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DowDuPont reveals soaring ag profits, despite 'soft fundamentals'

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DowDuPont revealed the, delayed, deadline for the spin-off of its agriculture division, as the group reported a sharp increase in profits at the merged operations in their first full quarter in existence, and forecast further growth to come.

 

The US based chemicals conglomerate, formed five months ago by the merger of Dow Chemical and DuPont, said that its agriculture division was “expected to separate by June 1 2019”, a date also set for the separate spin-off of the specialty products unit.

 

The date comes beyond the original spin-off deadline of 18 months after the creation of DowDuPont, although Ed Breen, chief executive of the merged group, said in November that 18-24 months might actually be needed.

 

A separate spin-off, of the materials science business, is expected to be finished by the end of March 2019.

 

Profits soar

 

Indeed, Mr Breen said on Thursday that the group was “making significant progress standing up the intended public companies”.

 

In agriculture, the group reported a more than doubling to $224m in operating ebitda (earnings before interest, taxation, depreciation and amortisation) for the October-to-December period, DowDuPont’s first full financial quarter in existence.

 

The increase was down in the main to margin improvement, with the group flagging boosts from the likes of merger synergies and lower pension costs.

 

Agriculture division revenues rose by 4.6% to $2.79bn, led by a 10% surge to some $1.2bn in sales of seed as the group achieved a “doubling of corn sales in Argentina, driven by penetration of Leptra corn hybrids”, a product genetically modified for insect resistance.

 

Crop protection revenues rose by 1% to $1.6bn, with the boost from an increase in sales volumes, notably in North America, “partially offset by decreased local pricing” from generic alternatives, “primarily” in Latin America.

 

‘Soft fundamentals’

 

DowDuPont added that “ag fundamentals remain soft”, with crop prices continuing to be weighed somewhat by the extent of global inventories – which the United Nations said separately on Thursday were, for grains, set to hit a clear record high at the close of 2017-18.

 

Nonetheless, it forecast ag division sales rising by a “mid-single digits percent” this year, with operating ebitda “up high-teens percent”.

 

Product launches this year in ag include that of Enlist corn – a corn seed genetically modified for use with a more advanced herbicide than the traditional glyphosate, against which many weeds are becoming resistant, cutting the advantage of planting glyphosate-resistant seed.

 

Overall, the agriculture business is expected “to launch 21 new products in the next five years”.

 

Group results

 

As a group, DowDuPont reported a loss of $1.26bn for the latest quarter, equivalent to $0.52 per share, reflecting a $3bn hit from the likes of asset impairments and restructuring costs relating to the merger.

 

Revenues soared 54% to $20.07bn.

 

However, on an adjusted basis, the group reported earnings per share of $0.83, up from $0.59 per share a year before, on revenue growth of 13.1%.

 

The group raised by $300m to $3.3bn the cost synergies it expects to reap from the merger.

 

DowDuPont shares stood 2.4% lower at $73.76 in afternoon deals in New York.

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