DowDuPont sees higher raw material costs, shares fall

By Laharee Chatterjee and Nivedita Bhattacharjee

(Reuters) - DowDuPont Inc said it expects higher raw material costs to hit all its units for the rest of the year even as an uptick in its agriculture business helped the U.S. chemicals producer beat Street estimates for the fourth straight quarter.

Shares of the company fell 3 percent to $66.11 in morning trade and were the biggest drag on the S&P 500 index at 1500 GMT.

"We see some discrete headwinds, most notably currency fluctuations, particularly in agriculture, and higher raw materials costs in all three divisions," Chief Financial Officer Howard Ungerleider said.

Dow and DuPont completed their $130 billion merger last September to form DowDuPont. It will create three separately traded companies next year, splitting into companies that look at agriculture, plastics and specialty products.

On a conference call with analysts, CEO Ed Breen said trade tensions have increased volatility in agricultural commodity prices.

"U.S. soybean exports that normally go to China are simply being shifted to other countries."

Last month, Washington imposed tariffs on $34 billion of Chinese imports. In return, China levied taxes on the same value of products from the United States, including soybeans and sorghum. Traders rushed shipments of U.S. soy to China before the tariff took effect on July 6.

However, the company, which has global operations and often sources materials locally, does not expect any tariff-related impact on overall business this year.

Total sales from the company's biggest revenue generator, the materials science business which makes chemicals used in cosmetics, packaging material, and brake fluids, rose 18 percent to $12.6 billion for the second quarter.

Sales from its agricultural business rose 25 percent to $5.7 billion. Cold weather in the northern hemisphere moved demand for the company's seeds from April to May.

The agriculture unit, a weak spot in earlier quarters, has struggled due to an industry wide grains glut that led to slowing demand.

The company said overall prices rose 4 percent in the quarter, including a 5 percent increase in materials science business and a 4 percent price rise in agriculture.

Net sales rose 17 percent to $24.2 billion, which the company said compares with net sales of $20.7 billion that DowDuPont would have made had it been one company in the same quarter a year earlier.

Adjusted earnings came in at $1.37 per share, above analysts expectations of $1.30 per share, according to Thomson Reuters I/B/E/S.

(Reporting by Laharee Chatterjee and Nivedita Bhattacharjee in Bengaluru; Editing by Supriya Kurane)