DuPont Blames Dollar for Missed Profit TargetJack Kaskey
DuPont Co., the chemical maker fighting Trian Fund Management’s slate of dissident directors, blamed a stronger U.S. dollar for a 2015 earnings forecast that trails its long-term goal as well as analysts’ estimates.
Operating earnings will rise to as much as $4.20 a share, a 4.7 percent gain from last year, DuPont said in a statement Tuesday. That missed the $4.47 average estimate of 21 analysts in a Bloomberg survey and the Wilmington, Delaware-based company’s multiyear target of a 12 percent annual increase.
The dollar’s strength against the euro, yen, Brazilian real and other currencies will reduce earnings this year by about 60 cents a share, Chief Financial Officer Nicholas Fanandakis said on a conference call. The lower value of sales abroad in U.S. dollar terms will prevent a revenue gain, he said. Analysts expected a sales increase.
“The size of the currency impact is surprisingly large,” Matt Arnold, a St. Louis-based analyst at Edward Jones & Co. who recommends buying the shares, said in an e-mail.
DuPont fell 1.3 percent to $73.18 at the close in New York. The shares have gained 21 percent in 12 months.
Drugmakers Pfizer Inc. and Bristol-Myers Squibb Co. also posted annual forecasts on Thursday that trailed predictions, in part because of the stronger dollar. Intercontinental Exchange Inc.’s U.S. Dollar Index -- which tracks the currency against six major peers -- is headed for a seventh straight monthly advance, after surging 18 percent since the end of June.
Money has flooded into dollar assets in recent months as the world’s largest economy outperforms its developed peers and the Federal Reserve prepares to raise its main interest rate, which has been unchanged since 2008.
DuPont’s revenue also trailed analysts’ estimates in the fourth quarter as the stronger dollar reduced companywide sales by 3 percent. Average prices fell in every business segment, led by an 8 percent decline in the agriculture unit, DuPont said. Profit excluding one-time items was 71 cents a share, matching the average estimate.
It’s unclear whether the weaker-than-expected quarterly sales and 2015 forecast will hurt efforts by DuPont Chairman and Chief Executive Officer Ellen Kullman to defend against Trian’s campaign for four board seats.
Trian has criticized Kullman’s failure to reach her goal of 12 percent annual earnings growth for three straight years, now forecast to extend into a fourth year. The New York-based activist fund co-founded by veteran investor Nelson Peltz is seeking four board seats and argues the 212-year-old company would be better managed if it were broken up.
While DuPont already plans to spin off it performance chemicals business, renamed Chemours, Trian advocates the rest of the company be split in two. One part would include the faster-growing agriculture and nutrition units and another would encompass more cyclical businesses.
Kullman, meanwhile, is cutting costs and repurchasing more of the company’s shares. About $1.3 billion will be cut by the end of 2017, including $1 billion this year, compared with a prior plan to save $1 billion through 2019, DuPont said. A dividend of about $4 billion from the spinoff of Chemours will be returned to shareholders via stock buybacks, CFO Fanandakis said.
Those buybacks would be in addition to a $5 billion repurchase program announced a year ago, said Daniel Turner, a DuPont spokesman.
Trian, which held a 2.7 percent stake in DuPont at the end of last year, says the company can cut $4 billion in costs. DuPont shareholders will vote to select the board at the company’s annual meeting in April.