Q3 2024 Corteva Inc Earnings Call
The poor earnings conference call.
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Speaker Change: After the Speakers' remarks, there will be a question and answer session.
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Speaker Change: <unk>.
Speaker Change: I would now like to turn the call over to Kim Booth, Vice President of Investor Relations. Please go ahead.
Kim Booth: Good morning, and welcome to Cortez third quarter 'twenty.
Kim Booth: Morning, and welcome to Cortez third quarter 2024 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, Tim Glenn Executive Vice President C business unit, and Robert King Executive Vice President crop protection business unit 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 Cortez a website and through the link to our webcast.
Kim Booth: 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.
Kim Booth: 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 statements.
Speaker Change: Please note in today's presentation, we'll 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's now my pleasure to turn the call over to Chuck.
Kim Booth: Kim Good morning, everyone and thanks for joining us.
Chuck: <unk> results for the third quarter were largely in line with our expectations. Despite.
Speaker Change: Despite the fact that we had an operating loss in the quarter, we continued to execute well and are on track to deliver over $400 million of savings from our controllable as this year.
Speaker Change: Our crop protection business delivered earnings and margin growth led by demand for our differentiated technology, along with deflation benefits that have just begun.
Speaker Change: We're also providing a first look at 2025, we are expecting to return to double digit earnings growth, which is largely driven by factors in our control.
Speaker Change: What continues to set us apart as the strength and leverage of our portfolio. We continue focus on execution and increased investment in innovation.
Speaker Change: And what has historically been our smallest quarter due to seed seasonality, we were still able to deliver over $160 million and controllable benefits.
Speaker Change: Our ability to pull multiple levers to improve overall performance makes us resilient when faced with variables not entirely in our control, including the ongoing crop protection market dynamics and acreage loss from Argentina cornerstone.
Speaker Change: Overall, the fee business is delivering a strong performance in 2024.
Speaker Change: From operational excellence perspective, the business drove approximately $175 million in controllable benefits on a year to date basis, including royalty improvement in productivity.
Speaker Change: Our <unk> business is also set up for continued growth with our pipeline of technology and new hybrid pricing gains in most regions as well as notable share gains in North America are a testament to the value of our technologies provide to farmers and.
Speaker Change: And for 2025, we will rollout several hundred new hybrids and varieties around the world.
Speaker Change: This is helping farmers increase yield and productivity when they need it the most.
Thank you for your attention.
Speaker Change: In what has historically been our smallest quarter due to seed seasonality, we were still able to deliver over $160 million in controllable benefits.
Speaker Change: On the crop protection side, we're happy to see a second consecutive quarter of volume gains as well as notable operating EBITDA growth margin improvement and the first meaningful tranche of deflation benefits in the third quarter.
Speaker Change: Our ability to pull multiple levers to improve overall performance makes us resilient when faced with variables not entirely in our control, including the ongoing crop protection market dynamics and acreage loss from Argentina corn stunts.
Speaker Change: We remain committed to our strategy of focusing on differentiated new technologies, which Warren a premium in the market.
Speaker Change: On a year to date basis, we received over 150 crop protection registration approvals spanning 25 active ingredients.
Speaker Change: Overall, the seed business is delivering a strong performance in 2024.
Speaker Change: From operational excellence perspective, the business drove approximately $175 million in controllable benefits on a year-to-date basis, including royalty improvement and productivity.
Speaker Change: In almost 50 countries and like feed our CP business is generating substantial value through its focus on controllable, which drove approximately $170 million of benefits in the first nine months of the year.
Speaker Change: Our seed business is also set up for continued growth with our pipeline of technology and new hybrids.
Speaker Change: Overall, the AG markets remain mixed.
Speaker Change: Pricing gains in most regions, as well as notable share gains in North America, are a testament to the value our technologies provide to farmers.
Speaker Change: Bill seeing record demand for food and fuel farmers continue to prioritize top tier seed technologies, while managing tighter margins in.
Speaker Change: And for 2025, we will roll out several hundred new hybrids and varieties around the world. This is helping farmers increase yield and productivity when they need it the most.
Speaker Change: In the crop protection market has turned the corner in every major market, except Brazil.
Speaker Change: We are early in the season. It is important to note that underlying farmer demand in terms of applications remains on track with historical levels.
Speaker Change: On the crop protection side, we're happy to see a second consecutive quarter of volume gains, as well as notable operating EBITDA growth, margin improvement, and the first meaningful tranche of deflation benefits in the third quarter.
Speaker Change: However, we continue to experience competitive market dynamics and expect that to continue into next year.
Speaker Change: So what does all this mean for the remainder of the year.
Speaker Change: We remain committed to our strategy of focusing on differentiated and new technologies, which warrant a premium in the market. On a year-to-date basis, we received over 150 crop protection registration approvals spanning 25 active ingredients.
Speaker Change: We are updating our full year operating EBITDA range to $3 4 billion at the midpoint to reflect the impact of the current Latin America market conditions that will carry through to our full year results.
Speaker Change: However, we are still positioned to achieve approximately 20% for full year EBITDA margin.
Speaker Change: in almost 50 countries. And like Seed, our CP business is generating substantial value through its focus on controllables, which drove approximately 170 million of benefits in the first nine months of the year.
Speaker Change: This adjustment reflects the latest market realities in Latin America, including expectations for an approximate 20% year over year reduction in argentinas corn planted area due to cornerstone.
Speaker Change: Overall, the ag markets remain mixed. We're still seeing record demand for food and fuel. Farmers continue to prioritize top-tier seed technologies while managing tighter margins.
Speaker Change: It is fair to say that our full year estimates are assuming a big fourth quarter in Brazil, but this is something we've done before it's also important to note that we remain committed to free cash flow in the range of one $5 billion to $2 billion for the year as well as a $1 billion in share repurchases.
Speaker Change: and the crop protection market has turned the corner in every major market except Brazil where we are early in the season. It's important to note that underlying farmer demand in terms of applications remains on track with historical levels.
Speaker Change: Today, we'd also like to provide a first look at how we're thinking about 2025.
Speaker Change: However, we continue to experience competitive market dynamics and expect that to continue into next year.
Speaker Change: We will provide official guidance in early February, but we wanted to give some insights prior to investor day.
Speaker Change: So, what does all this mean for the remainder of the year? We are updating our full-year operating EBITDA range to $3.4 billion at the midpoint to reflect the impact of the current Latin America market conditions that will carry through to our full-year results.
Speaker Change: From a macro perspective, we are anticipating a continuation of record demand for grain and oilseeds meat and biofuels.
Speaker Change: On farm demand is expected to remain steady and farmers will continue to prioritize top tier technologies in order to maximize their yields.
Speaker Change: However, we are still positioned to achieve approximately 20% for full year EBITDA margin.
Speaker Change: A farmer seed selection is particularly critical in as non discretionary when compared to other crop inputs.
Speaker Change: This adjustment reflects the latest market realities in Latin America, including expectations for an approximate 20% year-over-year reduction in Argentina's corn-planted area due to corn stunts.
Speaker Change: In terms of U S planted area assumptions total area planted by farmers in 2025 is expected to be nearly flat year over year.
Speaker Change: It is too early to say too much about Latin America for next year since farmers are in the fields right now planting in 'twenty four 'twenty five crop in Brazil.
Speaker Change: It is fair to say that our full year estimates are assuming a big fourth quarter in Brazil, but this is something we've done before. It's also important to note that we remain committed to free cashflow in the range of 1.5 to 2 billion for the year, as well as a billion in share repurchases.
Speaker Change: Which at this time is looking like a mid single digit increase for both corn and soybeans.
Speaker Change: Finally, it's too early to forecast a recovery for corn planted area in Argentina in the 25 crop year.
Speaker Change: Today, we'd also like to provide a first look at how we're thinking about 2025.
Speaker Change: Until we see how the current season plays out.
Speaker Change: Our current view of the crop protection industry is a flattish 2025, it's.
Speaker Change: We'll provide official guidance in early February, but we wanted to give some insights prior to Investor Day.
Speaker Change: It's a dynamic situation that we're monitoring daily, but all major markets are functionally normally except for Brazil, where as I said, it's early in the season.
Speaker Change: From a macro perspective, we're anticipating a continuation of record demand for grain, oil, seeds, meat, and biofuels.
David Johnson: On-farm demand is expected to remain steady and farmers will continue to prioritize top-tier technologies in order to maximize their yields.
Speaker Change: Brazil remains an attractive market given it is the only geography in the world that is able to materially increase planted area for corn and soybeans.
David Johnson: A farmer's seed selection is particularly critical and is non-discretionary when compared to other crop inputs.
Speaker Change: Farmer, economic and agronomic benefits incentivize Brazilian soybean farmers to continue to plant corn in rotation the.
David Johnson: In terms of U.S. planted area assumptions, total area planted by farmers in 2025 is expected to be nearly flat year over year.
Speaker Change: The strategic moves we've made including investments in biologicals and tilting our portfolio towards differentiated technology will allow our crop protection business to grow in 2025.
David Johnson: It is too early to say too much about Latin America for next year, since farmers are in the fields right now planting the 24-25 crop in Brazil, which at this time is looking like a mid-single-digit increase for both corn and soybeans.
Speaker Change: When combined with sizable incremental benefits from our controllable leavers.
Speaker Change: An increase in research and development investment and a significant currency headwind, we're anticipating double digit operating EBITDA growth.
Speaker Change: Finally, it's too early to forecast a recovery for corn planted area in Argentina in the 25 crop year until we see how the current season plays out.
Speaker Change: So high level, although our topline and bottom line expectations have been impacted by the crop protection industry. Our seed business has remained largely on plan and we are expecting to achieve our enterprise goal of 21% to 23% EBITDA margins by 2025.
