June 30, 2008


Dupont keeps its vow to maintain market share, but receives little praise


Although DuPont Co has successfully halted a nearly decade-long slide in its share of the important North American corn-seed market, investors have been slow to reward the company due to its exposure to other market sectors and rising costs.


The stock, trading recently around US$42.50 a share, has lost nearly one-fifth of its value in the past two months despite DuPont's announcement that it expects to live up to a high-profile vow to stabilize its position in the key corn market this year.


DuPont's achievement in agriculture have gained little traction with investors as troubles over US housing and the beleaguered automotive industry weigh in on the conglomerate.


"The good news is being masked," said Peter Klein, a portfolio manager at Fifth Third Asset Management Inc., which owns a DuPont stake.


Although DuPont makes a variety of industrial chemicals and materials, the company's agriculture and nutrition segment was its largest division last year, accounting for about 23 percent of 2007 sales.


In addition, the North American corn market has been viewed in particular as a key potential growth driver for the company, with the agriculture sector booming overall.


But DuPont has had trouble harnessing the market, largely because the company was slow to invest in GM seed technology.


DuPont's share of corn-seed sales in North America has slumped to about 30 percent, from 38 percent in 2000, while competitor Monsanto Co. (MON) has grown its share to about 25 percent from 10 percent.


DuPont - under intense pressure to stem the losses - made a high-profile pledge last year to hold its 30 percent market share in 2008. The company has done so, with spokesman Doyle Karr noting in a recent interview that "we expect it to go up in 2009."


Still, the reeling US economy, along with rising costs of chemicals, have contributed to investor jitters.


DuPont has acknowledged the rising costs but maintains it has been able to manage them so far, noting that it primarily makes high-margin specialty chemicals rather than commodity chemicals.


The company is expected to earn US$8.45 billion in revenue during the second-quarter, up 7 percent, with shares down 4 percent to US$1.08 a share, according to Thomson Reuters. The company is expected to release second quarter results July 22.


Still, the year-to-date performance of DuPont's shares - down about 4 percent - has been significantly better than the overall 12.6 percent slide for the S&P 500 Index.


Dupont's rival Monsanto "kind of fired a shot across (DuPont's) bow" this week with an announcement of its own that it expects its share of the market to continue growing in 2009, Soleil's Gulley said.

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