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

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

Q2 2009 Earnings Call

July 21, 2009 9:00 am ET


Karen A. Fletcher - VP - DuPont Investor Relations

Ellen J. Kullman - Chief Executive Officer

Jeffrey L. Keefer - Executive VP - Chief Financial Officer


David Begleiter - Deutsche Bank

Don Carson - UBS

PJ Juvekar - Citi

Lucy Watson - Jefferies

Robert Koort - Goldman Sachs

Edward Yang - Oppenheimer

Sergey Vasnetsov - Barclays Capital

Frank Mitsch - BB&T Capital Markets

Mark Connelly - Stern Agee

Mike Judd - Greenwich Consultants

Jeff Zekauskas - JP Morgan



Good morning. My name is John and I will be your conference operator today. At this time I would like to welcome everyone to the DuPont 2009 Second 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)

To listen to the webcast, please go to www.dupont.com. It is now my pleasure to turn the call over to your host, Karen Fletcher, Vice Present of Investor Relations.

Madam, you may begin your conference.

Karen A. Fletcher

Thank you, John. Good morning and welcome. With me this morning are Ellen Kullman, CEO, and Jeff Keefer, CFO. 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 reconciliation to GAAP statements provided with our earnings news release and on our website. And finally, we have posted supplemental information on our website that we hope is helpful to your understanding of our company’s performance. Please note that in discussing segment performance, comments on results are before significant items and all references we make to earnings are on a pre-tax operating income basis. In addition, all comparisons are on a previous year basis unless otherwise noted. We will also provide considerable detail about segment performance on the DuPont IR website. So with that I will turn the call over to Ellen.

Ellen J. Kullman

Thank you, Karen, and good morning. Today with the economy still a dynamic yet unusually uncertain factor in overall performance, I’d like to open with comments on macro conditions before discussing our results in the quarter. We are seeing macro conditions start to stabilize versus three months ago.

Last quarter I shared our view that global GDP would decline about 2.5% in 2009, and that view is unchanged. I also said our performance outlook in 2009 was based on global auto bills of about 58 million vehicles and US housing starts at about 550,000, and those outlooks are also unchanged. Many of our markets showed improvement in the second quarter with an apparent end to destocking across several supply chains. Our coating, electronics, and performance materials business segments all had sequential volume improvements. Our safety and protection segments volumes were essentially flat with a weaker mix given the lagging market conditions for our Nomex and Kevlar businesses, as we expected. And Ag had a strong quarter, as we expected. And all segments were positive earnings contributors.

With macro conditions evolving about as we expected, our aggressive cost actions have served us well. Our earnings results this quarter benefited from an aggressive fixed cost reduction, new product launches, pricing discipline, as well as from lower raw material cost. Last quarter, we made a commitment to increase our fixed-cost productivity with the goal of $1 billion in 2009. We delivered nearly 60% through the second quarter and are on track to meet our goal. What’s more important is the productivity mindset of our business leaders. We are committed to keeping about 75% of these fixed cost reductions out for the long term. That includes benefits from restructuring, manufacturing cost reduction using DuPont production systems methodology, and finding ways to keep half of our eliminated contract positions out permanently.

I was to emphasis, however, that even in these difficult times, we have demonstrated that innovation and cost discipline can not only co-exist, but together can enhance our competitive advantage in the marketplace. By continuing to invest in our differentiated market-driven science, we launched 316 new products in the quarter, up 20% from the second quarter of 2008. And when you look at the combined total for the first half, new product launches are up 46% over last year. Particularly in a downturn, customers have greater interest in assessing the merits and value of new products. We are seizing the opportunities in today’s environment to bring value to our customers using new products to help them differentiate their own offering in the marketplace. We believe this emphasis positions us well for eventual recovery.

The strong sales and earnings growth from our Ag segment this quarter, despite significant currency headwinds, is a great example of our innovation investment paying off. The success of our Y series launch in soybeans, the continued improvement in seed germplasm and new traits, and growth of Rynaxpyr insecticides are example of our robust pipeline contributing to bottom-line results.

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