November 1, 2018 / 10:47 AM / 16 days ago

DowDuPont tops profit estimates as chemicals demand provides boost

(Reuters) - DowDuPont Inc topped Wall Street estimates for third-quarter profit on Thursday, as stronger demand for chemicals used in cosmetics, paints and packaging gear helped offset slowing growth at its agriculture business.

FILE PHOTO: FILE PHOTO: A DuPont logo is pictured on the research center in Meyrin near Geneva August 4, 2009. REUTERS/Denis Balibouse/File Photo

The world’s largest chemicals producer, formed last year through the $130 billion merger of Dow Chemical and DuPont, also said it would buy back $3 billion in shares over the next five months.

DowDuPont’s shares rose 4.4 percent to $56.30 in premarket trading.

An intensifying trade dispute between China and the United States has weighed on the farm sector, especially after Beijing slapped a 25 percent tariff this year on U.S. soybeans, the most valuable American farm export to China.

DowDuPont said last month its agricultural unit, which produces seeds and pesticides, recorded a non-cash charge of $4.6 billion, as seed makers face shifts in demand as a result of trade tariffs.

China, the world’s top soybeans importer, has scaled back purchases of U.S. soy and is instead buying from Brazil.

The shift has prompted Brazilian farmers to plant more soybeans, instead of corn. Some U.S. farmers may make the opposite choice in the spring.

The tariff row could hurt DowDuPont’s U.S. agricultural business next year because of higher soybean production in Latin America, Chief Financial Officer Howard Ungerleider said in an interview.

Still, Ungerleider suggested the impact may not be immediate. “We don’t see any material impact from the (trade) tariffs on our businesses in the fourth quarter,” he said.

DowDuPont’s overall net sales rose 10 percent to $20.1 billion in the third quarter ended September.

Sales at its materials science business, which produces chemicals used in cosmetics, packaging material, paints and brake fluids, rose 13 percent to $12.4 billion. The unit is DowDuPont’s top revenue contributor.

Agricultural unit sales rose 2 percent to $1.91 billion.

Selling, general and administrative costs ballooned almost 50 percent to $1.5 billion.

Adjusted earnings jumped 35 percent to 74 cents per share, above analysts’ average estimate of 71 cents, according to Refinitiv data.

DowDuPont, which is in the process of splitting itself up into three companies, said the separation was on track. The materials science division, to be called Dow, should separate by April 1, the company said.

Reporting by Laharee Chatterjee in Bengaluru; Editing by Sweta Singh and Sai Sachin Ravikumar

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