Corteva, Inc lowered its yearly earnings guidance Friday as it braces for headwinds from Brazil, where weather challenges and tighter farmer margins have slowed crop protection sales.
The agrochemical company reduced its annual outlook by about $1 billion in sales and warned investors to expect a net loss of $315 million in the third quarter, citing market factors such as order delays, inventory destocking and tighter farmer margins amid record grain production.
Slow demand for crop protection items comes as Brazil’s farmers struggle with low to breakeven returns following a record corn crop and intense drought that has dried the Amazon River to levels not seen in 100 years, resulting in export and barge shipping delays.
This year, Brazil emerged as the world’s largest exporter of corn, but the tradeoff for the country’s industrial efforts has been poor farmer returns amid high input costs and low demand.
Corteva has seen lower fourth quarter seed deliveries impacted by reduced summer corn plantings. A potentially delayed and reduced planting for Brazil's second corn crop, called safrinha or "little harvest," along with other factors, is also expected to negatively impact sales.
"Early fourth quarter indicators from Brazil have caused us to recalibrate sales and earnings estimates in both Seed and Crop Protection for the remainder of the year given the significance of Brazil to our fourth quarter business," CEO Chuck Magro said in a statement.
Magro said results around the rest of the world were largely in line with expectations. He also added that he was pleased with Corteva’s margin improvement over the year thus far due to strong pricing, productivity and cost actions, and “will discuss early views on our 2024 outlook” on the third quarter earnings call scheduled Thursday, Nov. 9. The earnings report will be out after the markets close the day before.
Full year net sales are expected to be between $17 billion and $17.3 billion, with operating EBITDA to be in the range of $3.25 billion to $3.45 billion, according to the release.
This is down from estimates in early August, when Corteva saw net sales increase driven by its seed business, though the company noted at the time its crop protection business struggled from “strategic product exits, inventory destocking, weather and delayed farmer planting.”
About three months ago, full-year net sales were forecasted between $17.9 billion and $18.2 billion. The company also expected operating EBITDA to be in the range of $3.5 billion to $3.65 billion.