Corteva, Inc. · NYSE:CTVA
Corteva — Corteva Agriscience — Investor Day (February 2019)
54 slides from Corteva's investor day presentation, Feb 21, 2019
Slide 1: Analyst Day
Analyst Day February 21, 2019 Insert Risk Classification Agriculture Division of DowDuPont
Slide 2: Safe Harbor Regarding Forward-Looking Statements
Safe Harbor Regarding Forward-Looking Statements Forward-Looking Statements This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1
Slide 3: A Reminder About Non-GAAP Statements
A Reminder About Non-GAAP Statements These risks are and will be more fully discussed in the current, quarterly and annual reports and preliminary registration statement on Form 10 filed with the U. S. Securities and Exchange Commission by DowDuPont or the Company, as applicable. While the list of f
Slide 4: Agenda
Company and Industry Overview Jim Collins, CEO-Elect Financial Overview AGENDA Greg Friedman, CFO-Elect Question & Answer Session Adjourn Agriculture Division of DowDuPont 4
Slide 5: Company and Industry Overview
Company and Industry Overview Jim Collins, CEO-Elect 5
Slide 6: Section Highlights Company Overview
Section Highlights Company Market Growth Overview Overview Overview Crop Seeds Protection Digital Channel Geography Leading, U.S. based, pure-play Attractive industry fundamentals Global market leader with a balanced agriculture company despite short-term headwinds portfolio and strong pipeline Agri
Slide 7: Five Priorities for Shareholder Value Creation
01 Instill a strong culture Drive disciplined capital 02 allocation Develop innovative FIVE PRIORITIES 03 solutions for Shareholder Value Creation Attain best-in-class cost 04 structure Deliver above-market 05 growth Agriculture Division of DowDuPont 7
Slide 8: Corteva Strategy
We provide farmers with the right mix of innovative seeds, crop protection, and digital Corteva solutions to maximize yield and improve Strategy profitability, while strengthening customer relationships and ensuring an abundant food supply for a growing global population Agriculture Division of DowD
Slide 9: Bringing Together Two U.S.-Based Innovators
Bringing Together Two U.S.-Based Innovators Crop Crop Seeds & Crop Seeds & Seeds Protection Protection Traits Protection Traits ~70% ~30% ~80% ~20% ~44% ~56% Portfolio(1) + Route-to- Market Leading germplasm Germplasm diversification Best-in-class germplasm + traits + Direct route to market
Slide 10: Global Scale and Unique Routes to Market
Global Scale and Unique Routes to Market $14 Billion Net Sales* 20,000+ 130+ Colleagues Countries ~50% 140+ ~13,000 ~20% R&D Facilities Granted Patents ~10% ~20% Growers are able 100+ 65+ Production & Active to work with Mfg. Facilities Ingredients Corteva through HQ: Wilmington, DE Business Centers
Slide 11: Balanced Portfolio With Meaningful Seed and Chemistry Components
Balanced Portfolio With Meaningful Seed and Chemistry Components Company Bayer Syngenta BASF FMC ~$14bn ~$23bn ~$16bn ~$9bn ~$4bn 25% 25% Portfolio Mix 44% 50% 50% 56% 75% 75% Seeds 100% Chemicals 15% 15% 25% 20% Corn 10% 45% Soybeans Seed Portfolio 20% 50% 55% Vegetables 65% 20% Other 25% 35% 5% 10
Slide 12: Short-Term Industry Dynamics Influencing Crop Decisions
Short-Term Industry Dynamics Influencing Crop Decisions Soybean Ending Stocks (Mil Bu) Stocks-to-Use Ratio Historical Stocks Sorted from Smallest to Largest Record yields Corn Wheat Soybeans boosted ending 40% 910 stocks 35% Farmers continue to plant their land 30% to maximize their profits 25% 395
Slide 13: Projected Acreage Shifts Expected to Be Neutral for Corteva
Projected Acreage Shifts Expected to Be Neutral for Corteva Market dynamics are driving a shift in U.S. planted area from soybeans to corn, cotton, and spring wheat* + = - Agriculture Division of DowDuPont *Source: USDA 13
Slide 14: Aggregate Measure of Ag Productivity Is Turning Positive
Aggregate Measure of Ag Productivity Is Turning Positive Global Value of Ag Production (B$) Market Growth Expectations 1,000 Global Value* = Total Crop Area Harvested x Price x Yield Per Acre • The crop sector is in the Thousands demand-building era with more 900 stable commodity prices coupled 800
Slide 15: Growers Continue to Invest in Technology That Drives Yield
