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

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

Q1 2010 Earnings Call

April 27, 2010; 09:00am ET


Ellen Kullman - Chairman & Chief Executive Officer

Nick Fanandakis - Chief Financial Officer

Karen Fletcher - Vice President of Investor Relations


Frank Mitsch - BB&T Capital Markets

David Begleiter - Deutsche Bank

Amanda Sigouin - Jefferies

P.J. Juvekar - Citi

Don Carson - UBS

Kevin McCarthy - Bank of America/Merrill Lynch

Paul Mann - Morgan Stanley

Mark Gulley - Soleil Securities

Robert Koort - Goldman Sachs

Silke Kueck - 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 2010 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) To listen to the webcast, please go to www.dupont.com. Thank you.

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

Karen Fletcher

Thank you John. Good morning and welcome. With me this morning are Ellen Kullman, Chairman and CEO; and Nick Fanandakis, CFO. The slides for today's call can be found on our website at www.dupont.com, along with the news release that was issued earlier today.

Please turn to slide one. 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. Finally, we've posted supplemental information on our website that we hope is helpful to your understanding of our company's performance.

With that, I'll turn the call over to Ellen.

Ellen Kullman

Thanks Karen, and good morning everyone. This time last year we were taking aggressive actions to respond to deteriorating market conditions. Our initiatives were aimed and enhancing near term profitability, while preparing to respond to the economic recovery when it came. Today those actions are paying off in the form of streamline business units, a lower cost base, and just as important, much greater customer intimacy, with an ability to respond faster to customer demands.

During the first quarter we delivered strong results of $1.24 earnings per share, more than double the first quarter of 2009, and just $0.07 below the first quarter of 2008. I am very pleased with our performance, the way we responded to changing market demands, and our momentum going forward.

The forecast for 2010, global industrial production is about a 7% improvement, with recovery rates that very greatly by country and by industry. Many of our polymers and chemical businesses saw a strong demand pickup in the first quarter, magnified by the comparison to a particularly weak first quarter of 2009. Because we stay close to our customers and supply chain, we could better anticipate demand signals. In some cases, our management teams made conscious, thoughtful business decisions to take on cost, in order to keep pace with a strong pickup in demand.

Two cases in point; performance chemicals, and performance materials, had volume increases of 30% and 56% respectively. The supply chains were already tight, and these businesses skillfully managed significant challenges to produce and deliver product to keep up with market demand. They were able to, because our customer relationships gave us better visibility into markets and we were able to anticipate demand signals.

We believe we were better equipped to meet demand than our competitors, and in some cases gained market share as a result. Pre-tax operating margins of 13% to 15% in these two reporting units, reflect high operating rates, coupled with the leverage from outstanding work, to take out costs over the past 18 months.

Estimates for 2010, light vehicle production increased since I spoke to you last quarter. In January we expected global production to be up 9%. Our current view is a 13% increase for the year. In the first quarter, vehicle production was up nearly 40%, against a very weak year-over-year comp. The top performance coding stepped up to market demand, and we saw their earnings improve from a loss of $75 million in the first quarter of 2009, to a profit of $45 million this quarter.

With 5% pre-tax operating margin in the quarter, it’s clear that there is still work to do; however, I am pleased with the progress this segment has achieved against formidable challenges. They displayed dedication and determination as they continue to drive this business towards world-class status.

Demand for consumer electronics continued strong heading into the first quarter, which we anticipated. Demand for photovoltaics surged beyond our expectations, driven by new government stimulus programs, advance buying ahead of Germany’s feed and tariff production and pent-up demand from last year. In addition to meeting strong orders, we continue to introduce new products with added value through increased efficiency, enhanced performance and cost effectiveness.

Electronic and communications R&D spend is about 7% of sales, well above the company average, because our product offering, and value it brings to PV differentiates DuPont. DuPont sales in the PV are so strong that we now expect to surpass $1 billion in 2011, one full year ahead of plan.

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