David Anderson
Executive Vice President and Chief Financial Officer at Corteva
Thanks, Chuck, and welcome, everyone to the call. Let's start on Slide 7, which provides the financial results for the quarter and half. As Chuck said, and you can see from the numbers, we had a solid first half against quickly evolving market conditions.
Briefly touching on the quarter, organic sales were down 4% compared to prior year with pricing gains in both segments more than offset by declines in volume and Crop Protection. Volumes were impacted by strategic portfolio actions and the exit from Russia, which combined represent an approximate $240 million headwind in the quarter. In addition, we saw delayed customer purchases due to weather, higher interest rates and supply availability, again, particularly in Latin America and North America. Despite the reduction in top line growth, improved product mix and ongoing productivity and cost actions translated to earnings growth of 2% and nearly 140 basis points of margin expansion.
Now focusing on the half. Organic sales grew 2%, with broad-based pricing gains. Global pricing was up 11% with strong execution in both Seed and Crop Protection. Seed volumes were down 5% versus prior year, largely driven by the decision to exit Russia with Crop Protection volumes down 16%, which includes a 5% headwind from strategic portfolio exits. The top line performance translated into operating EBITDA of nearly $3 billion for the half, an increase of 8%. Pricing, favorable product mix and productivity more than offset higher input costs and volume and currency headwinds, driving more than 180 basis points of margin expansion.
So let's go to Slide 8, where you can see how the performance of our Seed business offset the Crop Protection market headwinds in the first half for total company sales growth of 1% compared to prior year. Seed net sales were up 8% in the first six months to more than $6.9 billion. Organic sales were up 9% on strong price execution as we continue the price-for-value strategy and also offset higher input costs. Global seed price was up 14% for the half with pricing gains in every region, led by North America and EMEA.
Seed volumes were down 5% versus prior year. Gains in North America driven by increased corn acres more than offset fewer soybean acres. Volume declines in EMEA were driven by the exit from Russia and lower corn planted area, with Latin America and Asia Pacific volumes down due to delayed plannings and also seasonal timing shifts. And importantly, the exit from Russia represented a 3% headwind for the Seed segment.
Crop Protection net sales were down 9% compared to prior year to more than $3.9 billion. Organic sales were down 9% for the half with pricing gains more than offset by lower volume. Global Crop Protection pricing was up 7% for the half versus prior year, reflecting pricing for value of our differentiated technology as well as to offset higher raw materials globally as well as currency impacts in EMEA. Crop Protection volumes were down 16% for the first half, impacted by the shift in order patterns that Chuck referenced as well as the roughly $240 million headwind from the strategic portfolio actions and exit from Russia.
Currency headwind on both Seed and Crop Protection was 3%, largely driven by European currencies. And finally, the Biologicals acquisitions added $135 million of revenue since we closed on the deals in early March, which is reflected in portfolio and other. Taking a step back, the performance in the first half showcases the strength and complementary nature of our diverse portfolio.
With that, let's go to Slide 9 for a summary of the first half operating EBITDA. You can see the operating EBITDA increased approximately $220 million to just under $3 billion, pricing and product mix, coupled with productivity and cost actions more than offset declines in volume and higher cost in currency headwinds. And we took a significant step in the journey towards royalty neutrality with more than $150 million of combined benefit from increased royalty income and a decrease in royalty expense driven by the continued penetration of Enlist.
The nearly $450 million of net cost headwind was related to seed commodity costs and unfavorable yield impact as well as crop protection inflation. Crop Protection raw material costs were up about 5% versus the prior year as we sold through higher cost inventory. In total, market-driven cost headwinds and other costs were mitigated by the improvement in net royalty expense and $175 million of productivity savings.
SG&A spend in the first half of the year was about flat versus prior year. It reflects the inclusion of approximately $50 million in SG&A from the Biologicals acquisitions. So excluding the acquisitions, SG&A is down versus prior year as we maintain disciplined spending and execution on cost actions. Investment in R&D was up roughly $80 million for the half, aligned with the targeted spend increases to support our leading position in ag technology. Portfolio and other gains in the half were driven by the Biologicals acquisitions, which contributed $22 million of EBITDA. Currency was a $228 million headwind, again, driven primarily by European currencies.
Turning now to Slide 10. I want to take you through the updated full year guidance, which reflects the current market dynamics. The change in order patterns and industrywide destocking is reflected in the Crop Protection segment. We now expect net sales to be in the range of $17.9 billion to $18.2 billion or 3% growth at the midpoint, roughly $700 million lower than the previous guide. This is largely driven by North America and Latin America Crop Protection. And consistent with the prior guide, we expect approximately $450 million of net sales for the full year from the Biologicals acquisitions.
Operating EBITDA is now expected to be in the range of $3.5 billion to $3.65 billion, 11% growth versus the prior year at the midpoint. The updated guidance is driven by lower top line growth, partially offset by improved product mix and greater-than-expected benefits from reduced net royalty expense as well as productivity and cost actions. Importantly, with the strength of Seed performance in the first half and Crop Protection's improved product mix, we now expect operating EBITDA margin of 19.8% at the midpoint of guidance or more than 130 basis points of margin expansion over prior year with growth in both Seed and Crop Protection.
Operating EPS is expected to be in the range of $2.75 to $2.90 per share, an increase of 6% versus the prior year at the midpoint. The change in guidance reflects lower earnings partially offset by lower forecasted effective tax rate and also a lower share count. Now it's important to point out that the allocation of earnings between the third and fourth quarters. Again, we expect order patterns to be more consistent with historical timing. This timing in Latin America sales, coupled with the seasonal patterns of the Biologicals acquisitions, is expected to result in nearly all of our second half earnings to be delivered in the fourth quarter. Free cash flow is now forecasted to be in the range of $1 billion to $1.2 billion. We expect share repurchases to be approximately $500 million for the year, including $330 million that we completed in the first half. And of course, we recently announced a 7% increase in the dividend consistent with the dividend growth strategy.
On Slide 11, I want to remind you, importantly, of the value creation framework we introduced at last year's Investor Day to accelerate our performance and deliver greater value to shareholders. The 2025 financial targets we presented included operating EBITDA of $4.4 billion or a 22% margin at the midpoint. This slide includes those 2025 financial performance targets, and it also reflects today's guidance for 2023. Execution on our strategic decisions including exiting low-margin commodity products, while delivering a cumulative $250 million reduction in net royalty expense and disciplined cost actions is driving margin expansion while also enabling increased R&D investment. And while we're revising our 2023 revenue and EBITDA guidance, we're confident that we're on track to deliver the 2025 earnings targets.
With that, let's go to Slide 12, and summarize the key takeaways. Again, we believe ag fundamentals remain positive and demand at the farm level is stable despite the significant Crop Protection market pullback that we're experiencing. We believe Corteva is well positioned relative to the market despite the industry-wide destocking trends and some macro-level headwinds, and our revised full year guide is proof of the strength of our portfolio with continued sales and earnings growth in 2023. We believe this performance differentiates us from others in the industry. And finally, our expected 2023 performance supports our 2025 financial targets and provides us confidence that we're able to execute and grow.
And with that, let me turn it over to Kim.
