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DuPont sees 'challenging' ag sector this year, after soft close to 2016

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Seed and crop-spray giant DuPont reported falling sales in its agriculture segment, and warned of more challenging times to come.

The company also pushed back its expected timeframe for completing a merger deal with Dow Chemical, in the face of regulatory scrutiny.

But the companies total earnings beat forecasts, thanks to currency and cost saving effects, helping shares in New York to rally 4.5% , to close at $76.05, their highest finish since March 2015.

Difficult ag market

DuPont said that the economic situation in agriculture would remain "challenging" in 2017, with "commodity prices under pressure resulting from record yields and crop production".

The company forecast demand for its seed corn being impacted by dynamics that favour sowing soybeans over the grain, with US sowings of the oilseed this year expected to jump comfortably above 2016's record high.

"Our order book in North America is tracking with our expectations and is consistent with the expected planted acre shift," DuPont said.

"In crop protection, we expect the industry decline to ease in 2017 but continue to be negatively impacted by high inventory levels, a stronger dollar, and the continued penetration of insect-resistant soybeans," DuPont said.

Falling sales

"The ag industry continues to face challenging conditions as stocks of all major crops, including corn and soybeans, reach record highs, pressuring commodity prices and US net farm income," DuPont said.

DuPont's agriculture sales fell 10% year-on-year in the last three months of 2017, to $1.39bn.

Volumes were down 9%, at prices down 4%, but the losses were partially offset by currency effects.

And the currency and cost savings trimmed the operating loss in the segment by $35m, to $19m, over the same period.

Delayed seed sales

DuPont's seed sales declined by 23% year-on-year.

But the company ascribed the decline to a shift in the timing of the sales, driven by a change it its delivery chain, as it shifts to an agency-based model in the southern US.

"Excluding this change, segment sales would have increased 3%," DuPont said.

The company's crop protection sales increased by 9%.

Merger delayed

DuPont pushed back its expected timeframe to complete a $130bn merger with Dow Chemical.

The deal is now forecast to be completed with the first six months of 2017, rather than the first three months, the second time the goalposts have been moved as the deal undergoes regulatory scrutiny in the EU.

DuPont guided to an 18% profits fall, year-on-year in the first three months of 2017, citing costs from the merger deals.

Excluding one-off chares, operating profit is expected to rise by around 8%, thanks to lower costs and the delayed seed deliveries.

Earnings beat forecasts

DuPont's total profits beat the market consensus, despite disappointing sales.

Net sales fell 1.7% to $5.21bn, falling short of Wall Street expectations of a $5.29bn figure.

But DuPont saw net income over the last three months of 2016 at $265m, compared to a loss of $253m a year ago.

Adjusted earnings were $0.51 a share, beating the $0.42 analysts had pencilled in.

By William Clarke

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