DuPont Considers Impact of Swings on Pigment Unit

DuPont Co., the biggest producer of titanium dioxide pigment, is considering whether earnings volatility from the whitening chemical mean the business should be sold, Chief Executive Officer Ellen Kullman said.

Titanium dioxide, known by its chemical formula TiO2, is “a very strong business for us” and has an advantaged cost position at Wilmington, Delaware-based DuPont, Kullman said yesterday in an interview with Bloomberg Television’s Betty Liu. Still, swings in earnings from TiO2, used to whiten paints and plastics, have “gotten to be pretty large,” she said.

“We have to consider and continue to talk about and understand how that does impact our shareholders and how that impacts the company,” Kullman said when asked in the interview about divesting the unit.

Kullman, who is also DuPont’s chairman, has forecast an earnings increase this year of 2 percent to 7 percent, less than her long-term goal of as much as 12 percent, because declining prices for TiO2 are eroding the benefit of gains in crop seeds and other businesses. She sold the slow-growing auto-paint unit in February for $4.9 billion.

“Our portfolio will continue to change over time as we find new ways for science to create value,” Kullman said. “Or maybe there are some places where science doesn’t have the value that it used to. Then there might be someone who values it more than we do.”

DuPont rose 0.1 percent to $55.46 at the close in New York. The shares have gained 23 percent this year.

Profit Falls

Operating profit in the performance-chemicals unit, which gets almost half of sales from TiO2, fell 56 percent in the first quarter. DuPont may wait until 2014 to divest the TiO2 unit in order to give earnings time to recover from cyclical lows, David Begleiter, a New York-based analyst at Deutsche Bank AG, said in a May 3 report.

“Its significantly greater volatility than rest of the portfolio and its outsized negative impact on the share price are the reasons we believe why the business will be divested,” Begleiter, who recommends buying the shares, said in the note.

DuPont competitors Huntsman Corp., Rockwood Holdings Inc., and Tronox Ltd. are reviewing their TiO2 operations. Rockwood wants to sell its pigment unit by the end of the year, Tronox is considering buying TiO2 assets, and Huntsman said April 30 that it wants to participate in the industry consolidation.

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