DowDuPont to Record $4.6 Billion Charge as Agriculture Unit Suffers -- Update
October 18 2018 - 7:55PM
Dow Jones News
By Micah Maidenberg and Jacob Bunge
DowDuPont Inc.'s agriculture unit is taking a $4.6 billion
charge in the third quarter after the business lowered its
long-term expectations on sales and profits, a move that
underscores challenges agribusinesses are facing in the
Americas.
DowDuPont said in securities filings Thursday that it
recalculated the fair value of goodwill and other intangible assets
on the books of the merged Dow and DuPont company, and determined
that the values of assets in its agricultural unit had fallen. The
company said lower cash flow projections for the segment on weaker
sales and profits in the Americas as well as currency challenges in
Brazil triggered the impairment.
The company said it would write off around $4.5 billion in
goodwill and $100 million in unspecified assets associated with its
agricultural unit. DowDuPont said financial statements for the
parent company in the quarter ended Sept. 30 won't be impacted by
the impairment charge.
But shares in DowDuPont fell 4.1% in after-hours trading
Thursday. The company is scheduled to release its third-quarter
earnings Nov. 1.
DowDuPont's charge reflects the many challenges facing seed and
pesticide makers. Five consecutive years of bumper crops in North
and South America have swelled storage bins and pushed down crop
prices, forcing farmers to scale back spending. DowDuPont in August
reported that its agricultural sales volume fell 5% over the first
half of 2018, partly because farmers planted fewer acres.
North and South American farmers' prioritization of soybeans
over corn this year has also cut into seed company profits.
Companies like DowDuPont and Bayer AG typically collect higher
profits on corn seed, which produces a bigger crop per acre for
farmers, and often includes more genes to deliver pest and
herbicide resistance.
A late-arriving spring planting season delayed North American
seed sales for DowDuPont, the world's second-largest seller of crop
seeds and pesticides after Bayer.
DowDuPont separately filed documents previewing the strategy and
operations of Corteva Agriscience, the seed and pesticide company
that will be spun out from DowDuPont. The company in September
named James Collins, DowDuPont's current head of agriculture
businesses, as Corteva's chief executive, and anticipates the
spinoff to complete by June 1, 2019.
Write to Micah Maidenberg at micah.maidenberg@wsj.com and Jacob
Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
October 18, 2018 19:40 ET (23:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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