EI DuPont de Nemours & Company (DD) has delayed the release of its corn hybrids and soybean varieties products at its Pioneer Hi-Bred seed business. The world’s second largest chemical company (in terms of market capitalization and fourth in terms of revenues) stated that the current quality of corn does not meet Pioneer’s high yield standards.
As a result, the division has reset its plans to commercialize its Optimum GAT corn and will not have controlled releases in 2010 and 2011 in North America. DuPont plans to intensify its research efforts for the corn trait and work toward commercialization. The company is hoping to release its Optimum GAT soybeans two to three years later than the anticipated 2011 introduction due to changes in regulatory policy in key import markets.
The company said it is pursuing the regulatory approvals, and has already received clearance in the U.S. and Canada. DuPont has however affirmed a 15% compound annual earnings growth rate through 2013 at its agriculture and nutrition business segment, the largest of the company’s five segments, based on year-to-date net sales.
DuPont has been focusing on aggressive cost cutting. The company plans to gain about $1 billion in fixed cost productivity and $1 billion in working capital productivity during 2010-2012. A focus on emerging markets and strong performance in the Agriculture & Nutrition segment will likely generate about 10% growth in the top line during 2009-2012. DuPont hopes to grow earnings at 20% between 2009 and 2012.
However, the U.S. housing market slump has impacted products, such as Corian and Tyvek. Weak North American automotive and construction markets have hurt its Coatings business. Pharmaceutical royalties are also expected to decline after the expiry of patents in 2010. Hence, we have a Neutral rating on the stock.
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