DuPont’s agriculture segment sales up 2% in Q3 2016

Sales of DuPont’s agriculture segment rose by 2% to $1.1 billion in the third quarter ended September 30th, 2016. Operating earnings for the quarter were a seasonal loss of $189 million, improved $21 million, or 10%, as cost savings, higher volumes and a $28 million benefit from currency were partially offset by lower local price and higher product costs. 

 

Operating margins improved 230 basis points. The solid performance was driven by a strong start to the Brazil summer season with new Leptra® hybrids continuing their successful launch. Favorable currency and cost savings also helped to drive earnings improvement. 

 

Third quarter volume increased 4% with growth in both corn and soybean seeds partially offset by lower crop protection volume, due to continued low pest pressure and high industry inventories. In Latin America, farmers chose a stronger mix of Pioneer’s newest corn hybrids resulting in higher net corn price. The third-quarter seasonal operating earnings loss improved by $21 million, driven by cost savings, higher volumes, and a $28 million benefit from currency. It is important to note that the $21 million improvement came despite the absence of $48 million of one-time benefits which were recorded in the third quarter of last year. 

 

The nine-month sales of $8.1 billion grew organically by 2% driven equally by volume and price. In corn seed the company has grown sales by 4% year-to-date also driven by both volume and price improvement. This was enabled by building upon leading positions in high-value global markets including North America, Brazil, Mexico, Southern Europe and South Africa, driven by the performance of newest products and continued enhancements to direct route-to-market. Operating earnings increased 5%, driven by cost savings and favorable pricing, which provided the company the ability to overcome currency headwinds and weakness in the crop protection industry.

 

 

DuPont expect sales to be down in the mid-single-digits percent range and the seasonal operating earnings loss to be nearly half of what it was in the same quarter of last year. The fourth-quarter outlook is pressured by timing in two respects. First, the company is shifting seed deliveries from the fourth quarter to the first quarter of 2017, primarily driven by Southern route-to-market change to a sales agency model, which is similar to the approach DuPont utilizes in the Midwest; and second, the company realized sales in the third quarter to the detriment of the fourth quarter, primarily in Asia and Africa. 

 

The Ag industry continues to face tough conditions with challenging commodity prices leading to a further decline in net farmer income and high channel inventories. 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. DuPont is helping to drive productivity to meet those needs through new product introductions such as its latest corn genetics, Leptra® and Qrome® corn products; newest crop protection products, such as Zorvec™ fungicide; and continued expansion of Encirca^SM services digital Ag offering, which will be on more than 2 million paid acres this year, up more than 2 times versus last year.