Growers Continue to Invest in Technology That Drives Yield U.S. Farm Income (B$) U.S. Seed and Chemical Input Costs (B$) $150 $40 Chemicals Seed $125 $30 $100 $75 $20 $50 $10 $25 $0 $0 2019F 2019F 2000 2005 2010 2015 2018 2000 2005 2010 2015 2018 However, growers are still expected U.S. farm income
Slide 16: Currency and Raw Materials Impacting Our Business Segments
Currency and Raw Materials Impacting Our Business Segments Description of Impact Currency and raw material costs impacted 2018 results Seed Crop Protection and will continue to have impacts in 2019 Key Trend Current Status We have limited ability to We can generally price for Currency price for curr
Slide 17: Attractive Long-Term Secular Trends Despite Near Term Headwinds
Attractive Long-Term Secular Trends Despite Near Term Headwinds Arable land per World population (bn) While a rising capita (ha) +2bn in 2015-2050 0.5 10.0 global Developing 0.4 8.0 0.3 6.0 countries population 0.2 4.0 Developed puts pressure 0.1 2.0 countries 0.0 0.0 on yields… 1960 1965 1970 1975
Slide 18: Leading Seed Position Across Largest Crops and Geographies
Leading Seed Position Across Largest Crops and Geographies 2018 Net Sales By Region 2018 Net Sales By Crop Corn NA Soy 2018 LA Sunflower Canola NET SALES EMEA Cotton AP $8B Other • Innovation in germplasm and traits Competitive • Global manufacturing footprint enables cost competitiveness Advantage
Slide 19: Seed Product Performance from Recent Yield Trials
Seed Product Performance from Recent Yield Trials U.S. Soybean Yield U.S. Corn Yield Advantage Advantage in Bushels/Acre in Bushels/Acre Soybean Varieties Pioneer® A-Series Soybeans with Roundup 2018 Harvest Data from On-Farm Trials: Ready 2 Xtend® Technology vs. All All Pioneer vs. Competitor Bushe
Slide 20: New Seed Product Launches Add Value Now and in the Future
New Seed Product Launches Add Value Now and in the Future DELIVERING FOR TODAY INNOVATING FOR TOMORROW Products Launched New Product Pipeline New Product Sales $1.9B $1.4B $1.1B Next Generation Corn Rootworm Trait Technology 2018 2019E 2020E We expect to deliver more than $1.4B in new product sales
Slide 21: Investment in Our Crop Protection Pipeline Driving Growth
Investment in Our Crop Protection Pipeline Driving Growth 2018 NET SALES $6.3B CP New Products Delivered By Region By Indication 8% Sales Growth in 2H18 Organic +10%* Organic +17%* $1.6B Fungicides $1.5B $1.4B $1.2B NA Herbicides LA Insecticides EMEA AP Other Q3 Q4 2017 2018 * Organic sales growth i
Slide 22: New Crop Protection Products Adding Value Today and in Future
New Crop Protection Products Adding Value Today and in Future DELIVERING FOR TODAY INNOVATING FOR TOMORROW Products Launched New Product Pipeline New Product Sales SEED APPLIED TECHNOLOGY INSECT MGT. $1.0B DISEASE MGT. SOLUTIONS SOLUTIONS $0.6B $0.4B NEMATICIDE DISEASE MGT. SOLUTIONS HERBICIDE 2018
Slide 23: Strong Proof Point in Our Enlist Complete Solution
Strong Proof Point in Our Enlist Complete Solution Enlist traits targeting over ~$1B of peak sales Progress on Enlist Trait Launches Enlist E3™ Enlist cotton Enlist corn soybeans – launched in commercially 2019 launch and 2017 available in 2018 2020 ramp-up Stacked with Industry-Leading Traits New r
Slide 24: Granular Products Focused on Increasing Farm Profitability
Granular Products Focused on Increasing Farm Profitability CURRENT PRODUCT FOCUS Better decisions across Operations Agronomy = Higher Farm Profitability Financials GROWTH PRIORITIES Global scale with Corteva Connecting farms online to ag value chain CORTEVA VALUE Standalone More compel
Slide 25: Expanding Access Through Multiple Brands and Channels
Expanding Access Through Multiple Brands and Channels Licensing and + Flagship Pioneer® seed brand Distribution with unique direct to farmer (“agency”) route-to-market + Strategically positioned retail brands with competitive germplasm in an underserved Global Brand market + Licensing and distributi
Slide 26: Strong Proof Point in Our Brazil Market Share Increase
Strong Proof Point in Our Brazil Market Share Increase Maintained #1 position with Pioneer leading the summer We grew corn growth 2018 share by 1 to 2 The Brazil corn market points in summer in summer corn and Brazil corn market Safrinha saw safrinha is down in 2018* an early start Despite this, Pot
Slide 27: Progress on Five Priorities for Shareholder Value Creation
