Corteva, Inc.(CTVA)Q2 2026 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to the Corteva Agriscience Second Quarter 26 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Kimberly Booth, Head of Investor Relations. Kimberly, please go ahead.

Good morning, and welcome to Corteva's second quarter and first half 26 Earnings Conference Call. Our prepared remarks today will be led by Charles Victor Magro, Chief Executive Officer, and David P. 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 Adviser, as well as Luke Kism, CEO-designate 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 Factors section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statement. 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 Charles.

Thanks, Kimberly. Good morning, everyone, and 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 1. The first half of 26 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%, 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. So 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. And while the external environment will always be dynamic—considering 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 market. What gives us confidence is that the factors within our control continue to perform well. So 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 to $4.3 billion and operating EPS of $3.60 to $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 will hear more from us on that in September. Turning to the separation, our message remains simple. We are on track in executing according to plan—on time and under budget. Over the first half of the year, we achieved several important milestones. We announced Luke Kism 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 am happy to report that on a run-rate basis, we have largely offset the impact of separation. This is the result of a lot of hard work from our employees in ensuring we are setting up two organizational 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 will 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 15 in New York. Assuming completion of those final milestones, we are targeting October 1 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. 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 am 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. 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 help transform the future of agriculture. And finally, we returned close to $8 billion of cash to shareholders in that same timeframe. I am confident in the leadership teams that will guide both organizations forward. I am 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 will turn the call over to David.

Thanks, Chuck, and welcome, everyone. Let's begin on slide 6 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. As expected, crop protection pricing remained under pressure due to competitive market dynamics, particularly in Latin America. However, strong adoption of new products continued to drive volume growth, helping partially offset pricing pressure. These commercial gains combined with productivity improvements, favorable royalty performance, and lower input costs drove operating EBITDA to $3.7 billion—an increase of 10% over prior year. Importantly, both businesses contributed to margin expansion, demonstrating that our strategy continues to balance growth with disciplined execution. Turning to slide 7, this bridge highlights the key drivers behind the first half EBITDA improvement. Operating EBITDA increased approximately $350 million year over year to $3.7 billion. Price and mix contributed nearly $100 million as we continued executing our value-based pricing strategy in seed, although those gains were partially offset by competitive crop protection pricing. Volume added roughly $40 million reflecting strong North America seed demand and high single-digit growth in crop protection new products. Cost performance remained the largest contributor, adding more than $160 million through lower input cost manufacturing efficiencies and continued productivity initiatives. In addition, currency provided an approximately $85 million benefit during the first half primarily driven by the euro. An additional contributor was $90 million of improved seed net royalties, reflecting lower royalty expense together with higher royalty income as we expect to be net royalty positive this year. Overall, we are continuing to demonstrate that disciplined execution and technology leadership can drive meaningful earnings growth even in a dynamic pricing environment. Let's move to slide 8. The first half demonstrated strong execution across both businesses. In seed, organic sales increased low single digits as North America seed continued to benefit from market penetration and strong customer demand for our differentiated technology portfolio coupled with increased royalty income. Crop protection pricing declined low single digits consistent with our expectations while volumes increased low single digits primarily on demand for our new products. Productivity initiatives, lower input costs, and favorable currency all contributed to first half margin expansion. Looking ahead to the second half, our assumptions remain largely unchanged. We expect Brazil corn area to remain approximately flat. Within seed, we continue to expect low single-digit organic sales growth. Within crop protection, volumes are expected to grow at a high single-digit rate led by continued adoption of new products, while pricing is anticipated to decline in the low to mid single digits. We also expect productivity savings to continue contributing during the second half while recognizing the potential impact from geopolitical uncertainty and ongoing foreign exchange movements. Overall, the first half performance provides a strong foundation as we move through the balance of the year. As a reminder, we anticipate a typical seasonal earnings pattern in the second half, with a third quarter operating EBITDA loss in the range of what we saw in 2024 and all second half earnings delivered in the fourth quarter. Overall, we expect second half EBITDA to be about flat compared to last year as the net impact of tariffs, dis-synergies, and the Middle East conflict are all weighted to the back half of the year. Let's turn to slide 9. The strength of our first half execution leads us to raise our outlook for the full year. We now expect operating EBITDA between $4.1 and $4.3 billion representing approximately 9% growth at the midpoint versus last year. This outlook reflects broad-based organic sales growth across the portfolio together with additional benefits from the controllable actions we have consistently discussed throughout this year, including productivity, cost management, and continued operational execution. We are also increasing our operating EBITDA margin outlook to a range of 22.5% to 23.5%, reflecting continued sales growth and disciplined cost management. Finally, we have raised our operating EPS guidance to a range of $3.60 to $3.80 per share, an increase of 11% at the midpoint versus last year. While higher net interest expense partially offset some of the EBITDA improvement, we continue to expect another year of strong earnings growth and margin expansion. Overall, the updated guidance reflects our strong first half performance and confidence in our expectations for the balance of the year. Turning to our key takeaways: First, we delivered a strong first half through continued commercial execution across both seed and crop protection. As expected, first half cash flow was impacted by the Bayer agreement, one-time separation items, and the pension contribution announced last quarter. Absent these items, we would expect full-year free cash flow conversion to be in line with our midterm target discussed at the 24 Investor Day. Second, our growth platforms of disciplined execution on controllable actions translate directly into meaningful EBITDA and margin expansion. Third, based on this performance and our confidence in the second half, we are raising our full-year guidance for operating EBITDA, margins, and EPS. Finally, we are progressing as planned toward the targeted October 1 separation, and we have largely offset the impact of the dis-synergies on a run-rate basis. We are confident both businesses will begin the next chapter from positions of financial strength and operational momentum.

