DuPont to cut jobs 10% in agriculture division

December 12, 2006|By MCCLATCHY-TRIBUNE

PHILADELPHIA -- Facing sharp competition and market share erosion in its once-unassailable corn seed business, DuPont Co. says it will cut about 10 percent of its work force, or 1,500 employees, in its agriculture and nutrition division.

The cuts will save the Wilmington, Del., chemical company about $100 million a year, which it will plow back into developing new high-yielding corn seeds.

DuPont's Pioneer Hi-Bred seed operation, a centerpiece of its effort to restructure into a biotech company and out of old-line petrochemicals, has been losing corn seed market share to Monsanto Corp. in the past five years.

The company said it was studying where the cutbacks would take place, noting that they would entail closing or streamlining 10 manufacturing plants. Some white-collar positions are likely to be eliminated, DuPont said.

The agriculture and nutrition division employs 15,000 and runs 250 sites around the world, including herbicide and pesticide manufacturing plants. The cutbacks are likely to take place next year.

The corn seed division had $6.4 billion in revenue in 2005, with about 45 percent coming from Pioneer seeds. By revenue, the division was the second-largest in DuPont, after performance materials.

DuPont spokesman Doyle Karr said corn prices are rising because of anticipated demand from ethanol plants, and the company wants to capitalize on the market through Pioneer. He said the $100 million in savings will be used to hire scientists to boost corn-seed breeding and develop new genetic traits.

"We're doing really good in some places, and in other areas we're challenged," Karr said of corn seed.

Five years ago, Pioneer had an estimated 40 percent of the market for corn seeds and Monsanto had about 10 percent. Pioneer now has 30 percent and Monsanto has 29 percent and could eventually pass Pioneer, according to a report from Kevin McCarthy, an analyst with Bank of America in New York.

Pioneer's largest seed business is corn, followed by soybeans and sunflowers. The company also sells canola, alfalfa and sorghum seeds.

DuPont is investing in research to develop genetic plant traits that would be resistant to Monsanto herbicide Roundup. Dupont also has opposed Monsanto's proposed acquisition of cottonseed producer Delta & Pine Land Co., which controls approximately half of the U.S. cottonseed market.

DuPont said it would take a pre-tax $200 million charge in the fourth quarter for cutbacks. The charges include write-downs on plants and businesses and severance costs in the agriculture and nutrition division.

Chief executive Charles O. Holliday Jr. has said that DuPont's joint venture in the Solae Co., which uses soy proteins for nutritious foods, has not performed well. Karr said some of the impairment charge is related to Solae.

DuPont also said it would take a pretax charge of $50 million for writing down the value of an industrial chemical business it is selling.

But the company's earnings will be helped in the fourth quarter by a $60 million gain before taxes from insurance recoveries related to asbestos litigation and Hurricane Katrina damages.

In trading yesterday, DuPont shares rose 1.1 percent, or 52 cents, to $47.42.

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