Speaker Change: Our current view of the crop protection industry is a slavish 2025. It's a dynamic situation that we're monitoring daily, but all major markets are functionally normally except for Brazil, where as I said, it's early in the season.
Speaker Change: We still have a lot of work to do but the setup is looking good for 2025.
Speaker Change: Brazil remains an attractive market given it is the only geography in the world that is able to materially increase planted area for corn and soybeans.
Speaker Change: And with that let me turn it over to David Johnson to review our financial performance as you know David joined <unk> with just under two months ago and has really hit the ground running as our CFO <unk>.
Speaker Change: Farmer economic and agronomic benefits incentivize Brazilian soybean farmers to continue to plant corn in rotation.
Speaker Change: I'm happy to have him on our leadership team and I'm impressed with how well he has immersed himself into the organization, which has allowed him in very short order to add valuable insights on our business and operations David over to you.
Speaker Change: The strategic moves we've made, including investments in biologicals and tilting our portfolio towards differentiated technology, will allow our crop protection business to grow in 2025.
David Johnson: Thanks, Chuck and welcome everyone to the call.
Speaker Change: When combined with sizable incremental benefits from our controllable levers, an increase in research and development investment, and a significant currency headwind, we're anticipating double-digit operating EBITDA growth.
David Johnson: Let's start on slide six which provides the financial results for the quarter and year to date.
David Johnson: Briefly touching on the third quarter organic sales were down 5% compared to prior year with crop protection up 1% and seed down 17%.
Speaker Change: Pricing for the quarter was down 8%, reflecting a continued competitive pressure in the crop protection industry and end of season settlements in North America seeds.
Speaker Change: Third quarter volume was up 3% over prior year.
Speaker Change: These volumes are down, 12%, primarily driven by reduced corn area in Argentina.
Speaker Change: We still have a lot of work to do, but the setup is looking good for 2025.
Speaker Change: Crop protection volumes were up 11% led by Latin America, and North America.
Speaker Change: And with that, let me turn it over to David Johnson to review our financial performance.
Speaker Change: As you know, David joined Corteva just under two months ago and has really hit the ground running as our CFO.
Speaker Change: Volume of new crop protection products, and <unk> were both up more than 20% in the quarter compared to prior year.
Speaker Change: I'm happy to have him on our leadership team and I'm impressed with how well he has immersed himself into the organization, which has allowed him, in very short order, to add valuable insights on our business and operations. David, over to you.
Speaker Change: Turning to year to date.
Speaker Change: Sales were down 4% versus prior year with flat pricing and lower volume.
Speaker Change: These organic sales were up 1% compared to prior year with pricing up 4% with gains across the portfolio.
Speaker Change: Thanks, Chuck, and welcome everyone to the call. Let's start on slide 6, which provides the financial results for the quarter and year to date. Briefly touching on the third quarter, organic sales are down 5% compared to prior year, with crop protection up 1% and seed down 17%.
Speaker Change: Seed volumes were down 3% year to date, driven by reduced planted area in Argentina, EMEA and Asia.
Speaker Change: Crop protection organic sales were down 7% year to date with pricing down, 5%, primarily driven by competitive market dynamics in Latin America.
Speaker Change: Pricing for Decor was down 8% reflecting the continued competitive pressure in the crop protection industry and end-of-season settlements in North America seeds.
Speaker Change: Crop protection volumes were down 2% with volume gains in Latin America, and Asia offset by declines in EMEA, driven by residual destocking and unfavorable weather in North America, driven by just in time purchasing behavior.
Third quarter volume was up 3% over prior year.
Speaker Change: Feed volumes were down 12%, primarily driven by reduced corn area in Argentina.
Speaker Change: Operating EBITDA of approximately $2 9 billion year to date is down 5% compared to prior year.
Speaker Change: Crop protection volumes were up 11% led by Latin America and North America.
Speaker Change: Operating EBITDA margin was 22% essentially flat compared to prior year.
Speaker Change: Volume of new crop protection products and spinosins were both up more than 20% in the quarter compared to prior year.
Speaker Change: Moving on to slide seven for a summary of the year to date operating EBITDA performance.
Speaker Change: Seed pricing gains were offset by crop protection pricing pressure, while volume was lower from headwinds in both seed and crop protection.
Speaker Change: Turning to year-to-date, sales are down 4% versus prior year with flat pricing and lower volume.
Speaker Change: Seed organic sales are up 1% compared to prior year, with pricing up 4% with gains across the portfolio.
Speaker Change: Improvement in net royalties crop protection raw material deflation and productivity actions more than offset cost headwinds from higher commodity and other costs.
Speaker Change: Seed volumes were down 3% year-to-date driven by reduced planted area in Argentina, EMEA, and Asia.
Speaker Change: SG&A costs were modestly higher as expected given the full year ownership of the biological acquisitions and normalized bad debt accruals.
Speaker Change: Crop protection organic sales were down 7% year-to-date, with pricing down 5%, primarily driven by competitive market dynamics in Latin America.
Speaker Change: R&D expense is in line with expectations on track to be approximately 8% of sales for the full year.
Speaker Change: Crop protection volumes were down 2% with volume gains in Latin America and Asia offset by declines in AMEA, driven by residual destocking and unfavorable weather, and North America driven by just-in-time purchasing behavior.
Speaker Change: With that let's go to slide eight and transitioned to the updated outlook for the year.
Speaker Change: The updated full year guidance reflects the current Latin America market dynamics.
Speaker Change: Now expect net sales to be in the range of 17, and $17 2 billion or down 1% at the midpoint versus prior year.
Speaker Change: Operating EBITDA of approximately $2.9 billion year-to-date is down 5% compared to prior year. Operating EBITDA margin was 22%, essentially flat compared to prior year.
Speaker Change: The lower guidance is primarily due to lower than expected planted area in Argentina, and dry weather in Brazil impacting both seed and crop protection.
Speaker Change: Moving on to slide seven for a summary of year-to-date operating EBITDA performance.
Speaker Change: Lower topline growth translates to an updated operating EBITDA range of $3 35, and $3 45 billion up 1% at the midpoint compared to prior year.
Speaker Change: Seed pricing gains are offset by crop protection pricing pressure, while volume was lower from headwinds in both seed and crop protection.
Speaker Change: Improvement in net royalties, crop protection, raw material deflation, and productivity actions more than offset cost headwinds from higher seed commodity and other costs.
Speaker Change: Driven by the strength of <unk> performance in the first half of the year and crop protection volume growth and cost improvement in second half of the year.
Speaker Change: Operating EBITDA margin expected to be about 20% at the midpoint or about 25 basis points higher than prior year.
Speaker Change: ST&A costs are modestly higher, as expected, given the full year ownership of the biological acquisitions and normalized bad debt accruals. R&D expense is in line with expectations and on track to be approximately 8% of sales for the full year.
Speaker Change: Operating EPS is now expected to be in the range of $2 50.
Speaker Change: And $2 60.
Speaker Change: We're down 5% compared to prior year.
Speaker Change: With that, let's go to slide 8 and transition to the updated outlook for the year.
Speaker Change: And finally, we are reaffirming our free cash flow guidance of one five to 2.1 billion or approximately $1 75 billion at the midpoint and cash flow to EBITDA conversion rate of 45% to 50% for the full year 2024.
Speaker Change: The updated full year guidance reflects the current Latin America market dynamics. We now expect net sales to be in a range of $17 and $17.2 billion, or down 1% at the midpoint versus prior year.
Speaker Change: With that let's transition the setup for 2025.
Speaker Change: The lower guidance is primarily due to lower than expected planted area in Argentina and dry weather in Brazil, impacting both seed and crop protection.
Speaker Change: As Chuck said, we'll provide formal guidance in early February with slide nine represents a high level view of our planning framework, along with key assumptions that could drive us to the low and high end of our net sales range of $17 three to $17 7 billion and operating EBITDA range of three six to $4 <unk>.
Speaker Change: Lower top line growth translates to an updated operating EBITDA range of 3.35 and 3.45 billion, up 1% at the midpoint compared to prior year.
Speaker Change: Driven by the strength of seed performance in the first half of the year and crop protection volume growth and cost improvement second half of the year, operating EBITDA margin expected to be about 20% at the midpoint or about 25 basis points higher than prior year.
Speaker Change: Yes.
Speaker Change: In 2025, we expect low single digit seed pricing driven by demand for our yield advantage technology.
Speaker Change: One of the biggest variables in seed is planted area, both in Latin America, and the corn versus soybean split in North America at.
Speaker Change: Operating EPS is now expected to be in the range of $2.50 and $2.60, or down 5% compared to prior year.
Speaker Change: At the midpoint, we're assuming relatively flat planted area.
Speaker Change: Another key variables how much growth, we see in crop protection given the current market dynamics.
Speaker Change: And finally, we are reaffirming our free cash flow guidance of $1.5 to $2.0 billion, or approximately $1.75 billion at the midpoint, and cash flow to EBITDA conversion rate of 45% to 50% for the full year 2024.
Speaker Change: On farm demand remains relatively stable, we're expecting the crop protection industry to be mostly flat in 2025.
Speaker Change: New and differentiated products, including Biologicals are expected to drive much of the volume growth while prices are expected to remain under pressure.
With that, let's transition the setup for 2025.
Speaker Change: In 2024, we started to see some raw material deflation in crop protection.
Speaker Change: As Chuck said, we'll provide formal guidance in early February, but slide 9 represents a high-level view of our planning framework, along with key assumptions that could drive us to the low and high end of our net sales range of $17.3 to $17.7 billion.
Speaker Change: In 2025, we expect to see more benefit from cost deflation with improvements in both seed and crop protection, coupled with productivity benefits.
and operating EBITDA range of $3.6 to $4.0 billion.
Speaker Change: Our assumptions include SG&A and R&D as a percentage of sales to be relatively consistent with 2024 levels.
