Corteva 2026 Q2 Earnings Call

Welcome to Corteva's second quarter and first half 2026 earnings conference call. Our prepared remarks today will be led by Chuck Magro, Chief Executive Officer, and David Johnson, Executive Vice President and Chief Financial Officer. Additionally, Judd O'Connor, Executive Vice President, Seed Business Unit, Robert King, Executive Vice President and Strategic Advisor, as well as Luke Kissam, future CEO for New Corteva, 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 factor 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 will 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 is now my pleasure to turn the call over to Chuck.

Thanks, Kim. Good morning, everyone. Thanks for joining us. The headline for this quarter is straightforward. We are delivering strong results, we are raising our full-year outlook, and we are on track to complete our separation on October 1st. The first half of 2026 demonstrated the resilience of our two businesses, the value of our technology portfolio, and the execution discipline of our teams around the world. In the first half, net sales increased 4%, Operating EBITDA increased 10%, and Operating EPS increased 14%. These results reflect strong execution in both seed and crop protection, despite a dynamic operating environment. In seed, farmers continue to place a premium on technologies that improve productivity and returns. That is reflected in the continued demand we are seeing for our latest genetics and trait offerings and the growing contribution from our new licensing business.

We saw organic growth across all regions in the first half, which speaks to the durability and the basic need of that technology demand. Crop Protection also performed well this half. Volume gains on new products, which are becoming a larger part of the business every year, remain robust, and pricing of these products was essentially flat in the first half, which we consider a success in this environment. Even in markets where pricing remains competitive, our teams are delivering productivity improvements and demonstrating operating discipline that allows us to continue expanding margins and improving earnings quality. The strategy we have deployed in Crop Protection for several years, building a more differentiated portfolio supported by innovation and commercial excellence while proactively reducing our cost of production, is working, and we continue to strengthen our pipeline, particularly in nature-based products.

You can find details in the deck about a recent acquisition that expands our capabilities in that area, as well as industry recognition for some of our crop health innovations. Corteva's first half performance was a result of execution. It was driven by technology adoption and being nimble in the market through productivity improvements, licensing growth, operational discipline, and of course, strong execution. Across the company, our teams have done an excellent job balancing separation-related work while maintaining focus on customers. What we are seeing today is the outcome of deliberate actions we have been making for several years. We have invested in differentiated technology. We have strengthened our germplasm portfolio. We have expanded our trait capabilities. We have built one of the strongest innovation pipelines in agriculture, and we have stayed disciplined on productivity, cost management, and asset optimization. Today, those investments are translating into measurable outcomes.

What is particularly important is that these results are being achieved in a market that is increasingly rewarding innovation. Farmers around the world continue to make investment decisions based on productivity, yield potential, and return on investment. That is exactly where Corteva is strongest. While the external environment will always be dynamic concerning weather, currency, trade flows, or geopolitical uncertainty, the fundamentals that matter most remain healthy. Global demand for food, feed, and biofuels continues to grow. Crop prices are up. However, farmer margins remain tight, so they continue to prioritize value-driven investments while remaining cautious on discretionary spending. Our technology portfolio is aligned with the needs of our customers who are looking for ways to produce more while using resources more efficiently. That is supporting confidence in our business.

As we look ahead, we remain confident in our outlook while continuing to monitor several external factors, including ongoing pricing pressure in pockets of the Crop Protection market. What gives us confidence is that the factors within our control continue to perform well. While we remain realistic about external risks, we enter the second half with a favorable outlook, a healthy respect for the market environment, and confidence in our ability to deliver the commitments reflected in our updated guidance. As a result of our first half performance and confidence in the second half, we are increasing our full-year outlook. We now expect Operating EBITDA of $4.1 billion-$4.3 billion and Operating EPS of $3.60-$3.80 per share. At the midpoint, that represents approximately 9% EBITDA growth and 11% EPS growth versus last year. This is because multiple parts of our business are performing well.

Strong technology adoption, new product momentum, growth in licensing, productivity gains, and cost discipline. Looking beyond 2026, the long-term opportunities for both businesses become even more attractive. You'll hear more from us on that in September. Turning to the separation, our message remains simple. We are on track and executing according to plan, on time, and under budget. Over the first half of the year, we achieved several important milestones. We announced Luke as the CEO of New Corteva, and he is here with us today for the Q&A session. We introduced Vylor as the name of the future advanced seed and genetics company, completed key leadership appointments, publicly filed the Form 10, appointed both boards of directors, and engaged with credit rating agencies regarding our planned capital structures. These milestones represent significant progress and provide confidence that both organizations will be fully prepared to operate independently.

Regarding dis-synergies, I'm happy to report that on a run rate basis, we've largely offset the impact of separation. This is the result of a lot of hard work from our employees in ensuring we're setting up two org structures in the most efficient way possible, placing time, money, and resources where they matter the most, and giving both companies the flexibility they need to excel on their own. We'll see something in the range of a $25 million headwind this year due to the timing of the separation activities, but this is a great result overall. Looking ahead, several important steps remain. We expect amendments to the Form 10, finalization of the capital structures, completion of the remaining IT separation activities, effectiveness of the Form 10, and we will be holding our Investor Day events on September 15th in New York.

Assuming completion of those final milestones, we are targeting October 1st as the separation date, with Vylor beginning operations as a separate public company. While separation activities have remained a major focus for management, I want to emphasize something that I believe is important. We have maintained our performance while simultaneously preparing to launch two public companies. That speaks to the strength of our organization and the commitment of our people. Teams across the company have managed the complexity of separation work while continuing to innovate, serve customers, drive productivity, and deliver strong financial results. As we enter the second half of the year, our priorities are clear. First, continue executing for our customers. Second, deliver on the commitments reflected in our increased guidance. And third, complete the separation efficiently and successfully, which will help position both companies for successful futures.

Thank you to our employees, customers, partners, and shareholders for their support. Before I turn the call over to David, I want to make a personal observation. This is my final earnings call as CEO of the combined Corteva organization before our planned separation. When I look at where the company stands today, I'm incredibly proud of what our teams have accomplished. We have strengthened our portfolio, built industry-leading innovation, improved execution, expanded margins, and positioned both future companies for success. Coming into 2026, since the year Corteva was formed in 2019, we had already improved Operating EBITDA by $1.7 billion, with over 750 basis points of margin enhancement, all while investing nearly $9 billion in R&D, which is just astonishing to think about what it is going to do to help transform the future of agriculture.

Finally, we returned close to $8 billion of cash to shareholders in that same time frame. I'm confident in the leadership teams that will guide both organizations forward. I'm confident in the opportunities ahead for both New Corteva and Vylor, and I am confident that the work we have done over the last several years has created a strong foundation for long-term value creation. With that, I'll turn the call over to David.

Thanks, Chuck, and welcome, everyone. Let's begin on slide six with our first-half financial performance. Overall, we delivered a strong first half with continued execution across both seed and crop protection, translating into higher sales, meaningful EBITDA growth, and nearly 200 basis points of margin expansion. For the quarter, net sales were $6.4 billion, while Operating EBITDA increased 4% to $2.3 billion. As I mentioned during our first quarter call, our business results are best reviewed in halves. Looking at the first half, net sales increased 4% to $11.3 billion, while organic sales grew 2%. Margin expanded to 32.8%, driven by continued value capture in seed, productivity improvements across both businesses, and disciplined cost management. Within seed, organic sales improved across every region, led by North America and EMEA, reflecting continued demand for our differentiated technology portfolio, our focus on capturing value, and increased out-licensing income.