DuPont food business slides further in Q4
fourth quarter net income, but results were dragged down by a weak
performance from the company's agriculture and nutrition division.
DuPont, which supplies the food industry with biotech crops through its subsidiary Pioneer Hi-Bred International, today reported net sales of $6.3bn for its fourth quarter, up 8 percent from the same period last year.
The increase, due to higher volume sales, increased prices and favorable currency benefits, resulted in total income of $576m, 45 percent up on last year.
However, the firm's Agriculture & Nutrition division continued its downward turn, making a loss of $350m in the three months ended December 31 2006. This compares to a loss of $272m in the year ago period.
According to the firm, the loss is a result of the seasonal nature of its business, which generates most of its income in the first half of the year.
However, this seasonal performance was also coupled with a number of challenges the firm faced in 2006, according to Pioneer's Doyle Karr. These included globally reduced corn acreage, as well as issues with meeting demand for certain biotech traits.
"Despite a challenging 2006, the fourth quarter was a strong one for us, setting us up for 2007, which we think will be back on the growth path," he told FoodNavigator-USA.com.
The firm expects this growth to stem from increased sales, as it expects corn acreage for 2007 to be "up significantly" , as well as from the continued restructuring of the division.
DuPont's restructuring plan for its Agriculture & Nutrition segment, announced in December, involves "streamlining or eliminating low-return opportunities" - such as certain herbicide products or areas of its Solae soy protein business - and focusing on higher growth opportunities, according to Doyle.
The restructuring, which will lead to an emphasis on plant genetics and biotechnology, will result in the loss of 1,500 jobs. It is expected to generate $100m a year in savings, which will be reinvested into the business.
"With the growth of biofuels, there has been an increase in demand for corn and other crops. It's important for us to increase our productivity to meet these industrial needs, and also ensure there is enough grain for food," said Doyle.
Despite a continued segment loss in the company's fourth quarter, sales of agricultural and nutrition products increased by 17 percent to reach $1.1bn. This corresponds to a 13 percent increase in volume sales.
"Our fourth quarter was helped by an increase in sales in Brazil, Argentina and Europe, which allowed us to reduce seasonal losses," said Doyle, adding that the company expected an improved operating environment to lead to a much smaller loss in the fourth quarter of 2007.