Speaker Change: In 2025, we expect low single-digit seed pricing driven by demand for a yield-advantage technology.
Speaker Change: Together, it's a balanced set of assumptions, which gives us confidence in our ability to grow earnings and margin in 2025.
Speaker Change: One of the biggest variables in seed is planted area, both in Latin America and the corn versus soybean split in North America.
Speaker Change: For both seed and crop protection.
Speaker Change: Turning to slide 10, you can see the operating EBITDA bridge for 2025 from approximately $3 4 billion in 2024 to $3 8 billion at the midpoint for 2025.
At the midpoint, we're assuming a relatively flat planted area.
Speaker Change: Another key variable is how much growth we see in crop protection given the current market dynamics.
Speaker Change: Unharmed demand remains relatively stable. We're expecting the crop protection industry to be mostly flat in 2025.
Speaker Change: Total company pricing expected to be flat to modestly up with low single digit pricing in seed to be offset by declines in crop protection.
Speaker Change: New and differentiated products, including biologicals, are expected to drive much of the volume growth, while prices are expected to remain under pressure.
Speaker Change: We are expecting volume growth in both seed and crop protection.
Speaker Change: Crop protection volume is expected to be up low to mid single digits, driven by demand for new products and biologicals.
Speaker Change: In 2024, we started to see some raw material deflation in crop protection.
Speaker Change: In 2025, we expect to see more benefit from cross-deflation with improvements in both seed and crop protection, coupled with productivity benefits.
Speaker Change: 2025 will be another important step in our journey to royalty neutrality, we expect approximately $50 million improvement in net royalty expense driven almost entirely by increased out licensing income as we continue to ramp up the licensing of <unk> E three soybeans and.
Speaker Change: Our assumptions include SG&A and R&D as a percentage of sales to be relatively consistent with 2024 levels.
Speaker Change: Together, it's a balanced set of assumptions which gives us the confidence in our ability to grow earnings and margin in 2025 for both seed and crop protection.
Speaker Change: Power corn enlist corn.
Speaker Change: We expect approximately $400 million of cost improvements in 2025.
Speaker Change: Driven by lower seed commodity costs.
Speaker Change: Our protection raw material deflation and productivity actions, including benefits from crop protection footprint optimization.
Speaker Change: SG&A and R&D as a percentage of sales are expected to be relatively flat with 2024 levels and planning a modest increase in spend.
Speaker Change: Total company pricing expected to be flat to modestly up, with low single-digit pricing in seed to be offset by declines in crop protection.
Speaker Change: Currency headwind is primarily driven by the Turkish lira and Brazilian real.
Speaker Change: We are expecting volume growth in both seed and crop protection.
Speaker Change: Together this translates to 12% operating EBITDA growth at the midpoint and more than 180 basis points of margin expansion.
Speaker Change: Our protection volume is expected to be up low to mid-single digit, driven by demand for new products and biologicals.
Speaker Change: With that said the slide 11 to review the key drivers of the cost improvements in 2025.
Speaker Change: 2025 will be another important step in our journey to royalty neutrality.
Speaker Change: For the past several years, we've experienced significant inflation in the seed business driven by higher commodity prices lower weather related productivity yields and higher production costs, including inflation on labor freight and warehousing.
Speaker Change: We expect approximately $50 million improvement in net royalty expense, driven almost entirely by increased out-licensing income, as we continue to ramp up the licensing of Conquesta E3 soybeans and Power Corn Endless Corn.
Speaker Change: While not all of these costs are expected to reverse we will start to see the benefit from lower commodity costs in 2025, driven largely by North America and Latin America.
Speaker Change: We expect approximately 400 million of cost improvements in 2025, driven by lower seed commodity costs.
Speaker Change: crop protection raw material deflation, and productivity actions, including benefits from crop protection footprint optimization.
Speaker Change: We expect to see a continuation as best fit through 2027, given current commodity prices.
Speaker Change: We expect another year of low single digit rate of deflation in crop protection raw materials.
Speaker Change: SE&A and R&D as a percentage of sales are expected to be relatively flat with 2024 levels, implying a modest increase in spend.
Speaker Change: This is expected to be weighted towards the first half of 2025 based on the year over year comparison, and our visibility given the roughly six months of crop protection inventory on hand.
Speaker Change: Currency headwind is primarily driven by the Turkish Lira and Brazilian Real.
Speaker Change: Together this translates to 12% operating EBITDA growth at the midpoint and more than 180 basis points of margin expansion.
Speaker Change: Both seed and crop protection are expected to deliver productivity savings, including a benefit from the crop protection footprint optimization.
Kim Booth: With that, go to slide 11 to review the key drivers of the cost improvements in 2020.
Speaker Change: Together these benefits translate to approximately $550 million, which will be partially offset by inflation other production costs.
Bye.
Kim Booth: For the past several years, we've experienced significant inflation in the seed business, driven by higher commodity prices, lower weather-related productivity yields, and higher production costs, including inflation on labor, freight, and warehousing.
Speaker Change: These costs include higher freight and labor as well as higher seed production cost related to the transition to seed trait technology in North America.
Speaker Change: Move on to slide 12, and summarize the key takeaways.
Speaker Change: While not all these costs are expected to reverse, we will start to see the benefit from lower commodity costs in 2025, driven largely by North America and Latin America.
Speaker Change: Driven mostly by the current market dynamics in Latin America for both seed and crop protection, we're updating full year guidance and now expect EBITDA to be in the $3 4 billion at the midpoint.
Chuck Magro: We expect to see a continuation of this bid through 2027, given current commodity prices.
Speaker Change: We remain on track to deliver one five to $2.0 billion to $1 billion of free cash flow and complete $1 billion of share repurchases for full year 2024.
Chuck Magro: We expect another year of low single-digit rate of deflation in crop protection raw materials.
Chuck Magro: This is expected to be weighted towards the first half of 2025 based on the year-over-year comparison and our visibility given the roughly six months of crop protection inventory on hand.
Speaker Change: We can provide our preliminary outlook for 2025, which include sales operating EBIT margin growth and we look forward to the upcoming Investor day, but we'll give you more detail on our growth outlook from 2025 to 2027.
Chuck Magro: Both seed and crop protection are expected to deliver productivity savings, including a benefit from the crop protection footprint optimization.
Speaker Change: With that let me turn it over to Kim with a reminder, about the upcoming Investor day.
Chuck Magro: Together, these benefits translate to approximately 550 million, which will be partially offset by inflation of our production costs.
Kim Booth: Thanks, David as most of you know we will be holding our Investor day, and then on November 19th in New York City. It will include a three and a half hour executive webcast with various members of our management team followed by an innovation showcase for those in person.
Speaker Change: These costs include higher freight and labor, as well as higher seed production costs related to the transition to seed trade technology in North America.
Speaker Change: <unk> of discussion will include our leading position in the AG Tech industry, the technology and operational excellence that will drive our financial framework out to 2027 as well as the various growth platforms that will create additional value creation through next decade. If you haven't already registered information can be found our investor relations website or please.
Move on to slide 12 and summarize the key takeaways.
Speaker Change: Driven mostly by the current market dynamics in Latin America for both seed and crop protection, we're updating full year guidance and now expect debit debt to be in the $3.4 billion at the midpoint.
Speaker Change: We remain on track to deliver 1.5 to 2.0 billion of free cash flow and complete 1 billion of share repurchases for full year 2024.
Speaker Change: Feel free to contact me directly.
Speaker Change: Now before we get into Q&A, Chuck I believe you would like to make a few closing remarks, yes. Thanks Kim.
Chuck Magro: We look forward to seeing many of you in New York in a couple of weeks, we have several exciting new announcements regarding the mid and long term growth trajectory of <unk>.
Chuck Magro: Finally, I'd like to say a few words about the announcement, we made a few weeks ago that we will have a new executive Vice president for our seed business beginning on December one.
Chuck Magro: <unk> O'connor will succeed Tim Glenn.
Chuck Magro: Who will transition to a strategic advisor role until his retirement in the first quarter.
Chuck Magro: Jud has a 25 year veteran of core Teva and its heritage companies and is assuming this position. After most recently serving as the president of our North American business.
Chuck Magro: Earlier in his career jet also served as Dupont's Latin America regional President based out of Sao Paulo.
Speaker Change: Few people know our customers and business better than Jud and I am pleased to have him join our management team.
Speaker Change: This of course is certainly bittersweet however, as Tim is such an institution at <unk>.
Speaker Change: There are few people anywhere in any company that know agriculture farming and our industry better we will certainly miss him, but wish him all the best in his well earned retirement and now I'll hand, it back over to Kim.
Kim Booth: Thanks, Chuck now, let's move on to your questions I would like to remind you that our caution 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.
Speaker Change: A question and answer session.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we ask that you. Please limit yourselves to one question.
Speaker Change: We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Vincent Andrews with Morgan Stanley. Please go ahead.
Vincent Andrews: Thank you and good morning, everyone could I ask on slide 11 at $150 million of inflation in other costs.
Vincent Andrews: Could you maybe break it down a little bit and give us a sense of how much each of those buckets. You mentioned were particularly interested in the in the seed trait transition costs.
Speaker Change: Which I assume are associated with <unk>, but as I think back to other trade transitions you've done whether it was to extend and then extend to enlist which we're obviously enormous transition I don't remember us talking about very substantial cost. So I'm. Just wondering if you could give us a little bit more insight into that.
Speaker Change: Total $150 million bucket. Thank you.
Speaker Change: Yes. So this is David Vinson nice to meet you.
Speaker Change: When you look at the total I would say about two thirds to 75% of that is in the seed business and then of that most of it is the trade.
Speaker Change: There is about 25% of that number would be in the inflation bucket as you can imagine when you look at our Cogs for the seed business and there is a commodity element, but there's a pretty significant element that's non.
