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What Drove DuPont’s Agriculture Segment in 2Q17?

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DuPont’s Agriculture segment in 2Q17

DuPont’s (DD) Agriculture segment is the highest revenue contributor to the company’s overall revenue. The segment accounted for 46.40% of the company’s revenue in 2Q17—compared to 45.60% in 2Q16. The Agriculture segment reported revenue of $3.45 billion in 2Q17—an increase of 7.10% on a YoY (year-over-year) basis. In 2Q16, the segment reported revenue of $3.22 billion.

The Agriculture segment’s growth was driven by higher sales volumes. The volume growth was primarily seen in the seed business. The growth was due to a benefit change in the southern US route-to-market and an increase in the soybean cultivation area, which led to higher soybean sales in North America. The crop protection business also witnessed volume growth driven by Zorvec and Vessarya. However, competition in the crop protection business led to price pressure, which resulted in lower product prices.

Segment’s operating income and margins

The Agriculture segment reported an operating income of $963 million in 2Q17—an increase of 11.30% on a YoY basis. In 2Q16, the segment reported operating income of $865 million. The segment’s operating income growth was driven by higher sales volumes. On the other hand, the cost of production increased during the quarter due to higher soybean royalties impacting the margins.

The segment’s 2Q17 operating income margin stood at 27.90%. In 2Q16, the operating margin was 26.90%, which implies an increase of 100 basis points on a YoY basis.

Investors can hold DuPont indirectly by investing in the First Trust Indxx Global Agriculture ETF (FTAG). FTAG has invested 10.70% of its portfolio in DuPont. The fund’s other holdings include Dow Chemical (DOW), Monsanto (MON), and Deere (DE) with weights of 10.60%, 9.0%, and 7.20%, respectively, as of July 25, 2017.

In the next part, we’ll discuss how the Materials segment performed.

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