Chemical and industrial products behemoth E. I. du Pont
de Nemours and Company ( DD )
reported adjusted earnings of $1.48 per share in the second quarter
of 2012, exceeding the Zacks Consensus Estimate of $1.46 and the
year ago earnings of $1.37 per share.
Growth was primarily driven by strong performance in
agriculture, food and bioscience businesses, along with the
company's advanced materials business which witnessed healthy
results despite weak European markets.
Including one-time items earnings came in at $1.25 per share
versus $1.29 in the prior-year quarter. The drop reflects
lower sales volumes across several segments and weak demand for
titanium dioxide, especially in Europe and Asia.
Net sales grew 7% year over year to $11,006 million, driven by
price hikes and portfolio changes, partially offset by unfavorable
currency impact and lower sales volumes. However, sales missed the
Zacks Consensus Estimate of $11,252 million.
Agriculture: Sales in the quarter rose 13% year
over year to $3.4 billion with a 6% growth in volumes and a 7% rise
in selling prices. The agriculture business Pioneer seed
contributed to a 12% growth in sales. North America corn and
soybeans also delivered strong results. Strong demand across all
the products led to a 15% increase in Crop Protection sales.
Increased sales led to pre-tax operating income (PTOI) of $926
million, a year over year jump of 12%, partly offset by input cost
increases and unfavorable currency and higher investments in Right
Product Right Acre commercial and R&D activities.
Electronics & Communications: Sales plunged
11% to $795 million, due to a decrease of 6% in sales volumes and
5% decline in selling prices. Sales were affected by weak demand
for photovoltaic materials though it was partially offset by
increased demand for smart phones and tablets. PTOI decreased 27.2%
to $75 million due to lower volumes and plant utilization.
Industrial Biosciences: Sales were up by a
whopping 143.9% to $300 million primarily reflecting the
acquisition of Danisco's enzyme business. The Danisco acquisition
also led to a 340% year over year increase in PTOI to $44
Nutrition & Health: Sales jumped 82% to
$885 million, principally due to the acquisition of Danisco
specialty food ingredients business. Increased demand for Solae
specialty soy products led to increased sales volumes.PTOI shot up
194.7% to $112 million, reflecting the positive impact from the
Danisco acquisition, realization of cost synergies and favorable
product mix in Solae.
Performance Chemicals: Sales declined 1% to $2
billion, with a decline of 10% in volumes partially offset by 9%
higher selling prices. Volumes declined, particularly in
Asia-Pacific and Europe, due to weak demand for titanium dioxide
and fluoropolymers. PTOI increased 7% to $538 million due to higher
selling prices and increasedproductivity actions.
Performance Coatings: Sales decreased 1% to
$1.1 billion, reflecting a 2% decline in volumes. Selling prices
increased 1% across all regions, partially offset by the
unfavorable currency impact. PTOI increased 26% to $92 million
due to higher selling prices, mix enrichment and continued
productivity actions, partially offset by unfavorable
Performance Materials: Sales went down 3% to
$1.7 billion, with a 1% decrease in selling prices and a 3%
reduction from a portfolio change, partially offset by 1% higher
selling volumes. Industrial and electronics markets continued to
experience weak demand, offsetting the strong demand in the
automotive markets, especially in North America. PTOI increased
24.8% to $317 million due to lower feedstock costs and higher
volume, partially offset by unfavorable currency.
Safety & Protection: Sales decreased 4% to
$986 million, with a 5% lower volume due to continued weakness in
the industrial markets and lesser demand in public sector. Lower
volumes were partly offset by a 1% hike in selling prices. PTOI
decreased 11% to $127 million.
DuPont had cash and cash equivalents of $3.50 billion as of June
30, 2012, compared with $3.59 billion as of December 31, 2011.
Long-term borrowings and capital lease obligations amounted to
$11.25 billion as of June 30, 2012, versus $11.73 billion as of
December 31, 2011.
DuPont expects full-year 2012 adjusted earnings to come in at
the lower end of its previous outlook of $4.20 to $4.40 per share
(excluding one-time items) citing macroeconomic and
currency-related uncertainties and a higher tax rate.
Despite slow growth in some markets and weak European markets,
DuPont's Agriculture segment delivered strong results in the second
quarter. The Danisco acquisition contributed to the growth across
the company's Industrial Biosciences and Nutrition & Health
divisions. Also continued productivity actions led to increased
However, increased raw material costs and decline in sales
volumes across many segments offset the increase. Moreover,
sluggish economic conditions might prove to be headwinds for the
company going forward.
Currently, we have a long-term (more than 6 months) Neutral
recommendation on DuPont. The company, which competes with
The Dow Chemical Company (DOW )
and BASF SE ( BASFY ), currently holds a short-term Zacks
#4 Rank (Sell).
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