Good day and welcome to the Corteva Second Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Megan Britt. Please go ahead.

Good morning, and welcome to the second quarter and first half 2020 earnings conference call for Corteva. I'm pleased to be joined today by Jim Collins, Chief Executive Officer; Greg Freedman, Executive Vice President and Chief Financial Officer; Tim Glenn, Executive Vice President and Chief Commercial Officer and Rajan Gajaria, Executive Vice President of Business Platforms. We have prepared presentation slides to supplement our comments 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 regarding our expectations for the future; slides 2 and 3 and our earnings release contain our forward-looking statement disclaimers and our SEC filings provide discussion of some of the factors that could cause material differences in our actual results. We provide a pro forma basis discussion in our earnings release and slide. Unless otherwise specified, all historical financial measures presented today exclude significant items which can be found in the schedule 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 is provided in our earnings release and on our website. It’s now my pleasure to turn the call over to Jim.

Thank you, Megan. It’s great to be with you on the call today. Corteva has been a public company for over a year celebrating our one year anniversary in the second quarter. Scanning the unprecedented event that have punctuated our first year and [indiscernible] of the operational agility that we have demonstrated in the marketplace and the determination and integrity of the team that is shaping our company. Slide 4 captures the principles that are guiding our actions, during this challenging time. This quarter our teams were called to respond to continued impacts from the global pandemic, a 500 year flooding event at our manufacturing facility in Midland Michigan, and tragic events in United States that brought racial inequity to the forefront globally. We've maintained a common set of principles and values and how we're responding to these events that place employees safety and security, business continuity of our customers, and care and compassion for our communities at the heart of our response. I'm very proud of how our global team has operated through these challenges keeping our purpose of enriching lives in focus. Relative to COVID-19 employee safety and security continue as a top priority and the global crisis management structure that we have activated at the outset of the pandemic remains in place. We've also maintained our work-from-home stance where possible and enhance safety and security protocols at our work sites for essential personnel. In the second quarter we completed detailed planning for our ultimate return to work sites. We're also evaluating institutionalizing efficiencies again as a result of our current work stance particularly our digital capabilities that enable more flexible and cost effective work arrangements. Beyond employees safety we are also actively engaged in keeping our supply chains open and supporting our customers and communities. In May,…

Thank you, Jim. Since we have covered first half performance, I’ll provide more insight into our second quarter results on slide 9. Net sales of $5.2 billion were down 7% versus prior year on 4% more volumes, currency headwinds at 3% and a 1% decline from portfolio. Price was a 1% increase for the quarter, primarily due to pricing actions in Latin America to offset currency. Early seed deliveries in North America shifted volumes into the first quarter. This was coupled with the headwind related to a strong start for the Latin America Crop Protection season in the prior year. Additionally, competitive pressures in North America herbicides contributed to lower volumes in the second quarter, partially offsetting this was continued penetration of new products in Crop Protection where sales increased 8% for the second quarter versus prior year. This increase includes the unfavorable impact due to rework from the Vessarya fungicide sales in Latin America. Turning to operating EBITDA, we reported $1.24 billion or a 15% decline versus the second quarter of 2019. Overall, declines were led by lower volumes in Seed due to seasonal shifts in North America, higher SG&A costs and the unfavorable impact of currency. Partially offsetting headwinds in the quarter, we continue to see realization of synergies and productivity along with early progress on spending actions as a result of the global pandemic. Our operating EBITDA margins were equally pressured in the quarter down 230 basis points from the prior year. Again, this is largely due to the shift in volumes and mix to the first quarter and headwinds from currency. For the quarter, operating earnings per share were a $1.26, down a 11% from the prior year period. Turning to slide 10 for an update on our 2020 guidance. Last quarter, we suspended our guidance…

