DuPont Sales Trail Estimates Amid Lower Farm Spending

By Jack Kaskey

DuPont Co. (DD), the biggest U.S. chemical maker by market value, posted a surprise drop in third-quarter sales amid reduced buying by farmers and rising competition in solar-panel materials.
Revenue dropped 2.9 percent to $7.51 billion, Wilmington, Delaware-based DuPont said today in a statement. The average estimate compiled by Bloomberg from 15 analysts was for an increase to $7.95 billion.
The decline was led by North America, where sales dropped 5 percent as prices fell and DuPont sold some businesses. Only Asia Pacific posted a gain.
DuPont Chairman and Chief Executive Officer Ellen Kullman is under pressure after activist investor Nelson Peltz last month stepped up his campaign for change at the company. He published a letter in September calling for DuPont to be broken up and criticized the board for missing earnings targets.
U.S. farm income is falling as bumper crops of corn and soybeans undermine grain prices. DuPont’s agriculture unit, which sells genetically modified seeds and
pesticides, is its largest by revenue. Sales there dropped 4.3 percent in the quarter amid lower prices and volumes for corn seed.
“All indications point to continued weakness in the Ag space,” James Sheehan, an Atlanta-based analyst at Suntrust Robinson Humphrey Inc. who has a hold rating on DuPont, said in an Oct. 15 report.
Sales were down at four of DuPont’s other six units. That was due in part to the sale of its GLS/Vinyls, Sontara and Stonetech businesses, its share of a joint venture with Borealis AG, and a French factory.

Profit Gains

DuPont said in presentation slides on its website that revenue declined in its electronics and communications segment because of lower prices and “intense competition” facing its Solamet paste, which is used to make solar panels.
The shares were little changed at $67.75 at 7:34 a.m. before the start of regular trading in New York.
Net income rose to 47 cents a share from 30 cents a year earlier. Profit excluding some items was 54 cents a share, compared with the 53-cent average estimate. Operating margins rose in five of seven units, and DuPont reiterated its forecast for 2014 operating earnings of $4 to $4.10 a share.
Kullman has already announced measures to improve shareholder value after Peltz’s Trian Fund Management LP first acquired a stake in DuPont last year. DuPont plans to spin off its performance chemicals unit, eliminate $1 billion in costs by 2019, and buy back $5 billion of shares.

Tyvek, Corian

Trian wants DuPont split into two entities: businesses such as agriculture and nutrition, and other more cyclical operations such as performance materials and electronics. Performance chemicals, which Kullman has said she plans to separate next year, would constitute a third company.
DuPont, founded in 1802 to make gunpowder, produces thousands of products from Corian countertops to Tyvek personal protection gear and Kevlar anti-ballistic fiber.