Corteva Inc. CTVA 0.89% forecast a big increase in profits for the year ahead as the agriculture giant faces pressure from an activist investor to improve its results.
The crop seed and pesticide maker on Wednesday said it expects operating earnings to rise 15% to 20% in the year ahead, slightly ahead of analysts’ projections, as surging crop prices and agricultural exports improve farmers’ fortunes. Early seed sales to North American farmers and fall pesticide spraying helped Corteva deliver a small profit for the fourth quarter, which analysts had anticipated to show a loss.
The Delaware-based farm supplier is under pressure from activist investor Starboard Value LP. The firm in January launched an effort to oust Corteva’s chief executive, Jim Collins, and replace most of the company’s board of directors. Starboard said Corteva’s profits have been stagnant and that Mr. Collins hasn’t acted decisively to change that.
Corteva’s board has stood behind Mr. Collins. The board in January acknowledged the company can improve its performance for investors, and is making progress, but said Starboard hadn’t offered specifics.
“We’re at a real inflection point,” Mr. Collins said in an interview. “There’s a lot of good work that’s gone on over the last few years, that folks don’t appreciate how ready we are to deliver.”
He declined to comment on any discussions with Starboard.
Farmers and their suppliers struggled in early 2020, after Covid-19’s arrival in the U.S. sent corn and soybean markets plunging, and international currency markets swooned, diminishing Corteva’s revenue in foreign markets like Brazil. The picture changed in late summer, when China ramped up crop imports and poor weather in some South American growing regions sent crop prices surging. Farmers in the U.S., Corteva’s biggest market, also received an estimated $46 billion in government payments, with coronavirus relief programs boosting federal funding to a record.
Corteva reported Wednesday $41 million in net income for the quarter ended Dec. 31, versus a $21 million loss for the same quarter a year earlier. Sales grew 8% to $3.2 billion as the farm economy improved, and the company raised prices on some products. Analysts surveyed by FactSet anticipated a $33 million loss for the quarter, traditionally a slower period for agricultural suppliers.
Corteva was formed via the 2017 Dow- DuPont merger and spun out as an independent company in June 2019. That year, it reported about $2 billion in operating earnings, down slightly from the preceding year. For 2020, Corteva earned $2.1 billion, the company said Wednesday.
Corteva projects its seeds, chemicals, digital farming services and other businesses in 2021 will bring in $2.4 billion to $2.5 billion. Mr. Collins said new genetically engineered soybeans have been selling better than the company expected, and that new insecticides and weedkillers have been in strong demand.
Write to Jacob Bunge at [email protected]
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