Thanks, Greg. Turning the slide 12 for the second half our fundamental priorities for me unchanged and how now we look to win in the market. Talking closely with former customers and channel partners to create demand for high value solutions and delivering that technology to our customers to help drive productivity in their operations. Starting first with global execution, our regional teams are focused on continuing to penetrate markets with new technologies particularly in crop protection with new products like Arylex and Rinskor herbicides in Europe and Asia Pacific and Isoclast insecticide in Latin America. We're also managing some headwinds in the portfolio based on strategic decisions we've made to exit certain products globally and ramp down low margin third-party products. Latin America where approximately 40% of our second half sales are concentrated, our sales teams are leveraging our strong position in corn seed to deliver on the summer and Safrinha season into Brazil. This includes continued penetration of both our global seed brands and Pioneer and Brevant in our differentiated seed traits like PowerCore ULTRA. In crop protection we're focused on continuing to drive growth in fungicides with strong market demand for Vessarya. Insecticide is another key area of success for us in the second half, as we continue to drive growth in high value products like spinosyns and Isoclast. In North America given the adjustments on fourth quarter delivery expectations that Greg mentioned we will continue to work closely with customers as we begin collecting seed orders towards the end of the third quarter and customers begin formulating planting plans for the 2021 crop season. We'll also work closely with channel partners to secure orders for the upcoming season and position product to capture the value we generate for our yield advantage portfolio. This includes leveraging the strength and velocity of our Enlist soybean system to ramping up for expected strong demand for the upcoming season during the fourth quarter. I'm confident that we have the right actions in place to address our second quarter gaps and we have a team that is determined to deliver for the year. Bottom line all regions will execute in the second half. Bottom line all regions will execute in the second half. I’ll now turn it over to Rajan.

Thank you. Tim. Turning to slide 13, I’ll respect spec through a few notable examples and key drivers of how we are driving our performance in 2020. Starting on the left with Seed, our Qrome corn technology is in its first full year of lunch and a significant contributor to the pricing execution we delivered in seed for the first half. For the second half, we will need to maintain this momentum as Qrome is an integral part to providing the high yielding performance our customers are looking to secure. Moving to Enlist E3 Soybeans, here continuing strong adoption is enabling sales growth. We expect Enlist E3 will contribute more than $200 million in net sales in 2020. Importantly, this progress is further reinforced by the value we expect the full system to bring and with the recent decision as Jim mentioned we are seeing increased farmer confidence in our Enlist herbicides. We are focused on continuing to deliver on our plan to further expand the presence of this technology in the marketplace and in our portfolio in 2021. We are working closely with our contracted grower to ensure that we are managing production to align with continued strong demand. Turning to Crop Protection, our portfolio of new products continues to deliver significant growth across various crops and geographies and its targeted to contribution an estimated $1 billion in sales for 2020 and expected 33% improvement over prior year. For the second half, we're expecting $150 million in incremental sales growth over prior year to deliver on our guidance. The balance, diversity and new mode of action of the new patented active ingredients is a cornerstone of the Crop Protection strategy. Molecules like Arylex, Rinskor, Isoclast and Zorvec are all a part of our business that is delivering a rapid ramp up in volumes. Another key differentiated active we have is a Spinosyn insecticide, which is expected to contribute approximately $750 million in net sales for 2020, a double-digit improvement over prior year. The majority of the 2020 growth is weighted to the second half in key markets such as Latin America, very key strong demand for the technology in a growing market. For 2020, we estimate that the [indiscernible] segment of the insecticide market is growing between 3% and 5%. We continue to deliver increased volumes from our capacity expansion investment and are on track to increase by more than 50% by 2023. Bottom line, these new technologies are an important growth catalyst for a Seed and Crop Protection portfolio and represent a critical part of our plan to deliver in the second half. With that, I'll turn it back to Jim.

Thank you, Rajan. To close, despite the rebound in the North America market and encouraging growth in our key technologies, 2020 has progressed, it's a very challenging year given the global health crisis and associated economic downturn. Setting currency aside, we're seeing solid fundamental performance in Seed, our new herbicide offerings and across our insecticide portfolio, which is providing momentum for the second half. As such, I am confident we have the necessary strategy in place to deliver on our updated 2020 guidance. So we have neutralized the downside risk on currency, we also recognized that market volatility is still a factor. So we’re working to accelerate more aggressive efforts on spending, increasing volumes for high demand products and securing more Enlist E3 seed volume for the 2021 season. We know a lot can happen in a growing season and we are closely monitoring crop conditions in the US and Latin America as well as the broader market backdrop, including further COVID related impacts to ensure that we are adequately adapting and adjusting our plans to deliver for the full year. So I’ll now turn it back to Megan.

