DuPont (NYSE:DD), the chemical major, has been looking for new avenues for growth. It’s bet on solar and other renewable energy seems to have stalled for the time being, as the makers of solar panels, electronics and other equipment used for generation of renewable energy have cut back on their orders to DuPont. It has zeroed in on two products, which it feel will drive most of its bottom line in the coming years. Both of the products are related to food industry, which is one of the most important divisions of DuPont, accounting for nearly 32% of the of our $59 price estimate. It also nicely fits in with the macro trend which dictates that the world will have to feed an additional 10 billion people in the next 40 years.
DuPont competes with other chemical manufacturing majors like Dow Chemical Company (NYSE: DOW) and Bayer AG (BAY:GR).
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Increasing Demand for Soy Supplements
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DuPont is looking to exploit the increasing demand for soy supplements by consumers who are want to get more protein in their diet. Soy supplements are extracted from soybeans after the plant is milled into a flour. It is popular among vegetarians and those who are lactose intolerant.
Soy protein has many health benefits and an increasing number of food companies are looking to incorporate them in their products. DuPont sells these soy supplements as a part of its Solae joint venture with Binge Ltd. It is among the few companies which make specialized ingredients used by large packaged food producers. Hence, DuPont feels that it will be able to capitalize well on this increasing demand for soy proteins.
Improved Weed Tolerance to Pesticides
The farming community had long back started shifting to genetically modified seeds which offer resistance to herbicides and pesticides resulting in a better yield. DuPont, like other companies, has also been bringing modified seeds to the market, which offer resistance to certain herbicides and pesticides as well as also use less water in some regions.
With the growing population, agricultural production will have to double. This means an increased yield resulting in higher use of pesticides and herbicides. In such a scenario, demand for seeds and products enhancing crop protection to these chemicals is bound to increase, providing a great opportunity for DuPont to capture this market.