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DuPont Sticks to Its Diet

For decades, DuPont has been synonymous with synthetic fibers. Nylon, Stainmaster carpet, and Lycra spandex were all invented in its labs. No more. On Nov. 17, DuPont (DD) sold its Invista fibers unit to privately held Koch Industries for $4.4 billion in cash.

The divestiture continues one of the most radical shrinkages in Corporate America. Just 10 years ago, the Wilmington (Del.) company was the nation's No. 1 chemical outfit, with $37 billion in revenue. Now, after the spin-off of Conoco (COP) and the sale of its drug unit to Bristol-Myers Squibb (BMY) in 2001, DuPont's annual sales next year could slip to less than $23 billion. That would be well behind industry leader Dow Chemical (DOW), which already topped $24 billion in sales in 2003's first nine months.

NOT ALONE. Still, smaller is better,rgues DuPont . Invista was the least profitable of DuPont's units in 2002. Andfor the first nine months of this year, the business had an aftertax loss of $1 billion -- due mostly to asset writedowns. Indeed, if the deal wins antitrust approval and closes as planned by mid-2004, DuPont says its earnings might rise next year.

Despite its brand names, DuPont has been struggling in the market for apparel and home-furnishing fibers. Raw-material costs costs are high in the U.S., squeezing margins. Moreover, big new plants overseas have the added edge of much lower labor expenses.

Its competitors have had their share of troubles, too. Midland (Mich.)-based Dow Chemical is lopping 4,000 jobs and selling or shutting down underperforming assets as it battles to earn enough to cover its dividend payout.

STOCK BUUYBACK? For now, DuPont Chairman and CEO Charles O. Holliday Jr. isn't saying whathis company will do with its latest windfall. Industry analysts expect it will use at least some of the money to pay down debt and buy back more stock. The rest could be used to invest in operations with higher margins or faster growth rates. Holliday says he'll update investors on his repositioning plans shortly.

Shareholders seem unimpressed. DuPont shares slipped 24 cents to close on Nov. 18 at $39.43, down nearly 2% since the deal with Koch was announced. DuPont stock also trails the performance of Dow Chemical and its other major rivals so far in 2003. After 201 years in business, DuPont has overcome tough times before. But it's hard to cut your way to prosperity. By Michael Arndt in Chicago

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