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E I Du Pont De Nemours And Co (DD), The Dow Chemical Company (DOW), FMC Corp (FMC): A Paradigm Shift From Chemicals to Agriculture

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Weak market conditions coupled with sluggish sales growth has led E I Du Pont De Nemours And Co (NYSE:DD)The Dow Chemical Company (NYSE:DOW) and FMC Corp (NYSE:FMC) to focus more on growth markets and shift towards agricultural products. Amid this transition we will scrutinize how DuPont is in a better position to contain market declines and provide its investors with the desired returns.

Recent Events:

E I Du Pont De Nemours And Co (NYSE:DD) has made news by announcing a spin off of its chemical business, since the company intends to focus on sales in less volatile markets, such as agriculture and biotechnology. E I Du Pont De Nemours And Co (NYSE:DD)’s chemical business was in a fix ever since the prices for Titanium Dioxide dropped,and margins were depressed due to low pricing. E I Du Pont De Nemours And Co (NYSE:DD)’s chemical business took a nose dive and dropped by 56 %. To top that, gas prices have also doubled as compared to the last year. This, coupled with uneven economies. has led to a decline in the chemical business sales, hence, the company is shedding off its chemical unit to enhance margins and returns.

However, to the brighter side drought resistant seeds helped the company double its profits, with agricultural sales elevated by 11 %. North American market has also picked up increasing the demand for its corn seeds, insecticides and fungicides, opening up huge growth avenues for the company.

Low ethane costs have helped  The Dow Chemical Company (NYSE:DOW) boost its margins, however a surge in gas prices could potentially increase input costs for Dow. Moreover despite high unemployment The Dow Chemical Company (NYSE:DOW). is troubled with finding skilled workers able to perform tasks needed in a growing environment. If these pressures end up requiring higher wage costs, The Dow Chemical Company (NYSE:DOW) might struggle to keep overall expenses in line, and this might suppress margins.

Moving on to a few figures, we realize that the company sales declined by 2% due to weak market demand, however, agriculture sales increased by as much as 14 % due to accelerated product sales. Moreover, Sadara Project, a joint venture between The Dow Chemical Company (NYSE:DOW) and  Saudi Arabian Oil,  is an integrated chemical complex with a capacity of producing 3 million metric tons of high value performance plastics and specialty chemical products. This joint venture ensures a stream of $500 million in equity earnings for Dow, for the first 10 years from start up.

FMC Corp (NYSE:FMC), in its domain, is very active in acquisitions to strengthen its portfolio as well as enhance its product reach. Recently the company acquired Omega 3 producer EPAX Nutra for $345 million, to strengthen and expand FMC Corp (NYSE:FMC)’s presence in the high growth nutraceutical market. The high growth market presents an array of opportunities for the company. In another deal, FMC Corp (NYSE:FMC) has acquired patented, broad spectrum crop protection product from Bayer CropScience. Furthermore, FMC Corp (NYSE:FMC) will develop and distribute the novel product for row crops in the U.S. and Canada, anticipating a surge in sales and margins.

FMC Corp (NYSE:FMC)’s industrial chemical units is faced with a decline in its revenues of as much as 5% from an year ago resulting in a 37% decline in earnings due to lower export pricing in soda ash and lower domestic volumes, hence a focus towards agricultural products. The market conditions are speculated to remain tough, since weak demand coupled with a decline in prices and low turnover might further suppress the revenues and margins.

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