Seed, pesticide sales give DowDuPont a boost
DowDuPont Inc. recovered from a slow start to the U.S. planting season during its second quarter.
Sales in the seeds and pesticide division increased 25 percent from the same period last year, DowDuPont said Thursday. That helped push total revenue up 17 percent to $24.2 billion, with reported earnings per diluted share of 76 cents, down 29 percent for the same quarter in 2017. Net income rose 33 percent to $1.8 billion. Shares were down nearly 3 percent to $66.09 in early morning trading.
Although cool weather earlier this year delayed seed sales from April to May, Thursday’s earnings showed the resiliency of the agriculture division, which will become Corteva Agriscience next year during a three-way split. The world’s largest chemical maker, created last year from the merger of Dow Chemical Co. and DuPont Co., also will split into a specialty products business known as DuPont and a plastics maker known as Dow, which will be based in Midland. The other two divisions will have headquarters in Wilmington, Delaware.
“These are indicators that our three divisions are making a difference in the marketplace and for shareholders,” DowDuPont CEO Ed Breen said in a statement. “We have great momentum and our employees are enthusiastic about the future of our intended industry-leading companies.”
The agriculture division netted $5.7 billion. In addition to the weather, double-digit growth in insecticides and 4 percent increases in local prices contributed to the sector’s boost. Volume rose 20 percent.
“Conditions in the U.S. corn belt have clearly changed for the better in recent months,” Kevin McCarthy, an analyst at Vertical Research Partner, said ahead of the earnings release. “After a slow start, domestic planting progress has caught up nicely.”
Fewer acreage of corn in Brazil and the United States, DowDuPont chief financial officer Howard Ungerleider said, may cause some headwinds for the division this year along with a low Brazilian Real. He said upswings from the materials science and specialty products division should help make up for it.
The materials science division had increases in all of its segments and regions. Sales rose 18 percent to $12.6 billion, the 23rd consecutive year-over-year earnings growth. Local prices rose 5 percent, and volume was up 18 percent from the opening of new plants. That helped offset the $400 million more spent on raw materials because of tariffs.
“We support fair trade and continue to work with all stakeholders to find effective and measured solutions to unfair trade policies,” Breen said during a call with analysts, adding the company does not expect tariffs to have a material effect on the company this year.
Specialty products saw an increase in sales by 10 percent to $5.9 billion. Volume rose by 4 percent with local prices increasing 1 percent.
CEO Breen is looking to cut costs at the company by $3.3 billion at the end of two years, giving an added boost to earnings. Breen said the company cut more than $375 million in the second quarter, totaling more than $900 million since the September merger, and increased its 2018 year-over-year savings target from $1.2 billion to $1.4 billion.
The company in March named Chief Operating Officer Jim Fitterling as CEO of the Dow spinoff, which is scheduled for April 1. He succeeds Andrew Liveris, who left July 1. Liveris is now a director at Saudi Aramco, helping the world’s biggest crude exporter expand its business in chemicals.
Breen said the leaders of Corteva and new DuPont will be named next month.