EI DuPont de Nemours & Co.
(
DD
) reported adjusted earnings of $1.61 per share in the first
quarter of 2012 which exceeded the Zacks Consensus Estimate of
$1.55. The earnings growth was primarily driven by strong
performance in Agriculture and Performance Chemicals and the
benefit of prior-year acquisitions in Nutrition & Health and
Industrial Biosciences.
Including one-time items (customer claim charges of $50
million), earnings came in at $1.57 per share versus $1.52 in the
prior-year quarter.
Quarterly sales grew 12% to $11,230 million, driven by price
hikes and strong sales in the Agriculture segment. However, sales
missed the Zacks Consensus Estimate of $11,239 million. The sales
volumes for Agriculture segment increased across all regions.
However, sales volumes for other segments remained flat in
Asia.
Segment Details
Agriculture:
Sales in the quarter rose 16% to $4.1 billion with an 8% growth in
volumes and a rise of 8% in selling prices. Strong North American
corn sales and favorable weather conditions in Europe and Brazil
contributed to the jump in seeds sales.
Insect control product volumes and price hikes led to Crop
Protection product sales growth. Higher volumes and prices drove
Pre tax operating income (PTOI) to $1.3 billion, a jump of 18% year
over year, partly offset by input cost increases and unfavorable
currency.
Electronics & Communications:
Sales plunged 17% to $677 million, due to a decrease of 18% in
sales volumes, reflecting destocking in photovoltaics, partly
offset by increased demand for smart phones and tablets. PTOI
decreased by 70.3% to $33 million due to lower volumes and plant
utilization.
Industrial Biosciences:
For the quarter, sales and PTOI were $288 million and $41 million,
respectively, primarily reflecting the acquisition of Danisco's
enzyme business. PTOI included approximately $5 million of
amortization expense associated with the fair value step-up of
intangible assets obtained as part of the acquisition.
Nutrition & Health:
Sales of $808 million more than doubled year over year, principally
due to the acquisition of Danisco's enzyme business. PTOI of $83
million in the quarter increased significantly by 232% over
comparable year-agoperiod, reflecting the positive impact from the
Danisco acquisition. PTOI included approximately $21 million
of amortization expense associated with the fair value step-up of
intangible assets obtained as part of the acquisition.
Performance Chemicals:
Sales escalated 6% to $1.9 billion, with a rise of 16% in selling
prices and a decrease of 10% in volumes. Volumes declined,
particularly in Asia-Pacific, due to weak demand for titanium
dioxide. However, global demand for titanium dioxide increased
sequentially. PTOI increased by $118 million to $512 million due to
higher selling prices.
Performance Coatings:
Sales rose 6% to $1.1 billion, reflecting rise in selling prices.
Higher selling prices helped in offsetting higher raw material
costs. Demand remained strong for OEM motor vehicle coatings and
industrial coatings, particularly in the North American heavy-duty
truck market.
However, the demand was offset by weakness in refinish,
primarily in southern Europe. PTOI of $87 million increased by
33.8% due to higher selling prices, mix enrichment and continued
productivity actions.
Performance Materials:
Sales went down 6% to $1.6 billion, with a 10% decrease in volumes
and a 2% reduction from a portfolio change, partially offset by 6%
higher selling prices.Industrial and electronics markets continued
to experience weak demand, offsetting the strong demand in the
automotive markets, especially in North America. PTOI of $240
million decreased $48 million on lower volumes.
Safety & Protection:
Sales decreased by 2% to $941million, with a 5% lower volume due to
continued weakness in the industrial markets. Lower volumes were
partly offset by a 3% hike in selling prices. PTOI decreased to
$100 million from $145 million in the prior-year quarter.
Financial Position
DuPont had cash and cash equivalents of $3.4 billion as of March
31, 2012, compared with $3.6 billion as of December 31, 2011.
Long-term borrowings and capital lease obligations amounted to
$11.2 billion as of March 31, 2012, versus $11.7 billion as of
December 31, 2011.
The company's productivity initiatives continued on track with
improvements of approximately $100 million each for fixed costs and
working capital.
Outlook
DuPont reiterated its full-year 2012 earnings outlook of $4.20
to $4.40 per share, an increase of 7% to 12% compared with 2011,
excluding significant items.
Our Take
Despite soft demand for consumer electronics segment, DuPont
delivered strong results in the first quarter. The company also
faced some economic headwinds in the quarter. However, markets for
DuPont's agriculture and food businesses continue to be strong.
We currently have a long-term Neutral recommendation on DuPont.
The company, which competes with
The Dow Chemical Company
(
DOW
) and
BASF SE
(
BASFY
), maintains a Zacks #3 Rank, which translates into a short-term (1
to 3 months) Hold rating.
BASF SE (
BASFY
): Free Stock Analysis Report
DU PONT (
EI
) DE (
DD
): Free Stock Analysis Report
DOW CHEMICAL (
DOW
): Free Stock Analysis Report
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