Chemical giants E I Du Pont De Nemours And Co (NYSE:DD) and The Dow Chemical Company (NYSE:DOW) are witnessing a transition in the sources of their revenue. That is why E I Du Pont De Nemours And Co (NYSE:DD) and The Dow Chemical Company (NYSE:DOW) bet on agriculture to fuel their billion-dollar companies. While assessing their entry into the agricultural sector, I will also be keeping Monsanto Company (NYSE:MON) in the picture to provide a benchmark for the standings of both peers in the agricultural industry. With production mixes shifting toward agriculture, I aim to find the most profitable chemical stock for investors.
Recent events
The growing demand for E I Du Pont De Nemours And Co (NYSE:DD)’s drought-resistant seeds helped the company double its quarterly profit from a year ago. More than 75% of the agricultural-segment revenue came from the sale of seeds thanks to the increased adoption of Pioneer’s AcreMax integrated and reduced refuge products. As a result, in Q1 2013, income from the company’s agricultural divisions represented more than 65% of total income compared to the 54% level in the past year.
However, E I Du Pont De Nemours And Co (NYSE:DD)’s titanium dioxide pigment, which has been massively successful in the past, dropped by 44% in revenue. The performance-chemicals business, which includes titanium dioxide sales, reached about 15%. Nevertheless, the company’s acquisition of Danisco and the sale of the car-paint business seems to be a great deal.
For The Dow Chemical Company (NYSE:DOW), sales of its agricultural products soared by 14%. It was the highest growth among its business areas, causing a 33% increase in its net income. Due to uncertainty in the chemicals market, The Dow Chemical Company (NYSE:DOW) strives to cut its costs and shift its capital to the production of more profitable product lines.
Additionally, the company also plans on making a $1 billion investment in carbon-fiber composites over the coming five years to discover new plays for growth. Interestingly, the two chemical companies are struggling in Europe due to the austerity measures being adopted by the EU. The demand for chemicals has dropped considerably, resulting in China becoming a target buyer for the American producers.
Monsanto Company (NYSE:MON) has its work cut out for itself on the back of reports that its seeds and genetically modified products are detrimental to human health. Furthermore, they allegedly go against the sustainability of agriculture. Courtroom visits have also become the norm for the company.
Monsanto Company (NYSE:MON) requires farmers to use the Roundup Ready seeds only for a single crop; growers can’t use the later generation of seeds from previous harvests. Monsanto Company (NYSE:MON) imposes these conditions because the technology, which renders crops resistant to weed killer, reproduces itself in each generation of seeds. On the bright side, the company expects a record crop of corn this year.