Now let's turn the call back over to Kimberly.

Thanks, David. I would like to briefly highlight a few things about our upcoming Investor Days. On September 15, we will host separate Investor Day events for both Vylor and Corteva at the New York Stock Exchange. Both events will be webcast and registration is currently open. These events will provide investors with a deeper look at each company's strategy, innovation pipeline, long-term financial framework, and capital allocation priorities as they prepare to operate as independent public companies. We believe these sessions will provide additional insight into the value creation opportunities for both organizations, and we encourage everyone to join us by registering today through the link on the Events and Presentations page of our website. Now let's move on to your questions. I would like to remind you that our cautions on forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

We will now begin the question-and-answer session. Please limit yourself to one question. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Vincent Stephen Andrews with Morgan Stanley. Vincent, your line is open. Please go ahead.

Thank you, and good morning to everyone. Wondering if we could talk a little bit about the seed business for the second half of the year. I see in the slide you are expecting flat corn acres. So I am kind of wondering if that is what you are seeing in the order book—Is that sort of an El Niño kind of assumption? What is driving that? And then also, from a pricing and mix perspective, what are you anticipating, particularly as it relates to Conkesta penetration? Thank you very much.

Hi. Good morning, Vincent, and thanks for your question. For the second half of the year, obviously, North America and the Northern Hemisphere are really wrapped up. It's all about what happens in Latin America and particularly in Brazil. From an acre perspective or a planted area perspective, we have typically seen low single-digit safrinha expansion on a year-over-year basis for the last several years—three, four, five years in a row. We could still see that, but we also could see it flattening out a little bit in 2026. Obviously, we will have sales orders come in at the end of this year in the fourth quarter. Our order book is on pace with—well, it is actually ahead of the market a little bit at this point in time. So we feel quite confident. Our product portfolio feels good. We are in a good position. We have had strong pricing in Latin America in particular. So all in, as we go into the second half of the year and orders come in in the fourth quarter for execution in that planning window, February and March, we feel like we are in a very strong position and, yeah, we just feel like we are in a really good spot. Conkesta—we have had good momentum with Conkesta. We think we are going to be high single digits to low double digits in terms of penetration in the market with Conkesta E3 in 2027. So we are on plan and continue to be very optimistic about the performance of that product.

Your next question comes from the line of David Begleiter with Deutsche Bank. David, your line is open. Please go ahead. Thank you. David, your line is open. Please go ahead. Your next question comes from the line of Christopher Parkinson with Wolfe Research. Christopher, your line is open. Please go ahead.

