DuPont Co., the most valuable U.S. chemical maker, said it will eliminate 1,500 jobs after posting a smaller-than-estimated third-quarter profit and cutting its forecast on declining demand for paint pigment and solar cells.
Net income dropped to $10 million, or 1 cent a share, from $452 million, or 48 cents, a year earlier, Wilmington, Delaware-based DuPont said today in a statement. Profit excluding earnings from the auto-paint unit and one-time items was 32 cents a share, trailing the 47-cent average of 14 analysts’ estimates compiled by Bloomberg. The shares fell.
Chairman and Chief Executive Officer Ellen Kullman plans to save $450 million with the job cuts and other actions as a weak global economy challenges her 12 percent profit-growth target. About half the reductions are tied to the auto-paint business, which DuPont previously agreed to sell to Carlyle Group LP for $4.9 billion. Profit in the performance-chemicals unit declined on lower demand for the white pigment titanium dioxide, and electronics earnings fell on lower sales of photovoltaic materials.
“About 60 percent of incremental earnings growth since 2009 has come from titanium dioxide,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who rates the shares neutral, the equivalent of hold, said today by phone. “If that’s cycling down, it seriously jeopardizes Ellen’s earnings growth target and has quite serious ramifications for 2013 and beyond.”
Profit this year from continuing operations will be $3.25 to $3.30 a share, which excludes one-time costs and about 41 cents of earnings from the auto-paint unit that’s being sold, DuPont said. That’s down from the company’s prior forecast of about $4.20 a share, or $3.79 a share adjusted to exclude auto paint, DuPont said in a slide presentation. The average of 17 estimates was for 2012 profit of $3.91.
Company revenue fell 9.2 percent to $7.39 billion as sales volumes dropped 5 percent and average prices climbed 1 percent, DuPont said. Currency exchange reduced the value of sales by 4 percentage points.
DuPont fell 9.1 percent to $45.25 at the close in New York, the most since Dec. 1, 2008. The shares gained 8.7 percent this year before today.
Pretax operating income in performance chemicals fell 37 percent to $372 million on falling demand for titanium dioxide and fluoropolymers such as Teflon coatings, DuPont said. Profit in the electronics business dropped 60 percent to $40 million as demand fell 20 percent, largely because of lower sales to makers of solar cells, DuPont said.
“Weaker than expected demand in titanium dioxide and photovoltaic markets contributed to the decline from last year’s record third-quarter earnings,” Kullman said in the statement. “We are addressing these challenges now to position ourselves for improved performance.”
Demand for titanium dioxide should improve in the first half of next year after producers cut inventories, Karen Fletcher, a DuPont spokeswoman, said today on a conference call to discuss the results.
The results mark the first time that Kullman has failed to beat analysts’ per-share profit estimates since becoming CEO in the first quarter of 2009.
The company plans to save about $230 million by eliminating corporate costs supporting the auto-paint unit, and $220 million will come from restructuring actions related to weak global economies, DuPont said in a slide presentation on its website. Restructuring charges reduced third-quarter profit by $152 million and another $58 million charge will be taken in the fourth quarter, DuPont said.
Prices for titanium dioxide, used to add opacity and whiteness in everything from paints to toothpaste and the filling in Twinkies, are dropping because of weak demand from auto and construction markets, particularly in Europe, David Begleiter, a New York-based analyst at Deutsche Bank AG, said in an Oct. 17 note. Cheap imports from China are adding to the global oversupply, he said.
The sale of the auto-paint business, expected to close in the first quarter, marks DuPont’s exit from a market it has served since the advent of the motor car. Kullman is shifting DuPont’s focus to products that help meet global demand for food, energy and security. She is targeting a 12 percent annual increase in per-share earnings through 2015.
DuPont, founded in 1802 to make gunpowder, produces thousands of products from Corian countertops and Teflon coatings to Tyvek weather barrier and Kevlar bullet-proof fibers.