(Reuters) - U.S chemicals company DowDuPont Inc on Thursday forecast a surprise drop in revenue for the current quarter, hit by reduced sales in its biggest unit, sending the company’s shares down 9 percent in pre-market trading.
The company, formed by the $130 billion merger of chemical giants Dow Chemical and DuPont in September 2017, said it expects first-quarter revenue to down in the “mid-single digits percent” without giving detailed numbers.
Analysts were expecting DowDupont to report revenue of $22.63 billion for the first quarter, 5 percent higher than the year earlier quarter.
The company said sales at the material science unit - its biggest revenue generator - would fall by high-single digits percent in the first quarter, weighing on the overall forecast. The unit makes chemicals that are used to make brake fluids and packaging materials among other things.
For the fourth quarter, net sales were $20.1 billion, unchanged from a year ago, but were below the average analyst estimate of $20.92 billion, according to IBES data from Refinitiv. Sales were hit by currency effects, Chief Financial Officer Howard Ungerleider said.
“We expect global economic expansion to continue in 2019 at a moderately slower pace than 2018,” Ungerleider said, adding that the company was closely monitoring ongoing trade negotiations and the pace of economic activity in China.
During the quarter, DowDuPont clocked double-digit percentage volume growth in China, Ungerleider told Reuters in an interview.
DowDuPont, which is in the process of splitting itself up into three companies, reiterated that the separation was on track. The new Dow will spin out of DowDuPont by April 2019 and its agriculture division, Corteva Agriscience, will spin out in early June.
In the quarter, the company said local prices in the regions they operate rose by about 1 percent, but currency changes reduced sales by 2 percent.
Sales in the materials science business fell 1 percent to $11.8 billion. Volumes - a proxy for demand - rose 1 percent.
The company said margin compression in materials science, lower equity earnings and the currency impact had all weighed on earnings before interest, tax, depreciation and amortization (EBITDA).
Net income from continuing operations in the fourth quarter was $513 million. DowDuPont saw a $1.1 billion benefit from lower U.S corporate taxes in the year-ago quarter, but posted a net loss of $1.2 billion from continuing operations, largely on merger-related costs.
Adjusted earnings for the quarter came in at 88 cents per share, an increase of 6 percent.
The company’s shares were down 9 percent at $54.04 before the bell.
Reporting by Shradha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty
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