DuPont expects rising profits in its agricultural segment despite the “challenging conditions” as it prepares for a tie up with Dow Chemicals to create the world’s top ag-chemicals group.
DuPont forecast steady sales, and rising earnings, in 2016, thanks to a cost-saving scheme put in to place ahead of the agriculture sector downturn.
Dollar-denominated sales are expected be in line with the previous year, despite higher prices, due to falling overseas currencies, DuPont said.
Agricultural earnings are seen rising, by “high-single digits percent,” thanks to cost savings.
Cost cutting drive
“Agriculture markets continue to face challenges as farmers endure tough economic conditions, seed and crop protection suppliers have elevated inventories, and credit remains tight,” DuPont said.
DuPont launched a cost cutting back in 2014, when the company first “recognized that the agriculture market was entering a challenging period”.
The company says its latest results “demonstrate the benefits of those disciplined actions”.
DuPont’s agriculture segment saw steady sales over the three months to June 30, at $3.2bn.
Volumes rose by 3%, but the falling value of overseas currencies, and a less supportive product mix, left dollar denominated flat year on year.
Earnings from the company’s agricultural segment rose 12% year on year in dollar terms, thanks to lower product costs, rising volumes, and lower costs after a long term restructuring project.
“As we move to the second half of the year the focus turns to Latin America,” DuPont said.
For crop protection, the company expects stronger demand by the last three months of the year, as farmers pick- up purchasing after delays due to low commodity prices and a shortage of credit.
Tie up continues
DuPont’s tie up with Dow Chemicals, which is expected to be completed by the end of the year, whill result in the creation of a separate agriculture business.
This will include the ag-segments of both companies, and is expected to boast $19bn of sales, making it the worlds to seed and sprays business, larger than Monsanto or Syngenta.
DuPont and Dow announced last week that shareholders had approved the merger plans.
Across the whole business, DuPont earned $1.02bn in the three months to June, compared with $940m a year ago, up 8.4%.
Adjusted earnings, were $1.24 a share, ahead of analysts’ forecasts of $1.10 a share.
“Continued progress on our cost savings program keeps us on track to reach $1bn on a run-rate basis by year-end,” said Ed Breen, chairman and chief executive of DuPont.
Group sales edged down 0.8% to $7.06bn, as currency fluctuations offset rising volumes.
This was ahead of analyst’s forecasts of $7.01bn.
(Source – http://www.agrimoney.com/news/dupont-profits-rise-ahead-of-dow-chemicals-tie-up–9781.html)