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DuPont upbeat - despite seeing 'continued weakness' in ag prices

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DuPont forecast an improved close to 2016 for its ag division, despite expecting "continued weakness" in crop prices, as it underlined improved demand for agricultural products.

But shares in the company eased, as it warned that a pending merger with Dow Chemical Company may not be completed by the end of the year, as planned.

The $59bn tie-up - which would see DuPont's agriculture sector spun out into a separate entity, creating the world's largest agrichemical group - is awaiting authorisation from European legislators.

It has also emerged that European Union antitrust officials are also taking a keen interest in another mega-merger in the sector, the takeover of Syngenta by China-based ChemChina - with fears over detailed scrutiny of the deal sending shares in the Swiss-based group tumbling on Monday.

Rising agricultural revenue

Revenue from DuPont's agriculture business, which accounted for about 23% of its total revenue, rose 2.4% as higher volumes partially offset lower prices.

But the US chemicals conglomerate, amid a $59bn merger with Dow Chemical Company, warned that it was expecting "continued commodity price weakness in the agriculture sector", a factor causing continued financial hardship for the industry.

"The ag industry continues to face tough conditions with challenging commodity prices leading to a further decline in net farmer income," the company said.

"However, one thing remains clear – global demand continues to climb, which places an emphasis on innovation to meet farmers' financial goals and the needs of a growing population."

And DuPont forecast reduced losses in the October-to- December quarter, a seasonally weak period for the group's agriculture segment.

Growth in corn, soybean seeds

DuPont reported rising seed demand from Brazil in the July to September period, ahead of the summer sowing season.

Sales by volume rose by some 4% year on year, as DuPont noted a "strong start to the Brazilian summer season," with both corn and soybean seed sales up.

But higher seed sales were partially offset by lower crop protection sales volumes, due to "continued low pest pressure and high industry inventories," the company said.

"Seed sales were up 10% and crop protection sales were down 4%," DuPont said.

Sales to fall

DuPont expects sales for the current, October-to-December quarter in the agriculture business to fall in the mid-single-digit percentage range amid weakness in commodity prices.

The company raised its full-year operating earnings forecast for the whole company to $3.25 per share from its earlier estimates of $3.15 to $3.20 per share, suggesting that a cost-cutting drive is bearing fruit.

Net sales over the July-to-September period were reported at $4.92bn, up 1.0% year on year, and beating expectations of $4.87bn.

Operating earnings for the three-month-period were reported at $288.0m, up 155% year on year, at 34 cents a share, beating analysts' estimate of 21 cents.

But despite better-than-expected quarterly profits, shares fell on news of a potential to the Dow tie-up.

Shares were down 1.1% in midday deals in New York, at $69.38.

By Tanya Ashreena

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