Dave Anderson
Executive Vice-President and Chief Financial Officer at Corteva
Thanks, Chuck, and welcome everyone to the call.
Let's start on Slide six which provides the financial results for the quarter and full-year. You can see in the table we finished 2022 with another quarter of strong performance. Quickly touching on the fourth-quarter, organic sales were up 11% versus prior year, led by Latin-America and North-America. The strong organic sales translated into earnings of $370 million for the quarter, more than 200 basis-points of margin improvement.
Turning to the full-year, organic sales grew 15% versus 2021, with broad-based pricing and volume gains, global pricing was up 10% over prior year with notable gains in both Seed and Crop Protection. Seed volumes were flat, due mostly to lower planted area in the US, canola supply constraints and the impact of our Russia exit in EMEA.
Crop Protection volume was up 19% for the year, driven by strong demand for new products. These new products delivered over $475 million of sales growth Year-over-Year, an increase of more than 30%. We delivered $3.2 billion in operating EBITDA for the year, an increase of 25% over the prior year. Pricing, product mix, and productivity more than offset higher input costs and currency headwinds. This earnings improvement translated into more than 200 basis-points of margin expansion Year-over-Year, reflecting the strength in execution by our organization. And as Chuck said, 2022 is an early instalment on our multi year performance goals that we shared with you at Investor Day.
So let's now go to Slide seven. You can see the broad-based growth with strong organic sales gains in every region for the full-year 2022. In North-America organic sales were up 10%, driven by Crop Protection on-demand for new technology including Enlist herbicide. Seed volumes were down versus prior year, primarily due to a reduction in US corn acres and supply constraints for canola in Canada. Soybean volumes were up 7%, driven by penetration of Enlist. Both Seed and Crop Protection delivered pricing gains, with pricing up 6% and 14% respectively.
In Europe, Middle-East and Africa, we delivered 18% organic growth compared to prior year, driven by price and volume gains in both segments. Seed pricing increased 11% and helped to mitigate currency impacts. In Crop Protection, demand remains high for new and differentiated products, driving volume growth of 15% for the year. In the fourth-quarter, volumes were muted by approximately $50 million related to the war in Ukraine and our previously-announced exit from Russia.
In Latin-America, organic sales increased 23%, with notable gains in both price and volume, pricing increased 60% compared to prior year, driven by our price for value strategy, coupled with increases to offset rising input costs. Seed volumes increased 4%, with some pressure due to tight supply of corn, while Crop Protection volumes increased 10%, driven by demand for new products.
Asia-Pacific organic sales were up 9% over prior year-on both volume and price gains. Seed organic sales increased 23% on strong price execution and the recovery of corn planted area. Crop Protection volume was down 1% due to wet weather and low pest pressure in certain areas, partially offset by demand for new products.
So with that, let's go to Slide eight for a summary of 2022 operating EBITDA performance. For the full-year, operating EBITDA increased approximately $650 million to $3.2 billion. And as I covered on the prior slide, strong customer demand drove broad-based organic growth, with price and volume gains in all regions, and we particularly benefited from the strong finish to the year, including favorable Year-over-Year performance in our functional spend.
We incurred approximately $1.2 billion of market-driven headwinds and other costs over the course of 2022, driven by higher Seed commodity costs, Crop Protection raw-material costs, and freight and logistics. We delivered approximately $250 million in productivity savings, which helped to partially offset these headwinds. SG&A as a percent of sales was down more than 230 basis-points versus prior year, as we maintain disciplined spending and accelerated execution on certain cost actions. Currency was a $290 million headwind, driven primarily by the euro and other European currencies.
Standing back, the performance in 2002 is a result of strong execution by the organization, demonstrating our ability to meet increased customer demand, while effectively managing costs through pricing, product mix, and productivity.
Turning now to slide nine, I want to provide an update on our full-year free-cash flow performance. Free-cash flow for the year was approximately $270 million compared to over $2 billion in 2021. The Year-over-Year decrease is driven by higher working capital balances, primarily accounts receivable and inventory. Receivables increases were largely due to higher sales, reflecting both volume and pricing. Importantly, DSO metrics remain healthy, benefiting from the strength of farmer incomes and also customer collections.
In the case of inventory, you'll recall we had significant drawdowns in 2020 and 2021, particularly in Crop Protection. This inventory drawdown was driven by significant customer demand in the face of supply-chain challenges, product availability, and shipping and logistics issues. This set of challenges was obviously not unique to Corteva and affected broader industry. In 2022, inventory increases reflect a rebuild of safety stocks to support growth, higher input and commodity costs, as well as the impact from market volatility. We have now been able to rebuild our inventory levels, we believe we have about them freight balances at this time.
Due to supply-chain dynamics and their impact on working capital over the last few years, it's meaningful to look at the free-cash flow to EBITDA conversion over the most recent two years rather than either year in isolation. Free-cash flow conversion average 42% in the two-year period from 2021 to 2022.
In 2022, we returned $1.4 billion to shareholders, including $1 billion in share repurchases, a clear commitment to deliver value for our shareholders. Our pension liability continues to be well-managed, despite volatility in both equity and bond markets. As of year end, the funded status of the US plan was 92%, and we do not anticipate cash contributions to the US plan in either 2023 or 2024.
