DuPont Relying on Ag Business

Non-G7 markets, agricultural chemicals and a focus on key customers and new products will drive growth for DuPont Co. (DD - Analyst Report). Strong performance in the agricultural products market, emerging markets, pricing actions, favorable currency and productivity is likely to outweigh increasing costs as well as weak auto and housing markets. The company is focusing on nearly doubling its earnings growth rate.

However, slowing demand in U.S. markets is likely to offset growth in the agriculture market. DD expects second half 2008 earnings per share to be lower than the last year due to higher energy and ingredient costs, lower demand in developed markets, lower income from asset sales and a higher effective tax rate. This compels us to rate the stock a Hold with a target of $41.50.

Due to an exceptionally strong North American agriculture market, Pioneer Hi-Bred, DuPont’s advanced plant genetics business is poised for large revenue gains. DuPont expects to achieve at least 30% North American seed corn market share in 2008 and to grow this share in the future years.

Pioneer will increase its seed production acreage by 58% in 2008 to meet increased demand for its canola hybrids. The company plans to double its capacity by 2008. Pioneer has already been gaining share in non-U.S. markets due to the strength of its base germ plasma.

On August 15, DuPont raised prices for all of its Ti-Pure titanium dioxide grades sold in Latin America, Western and Central Europe, Turkey, Greece and North Africa. The company increased the product prices in Latin America by $150 per metric ton.

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