Speaker Change: <unk> seen comps are commodity related and that's where we're seeing some of the inflation.
Speaker Change: Hey, Vincent I'll touch a little bit on the trade transition costs as we as we define them. So we've got two major corn trade transitions going on in North America right. Now one is from Chrome divorcee. This you identified and the other is from.
Speaker Change: Some of our heritage of above ground traits into power core enlist and so with the trade transition costs, they're going to be something we deal with over the next couple of years.
Speaker Change: Part of it is just the ramping up those new technologies and bringing in those lines. The other part is as we produce them.
Speaker Change: We were call it mature in terms of use of Australia and other technologies that we have that are driving a lot of productivity in the field and because of the pace of the transition here, we're not going to have the level of sterility, primarily in the field and so we're going to have to.
Speaker Change: Go back to the castle and doing some things incurring some costs associated with added just about the size of those transitions and the costs we have to incur.
Speaker Change: During this during this period until we're kind of operating as we add at a steady state like we have been for the last several years with with acre Max and Chrome technologies. So it's really something that we'll deal with over the next couple of years and will fade away as we as we move towards a I'd say a steady state with those technologies.
Speaker Change: <unk>.
Speaker Change: Our next question comes from the line of Jello Jackson with BMO capital markets. Please go ahead.
Jello Jackson: Good morning, everyone.
Jello Jackson: <unk>.
Speaker Change: When I look at your guidance here.
Speaker Change: Look here at the guidance next year for seed cost deflation and CPC cost deflation.
Speaker Change: It does seeing maybe what a couple hundred million dollars benefit next year. It does seem a little bit low versus what a lot of thought as possible can you talk about how youre initially modeling that number for 'twenty. Five is this what you have.
Speaker Change: 0.2. This is for sure what we can get or is this your base cases of our upside can you talk about that thanks.
Speaker Change: Yes, good morning, Joel So maybe I'll start and then David can give you a bit more specifics.
Speaker Change: So you are right, we wanted to give a <unk>.
Speaker Change: First look at 2025.
Speaker Change: Simply because.
Speaker Change: We're having our investor day in a couple of years, where we're going to talk about the framework through 2007, and some of the technology opportunities that we believe strongly in beyond 2027, even into the end of the decade and early next so this is a little early for Cortez to give a view of 2025.
Speaker Change: But there are reasons for it.
Speaker Change: Obviously, we will give official guide like normal and.
Speaker Change: In the beginning of February as we release, our fourth quarter.
Speaker Change: And a large part of this so the takeaways for me on the 25 number.
Speaker Change: Is a large part of it is under our control and we're feeling very good about that and on a gross basis at $600 million really driven by cost management productivity and there is deflation and I'd say, David deflation is about half of that correct.
Speaker Change: And then don't forget when we talk about fee deflation because of the way, we hedge and we manage that cost.
Speaker Change: It's going to be a three year journey focus and I think we've been as clear as we can be that there is going to be deflationary benefits in seed and 25% in 2026% in 2027. So we're just getting started in fact, we're seeing higher costs still in the feed.
Speaker Change: Cogs right now, but we're seeing deflation finally in CP, which we're pretty excited about.
Speaker Change: So when you start thinking about that 600 million gross there is some offsets which actually David just covered you.
Speaker Change: You put it all together double digit EBITDA growth margin expansion, our strong portfolio lineup and as Tim just described.
Speaker Change: <unk> is really strategically shifting now from being what we used to be a technology buyer to now a technology seller.
Speaker Change: The long term journey, that's really exciting for the company now we have to bear some costs in order to achieve that but the framework as well as well I think articulated and it's too early for us to really say, if it's overly conservative or not are viewed today. As this is our best perspective, and don't forget we are calling for basic.
Speaker Change: The CP market to be essentially flat year over year.
Speaker Change: Anything to add David.
David Johnson: No I think that's basically good as Chuck said about half of that number would be the.
David Johnson: Productivity the other half would be the cost deflation.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Kevin Mccarthy with vertical research. Please go ahead.
Speaker Change: Hi, This is Matt <unk> on for Kevin Mccarthy.
Speaker Change: How much seed sales were deferred to <unk> from <unk> and whats the associated impact on earnings from that deferral.
Speaker Change: Okay.
Speaker Change: So in terms of third quarter seed sales I assume you're talking primarily on Latin America.
Speaker Change: So.
Speaker Change: Normally we will have a.
Speaker Change: I'd say I'd say the bulk of Argentinean sales will take place in the third quarter and then it would would spread into the fourth quarter and then think about Brazil, we'd have summer that would generally be third quarter, and then sapremia would be exclusively.
Speaker Change: A little bit of a summer might go into the fourth quarter suffering is generally going to be fourth quarter and then the first quarter of the following year is going to catch it and so as we as we think about the market. This year that that reduction in Argentina is real.
Speaker Change: When we talk about a 20% area reduction that's business that isn't deferred that's business that has gone away and when we think about what our impact is probably we don't talk about Argentina. Every every call I do want to highlight from a seed standpoint is a very significant market.
Speaker Change: It's our third largest seed market in the world actually and it's actually quite profitable when you look at the margins and the area that the reduction is taking place.
Speaker Change: We have a we have above average market share approaching 40% of that market so that business doesn't.
Speaker Change: Doesn't really come back.
Speaker Change: The reduction that we've talked about in terms of the overall year. So I don't think of that as a deferral and from a summer standpoint in Brazil.
Speaker Change: We're looking at another area reduction there again in the Big picture.
Speaker Change: Some are represents about 20% or even a little bit less than the total.
Speaker Change: Brazil, corn area, and we're looking at probably a 10% or maybe even a little bit greater area reduction this year coming off of a substantial reduction last year and again thats not business. That's that's timing related so.
Speaker Change: From a <unk> standpoint, no timing issue that fourth quarter from an Argentina standpoint, and from a Brazil summer Thats essentially volume that won't take place and is part of what we've talked about in terms of the of the overall reduction of seat area in Latin America, Yes, maybe.
Speaker Change: It's our third largest seed market in the world actually and it's actually quite profitable.
Speaker Change: You look at the margins and the area that the reduction is taking place we have a we have a above average market share approaching 40% of that market so that business doesn't.
Speaker Change: Maybe just a couple of other thoughts on the overall <unk> business. If I can so when I look at the year to date performance. We're extremely pleased I think the seed business is having another extremely strong year, we're seeing market gains in corn and soybeans in North America.
Speaker Change: Doesn't really come back that's part of.
Kim Booth: The reduction that we've talked about in terms of the overall year. So I don't think of that as a deferral and from a summer standpoint in Brazil.
Speaker Change: I think where our EBITDA is up something like 8%.
Speaker Change: We have the leading technologies around the world and I believe our margins are approaching up to 220 basis points.
Kim Booth: We're looking at another area of reduction there again in the Big picture.
Speaker Change: Some are represents about 20% or even a little bit less than the total Brazil corn area and we're looking at probably a 10% or maybe even a little bit greater area of reduction this year coming off of a substantial reduction last year and again that that's not business thats.
Speaker Change: This is a business that I think the strategic pivot. We've made a few years ago is really starting to pay off.
Speaker Change: Tim rightly called out the third quarters.
Speaker Change: Slow quarter when it comes to seed sales.
Speaker Change: And I do think that from an overall perspective, the Argentina cornerstone issues one of the major drivers we did lower our full year guide, we believe that as a temporary item. In fact, there is some good news when it comes to Argentina and cornerstone. We're hearing some external reports now that the in fact that carries that issue.
Speaker Change: That's timing related so.
Kim Booth: From a <unk> standpoint, no timing issue that fourth quarter from an Argentina standpoint, and from a Brazil summer Thats essentially volume that won't take place and is part of what we've talked about in terms of the of the overall reduction of seed area in Latin America.
Speaker Change: The population is down something like 90%. So we're hoping that the worst will be behind us, but time will tell but we will do have this impact that will carry through the full year.
Kim Booth: Maybe just a couple of other thoughts on the overall <unk> business. If I can so when I look at the year to date performance. We're extremely pleased I think the seed business is having another extremely strong year, we're seeing market gains in corn and soybeans in North America.
Speaker Change: This question comes from the line of David Begleiter with Deutsche Bank. Please go ahead.
Kim Booth: I think our EBITDA is up something like 8%.
Speaker Change: Thank you good morning, Chuck all royalties see royalties next year. They are down why is that and where do you stand on a journey to royalty neutrality. Thank you yes.
Kim Booth: We have the leading technologies around the world.
Speaker Change: I believe our margins are approaching up to 220 basis points.
Speaker Change: Maybe I'll give a perspective and then Tim can give you the details David but.
Chuck Magro: This is a business that I think the strategic pivot. We've made a few years ago is really starting to pay off.
Speaker Change: We're feeling really good about our journey to royalty neutrality. If you recall. This is one of the fundamental sort of leading indicators on the shift of our technology focus we're still on track I would say, we're probably a little ahead, maybe a year maybe two years ahead to deliver royalty neutral by the end of the decade, and if you think.
Speaker Change: Tim rightly called out the third quarters.
Chuck Magro: Slow quarter when it comes to seed sales.
Speaker Change: And I do think that from an overall perspective, the Argentina corn stone issue is one of the major drivers we did lower our full year guide, we believe that as a temporary item. In fact, there is some good news when it comes to Argentina and cornerstone. We're hearing some external reports now that the insect that carries that issue.
Speaker Change: About what we've been able to deliver in the last couple of years, we've been run rate about $100 million a year.
Speaker Change: And this year in 2024, we're tracking quite a bit ahead of that.
Speaker Change: The population is down something like 90%. So we're hoping that the worst will be behind us, but time will tell but we will do have this impact that will carry through the full year.
Speaker Change: So that's one of the reasons why next year I think we're right now the preliminary view and I'll just state that again it is a preliminary view.
