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How DowDuPont’s Agriculture Segment Performed in Q3

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Agriculture segment in Q3 2018

DowDuPont’s (DWDP) Agriculture segment accounted for 9.7% of DWDP’s Q3 2018 revenues compared to 10.5% in Q3 2017 on a pro forma basis, implying a decline of 0.8 percentage points on a year-over-year basis. This segment reported revenues of $1.95 billion in Q3 2018, an increase of 1.8% on a year-over-year basis. In Q3 2017, the segment reported revenue of $1.91 billion.

The Agriculture segment revenue growth was primarily driven by higher volumes, which grew by 8%. Local price growth helped revenues to grow by 3%. However, unfavorable foreign exchange had an adverse impact of 6% on revenues, while the segment’s portfolio reduced the revenue by 3%.

The agriculture segment volume grew primarily because of new product launches, which included Picoxy-based crop protection products. Pyraxalt, a new insecticide, witnessed good growth in the Asia-Pacific region. Further, the demand for corn seeds also pushed the segment’s revenue up. Despite the strong dollar, price increases remained positive driven by crop protection in Latin America.

Segment’s EBITDA and margin

DowDuPont’s (DWDP) Agriculture segment reported EBITDA loss of $104 million in Q3 2018 as compared to EBITDA loss of $239 million in Q3 2017.

The decline in the EBITDA loss was primarily driven by higher sales, cost synergies, lower incentives, and lower pension costs. However, higher raw material prices and higher spending to advance the new product line had an adverse impact on the segment’s EBITDA. The reduced EBITDA loss also improved the EBITDA margin. The segment’s EBITDA margin stood at -5.3% as compared to a pro forma EBITDA margin of -12.5% in Q3 2017.

Outlook

The Agriculture segment is expected to remain flat. However, higher volumes and a price increase could provide a boost to the segment. However, on the other side, unfavorable foreign exchange and the lower planted area is expected to have an adverse impact on revenue. Cost synergies and lower pension costs are expected to drive the margin.

Investors can indirectly hold DowDuPont by investing in the First Trust Indxx Global Agriculture ETF (FTAG), which has invested 11.9% of its portfolio in DWDP. The fund also provides exposure to Deere (DE), CNH Industrials (CNHI), and FMC (FMC). These stocks have weights of 11.7%, 4.7%, and 3.0%, respectively, as of November 5, 2018.

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