E.I. du Pont de Nemours and Company (DD)

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E.I. du Pont de Nemours and Company (DD)

Q1 2009 Earnings Call Transcript

April 21, 2009 9:00 am ET


Karen Fletcher – VP, IR

Ellen Kullman – CEO

Jeff Keefer – EVP and CFO

Jim Borel – Group VP


Jeff Zekauskas – J.P. Morgan

David Begleiter – Deutsche Bank

PJ Juvekar – Citi

Sergey Vasnetsov – Barclays Capital

Don Carson – UBS

Frank Mitsch – BB&T Capital Markets

Laurence Alexander – Jefferies

Kevin McCarthy – Banc of America

Mark Gulley – Soleil Securities

Mike Judd – Greenwich Consultants

John Roberts – Buckingham Research



Good morning. My name is Don and I will be your conference operator today. At this time, I would like to welcome everyone to the DuPont 2009 first quarter investor call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator instructions)

In the interest of time, management requests that you limit yourself to one question and one follow-up question and please pick up your handset to allow optimal sound quality. If you have additional questions, you may re-enter the queue. Please note that this conference is being recorded. To listen to the webcast, please go to www.dupont.com. Thank you.

It is now pleasure to turn the floor over to your host, Karen Fletcher, Vice President of Investor Relations. Madam, you may begin your conference.

Karen Fletcher

Okay. Thank you, Don. Good morning and welcome. With me this morning are Ellen Kullman, CEO; Jeff Keefer, Chief Financial Officer; and Jim Borel, Group Vice President of DuPont's Production Ag businesses. The slides for today’s call can be found on our website dupont.com along with the news release that was issued earlier today.

Please turn to slide two. During the course of this conference call, we will make forward-looking statements. All statements that address expectations or projections about the future are forward-looking statements. Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks and assumptions. We urge you to review DuPont's SEC filings for a discussion of some of the factors that could cause actual results to differ materially.

We will also refer to non-GAAP measures and request that you please refer to the reconciliations to GAAP statements provided with our news release and on our website. Finally, we have posted supplemental information on our website that we hope is helpful to your understanding of our company's performance.

Please note today that in discussing segment performance, comments on results are before significant items and all references we make to earnings are on a pretax operating income basis. In addition, all comparisons are on a previous year basis unless otherwise noted. We also provide considerable detail about the segment performance on the DuPont IR website.

So with that, I'll turn the call over to Ellen Kullman.

Ellen Kullman

Thanks, Karen. And good morning, everyone. In January, I made a commitment to you that we would move with urgency and discipline, taking cost out and focusing on executing the fundamentals in each one of our businesses. We stay close to our customers and markets while implementing aggressive actions to take out costs. These actions enabled us to withstand further deteriorating economic conditions during the quarter to deliver results in the range we expected. Volumes are down, but our costs are down too.

To be clear, we had to reset our expectations for economic conditions for 2009 versus our position three months ago. In January, global GDP was predicted to decline 0.6%, and today our outlook is about a 2.5% decline. Three months ago the forecast for global motor vehicle builds was about $68 million; today it’s $58 million. Three months ago US housing starts were estimated to be 720,000 units, and today consensus guides us to about 560,000 units.

These changes are indicative of a deeper recession and reflect the volatility of our markets. In light of these macro updates and what we see in our sales pattern, we now expect larger volume contractions in 2009 than what we expected just three months ago and have revised our earnings outlook for the year appropriately. The ongoing actions we are taking position the company for a strong recovery and future growth.

We remain committed to take steps that will keep DuPont ahead of the weak economy. And that’s why we are expanding the action plans we reviewed for you in December. We have now increased our 2009 fixed cost reduction target from $730 million to $1 billion. In doing so, we are reducing additional contractor positions, expanding work schedule reductions companywide, and developing additional restructuring plans. And we made further reductions in capital spending.

An important part of DuPont’s approach during this downturn is to constantly think and act opportunistically even as we work on a day-to-day basis to manage the challenges of this severe recession. For example, we are redeploying employees from excess position into inventory and receivables mega projects. These efforts are well underway and expected to delivery $1 billion in working capital improvement this year. This approach allows us to retain highly talented people and adequately staff top priority initiatives during the downturn. It’s a win-win.

Likewise, we are taking out costs structurally particularly in businesses serving auto and housing markets. These businesses will emerge from the recession leaner, more competitive and well position to mass our science-based offerings against growth opportunities such as energy efficiency, safety and security, and advanced materials, just to name a few.

And a continued focus on our science will enable our performance during these volatile times. We launched 500 new products in the first quarter, a dramatic increase over the first quarter of 2008 when we launched 297. One of the biggest contributors to the increase was Pioneer. However, all our businesses delivered new products to continue to differentiate us in the marketplace.

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