Dow echoes DuPont in seeing ag as rare bright spot

Dow Chemical became the second US chemicals conglomerate within hours to report agriculture as one of the few highlights of a poor operational picture which is forcing hundreds of job cuts.

The top US chemicals group, in results released earlier than scheduled because of an information blunder, said that its agricultural sciences division achieved an 8.0% rise, to $1.30bn, in sales for the July-to-September quarter, boosted by "solid industry fundamentals".

"Elevated farm income levels [are] providing strong incentive for farmers to maximise yields," said Dow, reporting a particular increase in sales of seeds, which soared 21% "as a result of the introduction and ramp-up of new technologies".

Sales of agrichemicals rose 6%, "driven by significant volume and sales gains in Latin America", a region which is boosting the fortunes of a range of agricultural companies, thanks to forecasts of a jump in sowings to exploit high crop prices.

AgroSciences dodges cuts

While the division's earnings before interest, tax, depreciation and amortisation fell by 16% to $63m, it emerged as one of the group's better performers for a quarter in which group sales fell by 9.7% to $13.7bn, hurt by currency factors and price falls.

Price rises Dow achieved in its agricultural products were not shared by other operations, with prices at a group level falling "in all geographic areas, led by Europe, down 12%, and Greater China, down 11%".

Earnings attributable to shareholders slumped by 39% to $497m.

Dow unveiled plans to cut 2,400 jobs, shut 20 plants and cut back on investment to provide a $1bn boost to its performance.

"The reality is we are operating in a slow-growth environment in the near-term and, while these actions are difficult, they demonstrate our resolve to tightly manage operations, and mitigate the impact of current market dynamics," Andrew Liveris, the Dow chairman and chief executive, said.

However, he added that "importantly, we will continue funding projects where differentiation is rewarded even in this environment and where margin expansion opportunities are clear for example in Dow AgroSciences".

Echo of DuPont

The comments, released early after a copy of a press release was mistakenly sent out early to some media, came hours after rival DuPont revealed 1, 500 job cuts as it unveiled a 98% tumble to $10m, from $452m, in earnings for the quarter.

The drop reflected in part a 9.2% drop to $7.39bn in revenues, also reflecting price falls, and higher costs of some important inputs, such as titanium dioxide, a pigment used to make paint.

However, the group's agriculture division, which includes the seed group Pioneer, achieved a 4.0% rise to $1.42bn in sales, helped by a "strong start to the southern hemisphere planting season".

"Crop protection sales growth was underpinned by strong demand for insect control products and fungicides," DuPont said, while blaming currency movements and investment for a 23% drop in the agriculture division's pre-tax operating income.

'We remain bullish'

Ellen Kullman, the DuPont chairman and chief executive, told investors that "agriculture market fundamentals remain strong, supported by robust demand and a healthy outlook for farm income.

"We remain bullish about the growth opportunities for our seed and crop protection businesses as the Latin American planting season continues in the fourth quarter and the northern hemisphere season gets underway.

"And we are bullish on the solid momentum we have heading into 2013.

"We are really very pleased with how our agriculture business has performed through this season and is performing in Latin America."

Market reaction

On Wall Street Dow Chemical shares, which tumbled in the last session dragged lower by the DuPont statement, rebounded  4.7% to  close at $29.88 in New York.

Quarterly earnings were, at $0.42 a share, above market expectations, if down year on year.

However, DuPont stock extended its 9% losses of the last session, hitting $44.71 in early deals, a fall of 1.2% and the shares' lowest level for 2012. The shares closed at $44.91, a drop of 0.8% on the day.

JP Morgan on Wednesday cut to neutral its rating on DuPont shares.

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