DuPont’s Agricultural Business Offsets Weak Chemicals Performance

by Trefis Team
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DuPont (NYSE:DD) reported better than expected earnings buoyed by the strong performance of its agriculture segment. Total revenues for the quarter were at $7.3 billion, flat y-o-y as the currency impact and portfolio changes offset 3% volume growth. Sales for the full year were up 3%, reflecting 4% higher local prices, 2% adverse currency impact, 2% lower volume, and a 3% net increase from portfolio changes. [1] DuPont competes with other chemical manufacturing majors such as Dow Chemical Company (NYSE: DOW) and Bayer AG (BAY:GR).

Agricultural science products business outperforms

Agricultural science products sales were up 18% for the quarter y-o-y, backed by higher volume (11%) and higher prices (7%). For the full year, sales were up 14% as compared to 2011, due to higher volume (8%) and higher prices (6%). The segment’s full-year pre-tax operating income rose 18%, as strong sales more than offset unfavorable currency impacts and higher investments in commercial and R&D activities to support growth.

We see huge growth potential in the agricultural science business as growing adoption of genetically modified seeds for higher yields and better traits, coupled with rising population and declining availability of arable land, are all pointing toward higher demand for more sustainable technological solutions for the agriculture sector. DuPont’s Pioneer Hi-Bred is the largest producer of hybrid seeds and holds a handsome 20% market share in the global seeds market. Increased R&D investments and new product launches like the successful Optimum® AQUAmax™, will be remain a key to the company’s success in the segment.

Weak performance in the chemicals

DuPont’s performance chemicals revenues for the fourth quarter were down 15% y-o-y due to lower volume (8%) and lower price (7%). Weak demand for fluoropolymers in the US and Europe and lower prices of TiO2 led to the sales decline.

Given the nature of their usage, demand for pigments is highly correlated with GDP growth. With uncertainties in Europe and the slowdown in emerging markets such as China and India, we expect growth in TiO2 demand to remain subdued in the short run. However, the long term fundamentals of the industry remain strong and an increase in global infrastructure spending would put the market back on track.

Weak photovoltaic demand drive lower electronics and communications performance

Electronics and communications segment sales for the full year were down 15% due to lower volume (11%) and lower prices (4%) as compared to 2011. Weak pricing was primarily due to the pass-on of silver metal price decline to the customers. Lower demand for photovoltaic due to weak market conditions and uncertainties related to trade actions was also partially offset by higher demand for smartphones and tablets.

This year is expected to be better for photovoltaic demand as the Chinese government plans to revive the sector by increased investment. [2] Moreover, In the long run we expect the division to do better on higher demand for solar energy as an alternate source to the conventional fossil fuel sources.

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  1. DuPont Reports 4Q and Full-Year 2012 EPS of $.11 and $3.33 Ex-items,, January 22, 2013 []
  2. China Plans to Ramp Up Solar-Power Capacity,, January 8th 2013 []
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