E. I. du Pont de Nemours and Company’s (DD) agricultural business Pioneer Hi-Bred received a regulatory approval from the South African Competition Appeal Court to buy majority share of domestic seed company Pannar Seed Limited. The financial terms of the transaction are not yet disclosed. The approval is subject to the companies meeting certain conditions, including long-term investment in South Africa.
The deal will facilitate Pioneer to develop genetically engineered crops that will specifically cater to different regions of Africa. As per Pioneer, the deal will expand its presence in Africa and will help them to develop innovative products and services for the farmers across Africa.
By working with Pannnar, both the companies will have access to more customers and will be able to deliver the products faster and in a much more efficient manner than they would have done individually. Moreover, Pannar will be benefited from Pioneer's expertise and the deal will benefit Pioneer’s Africa operations and operations in the United States and Argentina.
In addition to buying a stake in Pannar, Pioneer intends to spend 62 million rand ($7.3 million) by 2017 to establish a regional research centre in South Africa, which will bring advanced research and development breeding technologies to Africa. The company has also committed 20 million rand ($2.4 million) to the programs that help developing farmers in South Africa.
This investment is consistent with DuPont’s strategy to deliver innovative solutions for issues such as the need for increased food production. Last month, the company released its financial results for the first quarter of 2012. The company reported adjusted earnings of $1.61 per share for the quarter, exceeding the Zacks Consensus Estimate of $1.55.
The earnings growth was primarily driven by strong performance in Agriculture and Performance Chemicals and prior-year acquisitions of Nutrition & Health and Industrial Biosciences. Including one-time items (customer claim charges of $50 million), earnings came in at $1.57 per share versus $1.52 in the prior-year quarter.
Sales grew 12% to $11,230 million in the first quarter, driven by price hikes and strong sales in the Agriculture segment. However, it missed the Zacks Consensus Estimate of $11,239 million. The sales volumes for Agriculture segment increased across all regions. However, sales volumes for other segments remained flat in Asia.
DuPont reiterated its full-year 2012 earnings outlook of $4.20 to $4.40 per share, an increase of 7% to 12% compared with 2011, excluding significant items.
The company competes with The Dow Chemical Company (DOW) and BASF SE (BASFY), and maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) “Hold” rating. We currently have a long-term “Neutral” recommendation on the shares of DuPont.
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