Now transitioned to a discussion on the guidance for 2023 on Slide 10. We expect net sales to be in the range of $18.1 billion and $18.4 billion, representing 5% growth at the midpoint, driven by pricing and strong customer demand for differentiated, best-in class technology, and increased US planted area. Keep in mind that this growth is muted by approximately $600 million of product and geographic exits.
2023 Operating EBITDA is expected to be in the range of $3.4 billion and $3.6 billion, a 9% improvement over prior year at the midpoint. Margins are also expected to improve with pricing, mix, and productivity actions, more than offsetting further cost inflation and currency headwinds, translating to roughly 70 basis-points of improvement at the midpoint.
Operating EPS is expected to be in the range of $2.70 and $2.90 per share, an increase of 5% at the midpoint, which reflects earnings growth, lower average share count, partially offset by higher effective tax-rate and interest expense. We expect our 2023 tax-rate to be in the range of 22% to 24%, an increase from the 2022 rate of 20.6%, largely driven by US tax law changes impacting foreign tax credits and the treatment of R&D expenses.
Higher interest expense is driven by higher borrowing costs and higher debt balances. As you know, we carry significant commercial paper balances throughout most of the year to fund cash needs. Our 2023 guidance assumptions include a higher average interest-rate on the commercial paper balances, as well as higher borrowing to finance growth including the biologicals acquisitions. We expect that free-cash flow will be in the range of $1.1 billon to $1.3 billion, with higher earnings partially offset by the higher cash taxes and higher interest expense. At the midpoint, this translates into a free-cash flow to EBITDA conversion rate of roughly 34%, or approximately 40% over the last three-year period.
On slide 11, I want to remind you of the value-creation framework we laid out in September to accelerate our performance and deliver greater value to shareholders. The growth targets we presented included a 2025 operating EBITA of $4.4 billion, or 22% margin at the midpoint. This slide includes our 2025 performance targets from Investor Day, and it also reflects our actual 2022 performance and today's guidance for 2023. Execution on our strategic decisions, including focusing on core crops in markets, pricing for value, being disciplined in costs, is driving margin expansion while also enabling increased R&D investment. Again, our performance in 2022 was a major installment on the path to 2025 financial targets. Coupled with our guidance for 2023, we're confident we're on-track to deliver those targets.
So let's now go to Slide 12, to discuss the operating EBITDA bridge for 2003. You can see the pricing of 2023 will be in the mid-single-digit range, which were more than offset the impact from higher commodity costs and raw-material inflation. Increased planted area in the US and demand for our best-in class technology, including continued penetration of Enlist E3 soybeans, are expected to drive volume increases in North-America. Latin-America, Seed volumes are expected to be up for the full-year, with the increased weighted to the second-half due to supply constraints early in the year from last season's dry weather. Volume growth in North-America and Latin-America will be partially offset in EMEA, driven by lower expected corn planted area and an approximate $200 million impact from our decision to exit Russia.
Demand remained strong for differentiated technology, which will drive increased volume in Crop Protection. Sales of new Crop Protection products will add approximately $300 million of incremental organic revenue. We'll benefit from the ongoing Spinosyns's capacity expansion, as we expect the franchise to generate more than $1 billion in sales in 2023. Volume growth will be partially offset by the approximately $400 million impact from our previously discussed product exits, including commodity glyphosate.
And while we are seeing some slowing in the rate of inflation as well as overall supply-chain improvements, the operating environment is still dynamic. For the full-year of 2023, we expect approximately 6% increase in-market driven cost headwinds, including higher commodity prices, input costs in freight and logistics. This impact should be largely weighted to the first-half of the year, reflecting Seed commodity cost impact in the sell-through of higher-cost inventory.
This translates into high-single-digit rate of inflation in the first-half of the year, dropping down to low-single digit in the second-half. In addition to these market-driven costs, we expect additional headwinds on other cost-of-sales. Importantly, the outlook includes approximately $100 million reduction in royalty expense, and an additional $300 million of productivity and restructuring benefits. Another key element of our cost structure and consistent with our multi year plan, we are increasing our investment in R&D in 2023.
Regarding currency, we expect continued headwinds, our assumption is for a weaker exchange rate relative to the dollar for several key currencies including the Brazilian real, the euro and the Canadian dollar. We estimate three to 4% currency headwind on revenues and low-double-digit headwind on EBITA. It's important to note the guidance does not include the impact of the Biologicals acquisitions which are expected to close-in the first-half of the year. We'll provide an update for 2023 to include these acquisitions in the quarter in which they close.
Let's now go to Slide 13 and summarize the key takeaways. We had great performance in 2022 with 15% growth in organic sale, more than 200 basis-points of margin improvement amidst dynamic operating environment, we had favorable momentum and we'll carry that into 2023 and expect another year of strong performance in growth, supporting our 2025 financial targets.
And finally, we're investing in innovation and the future of Corteva, we remain committed to a disciplined capital allocation strategy that is a balance of investing for growth while returning cash to shareholders. Since 2019, our capital deployment was heavily weighted towards returning cash to shareholders. As we returned more than $3.6 billion through share repurchases and dividends in 2023 against the backdrop of M&A, this distribution will be tilted towards investing for growth as we close on the previously-announced Biologicals acquisitions in the first-half of the year.
And with that, let me turn it over to Kim.
