Corteva IncCTVA53,90 $
The crisis of 2020 and geopolitical unrest in 2022 once again reminded investors, what are the sectors of the economy, who lend themselves differently to pressure in times of uncertainty. A competent investor diversifies his portfolio. And such a sector, as agriculture, claims to be the most profitable amid the coming food crisis.
Corteva Company, as one of the world's largest producers and suppliers of agricultural products – fertilizers and seeds, showed a positive trend in profit and growth in stock prices.
So, from March 2020, when, for example, shares of the oil and gas sector fell in price, Corteva Stock Quotes (NYSE: CTVA) Grew: from 20,13 to 58 $. The increase was almost 200%. This is another argument in favor of securities of companies in the agrochemical sector..
We understand, what prospects await the industry and Corteva, what indicators the business demonstrates, what to expect and whether it is worth working with it.
A Brief History of the Brand
Corteva registered in 2019, however it existed long before that: history of business development, now called Corteva, begins in 1802. Then the French chemist Elefther Irene Dupont founded the company, which would later become DuPont Pioneer.
In 1929, it changed its name to pioneer Hi-Bred Corn Company.. In 1968, the brand became Pioneer Hi-Bred International after opening branches and representative offices in other countries.. In 1989, the company became the number one soybean producer in North America.. In 1996, he began operating under the name DuPont Dow Elastomers as a joint venture between DuPont and The Dow Chemical Company..
In June 2019, Corteva Agriscience appears, or Corteva, as a result of separation from the main enterprise - DowDuPont, which eventually transformed into three independent brands: Corteva, Dupont and Dow.
Brief overview of the company
Corteva occupies its niche among the leading companies in agrochemistry, such as Nutrigen and Mosaic. The main profit is brought by two key areas:
- Crop protection. In this segment, products for plant conservation are produced.: Citrus, Rice, Seeds, Soybeans, Cotton, corn and corn silage and potatoes. Products will protect any kind of crop from diseases, pests and weeds.
- Seed. The company is considered the world leader in the production of corn, Cotton, soybeans and sunflowers.
The brand supplies seeds to agricultural producers through subsidiaries, e.g. Pioneer.
In addition to products for crop protection, the company is engaged in increasing the productivity of agricultural enterprises through the introduction of digital technologies.
Granular – Corteva Farm Management Software. The software helps to predict the yield, plan sowing operations for the season and calculate the required number of seeds and products to protect the crop.
Key facts about Corteva:
- one of the oldest in the industry - has been operating since 1802;
- profit grows annually: from $10.68 billion in 2017 to $15.66 billion in 2021;
- more than 21 thousand employees work in the state, the company is present in more than 140 countries of the world;
- the brand has ratings of the world's largest agencies of category "A", in which there are issuers with the most stable development forecasts;
- net sales for 2021 — more than 15 billion, operating EBITDA for 2021 — 2.58 billion;
- ratio of long-term debt to capital (long term debt / total capital) — 4,11%, what in 5 several times lower than the indicators of the main competitors, in which this parameter is in the region of 21-40%.
Financial indicators
Total sales for 2021 – $15.655 billion, which is more than the 2020 figures of 14.217 billion or slightly more 10%. Of these, 8.402 billion brought seed sales and 7.253 billion came for the sale of products to protect the crop..
The main consumer of seeds is North America. In total sales in the United States - 7.536 billion - the leader is the purchase of seeds: 5,004 billion, or 66,4% entire U.S. implementation.
And in Latin America, the sales structure is different.: goods to protect the crop are in high demand - 2.125 billion, what constitutes 60% of total sales of 3.545 billion. The smaller part is the purchase of seeds for 1.420 billion, what constitutes 40% of the total expenses of the region.
Business Growth Rate, million dollars
| 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|
| Gross profit | 5893 | 5543 | 5710 | 6435 |
| Revenue growth rate | — | −5% | 3,5% | 12,7% |
| Net revenue | −4966 | 13 | 736 | 1759 |
| Adjusted EBITDA | 2290 | 2047 | 2388 | 3878 |
Revenue by region
| North America | 48,1% |
| Latin America | 22,7% |
| Asia | 9,3% |
| Europe, Middle East and Africa | 19,9% |
48,1%
Business financial results improve every year. The company closed 2018 with a loss, but this cannot be considered the result of Corteva, because at that time the company was part of the parent holding DowDuPont. After the release, the company showed impressive results: for three years of independent work from 2019 to 2021, net revenue increased from 13 million to 1759 million dollars.