Thank you, Jim. Now let's move on to your questions. I'd like to remind you that our cautions on forward looking statements, non-GAAP measures and pro forma financials apply to both our prepared remark and the following Q&A. Operator, please provide the Q&A instructions.

[Operator Instructions] And our first question today we'll hear from Joel Jackson.

Jim, Greg, I wonder if you can help you know which the prior guide you have before expanded to about $2.2 billion EBITDA if you guided down about $22 million now. As specific and granular as possible can you help bridge you know to prior guide to the current guide all the buckets. And I guess it's too early to get to 2021, but is there any idea you know where you might see some drivers headwinds and tailwinds anything you can quantify the 2021 would be helpful.

Yeah great. Thanks Joel for the question. So you're right, we can -- it's actually pretty straightforward when you think about the previous guide of 2.2%, it comes down to two main elements. There's about $400 million of currency headwind versus that guide that we gave back in January and that is COVID-related due to a basket of currencies everywhere in the world. Brazil being the biggest component of that, but it's a -- it's a number of currencies. The second element is just some market softening. Part of that was the three million acres that that left us here right at the end of the second half, that that’s about $60 million per our formula of $20 million for every yard million acres. And then some softening that we're seeing in the fourth quarter that it's also COVID-related primarily ethanol corn demand commodity pricing and that's another $40 million. So you add those altogether, there's $500 million of headwind versus that previous guide $400 million currency $100 million of it is market-related. And so we've worked hard throughout this first half to offset about half of that $500 million, some of that is seed, corn pricing. So our first half very strong performance in North America around corn price, soybean pricing a lot of predictions at the beginning of the year that we would fall short on soybean pricing and we off obviously -- we drove very strong performance there. And some of that is rest of world volume. So if you look at our seed business in places like Europe, we're up low-teens. If you look at Asia-Pacific we're up high-teens and if you look at Latin America we're up high 20% in terms of rest of the world our seed business. So really strong rest of the…

And next we’ll move to David Begleiter.

James, just looking back – thank you. Just looking back at this growing season in North America, what do you think the ability of share market share both beans and corn this past season?

Yeah David. You know our first mission in North America this year was focused on value. We were very disciplined in driving new processes around pricing especially in corn and as I talked about a minute ago in soybeans. There has a lot of predictions that was – and it's always a competitive year, but I couldn't be prouder of the team. And so first and foremost, we focused on value rather than you know specifically focusing on share. So it's a little too early right now to call market share even though we've got kind of the macro numbers from USDA in terms of where we think planted acres came out and obviously we've got our visibility. You know it really matters exactly where those acres came out there in some parts of the country where we're stronger. And so we really got to get this down to a county level. So we're in the process of working through that. I can say pretty confidently we saw some share gains in other parts of the world. Tim, do you want to talk a little bit about those areas.

Yeah Jim. I think we're very confident that we gain share in the past to premier season that wrapped up here in the first quarter and also in terms of Europe for both corn and sunflowers both significant businesses for us. So it's as you say if it's too soon to call we had to get a little bit more granularity about where those final acres are and ultimately be able to get down to the details to be able to make a call on our market share for the US.

Okay. Thanks, Tim.

And next we’ll move to Jonas Oxgaard.

I was just wondering, I realize this a little bit early, but I was wondering if you could talk about your expectations for Enlist’s next year and how are you looking at the two sales as well?

