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DowAgrosciences cultivates sales record, but profit withers

October 24, 2013

Strong sales of new crop protection products helped Dow AgroSciences LLC cultivate revenue of $1.4 billion in its third quarter, up 8 percent from the same quarter a year ago.

That amounted to a third-quarter sales record for the Indianapolis-based maker of agricultural products, a unit of Michigan-based Dow Chemical Co. The parent firm reported its third-quarter results Thursday morning.

Despite the boost in revenue, profit for Dow AgroSciences tumbled more than 71 percent—from $63 million in the previous third quarter to $18 million in this year’s quarter. The figure represents earnings before accounting for interest, taxes, depreciation and amortization.

Dow attributed the decrease in profit to higher seed returns in North America driven by a late, wet planting season, as well as increased spending on growth investments.

Revenue from Dow’s crop protection products rose 10 percent in the quarter, driven by higher sales of herbicides in North America and insecticides in Latin America.

Parent Dow Chemical said that its third-quarter net income jumped nearly 20 percent, helped in part by gains from a joint venture in Kuwait that partly offset a decline in several businesses, including its epoxy unit.

The company earned $594 million, or 49 cents per share, in the three months that ended Sept. 30. That compares with net income of $497 million, or 42 cents per share, in the 2012 third quarter.

The results missed Wall Street expectations, and shares slipped 3 percent in trading Thursday morning to $39.97.

Dow said its earnings from investments in other companies climbed to $322 million in the quarter, an 84-percent increase from $175 million last year, mainly due to its joint venture in Kuwait. The company also helped its bottom line by cutting research and development and selling, general and administrative expenses by more than 3 percent and 5 percent, respectively.

But total revenue growth was nearly flat, inching up about 1 percent to $13.73 billion. Analysts expected $14.02 billion, according to FactSet.

Sales were hurt by a 7-percent drop in the company's feedstocks and energy segment, to $2.3 billion. Performance materials revenue, which includes its epoxy business, also fell 3 percent to $3.3 billion due to a drop in volume.

Earlier this month, Dow said it would sell its polypropylene licensing and catalysts business to W.R. Grace & Co. for $500 million. Chairman and Chief Executive Andrew Liveris said in a statement Thursday that the company has identified other units to divest, with a target of raising between $3 billion and $4 billion.
 

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