Dow Dupont posts solid quarter but ag component lags due to weather-related delays in North America. Acreage shifts from corn to soybeans may adversely affect the ag business going forward.
Weather-related issues slowed its agriculture business, but increased prices and strong demand in other segments more than made up for it as DowDuPont reported strong earnings for the first quarter of 2018.
The chemical giant reported a profit of $1.1 billion, or 47 cents per share. DowDuPont, still not a year into its historic merger, reported net sales of $21.5 billion, up 5 percent from this time last year if DowDuPont was one company. Sales were driven by segments within the materials science and specialty products divisions.
The earnings and revenue reported surpassed expectations.
“It was a mixed bag overall,” said Matt Arnold, an analyst with Edward Jones. “If you were to sum up all of the parts it came in as a slightly better-than-expected earnings report.”
DowDuPont also had more than $300 million in cost-saving synergies in the first quarter and says it is on pace to deliver 75 percent of the $3.3 billion run-rate by the end of the third quarter this year.
The specialty products division, which will stay in Delaware and be known as Dupont once the spin-offs happen, saw an increase of sales by 11 percent while the Michigan-based materials science division had a 17 percent increase in sales.
Those numbers helped offset agriculture, which saw net sales dip 25 percent to $3.8 billion this quarter thanks to weather delays in the northern hemisphere and Brazil.
“The Materials Science and Specialty Products divisions delivered better-than-expected top- and bottom-line growth with higher prices and volume gains,” CEO Ed Breen said in a statement. “Their growth more than offset weather-related delays that are expected to shift a substantial portion of our agriculture earnings to the second quarter.”
Arnold said he wasn’t overly concerned about DowDuPont’s “weak” start in agriculture. Arnold did say, though, that something to keep an eye on was if weather conditions in May force some corn crops to be replaced by soybeans, hurting profits.
Breen also updated the anticipated timeline for the spin-offs.
The materials science business is expected to be its own by the first quarter of 2019. Specialty products will be formed when agriculture separates by June 1, 2019.
Breen, toward the end of a webcast call with investors and media, wished Andrew Liveris, the outgoing former Dow chief, well in his future endeavors, which include a board seat at Saudi Aramco.
Earlier in the call, Breen also addressed his own future.
“I intend to be around through the intended spins and beyond,” Breen said. “I plan to be actively involved after the separations … I intend to see it through.”
“As an investor I think that’s a good thing,” Arnold said. “He has a track record of overseeing big transformations like this and doing it really well.”
Despite the first quarter success, DowDuPont stock is down nearly 11 percent on the year, a bit more than others in the industry who are also seeing slight dips.
Delaware Online, Jeff Neiburg, The News Journal, May 3, 2018