Yes. Great, Jonas. Thanks. Thanks for the question. You know for this year for 2020, we did see very strong performance with -- with system and this was -- I would say really our very first full year of commercial launch. So we had originally expected that about 10% of our seed units would be Enlist and then we were happy to report and talk to you about it earlier that we were at 17% of our seed volumes. And then we -- we now believe that more than 20% of the acres in the US were -- were Enlist risk acres. Tim Glenn just had a grower meeting here just -- just two or three days ago and everybody is really excited about the system and how it performed and -- and they're all you know ready to sign up for acres going into 2021. So the other thing that I think gives us some -- some positives here are also some momentum is the decision that we just saw in the Ninth Circuit Court, the Enlist dual registrations continuation. It really sends one more message to growers that it reinforces that they can count on this that they can have confidence in the technology. So we are preparing for a significant ramp up in the 2021 season. We're working with as many of our production growers as we can to try to maximize the seed units that we would have available. And so right now, we believe that acres can grow by about 50% moving to roughly a third of the soybean acres in the marketplace. And then inside Corteva, we think, we can more than double our Enlist seed volumes for 2021 for Enlist E3. And we're clearly going to continue provide you more updates as we work through our production plan, so that takes us from maybe the 17% or so that we're here this year to kind of the low 30% for our seed units going forward. But obviously a lot of that's going to depend on our ability to go out and secure additional supplies. On the chemistry side, we saw about two thirds of the planted acres received a treatment of Enlist chemistry, and what we’d expect that trend to continue as we see the acres expand, and we're going to be in a great shape in terms of production to be able to meet that demand, if it is a little bit higher, we'll have the chemistry and the ability to go after it. So, Rajan, anything else you would add to that?

No, I think, Jim, you’ve covered it. But just overall if you think about that Enlist system Jonas, we’ll be looking at north of half a billion dollars of sales this year, that includes the soybean, other crops globally and the herbicide, and we have a track of doubling that in 2021 just based up on the adoption numbers that Jim spoke about. So it’s playing off very well based up on everything we discussed and excited about the Enlist in the bigger part of our portfolio of next year.

Thanks, James.

And next we’ll move onto Vincent Andrews.

Thank you. Good morning – thank you. Good morning everyone. Just want to understand the hedging – can you hear me?

Yeah.

Okay. Sorry. Just want to understand the hedging comments a bit both in terms of, I believe you said you are implementing a new type of strategy than what you’ve done in the past, so if you can help us understand that? And then just more specifically that the comment on the $300 million of EBITDA ex-hedges, can you understand -- can you help us understand how much that would be, if you hadn’t hedged, and is there any risk that if the hedges roll off, the currency stays the same way that that – you know the benefit with the hedges becomes a risk for 2021?

Yeah. Thanks, Vincent. Maybe I'll just make a few comments here and I'll ask Tim and Greg to say few points. So as we mentioned in the opening comments, you know with $700 million of currency related headwinds in sales and about $400 million in operating EBITDA and a big chunk of that is Brazil, some of the European currencies are in part of that as well. And so we have a few tools, the first tool in that list is our – these are uses of price. And then we've got new tools that I’ll have Greg talk about that that are related to hedging instruments. And so you know what the hedges allow us to do is to manage to go forward volatility, pricing allows us to kind of recover that value, and then we have some natural hedges with local production that we do in some of those markets. So why don’t we start, Tim, do you want to talk a little bit about our pricing strategy is to go out ahead of currency?

Yeah. Absolutely, Jim. So pricing is clearly one of the key tools we have to help offset currency. And this year we saw a tremendous amount of volatility particularly I think February, March, April, and it was always moving against us. In some cases we were really limited in terms of how we could offset that currency because it was after we'd already priced and negotiated a sale with a customer, we saw that in both Europe and in Latin America particularly in the first half. But as we move through the first half and we look forward to the bulk of our business particularly in Latin America that happened in the second half of the year we were able to go out there and kind of pullback in our pricing and we actually did that at least a couple of times during the season and re-price based off of where currencies were and obviously we've got to be aware of where we sit from a competitive standpoint and other options that customers have. But we were able to make a pretty significant dent in what that potential currency impact could have been in the second half through those pricing actions. And certainly as we look towards the latter part of this year and into 2021 we're in all markets where we've had erosion due to currency to help offset that and regain what we could not offset this year. Greg?

Great. Thanks. So our first item of defense as Jim and Tim mentioned is pricing. The second item of defense here is financial hedging. And just -- let me clarify part of the question that you had, you asked about the $300 million hedges what’s really we're saying here is there is $400 million of currency exposure $300 million of that in the second half of the year and that $300 million is excluding the impact of pricing not excluding the impact of hedging. So just again on tap the impact is a little bit, more than 70% of our currency exposure is in Brazilian real and that exposure is heavily weighted to the second half of the year. The other keys of large exposure is related to European currencies, but that business is largely completed in the first half of the year and so that is already in our first half results. So working very closely with our commercial teams, who as Tim mentioned are out there booking business in the first half of the year for delivery in the third and the fourth quarter. We've been able to put financial hedges on those transactions to ensure that we lock-in the priced and offset any future volatility due to move-ins in currency rates. So this financial hedging strategy has been able to give us some confidence and predictability in our earnings in the second half of the year. I would also mention that in the past and currently we also do hedge our balance sheet from a net monetary assets perspective and that includes our receivables and that process and program does continue as well.

