Summary
E. I. du Pont de Nemours and Company (DuPont) has disclosed significant non-cash impairment charges totaling approximately $4.6 billion, expected to be recognized in the third quarter of 2018. These charges primarily relate to goodwill and other assets within its agriculture reporting unit. The impairment is driven by revised, lower cash flow projections for this segment, influenced by decreased sales and profit forecasts in North America and Latin America, unfavorable currency impacts (Brazilian real), reduced planted acreage, a shift towards soybeans from corn in Latin America, and delays in product registrations. Additionally, lower commodity prices and higher grain inventories are expected to impact farmer income and purchasing decisions. These revised projections, a result of strategic business reviews and current market conditions, are considered a triggering event for the impairment analysis. The company also anticipates recording a $75 million tax provision charge for a valuation allowance against a Brazilian legal entity's deferred tax asset and a $40 million charge for an "other-than-temporary" impairment of non-consolidated affiliates in China. Investors should note that these charges are non-cash and do not represent future expenditures. The company also included a cautionary statement regarding forward-looking statements, emphasizing the inherent uncertainties and risks associated with such projections.
Key Highlights
- 1Significant non-cash impairment charges of approximately $4.6 billion are expected for the agriculture reporting unit in Q3 2018.
- 2The impairment is primarily attributed to goodwill ($4.5 billion) and certain indefinite-lived assets ($0.1 billion).
- 3Revised cash flow projections for the agriculture segment reflect reduced sales and profitability forecasts, particularly in North America and Latin America.
- 4Key factors contributing to the reduced forecasts include unfavorable currency impacts, shifts in agricultural practices (e.g., soybean vs. corn), product registration delays, and market price pressures.
- 5A $75 million tax provision charge related to a valuation allowance for a Brazilian legal entity's deferred tax asset is also anticipated.
- 6An additional $40 million after-tax charge is expected for an "other-than-temporary" impairment of non-consolidated affiliates in China.
- 7The impairment charges are non-cash and do not involve future cash expenditures.