DuPont, Base In Titanium Sale Deal - Analyst Blog

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E. I. Du Pont de Nemours and Company ( DD ) has signed a purchase agreement with Australia's Base Resources to buy products from Base's titanium mining project in Kenya.

Under the deal DuPont is expected to purchase a minimum average of about 72% of annual rutile output from the Kenyan project for a period of six years once production starts. In addition, Base has the option of selling up to a further 25,000 tonnes per annum of rutile over the six year period.

In the last four years of the agreement, DuPont enjoys the right to reduce the off-take volume proportional to any reduction in DuPont's overall high-grade titanium dioxide feedstock requirements.

Production at the Kenyan mine is expected to start in late 2013 with the first shipments taking place in 2014.

Base Resources expects its Kenyan project's annual production of titanium ores to include 330,000 tonnes of ilmenite, about 10% of the world's supply, and 80,000 tonnes of rutile, or 14% of global output.

Recently, DuPont released its third quarter results; reporting a net income of $452 million or 69 cents per share in the third quarter of 2011 from $367 million or 40 cents per share in the same quarter of 2010. The profit exceeded the Zacks Consensus Estimate of 56 cents per share.

The improvement in profit was attributable to higher selling prices, increased sales volume and currency benefit, partly offset by higher raw material, energy, and freight costs.

Sales in the quarter grew 32% to $9.2 billion, up from the Zacks Consensus Estimate of $8.9 billion. The increase in sales reflected a rise of 1% in sales volume, a hike of 15% in local price, 4% currency benefit and 12% net increase from portfolio changes. Sales in the developing markets rose 38%.

DuPont upgraded its full-year 2011 earnings outlook to $3.97-$4.05 per share from its previous forecast of $3.90-$4.05 per share. This revision was attributed to the company's impressive earnings results.

Expectations for the fourth quarter include slowing global growth, some destocking, and the recognition of shifting a portion of Agriculture sales in Latin America to the third quarter by the early start of the planting season.

DuPont is a global chemical and life sciences company, employing more than 60,000 people worldwide with a diverse array of product offerings. With over 21,000 patents and 15,000 patent applications worldwide, DuPont sells its products in diverse markets, such as transportation, construction, apparel, agriculture, nutrition and health, packaging and electronics markets.

DuPont faces stiff competition from BASF SE ( BASFY) and The Dow Chemical Company ( DOW ).

The company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. In addition, we reiterate our long-term Neutral recommendation on the stock.

BASF SE ( BASFY ): 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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