And next we'll hear from Jeff Zekauskas.

Hi. Good morning. I also have a question on the currency issues. I think on slide 11 you said the EBITDA headwind would be about $300 million in the second half. Can I think in your prepared remarks you said that the sales effect in the second half would be about $500 million. So $300 million on $500 million is about 60% and normally I would think that the EBITDA effect would be pretty close to your EBITDA margin level a little bit more than 20%. And so I would have thought the currency effect would have been maybe $110 million something like that. Why is the EBITDA effect so large relative to the sales total if the sales total is $500 million?

Yeah. So the largest impact is really on the sales line. And that does translate largely into earnings because of the pricing impact or if offset by the pricing impact. So we were – what we feel the downside in revenue does largely translate into earnings. There’s a couple of offsets there. One is where we're able to recapture some price and the other is where we have natural hedges in place for both seed and crop protection in the local area. And we don't have as much of an offer because a lot of our manufacturing of crop protection is in the US. So we're producing the product for the Crop Protection in the US moving in as part of our supply chain into Brazil. And so we don't have that natural hedge protection there. If you recall, when we talked about our supply chain last – on the last call, we mentioned at about 65% of our Crop Protection supply was actually US based.

And next we'll hear from P.J. Juvekar.

Jim, I have a comment and then a question. And my comment is that, sometimes your reserves can be very confusing, because you have pull forward demand in certain region or pushing back of seeds and chemicals because of weather et cetera. So if it would be easier to understand your reserves, if you align your quarters with the planting cycle, and that's what the old Monsanto did, when you know they had the same issue, and so they had March, April and May together, because that’s the planting season and June, July, August together, because that’s the application season. So that’s just a suggestion. I'm not saying you should do that, but that would make it easier for investors to understand the company.

Yes. Yes. Thanks P.J. for the comment, you know you're exactly right that the timing of the ag market in the northern hemisphere, the first quarter second quarter split for the financial result is really, really difficult, because you know the season unfolds differently every single year, and so calling out, which is why we talk a lot about our business on a first half basis. It provides a more seasonal view of the results and then we can kind of talk about the Southern Hemisphere in a seasonal basis in the second half. We have discussed a lot about adjusting our fiscal calendar to be more in line with the cropping calendar and you know we're working right now to get audited financials and some history behind our belt. So that when we can make that change you know we can do it appropriately. We've got some financial systems, our ERP systems that we're currently you know kind of rewiring now to bring it all together. So we want to get the ERP system kind of lockdown and ready to go and then we're going to take a hard look at making that movement making that adjustment. Do you had a question P.J.

Yes. Thank you. And my question is I mean your figures also were down only 2% organically after being up 27% in 1Q.

Yeah.

So clearly you know Enlist E3 launch is going well as you ramp up Enlist E3 next year, how much of that will be in the Pioneer germplasm. And then if you can just talk about how much kind of germplasm of fee on the Enlist you will pay to Styne this year? Thank you.

Great let me just talk about CP volumes in 2Q for just a moment. You know this quarter was to your previous point a little bit of an aberration. We had some you know we had a very early start to the Latin-America season last year so there was a bunch of herbicides business that was in 2Q last year. We're going to get all of that in 3Q as a matter of fact I have the orders in hand right now to deliver most of that. The other reason is that CP results in 2Q are a little bit light, is this Vessarya issue that we talked about. We've got a fantastic fungicide in Brazil, growers it has tremendous performance. So there is no issue with the product performing itself growers and get their hands on it. It’s just as formulation issue, meaning that we need to hold it a little bit later, little tighter, little closer, it’s the right when the demand is needed. And so we have to pull some back and rework it and get it ready to go its stage in the warehouse ready to rock when the season unfolds. But because of that rework and pulling it back and created a little bit of depression in 2Q as well. So all of that comes back to us in the second half and as a matter of fact on an organic basis, if I looked at kind of the full year kind of CT guide when the second half kind of plays out like we think you know we're going to be high single digits organically in sales in our Crop Protection segment. So with respect to Enlist, Rajan, do you want to talk a little bit about that.