Speaker Change: This question comes from the line of David Begleiter with Deutsche Bank. Please go ahead.
Speaker Change: Is slightly less than that lease. So if you look at 'twenty four combined with 25, we're quite comfortable that we're on that average of about $100 million, but the real important thing isn't necessarily the numbers. It's what we're doing with the technology in terms of enlist power core and Theres, even some good news now in soybeans in Brazil, and maybe Tim you want to take a minute to.
Speaker Change: Thank you good morning, Chuck all royalties the royalties next year. They are down why is that and where do you stand on a journey to royalty neutrality. Thank you.
Speaker Change: Maybe I'll give a perspective and then Tim can give you the details David but.
Speaker Change: Talk about that yes, definitely we talked about the fact that we're largely transitioned the last few years a lot of our improvement in royalties our royalty position has been because of North America soybeans in the.
Speaker Change: We're feeling really good about our journey to royalty neutrality. If you recall. This is one of the fundamental sort of leading indicators on the shift of our technology focus we're still on track I would say, we're probably a little ahead, maybe a year maybe two years ahead to deliver royalty neutral by the end of the decade.
Speaker Change: The rapid adoption, we made over to enlist D. Three.
Speaker Change: We had talked about 25 being more of a transition year. So it is the year when royalty income is actually greater than royalty reduction and so the dynamics are a little bit different and as Chuck said.
Speaker Change: If you think about what we've been able to deliver in the last couple of years, we've been run rate about $100 million a year.
Speaker Change: Say, we're over delivering a little bit this year.
Speaker Change: And this year in 2024, we're tracking quite a bit ahead of that.
Speaker Change: And that's a good thing you don't get to count it once and we're going to take it this year instead of next year.
Speaker Change: As we think about where we.
Speaker Change: So that's one of the reasons why next year I think we're right now the preliminary view and I'll just state that again it is a preliminary view.
Speaker Change: Where we go from here they will still be.
Speaker Change: Say opportunities for us to reduce royalties as we transition to different technology platforms, and those will be more subtle than what we've seen on the on the.
Speaker Change: Is slightly less than that so if you look at 'twenty four combined with 25, we're quite comfortable that we're on that average of about $100 million, but the real important thing isn't necessarily the numbers. It's what we're doing with the technology in terms of.
Speaker Change: The soybean transition in North America, but the big news is going to be about royalty collections and we're now in the market in North America from a from a corn standpoint with with power for enlist.
Speaker Change: List <unk>.
Speaker Change: <unk> core and there is even some good news now in soybeans in Brazil, and maybe Tim you want to take a minute to talk about that yeah. There would be definitely we talked about the fact that we're largely transitioned the last few years a lot of our improvement in royalties our royalty position has been because of North America soybeans in the.
Speaker Change: Products being tested by many C companies and being commercialized independency companies and performance has been outstanding and interest and demand is good. Our challenge is we don't have a full portfolio offering we sell the above ground technology. Our next generation below ground we will.
Speaker Change: The rapid adoption, we made over to enlist D. Three.
Speaker Change: You talked about 25 being more of a transition year. So it's the year when royalty income is actually greater than royalty reduction and so the dynamics are a little bit different and as Chuck said.
Speaker Change: The opportunity to license that and that will really.
Speaker Change: Prove our position there, but it is a meaningful step forward in another milestone obviously enlisted three we've got over 100 licensees out there and that some benefit as well and then I'd say, Canada and Brazil.
Speaker Change: Say, we're over delivering a little bit this year.
Speaker Change: And that's a good thing you only get to count it once and we're going to take it this year instead of next year.
Speaker Change: That's the other one Brazil, and Argentina with <unk> three we continue to make great progress there and even though we're still in that.
Speaker Change: As we think about where we go from here they will still be.
Speaker Change: I'd say opportunities for us to reduce royalties as we transitioned the different technology platforms and those will be more subtle than what we've seen on the on the.
Speaker Change: Call it single digit.
Speaker Change: Penetration standpoint.
Speaker Change: Making progress and right now there's over 25 key Kirsty three varieties in the marketplace with more expected for next year.
Speaker Change: On the soybean transition in North America, but the Big news is going to be about royalty collections and we're now in the market in North America from a from a corn standpoint with with power core enlist products being tested by many seed companies and being commercialized independency companies and.
Speaker Change: Adoption is going to continue to accelerate as more varieties come into market and very competitive varieties at that plus our own internal breeding program.
Speaker Change: It's.
Speaker Change: Point, where we're going to be able to contribute into the licensing market.
Speaker Change: As well beginning in 2025, especially.
Speaker Change: <unk> has been outstanding and interest and demand is good. Our challenge is we don't have a full portfolio offering we sell the above ground technology. Our next generation below ground, we will have the opportunity to license that and that'll really.
Speaker Change: And I'd say a milestone we have again, we're still in the early stages, there with relatively low penetration, but we do have the first blockbuster blockbuster.
Speaker Change: <unk> three variety in Brazil, and we kind of measure that is.
Speaker Change: Improve our position there, but it's a meaningful step forward in another milestone obviously enlistee three we've got over 100 licensees out there and that some benefit as well and then on <unk> and <unk>.
Speaker Change: Friday is that cross that million unit sales.
Speaker Change: Alrighty called <unk>, which was developed by one of our key breeding partners. It's produced and sold by many multipliers, it's widely planted by growers and it crossed over 1 million units. This past year and I think it is one of eight varieties in the marketplace. So small step we've got a long way to go.
Speaker Change: Brazil that's.
Speaker Change: That's the other one in Brazil, and Argentina with <unk> three we continue to make great progress there and even though we're still in that.
Speaker Change: Call it single digit.
Speaker Change: And certainly as we get to the latter part of the decade, it's going to continue to accelerate.
Speaker Change: Penetration standpoint.
Speaker Change: We're making progress and right now there's over 25 <unk> three varieties in the marketplace with more expected for next year.
Speaker Change: But what it shows is we got to fit in the marketplace. We're in the game and this is a big market that that opens up for us as we go forward. So the exciting part going forwards less about royalty reduction really more about royalty collection.
Speaker Change: Adoption is going to continue to accelerate as more varieties come into the market and very competitive varieties at that plus our own internal breeding program.
Speaker Change: As the future.
Speaker Change: Yeah.
Speaker Change: Kind of hits its.
Speaker Change: The next question comes from the line of Christopher Parkinson with Wolfe Research. Please go ahead.
Speaker Change: Point, where we're going to be able to contribute into the licensing market.
Speaker Change: As well beginning in 2025, especially.
Christopher Parkinson: Great. Thank you so much.
Speaker Change: And I'd say a milestone we have again, we're still in the early stages, there with relatively low penetration, but we do have the first blockbuster blockbuster.
Christopher Parkinson: Just circling back to slide 10 in terms of your EBIT outlook. Obviously, there are a lot of moving parts and I think it's safe to say at least in my opinion. There is some upside to a lot of the positives.
Speaker Change: <unk> III variety in Brazil, and we kind of measure that is.
Christopher Parkinson: In terms of the deductions, referring specifically to currency, the SG&A and R&D as a percent of sales just cultural isolate those factors.
Speaker Change: Friday's that crossed that 1 billion unit sales.
Speaker Change: Friday called <unk>, which was developed by one of our key breeding partners produced and sold by many multipliers, it's widely planted by growers and it crossed over 1 million units. This past year and I think as one of eight varieties in the marketplace. So small step we've got a long way to go.
Christopher Parkinson: Along with the prospect of lower acreage in the U S and CPC pricing.
Christopher Parkinson: As we sit here today in terms of the let's say the offsets to the plethora of positives there R.
Christopher Parkinson: Are we confident that that FX is going to be stagnant at the 150 are we confident that CPC pricing is more of a one half just kind of marking to market. What we've seen in the second half and extending that into 2025 are there any other risks that the biotech community should really be factoring in or do we feel good about that and just kind of sitting back and see.
Speaker Change: And certainly as we get to the latter part of the decade is going to continue to accelerate.
Speaker Change: But what it shows is we got to fit in the marketplace. We're in the game and this is a big market that that opens up for us as we go forward. So exciting part going forward less about royalty reduction really more about royalty collection.
Speaker Change: How much of the upside scenario could actually play itself out. Thank you.
Speaker Change: As the future.
David Johnson: Hey, Chris This is David maybe I'll take the currency question, then maybe we'll pass it onto Chuck Reed regarding the other elements.
Yeah.
Speaker Change: The next question comes from the line of Christopher Parkinson with Wolfe Research. Please go ahead.
David Johnson: If you look at the currency right now most of that is in Brazil, and as you know we're kind of in the upper fives as far as where the real is trading at currently this year. Our base was somewhere just south of five 2%. So it's hard to really predict whether or not that will deflate further.
Speaker Change: Great. Thank you so much.
Speaker Change: Just circling back to slide 10 in terms of your EBIT outlook. Obviously, there are a lot of moving parts and I think it's safe to say at least in my opinion. There is some upside to a lot of the positives.
Speaker Change: In terms of its adoption, referring specifically to currency the SG&A and R&D as a percent of sales just kind of trying to isolate those factors.
David Johnson: Not an average year I think its somewhere around 8%. If you look over the long period of time, So I think we've.
Speaker Change: Along with the prospect of lower acreage in the U S and CPC price.
Speaker Change: As we sit here today in terms of the let's say the offsets to the plethora of positives there R.
Christopher Parkinson: We have a reasonable estimate of what we think the impact will be I never say never because further devaluation, but I think we feel really comfortable with this number yes, maybe Chris just a couple of thoughts why don't we just take the book and so you'll probably notice that the three six to four is wider than we normally provide we.
