DuPont 2007 Annual Report Download - page 30

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, continued
During the third quarter 2007, Pioneer entered into a business agreement on corn herbicide tolerance and insect
control trait technologies with Monsanto Company. Among other provisions, modifications were made to the existing
corn license agreements; both parties agreed to exchange certain non-assert and other intellectual property rights;
and both parties obtained rights to reference and access certain regulatory data and approval in which the other
party has certain interests. Refer to Note 11 to the Consolidated Financial Statements for further description of this
agreement.
Agriculture & Nutrition also serves the global production agriculture industry with crop protection products in the
grain and specialty crop sectors, forestry and vegetation management. Principal crop protection products are
herbicides, fungicides, insect control products and plant growth regulators. The segment continued to expand its
presence in fruit and vegetable specialty markets and continues to expand product offerings in the professional pest
control market. Additionally, the segment operates within the specialty food ingredients market, including soy
proteins and lecithins through its majority-owned venture with Bunge Limited, The Solae Company.
In 2006, the segment launched a restructuring plan to increase investment in plant genetics, biotechnologyand other
growth opportunities while consolidating manufacturing assets, technology centers and marketing strategies in its
nutrition and crop protection businesses. The segment recorded a charge of $122 million in the fourth quarter 2006
for employee separations and asset impairments associated with this investment and streamlining plan. The plan
includes the closure of manufacturing units and the elimination of approximately 1,500 positions. Operating costs
savings of approximately $100 million per year will be reinvested into the seed business (see Note 4 to the
Consolidated Financial Statements). During 2007, operating costs savings of $40 million were realized, which
partially offset the growth investment in the seed business.
2007 versus 2006 Sales of $6.8 billion were 14 percent higher reflecting 9 percent higher USD selling prices and a
5 percent increase in volume. Higher USD selling prices reflected a richer mix of corn and soybean seed, and crop
protection herbicides and fungicides. Volume increases were driven by corn seed sales in North America, herbicides
in Europe and fungicides in Latin America, partially offset by a decrease in the sale of soybean seed on lower
planting acreage in North America.
2007 PTOI was $894 million versus $604 million in 2006. 2006 PTOI included a $122 million restructuring charge. In
addition, 2007 PTOI benefited from sales volume and price gains, partially offset by higher production costs across
most of the segment and the growth investment in the seed business.
2006 versus 2005 Sales of $6.0 billion were 1 percent lower reflecting slightly lower USD selling prices and
volumes. Lower selling prices reflected declines in the crop protection market partially offset by prices for a richer mix
in corn and soybean seed. Volume declines were driven by lower corn seed sales in North America, specialty
products in India and herbicide sales in North America and Europe, partially offset by increases in the sale of
soybean seed. 2006 included some earlier than anticipated seed sales for the 2007 planting season in Europe.
2006 PTOI was $604 million versus $875 million in 2005. The decline in 2006 PTOI reflected the charge of
$122 million described above. In addition, 2006 PTOI reflected the sales decline and higher production costs across
most of the segment, slightly offset by income related to technology transfers, licensing agreements and asset sales.
Outlook In 2008, the segment anticipates continued PTOI growth through increased Pioneer corn value offerings,
including stacked traits and seed treatments in the U.S. and Canada. Pioneer will build on their North American
product offerings with the addition of approximately 30 new soybean varieties and 60 new Pioneer»brand corn
hybrids. In international operations, Pioneer expects continued market share gains supported by strong product
performance. Pioneer also expects continued market share gains in key soybean markets including the U.S.,
Canada and Brazil. The segment’s introduction of new crop protection products is projected to drive volume gains,
particularly in Europe and Latin America, and higher benefits from the 2006 restructuring program are expected to
be realized. Higher production and raw material costs and continued growth investments in research, sales and
marketing will be moderating factors.
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Part II