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  • Unconventional Ag

Weaker Agriculture Cuts into DuPont’s Profit Forecast

On Tuesday DuPont Co. cut its full year profit forecast for 2015 after adjusting for a change in portfolio and as weaker agricultural markets took its toll on the company’s agriculture business.

The downgrade was more than analysts had expected, as operating earnings for 2015 will be $3.10 per share, down from a predicted $4 per share, and comes as the company announced an 11% year-on-year drop in second quarter earnings to $8.6 billion.

A spinoff of the company’s chemicals unit, now renamed Chemours Co., earlier in the year, means that the company can now focus on more profitable businesses, such as seed and pesticides. But lower corn and soybean prices in 2015 are eating into farmer finances and putting downward pressure on demand for seeds and pesticides. As a result earnings in the company’s agriculture unit fell 6.9 percent.

“This reliance on ag looks to us to be a negative over the near term and potentially the longer term as well, as we see an extended bear market in ag as possible,” says Chris Shaw, a New York-based analyst at Monness, Crespi, Hardt & Co. who rates the shares hold, cited in a Bloomberg article on Tuesday.

In the earnings announcement, company CEO, Ellen Kullman confirmed plans to cut expenses by $1 billion for the year. In addition, DuPont plans to buy back shares using the $4 billion dividend from the spin-off of Chemours and by year’s end complete $2 billion of accelerated stock repurchases.

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