DuPont's agriculture segment sales down 30% in Q3 2015

A seasonal operating loss of $210 million was $154 million larger as improved productivity and cost reductions, increases in local price, $27 million gains from asset sales and a $21 million benefit related to prior periods were more than offset by lower volumes and a $108 million negative currency impact. Decreased volumes are due to lower seed volumes and reduced demand for insect control products, primarily in Brazil, and an about $40 million negative impact from the LaPorte manufacturing facility shutdown. Excluding the impact of currency, the operating loss would have been $102 million.

Near term conditions remain challenging in agriculture. Demand for seed and crop protection products, primarily in Brazil, further weakened in the quarter impacted by macroeconomic and competitive pressures. In Brazil, where the planting season is in progress, tighter farmer profit margins and credit are causing growers to be more cautious in their spending.

Third quarter sales were 30 percent lower as higher local crop protection prices in Brazil were more than offset by 17 percent lower volumes and a 15 percent negative currency impact. Seed sales were 38 percent lower and crop protection sales were down 23 percent versus last year.

A weaker Real makes Brazil soybean exports more competitive globally, and this is incenting growers to plant more soybeans. In addition, soybeans require fewer inputs than corn, particularly imported fertilizer. These factors are further reducing expectations for hybrid corn planted area and corn seed volumes in Brazil's summer season. Soybean seed volumes were lower in Brazil and in North America where adverse weather for late season planting lowered area expectations. In crop protection, DuPont has a strong market position with high-value products like Rynaxypyr® insect control products. However, low expected insect pressure, higher inventories and the macro environment have softened the demand for insect control products. Insect control volumes were also impacted by the shutdown of the LaPorte manufacturing facility. DuPont gained solid growth during the quarter for picoxystrobin fungicide products in North America and Brazil.

DuPont typically report an operating loss in the third quarter as this is the lowest period during the year for agricultural sales. An operating loss of $210 million was $154 million larger as cost reductions and continued productivity, increases in local price, $27 million of gains from asset sales and a $21 million benefit related to prior periods were more than offset by lower volumes, $108 million negative currency impact and about a $40 million negative impact from the LaPorte manufacturing facility shutdown. Excluding the impact of currency, the operating loss would have been $102 million. 

Outlook

The fourth quarter in Agriculture segment is driven by the completion of the Brazil summer season and shipments to position product for the upcoming Safrinha season in Brazil and for the 2016 Northern hemisphere season. DuPont expects strong headwinds from macroeconomic and competitive pressures to continue. For the fourth quarter it expects sales to be down low-teens percent as local pricing gains are expected to be more than offset by currency, lower crop protection volumes in Brazil and the continued impact of the shutdown of LaPorte. It expects an operating loss of about $100 million as cost reductions and continued productivity will be more than offset by a significant negative impact from currency, lower crop protection volumes, and the absence of prior year impacts from performance-based compensation adjustments and $36 million in gains from the sale of businesses.

While markets remain challenging, DuPont is confident in long-term growth in demand for agricultural products and in the pipeline of new genetics, unique trait combinations and innovative crop protection solutions coming from their focused investments in R&D. In crop protection it continues to receive registrations of Cyazypyr® insecticide in additional countries. DuPont is also growing their seed treatment portfolio, and is preparing for new launches of Zorvec™ fungicide and Pyraxalt™ insecticide for rice, pending regulatory approvals. For DuPont Pioneer in Brazil they are progressing well in limited launch of Leptra® corn hybrids for the upcoming Safrinha season with an aggressive ramp-up plan for the 2016 summer season. In North America, based upon the most recent 2015 USDA acreage estimate, DuPont held corn market share during one of the most competitive sales seasons in recent history. Two newest classes of genetics are showing early signs of strong harvest performance and are expected to make up about half of their North America corn sales volume in 2016. And Qrome™ corn products continue to progress well toward commercialization, having been tested this past summer in IMPACT™ trials, as DuPont awaits final import approvals in key markets.