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Total Agriculture Division Regional Sales

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Sales grew by 7.2% during the quarter and 5.4% during H1 2017 as both crop protection products and seed products showed growth in practically all regions led by Latin and North America, followed by Europe-Africa-Middle East and lastly Asia-Pacific. Changes in Q2 2017 were through Volume +8% and price (1%), while for H1 2017 volume grew 5%, price 1% offset by portfolio (1%) partly reduced crop protection products and partly fodder seeds.

Safrinha season sales in Brazil added to the numbers as demand for their Leptra™ corn hybrids was high. Demand for dicamba-tolerant soybeans and Leptra corn hybrids was also high in the US. Sales in parts of Asia, Australia, East and South Africa added to the half-yearly performance. EU and CIS sales increased strongly with high demand for sunflower seeds.

DuPont insecticides sales were also better this quarter in EAME and Asia-Pacific. Fungicide launches of Zorvec™ and Vessarya™in Brazil, Canada, China, Australia were extremely encouraging. Their seed-treatment range has also performed very well.

With the pending merger between DuPont and Dow approaching closer, the outlook for overall performance is slightly positive as the planting season in all regions is expected to be normal with increase in cotton and rice, where DuPont sells a considerable volume of insecticides. The fruit and vegetables sector is also expected to show strong growth as conditions have improved on the US west coast and in China and India as well as in Latin America. Seed sales would continue to grow especially in oilseeds and corn, soybeans for the rest of the year in south America.

Division Operating Profits

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Pre-tax operating profits for Q2 2017 grew by 11.3% with an increase of $98 million over Q2 2016. Crop Protection EBIT grew 16.3% while Seeds and Traits (Pioneer) EBIT grew 15.7%. For the 1st half 2017, operating profits grew 11.8% with Crop Protection growing slightly by 0.9%, while Seeds and Traits grew 13% even though costs were higher due to licensing fees and royalties due to Syngenta and Monsanto.

Higher profits are also estimated in Encirca™, the precision planting support system. Contributing factors were double-digit price increases and improved credit control for crop protection and seed products in Latin America, stronger Rouble and Real, and volume increase in soybeans, corn and sunflower seeds. Cost control in production, selling and general expenses helped increase earnings.

There were no significant items during the quarter. Divestiture of several products and product groups in speciality areas which had affected profits in the recent past have now been replaced with the new range for horticultural applications, seed enhancement and in major field crops. Cost management has helped to some extent but this has also been impacted by staff reduction planned at sites and in segments where some synergy is expected with the proposed merger with Dow. Costs of licensing in XtendMax™/XtendPlus™, Intacta™RR2™,(MON) and Duracade™, MIR 604, MIR 162 (SYNG) traits- impacted slightly but not enough to put a dent in profits.

Depreciation and amortisation

Depreciation and amortisation have decreased by 34.8% in Q2 and by 41$ in H1, with crop protection reduced by 35% and seeds by 43% during H1 2017 as extra production facilities were cut down in 2016. Collaborators in North and South America have been reduced during last year and the consequent reduction in D&A has reduced for the quarter and year. Licensing-in helps reduce depreciation and amortisation particularly with Monsanto, DAS and Syngenta traits.

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EBITDA increased slightly 9.3% in Q2 and 3.7% in H1 mainly growing 6% in Seeds and Traits while declining 3% in Crop Protection/Agchems due to the reduction of depreciation and amortisation in both seeds and crop protection facilities.

Research & Development

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R&D spending declined by 12.2% for the 2nd quarter and 6.8% for the H1 2017 period, as DuPont continues to reduce costs, pre-merger, through voluntary cost cutting measures. R&D expenditure for the segment as a percentage of sales is still higher than the company average.

Additional spending will continue for license fees in GM seeds as licensing payments made to Monsanto for the Intacta and RR2 trait, Syngenta for VIP (MIR162) and MIR 604/CRW for Leptra traits. Additional costs expected for shared work with Monsanto’s dicamba-tolerant trait hybrids in corn and dicamba-tolerant soybean, cotton trials (Xtend-XtendFlex).

DuPont and Syngenta seem to have shied away from the Enlist™ system offered by Dow AgroSciences traits applications for 2,4-D herbicides. Continued registrations for fungicides Oxathiapiprolin, Benzovindiflupyr, Penthopyrad and Picoxystrobin in China, Australia, North America, EU, Argentina and Brazil. In addition, development of Cyazypyr and the new Pyrazate insecticide is in progress. Additional trait research for Aquamax™ drought resistance and AcreMax™ refuge-in-bag seeds, & additional spending for maize seeds business in China (Denghai Shangdong partner), hybrid rice and sunflower in India, Philippines.

DuPont has also created a new R&D facility in Singapore, which is expected to streamline biotechnology research particularly for Asian markets. Additional spending on their new fungicide (see above) was offset by reductions in administration and other costs for research facilities.