DuPont Sees Profit at Lower End of Range on Economy
DuPont Co. (DD), the second-largest U.S. chemical maker, said 2012 profit will be at the lower end of a previously forecast range because of uncertainties created by weaker global economies and foreign currencies.
DuPont is projecting per-share of profit of $4.20 to $4.40, excluding one-time items, the Wilmington, Delaware-based company said today in a statement. The average of 20 analysts’ estimates compiled by Bloomberg was $4.27. Profit won’t reach the top of the range because of slower economic growth, a stronger dollar and a higher tax rate, Chief Financial Officer Nicholas Fanandakis said on a conference call.
“These guys tend to be very conservative when they give guidance and this is the first time in a while that it’s at the lower end,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who recommends holding the shares, said today in a telephone interview. “We are looking into a second half that does look quite uncertain.”
DuPont Chief Executive Officer and Chairman Ellen Kullman is trying to meet her target of increasing profit 12 percent a year as the debt crisis in Europe, which accounted for 26 percent of sales last year, threatens to further sap global demand. The euro is close to an 11-year low versus the dollar, eroding the benefit of higher prices for products such as crop seeds and titanium dioxide used in paint.
DuPont fell 2 percent to $47.74 in New York.
Currency exchange reduced revenue by 3 percent in the second quarter while sales volumes dropped 1 percent, DuPont said. Revenue climbed 7.3 percent on price gains to $11 billion, from $10.3 billion a year earlier. That trailed the $11.2 billion average estimate of 13 analysts.
Net income dropped 3.2 percent to $1.18 billion, or $1.25 a share, from $1.22 billion, or $1.29, a year earlier.
Profit excluding one-time items was $1.48 a share, beating the $1.46 average of 16 estimates compiled by Bloomberg. Those items were: costs to settle damage claims related to Imprelis herbicide and litigation related to its former Invista nylon business; costs related to the purchase of Danisco A/S last year; and a gain from selling an equity investment.
Kullman has shifted DuPont’s focus to products that help meet global demand for food, energy and security. The company has beaten profit estimates every quarter since she became CEO in January 2009. Kullman is targeting a 12 percent annual increase in per-share earnings through 2015.
Pretax operating profit rose in five of DuPont’s seven businesses and dropped in the electronics and safety and protection units.
Profit rose 7 percent in the performance chemicals unit as higher prices for titanium dioxide, which is used to make white pigment, helped recoup increased ore costs. Pigment demand should improve through the year, providing the business with profit margins similar to 2011, Kullman said on the call.
The agriculture unit, the company’s largest, saw profit rise 12 percent on higher sales of pesticides and bio-engineered soybean and corn seeds. U.S. crop prices are near record highs amid the worst drought in half a century.
The agriculture unit’s second-half loss may widen because of increased investments and a stronger dollar, DuPont said. Wet weather in Latin America will boost sales of fungicides and insecticides, making up for reduced chemical demand caused by the U.S. drought, Kullman said today on a separate call with reporters.
DuPont probably held its market share in North American corn and soybeans after gains since 2008 of 6 percentage points in corn and more than 10 points in soy, the CEO said. Monsanto Co. (MON) said June 27 that it probably gained share this year in U.S. corn and soybeans.
Dow Chemical Co. (DOW) is the biggest U.S. chemical maker by sales.
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