(Reuters) — Chemicals maker DuPont forecast lower-than-expected operating earnings for the current quarter and warned of a loss in its agriculture unit as weak farm sales constrain both profit and revenue.
DuPont has made a big push into agriculture, energy and specialty materials to insulate itself from more volatile businesses. The farm unit accounts for more than a third of the company’s sales.
But that has cost the company in the last two quarters. Farmers in North America switched to soybean from corn, a crop Dupont is more exposed to, after delaying purchases earlier this year due to an unusually harsh winter.
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Corn seeds accounted for about half of DuPont’s agriculture sales in 2013, while soybean made up 14 percent.
DuPont forecast operating earnings of $1.25 to $1.35 per share for the second half of the year, and said it expected to realize 40 percent of those earnings in the third quarter.
That works out to 50-54 cents per share. Analysts on average were expecting 60 cents per share, according to Thomson Reuters.
“The third-quarter outlook shows continued headwinds in the agricultural sector,” said Suntrust Robinson Humphrey analyst James Sheehan.
DuPont, the maker of Pioneer genetically modified corn and soybean, reported second-quarter revenue below Wall Street’s expectations on Tuesday.
The company said it expects “a similar third-quarter loss as the prior year” at its agriculture unit. The unit posted an operating loss of $62 million in the third quarter of 2013, the last the unit lost money.
Second-quarter operating earnings in DuPont’s agriculture unit fell 11 percent to $836 million in the second quarter, hurt by weak corn seed and herbicide sales and higher seed inventory write-downs.
Monsanto Co., the world’s largest seed company, reported a six percent drop in quarterly profit last month due to weak corn sales and higher costs.
DuPont, founded in 1802 to make gunpowder, is now the second-largest seed maker after Monsanto, thanks to a transformation that began in 2009.
DuPont said last month that it plans to generate at least $1 billion from cost cuts by the end of 2019 as it aligns its structure with a planned spin-off of its performance chemicals unit in 2015.
Operating earnings at the unit, which makes refrigerants and a white pigment used in toothpastes, sunscreens and other products, fell six percent in the quarter.
DuPont announced the spin-off after Nelson Peltz’s Trian Fund Management disclosed a stake in the company last year. Peltz, who holds less than a one percent stake in DuPont as per regulatory filings, has called the company’s stock undervalued.
DuPont, which set a $5 billion share buyback program earlier this year, raised its quarterly dividend by two cents to 47 cents per share on Tuesday.
Net income attributable to DuPont rose four percent to $1.07 billion, or $1.15 per share. Operating earnings were $1.17 per share — in line with the average analyst estimate.
Net sales slipped about one percent to $9.71 billion, missing the average analyst estimate of $9.79 billion.
