DuPont Inks $100M Deal with Yingli - Analyst Blog

By Harpreet Sandhu,

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E.I. du Pont de Nemours and Com ( DD ) inked a $100 million deal with the Chinese solar energy technology manufacturer Yingli Green Energy ( YGE ), whereby DuPont will supply its polyvinyl fluoride film and photovoltaic "paste," which will be used in the production of Yingli's modules for solar panels.

The deal is aimed at accelerating the adoption of solar energy to reduce dependence on fossil fuels. 

DuPont's solar energy materials help to increase efficiency, extend the lifetime of modules and ultimately help in reducing overall system costs to make solar increasingly more competitive with other forms of energy generation.

According to industry estimates, over the next five years, 20% average annual growth is expected in solar installations globally.

DuPont expects its solar photovoltaic market sales to reach $2 billion by 2014 from about $1.4 billion in 2011. Dupont and China-based Suntech Power Holdings Co., the world's largest solar panel maker, signed a similar agreement on February 1.

Recently, DuPont reported earnings of 35 cents per share in the fourth quarter of 2011 compared with 50 cents in the year-ago quarter. The profit exceeded the Zacks Consensus Estimate of 33 cents per share.

A higher tax rate in the quarter led to a year-over-year decline in profit. Further, higher selling prices during the quarter was offset by increased spending on selling, marketing and research and development, higher costs for raw materials, energy and freight as well as lower sales volumes.

For full-year 2011, the company reported earnings of $3.93 per share, up 20% from $3.28 per share in 2010, exceeding the Zacks Consensus Estimate by a penny.

Sales in the quarter grew 14% to $8.4 billion due to a rise of 14% in prices coupled with higher agriculture segment sales. However, the quarter witnessed declining sales volumes due to destocking in photovoltaics, polymer and industrial supply chains. The consumer electronics and construction division also faced soft demand. For fiscal year 2011, sales jumped by 20% to $38.0 billion.

We believe that the slowdown in global economic growth in the fourth quarter will continue in the first quarter of 2012, gradually improving in the second half of 2012. The company also faces stiff competition from The Dow Chemical Company ( DOW ) and BASF SE ( BASFY ).

However, markets for DuPont's agriculture and food businesses continue to be strong, especially with a strong planting season in Latin America. Therefore, the company retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. Currently, we have recommended the shares of the company as Neutral for the long term (more than 6 months).

BASF SE ( BASFY ): Free Stock Analysis Report
DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report
DOW CHEMICAL ( DOW ): Free Stock Analysis Report
YINGLI GREEN EN ( YGE ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BASFY , DD , DOW , EI , YGE

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