DuPont Profit Forecast Disappoints on Effects From Strong Dollar

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DuPont Co., which agreed last month to a historic merger with Dow Chemical Co., forecast lower-than-expected full-year earnings as the chemical company battles with the effects of a strong dollar and weak demand for its agriculture products.

Profit excluding some items will be $2.95 to $3.10 a share this year, DuPont said Tuesday in a statement. The average of 21 analysts’ estimates was $3.15 a share. Wilmington, Delaware-based DuPont also posted its first quarterly net loss since the height of the financial crisis, losing 29 cents a share in the final three months of 2015 compared with net income of 74 cents a year earlier.

“Current difficult global economic conditions in agriculture and slower growth in emerging markets are expected to continue, challenging the company’s sales growth in 2016,” DuPont said in the statement.

DuPont and Dow’s merger, the biggest ever in the chemicals industry, is planned as a prelude to a split that will create three new companies focused on agricultural products, commodity chemicals and specialty materials. Ed Breen, who was appointed DuPont’s chief executive officer a month before the merger was announced, is planning to reduce expenses, partly by eliminating 10 percent of the workforce. DuPont is cutting costs as its agriculture unit, the company’s largest by revenue, faces weaker commodity markets.

Cost Savings

DuPont said Tuesday that it sees a benefit of about $730 million, or 64 cents a share, this year from its cost savings and restructuring. That’s higher than the company’s previous view of $700 million. Annual savings will ultimately reach $1 billion, up from an earlier projection of $900 million, it said. However, it also expects currency to reduce earnings by about 30 cents.

Fourth-quarter profit excluding restructuring costs and other items was 27 cents, beating the 26-cent average estimate. Revenue declined to $5.3 billion from $7.38 billion, missing the $5.39 billion average estimate.

"Agriculture companies continue to be negatively impacted by low corn prices, currency headwinds, particularly the Brazilian real and Argentine peso, and further weakness in crop protection and seed products, primarily in Brazil," David Begleiter, a New York-based analyst at Deutsche Bank AG who recommends buying DuPont shares, said in a Jan. 20 note.

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