DuPont, the No. 2 U.S. chemical company, Tuesday reported lower-than-expected second-quarter profit as weak U.S. housing and auto markets slowed demand and overshadowed growth in other regions.
Shares of the DuPont were sharply lower Tuesday.
The company, second in sales to Dow Chemical, also said higher energy and raw material costs negated the benefits of higher prices for products sold.
Profit declined marginally to $972 million, or $1.04 a share, from $975 million, or $1.04 a share, a year earlier, the Wilmington, Del.-based company said.
Excluding items, earnings rose to $1.04 a share from $1.01. Analysts on average had forecast $1.06, according to Reuters Estimates.
Quarterly sales increased to $7.88 billion from $7.44 billion. Analysts were expecting $7.91 billion.
The company said volume declined 2 percent in the United States due to slower housing and auto markets, but rose 4 percent outside the country. DuPont, in 2006, generated about 60 percent of its sales outside the United States.
Agriculture Disappoints
Sales from the company's agriculture and nutrition unit grew 7 percent to $2.1 billion, driven by strong U.S. corn seed and herbicide sales.
However, pre-tax operating income from the segment slipped to $226 million, from $228 million a year ago.
"The big disappointment to me is ag, the pre-tax operating income number is virtually flat with last years number, which in such a strong ag market is a bit weird," said HSBC analyst Hassan Ahmed.
Earlier this month, some analysts raised earnings estimates for DuPont partly in anticipation of strong second-quarter results from DuPont's agriculture segment.
Ethanol demand in the United States has lifted corn prices and led farmers to boost corn acreage this year. Monsanto Co. and DuPont, the two biggest players in the U.S. corn seed market, stand to reap big profits from the bumper crop.
DuPont blamed lower soybean volumes and a $33 million growth investment for the decline in operating income from the segment.
But, Ahmed said the fact that increased corn acreage hurt domestic soybean acreage was no surprise and it was already anticipated by the market.
Outlook Reaffirmed
For the second half of 2007, DuPont said it expected to continue to benefit from growth outside the United States and higher local selling prices.
However, the company also anticipates continued weakness in U.S. housing, higher raw material costs and a higher base tax rate compared with last year.
DuPont affirmed its 2007 full-year earnings outlook of about $3.15 a share, excluding a charge of 6 cents for significant items.
Wall Street expects full-year profit of $3.18 a share.
Shares of DuPont, a component of the Dow Jones industrial average, have risen 8.3% over the last three months, but underperformed an 11.3% gain in the Standard & Poor's Chemicals Index.