And as this market unfolded, you know, our ability to move products around and meet demand as appropriate. I think our team out there really, really shined. I think there's a performance element to that. And maybe I'll kick it to Tim here to give you a little more color on it. And then I did add that Brazil, I think based on the current intended acres and external estimates that we get, we believe we've done really well in that summer corn market also. And I think, again, that's product performance. That's the lineup that we committed to as we've been really driving that. So Tim, do you want to add some other comments?

No, I think you touched on it well, Jim. I mean, what I would highlight is, you know, Vincent, I think the point is you have to have strong product performance and you have to be able to go out and execute. And the two go together. And in a year like this, I mean, we, you know, as we went through the entire califah, the selling season, you know, up to the point of planting, we had very strong demand for products. And so coming off a really strong performance in 2018, you know, we carried a lot of momentum on the product side, a lot of energy from our sales team. And so we felt very good about where we were prior to sort of the season breaking and, you know, chaos ensuing. I think the fact that we were able to be there, our route to model is definitely working in our advantage, our ability to go out there and serve customers as they were dealing with some of the adversity, potentially changing from one maturity to another in corn, evaluating other crop options, that hustle, that execution definitely made a difference. And I think that, you know, it helped translate into a strong finish for the year. You know, what we carry into 2020, to me, I think that those actions that we made this spring and into the summer, you know, that strengthens the relationship. You know, we expect that customers are going to have a very positive experience with our product. Again, you know, coming off that high level of service, you know, we believe it's sustainable. And, you know, we have longstanding relationships with farmer customers, and this only builds off of that. So it was a tough year at times. It felt like our sales team was not making a lot of progress just because so many changes and so much uncertainty. But, you know, tough years is when you really strengthen those relationships. And given that with our product performance, really excited

about what we carry into 2020.

Our next question will come from John Roberts with UBS. Please go ahead.

Thank you. I'm looking at slide 15, specifically the pricing in the seed marketplaces. Could you tell us what North American seed price was if you excluded the free seed given for replant of the flooded acres? And then if you look at the Latin American seed pricing of 14%, it was flat last quarter. Could you tell us maybe what it was on a -to-date basis? Because there must have been some strong mix effects quarter to quarter in the seeds in Latin America.

Yeah, I'll start again, Tim, you're a little close to this day to day. But, yeah, you know, we did have a slightly elevated level of replants in there year over year, probably more replant in beans than we had in corn. But when you exclude the effects of replant, the pricing was about flat year over year. And then on Latin America, Tim, maybe let you comment?

Yeah, just to kind of close the door on the replants, I mean, this is a customary program that we would have in place to ensure that our customers are getting the most value out of our products. You know, we ensure that they get a good stand. And I'd say it's, you know, while there's different variations in the industry, fairly standard across the board. And, you know, it can vary quite a lot between year over year. And what we saw this year, more or less, on corn was about a 10% increase versus the five-year average. And then on soybeans, as Jim said, we saw more replant. It was more like 30% above what that five-year average was. And, you know, you look back at the season and obviously, you know, not surprising considering the weather challenges we had. And I would say in Latin America, you know, a couple things that are driving our ability to price. You know, one would be, you know, we've got very strong performance. And we've been able to effectively establish the Revant brand and, you know, position the Pioneer brand appropriately. So, you know, very good overall product performance. And then we're getting strong benefit from the continued increase in utilization of new technologies like PowerCore Ultra and our Lutra hybrid. So it's a combination of mix. It's a combination of strong performance. And I think, again, very good momentum that we're carrying in the marketplace in both Brazil and Argentina. So it's really a Latin American story, not strictly a Brazil story. Thanks, Jim.

Our next question will come from Jonas Oxguard with Bernstein. Please go ahead.

Hi, good morning. You talked in the beginning of the call a little bit about the outcomes of the harvest and all the uncertainty. Can you help us think through what the impact is in these different scenarios? If we take two scenarios of one where corn price stays loosely where it is today and harvest is okay versus one where the harvest is much weaker, where corn price goes to four bucks, how does that impact next year's results for you?

Thanks. Thanks, Jonas. You know, clearly, as Tim mentioned earlier, we watch that soybean to corn price ratio really closely because, you know, over the years that we've been watching this, there is an indifference point where the economics and the value of those two crops, you know, sort of sort of sort of balance. And so as we see pricing differences, we see that ratio swing and we watch demand swing with that for corn. So right now, the scenario that's out there, it's the best data that we really have, the USDA estimates around yield, but also USDA estimates around, you know, intended planting for 2020, you know, I would say that we will see a little bit more corn and we'll see, you know, maybe the balance, one-third, two-thirds more of those acres that Tim mentioned, you know, coming back in to soybeans. So if you saw a big swing in price more towards corn, you'd see growers respond to that. The way our portfolio sits today on a net margin basis, as we've said many times before, our profitability would favor stronger corn acres than soybean acres, but we're really starting to change that equation. You start to think about the penetration that we'll have within LISP going forward as we've added other products to our portfolio, the A-series soybeans and the relative performance that we're having on that portfolio and our ability to price for the value that we deliver. It's starting to moderate that margin slightly, that margin difference slightly. So we're just going to put ourselves in a position to respond to the market with however it turns out and we'll be ready depending

on those two areas. That's fair.

Our next question will come from Steve Byrne with Banks America. Please go ahead.

