August 3, 2018
DowDuPont reported second quarter 2018 results on Aug. 2.
GAAP earnings per share from continuing operations was $0.76. Adjusted earnings per share increased 41% to $1.37, compared with pro forma adjusted earnings per share in the year-ago period of $0.97. Adjusted earnings per share excludes significant items in the quarter totaling net charges of $0.50 per share and an $0.11 per share charge for DuPont amortization of intangible assets.
Net sales increased 17% to $24.2 billion, with double-digit growth in all divisions and gains in all geographic regions, from pro forma net sales of $20.7 billion in the year-ago period. The Agriculture division increased sales 25%, driven by a recovery from weather-related delays in the first quarter and local price gains. The Materials Science division grew sales 18%, with double-digit gains in all segments and in all regions. The Specialty Products division increased sales 10%, with gains in most segments and all regions.
Volume grew 10% on a pro forma basis from the year-ago period, with gains in all divisions and all regions, led by double-digit gains in U.S. & Canada and Asia Pacific. Agriculture volume increased 20%, primarily driven by a recovery from weather-related delays in the first quarter. Materials Science and Specialty Products volume increased 10% and 4%, respectively, both with gains in all segments and regions.
Local price rose 4% on a pro forma basis, with gains in all divisions and all regions, led by a 5% increase in Materials Science and a 4% increase in Agriculture.
Operating EBITDA increased 29% on a pro forma basis from the year-ago period to $5.7 billion. Agriculture achieved 45% operating EBITDA growth. Specialty Products delivered operating EBITDA growth of 23%. Materials Science delivered operating EBITDA growth of 22%.
Operating EBITDA drivers in the quarter included volume and local price gains, cost synergies, currency, lower pension/OPEB costs and higher equity earnings.
DowDuPont achieved cost synergy savings of more than $375 million in the quarter, reaching cumulative savings of nearly $900 million since merger close. The company now expects to achieve year-over-year savings of $1.4 billion in 2018, a more than 15% increase from its previous target.
Cash flow from operations was $2.1 billion, driven by increased cash earnings.
The Company returned nearly $2 billion to shareholders in the quarter through dividends ($0.9 billion) and share repurchases ($1 billion). Since merger close, DowDuPont has returned $5.6 billion to shareholders.
“We continued to deliver strong results in the second quarter, including double-digit gains in sales and operating EBITDA,” said Ed Breen, chief executive officer of DowDuPont. “Volume growth, local price gains and operating margin expansion were the key highlights, reflecting a clear focus from the businesses on execution. Our new product launches are resonating with customers, resulting in strong demand across each of our targeted end-markets. These are indicators that our three divisions are making a difference in the marketplace and for shareholders. We have great momentum and our employees are enthusiastic about the future of our intended industry-leading companies – Corteva, Dow and DuPont.”
Second quarter division highlights
Net sales of $5.7 billion increased 25% from pro forma net sales of $4.6 billion in the year-ago period, driven by sales recovered from weather-related delays to the Northern Hemisphere planting season, local price gains and double-digit growth in insecticides. Volume rose 20%, local price grew 4% and currency added 1%.
Operating EBITDA of $1.7 billion rose 45% versus pro forma operating EBITDA of $1.2 billion in the prior-year period.
Total insecticide sales continued their growth trend and increased nearly 20% in the quarter, driven by strong demand creation efforts against competitive chemistries for Spinosyn products, and new product launches.
Operating EBITDA improvement reflected volume growth in U.S. & Canada and EMEA, higher selling prices in Seed, cost synergies, currency benefits and lower pension/OPEB costs, partly offset by lower expected planted area in U.S. & Canada, higher soybean royalty costs, increased research and development spending to continue advancing the pipeline and investments in digital platforms.
Agriculture first half 2018 results
First half net sales of $9.5 billion decreased 1% from pro forma net sales of $9.6 billion in the year-ago period. Local price improvement of 2% and currency benefits of 2% were more than offset by a volume decline of 5%. Price increases reflected continued penetration of new products, such as A-series soybeans. The volume change was driven by lower expected planted area in U.S. & Canada and a reduction in safrinha area in Brazil, partly offset by new product launches in Crop Protection. Insecticide sales in the first half continued to perform well with 17 percent growth versus prior year.
Operating EBITDA of $2.6 billion was down 2% versus the same period last year. Cost synergies, favorable currency, lower pension/OPEB costs and sales gains in Crop Protection were more than offset by higher soybean royalty costs, lower expected planted area in U.S. and Canada, a weaker safrinha season, and investments to support new product launches and digital platforms.
Nutrition & Biosciences
Nutrition & Biosciences reported net sales of $1.8 billion, an increase of 19% from pro forma net sales of $1.5 billion in the year-ago period. The increase was due to an 11% net benefit from portfolio, 4% from volume, 3% from currency, and 1% from local price. The net positive impact from portfolio-related actions was due to the acquisition of FMC’s Health & Nutrition business.
Volume growth in the segment was led by Nutrition & Health on improved demand for specialty proteins and continued gains in probiotics and pharmaceutical excipients, primarily in Asia Pacific and U.S. & Canada. Industrial Biosciences volumes grew on increased demand for bioactives in animal nutrition and home and personal care applications.
Operating EBITDA for the segment was $433 million, up 36% from pro forma operating EBITDA of $318 million in the year-ago period driven by a portfolio benefit, cost synergies, volume growth and lower pension/OPEB costs.
“Broad-based consumer strength continues to drive economic expansion and our underlying business growth,” said Howard Ungerleider, chief financial officer of DowDuPont. “Leading indicators, such as manufacturing output, employment, wages and consumer spending remain largely constructive, supporting increased global economic activity. We see some discrete headwinds, most notably currency fluctuations, particularly in Agriculture, and higher raw materials costs in all three divisions. Looking ahead, we continue to expect above-market growth through much of DowDuPont’s business portfolio, driven by our innovations, growth investments, geographic reach and leading market positions. We expect third quarter net sales to be up more than 10% and operating EBITDA up more than 12% year-over-year.”
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