DuPont Earnings Miss Leads Pigment Makers Lower

DuPont Co. (DD), the most valuable U.S. chemical maker, led shares of titanium-dioxide makers down after posting lower third-quarter sales of the white pigment and saying demand won’t recover until the first half of next year.

DuPont, the world’s biggest producer of the paint pigment known by its chemical formula TiO2, fell 9.1 percent to $45.25, the biggest decline since December 2008.

Tronox Ltd. (TROX), the largest TiO2 producer integrated to ore production, dropped 6.7 percent to $20.99. Kronos Worldwide Inc. (KRO) declined 4.3 percent to $13.89 and Huntsman Corp. (HUN) fell 6.1 percent to $14.73.

DuPont reported a drop in adjusted earnings to 32 cents a share, trailing the 47-cent average estimate of 14 analysts, as demand in the business that makes TiO2 dropped 18 percent. TiO2 sales will continue to decline through the fourth quarter as producers work down excess inventories, the Wilmington, Delaware-based company said.

“It’s going to be a tough end of the year, but we see stabilization occurring in the first half of next year,” Chairman and Chief Executive Officer Ellen Kullman said on a conference call today.

DuPont’s goal of increasing earnings 12 percent a year may be in jeopardy because more than 60 percent of the company’s profit growth since 2009 has come from the unit that makes TiO2, Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said today in a note.

The company’s results suggest earnings may decline at Tronox and in Huntsman’s pigment business, he said.

Demand Catalysts

Possible catalysts for improved demand include growth in the U.S. housing market and resumption of infrastructure spending in China, Kullman said. China’s demand should improve toward the end of the first quarter when the government’s leadership change is complete and the Lunar New Year holiday has ended, she said.

Titanium dioxide is mostly used to add opacity and brightness to paints, and it is also added to plastics and consumer goods such as toothpaste and the filling in Twinkies. Demand grows at about the same pace as economic output, Kullman said.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Steven Frank at sfrank9@bloomberg.net

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