Progress on Five Priorities for Shareholder Value Creation 01 02 03 04 05 Instill a strong Drive disciplined Develop innovative Attain best-in-class Deliver above- culture capital allocation solutions cost structure market growth Engaged Approved new Launched new Delivered YoY Delivered performance
Slide 28: Financial Overview
Financial Overview Greg Friedman, CFO-Elect 28
Slide 29: Focused on Shareholder Value Creation
Focused on Shareholder Value Creation Grow Expand Disciplined Sales EBITDA Investment Agriculture Division of DowDuPont 29
Slide 30: Section Highlights Financial Results
Section Highlights 2018 2019 Mid-Term Perspective Financial Financial Financial on Cash Results Guidance Targets Divisional Basis • Net Sales • Net Sales • Key Assumptions • Seasonality • Operating EBITDA • Operating EBITDA • Priority Uses • Key Assumptions Focus on Shareholder Value Creation Agricu
Slide 31: 2018 Sales and Operating EBITDA Recap
2018 Sales and Operating EBITDA Recap Net Sales Operating EBITDA ($ in bn) 0.4 ($ in bn) $14.5B (0.2) 0.4 $14.3B (0.1) $14.3B (0.1) 0.2 (0.2) $2.7B $2.6B 0.1 (0.3) (0.1) 2017 DWDP Crop Seed Organic Portfolio Currency 2018 DWDP 2017 DWDP Portfolio Non-op Crop Cost Weather and Input costs 2018 DWDP Ag
Slide 32: 2019 Net Sales Guidance
2019 Net Sales Guidance ($ in bn) 1-2% Organic Growth Expected Key Sales Drivers 1-2% 1-2% 1-2% ~$14.6B -2-3% $14.3B ~$14.3B Above market organic sales growth driven by product launches; new seed genetics and new crop protection products including Arylex, Vessarya, Rinskor, Pyraxalt, Isoclast and Zo
Slide 33: 2019 Operating EBITDA Guidance
2019 Operating EBITDA Guidance ($ in bn) Expected Key EBITDA Drivers 7% Projected Organic Growth Product Launches and synergies drive ~$0.3 growth ~$2.9B ~$0.1 ~$2.8B $2.7B ~-$0.2 Headwinds ~-$0.1 Currency Product launch costs Higher input costs Timing shift to Q4 2018: early NA seed shipmen
Slide 34: Reconciliation of Division to Standalone Financials
Reconciliation of Division to Standalone Financials Reconciliation Provided with First Form 10 Filing EBITDA (in millions) 2017 Spin adjustments: Excluded businesses $(89) Non-op pension costs $ 32 Other $ 34 Standalone costs: Functional and leveraged costs $(441) inc. in segment Corporate costs $(1
Slide 35: Mid-Term Financial Targets
Mid-Term Financial Targets Sales Expected to Exceed Market Growth by 1-2% • Above market organic growth in seeds of 1- 2% • Above market organic growth in crop protection of 1.5-2.5% • Markets expected to normalize to secular growth rate of 2-4% • Corteva growth expected to be 3-5% Operating EBITDA
Slide 36: Royalty Costs
Royalty Costs Moving toward proprietary trait packages • Royalty costs in 2018 were ~$750 million for all in-licensed traits • Expected net increase of ~$50 million in Out-licensing proprietary trait 2019 technology drives expanded • Royalty expense expected to plateau margins beginning ~2023 beginn
Slide 37: Productivity Enables R&D Cost to Grow Slower than Sales
Productivity Enables R&D Cost to Grow Slower than Sales Optimizing our $1.2B Annual R&D Investment Reallocation From Graduation Rate Resource Reallocation Stopped R&D Projects # of R&D projects # of R&D projects $MM 41 graduated to stopped business platform 10 18 31 13 6 22 6 2 Last 12 Months Last 2
Slide 38: Continued Flow of Merger-Related Cost Synergies
Continued Flow of Merger-Related Cost Synergies 2017 2018 2019E 2020E 2021E $50 million $450 million $750 million $950 million ~$1.2 billion 1H: $150 2H: $150 FY: $300 YOY synergy savings 2018 Progress - Cumulative realized cost synergies › Increased target from $1.1 billion to ~$1.2 billion › Excee
Slide 39: Focus on Continuous Productivity Improvement
Focus on Continuous Productivity Improvement After merger- Productivity is a Continuous Proof Points: related synergies cornerstone of our productivity are delivered, we performance-driven improvements will › ERP Project will continue to find culture keep our products new ways to boost competitive a
Slide 40: Future ERP Platform to Drive Simplified Business Operations
40 Future ERP Platform to Drive Simplified Business Operations 3 heritage businesses DuPont | Pioneer | DAS Harmonization Framework Future ERP Platform • Tight Management of Scope, Schedule & The commitment to process 2 business segments Cost unification across Corteva Seeds | Crop Protection • Robu
Slide 41: Brazil Corn Productivity
