Corteva, Inc.

Good day and welcome to the Corteva 1Q 2023 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kim Booth, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Corteva's first quarter 2023 earnings conference call. Our prepared remarks today will be led by Chuck Magro, Chief Executive Officer, and Dave Anderson, Executive Vice President and Chief Financial Officer. Additionally, Tim Glenn, Executive Vice President, Seed Business Unit, and Robert King, Executive Vice President, Crop Protection Business Unit, will join the Q&A session. We have prepared presentation slides to supplement our remarks during this call, which are posted on the investor relations section of the Corteva website and through the link to our webcast. During this call, we will make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including but not limited to those discussed on this call and in the risk factors section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note in today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in our earnings press release and related schedules along with our supplemental financial summary slide deck available on our investor relations website. It's now my pleasure to turn the call over to Chuck.

Thanks, Kim. Good morning, everyone, and thanks for joining us today. We're really pleased to report another solid quarter and a solid start to 2023 where we delivered double-digit organic sales and earnings growth alongside meaningful margin expansion. It is the first time we've crossed the 25% EBITDA margin threshold in Q1, which is a milestone for the company in our value creation journey and shows just how far we've come. Today, we are also updating our previously announced guidance for the full year. Net sales are now expected to grow 7% and operating EBITDA 13% at the midpoint over prior year. Operating EPS is expected to be in the range of $280 to $3. This outlook reflects the power of our strategy and the strength of execution in a dynamic ag market. Strategically, we continue to make choices to strengthen our portfolio mix and accelerate growth and margin expansion. Our actions are translating into higher quality earnings. We remain on track with regard to our 2025 value creation plan, and are focused on continuing to deliver on our targets. Let me provide a few highlights of progress we're making in each business. In seed, we recently announced the commercial launch of Boar Seed Enlist, our next generation corn rootworm protection products that includes the power of the Enlist weed control system. As a reminder, we expect the U.S. soybean market penetration percentage for Enlist to be in the mid-50s this year. On Brevant, our growing retail brand, which is serving as a catalyst for growth in the medium term, we continue to see robust demand and market acceptance. In crop protection, we continue to drive penetration of our recent technology launches with new product sales of approximately 620 million, a 30% increase over prior year. This was led by products like Enlist and Arlex herbicides, which each grew more than 50% over the same quarter last year. I'm also pleased with the advancements we've made in all three of our frontier markets in the first quarter. We see tremendous opportunity in the high-growth, high-value areas of biofuels, specialty oils and proteins, as well as biologicals. These growth markets will deliver increased optionality and value to our customers and allow us to work with partners to create new value chains and cropping systems that will increase both food and fuel security. In biofuels, our collaboration with Bungie and Chevron will increase the supply of lower carbon renewable fuels in the U.S. by using our proprietary winter canola hybrids in a new double cropping system. We are also collaborating with Bungie to develop and commercialize a more nutritious soybean meal for the animal feed industry in the U.S., aimed at reducing the use of synthetic feed additives. In biologicals, we successfully acquired Stoller and Simborg in the first quarter. With the addition of these two strong companies, we have cemented ourselves as one of the largest players in this rapidly growing segment. Biologicals are expected to represent about 25% of the global crop protection market by 2035, driven by increasing demand for effective, sustainable solutions. Importantly, the ag fundamentals remain constructive, underpinned by the profitability of farmers. There has been no change in farmer priorities. They are investing in productivity and yields, and we expect that to continue. As anticipated, we are seeing buying patterns normalize, something we haven't experienced in a few years. This dynamic is not surprising and is healthy for agriculture in the longer term. And the strategic portfolio decisions we made last year will allow us to thrive as we enter this next phase of normalization. Now let's go through more specifics on the market outlook. We continue to see tight grain and oil seed inventories around the world with crop prices above historical averages. Strong demand combined with tight supply and weather related reductions in estimated yields drove low stocks to use ratios for both corn and soybeans during the 22-23 crop year. We continue to believe that global grain and oilseed markets need two consecutive normal crop years to stabilize global supplies, and it's too early to tell whether this year will be a year of rebuilding. We expect these trends to continue throughout the year, given current commodity prices and the fact that productivity on the farm from top ag technologies is the best way for farmers to manage their businesses. Turning to the U.S. planted area, we expect farmers to plant 92 million acres of corn, up 4% year over year, and around 88 million acres of soybeans, essentially flat year over year. Projected farmer incomes are strong in 2023, though slightly lower than 2022 in the record we saw in 2021. Finally, when we look at the Brazil market, the farmer is financially healthy. investing in maximizing crop production, and all indications are that they'll plant more soybeans and safrinha corn this coming season than they did last year. In order to do this, they will need our technology to drive and protect yields. The strength in these two key markets is helping offset planted area and yield reductions in other parts of the world, including Ukraine and Argentina. Let's shift gears to our 2025 value creation framework. In September, we announced a new financial objective to deliver 4.4 billion of EBITDA on 20 billion of revenue by 2025. To achieve this, we focused on four value catalysts to accelerate EBITDA growth and earnings quality. Portfolio simplification, royalty neutrality, product mix improvements, and operational excellence. These are significantly under our control, and we are making good progress in each area. We're planning on completing about 85% of our 32 planned country exits and about 60% of our AI exits by the end of this year. On our path to royalty neutrality, we expect to generate an additional 100 million of EBITDA in 2023, largely driven by our enlist transition. In crop protection, we are creating sustainable differentiated products with plans to launch nine new AIs by 2035, on top of the nine launched since 2017. And finally, on operational excellence, where improvements across the company are driving price and productivity actions, we now expect to deliver approximately $300 million in savings in just 2023 alone. Discipline execution against this value creation plan is expected to translate into compounded EBITDA growth that would put us to between 21 and 23% EBITDA margins by 2025. This is a significant increase from where we started just a few years ago, and it includes a sizable increase in R&D investment. And with that, let me turn it over to Dave to provide details on our financial performance, as well as updates on the 2023 outlook.