Sure Jim. I think you covered it in your comments earlier, but when you think about Enlist P.J. for the whole market we believe that we are going to get to a third of the market next year. This year was more than 20%, so the Enlist E3 soybean market and the technology is going to be a third of acres next year. Related to our own germplasm, we feel that we are going to double the number we have. So let’s say between 35% and 40% right now is when we are looking at all the production and we’ll decide finally, but really this all hands on this trying to ramp up that technology significantly and looking forward to seeing how that adoption goes into the market. It’s very exciting at this point of time with all the feedbacks we are getting from customers and our team is waiting.

And next we'll hear from John Roberts.

Thank you. Good morning. Are you ramping down production of seed with the extend trade this season or do you need to actually produce for inventory flexibility or because of the minimum royalty arrangement that you have?

Yeah, thanks. Thanks John. So obviously a lot of the plan for production for -- for extend is out there. And so the main message here is we're going to have choices for our growers no matter how this -- how this really plays out and you know we're watching that situation closely. Thanks, john.

And we’ll move on to Chris Parkinson.

Good morning, sorry about that [indiscernible]. Thank you. So it's clear that you know there were a few moving parts in the Brazil CP in 2Q performance including the difficult comp you mentioned in your prepared remarks. And then the reformulation issue in the Vessarya the countryside. Can you speak to you know the performances parse out those issues and just kind of break down your outlook for the second half especially in the formulation issue and just how you think about your portfolio is normalized growth rate in the new region for the second half of 2020 as well as how we should begin to think about 2021? Thank you very much.

Yeah. Yes, Chris. So really the two main issues $80 million of Vessarya or $80 million of sales that were in the second quarter last year that that will now recognize in this -- in the back half of this year in 3Q. And like I said I have those orders in hand. No -- no concerns about that at all and Vessarya is -- is all of that those sales we had last year will have again this year we anticipate. So it’s a really strong product. So that’s the way to think about Latin America as is just a little bit of an aberration around reporting. Go forward strong performance with our insecticide business in Latin America in the second half as well Isoclast is really setting up to be a real strong contributor. So as I said in -- I think one of the previous answers here if I look at this guide and the CP business for the full year at the end of 2020 you know we're going to be in the high single-digits on that revenue line organically x currency. So we feel really good about you know kind of where our competitive performance sits versus the market. Thanks, Chris.

And our final question today we'll hear from Luke Washer.

Hi. Thanks for taking my question. Just wanted to ask about your supply chain, I know you know with regard to the market COVID you doesn’t had a large impact. But have you re-evaluate your supply chain kind of in light of the COVID any disruption or you’ve taken any actions that the diversify your project?

Yeah. Luke thanks. You know first of all a very large percent of our portfolio. I think the number is 80% of our Crop Protection portfolio is dual source at least from two sources and a big chunk of that is out of the United States. One of those set the sources would be out of US, I think the number is north of 60% of our -- of our active ingredient. So we already have tremendous resiliency and flexibility and key message there. You don't wake up the first day of this COVID crisis and decide to diversify your supply chain. This is something we've been working on for years and have really paid off for us. So as the crisis rolled through Asia, we sourced from Europe and in the US and as we had some things that hit the US like the flooding in Midland, we were able to pivot and -- and source those products from Asia-Pacific. So you know no additional -- additional changes we feel really good about where we stand today.

With that we conclude the question-and-answer session. At this time, I would like to turn the call back over to Megan Britt for any additional or closing the remarks.

Thank you. Before we close the call today I wanted to remind everyone of the upcoming investor webcast on August 17. During this virtual event, Jim and Greg will provide strategic updates, including portfolio updates on key product launches, specifically our planning underway to accelerate Enlist E3 could be in penetration next year. We look forward to your attendance on that call. With that, we're going to close the call. Thank you so much for joining.

And that will conclude today's call. We thank you for your participation.