DuPont Could Consider Consolidation Option as Crop Prices Fall and Fertilizer Output Spikes

Companies engaged in farm-focused businesses are seeking out opportunities for consolidation in the backdrop of the recent downslide in crop prices, which has only been aggravated by an increase in fertilizer output. Last week, the Dow Chemical Co said that it was conducting a fresh review of its farm chemicals and seeds business unit. And now, latest reports suggest that DuPont is also considering this strategy to offset the impact of the unfavorable market forces.

DuPont’s interim CEO, Edward Breen, said this week that the company would do what it takes to provide maximum value to their shareholders. He was responding to questions about whether the company was considering selling its farm unit. Edward took charge in early October 2015 in place on Ellen Kullman, who abruptly vacated office.

There have been rumors suggesting that DuPont is considering taking over Dow’s farm unit. This has left market watchers wondering whether the company has the resources to pull off a deal of such major proportions. Breen did not confirm whether or not his company was willing to either purchase a farm unit or sell its own. As of September 30, 2015, Du Pont’s farm unit represented about 22% of the total revenue filed by the company. However, the company expects its sales to show a dip of about 11% to 12% in 2015.

Breen said that DuPont would soon be reviewing its capital allocation strategy afresh and will also be taking a fresh look at its cost structure. The company is one of the largest players in the agricultural chemicals industry. According to the current financial plans of DuPont, it plans to achieve savings to the tune of US$1.6 billion annually by the end of 2017. However, there is a possibility that the company might have to cut back on this target by at least 10% to 20%, a report in Reuters said.

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