DuPont Profit Tops Estimates on Sales of Auto PlasticsJack Kaskey
DuPont Co., the biggest U.S. chemical maker by market value, reported fourth-quarter earnings that exceeded analysts’ estimates as demand climbed for plastics used in autos.
Profit was 11 cents a share after excluding one-time costs such as settlements for claims that an herbicide killed trees, Wilmington, Delaware-based DuPont said today in a statement. The earnings beat the 7-cent average of 10 estimates compiled by Bloomberg. Sales were little changed at $7.33 billion, compared with the $7.25 billion average of 15 estimates.
Adjusted profit in 2013 will be $3.85 to $4.05 a share, an increase of 2 percent to 7 percent from comparable 2012 earnings of $3.77, DuPont said. The average of 13 estimates was for profit of $3.93. The forecast includes a gain of 5 cents from a $1 billion share repurchase program that should be completed in the first half, Chief Financial Officer Nicholas Fanandakis said on a call with reporters today.
Sales in 2013 will climb to $36 billion from $34.8 billion, DuPont said, topping the $35.9 billion average of 17 analysts’ estimates. DuPont expects a “modest decline” in profit during the first two quarters of the year, Fanandakis said on a separate call with analysts.
“You are going to see a couple softer quarters before things firm up,” Matt Arnold, a St. Louis-based analyst at Edward Jones who recommends buying DuPont shares, said by phone today. “Autos seem to continue to strengthen, housing is on the mend and China is poised to potentially re-accelerate.”
Fourth-quarter profit gains were led by the performance materials unit, which makes engineered plastics for car parts, where “strong demand” from North American automakers helped boost pretax operating profit 68 percent, DuPont said.
DuPont rose 1.8 percent to $47.82 at the close in New York, the biggest gain since Jan. 2. The shares have gained 6.3 percent this year.
First-quarter pretax operating profit will drop in three segments, led by a “substantial” decline in the performance chemicals unit, while industrial biosciences will lead gains in three other segments, DuPont said in a slide presentation on its website.
Pretax operating margins in the performance chemicals unit may narrow by 7 to 9 percentage points this year, compared with a December forecast of as much as 7 points, CFO Fanandakis said on the call. Without performance chemicals, earnings would climb by a percentage in the “high teens,” Fanandakis said.
DuPont’s performance chemicals unit, the world’s largest maker of titanium dioxide, a white pigment used in paint, should stabilize by the end of the first half as excess inventories are used up and demand hits bottom, Chief Executive Officer Ellen Kullman said on the call. The business has a “strong” competitive position and is a “strong cash generator,” helping to make up for its earnings cyclicality, she said.
The 2013 forecast assumes global economic growth of about 2 percent and 5 percent higher costs for raw materials, energy and transportation, primarily because of higher seed making costs, the company said. Capital spending will rise to about $1.9 billion this year, from $1.8 billion in 2012, DuPont said.
Kullman, who is also chairman, announced 1,500 job cuts in October as a weak global economy challenges her target for adjusted annual earnings growth of 12 percent. Net income in the fourth quarter fell 70 percent to $111 million, or 12 cents a share, from $373 million, or 40 cents, a year earlier.
DuPont said it narrowed the fourth-quarter loss in the agriculture unit, which sells crop seeds and pesticides, to $92 million, from $116 million a year earlier, on improved sales volumes in Latin America. The fourth quarter is seasonally weak because farmers in North America and Europe haven’t begun spring planting.
Earnings from the auto paint unit, which is being sold to Carlyle Group LP for $4.9 billion, were excluded from adjusted earnings as the business is now a discontinued operation. Kullman, who said the sale should close in “a few weeks,” is shedding the unit as she shifts DuPont’s focus to products that help meet global demand for food, energy and security.
Items excluded from adjusted fourth-quarter profit include $135 million to resolve claims that Imprelis weedkiller destroyed trees, $66 million in restructuring costs, a $33 million impairment charge in the performance chemical unit and a $117 million gain from the sale of an agriculture business. Imprelis charges now total $750 million and may rise to $900 million, DuPont said.
The full-year forecast excludes pension costs and an anticipated U.S. tax gain, DuPont said.
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.