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How Did DowDuPont’s Agriculture Segment Perform in 4Q17?

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Agriculture segment in 4Q17

DowDuPont’s (DWDP) Agriculture segment accounted for 13.9% of DWDP’s 4Q17 revenue as compared to 15.0% in 4Q16 on a proforma basis. This segment reported revenues of $2.8 billion in 4Q17, an increase of 4.6% on a year-over-year basis.

The segment revenue was driven by both seed sales as well as the crop protection business. Seeds sale grew by 10% to revenues of $1.2 billion. Corn seed sales in Argentina doubled driven by the Leptra corn hybrid. In Europe, sunflower and the corn seed volumes saw growth. The crop protection business grew marginally by 1% led by the new launch of Vessarya fungicide. This segment also benefitted from price increases and volume growth.

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Segment’s EBITDA margin

The segment reported EBITDA (earnings before interest, taxes, depreciation, and amortization) of $224 million in 4Q17, a 124% increase on a year-over-year basis. In 4Q16 the segment reported EBITDA of $100 million. As a result, the segment’s EBITDA margin for 4Q17 stood at 8.0% as compared to 3.8% in 4Q16, an increase of 420 basis points on a year-over-year basis. The EBITDA margin increased primarily due to cost saving synergy and lower pension costs.

Segment outlook

The segment is expected to continue its growth driven by new product launches in crop protection as well as in the seed business. The segment’s EBITDA margins are expected to expand driven by the cost synergy impact.

Investors can hold DowDuPont indirectly by investing in the iShares U.S. Basic Materials ETF (IYM), which has invested 23.4% of its portfolio in DowDuPont. The fund also provides exposure to Monsanto (MON), Praxair (PX), and LyondellBasell (LYB) with weights of 7.4%, 6.2%, and 5.1%, respectively, as of February 2, 2018.

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