DuPont to Sell Car Paints Biz - Analyst Blog


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According to industrial sources, chemical giant E. I. Du Pont de Nemours and Company ( DD ) has launched the sale process of its car paints business, which could bring in more than $4 billion.

The sources further reported that the sale will pull the interests of the private equity players. The private parties believe that they can cut costs easily so that the unit can reap more profits. Other chemical companies may also be interested in the sale, as per the reports.

DuPont's adviser on the deal, Credit Suisse Group ( CS ), sent financial documents/details to potentially interested parties related to the sale.

DuPont's Coatings business reported sales of $1.1 billion in the fourth quarter of 2011. Despite soft demand for consumer electronics segment and weak markets for housing and construction, DuPont delivered exceptional results for full-year 2011.

The company 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 the 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 14% increase in prices and 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 and 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
CREDIT SUISSE ( CS ): Free Stock Analysis Report
DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report
DOW CHEMICAL ( DOW ): 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
More Headlines for: BASFY , CS , DD , DOW , EI

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