Great. Thank you so much for taking my question. I am going to switch my conversation to Luke, if I may. Given this is kind of your first interaction with investors regarding the longer-term outlook of New Corteva, I am just curious what you are most excited about in terms of the market and what you think you can do with the company's narrative. Is this going to be a focus primarily on R&D pipeline value, new product introductions, leadership, or is it a balance between crop protection, biologicals, seed treatments, margin opportunities? I would love to hear how you are thinking about it on a preliminary basis and how we should triangulate those thoughts into the CMD. Thank you so much.

Yeah. Thanks, Christopher. I appreciate it. I'm very excited. The number one strength at Corteva is our people. There is a great team; many of those grew up on or around farms, they understand the challenges that customers face every day, and they get excited about waking up every day solving those problems. From a portfolio standpoint, two-thirds of our current portfolio is differentiated technology, and we are not dependent on any one active, any one segment, any one crop, or any one geography. I love the diversity of the portfolio and the fact that the bulk of it is differentiated product. It is a real competitive advantage. When you add biologicals to the portfolio position, that gives us the ability to blend natural and synthetic solutions to solve growers' problems. In our pipeline, I cannot emphasize how strong I think our pipeline is. It is the best crop protection pipeline in the business, with seven new actives coming into that market over the next decade. I feel like I've been drinking from a firehose for the first month or so, and if I ever need a pick-me-up I wander over to our greenhouses and look at the results of R&D, where you can see the incredible results those people are delivering against targeted pests, targeted weeds, and targeted diseases. It just gets you excited and makes you want to come back, roll up your sleeves, and get after it. We look forward to sharing more details about R&D and our strategy at our Investor Day on September 15, and I look forward to seeing all of you in person there.

Your next question comes from the line of Joel Jackson with BMO Capital Markets. Joel, your line is open. Please go ahead.

Hi. Good morning. Chuck, Luke, and the rest of the team. I know you are doing your capital markets day in a month and a half, but Chuck, Luke, team, what I noticed is if I take your prior guidance targets for 2027—about $4.48 billion EBITDA at the midpoint—you did $4.2 billion this year. If you did 4% this year, that is about a 5% growth rate. I would like to know, as much as you can talk about right now, is that what you are thinking about now—mid-single-digit growth into next year? Tell me why that is right or wrong and what we should think about as a preview ahead of September.

Yeah. Good morning, Joel. I'll start and then David can fill in some of the numbers. Not a lot has changed with our original thinking from earlier in the year. If you look at the updated guide, $4.2 billion fits us very comfortably into that 2027 original communication around $4.4 billion. So our growth rates are in the range where we have communicated they would be. I would say we are a little ahead of our original plan. It is the core parts of our business that are driving this. In seed, licensing is literally three years ahead of our original plan, which is pretty astonishing considering that is a brand-new business for us. In crop protection, that new product portfolio that we have been talking about will touch $2 billion this year in revenue, and the margin profile and how we have priced it is really strong. These are the things leading the growth for Corteva combined. And, of course, we are focused on cost and productivity—it's part of our DNA. So when I look at it, our growth rates are exactly where we thought they were but probably trending a little ahead of our original plan. David, anything to add?

Joel, if you remember, the $4.4 billion was a $1 billion increase over that three-year period of time, and we always said it was going to be a little bit more front-end loaded mainly because of our cost and productivity that we expected in the first couple of years. As Chuck has mentioned, we feel like we are certainly ahead of where we expected to be on net royalty. We'll take that into consideration when looking at our guide for 2027, but I think we feel comfortable with the $4.4 billion at this point in time. The other thing I'll mention is some people were concerned about the impact of net dis-synergies and separation costs against our long-term target of $4.4 billion. As we articulated earlier, we feel like we are tracking pretty close to flat or within plus or minus the millions of dollars that would be within our typical guide range. We feel really strong about the $4.4 billion.

One last comment, Joel. In September, both companies will provide a 2029 financial framework. You will be able to follow where Corteva is leaving off and where New Corteva and Vylor are taking over. When you look at that and put it all together, there will be a lot to like there. Hopefully you can join us.

Your next question comes from the line of Kevin William McCarthy with Vertical Research Partners. Kevin, your line is open. Please go ahead.

Hi. This is Matthew on for Kevin. In crop protection, organic sales were down about 6%, but on a product-line basis, it looks like the trend was lower among herbicides, insecticides, and fungicides, while the difference was made up by substantial growth in the 'other' category. Can you unpack the underlying sales trends for those products and maybe comment on the trajectory we can expect in the back half?