Yes, thank you. You had a few of your crop chemical peers post results in the last couple of days. And one area that seems to reflect a differential result is Latin America where you had peers that posted some pretty strong volumes in contrast to yours. And I just wanted to get your view on that. You did note that there was some volume pull into the second quarter and a little bit of a push into the fourth quarter. Is this a differential impact on Corteva because of your product mix or your crop focus? Or is there anything else going on here like capacity constraints in Spinoza? Or is there any area where you might be losing some market share?

Yeah, Steve. So let's just start with the Latin America message. You know, you really can't just look here at third quarter and really compare what's going on. If I step back from that, you know, our Latin America business overall for the year organically is up 8%. So you said it accurately. There was a large portion of our crop protection business because of the products we sell and the timing of the market was really accelerated into the second quarter. And we reported out on that very, very specifically. And then on top of that, you know, we've got some of the leading fungicides for soybeans in Brazil. And you're all reading about what's happening with this with the planting in Brazil due to lack of rains. We've had a slightly delayed planting. And so, you know, the setup for our products has shifted a little bit here into fourth quarter. And we've got, you know, we've got good indications that that flow of products is happening. We've got October, you know, essentially behind us here. And we can see good volume growth. So and when you step back in and look at insecticides overall, again, really is not a story here to date. Our insecticide business in Latin America is up as much as 30%. And globally, our insect portfolio is up 9%. And we'd expect the market maybe is more like more like five, mid, mid, mid 5% range. So we're outpacing the market. Maybe I'll ask Rajan to talk a little bit about, you know, capacity and capacity constraints. We've done a lot in that. You saw some announcements we made today. So Rajan, you want to talk a little bit about that? Yeah,

thanks a ton, Jim. And hi, Steve. Related to the capacity, like you know, from a spinosan standpoint, like Jim said, 9% growth year over year, three quarters on the insecticide business. It's continuing to meet our expectations. The good news is that as the market continues to grow and we continue to see more demand for our products, we're instilling more capacity. And that was the capital project that we just announced earlier this week, said that they were building more capacity in. So very confident about where the insecticide portfolio is. Despite some of the supply challenges across the globe on insecticides, we have actually continued to grow. The Brazilian market is one indication. But as Jim said, globally, insecticide portfolio continues to grow and we continue to have high expectations of this portfolio for 2020 and beyond.

And Steve, I just maybe want to just clarify additional comment. The announcement that we made today is not the first expansion that we've had in that portfolio. Almost the day of merge, the opportunity in our insecticide space was obvious to us as a leadership team. And so this is another now succession or installment of capacity to carry us out now well into the 2020s. But thanks to some of those early steps, if we look since merge, we've grown our spinosans portfolio by 27 percent through the end here of 2019. And if I just kind of look at the plans that we're talking about and have in place going into 2020, we're going to be up 50 percent from where we were at merge with that complex of spinosad and spinatogram. So I couldn't be prouder of the team and how we're executing. And clearly, market demand is there for this chemistry that really occupies a very nice space

in the market. So we're going to keep driving it hard as we go forward.

And our last question will come from Don Carson with Susquehanna Financial. Please go ahead.

Thank you. Jim, a question on your Safrina outlook. Typically, when soybean planting is late, you know, sometimes see growers shift to lower quality seed because of the abbreviated Safrina season. So what's implicit in your 1.9 billion EBITDA guidance this year or would a shortfall in Safrina be more of a 2020 item and then just a housekeeping item? What's your total receivables exposure in South America?

Maybe Tim, you want to talk about Safrina and Greg can give us a receivables update.

Hey, good morning, Don. Question on Safrina. Obviously, you know, we look at that very closely as well in terms of the progress. That's one of the indicators on how that Safrina season is going to go. And, you know, we got to look at two elements there. One is the area, what gets planted, and the second element is around technology that they're going to employ. So, you know, we're monitoring that closely and I'd say it's probably too early to call, you know, whether there's a major technology shift. I think at the area level, I don't think we're at risk in terms of seeing a reduced area from maybe what the original intentions were. So I feel pretty good about that. And in terms of the technology employed, that probably will end up being more of a 2020 type issue because of the fact that that first planted Safrina seed will still be with, you know, our strongest hybrids, the highest technology. So, you know, what we would typically move into customers' hands in December of 2019 will be planted in a window where they should be able to get, you know, really good performance and it's not necessarily a late planted risky crop. So, you know, we'll continue to monitor that. And we get, again, we get reports on the ground most every day on what that progress and what the expectations are and we'll be prepared to deal with that if we do see a technology shift.

And then related to receivables, I would characterize our current receivables position in Latin America today as on track with our expectations. As we as we're monitoring and focusing on collections right now, our past dues year over year are better. And in fact, we are seeing our bad debt write offs this year to be better than our expectations. So I would characterize that, you know, just to be cautiously optimistic here. I would characterize that absolutely as on track, even though we are trending a little bit better right now.

So thank you all for your questions. I did want to close with an update on the Kamours litigation. As you know, Corteva and DuPont jointly filed a motion to dismiss. We expect the matter to be fully briefed by November 8th, subject to oral arguments that are really yet to be scheduled. A decision on our request for that dismissal should follow shortly thereafter. And as we've said before, we believe the claims made by Kamours are without merit and that Corteva will vigorously defend against the claims in the complaint to uphold our rights that were specified under the separation agreement. So with that, I want to thank you all for joining our call today.

And ladies and gentlemen, this does conclude today's call. Thank you all for your participation. You may now disconnect.