Speaker Change: Are we confident that FX is going to be stagnant at the 150 are we confident that CPC pricing is more of a one half just kind of marking to market. What we've seen in the second half and extending that into 2025 are there any other risks.
Speaker Change: The biotech community should really be factoring in or do we feel good about that and just kind of sitting back and see how much of the upside scenario could actually play itself out. Thank you.
Chris: Did that because we are providing it earlier.
Chris: And if you take the low end three six perhaps that is on the conservative side. The only only time will tell.
Speaker Change: Hey, Chris This is David maybe I'll take the currency question, then maybe we'll pass it onto Chuck Reed regarding the other elements. If you look at the currency right now most of that is in Brazil, and as you know we're kind of in the upper fives as far as where the real is trading at currently this year our base.
Chris: But we would certainly agree that a lot would have to be different than our current assumptions.
Chris: Now we are providing the 25 <unk>.
Chris: First look as we said because of our Investor day, and what would need to happen. We believe for that three six to become a reality as we would have to face some pretty significant additional headwinds rate most likely continued CP market weakness and we would probably have to miss on some of our cost and productivity deliverable.
Speaker Change: This was somewhere just south of five point too. So it's hard to really predict whether or not that will deflate further or not an average year I think its somewhere around 8%. If you look over the long period of time, So I think we've.
Chris: <unk>, which as you know we have a very good track record against.
Chris: Let's take the other end 4 billion.
Chris: As I said it is a wider range what would have to happen for us to hit $4 billion. We certainly think that $4 billion is on the table or we wouldn't put it out there and very achievable. It would probably take us to overachieve on our deliverables on our controllable, which we have a history of doing.
Speaker Change: Have a reasonable estimate of what we think the impact will be I never say never if it does.
Speaker Change: Further devaluation, but I think we feel really comfortable with this number yes, maybe Chris just a couple of thoughts why don't we just take the bookends. So youll probably notice that the three six to four is wider than we normally provide we did that because we are providing it earlier.
Chris: But I think we would also need to see a little bit of strength in the CP market is that possible absolutely, but it's a little early to get overly bullish when we're sitting in the just in the fourth quarter right now trying to finish up 2024, I think the important thing for folks to draw your attention to is as a first look for 2025.
David Johnson: And if you take the low end three six perhaps that is on the conservative side. The only only time will tell.
David Johnson: But we would certainly agree that a lot would have to be different than our current assumptions.
Now we are providing the 25 <unk>.
Look as we said because of our Investor day.
Chris: My Callout is double digit earning growth and margin expansion a continuation of the journey that we've been on for five years.
And what would need to happen, we believe for that three six to become a reality as we would have to face some pretty significant additional headwinds rate most likely continued CP market weakness and we would probably have to miss on some of our cost and productivity deliverables, which as you know we have a very good track record again.
Speaker Change: Your next question comes from the line of Joshua Spector with UBS. Please go ahead.
Joshua Spector: Hi, Good morning. This is like a solid answer Josh just trying to clarify your expectations there on the crop Chem side.
Let's take the other and $4 billion.
Speaker Change: As I said it is a wider range what would have to happen for us to hit 4 billion. We certainly think that $4 billion is on the table or we wouldn't have put it out there and very achievable. It would probably take us to overachieve on our deliverables on our controllable, which we have a history of doing but I think we would also need to see.
Speaker Change: For 2025, we guided.
Joshua Spector: Volumes are stabilizing and then ongoing risks on the processing side.
Joshua Spector: Same store implies sort of mid single digit volume growth.
Speaker Change: So I thought pricing down low single digits is that correct and sales et cetera.
Speaker Change: Single digits overall or can you walk us through kind of what's driving that thanks.
Little bit of strength in the CP market is that possible absolutely but.
Speaker Change: Yes, So let me try to hit the highlights here for you.
Speaker Change: It's a little early to get overly bullish when we're sitting in the just in the fourth quarter right now trying to finish up 2024.
Speaker Change: I think when I when I think about the.
Speaker Change: The CP market.
Speaker Change: The third quarter I think took another positive step towards full stabilization of this industry, we're not out of the woods yet.
Speaker Change: Think the important thing for folks to draw your attention to is as a first look for 2025.
Speaker Change: I call out is double digit, earning growth and margin expansion and a continuation of the journey that we've been on for five years.
Speaker Change: What we liked what we saw in the third quarter.
Joshua Spector: And when you step back and you think about that.
Joshua Spector: North America is actually seeing some strength I'd say Europe and APAC are operating normally.
Speaker Change: Your next question comes from the line of Joshua Spector with UBS. Please go ahead.
Joshua Spector: Brazil is still I think one of the most unstable market that we're operating in right now when it comes to CP.
Joe: Hi, Good morning, this is Joe.
Speaker Change: Josh just trying to clarify your expectations here on the crop Chem side.
Joshua Spector: And there is a combination of reasons right.
Joshua Spector: It was really dry so there was a weather impact it is a well supplied market and there is cautious farmer behavior is still in this market.
2025, we noted.
Volumes are stabilizing and then ongoing risks on the pricing side.
Joshua Spector: When you put that altogether.
Speaker Change: It seems to imply sort of mid single digit volume growth.
Joshua Spector: Think we're cautiously optimistic that the CPG industry is starting to reach some stability now now let's talk about our business. So the last couple of years have been tough for the industry Nobody will say anything different than that we feel that our business has performed quite well in the third quarter I would say for our CP.
Offset thought crossing down low single digits is that correct and sales of.
Speaker Change: Low single digits overall or can you walk us through kind of what's driving that thanks.
Yes, So let me try to hit the highlights here for you.
Speaker Change: I think when I when I think about the.
Joshua Spector: Business had a had a pretty good quarter, we saw the second consecutive quarter of volume growth, which is really to your question and then we saw EBITDA growth for the first time in a year over 30% EBITDA growth in our CP business and some of that is deflation a lot of that is what's in our control and our new <unk>.
The CP market.
Third quarter, I think took another positive step towards full stabilization of this industry.
We're not out of the woods, yet, but what we like what we saw in the third quarter.
And when you step back and you think about that.
Speaker Change: North America is actually seeing some strength.
Joshua Spector: Acknowledging.
Speaker Change: Say Europe and APAC are operating normally.
Joshua Spector: So the look for 2025, then just to get specific now is if our assumption is a flattish industry will do better than that and it'll be really driven by I think volume growth.
Brazil is still I think one of the most unstable markets that we're operating in right now when it comes to CP.
Speaker Change: There is a combination of reasons right. It was really dry so there was a weather impact it is a well supplied market and theres cautious farmer behavior still in this market. So when you put that altogether.
Joshua Spector: I'd say mid single digits.
Joshua Spector: And it's driven by our new technology, we have several new <unk> that are still ramping up the biologicals investments we've made but the overall market is healthy. It is certainly healthier than it has been and I think youll see that our CP business grow at probably better than that in 2025.
I think we're cautiously optimistic that the CPG industry is starting to reach some stability.
Speaker Change: Now, let's talk about our business. So the last couple of years.
Speaker Change: <unk> been tougher the industry, nobody will say anything different than that we feel that our business has performed quite well in the third quarter I would say for our CP business.
Speaker Change: Your next question comes from the line of Frank Mitsch.
Speaker Change: We had the Permian research. Please go ahead.
Speaker Change: Hey, good morning, and nice to meet you Telefonica <unk> David.
<unk> had a pretty good quarter, we saw the second consecutive quarter of volume growth, which is really to your question and then we saw EBITDA growth for the first time in a year over 30% EBITDA growth in our CP business and some of that is deflation a lot of that is what's in our control and our new technology.
Speaker Change: Just a question on on slide 17.
Speaker Change: North American seed price was down 25% year over year that reflects end of season settlements it seems like.
Speaker Change: It seems like an outlier I was wondering if you could provide any more color on that.
So the look for 2025, then just to get specific now is if our assumption is a flattish industry will do better than that and it will be really driven by I think volume growth in I'd say mid single digits.
Speaker Change: Okay.
Speaker Change: Hey, Frank Good morning. This is Tim I'll take a shot at that and obviously our business in North America is largely.
Speaker Change: In the first half of the year. There is a very limited amount of that first half business that sometimes can trickle into the third quarter.
And it's driven by our new technology, we have several new <unk> that are still ramping up the biologicals investments we've made but the overall market is healthy. It is certainly healthier than it has been and I think youll see that our CP business grow at probably better than that in 2025.
Speaker Change: And we just don't have a huge amount of business to.
Speaker Change: Kind of buffer some of these some of these things so we talked about settlement issues.
Speaker Change: What we're talking about here is in the case of replant.
Speaker Change: A replay ents are a normal part of the business, we factored into our equation as part of the terms of trade. We have service policy, we have for farmers and.
Your next question comes from the line of Frank niche.
Speaker Change: With the Permian Research. Please go ahead.
Speaker Change: And every year, we accrue for a replant.
Speaker Change: Hey, good morning, and nice to meet you Telefonica <unk> David.
Speaker Change: And sometimes they hit early sometimes they hit last sometimes they are a little bit more this year actually were from it from.
Speaker Change: Just a question on on slide 17.
Speaker Change: North American seed price was down 25% year over year that reflects end of season settlements it seems like it.
Speaker Change: The amount of re plants, we've had it's very much in the normal range. So if we had planned for it just hit a little bit later and so it showed up in the third quarter rather than the second quarter. So it's quite visible this year and why that is is if you think about the planning progress and some of the early season floods that we had particularly in the northern corn belt.
Speaker Change: It seems like an outlier I was wondering if you could provide any more color.
Speaker Change: On that.
Speaker Change: Hey, Frank Good morning, Timm I'll take a shot at that.
Obviously, our business in North America is largely.
Speaker Change: <unk> in the northwest, Iowa, Southern Minnesota.
In the first half of the year, there's a very limited amount of that first half business that sometimes can trickle into the third quarter.