Hi, Matthew. If I can start with the overall crop protection market: not a lot has changed in our view of the fundamentals. We still think the crop protection market is improving. 2025 was essentially flat versus the prior two years, and this year we said the market would grow low single digits. That is still our view. The growth is slow and a little bumpy, but we are seeing what we expected. We always said 2026 was likely to be a year of volume growth with low single-digit declines in pricing. We probably have a bit more competitive pressure in Brazil for lots of different reasons, but that market is well supplied and growing. When you look at Chinese exports into Brazil, they are essentially stable; they are not going down or going up substantially. So the market is recovering. We expected 2026 to be volume-led growth with low single-digit pricing decline. Regarding product indications, we have certain active ingredients coming off patent. In anticipation of some of those molecules, we've redone our cost structure. When that happens, you'll see competitive tension. We may lower our price, but if you look at the margin profile of crop protection, it is actually up this quarter in this first half. That's the product-life strategy we've employed: adapt cost structure, manage pricing, and protect margins. Looking forward to the new products, Luke mentioned we have seven new actives coming into the market in the next decade. The first will be in Brazil—Aviso—which we consider a blockbuster fungicide, and we are excited to put that into the market in the next couple of years. Hopefully that helps.

Your next question comes from the line of David Begleiter with Deutsche Bank. David, your line is open. Please go ahead.

Thank you. Good morning. Chuck, just on the North American growing season, any share gains you can point to in either corn or soybeans that you benefited from this year?

Chuck can take that question, David. From a share perspective, we feel pretty confident that we picked up a little bit of share in corn. Our price or value-capture strategy positions us as premium in the market, but we still feel like we picked up some share—a little in Pioneer, but particularly with our retail brand and a bigger share of shelf in Brevant. On the soy side, we feel like we picked up share in the Western Corn Belt—think Mississippi West—and the Eastern Corn Belt with the Pioneer brand. We got one hot pocket in the South in the Delta where Enlist, Dicamba, and the return of the Dicamba label has been a challenge, particularly with cotton in that geography, so we feel like we gave up a little bit of share there. All in all, in soy, we think we will end up pretty flat. In corn, I believe we picked up a tick of share.

Your next question comes from the line of Frank Joseph Mitsch with Fermium Research. Frank, your line is open. Please go ahead.

Good morning, and thank you. Luke, I wanted to come back to crop protection where you mentioned that two-thirds of the products are differentiated. I am looking at pricing—obviously pricing was down low single digits in the first half and expected to be down low to mid single digits in the second half. Could you parse out what is going on with the differentiated side in terms of pricing? How can we square the price degradation when two-thirds is differentiated?

Good morning, Frank. In the first half we were down low single digits—about 3%—which was within our expectations. Europe and the U.S. were essentially flat. Our new products—the portfolio we define as new products—will approach about $2 billion of revenue this year; their prices are essentially flat and volume is up high single digits. So growth is coming from newer products. The rest of the market is under competitive pressure because it's well supplied. We moved pricing for the second half from low single-digit declines to mid-single-digit declines primarily driven by what we are seeing in Brazil and perhaps one or two other pockets around the world. It's not uniform—pre-emergent herbicides are one of the larger areas with pressure. Weather impacts fungicide demand; for example, very dry conditions in parts of Europe and the U.S. can reduce fungicide application needs. Overall, we still expect to grow EBITDA led by volume even with mid-single-digit pricing decline in the second half.

And, David, something like low single-digit growth in the first half. The core segmentation—those molecules under price pressure—the team has been ahead on cost structure. When you look at those parts of the business, the improved cost base enables us to grow EBITDA dollars year over year. Last year was a growth year; this year we expect it to be a growth year as well. The first half was a good start.

Your next question comes from the line of Kristen Owen with Oppenheimer. Kristen, your line is open. Please go ahead.

Good morning. Thank you. I wanted to pull at the price versus volume piece in seed. I noticed in the deck you talked about organic volume growth in the back half of the year rather than a price-versus-volume breakdown. As we think into Capital Markets Day, can you help us understand how much of the price we are seeing is coming from greater mix of out-licensing and how much of that offset would normally be reflected in the volume line? Should we be thinking about transitioning from separate price and volume KPIs to a more combined organic view?

