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DuPont Profit Tops Estimates; 2011 Forecast Raised

DuPont Sees Year EPS $3.45-$3.75
The headquarters building of DuPont Co., which shares a building with the Hotel DuPont and DuPont Theatre, in Wilmington, Delaware. Photographer: Scott Lewis/Bloomberg

Jan. 25 (Bloomberg) -- DuPont Co., the third-biggest U.S. chemical maker, posted fourth-quarter earnings that beat analysts’ estimates as paint-pigment and solar-materials jumped and taxes plunged. DuPont raised its 2011 profit forecast.

Net income fell 15 percent to $376 million, or 40 cents a share, from $441 million, or 48 cents, a year earlier, Wilmington, Delaware-based DuPont said today in a statement. Profit was 50 cents a share after excluding gains related to tax accruals and restructuring and costs for a licensing accord and debt refinancing. That topped the 31-cent average estimate of 13 analysts in a Bloomberg survey. U.S. tax changes contributed to a $152 million income-tax benefit, the company said.

DuPont has exceeded estimates in the eight quarters that Chief Executive Officer Ellen Kullman has been in charge. She’s investing in industrial enzymes, solar energy and modified seeds to offset the expiration of drug patents, which is eroding income from pharmaceutical royalties.

“It’s a very good looking quarter,” Mark Connelly, a New York-based analyst at Credit Agricole Securities who rates the shares “outperform,” said in a telephone interview. He said the tax change boosted fourth-quarter profit by 13 to 14 cents a share. “These guys are still getting volume in most of their business and to me that is impressive.”

DuPont rose 15 cents to $49.04 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 49 percent in the past 12 months.

R&D Tax

Sales rose 15 percent to $7.4 billion from $6.42 billion, topping the $6.91 billion estimate of seven analysts surveyed. Average prices for DuPont’s products gained 6 percent, excluding the effect of currency exchange rates, while sales volumes climbed 12 percent.

“Volume strength, in our view, did not come via pricing compromises,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who rates the shares “neutral,” said in a note. “Positive pricing gains were observed in virtually every segment.”

The company said earnings per share this year will rise to $3.45 to $3.75, compared with its Dec. 9 forecast of $3.30 to $3.60. The revision was mostly attributable to lower-than-anticipated tax and pension costs, Chief Financial Officer Nicholas Fanandakis said on a conference call with analysts.

A lower-than-forecast tax rate for 2010 added 18 cents a share to fourth-quarter profit, Fanandakis said. About 6 cents came from the December approval of a U.S. research-tax credit retroactive to the start of the year and the rest was because DuPont had more sales in low-tax jurisdictions, he said in a telephone interview.

Tax Credit

Congress on Dec. 17 passed the research and development tax credit for 2010 and 2011 along with extensions of all Bush-era tax cuts.

Sales this year will rise to $33 billion to $34 billion, from $31.5 billion in 2010, the CFO said. Raw-material, energy and freight costs will climb 4 to 5 percent, he said. The recovery in U.S. autos will moderate in 2011 and the economic recovery in Europe will be mixed, Kullman said on the call. Demand in the Asia-Pacific region will continue to be “an area of strength for us,” she said.

Pretax operating income rose 51 percent to $315 million at the chemicals unit, which makes titanium dioxide, a pigment used in paint. Earnings at DuPont’s electronics unit, which makes materials for solar panels, advanced 61 percent to $98 million.

The pharmaceutical unit’s profit dropped 65 percent to $87 million after patents for Cozzar and Hyzaar hypertension medicines expired.

Danisco Deal

DuPont’s full-year net income increased 73 percent to $3.03 billion, or $3.28 a share, as sales climbed 21 percent.

DuPont on Jan. 9 agreed to pay $5.8 billion to acquire Copenhagen-based Danisco A/S, the world’s biggest producer of food additives and the second-largest maker of industrial enzymes, which are used in the production of biofuels. DuPont today reiterated that the acquisition should close in the second quarter and could reduce full-year profit by 30 to 45 cents a share.

Dow Chemical Co. and Exxon Mobil Corp. are the two largest U.S. chemical makers by sales.

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

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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