Slowing Seed Sales Contribute to DuPont Revenue Drop

January 27, 2015 06:44 AM
Slowing Seed Sales Contribute to DuPont Revenue Drop

DuPont Co., the chemicals company facing a proxy contest with activist shareholder Trian Fund Management LP, posted an unexpected drop in fourth-quarter sales and forecast 2015 earnings that trailed analysts’ estimates.

Revenue fell to $7.38 billion from $7.75 billion, Wilmington, Delaware-based DuPont said in a statement Tuesday, compared with the $7.79 billion average of 12 estimates compiled by Bloomberg. Profit excluding some items was 71 cents a share, matching the average estimate.

Average prices fell in every business segment, led by an 8 percent decline in the agriculture business, where lower grain prices reduced farmer spending on corn seeds in Brazil. Foreign exchange reduced company-wide sales by 3 percent, DuPont said.

Agriculture companies “continue to be negatively impacted by falling corn prices in the fourth quarter,” David Begleiter, a New York-based analyst at Deutsche Bank AG who recommends buying the shares, said in a Jan. 16 note.

For 2015, the company said operating earnings will be as much as $4.20 a share, trailing the $4.44 average estimate. Profit this year will be cut by 60 cents a share because of the impact of the stronger dollar, it said.

DuPont fell 1.5 percent to $73 before the start of regular trading at 6:21 a.m. in New York.

The company also said Tuesday it’s expanding its cost-cutting plan to $1.3 billion by the end of 2017. It previously sought $1 billion of savings through 2019. Dividends received by DuPont from Chemours, the performance-chemicals business it plans to spin off later this year, will be returned to shareholders via stock buybacks. The proceeds will be about $4 billion, DuPont said.

Trian Plan

The weaker-than-expected quarterly sales and 2015 forecast may hurt efforts by DuPont Chairman and Chief Executive Officer Ellen Kullman to defend against Trian’s campaign to seek four board seats. Trian has criticized Kullman’s failure to reach her goal of 12 percent annual earnings growth for three straight years and it argues that the 212-year-old company should be broken up.

Trian, which is based in New York, held a 2.7 percent stake in DuPont at the end of last year, and says the company can cut $4 billion in costs. While DuPont already plans to spin off Chemours, Trian advocates the rest of the company be split in two. One part would include the faster-growing agriculture and nutrition units and another would encompass more cyclical businesses.

Kullman’s choice to fight Trian, saying shareholder returns outpaced major stock indexes since she became CEO in 2009, contrasts with industry peers Dow Chemical Co. and Air Products & Chemicals Inc., who have decided to work with activists.

At the same time, she has already implemented some of the recommendations made by Trian, including the sale of the DuPont Theater in Wilmington.

DuPont shareholders will vote to select the board at the company’s annual meeting in April.


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Spell Check

John H
Ames, IA
1/27/2015 01:05 PM

  Dave - YOU have the power of choice. If you feel farming is like slavery, get out of farming and find something that makes you happier. If you feel like the seed companies are cheating you, change seed companies, or buy lower tech/cheaper seed. There are some very good seed companies out there that offer excellent products and that aren't multinational conglomerates looking to milk your revenue stream. Becoming more diverse is an excellent idea but it may require you to leave the subsidies and safety nets the US government has in place for the major crops. It is all about choice. If you're not happy, choose something different. Just stop complaining and do something about it. Farming is a fulfilling life and it has been extremely good to me, especially the past ten years.

Dave Burke
Smithfield, PA
1/27/2015 08:06 AM

  Farmers always are the first to lose and last to gain. Enhanced seed is helping with yields but look at the prices. Seed companies are like lawyers, they seldom lose any money no matter what. Big yield, cheap food, government and companies biggest gains. We are slaves to both. They already know many will plant more beans. We need to spread our risks out more, be more diverse in what we plant. We are the losers in this billion dollar game.

asdf, MN
1/27/2015 09:03 AM

  Dave-Farmers are first to profit. We sell our crops and choose to purchase from whomever. Cash exchanges hands from us to them. Yes we are slaves to the seed companies, but it's brought on by ourselves. Everyone pushes to produce more for less and we continue to chase our tails. We can choose to keep buying the old varieties if we wish. If the demand is there, they would not discontinue them. Likely not discount them either, but as patent rights expire you could replant last year's crops if you wished. It's possibly the price paid for not having to deal with customers.


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