DuPont Says Demand May Not Rebound Until Second Quarter
DuPont Co. (DD), the U.S. chemical maker that posted a 10 percent drop in fourth-quarter sales volumes, said demand may not fully recover until the second quarter.
Sales volumes may decline again in the first three months from a “strong” year-earlier period, even as volumes rise from the fourth quarter, Chief Executive Officer Ellen Kullman said today on a conference call with analysts. Manufacturers have used up inventories and demand should increase starting late in the current quarter, she said.
“Conditions will improve in many of our industrial businesses as the year plays out,” Kullman said on the call.
DuPont, the most valuable U.S. chemical maker, posted fourth-quarter profit excluding a gain from the sale of a business and other one-time items of 35 cents a share, topping the 33-cent average estimate of 17 analysts surveyed by Bloomberg. A 14 percent increase in average product prices and the June acquisition of food-additives maker Danisco A/S helped overcome the volume decline.
The year-end demand drop reflects customers’ cash conservation and inventory management rather than macroeconomic conditions, Kullman said.
“We expect some conservatism to linger in the first quarter with a rebound effect likely to come in the second quarter,” the CEO said on the call.
Sales volumes in the performance-materials unit, which makes automotive plastics, may drop again in the current quarter, reducing earnings, because of falling sales in Europe and inventory management, said Karen Fletcher, a company spokeswoman. Auto production may rise 4 percent this year, compared with an earlier forecast of 6 percent, led by gains in China and North America, Kullman said.
“It’s really a mixed bag depending on where you are in the world,” Kullman said on a separate call with reporters.
Demand for titanium dioxide, a white pigment that led fourth-quarter price gains, may not fully recover until midyear, Kullman said. Full-year volumes will meet or exceed 2011 levels, she said.
Kullman is expanding production of solar materials, titanium dioxide, Kevlar used in bullet-proof clothing and engineered crop seeds to boost per-share earnings by about 12 percent a year through 2015. The acquisition of Copenhagen-based Danisco is the most significant example of how Kullman is transforming DuPont from a chemical producer into what she calls a science company focused on meeting global demand for food, energy and safety.
A strong dollar will be a “headwind” of 25 cents a share for the year, double the prior forecast, Chief Financial Officer Nicholas Fanandakis said. The biggest impact will be on agriculture results in the first half, when DuPont gets most of its European seed and herbicide sales, he said.
DuPont reiterated that adjusted earnings this year will grow 7 percent to 12 percent to $4.20 to $4.40 a share, from $3.93 last year. That compares with the $4.26 average of 19 analysts’ estimates compiled by Bloomberg.
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