Speaker Change: We ended up with a little bit elevated re plants versus a year ago and they were a little bit later just in terms of the settlement standpoint, so it's that.
And we just don't have a huge amount of business to.
Speaker Change: It shows up as a price concession and obviously theres not a lot of volume that takes place there that kind of buffers and so it's quite visible there and it looks.
It kind of buffer some of these some of these things so we talked about settlement issues.
What we're talking about here is in the case of <unk>.
<unk> and so replay ents are a normal part of the business, we factored into our equation as part of the terms of trade we have a service policy we have for farmers.
Speaker Change: Unusual it's actually a normal part of the business. It just doesn't oftentimes hip.
Speaker Change: By itself and in a quarter as it did here so that's.
Speaker Change: Kind of a little background on what the issue is.
<unk>.
And every year, we accrue for replant and sometimes they hit early sometimes they hit last sometimes they are a little bit more this year actually were from it from a you know.
Speaker Change: The next question comes from the line of Steve Byrne with Bank of America. Please go ahead.
The amount of re plants, we've had it's very much in the normal range. So if we had planned for it just hit a little bit later and so it showed up in the in the third quarter rather than the second quarter. So it's quite visible this year and why that is is if you think about the planning progress and and some of the early season floods that we had particularly in the northern corn belt.
Speaker Change: Yes, thank you very much less volatile.
Speaker Change: Paul.
Speaker Change: <unk>.
Speaker Change: So.
Speaker Change: I wanted to check a little bit on the pricing environment.
Speaker Change: Catholic Health Center, especially in Brazil, where the price was down 18% and then if you can talk a little bit about that and why is it deteriorating. So rapidly is that youre trying to regain.
<unk> in the northwest, Iowa, Southern Minnesota.
Speaker Change: Sure the threat of imports on generics.
We ended up with a little bit, but elevated replay up versus a year ago and they were a little bit later just in terms of the settlement standpoint. So it is not.
Speaker Change: And at the same time I think one of your competitors was talking about they were actually the nature of the game trying to regain share by lowering their price.
It shows up as a price concession and obviously theres not a lot of volume that takes place there that kind of buffers and so it is quite visible there and it looks.
Speaker Change: And everybody has already so it doesn't seem like that's the case actually.
Speaker Change: What do you think your competitors are doing now will they have to respond to your price declines or are you. The last one I guess cut price.
Unusual it's actually a normal part of the business. It just doesn't oftentimes hip.
By itself.
A quarter as it did here so that's.
Speaker Change: Hi, This is Robert I'll touch a little bit on this specific.
Speaker Change: Kind of a little background on what the issue is.
Speaker Change: <unk>, Brazil and price, let me start with the crop protection and we finished up the quarter down 10% on price, but if you look at year to date, we are in the mid single digits.
The next question comes from the line of Steve Byrne with Bank of America. Lisa. Please go ahead.
Speaker Change: Yes, thank you very much <unk>.
Speaker Change: So third quarter was was different.
Speaker Change: Different period for us lots of things going on to get ready for the season.
For <unk>.
Speaker Change: So I wanted to check a little bit on the pricing environment for a crop chemical sector, especially in Brazil, where the price was down 18%. Then if you can talk a little bit about that and why is it still deteriorating so rapidly easily that youre trying to regain.
Speaker Change: Working with the channel on some different things, Brazil was down about 18% for the quarter, but.
Speaker Change: We're going to finish up the year back to that mid single digits for the company.
Speaker Change: We don't expect.
Speaker Change: Sequential quarter over quarter or quarter to quarter.
Sure easing the threat of imports on generics.
Speaker Change: And the same time I think one of your competitors was talking about they were actually the nature of the game trying to regain share by lowering their price.
Speaker Change: Pricing will be will be relatively flat.
Speaker Change: And when you think about why.
Speaker Change: A lot of competition going on in Brazil.
Speaker Change: And everybody has already done so it doesn't seem like that's the case actually.
Speaker Change: <unk>.
Speaker Change: In a flat market or a flat to down market really we're looking at this year.
Speaker Change: What do you think your competitors are doing now will they have to respond to your price declines or are you. The last one or two I guess cut price.
Speaker Change: Competition for volume coming from from all all areas.
Speaker Change: Trying to find growth and so we play we trying to hold share we do the things we need to do that makes sense for our products.
Hi, This is Robert I'll touch a little bit on this.
Specific to Brazil, and price, let me start with the crop protection and we finished up the quarter down 10% on price, but if you look at year to date, we're in the mid single digits.
Speaker Change: Comment on what our competition does or doesn't do or their philosophy, but for us we're going to continue to work on selling the things that we're going to drive value for our business and that really comes back around our new products and a differentiated products.
So third quarter was was a is a different period for us lots of things going on to get ready for the season and working with the channel on some different things, Brazil was down about 18% for the quarter, but.
Speaker Change: That's the majority of our growth happening in Q4 and on into the future you'll have seen that these products typically have a premium because of the value that they add on farm and they're going to continue to grow as well as our biologicals.
We're going to finish up the year back to that mid single digits for the company.
Speaker Change: In Brazil, you'll you'll recall that.
Don't expect a sequential quarter over quarter or quarter to quarter.
Speaker Change: Well over 50% of our overall biological business is in Brazil.
Pricing will be will be relatively flat.
Speaker Change: So that season is still to happen and we expect a good quarter out of biologicals down there as well. So short answer is we'll finish up in the mid single digits for price down for the year, which is about where we're trending.
And when you think about why.
There's a lot of competition going on in Brazil and.
In a flat market or a flat to down market really weren't looking at this year a lot.
A lot of competition for volume coming from from all all areas.
Speaker Change: Overall for the business right now maybe Robert one other thing to add when.
Trying to find growth.
Speaker Change: When you look at our order book for the fourth quarter.
So we play we trying to hold share we do the things we need to do that makes sense for our products.
Speaker Change: We like our position, we're certainly north of 50% for our CP book over 60%, 65% for our Biologicals book.
Not going to comment on what our competition does or doesn't do or their philosophy, but for us we're going to continue to work on selling the things that we're going to drive value for our business and that really comes back around our new products and a differentiated products.
Speaker Change: So we're sitting up exactly where we want to be for the fourth quarter.
Speaker Change: And I think.
Speaker Change: That's all factored into our current thinking.
The majority of our growth happening in Q4 and on into the future you'll have seen that these products typically have a premium because of the value that they add on farm and they're going to continue to grow as well as our biologicals.
Speaker Change: Yeah.
Speaker Change: The next question comes from the line of Patrick Cunningham with <unk>. Please go ahead.
Speaker Change: Hi, Good morning, just based on the last comments could you help quantify how new products and biologicals and perform year to date and what do you expect for contribution in 2025 and should the sensitivity around that number be similar to what youre expecting for broader crop protection.
In Brazil, you'll you'll recall that.
Well over 50% of our overall biological business is in Brazil.
So that season is still to happen and we expect a good quarter out of biologicals down there as well so.
Short answer is we'll finish up in the mid single digits for for price down for the year, which is about where we're trending.
Speaker Change: Yes, Patrick this Robert I'll start with Biologicals.
Speaker Change: We're 15 months into the acquisition and this business continues to perform very well.
Overall for the business right now maybe Robert one other thing to add.
Speaker Change: It's it's serving the portfolio serving as a very good complement to our synthetics business and it's driving solutions on the farm that.
When you look at our order book for the fourth quarter.
Kim: We like our position, we're certainly north of 50% of our CP book over 60%, 65% for our Biologicals book.
Speaker Change: We're able to offer to the to the farmer thats unique to us so we like how it's playing out.
Speaker Change: From a.
So we're sitting up exactly where we want to be for the fourth quarter.
Speaker Change: From an overall for the 2024, we're expecting biologicals to be up double digits EBITDA growth for the year and so that's going to continue to give us give us strength and.
And I think.
That's all factored into our current thinking.
Speaker Change: When you.
Speaker Change: The next question comes from the line of Patrick Cunningham with <unk>. Please go ahead.
Speaker Change: Les that into new products.
Speaker Change: Q3, we saw about a 20% volume organic growth and new products and so these these products continue to be.
Speaker Change: Hi, Good morning, just based on the last comments could you help quantify how new products in biologicals have performed year to date and what do you expect for contribution in 2025 and should the sensitivity around that number be similar to what youre expecting for broader crop protection.
Speaker Change: Perform above market.
Speaker Change: <unk>.
Speaker Change: We expect about mid single digits growth for the year and we're continuing to get value out of that so we're going to finish up the year strong with both of these as we as we finish out Q4, and then when you think about 2025 and beyond and we'll have more to share of course at the Investor day, but these are the <unk>.
Yes, Patrick this Robert I'll start with Biologicals.
We're 15 months into the acquisition.
Speaker Change: This business continues to perform very well.
It's it's serving the portfolio certainly was a very good complement to our synthetics business and it's driving solutions on the farm that.
Speaker Change: The growth engines of our CP business right because if you think through the strategy, we're trying to deemphasize the commodity part of the portfolio really sell differentiated technology. We believe we've got strong channels to market.
We're able to offer to the to the farmer that's unique to us so we like how it's playing out.
From a.
Speaker Change: And so these will lead I think the growth in terms of volume.
From an overall for 2024, we're expecting biologicals to be up.
Speaker Change: They will have a premium as Robert called out they're not immune to the market they will trade with the market.
Double digits EBITDA growth for the year and so that's going to continue to give us give us strength.
Speaker Change: They will always have a premium over less differentiated technology and we have even this year. So far we've had very good demand from a volume perspective on our <unk> franchise on our new products and on the biologicals that will carry into 'twenty five and beyond.
Speaker Change: And when you.
Les that into new products.
Q3, we saw about a 20% volume organic growth and new products and so these these products continue to be.
