DuPont Forecasts Wider Profit Margins in Most BusinessesJack Kaskey
DuPont Co., the largest U.S. chemical maker by market value, forecast wider profit margins for most of its units in the coming years as the company cuts costs and introduces new products ranging from pesticides to television technology.
Pretax operating margins in four businesses, including agriculture and electronics, will be wider than forecast 17 months ago, DuPont executives said today in a presentation to investors and analysts at its headquarters in Wilmington, Delaware. The company reduced long-term sales growth targets in four of the company’s six units.
Chairman and Chief Executive Officer Ellen Kullman shed the automotive coatings unit in February and acquired food ingredients maker Danisco A/S in 2011 to expand margins and drive faster sales growth. Cost controls also will help boost earnings 12 percent a year over five years as sales gain 7 percent, she said, maintaining company goals from December 2011.
“We recognize these are challenging growth rates in a slower growing economy,” Kullman said at the meeting. “We will achieve these goals and increase returns to you, our shareholders.”
DuPont rose 0.3 percent to $53.51 at the close in New York. The shares have gained 19 percent this year.
DuPont didn’t update its 2012 forecast for earnings growth of 2 percent to 7 percent. Gains this year have been slowed by declining prices in the chemicals unit, particularly titanium dioxide, a white pigment used in paints.
In agriculture, DuPont forecast long-term profit margins of as much as 24 percent, 2 percentage points higher than the prior outlook and 3 points higher than posted last year. Sales will rise as much as 10 percent a year on new seeds and pesticides in North America and expansion in emerging regions such as Ukraine, China, India and Brazil, Executive Vice President Jim Borel said.
Profit margins in the electronics unit will widen to as much as 18 percent long term, compared with 17 percent previously forecast and 10 percent last year, DuPont said.
Electronics sales will rise as much as 9 percent a year, down from 10 percent in the prior forecast, on materials used in solar cells and flat-panel televisions, particularly organic light emitting diodes, or OLEDs, Executive Vice President Mark Vergnano said. DuPont has licensed its OLED printing technology to one of Asia’s largest TV makers, he said without naming the company.
Products soon to be introduced will add $7 billion to sales by 2016, Executive Vice President Tom Connelly said.
DuPont raised its margin outlook in the industrial biosciences unit, where profit from cellulosic ethanol and bio-butanol should reach $100 million in 2017 and $500 million in 2022, Connelly said. The company plans to license the technologies to producers and also sell enzymes and microbes for converting plants into fuels.
Performance materials margins will be as wide as 18 percent long term, up from 14 percent previously forecast and down from 19 percent last year, as the unit continues to benefit from low-cost U.S. natural gas used to make plastic packaging as well as rising demand for lightweight auto parts, Connelly said.
Other units where DuPont cut sales growth forecasts are performance chemicals, performance materials and safety and protection.