Part of the financial indicators are about the norm and better than the main competitors. P / E exceeds the norm and above, than the main competitors, on 200%, however, for historical values of the company, the multiplier has greatly decreased in the value of. This indicates the potential for growth as a market value of shares., and the company's profits.
P / B below, than the main competitors: for example, mos he 1,94, and Corteva has been closer in history. 1, what is considered the optimal value. Now the company's indicator is considered better, than 62.5% of all companies in the agrochemical sector.
Valuation of the company by multipliers
| P / E | P / S | P / B | Total debt / capital | Growth of net profit | |
|---|---|---|---|---|---|
| Corteva | 25,20 | 2,72 | 1,67 | 0,09 | 10,72% |
| Mosaic | 9,05 | 1,67 | 1,94 | 0,29 | 18,99% |
| Nutrien | 11,46 | 1,87 | 2,23 | 0,31 | 14,34% |
| ICL | 18,14 | 1,79 | 2,81 | 0,51 | 16,06% |
| Industry average | 15,06 | 1,51 | 1,91 | 0,39 | 6,80% |
| Average company performance in history | 33 | 2,03 | 1,15 | 0,10 | — |
The financial indicator "total debt / capital" of the enterprise is at a minimum level and much lower, than competitors: 3-4 times. And in general, the industry is better, how 76,56% enterprises of the sector. This characterizes the business as financially stable..
Certainly, the company reduces the profitability of the business due to the fact that, which does not attract more borrowed resources, but the fewer credits, the lower the risks. High credit rating is confirmed by the largest rating agencies in the world: according to version S&P — A−, Fitchratings has assigned the company a level of A. Such values are not shown even by the largest competitors. For example, Mosaic has a BBB rating.
Prospects for the development of such companies, like corteva, whose main activity is related to agriculture or farming, directly depend on the demand for products: grain, feed and fertilizers.
Corteva's Prospects and Strengths
Positive trend of business development attracts investors, and therefore stock quotes are growing. The company shows such dynamics for the third year in a row.. Let's understand, what contributes to this.
High demand for the company's products and rising prices for seeds. Due to supply restrictions from Russia, which was under sanctions, Weather conditions and leadership in niche the company is considered the world leader in sales of corn and soybeans.
Corteva also creates seeds and protective products for the harvest according to its own innovative developments and it has patents for most of the goods sold., which provides a leading position in the niche.
According to the press release, for the first quarter of 2022, net sales increased by 10% compared to the same period in 2021. This is due to an increase in commodity prices by 8% and an increase in demand from Latin America and the Eurozone..
Dividend policy and shares of the company. For the last 6 months of securities quotations increased by 40% from 42 to 59 $. Management plans to increase earnings per share (EPS) with 2,35 to 2,55 $. EPS for the period from December 2018 increased from a negative value of -6.76 to 2,37 as of December 2021. The amount of dividends paid is now 0,14 $.
High credit ratings. The largest and most authoritative rating agencies confirmed the financial stability of the business. A low value of the ratio "total debt / capital" will help the company, if necessary, to attract borrowed capital on favorable terms, to mitigate the risks of possible losses due to adverse weather conditions in sales.
Corteva Risks
Suspension of business in Russia. For the first quarter of 2022, the company's net profit slightly decreased: 574 million versus $610 million for the same period in 2021. Due to events in Eastern Europe, the company closed its business in Russia.
Pressure on seed production due to drought in the U.S. and Brazil. Agricultural business depends on weather conditions. So, due to severe drought, according to the report of the US Department of Agriculture, in the first quarter of 2022, the country sowed an average of 50% less, than usual in the same period in the last five years.
conclusions
Corteva came about as a result of the separation of the world's largest – and one of the oldest – agricultural holding DowDupont. The company has the experience of several generations - more than two hundred years, which will allow the business to reasonably pursue the chosen model.
Unlike the main competitors, e.g. BASF, Corteva deals exclusively with agricultural products. Hence the main task is to provide everything necessary for each farm., so that together with the company farmers start sowing and finish the cycle. To do this, the company has developed everything: special software for farmers, which will adapt to the needs and requirements of the agricultural business, huge selection of seeds and ready-made solutions for crop protection.
Another advantage of Corteva is the sale of pesticides and insecticides of its own design., which have no analogues: for example, Qalcova and Isoclast are considered innovative in the niche.
Bloomberg analysts believe, that today stock quotes are at a fair price level. This is also true for the securities of the main competing brands., e.g. Mosaic or FMC.
However, the growth of food consumption, as a consequence, the demand for seeds and goods to protect the crop and the dynamics of the business clearly show, that the company has the potential to increase sales and revenue.