To perform above market.
<unk>.
We expect about mid single digits growth for the year and we're continuing to get value out of that so we're going to finish up the year strong with both of these as we as we finish out Q4, and then when you think about 2025 and beyond and we'll have more to share of course at the Investor day, but.
Speaker Change: Next question is from the line of ethylene Rodriguez with Mizuho. Please go ahead.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: A quick question on again on the guidance initial view.
Speaker Change: For 2025, I know you've talked about the skew between the low end and high end, but when will you get a better sense of which way the pendulum is swinging and related to that also is.
Speaker Change: These are the I think the growth engines of our CP business right because if you think through the strategy.
Ryan to deemphasize the commodity part of the portfolio really felt differentiated technology. We believe we've got strong channels to market.
Speaker Change: With all due respect not issues.
Speaker Change: I think you've lowered your guidance for the for the year for 2024.
And so these will lead I think the growth in terms of volume.
Speaker Change: Of course actual could be very challenging to forecast. The question is like do you think it's fair for people to be asking.
Speaker Change: They will have a premium as Robert called out they're not immune to the market they will trade with the market.
Speaker Change: What gives you confidence and how much confidence should we have in that guidance that you gave for 2025.
Speaker Change: They will always have a premium over less differentiated technology and we have even this year. So far we've had very good demand from a volume perspective on our <unk> franchise on our new products and on the biologicals that will carry into 'twenty five and beyond.
Edlund: Yes, good morning, Edlund Fair question absolutely.
Speaker Change: And if you think about this right so.
Speaker Change: We had a 25% mark that we did update earlier this year and I believe the range was something like three 9% to four four with a 415 mid with margins in that 21% to 23%.
Next question comes from the line of Edlin Rodriguez with Mizuho. Please go ahead.
Thank you and good morning, everyone. Just a quick question on again on the guidance initial view for 2025.
Speaker Change: And at that point. The reason, we had updated that is because our fundamental view on the CP industry had changed right. We hadn't thought at that point now that the CPG industry for 2024 would be in decline.
You talked about the skew between the low end and high end, but when will you get a better sense of which way the pendulum is swinging.
And related to that also is no.
Speaker Change: And we've always said that for us that.
Speaker Change: Again with all due respect this is the third time I think.
Speaker Change: Certainly.
Speaker Change: The numbers for 2025, we would need to see a return for the industry to grow in the year 2025, and today, we came out with our view that it's going to be flattish. So thats. The fundamental change. So if you look at the feed business, it's actually almost entirely on plan and in fact, it's probably trending a little bit ahead.
You've lowered your guidance for the for the year for 2024 and.
Speaker Change: Of course, as you know could be very challenging to forecast. The question is like do you think it's fair for people to be asking what gives you confidence and how much confidence should we have in that guidance that you gave for 2025.
Speaker Change: And we are also.
Speaker Change: Yeah. Good morning, Ed Linde Fair question absolutely.
Speaker Change: When it comes to cost productivity.
Speaker Change: But when I think about how we've done as a company.
And if you think about this rate so we.
We had a 25% mark that we did update earlier this year and I believe the range was something like three 9% to four four with a 415 mid with margins in that 21% to 23%.
Speaker Change: We've got a lot of things right. The fee business is on plan I think our cost and productivity in our controllable as are the CPG.
Speaker Change: <unk> industry has clearly moved against us and everybody else in the industry and that has had a profound impact on our outlook.
And at that point. The reason we had updated that is because we are our fundamental view on the CP industry had changed right. We hadn't thought at that point now that the C. P industry for 2024 would be in decline.
Speaker Change: To your question, how about $3 six now to four point out three eight.
Speaker Change: Our view is still founded on a flat two.
Speaker Change: 2025, when it comes to CP.
Speaker Change: And when will we know.
And we've always said that for us that.
Speaker Change: Let's get through this year, we've got a crop harvest in a crop to put in the ground and Latin America.
Certainly the <unk>.
<unk> for 2025, we would need to see a return for the industry to grow in the year 2025, and today, we came out with our view that it's going to be flattish. So that's the fundamental change. So if you look at the feed business it's actually.
Speaker Change: But we feel very good that the seed business is going to continue its journey.
Speaker Change: The $600 million of gross cost productivity and deflation I think we're feeling very very comfortable with.
Speaker Change: And as I mentioned, we're getting more comfortable that the CPG industry is finding.
Almost entirely on plan in fact, it's probably trending a little bit ahead, and we are also ahead when it comes to cost productivity. So when I think about how we've done as a company. We've got a lot of things right. The fee business is on plan I think our cost and productivity in our controllable.
Speaker Change: Some stability finally.
Speaker Change: So it is I think a very fair question to ask all we can do as an organization now is give you what were what were thinking and to update you as we learn more and this is our current view is that the CP industry. If it's flat will be somewhere between the three six from the floor.
But the <unk> industry has clearly moved against us and everybody else in the industry and that has had a profound impact.
Speaker Change: And we're feeling very good about the levers that we have to pull to create value.
On our outlook.
So to your question how about three six now to 4.03 0.8, our view is still founded on a flat.
Speaker Change: The next the next question comes from the line of Alex <unk> with Keybanc. Please go ahead.
25, when it comes to CP and when will we know.
Alex: Good morning, everyone. What did you assume for Argentina, placing ore in 25 years.
Speaker Change: Let's get through this year, we've got a crop harvest in a crop to put in the ground and Latin America.
Speaker Change: Any meaningful return on that Wall Street English.
Speaker Change: But we feel very good that the seed business is going to continue its journey.
Speaker Change: Hey, Alexia this is Tim I'll take a shot at that so.
The $600 million of growth.
Speaker Change: We're taking that 20% so call it from roughly $8 million actors down to six 5 million actors and for 25 at this point, we're taking a very I'd say, a prudent approach and not assuming a significant.
Cost productivity and deflation I think we're feeling very very comfortable with.
And as I mentioned, we're getting more comfortable that the CPG industry is finding.
Some stability finally.
Speaker Change: Increase our return and why that is is because.
Speaker Change: So it is I think a very fair question to ask all we can do as an organization. Though is give you what were what were thinking and to update you as we learn more and this is our current view is that the CP industry. If it's flat will be somewhere between the $3 six from the floor.
Speaker Change: Because of the pressure from a leaf hoppers last year.
Speaker Change: It's really difficult environment for farmers to plant into its hard to predict whether that was a one year deal or if it's something that we're going to.
Speaker Change: Have to deal with going forward and so.
Chuck Magro: Chuck share that right now the populations are moving in the right direction.
And we're feeling very good about the levers that we have to pull to create value.
Speaker Change: That's obviously a positive thing, but we've got a track that over the course of the season last year. We saw populations really build as you got into the January February timeframe.
Speaker Change: The next the next question comes from the line of Alex <unk> with Keybanc. Please go ahead.
Speaker Change: And so it's going to be really important.
Good morning, everyone. What did you assume for Argentina, placing ore in 25 years.
Speaker Change: That we understand before we assume some kind of a big rebound hard to do it it would be very speculative at this point in time Bottomline is Argentina is going to remain an important <unk>.
Any meaningful return on that Wall Street English.
Hey, Alexia this is Tim I'll take a shot at that so.
Speaker Change: Scenario for both corn and soybeans.
Speaker Change: Argentina is one of the three major exporters of corn, and we will continue to do that and from an agronomic standpoint farmers need to be planning corn and that northern area because that rotation between corn and beans is really important that complaint beans. This year is it.
We were taken out 20% so call. It from roughly 8 million Hector is down to six 5 million actors and for 25 at this point, we're taking a very let's say a prudent approach and not assuming a significant.
Increase our return and why that is is because you know because of the pressure from a leafhoppers last year.
Speaker Change: Defensive crop.
Speaker Change: On a one year basis, but you can't do that for three or four years, they're going to end up with some with some problems. So we're optimistic over over the next few years and for 25 or assuming essentially a flat market again with 24, and certainly we're going to be staying close and understood I understand what that opportunity is.
Speaker Change: The next question comes from the line Ireland.
Speaker Change: Ireland. This one out then with RBC. Please go ahead.
Speaker Change: Great. Thanks for taking my question I'll, just ask real quickly on the balance sheet. If you guys are well.
Speaker Change: When consider maybe taking on all of it or that I know that.
Speaker Change: Obviously interest rates with plan to that but then if you can just give us some updated thoughts on your on your views there. Thanks.
Speaker Change: I think as we sit here today, our views have been consistent I think when you look at the amount of.
Speaker Change: Cash that we generate the amount that we put back in the business versus.
Speaker Change: Getting back in dividends and buybacks, we don't see a meaningful change going forward certainly not in the 25 outlook and rather than the 25 to 27 outlook and room, maybe just a couple of other thoughts so far.
Speaker Change: Feeling good about the guide in terms of free cash flow, one 5% to $2 billion. So the company is generating I think very good cash in and the conversion is improving from EBITDA, we do recognize we have.
Speaker Change: A strategic asset in our balance sheet.
Speaker Change: Investment grade rating.
Speaker Change: I think.
Speaker Change: David just shared our philosophy really hasn't changed if you think through even this year, we're going to be approximately $1 5 billion of returning capital to shareholders through buybacks and dividends.
Speaker Change: A big number.
Speaker Change: We want to be able to invest for growth.
Speaker Change: Inside the business and we've got I think a lot of great things happening both in the seat and CP portfolio and we've got a few other things that wed like to share with you at the Investor day. So we'll hold the rest of the conversation, but it is a good position to have and I think it is one of the things that sets <unk> apart.
Speaker Change: That concludes our Q&A session I will now turn the conference back over to Kim for closing remarks.
Kim Booth: Great that concludes today's call. We thank you for joining and for your interest in courts. However, and we hope you have a safe and wonderful day.