DuPont warns on profits, blaming corn seed setback

The battle for share of the shrunken US corn seed market claimed a scalp when DuPont blamed weak sales in the segment for a cut to its operating profits, despite better-than-expected sales in soybeans.

The US-based pigments-to-kevlar conglomerate, blamed primarily a "lower-than-expected" performance at its agriculture division for a cut to $4.00-4.10 a share, from $4.20-4.45 a share, in its forecast for full year earnings.

DuPont also cautioned of a drop in earnings for the April-to-June quarter to "moderately below" the $1.28 a share it achieved a year before.

Wall Street had expected full year earnings of $4.30 a share, and a rise to $1.46-a-share for the current quarter.

'Decline in corn volume'

DuPont, which owns seed giant Pioneer, said that its disappointing performance in agriculture reflected below-forecast corn seed sales, leading to higher-than-expected inventory writedowns, besides a dent to agrichemical sales from wet US weather which has raised concerns over crop losses of up to 2m acres.

The weakness in corn contrasted with the performance in soybeans, for which, thanks to "favourable economics", sales volumes in North America "are higher than expected".

"However, the higher soybean volume will not fully offset the decline in corn volume," the group said, highlighting that is soybean portfolio was in a "transition" period ahead of fresh product releases.

Ellen Kullman, the DuPont chair and chief executive, said that the group had a "strong global market position and a rich pipeline.

"We will make the necessary changes so that we return to our five-year track record of delivering the reliable, attractive growth our shareholders expect from this [agriculture] segment."

'Challenges with insect resistance'

The comments came a day after rival seed group Monsanto reported a 12.6% drop to $751m in its gross profits on corn seed in the March-to-May quarter, on a 16.4% drop to $1.30bn in revenues.

Weaker corn prices have prompted farmers in both North and South America to cut plantings, with the group telling investors that "corn acres have come down in the Americas by about 5%, and currency reflects an incremental headwind to our business of roughly another 3%".

However, Brett Begemann the Monsanto chief operating officer, also said that "in Brazil, our largest competitor has acknowledged it had some challenges with insect resistance to its key [genetically modified seed] traits, making some late pricing adjustments across the current market".

Pioneer ranks second to Monsanto in the Brazil corn seed market, Credit Suisse said on Tuesday.

US corn area debate

DuPont's profit warning also comes ahead of a key US Department of Agriculture report on Monday, which is expected to confirm a drop in US corn sowings this year, from the 95.365m acres planted in 2013.

Investors are expecting Monday's briefing to show a figure of 91.725m acres, a small upgrade on the 91.691m acres farmers said in March that they intended to sow, although persistent rains and cold have raised some concerns that the actual figure may end up being far lower.

Broker Roach Ag on Thursday revealed results of a survey pegging US corn plantings at 89.31m acres, a four-year low, down more than 6m acres year on year.

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