Kristen, thanks for the question. Let me try to tease this out. The second half is significantly smaller and is really all about Brazil, and a bit of South Africa, which our business is doing well in. From a volume perspective in the second half, it depends on when farmers are ready to take seed in that fourth quarter; our forecast is flat year over year at this point. We do not expect the same safrinha expansion we've seen the last few years, so that will impact volume. From a price-and-mix perspective, it's all about bringing new products to market and putting them in the hands of farmers; that allows us to capture a piece of the additional value we provide. So it's a mix of price capture from new products and the typical volume dynamics tied to Brazil timing and farmer decisions.

And Kristen, to remind everyone, the second half is about 27% of our total topline, so it's very much a first-half-weighted business. When you look at what we projected for the second half, the difference between volume and price is about fifty-fifty—we are seeing a slight gain in price and a slight gain in volume over the back half of the year.

Your next question comes from the line of Matthew DeYoe with Bank of America. Matthew, your line is open. Please go ahead.

Thank you. This is Fabian on for Matthew. As we think about order patterns, at this point last year you had roughly 90% of Brazil summer orders in and about 40% of safrinha in hand, ahead of historical pace. As of today, where does your order book stand versus historical trends, and what are the drivers?

Thanks for the question. Last year we had very strong orders on the books at this point. As we sit here today, we are ahead of the market in terms of overall orders, so we feel great about our position from a competitive standpoint. There are some things in Brazil that have growers making decisions closer to planting time: credit is tight, and there is pressure from fuel and fertilizer prices which stress margins. We feel confident in our order book and our share position, and our product portfolio is as good as it has ever been in Brazil for both summer and safrinha. In terms of wrapping up orders that come in the fourth quarter and having the summer crop planted and the safrinha crop on the books, we feel like we are in a very strong competitive position, but we are being transparent that credit is tight for Brazilian farmers right now and we will continue to manage those dynamics closely.

Your next question comes from the line of Joshua Spector with UBS. Joshua, your line is open. Please go ahead.

Thanks. Good morning. This is Lucas Stone on for Joshua. I wanted to follow up on your comments around the split in the second half between Q3 and Q4. You indicated a third-quarter operating EBITDA loss of about $180 million, which would imply about $690 million in EBITDA growth in the fourth quarter. That balance is much more fourth-quarter-weighted than what we've seen over the past four to five years. Could you expand on the drivers of that timing shift, how you see upside and downside risks, and compare that relative to your confidence in the second half overall? Thanks very much.

Sure. If you step back and look at our second-half guide in aggregate, and then between Q3 and Q4 timing: we have it flat versus 2025 at about $500 million. Recall our second half in 2025 was up 16% versus 2024, so we're comparing against a pretty strong base. Our full-year guide of about $4.2 billion makes the second half a relatively small portion of the year. We do have some unfavorable price and cost built into the second half—unfavorable cost mainly from the residual dis-synergy number we discussed, the $25 million, and a bit due to logistics and freight costs—but we are offsetting that with volume in both businesses and slight favorable currency. Our second half guide is about 12% of our full-year guide, which is in line with the past four years at about 13%. Regarding Q3 specifically, we did say Q3 is likely to be around a $100 million loss similar to a couple of years ago; last year was a bit different due to favorable timing of safrinha into Q3. Some additional costs like net dis-synergies will be weighted into Q3. To summarize, we feel the second half is balanced and is a small portion of the year, and the timing between Q3 and Q4 will be more like it was a couple of years ago.

Your next question comes from the line of Benjamin Theurer with Barclays. Benjamin, your line is open. Please go ahead.

Good morning, Chuck and team. Thank you for taking my question. I wanted to dig a little deeper into some of the productivity savings and lower costs you highlighted; the first half was clearly a big driver. As you think about the next couple of years, where do you believe on a separate basis are the big advantages between what will be Vylor and what will be New Corteva for incremental productivity savings or lower input costs to further drive margin expansion?

If you step back and think about our last three-year guide presented at our last Investor Day, we articulated about $1 billion of growth productivity cost benefits and net about $700 million—some of that was due to commodity declines. You saw commodities come down in the first couple of years, which you probably won't see us repeat in the next three-year plan. What you will see is a continuation of productivity in both businesses. We continue to see productivity in seed and crop protection. You have seen that we have announced some additional footprint actions and restructuring, particularly in crop protection, and you will see those benefits continue in the next three-year plan.

