Dow raises ag profits, despite weather setbacks

Dow Chemical followed rivals DuPont and Syngenta in highlighting setbacks to seed sales from the late US spring, and the turn by Brazilian farmers away from corn, but achieved a rise in earnings in agriculture nonetheless.

The plastics-to-energy conglomerate said that a "series of weather- and transported-related issues in North America" had affected many of its businesses in the January-to-March quarter, hurting earnings by an estimated $0.03-0.04 per share, equivalent to about $35m-50m.

In agriculture, the region's cold and extended winter had meant a "late start to the season" for spring plantings and fieldwork, a factor which "contributed to lower sales of corn", the most popular US crop, besides canola, which is expected to enjoy near-record sowings in Canada.

A 7% drop in Dow's seed sales during the quarter was also attributed to "lower planted acreage of corn and sunflowers" in Latin America, where Brazilian farmers have cut sowings of second, or safrinha, corn because of a drop in prices from a year ago.

'Early start'

However, Dow's sales of agrichemicals grew 4%, reflecting primarily higher sales in Europe, where a mild winter "led to an early start to the cereal herbicide season".

Like its rivals, Dow also flagged increased sales of insecticides in Latin America, where Brazil especially has suffered from an outbreak of the Helicoverpa moth, whose caterpillar, the corn ear worm, can cause significant damage to a range of crops.

Furthermore, the group reported a 28% jump in sales of new crop protection sprays, led by its pyroxsulam herbicide, designed to control weeds in wheat crops and used in the UK, for example, to control blackgrass, ryegrasses and wild oats.

Indeed, "accelerating" problems of weeds becoming resistant to historic herbicides has been driving demand for new alternatives.

Cost cuts

Earnings before interest, tax, depreciation and amortisation (ebitda) in the division rose 9.3% to $529m, well ahead of growth in sales of 0.8%, to $2.12bn.

"Increased volume and lower operating expenses drove segment margin expansion," Dow said.

Group earnings rose 75% to $964m, on revenues flat at $11.7bn, with profitability boosted by efficiency measures, including the 2012 drive which cut 5% of the group's workforce and axed 20 plants.

The earnings were equivalent to $0.79 per share, above the $0.71 that Wall Street had expected.

Dow shares stood 1.1% higher at $49.50 in lunchtime deals in New York.

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