A Corn-Fueled Boost for DuPont

Robust sales of corn seed helped lift the chemicals giant's quarterly profit

DuPont (DD) said Apr. 24 that it managed to earn more during recent months, as sales grew overseas and in opportune businesses like making corn seed.

The Wilmington, (Del.) chemical company's net income during the first quarter rose to $945 million, or $1.01 per share including items, 15% more compared to the same period last year. "Our results highlight the benefits of our global presence and diversified businesses," CEO Charles O. Holliday, Jr. said in a press release Apr. 24.

Sales increased 6% year over year to $7.8 billion during the first quarter. Sales in both the Europe and Canada & Latin America regions gained 11% each, in contrast with U.S. sales, which rose only 2% year over year.

Troubles in the U.S. did take their toll. DuPont's Coatings & Color Technologies business unit, which makes products like auto paint supplies, grew sales only 5% year over year to $1.6 billion during the first quarter. But the company's agriculture and nutrition business unit, which includes corn seed, grew sales 13% to $2.5 billion during the first quarter. Prices for corn, which is used to make ethanol, have risen during recent months amid growing enthusiasm for alternative fuels.

"Robust farm fundamentals and solid performances in overseas markets were more than sufficient to offset the headwinds created by the decline in North American housing and automobile production," Morningstar analyst Ben Johnson said in a research note.

Investors bid up DuPont's stock 1.9% to $50.13 per share in afternoon trading on the New York Stock Exchange.

"We expect U.S. auto- and housing-related markets to stay sluggish," Standard & Poor's equity analyst Richard O'Reilly said in a research note. But noting the company's growing corn seed and overseas sales, S&P hiked its 2007 earnings per share estimate to $3.15 from $3.10 and a target price on DuPont's stock to $52 from $50.

Meanwhile CEO Holliday has taken steps in recent years to remove his company's cost burden. In April, 2004, for example, DuPont sold its Textile and Interiors unit for $4.2 billion and used the proceeds to repay debt. Since the business consisted of fiber products like nylon and polyester, that sale cut DuPont's exposure to raw material cost changes by about 55%, according to Standard & Poor's Corp. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

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