Benjamin, a couple other comments: we think the separation will give both companies the opportunity to take our cost and productivity work to the next level. A proof point is the annual dis-synergy number: we thought it would be around $100 million, which is already on the low side, and now we are saying it is closer to the $25 million range. The reason is we've been able to find integration efficiencies while working through separation. Tune into September to hear the rest of the story, but we would expect both companies to continue this productivity journey and to find new, different opportunities post-separation.

Your next question comes from the line of Patrick David Cunningham with Citi. Patrick, your line is open. Please go ahead.

Hi. Good morning. This is Rachel on for Patrick. How should we think about your normalized free cash flow levels maybe next year compared to the $2.1 billion to $2.3 billion framework you laid out at the last Investor Day? Are there any offsets such as separation-related costs we should be mindful of?

Thanks for the question. If you looked at the company on a combined basis, we would be well within those targets we set—kind of the 45% to 50% of EBITDA for free cash flow. This year, our first-half operating cash flow was down a couple billion dollars, mainly due to the $1.1 billion pension contribution, the Bayer agreement, restructuring, and similar items. If you backed out those unusual items, this year would probably be around the 46% range, so well within the typical range we communicated.

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets. Arun, your line is open. Please go ahead.

Great. Thanks for taking my question. Congrats on the progress toward the spin. Could you provide an updated view on some broad strokes for fiscal 2027? I know you had an operating plan at your prior Investor Day—are many of those assumptions still valid? Any updates you could provide would be helpful. Thanks a lot.

Sure. We are still operating in the same environment we described previously. The agricultural backdrop has puts and takes but is generally consistent with the assumptions we had in the original 2024 plan. We are seeing strong global demand for grains and oilseeds; crop prices are a bit up year over year. Farmer margins require watching—Brazilian farmers are dealing with higher interest rates and currency issues—but overall the agricultural complex is where we expected it to be for 2027. Internally, we are performing slightly better than expected: we're a bit ahead on cost and productivity, a bit ahead in licensing, and our new products are being well received in the market. On balance, the company is slightly ahead and the external backdrop is largely as expected.

Your next question comes from the line of Edlain Rodriguez with Mizuho. Edlain, your line is open. Please go ahead.

Thank you. Good morning, everyone. This is on crop protection. In Latin America, the pricing pressure is not abating. Is the high single-digit price decline the new normal, or do you expect pressure to moderate next year if farm economics improve? What are you thinking in terms of pricing pressure in Latin America?

Good morning, Edlain. We do not think a high single-digit price decline is the new normal in Brazil. When we look at the market, imports into the country are stable; the channel is healthy and there is growing demand for crop protection and acres. Brazil is well supplied, but it is a growing market and sometimes fundamentals are hard to pinpoint. In our portfolio, we had some products—one was a pre-emergent herbicide—that came off patent a couple of years ago and we anticipated generic pressure. We went to work on our cost structure; we lowered prices where necessary because generics entered the market, but our margins and share have been maintained. That is the playbook: adapt cost structure when patents lapse, protect margins where possible, and focus on differentiated products. Looking forward to new products, we have seven new actives in the next decade; Aviso will be next and we expect pricing premiums for true innovations. We are not expecting price recovery in Brazil in 2026, but we can still compete effectively with our portfolio and production base, and the underlying demand is quite strong. Overall, we expect a solid volume market in Brazil, with pricing dynamics remaining variable.

We have reached the end of our Q&A session. I will now turn the call back to Chuck Magro for closing remarks.

Thank you. I would like to take a minute to thank Robert King for his crop protection leadership over the past four years. It is remarkable—he has led the Crop Protection business over that time and has also led the company's charge in safety and operational excellence. When I look at Corteva today, especially the crop protection business, we are a much better company because of his leadership. This will be Robert's last earnings call. We wish him the very best in his next chapter, and I just wanted to make those final comments before I turn it back over to Kimberly.

Great. Thanks again for everyone joining the call and for your interest in Corteva. We hope you have a safe and wonderful day.

This concludes today's call. Thank you for attending. You may now disconnect.