Brazil Corn Productivity Cross-functional campaign to accelerate ramp of products drives sales and margin growth Actions Taken Results • Transitioned to PowerCore™ Ultra • Realized market share and pricing and PowerCore Ultra EnlistTM gains • Drove SKU reduction • Drove improvements in inventory & C
Slide 42: Seed Drives Earnings and Cash Flow Seasonality
Seed Drives Earnings and Cash Flow Seasonality Approximately 80% of seed sales occur in the first half of the year ~30% of Sales ~50% of Sales • Primarily NA and Europe Seed – corn, soybean, sunflower • Continuation of NA and Europe Seed – corn, soybean, canola • Includes Brazil’s Safrinha • AP larg
Slide 43: Intra-Period Working Capital and Debt
Intra-Period Working Capital and Debt Representative Cumulative NWC • Annual interest expense 1Q 2Q 3Q 4Q ~$150-200MM for intra-year debt • Seasonal borrowings increase Representative Seasonal Debt Level through 3Q • Borrowings largely repaid in 4Q 1Q 2Q 3Q 4Q Agriculture Division of DowDuPont 43
Slide 44: Capital Expenditures
Capital Expenditures Disciplined Approach to Capex Investments › Capex limited to depreciation plus ~$650 million ~$650 million capex for synergies Capex for Synergies Capex for Synergies ~$100MM ~$120MM › Depreciation is expected to be ~$570 million in 2019 › ~40% is required for repair, Underlying
Slide 45: Corteva Capital Structure and Shareholder Remuneration Plans
Corteva Capital Structure and Shareholder Remuneration Plans Targeting A- credit profile(1) Expected debt profile Liquidity and short-term debt › A- credit profile to support our › Adjusted Debt* ~$4B, primarily supporting seasonality differentiated business model pension and OPEB obligations › ~$2B
Slide 46: Pension
Pension › The pension is frozen; no further service costs to be accrued. All future benefit costs are non-operating Service Cost Frozen › Pension cost is driven by changes in mortality tables, asset returns, discount rates, etc Cash flows and non- › Pension impacts to be excluded from Corteva’s Segm
Slide 47: Management Focused on Shareholder Value Creation
Management Focused on Shareholder Value Creation Grow Expand Disciplined Sales EBITDA Investment Agriculture Division of DowDuPont 47
Slide 48: Corteva Is Positioned for Above Market Growth
Corteva Is Positioned for Above Market Growth #1 or #2 in every Innovative pipeline meaningful market Margin expansion Balanced portfolio Best team Industry growth Agriculture Division of DowDuPont 48
Slide 49: Jim Collins
James C. Collins, Jr. will be the chief executive officer of Corteva Agriscience™. He was previously chief operating officer for the Agriculture Division of DowDuPont. Prior to the DowDuPont merger, he was an executive vice president at DuPont responsible for the company’s Agriculture segment, inclu
Slide 50: Greg Friedman
Greg Friedman will be executive vice president, chief financial officer, of Corteva Agriscience™. Prior to this appointment, Mr. Friedman served as the vice president, Investor Relations for DuPont and currently leads the finance organization for the Agriculture Division of DowDuPont. Mr. Friedman h
Slide 51: Megan D. Britt
Megan Britt will be the Investor Relations Director for Corteva Agriscience™. Prior to this appointment, Ms. Britt led value capture initiatives for the Agriculture Division of DowDuPont and, since the close of the DowDuPont merger, has worked with senior leadership to shape cost synergy identificat
Slide 52: Important Notices
Important Notices DO NOT APPLY DICAMBA HERBICIDE IN-CROP TO SOYBEANS WITH Roundup Ready 2 Xtend® technology unless you use a dicamba herbicide Agrisure® and Agrisure Viptera®are registered trademarks of, and used under license from, a Syngenta Group Company. Agrisure® technology incorporated into pr
Slide 53: Reconciliation of non-GAAP financial measures
Corteva Agriscience ("Corteva" or the "Company") Reconciliation of non-GAAP financial measures Some Corteva communications or presentations to investors contain certain financial measures that are not defined under accounting principles generally accepted in the United States of America ("GAAP"). No
Slide 54: Pro Forma Operating EBITDA Calculation
Corteva Selected Non-GAAP Calculation of Corteva Pro Forma Operating EBITDA 3 In millions YTD 2016 YTD 2017 YTD 6/30/18 Pro Forma Pro Forma Pro Forma Pro forma income from continuing operations, net of tax (GAAP) 1 $ 495 $ 2,534 $ 843 (Benefit from) provision for income taxes (289) (2,963) 135 Pro f