DuPont’s (NYSE:DD) has obtained a federal judge’s preliminary approval to settle class action claims that its Imprelis herbicide damaged trees at thousands of homes and golf courses.  Imprelis herbicide that was intended to be a broad leaf herbicide for use on lawns when introduced in 2010, has been held responsible for damages to several trees in areas where the chemical was used. After investigations of the reports of unintended damages to trees (especially Norway spruce and white pine) received by the Environment Protection Agency (EPA), it banned the sale of the herbicide in August 2011. DuPont received several claims and was served with multiple lawsuits alleging that the use of it’s herbicide caused damage to certain trees. The lawsuits seeking class action status were consolidated in multidistrict litigation in federal court in Philadelphia, Pennsylvania.
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Impact on DuPont’s Agricultural Science Business
With a lot of uncertainties involved, the company currently expects settlement charges to resolve these claims to amount to $900 million, of which the company has already accounted for $750 million in the previous two years. However, the company notes that predicting the impact of Imprelis on living organisms and how those organisms may react over time are significant factors driving the uncertainty of future charges. Amounts of $175 million and $575 million were reported as additional charges in the cost of goods sold under the agricultural science segment for the year 2011 and 2012 respectively. 
It should be noted that these charges significantly dragged the segment’s operating income in the last couple of years, offsetting smart gains seen in both volume and prices. Although there were other factors pulling operating income down like higher input costs of seeds, unfavorable currency impacts and higher investments in commercial and R&D activities to support growth, the contribution of charges associated to Imprelis were most significant. While we expect the impact of input costs and higher R&D expenses to continue to weigh on the segment’s operating income in the coming years, the impact of Imprelis charges are not expected to be as significant as they were in 2012. Currency impacts will continue to remain very uncertain, and we expect the segment’s EBITDA margins to remain relatively flat at around 18% over the Trefis forecast period.Notes:
- Judge approves DuPont settlement of herbicide lawsuits, February 12 2013, reuters.com [↩]
- DuPont 2012 10k, DuPont Investor Relations [↩]