Corteva, Inc.

Good day and welcome to the Corteva third quarter 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, ma'am.

Good morning and welcome to Corteva's third 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. Just over a year ago, we unveiled a strategic framework to enhance Corteva's competitive position while achieving margin expansion and long-term value creation. What we didn't know at the time was how important the efficient execution of that plan would be in delivering continued earnings and margin growth in 2023, a year with no shortage of complicating geopolitical, macroeconomic, and ag-specific factors. We're making good progress towards our 2025 earnings and margin targets despite these challenges. Through the first nine months of the year, we've generated over 120 basis points of margin expansion. What sets us apart is the strength and balance of our global seed and crop protection portfolios and our continued focus on controlling our controllables. Our seed business is delivering exceptional performance in 2023 and is set up for continued growth with our pipeline of technology and new hybrids. For 2024, we will roll out over 200 new hybrids and varieties around the world, after more than 300 in 2022 and 2023 combined. This is helping farmers around the world increase yield and production, which is reflected in our price for value strategy. Thanks to the continued success of our Enlist platform, where last quarter we announced having become the number one selling soybean technology in the U.S., we're expecting to deliver royalty reduction benefits in 2023 of approximately $200 million, with another $100 million expected in 2024. This is about a year ahead of our plan to achieve royalty neutrality. And just last week, we announced our next series of Enlist E3 Soybeans in North America that builds off our industry-leading A-series performance. More to come on this soon. In corn, we are delighted to say that we now have a decade view of corn trade technology, which represents a robust market opportunity, including out-licensing all of which will translate to significant value creation. We're also running ahead in cost and productivity across both of our businesses. Last September, we estimated cumulative run rate savings of $400 million, and we're now set to deliver over $300 million in 2023 alone. And today, we're announcing the next steps in the plan to optimize our global crop production network. The plan includes the exit of production activities at our site in Pittsburgh, California, as well as decent production at other select locations. These actions will strengthen our competitive position in the market by improving our cost base and increasing supply agility. Dave will describe the plan in greater detail, but I'll highlight that we're estimating annual run rate savings of approximately $100 million by 2025. That should significantly enhance our competitiveness and our customer service globally. Overall, the ag markets remain constructive, but mixed. Global ag fundamentals remain positive, with farmer income still above historical levels. Destocking and crop protection appears to be largely behind us in North America, with an uptick in orders from the channel. But we expect destocking to continue through the current season in Latin America and the upcoming season in Europe. Underlying farmer demand in terms of applications is on track with historical trends. However, just-in-time order patterns, which are most pronounced in Brazil, will likely persist into 2024. So what does all this mean for the remainder of the year? Our current expectation is that our 2023 full-year results will still deliver operating EBITDA growth and over 100 basis points of margin expansion. We're responding to the local pressures we're experiencing in Brazil, and we remain committed to long-term value creation, including returning cash to shareholders, as evidenced by the $750 million in share repurchases this year. Turning to the market outlook, we're seeing solid global demand for agricultural production. Global demand for biofuels in 2023 is at a record level, and we expect continued growth in 2024. Global production of many key crops is estimated to be up versus the 2022-2023 crop year, including corn and soybeans. Although current USDA estimates for the most recent crop year show it would be the fourth consecutive year of below-trend corn yields in the US, we're starting to see a rebound of US ending corn stocks due to an increase in planted area. This comes after several years of tight stock levels driven by weather challenges. However, total corn and soybean stocks excluding China are not back to pre-pandemic levels and are dependent on critical southern hemisphere production, which is even more apparent in soybeans, where Brazil is a critical exporter. Meanwhile, corn production in Europe remains markedly below pre-conflict levels, particularly in the Black Sea region, where Ukraine production is down 30%. Brazil is really a tale of two crops. Soybean area is expected to be up in the 2023-2024 crop year based on relative production economics between soybeans and corn. Extreme weather varying by region and driven by the El Nino transition are adding an additional level of complexity to current USDA and CONAD crop area estimates. This is all factoring into our latest operating assumptions that both summer and safrinha area will be down. Although the combination of factors at play in Brazil this season are quite complex, this is part of the global agricultural market's ongoing balancing of supply and demand, which is expected to also result in a modest shift from corn to soybeans in the U.S. in 2024. To wrap up, we believe we have one of the most competitively advantaged ag technology portfolios in the industry. We believe our performance over the past three years speaks for itself. Since the beginning of 2021, our revenues are expected to be up about $3 billion, while delivering an increase of over $1.2 billion of EBITDA. But what perhaps is even more impressive is EBITDA margin improvement approaching 500 basis points. No other company in our space has come even close to that level of performance. and there's even more to come. And now, let me turn the call over to Dave.