DuPont, the world's second-largest seed maker, said its agriculture business would not improve in the current quarter as it struggles to cope with farmers' preference for soybean rather than corn, the mainstay of the business. The company, whose stock closed down nearly one percent on July 22, said it expects the agriculture unit to post "a similar third-quarter loss as the prior year", which was the last quarter the unit lost money.
DuPont, which employs about 60,000 people, also plans to cut its global workforce in the "low single digits" in percentage terms, company spokesman Dan Turner said in an email. He did not specify a timeframe for the job cuts.
DuPont, founded in 1802 to make gunpowder, now gets more than a third of its sales from the farm business after pushing into agriculture, energy and specialty materials to insulate itself from volatile businesses such as performance chemicals.
But that push has cost the company, as it did No 1 seed maker Monsanto Co, as farmers in North America switched to soybean from corn in the spring planting season after delaying purchases earlier this year due to an unusually harsh winter.
Soybean made up 14 percent of DuPont's 2013 farm sales. The low demand for corn seeds, which accounted for about half of DuPont's farm sales in 2013, led to weaker-than-expected revenue in the company's second quarter ended June 30.
"If the current supply dynamics persist and corn planted area remains under pressure, it will temper short-term growth rates for the agriculture segment, particularly in our seed business," James Borel, who oversees DuPont's farm business, said on a post-earnings call.
FARM FOCUS FIZZLES
The company's second-quarter operating earnings in the agriculture unit fell 11 percent to $836 million.
DuPont said it expects a third-quarter loss "similar" to the $62 million it reported a year earlier in the farm business.
The July-to-September quarter is seasonally weak for seed makers as it is harvesting season in the northern hemisphere and spring planting in the southern hemisphere is yet to begin.
DuPont's forecast for the second half of the year implies a company-wide operating profit of 50-54 cents per share in the third quarter, lower than the 60 cents analysts on average are expecting.
However, that means earnings would handily beat estimates in the fourth quarter. But analysts and investors shrugged it off.
"The strength in the fourth quarter may be earlier seed sales that might have otherwise occurred in early 2015, so I would say this is relatively disappointing," said UBS analyst John Roberts.
ACQUISITIONS AHEAD?
DuPont, however, expects a rise in third-quarter operating earnings at four of its five other businesses, including at the volatile performance chemicals unit, which is on-track to be spun off next year.
Chief Executive Ellen Kullman said the company was evaluating acquisitions as it looked ahead to the separation of the unit that makes white pigments and teflon coatings. DuPont announced the spin-off last year after Nelson Peltz disclosed a stake in the company.
