DowDupont estimated that in the first quarter of the year, its earnings fell by a percentage in the high teens, hit by flooding in the midwest of the US, and a squeeze on margins in packaging and plastics.
The company’s previous guidance was that earnings before interest, tax depreciation, and amortization would drop by a percentage in low teens.
The earnings warning comes just a few days before the planned break-up of DowDupont, formed in Dow Chemical’s 2017 merger with DuPont, commences.
It is planned that the agricultural business, called Corteva, will be spun off in June.
In the first three months of 2019, the group identified two main factors hitting earnings. The agriculture business, which produces seeds, pesticides and related chemicals, has been hit by the flooding in the midwest, a key agricultural region in the United States. Transport disruptions halted farming operations and limited product deliveries, resulting in a 4-6% drop in sales and a loss in EBITDA of $125-$150 million.
Furthermore, sales have fallen more sharply in the new Dow’s plastics and packaging division, than expected by the company, falling by a percentage in the low teens rather than the high single-digit drop projected in January.
The EBITDA of the division has also fallen more than expected and is set to be about $100 million lower than the previous guidance, primarily as a result of “greater than anticipated global margin compression in packaging and specialty plastics.”
