Dave Anderson: Yeah. I think the other key thing, David, related to this, is in 2024, we’ve got some assumed headwinds and really known headwinds. We’ve got those, particularly in SG&A as we lap 2023 where we had benefits of lower incentive compensation accrual, we’ve also got increased in our assumption in terms of merit and then there’s just a number of other sort of discrete items that affect 2024. And as a result, 2025, when you look at 2025 compared to 2024, you won’t have those same increments facing us. So that provides some of the lift as well in addition to the controlling the controllables that Chuck referenced.
Chuck Magro: Yeah. And maybe one last point here, David. If you think about the last two years, Corteva actually grew by about $800 million of EBITDA. That’s the same plan for 2024 and 2025, a little less in 2024, more in 2025, but we saw that in 2022 and then a little less in 2023. So it should give — at least when we look at it, it gives us some comfort that this path that we’re on to 2025 with the adjustments we’ve made, and by the way, we did not adjust the margin. We’re feeling very comfortable about that. We feel we are on the right path here.
Operator: Thank you. We’ll go next to Joel Jackson from BMO Capital Markets.
Joel Jackson: Hi. Good morning, everyone. I want to go back to slide 10, which is the 2023 operating EBITDA bridge. So looking at the bridge, looking at the drivers, the tax over hand side, the cost component we’re talking a lot about controllables and costs but actually, your bridge is showing that net-net costs are not driving any of your growth and even earnings in 2010. So you’ve got all these cost benefits, cost programs, lower seed royalties paying out to also have I — guess, higher cost in SG&A and R&D. Can you explain that a bit and trying to put this all together why net-net high level, you’re showing cost is not driving growth, but as far as your talking points on the right-hand side?
Dave Anderson: Yeah. It’s a really, really good question, Joel. It really plays into the response that I gave to the prior question. But let me give you a little bit more color. Number one, the cost benefits, we think, are really very much there. We’re going to get in CP manufacturing as well as overall productivity between both businesses. We’ve got an important contribution coming through. So, probably, let’s call it, around $250 million of benefit of goodness, another $100 million in terms of net royalties. Now offsetting that, we’ve got higher R&D. And I’m talking now just the cost lines, some of the benefits and some of the self-help shows up in price or volume. But just on the cost piece of the walk, which is reflected in the slide that you’re referencing.
So, $100 million of R&D and then over $200 million in SG&A. And that SG&A, again, is made up of merit incentive comp accrual. We’ve got some additional bad debt. As you know, we begin each year with a normalized accrual in terms of bad debt. That’s about $40 million. And then we’ve got other items, including the annualization of the SG&A for the Biologicals business. And that’s against the backdrop of what Robert referenced in terms of the significant increase in EBITDA that we believe will experience and deliver in 2024. And then we just have a lot of other things that comprise the tail. One of those prominently, which you would recognize is ERP in 2023 with our Latin America deployment, which is our last major deployment in the ERP sector having completed U.S. and Europe.
We’re now in Latin America. That will shift from capital in 2023 to expense in 2024. That’s about $40 million. So when you add it all up, that’s why the line shows optically what it is. So, significant self-help, some of that is outside the cost area, shows up in price and volume. That shows up in costs. We’ve got some headwinds as well. But importantly, and I referenced this in the earlier question, that if you will, increase for 2024, it becomes significantly less. In fact, that increase goes away for 2025. So looking at that lift, that’s part of the lift from 2024 to 2025. I hope that helps.
Operator: Thank you. We’ll go next to Kevin McCarthy from Vertical Research Partners.
Kevin McCarthy: Thank you and good morning. My question relates to your direct input costs for each segment. In Crop Protection, it seems to me that maybe you’re baking in for 2024, about $100 million of raw material cost relief or 2% to 3%. Is that fair? And then on the Seed side of the equation, are you anticipating any cost relief in 2024, given the decline in commodity prices? Or is it really more of a benefit to you in 2025? Maybe you could speak to that flow through would be helpful.
Dave Anderson: Kevin, sure. So in Crop Protection, as we indicated, the anticipated benefit we’re going to see on the direct material side. In terms of looking at really, call it, the addressable spend and the opportunity for improvement and what we’re experiencing in the second half of this year. So that low single digits, I think is an appropriate kind of range to be thinking about for 2024. On the Seed side, as you know, what you have is you have a delay when you look at spot or commodity costs in the market versus what shows up in the P&L. It’s associated with as Chuck said, and as you know, the commodity hedging strategy that we utilize. So for 2024, very important percentage of those costs in terms of that commodity cost is actually related to grower compensation and procurement activity that occurs in 2022 and 2023.
The other part of it is the FIFO accounting, which also influences the numbers on the Seed side. There’s a lot of other variables besides commodity costs. But as Chuck said, we don’t anticipate — aren’t currently planned, haven’t baked into our guidance, a meaningful change in terms of year-over-year cost of goods sold for the Seed business.
Operator: Thank you. We’ll go to Frank Mitsch from Fermium Research.
Q – Frank Mitsch: Thanks so much. I want to focus in on Latin America. Obviously, you had weather impacts, which you had kind of foreshadowed in the last conference call. I’m curious as to what you thought that might overall impact have been? And then just staying with that region, obviously, you’re expecting destocking to continue into the early part of the year, but you also referenced market dynamics in CPC which I assume I was referring to generic competition. I’m wondering what — if you could provide an update on what you’re seeing there in terms of the generic impact in Brazil in particular? Thank you.
Chuck Magro: Good morning, Frank, so yes, let me give you the high level and then I think it would be instructive if Tim, gives you a situation that’s happening in Seed and then if Robert has anything to add in CP. but look, you’re right. So — and I’ll just zero in, Latin America is a big diverse region for us. But really, this is a Brazil phenomenon. And if you look at 2023, I’d call it the perfect storm, right? We had CP destocking was probably the most pronounced in that country. It was hit with pretty severe weather challenges, which actually slowed down the destocking and certainly has impacted planted acreage of the safrinha crop. And then you’ve got all the kind of macroeconomic conditions on top of that. So it is going to take some time to sort out.
We do see that we are heading in the right direction. The positive, I think, comment I can make is the long-term trends in Brazil, the structural opportunity that we see in that country has not changed. This will be an ag growth market for the future. But there’s been some moving parts in Seed and CP, and I’ll turn it over to Tim now to talk about Seed.
